Idoport Pty Ltd v National Australia Bank Limited and 8 Ors; Idoport Pty Ltd and Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Ltd "JMG" v National Australia Bank Limited [27]

[2001] NSWSC 509

CITATION:	Idoport Pty Ltd & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Ltd & Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Ltd "JMG" v National Australia Bank Limited [27] [2001] NSWSC 509
FILE NUMBER(S):	SC 50113/98; 50026/99; 3991/00
HEARING DATE(S):	15/06/01, 18/06/01
JUDGMENT DATE:	20 June 2001
PARTIES :	Idoport Pty Ltd (Plaintiff) National Australia Bank Limited (Defendant) Donald Robert Argus (Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	Mr M Dicker, Mr R Alkadamani (Plaintiff) Mr T Bathurst QC, Mr H Insall (Defendants)
SOLICITORS:	Withnell Hetherington (Plaintiff) Freehills (Defendants)
CATCHWORDS:	Practice & Procedure - Application for leave to amend
LEGISLATION CITED:	Supreme Court Rules
CASES CITED:	Clough v Rogers (1974) 48 ALJR 481 Cropper v Smith (188 4) 26 CH D 700 per Bowen LJ Idoport Pty Ltd & Anor v National Australia Bank Limited & 8 Ors [2000] NSWSC 1141 Idoport Pty Ltd & Anor v National Australia Bank Limited & 8 Ors [2001] NSWSC 123 Idoport Pty Ltd & Anor v National Australia Bank Limited & 8 Ors [2001] NSWSC 142 Idoport Pty Ltd & Anor v National Australia Bank Limited & 8 Ors [2001] NSWSC 328 Idoport Pty Ltd & Anor v National Australia Bank Limited & 8 Ors [2001] NSWSC 485 Mackay v Dick (1881) 6 App Cas 251 Secured Income Real Estate (Aust) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596 State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146 Trego v Hunt [1896] AC 7,
DECISION:	Leave to amend to be allowed.

INDEX

Paragraph No.

The Application for Leave to Amend 1
The Plaintiffs’ Written Submissions 3
The Defendants Submissions 10
Alleged implied term said to be unarguable 11
Alleged failure to identify what were the posited "reasonable steps". 12
Prejudice 15
Dealing with the application for leave 22
The Principles 22
Submission that implication unarguable 23
Proper Particulars 25
Prejudice 27
Short Minutes 46
MLC Proceedings 49

THE SUPREME COURT

OF NEW SOUTH WALES
EQUITY DIVISION - COMMERCIAL LIST

EINSTEIN J

20 June 2001

50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS

50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS

3991/00 IDOPORT PTY LIMITED (“JMG”) v NATIONAL AUSTRALIA BANK LIMITED

JUDGMENT - Application for leave to further amend the proposed final version of the Fourth Further Amended Statement of Claim

The Application for Leave to Amend

1 Following delivery of the judgment [2001] NSWSC 485 of 12 June 2001, Idoport Pty Ltd has sought leave:

(1) to amend the proposed final version of the Fourth Further Amended Statement of Claim in alleging a further term to be implied into the Consulting Agreement as follows:
"18.8 That NMG would, and NAB would procure that NMG would, take all reasonable steps after 6 November 1996 to enhance modify and add to the Ausmaq Service as it existed as at 6 November 1986"
[The Particulars to be relied upon are the particulars presently to be found at page 21 of the Third Further Amended Statement of Claim, namely:

"Each of the terms is implied, and it is contended that it is implied

(1) as a matter of law (see, for instance, Mackay v Dick (1881) 6 App Cas 251 and Trego v Hunt [1896] AC 7), and

(2) as a matter of necessary implication, from the other terms of the Consulting Agreement, and/or
(3) as a matter of fact, as implied in fact, as necessary to enable the Consulting Agreement to operate according to its terms and being reasonable, by reason of


(a) the nature and terms of the Consulting Agreement and the Restructuring Agreement and related agreements referred to in the Restructuring Agreement as required for completion, and

(b) the facts and matters pleaded in paragraphs 8, 9, 12, 16, 17 and 20 to 25 of the Statement of Claim and further particularised in the Particulars of Statement of Claim dated 9 October 1998 and previously further supplied in the Plaintiffs’ reply to the Defendants’ request for further and better particulars of the Statement of Claim.

The terms of the Consulting Agreement particularly relied on are the definitions in Clause 1.1, and clauses 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 20 and Schedule 2.”]
(2) By way of amending to plead further breaches of contract and breaches of fiduciary duty by NMG and NAB as follows:

“NMG has, and NAB has either itself or, as the case may be, procured and induced NMG to act so that NMG has:

50.18 Since on or about June 1997, alternatively May-July 1998, failed to take all reasonable steps to enhance, modify and add to the Ausmaq Service as it existed as at 6 November 1996

Particulars


Failed to take all reasonable steps to cause the Ausmaq Service to be enhanced, modified and added to, so as to incorporate technical development for a functionality of similar or equivalent functionality to, alternatively so as to incorporate the actual technical development for the functionality of, the following services: the Gateway Service, the FX Auto-Dealing Service, the Premium Automated Margin Amending Service and the Project Maple Leaf/Operation First Choice Service.

Failed to take all reasonable steps to cause NAB to develop and implement the following services or services with equivalent or similar functionality to the following services, through enhancements, modifications and additions to the Ausmaq Service: the Gateway Service, the FX Auto-Dealing Service, the Premium Automated Margin Amending Service and the Project Maple Leaf/Operation First Choice Service.

51.19 In paragraphs 50.18, NMG has breached the terms of the Consulting Agreement alleged in paragraph 18.8 above.
Particulars
See the particulars to paragraph 50.18 above
52.19 In paragraph 50.19, NAB has breached or induced and procured NMG to breach the terms of the Consulting Agreement alleged in paragraph 18.8 above.
Particulars
Failure to procure NMG to take all reasonable steps to enhance, modify or add to the Ausmaq Service so as to incorporate technical development for a functionality of similar or equivalent functionality to, alternatively so as to incorporate the actual technical development for the functionality of, the following services: the Gateway Service, the FX Auto-Dealing Service, the Premium Automated Margin Amending Service and the Project Maple Leaf/Operation First Choice Service.
(3) To insert the particulars previously provided as particulars (1) and (2) and set out at the commencement of paragraph 23 of the judgment [2001] NSWSC 485, as particulars to paragraphs 30(2), 40(2), 46(2) and 49I (2) (with necessary amendments for the names of the relevant subject services) and subject to minor insubstantial amendments [see paragraph 26 of MFI P184].

2    The issue is one of real significance for the reasons given in paragraphs 7 to 49 of the judgment of 12 June.

The Plaintiffs’ Written Submissions

3    The plaintiffs relied upon two sets of written submissions in support of their application for leave to amend in the following terms:

Submissions dated 14 June 2001 [MFI P184]

“A. Introduction
1. On 8 June 2001, Einstein J at transcript T10,101-03 referred to the Court’s desire for further submissions from the parties in relation to the Plaintiffs’ proposed further particulars in relation to paragraph 30(2) of the proposed Fourth Further Amended Statement of Claim (“4FASC”).

2. This outline of written submissions provides background to the issue before the Court and attempts to provide clarification of the issue for the benefit of the Court and the parties.

3. Submissions were given by the parties in relation to this matter on 4 June 2001. The submissions for the Defendants are at T9803 line 9 – T9810 line 5 and the Plaintiffs’ position is at T9813 line 26 – T9820 line 36.

4. Although this issue was argued in the context of paragraph 30(2) of the 4FASC it also relates to the three other services pleaded in 4FASC and the corresponding paragraphs in relation to each service are in the following paragraphs: paragraphs 40(2), 46(2) and 49I(2).
B. Background
5. In MFI P71 the Plaintiffs attempted to set out what they said was the scope of the Defendants’ obligation to commercialise the Ausmaq Service. Also, in MFI P76 the Plaintiffs attempted to set out the pre-contractual common commercial objectives of the parties which included the following:
“3. As part of the commercialisation and marketing of the Ausmaq Service following acquisition by NAB, planned enhancements, modifications and additions and functionality developments would be funded and made to the Ausmaq Service, including in the immediate short term, the enhancements and additions of a general superannuation facility (tax advantaged accounts) and equities trading.”
[see Bundle page 6]
6. The ninth pre-contractual common assumption or objective was as follows:
“9. Following acquisition of Ausmaq by NAB, it was not intended by NAB/NMG and JMG to commercialise Ausmaq only locally exploiting its functionality then in use but rather it was intended to exploit all the existing functionality with modifications, enhancements and additions and expand the functionality of Ausmaq and commercialise the Ausmaq Service on a global basis.”
[see Bundle page 8]

