Centaur Litigation Limited (in liq) v Strong

Background 6 As originally pleaded, the claims made against Mr Williams and the second to sixth defendants were for an amount of $27.9 million in relation to what were identified by the plaintiffs as the direct misappropriations, the revolving facility agreement misappropriation and the share purchase agreement misappropriation. The amended statement of claim filed on 9 May 2017 related to the same upstream transactions and introduced claims against Mr Rose, Bedford CA and the ninth and tenth defendants. 7 Relevantly, the plaintiffs claimed that: (1) Mr Williams was a de facto director of the plaintiffs and owed them fiduciary duties. (2) By a dishonest and fraudulent design and in breach of his duties to the plaintiffs, Mr Williams misappropriated funds raised under various offering documents issued by the plaintiffs, ostensibly for litigation funding investments; these are the "upstream transfers". (3) In the period from 27 August 2013 to 17 December 2015, more than $6 million of the misappropriated funds (and their traceable proceeds) were dispersed with the assistance of Mr Rose and Bedford CA, partially through Bedford CA's trust account and partially through the second to sixth defendants which were Australian companies which acted as trustees of four trusts controlled by Mr Williams. These are referred to as the "downstream transfers". (4) Accordingly, Mr Rose and Bedford CA are liable to compensate the plaintiffs as persons involved in Mr Willaims' contravention of statutory duties under s 79 of the Corporations Act 2001 (Cth) and under the so called "second limb" of Barnes v Addy (1874) LR 9 Ch App 244 at 251-252. 8 It is commonly accepted that the test of knowledge of the "dishonest and fraudulent design" involving breach of fiduciary duty within the second limb of Barnes v Addy involves assessing whether the defendants had: (1) Actual knowledge; (2) Wilfully shut their eyes to the obvious; (3) Wilfully and recklessly failed to make such inquiries as an honest and reasonable person would make; or (4) Knowledge of circumstances which would indicate the facts to an honest and reasonable person. See: Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 (Grimaldi) at [259]-[262]. 9 On 29 October 2018, in opening submissions, senior counsel for the plaintiffs, Mr Bell SC, indicated that the plaintiffs did not press the claim for liability under s 79 of the Corporations Act. Mr Bell pointed out that in Grimaldi at [260] the Full Court noted that judges have cautioned against treating each category as exclusive and rigid. Nonetheless, the plaintiffs' case against Mr Rose and Bedford CA is pleaded generally by reference to this characterisation: see the Further Amended Statement of Claim at [188A], [188D], [188G], [188J] and [188M]. 10 There is some complexity in the pleading because the plaintiffs' claims relate to Mr Rose's alleged accumulating "knowledge" and assistance over time. This is demonstrated by an aide memoire handed up by the plaintiffs in the course of the hearing which summarised the claimed damage depending upon as at what date (if any) the Court finds Mr Rose and Bedford CA had "knowledge" and having regard to the alleged assistance as follows: (1) From 27 August 2013 to 19 November 2013 ([188A]-[188C]) resulting in a claim to total traceable proceeds of $6,578,024; (2) From 20 November 2013 to 16 December 2013 ([188D]-[188F]) resulting in a total traceable proceeds claim in the same amount; (3) From 17 December 2013 to 17 March 2014 ([188G]-[188I]) resulting in a total traceable proceeds claim of $6,517,131; (4) From 18 March 2014 to 22 May 2014 ([188J]-[188L]) resulting in a total traceable proceeds claim of $5,628,451; and (5) From 23 May 2014 to 17 December 2015 ([188M]-[188O]) resulting in a total traceable proceeds claim of $3,566,655. 11 Settlement was reached with the second defendant on 25 July 2017. 12 Mr Rose and Bedford CA filed their defence on 3 August 2017. 13 By a letter dated 1 September 2017 Allianz Australia Insurance Limited, with whom Bedford CA has a professional indemnity insurance policy, advised Bedford CA's broker that indemnity was available to Mr Rose and Bedford CA for costs in the proceedings, subject to the reservation of the right to recover those costs under the fraud and dishonesty exclusion in clause 38 of the policy. However, they would not be entitled to indemnity for any settlement or adverse judicial determination of the plaintiffs' claims because of the "fraud and dishonesty" exclusion. There is no evidence that the plaintiffs were made aware of this fact at any time before 18 October 2018. 