HP Mercantile Pty Ltd v Clements

[2014] NSWSC 213

Supreme Court

New South Wales

Medium Neutral Citation:	HP Mercantile Pty Ltd v Clements [2014] NSWSC 213
Hearing dates:	5 March 2014
Decision date:	06 March 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Orders made for defendant to have leave to file and serve a Fourth Further Amended Defence containing some but not all amendments sought. Defendant to pay costs thrown away by reason of amendment. Leave granted for defendant to make request that plaintiff calls a witness. Application for order to direct plaintiff to comply with request refused.
Catchwords:	PROCEDURE - pleadings - amendment - where defendant seeks leave to file amended defence - where hearing is due to commence and there have been lengthy delays - whether leave for proposed amendments should be refused on case management grounds - whether plaintiff will suffer prejudice in addressing amendments. EVIDENCE - request to call witnesses - application for order compelling plaintiff to call a witness under Evidence Act 1995 (NSW) ss 167, 169 - where plaintiff refused to comply with request - whether defendant should have leave to make request outside time limit - whether plaintiff's refusal to comply with request made without reasonable cause - matters to be considered in exercise of Court's discretion to order party to comply with request to call a witness.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) ss 56, 57, 58, 64, 64(2) - Evidence Act 1995 (NSW) ss 69(2), 135, 167, 168, 169(1), 169(1)(c), 169(4), 169(5) - Trade Practices Act 1974 (Cth) s 51A
Cases Cited:	- Australian Competition and Consumer Commission v Cabcharge Australia Ltd (No 2) [2010) FCA 837 - AON Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 - Deputy Commissioner of Taxation v Trimcoll Pty Limited [2005] NSWSC 1324 - Trimcoll Pty Ltd v Deputy Commissioner of Taxation [2007] NSWCA 307 - Iacullo v Iacullo [2013] NSWSC 1517
Category:	Interlocutory applications
Parties:	HP Mercantile Pty Ltd (Plaintiff) Phillip Clements (Defendant)
Representation:	Counsel: P M Knowles (Plaintiff) C R C Newlinds SC/A d'Arville (Defendant) Solicitors: Versace McKenzie Lawyers (Plaintiff) Legal & Commercial Solutions (Defendant)
File Number(s):	2009/289202

Judgment

1. By a Notice of Motion dated 24 February 2014 the Defendant, Mr Clements, brings two applications, the first in relation to an amendment of his Defence in the proceedings and the second in relation to an application for a direction that the Plaintiff, HP Mercantile Pty Ltd ("HP Mercantile"), call a particular person, Mr Purcell, as a witness in its case. I will deal with those two applications in turn.

1. By the first aspect of the Notice of Motion, Mr Clements seeks leave to file a Fourth Further Amended Defence in the form exhibited to his affidavit dated 25 February 2014 with leave to the Plaintiff to file any amended reply. That application is made in circumstances that the hearing in the proceedings is due to commence on 11 March and continue for several days over the subsequent weeks, and that there has been a very lengthy delay, by both parties, in bringing the proceedings to hearing and that the hearing date has previously been vacated.

1. Mr Clements sent his proposed Fourth Further Amended Defence to HP Mercantile's solicitors by letter dated 24 February and those solicitors did not take much time to indicate, by letter of the next day, that one aspect of the amendments was accepted, as narrowing the issues in dispute, but several other paragraphs of the proposed amendments were objected to. Mr Clements then filed his application for leave to amend. The affidavit in support of the amendment is not illuminating, in two respects. First it states that the purpose of the amendments "are to more accurately reflect my defence, in light of the evidence [and] as a result, to reduce the issues in dispute". The generality of that statement provides little justification for particular amendments, although I accept that there has been some narrowing and, as will emerge, significant widening by the proposed amendments. The affidavit is also unilluminating in respect of the delay in seeking the amendment. While I accept that the issues are complex, there has nonetheless been a very long period for them to be addressed, and numerous previous amendments in which Mr Clements has had the opportunity to refine the case he wishes to put.

