FEDERAL COURT OF AUSTRALIA

Oztech Pty Ltd v Public Trustee of Queensland (No 7) [2016] FCA 669

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to the applicant to file and serve the further amended originating application substantially in the form of the Further Amended Originating Application annexed to the interlocutory application filed on 26 May 2016 (the interlocutory application) and marked “A”.

2.    Leave be granted to the applicant to file and serve the further amended statement of claim substantially in the form of the Further Amended Statement of Claim annexed to the interlocutory application and marked “B”.

3.    The applicant pay the respondent’s costs thrown away by the amendments.

4.    The proceeding be listed for further directions on 9 June 2016.

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

REASONS FOR JUDGMENT

YATES J:

1    By its interlocutory application filed on 26 May 2016, the applicant seeks leave to file and serve a further amended originating application and a further amended statement of claim. The nature of the proceeding is adequately summarised in previous reasons for judgment given in respect of various interlocutory applications that have been made. I will adopt the same abbreviations for the various Octaviar corporate entities.

2    The respondent does not oppose leave being granted, save for the proposed amendments to paragraph 92C.1 of the amended statement of claim. The respondent opposes the amendments to paragraph 92C.1 on three grounds. First, the respondent submits that, by seeking to make these amendments, the applicant is effectively seeking to set aside or vary previous orders of the Court without there being any change in circumstances that would warrant the Court doing so. Secondly, the respondent submits that the applicant has had an adequate opportunity to plead its case and that the applicant has failed to provide a satisfactory explanation for what the respondent says is its “extreme delay” in putting forward the proposed amendments. Thirdly, the respondent submits that considerations of prejudice support the refusal of leave.

Background

3    I will not repeat the procedural history of this matter up to 27 November 2015. It is set out in Oztech Pty Ltd v Public Trustee of Queensland (No 2) [2015] FCA 1485 (Oztech 2) at [9]-[26].

4    On 27 November 2015, the applicant filed an interlocutory application seeking leave to amend the amended originating application and the statement of claim. The amendments to the statement of claim which the applicant then sought included paragraph 92C, in the following form:

92C    If the Respondent had taken any or all of the actions pleaded in paragraph 92B above, it would have:

92C.1    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;

92C.2    given notice to OIN declaring all the Notes to be due and payable on a date not more than 14 days after the date of the notice;

92C.3    demanded that OIN redeem all the Notes on the day specified in the notice for the face value of the Notes plus any interest that had accrued from the preceding interest payment date to the date specified in the notice;

92C.4    given written notice to OL and OA that the Respondent required OL and OA to pay the face value of the Notes plus any interest that had accrued from the preceding interest payment date to the date specified in the notice.

Particulars

The Respondent’s Claim in Supreme Court of Queensland Proceedings S-546 of 2014 at [164].

5    I draw attention to the particulars given with respect to this paragraph. They refer to [164] of the respondent’s statement of claim (the QSC pleading) in proceedings commenced by him in the Supreme Court of Queensland on 15 January 2014 against former officers of (what the QSC pleading designates as) the Octaviar Group for damages and equitable compensation in respect of alleged breaches of contract and certain statutory and common law duties. In effect, the allegation in [164] of the QSC pleading is that, had compliant quarterly reports (see s 283BF of the Corporations Act 2001 (Cth) (the Act)) and accurate information been provided to the respondent by the defendants in that proceeding, the respondent would have become aware of certain matters and exercised his rights under the Notes Trust Deed to cause OIN, OL and OA to provide information as to their financial position and solvency.

6    I also draw attention to the fact that a number of other allegations sought to be introduced into the statement of claim at that time relied on allegations pleaded in the QSC pleading.

7    On 23 December 2015, I gave judgment in relation to the applicant’s application to amend its statement of claim. With respect to the amendment proposed by paragraph 92C.1, I said (at [82] of Oztech 2):

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.

8    On that day, I made the following order:

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.

(Emphasis added.)

9    On 29 January 2016, the applicant filed its amended statement of claim, purportedly pursuant to the leave that had been granted. Paragraph 92C.1 was as follows:

92C    If the Respondent had taken any or all of the actions pleaded in paragraph 92B above, it would have:

92C.1    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;

Particulars

An Event of Default occurred on or about 31 July 2007 and was continuing because of the breach of clause 6.5(b) of the Trust Deed by the provision of the quarterly report by OIN to the Respondent.

An Event of Default occurred on or about 29 October 2007 and was continuing because of the breach of clause 6.5(b) of the Trust Deed by the provision of the quarterly report by OIN to the Respondent.

The Respondent ought to have formed the view that an Event of Default occurred on 30 November 2007 because OIN and/or OL were insolvent under the Act and continued to be so.

An Event of Default occurred on or about 16 January 2008 and was continuing because of the breach of clause 6.5(b) of the Trust Deed by the provision of the quarterly report by OIN to the Respondent.

An Event of Default occurred on 18 January 2008 as any other indebtedness for borrowed money of the Group became due and repayable prior to its stated maturity by reason of an event of default. This was an Event of Default because clause 12.1(t) of the Fortress Facility Agreement as amended provided that an Event of Default occurred under that agreement if the 5 day volume weighted average share price of OL on the ASX falls below $3.20.