14 Settlement was reached with the ninth and tenth defendants in October 2017. 15 The amended statement of claim was further amended on 19 October 2017 to include nine misappropriations which now appear in the Further Amended Statement of Claim among the upstream transfers, claiming an aggregate amount of $32.1 million. The claims against Mr Rose and Bedford CA were not materially amended. 16 Mr Rose and Bedford CA filed an amended defence on 1 December 2017. 17 On 24 April 2018, the matter was set down for final hearing for 10 days between 22 October and 2 November 2018. 18 On 10 July 2018, default judgment was entered against Mr Williams and the hearing days between 22 and 26 October 2016 were vacated but the days between 29 October and 2 November 2018 were maintained. 19 On 17 July 2018, Jagot J made timetabling orders for preparation for the hearing on 29 October to 2 November 2018 and the parties were ordered to attend mediation by 31 August 2018. 20 By an email dated 6 August 2018, Judith Specht of Allianz advised the insurance broker for Mr Rose and Bedford CA that Allianz had revised its position and granted indemnity subject to reservations. The email: (1) Referred to Allianz' letter of 1 September 2017 and "your email to us of [12 July 2018]" at [1.1]; (2) Advised that indemnity would not be available under the first three categories of "knowledge" set out above, "but it may be available to the extent that knowledge is proven [under the fourth category], being that Mr Rose and/or Bedford CA had knowledge of the alleged facts because they knew of facts which, to an honest and reasonable person, would [have] indicated the alleged facts": at [1.9]. This was explained at [1.12] as being because "such a finding may not result in a judicial decision that assistance rendered by Mr Rose and/or Bedford CA was dishonest and fraudulent. The Courts have recently accepted that the conduct of the person assisting the fraudulent party need not in of itself be dishonest or fraudulent to trigger liability". (3) The following appeared at [1.17]: Allianz otherwise responds to your specific queries set out in your email of 12 July 2018 as follows: (a) Why is indemnity still reserved? Indemnity is granted, but that grant is subject to a reservation of Allianz right, if an adverse finding is made against Bedford and/or Mr Rose, to decline cover and seek recovery of some or all of the costs advanced by Allianz up to that time, pursuant to the application of the fraud and dishonesty exclusion clause 38. In light of the foregoing Allianz must continue to reserve its right to apply the fraud and dishonesty exclusion clause 38 until a settlement is entered or a judicial determination is made. 21 There is no evidence that the plaintiffs were advised of Allianz' position at any time before 18 October 2018. 22 The date by which the parties were to attend mediation was extended to 12 September 2018 by consent. The order was made in chambers on 22 August 2018. 23 On 2 October 2018, a case management hearing was conducted, attended by both Mr Bell SC and Ms Beechey, counsel for the plaintiffs, and Mr Faulkner SC, counsel for Mr Rose and Bedford CA. At that hearing, the Court was advised that it may be necessary to set down additional days for hearing on the basis that Mr Faulkner, who had only recently come into the case, wanted to put the plaintiffs to proof on issues which it had been thought might not be in dispute. Those issues were the upstream transfers by which the alleged misappropriations were effected, whether Mr Williams owed fiduciary duties to the plaintiffs and the tracing of funds via the British Virgin Islands to the Australian trust companies (the second to sixth defendants) and Bedford CA's trust account. The estimate of a week which had been agreed on 17 July 2018 had been on the basis that the only real dispute concerned the knowledge and assistance of Mr Rose and Bedford CA. The parties told the Court on 2 October that evidence might be completed in five days but an additional two days might be required for submissions. 24 The extent of the discussion at the case management hearing of the possibility that Mr Rose and Bedford CA might seek to amend the defence was as follows: MR FAULKNER: … There's one thing I need to note. Nothing needs to be done about it today, but we may want to amend our defence. I can't do it without leave and the sooner I can tell Mr Bell about the detail of that, the less likely he is to be prejudiced. It will just be in relation to the professional standards scheme. I'm not in a position to do anything about it today, but I appreciate that the burden is on my [sic: me] to let Mr Bell know as soon as possible. HER HONOUR: So when do you think that's likely to be? MR FAULKNER: We're still getting together the details. I can't say any more than I understand I need to do it as soon as possible. 