Court of Appeal Supreme Court New South Wales Medium Neutral Citation: J & E Vella Pty Ltd v Hobson [2020] NSWCA 188 Hearing dates: 23 June 2020 Decision date: 24 August 2020 Before: Bell P at [1]; Basten JA at [1]; White JA at [1] Decision: 1. Grant leave to the applicants to appeal from the orders of 11 November 2019. 2. Order the applicants file a notice of appeal in the form of the draft notice of appeal at Tab 8 of the White Book. 3. Allow the appeal in part. 4. Set aside the order of the primary judge of 11 November 2019 granting leave to the plaintiffs to file an amended statement of claim in a form consistent with the judgment of the primary judge of that date. 5. In lieu thereof, order that leave be granted to the appellants to file an amended statement of claim in a form incorporating the amendments in paras 40A-48 of the statement of claim in annexure A to the interlocutory process filed on 30 October 2019. 6. Order that the respondents pay the appellants' costs of the appeal. 7. Set aside the orders for costs of 11 November 2019 of the primary judge in respect of the costs of the interlocutory process of 30 October 2019. 8. In lieu thereof order that the costs of the interlocutory process filed 30 October 2019 be the appellants' costs in the proceedings. Catchwords: CIVIL PROCEDURE – Pleadings – Application for leave to appeal from refusal of leave to amend statement of claim – Whether primary judge failed to consider the prejudice to the applicants – Where separate proceedings would be antithetical to the just, quick and cheap determination of the real issues between the parties Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 57, 58, 64 Partnership Act 1892 (NSW), Pt 2 Div 3, s 32(c) Supreme Court Act 1970 (NSW), s 63 Cases Cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Beach Petroleum NL v Kennedy & Ors (1999) 48 NSWLR 1 Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 House v The King (1936) 55 CLR 499; [1936] HCA 40 In the matter of Beverage Freight Services Pty Ltd [2019] NSWSC 1684 Macquarie Bank Limited v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 Texts Cited: J D Heydon, Heydon on Contract (Lawbook Co. 2019) Category: Principal judgment Parties: J & E Vella Pty Ltd (First Appellant) Joseph Gregory John Vella (Second Appellant) Brian Charles Hobson (First Respondent) Hynadam Pty Ltd ACN 002 478 828 (Second Respondent) Brett Soper (Third Respondent) Mechita Pty Ltd ACN 063 519 915 (Fourth Respondent) Beverage Freight Services Pty Limited ACN 097 919 769 (Fifth Respondent) Beverage Distribution Australia Pty Limited ACN 160 140 287 (Sixth Respondent) Representation: Counsel: G R Sirtes SC with A Fernon (Appellants) M Ashhurst SC with M Dolenec (Respondent) Solicitors: Yates Beaggi (Applicants) McEvoy Legal (Respondents) File Number(s): 2019/380876 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2019] NSWSC 1684 Date of Decision: 11 November 2019 Before: Black J File Number(s): 2015/157614 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] In 2015 the applicants commenced proceedings in the Equity Division seeking relief for alleged breaches of fiduciary duties and breaches of contract said to arise out of a partnership agreement or alternatively a joint venture agreement. The proceedings were case managed in the Corporations List which led to the interlocutory decision from which the applicant seeks leave to appeal. The parties to the agreement were each in the business of providing freight carrier services which included providing such services to a common client, Cadbury Schweppes. The agreement was said to provide for the setting up of a special purpose vehicle ('BFS') for the purposes of providing freight carrier services which was done in response to a request from Cadbury Schweppes that the parties operate under one corporate structure. The dispute arises from alleged conduct by the respondents which had the effect of diverting the Cadbury Schweppes business to a second special purpose vehicle ('BDA') and the exclusion of the applicants from the profits of the Cadbury Schweppes contract. In August 2017, the applicants also became aware from affidavits served in the course of the proceedings that BDA had entered into a contract with Toll, which had in 2015 interposed BDA and Cadbury Schweppes (now Asahi) after a tendering process to provide freight carrier services. On 21 August 2019 the applicants served a notice to produce which sought a range of documents relating BDA's engagement by Toll pursuant to its sub-contract. On 25 October 2019 the primary judge held that there was no pleaded issue in respect of any loss relating to Asahi or Toll and ordered that the notice to produce be set aside. In response the applicants filed an interlocutory process seeking leave to amend the statement of claim. Leave to amend