Chocolate Factory Apartments Limited v Westpoint Finance Pty Limited & Ors - [2003] NSWSC 547 - NSWSC 2003 case summary — Zoe

NSWNSWSC

Chocolate Factory Apartments Limited v Westpoint Finance Pty Limited & Ors

[2003] NSWSC 547

Supreme Court of NSW|2003-06-18|Before: Einstein J, Adam P

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2003-06-18

Before

Einstein J, Adam P

Source

Original judgment source is linked above.

Judgment (50 paragraphs)

[1]

CITATION : Chocolate Factory Apartments Limited v Westpoint Finance Pty Limited & Ors [2003] NSWSC 547 HEARING DATE(S) : 17/06/03, 18/06/03 JUDGMENT DATE : 18 June 2003 JURISDICTION: Equity Division JUDGMENT OF : Einstein J DECISION : Leave granted to plaintiff to amend statement of claim and in one instance question of leave to abide proper furnishing of particulars.

[2]

CATCHWORDS : Practice and procedure - Part 72 Supreme Court Rules Reference - Power in referee to permit amendments or additions to pleadings - Referee disallowing application by plaintiff for leave to amend - Application to the court by plaintiff to give directions granting the leave to amend - Ongoing reference - Principles applicable on such applications to the Court - Considerations to be taken into account - interests of justice likely require it to be quite clearly demonstrated that interlocutory decision by referee clearly miscarried before referee's decision will be interfered with - Case management by referee of parameters of application for leave to amend - Overriding Purpose Rule to facilitate the just, quick and cheap resolution of the real issues in civil proceedings - Long term view of reference taken into account - Orders made permitting amendments sought LEGISLATION CITED : Corporations Act 2001 Supreme Court Rules Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 AMP Fire and General Insurance Co Ltd v Leighton Contractors Pty Ltd [unreported, Court of Appeal, 14 July 1993] Ampolex Limited v Perpetual Trustee Company (Canberra) Ltd & Ors S100/1996 (22 May 1996) Cropper v Smith (1884) 26 ChD CASES CITED : Eydmann v Premier Accumulator Company Limited (1916) 85 LJKB 1037 Queensland v J L Holdings Pty Limited (1996) 189 CLR 146 Trevor Howse Associates Pty Limited v Dessmann (2003) NSWCA 148 U.S Surgical Corporation v Hospital Products (1983) 2 NSWLR 157 Xuereb v Viola (1989) 18 NSWLR 453 Chocolate Factory Apartments Limited (Plaintiff) PARTIES : Westpoint Finance Pty Limited (First Defendant) Westpoint Constructions Pty Limited (Second Defendant) Westpoint Management Limited (Third Defendant) FILE NUMBER(S) : SC 2583/02 COUNSEL : Mr F Corsaro SC, Mr VR Gray (Plaintiff) Mr DE Grieve QC, Mr D Hicks (Defendants) SOLICITORS : Frank G Kalyk (Plaintiff) Robinson Beale Horton McMinn (Defendants)

[8]

