Re Huat, J.L.K v Ex parte Sjarif, A.J

[1993] FCA 993

JUDGMENT No. .,....... ??3 , ...... , I H... ?a. I

IN THE FEDERAL COURT OF AUSTRALIA )	I
GENERAL DIVISION	i
1 No. P263 of 1993
EIANKRUPTCY DISTRICT OF THE	1
STATE OF WES!CERN AUSTRALIA	1

RE:  JOHN LEE KIAT HUAT

Debtor

EX PARTE :  AIDILSYAFI JOHAN SJARIF

Creditor

JODGE :	Heerey J
DATE:	8 December 1993
PLACE :	Perth

REASONS FOR JUDGMENT

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/

The debtor applies today for a direction that-he Court go behind the judgment on which the petition is based. It is common ground that if I decide that course is appropriate then the actual hearing of the issue thus reopened will take place at some later date and that procedural directions should be given.

have been recently restated by the Full Court in W o l f f v the petitioning creditor's judgment are well established and

The judgment in question was entered in the Supreme Court of Western Australia on 22 July 1992 in default of appearance. The judgment was for $US500,000 and $US270,575.33 interest, totalling $US770,575.33, or the Australian equivalent at the time of payment, and SA595.20 costs.

The principles on which a court of bankruptcy should go behind

Donovan (1991) 29 FCR 480.

In the present case the debtor succeeded in obtaining from a Master of the Supreme Court of Western Australia an order on 26 October 1993 that the judgment be set aside. However, that order was made conditionally on the debtor paying into court within 21 days the sum of $205,000.

The debtor subsequently lodged an appeal to the Full Court of the Supreme Court in respect of the condition imposed. That appeal has not yet been heard. It seems that the debtor has not been in a position to pay the amount ordered.

There was substantial affidavit evidence before me which included, by way of exhibits, copies of affidavits which had been sworn in the Supreme Court proceedings. From this it emerges that there is a substantial dispute between the parties. In his Statement of Claim filed in the Supreme Court the creditor claims that $US500,000 was lent by him to the

debtor and was to be repayable on November 1990. It was said	the loan was made pursuant to an oral agreement made between
the two men in April 1988 in Jakarta, Indonesia. It is further alleged that on 13 April 1988 the creditor caused that money to be transferred to "the defendant's account with the Westpac Bank in Perthn.
The debtor's version is that the creditor was anxious for the debtor, who was at the time a senior officer with the Banque

Nationale de Paris in Singapore, to leave Singapore and migrate to Western Australia and there assist the plaintiff in exploiting business opportunities, and in particular investment in finance companies. .The debtor says that the money was paid into an account of a Perth solicitor a M r Chew, in his (the debtor's) name and that he spent some $A400,000 of that amount in subscribing for shares in a company called Bridging Finance Corporation of Australia Limited (BFCA), pursuant to an agreement (called "the share allotment agreement") dated 15 April 1988.

The debtor says that under the share allotment agreement he and the creditor and another gentleman called Alex Arifin agreed to invest in BFCA and that the debtor was to be the managing director of that company. In the event, an audit of the company revealed some adverse features. The creditor did not proceed with his investment and the debtor received his money back via M r Chew. The balance of the $US500,000 he says has been used for his own purposes.

Counsel for the creditor argues that there are a number of	internal inconsistencies in the debtor's version of events;
for example, he points out that the debtor's original version involved a payment direct to himself in October 1988 but in subsequent affidavits that became a payment in April/May 1988 and one made into his account with Westpac.
On the other hand, there are some grounds for criticism of the

creditor's version. He says that the money was initially sent to Hr Chew for the purpose of investing in shares on his behalf. The evidence contained no explanation why, on that basis, the money should not have been invested in the name of the creditor himself. Likewise, the share allotment agreement seems consistent only with an intention that the debtor invest moneys with BFCA on his own account as principal and not as some kind of nominee or trustee for the creditor. Some evidence from a solicitor at Messrs Freehill, Hollingdale and Page, who were then acting for all investors, tends to support that view of the situation. When the investment of $400,000 was received back from BCFA, it appears from a Freehills letter of 1 July 1988 that the creditor acquiesced in it going to the debtor - apart from $1 each to the creditor and Mr Arifin. If the creditor then agreed to make a loan to the debtor, so that the money in the debtor's hands ceased to be beneficially owned by the creditor but became the property of the debtor with an obligation to repay a like sum in the future, that is a version inconsistent with the Statement of

