JUDGMENT No. \S2 /2..... CATCHWORDS PRACTICE - pleadings - amendment - by applicants after close of case - relevant principle - need to decide real issues - questions of prejudice. Trade Practices Act 1974 s.52 Cropper v Smith (1884) 26 Ch.D. 700 Farrell v Secretary of State (1980) 1 All ER 166 COLIN FREDERICK WRIGHT AND MAUREEN MARGARET WRIGHT v WHEELER GRACE & PIERUCCI PTY LTD, ROBERT JOSEPH PIERUCCI, GLENN JOHN WHEELER, MICHAEL JAMES GRACE and PETER FRANCIS COLLINS NO. WAG 108 of 1986 FRENCH J. . PERTH 16 MARCH 1988 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION NO. WAG 108 of 1986 BETWEEN: COLIN FREDERICK WRIGHT First Applicant MAUREEN MARGARET WRIGHT Second Applicant and WHEELER GRACE & PIERUCCI PTY LTD First Respondent ROBERT JOSEPH PIERUCCI Second Respondent GLENN JOHN WHEELER Thixd Respondent MICHAEL JAMES GRACE Fourth Respondent and PETER FRANCIS COLLINS Fifth Respondent MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 16 MARCH 1988 WHERE MADE: Perth THE COURT ORDERS THAT: 1. The applicants' re-amended statement of claim is amended in accordance with the Minute of Substituted Statement of Claim save for the following parts of that Minute:- (1) the words "on behalf of the First Respondent" appearing in subparagraphs (i), (iii) and (iv) of paragraph 9; (ii) paragraph 13; (iii)paragraph 17, 18 and 19; (iv) item (ii) of the particulars of loss and damage in paragraph 20. 2. The respondents have leave to amend their defence. 3. The applicants are to pay the costs of the hearing on Tuesday, 15 March 1988 in any event. 4. The applicants to pay any costs thrown away by reason of any necessary amendments to the respondents' defence. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. " IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) GENERAL DIVISION ) NO. WAG 108 of 1986 BETWEEN: COLIN FREDERICK WRIGHT First Applicant MAUREEN MARGARET WRIGHT Second Applicant and WHEELER GRACE & PIERUCCI PTY LTD First Respondent ROBERT JOSEPH PIERUCCI Second Respondent GLENN JOHN WHEELER Third Respondent MICHAEL JAMES GRACE Fourth Respondent and PETER FRANCIS COLLINS Fifth Respondent CORAM: FRENCH J. 16 MARCH 1988 REASONS FOR RULING ON AMENDMENT TO STATEMENT OF CLAIM The hearing of this application has now entered into its fifth day. The applicants have closed their case and the respondents have submitted that they have no case to answer. The question whether they should be put to their election to call or not call evidence 1s yet to be determined. 2. On the afternoon of Friday, 11 March, at the completion of the respondents' no case submission, counsel for the applicants foreshadowed various amendments to the statement of claim. As the hearing was to resume at 2.15pm on Tuesday, 15 March, I directed that the applicants file and deliver any proposed amendments by lpm on Monday, 14 March. This was done and on 15 March when the Matter was on again for hearing, counsel moved to amend the statement of claim by replacing it with a Minute of Proposed Substituted Statement of Claim. In this he was opposed by counsel for the respondents. The parties to this litigation have compelling considerations in their favour on either side of the argument about the pleadings. The applicants were small investors in the Carbon Gold Unit Trust and say they were induced to invest by various representations relating to the value and profitability of the mining venture in which the Trust was involved. The loss they claim between them 1s only $4,000.00. The costs bill they face if they are unsuccessful will undoubtedly dwarf the amount in issue. This trial 1s now in its fifth day. Should their case go off for inadequate pleading of their cause by their advisers, it will bea disaster for which they are not to blame. The Court's concern in this regard is only partly allayed by the indication from their counsel that to some extent this may be a test case for the claims of other investors in the Carbon Gold Unit Trust. 3. On the other side of the coin, is a company which carries on business as a financial and investment adviser and does so under the names of its principal directors, each of whom is joined as a respondent along with Mr Peter Collins, an employee of the company. Allegations of fraud, negligence and misleading and deceptive conduct have been made against the respondents and that fact faithfully and repeatedly restated in newspaper reports of the case. The respondents plainly have a pressing and legitimate interest in the earliest possible resolution of the proceedings. It is not to the point in a case such as the present to decide an application for leave to amend by reference to whether the need for such application is the fault of the applicants or their advisers. The purpose of litigation 1s to decide disputes justly, according to law. In relation to amendments generally that purpose was elaborated by Bowen LJ in Cropper v Smith (1884) 26 Ch. D. 700 at 710:- "Now, I think it is a well established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights.... I know of no kind of error or mistake which, 1f not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace.... It seems to me that as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have 1t corrected, if it can be done without injustice, as anything else in the case is a matter of right." 