Ubertini v Saeco International Group SpA (No 2)
[2013] VSC 489
•11 SEPTEMBER 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. S CI 2006 09429
| GIORGIO MASSIMO UBERTINI and UBERTINI INVESTMENTS PTY LTD (ACN 099 388 566) | Plaintiffs |
| v | |
| SAECO INTERNATIONAL GROUP SPA SOCIETA A SOCIO UNICO and SAECO AUSTRALIA PTY LTD (ACN 059 711 009) | Defendants |
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JUDGE: | ELLIOTT J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 10 SEPTEMBER 2013 | |
DATE OF RULING: | 11 SEPTEMBER 2013 | |
CASE MAY BE CITED AS: | UBERTINI v SAECO INTERNATIONAL GROUP SPA (No 2) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 489 | |
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Practice and Procedure – Pleadings – application to amend pleadings at trial – relevant principles governing court’s discretion to grant leave to amend – role and function of pleadings – delay in seeking leave to amend – whether 1st defendant taken by surprise – whether 1st defendant likely to suffer irremediable prejudice – leave granted – Supreme Court (General Civil Procedure) Rules 2005, r 36.01(1)(a) – Civil Procedure Act 2010 (Vic), ss 1(1)(c), 7(1).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr E N Magee QC with Mr T Mitchell and | Foster Nicholson Jones |
| For the 1st Defendant | Mr P Solomon SC with Mr P Herzfeld | Allens Linklaters |
| For the 2nd Defendant | No appearance |
HIS HONOUR:
A. Introduction
As noted in my earlier ruling,[1] this is an oppression case. The plaintiffs, Giorgio Massimo Ubertini (“Ubertini”) and Ubertini Investments Pty Ltd, allege oppressive conduct against the 1st defendant, Saeco International Group SpA Societa A Socio (“Saeco International”). Saeco International allege oppressive conduct by the plaintiffs.
[1]Ubertini v Saeco International Group SpA [2013] VSC 468.
The company in which each of them own shares is the 2nd defendant, Saeco Australia Pty Ltd (“Saeco Australia”). The plaintiffs together own 36% of the shares. Saeco International owns 60% of the shares.
The proceeding was set down for trial on an estimate of 3½ weeks, commencing 26 August 2013. On the 9th day of trial, the plaintiffs made an application to amend their particulars of claim. Saeco International opposed the application, substantially on the basis that it would suffer irremediable prejudice if leave were granted to allow the plaintiffs’ proposed amendments.
B. Background
The proceeding was commenced on 26 October 2006. On 3 August 2007 the court ordered that the case proceed by way of pleadings. The plaintiffs filed and served particulars of claim dated 31 August 2007. Amended particulars of claim dated 30 August 2010 were subsequently filed and served by the plaintiffs.
By its outline of opening submissions dated 22 August 2013, Saeco International stated that it would seek to hold the plaintiffs to their pleadings. On 23 August 2013, when the parties were attempting to agree a revised draft list of issues for determination at the trial, Saeco International objected to the insertion by the plaintiffs of certain matters which were not pleaded.
During the course of opening submissions at the trial, counsel for the plaintiffs raised a number of issues that went beyond the scope of the plaintiffs’ particulars of claim. Counsel for Saeco International raised objection to this at the conclusion of the 2nd day of trial. The issue was raised again on the 4th day of trial. On the 5th day of trial, counsel for the plaintiffs foreshadowed an application to amend their pleadings, which was to be heard on the morning of the 6th day of trial. The proposed pleading served shortly before court contained substantive amendments in a number of respects. Early the following morning, Saeco International filed and served extensive written submissions in opposition to the amendments proffered the previous day.
As it transpired, when the time came for the hearing of the application on the 6th day of trial, only minor amendments were pressed by the plaintiffs. These were not opposed by Saeco International and I granted the plaintiffs’ leave to amend their particulars of claim accordingly.
Shortly after the conclusion of the 9th day of trial, and some 6 days after the grant of leave to amend noted above, the plaintiffs foreshadowed the application currently before the court. An affidavit in support of the plaintiffs’ application was provided by the plaintiffs’ solicitor, Leath John Nicholson (“Nicholson”) (“the Nicholson Affidavit”). The Nicholson Affidavit was sworn[2] and served yesterday morning, the 10th day of trial.
