Supreme Court New South Wales Medium Neutral Citation: JKAM Investments Pty Ltd v Damien [2017] NSWSC 1182 Hearing dates: 4 September 2017 Date of orders: 04 September 2017 Decision date: 04 September 2017 Jurisdiction: Equity Before: Kunc J Decision: Adjournment and amendment allowed Catchwords: PROCEDURE – Application to adjourn hearing and amend pleadings – No issue of principle Cases Cited: Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd; Hotray Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd; Hotray Pty Ltd v JKAM Investments Pty Ltd (JKAM Investments Pty Ltd v Karl Damien- First Cross Claim; Karl Damien v JKAM Investments Pty Ltd- Second Cross Claim) [2015] NSWSC 272 Damien v JKAM Investments Pty Ltd [2015] NSWCA 368 Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd [2013] NSWSC 764 Category: Procedural and other rulings Parties: JKAM Investments ACN 159 084 018 (Plaintiff/Cross-Defendant)) Karl Damien (First Defendant/Cross-Claimant) Champion Homes ACN 082 497 247 (Second Defendant) Representation: Counsel: H Sonmez (Plaintiff/Cross-Defendant) J Cohen (First Defendant/Cross Claimant) Solicitors: JK Solicitors (Plaintiff/Cross-Defendant) Duffy Law Group (First Defendant/Cross-Claimant) File Number(s): 2015/276373 Publication restriction: No EX TEMPORE Judgment (REVISED) 1. These proceedings were listed before me to commence today for a hearing of five days. Last Friday my associate was informed that the plaintiff/cross-defendant ("JKAM") proposed to seek to vacate the hearing dates and apply for leave to amend its amended statement of claim. Later in the day my associate was also informed that any such application would be opposed by the defendant/cross-claimant ("Mr Damien"). 2. When the proceedings were called on for hearing this morning, JKAM made its foreshadowed application to vacate the hearing date and for leave to amend its amended statement of claim. That application was opposed. Mr H Sonmez of Counsel appeared for JKAM and Mr J Cohen of Counsel appeared for Mr Damien. 3. These proceedings have a long and tortured history arising from an agreement made in December 2012 for JKAM to purchase a property at Camden from Mr Damien. Related proceedings were determined by Darke J (Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd; Hotray Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952) and Rein J (Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd; Hotray Pty Ltd v JKAM Investments Pty Ltd (JKAM Investments Pty Ltd v Karl Damien- First Cross Claim; Karl Damien v JKAM Investments Pty Ltd- Second Cross Claim) [2015] NSWSC 272). There was an unsuccessful appeal by Mr Damien from the decision of Rein J: Damien v JKAM Investments Pty Ltd [2015] NSWCA 368. 4. The basis of JKAM's application before me was paragraph [18] of the Court of Appeal's judgment (emphasis added): "18. Given the manner in which JKAM pleaded the relevant part of its claim, the factual issue which the primary judge needed to determine was the identity of the company which performed the building work. As I have indicated, he found that it was ACPL. On that basis then there was no dispute but that the debt had been validly assigned to JKAM. Nevertheless, although not adverted to by the primary judge in his reasons, it was Damien's case before this Court that even if the debt had been validly assigned to JKAM, it was not due and payable so long as the Contract for Sale remained on foot. However, this aspect of Damien's case was undermined by the agreed fact that on the second day of the hearing before the primary judge, Damien had terminated the contract and brought it to an end. In these circumstances, subject to one matter, counsel for Damien reluctantly conceded that his client was liable to JKAM for the amount claimed." 1. The amended statement of claim, which was to be the subject of the hearing before me, pleaded an action based upon the contract which, as is apparent from the paragraph just quoted, had been the subject of an agreed fact in earlier proceedings between these parties to the effect that Mr Damien had terminated that contract. 2. The application for the amendment and adjournment was supported by an affidavit sworn today by JKAM's solicitor. Two salient features emerge from that affidavit. 3. First, it was said that in an earlier iteration of JKAM's pleadings, a claim for misleading and deceptive conduct of the kind now sought to be advanced in the proposed amendment had been included. However, during a redraft of that pleading the alternative claim of misleading and deceptive conduct "was somehow left out of the statement of claim drafted by the barrister" (not Mr Sonmez). No submission was made for Mr Damien that the Court should infer a deliberate forensic decision had been made to omit the claim. 4. Second, although these proceedings had been listed for some time, the solicitor received instructions during August to brief fresh counsel for the hearing before me after counsel who had been briefed at the beginning of August had said the case was "outside his expertise". As a result Mr Sonmez was briefed on 26 August 2017. Neither Mr Sonmez nor the other other counsel had appeared in the hearings before Rein J or the Court of Appeal. 