New South Wales Supreme Court CITATION : Short v Crawley [2004] NSWSC 752 HEARING DATE(S) : 28 & 29 July and 13 August 2004 JUDGMENT DATE : 17 August 2004 JURISDICTION: Equity JUDGMENT OF : Hamilton J DECISION : Application for amendment granted in part and refused in part. CATCHWORDS : PROCEDURE [101] - Supreme Court procedure - Practice under Supreme Court Rules - Amendment - Relevant considerations - Whether prejudice may be cured. Bomanite Pty Limited v Slatex Corp Australia Pty Limited (1991) 33 FCR 379 Expectations Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189 Intagro v ANZ Banking Group [2004] NSWSC 618 Ketteman v Hansel Properties Ltd [1987] AC 189 CASES CITED : Rosenberg v Percival (2001) 205 CLR 434 Short v Crawley [2003] NSWSC 1158 Spencer v VMD Packaging Pty Ltd [2001] NSWCA 118 The State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 WAEJ v MIMIA (2003) 76 ALD 597 Wiki v Atlantis Relocations (NSW) Pty Ltd [2004] NSWCA 174 Warwick Short (P1 & 1XD) Nabatu Pty Limited (P2 & 2XD) Christopher Crawley (D1 & 3XC) PARTIES : Marsico Holdings Pty Limited (D2 & 1 XC) J & J O'Brien Pty Limited (D3 & 2XC) Vensel Pty Limited (4D) Trudale Pty Limited (5D & 4 XC) Judith Crawley (6D) FILE NUMBER(S) : SC 2824/98 COUNSEL : I M Jackman SC and T M Thawley (Ps & XDs) A J L Bannon SC and D B Studdy (Ds & XCs) SOLICITORS : Kemp Strang (Ps & XDs) Blake Dawson Waldron (Dx & XCs) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J TUESDAY, 17 AUGUST 2004 2824/98 WARWICK SHORT & ANOR v CHRISTOPHER CRAWLEY & 5 ORS JUDGMENT 1 HIS HONOUR: The application I am dealing with is an application by the plaintiffs to amend further their amended statement of claim in these proceedings. The form in which the amendments are sought is attached to the plaintiffs' notice of motion filed 19 May 2004. The amendments are extensive but their significance must be viewed in the overall context of these proceedings. They are large and complex proceedings. They involve transactions between or affecting the parties over a period of more than 20 years commencing in 1982. Furthermore, the subject matter of the transactions was complicated. It involved different contractual arrangements concerning the purchase and running of a total of four hotels. These were purchased and run successfully and, in some cases, resold at a profit. It also involved a joint venture concerning the development of land in Elizabeth Street, Sydney. This transaction was not successful and a great deal of money appears to have been lost in the course of it. To give some idea of the ambit of the issues, the current estimate is that the trial will last three to four months and the discovery to date runs to some 500,000 pages. It is against this background that the extent of the currently proposed amendments and their consequences must be viewed. 2 Some of the amendments involve the legal restatement of claims where the subject matter is already clearly raised between the parties. Other amendments are proposed to raise subject matters that are entirely new and they pose the greater problem on the amendment application. 3 The law relating to the approach which courts should take in considering applications for amendment is reasonably clear, especially as it comes to be applied in this case. There are passages that are very well known in the joint judgment in the High Court in The State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 154. The incidence of those problems was discussed by the Court of Appeal in Spencer v VMD Packaging Pty Ltd [2001] NSWCA 118. There is a useful summary of the position particularly relevant to the present application by McDougall J in Intagro v ANZ Banking Group [2004] NSWSC 618. In McDougall J's words in that judgment at [64]: "The authorities are clear. Except in extreme circumstances, and putting aside (for the moment) questions of prejudice, a party is entitled to litigate an issue which is fairly arguable: The State of Queensland v J L Holdings Pty Limited (1997) 189 CLR 146, 154 (Dawson, Gaudron and McHugh JJ). In The Commonwealth of Australia v Verwayen (1990) 170 CLR 394, Dawson J at 456 said that 'an amendment which is futile because it is obviously bad in law will not be allowed. But it is no ground for refusing an amendment that it raises a claim or defence which ought not to succeed. That will be an issue upon trial.' In Horton v Jones (No 2) (1939) 39 SR (NSW) 305, Jordan CJ said at 310 that, again leaving aside questions of prejudice, an amendment should be allowed '[u]nless [it] is so obviously futile that it would be struck out if it appeared in an original pleading …'." 4 Detailed submissions concerning the various amendments have been put to me in writing and orally. I have paid attention to them all and have concluded that all the amendments raise matters that are fairly arguable. There are only two exceptions. The first is the proposed paragraph 54A, which is not pressed. The second relates to claims based on failure to give advice in the section of the proposed further amended statement of claim commencing at paragraph 115A. To that I shall return in more detail later. 5 Having come to that conclusion, I turn to questions of prejudice and discretionary matters that have been argued. Among these, the following issues have been raised. 