Claim. There the creditor pleaded that the agreement for a	loan was made before the money was sent to Perth.
It is of course quite impossible for me to resolve this substantial dispute of fact on the bare affidavits. Rather, I have to be satisfied that there is a genuine dispute and that as a matter of discretion it is appropriate to go behind the judgment debt. I am so satisfied and I will in a moment after hearing from counsel make some appropriate procedural directions for the purpose of that dispute being resolved.
I note the comment made by Davies J in Wolff v Donovan, 29 FCR at 482. After referring to the well known passage from the judgment of Fullagar J in Corney v Brien (1951) 84 CLR 343 at 358, his Honour said that those remarks

". . . do not mean that, in every case in which the

debtor casts doubt upon the judgment debt or some aspect thereof, a court of bankruptcy will determine again the whole of the creditor's claim. If the totality of the matter ought to be considered de novo, the bankruptcy court will often adjourn its proceedings to enable that course to be undertaken in the court in which the original proceedings were instituted or to allow an appeal to be instituted in an appropriate court from the judgment in question."

I do not understand that course as being urged upon me here. It would in any case, I think, be quite inappropriate where there have been contested proceedings to set aside the judgment, partial success and an appeal against the condition attached to the order setting aside. The judgment of the Supreme Court, of course, remains on foot until set aside by

that court.

What I am concerned with is the different exercise of ascertaining whether there is "in fact and in law a debt which could legally found the judgment": see Corney v Brien.

I will make the following directions:

1.  The question of the liability of the debtor to the petitioning creditor in respect of the debt alleged in par.2 of the creditor's petition be tried by this court on a date to be fixed.

2.    The petitioning creditor file and serve a statement of claim on or before 17 January 1994.

3.   The debtor file and serve a defence on or before 7 February 1994.

4.   Mutual discovery by 14 February 1994.

5.    Subject to any order of the trial judge, (a) the trial be on affidavit; and

(b) parties have leave to rely on affidavits already filed.

6.  Any further affidavits relied on by the petitioning creditor be filed and served by 21 February 1994.

7.  Any further affidavits relied on by the debtor be filed and served on or before 28 February 1994.

8.  Liberty is reserved to the parties to apply to the Registrar for a date for a trial after 1 March 1994; estimate two to three days.

9.  Adjourn the hearing of the petition to the date of the trial so fixed.

10.  Order that the period at the expiration of which the petition shall lapse shall be the period of 12 months from 2 March 1994.

11. Costs reserved.

I certify that this and the preceding six (6) pages are a true copy of the reasons for judgment of his -Honour

M r Justice Heerey.

Dated: 8 December 1993

Associate

AD~earances

Counsel for the applicant:	Mr T Galic
Solicitor for the applicant:	Chan Galic
Counsel for the respondent:	Mr S Bhejani
Solicitor for the respondent:	Smith Williamson Singh
Date of hearing:	8 December 1993

I

FEDERAL LAW COURTS

JUDGMENT No. ..e%&.../ ..?a..

IN THE FEDERAL COURT OF AUSTRALIA	1	1	!
WESTERN AUSTRALIA DISTRICT REGISTRY	j	NO. WAG 93 of 1991	I i
1
GENERXG DIVISION	1	;
!
B E T W E E N :

INSTANT COLOUR PTY LTD

First Applicant

AND ORS

- and -

CANON AUSTRALIA PTY LTD

First Respondent

AND ANOR

JUDGE :  Heerey J

RFcEIVED

DATE:  9 December 1993

- ~ J R N 1994

PLACE :  Perth -EDERAL COURT OF

AUSTRAUA

PRINCIPAL

REASONS FOR JUDGMENT \<

In 1988 the applicants commenced to purchase a number of colour photocopying machines from the respondent. Some 13 machines were purchased. It is said they proved to be defective and, by about the middle of 1990, the applicants