7. Thereafter, the Plaintiffs in December 2000 served their proposed 4FASC.

8. That pleading included the following as proposed implied terms in paragraphs 18.6(ii) and 18.6(iii):
“18.6(ii) That NMG would, and NAB would procure that NMG would, do everything technically possible (and would enhance, modify or add to the Ausmaq Service to the extent necessary) to exploit fully the existing actual and potential functionality of the Ausmaq Service, with the following:
(a) Tax Advantaged Accounts (General Superannuation); and/or
(b) Share Trading; and/or
(c) Foreign Currency Trading; and/or
(d) Fixed Interest securities; and/or
(e) Debenture market products; and/or
(f) Insurance Products; and/or
(g) Margin Lending.
(a) Particulars
See the matters referred to in MFI P71.
18.6(iii) In the alternative to 18.7 [ should read 18.6(ii) ], that NAB and NMG would take all reasonable steps to exploit fully the existing actual and potential functionality of the Ausmaq Service with the following functionality (and enhance, modify or add to the Ausmaq Service to the extent necessary) so as to provide:
(a) Tax
(b) Advantaged Accounts (General Superannuation); and/or
(c) Share Trading; and/or
(d) Foreign Currency Trading; and/or
(e) Fixed Interest securities; and/or
(f) Debenture market products; and/or
(g) Insurance Products; and/or
(h) Margin Lending.
(b) Particulars
See the matters referred to in MFI P71.”
[See Bundle pages 11-12]
9. The following was also proposed for paragraph 30 of 4FASC:
“30. The Gateway Service is and will be a service within the definition of the Ausmaq Service (as defined in the Consulting Agreement) being a service with equivalent or similar functionality to:
(1) the service of providing an automated securities trading system and related services being the AUSMAQ Service (by any name anywhere) as it was in fact at the relevant date (6 November 1996), and/or
(2) the service of providing an automated securities trading system and related services being the AUSMAQ Service (by any name anywhere) as it was in fact at the relevant date (6 November 1996) and as it is or should be or should have been enhanced or modified or added to (for the duration of the Consulting Agreement).
(c) Particulars
(a) Consulting Agreement Clause 7 and Clause 1.1: definition of Ausmaq Service.
(b) See Annexure Table 2 – Functionality Comparison pages 1-27.”
[See Bundle pages 13-14]
10. On 5, 6, 7 and 8 March 2001 the Plaintiffs’ Notice of Motion seeking leave to file the 4FASC was heard. This included cross-examination of Mr Damian Lovell on his affidavit sworn 2 March 2001.
11. Following a review of Mr Lovell’s affidavit and a consideration of his oral evidence, the Plaintiffs withdrew the amendments to the claim in paragraphs 18.6(ii) and 18.6(iii). See also T6444 lines 4-16 and T6578-9. [See Bundle pages 15-17]. At the latter pages the Plaintiffs confirmed that they withdrew the claim to the amendments in 18.6(ii) and 18.6(iii).
12. This also resulted in the withdrawal of the corresponding breach provisions in paragraphs 50.16, 51.17, 52.17, 50.17, 51.18 and 52.18 of 4FASC. [See 12 March 2001 judgment paragraph 7]

13. The Plaintiffs however made it plain that this withdrawal did not affect the plaintiffs' case otherwise that the express and implied obligations for which the plaintiffs already contended,( inter alia) obliged NMG and NAB to develop the Ausmaq Service technically to commercialise it locally and/or globally, commencing with the obligation to adopt and implement the full 1997 Business plan with its specified areas requiring technical development: see transcript 6603-6. [See Bundle pages 18-21]

14. The Plaintiffs, however, pressed the amendments to paragraphs 30, 35, 40, 46, 46B and 49I where they allege in essence that, for example, the Gateway Service is a service of equivalent or similar functionality to the Ausmaq Service “as it is or should be or should have been enhanced or modified or added to (for the duration of the Consulting Agreement)”.

C. Judgment of Einstein J dated 12 March 2001
In paragraph 72 of the Court’s judgment dated 12 March 2001, Einstein J stated as follows:
15. “72. …The second part of the defendants objection goes to an important matter which relates to the lack of transparent reasoning in identifying in paragraph 30(2), what, as a matter of an alleged legal obligation, is the obligation for which the defendants contend to support the allegation that there was a binding obligation on any of the defendants to enhance, modify or add to the Ausmaq Service in the terms stipulated for in the last two or so lines of paragraph 30(2). As the transcript will record Mr Bathurst took the court carefully through the steps which the plaintiffs previously sought to take and now seek to take, in moving from paragraphs 29 to paragraph 33.3. The defendants assert that they are entitled to require the plaintiffs to identify exactly where the contractual obligation is. The plaintiffs are obliged to identify with precision whether they assert that there was an obligation to enhance Ausmaq so that it became Gateway, if that is what is claimed, or alternatively to identify with precision whether they assert that there was an obligation, once the Gateway Service was envisaged, to use Ausmaq to supply it, if that is what be claimed. The claim is apparently put outside of the existing reference in paragraph 33.12 to a breach of clause 7 of the Consulting Agreement. To my mind this certainly requires to be clarified and I direct the plaintiffs make the position clear before being content to allow so much of paragraph 30 as includes within sub-paragraph (2) the words following the reference to the date 6 November 1996. Outside of this aspect, the balance of the claimed amendment to paragraph 30 is apparently not opposed and therefore ought be allowed.”

D. Provision of further and better particulars by the Plaintiffs
16. The Plaintiffs’ first particulars of paragraph 30(2) of FASC became MFI P130. The final version of the particulars which were contained in a letter from Withnell Hetherington to Freehills dated 7 May 2001 became MFI P162.

17. These were the particulars before the Court when the matter was argued on 4 June 2001. The Defendants filed supplementary submissions dealing with the issue which became MFI D122.
18. In the course of argument Mr Garnsey identified the obligation in paragraph 10(3) of the particulars supplied by the Plaintiffs which were MFI P162 as being an obligation on the Defendants “to take reasonable steps to enhance or modify or develop” the Ausmaq Service. See T9816 lines 6-12. [See Bundle page 22]


E. The particulars supplied in their context
19. It has always been the Plaintiffs’ case that the existing paragraphs of the Third Further Amended Statement of Claim pleaded obligations [See Bundle pages 23-24]:
(a) that as a term and condition of the Consulting Agreement JMG should have a substantial and continuing involvement in and effective control of the market, technical and systems development of NMG for the Ausmaq Service (paragraph 13.1);
(b) that as a term and condition of the Consulting Agreement JMG should have reasonable involvement by the provision of services of JMG in and in relation to the reasonable operation, development and commercialisation of the Ausmaq Service throughout the world in accordance with the annual Business Plan, which must be prepared to meet and achieve those objectives (paragraph 13.3);
(c) that NMG and NAB should take all reasonable steps to enable the implementation and operation of the Consulting Agreement, including the provision of adequate finance, management and personnel to enable the operation and commercialisation of the Ausmaq System and business throughout Australia and globally (paragraph 18.1);
(d) that NMG, NAB and JMG should co-operate to enable the performance by each party of its obligations under the Consulting Agreement (clause 18.2);
(e) that NMG and NAB should not conduct their respective business so as to affect prejudicially or diminish the value of the performance bonus or other rights of JMG under or in relation to the Consulting Agreement, or so as to render the Performance Bonus or other rights worthless (clause 18.3).
20. The Plaintiffs saw these obligations and the fiduciary obligations pleaded in paragraph 27 of the Third Further Amended Statement of Claim as leading to the following conclusions:
(a) NMG and NAB should provide adequate finance, management and personnel to enable the operation and commercialisation of the Ausmaq System including the market, technical and systems development of NMG for the Ausmaq Service;
(b) NAB and NMG could not effectively stultify the Ausmaq Service by refusing to provide adequate finance, management and personnel for its operation, commercialisation and enhancement.
21. In relation to the four NAB Services, the Plaintiffs saw paragraph 30.3 of the Third Further Amended Statement of Claim and its equivalents in relation to the other NAB Services as leading to the conclusion that if the Ausmaq Service could be enhanced, modified or added to so as to incorporate functionality which was similar or equivalent to the functionality of any one or more of the NAB Services, and provided that was reasonable in the circumstances (that being a question of fact), NAB/NMG would be obliged to cause the functionality to be provided by the NAB Services to be provided through Ausmaq. [See Bundle page 25]
22. The Plaintiffs’ primary case has always been that all of the NAB Services are similar or equivalent to the Ausmaq Service within the definition of the “Ausmaq Service” in the Consulting Agreement.

23. The Plaintiffs’ alternative case is that if they are wrong in that submission, and if the Ausmaq Service could reasonably have been enhanced, modified or added to, to incorporate the functionality of any one or more of the NAB Services, thereby making the Ausmaq Service similar or equivalent to any one or more of the NAB Services, then NAB and NMG were obliged to cause this to happen. The Plaintiffs say that this was an existing obligation arising out of the provisions pleaded in paragraphs 13, 18 and 30 (and the similar paragraphs relating to the other services) in the Third Further Amended Statement of Claim. It was on this basis that Mr Martin’s 10 July 2000 statement was served. The Plaintiffs say that the Defendants would not and could not have interpreted the service of that expert report of Mr Martin as going to any other issue. Indeed, the many statements filed for the defendants in answer to Mr Martin's statements on technical matters, and the difficulty in technical development of the Ausmaq service (see the statements of Professor Thomas Mr Hodgkinson particular) shows this to be the case.

