Jiwira v PIBA

[1999] NSWSC 985

CITATION:	Jiwira v PIBA [1999] NSWSC 985
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	2920/95
HEARING DATE(S):	21/09/99
JUDGMENT DATE:	21 September 1999
PARTIES :	Jiwira Pty Ltd (P1) Alan Howard Baker (P2) Primary Industry Bank of Australia Ltd (D)
JUDGMENT OF:	Austin J

COUNSEL :	J Young (P) D J Russell (D)
SOLICITORS:	James Solicitors (P) Owen Hodge Lawyers (D)
CATCHWORDS:	PRACTICE AND PROCEDURE - amendment of pleadings - amendment of statement of claim to introduce new cause of action after limitation period - relevant considerations under Supreme Court Rules; TORT - abuse of process - ingredients of cause of action
CASES CITED:	Ballina Shire Council v Ringland (1994) 33 NSWLR 680 Clough v Frog (1974) 4 ALR 615 Cropper v Smith (1884) 26 ChD 700 Hanrahan v Ainsworth (1990) 22 NSWLR 73 McGee v Yeomans [19977] 1 NSWLR 273 Tildesley v Harper (1878) 10 ChD 393 Weldon v Neal (1887) 19 QBD 394
DECISION:	Application for leave to amend granted

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

TUESDAY 21 SEPTEMBER 1999

2920/95 - JIWIRA PTY LIMITED & 1 OR v PRIMARY INDUSTRY BANK OF AUSTRALIA (‘PIBA’)

JUDGMENT (Delivered ex tempore on 21 September 1999, and revised on 23 September 1999)

1   HIS HONOUR: This matter has been set down for a 15 day hearing before me beginning on 9 November 1999. By a Notice of Motion filed on 11 August 1999 the plaintiff sought leave to file an amended Statement of Claim referred to in the materials as the ‘Second Further Amended Statement of Claim’. I shall it ‘the New Pleading’. The application was heard by me today. 2   The explanation for the need to file a further pleading, such as it is, is contained in the affidavit of Mary Cunningham, a solicitor, who has the conduct of the proceedings on behalf of the plaintiffs' solicitor on the record, dated 10 August 1999. She explains that the original Statement of Claim was prepared by counsel who is no longer retained and there now is litigation between that counsel and the plaintiffs. The plaintiffs have retained new counsel for the amended pleading following advice that the existing Further Amended Statement of Claim (‘the Existing Pleading’) is not satisfactory, in that it is poorly drafted and all the elements of the plaintiffs' claim are not clear. Ms Cunningham states that it has taken the plaintiff a substantial amount of time to obtain full discovery, and she makes contested assertions about the provision of information by the defendant. 3   According to the plaintiffs, the Existing Pleading is misconceived and mistaken and the problem needs to be cured before the hearing takes place. The plaintiffs' submission to me on this application puts the matter starkly, claiming the Existing Pleading is ‘inadequate to the point of being an embarrassing pleading’. 4   When the Court is confronted with an application of this kind, the general approach which it should take is reasonably clear. It is described in the well-known statement of Bowen LJ in Cropper v Smith (1884) 26 ChD 700 at 710, considered and applied by the High Court in Clough v Frog (1974) 4 ALR 615:

‘It is a well-established principle that the object of courts is to decide the rights of the parties and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise that in accordance with the rights. … 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. ... as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have it corrected, if it can be done without injustice, as anything else in the case is a matter of right.’

5   The matter is put even more clearly by Bramwell LJ in Tildesley v Harper (1878) 10 ChD 393 at 398:

‘My practice has always been to give leave to amend unless I have been satisfied that the party applying was acting mala fide, or that, by his blunder, he has done some injury to his opponent which could not be compensated for by costs or otherwise.’

6 In this Court the power to grant leave to a party to amend a pleading is dealt with in Pt 20 of the Supreme Court Rules. The Court's general power expressed in very broad terms is in r 1. Rule 4 deals with a case where a relevant period of limitation expires after the date of filing a Statement of Claim and, thereafter, an application is made under r 1 for leave to amend the Statement of Claim. The rule applies in three specific circumstances, set out in sub-rules (3), (4) and (5), though there is an issue as to whether r 1 confers a discretion to add a new cause of action after the expiry of a limitation period outside the specific cases mentioned in r 4: Ritchie's Supreme Court Practice (looseleaf) par 20.4.7. 7   For reasons which I shall explain, the defendant says that the amendment will have the effect of overcoming what would otherwise be a statute-barred claim and so r 4 is applicable. The relevant sub-rule of r 4 in the present circumstances is sub-r 4(5), which is in the following terms:

‘Where a plaintiff, in his statement of claim, makes a claim for relief on a cause of action arising out of any facts, the Court may order that he have leave to make an amendment having the effect of adding or substituting a new cause of action arising out of the same or substantially the same facts and a claim for relief on that new cause of action.’