4. To accept that general proposition 1s not to downplay the role of pleadings. Their primary purpose remains one of vital importance, namely "to define the z1ssues and inform the parties in advance of the case they have to meet and so enable them to take steps to deal with 1t" - Farrell v Secretary of State (1980) 1 All ER 166, 173. The Court is empowered by its rules to order that any document in a proceeding be amended or that a party have leave to amend any document and may do so at any stage of the proceedings - 0.13 r.2(1). Beyond that power the Court is under a duty expressed in 0.13 r.2(2) in the following terms:- "All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in any proceeding..." In essence, it seems to me, that the Court should be prepared to permit at any stage in the proceedings whatever amendment 1S necessary to enable the real question in the dispute to be decided. That general principle is subject to the qualification that the Court should not permit amendment where it will result in unfair prejudice to a party which cannot be remedied. Turning to the Proposed Substituted Statement of Claim it 1s a considerably more readable document than its predecessor. Paragraph 1 alleges the first respondent's status as a trading 5. and/or financial corporation and its occupation as a financial and investment adviser. Paragraph 2 pleads the status of the third to fifth respondents as directors of the first. Paragraph 3 pleads a meeting held at the offices of the first respondent between 5 May and 9 May at which the fifth respondent, acting for the first respondent, handed to the first applicant certain promotional circulars and orally invited him to subscribe to special one cent units in the Carbon Gold Unit Trust. The respondents make no complaint of the amendments to paras. 1] - 3. Paragraph 4 pleads a representation embodied in the circulars as to the excellence of investment in the Trust. It also pleads oral representations by the fifth respondent on behalf of the first respondent of a predictive nature as to the future of the Trust and its proposed restructuring and the return of premiums to investors in special units, each of which carried a premium of $499.99. These representations are said to have been false because the predictions embodied in them were not fulfilled, and this is the substance of the plea in para.8. The pleadings so proposed may be rightly criticised for failing to identify any statement of existing fact and for its use of the word "false" in the context of a failed prediction. Nevertheless, it lays a foundation for the later plea in paras. 9 and 10 of implied representations of existing or past fact. It does not of itself, give rise to any substantial new issue, the allegation generally reflecting the somewhat more condensed content of para.4(f) of the existing statement of claim. 6. Paragraph 5, which relates to the respondents' alleged request and intent that the first applicant should convey the representations to the second applicant to induce her to purchase units remains unamended. Paragraph 6, pleading acquisition of units by the first applicant in reliance upon the representations, 1S also unamended. Paragraph 7 in similar terms pleads reliance and acquisition by the second applicant and adds rather superfluously that she was induced to do so by the representations. That amendment however creates no prejudice and may be allowed. Paragraph 9 pleads that the representations referred to in para.4 "constituted statements of advice, information or opinion, [which] in the circumstances 1n which they were made incorporated representations of existing or past fact". The representations are then set out in sub-paras.(i) to (v). Sub-paragraphs (i) to (iv) plead represented beliefs, knowledge or conduct by the f1fth respondent "on behalf of the First Respondent". Insofar as these pleas refer to states of mind held by the fifth respondent "on behalf of" the first respondent they are embarrassing. Otherwise I am of the view that the amendment makes clearer the case put by the applicants in respect of the promissory and predictive statements pleaded in para. 4. I will therefore allow the amendments except for the words "on behalf of the First Respondent" appearing in sub-paras. (1), (1ii) and (iv). Counsel for the respondents contended that the circumstances 7. referred to in the preamble to para.9 would require particularisation. In my opinion, however, the context relied upon to support the implied representations emerges clearly enough from the applicants' case and no further particularisation is required to enable the respondents fairly to meet it. Paragraph 10 pleads the falsity of the various implied representations and does so by reference to states of mind attributed to the first respondent. Although this does not sit particularly easily with the plea in para. 9 of representations by