FEDERAL COURT OF AUSTRALIA Grimaldi v Chameleon Mining NL (No 1) [2011] FCA 936 Citation: Grimaldi v Chameleon Mining (No 1) [2011] FCA 936 Appeal from: Chameleon Mining NL v Murchison Metals Limited [2010] FCA 1129 Parties: PHILLIP FELICE GRIMALDI v CHAMELEON MINING NL and MURCHISON METALS LIMITED ACN 078 257 799 File number: NSD 68 of 2011 Judge: PERRAM J Date of judgment: 1 August 2011 Corrigendum 17 August 2011 Catchwords: PRACTICE AND PROCEDURE – Appeals – application to amend – application to amend notice of contention – where notice of appeal amended – no explanation for delay Legislation: Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth) s 37M Federal Court Rules 1976 O 13 r 2, O 52 r 22(3) Federal Court Rules 2011 r 36.24 Court Procedure Rules 2006 (ACT) r 21(2) Cases cited: Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 applied Barnes v Addy (1874) LR 9 Ch App 344 cited Date of hearing: 1 August 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 20 Counsel for the Appellant: Mr A G Bell SC with Mr M Watts Solicitor for the Appellant: M J Woods & Co Counsel for the First Respondent: Mr M Bennett Solicitor for the First Respondent: Bennett & Co Solicitor for the Second Respondent: Ms S Bellini of Freehills FEDERAL COURT OF AUSTRALIA Grimaldi v Chameleon Mining NL (No 1) [2011] FCA 936 CORRIGENDUM 1. The judgment originally published under the medium neutral citation of Grimaldi v Chameleon Mining NL (No 1) [2011] FCAFC 95 should have instead borne the medium neutral citation of Grimaldi v Chameleon Mining NL (No 1) [2011] FCA 936. 2. The Judges listed on the judgment coversheet as "Finn, Stone and Perram JJ" should instead be "Perram J". 3. Counsel for the First Respondent, Mr M Bennett, should be included on the judgment coversheet. I certify that the preceding three (3) numbered paragraphs are a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 17 August 2011 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 68 of 2011 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: PHILLIP FELICE GRIMALDI Appellant AND: CHAMELEON MINING NL First Respondent MURCHISON METALS LIMITED ACN 078 257 799 Second Respondent JUDGE: PERRAM J DATE OF ORDER: 1 AUGUST 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The first respondent's notice of motion be dismissed with costs. 2. The first respondent's oral application for adjournment be refused. 3. The appellant serve the amended notice of appeal on the respondents forthwith. Note: Entry of orders is dealt with in Rule 39.2 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 68 of 2011 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: PHILLIP FELICE GRIMALDI Appellant AND: CHAMELEON MINING NL First Respondent MURCHISON METALS LIMITED ACN 078 257 799 Second Respondent JUDGE: PERRAM J DATE: 1 AUGUST 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By a notice of motion dated 28 July 2011 the first respondent ('Chameleon') seeks leave to file an amended notice of contention. If filed, that notice of contention would raise two new grounds. First, that, in the event that the Full Court were to conclude that the trial judge was erroneous in his conclusion that Mr Grimaldi was a de facto director, his Honour's conclusions could nevertheless be sustained on the basis that he was an officer within the definition of that term in the Corporations Act 2001 (Cth). Secondly, if that could not be concluded, the reasons of the trial judge might be supported on the basis that, even though not owing fiduciary duties directly by reason of being a de facto director or an officer, nevertheless, Mr Grimaldi should be held liable on the basis that he was knowingly concerned in a breach of fiduciary duty by Mr Barnes. 2 The notice of appeal filed by Mr Grimaldi on 26 February 2011 contained within it, as grounds one and two, challenges to the trial judge's conclusions that Mr Grimaldi was a de facto director. The text of both grounds of appeal commenced with the words: 'The trial judge misapplied the test for deciding whether a person is a de facto director of a company...'. It was on the table, therefore, from 26 February 2011 when the notice of appeal was filed that Mr Grimaldi was seeking to tackle the conclusions of the trial judge that Mr Grimaldi was a de facto director. It was, therefore, possible for Chameleon to have filed a notice of contention seeking to support the trial judge's findings on the basis that Mr Grimaldi was an officer or, alternatively, was knowingly involved in a breach of duty by Mr Barnes from at least that date. 3 As at that time, O 52 r 22(3) of the Federal Court Rules 1979 would have governed the filing of the notice of contention. That rule provided: If the respondent proposes to contend that the judgment should be affirmed on grounds other than those relied on by the court below, but does not seek a discharge or variation of any part of the judgment, the respondent need not file a notice at cross-appeal but must: (a) file a notice of the respondent's contention within 21 days after the service upon the respondent of the notice of appeal… 4 The consequence of that rule is that if Chameleon wished to contend that Mr Grimaldi were an officer or, alternatively, be liable for knowing involvement under the first limb of the rule in Barnes v Addy (1874) LR 9 Ch App 244, it was required to file that notice of contention within 21 days of 26 February 2011, which was some time in March. No such notice of contention was filed. 5 Last week, during the course of a directions hearing of some length before me, I granted leave to Mr Grimaldi to amend his notice of appeal in various ways. Amongst the amendments which I permitted were amendments to grounds one and two. The proposed amendments sought to flesh out, in new ways, the manners in which and the processes by which it was to be concluded that Mr Grimaldi was a de facto director. These amendments did not, however, for the reasons I have already given, introduce for the first time into the appeal the issue of whether Mr Grimaldi was, in fact, a de facto director. As I have said, that was an issue in the appeal from 26 February 2011. 