RSD Chartered Accountants v Bolitho

[2014] VSCA 186

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2014 0057

RSD CHARTERED ACCOUNTANTS
	Applicant
v
LAURENCE JOHN BOLITHO	Respondent

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JUDGES:	NETTLE, ASHLEY and HANSEN JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	21 August 2014
DATE OF JUDGMENT:	21 August 2014
MEDIUM NEUTRAL CITATION:	[2014] VSCA 186
JUDGMENT APPEALED FROM:	[2014] VSC 184 (Ferguson J)

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Appeal – Leave – Amendment to statement of claim – No defence yet filed – Facts and context not yet known – Disputed issue of construction of s 729(1) Corporations Act 2001 (Cth) – Group proceeding – Managed by judge – Leave refused.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr AJ Kelly QC with Mr EA Gisonda	Moray & Agnew
For the Respondent	Mr NJ O’Bryan SC with Mr JA Castelan	Mark Elliott

NETTLE JA:

1. I will invite Hansen JA to deliver the first judgment.

HANSEN JA:

1. The applicant, RSD Chartered Accountants, seeks leave to appeal from the order of a judge in the Commercial & Equity Division which granted leave to the respondent, Laurence John Bolitho, to file a further amended statement of claim.[1]  The amendments were contained in a proposed further amended statement of claim upon which her Honour heard argument from affected parties and subsequently, on 30 April 2014, delivered judgment.  The judgment also dealt with amendments which concerned another defendant to the proceeding, The Trust Company (Nominees) Ltd; no appeal is sought to be brought in respect of her Honour’s disposition of that part of the proposed amendments.

   [1]Bolitho v Banksia Securities Ltd and ors (No. 2) [2014] VSC 184.

1. The proceeding is a group proceeding.  It arises out of the collapse of Banksia Securities Ltd, and is brought by Mr Bolitho on behalf of himself and all persons who held debentures issued by Banksia on 25 October 2012 and who suffered loss and damage as a result of the conduct of the defendants.  There are 16,000 group members.  Her Honour has had the management of the proceeding since its inception in December 2012. 

1. On 4 February 2014, her Honour had refused an earlier application to amend the statement of claim;[2]  on that occasion too her Honour delivered written reasons for her decision.  Each judgment reflects a careful and thorough appreciation of the relevant considerations.  This, on an application to amend, not on a strike out application following amendment and a clarifying defence.[3]

[2]Bolitho v Banksia Securities Ltd and ors [2014] VSC 8.

[3]See Commonwealth of Australia v Verwayen (1990) 170 CLR 394, 456, Dawson J.

1. The statement of claim alleges that between 6 October 2009 and 25 October 2012, Banksia, by certain Product Disclosure Statements and Supplementary Statements, invited members of the public to deposit moneys with it on the security of debentures, and members of the public did so deposit moneys for fixed terms and at call and which, on maturity, would automatically roll over.  There were three prospectuses, No 16, 17 and 18.  In essence, it is alleged that group members have suffered loss and damage as a result of the non-disclosure of material and adverse matters in the prospectuses. 

1. The present application concerns only RSD which is alleged to have been engaged by Banksia as its auditor, and to have acted as investigating accountant in respect of the prospectuses. 

1. In the case of each prospectus there is a like sequential pleading which identifies statements in the subject prospectus, including a statement under the heading ‘Independent Accountant’s Report’ that the audit report for an identified year was unqualified and expressed an opinion, and an allegation to the effect that RSD made the statement under that heading and that the other statements quoted were all based upon RSD’s Independent Accountant’s Report, which was published in full in the subject prospectus. That is followed by an allegation that the statements were misleading or deceptive in breach of s 728 of the Corporations Act 2001 for the reasons then alleged. 

1. Section 728 provides that a person must not offer securities under a disclosure document if there is a misleading or deceptive statement in it. Contravention of s 728 triggers a right of recovery under s 729(1) which provides, in summary, that a person who suffers loss or damage, because an offer of securities under a disclosure document contravenes s 728(1), may recover such loss or damage from a person referred to in the table to that section if the loss or damage is one that the table makes the person liable for. Relevantly, the table provides that a person named in the disclosure document with their consent as having made a statement:

(a)       that is included in the disclosure document;  or

(b)on which a statement made in the disclosure document is based -

is liable for loss or damage caused by the inclusion of the statement in the disclosure document. 

