Soia v Bennett [No 3]
[2011] WASC 361
•22 DECEMBER 2011
SOIA -v- BENNETT [No 3] [2011] WASC 361
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 361 | |
| Case No: | CIV:1130/2003 | 15 DECEMBER 2011 | |
| Coram: | COMMISSIONER SLEIGHT | 22/12/11 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Application partly granted | ||
| B | |||
| PDF Version |
| Parties: | KIM PETER SOIA PERSONALIZED TUITION SERVICES PTY LTD (ACN 009 099 71) MARTIN LAWRENCE BENNETT |
Catchwords: | Practice and procedure Application to amend statement of claim and particulars after the close of evidence Turns on its own facts |
Legislation: | Fair Trading Act 1987 (WA), s 9, s 79 Rules of the Supreme Court 1971 (WA), O 21 r 5 |
Case References: | Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CRL 175 Barclay Mowlem Constructions Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 Custom Credit Corporation Ltd v Dallas Development Corporation Pty Ltd [2003] WASC 98 Dare v Pulham (1982) 148 CLR 658 Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 Motium Pty Ltd v Arrow Electronics Australia Ltd [2011] WASCA 65 Soia v Bennett [No 2] [2011] WASC 133 Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- First Plaintiff
PERSONALIZED TUITION SERVICES PTY LTD (ACN 009 099 71)
Second Plaintiff
AND
MARTIN LAWRENCE BENNETT
Defendant
Catchwords:
Practice and procedure - Application to amend statement of claim and particulars after the close of evidence - Turns on its own facts
Legislation:
Fair Trading Act 1987 (WA), s 9, s 79
Rules of the Supreme Court 1971 (WA), O 21 r 5
Result:
Application partly granted
(Page 2)
Category: B
Representation:
Counsel:
First Plaintiff : Mr E W Alstergren & Mr C J Twidale
Second Plaintiff : Mr E W Alstergren & Mr C J Twidale
Defendant : Dr J T Schoombee
Solicitors:
First Plaintiff : Galic & Co
Second Plaintiff : Galic & Co
Defendant : Bennett & Co
Case(s) referred to in judgment(s):
Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CRL 175
Barclay Mowlem Constructions Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82
Custom Credit Corporation Ltd v Dallas Development Corporation Pty Ltd [2003] WASC 98
Dare v Pulham (1982) 148 CLR 658
Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666
Motium Pty Ltd v Arrow Electronics Australia Ltd [2011] WASCA 65
Soia v Bennett [No 2] [2011] WASC 133
Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323
(Page 3)
1 COMMISSIONER SLEIGHT: The plaintiffs seek leave to amend the statement of claim and further and better particulars to par 3 of the statement of claim. The application to amend is made after the evidence was completed at trial. The application was initially foreshadowed in the closing address of the plaintiffs' counsel. However, it should be noted that the proposed amendments go beyond what was foreshadowed by counsel in his closing submissions.
Background
2 In broad terms, the plaintiffs' claims relate to a joint venture with the defendant, Mr Bennett, to establish an internet tutorial business operated by a company, Internet Tuition College Pty Ltd (ITC). The plaintiffs claim Mr Bennett made representations and contractual undertakings to provide funding to develop the business, which included paying Mr Soia management fees. The claims made by the plaintiffs are that Mr Bennett breached his undertakings and by doing so is liable in damages under the Fair Trading Act 1987 (WA) and breach of contract. Part of the representations relied upon by the plaintiffs relate to a meeting on 30 June 1999 when the plaintiffs plead that Mr Bennett presented a budget document. The budget document covers a 12-year period and provides for both income and expenditure in each year.
Proposed amendments
3 The proposed amendments can be summarised as follows.
1. An amendment to further and better particulars of par 3 of the statement of claim which relate to an alleged telephone conversation between Mr Soia and Mr Bennett on 31 May 1999.
2. Amendments to pars 5, 20 and 21 of the statement of claim to plead:
(i) that Mr Bennett was to fund the development of the business for two years until the business was self-funded;
(ii) the funding would be in accordance with the expenditure items set out in a budget document dated 30 June 1999;
(iii) management fees would be paid to Mr Soia for two years as provided in the budget document;
(Page 4)
- 3. An amendment to the statement of claim to plead that representations made by Mr Bennett relating to future matters and were made without reasonable grounds.
The minute of proposed amendments to the statement of claim also included other minor amendments which are not controversial and need not be described by me in this decision.
