In the matter of Bishay Developments Pty Ltd

[2019] NSWSC 29

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Bishay Developments Pty Ltd [2019] NSWSC 29
Hearing dates:	24 December 2018
Decision date:	14 January 2019
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Directions made as to conduct of proceedings.
Catchwords:	CIVIL PROCEDURE — Originating process — Amendment — Where amendments and part of additional evidence to be led was late and would delay trial — Where no adequate explanation of delay in making amendments or serving substantial exhibit to affidavit.
Cases Cited:	- Aon Risk Services Ltd v Australian National University (2005) 239 CLR 175 - Bi v Mourad [2010] NSWCA 17 - Elsmore Resources Ltd [2016] NSWSC 884 - Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230
Category:	Procedural and other rulings
Parties:	Tadros Holding Pty Ltd (First Plaintiff) Eissa Tadros (Second Plaintiff) Bishay Developments Pty Ltd (First Defendant) Peter Holmes Investments Pty Ltd (Second Defendant) Manotik Pty Ltd (Third Defendant) Peter Marcus Holmes (Fourth Defendant) Sobhy Jean Nicola (Fifth Defendant) Kiumars Hashemizadeh (Sixth Defendant)
Representation:	Counsel: N Kidd SC (Plaintiffs/Respondents) D Pritchard SC (Defendants/Applicants)   Solicitors: SKM Lawyers (Plaintiffs) G & S Law Group (Defendants)
File Number(s):	2016/232549

Judgment

Nature of the application

1. By Notice of Motion filed on 4 December 2018, the Defendants seek several orders. They seek leave to file an Amended Defence, an Amended Cross-Claim, leave to file and rely at the hearing on five affidavits, leave to rely on certain business records of Bishay Developments Pty Limited (“Company”), and orders that the four day hearing of these proceedings listed on 12–15 February 2019 be vacated and these proceedings be heard together with other proceedings (“Howard Avenue proceedings”) commenced in 2016. These orders are sought notwithstanding that these proceedings were commenced in 2016 and have taken over two years to reach a hearing; a hearing date was fixed for the proceedings some four months ago, in August 2018, and these orders were first sought two months before the hearing was due to commence. This application was heard on Christmas Eve, to avoid the risk that it disrupted the hearing date irrespective of its result. Judgment was deferred to 14 January 2019, because it emerged in the course of the hearing of this application that, irrespective of its result, there may be a further issue as to the scope of the Plaintiffs' case; with which this application might interact. The parties ultimately did not seek to resolve that further question, which I note in paragraph 33 below.

2. I delivered an oral judgment, in summary form, on 14 January 2019, in which I first summarised the conclusions that I had reached and then set out my reasoning in more detail. In revising that judgment for publication, I have integrated the summary and the further reasoning, and I have also expanded the discussion of several issues without altering my reasoning or conclusions.

The evidence in the application

3. The Defendants rely on the affidavit dated 30 November 2018 of their solicitor, Mr Georges, in respect of the application. That affidavit sets out the issues in the proceedings, in a form that may be contentious, and refers to the additional affidavit evidence sought to be led by the Defendants, namely Mr Bishay's evidence in respect of accounting issues, and the other lay evidence. Mr Georges expresses the view that the existing four day hearing could be maintained, despite that additional evidence and the joinder of the two proceedings. Mr Pritchard, who appears for the Defendants and Cross-Claimants at the hearing of this application, rightly did not press that position, and accepted in submissions that at least the joinder of the two proceedings would likely have required that the hearing date for these proceedings be vacated.