was refused with respect to increasing the scope of the claim to include lost benefits arising from the Toll sub-contract. It is this interlocutory decision from which the applicants' appeal. The Court of Appeal (Bell P, Basten and White JJA) unanimously granted leave to appeal and partially allowed the appeal, holding: The primary judge did not address the possible prejudice to the applicants arising from the refusal of leave to amend which was a House v The King error: [26], [28], [34]. The applicants were within time to commence a separate claim with respect to the matters which the applicants were refused leave to plead, but an issue could arise whether such proceedings are liable to be defeated by a cause of action estoppel or an estoppel based on the principle discussed in Port of Melbourne Authority v Anshun Pty Ltd: [26]-[30]. If such proceedings were not barred it would nevertheless be antithetical to the just, quick and cheap determination of the real issues between the parties and contrary to the requirements of s 63 of the Supreme Court Act 1970 (NSW): [31]. Although the primary judge held that delay from August 2017 to October 2019 in seeking leave to amend was not met with a satisfactory explanation it is apparent that the delay was due to the applicants' misapprehension as to the scope of their pleadings: [37]-[40]. Nevertheless, there was no proper basis for that misapprehension so far as it related to a claim for damages or equitable compensation as it is necessary to establish a causal relationship between the relief sought and the respondents' alleged breach of their contractual or fiduciary duty: [40]. Leave to amend to plead such a claim was rightly refused in light of the substantial new factual issues that would arise: [41]. However, the claim for breach of fiduciary duty would give rise to a prima facie case for an account of profits which would not raise the same substantial new factual issue: [42], [43]. Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43; O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 276-277; Beach Petroleum NL v Kennedy & Ors (1999) 48 NSWLR 1 at 90 [432], 93 [444]: applied. The applicants' grounds of appeal which would have required the Court to assess the primary judge's conclusions concerning timetabling issues or the expansion of the evidence do not admit of House v The King error: [44]. Judgment 1. THE COURT: The applicants (J & E Vella Pty Ltd ("J & E Vella") and Mr Joseph Vella) seek leave to appeal from orders of the primary judge (Black J) of 11 November 2019 (In the matter of Beverage Freight Services Pty Ltd [2019] NSWSC 1684). The primary judge refused the applicants leave to file an amended statement of claim, save in limited respects. 2. The proceedings below were commenced by an originating process filed on 27 May 2015. By a statement of claim filed on 19 June 2015 the applicants allege that in about August 2001 they and the first to fourth defendants (Mr Brian Hobson, Hynadam Pty Ltd, Mr Brett Soper and Mechita Pty Ltd) and a Mr Stephen Phillips and Evermay Pty Ltd, entered into a partnership agreement, or alternatively a joint venture agreement, with a view to making a profit through the business of providing freight services to Mondelez Australia Pty Ltd (formerly Cadbury Schweppes Pty Ltd ("Cadbury Schweppes")) (para 13). 3. In the particulars of that allegation the applicants state that the agreement arose from a conversation between Mr Michael Vella, Mr Joseph Vella, Mr Hobson, Mr Soper and Mr Phillips in about 2001 in response to a request from Cadbury Schweppes that they operate under one corporate structure for the purpose of providing services to it. The particulars state that prior to that request J & E Vella and/or Mr Joseph Vella, Hynadam and/or Mr Hobson, Mechita and/or Mr Soper, and Evermay and/or Mr Phillips, each supplied freight services to Cadbury Schweppes on an individual basis. 4. The particulars state that the alleged partnership agreement or joint venture agreement arose from a business arrangement that the parties jointly and equally supply freight services to Cadbury Schweppes through one corporate entity for their joint benefit, or was implied from Pt 2 Div 3 of the Partnership Act 1892 (NSW), or was implied from custom. 5. The applicants allege that it was an oral term of the alleged agreement that a special purpose corporate vehicle, which became the fifth defendant, Beverage Freight Services Pty Ltd ("BFS") would be and was incorporated to conduct that business. Equal shareholdings in BFS were issued to each of the "partners", J & E Vella, Evermay, Hynadam and Mechita. 