FEDERAL COURT OF AUSTRALIA Lukey v Corporate Investment Australia Funds Management Pty Ltd [2003] FCA 1601 SAMANTHA JAYNE LUKEY v CORPORATE INVESTMENT AUSTRALIA FUNDS MANAGEMENT PTY LTD & ORS N1348 OF 2000 EMMETT J 1 OCTOBER 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N1348 OF 2000 BETWEEN: SAMANTHA JAYNE LUKEY APPLICANT AND: CORPORATE INVESTMENT AUSTRALIA FUNDS MANAGEMENT PTY LIMITED (ACN 059 438 514) FIRST RESPONDENT TRACKNET AUSTRALIA PTY LIMITED (ACN 079 730 466) SECOND RESPONDENT CARDINAL FINANCIAL SECURITIES LIMITED (IN LIQUIDATION) (ACN 058 650 212) THIRD RESPONDENT JOHN CHARLES KERIN FOURTH RESPONDENT GARRY MARTIN WHITE FIFTH RESPONDENT THOMAS JAMES VALENTINE SIXTH RESPONDENT FIRST CROSS-CLAIM BETWEEN: JOHN CHARLES KERIN CROSS-CLAIMANT AND: EMPLOYERS REINSURANCE CORPORATION (ARBN 072 715 738) FIRST CROSS-RESPONDENT SUNCORP METWAY INSURANCE LIMITED (ACN 075 695 966) SECOND CROSS-RESPONDENT SECOND CROSS-CLAIM BETWEEN: CARDINAL FINANCIAL SECURITIES LIMITED (IN LIQUIDATION) (ACN 058 650 212) CROSS-CLAIMANT AND: FINANCE AND PLANNING INSURANCE & SUPERANNUATION CONSULTANTS PTY LIMITED (ABN 45 080 753 797) FIRST CROSS-RESPONDENT SHERIN IBRAHIM SECOND CROSS-RESPONDENT THE HARTFORD GROUP PTY LIMITED (ACN 084 348 167) THIRD CR0SS-RESPONDENT ANTHONY ARTHUR CUNNINGHAM FOURTH CROSS-RESPONDENT GLEN-JOHN LACELLES SMITH FIFTH CROSS-RESPONDENT THIRD CROSS-CLAIM BETWEEN: JOHN CHARLES KERIN CROSS-CLAIMANT AND: THOMAS JAMES VALENTINE FIRST CROSS-RESPONDENT FOURTH CROSS-CLAIM BETWEEN: THOMAS JAMES VALENTINE CROSS-CLAIMANT AND: JOHN CHARLES KERIN FIRST CROSS-RESPONDENT GARRY MARTIN WHITE SECOND CROSS-RESPONDENT FIFTH CROSS-CLAIM BETWEEN: CARDINAL FINANCIAL SECURITIES LIMITED (IN LIQUIDATION) (ACN 058 650 212) CROSS-CLAIMANT AND: JOHN CHARLES KERIN FIRST CROSS-RESPONDENT THOMAS JAMES VALENTINE SECOND CROSS-RESPONDENT SIXTH CROSS-CLAIM BETWEEN: THOMAS JAMES VALENTINE CROSS-CLAIMANT AND: EMPLOYERS REINSURANCE CORPORATION (ARBN 072 715 738) FIRST CROSS-RESPONDENT SUNCORP METWAY INSURANCE LIMITED (ACN 075 695 966) SECOND CROSS-RESPONDENT JUDGE: EMMETT J DATE: 1 OCTOBER 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On Thursday, 25 September 2003, the third respondent, Cardinal Financial Securities Ltd (In Liq) ('Cardinal'), sought leave to amend the Second Cross-Claim, filed by it in the proceeding. To put the amendment application in context, I shall describe briefly the nature of the proceeding. 2 The proceeding was brought under Pt IVA of the Federal Court of Australia Act 1976 (Cth) by Ms Samantha Jayne Lukey ('Ms Lukey') on behalf of a number of participants in what is described as 'The First TrackNet Project' ('the Project'). The Project was established pursuant to a deed of 12 December 1997 ('the Project Deed'), whereby the first respondent, Corporate Investment Australia Funds Management Ltd ('CIAFM') and Cardinal agreed to the establishment of the Project, with CIAFM as manager and Cardinal as trustee. 3 The Project contemplated an invitation to the public to subscribe for interests in the Project on the basis that the interests would be prescribed interests within the meaning of the Corporations Law. The operational manager of the Project was to be the second respondent, TrackNet Australia Pty Ltd ('TrackNet'). There has been a compromise between Ms Lukey and TrackNet and I do not need to deal with TrackNet. 4 The directors of CIAFM at relevant times were the fourth, fifth and sixth respondents, Messrs John Charles Kerin, Garry Martin White and Professor Thomas James Valentine respectively (together 'the Directors'). In the proceeding, Ms Lukey claims for herself and other participants damages against Cardinal and the Directors. Various causes of action are relied upon. In particular, there are allegations that representations that were misleading and deceptive were made in the prospectus that was issued to the public and pursuant to which participants subscribed for interests ('the Prospectus'). The Directors are said to have responsibility, either directly or indirectly, for the damages suffered by participants when the Project, in effect, failed. 