5. On 30 August 2017 (last Wednesday) Mr Sonmez raised with his instructing solicitor his concern about the effect of the Court of Appeal's decision (and of the agreed fact concerning the termination of the contract) and its impact on the case sought to be brought in the amended statement of claim. Significantly for present purposes, while Mr Damien contended that the contract had been terminated, this "agreed fact" was not a point pleaded in Mr Damien's defence or raised in his pre-hearing submissions (which record that Mr Damien's notice of termination of the contract was not accepted by JKAM). 6. In short, Mr Sonmez accepted before me that, if the trial were to proceed today, the claim sought to be advanced in the amended statement of claim relying upon that contract could not be sustained. His submissions in support of his application included a proposed claim pleading a case in misleading and deceptive conduct. 7. The application was opposed by Mr Cohen on the basis that it was too late and, arguably, would be useless because of Anshun estoppels that were said to arise from the earlier proceedings. 8. I discussed the principles concerning amendment of pleadings in my decision in Macquarie International Health Clinic Pty Ltd v Sydney Local Health District; Sydney Local Health District v Macquarie Health Corporation Ltd [2013] NSWSC 764: "48 The parties, correctly, agreed that I had power to permit Macquarie's amendment under s 64 of the Civil Procedure Act 2005 (NSW) ("the CP Act"), which provides: (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. ... 49 Section 58 of the CP Act provides: (1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: (i) any order for the amendment of a document, and ... (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, ... (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case. 50 Pausing there, I therefore proceed on the basis that the prima facie mandatory requirement for all necessary amendments to be made under s 64(2) is to be exercised subject to the requirements of s 58. In doing so it is mandatory for the Court to have regard to the provisions of ss 56 and 57 of the CP Act and permissible for the Court to have regard to the matters listed in s 58(2)(b). I have reproduced above those permissive matters listed in s 58(2)(b) which I consider to be relevant to the present application and which I have in fact taken into account. 51 Section 56 requires the Court, in an application of this kind, to give effect to the overriding purpose of the CP Act, which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. 52 Section 57(1) of the CP Act requires the overriding purpose to be effected having regard to the following objects: (a)the just determination of the proceedings, (b)the efficient disposal of the business of the court, (c)the efficient use of available judicial and administrative resources, (d)the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties." 1. Having reviewed the new claim advanced by Mr Sonmez, it does not appear to me to be unarguable. I accept Mr Sonmez's observation that he would wish further time to refine it, but there does appear to be a cause of action that is capable of being argued set out in the draft pleading. 2. It is not possible for me to express any view on the proposed defence foreshadowed for Mr Damien relying on Anshun estoppel. The estoppel arises by reference to the principle enunciated in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 to preclude the assertion of a claim if the claim was so connected to the subject matter of the first proceeding as to make it unreasonable, in the context of the first proceeding, for the claim not to have been made in the earlier proceeding. To come to any view of that would require the Court to spend a great deal of time coming to grips with the complex previous litigious history of these proceedings. I very much doubt, on an application such as this, that the Court could come to a sufficiently clear view that such an estoppel would run so as to be satisfied that the proposed amendment was doomed to failure. 3. In considering how to approach this matter (and trying to see if some of the hearing time could be used) I raised with Mr Cohen the prospect of hearing Mr Damien's cross-claim, which was for a money sum for mortgage payments which Mr Damien alleges JKAM covenanted to make in respect of the subject property. JKAM's defence to that, as articulated by Mr Sonmez, again seemed to be based on the contractual consequences of the agreed termination noted by the Court of Appeal. In granting JKAM's application, I would have been prepared to go on to hear Mr Damin's cross-claim in any event. However, it was put for Mr Damien that quite apart from any contractual impact on his cross-claim that the agreed fact of termination may have had, Mr Damien was reluctant to proceed with his cross-claim if the adjournment