6. The terms of the alleged partnership or joint venture agreement are said to include terms as to: * the keeping of accounts; * the appointment of four specified directors, each being associated with one of the shareholders; * that all major or policy decisions would be made jointly and consensually by all the directors; * the allocation of particular responsibilities to Messrs Hobson and Soper; * the allocation of work on a rotating or equal basis to ensure that the net income of BFS earned by each shareholder (or partner) would be approximately equal and BFS' net profits would be divided equally; and * that each shareholder would supply its own trucks and employ its own drivers, and be responsible for ensuring that the trucks complied with Cadbury Schweppes' requirements (para 19). 1. The applicants allege that in about August 2012 the first to fourth defendants (Mr Soper, Mr Hobson, Mechita and Hynadam) incorporated the sixth defendant, Beverage Distribution Australia Pty Ltd ("BDA"), of which Mechita and Hynadam were shareholders and Messrs Soper and Hobson were directors, in contemplation that it would enter into a contract to supply freight services to Schweppes Australia Pty Ltd (which was said to have become the owner of the Cadbury Schweppes business) in place of BFS (paras 37 and 38). The applicants plead that in or about September 2012 Soper and Hobson caused BFS not to renew or renegotiate its contract with Schweppes Australia and for BDA to contract in its place (paras 39 and 40). 2. The applicants allege that this conduct was a breach of fiduciary and other duties owed by Soper and Hobson to the applicants. They allege that BDA was knowingly concerned in the breach of fiduciary duties and induced Hobson and Soper to breach the alleged partnership or joint venture agreement. 3. The remedies sought include an account of profits, damages for breach of contract, equitable compensation and a declaration that Mr Soper, Mr Hobson, Mechita, Hynadam and BDA hold any benefits they "unduly received" by reason of breaches of fiduciary duty on constructive trust for the plaintiffs. 4. The defence denies that the parties entered into a partnership agreement or a joint venture agreement. But the defendants accept that the parties agreed to incorporate a special purpose company for the purposes of providing freight carrier services to Cadbury Schweppes, that each of J & E Vella, Evermay, Hynadam and Mechita would be equal shareholders, and that all freight carrier work from Cadbury Schweppes would be allocated to the special purpose vehicle. The defendants allege that a Mr Sobara would be responsible for allocating delivery jobs to each corporate shareholder. The defendants plead that on allocation of a job, the individual shareholder would perform the work and then issue an invoice to the special purpose vehicle. The company would then issue an invoice to Cadbury Schweppes. It would keep proper books and records and the corporate shareholders would receive approximately an equal share of transport services work provided that representatives from each shareholder turned up for work (Defence para (13A)). 5. It is undoubtedly arguable that the arrangements between the shareholders could be called a quasi-partnership where the directors of the special purpose vehicle owe fiduciary duties not only to the company, but to the shareholders, and where the shareholders owe fiduciary duties to each other (Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 at [108]-[113]). 6. The defendants plead that in April 2012 Cadbury Schweppes requested BFS to ensure that all vehicles delivering Cadbury Schweppes products were speed-limited, and that J & E Vella failed to speed-limit its vehicles. They plead that in August 2012 Cadbury Schweppes directed BFS that particular J & E Vella vehicles were not to be used to deliver Cadbury Schweppes products and that on or about 28 August 2012 each of Messrs Hobson, Joseph Vella, Michael Vella and Soper agreed that BFS should be wound up and cease trading, and that its business then ceased, with each of the then shareholders expressing an intention no longer to be bound by the shareholders agreement. 7. The defence was filed on 20 August 2015. The plaintiffs' solicitor, Mr Farshad Amirbeaggi, deposed in his affidavit of 31 October 2019 that on 4 and 8 December 2015 the plaintiffs served affidavits of Mr Michael Vella and Mr Peter Donkin. This was evidently the plaintiffs' lay evidence in chief. Mr Amirbeaggi deposed that the defendants served lay evidence in chief of five witnesses in June 2016 and after several extensions of the timetable, the plaintiffs served lay evidence in reply between 30 January and 30 March 2017. He deposed that further lay evidence was served by the defendants between July and October 2017. 