[2]The Nicholson Affidavit records that it was sworn 9 September 2013. Nicholson acknowledged during cross-examination this was an error.
In opposition to the application, a member of the firm of solicitors acting for Saeco International, Andrew Ross Maher (“Maher”), filed and served an affidavit around mid-morning on the same day (“the Maher Affidavit”). The application was heard yesterday afternoon. By this time, the plaintiffs had completed the presentation of their case, Saeco International had opened its case, 1 of Saeco International’s witnesses had given evidence and been excused, and a 2nd witness had concluded, or substantially concluded, his evidence-in-chief.
C. The relevant principles
Before turning to the amendments sought by the plaintiffs, it is necessary to set out the relevant principles governing the exercise of the court’s discretion to grant a party leave to amend its pleadings. In this context, it also necessary to consider the role of pleadings in the conduct of civil litigation.
The starting point in any application for leave to amend pleadings is r 36.01(1)(a) of the Supreme Court (General Civil Procedure) Rules 2005, which provides, amongst other things, that the court may grant a party leave to amend any document in the proceeding for the purpose of determining the real question in controversy between the parties. In Aon Risk Services Australia Ltd v Australian National University,[3] the High Court set out the principles to be considered when deciding whether or not to grant leave. They include:
[3](2009) 239 CLR 175. In this case, the High Court considered a similar, though not identical, rule to r 36.01(1)(a).
(1) The need to consider case management principles and the effect of costs and delay on all litigants to the court. As was observed, “what may be just, when amendment is sought, requires account to be taken of other litigants, not just the parties to the proceedings in question”.[4]
[4]At 212 [95] (Gummow, Hayne, Crennan, Kiefel and Bell JJ). See also at 182 [5]-[6] (French CJ).
(2) The court is obliged to ensure that its limited resources are not wasted by the failure of parties to adhere to trial dates and trial directions of which they have proper notice.[5]
[5]At 189 [25].
(3) An order for costs, even on an indemnity basis, will not always be sufficient to remedy the prejudice occasioned by late amendment. The court should have regard to non-pecuniary prejudice, such as the strain imposed on litigants by protracted litigation.[6]
[6]At 182 [5], 213-214 [99]-[101].
(4) The party making the application during the course of a trial may, depending on the circumstances, bear a heavy burden to show why leave to amend should be granted.[7]
(5) A proper explanation should be proffered by the moving party to explain any delay in making the application.[8]
[7]At 182 [4], 214-215 [102].
[8]At 182 [5], 215 [102]-[103].
Regard must also be had to the overarching purpose set out in the Civil Procedure Act 2010 (Vic) in relation to civil proceedings, which is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[9]
[9]Sections 1(1)(c), 7(1).
Turning to the role of pleadings. An issue raised in the course of the application was whether the plaintiffs ought to be bound by their pleadings, in circumstances where their case had been conducted at trial beyond the scope of those pleadings.
Essentially, pleadings are the means by which parties are given proper notice of the issues in the case. In Banque Commerciale SA, en liquidation v Akhil Holdings Ltd,[10] Mason CJ and Gaudron J stated:[11]
The function of pleadings is to state with sufficient clarity the case that must be met. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities.
Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted.
(Citations omitted.)
[10](1990) 169 CLR 279.
[11]At 286.8-287.3. See also at 287.8-288.4 (Brennan J), 293.1-293.4 (Dawson J, dissenting), 302.9-303.1 (Toohey J); and Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liquidation) (1916) 22 CLR 490, 517.5-518.7 (Isaacs and Rich JJ); Jones Lang Lasalle (Vic) Pty Ltd v Korlevski [2012] VSCA 305, [67] (Neave JA, with whom Warren CJ and Ferguson AJA agreed).
Thus, the starting point in any case conducted on pleadings is that the parties are bound by the pleadings. Whether a departure from that general rule is justified will depend upon the conduct of the parties at trial.
In this case, Saeco International has made statements to the court which have made it abundantly clear that it has conducted, and continues to conduct, the trial based on the pleadings. However, there has been some evidence before the court which plainly goes beyond the issues that arise strictly on the pleadings.
