Nowland v Maiolla; Casbee Properties Pty Ltd v Eastwood Air Conditioning Pty Ltd [2013] NSWSC 980

Supreme Court New South Wales

Medium Neutral Citation: Nowland v Maiolla; Casbee Properties Pty Ltd v Eastwood Air Conditioning Pty Ltd [2013] NSWSC 980 Hearing dates: 11/07/2013 Decision date: 11 July 2013 Before: Robb J Decision: Amendments to the Short Minutes in 2012/136262 to be taken as mutatis mutandis with the other proceedings Catchwords: PROCEDURE - civil - pleadings - leave to file late amendment Category: Interlocutory applications Parties: 2012/85607: Dean Nowland (First plaintiff) Taimi Nowland (Second plaintiff) Gian Franco Maiolla (First defendant) The Casbee Group Pty Limited (Second defendant)

2012/136262: Casbee Properties Pty Ltd (Plaintiff) Eastwood Air Conditioning Pty Ltd (Defendant) Representation: Counsel: D Hogan-Doran (Plaintiff in 2012/85607; Defendant in 2012/136262) A Grant (Defendant in 2012/85607; Plaintiff in 2012/136262) Solicitors: File Number(s): SC 2012/85607; SC 2012/136262

EX TEMPORE Judgment 1HIS HONOUR: The court has before it today an amended notice of motion which the applicants were given leave to file in court today. 2The original notice of motion was filed on 11 June 2013. The original notice of motion sought leave to amend the statement of claim in one of the proceedings and the defence in the other proceedings. 3The two proceedings have been ordered to be heard together and they are fixed for hearing before me on 6 August 2013. In matter 85607 of 2012 the plaintiffs are Dean and Taimi Nowland; the defendants are Gian Franco Maiolla who is the first defendant and the Casbee Group Pty Ltd, the second defendant. The second matter is 136262 of 2012. In that case the plaintiff is Casbee Properties Pty Ltd and the defendant is Eastwood Air Conditioning Pty Ltd. Eastwood Air Conditioning Pty Ltd is a company associated with Mr and Mrs Nowland and I will refer to the Nowlands and Eastwood Air Conditioning as the Nowland interests. 4All other parties will be referred to as the Maiolla interests. 5The second of the proceedings, that in which Casbee Properties Pty Ltd is the plaintiff, was originally commenced in the District Court. 6On 1 March 2013, consent orders were made that the District Court proceedings be transferred into this court and that both proceedings be heard together with the evidence in one being evidence in the other. 7The evidence establishes that on 13 March 2013, the solicitor for the Nowland interests received advice from counsel that it was necessary and appropriate to amend the statement of claim in one proceedings and the defence in the other. The evidence shows that draft amended pleadings were prepared in about 17 March 2013. 8On 14 March 2013, consent short minutes of order were made and by one of those orders, the Nowland interests were to provide their proposed amended pleadings to the Maiolla interests by 28 March 2013. 9There were consequent orders designed to determine whether the Maiolla interests would consent to the amended pleadings and an order was made requiring the Nowland interests to file any application for leave to amend by 18 April 2013 which was to be returnable on 29 April 2013. 10There is considerable evidence before the court going to the entirety of the procedural history of both matters and the Maiolla interests have made submissions that the Nowland interests were responsible for delays before the making of the consent orders on 14 March 2013 which are matters which the court should take into account in exercising its discretion to decline leave to the Nowland interests to amend. 11The court is of the view that while there may arguably have been a number of delays, and also opportunity to the Nowland interests to amend their pleadings, those matters are not such as would be given significant weight by the court in declining the application for leave. 12The fact is that on 14 March 2013, the Maiolla interests consented to the Nowland interests being given leave to take steps to seek leave to amend their pleadings. If the orders had been complied with, then draft pleadings would have been delivered on 28 March 2013 and any application for leave to amend would have been dealt with on 29 April 2013. 13There is an unusual feature in this case in that on the evidence, and in relation to matters accepted by counsel for the Maiolla interests, the Nowland interests were impeded in complying with the orders made on 14 March 2013 by the occurrence of significant personal difficulties experienced by their counsel. 14Counsel for the Maiolla interests has taken the admirable course of not inquiring deeply into the nature of the personal problems experienced by counsel for the Nowland interests and in not requiring the court to be given evidence of the precise nature of those problems. This application has proceeded on the basis that the Maiolla interests accept the genuineness of the problems experienced by counsel for the Nowland interests and, as the court understands it, it is accepted that those matters impeded counsel for the Nowland interests addressing the need to prepare amended draft amended pleadings and taking other steps relevant to that process. 15In those circumstances the court should deal with this application on the basis that there was a serious impediment to the Nowland interests meeting the timetable set down by the court on 14 March 2013. 16The Maiolla interests say that nonetheless the Nowland interests have not adequately explained the delay that has occurred and that what should have happened is that the legal advisers for the Nowland interests should have appreciated at an earlier time that counsel would not be available in a timely manner to deal with the preparation of the draft pleadings. 17The evidence suggests that initially it was thought the problem would last for about a week, but it appears that, unexpectedly, the problem continued and was, effectively, an impediment to the draft pleadings being prepared, in the order of a couple of months. 