ICM Investments Pty Ltd v San Miguel Corporation (Ruling No. 2)
[2012] VSC 509
•24 October 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
List D
No. 1408 of 2011
| ICM INVESTMENTS PTY LTD | Plaintiff |
| v | |
| SAN MIGUEL CORPORATION | First Defendant |
| and | |
| BERRI LIMITED | Second Defendant |
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JUDGE: | DAVIES J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 - 24 October 2012 | |
DATE OF RULING: | 24 October 2012 | |
CASE MAY BE CITED AS: | ICM Investments Pty Ltd v San Miguel Corporation and Anor (Ruling No. 2) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 509 | |
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PRACTICE – PLEADINGS – AMENDMENT – Application for leave to amend statement of claim at commencement of trial – Plaintiff’s case as opened departed from the case as pleaded and particularised – Prejudice caused by the need to adjourn the trial if statement of claim amended – Consideration of principles in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 – Whether plaintiff should be permitted to amend – Leave granted – Trial adjourned
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | NJ Young QC with DC Gration | Baker & McKenzie |
| For the First Defendant | ND Hopkins | Herbert Smith Freehills |
| For the Second Defendant | DG Collins SC with SH Parmenter | King & Wood Mallesons |
HER HONOUR:
These are my reasons for granting leave to the plaintiff (“ICM”) to amend its Statement of Claim and for the adjournment of the trial.
The trial of this action commenced on 22 October 2012. Senior counsel for ICM,
Mr Young QC, opened ICM’s case in the morning. Shortly after the luncheon break, counsel for the first defendant (“SMC”), Mr Hopkins, opened SMC’s case. In the course of his opening, Mr Hopkins submitted that ICM’s case as opened went beyond its pleaded case and that SMC would be prejudiced if ICM was permitted to conduct its case as opened. The case for the second defendant (“Berri”) was then opened by Mr Collins SC, who also submitted that the ICM case as opened went beyond its pleaded case and that Berri would be prejudiced if ICM was permitted to run that case. For the balance of 22 October 2012, and much of the following day, argument was heard on whether ICM had, in fact, opened a case that was not pleaded. On the morning of 23 October 2012, I ruled that ICM’s case as opened had gone beyond its pleaded case.[1]
[1]ICM Investments Pty Ltd v San Miguel Corporation and Anor (Ruling No. 1) [2012] VSC 504.
ICM then sought leave to amend its Statement of Claim. SMC and Berri both opposed the grant of leave, arguing that they would be prejudiced in the conduct of their defences if the trial proceeded on the amended pleading. I accepted those submissions. Mr Young QC then made application to adjourn the trial, arguing that ICM would be severely prejudiced if it was confined to conducting its case as pleaded. SMC and Berri both opposed the adjournment of the trial, arguing that they would be severely prejudiced if the trial did not proceed.
In the interests of the parties knowing in a timely fashion whether the trial was to proceed or not, I ruled later that day on the application for leave to amend and to adjourn the trial and said that I would provide written reasons later. I granted leave to ICM to amend its Statement of Claim and adjourned the trial.
The case as pleaded against the defendants was for breach of contract. The alleged breach related to the non-payment of a dividend that ICM alleged was to be paid to it by Berri immediately before its shares were transferred to SMC. ICM alleged that SMC and Berri were contractually obliged to do everything necessary on their part to ensure that ICM was paid the dividend. A material fact alleged in the Statement of Claim was that Berri had sufficient distributable profits to pay a dividend as at
16 December 2005 (the date on which the share transfer was due to be completed) and as at 28 December 2005 (the date on which completion actually occurred). The case as opened sought to make good that allegation by reference to the monthly operational accounts for Berri for the months of October, November and December 2005, which showed actual and forecasted net profits. The forecasted net profit for the year ended 31 December 2005 was $19.1 million in November, well in excess of ICM’s dividend entitlement on its case as pleaded. ICM’s case as pleaded had not, however, particularised the monthly accounts as the foundation for the allegation that there were sufficient distributable profits. The particulars given were the figures contained in the statutory accounts for the year ended 31 December 2005 which showed that Berri had a general reserve of $5.313 million, an asset realisation reserve of $1.831 million, net profits for year ended 31 December 2005 of $1.717 million and undistributed profits arising from the six months ended 31 December 2004 of
$3.124 million. The particulars stated:
As at 31 December 2005, the sum of $10.268 million, alternatively a sum substantially in excess of the dividend entitlement of $3,472,198.04 was available for distribution as dividends.[2]
The sum of $10.268 million was the sum of the two reserves and the prior year undistributed profits.
