FEDERAL COURT OF AUSTRALIA

Patrick v Capital Finance Pty Ltd (No 1) [2002] FCA 1566

PRACTICE AND PROCEDURE – leave sought to amend Statement of Claim –amendments sought opposed by respondents – amendments based on allegations previously made – interests of justice – mandate of Court to decide completely and finally all matters in controversy – need to ventilate all issues – amendments raised at a late stage – no evidence of specific prejudice – whether leave should be granted to make amendments to Statement of Claim

Federal Court of Australia Act 1976 (Cth) ss 22, 23, 33ZB

St George Ltd v M J K Pty Ltd [1999] FCA 1752 cited

Jenkins v NZI Securities Australia Ltd (1994) 52 FCR 572 cited

The State of Queensland v J & L Holdings Pty Limited (1997) 189 CLR 146 referred to

WILLIAM GEORGE DOUGHTY PATRICK (for himself and as representing the persons referred to in paragraph 1 of the Statement of Claim) v

CAPITAL FINANCE CORPORATION (AUSTRALASIA) PTY LIMITED

(ACN 074 692 443), CAPITAL FINANCE CORPORATION (AUSTRALASIA) PTY LIMITED (ACN 074 692 443), CAPITAL FINANCE CORPORATION (AUSTRALIA) PTY LIMITED (ACN 074 352 104), CAPITAL FINANCE CORPORATION PTY LIMITED, (ACN 064 512 385), KERROD GRANT PARK, OVERSEA-CHINESE BANKING CORPORATION LIMITED (ABN 073 598 035), CHRISTOPHER COOTE, PHILLIP EMANUEL PRODUCTIONS LIMITED (ACN 002 693 512)

V 637 of 2001

TAMBERLIN J

SYDNEY (HEARD IN MELBOURNE)

18 DECEMBER 2002

THE COURT ORDERS THAT:

1.         Leave is granted to the applicant to amend his Statement of Claim in accordance with the Fourth Amended Statement of Claim provided to the Court on 25 November 2002.

2.         The applicant pay the costs of the respondents thrown away as a result of the amendment referred to in paragraph 1 hereof.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The applicant has applied to further amend the detailed pleadings in this matter by way of a Fourth Further Amended Statement of Claim.  On the second day of the hearing I decided to allow the amendments and I now briefly set out my reasons for so doing and confirm the orders which I have made.

2                     The gist of the amendments sought by the applicant relates to allegations that the first, second, fourth, fifth and sixth respondents had knowledge of an agreement of 9 April 1996 between Phillip Emanuel Productions Pty Limited (“the Management Company”), Adelaide Festival Centre Trust (“the Trust”) and Gordon Frost Attractions Pty Limited (“Frost”) under which the Management Company was obliged to invest only $1 million and not $5.5 million as referred to in the Prospectus for the “Crazy For You” stage production.  Some particulars are given as to the way in which such knowledge is attributed.  There are also amendments which assert that the sixth respondent, Christopher Coote, (“the representative”) paid money to the Management Company knowing that it was intended not to utilise the money for the presentation of the stage production.  The allegations rely on knowledge said to be attributed to the representative as providing a basis for the claim of misleading and deceptive conduct.  As against the other respondents the knowledge of such an agreement is said to be one of the grounds for claims of liability against them as accessories and for receiving funds with knowledge of the breaches by the representative.

3                     The amendments were opposed by all respondents who appeared on the hearing, on the basis that they raise for the first time new allegations of knowledge in relation to the agreement of 9 April 1996 against the relevant parties.

4                     Counsel for the applicant says that the substance of the charges now sought to be made, which involve serious allegations of dishonesty, was alleged in the Third Further Amended Statement of Claim as allowed by Heerey J against the objecting parties.  There is also an allegation sought to be made that the respondents knew that a large portion of the money advanced by the fifth respondent (“OCBC”) would be used to pay for the issue of term bonds by it.

5                     Declarations are sought as against the fourth respondent, Mr Park and the first, second and third respondents (collectively “Capital”), of which he is said to be the controlling entity, that they knowingly received Trust property that belonged to the applicant and were accessory to a breach by the representative of fiduciary and trustee duties.  As against OCBC, a declaration is sought that it knowingly received Trust property that belonged to the applicant and was an accessory to a breach of fiduciary and trustee duties owed by the representative and an order is sought for consequential relief that OCBC should pay such amount as the Court considers appropriate.  Although deceit by OCBC in accepting payments was squarely alleged previously (in par 68N as it stood in its earlier form in the Third Further Amended Statement of Claim), the allegations that the true extent of the Management Company’s investment obligations were not disclosed and that the Management Company only invested $1 million in the production was not relied on as an element in that version of par 68N.  Fraud has also been alleged previously against the first, second and fourth respondents (in par 67 of the Third Further Amended Statement of Claim).

6                     Counsel for the applicant made a number of submissions in support of the amendments sought.  They can be summarised as follow.

