FEDERAL COURT OF AUSTRALIA

Oztech Pty Ltd v Public Trustee of Queensland (No 2) [2015] FCA 1485

THE COURT ORDERS THAT:

1.    Leave be refused to the applicant to amend its originating application in the form of the proposed further amended originating application annexed to the applicant’s interlocutory application filed 27 November 2015 (the Amendment Application).

2.    Leave be granted to the applicant to amend its statement of claim in the form of the proposed amended statement of claim annexed to the Amendment Application, save for the paragraphs thereof identified in [86]-[88] of the reasons for judgment published on 23 December 2015 (the reasons) and subject to the applicant also providing particulars of the matters identified in [80]-[84] of the reasons. This leave is to be exercised by 29 January 2016.

3.    By 8 February 2016, the respondent give electronic discovery to the applicant in respect of the categories of documents identified in paragraphs 1(a)-(f) of the applicant’s interlocutory application filed 22 October 2015 (the Discovery Application). The balance of the Discovery Application be stood over for further hearing.

4.    Costs of the Amendment Application and the Discovery Application be reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This proceeding is a representative proceeding commenced under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act).

2    It arises out of the respondent’s role as the trustee for noteholders in respect of senior unsecured notes issued by the company now called Octaviar Investment Notes Limited (in liquidation) (OIN). A company now called Octaviar Limited (receivers and managers appointed) (in liquidation) (OL) was a guarantor of OIN’s obligations under the notes. The applicant alleges that, following a sharp drop in OL’s share price in January 2008, and OL’s sale of a business (the Stella Group) which was completed on 29 February 2008, the respondent acted too slowly to protect the interests of noteholders, in particular by failing to apply to wind-up OIN and OL, and to take other steps, by 29 February 2008, with the consequence that the respondent breached his statutory, contractual and general law duties to noteholders.

3    The applicant seeks leave to amend its amended originating application and its statement of claim. The application is opposed by the respondent on various grounds, including that the proposed amendments raise new causes of action that are now statute-barred and that the proposed amendments to the statement of claim are deficient in various respects. The respondent also raises discretionary reasons why leave to amend should be refused.

4    The application for leave to amend the amended originating application is brought pursuant to r 8.21 of the Federal Court Rules 2011 (the Rules). Rule 8.21(1)(g)(i) is of particular relevance to this application. It provides:

8.21 Amendment generally

(1)    An applicant may apply to the Court for leave to amend an originating application for any reason, including:

…

(g)    to add or substitute a new claim for relief, or a new foundation in law for a claim for relief, that arises:

(i)    out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the applicant; or

…

5    Rule 8.21(2) relevantly provides that an applicant may apply to the Court for leave to amend an originating application in accordance with r 8.21(1)(g)(i) even if the application is made after the end of any relevant period of limitation applying at the date the proceeding was started.

6    The applicant seeks to add the following new claims for relief:

(a)    an account in equity;

(b)    compensation pursuant to s 82 of the Trade Practices Act 1974 (Cth) (the TPA);

(c)    compensation pursuant to s 87 of the TPA;

(d)    compensation pursuant to s 99 of the Fair Trading Act 1989 (Qld) (the FTA);

(e)    compensation pursuant to s 100 of the FTA;

(f)    compensation pursuant to s 1041I of the Corporations Act 2001 (Cth) (the Corporations Act); and

(g)    compensation pursuant to s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).

7    The application for leave to amend the statement of claim is brought pursuant to r 16.53 of the Rules. The amendments include a substantial number of new allegations of fact. The applicant says that these new allegations of fact support its existing claims for relief. It also says that the new allegations of fact also support the new claims for relief which it seeks to add to its amended originating application.

The course of the proceeding

8    At the outset, I should briefly summarise the course of the proceeding so far.

9    On 16 September 2014, the applicant filed its originating application and statement of claim. Prior to that, the respondent had agreed, in a Standstill Agreement dated 25 February 2014, that the following period of 60 days would not be included for the purposes of any statute of limitation defence the respondent might have by reason of the fact that the proceeding had not been commenced on or before 25 February 2014. The period was subsequently extended to 17 September 2014.

10    On 16 February 2015, the respondent was ordered to file and serve its defence within 28 days after the provision for security for costs, which was required to be provided by 16 March 2015. Security was provided on 16 March 2015, with the consequence that the respondent’s defence was due to be filed on or before 13 April 2015. The respondent sought an extension of time for filing its defence, which was agreed to. Orders by consent were made accordingly. The defence was filed and served on 27 April 2015. In its defence, the respondent raised its state of mind in relation to certain events in January and February 2008—identified in more detail at [29]-[34] below—based on advice it received from PricewaterhouseCoopers (PwC) and legal advice it received from its solicitors and counsel.

11    On 8 May 2015, the applicant requested the respondent to provide copies of all documents referred to in its defence. On 18 May 2015, documents were received. However, the applicant formed the view that the documents which had been provided did not enable it to gain a proper understanding of all communications that passed between the respondent and its legal advisers that were relevant to the respondent’s state of mind as pleaded in its defence. The applicant sought a listing of all documents in the possession of the respondent’s solicitors and counsel for the period 4 February 2008 to 4 June 2008 relating to certain matters pleaded in the defence. This request was refused on the basis that discovery would be provided on 7 August 2015. A further request for documents in this connection was refused.

