These proceedings were commenced by statement of claim filed on 11 April 2016. They arise out of an oral joint venture agreement entered into by the plaintiffs and the first and second defendants on 16 September 2011 (JV Agreement) for the purpose of developing two parcels of land known as 8 and 10 Arthur St in Ryde, NSW (together, the Properties).
By their notice of motion filed on 28 May 2021, the plaintiffs seek leave to file an amended statement of claim (ASOC) to plead, among other things, a new cause of action based on allegations of false representations, new alleged breaches of the JV Agreement and fiduciary duties by the first and second defendants, and new claims for relief.
Some of the amendments are opposed and others are not. The defendants' opposition is primarily for reasons of delay in the context where the proceedings were ready for a final hearing in June 2019, an expert was appointed and has reported on the parties' respective contributions to the joint venture, and the parties had agreed that an order for judicial sale would be made following the expert report.
[2]
The parties, the claims and procedural history
The third plaintiff, who is now deceased, was the registered proprietor of the Properties. The first plaintiff is the wife of the second plaintiff and the daughter of the third plaintiff.
The first and second defendants are property developers. The third and fourth defendants are companies associated with them. The third defendant, Arthur Street Management, is the current registered proprietor of the 8 Arthur St property. The fourth defendant, Arthur St Build, is the current registered proprietor of the 10 Arthur St property. In these reasons, I refer to the first to fourth defendants as the "defendants".
The fifth defendant, ANZ, is a registered mortgagee of the 10 Arthur St property. The sixth defendant, Westpac, is a registered mortgagee of the 8 Arthur St property. The fifth and sixth defendants have filed appearances in these proceedings but did not appear at the hearing of the plaintiffs' notice of motion.
In their existing statement of claim (SOC), the plaintiffs allege that the JV Agreement contained terms that provided for the parties to make certain contributions to the joint venture. The plaintiffs' contribution was the net equity in the Properties which were to be transferred by the third plaintiff to a joint venture vehicle. The first and second defendants' contributions were to repay the third plaintiff's existing mortgages, finance and undertake the subdivision, development and construction of residential dwellings on the Properties, and provide alternative accommodation for the plaintiffs during the redevelopment process. The plaintiffs also allege that the JV Agreement provided for the redeveloped lots to be distributed equally between the plaintiffs on the one hand and the first and second defendants on the other: SOC at [11].
The plaintiffs plead that some of the required contributions were made pursuant to the JV Agreement, such as the transfer of the Properties and the repayment of existing mortgages. They also plead that the entities to which the Properties were transferred hold them on trust for the purposes of the JV Agreement and subject to the obligations of the parties to the JV Agreement: SOC at [14]-[16] and [23].
The plaintiffs allege that, in breach of the JV Agreement and their fiduciary duties owed as parties to the joint venture, the first and second defendants failed to subdivide the Properties and construct the dwellings, caused title to the 10 Arthur St property to be transferred to an entity associated with the second defendant, caused mortgages to be granted over the Properties to ANZ and Westpac, and failed to apply the proceeds of the loans associated with the mortgages for joint venture purposes or to account for those proceeds: SOC at [12] and [17]-[22]. They also allege that the first and second defendants repudiated the JV Agreement by failing to perform their obligations under it and that the plaintiffs terminated the JV Agreement by notice dated 17 February 2016: SOC at [25].
In the SOC, the plaintiffs seek a range of declaratory and other relief, including declarations as to the existence of the JV Agreement and its breach: SOC relief at [1]-[2]. They seek declarations that the JV Agreement has been validly terminated, the Properties are held by the third and fourth defendants on trust for the parties to the JV Agreement and the plaintiffs are entitled to a charge over the Properties securing their pecuniary interests (SOC relief at [3]-[6]). Relief is also sought in the nature of damages, an account of monies advanced by the parties to the joint venture, an order setting off any amount due to the first and second defendants under the account against the plaintiffs' damages and an order for judicial sale of the Properties: SOC relief at [7]-[10].
In relation to the proposed judicial sale, the plaintiffs seek orders that they be entitled to purchase the Properties, whether at auction or otherwise, by setting off their entitlement to the proceeds against the money bid or offered and subject to them paying the proceeds of sale in the following order: first, for the plaintiffs' costs and expenses relating to the sale; second, the amounts due under the fifth and sixth defendants' mortgages; third, any amount due to the first and second defendants by reason of the account; and fourth, any surplus to the plaintiffs: SOC relief at [11]-[12].