In Miller v Cameron,[12] Latham CJ held that where evidence which is clearly relevant to an issue that might have been raised on the pleadings has been admitted without objection, and where no party has been taken by surprise and all parties have had an opportunity to give evidence on the matter, the parties are precluded from treating the pleadings as governing the area of contest, and the court may take the evidence into account in determining the outcome of the proceeding.[13] Equally, if each of these factors apply to the conduct of the trial to date, then the existence of such evidence in these circumstances is also highly relevant to whether leave to amend the claim ought to be granted, so that the pleadings may accord with the evidence at trial.
[12](1936) 54 CLR 572.
[13]At 576.8-577.5. See also Metzke v Sali [2010] VSCA 267, [80] (Warren CJ, Neave JA and Beach AJA).
For the orderly conduct of the remainder of the trial, it is preferable that any discrepancy between the pleadings and the issues sought to be raised is the subject of an amendment application. In circumstances where the parties are not agreed, the alternative of leaving the pleadings as they stand and then having closing submissions as to the extent of the issues in the trial is likely to give rise to uncertainty, inefficiency and additional costs.
D. The proposed amendments
I now turn to the proposed amendments. In summary, the amendments fall into 4 categories. The first of those is to include an allegation of oppression concerning the treatment of allegedly unsaleable stock, alongside the existing allegation which concerns the treatment of allegedly defective stock. The second proposed amendment seeks to introduce particulars to an existing allegation of oppression concerning the demands by Saeco International for payment of debts. The new particulars refer to the existence of a dispute in February 2007 as to whether Saeco Strategic Services Ltd, a wholly owned subsidiary of Saeco International (“Saeco Strategic Services”), had provided services under a brand management agreement with Saeco Australia; as well as a dispute under the brand management agreement as to whether a 3.5% discount was required to be, and had been, applied to stock purchased by Saeco Australia. The third category of proposed amendments seeks to introduce matters that were previously only expressed in the plaintiffs’ reply. The fourth proposed amendment raises a new allegation concerning the charging of penalty interest.
D.1 Paragraphs 34 and 35
First, paragraphs 34 and 35 of the particulars of claim. The amendment concerns the introduction of the words “and unsaleable”, once in paragraph 34 and twice in paragraph 35, so that what previously read “defective stock” now reads “defective and unsaleable stock”. The application is opposed on the basis that Saeco International is caught by surprise by such an amendment.
Saeco International says it has conducted its case to date on the basis that the claim is for defective stock only. The preparation of its case including its pleadings and expert evidence demonstrate that up until trial Saeco International’s focus had been on seeking to establish the stock was not defective. This is entirely consistent with the way the case has been pleaded by the plaintiffs to date.
Counsel who prepared and settled the amended particulars of claim filed 30 August 2010 are not the barristers conducting the trial. I have no explanation as to whether the manner in which the case was pleaded was a conscious decision to exclude allegations in relation to unsaleable stock. Be that as it may, it is plain that the term “defective stock” does not include “unsaleable stock”; hence the need for the amendment.
The particulars to paragraph 34 refer to a letter dated 5 April 2006. That letter is already in evidence. That letter was sent by Ubertini, on behalf of Saeco Australia.
The letter relevantly provided:
We have worked to our extreme in satisfying our stock on hand issue, but there are too many factors that bear [Saeco International] responsibility which have prevented an acceptable stock rotation. This letter is to inform you that [Saeco International’s] unreasonable pressure to sell defective units or units not saleable because of technical problems resulting in lost clientele, have been collated and sent to [Saeco International] for credit.
We have sent back to [Saeco International] a list of defective products that have cost us not only customers, but sales revenue and most importantly company profit. You will receive an invoice at our original invoice cost from [Saeco International] less accrued storage and transport costs.
…
The vending units we’ve returned to [Saeco International] were ordered predominantly by two customers. In the case of the major of these two customers [Saeco International] had taken two years to rectify a fundamental flaw in the 8p which was the delivery of the first cup being cold; a problem that [Saeco International] has accepted. That customer took legal action against us for the problem, not to mention ceased the fruitful business relationship. Their orders of other units included (sic) 7p, 5p espresso and instant were also subsequently cancelled.
