Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 3]
[2018] WASC 73
•8 MARCH 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WESTGEM INVESTMENTS PTY LTD IN ITS OWN RIGHT TRUSTEE FOR HOSSEAN POURZAND AND JENNY MARIA POURZAND ATF THE HELEN TRUST -v- COMMONWEALTH BANK OF AUSTRALIA LTD [No 3] [2018] WASC 73
CORAM: TOTTLE J
HEARD: 2 MARCH 2018
DELIVERED : 8 MARCH 2018
FILE NO/S: CIV 2722 of 2012
BETWEEN: WESTGEM INVESTMENTS PTY LTD IN ITS OWN RIGHT TRUSTEE FOR HOSSEAN POURZAND AND JENNY MARIA POURZAND ATF THE HELEN TRUST
First Plaintiff
HOSSEAN POURZAND IN ITS OWN RIGHT TRUSTEE FOR THE HELEN TRUST & THE SHERIN TRUST & THE POURZAND TRUST
First Named Second PlaintiffJENNY MARIA POURZAND IN ITS OWN RIGHT TRUSTEE FOR THE HELEN TRUST & THE SHERIN TRUST & THE POURZAND TRUST
Second Named Second PlaintiffPAKWEST PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT TRUSTEE FOR NEWPORT SECURITIES PTY LTD & TRUSTEE FOR VARIOUS OTHER COMPANIES
Third PlaintiffNEWPORT SECURITIES PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ATF THE PAKWEST TRUST THE NEWPORT FAMILY TRUST & THE LUKE SARACENI FAMILY TRUST
Fourth PlaintiffOAKCURE PTY LTD OWN CAPACITY AND TRUSTEE FOR THE PARRY TRUST
Fifth PlaintiffSEAPORT PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT TRUSTEE FOR THE SEAPORT TRUST
Sixth PlaintiffLUKE SARACENI
Seventh PlaintiffMAYPORT NOMINEES PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT TRUSTEE FOR THE MAYPORT UNIT TRUST
Eighth PlaintiffQUEEN STREET PROPERTIES PTY LTD IN ITS OWN RIGHT TRUSTEE FOR THE QUEEN STREET PROPERTIES
Ninth PlaintiffGRAND EDITION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT TRUSTEE FOR THE FARAH INVESTMENT TRUST NO 4
Tenth PlaintiffLMS HOLDINGS PTY LTD ATF THE SARACENI FAMILY TRUST
Eleventh PlaintiffTOKYO CITY PTY LTD ATF THE TOKYO CITY TRUST
Twelfth PlaintiffMAREE SARACENI PTY LTD ATF THE TOKYO CITY TRUST AND THE LUKE SARACENI FAMILY TRUST
Thirteenth PlaintiffMAREE ANN SARACENI
Fourteenth PlaintiffSINGLE HOLDINGS WA PTY LTD ATF THE TUART INVESTMENTS UNIT TRUST
Fifteenth PlaintiffSARACEN PROJECT MANAGEMENT PTY LTD ATF THE SARACEN PROJECT MANAGEMENT TRUST
Sixteenth PlaintiffCARDUP INDUSTRIAL LAND HOLDINGS PTY LTD IN ITS OWN RIGHT TRUSTEE FOR THE CARDUP INDUSTRIAL LAND TRUST AND THE CARDUP INDUSTRIAL LAND TRUST NO 2
Seventeenth PlaintiffGOLDCUP NOMINEES PTY LTD ATF THE PAKWEST TRUST
Eighteenth PlaintiffGOLDEN WEST PROPERTIES PTY LTD ATF THE POURZAND FAMILY TRUST THE OZRA TRUST THE GOLD HOUSE TRUST AND JENNY'S TRUST
Nineteenth PlaintiffAND
COMMONWEALTH BANK OF AUSTRALIA LTD
First DefendantWESTPAC ADMINISTRATION 2 LTD
Second DefendantWESTPAC ADMINISTRATION 3 LTD
Third Defendant
Catchwords:
Practice and procedure - Pleadings - Strike out - Statement of claim - Whether defendants prejudiced
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Mr R Newlinds SC & Mr R May
First Named Second Plaintiff : Mr R Newlinds SC & Mr R May
Second Named Second Plaintiff : Mr R Newlinds SC & Mr R May
Third Plaintiff : Mr R Newlinds SC & Mr R May
Fourth Plaintiff : Mr R Newlinds SC & Mr R May
Fifth Plaintiff : Mr R Newlinds SC & Mr R May
Sixth Plaintiff : Mr R Newlinds SC & Mr R May
Seventh Plaintiff : Mr R Newlinds SC & Mr R May
Eighth Plaintiff : Mr R Newlinds SC & Mr R May
Ninth Plaintiff : Mr R Newlinds SC & Mr R May
Tenth Plaintiff : Mr R Newlinds SC & Mr R May
Eleventh Plaintiff : Mr R Newlinds SC & Mr R May
Twelfth Plaintiff : Mr R Newlinds SC & Mr R May
Thirteenth Plaintiff : Mr R Newlinds SC & Mr R May
Fourteenth Plaintiff : Mr R Newlinds SC & Mr R May
Fifteenth Plaintiff : Mr R Newlinds SC & Mr R May
Sixteenth Plaintiff : Mr R Newlinds SC & Mr R May
Seventeenth Plaintiff : Mr R Newlinds SC & Mr R May
Eighteenth Plaintiff : Mr R Newlinds SC & Mr R May
Nineteenth Plaintiff : Mr R Newlinds SC & Mr R May
First Defendant : Mr J Thomson SC & Ms S E Russell
Second Defendant : Mr J Thomson SC & Ms S E Russell
Third Defendant : Mr J Thomson SC & Ms S E Russell
Solicitors:
First Plaintiff : Jackson McDonald
First Named Second Plaintiff : Jackson McDonald
Second Named Second Plaintiff : Jackson McDonald
Third Plaintiff : Jackson McDonald
Fourth Plaintiff : Jackson McDonald
Fifth Plaintiff : Jackson McDonald
Sixth Plaintiff : Jackson McDonald
Seventh Plaintiff : Jackson McDonald
Eighth Plaintiff : Jackson McDonald
Ninth Plaintiff : Jackson McDonald
Tenth Plaintiff : Jackson McDonald
Eleventh Plaintiff : Jackson McDonald
Twelfth Plaintiff : Jackson McDonald
Thirteenth Plaintiff : Jackson McDonald
Fourteenth Plaintiff : Jackson McDonald
Fifteenth Plaintiff : Jackson McDonald
Sixteenth Plaintiff : Jackson McDonald
Seventeenth Plaintiff : Jackson McDonald
Eighteenth Plaintiff : Jackson McDonald
Nineteenth Plaintiff : Jackson McDonald
First Defendant : King & Wood Mallesons
Second Defendant : King & Wood Mallesons
Third Defendant : King & Wood Mallesons
Case(s) referred to in judgment(s):
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Gould v Vaggelas (1984) 157 CLR 215
Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431
Hightime Investments Pty Ltd v Lungan (No 2) [2010] WASC 296
Maronis Holdings Ltd v Nippon Credit Australia Ltd [2000] NSWSC 753
Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] 1 Ch 204
Samsung C & T Corporation v Loots [2016] WASC 330
Sino Iron Pty Ltd v Mineralogy Pty Ltd [2014] WASC 406
TOTTLE J:
Introduction