18It is difficult for the court to take a strong view about this issue. On the one hand, the appearance is that the solicitor for the Nowland interests expected, on a continuing basis, that the problem would resolve but, unfortunately, its duration was much longer than expected. 19It is hard to say when the solicitor for the Nowland interests should have appreciated that the issue had become demanding and urgent. One has to take into account the fact that counsel for the Nowland interests was the lawyer who had recommended the amendment and, the court infers, had been involved in investigations and, possibly, conferences in relation to determining what the terms of those amendments should be. It would be difficult for the solicitor for the Nowland interests to know, in this most unusual circumstance, whether the interests of the parties and the court would be best served by taking the extreme step of changing counsel in the circumstances. 20Ultimately the court takes the view that, while this is unfortunate, it is also exceptional, and it would be difficult to be too critical about the conduct of the solicitor for the Nowland interests. 21There is also the fact that the Nowland interests themselves are in no way personally responsible for these circumstances. Had the personal difficulties of their counsel not intervened the likelihood is that draft amended pleadings would have been served more or less in terms of the timetable, and this issue would have been resolved much before now. 22As it happens, draft amended pleadings were sent to the solicitors for the Maiolla interests on 31 May 2013. The court has been informed recently that the Nowland interests have taken the course of further revising their draft amended pleadings, in order to reduce the number of new allegations and, from their perspective, hopefully to reduce the risk that the court will be obliged to decline to grant leave to amend, on the basis that the amendments will cause prejudice to the Maiolla interests. 23The court has received into evidence, as exhibit A, a marked-up copy of the draft further amended statement of claim which, by means of yellow highlighting, indicates both the additions and the deletions that the latest form of the draft further amended statement of claim has, compared to that which was delivered to the Maiolla interests' solicitors on 31 May.2013. 24It should be said, in relation to the draft defence in the proceedings between Casbee Properties Pty Ltd and Eastwood Air Conditioning Pty Ltd, that the form of the amendment is to substantially delete the whole of the presently filed defence, and to substitute, essentially, all of the allegations in the draft further amended statement of claim. The consequence of that is that it is not necessary to give separate consideration to the terms of the proposed draft amended defence, as the same considerations will arise in relation to leave being granted to file that pleading as arise in relation to the draft further amended statement of claim. 25Broadly, the current version of the draft further amended statement of claim contains the same allegations as the earlier version, subject to the deletion of a significant number of paragraphs. There are also a number of additions. The court is conscious that there is some three odd weeks to the hearing. That, by itself, gives rise to a concern as to whether it is appropriate for the court to give leave to make substantial amendments to the further amended statement of claim at this time. There are, however, a number of features that arise in relation to the actual amendments sought to be made, which gives the court some, though not absolute, confidence that the amendments could be made and the case could proceed without undue prejudice to the Maiolla interests. 26The court is of the view that in this particular case it is the issue of potential prejudice which is the cardinal issue that the court must take into account in exercising its discretion in relation to the amendments sought to be made. 27This is, apparently, a family dispute, in the sense that largely the protagonists are members of the same family, as Mrs Nowland is Mr Maiolla's daughter. 28Counsel for the Nowland interests has informed the court of her submission that the new pleadings are supported by the existing evidence and, indeed, substantially by existing affidavits of Mr Maiolla and a gentleman called Mr Kennedy. 29There is, understandably, some difference of opinion on that subject. The court does not have before it the evidence in question, and is not in a position to form a view on the basis of that evidence, of the extent to which the new allegations are, in truth, based upon the existing evidence. However, counsel for the Nowland interests has informed the court that the Nowlands will not seek to file any additional evidence in support of their amended claim. 30That is subject to the existence of an affidavit of Dean James Nowland, dated 9 July 2013. That affidavit has 34 paragraphs. As I understand the submissions, that affidavit was served on the Maiolla interests shortly after it was affirmed. The affidavit is said to be partly in reply and partly in support of the new allegations sought to be made in the draft amended pleadings. 31No submission was made to the court that anything contained in that affidavit caused the Maiolla interests any particular prejudice. 32It is a significant matter to be taken into account by the court that the Nowland interests are prepared to fight the amended case, if leave is granted, on the basis of the evidence as exists, including the affidavit of Mr Nowland just mentioned. 