Hightime Investments Pty Ltd v Lungan [No 2] - [2010] WASC 296

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: HIGHTIME INVESTMENTS PTY LTD -v- LUNGAN [No 2] [2010] WASC 296

CORAM: BEECH J

HEARD: 19 OCTOBER 2010

DELIVERED : 26 OCTOBER 2010

FILE NO/S: CIV 2531 of 2004

BETWEEN: HIGHTIME INVESTMENTS PTY LTD (ACN 085 990 656)
Plaintiff
AND
ADRIAN LUNGAN
Defendant
ADAMUS RESOUCES LIMITED (ACN 094 543 389)
Third Party

Catchwords:

Practice and procedure - Pleadings - Amendment of pleadings - Application to disallow amendment - Whether pleading too general - Whether amendment should be disallowed on discretionary grounds - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA) O 21 r 3

Result:

Amendments to statement of claim disallowed

Category: B

Representation:

Counsel:

Plaintiff:     Mr P B Dobson
Defendant:     Mr D M Stone
Third Party                   :     No appearance

Solicitors:

Plaintiff:     Hotchkin Hanly
Defendant:     Williams & Hughes
Third Party                   :     Middletons

Case(s) referred to in judgment(s):

ABB Service Pty Ltd v Hetherington [2001] WASCA 417
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Beck v Corrs Chambers Westgarth [2010] FCA 552
Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413
Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394
Fletcher v St George Bank Limited [2010] WASC 75
Geneva Finance Ltd (Receiver and Manager Appointed) v Hugall [2010] WASC 269
Hartnett v Hynes [2009] QSC 225
Hewitt v Henderson [2006] WASCA 233
Hughes v St Barbara Mines Ltd [No 3] 2008 WASC 220
Jeffrey v Witherow [2006] WASCA 4; (2006) 31 WAR 236
Joyce v Palassis [No 4] [2008] WASC 45
Londsdale Investments Pty Ltd v OM (Manganese) Ltd [2009] WASC 188
Morgan v Banning (1999) 20 WAR 474
Tiao v Lai [No 2] [2010] WASCA 189
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Weldon v Neal (1887) 19 QBD 394
Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd [2005] WASCA 106; (2005) 30 WAR 290

BEECH J:

Introduction

On 6 August 2010 the plaintiff (Hightime) filed a reamended statement of claim. The filing of an amended pleading without leave was authorised by Rules of the Supreme Court 1971 (WA) O 21 r 3(1), no trial dates having been fixed.
By chamber summons dated 16 August 2010 the defendant (Mr Lungan) filed an application pursuant to O 21 r 3(3) to disallow the amendments to the amended statement of claim.
The chamber summons applied for an order that the amendments to 6 August 2010 be disallowed in their entirety on the grounds stated in pars 3.1 ‑ 3.7 of the chamber summons.
In his written submissions of 6 September 2010 Mr Lungan contends that pars 25A, 25B and 28A of the reamended statement of claim should be disallowed. Mr Lungan's submissions should be understood as also contending that the addition, in the prayer for relief, of an order that Mr Lungan account for all benefits which he obtained arising out Shan's entry into the Sanu agreement should be disallowed. Indeed, as emerged clearly in oral submissions, that is the gravamen of Mr Lungan's complaint.
In his submissions Mr Lungan puts three grounds on which he says these parts of the amendments should be disallowed:
(1)they fail to disclose a cause of action that would enable Hightime to recover profits or benefits from Mr Lungan;
(2)as a matter of discretion, taking into account lateness and other matters, the amendment should be refused; and
(3)further, or alternatively, Hightime has waived or abandoned its right to run a profit case.
I proceed on the basis that Mr Lungan's submissions supersede the wider application and wider grounds stated in the chamber summons.
For the reasons that follow, in substance I accept Mr Lungan's first ground, but not the second or third ground.
I begin with an outline of the statement of claim, identifying the amendments made on 6 August 2010.

Summary of statement of claim

The (original) statement of claim was filed on 6 September 2005. An amended statement of claim was filed on 15 July 2009. The reamended statement of claim dated 6 August 2010 is the subject of this application.
In the following summary, the italicised words reflect the changes made by the reamended statement of claim dated 6 August 2010.

Parties

The plaintiff, Hightime Investments Pty Ltd (Hightime), carries on a mineral exploration business [3]. The defendant (Mr Lungan) was an employee of the plaintiff. The third party, Adamus Resources Limited (Adamus), is a company with which Hightime entered into an agreement in relation to the interest the subject of this action.

Mr Lungan's appointment

Hightime employed Mr Lungan (agreement partly oral, partly in writing made 14 September 2002) to identify gold mining tenements in Ghana, to act as Hightime's agent in acquiring gold mining tenements, and to enter into contracts in that respect [4]. Mr Lungan was appointed as a director (the previous pleading said alternate director) of Hightime in Ghana, to negotiate with parties and enter into binding contracts on behalf of the company [5]. By reason of the matters pleaded in pars 4 and, or 5, the defendant was a 'director' and or an 'officer' of Hightime within the meaning of those terms in the Corporations Act 2001 (Cth) (the Act) [5A].
As a director or officer of Hightime, Mr Lungan owed duties under s 181(a), s 182(1)(a) and (b), and s 183(1)(a) and (b) of the Act [6]. (Paragraphs 7 ‑ 8 of the previous pleading pleaded fiduciary duties of good faith, acting loyally when discharging obligations, and avoiding conflict.)