These reasons concern an application to strike out pars 302A to 302I and 303A of the fifth further amended second substituted statement of claim, (the statement of claim) filed and served on 12 February 2018. These paragraphs were introduced into the fourth further amended second substituted statement of claim (filed and served on 8 December 2017) and a chamber summons seeking orders striking out those paragraphs was filed on 22 December 2017.
These proceedings were commenced in 2012. In August 2016 the proceedings, together with related proceedings, were listed for a 16 week trial of 'Liability' issues to commence on 2 March 2018. The parties have been preparing for trial in accordance with trial directions made in August 2016 varied from time to time in relatively minor respects. In December 2017 the start of the trial was postponed until 3 April 2018.
The proceedings involve a large number of complex factual and legal issues. As is recorded in the affidavit evidence adduced on this application, the pleadings and witness statements, and the documents referred to in the witness statements, comprise over 85,000 pages. Currently 18 lay witnesses, five 'quasi expert' witnesses and eight expert witnesses are scheduled to give evidence.
By 7 December 2017 witness statements addressing the issues as they then stood had been filed and served as had the defendants' expert evidence and some of the plaintiffs' expert evidence. The balance of the plaintiffs' expert evidence was due to be filed and served on 2 March 2018.
The amendments were made under O 21 r 3(1) of the Rules of the Supreme Court 1971 (WA) (RSC) which permits a party to amend a pleading without leave at any time up to seven weeks prior to the commencement of a trial. The trial of this action is due to commence on 3 April 2018 and thus the amendments were made over 16 weeks before the commencement of the trial.
Order 21 r 3(3) of the RSC provides that a party served with a pleading amended under O 21 r 3(1) may apply to the case manager to have the amendments struck out. Order 21 r 3(5) provides:
If, on an application made under subrule (3), the case manager is satisfied that, had an application for leave to make the amendment in question been made under rule 5 at the date when the amended pleading was filed under this rule, leave to make the amendment or part of the amendment would have been refused, the manager must order the amendment or part of it to be struck out.
In support of their chamber summons the defendants rely upon O 20 r 19(1)(c) of the RSC which provides that the court may strike out anything in a pleading that may prejudice, embarrass or delay the fair trial of the action. In their submissions the defendants argue the amendments should be struck out on the additional ground that they do not disclose a reasonable cause of action.
The defendants argue the amendments introduce new allegations that will cause them substantial prejudice in conducting the trial. They add that no adequate explanation has been provided as to why the matters raised in the amendments have not been raised at an earlier date. The defendants reinforce these arguments with submissions to the effect that there are factual and legal difficulties with the allegations introduced by the amendments and those difficulties are such that the allegations will inevitably fail.
The plaintiffs accept the amendments will cause the defendants' lawyers to undertake additional work but argue that properly understood the allegations introduced by the amendments are limited in nature and the defendants have overstated significantly the extent of what they characterise as the 'distraction prejudice' generated by the amendments. The plaintiffs argue that the court's discretion should not be exercised so as to prevent them from maintaining the allegations.
The nature of the amendments
The paragraphs introduced by the amendments are set out in the appendix to these reasons.
The proceedings concern the development of a multi‑storey office and retail complex in the Perth CBD known as Raine Square. The first plaintiff, Westgem Pty Ltd, was the developer, Salta Constructions Ltd (Salta) was the initial builder, and the Bank of Western Australia Ltd ('Bankwest', now Commonwealth Bank of Australia, 'CBA') and BOS International (Australia) Limited were the financiers.
Salta suspended building works on 8 February 2010 (the Salta Stoppage) and terminated the building contract with Westgem on 25 February 2010 (the Salta Termination). The plaintiffs allege that the cause of the Salta Stoppage and the Salta Termination was a misrepresentation by the financiers to Salta that Westgem did not have the capacity to meet its payment obligations under the building contract between Salta and Westgem.
Before the amendment the plaintiffs' case on causation was that but for the Salta Stoppage and the Salta Termination:
•Salta would have remained on site and completed the building contract works.
•Practical completion of the building contract would have occurred on a date between on or about 31 August 2010 and 31 December 2010.
•Westgem could and would have funded the completion of the works using funds drawn under the existing facility, the Multi‑Option Facility Agreement (MOFA) as extended beyond its expiry date of 30 June 2010.
•Upon completion of the development Westgem would have received rent from tenants.
•The 'sponsors' of the development, Mr Luke Saraceni and Mr Hossean Pourzand, would have retained ownership of the development for several years before selling it.