...
Please find attached invoices of items we are returning to [Saeco International] for credit of our account also attached some of the correspondence from the customer who ordered most of the stock we are returning.
(Emphasis added.)
In my view, the letter does not make it entirely clear the extent to which it was claimed by Saeco Australia in April 2006 that the stock returned was defective or was simply just unsaleable.[14]
[14]The letter also states that prior to this time Saeco Australia had never returned any stock. This statement was not the subject of any challenge by Saeco International in any subsequent correspondence before the court. Any suggestion that there might be relevant discovery in relation to Saeco International’s handling of earlier return of stock by Saeco Australia appears to be entirely without substance.
The case was opened differently to the pleading. Counsel for the plaintiffs expressly stated that not all stock the subject of the letter dated 5 April 2006 was defective, but it was said that, in any event, the stock that was not defective was unsaleable. Counsel also referred to complaints made by customers of Saeco Australia about the relevant coffee machines. The documents referred to in opening containing those complaints all related to the 8p model of vending machines. They said nothing about the 7p or the 5p models.
By way of further background, Ubertini also swore an affidavit filed in October 2006 in this proceeding in which he stated that the 7p model was not defective. Counsel for Saeco International was fully aware of this, taking Ubertini to the affidavit during the course of cross-examination, and in particular to this particular point.
Further, during cross-examination, the issue of whether the goods were defective or unsaleable was directly addressed. The issue is whether I should allow the amendment for the purpose of determining the real controversy between the parties.
Before this proceeding commenced, there was no material distinction made by Saeco Australia between defective stock and unsaleable stock. The evidence up to now demonstrates that the returned stock, consisting of 7 containers, was treated as one for the purposes of Saeco Australia requiring inspections by Saeco International (while the stock was still in Australia), seeking a credit from Saeco International (once the stock was returned), and complaining about Saeco International's refusal to accept the stock as returned.
It is now said by the plaintiffs that the conduct of refusing to accept the returned stock and provide a credit in relation to all of the stock constituted oppressive conduct[15] for the purposes of the Corporations Act 2001 (Cth). If the matter had been pleaded from the outset, then it would have properly encompassed what, on the evidence, was the real issue between the parties.
[15]That is “oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members”: per Corporations Act, s 232(e).
Accordingly, the question for me is whether the discretionary factors pertaining to such an application should prevent the amendment from now being made.
The explanation as to why the application to amend was not made before trial is contained in the Nicholson Affidavit. Nicholson stated it was only just before trial that he understood a component of the stock was unsaleable rather than defective. He was unable to be precise about how many days before the trial Ubertini had informed him of this matter. As to why the application to amend was not made at the start of trial, Nicholson essentially said the issue was in the hands of counsel. Although Nicholson was cross-examined as to issues of timing, the substance of his evidence was not seriously challenged.
Ideally, the application to amend would have been made at the start of trial, if not before. However, I am not satisfied that the delay in bringing the application will cause any prejudice to Saeco International that cannot be compensated by an award of costs and, if necessary, the ability to cross-examine Ubertini further on this limited topic.
Senior counsel for Saeco International submits there is prejudice because of the manner in which he has cross-examined Ubertini to date. He submitted that Saeco International positively sought to establish that stock was unsaleable to prove it was not defective.
Whilst it is correct to say this distinction was drawn, that submission does not canvass fully the cross-examination on this topic. Questions were also put to Ubertini in cross-examination on the basis that all of the non-defective stock was saleable in any event.[16] In short, the topic has been opened by the plaintiffs and canvassed on the evidence. I am not satisfied the case would have been conducted in a materially different manner if the amendment now sought had been made earlier.[17]
[16]T452.10-453.19, 489.14-595.27.
[17]Cf Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84, 106E-G (Waddell AJA, quoting Rogers CJ CommD at first instance).
Saeco International also sought to establish it would suffer irreparable prejudice. A number of matters were raised in the Maher Affidavit.