Hightime's contract with Fidelity regarding the Dadwen Tenure

As a result of negotiations between December 2002 and March 2003 by Mr Lungan [9] (who was acting on behalf of Hightime [11A]), Hightime entered into a contract in April 2003 with Fidelity Resources Ltd (Fidelity) in relation to the Dadwen Tenure [11]. Mr Lungan owed Hightime a duty:
1.not to do anything that would prejudice the contractual relationship or obligations between Hightime and Fidelity [12(a), 12(b)];
2.to use best endeavours to facilitate Hightime and Fidelity entering into an agreement [12(c)]; and
3.not to exploit Hightime's business opportunity for Lungan's own personal benefit [12(d)].
During due diligence of Fidelity, Mr Lungan discovered that Fidelity did not have a current prospecting licence over the Dadwen Tenure – another company called 'Sanu Resources (Ghana) Ltd' (Sanu) held the licence – and Sanu had defaulted in paying annual fees to the government in respect of the licence [13]. In April 2003 Hightime told Mr Lungan to apply to the Minerals Commission for the prospecting licence, but to make sure Fidelity was kept informed [14] ‑ [16].
Mr Lungan breached his director's and fiduciary duties by applying for the licence on behalf of Hightime without informing Fidelity/Sanu [17]. Because of Mr Lungan's breach of duties, Fidelity/Sanu refused to deal with Hightime and sent a letter to the Minerals Commission of Ghana accusing Hightime of fraudulent and misleading conduct [18A].

Mr Lungan's company - Shan

On 30 May 2003, Mr Lungan incorporated a company in the US called Shan Corporation LCC (Shan), of which he was the sole director and shareholder [18].
On 16 December 2003, Mr Lungan resigned from Hightime, stating his reason being that he had severe conflicts of interest [19].

Agreement between Hightime and Hightime Ghana

On 16 December 2003, Hightime and Hightime Ghana Pty Ltd (Hightime Ghana) entered into a sale and purchase agreement that Hightime would transfer to Hightime Ghana the Dadwen Tenure [9(a), 9(b)], the Temco prospecting licence [21(a)(ii)] and the Satemkon option to acquire a prospecting licence [21(a)(iii)]. In return, Hightime Ghana would transfer 10 of its shares to Hightime. A condition of the agreement was that Hightime obtain from the Ghanian Minister consent to transfer the application for a prospecting licence over the Dadwen Tenure [20] ‑ [21].

Agreement between Hightime and Adamus

On 17 December 2003, Hightime and Adamus entered into a share agreement that Hightime would transfer to Adamus its shares in Hightime Ghana; in return Adamus would pay US$350,000 and transfer five million of its shares to Hightime. A condition of the share agreement was that the sale and purchase agreement between Hightime and Hightime Ghana was completed [22] ‑ [23].

Agreement between Shan and Sanu regarding the Dadwen Tenure

In December 2003, the Minerals Commission issued to Sanu a prospecting licence for the Dadwen Tenure. Sanu had applied for the licence in November 2003 [24] ‑ [25].
Between April 2003 and December 2003, Mr Lungan had agreed to act for Hightime in relation to the Dadwen Tenure and therefore owed duties under the Act not to profit from his position, knowledge or opportunity, a duty not to place himself in a position of conflict between his personal interest and his duty to Hightime, and the duties pleaded in par 6 [25A, 25B].
Mr Lungan contends that these two new paragraphs should be disallowed.
On 12 January 2004, Mr Lungan caused (was previously 'on behalf of') Shan to enter into an agreement with Sanu for the development of the Dadwen Tenure (the First Sanu Agreement). (Previously, this was defined as the Sanu Agreement. In the original statement of claim pleaded the Sanu Agreement as made on 20 February 2004, the amended statement of claim pleaded it as 12 January 2004.) On 20 February 2004, Mr Lungan caused Shan to enter into an agreement with Sanu concerning an option to acquire 80% of the Dadwen Tenure and a right to conduct exploration (the Second Sanu Agreement) [27A, 27B]. Mr Lungan failed to tell Hightime about the existence of Shan, or his negotiations with Sanu [28].
Hightime says Mr Lungan breached his duties pleaded in pars 6, 12 and 25B by causing Shan to enter into these agreements [28A].
Mr Lungan contends that this paragraph should be disallowed.
(Paragraph 29 was removed. This pleaded a number of breaches of the duties in pars 6 ‑ 8. One of them was par 29(a): that in entering the Sanu agreement Mr Lungan breached his duty not to take for himself opportunities within the sphere of Hightime's business operations.)

Subsequent events

On 14 January 2004, the Minerals Commission advised Hightime it could no longer process its application for a prospecting licence over the Dadwen Tenure [31].
On 28 January 2004, Hightime and Adamus agreed to place two million of Adamus' shares in escrow [33].
By 30 January 2004, Hightime could not complete its sale and purchase agreement with Hightime Ghana, nor its share agreement with Adamus [34].
On 13 December 2005, Adamus cancelled the issue of two million shares to Hightime, because Hightime could not transfer the prospecting licence over the Dadwen Tenure [35].