The plaintiffs say that there are two elements to the amendments. The first element is constituted by the introduction of additional facts to the existing causal counterfactual. In this respect the plaintiffs say that the amendment can be characterised as further particulars of an otherwise pleaded case.[1] The further facts are:
•First, Charter Hall Funds Management Ltd as trustee for Charter Hall Wholesale Funds (Charter Hall) would have acquired the interest in the development associated with Mr Pourzand pursuant to an agreement (the Charter Hall Purchase Agreement). That interest was held by Oakcure Pty Ltd as the trustee of the Parry Trust. Oakcure did not hold a direct interest in the development. Its interest was held on trust for it by Westgem. The consideration for Oakcure's interest included a payment to it of $18 million.
•Second, as a direct consequence of the Salta Stoppage, Charter Hall determined not to complete the Charter Hall Purchase Agreement.
[1] This submission does not, however, sit easily with amendments being 'In the alternative …'.
The plaintiffs say that save for these additional facts the causal counterfactual remains the same.
On the plaintiffs' case, the significance of Charter Hall's involvement is that its willingness and capacity to provide capital on various bases increased the probability of the development being completed on time and within budget.
The second, and perhaps more significant, element of the amendments is the introduction of new causes of action, primarily, a claim by Oakcure for the $18 million loss it claims it suffered as a result of the Charter Hall Purchase Agreement not proceeding. The claim is framed in the alternative as a claim for the loss of the chance of the Charter Hall Purchase Agreement being completed.
The plaintiffs plead the Charter Hall Purchase Agreement was conditional upon:
(i)Charter Hall being satisfied with its due diligence investigations and satisfactory legal agreements being executed; and
(ii)Charter Hall having entered into an agreement with Newport in relation to lease tail liabilities.
The amendments include a plea that Charter Hall and Newport entered into an oral agreement or an arrangement in relation to lease tail liabilities.
The existing defences raised in answer to the plaintiffs' counterfactual include a defence to the effect that, even if any misrepresentation was causally linked to the Salta Stoppage or Salta Termination it did not cause the damage alleged by Westgem because the additional costs incurred in completing the development had Salta remained as the builder would have been about $112 million, which is about the same as the costs incurred to finish the development following the Salta Termination (approximately $124 million). The additional costs were such that the defendants say Salta would have inevitably withdrawn from the development as it became apparent that the available finance facilities would not cover the cost of completing the development. In the defendants' written submissions they draw attention to the fact that the causation defence just described is based in part on the evidence of Mr Peter Byford. The plaintiffs made an unsuccessful interlocutory application to exclude consideration of Mr Byford's evidence from the Liability Trial. Judgment on that application was delivered on 17 November 2017. In their submissions the defendants submit that it may be inferred that the paragraphs introduced by the amendments are an attempt to overcome difficulties that the plaintiffs have in responding to Mr Byford's evidence.
The defendants submit that it is apparent from the amendments that the allegations that have been introduced will fail. The defendants say that the legal and factual difficulties are such that the court should be slow to allow the plaintiffs to introduce the new causation argument having regard to the prejudice to the defendants in investigating and answering the claims at this late stage of the action. In support of the submission that the plaintiffs' new claims are doomed to fail the defendants advance two contentions.
First, the causal connection between the misrepresentation and the loss is extended and weak and the plaintiffs will not be able to establish that Oakcure suffered loss 'by' any misrepresentations made by the financiers. The defendants point out that it is not pleaded that Charter Hall relied on the misrepresentation. They say that first Oakcure must establish that the decision by Salta to suspend the works was materially caused by the misrepresentation. Next the plaintiffs must establish that Charter Hall's decision not to proceed with the Charter Hall Purchase Agreement was sufficiently and directly connected to the misrepresentation as to be a foundation for compensable loss. The defendants argue the plaintiffs will be unable to establish this link.
Secondly, the defendants contend that Oakcure's claim is essentially for a loss it has suffered in its capacity as a beneficiary of an interest held on its behalf by Westgem. The defendants argue the loss is reflective and thus not recoverable.[2]
[2] Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] 1 Ch 204, 222-223; Gould v Vaggelas (1984) 157 CLR 215, 220.
The evidence
The defendants relied upon affidavits sworn on 22 December 2017 and 16 February 2018 by Mr Roger Forbes of the defendants' solicitors. The plaintiffs relied upon an affidavit sworn on 23 February 2018 by Mr Neil Gentilli of the plaintiffs' solicitors.
Mr Forbes' evidence
In his first affidavit Mr Forbes identifies the factual issues he considers are generated by the amendments. In summary those issues revolve around whether the Charter Hall Purchase Agreement would have been completed. Without being exhaustive the issues are: would Charter Hall have been satisfied with its due diligence? Would satisfactory legal agreements have been executed? What would the commercial terms of those agreements have been? Would those terms have included a condition to the effect that the CBA provide term finance? And if so, on what terms? If the financiers' consent or co‑operation was required would that consent or co-operation have been forthcoming?
Mr Forbes outlines the steps that he contemplated would be necessary to investigate the issues and prepare the financiers' defence. Included in those steps are the following: obtaining further and better discovery from the plaintiffs; issuing a subpoena to Charter Hall to obtain relevant documents from it; engaging with Charter Hall to obtain evidence from its employees or former employees; identifying and proofing the employees of the financiers who would have been involved in making any decisions required of the financiers; and obtaining any relevant contemporaneous documents.
Mr Forbes deposes that it would take at least eight to ten weeks to complete the required work and that, though difficult to estimate, his best estimate was the work would cost between $50,000 and $100,000. Mr Forbes deposes that the defendants' legal team was fully engaged in the preparation for trial and the extra work required to deal with the amendments would involve a significant diversion of resources which will adversely affect the financier's trial preparation. Mr Forbes also notes that the amended pleading was filed not long before the Christmas and New Year vacation and that, making allowances for the vacation period, there were approximately 11 weeks before the trial was due to start.