6 The present application to amend the notice of contention seeks to put the argument in grounds four and five that Mr Grimaldi was an officer or was knowingly involved. In relation to some other matters, I granted leave to Chameleon last week to file a notice of contention. The present application is an application to amend that notice of contention. Mr Woods, the solicitor for Mr Grimaldi, has sworn an affidavit in which he deposes to various difficulties in meeting the amendments to the notice of contention if leave be granted. The difficulties are of a familiar kind: Mr Woods is a sole practitioner who has only one employed solicitor working in his office; he worked at the trial on the matter himself and his employed solicitor has had little involvement in the case. At the trial he briefed Mr Watts, but in May 2011 he briefed Mr Thompson of counsel and, more recently, Mr Bell SC. 7 Mr Thompson of counsel last week was afflicted with the necessity of having his shoulder reconstructed, which, it is said, diminishes his capacity to operate effectively in relation to this appeal; a proposition which should, I think, be accepted. Mr Woods also points to the fact that an assessment of an inquiry into damages is proceeding before The Honourable John von Doussa and that that inquiry has not been stayed, despite two applications to this Court to do so pending the outcome of the appeal. I am prepared to accept, in Mr Grimaldi's favour, that the conduct of that inquiry as to damages is also likely to impose upon Mr Woods a degree of additional work which must be done. 8 Then there is the fact, which ought to be confronted, that the quantity of documentation in this appeal and the volume of submissions and the like are such that, being one week out from the appeal, it is going to impose some degree of burden on those who represent Mr Grimaldi if this amendment is permitted. I am not necessarily persuaded that that prejudice is as high as it is put from the bar table. For one thing, it is apparent, at least in relation to the de facto officer's point, that detailed submissions were made to the learned trial judge about this; they are contained in paragraphs [114] through to [137] of Mr Grimaldi's submissions below. Although there may be difficulties in terms of getting across all of the documents it does, at least, appear arguable that the path has already been cleared once in getting to the answer to that question. That does not necessarily mean that it is a trivial task to clear it again; regrowth in these areas is not unknown. 9 The question of whether Mr Grimaldi could be made liable under the first limb of the rule in Barnes v Addy also appears to have been the subject of some submissions before the trial judge although, at least from the written submissions, one would have to describe the extent to which it was considered as fairly short. Paragraph [248] of Mr Grimaldi's written submissions which was included in a part entitled 'Relief from Liability (if any)' said, perhaps somewhat tersely: 'In the present case a finding that Mr Grimaldi's actions attracted the operation of the second limb of the rule in Barnes v Addy would necessarily imply a finding that Mr Barnes had breached a fiduciary obligation he owed to Chameleon as a director or officer. Thus, Mr Grimaldi is entitled to seek relief under either s 1317S of the Act [sic]'. It may be accepted, I think, that the preparation and presentation now of a Barnes v Addy case would require some effort on the part of those who are appearing from Mr Grimaldi. 10 Mr Bell SC who appeared, with Mr Watts, for Mr Grimaldi, drew my attention to the High Court's decision in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, and in particular, to a passage appearing in the joint reasons at 215 [103] in the following terms: Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case. 11 Rule 21(2) of the Court Procedure Rules 2006 (ACT) provided that the rules were to be applied in civil proceedings 'with the objective of achieving: (a) the just resolution of the real issues in the proceedings; (b) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.' Useful comparison can, I think, be made between the terms of rule 21(2) of those rules and s 37M of the Federal Court of Australia Act 1976 (Cth) which also contains similar aspirational sentiments. Mr Bell SC submitted that the effect of paragraph [103] of Aon was to have required from Chameleon's camp some explanation for why it was that, despite effectively being put in a position where the issue could have been raised some time in March, it was that it waited until, effectively, nine working days before the commencement of the appeal to bring its application to amend the notice of contention. 12 Mr Bennett, who appeared for Chameleon, submitted that paragraph [103] of Aon contained the introductory words 'generally speaking'; and this was a case where it was evident that some different approach ought to be taken to the general approach. The reason for this concerned what had occurred before me last Tuesday at the directions hearing. At that time I had granted leave to Mr Grimaldi to amend his notice of appeal in certain ways. There then occurred an interchange between myself and Mr Hutley SC, who was at that time appearing for Chameleon, along these lines: HIS HONOUR: So it's a question of whether you're disentitled by reason of the lateness of it and whether he suffers any real prejudice in any event. They're the two questions. MR HUTLEY: Well, firstly, as to – Murchison is fully engaging with it. That's the first point. Secondly, with respect to an appeal of this complexity, is we have had to deal with amendments on their part and amendments, for that matter, on Murchison's part. HIS HONOUR: You say things happen in appeal cases. MR HUTLEY: Things happen. For example, one of the things I am going to say is as a consequence of one of their latest series of amendments, I am going to seek further leave to amend our notice of contention in the Murchison – in the Grimaldi appeal to raise an issue that they're liable as an officer, if not a director, and, secondly that they're liable for knowing involvement and breach of fiduciary duty, which is in respect of the cheques. 