Relief

Hightime pleads that as a result of Mr Lungan's breaches it suffered damage, particularised as being that it was prevented from acquiring two million shares in Adamus [36]. It seeks, relevantly, the following relief:
(a)an order that Mr Lungan pay Hightime the value of two million shares in Adamus;
(b)compensation pursuant to s 1317H of the Act; or
(c)equitable damages;
(c1)an order that the Mr Lungan account for all benefits which he obtained arising out of Shan's entry into the Sanu Agreement.
Mr Lungan contends that the addition of par (c1) of the prayer for relief should be disallowed. As I have mentioned, that is the nub of Mr Lungan's complaint.
I turn to Mr Lungan's first ground for contending that some of these amendments should be disallowed.

Is a cause of action for an account of profits adequately pleaded?

Mr Lungan complains that there is no plea or no adequate plea in the reamended statement of claim that Mr Lungan profited by his breaches of fiduciary or statutory duty.
In Joyce v Palassis [No 4] [2008] WASC 45 Le Miere J upheld an objection to a claim of account of profits on the ground that the statement of claim did not allege that the defendant derived any profits from the alleged breach of fiduciary duty: [50] ‑ [51]. I accept Mr Lungan's submission that a statement of claim in which an account of profits is sought should plead that the defendant made a profit from his or her breach of duty.
In response, Hightime points to the nature of the duties pleaded and the pleas of breach, contending that, looked at as a whole, the pleading is sufficient.
Paragraph 28A pleads that Mr Lungan breached various duties when he caused Shan to enter into the Sanu Agreements. Among the duties said to have been breached are duties:
(a)to avoid improperly using his position to gain an advantage for himself [6(b)(i)];
(b)to avoid improperly using information to gain advantage for himself [6(c)(i)];
(c)not to exploit the business opportunity obtained for Hightime for Mr Lungan's own personal gain or benefit [12(d)]; and
(d)not to profit from his position or from knowledge or an opportunity which arose from his position [25B.1].
Consequently, Hightime submits, the plea that Mr Lungan's conduct was a breach of these duties carries with it a plea that by causing Shan to enter into the Agreements he gained a benefit or advantage or profit for himself.
In my opinion, these submissions reveal that par 28A is pleaded at an unsatisfactorily high level of generality.
A statement of claim must not plead allegations at too high a level of generality. A pleading must be sufficiently particular to conform with one of the central objects of pleading ‑ to inform the opposing party of the case that it must meet: Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413, 417; Londsdale Investments Pty Ltd v OM (Manganese) Ltd [2009] WASC 188 [5].
Paragraph 28A pleads that in causing Shan to enter into the Sanu Agreements, Mr Lungan breached some or all of nine duties, being those duties pleaded in pars 25B.1, 25B.2, 6 and 12. Many of these nine pleaded duties themselves contain two or three alternative limbs. The point may be illustrated by reference to a paragraph of the pleading particularly relied upon by counsel for Hightime in oral submissions. Paragraph 6(b) pleads that Mr Lungan had a duty to avoid improperly using his position to gain an advantage for himself or someone else, or to cause detriment to Hightime. That is one of the duties pleaded in par 28A as having been breached by Mr Lungan. The pleading does not identify whether Mr Lungan is alleged to have improperly used his position so as to gain an advantage for himself, or so as to gain an advantage for someone else (such as Shan), or so as to cause detriment to Hightime, or two or all of these possibilities.
Paragraph 28A does not plead or particularise the facts or matters said to lead to the conclusion that Mr Lungan's conduct, in causing Shan to enter the Sanu Agreements, constituted a breach of each of the various duties referred to. Nor does it adequately identify which of the various alternative limbs are relied upon in relation to some of those duties.
Hightime submits that these matters can be dealt with by way of a request for particulars. There may be room for doubt as to whether these are matters appropriately dealt with by way of particulars, rather than material facts. See in that regard Londsdale Investments [7]. It is not necessary to determine that question. Generally at least, when an amendment is moved or made at a late stage in an action, it is incumbent on the party moving the amendment to provide all necessary and appropriate particulars within the amendment proposed, rather than saying they will be dealt with subsequently by particulars: Fletcher v St George Bank Limited [2010] WASC 75 [30]. That approach seems to me applicable in the circumstances of the present case.
For these reasons, I disallow par 28A of the reamended statement of claim.
Consequently, Mr Lungan's first ground for disallowance of pars 25A, 25B and 28A and par (c1) of the prayer for relief succeeds. Strictly speaking, that may be sufficient to dispose of the application. However, the parties agreed that I should go on and express my views on Mr Lungan's second ground, namely that the amendments in question should be disallowed on discretionary grounds on account of lateness and other matters. Some further amendments to the statement of claim will be necessary in consequence of the disallowance of pars 25A, 25B and 28A. My views on the discretionary grounds will inform the scope of permissible further amendments.
The reamended statement of claim made a number of deletions to the previous pleading. Previous pars 7 and 8 pleaded a series of fiduciary duties and obligations, deleted in the reamended statement of claim. The previous par 29 pleaded a series of breaches of the fiduciary duties and other duties pleaded in pars 6 ‑ 8 of the amended statement of claim. Paragraphs 25A and 25B are a more refined restatement of the duties previously pleaded in pars 7 and 8. Paragraph 28A is a reformulation of the breaches previously pleaded in par 29.
Mr Lungan does not oppose the reformulation of the duties alleged to have been owed by him. Nor does he oppose a reformulation of the alleged breaches of duty by him, subject to there being no claim for an account of profits. In short, Mr Lungan contends that:
(1)as at July 2010, prior to the filing of the reamended statement of claim in August 2010, Hightime's claim was one for loss and damage and was not profit‑based; and
(2)Hightime should not now be permitted to introduce (or, more correctly, reintroduce) a claim for profit‑based relief.
Mr Lungan does not oppose amendment to plead a breach of duty constituted by the making of a profit, so long as there was no claim for an account of profits or other profit‑based relief (ts 51 ‑ 52). Of course, a breach of fiduciary or statutory duty by profiting can be pleaded in support of a claim for a loss‑based relief.