25 On 18 October 2018, the solicitors for Mr Rose and Bedford CA wrote to the solicitors for the plaintiffs. Attached to the letter was a draft amended defence and an affidavit affirmed by Mr Rose on that day. No interlocutory application was filed, but by the their written outline of submissions filed on 25 October 2018, Mr Rose and Bedford CA submitted that (citations omitted and as written): 90. Mr Rose and Bedford CA seek leave to amend their defence to plead reliance on the Professional Standards Act 1994 (NSW). By reason of the Scheme of the Institute of Chartered Accountants in Australia (NSW) which was in force from 8 October 2013 until 8 October 2014 (when virtually all the conduct in question occurred), the occupation liability of Mr Rose and Bedford CA is limited to $2,798,686 (inclusive of interest and costs). 91. The statutory limit on occupational liability does not apply to fraud and dishonesty. Therefore, there will be no limit on liability if the Court finds that Mr Rose had any of the first three types of knowledge of Mr Williams' alleged fraudulent and dishonest design, or that he was involved in Mr Williams' breaches of statutory duty. In effect, the liability of Mr Rose will only be limited if the Court finds that Mr Rose has a Barnes v Addy liability solely by reason of the fourth type of knowledge referred to above. Obviously, if the Court finds that Mr Rose has any a liability for an amount less than $2,798,686, the limit will have no work to do other than in relation to interest and costs. 92. Mr Rose has affirmed a short third Affidavit dated 18 October 2018 which sets out the material for the mechanics of the Scheme. 93. Given that the application of the Scheme is a discrete issue, the Defendants have proposed that the parties do not address the Court on the application for leave to amend nor the merits of the limitation on liability, until final submissions. However, the defendants accept that this would not be an appropriate course if the Plaintiffs' further conduct of their case would be affected by a grant of leave to amend. 26 In the proposed amended defence, the defendants plead the Scheme and their membership of the Institute of Chartered Accountants in Australia. At [123], it is alleged that the services provided by the defendants are within category 3 as defined in the Scheme at cl 4.1 on the basis that they are not audit services (which are in category 1) and if any services are liquidation services (which is category 2), it was only a negligible part of the services as a whole. At [124], it is pleaded that the actual and reasonable charge for those services was $279,868 (excluding GST) and that the hourly rates charged were within the average hourly rates charged by the top 50 chartered accounting firms in Sydney in 2014 (excluding the "big four"). At [125], it is pleaded that, applying the multiplier in cl 3.1(b) of the Scheme, the limit on liability is $2,798,680. At [126], the defendants plead that they have the benefit of an insurance policy insuring them against occupational liability to which the proceedings relate and the amount payable under it is not less than $2,798,680. 27 In his affidavit affirmed on 18 October 2018, Mr Rose deposed that: (1) In order to make the calculation of fees he had identified all the files held by Bedford CA for work performed for Mr Williams and his associated companies, he printed out tax invoices (excluding those for interest on unpaid fees) and added up the total charges. He attached a spreadsheet at annexure GG which sets out the invoices and included a reference to where they appear in the Court Book. (2) He has not included charges (of $32,853 and $20,366) for work done in relation to Argentum Investment Management Limited or Blue Edge Capital Trust, because they are not the subject of claims made against the defendants in the Further Amended Statement of Claim. (3) He has identified work which might form part of category 2 services (liquidation services) and notes that charges of $4,194 and $7,637 (excluding GST) have been included in the $279,868 aggregate of charges. (4) There is no scale applicable to the services for which charges were made. He relies on a survey conducted in 2014 in which Bedford CA participated. It is said to be a survey of the top 50 chartered accounting firms in Sydney (other than Ernst & Young, Deloitte Touche Tomatsu, KPMG and PriceWaterhouse Coopers and their associated entities) conducted by RoCo Executive Search. At