FEDERAL COURT OF AUSTRALIA Tameeka Group Pty Ltd v Landan Pty Ltd (No 2) [2016] FCA 480 File number: NSD 969 of 2015 Judge: MARKOVIC J Date of judgment: 6 May 2016 Catchwords: PRACTICE AND PROCEDURE – application for leave to amend pleadings – where application to amend pleadings was foreshadowed on the first day of hearing – where proposed amendments are confined to legal question of construction Legislation: Federal Court of Australia Act 1976 (Cth) s 37M Federal Court Rules 2011 r 8.21, 8.21(1)(g)(i), 16.53 Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Carter, in the matter of Spec FS NSW Pty Ltd (in liquidation) (2013) 225 FCR 79 Darcy v Medtel Pty Limited (No 3) [2004] FCA 807 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 Research in Motion Ltd v Samsung Electronics Australia Ltd (2009) 176 FCR 66 Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2 Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 Tameeka Group Pty Ltd v Landan Pty Ltd [2015] FCA 1218 Wotton v State of Queensland [2015] FCA 910 Dates of hearing: 27 April 2016, 28 April 2016, 29 April 2016 and 2 May 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 39 Counsel for the Applicants: Mr C D Freeman Solicitor for the Applicants: Falvey Kay Lawyers Counsel for the Respondents: Mr H Woods with him Ms V Cha Solicitor for the Respondents: Michael Flaherty Solicitor ORDERS NSD 969 of 2015 BETWEEN: TAMEEKA GROUP PTY LTD ACN 120 830 819 First Applicant 2444 ON THE GREEN PTY LTD ACN 606 425 389 Second Applicant AND: LANDAN PTY LTD ACN 109 801 229 First Respondent GRAN-DIA INVESTMENTS PTY LTD ACN 000 790 223 Second Respondent MALCOLM CORBETT (and another named in the Schedule) Third Respondent JUDGE: MARKOVIC J DATE OF ORDER: 6 MAY 2016 THE COURT ORDERS THAT: 1. Grant leave to the applicants to file an amended originating application in the form of the draft amended originating application provided to Markovic J on 27 April 2016. 2. Grant leave to the applicants to file a further amended statement of claim in the form of the draft further amended statement of claim provided to Markovic J on 27 April 2016. 3. The grant of leave for the filing of the amended originating application and further amended statement of claim in the form of the drafts provided to the Court is made on the condition that the scope of the amendment and any submissions made in relation to it by the applicants are limited to the matters set out in the 3 paragraphs in the document titled 'Applicant's Submission on Proposed Paragraph 1.9A Construction Issue' a copy of which has been provided to the Court. 4. The question of costs occasioned by the filing of the amended originating application and further amended statement of claim is reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MARKOVIC J: BACKGROUND 1 These proceedings were listed for hearing for three days commencing on 27 April 2016 on all issues of liability. 2 In summary, the proceedings concern the status of a call option deed for the purchase of a property known as Shop 1, 17-19 Horton Street, Port Macquarie NSW (the Property) between the first respondent, Landan Pty Ltd (Landan) as grantor, the first applicant, Tameeka Group Pty Ltd (Tameeka Group) as grantee and Paul Barr, the sole director of Tameeka Group, as guarantor dated 4 May 2010 (the Call Option) which was varied by deed of variation between the same parties dated 1 August 2013 (the Variation) and the effect of entry into of a lease for the Property dated 15 May 2015 between Landan as Lessor and the second respondent, Gran-Dia Investments Pty Ltd (Gran-Dia) which is a company related to Landan, as lessee (the New Lease). 3 It is relevant to note that the Call Option had annexed to it a contract for sale of land for the Property which, among other things, included an agreed purchase price and which specified that the sale was subject to "existing tenancies" (the Contract for Sale). 4 The terms of the relevant transaction documents are set out in Tameeka Group Pty Ltd v Landan Pty Ltd [2015] FCA 1218 (Tameeka (No 1)) at [7] to [17]. 5 In their amended statement of claim, the applicants, Tameeka Group and 2444 on the Green Pty Ltd (2444), allege that: (1) Landan breached the terms of the Call Option by entering into the New Lease; (2) Landan engaged in unconscionable conduct within the meaning of s 21 of the Australian Consumer Law being Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL) by granting the New Lease and by denying that the Call Option was valid and enforceable; and (3) Gran-Dia and the third and fourth respondents, Malcolm Corbett, an officer of Landan and Gran-Dia, and Diane Preston, an officer of Gran-Dia, aided, abetted, counselled, procured or were knowingly concerned in the contravention of s 21 of the ACL by Landan; (4) in the alternative to (2) and (3) above, Landan, Gran-Dia, Mr Corbett and Ms Preston engaged in the tort of conspiracy by lawful means by agreeing to the entry into of the New Lease in circumstances where they knew of the existence of the Call Option and were aware of the increase in value of the Property and where the true or main reason for entering into the New Lease was to injure Tameeka Group or its nominee and that the entry into of the agreement constituted a conspiracy among them to injure Tameeka Group and/or its nominee. 