8. In his affidavit of 14 August 2017 Mr Brett Soper deposed that in late 2013 a company called Asahi bought "Schweppes". It is unclear whether the purchase was of the business or the shares in Schweppes Australia Pty Ltd. Mr Soper deposed: "In about 2014, Asahi put its local and regional water and soft drink work out for tender. BDA put in a tender but it was unsuccessful. As far as I know, Toll won the tender for the soft drink and the water. The soft drink work was taken over by Toll in about 2014 and since that time BDA has dealt with Toll and been paid by Toll for doing soft drink work. The water work was taken over by Toll in about 2016 and since then has dealt with Toll and been paid by Toll for that work. BDA has no written contract with Toll and, as far as I know, no undertaking or arrangement with Toll that guarantees BDA will continue to do any work for Toll. BDA charges Toll the same rates as what it used to charge Schweppes/Asahi." 1. On appeal, we were informed by counsel for the respondents that Mr Soper was in error in saying that BDA had no written contract with Toll. 2. In his affidavit of 21 August 2017 Mr Hobson deposed that in or about 2015 Asahi put the Sydney soft drink bulk work out for tender, that the tender process took about a year, BDA was an unsuccessful tenderer and Toll won the tender. He deposed that BDA continued to do that work for Toll at the same rates it was paid by Asahi. He also deposed that on or about 20 September 2015 BDA entered into a written agreement with Toll to provide it with delivery services on a sub-contract basis for five years from 21 September 2015 to 20 September 2020, subject to the "cessation of Toll's contract to provide services to Asahi and subject to a termination on 14 days' notice provision". He exhibited a copy of that sub-contract. 3. Thus, by no later than late August 2017 the plaintiffs knew that BDA's previous contracting arrangements with Cadbury Schweppes or Schweppes Australia (Asahi) had been replaced by a sub-contracting arrangement with Toll. 4. It appears that during the remainder of 2017, and during 2018 and part of 2019, the preparation of the case for hearing progressed only to the extent that the plaintiffs sought and eventually obtained discovery of documents required for the preparation of an expert's report. Mr Amirbeaggi deposed that the documents were not made available for inspection by their expert, a Mr Gwynne, until 12 July 2018 and that Mr Gwynne's review of the documents did not commence until 9 August 2018. Mr Gwynne's report, that originally had been required to be served by 6 December 2017, was not served until 4 January 2019. The plaintiffs attributed the primary responsibility for the delay to delay by the defendants in producing documents for inspection. 5. The plaintiffs served a notice to produce on the defendants on 24 January 2019, the validity of which was upheld by the primary judge. Further documents were produced by the defendants on 27 March 2019 and delivered to Mr Gwynne, the plaintiffs' expert. A supplementary report was served by the plaintiffs on 9 September 2019. 6. Amongst other things, Mr Gwynne's report summarised income received by BDA in the four financial years from 30 June 2013 to 30 June 2017. He expressed opinions as to what income J & E Vella could have expected to receive but for its alleged exclusion from providing transport services to Cadbury Schweppes via BDA. He then calculated the loss claimed to have been suffered by J & E Vella, taking into account what were estimated variable costs. In making that calculation of loss, Mr Gwynne excluded income that he identified BDA as having received from Toll in the 2017 financial year. His calculation of loss did not include loss J & E Vella might have claimed it suffered as a result of being allegedly excluded from the Toll sub-contract. 7. On 21 August 2019 the plaintiffs served a (third) notice to produce documents, including a range of documents relating to BDA's engagement by Toll pursuant to its sub-contract. The notice sought production of documents evidencing the payments made by Toll or its related entities to BDA under the sub-contractor agreement. By an affidavit dated 14 October 2019 Mr Amirbeaggi deposed that the plaintiffs wished to investigate the extent to which and the terms upon which the defendants or any party associated with them received freight and carriage work from either Asahi or Toll Transport. 8. On 25 October 2019 the primary judge held that there was no pleaded issue in respect of any loss relating to Asahi or Toll and that a claim for loss of an opportunity to sub-contract with Toll was different in substance from the claim for a loss of relationship with Cadbury Schweppes which was the subject of the pleading. The primary judge ordered that the notice to produce be set aside. 