New South Wales Supreme Court CITATION : Yusen Daly Smith International Pty Ltd v Smith [2000] NSWSC 498 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2400/97 HEARING DATE(S) : 10 August, 7 & 10 September 1999 JUDGMENT DATE : 8 June 2000 Yusen Daly Smith International Pty Ltd (In Liq) (P1) PARTIES : Richard Graham Kent Binet (P2) Thomas Edwin Curtis Smith (D1) John D Green (D2) JUDGMENT OF : Hamilton J A W Street SC & Sylvia Emmett (P1 & 2) COUNSEL : R Conti QC & R Cameron (D1) No appearance (D2) Blake Dawson Waldron (P1 & 2) SOLICITORS : McLaughlin & Riordan (D1) No representation (D2) CATCHWORDS : PROCEDURE [101] - Supreme Court procedure - Practice under Supreme Court Rules - Amendment - Application to amend cross claim after judgment on basis that amendment would accord with case as conducted at trial - Whether prejudice incurable by costs order. LEGISLATION CITED : Supreme Court Rules Part 20 r 1(2) Hatzinikolau v Snape (1989) 97 FLR 86 CASES CITED : The State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 Yusen Daly Smith International Pty Ltd v Smith [1999] NSWSC 450 DECISION : Application to amend refused. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 8 JUNE 2000 2400/97 YUSEN DALY SMITH INTERNATIONAL PTY LIMITED (In Liquidation) & ANOR v THOMAS EDWIN CURTIS SMITH & ANOR JUDGMENT His Honour: 1 Some matters were left outstanding by my earlier judgment in this matter: Yusen Daly Smith International Pty Ltd v Smith [1999] NSWSC 450 ("my judgment"); terms defined in my judgment are used in the same sense in these reasons. Further submissions, both oral and written, have been received by me concerning these matters. Four matters remain outstanding: (1) Whether a claim may be made to the $27,787.88 under the 1996 assignment. Ancillary to this is the question of whether and in what form an amended cross claim ought be allowed to be relied on. (2) The ambit of the declaration to be made in relation to guarantee fees paid by DSC Management. (3) Flowing from the result under (1), whether the appointment of a receiver was justified. (4) Costs. I propose in this judgment to deal with (1) and (2). That means that (3) and (4) will remain for determination after this judgment has been delivered. The claim for $27,787.88 under the 1996 assignment 2 The first of these matters, relating to the $27,787.88 is the most substantial. The portions of my judgment which deal specifically with this claim are [21] and [25] to [28]. In my judgment I deal finally with the question of the claim for the $27,787.88 as made upon the basis of subrogation or under s 3 of the Law Reform (Miscellaneous Provisions) Act 1965. My conclusion was that, as made upon those bases, Smith's claim failed. In short the reason for that was that, although that sum as costs was originally owed by YDSI to the ANZ Bank and secured under the mortgage debenture and although Smith was the person who ultimately paid the corresponding sum to the ANZ Bank, it was not established by Smith that he had made that payment in the guise of guarantor. Whilst that was the only finding which I found necessary to make, I did indicate that if it were necessary for me to make a finding on the balance of probabilities on the evidence before me as to the guise in which the payment was made, I should find that it was paid by Smith as consideration for the 1996 assignment. I commented in my judgment that the evidence on this subject matter was exiguous, in the sense that there was no evidence available of the negotiations which took place with the ANZ Bank leading to the payment, as opposed to wordy correspondence afterwards between the parties to this litigation as to what the nature of the payment had been. Equally there was no evidence as to what the ANZ Bank had done in its books or in any way to show how it had treated the $27,787.88 upon receipt by it. This left entirely at large the question of whether or not, as at the moment the assignment took effect, there was still recorded in the books of the ANZ Bank a debt of $27,787.88 owed by YDSI. 3 What remained unclear to me, as I enunciated in [28], was whether the claim for the $27,787.88 had been made, in the pleadings and in argument at the trial, under the 1996 assignment, in which case different considerations would apply. At least one of the reasons why the considerations would be different was that the 1996 assignment did not exist at the time the Court of Appeal originally dealt with the matter. Although it did exist by the time Meagher JA dealt on motion with the ambit of the Court of Appeal's orders, his Honour was, of course, dealing with the same factual situation dealt with in the original judgment, and the 1996 assignment was not in any way before his Honour. This would be material, at the very least, to the various defences of estoppel arising from the earlier judgment. 4 The relevant history of the pleadings is as follows. There was propounded during the trial an amended cross claim by Smith. Leave has never yet been given to rely on the amended cross claim, although the trial was conducted on the basis that this would occur. I adverted in my judgment to the paragraphs of that proposed amended cross claim relating to the $27,787.88 as simplistic. Those paragraphs are as follows: "47 On 24 December, 1996, by Deed of Assignment made on that day, ANZ assigned absolutely all its right title and interest in and under the aforesaid Mortgage Debenture to Smith. 