24. In order to attempt to clarify the matter, the Plaintiffs sought leave to make the amendments reflected in paragraphs like paragraph 30(2) of 4FASC.

F. Judgment of Einstein J dated 12 June 2001
25. The Court’s judgment of 12 June 2001 expresses the view that, in effect, the particulars supplied which are MFI P162 are deficient in that they amount in substance to the allegation of new contractual terms instead of particulars. The Plaintiffs in the light of the Court’s views propose the following.
26. First, in relation to the proposed particulars numbered (1) and (2) (see Einstein J’s judgment of 12 June 2001 paragraph 23) to insert these particulars as particulars in the proposed final 4FASC following paragraphs 30(2), 40(2), 46(2) and 49I(2) (with necessary amendments for the names of the relevant services) subject to:
(a) inserting the word “the” before “Ausmaq system” in the first line of particular (2); and
(b) to delete “10 July 2000 statement” in the last line of particular (2) and substitute “25 May 2001 statement”.
See also paragraph 25 of the Court’s judgment of 12 June 2001.
27. Secondly, to propose and seek leave for the addition to the proposed 4 FASC of the paragraphs set out in Schedule A to these submissions.
28. It is submitted that the proposals in Schedule A:
(a) reflect the substance of the served particulars to paragraph 30(2) of 4FASC;
(b) reflect the Court’s views in paragraphs 26-47 of the judgment of 12 June 2001;
(c) whilst somewhat similar to existing paragraph 18.6 (iii) of the originally proposed 4FASC, are very much narrower than that paragraph;
(d) are, by the particulars to the breach paragraphs, limited to the four services in the 25 May 2001 report of Mr Martin;
(e) are, at the least, arguably able to be inferred from the Consulting Agreement or implied as a matter of fact.
G. Prejudice
29. The Plaintiffs’ case has always been that the Defendants were obliged unless they complied with the procedure set out in clause 4 of the Consulting Agreement, to accept the Business Plan propounded by JMG and to provide the necessary funding, management and staff to put that Business Plan (including any enhancements, modifications or additions to the Ausmaq Service referred to in the Business Plan) into effect. Any Business Plan included the requirement for the globalisation of the Ausmaq Service (clause 4.2(a)).

30. What the proposed additions plead is an additional obligation and that is to take all reasonable steps to enhance and to modify and to add to the Ausmaq Service.

31. In the case of the four Bank services, the Plaintiffs say that such enhancement, modification and addition should have occurred and rely on Mr Martin’s statement dated 25 May 2001. See also T9816 line 49 [See Bundle page 22] to T9817 line 1. See also T9818 line 46 to T9819 line 9. [See Bundle pages 26-28]

32. The Plaintiffs submit that that implied term satisfies the legal test for implication as an implied term either in law or in fact and leave should be given to amend to incorporate such a term.
33. Further, the Defendants are not prejudiced as:
(a) They have had the substance of Mr Martin’s report since 10 July 2000;
(b) The breaches relied upon and the issues to be litigated are no more than those which have been largely in issue and as to which statements have been filed before but at least since 10 July 2000, namely:-
(i) the functionality of the four NAB Services at a conceptual level (see the statements of Mr Maconochie, Professor Aitken and Mr Macpherson and
(ii) the development of the AUSMAQ Service (see the statements in particular of Professor Thomas and Mr Hodgkinson), and
(iii) (if it be relevant) the general development history of the four NAB Services. Numerous statements have been filed by the Defendants relating to this matter.
(c) The Defendants are not obliged to investigate generally reasonable technical development of the AUSMAQ Service locally or globally already raised in substance and under the express implied terms of the Consulting Agreement and the breach of fiduciary obligations case in relation to the four NAB Services and the obligations, contractual and fiduciary not to compete with the AUSMAQ Service so as to frustrate or sterilise the Consulting Agreement.”

Submissions dated 18 June 2001 [MFI P185]

“1. This additional note of submissions is prepared in response to certain matters raised by Your Honour on 15 June 2001 concerning the revised proposed Fourth Further Amended Statement of Claim (“Rev4FASC”) Paragraphs 30(1) and (2) and the general relevance of Mr Brian Martin's Enhancement Report dated 25 May 2001.
2. The 3FASC and Paragraphs 33.1, 33.2 and 33.3 of that pleading (and the corresponding paragraphs relating to the other services) and paragraphs 51.16, 52.16 and 53 have, in the Plaintiffs’ submission, pleaded breach and procuring breach of contract and breach of fiduciary duty (see paragraph 27) in and by the specific development of the four NAB Services. The original particulars did not include the 4 Bank Services in any way because the Plaintiffs only became aware of them after the commencement of proceedings.
3. In relation to whether or not the four NAB Services were Services of similar or equivalent functionality to the Ausmaq Service, the Plaintiffs have always relied upon and pleaded the definition of Ausmaq Service in the Consulting Agreement as including the Ausmaq Service as enhanced, modified or added to. In the Opening MFI P70 paragraphs 3, 4, 5 and 6, pages 6 to 11, the Plaintiffs deal with the matter: see especially at paragraphs 3 and 4:
The definition of AUSMAQ Service
3.1 Under the Consulting Agreement definition (Consulting Agreement Clause 7 and Clause 1.1: definition of Ausmaq Service), the Ausmaq Service is defined as meaning:
(1) the service of providing an automated securities trading system and related services known as the Australian Market Automated Quotation System or Ausmaq System or Euromaq regardless of its name, and includes but is not limited to
• the holding of Securities (as defined in the Consulting Agreement) and Entitlements (as defined in the Consulting Agreement) for clients,

• the provision of a related deposit facility,

• the execution of Securities (as defined in the Consulting Agreement) transactions with related client portfolio administration and reporting (or any of them),

and

(2) any service with equivalent or similar functionality, and

(3) any enhancements, modifications and additions to the service [in sub-paragraph (1) above]

anywhere in the world.

3.2 Consequently the definition includes:
(1) the service of providing an automated securities trading system and related services being the AUSMAQ Service (by any name anywhere) as it was in fact at the relevant date (6 November 1996),

(2) the service of providing an automated securities trading system and related services being the AUSMAQ Service (by any name anywhere) as it was in fact at the relevant date (6 November 1996) AND as [it is or should be or should have been] enhanced or modified or added to (for the duration of the Consulting Agreement), and

(3) any service with equivalent or similar functionality to either of the services referred to in (1) or (2) above in this sub-paragraph.

4. The definition is ambulatory for the duration of the Consulting Agreement as to 3(3) above and catches any service with equivalent or similar functionality to either of the following:
(1) the service of providing an automated securities trading system and related services being the AUSMAQ Service (by any name anywhere) as it was in fact at the relevant date (6 November 1996), or

(2) the service of providing an automated securities trading system and related services being the AUSMAQ Service (by any name anywhere) as it was in fact at the relevant date (6 November 1996) AND as [it is or could be and should have been under the Consulting Agreement] enhanced or modified or added to (for the duration of the Consulting Agreement).

4. Consequently the Plaintiffs' case raises, and the Plaintiffs say it has always raised, equivalent or similar functionality of the four NAB Services in respect of:
(1) the Ausmaq Service as at 6 November 1996,

(2) the Ausmaq Service as enhanced, modified or added to for the duration of the Consulting Agreement, and

(3) the Ausmaq Service as it could reasonably be enhanced, modified or added to for the duration of the Consulting Agreement, and

(4) the Ausmaq Service as it should reasonably be enhanced, modified or added to for the duration of the Consulting Agreement.

The Plaintiffs say that these matters are all raised by the pleading in 3FASC (paragraph 30 and corresponding paragraphs for the other services), but after comment by the Defendants, sought to amend paragraph 30 (and corresponding paragraphs for the other services) in rev4FASC, in respect of the Ausmaq Service as specified in paragraph 4(4) above in order to make their position unarguably clear.
5. In the Opening MFI P70 paragraphs 65 and 66, Mr Martin's Enhancement Report (of 10 July 2000, now replaced by the Report of 25 May 2001) was dealt with in the following terms, as relevant to the Ausmaq Service as specified in paragraphs 4(2), 4(3) and 4(4) above (see pages 141-145 of MFI P70):
Modifications, Enhancements and Additions - Mr Martin's Evidence

65. If it is necessary to find that any of the four NAB Services in question are services with equivalent or similar functionality to the AUSMAQ Service as able to be enhanced or modified or added to within the definition of the AUSMAQ Service, the Statement of Brian Martin dated 10 July 2000 (No 53) provides evidence which is all one way. Mr Martin says:

4. For the purposes of this statement I have been provided with the documents which are listed in Schedule 1 to the letter of instructions referred to in the preceding paragraph. I have reviewed all the documents listed briefly but have concentrated my review on the technical documentation. Although I would have ideally wished to review the documents supplied in more detail, time was not available to do this although, from my review, I am of the opinion that it is very unlikely that any of my views set out in this report would alter.

5. I refer to the various statements filed on behalf of the Defendants referred to in Annexure 1 to the 10 July letter from Withnell Hetherington relating to the development of the following NAB services:

FX Autodealing

Automated Margin Lending

Gateway

Maple Leaf/Operation First Choice.