6 First, there is a direction made by Hodgson J in a judgment delivered by him on 8 February 2002. At that time, his Honour was the judge charged with the case management of these somewhat unruly proceedings. I do not need to go in detail into his Honour's reasons, but his Honour did on that occasion order that, with certain exceptions: "There be no further amendments or evidence in chief from the plaintiffs without leave of the Court sought with the support of an affidavit giving a proper explanation of why the application is made." Relying upon the terms of that order, the defendants have argued that the plaintiffs have not by affidavit explained, or sufficiently explained, why this application is made and should on that ground be refused their amendments. 7 I do not propose to accede to that submission. In my view, too much water has flowed under the bridge in relation to these proceedings since 8 February 2002 for Hodgson J's direction to be regarded as governing the situation. It must be borne in mind that his Honour gave the direction to deal with the exigencies of the management of the case as they stood at that time. At that time there was a situation arising from the plaintiffs' delays in complying with certain earlier directions of his Honour that his Honour thought ought be met by making that direction. 8 A great deal has happened since that time. I should say at once that some of the considerations to which I shall advert below are overlapping. One of the things that has occurred is that, about a year later, the defendants were castigated by his Honour for their delays in the conduct of the proceedings. After that, the plaintiff, Warwick Short, came to face illness in the form of life threatening cancer, which, indeed, took his life early in 2004. By this time I had become the Judge managing the proceedings. An application was made which was dealt with by me for Mr Frank McAlary QC to be appointed as an examiner to hear the cross examination of Mr Short, in view of his obviously impending death. Over intense opposition by the defendant, I granted that application: Short v Crawley [2003] NSWSC 1158. I ordered that the cross examination take place before Mr McAlary commencing on Monday 15 December 2003 and continuing at the discretion of the examiner up to and including but not after 24 December 2003. The discretion of the examiner was provided for because of the problems raised by Mr Short's fragile state of health. Cross examination did take place over parts of eight days before Mr McAlary up to Christmas Eve 2003 and was videotaped in accordance with my directions. I was critical in my judgment of the course followed both by Mr Short personally and by his solicitors in delaying the application for the commission. I have conducted various other directions hearings in the matter. I set these matters out to show that a great deal has happened since Hodgson J made his order on 8 February 2002. It is without any disrespect to his Honour and without any suggestion that it was not appropriate for his Honour to make that direction at that time that I have come to the conclusion that that direction ought not be regarded as operative in the present circumstances. 9 Secondly, it is put that delay in bringing this application and in conducting the proceedings should also be taken into account as a discretionary matter. The factual situation as to delays over the last couple of years I have already adverted to above. One additional matter to which I should refer here is that there was some suggestion in cross examination of Mr Calabria, the solicitor who has done the bulk of the work in conducting the proceedings on behalf of the plaintiffs, that some of the delay in bringing the present application forward was deliberate. It was suggested to Mr Calabria that these amendments had received consideration before the application for the cross examination to be taken on commission and were deliberately concealed or deliberately not brought forward at that time. In other words, the suggestions put to Mr Calabria extended to a suggestion that there had been in effect either a plot to delay bringing forward these matters so that Mr Short could not be cross examined on them, or a decision to bring them forward after his cross examination because of a fear that the results of that cross examination necessitated the patching up of the plaintiffs' case. 10 I should say at once that, as far as I am concerned, it is not established that there was any deliberate withholding of any of these matters with the intention of disadvantaging the defendants. To my eye, it seems that the plaintiffs' efforts to prepare their case and to make any necessary reviews of it were accelerated by the appointment of new senior counsel in the person of Mr Jackman SC late in 2003. This produced redoubled activity in the plaintiffs' camp, which activity was in the first instance bent to obtaining the order for the commission and complying with directions of the Court as to statements that should be brought forward before the hearing on commission took place. If detailed consideration of any amendments that should be sought was postponed until after that evidence was taken, that arose from the greatly limited availability of time in the period of intense activity surrounding the preparation for and conduct of the cross examination, rather than any deliberate attempt to disadvantage the defendants. 11 The third consideration which was debated is the situation created by the death of Mr Short after the cross examination on commission. The defendants' complaint in this regard is that they are precluded from cross examining Mr Short on the amended allegations that will be introduced into the case if the plaintiffs' application succeeds. They complain, as they did before I granted the commission, that in any event their cross examination of Mr Short was constrained by the limited time available and by the state of Mr Short's health - and there can be little doubt that that is so. They now repeat that complaint in conjunction with the additional fact that it is now undoubted that Mr Short will not be available for any further cross examination. 