48 Immediately before the assignment YDSI owed ANZ an amount of $27,787.88 secured under the Charge. 49 Smith paid that amount to ANZ on 24 December, 1996. 50 By reason of such payment Smith became a secured creditor of YDSI by subrogation entitled to the benefit of the Mortgage Debenture and to ANZ's rights and remedies thereunder for recovery of the said amount and interest loss or damage." One of the problems that I perceived when I characterised the paragraphs as simplistic is that, although the 1996 assignment is pleaded in par 47, when in par 50 it is alleged that "Smith became a secured creditor of YDSI by subrogation", that is alleged to be solely "(b)y reason of such payment", ie, the payment by Smith to the ANZ Bank on 24 December 1996 of the sum of $27,787.88. No claim is made that the entitlement to the ANZ Bank's rights to the $27,787.88 arises by virtue of the assignment by instrument, as opposed to an assignment by law arising from subrogation. The question as to which I felt uncertainty at the time of my delivering my judgment, by reason of the very complex and convoluted argument in this case, was whether the case had in reality been conducted upon the basis of a claim under the assignment by instrument, so that Smith might argue either that he was entitled to maintain such a claim under the pleading as then propounded (and set out above), or whether, late as it might be for an amendment, a further amended form of claim relating to the $27,787.88 might be allowed on the special basis that it corresponded with the way in which the case had actually been conducted: see Hatzinikolau v Snape (1989) 97 FLR 86 at 88. 5 Since my judgment was delivered two further amendments to the amended cross claim have been propounded. Before the further hearing before me a document was brought forward which included a proposed paragraph 50A in the following terms: "50A Alternatively, because of the said assignment and payment of $27,787.88, Smith has the rights that ANZ had under the said Mortgage Debenture concerning that sum and ANZ's remedies for recovering the same with interest, loss and damage." 6 At the end of that oral argument, the parties were invited to lodge supplementary written submissions, if desired. With the cross claimant's written submissions there came a further proposed amendment in the form of a paragraph 50A in the following terms: "50A Alternatively:- (a) the said amount of $ 27,787.88 was the sum of a liability incurred by ANZ on account or arising out of the failure of YDSI to have paid on demand or at all to BOT an amount of $1,325 million the payment of which was guaranteed by ANZ to BOT on behalf of YDSI pursuant to the arrangements referred to in paragraphs 2 and 17 herein. Particulars It is alleged the amount was charged to ANZ by ANZ's own solicitor as legal costs incurred in representing ANZ as a defendant in proceedings 1913 of 1995; (b) by reason thereof the said ANZ liability was a secured liability of YDSI owed to ANZ under the aforesaid Mortgage Debenture that became payable by YDSI when the ANZ liability was paid; (c) on 24 December 1996 , Smith paid the said sum to ANZ in consideration for the simultaneous exchange from ANZ on that date of an absolute assignment to Smith of the benefit of ANZ's right title and interest under the said Mortgage Debenture. Particulars It is alleged that on 23.12.96 , Smith caused a bank cheque in favour of ANZ to be purchased from ANZ and that the Bank Cheque was paid over to ANZ's solicitors on 24.12.96 . (d) in the premises the payment was made by Smith to ANZ as an assignee under the said assignment. Particulars It is alleged that the Bank Cheque was negotiated on 24.12.96 after the assignment was delivered to Smith. (e) by reason either of the said assignment or the said payment, or both, YDSI became liable for and was obliged to pay the said sum to Smith and Smith became entitled to enforce and recover payment of the said sum with interest and costs of enforcement from YDSI as a secured creditor under the said Mortgage Debenture." 7 As to the way that the claim for $27,787.88 was conducted at the original trial before me, in submissions counsel for Smith have given me what they say are compendious details of the references to this matter by counsel for both Smith and YDSI, both during the course of evidence and in final submissions. Those references, which should be recorded, were to what was said by Mr Neil, of Queen's Counsel for Smith, at pp 21, 33, 86, 88 and 92 and what was said by Mr Street, of Senior Counsel for YDSI, at pp 5, 10, 12, 64 and 69 of the transcript. However, those references leave me in the same situation as I was in upon my own recollection of the matter and reading of the transcript, namely, that no clear statement was made at any time that the claim was being made under the instrument of assignment as opposed to the assignment by law by way of subrogation. As has already been indicated above, the way in which the case was conducted was that there was a contest as to whether the basis upon which the $27,787.88 had been paid was by way of payment of YDSI's costs made in the guise of guarantor, or