Apple Computer Australia Pty Ltd v George Mekrizis & Ors - [2002] NSWSC 982 - NSWSC 2002 case summary — Zoe

NSWNSWSC

Apple Computer Australia Pty Ltd v George Mekrizis & Ors

[2002] NSWSC 982

Supreme Court of NSW|2002-09-20|Before: Bergin J

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Source facts

Court

Supreme Court of NSW

Decision date

2002-09-20

Before

Bergin J

Source

Original judgment source is linked above.

Judgment (71 paragraphs)

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CITATION : Apple Computer Australia Pty Ltd v George Mekrizis & Ors [2002] NSWSC 982 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50054/01 HEARING DATE(S) : 20 September 2002 17 October 2002 JUDGMENT DATE : 22 October 2002

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Apple Computer Australia Pty Ltd (Plaintiff) PARTIES : Tjipto Hartono (Seventh Defendant) Wing Nin Liu (Thirteenth Defendant) JUDGMENT OF : Bergin J

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TEF Hughes QC leading CRC Newlinds (Plaintiff) COUNSEL : Dr C Birch SC (Seventh Defendant) P Hayes QC leading A Paterson (Thirteenth Defendant) Clayton Utz (Plaintiff) SOLICITORS : John A Bush (Seventh Defendant) Wright Pavuk Lawyers (Thirteenth Defendant) CATCHWORDS : Applications to amend Defences and Cross-Claims at conclusion of trial but prior to reservation of judgment - One applicant took no part in the trial until last day - Unjustified allegations against plaintiff and its lawyers of "sharp practice" - Meaning of term "sharp practice" - Evidence given by plaintiff's witness late in trial a suprise to both plaintiff and defendants. Late tender of material as an alternative to reliance upon a Certificate under the guarantee in relation to the amount of the debt alleged under the guarantee. LEGISLATION CITED : Contracts Review Act 1980 (NSW) CASES CITED : Pentagold Investments Pty Ltd & Anor v Romanos & Anor [2002] ANZ ConvR 132 DECISION : Applications allowed in part - see paragraphs [91] - [94].

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50054/01 APPLE COMPUTER AUSTRALIA PTY LTD v GEORGE MEKRIZIS AND ORS JUDGMENT 1 These are applications brought by the seventh defendant, Tjipto Hartono, and the thirteenth defendant, Wing Nin Liu, to amend their Defences and Cross-Claims. The applications were foreshadowed at the end of final submissions after a trial that was heard on 24, 26 to 28 June, 1 to 5 and 9 July 2002. Although the evidence has concluded and final submissions have been made I have not reserved my judgment in the matter by reason of these applications. 2 The proceedings relate to the failed merged business operated by Buzzle Operations Pty Ltd (Buzzle) as a reseller of computer products of the plaintiff, Apple Computer Australia Pty Ltd (Apple). Receivers were appointed to Buzzle in March 2001. The plaintiff sues the defendants for monies allegedly owing under guarantees given by the defendants in which they guaranteed monies owing by Buzzle to the plaintiff. 3 Buzzle was the merged business of six former resellers of computer products of the plaintiff. The seventh defendant, Tjipto Hartono, and his son Donald Hartono, the sixth defendant, were, with the eighth and ninth defendants, Stephen and Eva Ong, controllers of the reseller known as Choice Connections Australia Pty Ltd (Choice Connections). The thirteenth defendant purchased the business known as Mac's Place in August 2000. Both Choice Connections and Mac's Place were two of the six former resellers that merged and became Buzzle. 4 The seventh and thirteenth defendants executed guarantees on 8 September 2000. They each became liable for their "Guaranteed Share", 22.1% and 18.5% respectively, of the "Guaranteed Money" (cl 1.1 and 4.1). "Guaranteed Money" is defined in cl 1.1 of the guarantee as: All money which is now or may hereafter become or remain due and owing or unpaid by the Debtor to Apple on any account, in any capacity and under or in respect of any transaction, whether actual or contingent, present or future, and including, without limitation, under any Apple Agreements or any Security. 5 The Debtor is defined as Buzzle and "Apple Agreements" are defined in clause 1.1 as:

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10 The trial commenced on 24 June 2002 when Mr CRC Newlinds, of counsel, appeared for the plaintiff, Mr P Hayes QC leading Mr J Hyde, of counsel, and Mr A Paterson, of counsel, appeared for the sixth, seventh and thirteenth defendants, and the eighth and the ninth defendants appeared in person. The plaintiff had by then settled its claims against all other defendants. After the plaintiff's case closed on 24 June 2002 and on Mr Hayes QC's application I granted an adjournment to 26 June 2002 for the commencement of the defendants' cases. 11 On 26 June 2002 Mr Hayes QC advised that his instructions from the sixth and seventh defendants had been withdrawn and that he appeared for the thirteenth defendant and his company Aircent Pty Ltd as cross-claimant. Mr J Bush, solicitor, announced his appearance for the sixth and seventh defendants and informed the Court that at least the sixth defendant had executed a Debtor's Petition to be filed that day and that Mr Max Donnelly had consented to act as trustee. Mr Bush also advised that Mr Donnelly had indicated that he would not be taking any further part in the proceedings. The plaintiff settled its claims against the eighth and ninth defendants on 4 July 2002. The seventh defendant, Tjipto Hartono, took no part in the proceedings from 26 June 2002 until 9 July 2002. 12 On 9 July 2002 Dr C Birch SC sought leave to appear for the seventh defendant. At this time Mr Hayes QC had completed his submissions and Mr Newlinds was making submissions in reply. Dr Birch SC's submissions included the following: I am here to ventilate this issue which relates to quantum and the amount of the debt that has been certified in the Certificate tendered by the plaintiff … My client hadn't been taking an active part in the litigation and had assumed that there wasn't a proper basis for challenging the quantum that had been stated in the Certificate. He now, with advice, of course, takes the view that he has a real prospect of challenging the amount in that Certificate. Two issues arise at this late stage of the trial, three issues, I suppose. Firstly, we would submit that the plaintiff ought now to properly particularize. We accept that there has been an exchange in regard to particularization of this debt, but we say it hasn't ever been fully and properly particularized and the parties didn't pursue it because they didn't see that there was a purpose in ventilating an issue that wasn't going to go anywhere. Secondly, there ought to be an opportunity for the seventh defendant to review the material and put in a submission to the Court as to why the sum claimed is not owing if on a proper reading of that material that is in fact the case, and then, thirdly, there would be the need for him to put in a submission on any issue of law that might be raised by the Certificate.