An initial observation needs to be made about the Maher Affidavit. It is an affidavit based on Maher's own knowledge, as well as being based on information and belief. However, the body of the Maher Affidavit does not identify the specific basis on which any particular piece of evidence is given. Accordingly, I have no way of knowing which parts of the affidavit refer to Maher’s actual knowledge. Further, a substantial part of the Maher Affidavit purports to be evidence as to Saeco International’s position, and yet the source of such evidence is completely unidentified.
Finally, paragraphs 24, 26, 29, 31, 32(b) and (c) and 33 were said by Saeco International to be opinion evidence and admissible under s 79 of the Evidence Act 2008 (Vic). There are 2 observations I make in relation to these paragraphs.
First, the opinions are expressed without a basis for those opinions being disclosed. I accept there were considerable time pressures in the preparation of the Maher Affidavit and I am sympathetic to the circumstances in which it was prepared. However, those factors cannot remedy the deficiencies in the evidence.
Secondly, most of the opinions expressed are entirely or largely speculative. The court has been told that there are numerous things that Saeco International “may” have to do, without specific prejudice being identified. When reading the affidavit as a whole, I formed the distinct impression that an attempt was made to identify any conceivable prejudice no matter how remote, rather than identifying any real prejudice that could not be addressed properly by costs or leave to further cross-examine Ubertini.
In addition to the matters I have referred to, objections were made by the plaintiffs as to admissibility of some other parts of the Maher Affidavit. There was a dispute in relation to those objections.
Given time pressures, the plaintiffs then withdrew their objections and invited the court to give the Maher Affidavit minimal weight in light of its deficiencies. I will now address the relevant evidence.
Paragraphs 23 and 24 of the Maher Affidavit address paragraphs 34 and 35 of the particulars of claim. In relation to paragraph 23, 7 matters are identified and said to be relevant. The first is there is no reference made to the unsaleable goods in the plaintiffs’ pleadings. This is accepted, but it does not establish that there has been any prejudice.
The second issue identified is that the parties have not discovered relevant documents. I note that all relevant invoices have been discovered. Further documents referred to in this subparagraph as being the subject of possible further discovery have not been specified, by class or otherwise.
The third point is there is no reference made to these issues in Ubertini’s outline of evidence. This establishes there was lack of notice prior to the trial in relation to this application, but it does not establish any prejudice.
The fourth point refers to the outlines of evidence in relation to Saeco International and the absence of any reference to the matters now raised. This is covered by my response in relation to the third point.
The fifth matter raised commences with the words “[Saeco International] has made no enquiries ...”. This is not a satisfactory way for the evidence to be put before the court. It is unclear as to the basis upon which evidence as to Saeco International’s position is given. It is an assertion about the position of the company without any statement as to the basis or source of the information. It continues with the words “of its current or potential witnesses concerning [the issues in paragraphs 34 and 35]”. No attempt has been made to identify the possible new witnesses. As to the current witnesses, it is unclear why the relevant enquiries could not be made before their evidence is given or completed.[18]
[18]One witness has already completed his evidence, however there was no suggestion he had any particular knowledge in relation to this issue.
The sixth and seventh points also commence with the words “[Saeco International] has not”. The observations I have made with respect to the fifth point are equally applicable in relation to the unsatisfactory state of the form of the evidence on these points.
The sixth point reads, “[Saeco International] has not considered whether expert evidence may be relevant to [the issues in paragraphs 34 and 35]”. This does not say whether there is any realistic prospect of expert evidence being required. To date the evidence has been dealt with as a matter of fact in cross-examination. It is not readily apparent to me that expert evidence is required.
Finally, the seventh point deals with the following fact:
[Saeco International] has not collected or reviewed documents concerning these issues.
What the relevant documents are, or might be, is not alluded to. As I have said before, all the invoices are already in evidence.
As to paragraph 24 of the Maher Affidavit, first I make the same observations as expressed above[19] in relation to the assertions by Maher about Saeco International’s position without identifying the source of the opinion. Secondly, the reference to further enquiries is entirely speculative, expressed in terms of what enquiries “may” take place. It is not suggested that these enquiries necessarily need to take place. Two enquiries that might need to take place are said to be, first, identifying any Saeco International policy or procedure with respect to unsaleable stock that existed in or about 2006; and, secondly, Saeco International’s past practice and treatment of stock deemed to be unsaleable in or about 2006.
[19]At pars 37 and 47.