In his second affidavit Mr Forbes deposes that he had identified a further condition of the Charter Hall Purchase Agreement about which enquiries would have to be made. The condition was to the effect that the agreement of Bankwest or the CBA as a prospective tenant of Raine Square was required for certain amendments to an agreement known as the Agreement for Lease.
Mr Forbes deposes that the defendants had sought further and better discovery from the plaintiffs but at the time of swearing the affidavit it had not been provided. Mr Forbes gave evidence about the difficulties the defendants had encountered in retrieving the email files for the period September 2009 to September 2010 of three of the financiers' employees who were involved in communications as to whether the CBA would provide a term facility if the Charter Hall purchase proceeded. The effect of Mr Forbes' evidence is that it is likely that the emails are no longer available but, to the extent that there is a possibility that they may be retrievable, they will not be able to be retrieved until mid‑March 2018. Of the three employees only two remain employed by the CBA. Mr Forbes deposes that he had not yet been able to contact the former employee, a Mr Barnes.
Mr Forbes deposes that the plaintiffs issued a subpoena to Charter Hall on 11 January 2018 and that on 6 February 2018 Charter Hall had produced a USB containing documents (the Charter Hall subpoena documents). In accordance with an agreed protocol, the plaintiffs' solicitors processed the Charter Hall subpoena documents and loaded them in their electronic document management system. Mr Forbes explained that it would have been inefficient and duplicative to conduct an extensive review of the 'unprocessed' Charter Hall subpoena documents. The Charter Hall documents as processed by the plaintiffs' solicitors comprise over 6,000 pages and 54 'native' spreadsheets. Mr Forbes said that it was necessary to wait to receive the Charter Hall subpoena documents before approaching Charter Hall to arrange meetings with its employees. Mr Forbes estimates that it will take five days for his firm to review the documents, isolate the relevant materials and prepare to meet the Charter Hall employees.
Mr Forbes deposes that he has not been able to determine whether any supplementary expert evidence should be led by the defendants.
Mr Forbes considers that the defendants will not be able to complete all necessary work relating to the amendments to file a defence or to file responsive evidence until at least mid-April 2018.
Mr Forbes gave detailed evidence about the prejudice that will be suffered by the defendants in the preparation for and running of the trial. The defendants place considerable reliance on this evidence and I set it out below in full.
25.The matter is fixed for trial for four months commencing on 3 April 2018.
26.Even prior to the filing of the FFASSSOC on 7 December 2017, these proceedings involved pleadings running to several hundred pages, a very large number of causes of action, an extremely large number of complex factual and legal issues, some 19 lay witnesses, and 11 expert or 'quasi-expert' witnesses. The pleadings and witness statements (together with documents referred to therein) comprise over 85,000 pages. I have practised in the area of commercial litigation for almost 30 years. This is one of the most factually complex matters I have conducted.
27.Based on my analysis of the issues in dispute, and in consultation with my clients, I have ensured that the following resources have been made available for trial preparation and the conduct of the trial itself:
(a)KWM: two partners and seven full-time equivalent assistant solicitors; and
(b)Counsel: two senior counsel and three junior counsel,
I will refer to this as the 'Banks' Legal Team'.
28.Prior to the filing of the FFASSSOC, members of the Banks' Legal Team had been allocated to particular tasks in preparation for the hearing and the conduct of the trial. That allocation was devised by reference to the issues in dispute as defined in the pleadings and on particular members' knowledge of and familiarity with those issues and the evidence pertaining to them. Approximately 80% of my own practice is presently devoted to the preparation of this matter for the trial. I estimate that I will be required to devote at least that portion of my time to the trial itself. All available time of the other solicitors and counsel on the Banks' Legal Team is presently devoted to trial preparation, subject, in some cases, to the requirements of other matters.
29.Prior to the filing of the FFASSSOC, the tasks allocated to members of the Banks' Legal Team did not include the matters arising from the Charter Hall Amendments. Should those amendments stand, the work associated with preparing for and conducting a trial of those issues will involve a significant diversion of the Banks' Legal Team's resources, as described below. There has already been a significant diversion of my own time, the time of one assistant solicitor and of counsel. To date KWM has recorded approximately 70 hours of time on tasks associated with the Charter Hall Amendments, not including work related to the Banks' Application.
30.In my view, in order to carry out the work I have described in paragraphs 9 to 23 above, it will be necessary for me to devote between 25% and 30% of my own time up to at least mid-April 2018. It will be necessary for me to be assisted by at least one assistant solicitor and one junior counsel. I estimate that work associated with the Charter Hall Amendments will occupy approximately 50% of the assistant solicitor's time and up to 25% of the time of junior counsel. Senior Counsel will also be required to undertake associated work, possibly occupying approximately 10% of their time during this period. This estimate represents the following number of hours up to mid-April:
(a)120 hours of my time;
(b)200 hours of an assistant solicitor's time;
(c)100 hours of junior counsel's time; and
(d)40 hours of Senior Counsel's time.
31.This work would need to be undertaken by myself and existing solicitors and counsel working on the matter. Due to the extreme complexity of these proceedings, their long history, proximity to trial, and the fact that the Charter Hall Amendments raise issues of fact closely associated with other aspects of the pleaded case (including the Salta Stoppage and Salta Termination), it would not be possible to use solicitors or counsel not presently in the Banks' Legal Team. Nor could current tasks be re-allocated to other solicitors or counsel. I have been involved in the conduct of these proceedings since their commencement. During the course of these proceedings, including over the past several years, a number of solicitors and counsel have been added to the Banks' Legal Team. I have observed that it has usually taken those persons several months to sufficiently familiarise themselves with the issues in dispute so as to be able to undertake tasks with any degree of autonomy. All of the partners, solicitors and counsel who are currently members of the Banks' Legal Team are fully devoted to case preparation tasks associated with the case pleaded prior to the filing of the FFASSSOC. As at the date of swearing this affidavit, each has been a member of the Banks' Legal Team for not less than six months and, except for two members, for at least eighteen months.