Further or in the alternative, an Event of Default occurred by 23 January 2008 as an Insolvency Event occurred because OIN and/or OL were insolvent under the Act and continued to be so. The Respondent ought to have formed that view because on that date OL announced that its net debt was approximately $1.5 billion.

An Event of Default occurred on 30 January 2008 as any other indebtedness for borrowed money of the Group became due and repayable prior to its stated maturity by reason of an event of default. This was an Event of default for the reasons set out in the notice of default served by the Royal Bank of Scotland dated 30 January 2008.

An Event of Default occurred on 31 January 2008 as OL failed to have consolidated net assets of at least $280,000,000 on 31 December 2007 and this could not be rectified within 30 days of notice from the Respondent of such failure. The Respondent ought to have formed that view and issued a notice if it had taken the steps set out in paragraph 92B.

An Event of Default occurred on 4 February 2008 as any other indebtedness for borrowed money of the Group became due and repayable prior to its stated maturity by reason of an event of default. This was an Event of Default for the reasons set out in the notice of default and demand issued to McLaughlins Financial Services Limited (In liquidation) and MFS Bale Resorts Pty Ltd by Capital Finance Australia Limited.

An Event of Default occurred on 4 February 2008 as any other indebtedness for borrowed money of the Group became due and repayable prior to its stated maturity by reason of an event of default. This was an Event of Default for the reasons set out in the notice default issued to McLaughlins Financial Services Limited (In Liquidation) (a wholly owned subsidiary of OFS) by Mirvac Funds Management Limited and Capital Finance Australia Limited.

An Event of Default occurred on 12 February 2008 as any other indebtedness for borrowed money of the Group became due and repayable prior to its stated maturity by reason of an event of default. This was an Event of Default for the reasons set out in the notice of default issued to MPY by NAB.

10    The matter came before me for directions on 4 February 2016. At that time, the respondent raised the issue of whether, because of inadequate or incomplete particularisation, the conditions on which leave to amend had been granted, had been satisfied. I did not deal with that matter at that time. Rather, I made certain directions for the filing of subsequent pleadings and affidavit evidence.

11    On 9 March 2016, the respondent filed an interlocutory application seeking an order that the amended statement of claim filed on 29 January 2016, or certain paragraphs of it, be struck out or, alternatively, that certain particulars be provided. I heard that application on 13 April 2016 and, on 19 April 2016, gave judgment: Oztech Pty Ltd v Public Trustee of Queensland (No 6) [2016] FCA 391 (Oztech 6).

12    On 19 April 2016, I made the following order:

Save in respect of the alleged Event of Default that occurred on 23 January 2008 and the alleged Event of Default that occurred on 31 January 2008, as particularised, paragraphs 92C.1 and 92I.3 of the amended statement of claimed filed on 29 January 2016 (the amended statement of claim) be struck out to the extent that each alleges that the respondent 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”.

13    My reason for making that order was that the applicant had failed to comply with the grant of leave given on 23 December 2015: Oztech 6 at [48]-[60]. The effect of the order was to leave in place the allegation that, if the respondent had taken the “actions” pleaded in paragraph 92B of the amended statement of claim, he would have the formed the view that an Insolvency Event and an Event of Default had occurred on 23 January 2008 (OL had announced that its net debt was $1.5 billion and, by reason of that announcement, the respondent ought to have formed the view that OIN and/or OL were insolvent and continued to be so) and on 31 January 2008 (OL failed to have consolidated net assets of at least $280 million on 31 December 2007 and this could not be rectified within 30 days of notice from the respondent).

14    As I have noted, the present interlocutory application was filed on 26 May 2016. It was heard on 30 May 2016. In her affidavit made on 25 May 2016 in support of that application, the applicant’s solicitor, Ms Banton, has deposed that the amendments that are now sought to paragraph 92C.1 are a result of the successful strike out application to parts of paragraph 92C.1 of the amended statement of claim and a result of the applicant’s intended expert evidence which was filed and served on 8 and 22 April 2016. The applicant’s intended expert evidence comprises reports made by Philip Joseph (who will be called as an expert with experience in the affairs of corporate trustees) and Cosimo Borrelli (who will be called as an expert investigative accountant). I have been informed that this intended evidence is structured on the basis of steps which, Mr Joseph opines, should have been taken by the respondent, and on information which, Mr Borrelli opines, would have been revealed to the respondent if such steps had been taken. Thus, the entirety of the applicant’s case to be presented by this evidence is interdependent and culminates in the final reports of both intended witnesses that were filed on 22 April 2016.

15    The amendment to paragraph 92C.1 of the amended statement of claim that is now proposed is:

92C    If the Respondent had taken any or all of the actions pleaded in paragraph 92B above, it would have:

92C.1    formed the view no later than the end of January 2008, that an Insolvency Event and an Event of Default had occurred by that time and was continuing under the Terms of Issue in respect of OL and OIN;

Particulars

1.    Had the Respondent taken the actions pleaded in paragraph 92B above in about July or August 2007, the Respondent would have (either by itself or by appointing an investigative accountant) requested further information and documents from OL (Report by P Joseph dated 8 April 2016 particularly at [35]-[44]; Report by C Borrelli dated 8 April 2016 particularly at [1], [3]-[4]).