7                     First, it is said that there is a need to ventilate all the issues and decide the real questions between the parties and to make all proper orders: see ss 22, 23 of the Federal Court of Australia Act 1976 (Cth) (“FCA”); O 13 r 2(2) of the Federal Court Rules (“FCR”).  Section 22 of the FCA makes it clear that the mandate of the Court is to decide completely and finally all matters in controversy between the parties and to avoid multiplicity of proceedings: see St George Ltd v M J K Pty Ltd [1999] FCA 1752.  Counsel refers to the fact that fraud and intent have already been alleged in substance and the grave charges are not entirely new allegations.  It is also pointed out that new counsel has been appointed and the case has been advanced from a different perspective.  This, of course, is not a reason to grant leave to amend, but it explains how the amendments came about.  This is a representative proceeding and it is important that all real issues be properly ventilated because other parties may be bound by the ruling on the common questions of fact and law: see s 33ZB(b) of the FCA; also Jenkins v NZI Securities Australia Ltd (1994) 52 FCR 572.  Reliance is placed on the fact that the hearing will extend over a number of days and it will be possible to adjust the conduct of the proceedings to prevent prejudice.  There were general assertions of prejudice on behalf of the respondents but no specific evidence of irreparable difficulty relating to the further conduct of the case or costs was referred to.  Finally, the number of persons who may be adversely affected if the amendment is disallowed is significant.

8                     In support of their opposition to the proposed amendments the respondents point to the following considerations.  First the agreement of 9 April now alleged to be evidence of objective dishonesty is between entities who are not parties to the proceeding and there is a need to prepare to meet this new allegation. For example, it is said there will be a need to interview prospective witnesses and to obtain detailed instructions and to issue subpoenas in order to properly prepare cross-examination and the respondents’ case in relation to these new matters.  Second, it is pointed out that these grave additional allegations have been raised at the last moment shortly before the first day of the hearing and it is not possible to fairly remedy the prejudice that arises because it would be unfair to again adjourn the proceeding especially since it has previously been adjourned on extremely short notice.  No party seeks to have any further adjournment of the proceeding.  Third, the respondents submit that many of the matters sought to be raised are unclear to them from the particulars given in relation to the allegations sought to be raised.  For example, particulars are needed to clarify such questions as to who, specifically, is accused of fraud on the part of the fifth respondent and the other parties, and what the specific allegations are against each identified person.  It is said that in absence of particulars, the allegations are broad, general and unfair.  Fourth, it is submitted that if the amendments sought are allowed, the orderly conduct of the case will be disrupted. The interests of justice, it is said, indicate that permission should not be given for the respondents to be charged with serious allegations of misconduct for the first time at the opening of the trial.

REASONING ON APPLICATION

9                     Great importance is attached to the necessity for there to be full ventilation of all issues between the parties in litigation before the Federal Court.  The principles which govern the making of amendments to pleadings are well settled and as the High Court has indicated, in an appropriate case the principles of orderly case management must give way to the dominant interest of administering justice.  In the application of this approach, however, there is a need to preserve flexibility to meet the contingencies of the particular case: see The State of Queensland v J & L Holdings Pty Limited (1997) 189 CLR 146 at 155, 167-172.  Ultimately, the need for order in the conduct of proceedings must not be permitted to outweigh the primary objective which is the administration of justice to all parties in such a way that no party is prejudiced in the presentation of the case sought to be made.

10                  If the application to amend is not granted then this representative action will not resolve all the points at issue between the parties.  This is a particularly important consideration in a representative proceeding in that it carries the consequence that not all common issues of fact or law will be determined.  Moreover, I am not persuaded on the present state of the evidence that any difficulties to the presentation of the respondents’ case are insurmountable in the sense that any prejudice which may be caused to the respondents is incapable of adjustment by way of flexible case management.  The allegations of difficulties and potential prejudice are generalised assertions at this stage and no specific evidence of prejudice has been advanced and if during the course of the proceedings any detailed evidence of specific prejudice is provided, an application can be made to the Court to make appropriate adjustments to the management of the case.  It is of course obvious that the belated amendments could cause some practical difficulties for the respondents.

11                  While it is true that the additional matters sought to be raised are serious and late in the extreme, the underlying obligations of knowledge, fraud and dishonesty have been substantially formulated in the previous, extensive amendments in the Third Further Amended Statement of Claim.  The new matters further define the broader allegations raised, although it is correct to say that some further time may be required to counter the new allegations and prepare appropriate cross-examination.  Nevertheless, I consider that the interests of justice warrant the grant of leave to amend, especially given the time calculated for the hearing of this matter and the fact that inevitably there will be a need to set aside further time in the future for continuation of the hearing.  This will give the respondents sufficient opportunity, in my view, to undertake the necessary work to conduct their case so as to deal with the new matters raised.

12                  Because of the disruption to the progression of the case, and to the preparation by the respondents caused by the amendments, it is, as acknowledged by counsel for the applicant, appropriate that any costs incurred and thrown away as a result of the lateness of these amendments should be paid by the applicant, and I propose to make an order to that effect.

13                  Accordingly, the orders of the Court are that leave is granted to make the amendments, including the excisions, set out in the proposed Fourth Amended Statement of Claim.  The applicant is to pay, in any event, regardless of the outcome of this proceeding, any costs of any of the respondents thrown away which are shown to be due to these amendments.

Associate:

Dated:              18 December 2002