13 Mr Bennett submitted that the effect of that interchange was that it ought to be concluded that the granting of leave to amend the notice of appeal had, in some sense, attached to it as a quid pro quo the proposition that leave would be granted to file the amended notice of contention. Whilst I accept that Mr Hutley SC certainly put on the table at the directions hearing that an application to amend the notice of contention in the foreshadowed fashion would ensue, I am not able to read that part of the transcript as carving out an entitlement to have that application acceded to. The difficulty I have with that submission is that it engages notions of fairness which have to be seen in a context which includes the fact that the challenge to the correctness of the trial judge's reasoning about the de facto director's contention has been alive in the appeal since 26 February 2011. 14 I do not see that what Mr Hutley SC said on the transcript on the last occasion is capable of detracting from that proposition and I cannot, therefore, see a way in which the force of paragraph [103] of Aon may be avoided. For those reasons, it seems to me that it would be inappropriate to grant leave to amend the notice of contention in the fashion which is foreshadowed. 15 During the course of argument, a question arose as to whether leave was necessary. Because I have to answer the question, I will do so, although, in what follows, it is to be noted that the present question has come on in a very urgent fashion and the matter was far from the full subject of argument. To that, it may be added that today is the first day of the new rules and the situation could hardly be said to be one where the operation of these rules is, as yet, fully known. The assumption was made by the parties, and I make too, that there is not some transitional provision of these rules which has an impact on the question. I proceed on the basis that the new rules apply to all matters which have been filed, including this matter. Whereas provision for a notice of contention was formerly to be found in O 52 r 22(3), it is now to be found in r 36.24 of the Federal Court Rules 2011, which provides: If a respondent does not want to cross-appeal from any part of a judgment, but contends that the judgment should be affirmed on grounds other than those relied on by the court appealed from, the respondent must, within 21 days after the notice of appeal is served, file a notice of contention, in accordance with Form 124. 16 The short question which arises is whether the reference to a notice of appeal in r 36.24 includes an amended notice of appeal. If it does include an amended notice of appeal, then a respondent will be entitled as of right to file a notice of contention within 21 days of service of the amended notice of appeal under r 36.24. If it does not, it will not. There is no provision, so far as I can see, in Part 36 which would deem any reference to a notice of appeal in Part 36 to include a reference to an amended notice of appeal. Under the former rules, O 13 r 2 was sufficiently broad to permit amendment to any document. Under the present rules, O 13 r 2 appears to have been sent in two different directions. Instead of a general power of amendment in relation to documents, the corresponding new provisions are contained in r 8.21, which deals with amendments to originating applications; and r 15.15, which deals with amendments to cross-claims. 17 There does not seem, therefore, to be a general power of amendment, nor is there a provision, so far as I can see, which deems an amended notice of appeal to be a notice of appeal. The consequence seems to me to be that r 36.24 does not permit the filing of a notice of contention, save for when a notice of appeal is filed. That is to say, the filing of an amended notice of appeal does not give rise to a right to file a notice of contention. For that reason, I reject the submission that Chameleon is entitled to file the amended notice of contention as of right. The application is dismissed with costs. 18 At the conclusion of my reasons, Mr Bennett applied for a short adjournment, possibly till tomorrow morning, to put on an affidavit of explanation of the kind contemplated by paragraph [103] of Aon. During the course of argument on the principle application Mr Bell SC made quite plain the submission he was putting on this matter. That is, that he was relying upon paragraph [103]. During the course of further discussion between myself and Mr Bennett the difficulty with paragraph [103] and the need for an affidavit was ventilated. It seems to me that it was at that point that Mr Bennett should have made his application for a brief adjournment to put on such an affidavit. It seems to me that it is not appropriate that that application be made after I have considered the evidence, heard the arguments and decided to dismiss the application. 19 I should say for completeness that Mr Bennett's contention was that the transcript appearing at page 13, of the interchange between Mr Hutley SC and myself set out above, had generated in Chameleon's camp a perception that what was for debate today was not concerned with Aon issues. Further, he submitted that perception was hardly discouraged by the fact that Mr Grimaldi did not seek to put any evidence in relation to the Aon issue on the court file until, as I understood it, today. Whilst one can be sympathetic to those contentions, it seems to me that to permit an application effectively to reopen in circumstances such as these would be an unwholesome development in terms of procedure. The proper time for that application was to be made before I had decided the case. In those circumstances, I refuse the application for adjournment. 20 I direct Mr Grimaldi to file upon the other parties to the appeal his amended notice of appeal forthwith. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 1 August 2011