were to be granted because of the possibility of overlapping evidence and unspecified considerations arising from the way in which JKAM might now wish to put its case. 4. Initially I did not find JKAM's reasons explaining the lateness of the proposed amendment to be particularly persuasive. However, notwithstanding the prejudice of delay to Mr Damien and the general undesirability of hearing dates being vacated, I have come to the view on further reflection that a greater injustice would be worked by preventing the proposed misleading and deceptive conduct claim from being advanced at all in circumstances where counsel, newly briefed, has come to the view that the contract claim presently pleaded is untenable. I have been particularly influenced in reaching that conclusion by the impression I have formed that neither party has really thought through properly the consequences for its case of the agreed fact of the termination of the contract. In making that observation I am not to be taken as in any way criticising Mr Damien or his legal representatives, given that they opposed the adjournment and were prepared to proceed with today's hearing. However, it does seem to me that both sides need to consider the impact of the agreed fact of termination upon the legal relations between them, and the claims that they wish to litigate in these proceedings. 5. During the course of the argument, there was some discussion between the parties as to whether an undertaking should be given by JKAM not to press the prosecution of its bankruptcy proceedings against Mr Damien in the Federal Circuit Court based on Rein J's judgment (upheld by the Court of Appeal) pending determination of these proceedings. The parties came close to agreeing an inter partes undertaking, but ultimately that agreement was not forthcoming. I came to the view that the presence or absence of an undertaking by JKAM, whether inter partes or to the Court, in relation to the bankruptcy proceedings against Mr Damien would have made no difference to the conclusion which I have reached in relation to allowing the amendment and adjournment. That is because, in my view, the proper place to resolve (if the parties do not otherwise agree) the effect of these proceedings upon the bankruptcy proceedings is in the Federal Circuit Court. These reasons can be made available to the registrar or judge in the Federal Circuit Court to make clear that the adjournment of this hearing arose from JKAM's application in circumstances where, ultimately, JKAM received a substantial indulgence by being permitted to advance an amended claim. 6. For these reasons, in the exercise of the Court's discretion, I propose to allow JKAM to amend to bring its proposed claim in misleading and deceptive conduct. I will make procedural directions to give effect to that conclusion, including that JKAM must pay Mr Damien's costs thrown away by reason of the vacation of this hearing and by reason of the amendments. I rejected Mr Damien's application that such costs be payable forthwith because it seems to me that such costs can only be determined once the consequences of today have been worked through in the further conduct of the proceedings. 7. In allowing the application I note that, on instructions, Mr Sonmez confirmed that his client formally abandoned any further claim for contract damages against Mr Damien arising from the contract for sale of 21 December 2012 and the deed of 10 December 2012. 8. These proceedings are yet another round in what has become a dispute which has resulted in several sets of proceedings in this Court and now in the Federal Circuit Court in relation to JKAM's creditor's petition against Mr Damien. I was also informed that there has been an unsuccessful mediation in the proceedings already. 9. Nevertheless, it seems to me that these are proceedings which the parties need to give serious consideration to attempting to resolve. They otherwise show every prospect of continuing in this Court for years to come. The way I propose to deal with that is to appoint a further directions hearing before me once the pleadings have closed to revisit the question of whether the Court should order a further mediation. 10. The orders and directions of the Court are as follows: 1. Leave is granted to the plaintiff to file and serve a further amended statement of claim to bring claims for misleading and deceptive conduct on or before 25 September 2017. 2. A defence and any amended cross-claim is to be filed and served on or before 16 October 2017. 3. Any reply and any defence to any amended cross claim is to be filed and served on or before 6 November 2017. 4. I vacate the balance of the hearing fixed for 5 to 8 September 2017. 5. The plaintiff is to pay the defendant's costs thrown away by reason of the vacation of the hearing dates and by reason of the amendments to the amended statement of claim. 6. The proceedings are listed for further directions before me on 9 November 2017 at 9.30am. ********** 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: 05 September 2017