12    On 25 July 2015, an order for standard discovery was made. This order was sought by both parties.

13    On 7 August 2015, the applicant was provided with approximately 10,023 documents.

14    On 21 August 2015, the applicant served a notice to produce on the respondent seeking various reports prepared by PwC that had been referred to in an affidavit (Ian Donald Cameron Kelly made 11 March 2008) (the Kelly Affidavit). On 26 August 2015, the respondent produced the PwC reports.

15    On 1 September 2015, a hearing was conducted in relation to the form of notice that should be given to group members pursuant to s 33X of the Federal Court Act. At that hearing, the applicant advised the Court that its review of the discovered documents was likely to be completed by mid to late September 2015 and that, following completion of that review, consideration would be given to whether the statement of claim should be amended to take account of matters which, previously, had not been apparent to the applicant, but which were revealed in the documents produced on discovery or otherwise produced by the respondent. Specific reference was made to matters arising from the PwC reports.

16    In early September 2015, a chronological bundle of discovered documents was produced, although the applicant’s review of the documents was continuing and was not completed until 18 October 2015. As a result of the production of the chronological bundle, the applicant came to the view that there were a number of issues arising from the respondent’s identification of the documents. The applicant also came to the view that a number of documents had been duplicated.

17    In the meantime, on 14 September 2014, the Court ordered the applicant to file and serve, by 30 October 2015, any interlocutory application seeking leave to file an amended statement of claim. This was a date to which the applicant agreed at the hearing conducted on 1 September 2015: see [15] above.

18    The applicant also considered that there were other deficiencies in the discovery given by the respondent. It raised its concerns in correspondence passing between the parties in the period 12 to 20 October 2015. On 22 October 2015, the applicant filed an interlocutory application seeking further and better discovery from the respondent. I will deal with that application in other paragraphs of these reasons: see [92]-[97] below.

19    In an affidavit sworn on 26 November 2015, Ms Banton, the solicitor on the record for the applicant, deposed:

60    When it became apparent in mid October 2015 that the Respondent’s discovery had been deficient, I was initially concerned that the Applicant would not be able to properly amend its Originating Application and Statement of Claim without the Respondent first completing its discovery. I was also concerned that … it would not be consistent with ss 37M and 37N of [the Federal Court Act] for the Applicant to make an application to amend its Originating Application and Statement of Claim without the Respondent having first completed its discovery because that may result in the Applicant having to make a second application to further amend its Originating Application and Statement of Claim after the Respondent completed its discovery.

61    By 26 October 2015, when Justice Yates’ Associate informed me that the Discovery Application was listed for directions on 2 November 2015, it was apparent to me that the Respondent would not complete its discovery and that the Discovery Application would not be resolved as quickly as I had initially anticipated. As such, I formed the view that it was appropriate for the Applicant to amend its Statement of Claim and seek the Respondent’s consent to the Applicant seeking leave to file the Amended Statement of Claim as soon as possible.

20    On about 26 October 2015, the applicant made a decision to amend its statement of claim which, according to Ms Banton, addressed a number of matters which previously had not been known to the applicant at the time the statement of claim had been drafted. These matters included a number of events which occurred in 2007.

21    At a case management hearing held on 2 November 2015, counsel for the applicant informed the Court that it was “certain” that the applicant would be seeking leave to amend the statement of claim. On that day, the proceeding was listed for a two week trial, commencing on 27 June 2016. The listing was made on the basis that it would be a trial on liability only.

22    On 17 November 2015, a draft of the proposed amended statement of claim was served on the respondent, with a request that he consent to leave being granted to the applicant to file an amended statement of claim.

23    On 20 November 2015, the respondent advised the applicant that he would oppose any interlocutory application to amend the statement of claim. The reason advanced by the respondent was alleged undue delay on the part of the applicant. No other reasons were advanced at that time.

24    On 23 November 2015, the applicant wrote to the respondent expressing disagreement with the respondent’s position that there had been undue delay. In the absence of any other basis for opposition having been advanced, the applicant requested the respondent to reconsider its position, failing which the applicant said it would file an interlocutory application seeking the requisite leave.

25    On 24 November 2015, the respondent advised the applicant that his opposition would “be articulated in evidence and submissions”, but would include the contention that the proposed amended statement of claim sought to add statute-barred claims.

26    On 27 November 2015, the applicant filed its interlocutory application seeking leave to amend the amended originating application and the statement of claim.

The statement of claim as currently pleaded

27    As currently pleaded, the statement of claim alleges that from around December 2006, OIN—a company in the Octaviar Group (the parent company of which is OL)—issued notes pursuant to a Trust Deed (entered into on 2 November 2006) (the Trust Deed) and an Amending Trust Deed entered into on 1 December 2006 (the Amending Trust Deed). The obligations of OIN were guaranteed by various companies in the Octaviar Group, including (as I have already noted) OL. On or before 31 July 2007, OIN lent the funds raised by the notes (amounting to $349,819,946.17) to Octaviar Administration Pty Ltd (now in liquidation) (OA). On or before 29 October 2007, OIN lent a further sum to OA. OA did not provide security for these loans.

28    On or before 20 August 2007, OL provided OPI Pacific Finance Limited (receivers and managers appointed) (in liquidation) (PAC) with a put option, the effect of which was that OL agreed to purchase any of PAC’s assets at cost, in certain circumstances. The potential expected loss on this put option was $11.8 million.