1. It is convenient now to refer to her Honour’s reasons, and indeed to quote from them, because they succinctly identify the submissions made to her by RSD and her reasons for rejecting them.  It is to be noted that in rejecting RSD’s approach her Honour adhered to the view expressed in her earlier judgment:[4]

   [4]Bolitho v Banksia Securities Ltd & Ors [2014] VSC 184, [40]-[44].

40RSD submitted that there is a critical omission in the Proposed Pleading — that it contains no allegation that RSD was a person named in Prospectus 16 with its consent as having made a statement on which the Indirect Statements were based. Critically, RSD contends, the Proposed Pleading does not allege that RSD consented to the inclusion of the Indirect Statements. It submitted that on a proper construction of s 729, an element of the claim is that there was consent to the inclusion of the Indirect Statements not just consent to the inclusion of the statement on which the Indirect Statements are based. RSD contended that the proposed claim in respect of the Indirect Statements has no reasonable prospect of success, and leave to file the Proposed Pleading insofar as it relates to that claim should be refused. RSD urged the Court to determine the issue now, rather than leave it for trial. It submitted that it is a pure question of law and presents a short question of statutory interpretation that will not be altered by evidence at trial. It also contended that it is necessary to determine the question now in order to ascertain whether all material facts necessary to establish the claim have been alleged. RSD argued that approaching the matter in the way it urged is consistent with the overarching purpose of the Civil Procedure Act 2010 (Vic) that seeks to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute and is also consistent with the objectives of the Commercial Court.

41RSD also submitted that the statement extracted in paragraph 27(j) is an expression of opinion and Mr Bolitho has not pleaded the material facts which are necessary to establish that this opinion was misleading or deceptive.

42In relation to Mr Bolitho’s earlier application for leave to file an amended statement of claim, I said:

Mr Bolitho submitted that the ‘consent’ referred to in the table to s 729 is consent not to the inclusion of a statement (as contended by RSD) but rather consent to the naming of the person in the disclosure document. In my view, whether that is correct and whether any representations by RSD were statements of fact (as contended for by Mr Bolitho) or simply opinions (as contended for by RSD) and whether that distinction has any relevance when the claim is brought under s 729 are matters that ought be left for determination at a later stage. Again I would note that this provision has not yet been the subject of any reported judicial consideration and what Mr Bolitho contends for is not in the category of having no reasonable prospect of success. The issue is not sufficiently clear cut to put an end to it at the pleading stage of the proceeding.

43I remain of that view.  In my opinion, in a case such as the present which involves substantial claims and multiple defendants, courts should exercise caution in refusing to grant leave to file an amended pleading and should not do so unless it is clear that the proposed claim has no reasonable prospect of success.  It is important when implementing the overarching purpose of the Civil Procedure Act not to ignore the fact that one of the objectives is the just resolution of disputes.  In my opinion, it is not just to shut out a plaintiff at the pleading stage where the claim as alleged cannot be categorised as having no reasonable prospect of success.  Case management is not an end in itself.  Rather, it is a tool to be used.  Importantly, RSD will not lose the right to argue the point fully.

44At a pleading level, the claim as alleged by Mr Bolitho is not deficient and ought be permitted to proceed.  Given that the issue will be one for later determination, it is not desirable that I express my view on this application as to which of the parties has the better argument.[5]

[5]Footnotes omitted.

1. In substance, the applicant has presented to this Court the same arguments as were pressed upon her Honour.  In saying that, I do not ignore the elaboration with which Mr Kelly has developed his submissions today, particularly in discussion with the Bench.

1. It must be remembered that not only is this an interlocutory order, but an order made in a specialist managed list on a matter of practice or procedure.  Not merely does the applicant have to establish that the order is attended with doubt as would warrant the grant of leave and that to leave the order standing would occasion substantial injustice, but an even greater degree of clarity as to the order being erroneous must appear.

1. RSD’s counsel submitted further that at this early stage, even before pleadings, the Court should settle the disputed question of law as to the construction of the relevant statutory provisions on the basis that it is a pure question of law, and that to do so would conduce to the efficient and expeditious disposition of the litigation.  It was submitted in the written outline that to so approach the matter accords with Civil Procedure Act 2010.