2.    If the Respondent had done so, OL would have produced the information and documents so requested because otherwise the Respondent could have engaged the Australian Securities and Investments Commission or external lawyers to compel the production of this information under clauses 5.4, 6.2, 6.6, 7.3 of the Trust Deed or ss 238BB and 283CB of the Act. Had the information and documents not been provided, the Respondent could and should have taken those steps (Report by P Joseph dated 8 April 2016 at [27]).

3.    If the Respondent had taken the steps in particulars 1 and 2 above in about July or August 2007, the documents and information the Respondent and/or the investigative accountant obtained as a result would have caused the Respondent to form the view in about August 2007 that:

(a)    the cashflows forecasts prepared by OL since May 2007 projected substantial shortfall in cash required by OL; and

(b)    the risk of insolvency of OL was evident from July 2007 (Report by C Borrelli dated 8 April 2016 particularly at [28]-[29], [99]-104]; Report by P Joseph dated 20 April 2016 at [4]).

4.    If the Respondent had formed the view in particular 3 above, the Respondent (either by itself or by appointing an investigative accountant) ought to have from about August 2007:

(a)    requested further information and documents and monthly updates in relation to the financial and operational affairs of the OL Group and in particular those relating to:

(i)    short and long term cashflow forecasts;

(ii)    any potential sale and purchase of substantial assets and their impact on the cashflow position of the OL Group;

(iii)    the OL Group’s short and long term repayment obligations to old material creditors and the discussions and correspondence with these creditors;

(iv)    whether any current financial facilities were or were likely to be in default; and

(v)    any equity and/or debt raising activities;

(b)    monitored the cashflow position of the OL Group regularly;

(c)    monitored and assessed any sale and purchase of substantial assets and the repayment obligations of the OL Group;

(d)    monitored and assessed any breaches of the Trust Deed, Terms of Issue, Guarantee Deed Poll and/or the Act and the action to be taken in the case of any breaches; and

(e)    enforced immediate payment of the Notes upon identification of any events of default pursuant to the Terms of Issue in circumstances of any deterioration of the OL Group’s financial and operational position

(Report by C Borrelli dated 8 April 2016 at [34]-[35], [113]-[117]; Report by P Joseph dated 20 April 2016 particularly at [5].

5.    If OL resisted the steps set out in particular 4 being taken, the Respondent ought to have engaged ASIC and/or an external lawyer to compel the production of this information under clauses 5.4, 6.2, 6.6, 7.3 of the Trust Deed or ss 238BB and 283CB of the Act (Report by P Joseph dated 20 April 2016 at [9]-[10]).

6.    If the Respondent had taken the steps in particulars 4 and 5 above, the Respondent would have received information that would have or ought to have caused the Respondent to form the view that by about the end of January 2008 that an Event of Default had occurred on the basis of the following matters each of which constitute an Event of Default:

(a)    an Event of Default occurred on or about 31 July 2007 (and was continuing thereafter) when OIN provided a quarterly report to the Respondent that, in breach of clause 6.5(b) of the Trust Deed, was misleading because it failed to notify the Respondent of the:

(i)    fixed and floating charges as more particularly pleaded in paragraphs 48AX.2 and 48AX.3 above, information which OIN was required to give pursuant to s 283CC of the Act and clauses 7.2 and 7.3 of the Trust Deed);

(ii)    Fortress Facility Agreement as more particularly pleaded at paragraphs 48AV to 48AY above, which was materially prejudicial;

(iii)    UBS loan facility as more particularly pleaded at paragraphs 48AN to 48AT above, which was materially prejudicial;

(iv)    amounts owing to the Australian Taxation Office as more particularly pleaded at paragraph 48L above, which was materially prejudicial; and

(v)    forecasted cashflow shortfalls for the OL Group since May 2007, which was materially prejudicial (Report by C Borrelli dated 8 April 2016 at [98]-[99] and Report by C Borrelli dated 22 April 2016 at [121]-[122];

(b)    an Event of Default occurred on or about 29 October 2007 (and was continuing thereafter) when OIN provided a quarterly report to the Respondent that, in breach of clause 6.5(b) of the Trust Deed, was misleading because it failed to notify the Respondent:

(i)    of the amendments to the Fortress Facility Agreement as more particularly pleaded at paragraphs 48AZ to 48BA above, which was materially prejudicial;

(ii)    of the failure to obtain the Commercial Banking Facility as more particularly pleaded at paragraphs 48BD to 48BI above, which was materially prejudicial;

(iii)    that the Stella sale had not occurred as more particularly pleaded at paragraph 48AU above, which was materially prejudicial;

(iv)    that a substantial change in the nature of OL’s business had occurred (Report by C Borrelli dated 22 April 2016 at [121]-[122]; and

(v)    of the forecasted cashflow shortfalls for the OL Group from May 2007, which was materially prejudicial (Report by C Borrelli dated 8 April 2016 at [98]-[99] and Report by C Borrelli dated 22 April 2016 at [121]-[122];