12 Mr Jackman properly concedes that in some instances there must be some prejudice to the defendants from their inability to cross examine Mr Short. However, in the case of many of the proposed amendments, Mr Short's evidence is not relevant to the subject matter of the amendments. There are many issues that concern events in which Mr Short was not personally involved. It should be borne in mind in analysing this matter that the courts have of late times cast greater doubt than previously upon the value of demeanour as a determinant of the veracity or credibility of witnesses: see the decisions of the Full Court of the Federal Court in WAEJ v MIMIA (2003) 76 ALD 597 at [17] and Expectations Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189 and of the NSW Court of Appeal in Wiki v Atlantis Relocations (NSW) Pty Ltd [2004] NSWCA 174 at [60]. In addition, in a number of instances, the matter on which cross examination will not now be possible will be evidence as to the reliance of Mr Short upon various representations or events that are alleged to have been made or to have occurred. Again, recent authority has emphasised what was always apparent, that is, that a person's subsequent word upon what influenced the person at a particular time is likely to be less material in determining the basis of action at that time than is all the evidence surrounding the event, including contemporaneous documents that may reflect upon the state of mind at the time: for an example in a field different from the present see per Gummow J in Rosenberg v Percival (2001) 205 CLR 434 at [89]. 13 Another fact to be taken into account is that, whilst the defendants may have lost some benefit that may flow from additional cross examination of Mr Short, as far as demeanour and manner of answer are concerned, the trial Judge will be given some opportunity by reason of the commission and the videotape to assess Mr Short's demeanour. This is subject to the limitations of the cross examination already noted. But it is not the defendants who will be deprived completely of the evidence of potentially relevant witnesses in relation to the subject matters of the amendments. The plaintiffs may have lost potential evidence from Mr Short himself as to these matters, but the defendants still have their witnesses available to them to deal with any of these subject matters. 14 A fourth matter that was debated was the fact that, in one instance which I shall refer to below, the amendments will necessitate the addition of a party. That party is Athann Pty Limited ("Athann"). As well as dealing with general principles in the Intagro case, McDougall J dealt at [76] – [81] with the significance of and problems raised by an amendment adding parties. His Honour pointed out that the disadvantage of being added as a party to complicated and extensive litigation can be, and in days of modern case management will be, mitigated by directions as to the conduct of the trial and the extent and times of participation of that additional party in the trial. 15 In conjunction with their opposition to the addition of a party, the defendants have suggested that the amendments will cause substantial delay of the trial. I do not see why this should be so. In J L Holdings the High Court viewed as improbable the assessment of the trial Judge that an amendment to a defence, even if important, would in this day and age delay a trial that was still some six or eight months off. Considering the extent of the amendments applied for as against the extent of the matters involved overall in this trial, I do not see why either the presence of Athann or the making of the amendments generally should delay the trial of these proceedings. No date is yet fixed for trial and no trial Judge is yet assigned. The trial cannot commence earlier than March 2005 and it may well be June 2005 or later that, even if the parties are ready, a Judge of the Court can be found to devote the necessary months to this matter. I should say that in my view there is not any undue delay by the Court in providing facilities for this trial, bearing in mind its length and the period of years that the parties have between them taken to ready themselves for it. In any event, I am not convinced for a moment that the trial will be delayed either by the joinder of Athann or by the making of any of the amendments sought. 16 Fifthly, the defendants have emphasised that the Court will these days take into account realistically the stress imposed on parties by major litigation: Ketteman v Hansel Properties Ltd [1987] AC 189 at 220 per Lord Griffiths; Bomanite Pty Limited v Slatex Corp Australia Pty Limited (1991) 33 FCR 379 at 392 per French J; J L Holdings at 154 – 155 per Dawson, Gaudron and McHugh JJ; at 170 per Kirby J. I am one of the converted as far as this proposition is concerned. It is very often said that criminal proceedings are particularly stressful, involving, as they invariably do, the liberty of the accused and the feelings of persons who have been or are related to victims of crime, and I do not for one moment gainsay those factors. However, it is my observation, both as a barrister over many years and as a Judge of this Court, that major litigation that involves large financial consequences, and sometimes consequences to career and threats to reputation, are terribly stressful for those concerned. One of the many factors in favour of the settlement of litigation is that the stress may be earlier removed and people returned to more useful activities in life than engaging in conflict. However, all this said, it seems to me that the stress on those involved will not be significantly increased by the allowing of these amendments. 