1. In my view, her Honour’s decision is not attended by doubt as to warrant leave to appeal.  Indeed, I consider that her Honour’s disposition, and her reasons was appropriate, correct and sensible in the circumstances.  Furthermore, there is no injustice in the order standing.  The matter will proceed with pleadings, as to which RSD has not lost any right of objection, and to trial in the usual way. 

1. In my view, the application should be refused with costs.

NETTLE JA:

1. I entirely agree and would add only that, in the course of argument, it emerged with greater clarity than was previously apparent that the applicant's principal complaint is based on the difference between the respondent and the applicant as to the correct construction of s 729 of the Corporations Act 2001 (Cth). In brief substance, what the respondent (plaintiff) contends is that, other things being equal, it is sufficient to establish its alleged cause of action under s 729 against the applicant (defendant), for damages flowing from the inclusion of statements in a disclosure document, that the applicant consented to the inclusion in the disclosure document of statements (original statements) on which the subject statements were based; whereas the applicant (defendant) says that it is necessary for the respondent (plaintiff) to allege and prove that the applicant (defendant) consented to the inclusion of both the original statements (including the context in which they were included) and the subject statements based on the original statements (including the context in which the subject statements were included).

1. Whilst there is no authority on the point, and hence the correct construction of the section will need to be determined in the course of the proceeding, there is no question that the construction for which the respondent (plaintiff) contends is reasonably arguable. 

1. In those circumstances, the submission advanced by senior counsel for the applicant, that it was incumbent on the judge below, and now incumbent on this Court on appeal, to determine the issue forthwith, is tantamount to saying that a court should be prepared on a strike out application to make a final decision on a debatable and contentious point of law on which there is as yet no authority.

1. As appears from judgment of Williams J in Healey v Bank of New South Wales,[6] which was recently referred to with approval by Croft J in Clarke v Great Southern Finance Pty Ltd,[7] it would be wrong to do so.  In cases where what is in issue is a seriously arguably novel point of law, and particularly where, as here, the answer may well depend upon the factual context,[8] it is not the task of a judge at first instance or this court on appeal to undertake an exercise of that kind at this very early stage of the proceeding.[9]

   [6](1898) 24 VLR 405, 407.

   [7](2010) 80 ACSR 219, 225[13].

   [8]As was conceded in argument, and see Wickstead v Browne (1992) 30 NSWLR 1, 6 (Kirby P, in diss but upheld on appeal).

   [9]See also Lonrho plc v Fayed [1992] 1 AC 448, 469, 470 (Lord Bridge); Thorpe v The Commonwealth (1997) 144 ALR 677, 686 (Kirby J). cf Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241, 311 (Gummow J).

1. For the reasons given by Hansen JA and for those which I have added, I would dismiss the application.

ASHLEY JA:

1. I agree with the reasons of my brother Hansen and with those given by the learned presiding judge. 

1. As I apprehend it, senior counsel for RSD submitted that there are two problems with paragraph 27A of the statement of claim as it has been permitted to go forward. 

1. The first is the need – disputed by the plaintiff -  to plead consent with respect to statements allegedly made in the prospectus and said to have been based upon RSD’s relevant report. There is nothing that I wish to add concerning that matter.

1. The second is that the plea that various assertions made in paragraph 27 of the statement of claim were ‘based upon’ the report would unjustifiably amplify the amount of investigation which RSD would be required to undertake in order to defend the claim.  Counsel complained, in effect, that it would be difficult to identify whether the statements alleged by paragraph 27 of the statement of claim were in fact based upon the report. He conceded, however, that this problem would not arise in connection with sub‑paragraphs (i) or (j).

1. Senior counsel for the plaintiff submitted that sub-paragraphs (i) and (j) were not the only paragraphs which, unequivocally, could be said to be based upon the accountant's report.  He pointed to sub-paragraphs (e) and (f).

1. In my view, it is at least clear that the extent of the difficulties which senior counsel for RSD submitted would arise from the statement of claim in its present form were overstated.  That is so although I appreciate that he only took us to paragraphs 27 and 27A as instances of a problem said to arise elsewhere in the statement of claim.

1. (Discussion re costs.)

NETTLE JA:

1. The orders of the Court are as follows: 

1.        The application for leave to appeal is dismissed.

2.The applicant should pay the respondent's costs of the application which it is directed will be taxed forthwith and paid when taxed.

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