MARONIS HOLDINGS LTD & ORS v. NIPPON CREDIT AUSTRALIA LTD & ORS [2000] NSWSC 753

New South Wales Supreme Court

CITATION : MARONIS HOLDINGS LTD & ORS v. NIPPON CREDIT AUSTRALIA LTD & ORS [2000] NSWSC 753 CURRENT JURISDICTION: EQUITY FILE NUMBER(S) : SC 1946/94 HEARING DATE(S) : 21/07/2000 JUDGMENT DATE : 28 July 2000

PARTIES : Nippon Credit Australia Ltd - Applicant/Cross claimant Bowen & Ors (t/as Gadens) - Respondent/Cross defendant JUDGMENT OF : Bryson J at 1

COUNSEL : F Douglas QC/G Parker - Applicant/Cross claimant J Simpkins - Respondent/Cross defendant SOLICITORS : Allen Allen & Hemsley - Applicant/Cross claimant Philips Fox - Respondent/Cross defendant CATCHWORDS : PRACTICE and PROCEDURE - application for leave to further amend cross-claim - application made after hearing commenced - whether proposed amendment sufficiently particularised - whether proposed amendment merely formal - where hearing pending for several years. LEGISLATION CITED : Supreme Court Rules 1970 (NSW) Pt 1 r 3, Pt 20 Supreme Court Rules Amendment No 337 Brunninghausen v Glavanics (1999) 46 NSWLR 538 CASES CITED : Cohen v McWilliam (1995) 38 NSWLR 476 Macquarie Bank Ltd v National Mutual Life Association (1996) 40 NSWLR 543 State of Queensland v J R Holdings (1997) 189 CLR 146 DECISION : Amendment refused

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRYSON J.