1. Counsel have since exchanged summaries of submissions prior to the argument today, by which the paragraphs to which objection was taken were narrowed and the grounds of objection were clarified. Helpfully, and it is a matter of credit to both parties, the grounds of objection were further narrowed by agreement between them prior to the argument today.

1. HP Mercantile points to the general prejudice which it claims to suffer in dealing with an amendment when a trial date is imminent and contends that Mr Clements has failed to provide "any adequate" (or, on one view, any) explanation for the delay in the circumstances which I have noted. I would prefer to approach the matter, as the parties did in their substantive submissions, by reference to the particular amendments and their consequences, rather than by reference to a general proposition of that kind.

1. The applicable principles are well established and it is not necessary to set them out at length. I am required to exercise my discretion whether to allow the amendment having regard to the provisions of ss 56-58 and 64 of the Civil Procedure Act 2005 (NSW). Section 58 requires the Court to have regard to the dictates of justice when concerning an order for the amendment of a document and requires the Court also to have regard to the provisions of ss 56 and 57. Section 56 identifies the overriding purpose of the just, quick and cheap resolution of the real issues in dispute in the proceedings and s 57 requires proceedings to be managed having regard, inter alia, to the just determination of the proceedings.

1. These provisions point to, and I am conscious of, the requirement that in justice parties have a fair opportunity to put the case they wish to put; however, they also point to the need to take into account the wider public interest in the administration of justice, as to which delay is a significant matter. Section 64(2) in turn provides that, subject to s 58, all necessary amendments should be made for the purpose of determining the real issues raised by the proceedings.

1. I should also have regard to the High Court's decision in AON Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175, where the High Court, in the context of an amendment application, emphasised the significance of delay for the opposing party and the fact that a costs order should not be treated as an automatic solution to problems created by failures to conform to the objectives of case management. That decision also pointed to the fact that a judge was entitled to have regard to the strain that litigation imposed on litigants, but recognised that such strain is of lesser significance for business corporations or commercial entities than for personal litigants. In this case, HP Mercantile is a commercial entity, involved in litigation for commercial gain, and I would regard such strain as of lesser significance. The principles identified by the Court in AON above are, of course, also to be applied having regard to the statutory context established by the Civil Procedure Act and the matters which I have noted above.

1. In the present case, HP Mercantile submits that it will suffer prejudice in dealing with particular issues. It does not lead specific evidence, either from its principal or from its solicitors, of that prejudice, but there are some matters which seem to me to be self-evident, given the history of the proceedings and what is known as to the scope of the issues in them and the volume of the documents in them. I also have regard to the fact that, to some extent, to make further enquiries to scope the extent of searches that HP Mercantile would need to undertake, HP Mercantile would in fact have had to undertake those searches, subjecting itself to the very prejudice of which it complains.

1. Turning to the specific objections raised, HP Mercantile contends that paragraph 3AA of the proposed Fourth Further Amended Defence raises a new factual issue as to whether certain costs and expenses were incurred, which HP Mercantile contends it is unable to meet at trial. That matter overlaps with an issue to which I will refer in respect of the other aspect of the motion. HP Mercantile draws attention to the decision of Australian Competition and Consumer Commission v Cabcharge Australia Ltd (No 2) [2010) FCA 837 where Finkelstein J drew attention to the difference between a non-admission and a denial, noting that, on the one hand, speaking generally, "there is no difference in effect between denying and not admitting an allegation" (at [7]), but also pointing to a suggested custom that a party who does not admit an allegation which is within his or her knowledge will not tender evidence to contradict any evidence led by a plaintiff. That observation is, of course, in its terms limited to the position where a plaintiff does not admit a matter which is within his or her knowledge, and the scope for such a non-admission is now limited in New South Wales by the enquiries a party would need to make before not admitting a matter. In this case, it does not seem to me that it could be suggested that the particular matter is within Mr Clements' personal knowledge.