the end of 1993 the Court has to deal with an application to	ceased business. Proceedings were commenced in 1991. Now at	replace a further re-amended statement of claim extending over some 43 pages by an even more complex document described as "substituted statement of claim".
The respondent opposed leave. The opposition proceeded firstly on what counsel for the respondent aptly described as the macro level. It was said that the history of the proceedings made it unfair and unreasonable to allow the amendment at all at this late stage and, further, that the proposed amendment involved a number of substantial additions to the existing statement of claim and would cause prejudice. ~t the micro level there was detailed criticism of the form of much of the proposed substituted statement of claim. Counsel sensibly agreed that the macro question ought to be resolved first and since, without any significant waste of time or duplication, the argument has taken the whole of a day, I think it is best that I give my rulings on the application at that level first.
The matter was on 19 April 1993 listed for a trial commencing on 16 August with a direction that any interlocutory applications be made before 7 May. Those orders were made by consent. However, on the trial date, the applicants advised that because of lack of funds they could not be represented by counsel. Lee J adjourned the matter for a week. By 23 August new counsel had been engaged and his Honour adjourned the trial to a date to be fixed. There was leave to amend granted in some respects but shortly afterwards counsel for the
applicants advised counsel for the respondent that there would be some further amendments. Therefore the amended statement of claim in its then form was not delivered.
What was subsequently delivered on 19 November was the substituted statement of claim. As will be seen, this document did depart from the further re-amended statement of claim in a number of significant respects. I will deal with those in a moment but first I turn to the main contention which counsel for the respondent forcibly argued which was that the history of the matter made an amendment at such a late stage unfair and unreasonable. He relied on a passage from the speech of Lord Griffiths in Kettemin v Hansell
Properties Limited [l9871 1 AC 189 at 220, where his Lordship,
in a passage which has been followed on a number of occasions in this country, said:

"Whether an amendment should be granted is a matter for the discretion of the trial judge and he should be guarded in the exercise of the discretion by his assessment of where justice lies. Many and diverse factors will bear upon the exercise of this discretion. I do not think it possible to enumerate them all or wise to attempt to do so but justice cannot always be measured in terms of money and, in my view, a judge is entitled to weigh in the balance the strain the litigation imposes on litigants, particularly if they are personal lltlgants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes and the legitimate expectation that the trial will determine the issues one way or the other.

Furthermore, to allow an amendment before a trial begins is quite different from allowing it at the

end of the trial to give an apparently unsuccessful

defendant an opportunity to renew the fight on an

entirely different defence. Another factor that a judge must weight in the balance is the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently. We can no longer afford to show the same indulgence towards the negligent conduct of litigation as was perhaps possible in a more leisured age. There will be cases in which justice will be better served by allowing the consequences of the negligence of the lawyers to fall upon their own heads rather than by allowing an amendment at a very late stage of the proceedings."

Giving full weight, as I respectfully do, to the force of those comments, the fact remains that however regrettable and frustrating this must be for the respondent (and the applicants) the fact remains that the trial of this case has not yet commenced. In the passage just quoted Lord Griffiths explicitly recognises that amendment prior to the commencement of a trial is inherently less damaging. I think that the question in general of the propriety of the present proposed amendment is really to be considered having primary regard to the question of whether they, on the face, are reasonably arguable; that is to say, that the Court will not allow proceedings to be complicated by amendments which raise some hopeless contentions. Further, of course, I have to consider whether there is any prejudice to the respondent and, if there is, whether that prejudice is incapable of remedy.

For the reasons that I will deal with a little more fully when looking specifically at the various categories of new material, I do not think that the new matters raised by the