annexure HH, Mr Rose annexed a copy of that report. Mr Rose relied on page 6 of the report which sets out the average charge out rates for "Business Services Staff" for "All Companies" surveyed and he says that this is the category applicable to the services provided to Mr Williams and his associated companies. (5) Annexed at II and JJ are copies of an insurance policy with Allianz for the period 21 January 2016 to 21 January 2017 and the schedule to the policy. Also annexed, at KK and LL respectively, are the letter dated 1 September 2017 (referred to above) and an email dated 6 August 2018 from Allianz to Bedford CA's insurance broker in relation to claims made by Mr Rose and Bedford CA under the policy in relation to these proceedings (also referred to above). 28 On 2 November 2018, the defendants filed in Court an undated affidavit affirmed by Judith Specht, a Senior Claims Service Consultant at Allianz. Ms Specht deposed that she had read Mr Rose's affidavit of 18 October 2018. She then: (1) Confirmed that Allianz had issued professional indemnity insurance to Bedford CA for the period of insurance 21 January 2016 to 21 January 2017 and that annexures JJ and II to Mr Rose's affidavit are a copy of the policy schedule and wording respectively; (2) Confirmed that Mr Rose and Bedford CA have lodged a claim under the policy in respect of these proceedings and Ms Specht has been responsible for the conduct of the claim since 23 October 2017 when she took it over from a former colleague; (3) Confirms that she reconsidered the declinature of the claim and that she sent the email dated 6 August 2018 to Bedford CA's broker, a copy of which was marked LL to Mr Rose's affidavit; (4) Concluded at [7]: It was my intention when I sent my email on 6 August 2018 to inform Mr Rose and Bedford CA (via the broker) that Allianz will indemnify them if they are found liable in the proceedings because they are found to have had the 4th type of knowledge. Allianz's declinature of the claim relates to the situation where Mr Rose and/or Bedford CA is found to have a liability to the plaintiffs because they are found to have had one of the types of knowledge referred to in paragraphs 1.8(a), 1.8(b) and 1.8(c) of my email of 6 August 2018. 29 The plaintiffs oppose the grant of leave. They rely on the affidavit of Noel McCoy sworn on 27 October 2018. Mr McCoy is a partner in Norton Rose Fulbright, the plaintiffs' solicitors in these proceedings. Mr McCoy says that to consider properly the proposed amended defence and respond to it, it would be necessary to: (1) Conduct searches and undertake investigation to determine whether all invoices issued by Mr Rose and Bedford CA are accounted for in Annexure GG to Mr Rose's affidavit. (2) Obtain advice about: (a) the insurance policy and whether it would respond to a claim made if the plaintiffs were successful in view of the purported denial of coverage in the correspondence with Allianz; and (b) whether to make an application to the Court to join Allianz as a defendant in the proceedings to resolve the question of whether the insurance policy responds to any such claim. (3) Obtain expert accounting opinion evidence in relation to: (a) which category under the Scheme the services provided by Mr Rose fell into; (b) the applicability of any scale of charges prescribed or accepted by the Institute of Chartered Accountants in Australia at the material time; (c) having regard to cl 3.16(a)(ii) of the Scheme, if there is no scale, "the amount that a competent person of the same qualifications and experience as [Mr Rose and the employees of Bedford CA supervised by Mr Rose] would be likely to charge in the same circumstances". This would include whether charges had been made for all work performed and if not, what would be charged for the work performed, whether the hourly charges made by Mr Rose and Bedford CA in fact fell within the average hourly rates charged by the top 50 chartered accounting firms in Sydney in 2014 (other than the "big four") for that type of work, and if so, the relevance of the asserted fact to the amount that a competent person of the same qualifications and expertise would be likely to charge; and (d) the reasonableness of the charges (excluding charges for Argentum Investment Management Limited and Blue Edge Capital trust). (4) In the six clear business days since notice of the amended defence had been given, and in the middle of preparation for the hearing set down for 29 October-2 November and 19 and possibly 20 November 2018, Mr McCoy had not been able to identify suitable witnesses. (5) In Mr McCoy's estimate, it would take three to four weeks to take the steps identified.