17 In the course of all the arguments that have been put to me, no estimate has been placed on the time by which the amendments would extend the trial and I do not find it established that there would be any very significant extension of the already extensive trial if these amendments were allowed. I have already said that I do not accept that the trial itself will necessarily be delayed by the making of the amendments. 18 Sixthly, there is a question as to whether or not what prejudice there is can be ameliorated in any way. Again, I accept that, particularly because of the modern acceptance of personal stress as a relevant factor, the payment of costs cannot be regarded as the absolute anodyne as which it was once regarded. However, in my view, the prejudice to the defendants in this case will be significantly ameliorated by an order in appropriate terms that the plaintiffs must bear the costs of this application and the costs thrown away by the amendments, even if the application be successful. 19 I do not propose to traverse the very detailed submissions made about every amendment proposed. I have already said that I have paid attention to those submissions. I do propose to make a few comments on some particular subject matters of amendment, selecting in general terms those that have posed the greater difficulty in my coming to my decision or to deal with particular submissions that I feel merit some particular mention. I shall deal with them in the order in which they appear in the proposed further amended statement of claim. 20 The insertion of paragraphs 69A, 69B and 69C introduces an allegation of misrepresentation in relation to the entry into of the joint venture agreement. That is not an entirely new subject matter, because there were already existing allegations of breach of duty in relation to the entry into that agreement. In fact, the conversations in November 1993, which give rise to the alleged misrepresentation sought to be added were already before Mr Short's cross examination in the evidence in affidavits of both Mr Short and Mrs Short, who were present when the alleged misrepresentation was made. Mrs Short, of course, remains available for cross examination. But, although the conversations were not relied on specifically as containing a misrepresentation, they were already relevant to the breach of duty allegations and Mr Short was able to be cross examined concerning his clear account of that conversation, had it been desired. I am not suggesting that there may not have been further cross examination in view of the new significance placed on the conversation, but that does not detract from what I have just said. 21 The second set of amendments to which I shall refer specifically is the insertion of additional allegations as to unauthorised third party payments effected by the proposed amendments to paragraph 108, with consequent amendments to following paragraphs, and the insertion of some new paragraphs. The amendments both take the payments back from 1994, as originally alleged, to 1982 and include payments to a number of other individuals, in addition to payments to Vensel Pty Ltd, a company controlled by Mr Crawley, which was the sole recipient mentioned in the original paragraph 108. It should be said that here the evidence of Mr Short would not be in the forefront. The amendments depend mostly on lack of proper authorisation, although there is in the allegations an element involving Mr Short in that the payments are also said to have been made without the consent of Mr Short. It may be that the absence of Mr Short's evidence in this regard will disadvantage the plaintiffs rather than the defendants. 22 Among the factors that I take into account in relation to this set of amendments is the fact that separate proceedings could now be brought in respect of these third party payments. There is not yet any judgment in these proceedings, so there can at the moment be no Anshun estoppel. In any event, as the payments relate in part to totally different periods and in part to totally different recipients, it is dubious whether the Anshun doctrine would apply. If the plaintiffs chose to bring separate proceedings concerning these allegations, that could not be prevented. These are allegations of breach of fiduciary duty which are not automatically barred by the passage of time. If separate proceedings were brought, the Court would then be faced with an application for both sets of proceedings to be heard together. Furthermore, if the fresh proceedings were excluded from being dealt with together with the present proceedings, despite what I have said, this could lead to later proceedings being complicated by arguments as to the application of the Anshun doctrine, which would protract the finalisation of the disputes and protract proceedings and multiply costs. 