5 Cardinal has filed the Second Cross-Claim against, relevantly, Ms Sherin Ibrahim (Ms Ibrahim') and The Hartford Group Pty Ltd ('Hartford'). The claim against Ms Ibrahim and Hartford is for contribution from them in respect of any liability that Cardinal may have to Ms Lukey. In the Second Cross-Claim, Cardinal claims that, if it is liable in tort for damages to Ms Lukey, or is liable to Ms Lukey, whether in tort or otherwise, for damages or compensation, then Ms Ibrahim and Hartford are persons who would, if sued by Ms Lukey, either have been liable to her in tort in respect of the same damages or would have an equivalent co-ordinate liability to her. The claims against Ms Ibrahim and Hartford are based upon alleged retainer of Ms Ibrahim and subsequently of Hartford by Ms Lukey to act as her financial planner and adviser and investment adviser to provide advice in respect of Ms Lukey's investment in the Project. Notwithstanding the claims made in the Second Cross-Claim, no claim was made by Ms Lukey against either Ms Ibrahim or Hartford. 6 The proceeding has been fixed for hearing for some time and the hearing commenced on 8 September 2003. Towards the end of the third week, on Thursday, 25 September 2003, as a result of an objection to a question put by counsel for Cardinal, an application was made to amend the Second Cross-Claim so far as its claims against Ms Ibrahim and Hartford were concerned. 7 The application was opposed on the basis that it was proposed to amend the Second Cross-Claim in significant ways that would cause prejudice Hartford and, I assume, Ms Ibrahim that could not be compensated by an adjournment or costs. Hartford is represented by counsel. Ms Ibrahim is unrepresented but appears in person. 8 There appear to me to be three aspects of the proposed amendments. I shall deal with the amendments so far as Hartford are concerned. 9 In the Second Cross-Claim, as it presently stands, the allegations relevantly made against Hartford may be summarised as follows. 10 The Second Cross Claim alleges that Between 1 March 1999 and January 2000, Ms Lukey entered into an agreement or arrangement with Hartford, referred to as 'the Hartford Retainer', pursuant to which Hartford agreed to act, and acted, as Ms Lukey's financial planner and adviser and investment adviser, and agreed to provide, and provided, advice in respect of Ms Lukey's proposed investment in the Project. The terms of the Hartford Retainer included terms that Hartford would use all due care, skill and diligence in the performance of its obligations pursuant to the Hartford Retainer and that Hartford would exercise all due, care and diligence in the provision of financial planning advice and tax effective investment advice to Ms Lukey pursuant to the Hartford Retainer. 11 After reciting Ms Lukey's claims against Cardinal, the Second Cross-Claim asserted that, if it is determined that Cardinal breached a duty of care owed to Ms Lukey, then Cardinal makes the following claims against Hartford, namely that: (1) Hartford owed a duty of care to Ms Lukey in the performance of its obligations under the Hartford Retainer. The duty of care owed by Hartford included: · a duty to exercise all due care, skill and diligence in the performance of its obligations owed to Ms Lukey pursuant to the Hartford Retainer; · a duty to exercise all due care, skill and diligence in the provision of advice, including financial planning and tax effective investment advice, to Ms Lukey pursuant to the Hartford Retainer. (2) In breach of the duty of care which it owed to Ms Lukey, Hartford: · failed to advise Ms Lukey of the fact of or the details of the commission or fee that Ms Ibrahim would earn if Ms Lukey subscribed to the Project; · advised Ms Lukey to apply for a loan in order to finance her participation in the Project from Colonial State Bank, from Westpac Banking Corporation and from Barkley Finance Corporation Ltd ('Barkley') in circumstances where an investment in the project was inappropriate, having regard to Ms Lukey's investment objectives, financial situation and needs. · failed to advise Ms Lukey that the Project was highly speculative and that the return of her capital was not guaranteed; · failed to advise Ms Lukey that, if the Project was unsuccessful, all of the money she invested in the Project could be lost; · failed to advise Ms Lukey that, if the Project was unsuccessful, Ms Lukey could incur additional loss, including interest payments required to be made on any loan she obtained in order to invest in the Project. There were also further allegations of failure to exercise all due care, skill and diligence, although no additional particulars were furnished. Finally, it was then asserted that Ms Lukey relied on the advice of Hartford in deciding to invest, and investing, in the Project. 