4 The amendments that I have outlined above are vociferously opposed by the defendant complaining that the amendments are made in bad faith, are an abuse of process, are not supported by the evidence of Mr Soia, are statute barred and the defendant will suffer prejudice and unfairness if the amendments are allowed. It is also complained that no affidavit has been filed in support of the application for amendment.
General principles
5 A court has a discretion under O 21 r 5 of the Rules of the Supreme Court1971 (WA) to grant an amendment to pleadings at any time. In Soia v Bennett [No 2] [2011] WASC 133, which concerned an application by the plaintiffs to amend the pleadings prior to the commencement of the trial, I set out the general principles that apply to an application under O 21 r 5. Of course, what distinguishes the current application from the application dealt with in Soia v Bennett [No 2] is that the current application has occurred after the evidence has closed. However, this does not prohibit the plaintiffs from making their current application (see Seaman Civil Procedure Western Australia [21.5.21]).
6 In Dare v Pulham (1982) 148 CLR 658, 664, the High Court (omitting authorities and citations) stated:
Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings. But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed, though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily
(Page 5)
- preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence. (emphasis added)
7 In Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666, the High Court considered a case where an amendment had been allowed after the close of evidence. The plaintiff's claim was a fatal accident claim based upon negligence. The plaintiff's claim was framed in the pleadings on the basis that the deceased was about to board a train, the train moved, causing the deceased to be thrown from the train and injured. The trial was before a judge and jury. At the conclusion of the evidence, the defendant's counsel moved for a dismissal of the claim by direction, as there was no evidence supporting the pleaded circumstances of the accident. Counsel for the plaintiff then moved for an amendment of the statement of claim to plead, in accordance with evidence given at the trial, that the deceased attempted to enter a moving train when the doors had commenced to close, the doors had been reopened so as to admit the deceased, but then closed before he had entered the train causing him to be jolted out of the train and fatally injured.
8 The trial judge allowed the amendment and the jury found in favour of the plaintiff. The verdict was set aside by the Court of Appeal.
9 The majority of the High Court allowed the appeal and reinstated the jury verdict. A plurality judgment of Stephen, Mason and Jacobs JJ stated:
But the duty of the trial judge was clear. If in the cause of action upon which the plaintiff sued there had emerged at the conclusion of the evidence facts which, if accepted, established that cause of action, then it was a duty of the trial judge to leave the issue of negligence to the jury. The pleading should have been amended in order to make the facts alleged and particulars of negligence precisely conform to the evidence which had emerged. Part 20, rule 1(2) of the New South Wales Supreme Court Rules that all necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding. Now, for many years past, a plaintiff does not fail by being refused leave to amend or through failure formally to apply for amendments, where the evidence has disclosed a case in the cause of action fit to be determined by the tribunal of fact. Particularly is this so when the action finally determines the rights of the parties and the cause of action (668).
- In a strong dissenting judgment, Barwick CJ stated:
- The issues for trial need in every case to be settled, preferably before the trial begins. If they need amendment during the trial in order to allow the matter really in difference between the parties to be litigated, then the necessary amendment should be made so that thereafter it can clearly be seen to what the evidence, thereafter to be given, ought to be addressed: and, perhaps what witnesses already called should be recalled. In this case, no such opportunity occurred. It is said that the defendant did not ask for the discharge of the jury or for an adjournment when the new case was announced. But these courses, however desirable in some cases, seem to be of no consequence in relation to the very drastic step of allowing this change up front after the evidence was concluded (668).
10 These decisions of the High Court are now somewhat dated and must be considered in light of modern case management principles and the decision of the High Court in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CRL 175. It is now more difficult for a party to obtain leave to make substantial amendments during a trial in the era of case flow management: Custom Credit Corporation Ltd v Dallas Development Corporation Pty Ltd [2003] WASC 98 [104] (Hasluck J).
11 In Soia v Bennett [No 2] [37] - [44], I referred to the general principles relating to amendments. I expressed the view that the principles enunciated in Aon Risk Services Australia v Australian National University can be summarised as stating that the guiding principle is to obtain a just resolution of the dispute taking into account the recognition contained in modern case management principles of the need for litigation to be conducted in accordance with positive cash flow management objectives. I also went on to cite various passages from the decision of the plurality judgment (Gummow, Hayne, Crennan, Kiefel & Bell JJ). I do not propose in this decision to again set out those passages, but I again rely upon them.