8   At today's hearing counsel for the defendant informed me that its opposition to the application for leave to amend is now confined to two matters, both relating to new allegations of abuse of process in the New Pleading. I shall deal with them in turn.

Abuse of process in relation to the winding up proceedings

9 This matter is dealt with in paragraphs 38 - 43 of the New Pleading. Broadly speaking, the New Pleading alleges that the defendant commenced winding up proceedings in this Court at a time when it possessed security and was aware that the property over which it held security was to be sold at an auction. The allegation is that there was no proper commercial purpose to be served by seeking the first plaintiff's winding up and consequently the winding up proceedings were an abuse of process commenced and maintained to effect an object not within the scope of the process and causing the plaintiff damages. Particulars are given. 10 The winding up proceedings are referred to in the Existing Pleading. Paragraph 89 asserts that the defendant and others ‘acted negligently with conscious wrongdoing in contumelious disregard of the first plaintiff's rights’. Particulars of that pleading include the assertion that the defendant put the first plaintiff into liquidation on 17 December 1992, just four days before the defendant sold the Jiwira land and exercised a put option for the DLM land. The particulars also refer to the security which the defendant held. 11 Additionally, par 128 of the Existing Pleading asserts that ‘the defendant and others acted unlawfully, negligently, unconscionably with conscious wrongdoing in contumelious disregard for the second plaintiff's rights.’ The particulars which are given assert that ‘part of the defendant's conduct and strategy’ was to place the first plaintiff in liquidation on 17 December 1992 when the sale of property had been arranged to take place four days subsequently, and to keep the first plaintiff in liquidation. 12 Further, par 149 of the Existing Pleading asserts that the defendant and others deliberately charged the first plaintiff certain costs and kept the first plaintiff in liquidation, and particulars of the costs are given. 13 As the defendant points out, the acts complained of in these paragraphs occurred between November 1992, when the defendant commenced winding up proceedings, and 17 December 1992, when the company was wound up. Abuse of process is a tort and is subject to the six year limitation period contained in s 14 of the Limitation Act 1969 (NSW). Consequently, unless the Court exercises its power under Pt 20 to grant an amendment after the expiry of the limitation period, the pleading of the cause of action may be statute-barred.

Abuse of process in relation to bankruptcy proceedings

14 This is dealt with in pars 44 - 46 of the New Pleading. Those paragraphs assert that on about 21 January 1993 the defendant filed a creditors' petition in bankruptcy proceedings against the second plaintiff. It is alleged that the defendant relied on an affidavit of Beverley Hugh Waters of 19 January 1993 to support that application. The pleading asserts that the bankruptcy proceedings were an abuse of process commenced and maintained to effect an object not within the scope of the process and that the plaintiff thereby suffered damage. 15 Once again there are some matters in the Existing Pleading which are relevant. I have referred to paragraphs 89 and 128. The particulars to those paragraphs each refer to the issuing of the creditors' petition in much the same way as they refer to the winding up proceedings. 16 Additionally, pars 151, 152 and 153 of the Existing Pleading refer to a number of matters including the affidavit by Ms Waters, and allege that the affidavit is misleading, deceptive, unconscionable, false or negligent’ and in breach of the Trade Practices Act and Fair Trading Act. 17 The bankruptcy proceedings were commenced on 21 January 1993 and, consequently, any action in tort for an abuse of process is potentially statute-barred, just as in the case of the action for abuse of process in the winding up proceedings.