The defendants filed a defence, which was later amended, in which they denied the JV Agreement pleaded by the plaintiffs and relied upon a different and written form of a joint venture agreement as propounded in a cross claim (also later amended) which was filed on behalf of the defendants.
In their reply to the cross-claim, the plaintiffs deny the alleged alternative agreement and that the signature on the document relied by the defendants purporting to be the third plaintiff's signature is genuine.
Without setting out all the details, the proceedings progressed slowly. The defendants concede that some of the delay is attributable to them. It is apparent from the court file that the defendants delayed in completing their evidence and there were issues with their production of an account of monies paid into and out of the joint venture that was the subject of a direction by Slattery J and his Honour's reasons in Booth v Cerreto & Ors [2017] NSWSC 468 (judgment). His Honour's reasons record that, as at April 2017, the joint venture was at a stalemate, no development had occurred and the parties were not ready for hearing: at [24]. From 2 March 2017, Slattery J case managed the proceedings having noted that the joint venture was made in 2011, some six years prior, that the proceedings were still unresolved, and the third plaintiff's uncertainty as to her future accommodation until the proceedings were resolved.
On 31 May 2018, the proceedings were listed for a final hearing which was scheduled to commence before Pembroke J on 24 June 2019 with an estimate of five days. As events transpired, the hearing was vacated and an expert was appointed for the purposes of quantifying the parties' respective interests in the Properties. This occurred by consent after the defendants had informed the Court and the plaintiffs that they would agree to orders as sought by the plaintiffs for judicial sale and an account and did not propose to pursue the relief sought in their cross-claim which was based on the alternative joint venture agreement.
On 28 June 2019, orders were made adjourning the matter to 12 July 2019 for directions. On that occasion, Pembroke J noted that the defendants' concession that a number of prayers for relief in the statement of claim should be made meant it was entirely possible, even likely, that the resolution of the accounting questions by an expert would leave no other matters of substance for determination (28 June 2018 T25.7).
On 12 July 2019, the Court made orders (12 July orders):
1. appointing an expert under r 31.46 of the Uniform Civil Procedure Rules 2005 (NSW) to inquire into and report on certain matters relating to the parties' respective contributions towards the joint venture (Annexure A) based on an agreed statement of facts (Annexure B): Order 1;
2. noting that the parties had agreed that an order for judicial sale be made following the provision of a report by an expert in accordance with the expert's appointment: Order 4;
3. dismissing the cross-claim as amended: Order 5; and
4. reserving the costs of the proceedings, including the costs of the amended cross-claim: Order 6.
On 2 September 2019, the Court appointed Mr Troy Peisley as the expert.
The matters for determination by Mr Peisley, as set out in Annexure A, included an account of all monies paid, advanced, contributed or incurred in respect of and/or charged against the Properties on behalf of the plaintiffs, the defendants and Salcorp Facility Management Pty Ltd (in liquidation) (Salcorp) in the period from 16 September 2011 to date. The account was required to record and verify each transaction concerning the Properties and include an analysis and review of those transactions and a report classifying the amounts of the transactions into monies properly incurred for the purposes of the JV Agreement, monies not properly incurred for those purposes, and monies properly spent or incurred after the termination of the JV Agreement.
Annexure B to the 12 July orders is a "Statement of Agreed Facts". It includes agreed facts to the following effect: that the JV Agreement in the terms asserted by the plaintiffs had been entered into by the first and second defendants; that alternative accommodation had been provided to the plaintiffs, purportedly paid for by the first defendant; on 14 September 2012, the 8 Arthur St property was transferred to the third defendant and the 10 Arthur St property was transferred to Salcorp; the third plaintiff's mortgages had been discharged; the defendants had obtained advice from architects and town planners in respect of the JV Agreement; no works were otherwise undertaken under the JV Agreement; in July 2014, the 10 Arthur St property was transferred from Salcorp to the fourth defendant; and the JV Agreement was terminated by the plaintiffs by a letter dated 17 February 2016.