9. Following that ruling the plaintiffs filed an interlocutory process on 30 October 2019 seeking leave to amend the statement of claim. Some amendments were allowed. The amendments that were disallowed and which are the subject of the application for leave to appeal were as follows with the amendments shown in underlining: "40A. Further or in the alternative, in or about September 2015, BDA, through Brett Soper and Brian Hobson, entered into a contract with Toll Transport Pty Ltd ('Toll') for the purpose of providing transport supply services in respect of Schweppes Australia beverages and thereafter continued to provide such services to Toll, being services that were previously supplied directly to Schweppes Australia. ... 43. By entering into a contract to supply freight services to Schweppes Australia and/or Toll in place of BFS, BDA was knowingly concerned in the breach by Brian Hobson and Brett Soper of each of their Fiduciary Duties and Management Duties owed to the Plaintiffs and/or their Fiduciary Duties owed to BFS, as pleaded in paragraph 42 above. Particulars As BDA's directors were Brian Hobson and Brett Soper, their knowledge in causing BDA and not BFS to enter into the contract with Cadbury Schweppes Schweppes Australia and/or Toll was within the knowledge of BDA. 44. By entering into a contract to supply freight services to Cadbury Schweppes Schweppes Australia and/or Toll in place of BFS, BDA induced Brian Hobson and Brett Soper to breach the Partnership Agreement, as pleaded in paragraph 42 above. ... 47. By causing BDA to be incorporated in contemplation of entering into a freight services contract with Cadbury Schweppes Schweppes Australia and/or Toll in place of BFS each of Hynadam and Mechita breached the Partnership Agreement and induced Brian Hobson and Brett Soper to breach the Partnership Agreement, as pleaded in paragraph 42 above. Particulars The terms of the Partnership Agreement pleaded at paragraphs 19 (c) to (e) and (h) to (p). 48. By reason of each of the matters pleaded in paragraphs 42 to 47 above, Brett Soper, Brian Hobson, Hynadam, Mechita and BDA are: a. bound to account to the Plaintiffs and/or BFS for the improper advantage which they obtained; and b. hold on constructive trust the benefits unduly received by reason of the breach. Particulars The benefits received directly or indirectly through the contract to supply freight services entered into by BDA with Cadbury Schweppes Schweppes Australia and/or Toll, including all profits, dividends and other benefits received by Hyndadam, Mechita, Brett Soper and Brian Hobson by reason of their position as shareholders or officers of their relevant companies. 49. By reason of the breach of fiduciary relationship and the breach of contract described in paragraphs 42 to 47 herein, the Plaintiffs and BFS have suffered and continue to suffer loss and damage. Particulars a. The Plaintiffs did not receive the equivalent of their third share in the net income of the business of BFS for the years from 2011 – 2012; b. BFS expended money on the Arndell Park Lease, which was not to its benefit and thereby reduced the net profits available to be distributed to the Corporate Partners; c. BFS expended money on the maintenance of the vehicles of Hynadam and Mechita, which was not to its benefit and thereby reduced the net profits available to be distributed to the Corporate Partners; d. The Plaintiffs have lost the benefit or the opportunity to obtain the benefit of the one-third share of the ongoing contractual relations with Cadbury Schweppes Schweppes Australia and/or Toll since September 2012; e. BFS has lost the benefit of the ongoing contractual relationships with Cadbury Schweppes Schweppes Australia and/or Toll since September 2012; and f. Further particulars will be given after discovery." 1. In rejecting the application for leave to amend the primary judge said: * the proposed pleading was defective in that it did not plead material facts to explain how the entry by BDA into a subcontract with Toll gave rise to claims in respect of the pleaded partnership or the other causes of action alleged. Counsel had sought to explain that the subcontracted business of BDA to Toll was identical, or substantially identical, or somewhat alike, to the previous business of BFS, but the material facts that would be relied upon to establish that were not pleaded (J[4]); * there was no satisfactory explanation of the applicants' delay in seeking leave to amend (J[5]); * to allow the amendment would require further evidence to be served in respect of the arrangements with Toll and the amendments would inevitably require the production of further documents (J[6]); * the amendment would increase the scope and cost of expert evidence (J[6]); * memories of events relating to the entry into the Toll subcontract would have deteriorated over the several years' delay in the raising of that issue (J[6] and [8]); * sections 56-58 and 64 of the Civil Procedure Act 2005 (NSW) and the reasons of the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 indicated that the delay in the applicants' seeking the amendment and the costs that the amendment would occasion were such that the amendment should be refused (J[9]-[10]); * the litigation imposed strain on the defendants, some of whom were natural persons and consideration must be given to the interests also of other parties with proceedings before the Court (J[11]). 