29    In around January 2008, the Octaviar Group had exhausted all reasonably available opportunities to raise the capital it required to continue to fund its operations.

30    On 18 January 2008, OL announced its intention to separate parts of its business. One part was the Stella Group, which OL intended to recapitalise to reduce its indebtedness and to achieve appropriate capital structures. As a result of this announcement, the share price of OL dropped by 70% in one day.

31    On or about 4 February 2008, OL entered into binding agreements to sell a 65% interest in the Stella Group for $409.2 million. This transaction was completed on 29 February 2008. The applicant alleges that the respondent knew or should have known that OIN and OL were in financial difficulty by the time the proceeds of this sale were received.

32    The statement of claim then pleads various events concerning OL, OIN and other companies in the Octaviar Group in the period 18 January 2008 to 23 July 2008 including, importantly, the issue by the respondent on 23 May 2008 of a Notice of Event of Default under the Trust Deed to OIN on the basis, amongst others, that OIN and OL were insolvent.

33    The applicant’s case is that by no later than 29 February 2008, the respondent knew or ought to have known certain things which the applicant has identified in paragraphs 78 to 82 of the statement of claim. I will not repeat those matters here. The applicant alleges that, by that date, based on these matters, the respondent ought to have formed the view that the assets of OIN and its guarantors were unlikely to be sufficient to repay the notes when they became due. The applicant pleads that the respondent knew or ought to have known, based on these matters, that immediate steps were needed to be taken to protect the interests of the group members. The applicant alleges that, had the respondent formed these views, it would have given notice to OIN by no later than 29 February 2008 declaring all the notes to be due and payable and, upon any failure by OIN to comply with that notice, the respondent would have given notice to the guarantors demanding payment from them. The applicant also alleges that, by no later than 29 February 2008, the respondent should also have made various court applications (including seeking winding up orders against OIN and the guarantors) and, by no later than 28 February 2014, brought other proceedings against the directors of OIN and the guarantors for contraventions of various provisions (not specifically identified) of the Corporations Act and of Schedule 2 of the Competition and Consumer Act 2010 (Cth).

34    The applicant alleges that if, before 29 February 2008, the respondent had issued a Notice of Event of Default to OIN and declared that the notes were due and payable and/or initiated court proceedings to protect the interest of the group members at that time, then at least some of the funds received from the sale of the interest in the Stella Group of $409.2 million and other assets of OIN would have been available for the applicant and group members. The applicant alleges that, by the time the respondent took action to protect the interests of the group members, the assets available to OIN had been substantially dissipated.

35    The applicant alleges that, by failing to do these things, the respondent breached its obligations under the Trust Deed, the Amending Trust Deed, the Corporations Act and a common law duty of care and that, as a consequence, the applicant and the group members suffered loss and damage. The applicant pleads that it and the group members are entitled to recover their loss and damage from the respondent on various bases, stated as:

(a)    common law;

(b)    equitable principles governing compensation;

(c)    section 283F of the Corporations Act; and

(d)    section 128 of the Public Trustee Act 1978 (Qld).

The proposed amendments to the statemEnt of claim

36    The applicant seeks leave to amend its statement of claim by adding a large number of new allegations of fact. These include allegations concerning:

(a)    duties owed by the respondent as a trustee (paragraphs 37.2A, 37A, 38A and 38B);

(b)    the issuing of reports by PwC in the period 25 October 2006 to 8 June 2007 (paragraphs 48A to 48I);

(c)    the respondent’s resignation and attempts to find a replacement trustee (paragraphs 48J to 48Q), although the current statement of claim includes an allegation that on 6 July 2007 the respondent “purported” to resign as trustee subject to the appointment of a replacement trustee;

(d)    OL’s financial position during 2007 (paragraphs 48R to 48AE);

(e)    the sale of the Stella Group, its restructure and a loan by UBS Investment Bank (paragraphs 48AF to 48AU);

(f)    a facility provided by Fortress Credit Corporation (Australia) II Pty Ltd (paragraphs 48AV to 48BC), although a reference to this facility is made in the current statement of claim in relation to notification of an event of default on 21 January 2008 of which it is said that the respondent was aware or should have been aware;

(g)    negotiations to obtain a commercial banking facility (paragraphs 48BD to 48BI);

(h)    the making of a subscription agreement with Challenger Managed Investments Limited (paragraphs 48BJ to 48BK); and

(i)    the disclosure of a tax liability in OL’s annual report for the year ending 30 June 2007 (paragraph 48BL).

37    The events that are the subject of these allegations took place, largely, in the 2007 calendar year. The events are new to the statement of claim.

38    The applicant also seeks to amend its statement of claim by adding allegations concerning events from 1 January 2008. These events include the provision by PwC of a further report on 31 January 2008, referred to as the Fourth PwC Report, and certain advice from the respondent’s solicitors. These events are also new to the statement of claim.

39    The applicant also seeks to add allegations that the respondent:

(a)    contravened of s 283DA of the Corporations Act (paragraphs 92A to 92F);

(b)    breached its duty to exercise reasonable skill and care (paragraphs 92G to 92L);

(c)    breached its duty to act bona fide in the interests of group members (paragraphs 92M to 92U);

(d)    breached its duty to know and understand the terms of the Trust Deed and other trust documents (paragraphs 92V to 92AA);

(e)    breached its duty to provide the group members with accurate information as to the state of the Trust (paragraphs 92AB to 92AH);

(f)    engaged in misleading or deceptive conduct and unconscionable conduct (paragraphs 92AI to 92AO);

(g)    engaged in prohibited conduct under the Corporations Act (paragraphs 92AP to 92AY); and

(h)    contravened the ASIC Act (paragraphs 92AZ to 92BL).