Should an amendment to include an account of profits be disallowed on grounds of lateness and taking into account other discretionary matters?

Legal principles

Order 1 r 4A and O 1 r 4B of the Rules of the Supreme Court provide as follows:
4A. Elimination of delays
The practice, procedure and interlocutory processes of the Court shall have as their goal the elimination of any lapse of time from the date of initiation of proceedings to their final determination beyond that reasonably required for interlocutory activities essential to the fair and just determination of the issues bona fide in contention between the parties and the preparation of the case for trial.
4B. System of case flow management
(1)Actions, causes and matters in the Court will, to the extent that the resources of the Court permit, be managed and supervised in accordance with a system of positive case flow management with the objects of ‑
(a)promoting the just determination of litigation; and
(b)disposing efficiently of the business of the Court; and
(c)maximising the efficient use of available judicial and administrative resources; and
(d)facilitating the timely disposal of business; and
(e)ensuring the procedure applicable, and the costs of the procedure to the parties and the State, are proportionate to the value, importance and complexity of the subject matter in dispute; and
(f)that the procedure applicable, and the costs of the procedure to the parties, are proportionate to the financial position of each party.
(2)These Rules are to be construed and applied and the processes and procedures of the Court conducted so as best to ensure the attainment of the objects referred to in paragraph (1).
The goal in O 1 r 4A and the objects in O 1 r 4B(1) are to be sought in exercising the power to disallow an amendment.

In Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 the High Court made observations about the considerations relevant to the exercise of a discretionary power to allow or refuse amendment to a pleading in the Australian Capital Territory. Notwithstanding some differences in the language of the relevant rules, their Honours' observations are of valuable assistance in Western Australia and have been applied by courts in Western Australia. Those observations include the following:
(a)the effect of an amendment on the court and on other litigants is relevant;
(b)there is no right to amend to introduce an arguable case and it is wrong to say that only in extreme circumstances would a party be shut out from litigating an arguable case;
(c)justice requires that parties have a proper opportunity to plead their case, but limits may be placed on repleading when delay and cost are taken into account;
(d)a just resolution does not mean that a party will always be permitted to raise any arguable case at any point in the proceedings, on payment of costs, even indemnity costs;
(e)the inevitable strains of litigation must be taken into account in weighing the adverse consequences of delay ‑ this applies to natural persons and other litigants;
(f)the nature and importance of the amendment to the party amending must be taken into account;
(g)attention must be given to the extent of the delay, and the costs associated with it, the prejudice which might reasonably be assumed to follow from it and any prejudice that is shown;
(h)the point in the litigation relative to the trial may be an important consideration;
(i)where a discretion is sought to be exercised in favour of a party, an explanation will be called for;
(j)the point can be reached where a party has had a sufficient opportunity to put its case.
[89] ‑ [103]; [111] ‑ [112].
Some of the considerations identified in Aon were summarised by Martin CJ in Fletcher [25] as follows:
Mr Fletcher's application to amend the statement of claim comes late in the life of these proceedings. It would be wrong in principle to approach his application on the basis of an entitlement to amend, subject to payment of costs by way of compensation to the defendants: see Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. All factors relevant to the exercise of the discretion to permit amendment must be weighed including the fact of substantial delay by Mr Fletcher in bringing these amendments before the court, the wasted costs which the amendments might produce, and the effect of the amendments upon the defendants, who have already lost their opportunity to have this case tried on previously fixed dates because of the plaintiff's conduct of these proceedings. Consideration must also be given to the explanation, if any, for the delay in applying for the amendment, the impact of the amendments upon the likely timetable for the resolution of the case, the nature and importance of the amendment to the party applying, its effect upon the breadth of the evidentiary matters to be investigated in the case, and the impact of the amendments upon the limited resources of the court, having regard to the interests of other litigants in the efficient utilisation of those limited resources. This list of considerations is, of course, not meant to be exhaustive, as the breadth of the discretion to be exercised and the variety of circumstances in which applications to amend may be made preclude the prescription of all the factors that might be relevant to all cases.
In this case, the amendment is made as of right under O 21 r 3, subject to the power of the opposing party to apply to disallow the amendment. In an application to disallow an amendment, the considerations identified in Aon in respect of an application to amend are directly applicable (O 21 r 3(5)); alternatively they apply by parity of reasoning: Hartnett v Hynes [2009] QSC 225 [19]. That is consistent with the approach taken by Allanson J in Geneva Finance Ltd (Receiver and Manager Appointed) v Hugall [2010] WASC 269 [48]. That includes the proposition that, on an application to disallow an amendment, an amending party should explain any substantial delay in making the amendment: Hartnett [15].
It is convenient to turn to Hightime's submission that the statement of claim has always included a claim for profit‑based relief since, if that is so, the amendment may be seen not to add anything substantially new.