32.Accordingly, if the defendants are required to address the Charter Hall Amendments, there will be a significant and prejudicial diversion of Banks' Legal Team's resources from other case preparation tasks and from the conduct of the trial itself.
33.In addition to the matters to which I have referred in paragraphs 25 to 32 above, I am of the view that, if the Charter Hall Amendments stand, the defendants will suffer the following prejudice:
(a)they will be required to prepare their case for trial, including their opening submissions and cross-examination concurrently with, and in advance of, completing the work pertaining to the Charter Hall Amendments which I have described above;
(b)cross-examination of the plaintiffs' witnesses may commence prior to completing that work, which will have a detrimental effect on the fair and efficient conduct of the trial; and
(c)conduct of the trial may be delayed and the trial prolonged.
Mr Gentilli's evidence
In his affidavit Mr Gentilli explains that the amendments were suggested by an additional junior counsel retained by the plaintiffs in late 2017 and the amendments were made a day or two after the suggestion was made.
Mr Gentilli deposes that he reviewed the Charter Hall subpoena documents on 12 February 2018 and that it took him between two and two and a half hours to review all the documents and identify a reduced volume of documents for additional review by counsel. The reduced volume comprised 2,069 pages. Mr Gentilli expressed the opinion that it was likely that only 20 documents are likely to be material.
Mr Gentilli deposes that the further and better discovery sought by the defendants had been provided to the defendants' lawyers on 19 February 2018. He said that he had perused the additional documents and that this took him about two hours.
Mr Gentilli deposes that Mr Barnes, the CBA's former employee who was involved in communications concerning the provision of term finance by the CBA, was now a senior employee of Charter Hall. Mr Gentilli attached documentary evidence to his affidavit showing that the CBA had a contractual right to call upon Charter Hall to make available its officers and employees to the CBA's lawyers for the purposes of providing information, a statement or an affidavit for use by the CBA in proceedings including the present proceedings.
Mr Gentilli deposes that based on his examination of the Charter Hall subpoena documents there were, primarily, two Charter Hall employees who were concerned with the Charter Hall Purchase Agreement, though there was a small amount of email correspondence from three other Charter Hall employees.
Mr Gentilli deposes that the proposal by Charter Hall to the CBA for a term facility did not proceed beyond an internal Charter Hall draft prepared on 8 February 2010 and there was no record of any proposal being put to the CBA.
Mr Gentilli deposes that there is no record in the Charter Hall subpoena documents or the Westgem discovered documents of any proposal being put to CBA/Bankwest as a tenant of Raine Square to vary any agreements between them relating to the CBA/Bankwest tenancy for the purpose of the proposed Charter Hall acquisition.
Mr Gentilli responds to Mr Forbes' evidence of the prejudice suffered by the defendants by the requirement to divert their legal resources to deal with the amendments as follows:
20.In the light of the above matters, I am of the view that Mr Forbes' estimates of time required to deal with the Charter Hall Amendments as set out in the Second Forbes Affidavit paragraph 30, are significantly (about 5-10 times) greater than would in fact be required. I say this in particular because:
(a)the Charter Hall Subpoena Documents can be reviewed in a few hours;
(b)they contain very few documents of significance in relation to the Charter Hall Amendments;
(c)the plaintiffs' additional discovered documents also can be reviewed in a few hours and likewise contain very few documents of significance in relation to the Charter Hall amendment;
(d)there are in my opinion only 2 people employed by Charter Hall at the time relevant to the Charter Hall amendments who could probably give material evidence and the banks have a contractual right to interview and obtain statements from those people;
(e)in my opinion (formed as a result of reading the Charter Hall Subpoena Documents and the documents pleaded in the Charter Hall Amendments), statements from those people would most likely be brief;
(f)no proposal appears to have been put to CBA/Bankwest by Charter Hall in relation to the transactions set out in the documents pleaded in the Charter Hall Amendments and accordingly any statements from bank witnesses regarding the banks' attitude to any such proposed transactions would in my opinion be as to the banks' likely attitude to a proposal which was not in fact put to them and would most likely be brief.
The legal principles
There was no dispute about the principles that are to be applied in determining this application. The statements of principle that appear in the following paragraphs are taken from the defendants' written submissions.
The power to disallow an amendment pursuant to O 21 r 3(5) is to be exercised so as best to ensure the attainment of the goal in O 1 r 4A and the objects in O 1 r 4B(1).[3]
[3] See Hightime Investments Pty Ltd v Lungan (No 2) [2010] WASC 296 [51]; Sino Iron Pty Ltd v Mineralogy Pty Ltd [2014] WASC 406 [32]; Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431 [30]; Samsung C & T Corporation v Loots [2016] WASC 330 [62].
The goal of the practice, procedure and interlocutory processes of the Court as stated in O 1 r 4A is 'the elimination of any lapse of time from the date of initiation of proceedings to their final determination beyond that reasonably required for interlocutory activities essential to the fair and just determination of the issues bone fide in contention between the parties and the preparation of the case for trial'.
The objects of O 1 r 4B(1) are the following:
(i)promoting the just determination of litigation; and
(ii)disposing efficiently of the business of the Court; and
(iii)maximising the efficient use of available judicial and administrative resources; and
(iv)facilitating the timely disposal of business; and
(v)ensuring the procedure applicable, and the costs of the procedure to the parties and the State, are proportionate to their value, importance and complexity of the subject matter in dispute; and
(vi)that the procedure applicable, and the costs of the procedure to the parties, are proportionate to the financial position of each party.
The considerations identified in Aon Risk Services Australia Ltd v Australian National University[4] inform the exercise of the discretionary power to allow or refuse an amendment to a pleading under O 21 r 3(5).[5]
[4] Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175.