1. The primary judge concluded: "13 It seems to me inevitable that the Plaintiffs' proposed amendment to introduce claims in respect of the Toll subcontract would bring about the need for further document production, and that the Plaintiffs would ultimately need to seek the wider range of documents that they sought not long ago, rather than the narrower range for which Mr Sirtes has today contended, because it would be necessary to do so in order to properly advance their case. Second, it seems to me that the proposed amendments are here sought far too late, given the lapse of time since the subcontract with Toll was entered into, the time since it was addressed in the Defendants' evidence, the time which this case has already taken to reach this point, and the likely delay that would arise from further document production, further lay evidence, and an expansion of the scope of the Defendants' expert evidence that it would bring about. The delay that would then result would in turn lead to extra cost, including additional costs likely to be associated with a further delayed and extended hearing. 14 These matters also seem to me to emphasise that the Plaintiffs' delay would here cause difficulties which would not have arisen had this amendment been made, for example, promptly in 2015 when the subcontract with Toll was entered into or even, less promptly, in 2017 when it was specifically and clearly identified in the Defendants' evidence." 1. The application for leave to appeal and the appeal, if leave be granted, were heard concurrently. There was no issue that the applicants could not succeed on their appeal (if leave be given) unless they could demonstrate a House v The King (1936) 55 CLR 499; [1936] HCA 40 error. No submissions were addressed to the issue whether, if the refusal of leave to amend were upheld, the applicants would be precluded from bringing separate proceedings against the respondents for the same relief, either because determination of the currently pleaded claims would create a res judicata or on the principles of Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 (as to which see Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543). But the applicants did submit that the primary judge's discretion miscarried for reasons that included his Honour's not considering the prejudice that would be occasioned to the applicants if the amendments were not allowed, as compared to the prejudice the respondents might suffer if they were allowed. 2. The applicants also submitted that the primary judge mistook the facts or failed to take account of relevant considerations or acted on a wrong principle in holding that there was no adequate explanation for the delay in seeking the amendments, that the amendments would require further lay and expert evidence to be adduced and the production of more documents, and in assuming that the proceedings would otherwise be ready to take a hearing date. The applicants also submitted that the respondents were either primarily responsible, or at least equally responsible, for the delays to date in bringing the proceedings to a hearing. 3. The applicants are correct that the primary judge did not address the possible prejudice to the applicants arising from the refusal of leave to amend. 4. The applicants are within time to commence separate proceedings against the respondents claiming damages, equitable compensation or an account of profits. They would face the prospect that in defence to such a proceeding, the respondents might allege that they are estopped from pursuing such causes of action on the principles in Port of Melbourne Authority v Anshun Pty Ltd. They might also be faced with the contention that if they succeed in the present proceedings in establishing a claim for damages, equitable compensation or an account of profits in respect of BDA's dealings with Cadbury Schweppes or Schweppes Australia, that any claim for further damages, equitable compensation or an account of profits, was precluded by reason of a cause of action estoppel. 