Camilleri v The Trust Company

Federal Court of Australia|2015-10-27|Before: Mr P, Middleton J

INTRODUCTION 1 On 8 October 2015, I ordered that: The Applicants have leave to further amend paragraph 61 of the Amended Statement of Claim in the form set out in the email sent by the Applicants' solicitors to the Court dated 30 September 2015 (6.00pm). Otherwise the application for leave to further amend the Amended Statement of Claim be dismissed. The Applicants pay the Respondent's costs of and in connection with the application to further amend the Amended Statement of Claim and Originating Application, but otherwise costs be reserved. These are my reasons for making those orders. 2 This is a representative action brought under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the 'Federal Court Act') claiming various relief. 3 The Applicants were issued with debentures in Australian Capital Reserve Ltd ('ACR'). The Respondent (previously called Permanent Nominees (Aust) Ltd) ('Permanent') was the trustee of debenture holders under the provisions of Ch 2L of the Corporations Act 2001 (Cth) (the 'Act') and under an unsecured note trust deed made between ACR and Permanent. In the existing Amended Statement of Claim various duties are alleged to have been owed by ACR and Permanent, particularly in relation to the latter having a duty to exercise reasonable diligence to ascertain whether the property of ACR would be sufficient to repay amounts deposited and lent as and when they became due. 4 In relation to the allegations against Permanent, it is specifically alleged that in certain periods of time (up until November 2005) Permanent knew of certain matters, had information available to it, and was obliged to make enquiries relating to (for example) the financial position of various companies, sales contracts and development properties. The existing pleading then details the information available, the various actions Permanent should have taken in response to the information available and the opinions Permanent should have reached at the relevant time. Significantly, the allegations all relate to a period not extending beyond November 2005. 5 At a high level, it is alleged that, in contravention of its duties under s 283DA of the Act, Permanent failed to take certain steps and caused the Applicants (and group members) loss and damage. 6 The group members presently include all persons who: (a) were issued debentures by ACR on or after 17 November 2005; (b) still held those same debentures on 28 May 2007 when ACR entered voluntary administration; and (c) suffered loss or damage as a result of Permanent's contraventions of s 283DA of the Act prior to 17 November 2005. 7 The Applicants and group members, by reference to the facts relating to ACR and specific development projects, claim relief in the form of compensation from Permanent pursuant to s 283F of the Act. The cause of action is alleged to have arisen when ACR entered voluntary administration on 28 May 2007. 8 The Applicants now seek leave to further amend the Amended Statement of Claim and the amendments require consequential amendments to the Originating Application.

LEGAL PRINCIPLES 9 Rule 8.21 of the Federal Court Rules 2011 (Cth) (the 'Rules') governs amendments to an Originating Application. It is accepted that the grant of leave to amend a pleading should be done conformably with the requirements of that Rule. The Applicants rely upon r 8.21(1)(g)(i) of the Rules - that is, that the proposed amendments add a new foundation for a claim for relief, which foundation arises out of substantially the same facts as those already pleaded to support an existing claim for relief by the Applicants. In such cases, leave to amend may be granted even if the application is made after the end of any relevant period of limitation applying as at the date the proceeding was started. 10 Rule 8.21(1)(g)(i) of the Rules directs attention to the existing claim for relief, and the facts pleaded to support it, and then directs attention to the question of whether the proposed amendments are properly characterised as a new foundation in law for the relief, arising out of 'substantially' the same facts as those already pleaded: see generally Carter, in the matter of Spec FS NSW Pty Ltd (In Liquidation) (2013) 225 FCR 79 at [38]; Darcy v Medtel Pty Limited (No 3) [2004] FCA 807 at [30]; Clasul Pty Ltd v Commonwealth of Australia [2014] FCA 1133 ('Clasul') at [41]; New South Wales v Radford (2010) 79 NSWLR 327 at [69], citing Brickfield Properties Ltd v Newton [1971] 1 WLR 862 at 880 (Cross LJ). 11 I accept that the Court should not be too pedantic in considering the nature of the facts added to the existing pleading. Whether the added facts are substantially the same as the facts already pleaded will be a question of degree, and will depend on the nature and extent of the existing pleaded case, the facts sought to be added in and the relief already sought. 12 In Draney v Barry [2002] 1 Qd R 145 at [57], Thomas JA said (in my view correctly), in considering a relevantly similar rule: I do not think that "substantially the same facts" should be read as tantamount to the same facts, and consider that the need to prove some additional facts is not necessarily fatal to a favourable exercise of discretion under r. 376(4) [of the Uniform Civil Procedure Rules 1999 (Qld)]. If the necessary additional facts to support the new cause of action arise out of substantially the same story as that which would have to be told to support the original cause of action, the fact that there is a changed focus with elicitation of additional details should not of itself prevent a finding that the new cause of action arises out of substantially the same facts. In short, this particular requirement should not be seen as a straitjacket.