[5] See Hightime Investments Pty Ltd v Lungan (No 2) [52]; Sino Iron Pty Ltd v Mineralogy Pty Ltd [31]; Great Southern Finance Pty Ltd (in liq) v Rhodes [31]; Samsung C & T Corporation v Loots [63].
The relevant principles in Aon have been summarised as follows:
(i)the effect of an amendment on the court and on other litigants is relevant;
(ii)there is no right to amend to introduce an arguable case and it is wrong to say that only in extreme circumstances would a party be shut out from litigating an arguable case;
(iii)justice requires that parties have a proper opportunity to plead their case but limits may be placed on repleading when delay and cost are taken into account;
(iv)a just resolution does not mean that a party will always be permitted to raise any arguable case at any point in the proceedings, on payment of costs, even indemnity costs;
(v)the inevitable strains of litigation must be taken into account in weighing the adverse consequences of delay - this applies to natural persons and other litigants;
(vi)the nature and importance of the amendment to the party amending must be taken into account;
(vii)attention must be given to the extent of the delay, and the costs associated with it, the prejudice which might reasonably be assumed to follow from it and any prejudice that is shown;
(viii)the point in the litigation relative to the trial may be an important consideration;
(ix)where a discretion is sought to be exercised in favour of a party an explanation will be called for;
(x)the point can be reached where a party has had a sufficient opportunity to put its case.[6]
[6] See Hightime Investments Pty Ltd v Lungan (No 2) [52]; Sino Iron Pty Ltd v Mineralogy Pty Ltd [31]; Samsung C & T Corporation v Loots [63].
An amending party should explain any substantial delay in making the amendment.[7]
[7] Hightime Investments Pty Ltd v Lungan (No 2) [54].
Amongst the many judicial observations about the attitude of the courts to late applications to amend pleadings the trenchant observations of Bryson J in Maronis Holdings Ltd v Nippon Credit Australia Ltd[8] cited by Heydon J in Aon capture the essence of the defendants' opposition to the plaintiffs' application. In my respectful view, those observations (made prior to the decision in Aon) bear repetition:[9]
I do not think that the law requires the discretion to allow amendments to be exercised in entire innocence of understanding the obvious impact of forbearance and liberality on the behaviour of litigants, who have diminished incentive to do their thinking in due time and to tell the court and their opponents their full and true positions. When forbearance and liberality are extended to a delinquent the burden of inconvenience and lost opportunities for preparation tends to fall heavily and without adequate repair on parties who have not been delinquent. A relative disadvantage is imposed on those who proceed methodically and in due time; their interest in procedural justice should claim at least as much consideration as the interests of the applicant for a late amendment who does not have to look far for the creator of his difficulty. It is even conceivable that a litigant might deliberately pursue a course which will impose disadvantage on an opponent who has to reconsider his ground and change course in the midst of a contest. A wide overview is required when a far-reaching amendment application is made after a complex trial had been well launched.
[8] Maronis Holdings Ltd v Nippon Credit Australia Ltd [2000] NSWSC 753.
[9] Maronis Holdings Ltd v Nippon Credit Australia Ltd [15].
The parties' submissions
The defendants' submissions
I have already touched upon aspects of the defendants' submissions in the course of these reasons.
At the forefront of the defendants' submissions is the submission that if the amendments are allowed to stand the defendants' planning and preparation to be ready for trial will be substantially prejudiced. The evidentiary foundation for this submission is Mr Forbes' evidence about the prejudicial effect that undertaking the work required to address the issues raised by the amendments will have on trial preparation. It is unnecessary to set out Mr Forbes' evidence again. The defendants say the purpose of setting the proceedings down for trial approximately 18 months ago was to enable the parties to plan for the preparation for trial and the trial itself and to allocate adequate legal and support staff. The defendants' submissions emphasise that it is not possible to bring in new people who are not familiar with the background to the litigation to cope with new issues as they arise. The defendants say that these difficulties distinguish late amendments in substantial litigation such as this from late amendments in shorter matters the consequences of which might be managed by bringing in extra resources.
The defendants submit that the explanation provided for the lateness of the amendment in Mr Gentilli's affidavit is not an adequate explanation.
The defendants rely on the factual and legal difficulties they identify with the allegations that are introduced by the amendments and say that those difficulties weigh in favour of striking out the amendments.
The plaintiffs' submissions
In their written submissions the plaintiffs submit that the court should not exercise its discretion to strike out the amendments for the following reasons:
(i)The amendments were made nearly 17 weeks before trial.
(ii)The scope of the amendments is limited and the evidence is already within the witness statements filed and served by the plaintiffs.
(iii)The only prejudice the defendants can point to is 'distraction prejudice' and that prejudice must be assessed in the context of amendments having been made nearly four months before the trial and the defendants' legal team currently comprising two senior counsel, three junior counsel and King & Wood Mallesons. The plaintiffs submit Mr Forbes has been extremely conservative in his assessment of the extra work required by the amendments.
(iv)The length of the trial is a factor that weighs against striking out the amendments as a four month trial enables the court to accommodate any prejudice caused by the amendments without the need for an adjournment or loss of any time set aside for the trial.
(v)The fact that the trial was set down 18 months ago is also a factor that is against striking out the amendments as the parties' preparation for trial should be well progressed by this stage - a limited amendment four months before the trial can be dealt with by the defendants.
(vi)The defendants have taken limited steps since the amendments were made on 7 December 2017. The request for further and better discovery was made 61 days after the amendments were made and the plaintiffs provided the further and better discovery sought by the defendants by the date requested.
(vii)The plaintiffs have provided an explanation as to why the amendments were not made earlier.
(viii)There is no suggestion that the trial will need to be adjourned. If the defendants' evidence on the issues raised by the amendments is not served by mid‑April then the trial will probably not have reached the stage of any evidence having been tendered and witnesses cross‑examined. It is unlikely that the service of additional evidence by the defendants will disrupt the timetable. The plaintiffs will 'deal with' the evidence when it is served.
(ix)The court cannot determine the factual and legal questions raised by the defendants' submissions on this application.