12 Of course, the question of whether an amendment should be allowed in the present case includes an examination of the extent to which Mr Bennett will be prejudiced or will suffer unfairness as a result of the amendments.
Lack of affidavit in support
13 It is not usually necessary to file an affidavit in support of an application for an amendment unless the court requires one because the circumstances of the late application require scrutiny (including a question of whether the application is made in good faith). In my opinion, there is no need for the plaintiffs to file an affidavit in support of the application
(Page 7)
- to amend given my familiarity with the conduct of the trial and the issues that arise on the pleadings and the evidence presented. I am able to adequately assess, in the circumstances, the probability of prejudice or unfairness to the defendant of the proposed amendments: Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323, 336.
Affidavit of Mr Bennett
14 An affidavit sworn by Mr Bennett on 20 October 2011 was filed in opposition to the plaintiffs' application to amend. In my opinion the affidavit is largely in the nature of a submission and does not add to the strength of the defendant's oral submissions that Mr Bennett will be prejudiced by the proposed amendments.
Lack of good faith and abuse of process
15 The defendant submits the plaintiffs' application to amend is not a bona fide application and is an abuse of process. The contention is based upon a suggestion that all the facts indicate a deliberate forensic decision to hold back on the amendments, and to do so until the last moment to disadvantage and destabilise the defendant's case. I totally reject this submission. I am satisfied that the application to amend arises out of a genuine attempt by counsel for the plaintiffs to review the adequacy of the pleadings. There is no sinister motive as suggested.
Amendment to further and better particulars
16 The first proposed amendment I will deal with is an application to amend further and better particulars of par 3 of the statement of claim. The further and better particulars sought to be amended relate to alleged representations by Mr Bennett on 31 May 1999 (par 2(viii) of the Further and Better Particulars made pursuant to an order on 11 May 2011). One of the representations pleaded against Mr Bennett in the further and better particulars is that:
The Defendant also said words to the effect 'I will fund the business and I will make sure you have enough money, so you do not have to worry about anything'.
17 The first amendment the plaintiffs seek to make is to insert prior to this pleaded representation the words:
In that conversation The Plaintiff also said to the Defendant words to the effect 'I need you to assure me that you will fund this project completely and you will pay me at least a few hundred thousand dollars per year so that I can meet my commitments'.
(Page 8)
18 A further pleaded representation by Mr Bennett was that he said words to the effect:
I will write a proper budget and I will make sure you are provided with everything you need to develop your ideas including making payments to you. We will be in this 50/50. We had better incorporate a company so that we can get this business started.
19 A further proposed amendment is to insert prior to this pleaded representation the words:
During that conversation the plaintiff said 'Martin I need you to write a proper budget for the business and I will need to be paid regularly so that I can concentrate fully upon developing my ideas'.
20 The proposed amendments do not change the pleaded representations of Mr Bennett. However, I accept that the proposed amendments may alter the shade of meaning of the representations.
21 The proposed amendments coincide with the evidence contained in Mr Soia's first witness statement which the defendant, Mr Bennett, had notice of prior to trial. In Barclay Mowlem Constructions Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82, Martin CJ stated (after referring to modern pre-trial procedure such as the exchange of witness statements):
In my view, the contemporary role of pleadings has to be viewed in the context of contemporary case management techniques and pre-trial directions. In this Court, those pre-trial directions will almost invariably include; firstly, a direction for the preparation of a trial bundle identifying the documents that are to be adduced in evidence in the course of the trial; secondly, the exchange well prior to trial of non-expert witness statements so that non-expert witnesses will customarily give their evidence-in-chief only by the adoption of that written statement; thirdly, the exchange of expert reports well in advance of trial and a direction that those experts confer prior to trial; fourthly, the exchange of chronologies; and fifthly the exchange of written submissions [5].
22 In my opinion the amendments proposed to the particulars do not cause any prejudice or unfairness to Mr Bennett. Mr Bennett was given adequate notice of these particulars from the witness statement of Mr Soia. I conclude that the amendments should be allowed.