(c)    an Event of Default occurred by 31 December 2007 because by reason of the matters pleaded at paragraphs 48T to 48BL above, OL was in breach of clauses 7.2 and 7.3 and s 283CB(a) of the Act because it was not carrying on and conducting its business in a proper and efficient manner;

(d)    an Event of Default occurred on or about 16 January 2008 (and was continuing thereafter) when OIN provided a quarterly report to the Respondent that, in breach of clause 6.5(b) of the Trust Deed, was misleading because it failed to notify the Respondent

(i)    of the amendments to the Fortress Facility Agreement as more particularly pleaded at paragraphs 48BB and 48BC above, which was materially prejudicial;

(ii)    that the Stella sale had not occurred as more particularly pleaded at paragraph 48AU above, which was materially prejudicial;

(iii)    that a substantial change in the nature of OL’s business had occurred (Report by C Borrelli dated 22 April 2016 at [121]-[122];

(iv)    of the forecasted cashflow shortfalls for the OL Group from May 2007, which was materially prejudicial (Report by C Borrelli dated 8 April 2016 at [98]-[99] and Report by C Borrelli dated 22 April 2016 at [121]-[122]; and

(v)    of the payment of $130 million on or about 30 November 2007 from OA to Fortress (in the circumstances set out in the Report by C Borrelli dated 22 April 2016 at [20.6], [103]-[107], [126], and tab 8), which was a breach of s 283CB(a) of the Act and clauses 7.2 and 7.3 of the Trust Deed;

(e)    an Event of Default occurred on 30 January 2008 because, any security given by the OL Group for any indebtedness for borrowed money became enforceable by reason of the default, and steps were taken to enforce that security by Tasovac Pty Limited under clause 2.4(d) of the Deed of Charge dated 27 October 2006 for an event of default under clause 9. 1(b) of the loan agreement between MFS Investment Management Limited and the Royal Bank of Scotland plc dated 29 June 2007; and

(f)    an Event of Default occurred by about 31 January 2008 as an Insolvency Event occurred because OIN and/or OL were insolvent under the Act and continued to be so (Report by C Borrelli dated 22 April 2016).

Further or in the alternative, an Event of Default occurred by 23 January 2008 as an Insolvency Event occurred because OIN and/or OL were insolvent under the Act and continued to be so. The Respondent ought to have formed that view because on that date OL announced that its net debt was approximately $1.5 billion.

An Event of Default occurred on 31 January 2008 as OL failed to have consolidated net assets of at least $280,000,000 on 31 December 2007 and this could not be rectified within 30 days of notice from the Respondent of such failure. The Respondent ought to have formed that view and issued a notice if it had taken the steps set out in paragraphs 92B.

The respondent’s complaint

16    The respondent’s complaint is twofold.

17    First, the respondent submits that some of the proposed amendments to paragraph 92C.1 introduce allegations that, although based on the applicant’s intended expert evidence, are new allegations.

18    Secondly, the respondent submits that some of the proposed amendments are new allegations that are not based on the applicant’s intended expert evidence. The respondent says that these allegations include allegations that, in breach of clauses 7.2 and 7.3 of Terms of Issue, and contrary to s 283CB(a) of the Act, OL was not carrying on and conducting its business in a proper and efficient manner: particulars 6(c) and (d)(v). There is also an allegation that an Event of Default occurred on 30 January 2008 because a Deed of Charge had become enforceable under a loan agreement between MFS Investment Management Limited (MFS IM) (the responsible entity of the Premium Income Fund (PIF)) and Royal Bank of Scotland plc (the RBS) dated 29 June 2007: particular 6(e). Further, there is an allegation that an Event of Default occurred by about 31 January 2008 as OIN and/or OL were insolvent: particular 6(f). The respondent also says that the respects in which the applicant pleads that quarterly reports were misleading, travel beyond matters identified in its intended expert evidence.

19    It is a matter of dispute between the parties as to whether, and if so to what extent, paragraph 92C.1, as now proposed, travels beyond the applicant’s intended expert evidence and the allegations already pleaded, or which have been pleaded, in the amended statement of claim. There is some force in the respondent’s submission that proposed paragraph 92C.1 raises, at least as a matter of pleading, new matters. For example, the allegations that the quarterly reports were misleading because they failed to notify the respondent of forecasted cashflow shortfalls for the OL Group since May 2007 (particulars 6(a)(v), (b)(v) and (d)(iv)); failed to notify the respondent that a substantial change in the nature of OL’s business had occurred (particulars 6(b)(iv) and (d)(iii)); and failed to notify the respondent of a payment made by OA to Fortress on 30 November 2007 (particular 6(d)(v)) (see further below), appear to be “new”. The allegation that OL was in breach of clauses 7.2 and 7.3 of the Terms of Issue and s 283CB(a) of the Act because it was not carrying on and conducting its business in a proper and efficient manner, is new. Also, the allegation that OIN and/or OL were insolvent by about 31 January 2008 appears to be more broadly based than the existing allegation that the respondent ought to have known that OIN and/or OL were insolvent by 23 January 2008 because, on that date, OL announced that its net debt was approximately $1.5 billion. However, in light of the matters I discuss at [20]-[33] below, the respondent does not say that it is not, or cannot be, in a position to answer these allegations.