28 July 2000

1946/94 MARONIS HOLDINGS LTD & ANOR v. NIPPON CREDIT AUSTRALIA PTY LTD & ORS

JUDGMENT 1 HIS HONOUR: These reasons relate to a proposed further amendment to the First Cross-claim, in which Nippon Credit is cross-claimant and Messrs Gadens, Solicitors are cross-defendants. The plaintiffs filed their Statement of Claim in these complex proceedings on 7 April 1994. The proceedings arose out of a financing transaction on 1 June 1989 when the first defendant Nippon Credit lent $15 million to Girvan Corporation Limited, referred to as Girvan Australia, on the security of a first mortgage given by the first plaintiff Maronis over land which it owned at Liverpool, New South Wales, and a joint and several guarantee and indemnity given by both plaintiffs. The borrower and the plaintiffs were members of what can loosely be called the Girvan Group of companies; the group involved many companies, many of them wholly owned by Girvan Australia which was listed on the Australian Stock Exchange. However, the related New Zealand companies were not wholly owned by Girvan Australia. The second plaintiff Girvan New Zealand was listed on the New Zealand Stock Exchange and, through intermediate holdings, was 74% owned by Girvan Australia, and Maronis was, indirectly, wholly owned by Girvan New Zealand. Earlier litigation and elaborate interlocutory proceedings have established that Maronis cannot challenge the validity of the mortgage over the Liverpool land. The plaintiffs now make claims which would establish that the guarantee and indemnity is invalid, and that they are entitled to common law damages or equitable remedies in respect of the transactions, including relief against the operation of the mortgage. 2 There are seven defendants but these reasons relate only to the first, Nippon Credit. There have been many versions of the Statement of Claim, at least six, and there is a very elaborate web of cross-claims. By the First Cross-claim, which is said to have been filed in 1995, although it cannot now be located, the first defendant made claims against Mr Bowen and others who practised as Messrs Gadens arising out of their acting as solicitors for Nippon Credit on the lending transaction. The Cross-claim is now the Amended First Cross-claim filed on 17 September 1996. 3 I reviewed and made directions for the preparation of the proceedings for hearing at a number of directions hearings from February to June 2000 and determined several interlocutory notices of motion. At an early stage I made a tentative appointment for the hearing to commence on Monday 10 July 2000, and I have adhered to that appointment in view of the apparent state of readiness for hearing. Counsel have been unable to give a confident assessment of how long the hearing is likely to take, naturally enough in view of its complexity, and I have arranged business so that 10 weeks are available. 4 During the period commencing February 2000 I dealt with every procedural application which the parties put before me, and gave a great deal of time, attention and endeavour to ascertaining whether procedural difficulties were likely to arise and how they should be resolved. All parties had ready access to my attention for any application they brought forward. I repeatedly urged the parties to bring forward and complete any application relating to amendment of proceedings, although, in proceedings which have been pending for over five years, any reasonable time for attending to amendments was years in the past, as was obvious. I was conscious of the futility of endeavouring to fix the time within which any procedural step must be taken, on which I have received repeated appellate correction: Cohen v. McWilliam (1995) 38 NSWLR 476; Brunninghausen v. Glavanics (1999) 46 NSWLR 538. 5 Appellate corrections of the discretionary reflexions of my concerns about the value of time have taught me the wisdom of the proverb, attributed to the Irish Bar, "When God made time, he made plenty of it." 6 My experience, as appears in the law reports, has been that it is not practically possible to achieve finality or to preclude further attempts to amend pleadings or re-open other interlocutory preparations. My objects in conducting the directions hearings included achieving definition of the issues so as to enable them to be fought out at the hearing with real procedural justice and with opportunities to prepare for the hearing which have reality and are more than nominal. Achieving definition of the issues facilitates conduct of a hearing for the purposes of evidence rulings, and also for recognition and determination of the issues. In my concept it is not possible to decide an undefined or imperfectly defined controversy, and it is oppressive for the Court to require litigants to engage in one. 7 The complexity of the issues in these proceedings and the length of time required to address them exacerbate the consequences of any change in the issues, particularly any change which might occur once the hearing has begun. There are eight different sets of representation by counsel and one party appears in person. It was only with difficulty and some months of effort that the proceedings were made ready for the hearing to commence on 10 July. Unusually great practical difficulties, including costs and the creation of confusion and difficulties of allocation of hearing time, would be caused by an adjournment, or by allowing some time during the hearing for the purpose of meeting some new development. At most times 20 to 30 people are in the court room attending to the hearing, often more, including counsel, solicitors, litigants, witnesses and court staff, and the burden and waste created by interruption or deflection of the process is very great. The opportunity for a hearing was created with great difficulty, and at the urging of some parties, the first defendant prominent among them, that the proceedings be brought on for hearing and heard. 8 After the hearing proceeded for several days leading counsel for Nippon Credit told me that he wished at a convenient time to make an application further to amend the First Cross-claim. It was not possible to turn aside and hear the application when it was first mentioned, as I was about to hear the evidence of Mr Boscawen, formerly an officer of the plaintiffs, who attended from New Zealand for the purpose and whose attendance was required by a subpoena served in New Zealand. His evidence was concluded on the morning of 20 July, the fifth day on which he had been in the witness box. Nippon Credit's counsel then applied orally for leave to amend. Some of the amendments were not controversial and were not opposed; they in effect carried into the allegations which the first defendant made against the cross-defendant allegations which had been recently introduced into the Statement of Claim by amendments made by the plaintiffs. However, one amendment was of substance; it was the proposed addition of para 8 in these terms: 8. Further, by reasons of the negligence of Gadens, by its entry into the Transaction Nippon Credit has suffered loss and damage. Particulars Nippon Credit repeats the matters alleged in the particulars to paragraph 7 and says that, had Gadens advised it of the significance of the matters referred to therein, Nippon Credit would not have entered into the Transaction. Particulars of the loss suffered by Nippon Credit as a result of entering into the transaction will be provided in due course. 9 The particulars referred to have not been provided, but on 12 July Nippon Credit's solicitors stated this in a letter to their opponents: We refer to your fax of 11 July 2000. Our client's claim for damages under the Further Amended Cross Claim is not limited to the amount of the Plaintiffs' claim against our client. The claim is for damages caused to it from having entered into the Transaction Documents, which it would not have done but for your clients' negligence (see paragraphs 58 and 59 of the Affidavit of Christopher Leigh Walker dated 22 February 1999). Such damages will therefore include: 1. Any damages payable by Nippon Credit to the Plaintiffs, if they succeed in their claims against Nippon Credit; and 2. Any other damages referable to Nippon Credit having entered into the Transaction Documents. In that regard, under the Transaction Documents, Nippon Credit released $15 million to Girvan Australia on or about 1 June 1989. Nippon Credit has not been fully repaid in respect of that loan, its only recovery of substance comprising of $12.2 million net recovery it obtained from the sale of the Cross Roads property in October 1998. 