SUBMISSIONS 30 Mr Faulkner conceded that there was no explanation for the delay. 31 Mr Faulkner submitted that any complexity in the work to be done identified in Mr McCoy's affidavit (referred to at [29(1)] above) is superficial because: (1) The plaintiffs already have all invoices rendered by Mr Rose and Bedford CA for all relevant work done for Mr Williams' companies and the court book references for them are set out in Mr Rose's affidavit affirmed on 18 October 2018. (2) To the extent that there may be doubt as to which of the three categories of work covered by the Scheme (audit, liquidation and other), Mr Rose has identified any doubtful work in his affidavit; (3) The invoices were obtained pursuant to notices to produce documents issued to Mr Rose as part of public examination proceedings at which he gave evidence. The plaintiffs are therefore not strangers to the material. Accepting that the plaintiffs would now need to look at the invoices in a new light, this is not a very onerous task, such as might be the case if they did not know anything about the invoices and they were obliged to seek a subpoena to get them for the first time. 32 Mr Faulkner accepted that the plaintiffs could not perform the work required during the week set down for the hearing from 29 October to 2 November 2018. However, the matter was listed for a further two hearing days, on 19 and 20 November 2018. Mr Faulkner submitted that the issue raised by the proposed amendment is a discrete issue. The conduct of the case would not be unduly disrupted by the amendment, indeed, it had no material effect on the first five days of the hearing. The Court had indicated that it could not accommodate extra hearing days immediately after 20 November 2018; but they could be accommodated in December 2018. There was therefore no prejudice to the plaintiffs if the further hearing days are set down at a time which accommodates the plaintiffs' need to provide further evidence. 33 Mr Faulkner submitted that, having regard to the claims made against Mr Williams and the second to sixth defendants, it was necessary for the plaintiffs to do the work which they had done to establish those claims, and therefore the plaintiffs had not suffered any cost disadvantage in the conduct of the proceedings which might have been avoided had they known at an earlier time of the proposed amendment. Put briefly, this was always going to be a big case. 34 Mr Faulkner submitted that Allianz had, by Ms Specht's email of 6 August 2018 and her affidavit, accepted liability if the Court finds Mr Rose and Bedford CA had knowledge within the fourth category so that the Court could determine the question of whether the professional indemnity policy responded to the plaintiffs' claims and determine whether the cap on liability available under the Professional Standards Act and the Scheme applied in this case. Counsel submitted that it was unnecessary for Allianz to be joined as a party. After the hearing on 5 November 2018, counsel provided four cases to chambers which dealt with the professional standards liability cap. In two of those cases, a court had considered the operation of the professional standards scheme without the insurer being joined. The insurer was joined in one of the cases and it is not clear from the fourth case whether the insurer was joined. It is not apparent that the question of whether it was necessary for the insurer to be joined had been considered in any of those cases. 35 Mr Faulkner also submitted that the relevant period of delay was from 6 August 2018, not earlier, having regard to Allianz' position. He noted that the possibility of an amended defence had been mentioned at the case management hearing on 2 October 2018. 36 The plaintiffs rely on the High Court's decision in Aon Risk Services Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 (Aon) at [111]-[114] for the propositions that: (1) 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. All matters relevant to the exercise of the power to permit amendment should be weighed. (2) The fact of substantial delay and wasted costs (concerns of case management) will assume importance on an application for leave to amend. (3) The party seeking leave to amend pleadings at a late stage should ensure that adequate explanation for the delay is given. (4) Statements in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; [1997] HCA 1 which suggest only a limited application for case management should not be applied. (5) Limits will be placed upon a party's ability to change pleadings. Particularly if the litigation is advanced: parties have an opportunity, not a right, to change pleadings; and (6) The effect on other litigants and the public as a whole will be considered. 37 The plaintiffs first submitted that it is not clear why it took the defendants 10 months (from 1 September 2017 to 12 July 2018) to approach Allianz to reconsider its decision to decline indemnity in relation to these proceedings. They say that whether that delay was a result of error or a conscious decision, Aon at [103] makes it clear that the explanation of delay is important to the determination of whether leave should be granted to amend the defence at this late stage. Without an explanation, neither the Court nor the plaintiffs are in a position to assess whether the exercise of the discretion to grant leave is warranted. 