1. It does not seem to me that the proposed amendment can fairly be characterised as raising a new issue. Mr Clements previously did not admit the allegation as to the expenses incurred and proof of the alleged expenditures had always been necessary to HP Mercantile's case. To the extent that they are sought to be proved by documents, the question of the admissibility of those documents and the weight to be given to them had always arisen. The dispute has perhaps been sharpened by, but does not arise from, the proposed amendment. I would allow the proposed amendment in respect of paragraph 3AA, noting that it is not the withdrawal of an admission, because the paragraph had never been admitted.

1. Objection is taken to proposed paragraph 34(b)(i) on the basis that it raises a new factual issue which HP Mercantile would be unable to meet at trial, namely, the capacity of participants in the relevant project (and I note that the issue does not seem to be unique to Mr Clements) to carry on a "farm business" (as defined in the Loan Agreement) without granting a particular charge or lien. This issue arises in circumstances that the grant of that charge or lien, by the manager of the project, is said to have caused the particular loan to convert from non-recourse to recourse status. HP Mercantile contends that this issue would require investigation of the terms of the appointment of third parties and the basis on which they would have accepted appointment as manager, including whether they might have accepted certain arrangements other than the grant of a security or charge.

1. Mr Clements responds that the Plaintiff's case is documentary only and that there is no evidence of specific prejudice. HP Mercantile in turn accepts that its case to date is documentary, but it cannot be assumed that its response to this issue would have the same character. It seems to me that this issue can be resolved on a narrower basis. The documents in this case are, in any view, extremely voluminous, with the documents having been produced on subpoena by key entities exceeding 150 boxes of documents. It seems to me that I can infer, without specific evidence, that there would be a need to review the documents to address this allegation. Even if, as Mr Newlinds hypothesises on behalf of Mr Clements, there might be a folder in those 150 boxes which deals with the issue, that does not address the difficulty of the need to search to find the folder, and then further to search for the documents which might be there which are not contained within the folder. It seems to me that the prejudice of imposing such a search upon HP Mercantile at this late point is self-evident, particularly when there is no real explanation from Mr Clements as to why the point would not have been raised earlier.

1. Mr Newlinds contends that the point will still be in issue, so far as HP Mercantile will need to establish its case, that the relevant conversion from a non-recourse loan to a loan as to which recourse was available against Mr Clements took place. If that is the case, then that is less reason rather than more reason to permit the amendment. For these reasons, I will not grant leave in respect of the proposed amendment in respect of paragraph 34(b)(i).

1. Objection is also pressed in respect to proposed amendments to paragraphs 34X(e)-(f), 52A(e)-(f) and 52G(g)-(h) which are said to raise a new issue as to the construction of netting and certain facilities. Paragraph 34X(e)-(f) pleads alleged representations as to those matters; paragraph 52A(e)-(f) plead their falsity by the absence of construction of the netting or facilities; and paragraph 52I relies on a reversal of onus under s 51A of the Trade Practices Act 1974 (Cth). I note that the reliance on a reversal of onus may be essential, because a statement which had an element of futurity to it would not have been falsified merely by showing that it had not come to pass. It seems to me that this issue plainly raises factual issues, which are exacerbated where a reversal of onus is relied upon, so as to shift the onus to HP Mercantile to justify the relevant representations, which it could not do without identifying further documents to support them or calling witnesses to support them. In this circumstance, the detriment of HP Mercantile being forced to address this matter at this late stage is again substantial, and I would not grant leave for the amendment.

1. Finally, an amendment is sought to be made in respect of paragraphs 83AA and 83BA which seek to plead that a non-disclosure of the matter pleaded in paragraph 52A(d), as to which the amendment is not now opposed, breached a fiduciary duty which is in turn pleaded in paragraph 83A. The alleged breach is the consequence of an already pleaded fact, as now amended; it overlaps with Mr Clements' representational case, and there is no suggestion that any disclosure has been pleaded in response to that representational case. I can see no prejudice to HP Mercantile in respect of the relevant amendment, which does not seem to me to raise issues other than those which are already raised, directly or by implication, in the representational case. There may be a legal question whether a non-disclosure is capable of amounting to a breach of fiduciary duty, but that point was not taken before me and the issue in any event is not closed beyond argument: Iacullo v Iacullo [2013] NSWSC 1517 at [106]. I will therefore grant leave for the amendment in respect of paragraphs 83AA and 83BA.