On 23 October 2020, Mr Peisley's report was provided to the Court and the parties. In summary, Mr Peisley determined that:
1. the plaintiffs contributed $575,970 to the JV Agreement;
2. the defendants and Salcorp contributed and properly incurred $2,098,130 in relation to the JV Agreement, comprising payment of the third plaintiff's mortgages, rates, stamp duty, land tax, interest expenses on loans and rental expenses for alternate accommodation for the plaintiffs; and
3. the defendants and Salcorp did not contribute monies towards land subdivision and redevelopment of the residences according to the JV Agreement.
Mr Peisley's report does not include in the account the details of the amounts charged against the Properties by the defendants (as required by item 1ii of Annexure A) but notes that it assumes the Properties were used by the third and fourth defendants as security for loans and refers to the $2 million Westpac loan facility and an ANZ loan of $2.27 million for the purposes of calculating interest expenses.
Following receipt of Mr Peisley's report, the proceedings were adjourned on numerous occasions at the plaintiffs' request. On 11 February 2021, the plaintiffs issued subpoenas to Westpac and ANZ.
The documents produced by Westpac identify that, on 27 October 2014, the third defendant was offered a $2 million loan facility secured by a registered mortgage over the 8 Arthur St property and that the nett closing balance was $2,006,681.44.
The documents produced by ANZ identify that, as at 10 February 2016, the fourth defendant had four loan facilities with ANZ totalling $5,617,603.63, the security for which includes a registered mortgage over the 10 Arthur St property. One of the ANZ loan facilities, in the amount of $575,000, was for the purpose of assisting with the purchase of that property (ANZ Arthur St property loan). As at 23 February 2021, the payout figure for the ANZ Arthur St property loan was $564,040.62.
On 23 June 2021, ANZ issued a notice to the fourth defendant under s 57(2)(b) of the Real Property Act 1900 (NSW) in relation to the ANZ Arthur St property loan. According to an email in evidence, the plaintiffs have offered to repay that mortgage debt if it is agreed that the mortgage is transferred to them.
[3]
The plaintiffs' application to amend
The amendments to the statement of claim sought by the plaintiffs' notice of motion fall into four categories.
First, there are amendments which update, correct and plead or particularise facts already pleaded or which are not in dispute. These include the joinder of Mary Butterworth, a co-executor of the third plaintiff's will and the inclusion of the sums paid towards the third plaintiff's mortgages and details of the loans with Westpac and ANZ: ASOC at [1], [10], [12A]-[12C], [13], [16] and [21]-[22] and the particulars to [11], [14] and [21]-[22]. The defendants do not oppose leave being granted in relation to these amendments.
The second category of amendments seeks to plead a new cause of action and new claims of relief based on allegations of false representations.
The ASOC pleads representations made by the first and second defendants on 16 September 2011 and in early 2012 that they would enter into the joint venture and transfer the Properties to an agreed corporate joint venture vehicle. It alleges that these representations were knowingly false or made without belief or with reckless indifference as to their truth as the defendants did not intend to follow through with the joint venture and caused the Properties to be acquired by corporate entities associated with the first and second defendants. The ASOC pleads that the plaintiffs relied on the representations and were induced to enter into the JV Agreement and the contracts for sale and to transfer title to the Properties to the corporate entities: ASOC at [10A], [11], [12D], [12E] and [15A]-[15B].
The ASOC pleads that, by reason of their reliance on the representations, the plaintiffs are entitled to rescind each of the contracts and transfers and have title to the Properties reconveyed to them subject to any just allowances: ASOC at [15B]. The ASOC includes five new prayers for relief at [2A]-[2E] that seek orders rescinding the JV Agreement, rescinding the contracts for sale of the Properties and transfers of title, a declaration that the Properties are held on trust for the third plaintiff, an order that the third and fourth defendants transfer title to the Properties to the third plaintiff subject to just allowances, and equitable compensation. The new prayers for relief are proposed to be the primary relief sought, with the existing relief identified as "further or in the alternative to 2A to 2E", and the order for judicial sale also sough as an alternative claim for relief: ASOC relief at [3] and [10].
The defendants oppose leave being granted for the second category of amendments.