6 Tameeka Group and 2444 claim loss and damage as a result of the alleged breaches. 7 In opening submissions on the first day of the hearing, counsel for the applicants foreshadowed an amendment to the pleadings which he outlined in his opening address. On the morning of the second day of the hearing, the applicants made a formal application to amend the originating application and the amended statement of claim. That application was opposed by the respondents. 8 After hearing submissions from both parties I made orders allowing the amendments. I now provide my reasons for doing so. THE PROPOSED AMENDMENT 9 By their application, Tameeka Group and 2444 sought to amend the originating application and amended statement of claim by: (1) adding to the originating application a new prayer for relief, paragraph 6A, seeking a declaration that the New Lease is not an existing tenancy or tenancies within the meaning of the Contract for Sale of Land annexed to the Call Option; and (2) amending the amended statement of claim by: (a) adding a new paragraph: 29A. On the proper construction of the Contract, the New Lease is not an existing tenancy or tenancies as provided in the Contract; and (b) amending [30] to add the underlined words: Without admission, if the Court holds that the new lease is an existing tenancy or tenancies as provided in the Contract, Tameeka Group and 2444 repeats paragraphs 17-20 above and say that such conduct constituted a breach by Landan of: (a) The First Implied Terms; and/or (b) The Second Implied Term. 10 The applicants submit that the amendment raises a point of construction only. That is, whether the New Lease is an "existing tenancy" within the meaning of the Contract for Sale attached to the Call Option. In support of and by way of explanation of the proposed amendment, the applicants provided the respondents and the Court with a document entitled "Applicants' submission on proposed paragraph 1.9A construction issue" (the Amendment Submission) which they submit sets out the nature of and basis for the amendment and which, counsel for the applicants submitted, sets out the limits of their argument on the issue. By that document they submit that: (1) the correct approach to construction is to consider, among other things, "the surrounding circumstances known to [the parties] and the commercial purpose or objects to be secured by the contract" and to approach construction on the basis of a business like interpretation: see Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; (2) the front page of the Contract for Sale provided, among other things, an agreed contract price and that the sale was subject to "existing tenancies". At the date of the Call Option, a lease with Tameeka Pty Ltd was in force, or it was contemplated that it would shortly be in force. That lease was an arms' length lease on ordinary commercial terms. Objectively the parties intended that at the date of any exercise of the Call Option, if there was a lease in place, it would be an arms' length lease on ordinary commercial terms. That would be consistent with the commercial purpose or object to be secured by the Call Option. That is, the purchaser would acquire a commercial property at the agreed price in the Contract for Sale and, if there was a tenant, it would be in occupation on ordinary commercial terms; (3) the corollary of this argument is that if the New Lease is construed as an existing tenancy, then the underlying commercial purpose of the Call Option is defeated because a reasonable purchaser would not pay the agreed price in the Contract for Sale for a property that is effectively locked up for twenty years on the terms of the New Lease. The applicants contend that the Court would not accept such an interpretation. LEGAL FRAMEWORK AND PRINCIPLES 11 Section 37M of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) provides: (1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes: (a) according to law; and (b) as quickly, inexpensively and efficiently as possible. (2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. (3) The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose. (4) The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings: (a) the Rules of Court made under this Act; (b) any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court. 12 Rule 8.21 of the Federal Court Rules 2011 (the Rules) applies to amendments of originating applications. It relevantly provides that an applicant may apply to the Court for leave to amend an originating application, among other things, to add or substitute a new claim for relief, or a new foundation in law for a claim for relief, that arises out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the applicant: see r 8.21(1)(g)(i). 13 Rule 16.53 of the Rules applies to applications for leave to amend pleadings which include statements of claim. It provides that, unless r 16.51 applies (which does not in the circumstances of this matter), a party must apply for the leave of the Court to amend a pleading. 