Sydney Attractions Group Pty Ltd v Schulman

[2012] NSWSC 1359

Supreme Court

New South Wales

Medium Neutral Citation:	Sydney Attractions Group Pty Ltd v Schulman [2012] NSWSC 1359
Hearing dates:	5, 6 and 8 November 2012
Decision date:	09 November 2012
Jurisdiction:	Equity Division - Commercial List
Before:	Stevenson J
Decision:	Leave to amend pleadings refused
Catchwords:	PRACTICE AND PROCEDURE - amendments - lack of adequate explanation for delay - futility - prejudice
Legislation Cited:	Civil Procedure Act 2005 Uniform Civil Procedure Rules
Cases Cited:	Breen v Williams [1996] HCA 57; (1996) 186 CLR 71 Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Cropper v Smith (1884) 26 Ch D 700 State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 Sydney Attractions Group Pty Ltd v Schulman [2012] NSWSC 951
Texts Cited:	Ritchie's Uniform Civil Procedure NSW
Category:	Interlocutory applications
Parties:	Sydney Attractions Group Pty Ltd (plaintiff) Frederick Schulman (defendant)
Representation:	Counsel: R McKeand SC with A C Casselden (plaintiff) N J Kidd SC (defendant) Solicitors: Herbert Geer Lawyers (plaintiff) Levitt Robinson Solicitors (defendant)
File Number(s):	SC 2010/92382
Publication restriction:	Nil

Judgment

Introduction

1. The general background to these proceedings is set out in my judgment of 21 August 2012: Sydney Attractions Group Pty Ltd v Schulman [2012] NSWSC 951.

1. I shall use the same abbreviations as appear in that judgment.

1. Sydney Attractions seeks leave to file an Amended Reply and an Amended Response. Both amendments add allegations to the same effect.

1. The amendments sought to the Reply are in the following terms: -

"In reply to the whole of the Defendant's Response to Amended Summons the Plaintiff says as follows.

a)The Deed contained the following provisions.

7.1 The Releasor (or its professional advisers) will be entitled to inspect and audit the Purchaser's Business Records on reasonable notice during normal business hours (no more frequently than once every 12 months during the Earn Out Period) to the extent necessary to verify the calculation of the amount of each payment under the Deferred Component under clause 5 after the date of any previous inspection pursuant to this subclause. The Purchaser must make all relevant Business Records available to the Releasor (or its advisers) for this purpose.

7.2 If the Releasor disputes the Purchaser's calculation of any amount of the Deferred Component, then the Releasor must give notice of the dispute ('Dispute Notice') to the Purchaser within 30 Business Days after completion of its inspection pursuant to subclause 7.1.

7.3 A Dispute Notice given pursuant to subclause 7.2 must detail with reasonable particularity the respects in which the Releasor disagrees with the Purchaser's calculation of the relevant amount of the Deferred Component the subject of the dispute.

7.4 If the Releasor gives a Dispute Notice to the Purchaser within the period required by subclause 7.2 and the Releasor and the Purchaser do not resolve the dispute within 10 Business Days after the date on which the Dispute Notice is given to the Purchaser then either the Releasor or the Purchaser may refer the matters in dispute to the Independent Accountant with a request that the Independent Accountant make a decision in respect of the dispute within 30 days of receiving the reference.

7.5 If a dispute is referred to the Independent Accountant

(a) the Purchaser must procure that all necessary access to the relevant Business Records is given to the Independent Accountant; and

(b) within 7 days of the reference the Releasor and the Purchaser may prepare and deliver to the Independent Accountant any submission about the matters in dispute they wish to make.