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Birch: Indeed, yes, and my submission is that what needs to be done can be done without causing practical disruption to the course of the trial. It might involve us being accorded the liberty of some days to go away and prepare a response and it might be that there needs to be a direction given to the plaintiff to explain, we don't particularly mind formally how it is done, explain how the debt is arrived at. (tr. 865-866). 13 Mr Newlinds concluded his submissions and Dr Birch SC was granted leave to make submissions as to why an amount of $7 million purportedly transferred to Buzzle should not be held to be part of any debt owing by the seventh defendant under his guarantee. Mr Newlinds then tendered the source material from which the Apple debt was calculated. Those two boxes of documents became Exhibit M and Exhibit N. I directed that the plaintiff provide a Schedule setting out what it wished to prove from Exhibits M and N to the Court and to the other parties by 19 July 2002. In order to provide time for the assessment of the volumes of materials provided and the Schedule and to meet the convenience of counsel, I stood the matter over for further submissions on 26 August 2002. 14 On 26 August 2002 the thirteenth defendant sought leave to rely upon further written submissions dated 21 August 2002 together with an affidavit of Malcolm John Wright, the solicitor for the thirteenth defendant. Those submissions dealt with the quantum of the debt, the plaintiff's allegedly incorrect interest calculation, additional matters in relation to the Franchising Code of Conduct, an argument in relation to the GST and the tender of an exhibit that was in issue. Mr RG Forster SC appeared for the seventh defendant and also sought leave to rely on further written submissions. Those submissions dealt with (a) the purported transfer to Buzzle of the resellers' liability to the plaintiff, and (b) the Certificate of indebtedness relied upon by the plaintiff. These submissions also adopted the further submissions made by the thirteenth defendant and sought "the same relief" claimed by the thirteenth defendant. 15 During the hearing on 26 August Mr Newlinds advised that the plaintiff relied upon Exhibit M as an alternative to the Certificate issued under the guarantees. Over opposition by the plaintiff I allowed reliance on the submissions, however, on the plaintiff's application, I allowed further time to respond to the submissions and to call additional evidence if necessary. I stood the matter over to 30 August 2002 for further directions. 16 On 30 August 2002 it became apparent that the seventh and thirteenth defendants may have been seeking to amend their pleadings beyond what had been contemplated in the submissions made on 26 August 2002. On the plaintiff's application I directed the seventh and thirteenth defendants to file Motions seeking leave to amend their pleadings and to call further evidence. I also directed that any evidence in support of the Motion together with all additional evidence proposed to be called, if leave were to be granted, be filed by 6 September 2002, well prior to the hearing of the Motion on 20 September 2002. 17 On 20 September 2002 Mr TEF Hughes QC appeared leading Mr Newlinds for the plaintiff. Mr Hayes QC leading Mr A Paterson appeared for the thirteenth defendant and Dr Birch SC appeared for the seventh defendant. 18 These applications were in the main triggered by some evidence given during the trial on 2 July 2002 by James Likidis, the Director of Finance and Business Operations of the plaintiff. Throughout the trial, it had been the defendant's position that the total combined debt of the Apple resellers to the plaintiff was approximately $15.2 million. The Payments Deed lists that amount in the Schedule with details of the proportion of that debt owed by each of the resellers. Mr Likidis gave evidence that an oral agreement was reached whereby Buzzle agreed to pay the plaintiff approximately half of that $15.2 million debt. That evidence was as follows: Q. Were you aware as at 13 September the debt was being divided between Buzzle and the dealers? A. There was an agreement that we reached.

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(y) a positive act done by the Plaintiff to the prejudice of the guarantors (including the Thirteenth Defendant), such as would be so unfair to the guarantors (including the Thirteenth Defendant) so as to warrant the setting aside of the Guarantee in its entirety. 21. In breach of the proper construction of the Guarantee, and in particular of the definition of "Guaranteed Money", the Plaintiff has received money or other valuable consideration from each of the First to Fifth and Tenth to Twelfth Defendants as well as from Robert and Barbara Kloester (who were guarantors but not defendants) and has not applied such money or other valuable consideration in reduction of the indebtedness of Buzzle to the Plaintiff for the purposes of the definition of "Guaranteed Money" as referred to in the Guarantee. 22. The Plaintiff is entitled to receive a credit for a decreasing adjustment of an amount equal to 1/11th of the amount, if any, due to it from Buzzle under section 21-5 of A New Tax System (Goods and Services Tax) Act 1999. 23. In breach of the proper construction of the Guarantee, and in particular of the definition of "Guaranteed Money", the Plaintiff has not given credit for a decreasing adjustment of an amount equal to 1/11th of the amount, if any, due to it from Buzzle under section 21-5 of a New Tax System (Goods and Services Tax) Act 1999 in reduction of the indebtedness of Buzzle to the Plaintiff for the purposes of the definition of "Guaranteed Money" as referred to in the Guarantee. 22 The thirteenth defendant and his company Aircent Pty Ltd also apply to amend paragraph 31A of the Cross-Claim in which there is pleaded an allegation that the guarantee was unjust within the meaning of the Contracts Review Act 1980 (NSW) (the Act). The particulars to that allegation presently include what might be described as the usual particulars of superior bargaining power and impracticability for negotiation for the alteration of terms. The further particulars sought to be added to the allegation are as follows:

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The seventh defendant's Motion 24 Although the seventh defendant's Motion annexed a proposed pleading with paragraphs additional to those sought by the thirteenth defendant, the seventh defendant ultimately sought to amend his Defence by the inclusion of the paragraphs referred to above in the thirteenth defendant's application as set out in Exhibit B on the Motions. The seventh defendant has also included in his Draft Amended Defence a claim in respect of the Act. Dr Birch SC has asked me to deal with this application as if it was included in a proposed Cross-Claim. 25 The seventh defendant filed a Defence on 28 June 2001. In that Defence he denied liability for payment under the Demand made by the plaintiff on the basis of the plaintiff's alleged misleading representations as to his liability under the guarantee. There was also a denial of liability for payment under the Demand based on an allegation that the plaintiff had behaved unconscionably. The allegation as to unconscionability was set out in the Cross-Claim filed on 28 June 2001. That Cross-Claim alleged that the plaintiff had through its officer, Kevin McElduff, represented that the liability of the seventh defendant and his son, the sixth defendant, would be jointly and severally limited to 22.1% of $10 million and that the plaintiff would extend credit facilities to Buzzle for the payment for the plaintiff's products from 30 days to 90 days. 26 The Cross-Claim alleged that those representations were false and that such conduct was unconscionable. The only other basis upon which unconscionability was pleaded was the practice known as "channel-stuffing" with which I have dealt in a number of other interlocutory judgments and it is only necessary to say that such allegations were abandoned. There was no claim in the Cross-Claim filed in 28 June 2001 for relief under the Act. 27 The seventh defendant filed an Amended Cross-Claim on 25 March 2002. That amendment included paragraph 26A, in which there was a claim that the guarantee was unjust within the meaning of the Act. The particulars stated that the plaintiff had more bargaining power and that it was not reasonably practical for the seventh defendant to negotiate the alteration of terms of the guarantee. The particulars also stated that the guarantee formed part of an arrangement consisting of the inter-related combination of a series of contracts including the Merger Deed and the Payments Deed. There was also reliance upon the channel-stuffing allegations to claim that the provisions were unreasonably difficult to comply with and not reasonably necessary for the protection of the plaintiff's legitimate interests. There was also a claim that the provisions of the guarantee were intended to, and were likely to, and did, have the effect of increasing the seventh defendant's indebtedness under the guarantee. 28 The final particular pleaded in that Amended Cross-Claim was that there had been unfair pressure or unfair tactics exerted on or used against the seventh defendant. In that regard, the particulars pleaded the representations in respect of the percentage of $10 million, the change in the credit facilities and the fact that those representations were false. 29 On 10 April 2002 the seventh defendant filed a Further Amended Cross-Claim by which amendments were made to claims other than claims under the Act. There was a minor amendment to paragraph 26A(3) adding (j), which had no significant consequence. 30 What the seventh defendant now seeks to do is to plead a Cross-Claim which adds new particulars of alleged unjustness under the Act as follows:

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(m) The undue influence, unfair pressure or unfair tactics exerted on or used against the seventh defendant by the sixth defendant. 31 The seventh defendant seeks to have the whole of the guarantee, or alternatively the definition of the term "Guaranteed Money", set aside or alternatively, varied. 32 The amendments sought by the thirteenth and seventh defendants to the defences are identical and the amendments sought to be made to the cross-claims are similar but with some important differences. In those circumstances, it is appropriate to deal with the applications together insofar as they relate to the identical or similar amendments. 33 The thirteenth defendant's claim for leave to amend was in the main based upon allegations of failure by the plaintiff to discover the documents that became Exhibits M and N and failure to provide proper particulars of the alleged debt. The seventh defendant supported these submissions. In support, the thirteenth defendant relied upon three affidavits of his solicitor, Mr Malcolm John Wright, sworn 21 August 2002 (the first affidavit), 6 September 2002 (the second affidavit) and 19 September 2002 (the third affidavit). The further submissions of Mr Hayes QC and Mr Paterson, dated 21 August 2002, included the following paragraphs: 2. It is respectfully and after deep consideration submitted that Apple has tried to bulldoze through a case that is totally and fundamentally flawed and has not fulfilled its obligations of discovery or the provision of the particulars and relevant information to the other parties and to the Court. For the reasons set out below, when properly understood, no money is owed by Mr Liu or probably by any of the defendants to Apple. 3. When this trial commenced the lawyers representing Mr Liu were under enormous pressure. This was due in part to the change in practitioners involved and the state of preparation; but was also as a result of the inadequate particulars provided and as it turned out late/or inadequate discovery. It is only as a result of the trial and time to reflect on the material provided that the lawyers have realized the enormous misconceptions that the case was based on. 34 In his second affidavit Mr Wright claimed that it was not possible from an examination of Exhibit M alone to determine what amounts owed by the six Apple resellers to the plaintiff were paid or taken over by Buzzle. He also complained that the documents in Exhibit N were only discovered shortly before or during the course of the trial. Mr Wright stated that prior to the commencement of the trial he was not aware that any part of the debt of the six Apple resellers to the plaintiff had been charged to Buzzle's account with the plaintiff. 35 On 11 September 2002 the solicitors for the plaintiff, Clayton Utz, wrote to Mr Wright's firm, Wright Pavuk, referring to documents discovered by the plaintiff that had been couriered to the thirteenth defendant's previous solicitors, Surry Partners, on 12 April 2002. Clayton Utz stated that the documents included the Buzzle invoices referred to in Exhibit M and also included receipts and credit notes and requested the return of those documents as they had not retained copies due to the large volume that had been provided. 36 Mr Wright's third affidavit dealt with this letter. As a result of its receipt, he made enquiries with Surry Partners and the forensic accountant apparently briefed to assist the thirteenth defendant. Mr Wright stated that his client, the thirteenth defendant, was in possession of two cardboard cartons which contained computer-generated copies of tax invoices and adjustment notes issued by the plaintiff to Buzzle, together with receipts and tax invoices issued by Buzzle to the plaintiff. 37 The thirteenth defendant had received those two cartons in late April 2002 and Mr Wright stated that the thirteenth defendant "was not aware that located within the documents in the cardboard cartons were a number of adjustment notes" until Mr Wright brought that matter to the thirteenth defendant's attention as late as 18 September 2002. The adjustment notes were located within the cardboard carton that also contained the tax invoices. Mr Wright complained that the documents were not in any "particular order" and that small bundles of adjustment notes were "located randomly amongst bundles of copy invoices". Mr Wright estimated that there would be some thousands of individual documents located in the cardboard cartons. After examining the cartons he found the adjustment notes and observed that they included copies of some of the adjustment notes that were incorporated into Exhibit N. He said: Accordingly I now realize that the second sentence of paragraph 8 of my affidavit sworn on 6 September 2002 is incorrect. I am swearing this affidavit in order to make the necessary correction.