5. An analogous issue arose in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd. All members of the Court were satisfied that no Anshun estoppel would arise. Powell JA and Clarke JA differed on the question whether a cause of action estoppel could arise. Priestley JA agreed with Clarke JA's analysis that no such cause of action estoppel would arise. Nonetheless, as Clarke JA said (at 555): "The alternative possibility was that Macquarie would be allowed to pursue those claims in a separate action. In that event, the refusal to grant the amendment sought would neither have advanced court efficiency nor saved time and expense to the parties. More importantly, it would not have advanced Westgarths at all. That is because the court would be faced with a total hearing of the claims and Westgarths would be obliged, in separate proceedings, to defend those claims. The result would, for all practical purposes, be identical with the result which would have flowed from a decision to allow the amendment and separate for later hearing the new issues raised by Macquarie. The consequence of his Honour's failure to examine the consequences of the refusal to allow the amendment in some detail was that the real impact of the taking of that course was never demonstrated." 1. The respondents submit that otherwise than in the most general terms, the applicants did not address before the primary judge the prejudice that they would suffer if the amendments were refused. The applicants submitted before the primary judge that the proposed amendments would align the allegations with the true facts and were necessary to ensure that the real issues were litigated. But they did not specifically address the primary judge's attention to whether the consequence of refusal of the amendments might be that the applicants would be precluded in later proceedings from raising the same issues, or, if they were not so precluded, whether it would be antithetical to the just, quick and cheap determination of the real issues between the parties, and contrary to the requirements of s 63 of the Supreme Court Act 1970, (NSW) that claims for relief in respect of the Toll sub-contract be decided in separate proceedings. 2. The position of the applicants before the primary judge, and on appeal, was that until the primary judge's ruling on 25 October 2019 (at [22] above) they had proceeded on the basis that claims for monetary relief arising from the Toll subcontract were encompassed by the pleadings as they stood. Although the point was not elaborated, the submission would have to be understood as being that the applicants would not, or at least might not, be able to maintain their claims for monetary relief in respect of the Toll subcontract if the amendments were refused. 3. That issue was not addressed in the primary judge's reasons, which were delivered ex tempore immediately after the submissions were completed. 4. Had the issue been addressed, then it would have been seen that either the applicants would suffer substantial prejudice if the amendments were disallowed but they succeeded on their primary claim at trial, or, that it would be necessary for the applicants to bring separate proceedings which would occasion additional delay and costs. 5. On this ground, the primary judge's discretionary decision whether to allow the amendment proposed should be reviewed. 6. We turn to the other grounds relied upon. 7. At one point in his reasons the primary judge said that the plaintiffs had not explained why it was only in 2019 that the plaintiffs were seeking to amend their claim to bring a case in respect of events said to have occurred in September 2015 in respect of the subcontract with Toll (J[5]). That was an error. The applicants had provided such an explanation. The explanation was that until the respondents' evidence was filed in August 2017, they were not aware of that subcontract. 8. However, the primary judge's reasons did not depend on that conclusion. Rather, the primary judge said that in any event the delay from August 2017 to 2019 should preclude the application to amend. 9. A stronger ground of review is that the applicants did provide an explanation that, prima facie, was satisfactory, as to why it was only in 2019 that the amendment was sought. The explanation was that it was not until the primary judge's reasons of 25 October 2019 that the applicants thought that they would be precluded by their pleading from relying upon the events concerning the Toll subcontract. 10. In so far as the applicants were to rely upon the Toll subcontract as giving rise to a claim for damages or equitable compensation, there would not be a proper basis for that expectation. The applicants would need to plead and establish a causal relationship between the damages or equitable compensation sought and the respondents' alleged breach of their contractual or fiduciary duty (J D Heydon, Heydon on Contract (Lawbook Co. 2019) at [26.140]; O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 276-277; Beach Petroleum NL v Kennedy & Ors (1999) 48 NSWLR 1 at 90, [432], 93 [444]). In other words, they would need to establish that but for the alleged breach the applicants would have earned profits from the Toll sub-contract. 