Chelmer NZ Ltd v Financial and Energy Exchange Ltd; No 1

Determination

On 25 July 2017, I raised with counsel for FEX whether the specific allegation that it was making was beyond those in [6] of its pleaded cross-claim. I was informed that at that point: "No, your Honour. It isn't inaccurate. That is accurate." [17] I drew to counsel's attention my concern about whether it needed any amendment. [18] Counsel for Chelmer acknowledged that to the extent that information came from emails in affidavits prepared on behalf of his client, he could hardly submit that he was taken by surprise. [19]
This is the way the matter was advanced until the eve of the resumption of the hearing on 10 August 2017. When I inquired of counsel for FEX as to the reason, I was informed: "I just, I personally couldn't attend to it earlier; but I had anticipated that most of the way the matter was pleaded, was a matter for, a matter that arose from the evidence that Mr Robertson gave in the witness box." [20]
UCPR 19.1 enables a party to amend its statement of claim as of right within 28 days of filing.
Be that as it may, s 64 of the Civil Procedure Act 2005 (NSW) (the '2005 Act') [21] gives the Court a wide power in relation to the amending of documents and pleadings. s 64(2) specifically states:- 64 Amendment of documents generally (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.
Furthermore, as was identified in FEX's submissions, s 65 of the 2005 Act gives the Court power amongst other things, to grant leave to a party to amend a statement of claim to include a new cause of action, where the relevant limitation period for that cause of action has expired.
In Kelly v Mina [2014] NSWCA 9, Barrett JA stated: 47. Particularly in light of the opening words of s 64(2), it is not controversial that the provisions in Part 6 Division 1 of the Civil Procedure Act were binding on the primary judge and that, in accordance with s 58, his Honour was bound to seek to act in accordance with the dictates of justice and, in so doing, to have regard to s 56 concerning the "overriding purpose" of the Act and rules of court in their application to civil proceedings; also that, in addressing the amendment application in the particular statutory context, his Honour was required to take into account a combination of factors identified by the High Court in Aon Risk Services Pty Ltd v Australian National University (2009) HCA 29: (2009) 239 CLR 175 and usefully summarised by Vickery J in Namberry Craft Pty Ltd v Watson [2011] VSC 136 (at [38]) as follows: "(a) Whether there will be substantial delay caused by the amendment; (b) The extent of wasted costs that will be incurred; (c) Whether there is an irreparable element of unfair prejudice caused by the amendment, arising, for example, by inconvenience and stress caused to individuals or inordinate pressures placed upon corporations, which cannot be adequately compensated for, whatever costs may be awarded; (d) Concerns of case management arising from the stage in the proceeding when the amendment is sought, including the fact that the time of the court is a publicly funded resource, and whether the grant of the amendment will result in inefficiencies arising from the vacation or adjournment of trials; (e) Whether the grant of the amendment will lessen public confidence in the judicial system; and (f) Whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought." 48 .As this Court has emphasised more than once, Part 6 Division 1 of the Civil Procedure Act made substantive and important changes to the law so that considerations of promptness and efficiency in the conduct of civil litigation are afforded a new and special importance which may sometimes provoke a sense of injustice in a party who has failed to proceed with despatch: see, for example, Dennis v Australian Broadcasting Corporation [2008] NSWCA 37; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]- [161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; Bi v Mourad [2010] NSWCA 17; Richards v Cornford (No 3) [2010] NSWCA 134. [22]
Whilst I accept that some parts of the proposed Amended Cross-Claim would standing alone, amount to reformulations of the allegations in [6] so as to provide a different basis for the payment said to be made to Lucsan, I would not accept the amendments based on new causes of action, being deceit and fraudulent concealment.
FEX has been in possession of the documents as referred to Tab 16 of Exhibit AR 16 as disclosed in the evidence of Kirstie- May Morris since 2015. It would have been aware that Chelmer kept the arrangement confidential from it. Whilst I accept that FEX would not have been aware of the precise mechanism by which the full amount of US $26,000 was used to inflate the price so as to take into account Lucsan's share, it was in a position, should it have chosen to do so, to advance the case it now seeks to make.
Beyond that, it is necessary to consider how the matter was advanced in evidence.
In Nadinic v Drinkwater [2017] NSWCA 114, Leeming JA (with whom Beazley P and Sackville AJA) stated: [108] In light of the submission, it may be reiterated that a finding of fraud is a serious matter. It is not lightly to be made. Section 140 of the Evidence Act 1995 (NSW) is to be applied. And if such a finding is made, it is to occur in a way which is procedurally fair. [109] Mr Nadinic was both a witness and a party. As a witness, a finding of dishonesty could not be made without his first having been given an opportunity to deal with the criticism: Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [67]. This is not a case where the pleadings or the affidavits or the openings put Mr Nadinic squarely on notice of the dishonesty which the primary judge ultimately found. In the absence of cross-examination on the point, fairness dictated that the primary judge refrain from making findings of dishonesty: Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 at [67]; State of New South Wales v Hunt (2014) 86 NSWLR 226; [2014] NSWCA 47 at [32]-[44]. [110] As a party, Mr Nadinic was entitled to be informed of the way in which it was said he had been party to the fraud. Ordinarily, that is done by the pleadings. In theory, it is possible that a party may forego that right, and may do so by acquiescence rather than express election, but such acquiescence is not easily inferred.
Even accepting that the question of dishonesty was put in cross examination, [23] it is necessary to bear what was said in Gordon v McGregor [24] by Griffiths CJ at 32: … it is a very dangerous thing after the close of the evidence to allow an amendment to raise a point founded on some oral statement by a witness, which may be perfectly complete so far as it is relevant to the issues which are being tried, but which if it were given with reference to entirely different issues would be incomplete. [25]
Beyond that I accept Chelmer's argument that the new causes of action of deceit and misrepresentation raise new matters that it has been deprived of the opportunity to make timely inquiries and to adduce evidence about. [26] I do not accept FEX's submission that:- [2.1] The amendments do little more than reformulate allegations of fact, of the pleading of which Chelmer cannot be surprised. The new causes of action are based on the same factual matrix as the claims for misleading or deceptive conduct, which were already at the heart of this case. The facts pleaded were clearly within the knowledge of Chelmer at all times and based on evidence from Mr Robertson, Chelmer's principal. [2.2] Chelmer would not be prejudiced if the amendments were allowed.
In this instance, it is relevant to note, without the allegation having been squarely pleaded, or outlined in the opening, counsel for Chelmer chose not re-examine Mr Robertson at the conclusion of Mr Robertson's evidence. Nor did it call other evidence that could have been relevant to the issue. [27]
During the time since Mr Robertson had given evidence, the Court heard from Ms Kelly Leslie-Cole, Mr Martin James Clelland-Pottie, Mr Andrew Lang Hamilton, and Mr Michael Holdsworth. The Defendant's witness Mr John Hulst was part way through cross-examination.
Counsel for FEX stated that the evidence, other than Mr Robertson's evidence, went to the Derivatives Project and not the Equities Project, which is the project in relation to which the statement of works in relation to which FEX was complaining about alleged inflated figures. [28] That argument to the extent it has force, overlooks the asserted interconnectivity between the two projects which FEX's counsel submitted on in his opening.
Chelmer contended that were the allegations to be made at an earlier point in time, it could have produced additional evidence that would have been relevant. [29] It outlined that this could have included enquires from Lucsan, particularly Mr Lucero, [30] and industry evidence as to referral arrangements. [31]
FEX argued that if Chelmer wanted to call "Lucsan people" it could have as it always knew there was a misleading and deceptive conduct claim and it shouldn't be the basis of opposing the pleading. [32] FEX submitted that on the question of prejudice, Chelmer cannot argue that it would have led evidence in relation to the claims now sought to be advanced on the proposed amended cross-claim if it had not led it in the misleading or deceptive conduct claim. [33]
FEX's submissions overlook that the forensic choice which a party takes to deal with a claim of misleading or deceptive conduct may be very different to one where there are allegations of fraud or deceit - a matter which I drew to the parties' attention. [34] To allow the amendment at this point would require as a matter of fairness an opportunity to address the issue that FEX seeks to raise involving additional expense and delay and a further fragmentation of the proceedings.
I have regard to the overriding purposes of sections 56 and 57 of the 2005 Act, and I bear in mind that the hearing has been conducted in circumstances where a previous hearing allocation had been vacated. The hearing was listed to commence on 24 July 2017 as a five day matter. At the outset I indicated to the parties that I could not sit past four days, and the matter had to be thereafter adjourned if it had not concluded. A further two hearing days were allocated. However, as events have evolved further time will be required beyond that.
I bear in mind the delay that has been occasioned in the raising of this matter, the point in the proceedings where it has been raised, the potential injustice that could flow were the amendment to be allowed. Having regard to the dictates of justice in section 58 of the 2005 Act, in my view, this is not the appropriate case for the exercise of the discretion to grant leave. For those reasons the motion was dismissed. [35] Costs were reserved for determination at the conclusion of the substantive proceedings.