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That of course was a claim that the documents in Exhibit N were only discovered shortly before or during the course of the trial. 38 Mr Wright admitted in cross-examination that the allegations he had made in relation to the plaintiff's alleged failure to provide proper discovery were very serious. He agreed with Mr Hughes QC that he had been aware of what was referred to as an "hullabaloo" about discovery since the last week of the trial proper on about 9 July 2002. He gave the following evidence: Q: Well, didn't the hullabaloo and the fact that it was in existence prompt you to inquire earlier than Wednesday whether any documents comprised in Exhibit M, or for that matter N as well, had been received by your client, by whatever means? A: No, no, I didn't. Q: Was that because you didn't regard the hullabaloo as very important? A: No. Q: If you had regarded the hullabaloo as important surely you would have alerted yourself to ascertaining whether per chance your client had received by some means or other the documents? A: Well, my client was present in Court throughout the whole of the trial and heard what was going on and I had assumed that if my client had been in possession of those documents he would have brought it to my attention. Q: You relied on that assumption, did you? A: I did. Q: The assumption of course was all unfounded, wasn't it? A: Yes. Q: Totally unfounded in relation to a very serious allegation bandied about against my solicitors, that's right? A: That's correct. Q: Would you agree that the making of that allegation which has been bandied about in the course of this hullabaloo was, in the light of your client's possession of documents falling within Exhibit M and N, quite unfounded? A: Yes, it was unfounded. Q: Do you apologize for it? A: I do. (tr. 927-928). 39 Notwithstanding the apology referred to in the evidence above, Mr Wright made complaint about the way in which Exhibit M had been delivered to him. He then gave the following evidence: Q: Well would you not agree that if you entertained a genuine objection to the form in which the documents were provided to you, it was incumbent upon you to make a complaint? A: Yes. Q: And you didn't did you? A: No I didn't. Q: It is a little odd, isn't it, for you to be making now in this witness box a complaint about inappropriate discovery in relation to exhibit M when you never troubled to make even the slightest complaint about the form in which Exhibit M was provided to you on discovery, it is a little odd, isn't it? A: Yes. Q: On reflection and as a matter of fairness, now that I have pointed those circumstances out to you and you have very frankly agreed with them, are you prepared to withdraw on consideration your allegation that Clayton Utz did not fulfil its discovery obligations? A: In respect of Exhibit M, yes. (tr. 938-939). Q: You have got no complaints, have you, yourself, about non-fulfilment of discovery obligations in respect of Exhibit N, have you? A: The documents were provided in a timely fashion, so to that extent I have no complaint. (tr. 940). 40 Mr Wright was originally acting as agent for the firm Issac Brott & Co in Melbourne. It was not until 27 or 28 June 2002 that he became the solicitor on the record in his own right. I do not intend to repeat the circumstances in which I vacated the original trial date which are set out in my judgment of 11 April 2002, however Mr Wright gave the following evidence in respect of his complaints about discovery and particulars generally: Q: In fairness to you, you were at a considerable disadvantage for the purpose of making a meaningful criticism of discovery or particulars because of the very unusual circumstances in which you came to be on the record in this trial is that right? A: That's so. Q: Of course, those unusual circumstances would tend to mitigate the force of any criticism that you would make of your opposite number's behaviour in relation either to discovery or particulars, wouldn't it? A: That may be. Q: That is probably the case? A: That is probably the case, yes. (tr. 943). 41 The pleadings as they stood during the trial abandoned the allegations of channel stuffing. The only basis upon which the quantum of the debt had been questioned on the pleadings was that of channel stuffing. After Mr Likidis' gave his evidence in relation to the alleged oral agreement and the transfer of the debt to Buzzle, the thirteenth defendant's solicitors wrote again to the plaintiff's solicitors in respect of the quantum of the debt. This was on the day before the last day of the trial when the parties were making their final submissions. Although the plaintiff's solicitors have not addressed that letter by written response the plaintiff relies upon the evidence that has been given on oath during the trial to establish the way in which the amounts have been debited to the Buzzle account. Additionally, during the hearing of the Motions, Mr David Cowling, a partner with Clayton Utz, gave evidence that he understood that Mr Newlinds and Mr Hayes QC were discussing the question of the quantum of the alleged debt under the guarantee after Mr Likidis had given his evidence. 42 This brings me to a matter that has permeated these applications. It is an allegation made by Mr Hayes QC that the plaintiff and thus its lawyers have been guilty of "sharp" practice. Mr Hayes QC used that term for the first time on 30 May 2002 during an interlocutory application prior to the commencement of the trial when he appeared for the sixth, seventh and thirteenth defendants. In making submissions in response to a question from me as to whether his clients could resist a costs order in respect of the interlocutory application, Mr Hayes QC said: With difficulty, your Honour. The point I suppose is this; if it should turn out, as I am submitting to your Honour we are investigating, that my clients are a victim of sharp practice by Apple, then a lot of their misconduct, the way they have prepared the matter and the delay will become much clearer and understandable but we have had to seek an indulgence, and I don't wish to say anything else about it. 43 On 26 August 2002 there was further reference to it. The transcript records the following: … Mr Hayes advised because it (the plaintiff) has chosen to run the case on a harsh, tactical approach ignoring the most fundamental of obligations of fairness and candour to the Court and the other parties, they have sat on the $7 million point without giving particulars, fobbing off all requests for particulars, trying to put the burden onto someone who does not have the burden. Mr Hayes submitted he wrote on 8 July before the oral addresses were completed asking is any part of the $15 million included, give particulars; no response was received. He wrote on 26 July indicating the nature of the matters that he would seek to raise including the GST point, wrote back accusing deliberately putting forward a false version of Exhibit 20 and to say make sure you are on time with your submissions. Mr Hayes submitted he was on time. Mr Newlinds said he looked at it over the weekend, the plaintiff has strenuously resisted all requests he has made, the plaintiff has chosen to run the case on a sharp tactical basis where they are wrong, today they are trying to say it is the defendant's fault. Mr Hayes submitted that it is rough for them to claim prejudice when they have had time and been on notice and above all deliberately run the case on a sharp, tactical approach that had the potential to be unfair. (Emphasis added). (tr. 918-919).