6. These statements in essence say that the NAB four services were developed without relying on AUSMAQ.

7. I have been provided with a Code of Conduct for Expert Witnesses in the Supreme Court of New South Wales, which I have read and agreed to be bound by. A copy of the Code is annexed to this statement and marked with the letter “C”.

2) ASSUMPTIONS MADE

8. In forming the opinions expressed in this report, I have made the assumptions referred to in Schedule 2 to the letter of instructions which I received from Withnell Hetherington dated 10 July 2000.

9. In providing the opinions set out in this report I have relied upon the background knowledge and expertise I have obtained in relation to the AUSMAQ system in the course of working on the preparation of the development of that system, on its establishment, and on the maintenance and improvement of that system in the period from 1995 to 1999 (the “AUSMAQ system” or “AUSMAQ”). I understand the AUSMAQ Service (the “AUSMAQ Service”) is defined in the Consulting Agreement as being:

“Ausmaq Service means the service of providing an automated securities trading system and related services known as the Australian Market Automated Quotation System or Ausmaq System or Euromaq regardless of its name and includes but is not limited to, the holding of Securities and Entitlements for clients, the provision of a related deposit facility, execution of Securities transactions with related client portfolio administration and reporting and any service with equivalent or similar functionality, and any enhancements, modifications and additions to the service anywhere in the world.”
3) OPINION
10. In paragraph 5.1.1 to the letter of instructions from Withnell Hetherington dated 10 July 2000 I was asked for my opinion on the following question:
“In your opinion, could the Ausmaq Service as it existed in the AUSMAQ system either at:

(a) 6 November 1996;

(b) 2 August 1997; or

(c) the last date you had day to day supervision of the Ausmaq system,

have been enhanced, modified or added to, if necessary, so that any or all of the following NAB services had equivalent or similar functionality to the AUSMAQ Service:

(a) FX Autodealing Service;

(b) Automated Margin Lending Service;

(c) Gateway Service; and

(d) Maple Leaf/Operation First Choice Service.”

4) SUMMARY OF OPINIONS REACHED
11. A summary of my opinions follows. This report is prepared in the light of the comments in the statements filed on behalf of the Defendants referred to in Annexure 1 to the 10 July 2000 letter from Withnell Hetherington that the four NAB services were developed without relying on the AUSMAQ Service.
Automated Margin Lending Service

12. In my opinion the AUSMAQ system as it existed at 6 November 1996, 2 August 1997 and the last date on which I had day to day supervision of the AUSMAQ system (April 1999) (“the Relevant Dates”), could, if necessary, have been enhanced, modified or added to so that NAB’s Automated Margin Lending Service had virtually the same or equivalent functionality to the AUSMAQ Service.

Maple Leaf Service

14. In my opinion, the AUSMAQ system as at all three Relevant Dates could have been enhanced, modified or added to if necessary so that the NAB Maple Leaf Service has or would have similar functionality to the AUSMAQ Service.

FX Autodealing Service
15. In my opinion the AUSMAQ system as at all three Relevant Dates could have been enhanced, modified or added to, if necessary, so as to interface with either the NAB’s FX Autodealing Service system or with one of the other (eight) computer systems which NAB used in the processing of foreign exchange. The AUSMAQ system could also have been enhanced if necessary to provide an “automated system through which customers can purchase selected FX products”. In my opinion the FX Autodealing Service then would have equivalent or similar functionality to the AUSMAQ Service.
Gateway Service
16. In my opinion the AUSMAQ system as at the three Relevant Dates could have been enhanced, modified or added to, if necessary, so as to support and include most of the features of the NAB Gateway Service and the NAB Gateway Service then would have equivalent or similar functionality to the AUSMAQ Service.
66. Mr Martin's evidence supports the evidence of Mr Maconochie in his Statement in Reply to Mr Macpherson dated 4 July 2000 ( No 32 ) at paragraphs 20 and 26.2:
“20. Where any of the four National Services possessed or proposed to possess certain functionality that the AUSMAQ Service did not have as at the time I made my comparisons in my Second and Third statements, in my opinion, and AJM gives no reason to the contrary in his report, there is no reason why the AUSMAQ Service could not have been modified and enhanced such that the additional functionality that may have been included in the four National Services between the time I made my comparisons in 1998 and 1999 and the date 15 January 2000 when AJM makes his comparison rendered each of the National services similar or equivalent to the AUSMAQ Service.

26.2 As I have referred to in paragraph 20 above, the functionality of the AUSMAQ Service was not necessarily frozen in time, but could reasonably have been or be modified and enhanced to meet the needs of the target markets as they developed. There is no practical reason that I am aware of, and the Consulting Agreement as I understand it does not preclude it, why the functionality of the AUSMAQ Service could not have been modified and enhanced beyond the functionality I have assumed in my Second and Third Statements. It appears that AJM has been asked to compare the four National Services which have been started and continuously developed since 1996 to an AUSMAQ Service undeveloped suspended in time since 1996, or, alternatively, if developed at all, to an unspecified and unknown extent.”

6. Mr Martin's Enhancement Report gives evidence of the way in which the AUSMAQ Service could be enhanced, modified or added to to have the same technical development as the four NAB Services to achieve similar or equivalent functionality.
7. This evidence is, in any event, also clearly relevant and admissible in relation to other issues raised by many statements for the Plaintiffs and the Defendants long filed:

• As to breach of contract, procuring breach of contract, and breach of fiduciary duty by the development etc of the four NAB Services outside the NMG Group pleaded in 3FASC paragraphs 33.1, 33.2 and 33.3 (and the corresponding paragraphs relating to the other services) and 51.16, 52.16 and 53 (see also paragraph 27) and rev 4FASC paragraphs 50.17, 51.18 and 52.18, 53 and 53A,

• As to the alleged (by the Defendants) defectiveness of AUSMAQ's "value proposition",

• As to the reference and consideration given or not given to AUSMAQ relating to the development of the NAB Services,

• As to the way in which AUSMAQ could be technically developed.
8. Further, importantly, whether or not there is an obligation to enhance, modify or add to the AUSMAQ Service, the definition of AUSMAQ Service by referring to enhancements, modifications or additions, [from time to time - the ambulatory point: see the Opening on Similar and Equivalent referred to above in paragraph 3] means that evidence of the ways in which such matters could be carried out relating to the four NAB Services is relevant to damages: the potential of the AUSMAQ Service to carry out the NAB Group's e-commerce.
9. Consequently, the Plaintiffs press the whole of rev4FASC paragraphs 30(1) and 30(2) and the corresponding paragraphs for the other services. Leave to plead the amendment in paragraph 30(2) and the corresponding paragraphs is necessary to plead the whole of what is presently pleaded in 3FASC paragraph 30 (and the corresponding paragraphs) to encompass the Ausmaq Service as specified in paragraphs 4(2), 4(3) and 4(4) above. Otherwise the Plaintiffs may not exercise the leave in respect of rev4FASC paragraph 30 and the corresponding paragraphs and retain the existing 3FASC paragraph 30 (and corresponding paragraphs).
10. The Plaintiffs submit, with respect, that the objections of the Defendants to the amendments in rev4FASC paragraphs 30(1) and 30(2) and the corresponding paragraphs for the other services are merely a further attempt to constrain and restrict the Plaintiffs' existing case in relation to the Consulting Agreement, consistently with the Defendants' case inter alia as to the following matters which are clearly in issue and will be litigated:
• the mere "take and pay" consultancy issue, with no relevant rights of JMG concerning the formulation of business plans or the management committee, and
• the absence of express or implied terms in the Consulting Agreement which would prevent NMG and NAB failing to develop and sterilizing the Ausmaq Service, despite the entitlements of JMG to the Performance Bonus and despite the restraints upon JMG and its consultants, and
• the static interpretation of "System IP Rights" in the Consulting Agreement despite the difference in phraseology from the Restructuring Agreement and the plain "ambulatory" wording of the definition in the Consulting Agreement.

All these matters are to be litigated. The Plaintiffs' respectfully submit that, likewise, the amendments sought should be allowed.”

4    The plaintiffs supplemented these written submissions from the bar table. The further submissions were also to the effect that a number of references in the Consulting Agreement indicate that the parties contemplated that there would be additions, enhancements and modifications by way of developments to the Ausmaq Service after the date of the agreement.

5    The plaintiffs also drew attention to paragraph 10.39 of Cheshire & Fifoot’s Law of Contract Seventh Australian edition by N.C.Seddon and M.P. Ellinghaus, 1997, where reference is made to terms implied by law and in particular to the implication of a general duty of cooperation into every contract. Reference is particularly made to a suggested formula said to have been endorsed in the High Court to the following effect:

"It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his [or her ] part to enable the other party to have the benefit of the contract"

6    Following this reference the authors put the matter as follows:

"As a statement of what is inherent in every contract this formula has the potency of universal application. But the obligation imposed by it has a defined ambit . It requires only acts necessary to preserve 'the benefit of the contract' (not 'the benefit of the party'). The obligation is further limited to what can be reasonably required in the circumstances - Secured Income Real Estate (Aust) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596 at 610, 615"

7    Generally these submissions were advanced in support of the proposition that the term sought to be pleaded in paragraph 18.8 could not at a pleading level, be said to be unarguable as meaningless or as falling outside the criteria of arguable implication such as are necessary to give business efficacy to the contract.