1. I therefore make the following directions in respect of this aspect of the motion:

1. The Defendant, Mr Clements, have leave to file and serve a Fourth Further Amended Defence in accordance with this judgment by 4.00pm today.

2. The Defendant to pay the costs thrown away by reason of the amendment.

3. The Plaintiff have leave to file and serve a reply to the Fourth Further Amended Defence by noon on 10 March 2014.

4. Extend the time for the parties to send to my Associate, and serve on each other, their outlines of submissions and to send to my Associate the Court book, to noon on Monday 10 March 2014.

1. I now turn to the other aspect raised by the Notice of Motion, which is an application that Mr Clements, first, have leave to make a request set out in a letter dated 24 January 2014 that HP Mercantile call Mr Purcell as a witness in its case and, second, that HP Mercantile be directed to comply with that request.

1. I have already referred to the circumstances in which this application is filed, again reflecting the delays by both parties over many years, and the fact that the proceedings are set down for hearing commencing 11 March. The application is again supported by Mr Clements' affidavit dated 25 February 2014, which indicates that he has been preparing evidence, in circumstances that he is party to the proceedings and his firm is acting for him, during January and February 2014. He notes that HP Mercantile relies on two documents exhibited to Mr Chapman's affidavit sworn 9 October 2013 and refers to paragraphs 83 and 86 of that affidavit. Those paragraphs respectively refer to a schedule setting out Queensland harvesting and marketing costs for the year ended 30 June 1999 and a schedule setting out Queensland harvesting and marketing costs for the period commencing 1 July 1999 and ending 22 March 2000. The exhibited documents do not precisely correspond to that description, because each also includes memoranda dated 19 September 2001 in identical terms purporting to describe the content of the schedules and to support their accuracy.

1. Mr Clements indicates that, when he was involved in finalising an affidavit of Mr Hennessey which was sworn on 31 January 2014, "[i]t became apparent that there was good reason to doubt the accuracy of the documents" referred to. On 24 January 2014, Mr Clements sent a request to HP Mercantile's solicitors under s 167 of the Evidence Act 1995 (NSW) that HP Mercantile call Mr Purcell, who signed those memoranda, as a witness in the proceedings. On 30 January 2014, HP Mercantile's solicitors responded indicating that they were not aware of Mr Purcell's address and pointing to several other reasons why HP Mercantile did not propose to call him. On 4 February 2014, Mr Clements advised HP Mercantile's solicitors of an address which is or may be Mr Purcell's address and responded to the other matters they raised. Mr Clements appears to have accepted in that letter, possibly rather too readily, that the relevant documents exhibited to Mr Chapman's affidavit are business records and indicated that was the reason for the request made under s 167 of the Evidence Act.

1. HP Mercantile relies, in response to the application, on an affidavit of its solicitor, Mr Versace, dated 4 March 2014 which elaborates the reasons why HP Mercantile resists an order that it call Mr Purcell, including issues as to his credit and an apprehension that he would seek to avoid service of a subpoena or not comply with it.

1. The initial question raised by the motion is whether Mr Clements should have leave to make the request in his letter dated 24 January 2014. That question arises because s 168 of the Evidence Act sets a time limit for making a request where another party has given recent notice of its intention to adduce evidence of a previous representation, so that request may only be made within 21 days after the notice was given, unless the Court gives leave to make it after the end of that period if it is satisfied that there is good reason to do so. Mr Clements accepts, explicitly or implicitly, that such notice was given when Mr Chapman's affidavit was served in October 2013 and the request was, therefore, made out of time.

1. I am satisfied that there is good reason to grant the leave sought by Mr Clements. The evidence goes to a significant issue; Mr Chapman's affidavit appears to have been very detailed, in 39 pages and 253 paragraphs with 113 exhibits and it would have taken some time for Mr Clements to review that affidavit and identify the matters which arose from it to which he was required to respond; the delay in giving the notice was not particularly long, given the history of the proceedings and having regard to the complexity of that affidavit; and, most importantly, the notice was given in sufficient time to allow HP Mercantile to make arrangements to call Mr Purcell had it wished to do so.