40    Five matters should be noted in respect of these allegations.

41    First, the contravention and breach referred to in (a) and (b) above concern the alleged failure of the respondent to act on or respond to, in various ways, certain of the new events pleaded with respect to the 2007 calendar year, including two of the PwC Reports (the Second PwC Report and the Third PwC Report) and the disclosure of information in OL’s consolidated balance sheet as at 30 June 2007, or to do certain things based on the new events.

42    Secondly, the breach referred to in (c) above concerns certain of the new events pleaded with respect to the 2007 calendar year in relation to the respondent’s resignation as trustee. As I have noted, in the current statement of claim, the applicant pleads that the respondent “purported” to resign as trustee subject to the appointment of a replacement trustee. In the current statement of claim, the applicant particularises that subsequently, on 1 August 2008, the applicant withdrew its “purported” resignation. No significance is placed on the “purported” resignation other than that it was subject to the appointment of a new trustee. The allegation in (c) above places a different colour on the respondent’s resignation, based on the new facts. The new paragraphs attribute certain motives to the respondent by reference to which the applicant now alleges that the respondent sought to prefer its own position over the interests of group members. This includes an allegation that, in the period 6 July 2007 to 18 January 2008, the respondent devoted its time and efforts towards effecting its resignation as trustee rather than performing its duties as trustee. This finds no expression in the current statement of claim where the respondent’s resignation is simply pleaded as an event which has no significance beyond the fact that it still remained as trustee at times relevant to the allegations made in the pleading.

43    Thirdly, the breach referred to in (d) above concerns the new events in 2008, in particular the provision of the Fourth PwC Report and the provision of advice to the respondent by its solicitors.

44    Fourthly, the breach referred to in (e) above concerns the alleged failure of the respondent to provide accurate information as to the state of the Trust, by failing to disclose each and every one of the new events pleaded in paragraphs 48A to 48BL with respect to the 2007 calendar year.

45    Fifthly, the contraventions referred to in (f), (g) and (h) above concern the alleged failure of the respondent to act on or respond to, in various ways, certain of the new events pleaded with respect to the 2007 calendar year, including the Second PwC Report and the Third PwC Report, and the disclosure of information in OL’s consolidated balance sheet as at 30 June 2007, or to do certain things based on the new events. They also concern the alleged preference that the respondent is said to have given to its own interests over the interests of group members. In essence, these allegations are based, in part, on the same events that underpin the allegations in (a), (b) and (c) above. The allegations in (f), (g) and (h) above also concern the alleged failure of the respondent to notify group members of the respondent’s resignation as trustee, the reason for its resignation, and what the applicant alleges were the respondent’s concerns pleaded in paragraph 48K.

46    In respect of each contravention or breach, the applicant alleges, in effect, that, if the respondent had taken any or all of the steps it pleads the respondent should have taken before 18 January 2008—no more precise date is given—the respondent would have formed certain views and/or taken certain steps, or others would have taken certain steps, with certain consequences. The applicant pleads that the respondent’s contraventions and breaches resulted in loss or damage to group members for which relief is claimed.

47    The point of present significance is that the allegations summarised at [39] above are based principally but not exclusively on matters occurring or which should have occurred, or of which the respondent had knowledge or ought to have had knowledge, before 18 January 2008, whereas the allegations pleaded in the current statement of claim are based principally but not exclusively on matters occurring on and after 18 January 2008 and about which the respondent had knowledge or should have had knowledge and should have taken action by 29 February 2008. Nevertheless, the applicant seeks to rely on the new allegations of fact not just for the new claims for relief, but to supplement and support the currently pleaded causes of action and current claims for relief.

The approach of the parties

48    The parties adopted fundamentally different approaches to the way in which they said the question of amendment should be approached.

49    The applicant submitted that the new allegations of fact which, it says, became known to it primarily by way of discovery and from documents otherwise produced to it in the course of the proceeding, are relevant to, and support its principal allegation that, by no later than 29 February 2008, the assets of OIN and the guarantors were unlikely to be sufficient to repay the notes when they became due and that the respondent knew or ought to have known that immediate steps were needed to be taken to protect the interest of group members. Calling in aid certain observations made by Button J in Zhang v Popovic [2015] NSWSC 1593 at [23]-[28], the applicant submitted that, subject to the discretionary considerations discussed at [62]-[78] below, there was no reason why it should not be permitted to plead and rely upon the new allegations for that purpose, which do no more than expand a cause of action already pleaded.

50    The applicant then submitted that, if that be so, leave should be granted (once again subject to discretionary considerations) to amend the amended originating application to include the new claims for relief because the new claims for relief would then arise out of the same or substantially the same facts pleaded or which, by leave, would be pleaded to support its existing claims for relief. This submission carried with it the implicit submission that, correspondingly, leave should be granted to plead the new allegations specifying the new contraventions and breaches. In advancing these submissions, the applicant relied on the observations made in Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (No 2) (2013) 213 FCR 289; [2013] FCA 409 at [16]-[19] and McGrath v HNSW Pty Ltd (2014) 219 FCR 489; [2014] FCA 165 at [25]-[51] that r 16.53 of the Rules should not be understood to prevent amendments to a statement of claim that would have the effect of adding a new cause of action that would otherwise be time barred.