14 In Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 (Tamaya Resources) at [125] Gleeson J observed that the Court's powers in r 8.21(1) and r 16.53 are broad and that consideration of whether to grant leave to amend must be undertaken in accordance with the overarching purpose set out in s 37M(1) of the FCA Act. 15 At [127] her Honour noted that the principles articulated by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (Aon) apply in this Court and that the relevant matters that the Court is to consider include: (1) The nature and importance of the amendment to the party applying for it: Aon at [102]; (2) The extent of the delay and the costs associated with the amendment: Aon at [102]; (3) The prejudice that might be assumed to follow from the amendment, and that which is shown: Aon at [5], [100] and [102]; (4) The explanation for any delay in applying for that leave: Aon at [108]; and (5) The parties' choices to date in the litigation and the consequences of those choices: Aon at [112] and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 ("Luck") at [44]; (6) The detriment to other litigants in the Court: Aon at [93], [95] and [114] and Luck at [44]; and (7) Potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification: Aon at [5], [24] and [30]. 16 A Full Court of this Court found that the summary of relevant matters from Aon included in Tamaya at [127] were correctly set out: see Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2 at [125]. 17 In Aon at [111] – [112], the plurality said: An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. … A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate. 18 The weight to be given to the considerations identified in Aon, individually and in combination, and the outcome of the balancing process is likely to vary depending on the facts in each individual case: Tamaya Resources at [128]. 19 An application for leave to amend an originating application pursuant to r 8.21(1)(g)(i) requires the Court to focus on the facts as currently pleaded and to assess whether the new claim for relief arises from the same or substantially the same facts: see Carter, in the matter of Spec FS NSW Pty Ltd (In Liquidation) (2013) 225 FCR 79 at [38] and [40] (per Wigney J); Darcy v Medtel Pty Limited (No 3) [2004] FCA 807 at [30] (per Sackville J) and Tamaya Resources at [136]. CONSIDERATION The application to amend the originating application 20 The applicants seek to add a new prayer for relief by way of a declaration in relation to the status of the New Lease. 21 The respondents submit that the applicants seek the Court's advice on the Contract for Sale which is a standard form contract and that they do so in circumstances where the Contract for Sale has not yet been executed. 22 The proposed amendment to the originating application adds a prayer for relief which arises out of the same facts and circumstances as are currently pleaded. That is, it relies on the New Lease and its terms. It does not require the introduction of any new facts. On that basis alone, the amendment should be allowed. The fact that the Contract for Sale is in standard form and has not yet been executed does not alter my conclusion. The issue arises for determination in the context of the facts before the Court in relation to the Contract for Sale that is annexed to the Call Option. The application to amend the amended statement of claim The nature of the amendment and its importance 23 The nature of the amendment is set out above. The applicants submit that it is important that the amendment be allowed as, in their view, the corollary of the amendment was, in any event, raised by the respondents on their amended defence and was not a new issue to the proceedings. The applicants submit that, assuming a finding by the Court that the Call Option is valid and able to be exercised, the amended defence raises the New Lease as an "existing tenancy" under the Contract for Sale. The applicants suggest that this means that the Court will need to proceed on the basis that it is an "existing tenancy". 24 In terms of their submission that this is not a new issue, the applicants point to the following matters: (1) a letter dated 20 July 2015 from Michael Flaherty, solicitor for the respondents, to Falvey Kay, solicitors for the applicants, prior to commencement of proceedings, in which the respondents stated: With respect to the third last paragraph of your letter: (a) neither Landan Pty Ltd nor Gran-Dia Investments Pty Ltd proposes to terminate the Lease between them or give any undertaking. (b) so as to ensure there is no misunderstanding, and as previously advised, Landan Pty Ltd does not accept that the call option remains open for exercise. The option expired either on 30 June 2013 or when the lease between Landan Pty Ltd and Tameeka (sic) Pty Ltd was terminated. (c) even if the option is otherwise capable of being exercised, the Option Deed and the annexed contract for sale of land provided for the sale of the property "subject to existing tenancies". (emphasis added) (2) the matters pleaded in [8(a)], [31B(d)(iii)], [35B(c)(iii)] and [42A(c)(iii)] which are in the following terms: 8. The respondents admit paragraphs 8 of the ASOC, and say further in respect of the terms of the Call Option Deed: (a) the Contract referred to at clause 2.2 of the Call Option Deed provided that the Property was to be sold subject to existing tenancies