[2]Amended Statement of Claim (29 July 2011), particulars to [27].
The defendants claimed that the case put against them, and the case which they had come to court to meet, was that $10.268 million was available for distribution as dividends, based on the statutory accounts. ICM’s case as opened was that the statutory accounts were irrelevant to the question of whether there were distributable profits as at 16 and 28 December 2005 because the dividend that ICM claimed that it was entitled to be paid was an interim dividend. Whether there were sufficient profits to pay an interim dividend depended on the profits that the directors anticipated would be disclosed when the final accounts were produced.[3] Mr Young QC explained (during the course of an argument as to whether his opening had gone beyond the pleadings) that the particularisation of the statutory accounts related to a separate claim against SMC and Berri, no longer pursued, that Berri had failed to declare and pay a dividend for the six month period ending
31 December 2005 as obliged by provisions in a shareholders’ agreement. If that be so, there was then no particularisation of the allegation that as at 16 and 28 December 2005 there were sufficient distributable profits. The defendants were not put on notice that ICM relied on the monthly accounts to prove the allegation of sufficient profits as at 16 and 28 December 2005.
[3]Marra Developments Ltd v B W Rofe Pty Ltd [1977] 2 NSWLR 616, 622 (Hutley JA).
The plaintiffs had presented to them in the opening a case of which the defendants had no warning in the pleadings, in the expert report filed on behalf of ICM, or in the list of issues filed by the parties at the direction of the Court. The unfairness and prejudice to the defendants if required to meet that case, if the trial proceeded, was that they were in no position to deal with the factual and possible legal and accounting issues around the differential between the forecasted profits in the monthly accounts and the actual profits as disclosed in the statutory accounts. The trial had to be adjourned, if leave to amend was granted.
Mr Young QC explained to the Court that he opened the case in the way in which he did because ICM’s legal representatives had genuinely believed that the case as opened was engaged by the pleadings and the list of issues. I accept
Mr Young QC’s explanation. And there was no suggestion from Mr Hopkins or
Mr Collins SC that I should not accept Mr Young QC’s explanation. But the parties are bound by their pleadings in the conduct of the trial. A case which is sought to be presented which significantly departs from the case as pleaded has the potential for causing significant injustice to the other party. Pleadings define what is to be agitated at trial by putting the other side on notice of the case that must be met. It is no answer to a defective pleading that the parties were well aware of, or should have been aware of, the issues to be engaged by cause of action sued on. As Harper J said in Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust)Pty Ltd:[4]
[1] Litigation is sometimes conducted to judgment with barely a glance at the pleadings. It remains generally true that good pleadings are an important, and often crucial, element in the civil justice system. When well drawn, as they always should be, they form the touchstone by which the uses are identified and the relevance of the evidence assessed.
[2] Consistently with this, one of their primary purposes is to reveal to the opposite party how the party pleading puts its case. On reading a well-drawn statement of claim, the defendant to whom it is directed will be able to say: “These are the material facts that will be the subject of the plaintiff’s evidence. They tell a coherent, comprehensible story; and, to the extent that any additional evidence is to be called that might cause me to be taken by surprise, here is that evidence outlined in the particulars”.
[3] A complaint that the pleadings do not achieve this is often met with the response that the opposite party knows very well, from documents and perhaps other sources, what the case against it is. This no answer at all, at least unless the relevant documents are properly incorporated into the pleading. It is, as a general proposition, true to say that each pleading should be sufficient in itself. And although an element in an adversarial process, pleadings are themselves intended to be the opposite of adversarial, at least to the extent that they must, if they are to perform one of their proper functions, inform the opposite party of the case that party will have to meet at trial.
It is regrettable that sufficient attention was not paid to the Statement of Claim and whether it was sufficient to engage how ICM would put its case.
[4][2008] VSC 77.
In Aon Risk Services Australia Ltd v Australian National University[5] the High Court stated that applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to the other party could be compensated by costs. As French CJ stated, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings.[6]
[5](2009) 239 CLR 175.
[6](2009) 239 CLR 175, 182.