10 This is very far from a particularisation of damages. The statement is inclusive only, so something else may be included. Paragraph (2) is of the vaguest kind; it indicates nothing, but seems to suggest that there is a claim for whatever Nippon Credit would now receive if it were fully repaid in respect of that loan. Cross-defendant's counsel Mr Simpkins spoke in his submissions of the additional claim being in the order of $3 million. While it cannot be known whether that is correct, given the state of the particulars, it seems to me that the additional claim could well be far larger, including interest for many years and up to the present, the advance was made on 1 June 1989, the recovery of $12.2 million was made in October 1998 by which time there had been large accruals of interest, and thereafter there have been further accruals. The assessment of damages could well involve elaborate considerations of law as well as of fact. The view that the measure of damages is the amount which would have been paid under the securities if they had been effectually enforced is one which requires careful appraisal, and an address by the cross-defendant to questions of mitigation is difficult to make, or even to begin, until there is some comprehensible statement of what is conceived of as damages. 11 The words which are proposed to be introduced into the Cross-claim by para (8) and the attached particulars are extremely bald and inadequate as an indication of what case the cross-defendant is to meet and the court is to adjudicate. The new case relates to the solicitors' having responsibility not only for obtaining security documents which were valid and also effectual in the sense that they did not render Nippon Credit liable for equitable relief against their enforcement, but also having responsibility for giving advice upon which Nippon Credit was to act for the purpose of deciding, finally, whether it would enter into the transaction at all. There is a wide gulf between responsibility for carrying out legal work and obtaining fully effectual documents, and responsibility for a client's decision to enter into a transaction. The second part of the particulars of damages which I have quoted indicates that the plaintiffs' claim crosses that gulf. Although the terms to be added by proposed para (8) to the Cross-claim would leave the subject obscure, the claim that the solicitors have a further liability for damages even if the plaintiffs are wholly unsuccessful against Nippon Credit and recover nothing illustrates that the gulf has been crossed. 12 The amendment, notwithstanding the superficial simplicity of its terms, cannot rightly be understood as either formal or simple. If allowed it would confront the cross-defendants with an array of difficulties, new considerations and elaborate considerations which would have to be addressed while the hearing progressed. 13 It is an affront to the court's authority and to the endeavours which I have directed to putting the proceedings in a condition where they were fit for trial, that Nippon Credit's case was not fully considered and pleaded earlier, and the application has been brought forward after the long course of directions hearings was completed and after the trial began, without any notice to me or it would seem to the cross-defendants before the trial began. I put a great deal of endeavour into seeing that litigants were not confronted with disruptions of this kind once the trial began, and my concern extends to the interest of those litigants, the great majority of the parties, who are not concerned in the present application, but would be involved in disruption and expense if there were any short delay or long adjournment. The application sets all this endeavour at naught. 14 No explanation whatever is offered in evidence for the choice of the time at which to bring forward this application. The need for an explanation is great. Late applications of this kind prompt consideration whether their lateness is related to pursuit of a strategy of disruption and of injuring the opportunity of the opponent to participate in the trial process on a fair basis. Disregard of the need for explanation was manifestly inappropriate in these circumstances. All I received was a narration, in familiar terms, and from the bar table, of late inspiration of the full and true nature of the claim. In relation to a Cross-claim pending for five years, this explanation, however well delivered from the bar table, is not useful. An explanation that might be readily accepted at an interlocutory stage when a change of course can be accommodated requires to be proved with clarity and detail if it is presented when such a change would create great difficulty. The sincerity of the wish to bring forward the new allegation and the circumstances which explain the time at which it was brought forward cannot be presumed and must be established by evidence, and in this case they were not. 15 I am mindful of the liberal approach to amendment applications required by Pt 20 of the Rules of Court and by many decisions of authority, most notably State of Queensland v. J.R. Holdings Pty Ltd (1997) 189 CLR 146. Counsel referred me in particular to the earlier decision in Macquarie Bank Limited v. National Mutual Life Association (1996) 40 NSWLR 543; and counsel claimed analogies in the nature of the amendment to be brought forward, and pointed, appropriately, to the authoritative statements there made relating to the approach to be taken to amendments. In view of the state of the law governing allowance of amendments, amendment applications brought forward before the trial began were treated with uncomplaining supine liberality, notwithstanding that they sometimes showed that problems had been addressed years after they should have been. I do not think that the law requires the discretion to allow amendments to be exercised in entire innocence of understanding the obvious impact of forbearance and liberality on the behaviour of litigants, who have diminished incentive to do their thinking in due time and to tell the court and their opponents their full and true positions. When forbearance and liberality are extended to a delinquent the burden of inconvenience and lost opportunities for preparation tends to fall heavily and without adequate repair on parties who have not been delinquent. A relative disadvantage is imposed on those who proceed methodically and in due time; their interest in procedural justice should claim at least as much consideration as the interests of the applicant for a late amendment who does not have to look far for the creator of his difficulty. It is even conceivable that a litigant might deliberately pursue a course which will impose disadvantage on an opponent who has to reconsider his ground and change course in the midst of a contest. A wide overview is required when a far-reaching amendment application is made after a complex trial had been well launched. 16 I am mindful that, for the whole of the year 2000, the obligations of litigants to participate fully and reveal their cases appropriately has been reinforced by the statement of the overriding purpose of the Rules of Court and the place of the overriding purpose in the duties of the court and of parties in Pt 1 r 3, inserted by Amendment 337. The existence of that rule has contributed to my sense of affront, as the interlocutory attention I have given to these proceedings was given in a context where it was explicitly the duty of parties to consider fully and to reveal fully what their cases were so that preparations for the hearing would be fully effectual. 17 After reviewing the considerations which I have mentioned I decided that I should not allow the amendment of para 8. On 21 July I gave leave to make the other amendments sought.