8    The burden of a number of the plaintiffs’ submissions generally pursued with vigour on 18 June 2001 [at the same time as the second set of written submissions MFI P185 were handed up], concerned the suggestion that whether or not the current application for leave to amend was acceded to, many of the very same issues as would arise were either already issues which had been pleaded or opened or were so close to those issues as to have likely been treated with by the defendants at least to a real extent, as part of the complex mosaic of legal and factual issues raised by the proceedings generally. Mr Dicker either referred to, or took the court to a number of statements already filed by the defendants where the process of establishment of each of the NAB services had been closely dealt with and to certain statements where the issue of whether or not Ausmaq was in fact taken into account in the course of development of at least one of the Bank services was addressed. An example of such a statement is that made by Mr Godinho of 21 December 1999 referred to during argument at transcript 10427 and 10432 which includes the following:

“29 The document entitled “Margin Lending and Ausmaq” (DEF.176.0011) (pages 1 to 6 of NSG1) was prepared by Graham Nelson of Ausmaq. I was told, I believe by Glenn Einsedel that someone (perhaps Glenn Barnes) had suggested to the sponsors of the project that, because the margin lending product was later in getting to market than the initial proposal had anticipated, and because Ausmaq was moving along, it was worthwhile examining whether there could be any savings from developing the two projects together. Because I had little knowledge of the Ausmaq proposal I provided by email the business case and the objective statement (as they stood in May 1998) to Graham Nelson at Ausmaq and asked him by email to identify the differences between the two products and to identify any potential areas for saving money in their joint development. Justin Begg worked at this time for Glenn Barnes. This is the task to which he refers in his email document DEF.183.0125 (page 229 of NSG2). At this meeting it was decided to identify what alignment opportunities there were for the Ausmaq and AFS Margin lending projects. In response to this initiative, I believe that Graham Nelson prepared document DEF.176.0011 (pages 1 to 6 of NSG1) which was the first attempt of which I had any knowledge to identify the differences between Ausmaq and the margin lending product.
30. Graham Nelson’s document is an analysis only. It contains no recommendation. I read the document in May 1998. The annotations on it are mine. Upon reading it I perceived that there were a large number of differences between the two products. Graham Nelson’s document contained no estimate of the likely costs of further development of Ausmaq, no anticipated timeframe for getting the Ausmaq product to market, no statement of the likely impact of its future development on any other product being offered by the NAB. Having read the document, I simply put it in the file. The document identified a raft of significant improvements that were needed to be made to the Ausmaq system before it could be capable of interfacing with the computer systems of the NAB (as provider of the loans) and Star Systems (which was used by market traders) and before it could provide a margin lending facility. The barriers identified in the document to Ausmaq being a commercially operable proposition included :

From my reading the document, and from my understanding of the NAB’s requirement of a margin lending system, I concluded that there were too many logistical obstacles to doing anything in conjunction with Ausmaq at the time .
In the competitive environment in which the business case for margin lending had had to bid for NAB resources to take that product to market, it had been difficult enough to get the resources for the margin lending product which had the promise of a definite market, a definite feasibility and a definite budget and time frame. I could not see any advantage in linking the product at this stage with Ausmaq which appeared on the basis of Graham Nelson’s paper, to have none of the features required for system interface. I telephoned Graham Nelson soon after thanked him for the work and expressed my conclusions. I do not recall Graham Nelson making any comments on my views. The paper was forwarded for information to Justin Begg………


37 I have never seen any Ausmaq source code or other programming material.

38 The design of the margin lending project was based entirely on my knowledge of NAB’s requirements for a margin lending system having regard to my expertise and the expertise of those with whom I worked on the project.” [emphasis added]

9    Mr Dicker also referred to the 16 June 1998 Ausmaq Strategy Review document, part of which related to a consideration of Ausmaq in the context of the Gateway Service. He also referred to the statement by Mr Salamito of March 2000 [which appears in volume 18 tab 1] where paragraph 308 includes:

"I deny that NAFM or NAB Group developed All in One as an 'alternative' to Ausmaq. I did not regard Ausmaq as a viable alternative to a master fund. I deny Ausmaq's intellectual property was used in the creation and design of All in One"

The Defendants Submissions

10    The defendants addressed at a number of levels.

Alleged implied term said to be unarguable

11 In the first instance, the defendants sought to submit that the proposed amendments should be disallowed as seeking to raise alleged implied terms which were simply unarguable. Hence Mr Bathurst took issue with the submissions addressed by Mr Dicker and submitted that the court should have no hesitation in refusing to allow the amendment by reason of the fact that the clause was not necessary to give business efficacy to the contract and on careful examination was simply meaningless. I understood the submission to repeat the futility argument summarised in paragraph 16 of the judgment [2001] NSWSC 142.

Alleged failure to identify what were the posited "reasonable steps".

12    Mr Bathurst submitted that neither the proposed paragraph 18.8 nor the proposed paragraph 50.18 gave proper particulars of what were the alleged reasonable steps which NMG was to have been obliged to take and which NAB is said to have been obliged to procure be taken by NMG. The submission was that insofar as the particulars to paragraph 50.18 purport to give particulars of these reasonable steps, on examination no such particulars are seen to be in fact furnished.

13    The proposition was that it is simply insufficient for the plaintiffs to assert that they had given particulars of these reasonable steps when all that the plaintiffs had in effect done in purporting to furnish such particulars was to propound two steps:

Step 1 That it was possible for the Ausmaq Service to be enhanced, modified and added to:
(a) so as to incorporate technical development for a functionality of similar or equivalent functionality to the Bank Services or
(b) so as to incorporate the actual technical development for the functionality of the Bank Services.
Step 2 That NMG had failed after 6 November 1996 to so enhance, modify and add to the Ausmaq Service.

14    In short the proposition was that the plaintiffs had simply failed to identify what the alleged reasonable steps were. The plaintiffs had failed to identify when, how, by whom and by precisely what route such allegedly reasonable steps should have been taken.

Prejudice

15    At another level the defendants submissions addressed the question of prejudice to the defendants unless an appropriate accommodation was given in terms of time both by way of:

(a) a necessary, in the first instance, 12 week hiatus in the hearing; and

(b) otherwise, as might be appropriate.

16    In support of these submissions the defendants relied upon an affidavit made by Mr Lovell on 15 June 2001 to the following effect:

"… The plaintiffs’ evidence on “equivalent or similar functionality”:
3 The plaintiffs’ evidence in chief on the so-called “equivalent or similar functionality” case (see paragraphs 28 to 49H of 3FASOC) initially comprised a statement of Mr Maconochie dated 20 November 1998 and the statement of Professor Aitken dated 23 December 1998.
4 Mr Maconochie, as a result of a judgment of this Honourable Court (see judgment of Einstein J cited as [2001] NSWSC 123) has been given leave to supplement his statement of 20 November 1998. No statement has yet been served. Two further statements of Mr Aitken have been served (each on 7 June 2000).
5 A further statement of evidence in chief, being a statement of Mr Martin dated 10 July 2000, was subsequently served after the defendants had filed their evidence (including the defendants’ expert report of Mr MacPherson dated 29 February 2000). Mr Martin’s statement was in turn updated, a replacement statement dated 25 May 2001 being served (“Martin Enhancement statement”).
6 From my review of the Martin Enhancement statement, it deals only with technical matters and does not deal with what constitutes “reasonable steps” to enhance, modify or add to the Ausmaq Service. This is made plain in the assumptions upon which the statement is based (see paragraph 8 and the letter from Withnell Hetherington containing those assumptions annexed and marked “A”) and the question Mr Martin was asked to address as set out in paragraph 10 of the Martin Enhancement statement.
7 From my review the statements of Professor Thomas and Mr Hodgkinson filed in answer to Mr Martin’s statements on technical matters have not dealt with the Martin Enhancement statement (as to which see the questions asked of each of Professor Thomas and Mr Hodgkinson annexed and marked “B” and “C” respectively).
New paragraph 18.8
8 Paragraphs 18.6 where second occurring and where third occurring of the draft Fourth Further Amended Statement of Claim dated 8 December 2000 were in the following terms:

“18.6(ii) That NMG would, and NAB would procure that NMG would, do everything technically possible (and would enhance, modify or add to the Ausmaq Service with to the extent necessary) to exploit fully the existing actual and potential functionality of the Ausmaq Service with the following:

(a) Tax Advantaged Accounts (General Superannuation); and/or

Particulars
See the matters referred to in MFI P71.
18.6(iii) In the alternative to 18.7, that NAB and NMG would take all reasonable steps to exploit fully the existing actual and potential functionality of the Ausmaq Service with the following functionality (and enhance, modify or add to the Ausmaq Service to the extent necessary) so as to provide:

9 I set out the difficulties that the defendants would have in dealing with such amendments in paragraphs 72 to 76 of my First Affidavit.