38 Second, the plaintiffs submitted that amendment must be refused because it would necessitate the joinder of Allianz. Clause 3.14(a) of the Scheme provides that where proceedings relate to category 3 charges, for the limitation of damages to apply, the chartered accountant must be able to establish that it has the benefit of an insurance policy insuring them against the liability. It is therefore an issue in the proceedings (and insurance cover is pleaded at [124] in the proposed amended defence) but that issue cannot be resolved by a finding in proceedings only between the plaintiffs and the defendants. Allianz could successfully deny cover in subsequent proceedings, leaving the plaintiffs in the unenviable position of having had the cap on recovery applied but in circumstances where there is no insurance cover. The Court can only be satisfied that the professional standards scheme applies so as to limit the defendants' liability for equitable compensation, interest and costs if Allianz is joined. Allianz' joinder would derail the hearing and result in delay in judgment but without it, amendment is pointless so that leave to amend the defence should be refused. 39 On the matter of the invoices for charges - the plaintiffs have never submitted that they tendered all of Mr Rose's invoices; that would need to be checked. Further, in relation to the RoCo Executive Search report, none of the procedures in relation to survey evidence contemplated by GPN-SURV have been observed. The plaintiffs do not know how the survey was undertaken and who was surveyed and who was not. All of that would need to be considered in deciding whether or not to object to that evidence. It would be necessary to consider the evidence as to the reasonableness of the fees charged by Mr Rose and Bedford CA and the matters raised by Mr McCoy are all matters which could have been considered had the application for leave to amend the defence been raised at the right time. There is a lack of clarity as to whether some of the charges are "liquidation" charges within category 2. There has been no exploration of whether Bedford CA or Mr Rose charged for all of their work. 40 Mr Bell submitted that the forensic disadvantage to the plaintiffs might be addressed if the later hearing days were deferred into December 2018, but that does not address the problem with the fact that the insurer has not been joined in the proceedings and the hearing of the substantive application has begun. 41 In reply, Mr Faulkner submitted that: (1) The defendants do not contend that the cap on liability provided by the Scheme would apply if the defendants were found to have knowledge within the first three categories. However, it is clear that there is cover for the fourth category having regard to the email of 6 August 2018 and Ms Specht's affidavit. The Court would be in a position to make the required finding without the insurer being joined. (2) The importance of the proposed amendment needs to be weighed against the difference between the last days of the hearing taking place in November or December 2018. (3) Practice note GPN-SURV relates to a survey that is to be conducted for the purposes of the litigation. The survey on which Mr Rose seeks to rely is a historical survey. The document explains what was done and when.

Consideration 42 The proposed amended defence has had no material impact on the first five days of the hearing. At the hearing on 5 November 2018, the plaintiffs appeared to accept that the forensic prejudice to the plaintiffs (in terms of the need to provide evidence to meet the claims in the draft amended defence) would be ameliorated if the final days of the hearing are deferred from 19/20 November 2018 until mid-December 2018. It may also be accepted that any defect in the historical report by RoCo Executive Search might be addressed by evidence from an appropriately qualified expert witness obtained during that time and the weight to be accorded to it is a matter to be decided. The insurer, Allianz, has given evidence that Mr Rose and Bedford CA have indemnity provided any judicial finding or settlement is based on the fourth category of "knowledge". I also accept that the proposed amendment is one which is important to the defendants. However, I am not persuaded that leave should be granted. 