Third, there are amendments which seek to plead further breaches of the JV Agreement and of fiduciary duties by the first and second defendants, Barnes v Addy claims against the fourth defendant, and a claim for relief by way of rescission and transfer back of the Properties. The defendants oppose leave being granted in respect of this category of amendments. These amendments can be summarised as follows:
1. breaches of the JV Agreement by transferring title to the Properties to the third defendant and Salcorp (ASOC at [15]), denying the JV Agreement as pleaded and falsely and dishonestly claiming the alternative written agreement in the defence (ASOC at [26]-[27]), and failing to keep proper records or accounts with respect to the joint venture giving rise to loss and damage, such as the contribution of half of the costs of the expert inquiry and report (ASOC at [28]-[29]);
2. breaches of fiduciary duty by failing to act honestly and in good faith in causing the Properties to be transferred to the third defendant and Salcorp and, later, the fourth defendant, failing to undertake the subdivision and construction of the dwellings, charging the Properties as security for loans for purposes unrelated to the joint venture, placing themselves in a position of conflict and obtaining an unauthorised gain or profit from the joint venture: ASOC at [15C];
3. Barnes v Addy knowing receipt and assistance claims based on the fourth defendant being the alter ego of and controlled by the second defendant with knowledge of the representations and JV Agreement, knowingly receiving property transferred to it, and having knowledge of a dishonest and fraudulent design on the part of the first and second defendants: ASOC at [17A]-[17B]; and
4. a claim that the plaintiffs are entitled to an order that the transfer of title of the 10 Arthur St property to the fourth defendant be rescinded and that title be reconveyed to the third plaintiff, with a claim for associated relief: ASOC at [23] and ASOC relief at [4A].
Fourth, there are amendments to the claims of relief which update or refine the relief sought, including a claim for equitable compensation arising from the existing claims in the SOC, an order that the declarations and orders sought are subject to the fifth and sixth defendants' registered mortgages, and an order that provides a mechanism for the plaintiffs to pay their reasonable costs and expenses of the sale of the Properties: ASOC relief at [4B], [6A], [9] and [12A]. The defendants consent to these amendments subject to references to other claims for relief which are opposed.
In support of their application, the plaintiffs rely on two affidavits of the first plaintiff sworn 28 May 2021 and 30 June 2021.
The defendants rely on the affidavit of their solicitor, Mr Stefano Laface, sworn 21 June 2021. Mr Laface gives evidence, on information and belief, that the defendants have been unable to put the Properties to any use by way of the joint venture or otherwise and that, since 2012, they have incurred significant and ongoing mortgage repayments to ANZ, which they ceased making in around early 2020.
While acknowledging the time that has passed since these proceedings were commenced, the plaintiffs submit that leave to amend to plead the second and third category of amendments should be granted as they are necessary for the purposes of determining the real questions raised by, or otherwise depending on, the proceedings and the overriding purpose and dictates of justice favour allowing them. The following matters are advanced in support of this.
First, the plaintiffs submit that the amendments that seek to plead the new cause of action based on the alleged representations and claim an entitlement to rescind the JV Agreement arise, in part, from information contained in Mr Peisley's report received in late 2020 that no money was spent on the subdivision and construction of the dwellings. The amendments are also said to arise from the documents produced on subpoena by ANZ and Westpac in March 2021 that identified the Properties were used as security for loans. It is submitted that the second and third category of amendments are otherwise based on existing pleaded facts, information known to the defendants and existing affidavit evidence previously served by the plaintiffs, to which the defendants have already responded.
Second, the plaintiffs submit that the proposed amendments and new relief are not inconsistent with the parties' agreement that an order for judicial sale be made, as noted in the 12 July orders, or the agreed statement of facts, noting that the ASOC continues to include claims for the Court to order that the Properties be sold and for repayment of the registered mortgages. The plaintiffs submit that the proposed new relief for an order that title to the Properties be transferred to the third plaintiff subject to just allowances (at [2D]) is a type of judicial sale as it amounts, in substance, to an order that the Properties be sold to a particular person, namely the third plaintiff, at a particular price. They also submit that the relief sought for an order transferring title to the Properties subject to just allowances (at [4A]) is an alternative claim for relief based on an existing pleading as it derives from the claim that the plaintiffs have validly terminated the JV Agreement by reason of the defendants' breaches.
Third, it is submitted that the proposed amendments are not matters about which the plaintiffs intend to serve any further evidence apart from the documents produced on subpoena and, based on the evidence on this application, there is no suggestion that the defendants will need to serve any further evidence if the amendments are allowed. In that context, the plaintiffs submit that there is no basis to conclude that granting leave to allow the amendments will delay the proceedings.