12 The original pleading of the retainer may well have been embarrassing and could have been subject to striking out, although no such application has been made. In the course of argument, the infelicity of the expression in the allegation of the retainer became apparent. 13 The first amendment proposed by Cardinal is to make two separate allegations, both of which are said to be found, in substance, in the allegation that was originally made. The allegation as originally made might be summarised as follows. (1) On or about 20 April 1999, Ms Lukey entered into an agreement or arrangement with Hartford, referred to as 'the Hartford Retainer', pursuant to which Hartford agreed to act as Ms Lukey's financial planner and investment adviser and to provide advice in respect of Ms Lukey's investment in the Project. (2) Between about April 1999 and about January 2000, Hartford acted as Ms Lukey's financial planner and investment adviser and provided advice in respect to Ms Lukey's investment in the Project, referred to as 'the Hartford Services'. 14 The particulars of the retainer, on the one hand, and the provision of advice pursuant to the retainer, on the other, are not, in substance, changed from the particulars provided in the earlier pleading, apart from a reference to one additional document. I do not consider that there is likely to have been any prejudice to Hartford or Ms Ibrahim in the restructuring of the allegation of the retainer to make clear what was almost certainly implicit in the earlier allegation, however infelicitously it may have been expressed. One amendment is to abandon any reliance upon an implication so far as the retainer is concerned. The retainer is now alleged to be constituted by a written document and continued dealing between Ms Lukey and Ms Ibrahim as the agent of Hartford. Parallel amendment is made in respect of the claim against Ms Ibrahim and, again, I do not consider that there is any prejudice from the amendment of the Second Cross-Claim in that regard. 15 The second amendment proposed by Cardinal concerns the allegation of the duty said to be owed by Hartford to Ms Lukey. It is now sought to allege that duty in the following terms: (1) Hartford owed a duty of care to Ms Lukey in the provision of the Hartford Services; (2) the duty of care owed by Hartford included: · a duty to exercise all due care, skill, and diligence in the provision of the Hartford Services; and · a duty to exercise all due care, skill, and diligence in the provision of advice including financial planning and tax effective investment advice to Ms Lukey. 16 A significant change is that, under the original pleading, the duty of care was said to be owed in the performance of obligations under the Hartford Retainer. The duty to exercise all due care, skill, and diligence was said to be in the performance of obligations owed to Ms Lukey pursuant to the Hartford Retainer. That appears to me to be an unequivocal assertion to take care in the performance of the contractual obligations alleged in the Second Cross-Claim. 17 Under the proposed amendment, the duty of care is not tied to a contractual obligation but seems to be an allegation of a duty of care independent of any contractual relationship. That in my view is a significant departure. Counsel for Cardinal contends that, notwithstanding that departure, there should be no prejudice to Hartford or to Ms Ibrahim because he foreshadowed the nature of the claim that was being made by Cardinal in the course of opening and that counsel for Hartford, in the course of his opening, indicated an acceptance that claims were being made both in contract and in tort. 18 More specifically, counsel for Cardinal referred to the claim made in the Second Cross-Claim that, if Cardinal is liable in tort and damages to Ms Lukey, then each of Ms Ibrahim and Hartford is a person who would, if sued by Ms Lukey, have been liable to her in tort in respect of the same damage. That is the claim, but the pleading, on a reasonable reading of it, does not, in my view, allege a duty of care otherwise than pursuant to, and in the performance of, Hartford's obligations under the Hartford retainer. 