and that the sale of the Property was to be GST free because the sale is the supply of a going concern under section 38 – 325; 31B. Further, in respect of paragraphs 30 and 31 of the ASOC: … (d) further or in the alternative, if 2444 has suffered any loss or damage, which is denied, such loss or damage was caused by the independent and intervening act of 2444 accepting the nomination having been informed or where it otherwise knew or ought reasonably to have known that: … (iii) Landan had entered the lease with Gran-Dia referred to at paragraph 17 of the ASOC; … 35B. Further in respect of paragraphs 35 and 35A of the ASOC: (c) further or in the alternative, if 2444 has suffered any loss or damage, which is denied, such loss or damage was caused by of (sic) the independent and intervening act of 2444 accepting the nomination having been informed or where it otherwise knew or ought reasonably to have known that: … (iii) Landan had entered the lease with Gran-Dia referred to at paragraph 17 of the Statement of Claim; 42A. Further in respect of paragraphs 41 and 41A of the ASOC: … (c) further or in the alternative, if 2444 has suffered any loss or damage, which is denied, such loss or damage was caused by of (sic) the independent and intervening act of 2444 accepting the nomination having been informed or where it otherwise knew or ought reasonably to have known that: … (iii) Landan had entered the lease with Gran-Dia referred to at paragraph 17 of the Statement of Claim. (3) the respondents' amended case outline dated 23 April 2016 which was served prior to the commencement of proceedings which states at [19] that: 2444 was not a party to the transactions, did not exist until after the Gran-Dia Lease had been entered and accepted the nomination knowing of the Gran-Dia Lease. Further the nomination did not involve a transfer or assignment of rights. In those circumstances it is the respondents' case that 2444 has no entitlement to sue for breach of contract or unconscionable conduct and none of the respondents could have conspired to injure 2444 in May 2015, when it did not exist. Nor could it be said that any conduct by the respondents caused any damage to 2444; and (4) the preliminary statement of issues which provides that: 1A.1 If the Call Option remained open to be exercised from after about 13 May 2015: (a) the effect of the first applicant's appointment of the second applicant as its nominee (para 27 ASOC and Defence), including: … (ii) the entitlement of the second applicant to bring these proceedings and claim damages where it was not a party to the transactions, did not exist until June 2015, and was aware of the Lease from the first respondent to the second respondent prior to being appointed as a nominee (para 2, 31B, 35B, 42A Defence); … 25 The applicants also rely on [8] of their reply which pleads that, except as expressly set out therein, the applicants join issue with each and every other matter in the defence. 26 The amended defence proceeds on the basis that the applicants were aware of the New Lease. As the respondents submit it was common ground that the New Lease was in place. The parties proceeded on that basis. The paragraphs in the amended defence referred to by the applicants respond to allegations of breach of the Call Option, unconscionable conduct and engaging in the tort of conspiracy by lawful means. Those paragraphs plead the existence of the New lease as a response to, and in the context of, claims by 2444 that it has suffered loss or damage. That is, by those paragraphs, the respondents allege that any loss or damage was caused by the independent and intervening acts of 2444 accepting the nomination in circumstances where it had been informed of or where it otherwise knew, or ought to have known, of the existence of the New Lease. The defences raised do not necessitate a finding that the New Lease is an existing tenancy. Rather, the amended statement of claim and the amended defence proceed on the assumption that it is such a tenancy. 27 Neither party had agitated the status of the New Lease as an issue in the way the applicants now seek to do. If the amendment is allowed it will be raised squarely as an issue for determination. In my opinion the proposed amendment raises a question of construction, within narrow confines, for determination by the Court. Subject to the questions of delay and prejudice, it is in the interests of the parties that all issues be raised for determination. 28 The respondents submit that there is a difficulty with [29A] of the draft further amended statement of claim because it does not identify why the applicants assert that the New Lease is not an existing tenancy within the terms of the Contract for Sale. However, in my opinion the applicants have stated openly that the amendment is limited to a question of construction and that the ambit of the argument is as set out in the Amendment Submission. That being so, the amendment is adequately pleaded and explained. 