10 It is my view that the new paragraph 18.8, drafted as it is, in even wider terms, would cause the same type of difficulties for the defendants as set out in paragraphs 72 to 76 of my First Affidavit. The difficulties, if anything, are in my opinion likely to be more acute as there is no limit expressed in paragraph 18.8 to the type of enhancement, modification or addition required, other than it be “reasonable”, and there are no particulars or evidence stating what is meant by the term “reasonable”. Unlike the previous paragraphs 18.6, the new paragraph 18.8 is not limited to particular services or functions.
New paragraph 50.18
11 The particulars to the new paragraph 50.18 make plain that the failure (but not the obligation) to take reasonable steps was two-fold. First, a failure to incorporate technical developments into the Ausmaq Service. Secondly, a failure to develop and implement the Gateway Service, the FX Auto-Dealing Service, the Premium Automated Margin Lending Service and the Project Maple Leaf / Operation First Choice Service (the “Four Services”) through enhancements, modifications and additions to the Ausmaq Service.
12 If paragraph 50.18 is permitted, further evidence will need to be adduced by the defendants.
13 Although it is not possible at the present time to definitively describe the evidence that would need to be adduced, given the width of the term “reasonable steps”, it is likely that it would involve first an investigation, and secondly the taking and filing of evidence in relation to:
(a) Conceptual issues
There are a number of conceptual issues that would need to be considered. The first is to determine the specific ways the Ausmaq Service could be enhanced, modified or added to enable it to perform the functions currently performed by the Four Services. For example, in relation to the Margin Lending Service, margin lending involves in essence, the provision of a loan facility. One option would be to transfer the Ausmaq Service into a loan provider. If the Ausmaq Service was not to provide that service, the question of the extent to which it could, or could reasonably, provide the “back-office” accounting and data management services would need to be considered. Similarly, Project Maple Leaf comprised a series of inter-related programs to effect a change in the distribution channels of the Bank’s products and services from branch based to electronic means. This raises the question of the extent to which the Ausmaq Service could be enhanced, modified or added to, to perform what are essentially core banking functions. In this regard, it would be relevant to consider the concession made by Mr Garnsey QC before the New South Wales Court of Appeal on 9 February 2000 in the defendants’ leave to appeal application relating to e-commerce discovery (at which I was present) where he stated (as recorded on page 21 of the transcript):
“the AUGMAQ (sic – AUSMAQ) services were further and wider, greater on our case and more diversified in providing market services and wasn’t concerned with running ATM machines or telephone banking or such and, with respect, none of our statements even suggests that”.
Annexed and marked “D” is an extract from the transcript of the proceedings before the New South Wales Court of Appeal on 9 February 2000.
(b) Technical aspects
This would involve an investigation and evidence as to the degree to which the Ausmaq Service could be enhanced, modified or added to in order to perform, at a technical level, the functions performed by each of the Four Services. One of the primary issues in any technical assessment of what is reasonable would be issues of the cost and time involved.
(c) Regulatory aspects
It would be necessary to investigate the regulatory requirements and whether it was reasonable, or even possible, to enhance, modify or add to the Ausmaq Service so that it would have similar or equivalent functionality to all or any of the Four Services.
(d) Market Aspects
It would be necessary in assessing reasonableness to investigate various market related issues such as:
a) (1) the different ways each of the Four Services may or may not be able to be provided by Ausmaq System as compared to being provided by another part of the Bank or otherwise (for example whether the FX Auto-Dealing should be run through the Bank’s traditional foreign exchange channel);
b) (2) the existence, performance, price and competitive advantages of alternative or competitive services or software to the Ausmaq Service, including those considered or used for the Four Services;
c) (3) the likely performance and returns of any alternatives when compared with Ausmaq Service.
14 Following this investigation and the filing of such evidence, consideration would need to be given to further evidence on the damages case, for example to assess whether, and the extent to which, various alternatives would affect the cost to income ratios of the Four Services.
15 In my opinion undertaking the necessary investigations and drafting the evidence would be time consuming, complex and require extensive knowledge of the issues in the proceedings as they relate to the Ausmaq Service and the Four Services. Accordingly these tasks could not be undertaken without the extensive involvement of the defendants’ legal representatives at a senior level (junior counsel, partner and senior solicitor). At present these persons are engaged in other aspects of the defendants’ preparation and conduct of its defence.


Prejudice and the need for an adjournment
16 I do not agree with the matters stated in paragraph 33 of the plaintiffs’ submissions as to prejudice. In relation to sub-paragraph 33(a) the Martin Enhancement statement was served shortly prior to the commencement of the final hearing, does not deal with the question of reasonableness and was objected to on the basis of relevance (see the letter from Freehills to Withnell Hetherington dated 29 January 2001, annexed and marked “E”).
17 As to sub-paragraph 33(b), as set out above further evidence would be needed to be filed on behalf of the defendants. The evidence that was filed by the defendants in relation to the general development history of the Four Services, being filed in respect of the allegations raised in the plaintiffs’ particulars as to alleged misappropriation and use of the Ausmaq IP in the development of the Four Services (a claim which has now been abandoned – see MFI P9) is not a sufficient treatment of the issues raised by a pleading alleging a need to take “reasonable steps”.
18 In paragraph 33(c) of the Plaintiffs’ submissions dated 14 June 2001, it is suggested that the proposed additional implied term raises the same issues as those already raised “in substance” in relation to the “obligations, contractual and fiduciary, not to compete with the AUSMAQ Service so as to frustrate or sterilise the Consulting Agreement”. That is a reference to the obligation now pleaded in paragraph 18.7, that “NAB and/or NMG would not act or conduct itself or themselves as a competitor to either Ausmaq Systems or the Ausmaq Service”. The amendment to add paragraph 18.7 to the pleading has not yet been allowed, and is still subject to the provision by the Plaintiffs of further particulars of paragraph 30(2) (see paragraphs 71 and 72 of his Honour’s judgment dated 12 March 2001). That was to deal with the Defendants’ concerns about the references in the particulars to paragraph 18.7 to the Four Services (see paragraph 71 of his Honour’s judgment).

19 Having regard to issues including the following:
(a) the status of the final hearing and the fact that Mr Martin is currently under cross-examination;
(b) that the defendants are, and will be engaged in the task of considering and filing evidence in respect of other amendments to the 3FASOC (including to deal with the two further implied representations);
(c) the need to consider any evidence that the plaintiffs may file in support of these new amendments (assuming they are allowed), whether in chief or in reply, including, for example statements from Mr Martin or Mr Maconochie;
(d) the need to continue to prepare for the cross-examination of a number of witnesses including Mr Martin and Mr Maconochie;
(e) the need to undertake investigations and file evidence as set out above;
(f) the complexity of those investigations; and
(g) my view that the taking and settling of evidence would need to be done by senior solicitors, partners and junior counsel familiar with the issues in the proceedings,
I presently consider that it would be necessary for there to be a further adjournment in the proceedings of not less than 12 weeks while such investigations occurred and such evidence was gathered and filed. A further period may be necessary depending on the outcome of investigations during this period.”

17    Mr Lovell, whose previous affidavit of 2 March 2001 had also addressed questions of then perceived prejudice arising out of the form of the then proposed amendments to add paragraphs 18 (ii) and 18 (iii), also was also cross-examined on the application.

18    The burden of Mr Bathurst's submissions was to vigorously assert that the amendments raise issues which have not been pleaded or particularised up to this point in time. Insofar as Mr Dicker had submitted that relevant questions (going to whether or not and if so in what way, the Ausmaq Service, following the entry into of the Consulting and Restructuring Agreements, was capable of being modified, added to or enhanced at material times), were already in issue as going to the value proposition of the Ausmaq Services and hence to damages, Mr Bathurst submitted that none of the damages reports filed by the plaintiffs had relied in any way upon Mr Martin's evidence and that Mr Dicker's submissions were simply incorrect.

19    Mr Bathurst submitted that no consideration had been given by the defendants in the statements which they had filed, to the issue of whether it would have been ‘appropriate technically’ or ‘technically reasonable’, or ‘commercially reasonable’, for Ausmaq to be used to develop the NAB services. The above excerpt from Mr Godinho’s statement albeit arguably in some ways an isolated instance, does appear to undermine Mr Bathurst’s generalisation. Clearly a large number of statements have been filed by both parties treating with the matters described in paragraph 33 (b) of the plaintiffs’ first set of written submissions. Mr Bathurst pointed out that no statements had been filed by the plaintiffs by way of evidence to show how profitable the NAB services would have been, had they been developed through Ausmaq.

20    Mr Dicker had made plain on 18 June 2001 that if the leave to amend now sought was granted then, depending upon what experts reports the plaintiffs were able to obtain in relation to the MLC Services, it was reasonably likely that the plaintiffs would make a like application for leave to amend the pleadings in the MLC proceedings. Two of those services were said by Mr Bathurst to have been developed by entities which at the time of the development were subsidiaries or related companies of the Bank. [Transcript 10439]

21    Mr Bathurst suggested that the plaintiffs would inevitably seek to rely upon extensive evidence in reply and that the effective likelihood was that leave to amend as now sought would expand the present estimates of the time which the hearing would take. The submission was that there is a public interest in the finality of litigation and that the present exercise should simply not be permitted at this stage in these proceedings.