19 The question of what significance is to be attached to the observations made by counsel for Cardinal in the course of opening is blurred somewhat by the case that Cardinal makes out in answer to Ms Lukey's claim against it. That is to say, Cardinal says that, even if it be the fact that there was a breach of duty or misleading or deceptive conduct on its part, at least part of the damage claimed by Ms Lukey was not caused by any such breach or conduct on the part of Cardinal but was in effect caused by what subsequently happened in relation to her arrangements concerning the Project. That assertion requires some explanation. 20 Ms Lukey subscribed for an interest in the Project in December 1998. At that stage, it is alleged by Cardinal, she was being advised by Ms Ibrahim. The amount to be subscribed for an interest was $25,500. However, Ms Lukey subscribed no more than $1,100. The balance was intended to be provided by a loan to be made to Ms Lukey on some non-recourse basis. For various reasons, arrangements for that loan were not put in place so that, on one view, Ms Lukey, after committing herself to subscribe for the interest, committed to an obligation to subscribe $24,000 for the balance of the amount payable for her interest in the Project. 21 Ultimately, in August 1999, loan arrangements were entered into between Ms Lukey and Barkley pursuant to which, at least on paper, Barkley was to advance to Ms Lukey the balance of the amount payable for the subscription by way of paying that amount on her behalf to CIAFM or Cardinal. Part of the damages claimed by Ms Lukey include the interest that she paid to Barkley in January 2000 pursuant to those arrangements. 22 Cardinal, in effect, says that it is not liable for any damage or loss occasioned to Ms Lukey by reason of the payment of interest made in January 2000 because, having regard to the misleading and deceptive nature of the representations made in the Prospectus, she could have excused herself from any further obligation to pay money for her participation in the Project and, therefore, need not have incurred any obligation so far as Barkley was concerned. 23 The matter is further complicated by a proposed scheme of arrangement promulgated at the end of 1999, whereby interests in the Project were to be converted into shares in CIAFM. While resolutions to that effect were passed for various reasons, the arrangements did not come to fruition. 24 I mention those matters because they are circumstances generally opened by counsel for Cardinal as Cardinal's case in answer to Ms Lukey, that is, that the chain of causation between the loss claimed and the conduct on the part of Cardinal complained of 'just doesn't extend that far'. In the course of explaining Cardinal's case concerning causation, counsel for Cardinal referred to the commission to which Ms Ibrahim would have been entitled in respect of any interest in the Project that she sold. It was contended that an inference should be drawn that Ms Ibrahim was concerned that, if she simply advised her clients to pull out of the transaction and resist any claim for further funds to be put in by her clients, she would have to pay back commission or would fail to collect commission that she had not yet received. 25 Reference was made to the 'incestuous' nature of the arrangements. Initially, Ms Ibrahim promoted interests as a proper authority holder of CIAFM. When Hartford was established, Ms Ibrahim became a proper authority holder of Hartford. Professor Valentine was a director of Hartford, as was Mr White. 26 In the course of opening, counsel for Cardinal drew attention to the fact that Professor Valentine set about agitating, from about April 1999, his concerns at the problems being experienced by the Project. Cardinal said that Professor Valentine's knowledge should be treated as the knowledge of Hartford and that questions were going to arise as to the extent to which information that was available to Hartford was passed on to investors in the Project, such as Ms Lukey, who, as at April 1999, had contributed only a relatively small amount of money. 