New South Wales Supreme Court CITATION : Silver v Dome Resources NL [2006] NSWSC 26 HEARING DATE(S) : 14 September, 11 November and 6 December 2005 JUDGMENT DATE : 3 February 2006 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Rulings on late applications to rely on arguments not previously put and to further amend defence. CATCHWORDS : PROCEDURE [101] Supreme Court procedure - Practice under Supreme Court Rules – Amendment - Whether amendment necessary for defendants to rely on particular subject matter - Relevant considerations - Prejudice – Lateness of application – Overriding purpose. Civil Procedure Act 2005 s 56 LEGISLATION CITED : Supreme Court Rules 1970 Part 15 rr 7 & 18 Uniform Civil Procedure Rules 2005 rr 14.7, 14.19, 36.1 ASIC v Rich [2005] NSWSC 706 Hannover Life Re of Australasia Limited v Sayseng [2005] NSWCA 214 Harvey v John Fairfax Publications Pty Ltd [2005] NSWCA 255 CASES CITED : Ingot & Ors v Macquarie & Ors [2004] NSWSC 1219 Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 Woodside Petroleum Development Pty Ltd v H & R-E & W Pty Ltd (1999) 20 WAR 380 Michael Bernard Silver (P1 & XD1) PARTIES : Fair Choice Limited (P2 & XD2) Dome Resources NL (D1 & XC1) Durban Roodepoort Deep Limited (D2 & XC2) FILE NUMBER(S) : SC 2586/01 COUNSEL : J E Thomson and M J Watts (Ps & XDs) T G R Parker SC (Ds & XCs) SOLICITORS : Bull, Son & Schmidt (Ps & XDs) Allens Arthur Robinson (Ds & XCs) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J FRIDAY, 3 FEBRUARY 2006 2586/01 MICHAEL BERNARD SILVER & ANOR v DOME RESOURCES NL & ANOR JUDGMENT 1 HIS HONOUR: The subject matter of this judgment is an application by the defendants to rely by way of defence upon certain contentions. The application is made very late in the proceedings, after the close of evidence and almost at the end of lengthy arguments, written and oral. The plaintiffs contend that the defendants ought not be allowed to rely on these matters at this late stage of the proceedings. 2 In these proceedings the plaintiffs, Silver and Fair Choice Pty Ltd ("Fair Choice") sue Dome Resources NL ("Dome") as primarily liable and its holding company Durban Roodepoort Deep Ltd ("DRD") as guarantor under a Retirement Deed and a Retirement Variation Deed relating to services by Silver to Dome in relation to a sum alleged to be payable by Dome consequent upon Silver's retirement as a director ("the retirement payment"). 3 The defendants mount three arguments on which they say they ought now be allowed to rely. They say that these need to be considered separately. Those three arguments are formulated by the defendants as follows: (1) Judgment cannot be entered in favour of Fair Choice for the amount claimed under the Amended Retirement Deed (nor can it recover damages nor obtain any other relief) because it is not a party to the Deed. (2) Silver cannot recover substantial damages for breach of contract because any loss from the failure to pay Fair Choice is a loss to Fair Choice, not a loss to Silver. (3) An order in the nature of specific performance cannot be made in favour of Silver because he gave no valuable consideration for the obligations of Dome and DRD to pay Fair Choice. 4 Whether these arguments may now be relied on must be considered against certain background matters. The first is the state of the pleadings. The plaintiffs in their amended statement of claim filed 4 April 2005 ("the statement of claim") alleged that by the Retirement Deed Dome agreed with Silver to pay to Goldspark (a company associated with Silver) the retirement payment on specified events of retirement, dismissal or removal of Silver as a director of Dome: par 4. It then alleged that Silver, Dome and DRD executed a Retirement Variation Deed by which DRD guaranteed for the benefit of Silver the payment obligations of Dome under the Amended Retirement Deed. Fair Choice (another company associated with Silver) was substituted for Goldspark as the designated recipient of the retirement payment to be made by Dome: pars 6, 9 and 12. Fair Choice was not alleged to be and was not a party to the Retirement Variation Deed, as Goldspark was not alleged to be and was not a party to the Retirement Deed. 5 The prayers of the statement of claim included a prayer for judgment in favour of Fair Choice against Dome and DRD for the amount alleged to be payable under the Retirement Deeds: prayer 7. It also sought specific performance in various forms. It is now claimed that Silver should have specific performance in the form of an order that the retirement payment be paid to Fair Choice or a mandatory injunction with the same effect. Although these forms of relief do not correspond exactly with the claim for specific performance made in the prayers of the statement of claim, it is sensibly conceded on behalf of the defendants, bearing in mind the way the case has been conducted, that the relief now sought would be available to Silver under r 36.1 of the Uniform Civil Procedure Rules 2005 ("the UCPR"), if Silver is otherwise entitled to such relief. 6 The plaintiffs in the statement of claim also pleaded causes of action under the Trade Practices Act 1974 (Cth) ("the TPA") and by way of estoppel. 7 The relevant portions of the amended defence filed 11 April 2005 ("the defence") are as follows. In par 6 the defendants relevantly plead in relation to the Retirement Variation Deed denials that it was effective as a deed as against DRD and that it was supported by "good" consideration as between Silver and DRD and allege that it was therefore not binding upon DRD: par 6(f), (g). Significantly, in the portion of par 6 that deals with the status of the Amended Retirement Deed as between the plaintiffs and Dome, the defendants do not deny the existence or adequacy of consideration as between Silver and Dome. By par 86 of the defence the defendants deny that the plaintiffs are entitled to any of the relief they seek. 8 The trial was heard before me on numerous days spread over a period commencing on 4 April 2005. It was only on 14 September 2005 that arguments (1) to (3) above were clearly signalled to be in play and only in the defendants' written submissions "by way of rejoinder" received on 28 November 2005 that those arguments were formulated as set out in [3] above. The plaintiffs on 5 May 2005 in court had abandoned their alternative causes of action under the TPA and by way of estoppel. 9 Bearing these matters in mind I turn to the three specific arguments as formulated by the defendants. 