23 I should say that the particularisation at present contained in the proposed further amended statement of claim is not adequate. Particulars of the sort properly given in the proposed paragraph 110A in respect of certain payments are omitted in respect of many others. However, Mr Jackman has told me in the course of argument that the payments relied on are all contained and referred to in the report of Anthony Bell dated 31 March 2004, which is referred to in the particulars appended to paragraph 110A. I do not regard the absence of the particulars as preventing the granting of the amendments, but I propose to place a limitation on any order allowing amendments to make it plain that the allegations made in the amended paragraph 108 are to relate only to payments mentioned in that report of Mr Anthony Bell. Furthermore, I should make it quite plain that the imposition of that limitation will not preclude any proper further particulars being sought and ordered. It may be that a direction to search through a lengthy report for the details is not an adequate method of proper identification, but that can be considered on another day. 24 The third subject matter of amendment about which I propose to say something particular is the totally new matter appearing in paragraphs 114N to 114R of the further amended statement of claim under the heading "Nineteenth Instance". This is the section that requires the joinder as a defendant of Athann, a company controlled by the Davis interests, which I have already adverted to. I should say that the central issue raised here is a question of whether or not a transfer of shares was invalidated by reason of non disclosure. It is true that in paragraph 114N(c) and (d) there is an allegation of a misrepresentation made in Mr Short's presence as part of the case of non-disclosure. However, it is not central. Whilst Athann will be a new party to the proceedings, it will be concerned only with the amendments raised in these paragraphs, which are quite limited in extent. There is no reason that I can see why it should not be able to prepare itself for trial in the many months that are still to pass before a trial can take place. I have already said that in my view the amendments will not cause any necessary further delay to the trial. 25 The last matter about which I seek to say something specific are sections, again new, relating to deficiencies in advice given or not given by Mr Crawley as a solicitor. The first section commences at paragraph 115A of the proposed furthered amended statement of claim under the heading "Twenty first Instance". This relates to advice said not to have been given, essentially by Mr Crawley, to Mr Short at various times going back as far as the inception of their relationship in 1982. The breaches of duty upon which those paragraphs at present rely include breaches of a duty of care, giving rise to a cause of action in negligence, as well as to breaches of fiduciary duty. Among the amendments caught by what I have just said appear to be various allegations of the breach of the duty of care and the allegations in paragraph 115F(d) of the suffering of loss and damage in a form which appears to relate to a cause of action in negligence. Mr Jackman conceded in argument that the causes of action arising from these allegations were cast in negligence. Insofar as these allegations are of matters occurring more than six years ago, they cannot succeed and the plaintiffs do not contend that they can. In these circumstances, I am not prepared to allow these amendments in their present form. The defendants should not be put to the trouble of raising defences of the statute of limitations, which must inevitably succeed, nor should the Court have to deal with that matter. 26 However, the breaches of duty complained of are not only breaches of care but breaches of fiduciary duty. So far as the claims are based on breaches of fiduciary duty, the matter is different, eg, see the claim in paragraph 115G. Those claims are not automatically precluded by the passage of time and, furthermore, the part played in the necessary allegations by Mr Short himself would seem to be considerably less. All I propose to say at the moment is that I shall not allow paragraphs 115A to 115G as at present cast to be incorporated into the further amended statement of claim. The plaintiff may, however, bring forward a further version of these paragraphs removing statute barred causes of action in negligence for consideration as to whether they should be allowed. 27 The other sections relating to inadequacy of advice, which appear under the headings "Twenty Second Instance", "Twenty Third Instance" and "Twenty Fourth Instance" respectively, are all in the same category as the allegations under the heading "Twenty First Instance". The same considerations seem to me to apply to them. That is, I shall not allow them as at present framed, but they may be brought forward again in a form which makes it plain that breaches of fiduciary duty are relied on but breaches of a duty of care are not. 28 In view of all the foregoing, the conclusion that I have come to in the exercise of my discretion is that all the amendments sought should be allowed with the exception of paragraph 54A, which is withdrawn, and the paragraphs, the first of which is paragraph 115A of the proposed amendments relating to advice, but these may be brought forward again as I have outlined. 29 I should add that in a large number of places in the pleading as it will stand after this amendment there is reference to presumed undue influence, that is, undue influence arising from the relationship of the parties. There had been some suggestion at some stage that there was to be in all or some cases allegations made of actual undue influence. If that course had been persisted in , that may have created problems of a different dimension, which may or may not have led to a different result from the present. However, in the course of the present argument, Mr Jackman eschewed reliance upon any allegations of actual undue influence, so that allegation will now be removed from any aspect of the case upon the amended pleading being filed. ********** Last Modified: 09/24/2004 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.