27 Counsel for Cardinal said that Cardinal's case would be that people in the position of Ms Lukey had not really sustained any binding commitment. He then went on to say: 'If Ms Lukey in mid 1999 had said "This is all a fraud, I've been misled and I'm certainly not going to pay this $24,350 which is on the books for Barkley", she would've been in a very strong position because at that stage, as I've explained, Barkley didn't even have a signed contract with her. Even after August 1999 when there is a signed contract with Barkley it would have been perfectly clear if not to Ms Lukey – and it may have been clear to her but if not to Ms Lukey then to Ms Ibrahim and other people at Hartford – that Barkley was just the alter ego of Mr Flanagan. [Mr Flanagan was a party who had been involved in procuring alleged benefits for the Project.] The prospect that Barkley could have enforced as against Ms Lukey at some point from 1999 onwards payment of the $24,350 in view of all the information which has emerged about the difficulties with this [P]roject we submit is just laughable. The question that arises in all of those circumstances, now jumping forward to the end of January when the $2000 was paid [the interest paid by Ms Lukey],is why ever that money was paid.' 28 It is not entirely clear precisely what was intended by some of the references in the passage that I have just quoted. It may be that at least one of the references to Barkley should have been a reference to CIAFM, although that is not certain. 29 Counsel for Cardinal proceeded further and took up the question of why the payment in January 2000 was made: 'Now, there has just been no explanation at all as to why in the face of that advice [from Ms Ibrahim recommending to her clients that they not pay interest] the payment was made but where all this is going on from my client's point of view is this, your Honour, and you may ultimately conclude that there was a legal obligation or at least Ms Lukey believed that it was the best thing to deal with, it was a genuine step that was taken, but ultimately our submission will be that both Ms Ibrahim and through her Hartford [are the] approximate cause of the losses that Ms Lukey suffer. Rather I put that badly. That bad decisions were the [proximate] cause of the losses Ms Lukey suffered, bad decisions which it would seem were contributed to by the conduct of Ms Ibrahim and Hartford both in advising her to get into this [P]roject in the first place with all, and we will be saying that this was the sort of project which a person in Ms Lukey's financial position should never have been suggested should touch in the first place, and then throughout 1999 in effect in putting Ms Lukey into the loan with Barkley when through Professor Valentine and through Ms Ibrahim's activities and the like they had a very clear idea – I withdraw that. There was a lot of information available about problems with this project. Now maybe some of the information was passed on to Ms Lukey and she decided to go ahead anyway because of the tax consequence, maybe there's some other reason and we will only find that out when the evidence comes out from Ms Lukey and Ms Ibrahim but either way we say that's the [proximate] cause and to seek to attribute to my client responsibility for payments in 2000 and even later in relation to supposed or even actual defaults that may have taken place in the middle of 1998, with all of those events happening in between and all of those activities with people writing letters to trustees and ASIC and everything else is just not real. The chain of causation just doesn't extend that far. … Of course, our alternative submission is that if we are responsible, then responsibility must be shared by others who were there and that's why we've cross-claimed against Ms Ibrahim and Hartford. We have also cross-claimed against the other entities who are involved in introducing Ms Lukey to the [P]roject but they haven't appeared and one of them at least is bankrupt.' 30 The structure of the opening, as I have cited, is, in my view, significant. It is apparent that, up until the end of the quoted passage, counsel for Cardinal was describing the case on causation that was intended to be advanced by Cardinal. That case inevitably involved the circumstances in which Ms Ibrahim and Hartford had a part to play. However, it is by no means apparent, in what was being said, that an allegation was being made of a case against Hartford and Ms Ibrahim quite different from that which was pleaded. Counsel for Hartford would be entitled to take comfort in the pleading, notwithstanding that there may be foreshadowed in what was said by counsel for Cardinal possible claims against Hartford and Ms Ibrahim based on some failure on the part of Ms Ibrahim to disclose something to Ms Lukey during 1999. 