In relation to each of these 2 items, I would expect that the witnesses still to give evidence would be able to address them. In any event, because the evidence is speculative, I do not give it much weight.
The third point raised in paragraph 24 is said to be a possible enquiry in relation to evaluating whether the subject stock was likely to have been unsaleable in the Australian market in the period leading up to April 2006. This topic has already been directly the subject of cross-examination of Ubertini by Saeco International’s senior counsel.
In summary, I am not satisfied there is the requisite prejudice that would preclude the court from allowing the amendments to enable the real question in controversy to be before the court.
I wish to make one final observation in relation to this amendment (which applies equally to all the amendments sought). Nowhere in the Maher Affidavit is there any suggestion that, if leave were granted, such leave would result in the need, or even the desire, of Saeco International to adjourn the hearing to address the matters the subject of the application.[20] Although this position does not mean that there is no prejudice to Saeco International if leave is granted, it does shed some light on the real extent of the likely prejudice. It also demonstrates the circumstances in this case are far removed from those that confronted the High Court in Aon Risk Services Australia Ltd v Australian National University.[21]
[20]Maher did express a belief at paragraph 33 of the Maher Affidavit that the further tasks could not be completed before the scheduled conclusion of the trial on 19 September 2013. However, Maher’s statement as to this belief was preceded by the statement that he had not yet had an opportunity to “scope” these further tasks, and therefore was unable “to provide any reliable estimate of how long these tasks would take to complete”: paragraph 33. Accordingly, this evidence is of limited weight.
[21](2009) 239 CLR 175.
D.2 Particulars to paragraph 58
The second amendment to consider is the introduction of further particulars to paragraph 58. That amendment seeks to provide particulars of an allegation that:
[T]he resolution by Christopher Egan (“Egan”) and Nicolas De Gregorio (“De Gregorio”) on 13 February 2007, made in their capacity as directors of [Saeco Australia] and at the direction of [Saeco International], was oppressive, unfairly prejudicial to, unfairly discriminatory against Ubertini and Ubertini Investments Pty Ltd as members of [Saeco Australia], for the reason that on 13 February 2007 [Saeco Australia] was not insolvent or likely to become insolvent at some future time within the meaning of section 436A of the [Corporations Act].
The new particular seeks to raise 2 issues as to why part of the debt claimed to be owing by Saeco International was in dispute. The first is the alleged failure of Saeco Strategic Services to provide certain services under the brand management agreement dated 1 November 2003. The second relates to an agreement or arrangement said to have been entered into in return for the brand management agreement, namely a discount of 3.5% on stock supplied by Saeco International to Saeco Australia. These matters were either opened by the plaintiffs or were the subject of evidence-in-chief from Ubertini without objection.
The particulars relate to factual matters and also to the knowledge of Saeco International’s managing director at the time, De Gregorio. De Gregorio is yet to give evidence. There are 3 matters raised in opposition to leave.
First, it is said that the matters raised are not really particulars but are allegations of material facts. It is really an objection as to form over substance. The alleged matters are clearly relevant to the issue of whether the conduct on 13 February 2007 alleged in paragraph 58 was oppressive or unfairly prejudicial or unfairly discriminatory. It may be that the particulars could have been pleaded as material facts but, in any event, Saeco International is on notice of the issues to be raised.
Secondly, by reference to exhibit D2, Saeco International correctly submits this issue has been raised previously in proposed amendments which, as a result of objections by Saeco International, were not pursued. The amendments proposed on 2 September 2013 by a proposed paragraph 45 were far broader than the particulars now advanced. They raised issues as to the use of trademarks and alleged unlawful transfer pricing, matters which are now not pursued.
Although this earlier attempt to amend has undoubtedly been very inconvenient to counsel and caused a waste of time and expense, such matters do not establish the requisite degree of prejudice which would necessarily require leave to amend to be refused on this application.
Thirdly, by reference to the Maher Affidavit,[22] it is said enquiries would need to be made if leave were granted. It was said they “may” include:
[22]At par 26.