PROPOSED AMENDMENTS - FACTS AND RELIEF 13 There are two categories of amendment sought. 14 The first category is to amend paragraph 61 of the Amended Statement of Claim as follows (the underlining indicating the further amendment sought): 61. If Permanent, exercising reasonable diligence, had done each of the things alleged in the preceding paragraph, then: 61.1. debentures would not have been issued on or after 17 November 2005; and 61.2. by not later than 17 November 2005, receivers or administrators would have been appointed to the property of ACR; 61.3. the applicants and the group members who were first issued debentures on or after 17 November 2005 would not have suffered any loss or damage in respect of those debentures; and 61.4. group members whose debentures were issued on or after 17 November 2005 ("Reinvestment") would have suffered less loss and damage in respect of those Reinvestments. 15 This amendment in my view only clarifies the position as to the rolling over of investments by group members and does not impact upon Permanent's position or preparation for trial. I do not consider that the amendment widens the class of group members, and the Applicants do not contend otherwise. The amendment should be allowed. 16 The second category of amendment relates to two periods, December 2005 to December 2006, and January 2007 to March 2007. These amendments repeat the type of allegations previously made as to information available to Permanent, further enquiries that Permanent should have made, and the conclusions and actions that Permanent should have reached or taken (including ceasing fund-raising), but in respect of these later time periods. Significantly, whilst at a high level the allegations have the same character, the actual facts and circumstances are different in each period, and would involve a different factual enquiry as to each element of the allegations made against Permanent. 17 Undoubtedly, the claim for relief as reflected in the proposed amendments would remain the same as in the existing pleading: a claim pursuant to s 283F of the Act for recovery of loss or damage resulting from contraventions of s 283DA of the Act, where the cause of action arose on 28 May 2007. 18 The Applicants submit that the effect of the proposed amendments to the Amended Statement of Claim is simply to update the facts already pleaded to introduce alternative allegations by reference to later dates by which fund-raising ought to have ceased, being December 2006, January 2007 or March (or April) 2007. 19 The Applicants also submit that whilst these are dates later than the existing 'cessation' date of 17 November 2005, these later dates are nominated by reference to quite limited further developments in the pool of information which it is alleged Permanent ought to have been monitoring. The Applicants submit that the further developments build upon the information already available (and pleaded) at 17 November 2005: the accumulation of information by the later dates was 'substantially the same' as the information already pleaded. 20 Therefore, the Applicants submit the effect of the proposed amendments is to contend that even if the information available by 17 November 2005 is not sufficient to conclude that ACR's fundraising ought to have been ceased in late 2005, nonetheless that information combined with the modest additional data through 2006 and early 2007 ought to have had that result. The Applicants submit the amendments merely identify alternative, later dates by which the existing claim group will contend that fundraising ought to have ceased, and involve no change to the identity or number of group members.