Fourth, the plaintiffs submit that, despite the orders made on 12 July 2019, it remains necessary for there to be a final hearing of the existing proceedings, with the expert's report being taken as evidence, cross-examination of the expert and a determination of the plaintiffs' claims for declaratory relief based on breach and damages and the appropriate orders relating to the judicial sale of the Properties. That hearing has not yet been fixed and, it is submitted, there is no reason to suppose that allowing the amendments will delay it.
Fifth, the plaintiffs submit that there is no basis to suggest that the length of the proceedings has been caused or contributed to by any lack of diligence or delinquency on the part of the plaintiffs.
The defendants take issue with each of these submissions and contend that leave to amend should be refused except in respect of those amendments which I have identified are not opposed. The defendants submit that the new claims of false representations and breaches of fiduciary duty and of the JV Agreement are based on facts which were known to or readily discoverable by the plaintiffs some time ago and there has been an inadequate explanation for the plaintiffs' delay in seeking the amendments. They submit that the plaintiffs' delay is compounded by the fact that the proceedings are close to finality with little left to be done to determine the plaintiff's pleaded claims.
The defendants submit that the primary relief now proposed by the plaintiffs, namely that there be an order transferring the Properties and declaratory relief that the JV Agreement has been rescinded, is contrary to the parties' agreement that an order would be made for the judicial sale of the Properties. They also submit that they will suffer prejudice (to the extent prejudice is necessary) should the plaintiffs be allowed to amend and resile from the agreement for judicial sale considering the advanced stage of the proceedings.
[4]
Consideration and determination
The Court's power to grant leave to amend is discretionary and made pursuant to s 64(1)(b) of the Civil Procedure Act 2005 (NSW) (CPA). Section 64(2) of the CPA provides that all necessary amendments are to be made for the purposes of determining the real questions raised by, or otherwise depending on, the proceedings.
In considering whether to make an order granting leave to amend, the Court must seek to act in accordance with the dictates of justice: CPA, s 58(1). For the purposes of determining the dictates of justice in a particular case, s 58(2) of the CPA provides that the Court must have regard to the overriding purpose of the CPA and the rules of court as stated in s 56(1), which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
The Court must also have regard to the objects stated in s 57 of the CPA. Those objects are the just determination of the proceedings, the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings, and all other proceedings in the Court, at a cost affordable to the respective parties.
The weighing of the factors in the exercise of the discretion to grant leave to amend includes, in particular, a consideration of:
1. the nature and importance of the amendments to the party seeking them;
2. the extent of the delay in applying for leave to amend and the explanation for that delay;
3. the prejudice that is assumed to follow from the amendment, and that which is shown;
4. the parties' choices to date in the litigation; and
5. the detriment to other litigants, the need to avoid waste and inefficient use of public resources, and the potential loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification.
See Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [5], [24], [30] (French CJ), [93], [95], [100], [102], [105], [108], [112], [114] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).
As the moving parties seeking leave to amend, the plaintiffs are expected to bring the circumstances giving rise to the amendments to the Court's attention to explain the delay in their application. Those circumstances may demonstrate that the delay is justified in the sense that the reasons for delay are not inconsistent with any failure on their part or on the part of their legal advisers to act diligently and expeditiously in raising the new claims. If the circumstances provide some justification for the delay, they may be weighed against the effects of the delay on the other parties: Karl Suleman Enterprizes Pty Ltd (in liq) v Pham [2013] NSWCA 93 at [22].
The explanation proffered for the plaintiffs' delay in making the amendments is, in essence, the discovery of what they contend is new information in the subpoenaed material and the expert's report. Specifically, this is the information about the extent to which the defendants have mortgaged the Properties, including for purposes unconnected with the joint venture, and the evidence in Mr Peisley's report to the effect that the defendants did not contribute any monies towards land subdivision and development of the residences in accordance with the JV Agreement. This information is said to form the basis of the new allegations made that the defendants never intended to implement the JV Agreement in the proposed pleadings at ASOC [15A]-[15C], the new claim that the plaintiffs are entitled to rescind the JV Agreement at ASOC [15B] and [23], and the new relief sought at ASOC [2A]-[2E] and [4B].