Analysis
Lateness of amendments
The amendments were made within the time permitted by O 21 r 3(1) but this is not a decisive factor. The amendments and any prejudice they generate must be considered in the context of the litigation as a whole. In a practical sense the defendants' time for responding to the amendments has been reduced by the Christmas and New Year vacation.
Arguable case
I am satisfied that the paragraphs introduced by the amendments plead an arguable case and should not be struck out on the basis that they disclose no reasonable cause of action.
To succeed the plaintiffs' alternative causation case must overcome challenging factual hurdles but the factual issues cannot be resolved summarily.
I am not satisfied that the defendants' 'reflective loss' submissions provide a complete answer to Oakcure's claim. The essence of its claim (the second element introduced by the amendments) is that it suffered a loss because a sale of its interest in the development was not completed rather than a loss in the form of a reduction in the value of its interest in the development. The former loss is a loss personal to Oakcure and the latter is reflective of a loss suffered by Westgem.
The amendment introduces a substantial claim which is of considerable importance to Oakcure.
Explanation for amendments provided
The plaintiffs' senior counsel characterised the explanation for the late amendment in terms of 'fresh eyes' seeing a case that had not been seen by those who had previously considered the case. The context in which the explanation must be viewed is that the plaintiffs have been represented by experienced and eminent counsel and solicitors from the commencement of this litigation. That said the conclusions that can be drawn from the fact that the new case was raised at a late stage by junior counsel are limited. I cannot infer as the defendants, impliedly at least, invited me to infer that the amendments lack merit because they were suggested at a late stage by junior counsel. I am satisfied that the amendments were not made with the ulterior intent of disrupting the defendants' preparation for trial.
The extent of the prejudice
Mr Forbes and Mr Gentilli are senior and experienced commercial litigators. Their detailed evidence requires careful consideration. Their evidence, however, invites the court to draw quite different conclusions on the extent of the prejudice that the amendments has and will cause to the defendants' preparation for trial and the extent to which the amendments will prejudice or delay the trial itself.
In making an assessment of how the evidence of Mr Forbes, and that of Mr Gentilli, bears upon the determination of this application the following considerations are of particular significance.
First, if run on a stand-alone basis the second element of the plaintiffs' case introduced by the amendments, Oakcure's claim, would constitute substantial commercial litigation. If run on that basis the quantum of Oakcure's claim is such that the defendants would want, quite reasonably, to investigate the claim thoroughly and raise every defence open to them. There is no reason why the defendants should be disadvantaged because the claim is raised in the context of the plaintiffs' wider claims.
Secondly, Mr Forbes is better placed to make the assessment of the effect of the amendments on the defendants' trial preparation than Mr Gentilli.
Thirdly, the amendments concern events that occurred approximately eight years ago. That employees have left the financiers and contemporaneous documents are either no longer available or difficult to retrieve is no surprise. These are objective factors that support the conclusion that investigating the allegations introduced by the amendments and collating the evidence will not be straightforward, but will be time consuming and disruptive.
Fourthly, the defendants' investigation and collation of evidence must be completed in time to enable the defendants' counsel to cross‑examine the plaintiffs' witnesses who will give evidence in support of the allegations introduced by the amendments. The plaintiffs' witnesses on these allegations will be primarily Mr Saraceni and Mr Pourzand. It is likely that Mr Saraceni and Mr Pourzand will be called at an early stage of the plaintiffs' case.
Fifthly, the 'causal counterfactual' involves making findings about past facts and 'past hypothetical facts'. Findings about the primary past facts are likely to be made on the basis of the contemporaneous documents or inferences drawn from them combined with the inherent probabilities. The primary sources of documents relevant to the Charter Hall Purchase Agreement are records of the plaintiffs and those of Charter Hall. In relative terms the Charter Hall subpoena documents and the documents of which the plaintiffs have given further and better discovery do not constitute a significant extra volume of documentary evidence. It is unlikely that the Charter Hall Purchase Agreement caused the financiers to generate a significant volume of documents.
Sixthly, the scope of the factual matrix of past facts and past hypothetical facts is relatively limited. The plaintiffs' position is that they do not intend to adduce additional evidence. The nature of the issues is such that the scope for the defendants to adduce substantial amounts of additional evidence is limited. It is not possible to express firm conclusions but my impression is that the evidence on the new allegations is likely to be limited to perhaps one or two Charter Hall witnesses and one or two financier witnesses.
Seventhly, the defendants are well resourced commercial organisations. The situation presented is not one in which the defendants cannot deal with the consequences flowing from the amendments but one in which those consequences are disruptive to the defendants' trial preparation.
Eighthly, the fact that the trial is a long trial does provide some latitude for directions to be made to attenuate any prejudice that might otherwise flow from the amendments.
The first four considerations suggest the amendments should be disallowed and the next four suggest that they should be allowed to stand.
No adjournment
The amendments have not been the catalyst for an application to adjourn. In one sense, in considering this application the defendants had to make a decision as to which was the lesser of two evils: an adjournment application, an application that for very obvious reasons they do not wish to make, or pressing ahead and taking the risk that the amendments may be allowed to stand. Be that as it may, the fact that the amendments have not been the catalyst for an adjournment differentiates this application from many late applications to amend. It is a factor that favours allowing the amendments to stand.
Disposition
This application involves a difficult discretionary judgment. On one analysis it involves balancing the risks of doing an injustice - the procedural injustice suffered by the defendants if the amendments are allowed to stand against the risk of injustice inherent in depriving the plaintiffs of the benefit of an arguable cause of action that may result in substantial damages. The merits are finely balanced. With some hesitation, however, I have concluded that in the interests of justice the amendments should be allowed to stand. In reaching this conclusion I have taken into account the considerations to which I have referred in the preceding section of these reasons. The factors that tipped the scales in favour of the plaintiffs are that: first, no adjournment is required; second, although the amendments create difficulties for the defendants they are able to respond to the new allegations albeit after the start of the trial; third, my assessment that it is likely that the evidence on the new case will be relatively confined; and fourth, the substantial nature of the new claim: it is a claim for significant damages. I will give consideration to such variations in the existing trial directions as are required to take account of the procedural consequences flowing from allowing the amendments to stand.