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44 It was not until the afternoon of 20 September 2002 after the completion of the evidence in these Motions that Mr Hayes QC made the following statement to the Court: We withdraw and apologize for the excessive language involved in the reference to sharp practice because having heard the evidence it does not amount to that, but what it does show is there was, at the very least, a great misunderstanding on both sides as to the basis upon which the debt was claimed. (tr. 989). 45 "Sharp practice" is a term one hopes will not be used in relation to lawyers in the practice of the law. It imputes unscrupulous or dishonest conduct. Such allegations are disappointing to hear but when they are without foundation they assault not only the integrity of the profession but also the reliance the judiciary is able to, and must, place upon the integrity of the profession. The plaintiff was put to the task of briefing Senior Counsel, different from trial counsel who was caught up in the allegations of sharp practice, to achieve the withdrawal of the slur that had been made against the plaintiff and its lawyers. That withdrawal has now been achieved and I should deal with the real substance of the matters in issue between the parties. 46 There is no doubt that the seventh and thirteenth defendants did not prepare for trial properly. Mr Hayes QC conceded this on 30 May 2002 (tr. 1 l. 49-55). I vacated the trial in April so that proper preparation could occur. The basis upon which that trial was vacated and the disarray in which the defendants found themselves is detailed in my judgments in April this year. There is also little doubt that once new solicitors and barristers were briefed, in particular, Mr Hayes QC, Mr Hyde and Mr Paterson, a great deal of effort was put into having the matter ready for trial in late June. 47 The evidence of Mr Likidis extracted above in which he alleged that there was an oral agreement to transfer half of the $15 million debt of the re-sellers to Buzzle was the trigger for these applications. As I have said, that evidence was given towards the end of a long trial.

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The proposed amended defences 48 Paragraph 8 of the proposed amended defence calls into question the amount of the debt claimed by the plaintiff in the Certificate. Subparagraphs (a) and (b) are matters arising from evidence given by Mr Likidis. They are matters dealt with in the submissions dated 21 August 2002 upon which I granted leave to the thirteenth defendant to rely. Although the GST matter raised in subparagraph (c) did not arise from Mr Likidis' evidence, it too is dealt with in the submissions dated 21 August 2002. 49 The plaintiff's objection to the proposed paragraphs 9 and 10 of the proposed amended defence is that there is no reason why these matters could not have been raised earlier. In particular, the written submissions dated 19 September 2002 suggest that such should have been raised "before reservation of judgment". As I have said earlier, judgment has not been reserved specifically because counsel for the thirteenth defendant, and for that matter the seventh defendant, made application to make further submissions. Paragraph 9 deals with matters that have been in part the subject of oral submissions and otherwise are matters of construction of the relevant agreements. Paragraph 10 deals with matters raised in the submissions dated 21 August 2002 in respect of which I granted leave. It also includes matters arising from Mr Likidis' evidence. 50 Paragraph 11 is a claim made as a result of Mr Likidis' evidence in relation to the alleged oral agreement and the division of the amount owing to the plaintiff by the resellers. The plaintiff's objection is that the paragraph is embarrassing and does not purport to answer any allegation in its amended summons. Although there is no claim in the amended summons in relation to purported assignment, the plaintiff does claim that the thirteenth defendant is liable under the guarantee for his share of the whole of the amount claimed in the Certificate. On one view of the evidence, that amount includes an amount debited to Buzzle in reliance upon the claimed oral agreement. In those circumstances I am not satisfied that the paragraph is embarrassing. 51 Paragraphs 12, 13 and 14(b) are allegations linked back to the proposed pleading in paragraph 9(b) involving the construction of the Payments Deed. Paragraph 14(c) is linked back to paragraph 10(b) with which I have dealt above. The plaintiff complains that these paragraphs go nowhere and are embarrassing. I disagree for the reasons I have given in respect of paragraphs 9 and 10 above. 52 Paragraph 17 is a claim in respect of the amounts in paragraph 10 of the proposed defence. It claims that by reason of the matters referred to within the proposed amendment the amounts do not fall within the term "Guaranteed Money" in the guarantee. It is effectively a claim that the thirteenth defendant is not liable in respect of the amounts transferred as pleaded in paragraph 10 of the proposed defence. I disagree with the plaintiff's submission that the paragraph is embarrassing. 53 Paragraph 20 is an allegation of unfairness that is pleaded as a basis for setting aside the guarantee in its entirety. This is a matter that is more appropriate to be included in a cross-claim and is not proper matter for a defence. Paragraph 21 contains allegations the subject of submissions dated 21 August 2002 in respect of which I have granted leave. Paragraphs 20 to and 23 are in the same category and deal with the GST. 54 For the reasons given above, I grant leave to the thirteenth defendant to amend his defence to include paragraphs 8 to 14 inclusive, 17 and 21 to 23 of the proposed amended defence in Exhibit B on the Motions. I refuse to grant leave in respect of paragraph 20 of the proposed amended defence, however I will consider that paragraph as part of the thirteenth defendant's proposed amended cross claim. For the same reasons I grant leave to the seventh defendant to amend his defence to include paragraphs 8 to 14 inclusive, 17 and 21 to 23 of the proposed amended defence in Exhibit B on the Motions. I refuse to grant leave in respect of paragraphs 18 and 20 of the proposed defence annexed to his Notice of Motion, however I will consider them as proposed amendments to the cross claim. The proposed amended cross claims Thirteenth Defendant 55 Mr Cowling, in both affidavit and oral evidence, dealt with the prejudice that will be suffered by the plaintiff if the seventh and thirteenth defendants are allowed to amend their Cross-Claims. He referred to the probable need for further cross-examination of the thirteenth defendant and for cross-examination of the seventh defendant. 56 Mr Cowling also referred to the need to consider calling additional witnesses for the plaintiff, including the solicitors and financial advisers that are said to have given advice to the seventh and thirteenth defendants at the time of the signing of the guarantee and the merger documents. He also expressed the view that it will be necessary to review the videos of the various meetings and the transcript generally in the light of the new claims made in the proposed Cross-Claims. Mr Cowling expressed the opinion that it would take at least five days of further hearing time to complete the case should the amendments be allowed. 57 Mr Hughes QC relied upon some cross-examination by Mr Newlinds of the thirteenth defendant in the trial to submit that the plaintiff has made justifiable forensic decisions consistently with the case it was meeting on the cross-claims and that if the amendments to the cross claims are allowed the plaintiff will be placed in a position of irreparable prejudice. The evidence relied upon was in relation to the thirteenth defendant's understanding of the guarantee as follows: Q. And you have no doubt then that you understood what the guarantee you were signing meant? A. I understand guarantee. Q. You understood each clause of the guarantee as Mr Ford took you through it? A. I have read it, yes. Q. And you have read it close to today for the purpose of this case? A. Closer to today, no, I haven't. Q. Is there any particular part of the guarantee that you don't understand? OBJECTION HAYES: It is not and never has been part of this cross claimant's case that there was any lack of understanding in relation to the guarantee. NEWLINDS: I will make it relevant by the next question. (tr. 330)