1. The next issue is whether the Court should direct that HP Mercantile comply with Mr Clements request that it call Mr Purcell as a witness. Section 169(1) of the Evidence Act provides that, if a party has, without reasonable cause, failed or refused to comply with the notice, the Court may make one or more of specified orders, one of which is an order directing that party to comply with the request, and another of which is an order that the evidence in relation to which the request was made is not to be admitted in evidence. Section 169(4) provides, inclusively, several matters that may constitute reasonable cause to comply with such a request, none of which is established in the present case. Section 169(5) specifies matters relevant to the exercise of a power under s 169(1); however, those matters would only arise if HP Mercantile did not have reasonable cause to fail or refuse to comply with that request so that the Court's power under the section was enlivened.

1. At first instance in Deputy Commissioner of Taxation v Trimcoll Pty Limited [2005] NSWSC 1324 at [55], Hall J observed that the categories of circumstances that may constitute reasonable cause are not closed and might include the position where the existence or contents of the documents are not in issue in the proceedings. That is plainly not the case here. On appeal ([2007] NSWCA 307), Basten JA (with whom Spigelman CJ and Ipp JA agreed) noted that a request under s 167 of the Evidence Act may be made in respect of matters going to admissibility and potentially also to the accuracy of evidence. In the present case, Mr Purcell's evidence would very likely go to the former, so far as there may be an open issue whether the documents are properly admissible as business records, as well as the latter so far as Mr Clements seeks to lead evidence contesting their accuracy. Basten JA also noted that where the documents were created by a third party may be relevant; here, the documents were created by a third party, but it appears that HP Mercantile is a successor in title to that third party, and relies on the documents in order to establish its claim.

1. It seems to me that it is arguable that HP Mercantile had reasonable cause not to call Mr Purcell, so far as it had doubts as to his credit for the reasons set out in Mr Versace's affidavit and could reasonably have anticipated that its resources would be diverted, not long before a trial, to the process of seeking to procure his attendance on subpoena, and it would have been put to the costs of doing so as to which Mr Clements had offered no undertaking, although he notes that he was not expressly asked for one. I consider it preferable not to decide that matter, at this point, because it may arise at the final hearing so far as Mr Clements might seek other orders under s 169 of the Evidence Act. I will assume, for present purposes and for the sake of argument, that HP Mercantile's failure to call Mr Purcell did not have reasonable cause. Even on that basis, I would not make the order that HP Mercantile call Mr Purcell in the relevant circumstances. I accept that, for the purposes of s 169(5) of the Evidence Act, the evidence is important, that there is a dispute about the matter and that there is reasonable doubt as to the authenticity and accuracy of the relevant schedules and the accuracy of the representations recorded in them. On the other hand, there seems to me at least a possibility, for the purposes of s 169(5), that compliance with the request would involve undue expense for HP Mercantile, and it seems to me at least arguable that it would not be reasonably practical for HP Mercantile to comply with the request, although it would arguably have been able to do so had it acted promptly.

1. The matters arising under s 169(5) of the Evidence Act therefore go each way. However, that subsection does not limit the matters that I can take into account. It seems to me that the order sought by Mr Clements requiring HP Mercantile to call Mr Purcell should not be granted on wider grounds. First, the schedules would not be admissible as business records unless the matters specified in s 69(2) of the Evidence Act are established; second, the Court has alternative means available to it to address the issue, including the exclusion of evidence under s 169(1)(c) or s 135 of the Evidence Act in an appropriate case; and, third, and critically, it does not seem to me that it would be proper to force HP Mercantile to call a witness where I accept that it has a genuine doubt as to the truth of the evidence that he would give.

1. For these reasons, I grant leave as sought in paragraph 1 of the motion but do not make the direction sought in paragraph 2 of the motion. It will, of course, be open to Mr Clements to make any further appropriate application in respect of these matters at the hearing.

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Decision last updated: 01 April 2014