The question of prejudice

20    At this stage of these reasons, it is necessary to mention certain aspects of timetabling. The respondent is due to file his intended lay and expert evidence by 15 June 2016. Further, the hearing of the matter is to commence on 27 June 2016 for an initial two week period. The hearing is then to resume on 5 September 2016 for, potentially, a further two week period. On any view, the hearing will occupy at least the first week of that period.

21    In the course of submissions in the present application, the respondent foreshadowed that, at the hearing, he will be making an objection to the admissibility of the entirety of the applicant’s intended expert evidence. In this connection, I have been informed that the applicant’s case is, largely, a documentary one, with the principal witnesses being Mr Joseph and Mr Borrelli. Now that a substantial objection to the admissibility of the applicant’s intended expert evidence has been foreshadowed, a case management issue arises as to how best to deal with that objection in the course of the hearing to commence on 27 June 2016. I have suggested to the parties that the hearing should commence on 27 June 2016 with the applicant’s opening, followed by argument on the admissibility of the applicant’s intended expert evidence. Hopefully, this objection can be determined during the first week of the hearing. No doubt there will be substantial argument on the matter. The second week of the hearing could then be devoted to the lay evidence, with the intended expert evidence (subject to the ruling to be made) being given during the second hearing period commencing on 5 September 2016. I should note, here, that the intended expert evidence of the parties is to be given concurrently, following the making of a joint report.

22    The applicant supports this framework for the hearing. The respondent accepts that it is feasible. The respondent’s complaint concerning prejudice caused by the proposed amendments to paragraph 92C.1 must therefore be considered in light of this new state of affairs.

23    With regard to those parts of proposed paragraph 92C.1 which the respondent accepts are based on the applicant’s intended expert evidence, the respondent says that the prejudice caused by these amendments can be overcome by extending the period for the filing and service of his intended lay and expert evidence to 22 June 2016. On the basis of the framework discussed for the hearing, the applicant raises no objection to this course. I am minded to grant such an extension, if the amendments to paragraph 92C.1 are to be allowed.

24    With regard to those parts of proposed paragraph 92C.1 which, the respondent says, travel beyond the applicant’s intended expert evidence, the respondent’s solicitor, Mr Sharry has deposed, in an affidavit made on 27 May 2016, that there is insufficient time for the respondent to obtain additional expert evidence to meet that particular part of the case in time for the hearing to commence on 27 June 2016. However, this evidence is not directed to the new state of affairs to which I have referred, particularly the respondent’s now foreshadowed challenge to the admissibility of the entirety of the applicant’s intended expert evidence which will need to be argued during the course of the hearing.

25    As I see it, the respondent’s foreshadowed challenge to the admissibility of the entirety of the applicant’s intended expert evidence will inevitably lead to a delay in the hearing, which will most likely affect the time at which concurrent expert evidence is to be given (if it is to be given at all). Given this delay, it seems that accommodation can be given to the respondent to enable it to file and serve his intended evidence in response to this part of the applicant’s proposed case.

26    Further in this connection, the following matters raised by the applicant should be noted.

27    First, the applicant says that its case under proposed particulars 6(c) and (d)(v) is one to be made on primary facts without the need for additional expert evidence. Subject to certain relatively small amendments (to which the respondent does not object), the primary facts have already been pleaded in the amended statement of claim. They were pleaded on 29 January 2016. On the applicant’s case, the question will be whether those pleaded facts lead to the legal conclusion that the breaches and contravention occurred. Nevertheless, I accept that the respondent might wish to lead evidence on that question extending beyond the pleaded facts.

28    Secondly, the Event of Default arising under proposed particular 6(d)(v) concerns the giving of an allegedly misleading quarterly report to the respondent which, amongst other things, failed to notify a payment made on 30 November 2007 in respect of the Fortress Facility. (The amount is said to have been $130 million. It is possible that the applicant intended to plead $103 million.) This event was, in fact, pleaded by the respondent in the QSC pleading in relation to the so-called PIF Transaction—a transaction in which part of the funds drawn down under the loan made to MFS IM (as the responsible entity of the PIF) by the RBS were transferred by MFS IM to OA and used by OA, at least in part, to make payment to Fortress under the Fortress Facility. The respondent relied on this payment as an indicium of insolvency in the winding up proceeding he commenced against OIN and OL, amongst other companies, in 2008. It features in the respondent’s written submissions dated 11 September 2008. Thus, the applicant submits, these events are well-known to the respondent and his present legal advisers.

29    Thirdly, the Event of Default arising under proposed particular 6(e) is related to the PIF Transaction in that the default occurred upon the enforcement of the Deed of Charge given in respect of the loan agreement between MFS IM and RBS. The respondent raises some pleading issues about this proposed particular, but I am satisfied that it is sufficiently informed of the case that the applicant proposes to bring in this regard.