51    On the other hand, the respondent submitted that r 16.53 of the Rules (dealing with amendments to pleadings) should be construed conformably with r 8.21 (dealing with amendments to an originating application) so that, at the outset, leave should not be granted to the applicant to amend its statement of claim in the way proposed, because the causes of action on which the new claims for relief are based do not arise out of the same or substantially the same facts currently pleaded in the statement of claim.

52    In this connection, the respondent relied on the approach adopted by Middleton J in Camilleri v The Trust Company (Nominees) Limited [2015] FCA 1138 (Camilleri) at [21]-[29]. This was also a representative action brought under Pt IVA of the Federal Court Act where claims were brought by a debenture holder against a trustee, where the allegation was that the trustee failed in its duty to exercise reasonable diligence, in particular to take action in response to certain information and opinions that were available to the trustee.

53    In advancing this submission, the respondent proceeded on the reasonable assumption that the applicant had accepted that, if the new claims for relief were to be made in proceedings commenced on 27 November 2015 (the date when the applicant’s interlocutory application was filed), they would be statute-barred. This appears to have been the position accepted by the applicant up to the time of the hearing of the interlocutory application. However, at the commencement of the hearing, the applicant’s position had changed in that regard, particularly in relation to the breaches and contravention identified in (c), (d), (e) and (f) above. I should record that the respondent also submitted that all the new claims for relief were already statute-barred by 25 February 2014.

54    The determination of whether the new claims for relief were statute-barred as at either 25 February 2014 or 27 November 2015 raises difficult questions of fact and law. The decision of the Court of Appeal in Khoury v Coffey Projects (Australia) Pty Ltd [2015] NSWCA 371, can be taken as expressing the view that it is not appropriate to decide, on an interlocutory basis, complex legal and factual questions concerning when a limitation period might have expired, especially when all the evidence which informs such a question has not been given: see also Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514 at 533. The applicant also relied on observations made by Adamson J in Octaviar Administration Pty Ltd (in liquidation) v Craig [2013] NSWSC 1116 at [17] that the threshold for refusing an amendment on the ground of utility is high and “must be so obviously bad in law that it does not raise an arguable claim” (relying on Commonwealth v Verwayen (1990) 170 CLR 394 at 456 (Dawson J)).

55    On the evidence before me, as well as the state of argument between the parties, I cannot determine with any confidence which of the competing contentions of the parties on this question are correct. I do not think that the present interlocutory application is an appropriate vehicle for deciding such questions.

Consideration

56    Had the present interlocutory application been concerned only with whether leave should be granted to add the new claims for relief, then the approach advocated by the respondent is persuasive. As I have noted above, a number of the new claims for relief are based on new causes of action concerning matters occurring or which should have occurred, or of which the respondent had knowledge or ought to have had knowledge, before 18 January 2008, whereas the currently pleaded causes of action are based, principally but not exclusively, on matters occurring on and after 18 January 2008 and about which the respondent had knowledge or should have had knowledge and should have taken action by 29 February 2008. The focus of the current statement of claim is that, because of events essentially occurring in the period January to February 2008, the respondent failed to take steps as quickly as it should have taken them, with the consequence that the applicant and group members are worse off than they would have been.

57    However, the present interlocutory application is not confined in that way. I accept that the new factual allegations which the applicant seeks to plead in relation to events occurring in 2007 and 2008 can be seen as relevant to the applicant’s currently pleaded causes of action and claims for relief. Had the applicant’s interlocutory application been limited to pleading new allegations of fact which inform its present causes of action and claims for relief, then subject to the discretionary considerations raised by the respondent, it is difficult to see why the applicant should not be permitted to amend its statement of claim to plead the new facts. That, it seems to me, is the critical consideration in the present application. If it be accepted that leave should be granted to do so (i.e. to support the currently pleaded causes of action and claims for relief), then I do not see any reason why the applicant should be refused leave to also amend its amended originating application to include the new claims for relief. There is no question that, in such circumstances, the new claims for relief would then arise out of the same or substantially the same facts.

58    In this connection, had the new allegations of fact been pleaded at the time that the originating application was filed on 14 September 2014, there is no question in my mind that the new claims for relief would be allowable under r 8.21(1)(g)(i). In my view, it should not make any difference that the applicant seeks to plead the new allegations of fact now, given that the applicant also seeks to rely on these allegations to support its existing causes of action and claims for relief.

59    Whilst the decision in Camilleri provides some support for the respondent’s approach, the case does not appear to be one that involved the pleading of new facts to support existing causes of action already pleaded in respect of existing claims for relief: see at [25]. In any event, as Middleton J stressed (at [26]), each case must be looked at in the circumstances of the amendments and relief being sought.

60    I am satisfied that, subject to my consideration of certain specific discretionary matters raised by the respondent, the applicant’s proposed amendments are allowable.