Dealing with the application for leave

The Principles

22 The principles which are to be applied by the Court in dealing with an application for leave to amend have been referred to on a number of occasions in interlocutory judgments delivered in these proceedings. It suffices to simply repeat paragraphs 42-45 of the judgment delivered on 7 December 2000 [2000] NSWSC 1141 which were in turn set out in paragraph 12 of the Judgment delivered in relation to the first tranche of the amendments [2001] NSWSC 142:

“In State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146 the High Court carefully analysed the development up to January 14 1997, of approaches taken to the exercise of the discretion to permit amendments to pleadings. Generally that judgment of the High Court, without purporting to be exhaustive, serves to set out the types of consideration which ought to direct the mind of the decision maker on such applications. However, the court accepted that the trial judge is afforded a large discretion in relation to the exercise and that it would be unwise and contrary to principle to seek to fetter that discretion with rigid rules. The special significance of the decision is to direct the mind of the decision maker to many of the considerations which may be taken into account in exercising the discretion and to emphasise, if it needed to be emphasised, that justice is the paramount consideration in determining such an application.
J L Holdings dealt, of course, with the particular circumstances before the court and whilst the general statements to be found in the joint judgment of Dawson, Gaudron and McHugh JJ and in the judgment of Kirby J assist a decision maker considerably, the obvious fact is that each and every case in which an application for leave to amend is pursued requires the court to deal with the special and peculiar matrix of circumstances which obtain at the material point in time in the litigation in respect of which such application is pursued.
To my mind the following statements of principle affirmed in JL Holdings are fundamental and clearly and succinctly express the general approach to be taken:
(a) "Now, I think it is a well established principle that the object of Courts is to decide the right of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself, and in conformity with what I have heard laid down by the under division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment has a matter of favour or of grace"
[Cropper v Smith (188 4) 26 CH D 700 per Bowen LJ at 710]
(b) "As the defence, if established, would be a complete answer in the either action, the amendments sought should have been an amount unless it appeared that injustice would thereby have been an occasion to the respondent, there being nothing to suggest fraud or improper concealment of the defence on the part of the appellants. With the exception of the suggestion of prejudice arising in respect of the loss of the possible claim against the nominal defendant, the matters relied upon by the respondent in opposition to the amendments sought go at the most to delay and irregularity only, matters which are relevant to costs by do not constitute injustice to the respondent in the sense in which that expression is used"
[Clough v Rogers (1974) 48 ALJR 481 at 482]
A recent development in this State, which the Court is also entitled and indeed required to take closely into account, relates to Part 1 of the Supreme Court Rules as modified by Amendment No 337, which elucidates the overall objectives of practices and procedures as specified in the Rules. The overriding purpose of the Rules is to facilitate the “just, quick and cheap resolution of the real issues” in civil proceedings. The overriding purpose clause imposes an obligation on the Court to give effect to the overriding purpose when it exercises any of its powers."

Submission that implication unarguable

23 To my mind it is inappropriate on a pleading argument for the court to reject the application for leave to imply the new term as unarguable. That is a matter for final address. Similar issues arise in relation to a number of the other terms said on the present version of the pleadings to be implied. It is difficult in the extreme to deal with an isolated question of construction of the Consultancy Agreement when the evidence is incomplete and when the Court’s reasoning will require to work through a maze of complex and in some cases closely related construction issues. The difficulties were generally explained in paragraphs 15 to 17 of the judgment [2001] NSWSC 142.

24    The real issues go first to precision, in terms of the particulars necessary and appropriate to furnished in relation both to the implied term as well as to the alleged breaches of the term and secondly, to questions of prejudice.

Proper Particulars

25    As to the first matter I accept as of substance the defendants’ submissions that neither the proposed paragraph 18.8 nor the proposed paragraph 50.18 give proper particulars of what were the alleged "reasonable steps" which NMG is said to have been obliged to take and which NAB is said to have been obliged to procure be taken by NMG.

26    I accept as of substance the defendants’ submission that it is simply insufficient for the plaintiffs to assert that they have given particulars of these reasonable steps when all that the plaintiffs have in effect done in purporting to furnish such particulars is to take the two steps set out in the above summary. The plaintiffs have as I see it, failed to identify what the alleged reasonable steps were. This is a matter which can be attended to by the provision of appropriate particulars. The plaintiffs will be required to provide the particulars by Wednesday 27 June.

Prejudice

27    As already indicated, the defendants’ submissions addressed the question of prejudice to the defendants unless an appropriate accommodation was given in terms of time both by way of a necessary, in the first instance, 12 week hiatus in the hearing and otherwise as might be appropriate.

28    It seems to me important to recognise that as long ago as the occasion when the defendants were served with Mr Martin's Report of 10 July 2000, they would clearly have seen that he had been asked:

(a) to provide his expert opinion on the question of whether the Ausmaq Service as it existed in the Ausmaq System at material dates could have been enhanced, modified or added to, if necessary, so that any or all of the four identified NAB services had similar or equivalent functionality to the Ausmaq Service [paragraph 5.1.1 of letter sent by the plaintiffs’ solicitors to Mr Martin of 10 July 2000]

(b) for the purposes of his report, to make assumptions that in relation to the proposed enhancement, modification and additions to the Ausmaq Service referred to in paragraph 5.1.1 that:
(i) there would be sufficient corporate will from the NAB to cause such enhancements, modifications or additions to be made;
(ii) all adequate resources in terms of staffing, funding for external consultants and computing services and equipment would be made available;
(iii) a person was in charge of the project who, to the extent that it could be technically achieved, had as an objective, the enhancement, modification or addition to the Ausmaq Service so as to have similar or equivalent functionality to the four NAB services referred to in paragraphs 5.1.1.

29    Mr Lovell accepted under cross-examination that when he read the assumptions given to Mr Martin for the purposes of his report, he had realised :

(a) that Mr Martin was asked to make certain assumptions as to adequate resources in terms of staffing funding for external consultants and computing services and equipment. [Transcript 10402].
(b) that the statement itself, other than through the assumptions, did not deal with those matters [Transcript 10403]

30    Mr Lovell gave evidence as follows:

“Q: It was clear to you, was it not, from the service of Mr Martin’s statement dated 10 July 2000, that that statement dealt with technical matters relating to the four Bank services and AUSMAQ?
A: It certainly was apparent when I read it that it dealt with technical matters. I didn’t see it as going to any issue as pleaded, and I can certainly say when I read it I immediately was - what sprung to mind was what Mr Garnsey had said before the Court of Appeal that the - what was being put by the plaintiffs had nothing to do with ATM machines, and telephone banking, and there seemed to be a step right away from what Mr Garnsey had said back in February 2000 before the Court of Appeal. I must admit I was puzzled by it.”

31    It is equally clear that for some considerable time now the plaintiffs have sought to mobilise evidence going to whether Ausmaq could have been enhanced, modified or added to, so as to have virtually the same or equivalent functionality to the NAB Services. It is also quite clear that the statements of Professor Thomas and Mr Hodgkinson consider in detail, aspects of the Ausmaq service and consider whether the Ausmaq Service had limitations of a technical nature and consider issues such as scalability.

32    The focus of many of the factual issues currently being litigated on the present pleadings goes to precisely what was the functionality of the Ausmaq Service at the date of the Consulting and Restructuring Agreements and at the date of completion of those agreements. The examination of the factual issues relevant to issues which are raised on the present pleadings extends to such an extent into the actual or potential functionality of the Ausmaq Service, and into the circumstances and period of time in which the Bank Services were developed and came into existence and embraces so many other matters germane to be treated with as part of the contractual obligation now sought to be pursued under cover of paragraph 18.8, that, to my mind, the plaintiffs ought be permitted to pursue the alleged implied term if any potential prejudice to the defendants is capable of being accommodated by appropriate case management directions.

33    One of the most important of the many factors to be taken into account in determining the application for leave to amend concerns the extent to which the issues of fact raised by the proposed amendments are already in some form or other, the subject of very close consideration and treatment in the statements filed by the parties as they relate to the issues which were perceived to be the pleaded issues or to be raised by the pleaded issues, at the time of filing the statements. Clearly the defendants must have had in mind at least for some considerable time now, the possibility that the plaintiffs would be permitted to plead that there existed a contractual obligation, the proper discharge of which would have required the taking of necessary steps by way of the modification, addition or enhancement to the Ausmaq Service, so as to result in the resultant modified, added to or enhanced Ausmaq Service then being of similar or equivalent functionality to the Bank Services [see for example the last sentence of paragraph 72 of the first tranche amendment judgement. And, note the date when the original form of the proposed fourth further amended statement of claim was served. And, note paragraph 4(2) of MFI P70 which was marked for identification on 30 August 2000 as part of the plaintiffs’ opening]. Mr Martin has filed evidence to that effect. In the result, and although the subject amendments, it must be fairly acknowledged, raise a number of further issues, the fact is that the proceedings involve at their centre the Ausmaq Service as relevant to:

(1) the misrepresentational cases brought by both sets of parties in relation to the pre-contractual negotiations;
(2) the respective cases concerning the proper construction of the contract;
(3) the respective cases concerning the manner in which the Ausmaq Service was in fact modified, added to or enhanced following the entry into of the Consulting Agreement and Restructuring Agreement;
(4) the respective cases concerning the business plans including the sections of relevant such plans dealing with proposed enhancements, modifications &c.; and
(5) the plaintiffs’ case in terms of damages/loss of opportunities.