Have the statements of claim always included a claim for profit‑based relief?

The original statement of claim, filed on 6 September 2005, included, as par (b) of the prayer for relief, a claim for an order for compensation pursuant to s 1317H of the Act. Hightime submits that that claim carries with it a claim for profit‑based relief, given the terms of s 1317H(2).
Section 1317H(2) provides that in determining the damage suffered by a corporation for the purposes of making a compensation order, profits made by any person resulting from the contravention are included.
I accept that s 1317H(2) permits a plaintiff to claim a compensation order that includes profits made as a result of the contravening conduct. However, that does not seem to me to detract from the need for a plaintiff to plead and particularise the claim or claims advanced in an action and the relationship between the pleading and the relief claimed. The prayer for relief in a statement of claim is not to be read as if it were at large. Rather, it is to be read against the pleadings and particulars that precede it.
A contravention order is made in respect of 'damage'. Paragraph 36 of the reamended statement of claim pleads that Hightime has suffered loss and damage by reason of Mr Lungan's breaches of the duties pleaded. In the original statement of claim, the loss and damage was particularised as being loss of the opportunity to acquire an interest in the Dadwen Tenure. By the amended statement of claim of 15 July 2009, the particulars were amended to state that Hightime was prevented from acquiring two million shares in Adamus. In each case, the particulars identified something said to have been lost, in the conventional sense, by Hightime. The particulars did not identify any profit made by any person. The particulars were not amended in the reamended statement of claim.
In my opinion, the claim for an order for compensation under s 1317H was and is confined by the plea of loss and damage in par 36, and by its particulars. Thus that claim does not include any element of profit‑based relief.
Nevertheless, prior to the first amendment made in July 2009, the original statement of claim included a claim for profit‑based or benefit‑based relief. The original statement of claim included in par (a) of the prayer for relief a claim for a declaration that Mr Lungan holds on trust 'the benefits received by the defendant arising from [his] breach of fiduciary duties'. That claim plainly encompassed benefits received by Mr Lungan from Shan's entry into the Sanu Agreement, since that conduct was pleaded in par 27(a) as a breach of fiduciary duty.
However, by the amended statement of claim of July 2009, that paragraph of the prayer for relief was deleted.
Moreover, the writ dated 25 November 2004 included a claim for a declaration that any profit acquired by Mr Lungan by reason of his breach of fiduciary duty be held on constructive trust for Hightime.
The constructive trust claim in the original statement of claim and the account of profits claim in the 2010 reamended statement of claim are, for present purposes, similar in character. Both seek relief based on benefits or profits derived by Mr Lungan from Shan's entry into the Sanu Agreement or the Sanu Agreements. (Given the pleading history that I have outlined [24], nothing turns on the fact that the reamended statement of claim pleads two Sanu Agreements while the earlier pleadings pleaded a single Sanu Agreement.)
The fact that for the first several years of the action, Hightime's claim included a claim that any profit or benefits derived by Mr Lungan from the Sanu Agreement were held on constructive trust, seems to me to be of significance to the proper disposition of this application. It is relevant in at least two ways. First, it invites attention to why the claim was deleted and then a profit‑based claim reintroduced in a modified form of an account of profits in 2010. Secondly, it bears upon the nature and extent of any prejudice to Mr Lungan in the reintroduction of a claim based on the profit or benefits he is said to have derived from the Sanu Agreements. I will return to these matters later in these reasons.

Mr Lungan's submissions

By way of overview, the major matters emphasised in Mr Lungan's submissions in opposing inclusion of a claim for an account of profits include the following:
(a)Hightime's delay in the action to date, and the absence of any satisfactory explanation for that delay;
(b)the absence of any explanation for the deletion in July 2009 of the profit‑based claim of constructive trust and for the reintroduction, in the form of an account of profits, in August 2010;
(c)a profit‑based claim is or may be statute barred;
(d)the introduction of a claim for an account of profits will cause delay in the action, and other prejudice to Mr Lungan; and
(e)permitting the amendment would undermine confidence in the legal system.
The first two of these considerations emphasised by Mr Lungan seem to me to militate quite strongly against permitting the reintroduction of a profit‑based claim to relief. However, in the end, I am not persuaded that an amendment to include a claim for an account of profits should be disallowed.
I turn to the major matters relied upon by Mr Lungan.