APPENDIX
302AIn the alternative, on or about 15 January 2010, Oakcure as trustee for the Parry Trust entered into a written agreement with Charter Hall Funds Management Limited as trustee for a Charter Hall Wholesale Funds (Charter Hall) (the Charter Hall Purchase Agreement) (RSQ.007.0342.0001; RSQ.007.0342.002).
302BThe express terms of the Charter Hall Purchase Agreement were that:
302B.1 Oakcure as trustee for the Parry Trust would sell its interest in the Raine Square Development to Charter Hall;
302B.2Charter Hall would pay Oakcure as trustee for the Parry Trust the amount of $18 million;
302B.3Charter Hall would assume all of the obligations and liabilities of Oakcure as trustee for the Parry Trust relating to the Raine Square Development except the HOA Lease Tail Liability and/or the AFL Lease Tail Liability;
302B.4the Charter Hall Purchase Agreement was conditional upon Charter Hall being satisfied with its due diligence investigations and satisfactory legal agreements being executed;
302B.5the Charter Hall Purchase Agreement was conditional upon Charter Hall and Newport as trustee for the Pakwest Trust entering into an agreement in relation to the HOA Lease Tail Liability and/or the AFL Lease Tail Liability; and
302B.6the Charter Hall Purchase Agreement was binding on Oakcure as trustee for the Parry Trust if Charter Hall was satisfied with its due diligence.
302COn or about 14 January 2010, Charter Hall and Newport as trustee for the Pakwest Trust entered into an oral agreement evidenced in writing, alternatively an arrangement (Newport / Charter Hall Agreement) (SAR.103.004.028462).
302DThe express terms of the Newport / Charter Hall Agreement included that:
302D.1the Newport / Charter Hall Agreement was conditional upon completion of the Charter Hall Purchase Agreement;
302D.2Charter Hall would pay the amount of $8.5 million in relation to the Second Alleged Cost Overrun under the Charter Hall Purchase Agreement;
302D.3Charter Hall would lend Newport as trustee for the Pakwest Trust up to an amount of $8.5 million to satisfy the Second Alleged Cost Overrun;
302D.4Newport as trustee for the Pakwest Trust would pay Charter Hall the amount of $8.5 million if upon practical completion the value of 50 per cent of the Raine Square Development did not exceed $205 million;
302D.5Newport as trustee for the Pakwest Trust would not make any payment to Charter Hall if upon practical completion the value of 50 per cent of the Raine Square Development exceeded $213.5 million;
302D.6if upon practical completion the value of 50 per cent of the Raine Square Development was between $205 million and $213.5 million, Newport as trustee for the Pakwest Trust would pay Charter Hall the difference between the value and $213.5 million;
302D.7Newport as trustee for the Pakwest Trust were equally liable for the HOA Lease Tail Liability and/or AFL Lease Tail Liability up to $17 million; and
302D.8Newport as trustee for the Pakwest Trust was solely liable for the HOA Lease Tail Liability and/or AFL Lease Tail Liability in excess of $17 million.
302EBy reason of the Capacity to Pay Contravention:
302E.1the Salta Stoppage occured; and
302E.2as a direct consequence of the Salta Stoppage, Charter Hall determined not to complete the Charter Hall Purchase Agreement.
Particulars
i.Email from David Harrison to Luke Saraceni dated 22 February 2010 (RSQ.007.0346.0001).
302FIf the Capacity to Pay Contravention had not occurred:
302F.1the Salta Stoppage would not have occurred; and
302F.2Charter Hall would have completed the Charter Hall Purchase Agreement.
Particulars
i. Email from David Harrison to Luke Saraceni dated 22 February 2010 (RSQ.007.0346.0001).
302GIn the alternative, by reason of the Capacity to Pay Contravention:
302G.1the Salta Stoppage occurred; and
302G.2as a consequence of the Salta Stoppage, Oakcure as trustee for the Parry Trust lost the chance of Charter Hall completing the Charter Hall Purchase Agreement.
Particulars
i.Email from David Harrison to Luke Saraceni dated 22 February 2010 (RSQ.007.0346.0001).
302HFurther, if Charter Hall completed the Charter Hall Purchse Agreement, PC within the meaning of the HOA (Item 47), alternatively the AFL (cl 4), would have been achieved by Salta (or an alternative builder) no later than between on or about 31 August 2010 and 31 December 2010, or a time materially earlier than it in fact was achieved.
302IThe Plaintiffs repeat paragraph 302 above.
303A By reason of the Salta Stoppage, and the consequential decision by Charter Hall not to complete the Charter Hall purchase agreement:
303A.1Oakcure as trustee for the Parry Trust suffered loss and damage;
Particulars
i.Oakcure as trustee for the Parry Trust did not receive $18 million.
ii.Charter Hall did not assume the obligations and liabilities of Oakcure as trustee of the Parry Trust in relation to the Raine Square Development.
303A.2the First Additional Security Providers suffered loss and damage;
Particulars
i.The First Additional Securities would have been released under the 18 November 2009 Letter Agreement.
ii.The particulars to paragraph 371.3 below are repeated.
303B.3 Westgem suffered loss and damage;
Particulars
i.The particulars to paragraph 343 below are repeated.
303B.4 the Restated MOFA Guarantors suffered loss and damage;
Particulars
i.The particulars to paragraph 371.1 below are repeated.
303B.5the Second Additional Security Providers suffered loss and damage;
Particulars
i.The particulars to paragraph 371.2 below are repeated.
303B.6the Consequential Loss Plainitffs (as defined in paragraph 371.4 below) have suffered loss and damage.
Particulars
i.The particulars to paragraph 371.4 below are repeated.
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