Bendigo and Adelaide Bank Limited v Benedetta Russo and Sid Russo; Bendigo and Adelaide Bank Limited v Sid Russo;

Supreme Court of NSW|2017-04-20|Before: Bellew J

Judgment

In these proceedings I delivered judgment on 18 November 2016 ordering that the default judgment entered in each set of proceedings be set aside: Bendigo and Adelaide Bank Limited v Benedetta Russo and Sid Russo; Bendigo and Adelaide Bank Limited v Sid Russo (No. 1) [2016] NSWSC 1493. As will be evident, the plaintiff has brought two sets of proceedings. The first are proceedings No. 2015/337145 ("the 145 proceedings") which names Benedetta Russo as the first defendant and Sid Russo as the second defendant. The second are proceedings No. 2015/337116 ("the 116 proceedings") which names Sid Russo as the only defendant.
A notice of motion has now been filed by the plaintiff in each set of proceedings seeking the following orders: 1. An order pursuant to s. 64 of the Civil Procedure Act 2005 (NSW) that the plaintiff be granted leave to file and serve an amended statement of claim. 2. If leave is granted, orders providing for the time for filing and service of the amended statement of claim and defences to the amended statement of claim. 3. Costs against any party opposing or not consenting to the amendment application. 4. Such further or other orders as the court thinks fit.

The nature of the proceedings

The nature of the proceedings between the parties will be apparent from my previous judgment. In short, the plaintiff sues the defendants in respect of loans provided to each of them for the purpose of facilitating investments in a managed investment scheme known as the "Great Southern 2008 Diversified Olives Income Project".
In the 116 proceedings, the plaintiff claims against Sid Russo in his capacity as the borrower. In the 145 proceedings, Benedetta Russo and Sid Russo (who were previously married but who are now separated) are sued, the former as the borrower and the latter as the guarantor.

Submissions of the plaintiff

Counsel for the plaintiff took the Court through what he described as a number of "key documents" in support of the submission that the proposed amendments simply extended the claim(s) presently pleaded, by asserting additional material facts which were already well-known and understood by the parties, and which were the subject of evidence which had already been served. It was submitted that the proposed amendments sought to rely upon the existence of a loan agreement, in addition to a loan deed, as the basis of recovery, and upon an alternative claim of restitution/unjust enrichment. It was submitted that the amendments were "consequential or minor", were based on admissions made by the defendants, and were made for the purposes of ensuring that the pleadings were consistent with the evidence which had been served.
Counsel for the plaintiff submitted that the proposed amendments would assist in the determination of the real issues in the proceedings, and that the dictates of justice favoured a grant of leave. Bearing in mind the different positions taken by the respective defendants, counsel for the plaintiff submitted that it would be contrary to the objects of s. 56 of the Civil Procedure Act 2005 (NSW) ("the CPA") if the amendments were allowed against one defendant but not the other. He submitted that this would have the result that a final hearing would canvass all of the matters which were the subject of the amendments against only one defendant, and could lead to inconsistent findings being made in respect of the same factual issues.
Counsel submitted that there would be no prejudice to either defendant if leave was granted. He pointed out that the present application was brought within a relatively short time of the defendants being required to file their defences, that the plaintiff had served its evidence in chief, and that the amendments sought would not expand the scope of the evidence or lengthen the ultimate hearing.
To the extent that either or both of the defendants sought to raise limitation issues in defending the proceedings, counsel for the plaintiff submitted that such issues were not appropriate for determination on an interlocutory application such as this, and that to the extent that they arose they should be reserved for determination at the final hearing.

Submissions of the defendant Sid Russo

Senior counsel for the defendant Sid Russo submitted that properly understood, the plaintiff sought to amend the pleadings to enable it to advance a different basis on which to support its claim. It was submitted that the facts upon which the plaintiff now sought to advance its claim had been known to the plaintiff for some time, and that the failure to provide any explanation of why the application was made at this stage was a factor which weighed heavily against the exercise of discretion in the plaintiff's favour.
Senior counsel further submitted that the interests of justice were not served by allowing the plaintiff to amend the pleadings, having regard to the prejudice to the defendants. It was submitted, in particular, that the proposed amendments were embarrassing and that, if permitted, they should have effect only on and from the date on which any order was made, and not retrospectively from the date on which the statement of claim was first filed. It was submitted that the Court should not avail the plaintiff of the benefit of the retrospective effect of an amendment, in circumstances where there was no explanation from the plaintiff as to why its case was not properly pleaded from the outset.
Finally, senior counsel submitted that the decision of Mrs Russo not to object to the amendments sought should not be regarded as a factor supporting the granting of leave to amend the pleadings against his client.