argument. As to prejudice, the only evidence relied on by the	substituted statement of claim are hopeless or unworthy of
respondent was that contained in an affidavit of M r Anthony Gerard Percival sworn on 23 August 1993. As will appear immediately from the date, that affidavit was sworn in the context of the applicants' application to vacate the trial date. M r Percival, who is the corporate solicitor for the respondent, goes into considerable and persuasive detail as to the time, money, disruption and frustration which this litigation has caused to respondent's personnel. Those consequences were exacerbated by the raising of this matter on a television program.
However, I think it has to be recognised that major litigation is almost inevitably inconvenient, disruptive and stressful for those involved in it. But, for the present purposes, I think the important thing is that there is no evidence that the respondent will suffer the sort of prejudice in the conduct of its case which might result from late amendments such as the inability to produce witnesses or documents which would have been available at an earlier stage had the allegations the subject of the amendment been raised promptly.
It is also clear that some of the additional material in the substituted statement of claim has resulted from the engagement of new counsel, with the significant further fact that those same counsel appeared in a case in this Court before .Jenkinson J when his Honour upheld a claim against the
which is the subject of those proceedings. It is perhaps not present respondent in respect of the same model of machine
surprising, therefore, that counsel with some particular experience of similar litigation might bring to bear new ideas and a different perspective to this case. The frustration that the respondent might feel at the delay and new issues thereby raised is understandable but should not, to my mind, stand in the way of the applicants getting before the Court all the material relevant to their case and putting the best case they can, provided there is not irreversible prejudice to the respondent.
Turning now to the particular categories of material which were new. First, there was an allegation in par.15 which counsel for the respondent, with some reason, criticised as confusing. The paragraph pleaded to the agreement for the purchase of the machines. The difficulty adverted to in argument and arose from some possible confusion as to whether the initial agreement was made by the first applicant, Instant Colour Pty Limited, or the two proprietors, 14r Ivey and Mr Fergusen, the second and third applicants. I do not see that as a fatal defect and it is a matter to which counsel's attention has now been directed. This and other matters which are really more matters of form can and should be attended to in a way that I will later suggest. Secondly, the substituted statement of claim alleges a number of representations said to have been conveyed by a video shown to the applicants on or about 13 July 1988. This raises for the first time the
defence. Counsel for the respondent contended that the court important question of the effect of a possible limitation
should not allow an amendment which would raise a claim which would be statute barred. He relied on the rule in Weldon v
Neal (1887) 19 QBD 394. The answer of counsel for the
applicants was partly to point out that the representations were also pleaded as common law claims for misrepresentation and collateral warranty and were, accordingly, subject to a six year limitation period.
However, the question of the limitation period under s.82 of the Trade Practices Act 1974 remains to be grappled with. I think the answer is as follows. The High Court in Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 533 made it very clear that it is

"... undesirable that limitation questions of the

kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action except in the clearest of cases."

On the face of it, representations allegedly made in 1988 which resulted in loss which must have been incurred at the very latest by the middle of 1990 when the business closed, would be statute barred by the end of 1993. However, there does seem to be room for argument that the principle in Black v City of South Melbourne (1964) 38 ALJR 309 may apply, that is to say that the particularisation of facts in a different way does not change the cause of action so as to bring into operation the rule in Weldon v Neal. Perhaps surprisingly, this argument was not raised in Wardley.

present amendment are not essentially different from those	So it may be that the representations the subject of the
already in the pleading and therefore are simply different ways of particularising the same cause of action. Stating the question in this way only highlights the desirability of following the course indicated by the High Court in Wardley and leaving the question for the decision of the trial judge in the light of all the evidence.
However, to avoid the injustice that might be caused to the respondent by prejudicing its opportunity to raise the limitation defence at the trial, I sought and received an undertaking from counsel for the applicants in these terms; that the applicants will not hereafter contend that any amendments made pursuant to leave granted this day have effect as from the date of the original statement of claim. Thus at trial the respondent will not be shut out from contending that the amendments made today were new, did raise a new cause of action, and did not fall with Black v City of South Melbourne.
The next category of amendments concerned some representations which were said to have been made between October 1988 and January 1989. These took the form of the applicants complaining about features of the machines which, by this stage, had already been delivered, and the respondent giving certain promises and explanations. Evidence of this sort would ordinarily be adduced in a s.52 claim because, amongst other .things, it would go to the question of damage and
whether the applicant acted reasonably once it was discovered that the alleged initial representations had turned out to be
untrue. However, I was told in argument that these particular representations were relied on as misleading and deceptive conduct in themselves. Again, this raises the limitation point but, for the reasons I have already indicated, I think it proper to allow the amendment.
The next category of new material was an allegation of implied terms of merchantable quality and fitness for purpose. In the absence of specific evidence as to prejudice and in the light of the argument that these are conventional implied terms either directly arising from the . S a l e of Goods Act or analogous thereto I do not think it can be said that they raise prejudice of a kind which would preclude the amendment.
The next category of further material raised an allegation of fraud . It was alleged that the respondent made representations about the machines when it knew that there was substantial difficulties already recorded with them. Counsel for the respondent particularly stressed the importance of the seriousness of an allegation of fraud and the lateness of this allegation being made.
There is the further complication that it seems at some earlier point in time when the case was in other hands there was an allegation of fraud on the pleadings but it was subsequently withdrawn. When the matter was before Lee J in
August in the course of the application for adjourning the trial, leave was sought to amend then to raise again an
allegation of fraud. His Honour said:

"Well, what I propose is that I deal with the motion instanter, that I not give you leave to include fraud but the statement of claim can be amended in the terms sought otherwise. It is far too late to be raising such an allegation now and if you are not in a position here and now to support it then I should not leave open any avenue for you to do it. It does not mean you are foreclosed at some later time if you can establish a prejudice resulting if you are not given leave to do it and follow the usual chain of seeking leave and making an application if you are so instructed, but leave will not be granted now."