11. Even the amended pleading does not plead the material facts that would need to be proved to establish such a causal relationship. That issue, if pleaded, would raise a substantial new factual issue, in addition to the quantification of damages: namely, would Toll have awarded the sub-contract to a company in which the applicants were shareholders, and where the applicants would be responsible for performing a share of the work? The primary judge was correct in refusing the amendments proposed to para 49 of the statement of claim. 12. But, as the applicants submitted, if the respondents breached their alleged fiduciary duties, the applicants would prima facie be entitled to an account of profits and there is no reason, on the face of things, why that account of profits should be restricted to profits derived only from the contracts with Cadbury Schweppes or Schweppes Australia, and not include the profits said to have been derived from the subcontract with Toll, at least if the breach were dishonest (Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 at [9], [88]). The amendments proposed to paras 40A-48 of the statement of claim sufficiently raised that claim. 13. It is true that the amendment would raise a new issue of quantification of profits. But it would not necessarily follow from the grant of leave to amend that all of the issues that would arise on the pleadings, including the quantification of claims for damages, equitable compensation, or an account of profits, should be resolved in one hearing. It will be a matter for the primary judge and the parties to consider whether questions of liability should be determined separately. 14. The other grounds relied upon by the applicants require an assessment of whether the amendments proposed would or would not require further lay or expert evidence, or the production of documents, or whether the matter was otherwise ready to take a hearing date. The primary judge was in a far better position than is this Court to make an assessment of those matters. If they were the only grounds for the application, we would not interfere with the primary judge's exercise of his discretion. 15. Nonetheless, for the reasons above, we propose that leave to appeal be granted and that the appeal be allowed. In lieu thereof, the appellants should be granted leave to file an amended statement of claim in the form of annexure A to the interlocutory process filed on 30 October 2019, save for the amendment proposed to para 49. 16. There remain issues with the pleadings which the parties should consider to ensure that the real issues are addressed at trial. The statement of claim pleads a partnership agreement, or alternatively a joint venture agreement, but is silent as to the alleged term of that agreement. 17. There may be a substantial question as to whether what is alleged is truly a partnership, that is, a relationship between persons who carry on business in common with a view of profit, or what has been called a quasi-partnership. However that might be, there is clearly an issue as to what was the term of the partnership or quasi-partnership. The statement of claim assumes, although it does not assert, that the term was indefinite. The defence alleges, in substance, an agreement for the dissolution of the partnership or quasi-partnership. 18. The pleadings do not address the issue, which would arise at trial, whether the partnership, or quasi-partnership, if for an indefinite term, would in any event be dissolved by notice of some partners' intention to dissolve the partnership (Partnership Act 1892 (NSW) s 32(c)). 19. However these matters do not affect the decision on whether leave to amend should have been granted. 20. For these reasons we make the following orders: 1. Grant leave to the applicants to appeal from the orders of 11 November 2019. 2. Order the applicants file a notice of appeal in the form of the draft notice of appeal at Tab 8 of the White Book. 3. Allow the appeal in part. 4. Set aside the order of the primary judge of 11 November 2019 granting leave to the plaintiffs to file an amended statement of claim in a form consistent with the judgment of the primary judge of that date. 5. In lieu thereof, order that leave be granted to the appellants to file an amended statement of claim in a form incorporating the amendments in paras 40A-48 of the statement of claim in annexure A to the interlocutory process filed on 30 October 2019. 6. Order that the respondents pay the appellants' costs of the appeal. 7. Set aside the orders for costs of 11 November 2019 of the primary judge in respect of the costs of the interlocutory process of 30 October 2019. 8. In lieu thereof order that the costs of the interlocutory process filed 30 October 2019 be the appellants' costs in the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 August 2020