Endnotes

The Plaintiff hereinafter referred to as "Chelmer" and the Defendant as "FEX".
Hereinafter "Lucsan"
T 9.23 - .42.
T 12.26 - .39.
Exhibit B.
Exhibit C.
Voir Dire Exhibit B, Letter from Macedone Legal sent to Baker & McKenzie dated 12 September 2014 at [2.1] - [2.2].
Voir Dire Exhibit C, Letter from Baker & McKenzie to Macedone Legal dated 25 September 2014
Voir Dire Exhibit D.
Voir Dire Exhibit D at [9] - [11].
Exhibit C at [84]
Exhibit C, p 245.
Exhibit C, p 77.
T 346.42 - 347.21.
T 81.14 - .37.
Affidavit of Mr Anthony Waller, affirmed on 9 August 2017 at [4].
T 102.34 - .48.
T 102.50 - 103.1.
T 103.33 - .41.
T 340.46 - .49.
Hereinafter "the 2005 Act".
[2014] NSWCA 9 (Ward and Leeming JJA agreeing)
A matter which the Plaintiff at one stage disputed; see T 388. 28-.34.
(1909) 8 CLR 316, 321 (noting that the statement was referenced to the close of evidence).
See also: Patrick v Capital Finance Pty Ltd [2003] FCA 206 at [19] (Tamberlin J) and R v ACR Roofing Pty Ltd [2004] VSCA 215 at [33] (Ormiston, Vincent, Nettle JJA). See further: National Australia Bank Ltd v Kim Francis Hunter & Anor (No 2) [2013] NSWSC 763 at [15] (Slattery J).
Plaintiff's Written Submissions dated 11 August 2017, [7].
T 389.17-394.30.
T 348.23 - .27.
T 390.44 - 391.3.
T 394.43-.44.
T 394.21-.25.
T 359. 12-.19.
T 404.24 - .44.
T 404.46 - 405.17.
See also Geelong Building Society (in liq) v Encel [1996] 1 VR 594. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 February 2019

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