(a) whether, and to what extent, a dispute existed between Saeco Strategic Services and Saeco Australia, and/or
(b) whether, and to what extent, [De Gregorio] knew of the alleged dispute in relation to:
(i) the provision of services by Saeco Strategic Services;
(ii)the provision of a 3.5 per cent discount on stock purchased from [Saeco International]; and/or
(iii)whether the sum demanded by (sic) on 22 December 2006 by Saeco Strategic Services was due and payable.
Dealing with the second of these first, senior counsel for Saeco International frankly and properly accepted this would readily be attended to by asking De Gregorio the extent of his knowledge, and that this could be done before De Gregorio gave his evidence. No prejudice is apparent in this regard. As to the first matter, that may be readily addressed by De Gregorio and Egan, both directors of Saeco Australia at the relevant time, and who both attended the board meeting on 13 February 2007. Egan is in the process of giving evidence-in-chief which is due to be continued next Monday and there is ample opportunity for instructions to be obtained.
Finally on this issue, it is relevant to note that as long ago as May 2012 the parties filed outlines of evidence which set out the evidence the parties proposed the lead. In broad terms, Ubertini referred to the failure to provide services under the brand management agreement. There is no evidence before me to suggest there was any objection to this outline, or at least this part of the outline. On the contrary, the subject matter was addressed by Saeco International’s outlines in response, albeit briefly.
In those circumstances, if the case were to be run to the pleadings as previously ordered, there was notice given that this issue might be the subject of an amendment application in due course.
As I can see no relevant prejudice to Saeco International if leave to amend is granted, and as I am satisfied there is a real controversy between the parties as to the issues raised, leave will be granted to add to the particulars proposed to paragraph 58.
D.3 Paragraphs 59 and 60
The third amendment sought concerns introducing paragraphs 59 and 60 to the particulars of claim. With one exception, to which I will come, the subject matter of these 2 paragraphs is in substance the same as what is already pleaded in paragraph 10 of the reply, which was filed on 15 December 2010.
Saeco International contends that by reason that the allegations are found in the reply rather than in the particulars of claim, those allegations may not be relied upon to found the primary relief sought by the plaintiffs. Without accepting that to be so, the plaintiffs seek to amend their particulars of claim to avoid the point presently raised from continuing to be an issue.
There can be no question that the issues have been before the court since December 2010. Nicholson gave an explanation as to why the issues were pleaded in the reply at the time, rather than in an amended pleading of the particulars of claim. His evidence was to the effect that he discussed the matter with a partner of his and they agreed this could be properly done, rather than incurring the expense of including the allegations in an amended particulars of claim.
No issue was taken by Saeco International in relation to the fact that these allegations were contained in the reply at the time the reply was filed. However, Saeco International now resists the application on the following basis:[23]
(b)By reason of the above [ie the allegations being in the reply rather than in the particulars of claim], I formed the view that these allegations did not form part of Ubertini's oppression claims against [Saeco International] and [Saeco International] did not focus on these allegations in preparing [Saeco International’s] case for trial; and
(c)had these allegations formed part of the 2010 Particulars of Claim, rather than the Reply, I believe that [Saeco International] would have directed greater attention to these allegations in preparing for trial, including in respect of preparing for the discovery and evidence phases of the proceeding.
(Emphasis added.)
[23]The Maher Affidavit, pars 27(b) and 27(c).
It is difficult to know what to make of this evidence. It clearly indicates attention was paid to the allegations in paragraph 10 of the reply, as one would expect. However, it is said greater attention would have been directed if the allegations appeared in the particulars of claim; though how much greater attention is left entirely up in the air. As to the evidence that Saeco International did not focus on the allegations, the form of evidence suffers from the problem referred to above.[24] In any event, the meaning of this evidence is entirely unclear when it is plain that Saeco International had sought instructions and provided outlines of evidence on the relevant topics from no less than 4 witnesses.
[24]At pars 37 and 47.
Finally, it is said that Saeco International would be required to make further enquiries if leave were granted but, again, these enquiries are only referred to as a possibility and include 2 matters. There is no evidence before the court as to what, if any, specific enquiries need to be made that have not already been made. In these circumstances, it is appropriate to grant leave to amend the particulars of claim to introduce these matters previously expressed by way of reply.