4. The Plaintiffs in turn rely on the affidavit dated 14 December 2018 of their solicitor, Ms Metry, which refers to multiple delays by the Defendants in the conduct of the proceedings to date. Ms Metry fairly recognises that there have been delays in the Plaintiffs' conduct of the proceedings. It seems to me that the question of who has delayed, and for what reason, is ultimately of limited significance, where the real question is not what has occurred in the past, but what ought now to be done to promote the just, quick and cheap resolution of issues in the proceedings. Ms Metry also refers to difficulties with Counsel's availability in the period prior to the hearing, which plainly would have caused real difficulty, had leave been granted to amend the Cross-Claim and file Mr Bishay's further affidavit evidence. Ms Metry also refers to difficulties with the health of the second respondent, Mr Tadros. I have regard to those difficulties, although their impact is ultimately unclear, where it appears to be accepted that Mr Tadros is at least well enough to attend and be cross-examined at the hearing. There is no reason to think that Mr Tadros’ health difficulties would prevent, for example, his response to affidavit evidence, if they do not prevent him being cross-examined. Mr Georges in turn responds to Ms Metry's affidavit by his further affidavit dated 18 December 2018.

The applicable principles

5. I also have regard to the parties' submissions as to the history of their dealings, and the history of the proceedings, and the scope of ss 56–60 of the Civil Procedure Act 2005 (NSW) and the case management principles addressed in the case law. I am conscious that I must exercise my discretion whether to allow the amendments, and grant the leave to lead further evidence that is sought, having regard to those provisions. In particular, s 58 of the Civil Procedure Act requires the Court to have regards to the dictates of justice when considering an order or, inter alia, the amendment of a document, and requires the Court to have regard to the provisions of ss 56 and 57. Section 56 identifies the overriding purpose of the just, quick and cheap resolution of the real issues in dispute in the proceedings, and s 57 requires proceedings to be managed having regard, inter alia, to their just determination. Section 64 relevantly provides that, at any stage of the proceedings, the Court may order that leave be granted to a party to amend any document in them and, subject to s 58, all necessary amendments are to be made for the purpose of determining the real questions raised by the proceedings and avoiding multiplicity of proceedings.

6. I have also had regard to the case law, including Aon Risk Services Ltd v Australian National University (2005) 239 CLR 175, which has emphasised the significance of delay, not only for particular proceedings, but for the Court system generally. The High Court also there recognised, in the context of an amendment application, that a costs order cannot be treated as an automatic solution to failures to comply with case management requirements, and that the Court should recognise the strain imposed upon litigants, by, and the cost to the community of, late amendment applications. I have also had regard to the Court of Appeal's observations in Bi v Mourad [2010] NSWCA 17 and in Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [36], which also emphasised the significance of case management requirements for the community and the Court system generally.

Amended Defence and mediation

7. The first order sought by the Notice of Motion provides for the Defendants to file and serve an Amended Defence. That order is not contested, and there is also agreement between the parties that they should be ordered to attend a mediation. I will grant leave to file that Amended Defence and make an order for mediation accordingly.

Amended Cross-Claim

8. The second order sought by the Notice of Motion is that the Cross-Claimants be granted leave to file and serve an Amended First Statement of Cross-Claim, in a form annexed to the Notice of Motion. By that Amended Cross-Claim, the Plaintiffs seek to introduce an alternative case, inconsistent with their present case, as to the terms of a contract that is in issue, including as to the payment of builder’s margin and liability for modification work; introduce a claim that “Improper Payments” made in respect of Tadros Holdings Pty Ltd and Mr Tadros are held on constructive or resulting trust for the Company; and amend the declarations that are sought. Additional facts are sought to be pleaded in respect of profit distributions, the case sought to be made in respect of the alleged improper payments is significantly expanded, and reference is made to substantial new factual matters that are not pleaded but particularised to paragraph 22 of the proposed Amended Cross-Claim.

9. As Ms Metry notes in her affidavit, it appears that the amendments in paragraphs 22–31 of the proposed Amended Cross-Claim reflect new factual matters based on schedules of partnership drawings and calculations as set out in Schedules 1 and 2 to the Amended Cross-Claim, which are in turn referenced to the exhibit to Mr Bishay's affidavit of 3 August 2018, comprising more than 600 pages, part of which was served in early December 2018 and the balance not until the hearing of this amendment application in late December 2018. I will refer below to an unfortunate dispute between the solicitors as to whether those documents could previously be served, where the Court had made orders that further evidence not be filed without leave. That dispute could readily have been relisted before the Corporations List Judge to resolve the question, rather than delaying service of that exhibit by several months. The late service of that material would, as the Plaintiffs point out, deprive them of any realistic opportunity to respond to it before the commencement of the hearing. I do not treat this as a question of fault, but it is relevant to the orders that can now be made, where that material was not served until December 2018. Ms Metry also refers to the consequences of the proposed amendments which, it seems to me, would at least include the need for expert accounting evidence in response, as Ms Metry contends, and the likely loss of the hearing dates in consequence. That risk is exacerbated given the constraints on the availability of hearing dates in the Corporations List in the early part of 2019, such that a loss of the existing hearing dates would likely delay the hearing until the second half of 2019.