33The court is of the view that it is at least broadly true that the new causes of action sought to be pleaded by the Nowland interests are, so to speak, different legal bases for dealing with substantially the same set of facts. It would be unfortunate if, by reason of leave being refused, the Nowland interests were prevented from litigating all matters in dispute with the Maiolla interests, particularly given that the source of the problem is the unexpected and exceptional difficulty of a personal nature faced by their counsel. In these circumstances, as mentioned, ultimately the issue becomes one of prejudice. 34The Maiolla interests have had the more extensive version of the draft amended pleadings since 31 May of this year, and have been aware, since 11 June 2013, that an application would be made by the Nowland interests for leave to amend in terms of those drafts. 35The court would expect, in the circumstances, that the Maiolla interests would conduct themselves on the basis that, although they were opposing leave being granted, the outcome of an application for leave could not be known until judgment was given. The Maiolla interests, in the circumstances, would not be expected simply to prepare the case as if the leave had been given but, on the other hand, it would be expected of them to investigate the allegations and to determine whether, in a real, objective way, they could bring before the court evidence that leave would be prejudicial to them. 36As a general matter it can often occur that, if one party is given leave to amend pleadings, that will introduce true, new issues, which will require evidence from the other party, and may throw up the need for the utilisation of the usual court practises, to investigate allegations that have been made. 37Counsel for the Maiolla interests, before this court, has conscientiously put submissions as to why the court should take the view that allowing the amendments sought by the Nowland interests, at this stage, will cause prejudice. However I think it is fair to say that, in all the cases, the alleged prejudice was of a hypothetical nature. That does not mean that the hypothesis cannot in fact occur but, first, no evidence was put before the court of prejudice. The court does not take the view that that, in the circumstances, is the only way the court can draw conclusions about prejudice, but it is true to say that the court can expect a party, resisting an application to amend, to identify aspects of the pleading, aspects of the existing evidence, and a rational basis for saying, or identifying, what additional evidence or procedures will be necessary. I think it is fair to say that counsel for the Maiolla interests was not in a position to do that. 38Counsel strongly made the point that the existing statement of claim, as filed, essentially raises factual issues that occurred in a period 14 July to 10 November 2008. 39Counsel for the Maiolla interests concedes that deponents of affidavits who will be called by him have given substantial evidence in relation to events that occurred during that period, although he says, properly, that that evidence precisely addresses the existing pleadings. 40When one looks at the current version of the draft amended statement of claim one sees that there is a significant number of new factual allegations. At least a substantial number of those factual allegations, even though they go back to February 1990, are matters of fact which, if correct, would be expected to be proved by clear and simple evidence. Either the evidence is available or it is not and, as counsel for the Nowland interests has indicated, subject to Mr Nowland's brief additional affidavit, the Nowlands are prepared to proceed upon the basis that the existing evidence will prove those matters. 41In these circumstances counsel for the Maiolla interests was invited to identify paragraphs of the draft further amended statement of claim which he submitted introduced significant further areas of factual enquiry, the point being that counsel's position, effectively, was that, in the absence of evidence of prejudice, or specific submissions which would demonstrate to the satisfaction of the court, that particular aspects of the amended pleading would require specific types of additional evidence which could not readily be obtained then, effectively, counsel had to point to new allegations which, on their face, could be expected to raise prejudice. 42Having considered the particular allegations identified by counsel, the court is not persuaded that the supposed prejudice will necessarily arise, or is likely to arise with sufficient probability for the court simply to exercise its discretion to decline to allow the amendments. 43In the circumstances, I do not believe that it will be necessary, or convenient, to analyse each of the identified paragraphs, as that will involve, largely, a speculative exercise on the part of the court. 44Just taking some examples: Counsel pointed to the allegations in 4H to 4K of the draft document. 4H sets out an agreement between certain persons alleged to have been made in July 1997, and 4I alleges another agreement, alleged to have been made at about the same time. Counsel suggested to the court that these agreements would be significant as, no doubt, the agreements were relevant to the oppression claim which the Nowland interests now seek to introduce into the case, by means of paragraphs 30, 31, and 33 of the draft further amended statement of claim. 45However, when one goes to those paragraphs, taking 30 as an example, paragraph 30 asserts that the failure of Mr Maiolla to cause the plaintiffs to each hold 15 per cent of the issued shares in Casbee Group and Casbee Properties was, to use the shorthand, oppressive conduct. 46That failure appears, on the pleading, to arise out of a failure to implement what is alleged in paragraph 8 to be a de-merger agreement made on or about 14 July 2008. 47Though the Nowland interests seek to amend paragraph 8 it substantially was an allegation contained in the existing pleadings. 