10 As to argument (1), the plaintiffs controvert the defendants' right to rely on this argument raised at a late stage. The defendants say that this is a pure matter of law, which was not required to be pleaded. Although pleadings may state points of law (Supreme Court Rules 1970 Part 15 r 18; UCPR r 14.19), they need state only material facts (Part 15 r 7; r 14.7). The defendants say that they are therefore entitled to take this point of law. There seems to me to be a great deal in favour of this view. As is already made plain by the plaintiffs' pleading of the Retirement Deeds set out above, it is plain that Fair Choice is not (as Goldspark was not before it) a party to either of the Deeds. This means that, bearing in mind the doctrine of the privity of contract, the plaintiff has not pleaded, much less established, facts which would support a judgment at law in favour of Fair Choice for the amount of the retirement payment. In effect, the defendants are merely pointing this out. 11 The plaintiffs say that they are entitled to rely upon an extension of the exception to the doctrine of privity of contract enunciated by the High Court in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 in relation to contracts of insurance. They also refer to the judgments of Ipp J in Woodside Petroleum Development Pty Ltd v H & R-E & W Pty Ltd (1999) 20 WAR 380 FC and of Santow JA in Hannover Life Re of Australasia Limited v Sayseng [2005] NSWCA 214. They say that the reasoning in the High Court in Trident justifies the expansion of the exception to the privity rule there enunciated to instances other than insurance policies and that the Court can find that the present case falls within that extended exception. It is not suggested by the plaintiffs that they would wish to rely upon the proof of any additional facts to establish this pathway through the doctrine of privity; it is upon a legal argument as to the correct formulation of that doctrine that they seek to rely. If they are unable to obtain a ruling that the exception should now be treated as extended, it seems to me that, upon the facts pleaded and proved, the defendant is correct in suggesting that this case would fall within the principle enunciated by Giles JA in Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 at [14], where his Honour said that, even where a point is not raised by the opponent, the Court should not make unfounded orders. 12 The conclusion that I come to is that argument (1) should not be precluded. No relevant prejudice to the plaintiffs is shown. The argument as to whether this Court should treat the exception to the privity doctrine as being expanded can be dealt with in the final judgment in these proceedings. Whilst, as appears below, I am alive to the prejudice arising from expanding costs to which the plaintiffs have drawn attention, the considerations that I have set out require that the Court determine this question. If the plaintiffs desire to expand their argument on the point of law, this can be done in short compass in a supplementary written submission. 13 As to argument (2), in the end it has been conceded by the plaintiffs that this issue has always been in play in one form or another. It may be taken into account in the final consideration of the case. 14 As to argument (3), the defendants face the difficulty of the distinction in their defence whereby the allegation of the lack of consideration in relation to a specific performance claim contrasts with the absence of any allegation of lack of consideration as against Dome. No amendment to the pleading is needed so far as DRD is concerned: the allegation has long been there and there is no reason why the submission cannot be put upon the present evidence. The plaintiffs have already made their submissions concerning this. However, in relation to an allegation of lack of consideration against Dome, this was clearly not pleaded. That lack cannot be supplied by the utterly general allegation in par 86, which is in any event rather a charge of law in relation to the availability of relief rather than an allegation or traverse of any fact or facts. The absence of this allegation, bearing in mind the presence of the corresponding allegation concerning DRD, must be taken to be deliberate. No evidence was led that it was accidental. Had it been present in the defence, it may be that further evidence would have been led by the plaintiffs. One possible area would have been in relation to the value of Silver's services to Dome (see the decision of Santow J (as His Honour then was) in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723). But there may have been other areas for evidence, relating to the nature or quantum of consideration. And the abandoned causes of action may have been maintained if the allegation had been present and may need to be reactivated if it is now introduced. Further evidence may now have to be found or presented and the parties' cases in the trial reopened, if this course is allowed. I bear in mind the ever lengthening course of this litigation and the apparent disparity in resources between a South African listed company actively engaged in mining and an ex officer of one of its subsidiaries. The litigation may run the danger of passing into the category of "deep pocket" litigation. 15 In all the circumstances, I am satisfied that there would be prejudice to the plaintiffs from the matter being prolonged by an amendment at this late stage (see ASIC v Rich [2005] NSWSC 706 per Austin J at [71]) and I am not satisfied that that prejudice can be adequately met by a costs order or otherwise: see Ingot & Ors v Macquarie & Ors [2004] NSWSC 1219 per McDougall J at [64]; ASIC v Rich supra at [66] – [68]. I bear in mind the lack of explanation of the failure to plead this matter earlier. I also bear in mind the provisions as to the overriding purpose expressed in s 56 of the Civil Procedure Act 2005. Whilst these proceedings have been long and complex, the further proliferation of issues at this late stage would be oppressive to the party of lesser means and would not conduce to the disposition of the proceedings with the best available measure of justice, speed and economy. See Harvey v John Fairfax Publications Pty Ltd [2005] NSWCA 255 at [78] – [81]. This seems to me akin to that case, in that the defendants may be said to be "now seeking to make a case which [they] could and should have made at the … trial but may not have done so for tactical reasons, and without providing any reasonable explanation for not having done so." I am not prepared to allow an amendment to plead lack of valuable consideration in favour of Dome or to allow this point to be taken at this late stage of these proceedings. The application for such an amendment is refused. 16 Upon the delivery of this judgment, directions may be sought and given in relation to any further submissions necessary or desired to be made before judgment is reserved. ********** 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.