As early as April 2017, the plaintiffs were aware that there were loans to the defendants that were outstanding of approximately $2 million from Westpac and $575,000 from ANZ secured by mortgages over the Properties: judgment at [22]. While the plaintiffs may not have known that the 8 Arthur Street property was listed as security for ANZ facilities that totalled over $5 million, they were clearly on notice that the Properties were being used as security for significant loans. They also could, in my view, reasonably have discovered the extent and purposes of that security much earlier than March 2021. Relevantly, the prospect of issuing subpoenas to ANZ and Westpac was raised by plaintiffs' counsel in April 2017: judgment at [34]. No evidence was adduced or explanation given by the plaintiffs on this application as to why they did not take that step at the time.
As to the determination in Mr Peisley's report that the defendants made no contributions to subdivision and redevelopment, the evidence on this application indicates that the plaintiffs were aware that very little funds, if any, had been incurred by the defendants on those matters. It seems to have been common ground before Pembroke J that nothing much had been done by the defendants in relation to the joint venture. The parties had agreed that no works were undertaken under the JV Agreement other than the defendants having obtained advice from architects and town planners in respect of the Agreement and having arranged or paid for alternative accommodation, the third plaintiff's mortgages and stamp duty for transfers of the Properties: Annexure B at [6]-[11].
In other words, the existence of significant mortgages and loans associated with the Properties and the failure by the defendants to undertake the subdivision and development, as evidenced by the fact that they spent no money on that work, were matters known to the plaintiffs some time ago, well before the accounting issues were referred to the expert and the final hearing deferred.
In any event, the second and third categories of amendments and the newly claimed relief are primarily grounded on facts about which the plaintiffs have been aware at all material times since the proceedings were commenced and were therefore capable of being pleaded earlier. For example, the new representations are asserted to have been made to the plaintiffs in 2011 and 2012.
The alleged falsity of the representations is based on the alleged absence of any intention by the defendants to carry through with the joint venture by undertaking the subdivision and construction of the villas. However, the plaintiffs knew that, other than paying the third plaintiff's mortgages and arranging for alternative accommodation, nothing was being done by the defendants in pursuit of the joint venture from at least April 2017, if not before. The claims of falsity and the new allegations of breaches also rely on the fact that the Properties were transferred to the third defendant, Salcorp and the fourth defendant, and not to a corporate joint venture vehicle. Again this was known to the plaintiffs from the time they commenced the proceedings in 2016 as they were already pleaded: see, for example, SOC at [16]-[17].
Similarly, the new allegations that the defendants breached the JV Agreement, denied the Agreement and failed to keep proper accounts are based on facts which the plaintiffs were aware of in 2017 and 2018, prior to the expert handing down his report.
Having regard to the above, I accept the defendants' submission that the second and third category of amendments arise out of matters known to the plaintiffs, or which could reasonably have been discovered earlier by them, and that the plaintiffs have not provided an adequate explanation for their delay in making their application to amend.
The significance of the absence of a good explanation for the plaintiffs' delay needs to be weighed against the nature and importance of the amendments and the other circumstances of this case.
While accepting that the amendments raise claims that are connected with and relate to the issues on the existing SOC, in my view, it is notable that the amendments are not asserted to be critical to the plaintiffs' claims. It is not said that the amendments are needed to overcome some deficiency in the plaintiffs' existing pleading or to respond to a particular defence raised. As was put at the hearing, the plaintiffs' rationale for the amendments was merely to support an "alternative route to a remedy", a "clearer pathway" to reconvey the Properties to the plaintiffs and to add to the existing pleaded case as relevant to the terms and conditions of any equitable relief. This is in circumstances where it is alleged that the defendants have not acted honestly in the conduct of the joint venture and their defence of the proceedings.
The plaintiffs did not point to any particular detriment or prejudice which they would suffer if the amendments are not allowed. Significantly, the plaintiffs will not be left without any claims for relief or outcomes in their favour if their application is refused. To the contrary, it is common ground that some relief sought by the plaintiffs' existing claims will be granted based on the statement of agreed facts, the defendants' concessions and the parties' agreement that an order for judicial sale will be made in relation to the Properties following the expert process. As was noted by plaintiffs' counsel at the directions hearing before Pembroke J when the 12 July orders were made by consent and an expert appointed to deal with the accounting issues, "the plaintiff has sought the relief that has now been substantially granted or consented to" (12 July 2019 T5.23-5).