(2) Subject to any direction under sub rule (1): (a) the referee may conduct the proceedings under the reference in such manner as the referee thinks fit; (b) the referee, in conducting proceedings under the reference, is not bound by rules of evidence but may inform himself or herself in relation to any matter in such manner as the referee thinks fit] · Albeit that the Court, by making orders for reference to a referee for inquiry and report, has not abrogated its ultimate control and responsibility in terms of the proceedings so referred [and may for example under Part 72 rule 10, of its own motion or on application by a referee or a party, set aside or vary any order made under Part 72 rule 2], the proper approach to interlocutory directions sought pursuant to Part 72 rule 9 is to regard such applications as requiring to be determined by the interests of justice as applicable in the particular circumstances which may obtain. · Further the interests of justice may very well require it to be quite clearly demonstrated that an interlocutory decision by a referee in the exercise of a duly conferred power to permit amendments or additions to the pleading had miscarried, before such a decision would be set aside or varied or otherwise interfered with. [In this regard it requires to be recalled that all that the referee has been ordered to do is to inquire into and thereafter to make a report to the Court, in this case in relation to the whole of the proceedings: the requirement being that the report state the referee's opinion on the matter and the reasons for the opinion.] 5 I note in this regard to that in AMP Fire and General Insurance Co Ltd v Leighton Contractors Pty Ltd [unreported, Court of Appeal, 14 July 1993] Kirby P observed that it would usually be sensible to include in an order of reference, at least where as here, the referee is an experienced lawyer, large powers to permit amendment of the pleadings and the issues to be determined in the reference. Further it would usually be undesirable that an experienced referee should be confined to the pleadings as they stood at the time of the reference, irrespective of any developments which might occur during the hearing of the reference [Kirby P uses the term "power of enlargement" to express this notion]. 6 In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd, Kirby J dealt with a summons seeking an order restricting access to documents produced in a trial then proceeding in the Supreme Court of New South Wales. The order was sought to secure, in effect, a stay of a decision made in the trial, pending determination of an application for special leave to appeal to the High Court from that decision. In the course of the reasons for dismissing the summons Kirby P. made the following observations in relation to the reluctance of an appellate court to disturb such proceedings by way of an interlocutory appeal. Albeit mindful of the fact that this Court continues to have power to give directions with respect to the conduct of proceedings under the reference and is of course not to be regarded as an appellate tribunal [in the fullness of time an application will be made for the adoption or rejection of all or part of the final report] it does seem to me that there is real point in reproducing the following sections of the reasons given by Kirby P:

[9]

"8. The following considerations are then relevant to the remaining questions before me. The ruling arose in the seventh week of a lengthy and complex trial. Any appellate court, but this Court particularly, will be extremely reluctant to disturb such proceedings by permitting an interlocutory appeal. The reasons for such reluctance are obvious. A trial judge must make many such rulings virtually every day. The rulings often involve discretionary considerations or at least considerations involving judgment and degree. The rulings sometimes touch upon the practice and procedure of the court of trial. The trial judge will often have a much better idea of the relevance and merits of the point in issue in the context of the matters truly in dispute. Disrupting the course of the trial involves great cost and inconvenience to other parties and to the public use of courts and the scarce time of judicial officers and other court staff. Wealthy or powerful litigants should not be encouraged to think that they can readily interrupt the course of a trial, once begun. As a matter of law, appellate rights for errors in interlocutory rulings ordinarily remain for exercise at the end of a trial, if still then considered important. (See Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177, 189)" [Ampolex Limited v Perpetual Trustee Company (Canberra) Ltd & Ors S100/1996 (22 May 1996)] 7 In my view this approach whilst by no means to be regarded as precisely in point at the least gives some guidance to the proper manner in which applications for directions such as those now made should be dealt with. Most particularly of all the reasons given by Kirby P point up in relation to the circumstances presently before the Court, the very real difficulties in a judge of this Court being asked to deal with a series of matters which by definition and certainly on the evidence presently before the Court, the Court has no familiarity at all. I refer in that regard to the fact that neither of the parties has seen fit to tender the whole of the transcript of the reference, nor any statements of evidence which may have been made and admitted into evidence. One of the matters raised by the defendants in answer to the application concerns the submission that they have conducted their case particularly in cross-examining the Plaintiffs witnesses [two of whom have been apparently lay witnesses] along the lines of the pleadings in place and would be prejudiced if the pleadings were now permitted to be amended. No specificity was given to the nature of the suggested prejudice but the proposition advanced was that: · the first of the lay witnesses, Mr Roberts was not cross-examined at all in view of the pleadings as they then stood · a deal of the statement of the second lay witness, Mr Church, was not read in the light of the pleadings as they then stood and his cross-examination was tailored to the form of the pleadings as they then stood. The proceedings 8 The proceedings are currently continuing by way of the reference hearing which commenced on 21 May 2003 and has continued for approximately four weeks. Apparently the period up to and including 3 June 2003 was substantially taken up with sundry applications concerning proposed amendments or pleadings. It was on 30 May 2003 that the plaintiff was granted leave to proceed upon the further revised version of its Statement of Claim which is now in place. 9 There have been a number of versions of the statement of claim which in its current form comprises some 22 pages in respect of which leave to propound the form of the document was granted in late May 2003. Indeed it seems that some considerable time as being occupied prior to the formal commencement of the reference hearing and then during the reference in argument concerning sequential further claims to further amend the statement of claim. 10 The proceedings in general terms relate to the conversion of an existing industrial building in Stanmore, Sydney into a four level, 87 apartment building complex. Until its conversion the existing building had been used to make chocolates, hence the name of the plaintiff owner of the property Chocolate Factory Apartments Ltd. The project was apparently promoted by the Westpoint group of companies, three of which are the defendants, Westpoint Finance Pty Ltd, the first defendant; Westpoint Constructions Pty Ltd, the second defendant; and Westpoint Management Ltd, the third defendant. 11 The plaintiff was the project vehicle for the development. In the original version of the statement of claim the plaintiff pleaded that on 24 December 1999 and at all times up to the issue of the statement of claim, Mr Carey was a shareholder and director of and was in effective control of the three defendants. Likewise the original form of the statement of claim pleaded that on 9 August 2001 and at all times thereafter up to and after 19 November 2001: · Mr Beck and Mr Coleman were both directors of the plaintiff and directors and/or employees of one or more companies controlled by Mr Carey; · The management of the plaintiff and the Project was undertaken by Management which was a company controlled by Mr Carey. The Management Contract 12 The plaintiff alleges that under a Management Agreement dated 24 December 1999 and entered into between itself and the third defendant, the third defendant agreed in consideration of a management fee, to provide certain services to the plaintiff. Those services are alleged to have included overseeing all aspects of the Project including the arranging and managing of all funding and the overseeing of project construction. The Design and Construction Contract 13 The plaintiff in paragraph 2 of the first version of the statement of claim filed on the 11th June 2002, alleged that by contract, the second defendant agreed with the plaintiff for the consideration therein provided, to design and construct the subject building work ("the Works"). Particulars of this allegation were as follows:

[10]

"The Contract comprised a contract in writing dated 31 August 2000 or alternatively 24 December 1999 and the Prospectuses referred to in paragraph 4 hereof." 14 The reference to prospectuses was a reference to the prospectuses issued by Chocolate Factory (Charterbridge Davey) Pty Ltd ["Charterbridge"], Chocolate Factory (Winthrop) Pty Ltd ["Winthrop"] and Chocolate Factory Investment Ltd ["Investment"] [together "the Chocolate Factory Companies"] each in substantially the same terms and each dated 14 January 2000, by which prospectuses, investors were invited to invest through such companies as the plaintiff, and thereby in the Project, such that the capital in the plaintiff would become effectively owned by such companies and it would cease to be a wholly-owned Westpoint Group company. 15 A Shareholders Agreement had been entered into on 24 December 1999 which recited that Westpoint Management was a shareholder in the plaintiff and that Charterbridge, Investment and Winthrop had agreed to become shareholders in the company. The shareholder agreement provided for the issue of shares such that 49.9998 percent of the shareholding would be held by Charterbridge, 24.999 percent of the shares would be held by each of Investment and Winthrop and 0.0004 percent of the shares would be held by Westpoint Management. The applications for leave to amend 16 It is true to say that there was considerable confusion at the bar table, at least from the plaintiff's side, in being in a position during the course of the application to identify with precision: · Precisely what had been the form of the statement of claim on the occasion of each application for leave to amend; · Precisely what had been the form of the content of the amendment sought to be propounded; · Precisely which portion or portions of the transcript recorded submissions from the two parties in relation to each application for leave to amend; · Precisely which portion or portions of the transcript recorded rulings on each application for leave to amend and what precisely, in terms of reasons given by the referee, were the particular documents being referred to, when particular paragraphs were referred to.