43 First, the defendants have offered no explanation for the delay in raising the proposed defence based on the Professional Standards Act. 44 Mr Faulkner submitted that the Court has no evidence of what steps the defendants took after 1 September 2017 (the date liability was declined) and before 12 July 2018 (the date referred to in the 6 August 2018 email accepting limited liability) and it cannot be inferred that none were taken. That is true, however, only the defendants can tell the Court what it did and they have refrained from doing so. They have not even put into evidence the email of 12 July 2018 referred to in Ms Specht's email of 6 August 2018 or any other correspondence with the insurer. More importantly, it was open at all times from 1 September 2017, for the defendants to seek to amend their defence to accommodate a claim under the Professional Standards Act and join the insurer to determine definitively the question of whether the policy responds to the plaintiffs' claims having regard to any findings which the Court might make. 45 Further, no reason has been given for why the defendants did not take immediate steps to advise the plaintiffs of their intention to rely on a defence in terms of the proposed amended defence following the advice received on 6 August 2018. Had the plaintiffs been on notice of that, their approach to the mediation which was to be undertaken in August 2018 and deferred into September 2018 might well have been different. That is a matter of speculation but the plaintiffs are prejudiced by being denied that opportunity. Further, had the proposed amended defence been raised sooner and the insurer been joined, multiplicity of proceedings which might arise (for instance, because Allianz ultimately declines indemnity notwithstanding Ms Specht's expressed view) could have been avoided, albeit that it might have affected the hearing date. 46 The overarching purpose which is set out in s 37M(1) of the Federal Court of Australia Act 1976 (Cth) is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. Consistently with that overarching purpose, the High Court's decision in Aon and s 37N, it is the obligation of the parties to disclose the real issues in dispute as expeditiously as possible. In my view it was inconsistent with that purpose for the defendants to provide the draft amended defence to the plaintiffs on 18 October 2018, only six clear business days before the commencement of the hearing. 47 Second, while there is evidence that the case officer charged with managing the insurance claim is currently minded to accept that Allianz has an obligation to indemnify the defendants if the plaintiffs are successful on the basis of the fourth category of "knowledge", that issue is not settled. There is nothing in Ms Specht's affidavit which indicates that she has authority to bind Allianz. Ms Specht's affidavit does not contain an undertaking to the Court to give effect to her current opinion. Ms Specht's opinion is inherently uncertain as may be observed from the language of the email dated 6 August 2018. There is good reason for that. As emphasised in Grimaldi at [262], notwithstanding the High Court's acceptance of the four categories of "knowledge/notice" in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22, the "knowing assistance" limb of Barnes v Addy is "based manifestly on the third party's own wrongdoing in the circumstances". Ms Specht has, unsurprisingly, reserved Allianz' position so that the exact terms of the findings made in these proceedings or any settlement the parties might enter into can be examined to see whether the "fraud/dishonesty" exclusion under cl 38 of the policy operates to exclude its liability under the policy. 48 Last, it is true that in some of the cases provided to chambers by the defendants the insurer was not joined in proceedings in which a professional standards scheme defence was raised, but that is ultimately not to the point. It was available to defendants to raise the defence earlier. Had they done so, it would have been open to the plaintiffs (or the defendants) to seek leave to join the insurer to ensure that the jeopardy that the plaintiffs fear - that the Court might find the defence to have been made out so as to cap the defendants' liability but Allianz declines the defendants' claim on the basis of cl 38 of the policy because it is not bound by the finding - was not realised. That prejudice is, in my view, contrary to the policy of the Professional Standards Act in which there is a trade-off - the cap on liability for professionals is predicated on the availability of insurance. If leave is now granted to amend the defence and the plaintiffs seek to join the insurer, it will most likely derail this proceeding in which five days of hearing have already occurred. That is a real prejudice. I am not satisfied that costs would adequately deal with that prejudice.

Conclusion 49 I am satisfied that leave to amend the defence should be refused. I will hear the parties on the costs of this application at the same time as closing submissions on the substantive application are heard. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell.

SCHEDULE OF PARTIES NSD 1421 of 2016 Defendants Fourth Defendant: WOODSIDE HOLDINGS PTY LTD ACN 168300927 Fifth Defendant: WOODSIDE HOLDINGS PTY LTD ACN 168313960 Sixth Defendant: BLUE EDGE CAPITAL AUSTRALIA PTY LTD ACN 168965320 Seventh Defendant: MURRAY ROSE Eighth Defendant: BEDFORD CA PTY LTD ACN 129 953 215 Ninth Defendant: CAMERON FISHER Tenth Defendant: MICHELLE FISHER