30    Fourthly, the Event of Default referred to in proposed particular 6(f)—which alleges that OIN and/or OL were insolvent as at 31 January 2008—is consistent with the case advanced by the respondent in the winding up proceeding to which I have referred. Indeed, in that proceeding, the respondent relied on evidence given by Professor Gray to the effect that the companies were insolvent on 22 January 2008 or on 4 February 2008. Thus, the applicant submits, an allegation that OIN and/or OL were insolvent by about 31 January 2008 is hardly a matter of surprise for the respondent when this was a plank of his own case in the winding up proceeding. Nevertheless, as I have noted above, this allegation appears to be more broadly based than the existing particular that OIN and/or OL were insolvent as at 23 January 2008 because of the announcement made by OL on that day.

31    I accept that the respondent’s existing knowledge of the matters noted at [27]-[30] above are relevant to my consideration of the prejudice said to be caused to him, should leave to amend paragraph 92C.1, as now proposed, be granted. In saying this, I also accept that it is for the applicant to plead and prove why it says the respondent knew or ought to have known the matters particularised in proposed paragraph 92C.1 at relevant times.

32    I am satisfied that the prejudice to the respondent which will be caused by permitting the proposed amendments to paragraph 92C.1 is capable of being addressed, substantially, by providing time to the respondent to file and serve his intended lay and expert evidence within the framework now proposed for the hearing. Of course, it will also be necessary for the respondent to file a further amended defence. However, the prejudice to the respondent, in terms of additional costs, can be met by the usual order that the applicant pay the respondent’s costs thrown away by reason of the amendments.

33    Notwithstanding these matters, the respondent still opposes leave to amend being granted, on the basis of the first two grounds noted at [2] above.

The respondent’s remaining grounds of objection

34    As to the first ground, the respondent submits that the leave granted on 23 December 2015 ([7] above) was conditioned on appropriate particulars of paragraph 92C.1 being given by 29 January 2016. The respondent says that, by its present application to amend, the applicant is seeking to revisit this grant of leave—in effect, to change the date by which particulars are to be provided, from 29 January 2016 to 30 May 2016. The respondent also argues that, by its present application to amend, the applicant is seeking to “re-open” the Court’s order made on 19 April 2016 that struck out various parts of paragraph 92C.1 as then pleaded ([12] above).

35    The focus of the respondent’s submissions in this regard is the private injustice and public undesirability of permitting the relitigation of matters already litigated once. The reflection of this precept in the context of interlocutory orders made after a contested hearing, is to be seen in McLelland J’s statement of principles in Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46, where his Honour was dealing with a motion to set aside the appointment of a provisional liquidator who had been appointed after a contested hearing on that question:

Interlocutory orders, of their very nature, create no res judicata or estoppel, and the court retains jurisdiction to set aside, vary or discharge an interlocutory order up to the time of the final disposition of the proceedings. However the general rationale of the principles last referred to applies even in the case of interlocutory orders. It would be conducive to great injustice and enormous waste of judicial time and resources if there were no limit on the power of a party to have any interlocutory application or order relitigated at will.

The overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstances of the case. In giving effect to that general principle, and in recognition of the public and private interests earlier referred to, rules of practice have been developed in accordance with which the discretionary power of the court to set aside, vary or discharge interlocutory orders will ordinarily be exercised. Not all kinds of interlocutory orders attract the same considerations. For present purposes one may put to one side orders of a merely procedural nature (as to which see for example Wilkshire & Coffey v Commonwealth (1976) 9 ALR 325) and injunctions (or undertakings) made or given by agreement and without contest “until further order” (as to which see for example Warringah Shire Council v Industrial Acceptance Corp (unreported, SC(NSW), McLelland J, 22 November 1979).

In the present case I am dealing with an interlocutory order of a substantive nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. In such a case the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application…

36    The respondent also referred to the discussion of these principles in Liu v The Age Company Limited [2016] NSWCA 115 at [13]-[14], [168]-[169], [199] and [203]; ACCC v Adata (Vic) Pty Ltd (No 2) [2015] ATPR 42-502; [2015] FCA 272 at [40], [44] and [55]; and Dallas Buyers Club LLC v IiNet Ltd (No 5) (2015) 115 IPR 544; [2015] FCA 1437 at [12]-[15] and [35]. The respondent also referred to AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [23]-[24], [31], [96] and [102].

37    The essence of the respondent’s submission is that, by (a) supporting the pleading of paragraph 92C.1 in the amended statement of claim at the hearing on 13 April 2016 on the basis that it was in conformity with the leave granted on 23 December 2015, and by (b) not indicating at that time that it wished to plead a “new case” based on its intended expert evidence, the applicant made a forensic decision from which it should not be permitted to depart. The respondent submits that “to permit that course would be to endorse an abuse of the Court’s process, or conduct tantamount to that, there being no new facts that have come into existence since 13 April 2016 that would make the order of 19 April 2016 unjust”.

38    Thus, the respondent submits, the applicant “has no right to what is effectively a new hearing on the matters resolved by the order of 19 April 2016 following a change in its forensic position”. In support of this last submission, the respondent argues that the applicant must have known the substance of the opinions to be expressed by its experts by the time of the hearing on 13 April 2016. He argues that the applicant cannot complain if the Court declines to reopen the matters resolved on 19 April 2016 in order to advance a case which the applicant has effectively “kept up its sleeve”.