D.4 Penalty interest: a new paragraph 60(d)
That leaves the issue of penalty interest. Insofar as the pleadings are concerned, the allegation in relation to penalty interest is entirely new. An attempt was made by the plaintiffs to include the matters sought to be raised on this issue as part of the particulars to paragraph 60(c). However, that attempt was futile. As was submitted by Saeco International, the penalty interest issues cannot sensibly be read as particulars of the obtaining of stock at significantly discounted values or of book debts at lower values, as alleged in paragraph 60(c).
The futility of this attempt was conceded by counsel for the plaintiffs during argument. Accordingly, a further application was made to introduce a new paragraph 60(d) which reads as follows:
[Saeco International] paid the purchase price for the assets of [Saeco Australia] by reducing the debt owed to it by [Saeco Australia], but that debt was overstated because it included penalty interest that:
(i)it was not company policy of [Saeco International] to charge; and
(ii)had not until [Saeco International] lodged its claim in the administration been claimed from [Saeco Australia].
This subparagraph was objected to by Saeco International on the grounds that it was new and also on the basis that Saeco International would need to identify who imposed the interest. It was further submitted by Saeco International that the question of which system of law applied would be an issue and that, in turn, may require expert evidence.
Dealing with each of these issues separately, it is plain the allegation is new on the pleadings. However, the issue was foreshadowed by counsel for the plaintiffs at a directions hearing on 1 June 2012. No exception was taken by counsel for Saeco International at the time. Perhaps this is because outlines of evidence had already been filed and served in May 2012.
In particular, the outline of evidence filed on behalf of Ubertini included the following:
78.In the course of the administration [Saeco Australia] claimed that it was owed penalty interest by [Saeco Australia] in the sum of over $5m. There was never any agreement for [Saeco Australia] to be able to charge penalty interest. Further, it had never occurred in practice between [Saeco International] or [Saeco Australia], nor is Ubertini aware of it ever occurring in practice between [Saeco International] and any other subsidiary. This claim to penalty interest had no foundation and was improperly accepted by the administrators without them receiving a proper proof of debt from [Saeco International] to justify the amounts claimed by [Saeco International].
79.Ubertini explained to Egan and the Administrators of [Saeco Australia] at various times that:
…
(c)[Saeco International] had no right to claim penalty interest.
Further, the responsive outlines of evidence of Saeco International expressly referred to the topic of penalty interest. The outline of evidence of Salvatore Algeri included the following:
37.Mr Algeri does not recall any discussion with [Ubertini] in which [Ubertini] said any of the following:
…
(c)[Saeco International] had no right to claim any penalty interest.
As to the identity of the person who imposed the interest or at least made the decision in that regard, it is clear on the evidence available before me that either De Gregorio or Egan, or both, would be highly likely to have first-hand knowledge of such matters. I do not anticipate it will create any material difficulty.
The questions in relation to the applicable system of law and the possible need for expert evidence may have presented a real obstacle to leave being granted. But the way in which the issue is raised in the particulars of claim, and the assurances given by the plaintiffs in reply submissions, make it plain the only basis upon which the plaintiffs seek to raise this issue is by reference to Saeco International’s company policy and the history of whether such a claim had been lodged in the past. As to the latter point, it is common ground that, as a matter of fact, no penalty interest was claimed before administration. As to the former point, De Gregorio is perfectly placed to give evidence on the topic. In those circumstances, no relevant prejudice exists.
D.5 Further matters
Finally, the plaintiffs seek to add paragraph 61 which is consequential on leave being granted in relation to paragraphs 59 and 60. In effect, it is a pleaded conclusion that the matters alleged amount to oppressive conduct. In light of my earlier reasons, it follows that leave will be granted in relation to paragraph 61.
E. Order
I intend to make the following order:
The plaintiffs have leave to file and serve amended particulars of claim substantially in the form of the plaintiffs’ proposed 2nd further amended particulars of claim dated 10 September 2013, save that the particulars to paragraph 60(c) end with the words “significant discount”, and that the remainder of the particulars to paragraph 60(c) be expressed as a new paragraph 60(d), with the 2nd reference to “SIG” on the 1st line of the 1st sentence amended to read “SA”.[25]
[25]“SIG” and “SA” are references to Saeco International and Saeco Australia respectively.
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