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58 Mr Hughes QC submitted that the effect of the intervention by Mr Hayes QC was to head Mr Newlinds off from obtaining an answer to a question that is now critical in the light of the present application. It is submitted that the plaintiff and the cross-examiner were entitled to rely upon the concession made by Mr Hayes QC as covering the field. 59 Although Mr Newlinds said that he would make it relevant by the next question, it is clear from a reading of the transcript that follows immediately thereafter that he did not return to the question as to whether there was any particular part of the guarantee that the thirteenth defendant did not understand. There was however further cross-examination of the thirteenth defendant in relation to the guarantee, including the following: Q. And you read the document didn't you? A. Well, I read it, I did. Q. And you understood it, didn't you? A. Yes, I understand what guarantee is. Q. And Mr Ford used phrases like "This is a one-sided document that is designed to protect Apple's interests" didn't he? A. I can't recall. … Q. You probably didn't listen much to what he said because you understood it anyway, is that the position? A. Oh, I understand what guarantee is, yeah. (tr. 337) 60 Mr Hughes QC submitted that the forensic prejudice is manifest because the thirteenth defendant did not swear an affidavit in support of the Motion setting out any particular claims he intended to make in respect of any lack of understanding of the guarantee and sat in court throughout the hearing of the Motions, as Mr Hughes QC put it, "drinking in the words of his learned counsel, knowing exactly what the case is that he is supposed to make if he gets the amendment" (tr. 997). It was submitted that the thirteenth defendant will come up to the proof so generously given to him by his learned counsel and that any further cross-examination of him on the point raised under the Act would be futile: Pentagold Investments Pty Ltd & Anor v Romanos & Anor [2002] ANZ ConvR 132 at par [42]. It was submitted that on this basis the amendments should be disallowed. 61 There is force in the submission that the thirteenth defendant has had the opportunity to listen carefully to his counsel as to how the case will be put upon any amendment that may be granted. I am also conscious that the thirteenth defendant is an intelligent man and I accept Mr Hayes QC's submission that he is a sophisticated man with business experience. He is also a qualified accountant. However, I am not satisfied that the intervention by Mr Hayes QC during Mr Newlinds' cross-examination, combined with the fact that the thirteenth defendant was able to listen to the argument on the Motions, is a reason for me to disallow an amendment otherwise warranted in the circumstances of the case. However, depending upon the circumstances, it may certainly be a factor to be taken into account in respect of any evidence that the thirteenth defendant may give in respect of any amendments that may be allowed.