61    In the event that I considered the amendments to be allowable, the respondent invited me to order that the amendments should take effect on the date they are made. The traditional rule is that an amendment duly made takes effect from the date of the document that is amended, not the date of the amendment itself: Baldry v Jackson [1976] 2 NSWLR 415 at 419. I am prepared to accept that I have the power to make an order of the kind suggested by the respondent but, in my view, it would be inappropriate to displace the traditional rule in the present case. If the new allegations of fact supplement and support the currently pleaded causes of action and claims for relief, as I accept they do, then these amendments should speak as at the date the originating application was filed. It would be a curious outcome if they did not. And if that be the case, the additional allegations of contravention and breach based on those facts should also speak from the same date. If, as the respondent contends, the new causes of action would be statute-barred as at the date the proceeding was commenced, the respondent will continue to have its defence or defences in that regard.

Discretionary matters

62    In Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 (Tamaya), Gleeson J discussed (at [120]-[146]) the principles concerning amendments. It is convenient to refer, specifically, to [125]-[128] of her Honour’s reasons. I will proceed on these principles in the present case:

125    The applicable principles are well established. The Court’s powers in rules 8.21(1) and 16.53 are broad. Consideration of whether to grant leave to amend must be undertaken in accordance with the overarching purpose set out in s 37M(1) of the Federal Court Act: Australian Competition and Consumer Commission v Jutsen (No 2) [2010] FCA 982 at [12]; Suzlon Energy Ltd v Bangad [2011] FCA 92; (2011) 196 FCR 259 at [19]; University of Sydney v ResMed Limited (No 5) [2012] FCA 232 at [14]; Bowen Energy Ltd v 2KD Drilling Pty Ltd [2012] FCA 275 at [8].

126    The onus is on the party seeking leave to amend to persuade the Court that such leave should be given: Dye v Commonwealth Securities Ltd (No 2) [2010] FCAFC 118 at [17].

127    The principles articulated by the High Court in Aon apply to matters in this Court: Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101; (2010) 187 FCR 261 (“Cement Australia”) at [43]. Relevant matters the Court is to consider include:

(1)    The nature and importance of the amendment to the party applying for it: Aon at [102];

(2)    The extent of the delay and the costs associated with the amendment: Aon at [102];

(3)    The prejudice that might be assumed to follow from the amendment, and that which is shown: Aon at [5], [100] and [102];

(4)    The explanation for any delay in applying for that leave: Aon at [108]; …

(5)    The parties’ choices to date in the litigation and the consequences of those choices: Aon at [112] and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 (“Luck”) at [44];

(6)    The detriment to other litigants in the Court: Aon at [93], [95] and [114] and Luck at [44]; and

(7)    Potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification: Aon at [5], [24] and [30].

128    The weight to be given to the considerations identified in Aon, individually and in combination, and the outcome of the balancing process, may vary depending on the facts in the individual case: Cement Australia at [51].

Delay

63    The applicant addressed the issue of delay principally on the basis that the proposed amendments arise out of documents provided by discovery and by a notice to produce. The respondent accepts that some of the documents referred to in the proposed amendments first became available to the applicant in August this year. It says, however, that most of the documents were already in the applicant’s possession or were documents publically available to the applicant on reasonable search, prior to commencement of the proceeding. The respondent refers, specifically, to the respondent’s claim in proceeding S 546 of 2014 in the Supreme Court of Queensland (S 546/2014), the 2007 Annual Report of OL, the s 439A Report to Creditors of OL, and various ASX announcements in respect of OL, all of which are referred to in many of the new paragraphs of the proposed amended statement of claim. The respondent also refers to the Kelly affidavit. The Kelly affidavit assumes some significance in the proposed amendments.

64    The respondent has produced a table which lists the material supporting each new allegation and identifying the date by which, according to the respondent, that material was available to the applicant. I do not propose to go into the detail of that table or the observations made by the respondent’s solicitor, Mr Sharry, who made an affidavit on 2 December 2015 that was read at the hearing of the application. Ms Banton has responded to Mr Sharry’s affidavit. It is clear that there is a significant debate between the parties on this question. Ms Banton’s evidence is that, of the 47 documents identified in the respondent’s table, only nine were in the applicant’s possession at the time that the proceeding was commenced and that less than half of the identified documents were publically available.

65    Whilst the evidence shows that, before the commencement of the proceeding, the applicant was in possession of a number of the documents on which it relies to make the new allegations, I am satisfied, on the basis of Ms Banton’s evidence, that the full significance of, for example, the Kelly affidavit was not apparent until the applicant received the respondent’s discovered documents.

66    The applicant also wrote to the respondent on 28 April 2014, before the commencement of the proceeding, seeking documents in the respondent’s possession as trustee, particularly documents concerning the period mid-2007 to 23 May 2008. The respondent replied on 16 May 2014 stating that it did not propose to “engage in de facto pre-pleading discovery”. Further, the respondent first produced the PwC reports to the applicant on 26 August 2015, after the applicant had served a notice to produce. Ms Banton says that the Third PwC Report, in particular, provides context for the Kelly affidavit.

67    It is not clear to me when the claim in S 546/2014 first came into the applicant’s possession. That question does not appear to have been addressed in the evidence, although, with some justification, the applicant takes issue with the respondent’s suggestion that it was incumbent on it to review all the court files relating to what has been referred to globally as the “Octaviar litigation”, which has been or is being conducted in various courts in Australia.