34 It is common ground that questions concerning the Business Plans and particularly the 1997 Business Plan are raised by the current pleadings (see also the judgment allowing additional amendments in this area on the second tranche amendments [2001] NSWSC 328). To the extent that the plaintiffs’ cases allege a failure by the corporate defendants, NMG and NAB, to take proper steps by way of putting into place actions to implement the JMG Business Plans, which failure is said to constitute relevant breaches of certain terms of the Consulting Agreement, it is common ground that a number of questions concerning the failure to pursue/viability of particular suggested enhancements &c. are currently being litigated in relation, for example, to the issue concerning the failure of the relevant corporate defendants to approve scenario 2 [see the discussion dealing with Business Plans at paragraphs 70 and following in the judgment [2001] NSWSC 328]. Indeed Mr Bathurst at transcript 10391 accepted that the defendants could not oppose an amendment "to say as an implied term [that the defendants were obliged to] do all things reasonably enhanced (sic ) as provided for in the 1997 Business Plan…….. [as] an issue that was already there".

35    A further consideration of relevance is of course the fact that for all the apparent width of the contractual obligation sought to be propounded as an implied term by the new proposed paragraph 18.8, the particulars of breach are confined by reference to the asserted failure to take all reasonable steps “to cause the Ausmaq Service to be enhanced &c. so as to incorporate technical development for a functionality of similar or equivalent functionality to, alternatively so as to incorporate the actual technical development for the functionality of, the [Bank Services]”. In the result the particulars of breach do serve to severely constrict, at least at the important level of breach, the area of factual enquiry to be litigated.

36    The proceedings are complex in the extreme. The application for leave to amend raises a number of very difficult questions as to whether and if so precisely under cover of what presently pleaded paragraphs and supporting particulars, aspects of the allegations now sought to be pursued have already been placed in issue. The Ausmaq Service value proposition clearly sits at the centre of a great deal of the evidence sought to be mobilised by both parties.

37    I am satisfied that to the extent that the application for leave to amend, if granted, would necessarily lead to the defendants having to obtain further instructions from relevant witnesses including experts, it is likely that very many of such witnesses will already have been consulted on an extensive number of matters which both parties have accepted are being litigated on the current pleadings. Insofar as the defendants may require to expand their present evidence to deal with the new amendments, the exercise, whilst complex, is so close to the heart of the matters being litigated as to make it very difficult for the court, even at this stage, to exercise its discretion by denying the plaintiffs leave to amend. The fact is that the defendants have not been able to point to any particular prejudice but rather have taken the stance that:

(1) the leave to amend is necessary as the existing pleadings do not raise the same issues;
(2) the accommodation which would be necessary to permit the defendants to fairly treat with the additional allegations, would be likely to be substantial; and
(3) there is a public interest in the finality of litigation.

38    The plaintiffs have not accepted that the issues are not open to be litigated on the present pleadings but have in any event pursued leave to amend as within the Court’s discretion.

39    On the estimates from both sides of the bar table, the proceedings are due to continue for a very considerable time. As at 1 July 2001, the defendants, on Mr Lovell's evidence, will have five full-time partners working on these proceedings; a further partner having a general role; approximately 14 or 15 full time solicitors working on the proceedings; and approximately 6 to 8 paralegals working on the proceedings, it being common ground that there are three senior counsel and three junior counsel retained to conduct the proceedings as well as a further junior counsel, Dr Bell, retained in relation to the security for costs application. On anyone's terms these are massive legal resources. To my mind following the extensive openings and the many interlocutory motions and interim judgments related to the conduct of the proceedings on a wide variety of parameters, and following the taking of evidence up to this point in time, the court is in a position to assess what is appropriate in terms of being able to accommodate any suggested prejudice to the defendants by reason of the granting of the plaintiffs application to amend in the terms earlier set out.

40    During late June, and in July and August of this year there are already in place arrangements for a five week hiatus in the hearing. Two of those weeks were identified as appropriate in terms of the mediation to be conducted by Sir Anthony Mason. Mr Lovell has given evidence under cross-examination covering certain aspects of the resources of the defendants to which I do not need to refer. He accepts that his assessment of 12 weeks set out in the last sub-paragraph of his affidavit may have room for error. He accepts also that the first three weeks of the break in hearing [principally granted to permit evidence to be prepared resulting from the first round of amendments to the pleadings] will not involve all members of the defendants’ legal team. He accepts also that the continued cross-examination over the next few weeks involves certain identified members of the defendants’ legal team whilst other persons are responsible for other matters. Mr Ling’s evidence is to follow from 16 July. Mr Sackar is to cross examine Mr Ling. Mr Lovell accepts also that the mid-August mediation will involve a more limited number of members of the defendants’ legal team.

41    At the end of the day it seems to me that the defendants are not shown on the evidence to be so prejudiced by permitting the amendments as to require the application for leave to amend to be refused. The defendants should in my view be given an appropriate opportunity to come to grips with the new pleading once proper particulars are furnished. Further evidence required to be adduced by the defendants can be prepared. If it becomes necessary for the plaintiffs’ witnesses, or some of them, to be recalled, that can take place.

42    It is important for the court to permit the plaintiffs the opportunity to pursue the case which they seek to pursue if this can be done within the constraints of the litigation and without any real or significant prejudice to the defendants. The defendants resources are such that I cannot accept the necessity for a hiatus of 12 weeks at this stage. The hiatus which is now to take place can certainly, to an extent, be made use of. And the balance of the hearing as it progresses towards the end of the year and across the long vacation and into next year, gives considerable leeway in terms of the defendants being able to fairly litigate any of the factual issues raised by the allegations.

43    Insofar as the Court has had to take into account the reasons for the application for leave being pursued at this point in time, I am satisfied from the general history and background that on more than one occasion, difficult questions of construction of the extant pleadings have arisen. Ultimately I doubt that the plaintiffs can make good the proposition that the issues raised by the amendments now sought to be pursued remained open on the present pleadings [cf transcript page 1678.16-.38 and 1678.55-1679.1] [But compare transcript 16605.10-.20, 1669.5-.10] and/or in any event can be said to have remained open following the plaintiffs previous decision not to pursue paragraphs 18.6 (ii) and (iii) [see transcript 6603.37-.53]. It becomes strictly unnecessary to determine that issue presently although the matter may well required to be determined at some stage in relation to costs.

44    I have of course, taken into account my knowledge of the issues and sub-issues in my assessment of the extent to which the new issues overlap with or are related to existing issues.

45 At paragraph 75 of the judgment [2001] NSWSC 142, reference was made to Part 1 of the Supreme Court Rules as modified by Amendment No 337. As there, I particularly presently take into account the overriding purpose of the Rules being to facilitate the just, quick and cheap resolution of the real issues in civil proceedings. As there, I am very clearly of the view that as a matter of case management, the appropriate course is to permit the evidence of the witnesses to proceed whilst the defendants take such instructions and steps as they may see as necessary to deal with the further amendments. As there, it seems to me that there must surely be a number of occasions when such solicitors and counsel as are retained by the defendants as may be appropriate for the exercise, are able to put into place the necessary plans to deal with any of the new issues seen as now arising. As there, and whilst I accept Mr Lovell's evidence of the need to take care in ensuring that proper investigations are put in place to treat with any of the new issues, the resources which on the evidence are being utilised by the defendants, suggest to me that the Court requires to take very special care indeed before acceding to any form of hiatus otherwise than upon a very informed basis. That basis has not yet been established on the evidence before me on this application. The position may alter. It may not. The Court will continue to case manage the ongoing hearing with an open view to protecting both parties against unfair prejudice.

Short Minutes

46    It is appropriate for the plaintiffs to bring in short minutes of order to reflect the above reasons. The short minutes of order require to treat with the provision by the plaintiffs of the particulars to paragraphs 18.8 and 50.18 which I have indicated require to be furnished.

47    In the light of the above reasons the proposed particulars to paragraphs 30(2), 40(2), 46(2) and 49(2) seem appropriate. The short minutes should provide accordingly.

48    Submissions will be taken as to costs.

MLC Proceedings

49    Any like application sought to be pursued in relation to the MLC proceedings will have to be determined upon its independent merits when and if an application is pursued.

I certify that paragraphs 1 - 49
are a true copy of the reasons
for judgment herein of the
Hon. Justice Einstein
given on 20 June 2001

___________________
Susan Piggott
Associate

20 June 2001

Last Modified: 06/13/2002