Compliance with r 8.21(1)(g)(i) 21 The existing Amended Statement of Claim primarily alleges a contravention of s 283DA of the Act. The contraventions are alleged to have occurred before 17 November 2005. In substance, it is alleged that Permanent ought to have formed certain opinions and made certain inquiries about the financial health of ACR and of Estate Property Group Limited and its subsidiaries (the 'EPG Group') as at late 2005, as a result of which it ought to have formed various conclusions about specific development projects then being conducted by the EPG Group. The conclusions are specific to the development projects the subject of the existing claims, and concern matters such as the then current balances of the loans secured against each property, the level of sales of apartments then achieved for particular properties, whether the then current valuations could be supported, and the prospect that the projects would generate revenue 'in the near future.' It is then alleged that the conclusions Permanent ought to have formed about the EPG Group's development projects ought to have lead to a number of ultimate conclusions about the financial position of ACR and the EPG Group as at November 2005. 22 Whilst the newly added allegations broadly follow the same pleading style as the existing claim, the amendments concern two new sets of contraventions which relate to substantially different facts occurring in two discrete periods of time, each after 17 November 2005. 23 The first new set of contraventions relates to the period of fundraising by ACR under two prospectuses. Like the existing contraventions, they do concern alleged failures by Permanent to make inquiries, form conclusions and take certain action. However, the factual foundation for the alleged failures is new. It concerns the financial position of ACR and the EPG Group during the period after 17 November 2005 until February 2007, and the position of the then current EPG Group development projects, some of which are relevant to the existing claim, and some of which are not included within the existing claim. 24 The second set of new contraventions is alleged to have arisen out of ASIC's issuing on 10 March 2007 of an interim stop order on one of the earlier prospectuses. In addition to the circumstances alleged in respect of the period from November 2005 to February 2007, it is sought to be alleged that this interim stop order should have led to Permanent taking certain action. Again, this addition will involve factual enquires over the extended period now introduced relating to the failures of Permanent. 25 It is not just a matter of adding into the existing allegations one or more facts supplementing the previous story sought to be established by the Applicants. The new allegations are intended to stand on their own to justify the relief being sought, and by their very nature would require an extensive and independent analysis of the circumstances existing at the time of the new allegations and in the financial circumstances then existing and confronting each of the relevant parties. 26 Justice Gleeson in Clasul usefully set out (at [41]-[51]) a number of authorities where amendments were sought in the context of r 8.21(1)(g)(i) (or similar rule of court). Each case (as her Honour recognised) must be looked at in the circumstances of the amendment, and the relief being sought. 27 However, the position confronting me is similar to that in Pianta v BHP Australia Coal Limited [1996] 1 Qd R 65, although in a different context. In that proceeding, amendment was sought to a pleading, seeking to rely upon a similar rule of court to r 8.21(1)(g)(i). The Full Court (comprising Fitzgerald P, Davies JA and McPherson JA) set out the relevant background (at 67) as follows: The action in which the application below was made was one for personal injuries arising out of an accident alleged to have occurred during the course of the applicant's employment with the respondent. In summary his plaint alleges that on 24 August 1990, whilst driving a "cable reeler" (a large converted front-end loader) over rough terrain the applicant experienced severe pain in his lower back in consequence of which he suffered disabilities enumerated in the plaint. It was alleged that inadequate suspension of the cable reeler and roughness of the terrain over which it was driven were caused by negligent acts or omissions of the respondent as the applicant's employer. The amendments which the applicant sought to add to his plaint would, if allowed, add a new cause of action against the respondent. They allege that on 22 January 1991, during the course of his employment with the respondent, the applicant suffered another injury to his lower back. On this occasion he had been operating a Komatsu Dozer which operated on tracks. A track of the dozer had become loose and the applicant resolved to attempt to fix it. In order to get access to it he had to remove a large amount of excess mud which he attempted to do with a spade. It was whilst he was shovelling this mud that he received this additional injury. 28 The Full Court concluded (at 67-68): It was common ground in this Court that the question which the learned District Court Judge had to determine was whether the cause of action arising from the accident which occurred on 22 January 1991 arose out of the same facts or substantially the same facts as the cause of action alleged in the plaint. It was not submitted for the applicant that the cause of action arising out of the accident of 22 January arose out of the same facts as the cause of action pleaded but it was submitted that it arose out of substantially the same facts as that cause of action. Mr Williams Q.C., who appeared for the appellant, relied mainly for his argument on the fact that the injury in each case was of the same kind. And, at least at one point in his argument, he also relied on the fact that, in each case, there was the same relationship of employer and employee giving rise, it was submitted, to the same duty of care. The facts out of which each of the causes of action arose were those giving rise to the duty of care, those which constituted a breach of that duty and the fact of injury. The submission that the duties of care owed by the respondent to the applicant in each case were the same because the parties were the same and they were, in each case, in the relationship of employer and employee is correct only in a general sense. Relevantly the precise duties owed are correlative to the breaches of those duties and, as the applicant conceded, the facts constituting the breaches of duty in each case were quite different; neither the same nor substantially the same. And it follows that if the second accident gave rise to a new cause of action the damage was new and consequently different even though it may have been of the same kind. 29 In a similar way in this application before me, the amendments sought raise a different set of facts giving rise to the alleged breaches of a statutory provision, and are not substantially the same as previously alleged. To determine whether a breach occurred will necessarily involve an analysis of each period of alleged failure on the part of Permanent.