I do not read those reasons as indicating a decision by his Honour to forever close out the possibility of amending to plead fraud and, of course, his Honour did not have before him the substituted statement of claim which is what I have to consider. On this point I also take into account that there are documents which the applicant produced and in particular a document headed: "Colour Laser Report from Melbourne, September 1, 1988" which speaks of considerable difficulties with the machines in respect of which the applicants complain, this having emerged at about the time the representations were made. It is true, so counsel for the respondent points out, that one would need to look at the level of knowledge within the company of the defects and whether that can be attributed to the whole company so as to make a statement made by other employees fraudulent. However, there is some evidence in the documents before me to indicate that the report in question

Plainly, this is not the time for any conclusive determination did get circulation at a senior level.	as to difficult questions of this kind. Suffice it to say,
there is a case which, on its face is, at the very least, not completely hopeless and in respect of which is not shown that there is any prejudice to the respondent in granting the amendment.
Finally, I can mention a number of what were called by counsel for the applicants "tidying up" amendments. I think those can be left for the moment. The respondent did, however, criticise specifically two 'things and in my opinion with some reason. First, the particulars of loss and damage. These are stated to be trading losses and are said to be provided in Schedule 2. When one looks at schedule 2, there is nothing of the sort. All there is is a list of creditors with money amounts. There is also said to be a loss of profits claim. Schedule 3 sets out a list of what appear to be the 13 machines and, in respect of each, claims an amount of $70,000 for five years. There is no indication at all of how the $70,000, or the five years for that matter, is calculated or made up.
It was said by counsel for the applicants that, subject to questions of discovery, if the substituted statement of claim were allowed as an amendment, the case could and should be set down for trial. Plainly, that is not so, in my opinion, when
the important issue of damages appears in the pleadings in such a patently unsatisfactory state. If the applicants
really want this case to go to trial on issues of liability as quantum, they have to carefully analyse what is the loss they say they have suffered. They need to analyse carefully whether they are claiming representational loss or promissory loss or both and, if so, on what basis that loss is claimed and how it is made up. I get the distinct impression that quite insufficient attention has been given to this aspect of the case.
Finally, there was a claim in the prayer for relief which sought a declaration that:

"The CLC 100 copies machine - of the type referred to in this substituted statement of claim - was inherently faulty."

I was told quite candidly by counsel -for the applicants that the genesis of this claim was a hope that it might assist in persuading the Trade Practices Commission to support the applicant's case. I think that is a quite inappropriate and a possibly improper purpose for a pleading. The declaration sought does not seem to add anything of value to the applicants' case, to include it because it might encourage some other party to support the case seems to be, in itself, a reason against granting it.

In the upshot, I will allow the amendment but with the deletion of the particulars of loss and damage under par.54

upon the undertaking that I have mentioned as to the date from	and with the deletion of par.8 of the prayer for relief and
which these amendments will take effect.
Further consideration of the case will be adjourned to a date to be fixed.

I certify that this and the preceding twelve ( 12 ) pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerey.

Dated: 9 December 1993

Counsel for the applicant:	M r E Szabo
Solicitor for the applicant:	Blair Doncon & CO
Counsel for the respondent:	Mr W Martin QC with Mr D
Martino
Solicitor for the respondent:	Clayton Utz
Date of hearing:	9 December 1993

24 December 1993

Sonia Cornale
Federal Court of Australia
Principal Registry
Law Courts Building

Queens Square

SYDNEY NSW 2000

Dear Sonia,

Re: John Lee Kiat Huat
No. P263 of 1993
Re: 1nitant Colour Ptv Ltd & O r s v Canon Australia Ptv Ltd
No. WAG 9 of 1991

I enclose copies of the judgments delivered by his Honour M r Justice Heerey in the above matters on 8 December and 9 December respectively.

These judgments are not for general distribution.

Regards,

David Brennan

Associate to Heerey J

enc.