7.6 The Independent Accountant will act as an expert not an arbitrator and their decision will be final and binding on the parties, except in the case of Material manifest error.

b)It was implicit from the language of clause 7 in the context of the Deed as a whole that the right to inspect conferred by clause 7.1 must be exercised within 30 Business Days (as defined in the Deed) of the service on the Defendant of the Plaintiff's calculation of the amount of each payment under the Deferred Component payable pursuant to the Deed.

c)Alternatively to b), it was an implied term of the Deed that the right to inspect conferred by clause 7.1 must be exercised within a reasonable time, which, in the circumstances, was within 30 Business Days (as defined in the Deed) of the service on the Defendant of the Plaintiff's calculations of each payment under the Deferred Component payable pursuant to the Deed.

d)The Plaintiff served on the Defendant its calculations of the amounts payable under the said Deferred Component together with a certificate pursuant to clause 5.12 of the Deed, on 28 September 2009.

e)By agreement between the Plaintiff and the Defendant, by his solicitors, the time for exercising the right to inspect conferred by clause 7.1 was extended until 20 November 2009; alternatively, it was unilaterally extended by the Plaintiff to that date.

f)The Defendant failed to exercise the said right to inspect within the extended time and thereby forewent the right to inspect.

g)On the true construction of the Deed, by foregoing the right to inspect the Defendant had no right to dispute the Plaintiff's calculations of each payment under the Deferred Component payable pursuant to the Deed.

h)Alternatively, in order for the Defendant to be entitled to dispute 'the Purchaser's calculation of any amount of the Deferred Component' after foregoing the right to inspect it was mandatory that he give notice of the dispute in accordance with clause 7.2 within 30 days of the expiry of the right to inspect pursuant to clause 7.1.

i)The Defendant gave no notice of dispute to the Plaintiff within 30 Business Days of the extended period for inspection of the Plaintiff's 'Business Records'.

j)On the true construction of clause 7 the Defendant is not entitled to dispute the Purchaser's calculation of any amount of the Deferred Component, in these proceedings or otherwise." (Emphasis added)

1. This matter is fixed for hearing for three weeks commencing 19 November 2012.

1. Application to amend was first made before me on 5 November 2012. On that occasion I made directions for the service of evidence and submissions and adjourned the matter to 6 November 2012. Because of the state of my list, I was not able to finally deal with the matter on that day. Final argument occurred before me on 8 November 2012.

Decision

1. I refuse to grant Sydney Attractions leave to make the amendments sought.

General principles

1. As a general rule, a party should be entitled to an amendment, even at a late stage in a trial, to permit the real issues in dispute between the parties to be finally resolved: Cropper v Smith (1884) 26 Ch D 700 at 710.

1. A significant qualification to that rule follows from the case management principles established by the Civil Procedure Act 2005 and Uniform Civil Procedure Rules ("UCPR").

1. The common law position is stated by the majority of the High Court in State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 154 as follows: -

"Case management is not an end itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim."

1. However, in Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Spigelman CJ with whom Basten and Campbell JJA agreed, observed that, while State of Queensland v J L Holdings Pty Ltd, above, remained binding authority with respect to applicable common law principles, those principles could be and had been modified by statute both directly and via statutory authority for rules of court: [28].

1. Spigelman CJ said at [29]: -

"In this State J L Holdings must now be understood as operating subject to the statutory duty imposed upon the courts by s 56(2) of the Civil Procedure Act 2005, which requires the Court in mandatory terms - 'must seek' - to give effect to the overriding purpose - to 'facilitate the just, quick and cheap resolution of the real issues in the proceedings' - when exercising any power under the Act or Rules. That duty constitutes a significant qualification of the power to grant leave to amend a pleading under s 64 of the Civil Procedure Act."

Grounds on which the amendment is resisted

1. Mr Kidd SC, who appeared for Mr Schulman, resisted the proposed amendment on three bases: -

(a)   lack of adequate explanation for the delay;

(b)   futility;

(c)   prejudice.

Lack of explanation

1. There is no adequate explanation for the late application to amend. Mr McKeand SC, who appears for Sydney Attractions, candidly conceded that the point (which involves the proper construction of the Deed) occurred to him only recently. That may be understandable. The Deed is not lacking in complexity. However, the fact remains that the point (if there is any substance in it) has been there for Sydney Attractions to take for the duration of these proceedings.

Futility

1. A matter relevant to the exercise by the Court of its discretion to grant an amendment is whether the amendment is so fruitless that it would be struck out if it appeared in an original pleading.