Hightime's delay

Hightime has not progressed the action with due expedition. It has failed to comply with a number of case management orders. The summary of the history of the action in pars 4 and 5 of Mr Robinson's affidavit of 6 September 2010 is not in dispute.
In essence, the chronology in pars 4 and 5 of Mr Robinson's affidavit reveal the following:
(a)in 2005 there were delays in filing the (original) statement of claim;
(b)there was little progress in the action in 2007 ‑ 2008, apart from some mediation;
(c)in 2009 there were substantial delays in filing particulars of damage, in accordance with orders made 22 April 2009, 8 June 2009 and 29 June 2009;
(d)through 2010 Hightime has failed to file and serve its witness statements in accordance with orders made;
(e)from March 2010 to July 2010 Hightime has sought and obtained extensions of time for the exchange of witness statements on the basis that Hightime would do so within a short time (often about week, never more than a month) but has repeatedly failed to comply with the amended timetables.
The witness statement of Mr Gardiner, the director of and principal witness for Hightime, has not yet been filed and served.
Mr Lungan submits that but for Hightime's delay in progressing the action, the action would have been tried by this stage. I accept that that is so, in the sense that Hightime could, and on the evidence should, have progressed the action more expeditiously since it was instituted in 2004, so that it would have been tried by now. That is a relevant circumstance to be taken into account in the exercise of the discretion respecting amendment. However, the discretion to disallow an amendment is not to be exercised with the object of punishing a party for its previous delays.
Mr Lungan further submits that the explanation offered in Mr Dobson's affidavit of 20 July 2010, for delays in progressing the action in 2010, demonstrates or suggests that Hightime, through Mr Gardiner, puts Mr Gardiner's other commercial aspirations above the need to comply with court orders. I accept that the explanation provided by the affidavit is unsatisfactory. It will be necessary for Hightime to ensure that in the future it complies with court orders and that doing so is given priority over Hightime's and Mr Gardiner's other affairs.

Absence of explanation for the amendment

Mr Lungan submits, and I accept, that there is no direct evidence from Hightime to explain the deletion of the claim for a declaration of trust in respect of benefits, in July 2009, or to explain the insertion, in August 2010, of a claim for an account of profits.
Mr Lungan submits, and I accept, that the absence of such evidence is a weighty factor in favour of disallowing the amendment.
There is evidence that Hightime retained new counsel, being senior counsel, during 2010. The inference may be open that the addition of the claim for an account of profits arose from senior counsel's consideration of the matter. However, the position in that regard is unclear. In any event, the appointment of new counsel is not a sufficient explanation.
Mr Lungan submits that, at the least, the majority of the factual and documentary material founding the claim for an account of profits have been available to Hightime for some years. Given the absence of evidence from Hightime and the generality of the pleading, the position is less than clear, however that inference would seem to be open. Certainly, it can safely be said that there is no evidence that the introduction of the claim for an account of profits was prompted by the recent uncovering of any new material or document.
As I have said, the absence of explanation for the delay in making this claim and for the removal of the constructive trust claim in 2009 is a weighty factor militating in favour of disallowing the claim for an account of profits. I will return to this factor.

Is a profit‑based claim statute‑barred?

Mr Lungan submits that any claim for profits as damages under s 1317H of the Act is statute‑barred. As I have held that the reamended statement of claim does not include any such claim, it is not necessary to deal with that submission.
Mr Lungan further submits that a claim for an account of profits 'may' be statute‑barred by application of the statute of limitations by analogy. In written submissions, Mr Lungan appeared to submit that the introduction of a claim for an account of profits was precluded by the rule in Weldon v Neal (1887) 19 QBD 394 because the claim was statute‑barred. However, in oral submissions, counsel for Mr Lungan put the position no higher than that a claim for an account of profits 'may' be statute‑barred.
For the reasons that follow, the possibility that a claim for an account of profits might be statute‑barred does not seem to me to be a factor of any significant weight in the exercise of the discretion whether to disallow a claim for an account of profits.
The parties' written submissions focused on the contents of the earlier statements of claim in considering whether the claim for an account of profits was statute‑barred. However, limitation is concerned with the writ, not with a subsequent statement of claim: Morgan v Banning (1999) 20 WAR 474, 483; ABB Service Pty Ltd v Hetherington [2001] WASCA 417 [9]; Hughes v St Barbara Mines Ltd [No 3] 2008 WASC 220 [93]. If a writ when issued bears an endorsement in terms sufficiently wide to encompass the amendments sought to be made to the statement of claim, no question of limitation arises: Morgan (483); Hughes (No 3) [93].
The writ in this action included, as part of the relief claimed, a declaration that profit made by Mr Lungan from his breach of fiduciary duties was held on a constructive trust.
That claim was pursued in the original statement of claim. As I have said, it was not pursued in the amended statement of claim of July 2009. The fact that that claim was not pursued in the amended statement of claim does not give rise to a deemed abandonment of what is within the scope of the writ: Jeffrey v Witherow [2006] WASCA 4; (2006) 31 WAR 236 [36]; Hughes (No 3) [93].
Moreover, except in the clearest of cases, an interlocutory application is not an appropriate occasion for determining the application of a question of limitation: Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514, 533. That will certainly be so in the context of an application of the statute of limitations by analogy: Hewitt v Henderson [2006] WASCA 233 [29].
In any event, the allowance of an amendment would not prejudice the defendant in respect of any limitation defence. If there is a good limitation defence, it is not defeated by an amendment, whether by leave or otherwise, or by any doctrine of relation back: Morgan (483); ABB Service [9], [12] and [19].
That brings me to the question of prejudice.