39    I am not persuaded to the view that the present application to amend is appropriately characterised as an application to change the date by which the applicant was to provide particulars of paragraph 92C.1. Similarly, I am not persuaded to the view that, by making its present application to amend, the applicant is seeking to reagitate matters determined at the hearing on 13 April 2016 by the orders made on 19 April 2016. At the hearing on 13 April 2016, the respondent was seeking to strike out certain parts of paragraph 92C.1 of the amended statement of claim on the basis that the condition on which leave was granted to plead paragraph 92C.1, had not been fulfilled. The applicant’s position was that it disputed that contention. However, the applicant’s position could not be sustained. It lost that argument. It does not seek to re-open it. It advances a new pleading of paragraph 92C.1. The new pleading of paragraph 92C.1 is based in part on the expert opinions that are now available to it. The new pleading also seeks to take into account, and avoid, the pleading deficiencies discussed in Oztech 6 at [48]-[60]. The applicant is not seeking to support or reagitate the adequacy of the pleading of paragraph 92C.1 of the amended statement of claim as filed on 29 January 2016.

40    Further, I am not persuaded that the case to be made under paragraph 92C.1, as now proposed, is one that, at the hearing on 13 April 2016, the applicant had “kept up its sleeve”. In fact, on 13 April 2016, I made orders extending time to the applicant to file its additional expert reports. At that time, I had understood, based on what I had been told by counsel for the applicant, that the applicant’s experts were still in the process of undertaking the tasks that had been assigned to them. There is no material before me that would undermine that understanding or cause me to change my view. As I have explained at [14] above, I have been informed that the reports of the applicant’s experts are structured in a particular way. The opinions expressed culminate in the final reports filed on 22 April 2016. I have no reason to think that the applicant was in a position to accommodate its intended expert evidence in the pleading of paragraph 92C.1 until the experts’ reports were finalised.

41    For these reasons, I reject the respondent’s contention that the present application to amend is, in effect, an abuse of the Court’s process.

42    As to the second ground, the respondent submits that the applicant has failed to provide an adequate explanation for its delay in seeking to amend paragraph 92C.1. The respondent argues that the applicant has been, at all times, subject to an obligation to proceed with expedition, particularly in circumstances where it commenced this proceeding at the very end of a limitation period.

43    In this connection, the respondent points to the procedural history of the matter, much of which I have canvassed earlier in these reasons ([3]-[13] above) including by reference to [9]-[26] of Oztech 2. One matter not yet referred to by me is the fact that, in the period 14 January 2016 to 7 March 2016, the applicant was granted leave to serve subpoenas addressed to numerous Octaviar companies, which resulted in the production of a large number of documents. The respondent says that, on 3 February 2016, some 9,979 documents were produced on a USB stick and a further 69 documents were produced in a folder, in answer to a subpoena addressed to OA that was issued on 27 January 2016. The respondent also gave further discovery on 9 and 19 February 2016.

44    Another aspect of the procedural history is that, on 4 February 2016, I made orders extending time to the applicant to file its expert evidence. One reason for this was the fact that, on that day, I also ordered the respondent to file and serve an amended defence by 26 February 2016. As I noted in Oztech 6 at [38], at that time I was informed that the respondent would be advancing a positive case in his defence. It therefore seemed to me to be highly desirable that the respondent plead to the amended statement of claim before the applicant was required to file its expert evidence. The time for filing the applicant’s expert evidence was again extended on 16 March, 23 March and 13 April 2016. On the last occasion, I also ordered that the applicant not be permitted, without further leave, to lead any expert evidence at the trial that had not been filed in accordance with the Court’s then order.

45    The respondent’s contentions are, essentially, these. First, the applicant could have sought leave to issue the subpoenas much earlier than it did (according to the respondent, even before the proceeding was commenced). The respondent says that the applicant has not explained why that course was not adopted. Secondly, the applicant has advanced a new case under proposed paragraph 92C.1. The respondent says that the applicant has not explained why it did not inform the Court or the respondent of its intention to do so at an earlier stage. I have already addressed certain aspects of that contention: see [19] and [27]-[30] above.

46    The applicant’s response is that, firstly, it cannot be criticised for seeking leave to issue subpoenas when it did, given that:

    leave to file the amended statement of claim was only granted on 23 December 2015;

    the respondent filed his amended defence on 1 March 2016;

    the respondent continued to provide his supplementary discovery on 9 and 18 February 2016, and as recently as 10 and 11 May 2016; and

    the respondent has failed to explain how the applicant could have caused subpoenas to be issued before the proceeding was even commenced.

47    In support of these submissions, the applicant refers to the following observations by Hill J in Universal Press Pty Limited v Provest Limited [1989] FCA 402:

With respect, the interests of justice and efficiency, will in most cases be best served if subpoenas are issued requiring documents to be produced at a time before the hearing but it does not follow from that that it will ordinarily be appropriate in the interest of justice for a subpoena to be made returnable before discovery itself has been given by the parties to each other or indeed before, as in this case, the defendant has even filed a statement of defence in the proceedings. Rather it seems to me, so that the issues are defined, that it will be a rare case indeed where the interests of justice will require a subpoena to be issued until the ordinary interlocutory steps have been completed.