Discretion 30 In any event, I would not allow the amendments sought in the exercise of my discretion. There are a number of considerations that lead to this conclusion, despite the fact that it must be recognised that it is a serious step to prevent the Applicants (and group members) from raising these new allegations. 31 The first consideration is that the new allegations give rise to a wide factual enquiry and relate to a distant period of time. The elapse of time does impact upon a fair trial being able to be conducted. For the first time (in the later part of the year 2015), Permanent would be required to investigate and prepare for an enquiry into its activities after November 2005. 32 Secondly, since 2013 in the course of the case management of this proceeding, Permanent has been concerned that the Applicants make clear that their claim was limited to conduct occurring up until 17 November 2005. Whilst the Applicants did 'qualify' their position, it is fair to conclude that a deliberate decision was made by the Applicants (prior to this amendment application) to confine their claim to conduct occurring before 17 November 2005. While I appreciate circumstances change, the Applicants' clear indication since 2013 to limit their claim is a factor to be considered and one relied upon by the Court and Permanent. 33 Thirdly, whilst no third party claims have been made on the basis of the existing pleaded case, there is a risk that if the amendments are allowed, any potential third party sought to be joined (including auditors, for example) may raise successful limitation of action defences, having regard to the lapse of time. I put it no higher than a risk, and a possibility. However, Permanent should not, putting the other factors into the mix, have to bear that risk at this stage of the proceeding. 34 Fourthly, if the amendments are allowed, the trial date of 1 December 2015 will be lost. It is important to recall that the trial date has been set down for some time. The Court and the parties have been working towards that date, involving time and cost. 35 Expert evidence filed already by both parties addresses the financial position of ACR as at November 2005 in detail. Permanent would need the opportunity to consider whether it wishes to file expert evidence directed to the position as at, or evidence from any lay witness in relation to, the extended period of time. As I have alluded to, the events in question took place between eight and 10 years ago. It is extremely unlikely any evidence could be prepared, filed and served by Permanent before the current trial date if the amendments are allowed. As I have indicated, the proposed amendments contain a series of allegations as to the status of individual properties in the EPG Group. It is difficult to see how, nine years later, such allegations could meaningfully be investigated and responded to by Permanent (although there is no evidence that this would be an impossibility). 36 Nevertheless, it is well known that prejudice by delay in bringing proceedings may be insidious and difficult to positively prove: see, eg, McHugh J in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551. Further, litigants should be able to organise their resources on the basis that certain claims will not or cannot be made against them. In this proceeding, Permanent has acted on the basis that the cut-off date for its preparation for trial was November 2005. 37 The principles to be applied in exercising the discretion to allow an amendment are dictated by s 37M(2) of the Federal Court Act and informed by the decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. Whilst shutting out an Applicant, and group members, from pursuing claims is not a path to take readily, the circumstances of this proceeding and the conduct of the parties lead to the conclusion that the second category of amendments should not be permitted, even if r 8.21(1)(g)(i) was satisfied.

COSTS 38 Finally, I see no reason for not following the general principle that costs follow the event. The Applicants have substantially failed to obtain the amendments sought other than in respect of paragraph 61 of the Amended Statement of Claim (which was for clarification). I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.

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