Amendment to pars 5, 19 and 20 of the statement of claim
23 The second set of amendments I proposed to deal with relate to pars 5, 19 and 20 of the statement of claim.
(Page 9)
24 Paragraph 5 of the statement of claim pleads that:
(a) At a meeting of directors of ITC held on 30 June, 1999, the Defendant provided a budget, (hereon referred to as the 'Budget') for ITC which included:
(i) expenditure for each of the next twelve (12) financial years commencing on 1 July 1999, the expenditure for 1999/2000 ('the first year') and 2000/2001 ('the second year') being respectively $1,765,765 and $1,986,080 (and increasing each year thereafter);
(ii) management fees for the First Plaintiff of $200,000 for the first year and $300,000 for the second year, $400,000 for the third year and $650,000 for each of the next nine years.
(b) The First Plaintiff and the Defendant orally agreed that such Budget was adopted and would be implemented.
(c) The defendant represented expressly or impliedly that he would fund development of the business in accordance with the budget and that the first plaintiff would be paid management fees in accordance with the budget.
Particulars
- (i) Insofar as the representation was expressly made it was partly oral and partly in writing.
(ii) Insofar as it was oral it was contained in the conversation during the meeting held on 30 June 1999 in which the defendant said to the first plaintiff words to the effect 'I will fund that company and I will pay you management fees so that you will be free to concentrate on producing the best education system in the world. If you look at the budget you will see the expenditure will be $1,765,765 in the first year. To get this project off the ground is going to cost real money'.
(iii) Insofar as it was in writing it was contained in the budget document that set out the expenditure for each of the 12 years starting July 1999.
(iv) Insofar as the representation was implied, it went without saying that the defendant would fund the development of the business in accordance with the budget and that the first plaintiff would be paid management fees in accordance with the budget because the parties had agreed to adopt the budget and implement the same. The ITC
- budget estimates were provided by the defendant on the basis that he would provide the necessary funding for the business to operate.
25 Paragraphs 19 and 20 of the statement of claim plead as follows:
19. Between about 4 May 1999 and 30 June 1999, the defendant orally undertook to the first plaintiff, that if the first plaintiff joined the defendant in operating the business, and in consideration of the first plaintiff doing so and devoting his time, energy and expertise to development of the business, the defendant would fund the development of the business including providing for payment of management fees to the first plaintiff.
20. The first plaintiff repeats paragraph 5(a) and (b) above, and says the defendant undertook to the first plaintiff expressly and/or impliedly that he would fund development of the business in accordance with the Budget and that the first plaintiff would be paid management fees in accordance with the Budget, in consideration of the first plaintiff participating in development of the business.
26 The application to amend is as follows:
(i) Where the word 'budget' appears in pars 5(b) and 5(c), it is expanded to read, 'the expenditure items listed in the budget for the first two years'.
(ii) In subpar (ii) of the particulars to 5(c), the words are added, 'The defendant also said that he would fund ITC's development for the first two years until ITC would be able to produce its own income'.
(iii) In subpar (iv) of par 5(c) of the particulars the words 'in accordance' are deleted.
(iv) In relation to par 19, the proposed amendments seek to amend by inserting the words 'for the first two years' where it is pleaded that the defendant would fund the development of the business and also seeks to add the words 'in the sum of $200,000 for the first year and $300,000 for the second year' at the end of the paragraph.
(v) The proposed amendment to par 20 is, in effect, by substituting the word 'budget' with the words 'expenditure items set out in the budget for the first two years'.
27 The net effect of the proposed amendments is that the representations alleged against Mr Bennett relating to the budget document 30 June 1999
(Page 11)
- are restricted to expenditure components of the document; further that he would fund the development of the business for the first two years until ITC would be able to produce its own income. The amounts of $200,000 in the first year and $300,000 in the second year referred to in the proposed amendments to par 19 are extrapolated from the budget document dated the 30 June 1999.
28 These amendments must be considered in the context that Mr Bennett had raised in his amended defence (par 5.5) that if representations were made as pleaded in the existing statement of claim then, by implication from the content of the budget document dated 30 June 1999, the representations were conditional upon and limited to circumstances where ITC generated the income materially of the magnitude and over the time periods covered in the budget document dated 30 June 1999.
29 In response to this pleading, the plaintiffs by an amended reply (pursuant to an order of 20 May 2011) pleaded in par 1(c)(i) that:
The conduct of the defendant was inconsistent with the necessary implication pleaded in the amended defence in that:
(i) the defendant agreed to pay the costs of running the business for the first two years as per the adopted budget.
- The reply clearly alerts the defendant to the plaintiffs' case that Mr Bennett had agreed to pay the costs (ie expenditure) of conducting the business for the first two years.