10. Mr Pritchard in turn submits that the Amended Cross-Claim will “more precisely” identify the Defendants’ claims in respect of profit distribution, but that submission seems to me to significantly understate the extent of the amendments made and the new material introduced. Mr Pritchard also submits, but I do not accept, that those amendments would cause “little prejudice” to the Plaintiffs. Mr Kidd, who appears for the Plaintiffs and Cross-Defendants, responds that there is no present issue in the proceedings as to the outcome of a reconciliation of a shareholder loan account, first raised in the proposed Amended Cross-Claim, as distinct from whether there was an agreement between the parties that such a reconciliation was to be done before completed apartments were distributed to the shareholders, which is denied by the Plaintiffs. The determination whether such an agreement did or did not exist does not require the determination of the outcome of such a reconciliation. It seems to me that the introduction at this late stage of the issue as to the outcome of that reconciliation, as distinct from whether it was required, would be inconsistent with the just, quick and cheap resolution of the real issues in the proceedings. Mr Kidd also submits that the amended pleading does not adequately articulate the Plaintiffs’ case as to “improper payments”, quite apart from its reliance on particulars rather than the pleading of material facts. Mr Kidd also submits, and I accept, that substantial work would be required by the Plaintiffs in order to respond to a new case as to the outcome of such a reconciliation.

11. It seems to me that there are fundamental difficulties with the pleading of the proposed Amended Cross-Claim, so far as it involves broad allegations, raising new issues, by material facts identified in particulars, which can only be understood by reference to the schedules and the materials found in the exhibit to Mr Bishay’s affidavit. Quite apart from the difficulties of the extent of the amendment, at this late stage, it does not seem to me that the pleading gives the Plaintiffs fair notice of the case that they have to meet. In my view, leave should not be granted to file the Amended Cross-Claim in its present form, where the amended paragraphs would likely be struck out if an application was made to do so. In particular, it seems to me that there are significant difficulties with the way in which the case for the so-called "Improper Payments" is pleaded, such that the present form of the pleading would significantly disadvantage the Plaintiffs in responding to the allegations put against them.

12. In summary, the proposed Amended Cross-Claim is very late, and its lateness is exacerbated by significant failures in the form of the pleading, so that it would not give fair notice to the Cross-Defendants of the case which they would have to meet, which would have to be assembled by joining different paragraphs, particulars and calculations as set out in MFI 1. It seems to me that, where an amendment of the Cross-Claim was sought so close to the hearing, it would at least need to be clearly formulated so that the Cross-Defendants could promptly identify what was put against them and what was needed to respond to the proposed Amended Cross-Claim. The present draft of the proposed Amended Cross-Claim falls well short of such a formulation of the claim. I do not grant leave to file it, given its form, its lateness and its likely adverse impact upon the hearing dates.

Leave to file further affidavits

13. The third order sought by the Notice of Motion seeks leave for the Defendants to file, and rely at the hearing, on several affidavits. I note that Brereton J made orders as early as March 2018, extended by me in May 2018, which provided that no further evidence could be filed without leave. Mr Pritchard points out, and I accept, that whether leave should now be granted to file the further affidavits is to be determined by reference to ss 56–60 of the Civil Procedure Act and the well-established principles to which I have referred above.