whether it was a sum paid as consideration for the assignment. Since the payment was undoubtedly made at about the time of and in connexion with the assignment, it is not surprising that the assignment itself was referred to in the various statements made by counsel, but, in my view, none of them amounted to a clear statement by counsel for Smith that the claim was being made under the instrument, much less any acknowledgment by counsel for YDSI that they understood the claim to be being made in that way. Furthermore, the proposed pleading itself, as it stood during the trial and at the time of my judgment, and as it still stands pending the determination of the present amendment application, does not in my view, bearing in mind the form of par 50, make any claim under the terms of the 1996 assignment as opposed to the claims by subrogation that had always been made. 8 For the cross claimant to succeed upon a claim based upon the instrumental assignment it would therefore be necessary for him to obtain an additional amendment. For that purpose he has propounded initially the form set out in [6] and subsequently the form set out in [7]. He has reminded me of the terms of Part 20 r 1(2) of the Supreme Court Rules and the decision of the High Court in The State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146. In general, amendments should be allowed to permit the real issues between the parties to be determined, unless they would cause the opposing party prejudice which cannot be remedied, which is usually done by orders for costs. 9 However, this is a case in which the application is made after the delivery of judgment in proceedings in which, as I have found, the case at the trial was not conducted on the basis now sought to be pleaded (cf Hatzinikolau v Snape supra). Mr Street has submitted that no amendment which would permit a claim to be made under the assignment by instrument ought now be allowed, since he had deliberately conducted YDSI's case at the trial upon the basis that no such claim was made. That was because he took the view that the claim on the basis of subrogation was bound to fail. Among the things that he did not do was to cause further exploration of the situation in the ANZ Bank's books and records which may have been relevant to a claim arising under the instrument. I accept what Mr Street says in this regard. It is quite understandable in the context of the factual matters set out in [2] above. It is impossible to remedy this situation by costs orders. Furthermore, it may well be necessary to permit the evidence to be reopened if this amendment be granted. I also bear in mind the stage of the proceedings at which the application is made, and the need for finality at last in this long drawn out litigation. In all the circumstances, I do not propose to allow the application to make either of the amendments set out in [6] and [7]. 10 In the circumstances, I propose simply to allow the filing of the amended cross claim containing paragraphs pars 47 to 50 only, which was the proposed cross claim present at the trial and on which the trial was conducted, as noted above. I find, in accordance with my judgment, that Smith's claim for $27,787.88 was not made out, and that that claim fails. The guarantee fees 11 The aspect of this matter which I indicated in my judgment could be the matter of further submissions was whether the evidence showed that there was a guarantee by DSC Management in force prior to April 1994, so that the fees up to that time could be characterised as paid in the guise of surety and a right by subrogation to recover them assigned to Smith by the 1996 assignment: see [30]. The parties put extensive submissions to me on the further hearing. Most of those did not address the matter on which submissions were invited, but canvassed my earlier ruling on this subject matter. That ruling I did not and do not intend to depart from. So far as the real subject matter of the further hearing is concerned, it is conceded that no relevant guarantee is in evidence, but it is argued that I should infer from the fact that the bank guarantee was in place that a relevant guarantee must exist and must by its terms extend to these guarantee fees. The text of other guarantees in favour of the ANZ Bank that are in evidence were urged upon me as showing what must have been the terms of the relevant guarantee that must have existed. I decline to draw any inference as to the actual existence of such a guarantee or its terms. This means that relief in relation to the guarantee fees must be limited to the fees paid from April 1994 onwards. At one stage there appeared to be an argument as to whether this was the whole or one half of the sum of $16,562.50. In the end, however, there was agreement that the appropriate figure was $9,937.50. Conclusion 12 Short minutes should be brought in to reflect the conclusions in my judgment and in these reasons. These should deal with the appointment of the receiver, unless Mr Conti wishes to address further on this subject pursuant to leave which I reserved. Directions can be given at that time as to the argument of all questions of costs. …oOo… Last Modified: 09/26/2000 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. 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