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62 During the hearing of the Motion on 20 September 2002 Mr Hayes QC (tr. 988) submitted: Although we are out of time under your Honour's orders I would seek very quickly to provide an affidavit of evidence from Mr Liu dealing specifically with that matter, albeit we would say the conclusion follows from the answers that I've just mentioned. Her Honour: What's he going to say? HAYES: He will say that he did not have any idea that the definition of guaranteed money might include money such as the 7 or the 5 transferred in these circumstances, not paid out of the surplus cash flow, and when Buzzle could not afford to pay and that would have been highly material to his decision and, objectively, which is actually principally the test, that's likely to be so. No-one in their right minds would go into something as open ended as that. 63 By Motion filed on 25 September 2002, the thirteenth defendant sought an extension of time within which to file an affidavit sworn by the thirteenth defendant to be relied upon should the leave sought to amend be granted. Affidavits should have been filed by 6 September 2002. To suit the convenience of counsel in the matter I listed this Motion for hearing on 17 October 2002. The affidavit was provided to the court on that date as was a further written submission dealing with a matter that I had raised during the hearing of the Motion on 20 September 2002. I have had regard to those further submissions and I have reviewed the contents of the affidavit for which leave to extend the timetable has been sought. 64 It is understandable that counsel and solicitors for the thirteenth defendant were very busy during the trial of the matter in June/July this year but once Mr Likidis gave the answers in cross-examination in relation to the alleged oral agreement prior to the merger documents being signed, instructions could have been taken and evidence in reply on the cross claim could have been called from the thirteenth defendant in respect of the matter. This was not done. Instead the protracted hearing of these applications occurred with further and further written submissions being filed and further application for indulgences to extend the timetable in the face of forensic decisions to the contrary. 65 However there is in all of this a basis upon which the defendants' applications have some merit. It relates to the quantum of the alleged debt by reason of the late tender of Exhibits M and N and Mr Likidis' evidence in relation to the transfer to Buzzle of a portion of the resellers debts to the plaintiff allegedly pursuant to an oral agreement. These are matters that persuade me that I should allow the thirteenth defendant leave to amend his cross claim only insofar as it relates to or arises out of those matters. 66 In the trial proper the thirteenth defendant gave evidence that he understood the guarantee. Mr Hayes QC opened the case on the basis that the thirteenth defendant did not claim any disadvantage and that he was an intelligent, sophisticated man with business experience who had received financial and legal advice at the time that he signed the guarantee. I do not intend to allow an amendment that pleads that the physical form of the guarantee caused the thirteenth defendant not to notice the definition of "Guaranteed Money". That would be inconsistent with the evidence that he has already given in the trial and with his senior counsel's opening and conduct during the trial in particular during the cross examination, as noted above. Thus I will refuse to grant leave in respect of the proposed subparagraph (c) to paragraph 31A of the cross claim. 67 The additional paragraph at the conclusion of subparagraph (d) is an amendment consequential upon the inclusion of the amended paragraph 9 of the defence. I intend to allow it. 68 The further claim raised in subparagraph (i) calls into question the effectiveness of the independent legal or other advice in relation to the guarantee. This is particularly focused upon the wide ambit of the guarantee as a consequence of the definition of the term "Guaranteed Money". This is a matter that should have been raised during the trial. This is not dependent upon the evidence of Mr Likidis or the late tender of Exhibits M and N. There has been no proper explanation for the failure to raise it during the trial other than the unfounded attack on the plaintiff's lawyers for default in their pre-trial obligations. Having regard to the way the trial was conducted, there is no proper basis for this amendment. 69 It is also necessary to focus upon that to which the "new" evidence given by Mr Likidis goes. It is either the case that there was an agreement that entitled a transfer of the debt or there was not. Additionally, if there was such an agreement, the question arises as to who were the parties to it and whether there was an entitlement in the plaintiff to transfer the debt to Buzzle and to make the thirteenth and the seventh defendants liable under the guarantees in their respective percentages for that part of the Buzzle debt. 70 Subparagraphs (h) and (j) relate to these issues and, to the extent that they are so confined, I intend to grant leave to amend the cross claim by their inclusion. The second limb of subparagraph (h) pleads that the thirteenth defendant did not and could not know that "Buzzle's operations were likely to be curtailed because the six resellers could not afford to repay their debts". This relates to an aspect of the case run at trial and I intend to allow the amendment in so far as it relates to the evidence already given by the thirteenth defendant as well as allowing it in respect of the additional alleged amount of $7 million as pleaded in the proposed amendment. 71 Subparagraph (k) was already part of the thirteenth defendant's cross claim (par 31A(e)) and I do not need to consider it separately in these applications. Paragraph 31A(e) will apply to any amendments that I allow. 72 As I have already said, paragraph 20 of the defence as it was ultimately pleaded in Exhibit B on the Motion, is appropriate to consider as a part of the proposed cross claim. I am satisfied that this paragraph falls within the matters to which I have referred above and I will grant leave to the thirteenth defendant to include it in the cross claim. 73 The thirteenth defendant is granted leave to amend his cross claim by the inclusion of the addition to subparagraph (d), and by the inclusion of subparagraphs (h) and (j) of paragraph 31A and by the inclusion of paragraph 20 of the defence in Exhibit B on the Motions. Leave is otherwise refused. Seventh Defendant 74 The seventh defendant's application to amend his cross claim is quite inconsistent with what his counsel, Dr Birch SC, informed the court on 9 July 2002 as recorded in paragraph 12 above. In reliance upon what Dr Birch SC put to the court, I allowed the seventh defendant the time to put further submissions and I also allowed a further adjournment for the purposes of examining Exhibits M and N and making submissions about the amount of the debt. 75 It was not until the seventh defendant's, apparently alternate, Senior Counsel, Mr RG Forster SC filed his written submissions dated 26 August 2002 that any mention was made of a claim under the Act in respect of, or arising out of, the evidence given by Mr Likidis. Those submissions were: 8. If, contrary to the submissions made in paragraph 7 hereof, it is held that upon its true construction, the term "Guaranteed Money" does include a debt owed to the resellers but assigned to Apple, then it is submitted that such term constitutes a "provision of a contract [that is] unjust in the circumstances relating to the contract at the time it was made" within the meaning and for the purposes of section 7 of the Contracts Review Act . 9. The guarantee and the other Deeds are all governed by NSW law, and accordingly, the fact that the seventh defendant's address is in Victoria does not prevent the Contracts Review Act from applying in the present case. 76 A further relevant matter for consideration in the exercise of my discretion is that the seventh defendant, when represented by Mr Hayes QC on 30 May 2002, informed the court as follows: There does appear to be a real issue of whether he understood about the nature of the guarantee he signed and whether there is an Amadio defence which has not yet been run. I am dealing frankly with my friend and the Court because it is unsatisfactory that this is raised late. If it is sought to be raised we have set a tight timetable in the prepared motion to raise it before your Honour. (tr. 3) 77 The seventh defendant did not make any application and as I have said he took no part in the trial until 9 July 2000. It is also to be remembered that on 9 July 2002 Dr Birch SC informed the court that he was not briefed to attempt to conduct a fresh trial of cross claims that have not been pursued (tr. 865). 78 In further written submissions dated 20 September 2002, the seventh defendant's counsel, this time Dr Birch SC, stated the following by way of what was described as an "explanation" of delay: 7. This has been long, complex and expensive litigation. The seventh defendant makes no secret of the fact that he has not retained lawyers to review afresh the whole of the material in the trial, but has merely sought where possible to adopt the defences of the thirteenth defendant where they are applicable to his circumstances. 8. The legal representatives of the thirteenth defendant have themselves recognised new and important arguments during the course of the trial. These are arguments of general application and the seventh defendant now seeks to incorporate them into his defence by the amendments. 