I am also unpersuaded by the plaintiffs' submission that their new claims for equitable relief at ASOC [2D] and [4A] seeking the transfer of title to the Properties subject to just allowances are in substance, and can be characterised as akin to, orders for judicial sale.
Ordinarily, a judicial sale is by auction to ensure that the market is fully tested and the best price obtained, although it may be by private treaty or ordered by retrospectively authorising a pre-existing sale under an existing contract. In the case of private treaty, the price, terms of payment and conditions of sale must be proper in the particular circumstances, with the price being the best that can be reasonably obtained and not less than the value of the property: Sood v Christianos [2008] NSWSC 1087 at [20]-[21], citing with approval New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd [2007] NSWSC 474 at [27] and G P Stuckey and C D Irwin, Parker's Practice in equity (New South Wales) (2nd ed, 1949, Law Book Co) at 283, 286, 288.
Thus, the concept of judicial sale involves ascertaining the proper price based on the value of the property the subject of the sale. This reflects the ordinary meaning of sale, which is the exchange of something for money. The proposed new relief does not involve any concept of sale in the sense of seeking to maximise the price based on the market value of the property. Rather, it provides for the transfer of the Properties to the plaintiffs taking into account just allowances as between the plaintiffs and the defendants and subject to the requirement for the registered mortgages to be repaid.
It follows, in my view, that granting leave to the plaintiffs to pursue the proposed relief at [2D] and [4A] of the ASOC as their primary claims for relief would be inconsistent with the agreement reached between the parties that an order for judicial sale be made after the expert report is produced, as recorded by the 12 July orders. Further, to grant leave to the plaintiffs to pursue claims that they are entitled to rescind the JV Agreement is also, to my mind, at odds with the agreed statement of facts and existing claims for relief which are premised on the parties having made some contributions to the joint venture and the JV Agreement having been terminated for the first and second defendants' breach.
The potential prejudice to the defendants is also a relevant factor that must be taken into account on this application. The threatened recovery proceedings by ANZ is ameliorated by the plaintiffs' offer to take over the mortgage debt if it is agreed that the mortgage is transferred to them. That said, I accept the defendants would be prejudiced as a consequence of further delay if leave to amend were granted given the amendments have the effect of significantly changing the nature of and expanding the claims made against them in these proceedings.
In my view, it is inevitable that granting leave to the plaintiffs to plead the new cause of action based on the false representations, the new claims of breaches of fiduciary duty and the JV Agreement and the new claim for relief will expand the matters of substance that require determination, delay the hearing of this matter and likely result in the parties incurring further costs. This is particularly as the new cause of action is, in substance, a new allegation of common law fraud and one of the new pleadings of breach of the JV Agreement raises a claim of dishonesty, each of which would need to be the subject of consideration and determination. If leave to amend to pursue these claims is granted, the defendants will need time to file an amended defence. Although the defendants' affidavit evidence on this application did not address whether they would seek to rely on any further evidence if the amendments were allowed, at the hearing, their counsel adverted to the need to do so if leave to amend was granted. Given those amendments raise new and serious claims regarding the conduct of the first and second defendants and issues regarding their state of mind, it would not be unexpected that the defendants will require time to adduce evidence in response.
While a date has not yet been fixed for the final resolution of these proceedings, the plaintiffs' application to amend is made three years after the proceedings were first allocated a hearing date and almost two years after the hearing of the plaintiffs' claims was to take place. The expert process may have taken longer than anticipated through no fault of the plaintiffs, but it was undertaken following orders made by consent, the defendants' concession to several of the plaintiffs' claims for relief in the SOC, and an agreement for an order for judicial sale of the Properties to be made.
At the directions hearing on 28 June 2019, Pembroke J gave brief reasons to make clear that the deferral of a final hearing and appointment of an expert was part of "the resolution which the parties had sensibly arrived at". In doing so, his Honour observed (28 June 2019 T25.7-10 and T25.14-21):
It is entirely possible, even likely, that the resolution of those accounting questions [by the expert] will leave no other matters of substance for determination. It has already been conceded by the defendants that a number of prayers for relief in the statement of claim should be made.
….