It must ultimately be borne in mind that a subpoena is intended to require the production of documents so that those documents can be available for tender during a trial and for the purposes of it. I use trial as encompassing of course interlocutory motions should such motions be relevant. In this context I would refer to what was said by Bowen LJ in Elder v Carter (supra) (at p. 201, 202):

“But I am as certain as one can be of anything with regard to practice, that does not intend to enact that at any stage of a proceeding a judge may make, subject to his discretion, an order on a third person for production of a document which belongs to the third person, unless the production of it at that moment is a thing to which the parties are entitled for the purpose of justice; and you are not entitled, for the purpose of justice at any moment during suit, simply because you are a litigant, to see what is in the possession of a third person and to have production of it. Such a thing was never heard of …”

48    Secondly, the applicant says that any delay in seeking to amend paragraph 92C.1 has been explained by Ms Banton in her affidavit: see [14] above.

49    In cross-examination, Ms Banton’s attention was directed to the subpoena addressed to OA that was issued on 27 January 2016. In effect, this subpoena called for documents that Mr Borrelli had before him in preparing a report filed in another proceeding in the Supreme Court of Queensland. Ms Banton said that she wanted to review these documents to see whether they were relevant to the report that Mr Borrelli was to prepare for the purposes of the present proceeding.

50    Ms Banton was challenged on why leave to issue this subpoena was not made earlier. Her response was that, normally, she would consider the documents to be produced on discovery, consider what “gaps” there might be and then “work out what subpoena[s] were needed to be issued”. However, Ms Banton said, in this case the timetable was so compressed that “we didn’t have the benefit of being able to do that”.

51    Ms Banton was challenged on this explanation, including by reference to the fact that she knew that the further discovery being sought from the respondent in this proceeding was not due to be given until 8 February 2016. I do not think that the explanation given by Ms Banton is inconsistent with this fact.

52    However, notwithstanding Ms Banton’s explanation, it does seem to me that leave to issue this particular subpoena, and perhaps others, could have been sought earlier, regardless of the documents that the applicant was seeking to obtain by way of discovery. Whether the delay in doing so caused any appreciable additional delay in the preparation of the applicant’s intended expert evidence and, hence, a consequential delay in the applicant seeking to amend paragraph 92C.1 of the amended statement of claim to take account of that intended evidence, I cannot tell. It is but one factor in play which could have affected—although not necessarily affected—the timing of the preparation of that intended evidence. I am, in any event, reluctant to conclude that any miscalculation by Ms Banton in this regard should have the consequence that leave to amend paragraph 92C.1 should be refused, particularly in light of my finding that prejudice to the respondent, caused by the proposed amendments, can now be remedied satisfactorily. I do not think, therefore, that a refusal on this basis would be a just outcome in the circumstances.

53    For completeness, I would add that, even though the applicant accepts that it commenced this proceeding at the end of a limitation period, I do not see this factor as having any particular significance, given the respondent’s particular involvement in litigation concerning the Octaviar Group and its officers. As the applicant argued, it is a brave submission for the respondent to rely on “the notorious difficulties of trying claims involving matters that occurred a number of years ago” when, as I have noted, a number of the allegations pleaded in this proceeding concern facts, matters and circumstances which the respondent has relied on in proceedings which he has brought himself. Moreover, as I have noted (at [19]), the respondent does not say that it is not, and cannot be, in a position to answer paragraph 92C.1, as now proposed, given appropriate time.

conclusion

54    The amendments to paragraph 92C.1 now proposed are central to the applicant’s case that the respondent breached his duty under s 283DA of the Act to exercise reasonable diligence to ascertain whether the property of OIN and the relevant guarantors would be sufficient to pay the amounts owed to group members. I am not persuaded that there has been delay in seeking the amendment, such as would warrant the refusal of leave to amend. The present application to amend follows closely upon the completion and filing of the applicant’s intended expert evidence and my rejection of parts of paragraph 92C.1 as pleaded in the amended statement of claim. I accept that the purpose of the present application is to address both those matters. I accept that the present application is brought in good faith and that an adequate explanation has been provided as to the reason why leave to amend is sought now. The fact that an aspect of that explanation has been challenged successfully does not mean that leave to amend should be refused. It is simply one matter to be weighed in the balance. I accept that the respondent will be prejudiced by amending paragraph 92C.1 in the way proposed. However, I am satisfied that this prejudice largely concerns timing difficulties given the imminency of the hearing to commence on 27 June 2016. As I have explained, this prejudice to the respondent can be addressed, without further delaying what now appears to be the likely course of the hearing.

55    In all the circumstances, I propose to allow the amendments, but on the basis that the applicant should be ordered to pay the respondent’s costs thrown away by reason of those amendments.

56    It will be necessary for further directions to be made concerning the timing and service of the respondent’s intended lay and expert evidence and for the filing of a further amended defence. Other aspects of the present timetable may also need to be considered and varied. The parties should give consideration to the directions that are now appropriate to be made, including whether the order made on 26 April 2016 remains appropriate for defining the scope of the hearing to commence on 27 June 2016. These matters can be considered when the proceeding is next before the Court on 9 June 2016 to deal with certain remaining procedural disputes between the parties.

Associate:

Dated:    6 June 2016