the fifth, respondent of his enquiries and states of mind, it is open tothe' applicants to contend that the statements attributed tte to the' Eigth respondent were attributable to the first and were 2% false' in: ot representing the true position of the first. In my opinion the proposed para.10 should also be allowed. Par ve the trade seactices Act. Paragraph 12 sets up a plea of negligent Tae ee id misstatement on the part of the fifth respondent vicariously 7 or attributable to the first. In particular, it pleads that the wMe ls fifth "bspondent possessed special skill or knowledge and was Pt Aes > otherwi: ésin a special relationship with the applicants and failed "ath Eeasonable care to ensure the accuracy of his represénpations. The plea rather resembles that in para.9 of the onset gl Econo of claim, save that it expressly raises the Nye, ito issues BEE pe 8. respondent and a special relationship with the applicants. In my Opinion, this proposed paragraph tends to narrow rather than broaden the plea previously made in para.9. As to the special skill or knowledge and special relationship questions, these seem to me to be largely a matter of argument and inference from facts which are not substantially in 1ssue. However, to the extent that they raise new factual issues, the respondents may apply to recall and further cross-examine any witness called by the applicants. Paragraph 13 raises a plea of negligence on the part of the first respondent in failing to advise the applicants of the highly speculative and uncertain nature of investment in the Trust. This presents a somewhat different case against the respondents and one which might well have required a different approach to the applicants' evidence. I am not prepared to allow para. 13 of the proposed substituted statement of claim. Paragraph 14 pleads that the second, third and fourth respondents authorised the fifth to make the representations pleaded. Such an allegation is an important element of the applicants' case and was to some extent foreshadowed in their opening. The applicants have offered no direct evidence of such authorisation but will, I apprehend, seek to argue that it may be inferred from the evidence, especially documentary matter before the Court. I do not consider that the amendments here proposed impose any undue burden on the respondents, and I will allow para. 14. 9. Paragraph 15 pleads that the conduct of the second, third and fourth respondents, constituted aiding, abetting and counselling the contraventions of s.52 of the Trade Practices Act, said in para. 11 to have been committed by the first respondent. They are also said to have been directly or indirectly knowingly concerned or involved in the contravention. Particulars are given which may or may not support the plea but they are essentially matters of argument and inference and the amendment will be allowed. Paragraph 16 raises a plea of negligence against the second, third and fourth respondents confined to their causing or permitting the first respondent to make the various representations set out in paras. 4 and 9. Subject to the provision of particulars, if they be requested, of what constituted the "causing or permitting", I am inclined to allow the amendment because, on the applicants' case as it presently stands, I doubt that it would have involved any significantly different approach by the respondents. It is largely a matter, on the applicants' case so far, of inference and argument about the respondents' conduct. Paragraphs 17 to 19 of the proposed substituted statement of claim raise pleas of collateral contract and implied terms which so alter the direction of this aspect of the case, that they should not be allowed. Paragraph 20 pleads damages in a way which I think reflects the approach already taken by the applicant and can be permitted to stand. Paragraph (i1) of the particulars of loss and damage however, is a rather obscure plea and should not be allowed. re-amended statement of claim by substitution of the Proposed 10. In summary, I will allow the applicants to amend their Substituted Statement of Claim save for:- (1) The words "on behalf of the First Respondent" appearing in sub-paragraphs (1), (111i) and (1v) paragraph 9; (21) Paragcaph 13; (i11)Paragraphs 17, 18 and 19; (iv) 1tem (11) of the particulars of loss and damage in costs of the hearing on Tuesday, 15 March, as that was completely paragraph 20. The applicants will be required to pay the respondents' occupied with debate as to their amendments. consequential orders should be made in relation to the amendments, including any orders relating to costs thrown away. I will now hear from the parties as to what further I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Ruling of his Honour Justice French. Ve eas Associate: Perveck— Date: (lo Wroaebs ll. Counsel for the Applicants: M: J.P.T. Olivier Solicitors for the Applicants: Talbot & Olivier Counsel for the Respondents: My M. McCusker 0.C. with Mr A.T. Macknay Solicitors for the Respondents: Warren Harrison Date of Hearing: 15 Mascch 1988 Date of Judgment: 16 March 1988