9. The seventh defendant has in effect relied upon the thirteenth defendant's representatives to uncover these arguments and his delay in raising the matters is effectively the delay of the thirteenth defendant. 10. The thirteenth defendant's representatives have explained that these arguments have arisen late through inadequate particulars and late or inadequate discovery given by the plaintiff's lawyers (thirteenth defendant's submissions paragraphs 2 and 3, affidavit of Malcolm Wright affirmed 24 June 2002). 11. It was reasonable of the seventh defendant to rely upon the efforts of the thirteenth defendant's lawyers and not duplicate their expense and work. Even if the seventh defendant had retained a separate legal team to appear on his behalf throughout the trial that legal team may well have only come to appreciate the new defences at the same time as the thirteenth defendant. 79 Reference was also made to the alleged change of position by the plaintiff in relying upon the Certificate and then electing to tender Exhibits M and N on 9 July 2002. It was submitted that the plaintiff has maintained a calculated ambivalence as to whether its proof of the debt now depends upon the Certificate or will be independently proven by evidence or a combination of both the Certificate and the evidence. 80 It is all very well to submit that the delay of the thirteenth defendant in recognising the new points caused the seventh defendant's delay. The seventh defendant made a decision not to take part in the trial. If there had been separate representation for the seventh defendant, an independent and fresh mind may well have recognised the forensic need to deal with the evidence given by Mr Likidis in relation to the alleged oral agreement. To blame the tardy recognition of the need for necessary forensic steps in the thirteenth defendant's legal representatives and proffer such blame as an "explanation" is, with respect to learned senior counsel, an unimpressive submission. 81 There is also the fact that by reason of the seventh defendant's adoption of the thirteenth defendant's submissions he adopted the thirteenth defendant's allegations of "sharp practice" and submissions against the plaintiff and thus its lawyers. After I raised Mr Hayes QC's apology with Dr Birch SC he informed the court that "to the extent that we were a party to it we naturally fall in behind Mr Hayes" (tr. 1001). I took that to mean that the seventh defendant was proffering a similar apology to that made by Mr Hayes QC for the thirteenth defendant. This demonstrates the dangers of relying upon others in complex litigation in circumstances where serious allegations are made against not only a party but also the lawyers. It is so very unsatisfactory. 82 In respect of the very late claim sought to be raised under the Act the seventh defendant has filed a short affidavit. It is submitted that this affidavit deals with matters that are of narrow compass. It states relevantly: 5. It has been explained to me by Mr Bush that Apple argue that the guarantee which I signed was wide enough in its terms to include moneys which were previously owed by the various businesses prior to the set up of Buzzle. Mr McNab did not explain to me that the guarantee which I signed was wide enough to include moneys which were owed by companies other than Buzzle. If this information had been given to me I would not have signed the guarantee. 6. From my limited understanding I believe that the guarantee which I was signing was for debts of Buzzle to Apple which might be incurred after the date of the guarantee. I understood that Buzzle would be starting its operations with a fresh start and would not have any prior liabilities. 83 The written submissions include the following: 27. Because the case is based on the objective unfairness of the guarantee, evidence as to the circumstances in which the guarantee was signed, representations made at that time and the state of mind of Mr Tjipto Hartono when he signed the guarantee will be of less relevance than in a (Contracts Review Act) case of the sort where a guarantee in unexceptional terms is sought to be set aside largely on grounds of the subjective disadvantage of the guarantor. 84 I find it difficult to reconcile that submission with the proposed amendment. The proposed amendments seek to raise the very matter that Dr Birch SC suggests by contrast would not exist in this case if the amendment were to be allowed. That much appears from subparagraphs (k), (l) and (m) of the proposed amendment in which it is claimed that the seventh defendant was not reasonably able to protect his interests because of his age, education and ability to understand the English language, the alleged prejudice vis-à-vis the plaintiff by reason of his relative educational and literacy background and the alleged undue influence, unfair pressure or unfair tactics exerted on or used against him by the sixth defendant, his son, respectively. 85 This may or may not be a guarantee in "unexceptional terms" but the proposed amendment is obviously seeking to raise the subjective disadvantage of the seventh defendant. These matters combined with allegations of a lack of any independent legal or other advice (par (e)) and that the physical form of the guarantee not being such as to alert the seventh defendant (or a reasonable person) to the import of the term "Guaranteed Money" (par (d)) satisfy me that the written submissions so far as they suggest a narrow ambit and a case of objective unfairness simply fly in the face of the leave sought in the Motion. 86 I raised this matter, particularly in relation to subparagraph (m), with Dr Birch SC in his oral submissions in support of the Motion. In response he submitted that if that opened up "too vast a field" then I could limit the permitted amendment to particulars that "focus upon the objective unfairness" of the guarantee (tr. 992). Dr Birch SC submitted (tr. 995) that if the seventh defendant were trying to run a case that could have been run at the beginning of the trial there would be "great difficulty" in obtaining leave. I agree. I am of the view that a great deal of what the seventh defendant is trying to do is just that and I do not intend to allow it. 87 The only real surprise in the plaintiff's evidence and its case in respect of the amount owing under the guarantees was the evidence that Mr Likidis gave on 2 July 2002 in respect of the alleged oral agreement the night before the Merger documents were executed. That evidence was elicited in cross-examination. Until that point of the trial, the amount of the debt had not been put in issue on the pleadings. It is apparent that Mr Likidis' evidence was a surprise not only to the defendants but also to the plaintiff. It seems to have been, at least in part, the reason for the tender of Exhibits M and N on 9 July 2002. 88 It is this new evidence and any matters directly consequent upon it that in my view are properly the subject of application for leave to amend the pleadings. It should not be utilised as an opportunity to attempt to run cases that should have been run at trial and I intend to refuse leave in respect of such matters. 89 I therefore refuse the seventh defendant leave to amend so as to bring a cross claim in terms of any of the particulars to paragraph 18 of the proposed amendment. I grant leave to rely upon the body of paragraph 18 as it relates back to the defence in respect of which I have granted leave and I also grant leave in respect of paragraph 20 excluding subparagraph (a). This limits the seventh defendant to what Dr Birch SC referred to as the alleged "objective" unfairness of the guarantee. 90 In the light of these rulings the parties are to consult for the purposes of further directions being given for the finalisation of the trial. This will include any further evidence to be called by the plaintiff in respect of matters included in the further submissions in respect of which I granted leave on 26 August 2002. It will also involve the further limited evidence that may be called by the thirteenth defendant. In that regard the Motion heard on 17 October for leave to file a further affidavit by the thirteenth defendant in the form handed up will be refused in so far as it relates to matters outside the leave to amend that I have granted. I will hear argument as to the extent of the evidence in the light of my rulings in due course. As I have limited the seventh defendant to the alleged "objective" unfairness, it seems to me that there may be no need to call any evidence. Any necessary facts may be able to be agreed. Orders 91 I grant leave to the thirteenth and seventh defendants to amend their defences by including paragraphs 8 to 14 inclusive, 17 and 21 to 23 of the proposed amendment in Exhibit B on the Motions. Leave sought in respect of the amendment of the defences otherwise is refused. 92 I grant leave to the thirteenth defendant to amend his cross claim by the inclusion of the addition to subparagraph (d), and subparagraphs (h) and (j) of paragraph 31A and by the inclusion of paragraph 20 of the defence in Exhibit B on the Motions. Leave is otherwise refused. 93 I grant leave to the seventh defendant to amend so as to bring a cross claim in terms of the body of paragraph 18 (without particulars) and paragraph 20 of the proposed amended defence annexed to the Motion filed on 9 September 2002. Leave is otherwise refused. 94 If the parties are unable to agree on a costs order in respect of these applications, I will hear argument at the directions hearing. The matter is listed for directions at 9.30am on Friday 25 October 2002.