CONSIDERATION

Section 64 of the CPA is in the following terms: 64 Amendment of documents generally (cf SCR Part 20, rules 1 and 4; DCR Part 17, rules 1 and 4) (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. (3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made. (4) If there has been a mistake in the name of a party, this section applies to the person intended to be made a party as if he or she were a party. (5) This section does not apply to the amendment of a judgment, order or certificate.
That section confers a discretion on the Court, in the exercise of which the Court must have regard to the provisions of ss. 56 to 58 of the said CPA: 56 Overriding purpose (cf SCR Part 1, rule 3) (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (4) Each of the following persons must not, by their conduct, cause a party to civil proceedings to be put in breach of a duty identified in subsection (3): (a) any solicitor or barrister representing the party in the proceedings, (b) any person with a relevant interest in the proceedings commenced by the party. (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. (6) For the purposes of this section, a person has a "relevant interest" in civil proceedings if the person: (a) provides financial assistance or other assistance to any party to the proceedings, and (b) exercises any direct or indirect control, or any influence, over the conduct of the proceedings or the conduct of a party in respect of the proceedings. Note : Examples of persons who may have a relevant interest are insurers and persons who fund litigation. 57 Objects of case management (1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. (2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1). 58 Court to follow dictates of justice (1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: (i) any order for the amendment of a document, and (ii) any order granting an adjournment or stay of proceedings, and (iii) any other order of a procedural nature, and (iv) any direction under Division 2, and (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case.
The terms of s. 64(2) of the CPA effectively mandate that an order be made for amendment where the amendment is necessary to (inter alia) determine the real questions raised in the proceedings. This, of course, is subject to compliance with the dictates of justice set out in s. 58 of the CPA. These provisions are directed primarily to ensuring that the pleadings accurately reflect the substance of the matters that are really in dispute between the parties: Aon Risk Services Australia Limited v Australian National University (2009) 258 ALR 14; [2009] HCA 27 at [14], [30], [93], [96] and [97].
In determining whether leave ought to be granted, I have had regard to the overriding purpose of the CPA expressed in s. 56, namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings. I have also had regard to the provisions of ss. 56, 57 and 58.
In my view, the amendments facilitate the purpose referred to in s. 56. Properly viewed, they constitute what could be described as a refinement of the pleadings which were previously filed. To the extent that they plead "new" facts, those facts essentially arise from those already pleaded. Importantly, they are all matters about which, on the evidence, both defendants were aware.
These proceedings arise from a loan or loans. The fundamental issue is whether either or both of the defendants are liable to the plaintiff as a consequence of defaulting under those loans. The affidavits of Mr Rowland explain, at least to some extent, the delay which has been occasioned in bringing the applications. Whilst there has been some delay, it could not be described as gross. Moreover, I am satisfied that the proposed amendments will facilitate the just disposition of the proceedings, and the entirety of the issues between the parties.
I am unable to accept the submission advanced on behalf of Mr Russo that the application which is now brought represents a calculated decision on the part of the plaintiff to plead its case in a particular way in order to circumvent limitation issues. The evidence simply does not permit me to draw that inference. Moreover, and to the extent that either or both of the defendants wish to raise such issues, they are more appropriately raised, and resolved, at the final hearing rather than on an interlocutory application: Wardley v State of Western Australia (1992) 175 CLR 514; [1992] HCA 55 at 533. I am also unable to accept, in the absence of any evidence, that a grant of leave will impede one or other of the defendants in their filing of any cross-claim(s). Further, any grant of leave should date from the commencement of the proceedings.
For all of these reasons, leave to amend the pleadings should be granted.

Costs

It was accepted by the plaintiff that it should bear the costs of both defendants in respect of any costs thrown away by the amendments sought. However, counsel for the plaintiff submitted that in circumstances where the defendant Sid Russo had strenuously opposed the motion, the plaintiff should have an order for costs of the hearing of the motion in its favour.
Senior counsel for Mr Russo submitted that even if the plaintiff was granted leave to amend, the plaintiff should nevertheless pay the costs of the application. He submitted that it was evident that the plaintiff had known of the deficiencies in its case for a substantial period time, and he repeated his submission that a calculated decision had been made by the plaintiff in terms of making the application. It was submitted that this was at odds with the manner in which litigation ought be conducted in this Court, and that in those circumstances the plaintiff should not be "rewarded" with an order for costs in its favour.
As I have indicated, I am unable to come to the conclusion that the present application is the consequence of any calculated decision on the part of the plaintiff at all. In short, the plaintiff made an application in each of the proceedings for leave to amend the pleadings. Mr Russo chose to oppose that application. Mrs Russo did not. In circumstances where the plaintiff was successful on the hearing of the motion, there should be no departure from the general rule set out in r. 42.1 of the Uniform Civil Procedure Rules 2005 (NSW), that costs should follow the event.
Accordingly, whilst the plaintiff should bear the costs (of both defendants) in respect of any costs thrown away as a consequence of the amendments, it should have its costs of the motion as against Mr Russo on the ordinary basis. Should counsel for Mrs Russo wish to make any further submissions as to costs of the motion brought against her, I will hear those submissions on the next occasion.

ORDERS

As I indicated to the parties at the conclusion of the hearing, a timetable needs to be set in these proceedings so that any remaining steps can be concluded and a hearing date allocated.
In these circumstances I make the following orders: 1. The proceedings are adjourned for further directions before me on 16 May 2017 at 9:30am. 2. The parties are to bring in Short Minutes on that day, reflecting the conclusions that I have reached in this judgment (including those as to costs) and setting out a timetable for the completion of all remaining interlocutory steps.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 April 2018

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