30 Further, the evidence of Mr Soia made it clear that his case was that the alleged representations made by Mr Bennett on the 30 June 1999 related to the expenditure side only of the budget document for the first two years. In par 44 of the first witness statement of Mr Soia dated 1 June 2011 (exhibit 3), Mr Soia stated:
Bennett and I then agreed Bennett's proposal Budget be accepted as the true ITC Expenditure Budget and that the company would proceed based upon the agreed Expenditure Budget.
31 In cross-examination of Mr Soia, the following evidence was given:
So your case is that Mr Bennett agreed to fund the total expenditure of - I think it was 1.7 million and 1.9, of course with additions, for the first two years without expectation of any income?
(Page 12)
- That is the evidence?---Yes. And that is also reflected in the documents before the court (ts 885).
32 Earlier, Mr Soia was questioned about the fact that he was relying only upon the expenditure side of the budget and that this had not been pleaded. His response was as follows:
Well, the pleading is only talking about expenditure, sir. It's not talking about any income whatsoever and if I read the pleading in literal terms, which I think is what you're asking me to, it's speaking about expenditure. There is no comment at all about income. The pleadings are very clearly are expressing expenditure, sir (ts 884).
33 In my opinion, the proposed amendments simply seek to make the pleadings conform with Mr Soia's witness statement and what clearly was identified during Mr Soia's evidence as the plaintiffs' case. It could not be said that the defendant will be prejudiced or that it will be unfair to make the amendments sought. Mr Bennett was adequately alerted to the plaintiffs case by Mr Soia's witness statement and Mr Soia's evidence in court. Mr Bennett's position remains clear. He denies that any such representations were made and, in the alternative, if representations were made that the budget document of 30 June 1999 would be adopted, then by its express terms it was conditional upon income being earned.
34 The defendant further contends that the amendments, in so far as they seek to limit the plaintiffs' reliance upon the budget document of the 30 June 1999 to the expenditure side of the document, are embarrassing. This submission is based on evidence that certain expenditure items included in the budget document do not apply. An example of this are items in the expenditure side of the budget for the first two years that are calculated on a percentage basis of the income, yet Mr Soia's case is that it was agreed that no income would be earned for the first two years of the operation of ITC. Notwithstanding these apparent inconsistencies, I conclude that they ultimately go to the credibility of Mr Soia's evidence and do not create an embarrassment in the pleading so as to create an unfairness to the defendant, Mr Bennett. Mr Bennett's case remains that the budget was not agreed to in any form.
35 Finally, it is submitted that the amendments create a new cause of action which is statute barred. In Soia v Bennett [No 2] I summarised the relevant legal principles concerning an application to amend which raises issues of time limitations. Applying those principles I conclude that there is enough overlap between the original pleaded representations and the amended representations so that if a new cause of action arises it does so
(Page 13)
- out of substantially the same set of facts as the existing pleaded cause of action. Accordingly, I conclude that the statutory limitations period ought not prevent the plaintiffs from making the proposed amendments.
36 For the above reasons, I will allow the amendments to pars 5, 19 and 20 of the statement of claim.
Amendment to par 15 and insertion of a new par 16
37 The existing par 15 reads:
The Defendant's representations pleaded in paragraphs 3, 5 and 6 above -
(a) constitute conduct in trade or commerce;
(b) have been 'falsified' in that -
(i) Defendant failed duly to fund the joint venture and abandoned it in September 2000;
(ii) the Defendant failed to pay or cause to be paid to the First Plaintiff management fees in accordance with the budgeted figures;
(iii) no or no significant financial or professional rewards were derived by the First Plaintiff from entering upon the joint venture with the defendant in respect of the business; and in the premises must be deemed to have constituted misleading or deceptive conduct.
39 It is also proposed to add a further subparagraph to read:
(c) were misleading or deceptive or likely to mislead and deceive in contravention of s 10(1) of the Fair Trading Act 1987 (WA) (the Act).
40 It is also proposed to plead a new par 16 which is to read:
16. To the extent that the representations in paragraphs 3, 5 and 6 herein related to future matters they were made without reasonable grounds in contravention of s 9 of the Act.
Particulars
- The Defendant at the time he made the representations had no intention of funding the business or did not have reasonable grounds by saying he was going to fund the business to the extent
- required for its development for the first two years as set out in the budget of $1,765,765 for the first year and $1,980,000 for the second year or the management fees listed therein as $200,000 for the first year and $300,000 for the second year or to pay any management fee until the business had its own income.