[11]

17 Some advances in this regard took place overnight when the matter was adjourned for the purpose of many of these issues being made explicit. At the commencement of today's hearing the plaintiff sought leave to file a Notice of Motion seeking leave to file a Further Amended Statement of Claim which treats with all amendments now sought. 18 Ultimately as I have understood the plaintiff's position there were three brackets of applications to the referee for leave to amend: Bracket 1 19 This application was made on 12 May 2003. The amendment sought to be propounded is comprised of paragraphs 2, 3, 4, 5, and 26, 27, 28, 29 and 30 of the document marked for identification tab 10. [Paragraph 7 essentially repeats paragraph 2 of the Original Summons.] 20 In essential terms the application was for leave to amend to permit the plaintiff to allege that the contract between the plaintiff and Constructions dated 31 August 2000 was a related party transaction for the purposes of section 228 of the Corporations Act and to claim damages under section 1324 (10). 21 The transcript before the referee of 12 May 2003 became an exhibit on the hearing of the motions before me. That transcript records the argument on the application for leave to amend and the short reasons for dismissing the application. The reasons for decision in terms of the rejection of the application to amend paragraph 2 were that the paragraph was embarrassing. By reference to the argument which preceded this decision and by reference to the decision itself, it is tolerably clear that the referee could not discern any link between the allegations made in paragraph 2 and any other allegation in the pleadings sought to be propounded. The submission was advanced by the plaintiff's counsel that there was a link to paragraphs 26, 27 and 28. The referee appears to have formed the view that there being no obvious relevance of the matters sought to be pleaded in paragraph 2 to any other allegation in the pleading [and there being no relevant cross-reference], this was a case in which the paragraph was embarrassing and should not be permitted. 22 In my view the rejection of paragraph 2 comprised an incorrect exercise of the discretion to grant leave to amend. Each of paragraphs 2-5, 7 and 26, 27, 28, 29 and 30 (d) clearly represented an attempt to plead proper grounds for the plaintiff's claim sought to be pressed against the second defendant for damages pursuant to section 1324 (10) of the Corporations Act in respect of the alleged loss suffered by the plaintiff. 23 The referee dealt separately with paragraphs 2, 3, 4, 5, and 26, 27, 28, 29 and 30. The reasons for decision in this regard commence at transcript 135.7 and continue to 136.9. The plaintiff asserts that it wished to advance before the referee a case that: · under section 228 of the Act, an entity that controls a public company, is a related party of a public company.; · under 228(5), an entity is a related party of a public company at a particular time if the entity was a related party of the public company of a kind referred to in subsections (1), (2), (3) or (4) at any time within the previous six months; · Mr Carey was a director of the plaintiff within the previous six months and ceased to be a director on 22 August? · Management, the third defendant, also came within the provisions of the act because under the terms of the shareholders' agreement it controlled by way of appointment of directors, the affairs of the plaintiff, and therefore it came within 228(1); · Management was a related party because Mr Carey and Mr Beck at the relevant time were also directors of Westpoint Management; · As at 31 August Mr Carey was a related party, related to the plaintiff, because he fell within the provisions of section 228(5) of the act, the Corporations Act. 24 In short the plaintiff wished, through a variety of routes, to contend that Management was a related party for the purposes of the act. 25 Clearly also section 229(1)(a) and (c) require, in the determination of whether financial benefit is given for the purposes of related party transactions, a broad interpretation, disregarding any consideration that is or may be given for the benefit, even if the consideration is adequate. The plaintiff wished to contend that the contract itself fell within the definition, putting aside the amount of money paid, as a "financial benefit" conferred. 26 The reasons for decision with respect to paragraphs 3,4, 5 and 26-30 are very short. [Transcript 135.7-136.9]:

[15]

It may be that these pleading difficulties can be rectified, but to allow the case to proceed on the very generalised basis on which it is pleaded, and the way in which it is sought to construct issues arising from the generalised words, seems to me to be inappropriate, and I will therefore disallow paragraphs 3, and I think it follows, 4 and 5, and paragraphs 26 to 30 inclusive." 27 Essentially these reasons were based upon there being insufficient specificity of the allegations made in paragraphs 26-30 to allow the amendment. The referee made the point that the pleading difficulties may arguably be rectified but that to allow the case to proceed on what he described as "the very generalised basis on which it is [sought to be] pleaded" and "the way in which it is sought to construct issues arising from the generalised words", seemed to him to be inappropriate. 28 Mr Gray then asked for time to obtain instructions and after a short adjournment indicated that his instructions were to ask the referee to consider the proposed amendments set out in paragraphs 38-45 and 59; his instructions being "that we would not pursue any other amendments to the existing statement of claim apart from those sections". [Transcript 136.25] 29 When taxed by the Court in terms of how it had come about that counsel appearing on the hearing of the reference had not determined to seek to rectify the suggested pleading difficulties, Mr Corsaro SC, appearing for the applicant on the present motion, submitted that this was essentially because at that time, the bifurcated approach to what was the Contract was still part of the Statement of Claim. The proposition put by Mr Corsaro was that as long as the bifurcated approach remained the relevant pleading, the plaintiff could argue that the earlier design and construct contract had been by far the more beneficial. It was only if the earlier contract was not being pressed that it became especially poignant for the plaintiff to seek to rely upon the related party provisions. As he put it:

[24]

Now, [counsel for the defendants] might say "Well, that would be equally embarrassing and vexatious," but at least we would know where we are going. At the moment I don't know where this is going." [Transcript 134.24 - 134.35] 34 To my mind and adjudicated as at the 12th May 2003 when these amendments were sought to be propounded, this reasoning insofar as it may be read as suggesting an inconsistency, was misconceived because the plaintiff had, both in the original form of the statement of claim and in the document sought to be propounded on 12 May, pursued the bifurcated contract case. There was nothing inconsistent in the plaintiff wishing to assert that if the 2000 contract was valid, then it was a related party transaction and in that circumstance the plaintiff would have rights against Constructions for breach; but in addition would have rights against related parties for damages by way of the financial benefits provisions of the related parties provisions. The plaintiff was entitled to assert that the second contract having been entered into and being valid, had conferred financial benefits which the plaintiff was entitled to pursue under the Act. 35 For those reasons the exercise of the referee's discretion in relation to paragraphs 3, 4 and 5 and 26-30 (d) seems to me to have miscarried. Whilst the referee did not in any separate fashion expressly deal with the reasons for rejecting the amendments sought to be propounded in paragraph 30 (a), (b) and (c), to my mind these sub-paragraphs were rightly rejected, upon the basis that they were disconnected from what went before and would certainly have required additional paragraphs in the form of pleading and particulars. In any event the plaintiff does not presently seek to press amendments in terms of subparagraphs (a) (b) and (c). 36 It is convenient to note that the version of the further amended statement of claim sought to be propounded in the document appended to the notice of motion filed today generally sets out the related parties cause of action from paragraphs 43 to 54 [it being acknowledged by the plaintiff that there are some further additions to the content of the related parties cause of action paragraphs in respect of which the referee had declined leave]. 37 The matter does not however rest with the above decision and the plaintiff does not automatically succeed in the application presently before the court in relation to this bracket. It seems to me that it is proper in the exercise of the discretion in this Court to take into account the overriding purpose rule. What is plain in terms of the instant application is that: · There was no application made to this Court on or soon after 12 May 2003 · Following the referee's decision, counsel for the plaintiff took instructions it having been made plain that he could indicate whether he sought to have an adjournment to deal with the pleading points. He [apparently understanding the reference to an adjournment or a reference to the adjournment of the reference hearing starting date] obtained instructions which were not to proceed in that way. · Importantly the next step involved in the production of the 23 May version of the pleading was to make a very material further change to the structure of the pleading, when paragraph 2 moved away from the previous bifurcated contract pleading to plead only the 31 August 2000 Contract. That has remained the position in the subsequent versions of the statement of claim. · There were later changes which may be seen in the current version of the statement of claim. · The hearing of the reference proper has now proceeded for some weeks Bracket 2 38 An application was pursued on 23 May 2003 seeking inter alia leave to amend to allege that the third defendant breached its obligations under the management agreement by causing the plaintiff to enter into the contract dated 31 August 2000. 39 This application was disallowed - the reasons appearing from transcript 263.27 - 266.22

[25]