31 In the course of his opening, counsel for Hartford referred on several occasions to the allegation of tortious and contractual obligations said to be owed by Hartford to Ms Lukey. I shall come back to that in a moment but in the course of the opening I endeavoured to clarify the understanding of Hartford's counsel as to the claim made against it by Cardinal. At one point, for example, I said to counsel for Hartford: '… [I]f it be the fact that you could have prevented the loss by giving your advice in the second half of 1999 not to enter into this agreement or to do something else, why haven't you then contributed to the loss?' Shortly thereafter, I said to counsel for Hartford: 'You are liable for what Ms Ibrahim did or didn't do in the second half of 1999, namely advising to enter into this arrangement or not advising to do something else.' 32 Those passages rather suggest that I had in mind, presumably from the opening, that there was some suggestion that Hartford was in breach of a duty or an obligation to advise Ms Lukey, through Ms Ibrahim, to do something else. Whether any such duty or obligation to advise to do something else was pursuant to a contract or an extra-contractual duty was clear enough from the original pleading: the only allegation was of a contractual duty to take care. 33 However, as I have said, in the course of his opening counsel for Hartford referred on several occasions to the dichotomy between tortious and contractual obligations in referring to his understanding of the claims being made by Cardinal. Thus, he said, Ms Ibrahim became an authorised representative of Hartford in March 1999 and it is alleged from that point Hartford entered into tortious and contractual obligations with Ms Lukey. 34 Next, Cardinal wants to assert that Hartford acquired an obligation, or assumed an obligation, both in contract and in tort, to give proper financial advice to Ms Lukey as part of the retainer and that, in breach of such obligation, did not, at any material time after March 1999, dissuade Ms Lukey from taking any further steps in relation to the Project. 35 I sought clarification from counsel for Cardinal as to Cardinal's claim against Hartford. His response was as follows: 'Ms Ibrahim was Ms Lukey's financial adviser after March 1999 and that includes the time when she entered into the loan agreement with Barkley in August. The evidence will show that Ms Ibrahim actively suggested to Ms Lukey that she ought enter into that agreement with Barkley and that she did so partly by reference to letters written on her letterhead and stamped with Hartford's name.' I then said: 'The complaint is that Ms Ibrahim actively suggested that Ms Lukey should enter into the agreement with Barkley in the second half of 1999.' The response was 'That's right'. 36 Subsequently, counsel for Hartford said: 'Our second point is that what Ms Ibrahim did or failed to do she failed or did as our representative, Hartford's representative. What we put is that none of that was negligent, none of it was in breach of any contractual or tortious duty. Properly understood, Ms Ibrahim's actions after March 1999 distilled down to this: she was seeking to obtain for her client Ms Lukey the obvious benefit of a non recourse or limited recourse loan.' Later on, counsel for Hartford said, after referring to attempts to obtain finance by Ms Lukey: 'The fact is the particular fact of Ms Lukey is that what Ms Ibrahim did was save her from her immediate obligation to pay $25,000 under the [P]roject [D]eed and to do it in a non-recourse way, non-recourse as to principal. So even if what Ms Ibrahim did she did as our agent, it was not negligent. It was prudent, it was vigilant and it proper in the circumstance which prevailed after March 1999. Even if Ms Ibrahim undertook those steps or failed to take steps as our agent, as the agent of Hartford, and even if … what Ms Ibrahim did or failed to do is valued or assessed … to have fallen short of a duty, tortious or contractual, there is still a real issue of causation. In short what would Ms Lukey have done, what would she have done if Ms Ibrahim had said to her, let us say in June of 1999, do not take any further steps to acquire any further finance, simply remain immediately liable to pay ….' 