The defendant's contentions

18 The defendant's first contention is that Pt 20 r 4 is inapplicable in the circumstances set out above and, consequently, that the Court should follow the rule of practice enunciated in Weldon v Neal (1887) 19 QBD 394, which would mean that the amendment would be refused because it would set up a cause of action which is statute-barred at the time of the amendment. The rule of practice has been reversed by Pt 20 r 4 (McGee v Yeomans [19977] 1 NSWLR 273), but the defendant says that since Pt 20 r 4 does not apply in the present case the rule of practice should be applied. 19 As an alternative submission the defendant says that if the Court decides to exercise its power under Pt 20 r 4(5) an order should be made under sub-r 4(5A) so that the amendment takes effect only from the date upon which it is made and does not relate back to the filing of the Statement of Claim, with the result that the statute bar remains applicable. 20 Secondly, the defendant submits that no adequate reason has been advanced to persuade the Court in the exercise of its discretion to allow the application to be made at this very late stage. 21 I shall deal with the application of Pt 20 r 4(5) and with the question of discretion sequentially. There is another claim which relates to the adequacy of the New Pleading, to which I shall then turn.

The applicability of Pt 20 r 4(5)

22   The defendant makes two submissions. First, the defendant says that in the Existing Pleading the plaintiff has not made any ‘claim for relief on a cause of action arising out of any facts’. The defendant submits that the winding up and bankruptcy proceedings have not been pleaded as facts which are part of any recognised cause of action. The facts relating to the winding up and bankruptcy are principally contained in particulars scattered throughout the pleading in a disjointed fashion, leaving no finding of conclusion or recognisable cause of action. Secondly, the defendant submits that an amendment adding new causes of action for abuse of process in respect of the winding up and bankruptcy proceedings cannot be described as ‘adding or substituting a new cause of action arising out of the same or substantially the same facts’. 23   As to the first of those contentions, while I have considerable sympathy with the defendant's frustration with respect to the Existing Pleading, it seems to me there is just enough in the Existing Pleading to attract the words of sub-r 4(5). 24   There is, in the paragraphs to which I have referred, an assertion of a cause of action which might broadly be described as a cause of action in negligence arising out of facts concerning the winding up and bankruptcy pleadings. The pleader has mixed up the ingredients of the cause of action, and ingredients which go to the assessment of damages on some exemplary or aggravated basis. The whole pleading is most unsatisfactory. However, when read literally, the paragraphs to which I have referred identify a cause of action, however misconceived it might be, and however little support the pleaded facts might give to the cause of action which there arises. 25   As to the second submission, the defendant has handed up a very useful comparison between the Existing Pleading and the New Pleading from which it appears that the New Pleading is in many respects more fulsome and certainly more specific and clearer than the Existing Pleading. 26   There is a question of judgment to be dealt with in applying the words of sub-r 4(5) ‘arising out of the same or substantially the same facts’. It is clear that the pleaded facts in the Existing and New Pleadings need not be identical. It seems to me that the words of the sub-rule need to be interpreted having regard to their purpose, which is to ensure that undue prejudice does not flow to a party who is affected by the amendment to the pleading. 27   Applying the sub-rule in that way, although I acknowledge there are some important differences demonstrated by the schedule produced by the defendant, it seems to me this is a case where the Court can conclude that in the confused and unsatisfactory Existing Pleading there is a pleading of facts which are substantially the same facts as are relied upon in the New Pleading to support the new cause of action for abuse of process.

The Court's discretion

28   That being so, the question is whether the Court should, in the exercise of its discretion, allow the amendment to be made at this late stage in the proceedings. It appears that no new substantial evidence will be needed to support the New Pleading and as I have said it relies upon substantially the same facts as have earlier been pleaded. It is sensibly suggested by the defendant, and happily the plaintiffs agree, that if the abuse of process amendments are granted this should be on terms that the defendant have leave to bring an application to seek to strike them out if, having been served with some further affidavit evidence which the plaintiff seeks to provide, the defendant can then demonstrate prejudice in meeting the abuse of process claims. 29   I propose to make my orders in those terms. That being so, my opinion is that undue prejudice to the defendant has not been shown and it is appropriate, in the exercise of my discretion, to allow the amendment to be made.