48The point of this is that paragraph 30, in raising an oppression claim, appears to be based on the de-merger agreement, which is said to have been made on or about 14 July 2008, which is within the period mentioned by counsel as being the period covered by the presently filed pleadings. 49This example is given because it appears that the allegations in paragraph 4H and 4I are more historical in nature, and it is not at all clear that those allegations are of fundamental importance to the actual claim for relief by the Nowland interests. 50This example is given because, in determining whether or not there is prejudice, one needs to grapple in some detail with the new allegations and be satisfied that the prejudice is a real one. 51One then looks at paragraph 4J and 4K that were also relied upon by counsel for the Maiolla interests. Paragraph 4J lists a number of corporate events such as, a) the incorporation of Casbee Group, which is said to have occurred on 24 July 1997. Paragraph 4K alleges that on 4 March 1998 Casbee Group caused Casbee Property to be incorporated. 52These allegations are of a nature that they will be proved or not, as the case may be, by simple documentary evidence, and on the basis on which the Nowland interests are prepared to conduct this case that evidence, if it exists, is already in affidavit, or documentary form, to be tendered. 53Counsel referred to paragraph 5E. That concerns an allegation of Casbee Group declaring a $430,115 dividend to its shareholders in 2006, and as to what was agreed to be done with that money. 54Counsel says that this is a new allegation and, obviously, that is true, from the form of the draft amended pleading. Counsel was not able to say exactly why it was, in view of the Nowland interests' stance that those matters are proved or not by the existing evidence, as to precisely what it might be that the Maiolla interests would need to do in response, and as to why that could not be done in the time available. Counsel commented that the Maiolla interests would not have the opportunity to use the court's processes such as the issuing of subpoenas, discovery or notices to produce, to investigate the new allegations. 55The court has reached the conclusion that, with some concerns and a little doubt, it is proper to permit the Nowland interests to amend their pleadings in the manner sought. However, that conclusion is necessarily based upon hypothetical considerations to a considerable extent. 56In part that is because the Maiolla interests have not demonstrated in a real and actual way how they will suffer prejudice. However, the court cannot rule out the possibility that when the Maiolla interests seek to respond to these amendments then genuine prejudice will be discovered. Accordingly, if the court gives leave to the Nowland interests to amend then the court must strive to ensure that the Maiolla interests are protected as fully as possible and, in particular, from the possibility that real prejudice emerges which their legal advisers have not been able to identify in specific terms before me today. 57Draft short minutes of order have been provided by counsel for the Nowland interests. The first order would grant leave to the plaintiffs to file the latest version of the further amended statement of claim, paragraph 2 would be an order that the plaintiffs pay the defendants' costs thrown away, and paragraph 3 extends that order to the costs of the notice of motion. Paragraph 4 directs the defendants to file and serve any defence to the further amended statement of claim and any further evidence by 5pm Wednesday 24 July 2013. Paragraph 5 directs the plaintiffs to serve any evidence in reply by 5pm on Wednesday 31 July 2013. 58I propose to hear the counsel for the parties in relation to the orders that should be made, particularly as to timing. Plainly, in the circumstances, the court has to be extremely sympathetic to the position of the Maiolla interests. 59The point which the court would ask counsel to consider is this: It is plain that this application, for the most exceptional and unfortunate reasons for which the Nowland interests themselves are in no way really responsible, has been brought late, and very close to the hearing. That has the result that the court must strive to ensure that the Maiolla interests are protected from any genuine prejudice which arises. 60Accordingly, even if leave is granted, that must be on terms that the Maiolla interests can apply to the court for whatever relief they see fit, if circumstances put them in the position where they can demonstrate, in a proper way, prejudice which would be unfair for them to suffer. The court has in mind that the Maiolla interests should do that as soon as it becomes apparent that they will suffer prejudice, and when that prejudice can be demonstrated. 61Counsel for the Nowland interests indicated that, if any such event occurred, it may be possible to deal with that issue by further amending the pleadings, rather than risk losing the hearing date. 62In the circumstances it is self-evident that, by making this late application for amendment, the Nowland interests are in some jeopardy of the hearing date being lost, although it is not self-evident that that will happen, and that there might be some consequent costs order in relation to that matter. 63In the circumstances, subject to hearing counsel as to the precise orders that should be made, it will be necessary for the legal representatives of the Maiolla interests to consider the position in relation to the filing of a defence and any further evidence that may be necessary and, if and when prejudice arises of an objective and demonstrable nature, the court will have to deal with that issue at the time. 64I will make amendments to the Short Minutes of Order in case number 2012/136262 to be taken as mutatis mutandis with the other proceedings. 65Liberty to apply on two days notice. 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: 23 July 2013