29 The amendment discloses a reasonable cause of action; it is not one which will have a tendency to cause prejudice, embarrassment or delay in the proceeding: see Research in Motion Ltd v Samsung Electronics Australia Ltd (2009) 176 FCR 66 at [21]-[22] (per Kenny J); Wotton v State of Queensland [2015] FCA 910 at [59] (per Mortimer J). Delay and explanation for the delay 30 There is no doubt that the application for amendment has come very late. It was only foreshadowed on the first day of the hearing and was formally made on the morning of the second day of the hearing. Counsel for the applicants quite candidly said in his opening submissions that the amendment arose because he had only very recently considered the matter in detail in preparation for hearing and had at that time identified the need to amend in the way proposed. The applicants did not rely on any evidence to explain the delay. 31 The applicants submitted that, as the amendment raised a legal point and it relied on the same facts and circumstances that were already before the Court in relation to the New Lease, they did not need to file any further evidence nor did they require any further time to deal with it. 32 In my opinion the delay is significant, particularly when viewed in light of the history of the proceedings. The statement of claim when first filed was the subject of a partially successful application by the respondents to strike out a part of it and thus some focus must have been given to the pleaded case at an early stage: see Tameeka (No 1). Even if such an application had not been brought, the delay is significant. 33 It is not an answer to the delay for the applicants to say that the issue now reflected in the proposed amendment was raised as an issue in the early correspondence referred to at [24] above or that it is an issue raised on the amended defence. As I have already found, the issue is not in my opinion raised in the manner now raised by the amended defence. It is beyond question that the parties have proceeded and prepared the case for hearing on the basis that the New Lease was in place. Prejudice to the respondents 34 Critically, beyond a submission that they may need to file further evidence, the respondents were not able to point to any particular prejudice that they might suffer if the amendment is allowed nor did they rely on any evidence in that regard. This is not a case where the proposed amendment would necessitate the respondents to reconsider the way they put their defence, the nature and extent of the evidence they would need to rely on or the nature of cross examination, to the extent there had already been cross examination. In fact, when asked, counsel for the respondents indicated that, if the amendment was allowed, the respondents would not make any application for an adjournment provided the applicants restricted the ambit of, and their submissions on, the amendment to the matters set out in the Amendment Submission. 35 The only prejudice that counsel for the respondents could point to is the respondents' contention that the vague way in which the amendment is pleaded creates prejudice because it does not identify why the applicants assert that the New Lease is not an existing tenancy. The Amendment Submission states that an existing tenancy equates to a lease on "ordinary commercial terms". However, there is no content or meaning given to that term. As I have already found, the proposed amendment is adequately pleaded and is explained by the Amendment Submission. The applicants have said that they rely on the evidence currently before the Court to demonstrate the commerciality or lack thereof of the terms of the New Lease. In my opinion there is no prejudice to the respondents stemming from the way the amendment is pleaded. Detriment to other litigants and the potential loss of public confidence in the legal system 36 The question of efficiency of and the public confidence in the legal system is an important issue. As was recognised in Aon by French CJ at [5] courts are a publicly funded resource and inefficiencies in the use of that resource by adjourning or vacating trials should be taken into account. His Honour also recognised the importance of maintaining public confidence in the judicial system. 37 The amendment as framed and as limited by the Amendment Submission does not necessitate an adjournment. On that basis there is no detriment to other litigants waiting their turn for hearing dates and, in that respect, allowing the amendment will not impact on the efficiency of the Court. Of itself the amendment may add to the time for hearing. However, if it does it is unlikely to do so in a significant way. The exercise of my discretion 38 In my opinion having regard to the factors set out above and, in particular, that the proposed amendment raises a construction argument which relies on facts already pleaded, does not necessitate the filing of any further evidence or an adjournment of the proceedings, is limited by the matters raised in the Amendment Submission and will bring before the Court all issues for determination, it should be allowed. That is so notwithstanding the significant delay by the applicants in making their application to amend. CONCLUSION 39 I have made orders allowing the amendments. The question of costs occasioned by the amendments is reserved. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic. Associate: Dated: 6 May 2016 SCHEDULE OF PARTIES NSD 969 of 2015 Respondents Fourth Respondent: DIANNE MAREE PRESTON