Attempting to follow the pattern of movements in the successive statement of claim 40 It is convenient to interpolate at this point some overview matters which required to be taken into consideration before examining in detail the attack on the ruling concerning the second bracket of claim and amendments. 41 It is certainly extremely difficult to follow the pattern of movements in the several propounded statements of claim and one finds in this exercise some real changes, often quite unexpected as far as I was concerned, as I travelled through the disparate documents. The point may be briefly made in the following non-exhaustive observations: · The original statement of claim did not include any attempt to rely upon the related party sections of the Corporations Law. The 12 May 2003 version did include such an attempt. · The original statement of claim did not seek to allege any representations made to the plaintiff and to the Chocolate Factory companies that the contract would include particular terms or that by the prospectuses, the second and third defendants represented certain matters to the plaintiff and to these companies which had issued the prospectuses. Nor did it allege that such representations were false or misleading, or were relied upon or that the Investor Vehicles, by reason of those representations and that conduct, had suffered loss and damage for which they were entitled to claim against the plaintiff, by reason whereof the plaintiff had suffered loss and damage. The 12 May 2003 version did include an attempt to so allege. · The original statement of claim did not seek to allege that Westpoint, Mr Carey and Mr Beck had led the independent directors of the plaintiff to believe, or had knowingly permitted them to believe, that the 2000 contract, proposed to be executed [and in fact executed at the end of August 2000], was in the terms and to the effect of matters referred to in paragraphs 13 and 15 and in terms not less favourable to the plaintiff and the 1999 contract, so as to induce them to raise no objection to the Plaintiffs execution of the 2000 contract in late August. Nor did the original statement of claim seek to plead that Westpoint, Mr Carey and Mr Beck knew and the fact was that it was essential to the commercial viability of the Project that it include particular inclusions and finishes and be designed in particular fashion. The original statement of claim did not seek to plead that Westpoint, Mr Carey and Mr Beck procured the plaintiff to enter the 2000 contract on 31 August 2000 which they well knew did not reflect or provide for such matters, and well knew that the independent directors of the plaintiff did not know such matters. The 12 May version did seek to plead these matters as well as to plead the related party's provisions earlier referred to. · Whereas the original statement of claim, as has already been indicated, sought to plead the Contract in bifurcated fashion giving particulars also to the Prospectuses, and the version sought to be propounded on 12 May 2003 included a paragraph in almost identical terms, by the time the 23 May 2003 version was drafted, the plaintiff was no longer pursuing any bifurcated version of the alleged Contract but was merely pleading the 31 August 2000 written contract. As already stated that approach has continued into the current version of the statement of claim. 42 Returning to the amendment sought by the second bracket, as will appear from the above general description of the anterior allegations, aside from the problematic and defectively pleaded paragraphs 30 (a) (b) and (c), the 23 May amendments included for the first-time, as I understand it, an allegation grounded upon the proposition that there had been legal wrongdoing concerning how it came about that the plaintiff had been caused to enter into the 31 August 2000 Contract. The 23 May version of the statement of claim squarely sought to allege inter alia: "45 CA Management breached its obligations under the Management Agreement by: (a) causing [the plaintiff] to enter into the Contract dated 31 August 2000…" [emphasis added] 43 Paragraph 45 CA then proceeded to include a number of sub paragraph is: (b)-(p). Apparently sub-paragraphs (g)-(o) were allowed, sub-paragraph (p) was not pressed. During argument yesterday counsel were not able to agree as to whether (b)-(f) were disallowed or withdrawn, it appearing from transcript 369 on the plaintiff's submissions before me that (b) and (c) were disallowed. The defendants before me asserted that (b)-(f) were withdrawn. During argument today transcript references and an explanation as to reformulated pleadings satisfied me that subparagraph (b) - (f) were in fact disallowed [see transcript 342.3, 342.34, 343.23, 363.34, 366.1, 366.42 - 369, 369.3, 369.12]. 44 Notwithstanding this general muddle on the application before me it is clear enough that the central focus of the parties before me was on paragraph 45 CA sub paragraph (a). 45 The transcript of the argument of 23 May makes clear that the plaintiff's counsel before the referee, in being requested to identify how the plaintiff sought to put its case that the third defendant had breached its obligations under the Management Agreement by causing the plaintiff to enter into the later contract, furnished a long answer at transcript 255.41 - 256.40 in the following terms: "Mr Gray: And the consequences of it. The last question I think was how was it caused. My answer, I think, was that it was signed by Mr Beck who had roles as directors of both Management and the plaintiff and by Mr Coleman who was a Management employee fulfilling the responsibilities of management under the management agreement in relation to the plaintiff's affairs. The way in which the causation occurred can be explained by reference to documents in the folders, and, in a nutshell, the case will be put that the Westpoint interests were intending to seek changes to the 1999 contract from very early on in 2000. On the plaintiff's side in August at least, Mr Church, as a director of the plaintiff, at a directors meeting expressed the view that there should be an independent review of the contractual documents between the plaintiff and Westpoint, particularly the construction contract. What then happened was that apparently a number - perhaps even three - of draft new contracts were prepared by Westpoint interests. They were given to Blake Dawson Waldron, a firm called MM Consulting, and Coudert Brothers for the purpose of obtaining advice and in particular some expression of view about the effect on, vis-à-vis, the plaintiff. Reports were received from all of them. The Blake Dawson Waldron advice and the MM Consultant's advice were never disclosed to the plaintiff. Coudert Brothers gave a one-page advice, the terms of which were apparently unsatisfactory to Westpoint. They asked Coudert Brothers to change the terms of the advice. That was done and subsequently a copy of that one-page Coudert Brothers advice was given to the directors of the plaintiff. That happened after the second contract had been signed. The directors of the plaintiff never saw the second contract and never had any detailed explanation of what it did and how the plaintiff's interests were affected. So that the background circumstances underlying the allegations in paragraph 34CA is that the second contract was entered into by the plaintiff through the actions of Management personnel, namely Mr Beck and Mr Coleman, in circumstances where its terms and effect have never been disclosed to, let alone approved by, the directors of the plaintiff." 46 The transcript then covers the referee putting to the plaintiff's counsel that his explanation "boils down… to an allegation of fraud on the part of at least Messrs Beck and Coleman." [Transcript 256.44] 47 The plaintiff's counsel responded by making the point that the word "fraud" had not been used in the proposed amendment of the statement of claim and submitting that it was not necessary for the plaintiff to plead fraud, adding:

[43]

In these circumstances, unless Mr Gray seeks an adjournment to further amend the statement of claim and unless Mr Grieve consents to that, I propose to strike out subparagraph (a) of 45CA and I do not propose to allow an amendment to be made to bring forth the material on which Mr Gray said the paragraph is based." 52 The essential gravamen of the decision concerned the well-known requirement that where very serious misconduct or dereliction of duty is alleged, it is incumbent that the precise allegations be squarely made so that the defendants may know the case which the plaintiff seeks to bring against them. Appreciating that the claim was one sought to be brought by the plaintiff against Management , the referee appears to have accepted the submission by the defendants to the effect that the plaintiff was seeking to allege fraud. It is unnecessary for me to treat with whether or not the allegation was properly described as one seeking to allege fraud, for the reason that it is plain that the most serious allegations of misconduct were apparently to be pursued as underpinning the somewhat innocuous wording of the sub-paragraph in question which allegations required to be squarely pleaded and/or particularised. 53 For those reasons as well as the likely expansion in issues going to damages, the referee stated that unless the plaintiff's counsel sought an adjournment to further amend and unless that was consented to, he proposed to strike out the offending sub-paragraph (a). The transcript then records that counsel for the defendant made plain that, assuming that the plaintiff was to seek an adjournment to further amend the statement of claim, he would oppose an adjournment being granted to plead those allegations or the material facts upon which the plaintiff would rely, in terms of the "causing" issue. [Transcript 266.37] That effectively foreclosed any further consideration of the matter and the referee was taken by the parties as refusing leave to the plaintiff to rely upon sub paragraph (a). 54 In my view the exercise of the discretion in this regard miscarried for the reason that it was inappropriate in the circumstances which obtained on 23 May 2003, to allow the defendants to dictate whether or not the plaintiff should be permitted an adjournment to properly plead this issue, let alone an opportunity to consider its position in that regard. Nor was the fixture locked in concrete. As with any court commencing to hear any final hearing, ultimately the proper exercise of the discretion is dictated by the interests of justice. There was no examination of the plaintiff's entitlement to such an adjournment nor how long it may have taken the plaintiff to properly plead the issue nor of the extent to which the regular completion of the reference hearing may have been interfered with nor of the question of accommodating the matter in terms of the costs of and occasioned by the need for any such adjournment. 55 It is convenient to note that the reference in the form of Further Amended Statement of Claim sought to be propounded today seeking to again introduce paragraph 45CA (a) is to be found in paragraph 57. 56 I am further of the view that the referee's exercise of his discretion in relation to the further sub-paragraphs (b) - (f) which appear not to have received independent treatment or reference by the referee, also miscarried [the reference in the form of Further Amended Statement of Claim sought to be propounded today seeking to reintroduce these sub paragraphs is paragraph 57 (b)-(f), but now supplemented with particulars].