41 I will allow the proposed par 15(c) because it was always clear that the plaintiffs' claim, as pleaded in par 15, was a claim pursuant to the Fair Trading Act 1987. This is notwithstanding the defendant submits that the amendment should not be allowed as a claim under the Act cannot succeed based upon a non-compliance of a representation of a future matter. However, in the absence of an application to strike out par 15, I believe that issue of whether the claim can succeed should be reserved to my final decision.
42 However, in my view the balance of the proposed amendments to par 15 and the insertion of par 16 give rise to different considerations. These amendments create a major shift in the nature of the claim made by the plaintiffs. The defendant's counsel in his opening contended that the pleading of misleading or deceptive conduct was bad in law because a falsification of a promissory representation about future funding (including payment of management fees) could not amount to misleading or deceptive conduct within the meaning of the Fair Trading Act 1987. This is because the misleading or deceptive conduct must exist at the time of the representation. The submission was supported by the authority of Motium Pty Ltd v Arrow Electronics Australia Ltd [2011] WASCA 65 which related to the identical provisions in the Trade Practices Act 1974 (Cth). Newnes JA stated [59]:
Whether a representation is misleading or deceptive is to be judged at the time the representation is made: Bill Acceptance Corporation Ltd v GWA Ltd (1983) 78 FLR 171, 178 - 179. Where it is alleged that a corporation made a representation as to an existing state of affairs the question is whether, at the time it was made, the representation was misleading or deceptive as to that state of affairs. Where, on the other hand, it is alleged that a corporation made a representation with respect to a future matter, the representation will be misleading or deceptive if, at the time it was made, the corporation did not have reasonable grounds for making it. Where such a case is alleged, the onus of establishing that it had reasonable grounds for making it lies on the corporation: s 51A. But a representation that a corporation will do something in the future will not be shown to be misleading or deceptive at the time it was made simply by showing that when the time came to do that thing the corporation did not do it: Bill Acceptance Corporation Ltd (179); Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82, 88; Concrete Constructions Group Ltd v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290 [155].
(Page 15)
43 Despite the defence opening, the plaintiffs made no application to amend.
44 The plaintiffs' case is that Mr Bennett was to fund the development of the business for a period of two years and pay Mr Soia management fees for that period. Mr Bennett's evidence was that he agreed to fund the development of the business to the testing of a prototype only and this did not include a provision for management fees payable to Mr Soia. The plaintiffs argue that if Mr Soia's pleaded representation is accepted by me in my decision, then it necessarily follows from Mr Bennett's evidence that he did not have an intention to honour the representation at the time he made the representation. As a matter of logic, the contention of the plaintiffs is flawed. If I reject Mr Bennett's evidence and accept Mr Soia's evidence that the representations were made, it does not necessarily follow that Mr Bennett did not have an intention to honour that commitment at the time of the statement. That is a separate factual issue to the question of whether the representation was made.
45 In my opinion, these further amendments should not be allowed for the following reasons:
1. Firstly, the amendments raise a new cause of action based upon an allegation that the defendant did not have reasonable grounds for making the alleged representations at the time of the representations. In my view, such a new cause of action is statute-barred as any claim for damages must be commenced within three years after the date on which the cause of action accrued (s 79 of Fair Trading Act 1987). The new cause of action, which focuses on Mr Bennett's position at the time he made the alleged representations is not based substantially upon the same set of facts as the existing cause of action pleaded in par 15 of the statement of claim: see [35] above.
2. Secondly, if the amendments are allowed, there is a significant legal effect in terms of the onus of proof. Section 9 of the Fair Trading Act 1987 provides as follows:
(1)` For the purposes of this Part, where a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
- (2) The onus of establishing that a person had reasonable grounds for making a representation referred to in subsection (1) is on the person.
(3) Subsection (1) shall not be taken to limit by implication the meaning of a reference in this Part to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.
- The creation of the onus of proof on Mr Bennett if the amendment is allowed would, in my opinion, be grossly unfair given that the evidence is closed.
- 3. Finally, the amendments give rise to a new factual issue as to whether Mr Bennett engaged in misleading and deceptive conduct at the time of the representations. To allow such an amendment after the close of evidence will create an obvious unfairness to the defendant.
46 For the above reasons, the remaining amendments to par 15 and the insertion of a new par 16 are disallowed.
Final orders
47 I will hear counsel as to final orders to be made as a consequence of this decision.
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