68    I accept that, before the proceeding was commenced, the applicant had been seeking documents from the respondent relating to the respondent’s knowledge of OIN’s financial position, particularly in the period from mid-2007, and that the respondent had resisted the applicant’s requests. Discovery was sought relatively early in this proceeding and the applicant has persisted, with due expedition, in obtaining other documents from the respondent. I do not think that there has been undue delay in this regard.

69    I also accept that discovery was voluminous and that the review of the discovered documents took some considerable time. I do not think that there has been undue delay in reviewing the discovered documents or other documents produced by the respondent.

70    Further, I do not think that it was unreasonable for the applicant, in the particular circumstances of this case, to seek to review the discovered documents before proposing amendments to the statement of claim.

71    In all the circumstances, I do not think that it would be a proper exercise of discretion to refuse leave to amend the amended originating application and statement of claim by reason of delay on the part of applicant.

72    I note, in this connection, the order made on 14 September 2015 that required the applicant to file any interlocutory application seeking leave to amend by 30 October 2015. Having regard to the explanations provided by Ms Banton, I am not persuaded that the applicant’s failure to file its interlocutory application by 30 October 2015 is an insurmountable obstacle to leave being granted now.

Prejudice

73    The respondent contends that, if the proposed amendments are to be allowed, the hearing will take longer than the currently allocated period of two weeks.

74    The respondent is also concerned that the present proceeding will delay distributions to all noteholders, including those who are not group members, from funds which the respondent expects to receive, sometime in 2016, from the liquidators of companies in the Octaviar Group, including OIN and OA. The respondent says that it will not distribute any part of these funds until the present proceeding is finally determined.

75    The respondent also points to the extra work that will be required to meet the proposed new claims for relief, and the resultant additional costs that will be incurred.

76    It is not clear to me at the present time that the additional claims, if allowed, will substantially prolong the hearing beyond the currently allocated hearing dates. The decision to delay distributions to noteholders, when and if funds become available, is a decision which the respondent has taken, regardless of the present application. Naturally, if the hearing is prolonged, then there may be a corresponding prolongation of the time when distributions to noteholders will be made by the respondent. But I do not think that this stands as a persuasive reason for refusing leave to the applicant to amend the amended originating application and statement of claim, as it now proposes.

77    Similarly, I accept that, if leave is granted to make the amendments, additional work will be involved and additional costs will be incurred in meeting the new claims. Also, certain costs, already incurred, will have been thrown away. To an extent, this prejudice can be remedied by appropriate costs orders. In the context of this litigation, I do not think that the burden imposed upon the respondent in meeting the new claims should tip the balance in favour of refusing leave. The applicant points out, with some justification, that, regardless of whether the amendments are allowed, the factual material supporting the new allegations is likely to be material that the applicant will seek to adduce as evidence at the hearing in any event because, arguably, it goes to the respondent’s state of mind as at 29 February 2008 which the respondent has itself raised by relying on the Fourth PwC Report and the legal advice given to it at the time. It is at least possible, for example, that the earlier PwC reports as well as other factual material now sought to be pleaded will be relevant to that question.

78    For these reasons, I am not persuaded that the matters of prejudice raised by the respondent should lead me to refuse the leave that is sought.

Deficiencies in the proposed pleading

79    The respondent has raised a number of asserted deficiencies in the pleading of the proposed amended statement of claim. Normally, the Court will not grant leave to allow an amendment if the amendment would be liable to be struck out had it appeared in the original pleading: see Tamaya at [143] and the cases there cited. Unfortunately, the respondent did not raise these matters with the applicant when the applicant was seeking the respondent’s consent to the filing of the proposed further amended originating application and amended statement of claim.

80    In paragraphs 92B.3 and 92H.5 of the proposed amended statement of claim, the applicant alleges that the respondent failed to “properly respond” to the Third PwC Report, but does not state what conduct would have constituted the “proper” response.

81    In paragraphs 92B.7 and 92H.9, the applicant alleges that the respondent failed to assess whether information provided by OL to the respondent was true and correct and was not (by omission or otherwise) misleading, but does not state what “information” was not properly assessed.

82    In paragraphs 92C.1 and 92I.3, the applicant alleges that if the respondent had taken certain “actions”, it would have formed the view that an Insolvency Event and an Event of Default had occurred and was continuing under the Terms of Issue in respect of OL and OIN, but does not state which particular Insolvency Event and Event of Default had occurred and when it/they occurred, or the circumstances that would have led the respondent to form the view that these events had occurred.

83    In paragraph 92AD, the applicant alleges that the respondent breached its alleged duty to provide accurate information to group members as to the state of the Octaviar Note Trust by failing to disclose the matters pleaded in paragraphs 48A to 48BL, but does not state whether the respondent knew or ought to have known (and, if the latter, on what basis the respondent ought to have known) the alleged facts, in particular those pleaded in paragraphs 48BF, 48BG and 48BH.

84    In paragraph 92AE, the applicant alleges that if the respondent had provided group members with accurate information, noteholders holding no less than 10% in nominal value of the notes would have convened a meeting of noteholders and directed the respondent to do certain things, but does not identify who the noteholders were and why they would have issued such a direction.

85    I am satisfied that the respondent should be informed of the unstated matters referred to in [80]-[84] above and that, at least in the first instance, it would be sufficient for the respondent to be informed by the applicant providing particulars. The respondent raised a number of other matters of a similar kind which it argued should be addressed by the applicant. I am not presently persuaded that the additional matters presently require particularisation, but I would not shut out the respondent from seeking such particulars.