14. The Defendants seek to rely, first, on an additional affidavit of Mr Ashraf Bishay sworn 3 August 2018 and its voluminous exhibit. Mr Georges’ evidence is that Mr Bishay gives accounting evidence of the Company’s transactions during and relating to the relevant project and another project at Howard Avenue, Dee Why, which is in issue in the Howard Avenue proceedings that the Defendants now seek to have joined with these proceedings. He contends that accounting evidence is relevant because the amount payable is a “necessary part” of the claims. He says that Mr Bishay was retained by the Company, some four years ago, to review and correct its financial records, and claims that evidence relates to business records that were in the possession of Mr Tadros before the evidence was filed. Mr Georges also refers to Mr Tadros’ evidence led in response to the Cross-Claim, before it was amended, but little turns on that, where Mr Tadros had led that evidence several months ago, in June 2018, and the Defendants had ample time to address that evidence in accordance with earlier directions made by the Court.

15. Mr Georges seeks to justify the late service of Mr Bishay’s evidence by the fact that Mr Tadros had control of the Company’s books and records before he provided them to the Defendants in 2016, some three years ago. That also provides no justification for the service of Mr Bishay’s evidence at this late stage. Mr Georges also contends that Mr Bishay could not reconcile the accounts until June 2017, because it was necessary to prepare the Company’s 2017 financial statements and tax returns. Assuming, without deciding, the correctness of that proposition, that does not explain the further delay of over 12 months in service of Mr Bishay’s affidavit and of nearly 18 months in service of the exhibits to that affidavit. Mr Georges also refers to steps taken to obtain other documents, but there is no explanation why those steps could not have been taken earlier, and in any event those documents were obtained in March 2018, some nine months ago. Mr Georges acknowledges that a guillotine order was made by consent in March 2018, and that his clients then obtained the benefit of further time to serve their evidence on that basis. He also refers to rulings made by Robb J in mid-2018 in respect of the evidence as it stood, the utility of which would be undermined by the approach the Defendants now seek to take.

16. I have had regard to the scope of Mr Bishay's evidence and to Mr Georges' evidence that the accounting records on which Mr Bishay relies are documents which, to some or a substantial extent, would be within the Plaintiffs' possession. That, it seems to me, is not the point, since the question is not whether they were in the Plaintiffs' possession at some earlier day, or today, but whether the Plaintiffs were aware, before Mr Bishay's exhibit was served, in December 2018, that they would be relied on in these proceedings.

17. As I noted above, the first part of the exhibit to Mr Bishay’s affidavit was not served until early December 2018 (although the affidavit had been sworn on 3 August 2018) and the other part of the exhibit was not served until late December 2018. I have referred above to a dispute between the solicitors as to whether that exhibit could previously be served, by reason of the Court's previous orders. However, that provides no explanation for the long delay in serving that exhibit, where, as I noted above, that dispute could readily have been resolved by restoring the matter before the Corporations List Judge at any time between August and December 2018. Mr Pritchard submits that there was no fault on behalf of the Defendants and Cross-Claimants personally in that respect, and I accept that proposition, so far as the difficulties appear to have arisen between the parties' solicitors. That, however, is not to the point. The present difficulty is that a hearing for four days has been allocated for four months, in a proceeding that has taken two years to reach hearing, and a voluminous exhibit is now sought to be relied upon where it was not served for several months after the affidavit was prepared and until shortly before the hearing. This is not a question of fault but whether leave to rely on that affidavit and exhibit would promote the just, quick and cheap resolution of the proceedings.

18. I have regard to the orders previously made by the Court in respect of the serving of affidavit evidence, and to the matters to which I have referred in respect of ss 56–58 of the Civil Procedure Act in respect of whether leave should be granted to rely on Mr Bishay's affidavit and its exhibit. I do not grant leave to file or rely on that affidavit, where it travels well beyond the Defendants’ and Cross-Claimants’ existing case, where that affidavit and its exhibit go to aspects of the proposed Amended Cross-Claim, which I have not granted leave to file, and where the lateness of service of the exhibit is such that reliance on it would cause significant detriment to the Plaintiffs.