This proceeding has been on foot since 29 March 2011. It appears to have been commenced just before the expiration of the limitation period as it relates back to events in 2005. The numerous consent orders filed by the parties show co-operation from the defendants’ legal representatives in bringing this matter to trial as quickly and cost effectively as possible. The steps for preparation for trial were completed by August 2012, when the matter was listed for trial commencing on 22 October 2012 on an estimate of four days. Some of the witnesses to be called by SMC had to travel from overseas and experts have been on call to give evidence. I am mindful of the wasted time, significant costs and considerable inconvenience and delay involved in an adjournment of the trial. These are important and weighty considerations. There is also inconvenience to the Court occasioned by lost sitting days, which is also an important consideration.
On the other hand, there would be a very significant prejudice to ICM if it is not able to put the case which it came to the Court to argue. The case as pleaded does not engage the issue that must be decided by the Court to give ICM the relief that it claims in the Statement of Claim - namely whether, as at 16 and
28 December 2005, the profits then anticipated to be disclosed in the final accounts were sufficient to declare and pay an interim dividend. The amendment is necessary to raise the issue.
It is relevant in the circumstances of this case, and I place weight on the fact, that ICM’s legal representatives had a genuine, but erroneous, view of the issues engaged by the pleadings. Furthermore, that the first time that they became aware that the way in which they put their case was not the case that the defendants understood by their Statement of Claim was after Mr Young QC’s opening. Against this, of course, is the fact that there is wasted time, expense and considerable inconvenience to the defendants by any adjournment of the trial which bears heavily upon the Court’s exercise of discretion and whether ICM should be granted leave to amend, given that that the trial would have to go off if leave is granted.
Weighing up the competing considerations and prejudices, I am disposed to give ICM the opportunity to agitate the case that it thought it had come to trial upon. In the particular circumstances of this case, ICM should be permitted to conduct the case that it had thought it had come to court to conduct, where the need to amend has been caused by the erroneous, but genuine, view of ICM’s legal representatives about the issues engaged by the pleadings and where there would be significant prejudice to ICM if it cannot run the case as opened.
In so concluding, I take into account Mr Young QC’s argument that ICM could not fairly present its answer to Berri’s defence without raising all the same factual and potential legal and accounting issues on which it opened. Berri opened on ICM’s case that there were sufficient distributable profits as at 16, 28 or 31 December 2005 out of which to pay a dividend because Berri had the reserves, net profit and prior year profit disclosed in the statutory accounts.[7] The defence as opened included that those profits were not available for distribution as a dividend as those profits were required to be applied to offset accumulated losses and the interim dividend already paid in excess of the actual profit for the 2005 year.[8] There was some debate about whether that defence was squarely raised by Berri’s pleading. For the most part, the debate reflected how each party had understood the case that it had to meet. The debate highlighted the fact that there is not common ground about the parameters and scope of the litigation and that there is a need for clear identification of the issues raised by the pleadings.
[7]Berri’s written opening submissions (18 October 2012) at [49]-[51].
[8]Ibid at [63]-[65].
Something needs to be said about the list of issues. The list of issues prepared in
May 2012 did not expose ICM’s case, as it was put in opening. Nor did it expose the defendants’ cases, as opened. In failing to expose the issues between the parties, the list of issues failed to achieve the purpose for which it was ordered by the Court. A list of issues is not intended to be a mere repetition of allegations made in the pleadings. There would be no need for a separate list of issues, if that were the case. The list of issues is intended to serve the purpose of identifying what is actually in dispute between the parties. Pleadings often obscure the real issues in dispute or do not define the issues in dispute with sufficient precision to discern where the dispute actually lies. Sometimes, they wholly fail to plead the case that is intended by a party. A list of issues should set out the key issues in a way that meaningfully exposes what the case is really about. An effective list of issues will identify the factual and legal issues presented by the case as pleaded in a way that focuses on what the case is all about. This assists to ensure that the parties and the Court are clearly seized of what the issues are and what must be proved. A list of issues also serves to identify where there is common ground between the parties so that unnecessary time and expense in proving or arguing non-contentious matters can be avoided. The list of issues does not replace the pleadings, but it is a useful and important tool to distil what is in dispute, to ensure that the parties understand the case put against them, to ensure that the pleadings actually set out each party’s case and that the case proceeds as expeditiously and as cost effectively as possible.
Subject to argument, I propose to order ICM to pay the costs of SMC and Berri thrown away by reason of the adjournment of the trial. If any party seeks a cost order different to that order, the party is directed to make that application within seven days. I was asked by Mr Hopkins to indicate what portion of the hearing time has been thrown away by reason of the adjournment of the trial. I decline to do so. The transcript speaks for itself and is there for use on any taxation of costs.
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