1. Thus a relevant matter is whether the proposed pleading discloses no reasonable cause of action or is doomed to fail (see UCPR r 14.28 and the cases gathered at Ritchie's Uniform Civil Procedure NSW at [14.28.5]).

1. In my opinion, that is the position here.

1. In substance, the proposed amendments are based on the proposition that, on the proper construction of clause 7 of the Deed, Mr Schulman is precluded from disputing Sydney Attractions' claim because he did not exercise his right of inspection under clause 7.1 within 30 days of receipt of a certificate from Sydney Attractions under clause 5.12 of the Deed.

1. Clause 5.12 of the Deed required Sydney Attractions to give a certificate ("the Certificate") setting out its calculations of the SkyWalk Final Component within 30 days of the last day of the Earn Out Period.

1. The last day of the Earn Out Period was 30 June 2009. Thus Sydney Attractions was obliged to give the Certificate by 30 July 2009.

1. In fact Sydney Attractions gave a Certificate on 28 September 2009. The Certificate recorded a "negative amount" for the purposes of clause 5.12. It called on Mr Schulman to pay Sydney Attractions $2,657,198, together with an amount of $2,009,407 earlier demanded, making a total of $4,656,605.

1. Clause 5.12 of the Deed obliged Mr Schulman to pay the amount in the Certificate within 30 days.

1. Apart from clause 7 of the Deed, there is no provision in the Deed obliging Mr Schulman to dispute the amount claimed in a Certificate within a particular time, or to preclude him from disputing amounts in a Certificate, absent the notification of a dispute within a particular time.

1. The proposed pleading asserts that, on the proper construction of clause 7, "in the context of the Deed as a whole" Mr Schulman was not entitled - ever - to dispute the figure claimed in the Certificate, unless he exercised the right to inspect referred to in clause 7.1 of the Deed within 30 days (or, alternatively within a reasonable time, which in the circumstances, was 30 days) of receipt of the Certificate.

1. The basis upon which that argument is put appears from Sydney Attractions' written submissions as follows: -

"The primary element of cl 7.2 is the unconditional obligation to give notice of dispute if the defendant disputes calculation of any amount which leads directly to the right for either party to refer the dispute to expert determination.

There is no indication that the right to expert determination is not to arise if the defendant elects not to inspect. The language is such that it is assumed the Releasor will inspect before disputing. Cl 7.2 is expressed accordingly. Prior inspection is the logical assumption which underlies the right to refer disputes to independent determination.

There is a logical conclusion that appears when reading together 7.1 and 7.2 in that it is a condition precedent to the defendant having a right to dispute any calculations that he first inspect and then give a notice of dispute. Read alone, 7.1 appears to grant a mere right to inspect. But read with 7.2 it becomes implicit that inspection must precede a notice of dispute, at least partly for the reason to discourage shooting from the hip, ill considered, disputation of the calculations: 'Get your evidence first'. Then a dispute can only be raised with detailed reasonable particularity (7.3), within 30 Business days of the inspection." (emphasis added)

1. The difficulty with this construction is that it necessitates reading the words "will be entitled" in clause 7.1 as if they read "must, if it wishes to dispute [Sydney Attractions'] calculation of any amount of the Deferred Component".

1. In my opinion, that involves a construction of 7.1 that contradicts its language.

1. Further, it involves implying into clause 7 an operation that has the result that if Mr Schulman did not exercise his right to inspect under clause 7.1 within 30 days of receipt of the Certificate, he would be forever precluded from disputing the calculations in the Certificate. Had the parties intended the right of inspection to have such far reaching consequences, my opinion is that they would be said so in terms.

1. Further, the implication of such a term would contradict clause 28.2 of the Deed which provides that the Deed contains the entire agreement between the parties, and that there are no "implied conditions, warranties, promises, representations or obligations" in relation to the Deed other than those "necessarily implied by law".

1. The term sought to be implied by Sydney Attractions is not one implied by law. It is one said to be implied in fact, to give effect to the presumed intention of the parties: eg see Breen v Williams [1996] HCA 57; (1996) 186 CLR 71 at 102-103 per Gaudron and McHugh JJ.