19. The Defendants also seek to rely on the additional lay affidavit of Mr Nicola, dated 3 December 2018, of 19 pages. Mr Nicola refers to medical issues since March 2018, which provide limited explanation of why his evidence was not filed at the time of his earlier affidavit in March 2018. Mr Nicola seeks to provide an explanation of documents to which Mr Tadros refers and to give evidence, which may be inadmissible in parts, as to his motives for taking particular steps and makes assertions, which may also be inadmissible in parts and as to the purpose of several payments. Ms Metry’s evidence is that part of this evidence appears to respond to Mr Tadros’ affidavit evidence sworn on 2016 and part addresses the proposed Amended Cross-Claim.

13. The Defendants also seek to rely on a second additional lay affidavit of Ms Kim Adams dated 4 December 2018, which expands the affidavit evidence she gave by her affidavit dated 29 June 2018. That affidavit refers to several other projects between the parties, the relevance of which is not immediately apparent, and to several conversations which are set out at some length. Ms Metry notes that Ms Adams’ evidence relates to evidence which Robb J had held should not be admitted, in response to Mr Tadros’ evidence served in June 2016.

14. The Defendants seek to rely on a third additional lay affidavit of Mr Peter Holmes dated 30 November 2018, which leads additional evidence of conversations that took place in June, July and August 2015 and of a meeting in August 2015. Ms Metry refers to the evidence which would be served in response to Mr Holmes’ further evidence. The Defendants seek to rely on a fourth additional lay affidavit of Mr Kiumars Hashemizadeh dated 24 November 2018 which refers to his earlier affidavit dated 17 March 2018 and Mr Tadros’ affidavit dated 14 June 2018. That evidence relates to earlier conversations and Ms Metry also refers to the evidence which would be led in response.

15. There is a disputed question as to the extent to which that affidavit evidence is responsive to, or not responsive to, evidence led by Mr Tadros which may or may not have been properly led in reply. It may have been possible to approach that question on the basis that any evidence of Mr Tadros that was not properly in reply could have been objected to and rejected. However, it seems to me that the bulk of the lay evidence, so far as it deals with questions of conversations as to which the parties already lead evidence, can be addressed by the Plaintiffs without any substantial difficulty, in the time that remains before the hearing. There is also force in Mr Pritchard's submission that it is likely to be preferable to permit that evidence to be led, by affidavit, where the matters that are dealt with in it could otherwise be put to Mr Tadros in cross-examination, on instructions, and that would be a more time consuming way of addressing that matter.

16. So far as parts of those affidavits relate to matters raised by the Amended Cross-Claim, then it seems to me they should not be admitted, but that can readily be addressed by the Defendants and Cross-Claimants indicating those parts of those affidavits which are not pressed on that basis. I am satisfied that the Plaintiffs will have sufficient time to reply to the narrower parts of those affidavits that are properly read, if they seek to do so, before the hearing. For these reasons, I will grant leave to rely on the lay affidavits, excluding Mr Bishay's affidavit, and excluding those matters which go only to the Amended Cross-Claim.

Evidence in response

24. The next order sought by the Defendants, relating to evidence in response, does not immediately arise, although the parties may wish to discuss whether the Plaintiffs will seek to lead further evidence in respect of the limited additional lay evidence on which the Defendants will now be permitted to rely.

Reliance on the Company’s business records

25. The Defendants seek a fifth order, in broad terms, to permit the parties to file and serve business records of the Company within two working days. Mr Georges identifies the relevant documents on which the Defendants seek to rely as 2018 financial reports and tax returns of the Company which he contends will give the parties and the Court information as to the Company's current financial position. It is not entirely clear whether that is the only additional documentary evidence that is to be relied upon, and the order that is sought is not limited to those documents. It seems to me that an order should not be made in the broad form in which it is sought. The admissibility of any documentary evidence that is sought to be tendered at the hearing can be determined at that time, having regard to their content and any prejudice that they may cause to the parties and the conduct of the hearing.

Joinder of proceedings with Howard Avenue proceedings and application to vacate hearing date

26. The Defendants seek a sixth order that the hearing of these proceedings be vacated, which was said to be consequential upon an application for joinder of the hearing with the Howard Avenue proceedings. As I noted above, an application is made to vacate the hearing date. I will deal with the application that the two proceedings be heard together first and then return to the question of vacating the hearing date.

