Bastas v Hodes

State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1996-1997) 189 CLR 146 CASES CITED : Sali v SPC Ltd [1993] HCA 47; (1993) 67 ALJR 841 Dekkan v Picciau [2008] NSWCA 18 Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 83 ALJR 951

Elias Bastas (First plaintiff) PARTIES : David Millard Lawson (Second plaintiff) David Rooney (Third plaintiff) John Edward Hodes (Defendant)

COUNSEL : P O'Loughlin (Plaintiffs) A McInerney (Defendant)

SOLICITORS : JGP Lawyers (Plaintiffs) HWL Ebsworth Lawyers (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3346/07 ELIAS BASTAS & ORS v JOHN EDWARD HODES EX TEMPORE JUDGMENT 1 On the opening of a case set down before me for four days an application is made to amend the statement of claim in three respects. 2 First, the allegation of breach of contract in the pleading is sought to be expanded. The first aspect of the contractual claim in paragraph 32 of the statement of claim relates to an alleged failure of the defendant, John Edward Hodes, to adopt a plan with respect to his former clients transferred to an earlier partnership of which the current plaintiffs, Elias Bastas, David Millard Lawson and David Rooney, are its present members. Under the second aspect in paragraph 32(g), 65 entities are identified as former clients of Mr Hodes and it is alleged that he solicited them on or before the cessation of his employment by the current partners to bring their work to him at another firm of chartered accountants. By the proposed amendment the current partners seek to replace the 65 entities with an expanded list of 196 entities. 3 Secondly, it is sought to delete a loss of profits claim referred to in paragraphs 47 and 50 of the statement of claim. No opposition is raised to that amendment save that Mr Hodes will argue that the costs thrown away in preparation for trial of that issue should be the subject of a special order. 4 Thirdly, there is a proposed amendment to the relief claimed in seeking by a new paragraph (B1) an order that, to the extent necessary, the proceedings be referred to an Associate Justice to assess the damages of the current partners. 5 In opposition to the third amendment, it was submitted that Mr Hodes has prepared his case on the basis that the entirety of it would be dealt with in the four days allotted to the hearing and there ought not to be, at this late stage, a bifurcation into a hearing as to liability and another hearing as to damages. 6 So far as the first amendment is concerned, it was submitted that since the identity of the 196 entities was revealed in an affidavit of Mr Bastas sworn in 2008, the information was well known to Mr Hodes. Reference was made to a series of letters addressed to these entities by Mr Bastas in February 2007. It was submitted that the current partners ought to be entitled to have the real issues determined by the court, and in the absence of prejudice to Mr Hodes, the amendment should be granted. 7 The matter came before me for directions in May of this year. I inquired whether there was any need for a special order. None was sought. If the information, as the current partners submit, was well known because it was set forth in an affidavit of Mr Bastas sworn in 2008, why was no application for the amendment made before the first day of the hearing? 8 In State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1996-1997) 189 CLR 146, the High Court held that case management considerations should not prevent a party litigating an issue that was fairly arguable provided any prejudice could be compensated by costs. At 155 the court said that justice was the paramount consideration. 9 While the attitude of courts to adjournment applications or amendment applications based on J L Holdings has been lenient, they have not always been successful. In Sali v SPC Ltd [1993] HCA 47; (1993) 67 ALJR 841, the High Court held that a refusal to grant an adjournment on the basis of an inability to obtain the services of senior counsel was not a miscarriage of justice. And a lack of preparedness of a party's legal adviser did not justify an adjournment in Dekkan v Picciau [2008] NSWCA 18. 10 In Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 83 ALJR 951, the High Court has recently restored case management principles as relevant considerations in such matters and has held, in that respect, that J L Holdings is not authoritative. The ANU brought proceedings in the ACT against its insurers and against Aon, its insurance broker. It settled against the insurers and then sought an adjournment to raise extensive amendments of its pleadings against Aon. The adjournment was granted and leave to make the amendments was subsequently granted, notwithstanding that the explanations for delay were not entirely satisfactory, according to the trial judge. On appeal, indemnity costs were substituted for ordinary costs. The High Court ordered that leave to amend should be refused. 11 The ACT Rules of Court contain an equivalent of s 56(1) of the Civil Procedure Act 2005 in its r 21. Gummow, Hayne, Crennan, Kiefel and Bell JJ concluded as follows at [111] - [112]: "An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.

A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate."

Then at [114] their Honours said: " Rule 21 of the Court Procedures Rules recognises the purposes of case management by the courts. It recognises that delay and costs are undesirable and that delay has deleterious effects, not only upon the party to the proceedings in question, but to other litigants. The Rule's objectives, as to the timely disposal of cases and the limitation of costs, were to be applied in considering ANU's application for amendment. It was significant that the effect of its delay in applying would be that a trial was lost and litigation substantially recommenced. It would impact upon other litigants seeking a resolution of their cases. What was a "just resolution" of ANU's claim required serious consideration of these matters, and not merely whether it had an arguable claim to put forward. A just resolution of its claim necessarily had to have regard to the position of Aon in defending it. An assumption that costs will always be a sufficient compensation for the prejudice caused by amendment is not reflected in r 21. Critically, the matters relevant to a just resolution of ANU's claim required ANU to provide some explanation for its delay in seeking the amendment if the discretion under r 502(1) was to be exercised in its favour and to the disadvantage of Aon. None was provided."

12 French CJ and Heydon J, while agreeing with the joint judgment, added their own observations. 13 In this case there is the prospect of an adjournment if the amendment is granted. Counsel for Mr Hodes pointed out that there would be a need to contact the additional entities said to have been the subject of solicitation by Mr Hodes in order to determine whether or not evidence should be taken from them. That would necessitate an order vacating the hearing. That is a matter of prejudice that would flow to the defendant if the application for amendment was successful. 14 No explanation has been given for the delay in making the application in this case. 15 It seems to me that in accordance with the principles now expressed in Aon, I should refuse the first application for amendment with respect to paragraph 32(g) of the statement of claim. 16 The prejudice that would be suffered by Mr Hodes if the hearing were bifurcated into one with respect to liability and one with respect to damages is clear. Obviously, there would be further delay and further costs. Mr Hodes has prepared his case, as I have said, on the basis that the entirety of it would be dealt with today and in the succeeding three days. In my view the amendment sought by the addition of paragraph (B1) to the relief claimed in the statement of claim should be refused. 17 I allow the amendments that delete reference to a loss of profits claim in paragraphs 47 and 50 of the statement of claim.

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