37 Those references by counsel for Hartford suggest to me an appreciation that, infelicitously expressed notwithstanding, the allegation of a duty of care was understood as being a duty of care independent of contract, namely in tort. That would be consistent with the claim made in the Second Cross-Claim. 38 The third amendment proposed by Cardinal concerns the particularisation of the acts of Hartford and of Ms Ibrahim said to be in breach of that duty. Two new allegations are made against Hartford and parallel allegations are made against Ms Ibrahim. The allegations may be summarised as follows: (1) Hartford failed to advise Ms Lukey at any time prior to the submission of the Barkley loan documentation that Hartford believed that: · the TrackNet Project was not going well; · the TrackNet Project was not, or might not be, viable; · CIAFM might be in financial difficulties; · the project was under the control of persons, namely Mr White and Mr Flanagan, who were, or might be, dishonest; · material representations made in the Prospectus and in information provided to investors had been or might have been false, incomplete or misleading; · if Ms Ibrahim could procure Ms Lukey's entry into fresh financing arrangements, Hartford would then receive the balance of the commission she was claiming in respect of introducing Ms Lukey to the Project. (2) Hartford recommended that it was in Ms Lukey's best interest to execute the Barkley loan documentation when Ms Lukey ought to have been advised to seek to withdraw from participation in the Project and to make no further financial commitment or purported financial commitment in relation to the Project. 39 Those two allegations are entirely new. The only basis for their support as part of the amendment is the reference in opening to which I have referred. Having regard to the detail of the directions for preparation of the proceeding for hearing, I do not consider that it is appropriate for counsel for a cross-respondent to be informed without warning in the course of opening of the nature of a case that is quite significantly beyond that which is pleaded. It may be that astute attention to the opening by counsel for Cardinal might have hinted to counsel for Hartford that there was now to be an allegation that Hartford was under an obligation to advise Ms Lukey to seek to withdraw from participation in the Project and to make no further financial commitment or purported financial commitment in relation to the Project. 40 Accordingly, unless I am persuaded that there has been no prejudice to Hartford by reason of that amendment, I would not allow the amendment at this stage of the proceeding. Counsel for Hartford says that, had he been awake to the claims that are now sought to be made, he may well have taken a different course, both in the preparation of the proceeding and in the cross-examination that has been conducted to date. 41 Ms Lukey has given evidence and been cross-examined by all parties who wish to cross-examine on the basis of the current pleadings. Counsel for Cardinal draws attention to his cross-examination of Ms Lukey on matters that are said to be relevant to the issues now sought to be tendered in the proceeding. Thus, on 15 September 2003, counsel for Cardinal examined Ms Lukey as to whether or not she was informed by Ms Ibrahim as to various matters concerning the difficulties that were being experienced with the Project. He also put to Ms Lukey that, had she been informed of those matters, Ms Lukey would have done nothing about making any commitment to Barkley in August 1999. 42 Ms Lukey's response was that, even if she had been told about difficulties with the Project, her belief and understanding was that she had purchased an interest and that she had to find the money to pay for it. Thus, it was clear enough that counsel for Cardinal was suggesting that Ms Lukey could have avoided the loss to the extent that it involved payments to Barkley, by declining to have anything further to do with the project. It is said that the only matters that would be relevant to Hartford were explored by that cross-examination. 