27. Mr Georges' affidavit evidence does not address, in any detail, why it is said that these proceedings and the Howard Avenue proceedings should be heard together, although he expresses the view that both proceedings could be heard in four days, a proposition that was not pressed by Mr Pritchard in submissions. Mr Pritchard instead submitted that, if the two proceedings were joined, then the hearing for 12–15 February should be vacated. Mr Pritchard's submissions supported the joinder of the proceedings on the basis that it would allow all relevant issues in respect of the two developments to be addressed together.

28. Mr Kidd responds by reference to the nature of the Howard Avenue proceedings, which were commenced in April 2016 and where the Court ordered, in December 2017, that draft final partnership accounts be prepared. Mr Kidd refers to the extent of evidence in those proceedings, comprising seven lay witnesses and four expert witnesses. Mr Kidd submits that there is no substantial overlap between the two separate proceedings, on the basis that the only connection between the Company and the Howard Avenue proceedings is a loan account, that the Company has not sought payment of the loan in these proceedings and the claim in these proceedings instead relates to payments alleged to have been made to the benefit of Mr Tadros, rather than in respect of the loan account. Mr Kidd also emphasises the lack of explanation as to why the application to hear the two proceedings together is made so late.

29. I am not satisfied that the two proceedings should be heard together, where it seems to me that there is minimal overlap between them, and where the extent of evidence in the two proceedings would force the vacation of the current hearing dates, significantly delay the resolution of these proceedings, and run the risk that the parties and a trial judge would have considerable difficulty in identifying what was relevant in each of the two proceedings. While I accept that, ordinarily, it is desirable to avoid a multiplicity of proceedings in respect of the same matter, it does not follow from that proposition that all proceedings between particular parties should be heard together, if there is no real overlap between their subject matter. The parties in this case have proceeded for the last two years on the basis that these proceedings are sufficiently distinct that they can proceed separately. I am not persuaded that there is any reason to take a different view at this late stage.

30. As I noted above, Mr Pritchard submitted that the vacation of the hearing date for these proceedings was consequential upon the joinder of the two proceedings which will not occur. The question of vacating the hearing date therefore does not arise on that basis. It also does not arise on the basis of further amendments to the Cross-Claim, or evidence to be served, where the further amendments to the Cross-Claim will not be permitted, and the further lay evidence that may be relied on is of a limited scope. As I noted above, the limited additional affidavit evidence which will be led ought not to have the consequence that the existing proceeding cannot proceed on the allocated hearing dates.

31. I should also have regard to the application of the principles in ss 56–58 of the Civil Procedure Act in respect of any order vacating a hearing. In my view, the vacation of the hearing dates in this case, for four days, set down several months ago, would be destructive of the public interest in the proper administration of justice, as well as in the prompt resolution of the matters in these proceedings. I use the word "destructive", which is a strong word, advisedly, where it is prejudicial to other members of the community that a hearing of several days should be set down and then vacated at a very late stage, potentially depriving those other members of the community of hearings that could have been allocated in that period: Elsmore Resources Ltd [2016] NSWSC 884.

Orders and other matters

32. In these circumstances, the only orders that I will make are to grant leave to file the Amended Defence, by consent; the order for a mediation which the parties contemplate; and the order that the Defendants and Cross-Claimants be granted leave to file, and rely at any hearing in these proceedings, on the affidavits of Sobhy Nicola sworn 3 December 2018, Kim Adams sworn 4 December 2018, Kiumars Hashemizadeh sworn 24 November 2018 and Peter Holmes sworn 4 December 2018, excluding material that is relevant only to the matters raised by the proposed Amended Further Statement of Cross-Claim, which I have not granted leave to file.

33. I should note that I raised another issue in submissions, as to whether the Plaintiffs' oppression case will or may be undermined if there are unresolved issues as to the parties' entitlements, which will not be resolved by these proceedings. That is a risk that was squarely drawn to the Plaintiffs' attention, and the Plaintiffs have chosen to run it.

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Decision last updated: 12 February 2019