1. For these reasons, my opinion is that the construction contended for is not reasonably arguable and is doomed to fail.

1. That, alone, is a reason to refuse leave to amend; especially at this late stage.

Prejudice

1. In any event, Mr Kidd submitted that Mr Schulman will be prejudiced if the amendment is granted as his legal team will need to be diverted from the task of preparing for a three week hearing, due to commence in six business days, by the need to make enquiries as to whether Mr Schulman did inspect Sydney Attractions' records within 30 days of receipt of the Certificate, or within a reasonable time thereafter.

1. In this respect, Ms Chrystalla Georgiou, the solicitor acting for Mr Schulman in the proceedings deposed: -

"In order for our client to properly meet the proposed amendments to the proposed Reply and proposed Reply to the Commercial List Response to the Amended Summons served by the Plaintiff on 31 October, 2012 and 1 November, 2012 respectively, I and/or the other members of the Defendant's legal team will need to attend to the following matters:

a. We will need to investigate all correspondence and communications passing between the parties and our client's legal representatives in New York from September 2009 until our Defence was filed on 31 August, 2010 concerning any inspection of the plaintiff's business records and any dispute of the plaintiff's calculations that may have been notified;

b.We will need to confer with our client and possibly others who are resident of New York concerning the new matters pleaded. I understand from instructions received from our client that discussions did take place between our client's lawyers in New York and the US Lawyers representing the Plaintiff. Consideration will have to be given to whether any of those communications are relevant to the proposed amendments to the pleadings.

c.It may also be necessary to obtain the file maintained by the Defendant's Lawyers in New York to ascertain whether there is any correspondence of file notes of conversations passing between those representatives and the representatives of the Plaintiff in New York which may be relevant to the issues now sought to be agitated by the Plaintiff in the proposed amended pleadings."

1. Ms Georgiou also pointed to the time difference between Sydney and New York and submitted that such time differences will "make it difficult for this firm to be in a position to obtain further instructions from the client and those who represented him in New York in a timely fashion".

1. The relevance of the references to New York is twofold.

1. First Mr Schulman is a resident of New York.

1. Second, on 6 November 2009, following service by it of the Certificate on 28 September 2009, Sydney Attractions commenced proceedings against Mr Schulman in the Supreme Court of New York. In those proceedings, Sydney Attractions made allegations similar to those now made in these proceedings. Ultimately, on 11 February 2010, the New York proceedings were stayed, following a forum non conveniens argument. These proceedings were commenced shortly thereafter, on 14 April 2010.

1. The question is, whether Mr Schulman, or his advisors, inspected Sydney Attractions' records.

1. Ms Georgiou's affidavit reveals that on 11 November 2009, Mr Schulman sought access to Sydney Attractions' records. On 12 November 2009, Sydney Attractions proposed that Mr Schulman's expert, Mr Peter Blythe, attend at Sydney Attractions premises at Darling Harbour on 20 November 2009.

1. On 17 November 2009 Mr Schulman's representative in New York told Mr Schulman's Australian solicitor that because of a proposed meeting between the lawyers for the parties "in the next few days the inspection should wait".

1. Mr Schulman must know whether then, or later, he caused an inspection of Sydney Attractions' records to take place. However, I accept that some investigations will be required, and that this will be a distraction and diversion of resources this close to the hearing.

1. I am satisfied that Mr Schulman will suffer some prejudice if the amendments were allowed.

Conclusion

1. Taking all these matters into consideration, my conclusion is that leave to amend should be refused. There is no good reason why the amendment is sought to be made this late. In my opinion, it raises an issue of construction that is bound to fail. And it will cause an unfair distraction to Mr Schulman and his legal team at this late hour.

1. I make the following orders: -

(1)   the application of Sydney Attractions to file an Amended Reply to the Commercial List Response to Amended Summons and an Amended Commercial List Response to the Amended Cross Summons is refused;

(2)   Sydney Attractions pay the costs of this application.

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Decision last updated: 12 November 2012