The agreement by the defendants to certain relief sought by the plaintiffs and the agreement by the parties to the appointment of an expert, without there having been any hearing, does not allow me to conclude that either party is more responsible than the other party for the events which have transpired. All that is apparent is that the parties have cooperated sensibly and responsibly with the assistance of experienced legal advisers and have arrived at a method of disposing of the litigation which avoids the need for a court hearing, subject to any matters that may arise after receipt of the expert's report.
Those observations, the positions adopted by the parties and the 12 July orders were based on the plaintiffs' claims in the SOC. Those claims are, relevantly, that the JV Agreement had been terminated for the first and second defendants' breaches, including breaches of their fiduciary duties owed as joint venturers by, amongst other things, encumbering the Properties by mortgages to ANZ and Westpac and failing to apply the proceeds for joint venture purposes, and claims for relief by way of an account and judicial sale. Further, and as noted above, I am not satisfied that the second and third category amendments could be characterised as matters that arise from new information ascertained from or shortly after receipt of the expert's report.
I accept that the expert process does not obviate the need for a final hearing in these proceedings or have the consequence that there are no matters of substance that remain for determination. The Court will need to be satisfied that there is a proper basis for the declaratory relief sought in the SOC, what, if any, loss the plaintiffs have suffered by way of damages, and the appropriate terms and conditions of the judicial sale. However, even accepting that there are matters that will need to be considered at a final hearing, there is little left to be done to finally determine the plaintiffs' existing claims. There is an agreed statement of facts, concessions made by the defendants about the plaintiffs' claims for relief and evidence from the expert process on the parties' respective contributions to the joint venture to which regard may be had in determining the appropriate order for judicial sale and the plaintiffs' other claims for relief. To the extent that the plaintiffs take issue with the expert's findings of the account, they may cross-examine him pursuant to r 31.51 of the Uniform Civil Procedure Rules 2005 (NSW).
In summary, the second and third categories of proposed amendments seek to raise substantial new claims in circumstances where the subject matter of those claims has been within the plaintiffs' knowledge for a number of years. The new claims for relief are not consistent with the agreement for a judicial sale order, the plaintiffs' other claims for relief as at 12 July 2019, or the way in which the parties agreed that the proceedings were to be disposed of, which included an expert process that took an account of monies advanced by the parties to the joint venture. Nor are the amendments said to be critical to the plaintiffs' claims for relief which, in certain respects, have already been conceded by the defendants. Further, but for this application for leave to amend, it seems likely that the proceedings would have been allocated a date to resolve the plaintiffs' claims for final relief. To grant leave to amend those matters which are opposed by the defendants would likely delay the finalisation of proceedings which have already been the subject of significant delays.
For these reasons, I do not consider that it would facilitate the just, quick and cheap resolution of the real issues in the proceedings or be consistent with the dictates of justice and s 57 of the Civil Procedure Act 2005 (NSW) to grant leave to the plaintiffs at this late stage to file and serve the ASOC other than in respect of those amendments which are not opposed by the defendants.
[5]
Costs and orders
The general rule is that costs follow the event unless it appears to the Court that some other order should be made: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.
I see no reason other than to apply the general rule and will order the plaintiffs to pay the defendants' costs of the notice of motion.
If any of the parties consider that some other costs order should be made, they are to confer with the other parties and, within seven days, notify my Associate that a variation to the costs order is sought. They should also provide an agreed timetable for the exchange of short written submissions so that the issue of costs can be determined on the papers.
Accordingly, I make the following orders:
1. Grant leave to the plaintiffs to amend the Statement of Claim by filing and serving an Amended Statement of Claim document in the form of Annexure B to the affidavit of Millie Booth dated 30 June 2021 but not including the amendments proposed at:
1. prayers for relief [2A] to [2E], [3], [4A], [6Aii] and [10];
2. prayers for relief [6Ai] and [9] to the extent those prayers refer to [2B], [2C], [2D], [2E] and [4A]; and
3. paragraphs [10A], [11(ix)], [12D], [12E], [15], [15A], [15B], [15C], [17A], [17B], [23], [26] to [29], and the words in the chapeau to paragraph [11].
1. The plaintiffs to pay the defendants' costs of the notice of motion filed on 28 May 2021.
2. List the proceedings before the Equity Registrar at 9.30 am on 14 September 2021.
[6]
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Decision last updated: 31 August 2021