Prejudice

Mr Lungan submits that in circumstances where Hightime has not explained why it now seeks to insert the claim for an account of profits, the court should find that no prejudice to Hightime would be caused by disallowing the claim.
As I have said, I accept that the absence of explanation for the timing of the amendment is a weighty consideration. However, I do not accept that it means that Hightime cannot complain of prejudice. Hightime will be prejudiced by the disallowance of an amendment to add a claim for an account of profits because it will thereby be shut out from advancing the claim at trial. Of course, as Aon makes clear, that prejudice does not have a controlling significance. It has to be weighed with all the relevant circumstances and considerations. Moreover, the weight to be given to it is diminished by Hightime's failure to explain why it includes a claim for an account of profits in August 2010, after having removed the constructive trust claim in July 2009. Nevertheless, it is relevant prejudice.
Mr Lungan submits that if a claim for an account of profits is permitted, he will be prejudiced in a number of respects. First, there will be further delay in the trial of the action. Secondly, Mr Lungan will be put to additional expense and effort. Apart from the additional legal costs, he lives overseas and may need to return to Perth two additional times to search for documents and to finalise the witness statement. Thirdly, he will have to deal with a case that is said to be likely to be statute‑barred. Fourthly, it would defeat Mr Lungan's expectation that the case was to be tried on a particular basis.
For the reasons already given in relation to the limitation issues [82] ‑ [86], I do not consider the third factor to be of any significant weight.
In weighing the prejudice to Mr Lungan it is, in my view, important to bear in mind that the claim for an account of profits is not the first introduction of profit‑based or benefit‑based relief in the action. From 2004 until July 2009, the action included a claim against Mr Lungan that any benefits derived from his breaches of fiduciary duties, including the entry into of the Sanu Agreement, were held on constructive trust. To my mind, that bears significantly on the weight to be given to his expectation that the action sought loss‑based relief only. That expectation has existed only since July 2009.
The first and second factors can be dealt with in two alternative ways.
First, as I have said, it is the inclusion of a claim for an account of profits, not the inclusion of a plea of breach by making profit, that is opposed by Mr Lungan (ts 51 ‑ 52). The inclusion of a plea of breach by profiting will lead to any necessary inquiries and investigations, whether or not it is coupled with a claim for the remedy of an account of profits. Therefore, very little additional effort or investigation is required from Mr Lungan by an account of profits claim, and the additional expense is limited.
Similarly, any delay in the progress of the trial from a plea of breach by profiting will arise regardless of whether the remedies claimed include an account of profits. Thus the inclusion of a claim for an account of profits, in itself, will cause minimal delay, if any.

However, while the position would be more finely balanced, my decision would be the same if the question were about the consequences of insertion of breaches by profiting, as some of Mr Lungan's submissions appeared to assume. For the sake of completeness, I now deal with the first and second factors on this alternative basis.
As to the second factor, the presence of the constructive trust claim until July 2009 means that the claim for an account of profits and breach by profiting would not require Mr Lungan to conduct documentary and other evidentiary inquiries for the first time in relation to events that occurred years ago. Rather, documents and evidence relating to benefits derived by Mr Lungan from the entry into the Sanu Agreement were relevant from the institution of the action until July 2009. Accordingly, they are matters that likely would and, in any case, should have already been the subject of inquiry and investigation.
This seems to me to distinguish the present case from the cases relied upon by Mr Lungan in which new allegations were sought to be raised, for the first time, years after the relevant events, and in which an application for leave was refused or the amendment disallowed. See, for example, Fletcher, Hartnett and Beck v Corrs Chambers Westgarth [2010] FCA 552.
In any case, while one additional trip may be required, I think two would be unlikely. One trip is likely to be needed in any event in order to finalise the witness statement or otherwise progress trial preparation.
I turn to the first factor. In light of the findings I have already made, if I considered that inclusion of a claim for an account of profits would substantially delay the trial, I would disallow the inclusion of the claim.
Counsel for Mr Lungan submits that inclusion of a claim for an account of profits would cause delay first, in relation to the pleadings, and second, in relation to discovery and finalisation of the witness statements. He submits that the pleading stage would require about an additional two months and the search for documents and completion of the witness statements another two to three months.
In light of my disallowance of pars 25A, 25B and 28A, the pleadings will require some tidying up regardless of whether a claim for an account of profits or pleas of breach by profiting are included. Consequently, finalisation of the pleadings will not be delayed by something in the order of two months by including a claim for an account of profits. Moreover, the search for documents and finalisation of the witness statements can be substantially progressed in parallel with the finalisation of the pleadings.
Most importantly, to my mind, given the present state of the case and given the availability of trial time, the action is unlikely to be able to be tried any time before, or substantially before, March 2011. Hightime has suggested that the parties seek the fixing of a trial date. It is, from the court's perspective, open to the parties to seek to fix a trial date in or around March and April 2011. It seems to me that if a trial date were fixed in, say, April 2011, with the claim including an account of profits, directions could program the matter for trial in an orderly fashion. Thus, I do not consider that at this stage the inclusion of pleas of breach by profit will substantially delay the timing of the trial.
Mr Lungan also submits that the prejudice occasioned by delay in the trial of the action was particularly acute given the credit issues that arise in the action in relation to a meeting many years ago. However, because I consider that inclusion of the claim for an account of profits will not cause substantial delay in the date of the trial, that does not seem to me to be a factor of any significance.