86    The respondent submitted that the misleading or deceptive conduct and unconscionability claims (paragraphs 92AI to 92AO, 92AP to 92AY, and 92AZ to 92BL of the proposed amended statement of claim) are defective in that the applicant has not pleaded how the alleged contravening conduct caused loss to the group members. The proposed amended statement of claim thus fails to plead the necessary causation to support the allegations of loss or damage. I accept that submission. In the absence of a properly pleaded case on causation, leave should be refused to amend the statement of claim by including the allegations in paragraphs 92AI to 92AO, 92AP to 92AY, and 92AZ to 92BL. This means that leave should also be refused to amend the amended originating application by adding the claims for relief identified in paragraphs 6 to 11 of the proposed further amended originating application, which are dependent on the identified paragraphs in the proposed amended statement of claim.

87    Similarly, in relation to the causes of action for which an account is sought, there is no pleading of material allegations of fact that would support a conclusion that, for example, the respondent made an unauthorised profit or lost or misappropriated trust property. The basis on which an account is claimed is not at all clear. In my view, the claim for an account should not proceed in the absence of a properly formulated pleading stating the basis for the account. The consequence is that leave should be refused to amend the amended originating application by adding the claim for relief identified in paragraph 5 of the proposed further amended originating application. Correspondingly, leave should be refused to amend the statement of claim by adding paragraphs 92L.2, 92S.1, 92U.2, 92AA.1 and 92AH.1.

88    Further, neither loss nor causation is pleaded with respect to the claim for breach of duty alleged in paragraph 92T of the proposed amended statement of claim. Therefore, leave should be refused to amend the statement of claim by adding paragraph 92U.2.

89    In the course of oral submissions, I canvassed various ways in which the pleading objections might be managed. On reflection, I do not think that any course other than rejection of the paragraphs identified in [86]-[88] above is warranted.

90    Accordingly, leave to amend the statement of claim in the form of the proposed amended statement of claim should be granted, save for the paragraphs identified in [86]-[88] above and subject to the applicant also providing particulars of the matters identified in [80]-[84] above.

91    For completeness, I note that the respondent made a submission that, pleading deficiencies aside, a number of the claims made by the applicant in the proposed amended statement of claim are misconceived and have no real prospect of success. On the current state of the evidence, I am not persuaded on those matters, although I do not wish to be taken as expressing any view on the likely prospects of success of any such claims.

Discovery

92    By an interlocutory application filed on 22 October 2015, the applicant seeks further and better discovery from the respondent. The applicant complains that the respondent has effectively limited its discovery to the period on and after 18 January 2008, even though, when making an affidavit in support of an application for security for costs, Mr Sharry stated that the respondent took steps throughout 2007 and 2008 to determine the financial position of OIN and the guarantors and that electronic searches of emails of the officers of the respondent would be required to obtain documents relating to the steps that were taken for that period. The applicant contended that the respondent has misapprehended its discovery obligations and has not discovered documents in the categories identified in paragraphs 1(a)-(f) of the interlocutory application.

93    I am not persuaded that the respondent has misapprehended its discovery obligations. With reasonable justification, the respondent appears to have confined its discovery to the pleaded allegations in the current statement of claim which, as I have said, focus on the period on and after 18 January 2008.

94    That said, I do not understand it to be seriously in contest that if the statement of claim is amended to plead the additional facts in 2007, then discovery in relation to categories 1(a)-(f) in the interlocutory application is justified. In light of the views to which I have come that leave should be granted to the applicant to plead the new facts, I propose to order that discovery be given in respect of these categories. Discovery should be provided on or before 8 February 2016. If discovery cannot be provided by that time, I will entertain any reasonable application that the respondent may make for an extension of time.

95    The interlocutory application seeks discovery that includes, but is not limited to, these categories. I do not understand Ms Banton’s affidavit in support of further discovery to address anything other than these nominated categories. I am not persuaded that it would be appropriate to order further discovery in some open-ended way extending beyond the identified categories.

96    The interlocutory application raises two additional matters. The first concerns redactions to discovered documents. These appear to have been made to protect claims of legal professional privilege. Whether or not these claims can be maintained is a matter in contest. The question has not been properly ventilated before me at the present time. But, as I will be the trial judge, I do not think that it is appropriate that I should seek to determine disputed claims for privilege which may well require inspection of the disputed redacted portions of the documents in question. It has not been feasible to have that question determined before the end of the current Court sitting period for 2015. In these circumstances, the parties are to liaise with my Associate to advise on how long they anticipate the argument on that question will take and when, after the commencement of the Court sitting period for 2016, they are available to argue that question.

97    The second matter concerns the applicant’s request to be provided with transcriptions of a very large number of handwritten file notes (pages 369 to 908 of Exhibit AKB-3 to Ms Banton’s affidavit made 22 October 2015). Once again, that question has not been adequately ventilated before me. I will hear the parties further on that matter.

disposition

98    For the above reasons, I propose to order that, subject to particulars being provided, leave be given to the applicant to file an amended statement of claim in the form identified in [90] above, but that leave be refused to amend the amended originating application in the form proposed. I will order that discovery be given in respect of the categories of documents identified in paragraphs 1(a)-(f) of the interlocutory application filed on 22 October 2015.

99    I will reserve the question of costs.

Associate:

Dated:    23 December 2015