Adequacy of the New Pleading

30   The defendant also submits that the New Pleading with respect to abuse of process is deficient in a vital element. It contends that the New Pleading fails to allege that the purpose of intimidating or frightening the first plaintiff from investigating and challenging the activities of the contest was achieved. 31   This challenge to the New Pleading should not be allowed to succeed on the present motion. The ingredients of the tort of abuse of process are at this stage not completely settled. In Hanrahan v Ainsworth (1990) 22 NSWLR 73 at 112 Clarke JA said that an action on the case for abuse of the process of the court lies where it has been proved that process ancillary to a principal claim for relief has been used to effect an object not within the scope of the process, and damage has resulted. That formulation does not require, as an ingredient of the tort, proof that the abusive purpose has been effected. 32 The matter was also referred to by Gleeson CJ in Ballina Shire Council v Ringland (1994) 33 NSWLR 680 especially at 695-6. His Honour said that this matter is a subject upon which there are conflicting opinions, and the law cannot be said to have been settled. He remarked that there is authority which supports the view that in order to make out a claim of the kind presently in question, it would not be enough for the claimant to show that the respondent had an improper subjective purpose at the time that it initiated proceedings; on this view of the law it would also be necessary for the claimant to show something of the nature of an overt act, that is to say, some actual use of the proceedings for the improper use alleged. Gleeson CJ then remarked that where the alleged improper purpose is intimidation, the distinction is a fine one and that if the alleged improper purpose is to frighten someone into inactivity, and it can be shown to have that effect, it must be at least arguable that the requirements for establishing an abuse of process for an improper purpose have been satisfied. 33 It seems to me unnecessary to resolve this issue in an application of the present kind. There is sufficient support for the view of the ingredients of the tort of abuse of process reflected in the New Pleading as presently drafted that I should allow the amendment to proceed in that form. Clearly this is a matter which the present counsel for the plaintiffs has carefully considered and if at the hearing I am persuaded that the pleading is deficient, it is possible that consequences may follow at that stage.

Other matters

34   The plaintiffs, as I have indicated, wish to put on some additional evidence and the parties agree that it would be proper to require that the additional evidence be filed within seven days. I shall give a direction accordingly. The defendant should be allowed a further 28 days to put on its evidence in response. At that stage no further evidence should be filed. If the defendant can, having seen the plaintiff's further evidence, point to some specific prejudice with respect to the abuse of process amendments, it will have leave to make an application accordingly. The defendant has sought particulars of the New Pleading and they should be provided within 14 days. I propose to make a direction accordingly. 35   Finally, on the question of costs, the plaintiffs concede that it is appropriate for an order to be made against them for payment of the defendant's costs thrown away by virtue of the amendment which I will grant leave to file, and that the plaintiffs should be ordered pay the defendant's costs of the present Notice of Motion. At one stage the defendant sought an order that the plaintiffs pay those costs forthwith upon assessment, but that matter was not pressed. My own view is that the abandonment of that claim was appropriate given that the hearing is now very close. 36   The defendant also sought an order that the plaintiffs provide security with respect to the costs order which I am about to make, on the ground that the application for amendment has been made late. The defendant has had to incur costs which, it says, it should not be required to bear at this stage. The defendant points out this is the second application to amend which has been made and a costs order was made on the earlier occasion. A further costs order would be cold comfort to the defendant if nothing is left to cover payment of its costs should it be successful at the hearing. 37   This is not sufficient to justify an order for provision of security and I do not, therefore, propose to make such an order. But my decision not to do so should not be taken to prevent the defendant from making an application for security for costs on proper grounds in respect of the costs order which I shall make today on any proper basis. 38   My orders are as follows:

(1) I grant leave to the plaintiffs to file an amended Statement of Claim in the form of the Second Further Amended Statement of Claim being Annexure A to the affidavit of Mary Cunningham of 10 August 1999.

(2) I grant leave to the defendant to make an application by Notice of Motion seeking to strike out all or any of paragraphs 38 - 46 of the Second Further Amended Statement of Claim on grounds relating to specific prejudice, if that application is filed on or before Tuesday 12 October 1999. (3) I direct that any further affidavit evidence for the plaintiffs be filed and served on or before Tuesday 28 September 1999.

(4) I direct that any further affidavit evidence in reply to further evidence of the plaintiffs be filed and served on or before Tuesday 19 October 1999.

(5) I direct that the plaintiffs answer the defendant's request for particulars of the Second Further Amended Statement of Claim contained in a letter dated 14 September 1999 on or before Tuesday 5 October 1999.

(6) I order that the plaintiffs pay the defendant's costs thrown away by the amendment constituted by the Second Further Amended Statement of Claim and the defendant's costs with respect to the present Notice of Motion.

(7) I make the orders in the pre-trial directions which I initial and date for the purposes of identification.

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Last Modified: 09/28/1999