Public confidence in the legal system

Mr Lungan submits that public confidence in the legal system will be undermined if the amendment is not disallowed, referring to what was said by French CJ in Aon [30] and [35]. In this context, counsel submits that Mr Lungan has complied 'scrupulously' with case management orders, in marked contrast to Hightime.
French CJ's observations at [30] relate to an application for an adjournment or an amendment that gives rise to an adjournment or vacation of trial dates. That is not the case here. Nevertheless, I accept that any effect on public confidence in the legal system is a matter to be taken in to account in deciding whether to permit an amendment.
Whether allowing an amendment will undermine public confidence is, of course, dependent on all of the circumstances of the case. In the circumstances of this case, as I have outlined them, I am not satisfied that allowing the amendment would be liable to undermine that confidence. I refer in particular to what I have said under the heading 'prejudice'. As I have said, this case must be distinguished from a situation in which an entirely new claim, raising different facts, is sought to be added. In the present case, a profit‑based claim for benefits from the Sanu Agreement was pleaded and maintained for about four years, then removed in 2009, and then essentially sought to be reintroduced in a modified form. Notwithstanding the lack of explanation for this, the two situations are, to my mind, quite different when considering public confidence in the legal system. Furthermore, the amendment will not substantially delay the trial, if at all.

Conclusion on discretion

Mr Lungan submits that even when trial dates have not been allocated, leave to amend may, in some cases, be denied to a party that has had sufficient opportunity to plead its case, referring to Hartnett [27]. I accept that submission. In Hartnett [27] Applegarth J said that that may occur for the sake of doing justice to the other parties and to achieve the objective (prescribed by the applicable rules in Queensland) of the just and expeditious resolution of the real issues in dispute, at a minimum of expense.
Hightime's previous delay, and the absence of any explanation for Hightime's removal of the constructive trust claim in July 2009 and for the insertion of the account of profits claim in August 2010 are weighty factors militating against allowing the amendment. In the circumstances of this case, it can fairly be said that by, say, the beginning of 2010, Hightime had had an ample opportunity to include a claim for an account of profits if it wished to do so. It has not explained why it had not taken the opportunity by that stage.
Those conclusions do not, of themselves, compel disallowance of the claim for an account of profits. Rather, they are to be borne in mind, as significant considerations, in weighing matters that point in favour of disallowance of the amendment, such as the effect on the court and litigants in other actions, the objects in O 1 r 4B, and the prejudice or injustice to the other party to the action. Further, as I have mentioned, they are also to be considered in weighing the prejudice to Hightime.
In my view, in the circumstances of this case, to allow a claim for an account of profits will not have any negative impact on the attainment of the goal stated in O 1 r 4A or the objects stated in O1 r 4B. It will not cause any substantial delay in getting the matter to trial. It will not adversely affect litigants in other actions or the efficient use of court resources. The additional costs flowing from the amendment will be quite limited in the context of the case as a whole. To allow the claim is, in my view, consistent with the just determination of the action.
The amendment will cause some prejudice to Mr Lungan. However, that prejudice is quite limited for the reasons I have given in dealing with the question of prejudice [88] ‑ [104]. First, much of the prejudice of which Mr Lungan complains flows from the inclusion of a plea of breach by profiting, to which Mr Lungan does not object, not from the inclusion of a claim for an account of profits. In any event, the claim for profit‑based relief is not being introduced for the first time. Profit‑based relief was claimed until July 2009. Further, in my assessment, introduction of the claim for an account of profits will not cause any significant delay in the fixing of the trial dates for this action in 2011.
In my view, Hightime should be permitted to advance its claim for an account of profits. In all the circumstances, the prejudice to Mr Lungan if the claim is permitted, and the other matters militating against allowing the claim, do not outweigh the prejudice to Hightime if the claim is disallowed.

Waiver/abandonment

Plainly, the fact that a profit or benefit‑based relief was sought in the original statement of claim and removed in 2009 is relevant to whether the account of profits claim should be disallowed, as a matter of discretion, in the 2010 reamended statement of claim. I have dealt with that question. Although it is not entirely clear, it appears that Mr Lungan's written submissions put waiver as a distinct ground to disallow the amendment. Reference was made to judgments of Toohey and Gaudron JJ in Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, 472 ‑ 475 and 482 ‑ 485. No oral submissions were advanced in support of this proposition.
The position in relation to the law of waiver is explained in Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd[2005] WASCA 106; (2005) 30 WAR 290, 305 ‑ 309 and in Tiao v Lai [No 2] [2010] WASCA 189 [76] ‑ [79]. It is clear that there are certain spheres in which waiver operates independently of election and estoppel. I am not persuaded that the doctrine of waiver operates, independently of election and estoppel, to preclude a plaintiff from reintroducing a claim previously made but abandoned.

Application for further and better discovery

Hightime's application by chamber summons dated 23 August 2010 for further and better discovery was also listed for hearing before me on 19 October 2010. However, counsel for both parties suggested that the result of my decision on the application to disallow the reamended statement of claim would enable the parties to resolve the discovery application without the need for judicial determination. Consequently, that application was adjourned without hearing submissions.

Conclusion

For these reasons:
(a)I disallow pars 25A, 25B and 28A, and par (c1) of the prayer for relief;
(b)Hightime has leave to replead;
(c)Hightime is not precluded, on discretionary grounds, from including a claim for an account of profits.