43 Be that as it may, in circumstances where there is now an allegation of tortious obligation by reason of having failed to advise Ms Lukey to seek to withdraw from participation and to make no further financial commitment, counsel for Hartford may wish to take a different approach in terms of cross-examination. I have indicated that I did not propose to permit cross-examination by more than one counsel on the same topic. Nevertheless, had counsel for Hartford been alerted to the claim that is now sought to be made, a different course might have been adopted in the conduct of the proceeding quite apart from additional preparation that would have been made in a timely fashion before the commencement of the hearing. 44 I consider that it would require the recall of Ms Lukey if the third amendment were to be made. That course is opposed by counsel for Ms Lukey. Ms Lukey, of course, has chosen to bring this proceeding, albeit as a representative party. Nevertheless, she was entitled to assume that, once her examination was finished, she would be free of the stress and strain of giving evidence in Court. Ms Lukey was clearly under stress when giving evidence and I do not consider that it is appropriate that she be recalled, notwithstanding that she is the moving party, because of the decision of a respondent to amend its cross-claim. 45 If the pleading had been filed in its proposed form, counsel for Hartford may have cross-examined differently and may have wanted to put things in a different way from the way in which it was put by counsel for Cardinal in so far as those questions elicited in cross-examination were being tendered against Hartford and Ms Ibrahim. It is always difficult for counsel to identify precisely the extent of the prejudice which arises in such a case. 46 I am satisfied that the case has been conducted so far in relation to Hartford and Ms Ibrahim on the basis of the allegations of breach that are contained in the Second Cross-Claim as it stands. While I do not consider that there is likely to be prejudice that could not be dealt with by further adjournment in relation to the clarification of the allegation of a tortiuous duty, I do consider that there would be prejudice, whether or not Ms Lukey is recalled, in relation to the allegation of further breaches. 47 Accordingly, I would be disposed to give leave to amend the Second Cross-Claim in so far as it clarifies the allegations concerning the entering into the retainer and performance pursuant to the retainer and in so far as it alleges a duty of care that is not tied to a contractual obligation. However, I would not permit an amendment that involved the further allegations of failure to disclose knowledge of Hartford to Ms Lukey or failure to advise Ms Lukey to seek to withdraw from participation in the Project. 48 I take the view that the Second Cross-Claim is framed only in relation to any liability that Cardinal may have to Ms Lukey. In so far as it is necessary to embark on the hearing of claims by other members of the claimant group, it will be appropriate then for any further cross-claims to be considered to the extent that cross-claims are made by present respondents. The significance of that, is that if Cardinal chooses to make a cross-claim in relation to the claims by other members of the group, the refusal of leave to amend the present cross-claim would not interfere with the freedom of pleading that might otherwise be open to Cardinal at that stage. That proposition was ventilated in the course of argument and counsel for Hartford did not wish to say anything in opposition to the proposition. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 22 January 2004 Counsel for Ms Lukey: A Leopold Solicitor for Ms Lukey: Maurice Blackburn Cashman Counsel for CIAFM: G M White (with leave) Counsel for Cardinal: T G R Parker with R E Steele Solicitor for Cardinal: Allens Arthur Robinson Counsel for Mr Kerin: R B O'Hair Solicitor for Mr Kerin: Pappas J Attorney Counsel for Mr White: Mr White appeared in person Counsel for Professor Valentine: D J Fagan SC and G O Blake SC Solicitor for Professor Valentine: Colin Biggers & Paisley Counsel for the Insurers (the Cross-Respondents to the First and Sixth Cross-Claims): S R Donaldson SC with M T McCulloch Solicitor for the Insurers (the Cross-Respondents to the First and Sixth Cross-Claims): Minter Ellison Counsel for Hartford: G Lucarelli Solicitor for Hartford: Sparke Helmore Counsel for Ms Ibrahim: Ms Ibrahim appeared in person Date of Hearing: 8, 9, 10, 11, 12, 15, 16, 17, 18, 22, 23, 24, 25, 26, 29, 30 September, 1 October 2003 Date of Judgment: 1 October 2003