[45]

"The Contractor is responsible for the management of the construction of the Project and will be paid a fixed project management fee of $324,117 for these services, which fee has been included in the Contract" 60 Hence there appear to be had been two separate parts of the relevant scope. The first was the design and construction obligations ordinarily to be found in a building contract. The second is what was separately defined as project management. The plaintiff sought to assert that the contractual documents imposed the same obligation on both entities. Hence the plaintiff's endeavours to propound a pleading and case that the entity which was duty-bound to oversee the management of the plaintiff as well as the overall management of the project and to provide project management services, breached its duty by failing to ensure that the plaintiff did not pay the $324,117 amount because the services were either not required or were not provided. The duty sought to be alleged was that this entity, Management, was obliged to ensure that it oversaw the management of the plaintiff and the overall management of the construction and provided project management services. Alternatively a duty consistent with this requirement to carry out its services properly. 61 One finds the allegations sought to be pursued originally only against Constructions in paragraph 17 (y) of the version of the Amended Statement of Claim of 12 May where the loss and damage pleaded as having been suffered by reason of the breaches of contract by Constructions was: "Project Management Fees for services not provided - $324,117 ". 62 Now what the plaintiff had been seeking to add was a like assertion which would mirror the claim but against Management. 63 The matter dealt with in the self-contained reasons of 11 June commenced by the referee making the point that at pages 700 and 701 of the transcript, he had rejected the tender of certain paragraphs of the statement of Mr Ash of 4 June 2003. His reasons for doing so are said to have been firstly, that he was not satisfied that paragraph 23 (g) supported them, he having expressed the view that there should have been a specific pleading raising the issue. The second reason was that each of Constructions and Management had undertaken obligations to the plaintiff and that, if there was an overlapping of them, that did not acquit either from carrying out its contractual obligations. 64 At least in relation to the second of these reasons the referee appears to be dealing with a submission made that there were two entities, Management and Constructions, both on the terms of the relevant documents, having undertaken obligations to provide the same services. The referee appears to have formed the view that in light of the fact that Constructions and Management had both undertaken obligations to the plaintiff, the fact that there was an overlapping of such obligations would not have acquitted either of them from carrying out its contractual obligations. In my view this reasoning failed to grasp the underlying issue which was that the plaintiff's case sought to be put was that because it had Management providing those services, Management having the duty to oversee the management of the company and the management of the project, should have ensured that these obligations were carried out. As I have said the plaintiff sought to make a case against Management that it had breached its duty by failing to ensure that the plaintiff did not have to pay the $324,117 amount because the services were either not required or were not provided. 65 The first of the reasons given by the referee concerned whether or not paragraph 23 (g) supported the assertion for which the plaintiff contended. That paragraph was it seems to me, quite arguably sufficient for the purpose. And any lack of precision was a matter which could have been properly treated with in terms of case management without requiring a dismissal of the application for leave to amend. Ultimately the matter has now been squarely put with attendant particulars in paragraph 55 (a) and (b) of the pleading now propounded. Ultimate holding 66 I have given very close consideration to what is the proper exercise of the courts discretion on the subject Notice of Motion. Clearly this Court is not presently sitting in an appellate capacity in relation to that motion. Clearly Part 72 rule 9 permits the Court at any time and from time to time on motion of the referee or of a party to give directions with respect to any matter arising in proceedings under the reference. Clearly the principles are as I have earlier expounded. There is no doubt but that the plaintiff has taken real-time to make the application. There is no doubt but that the plaintiff on a series of occasions has moved to propound amendments to the Statement of Claim. It would be arguably entirely appropriate for this Court to reject out of hand any grant of leave of the type sought in the Motion, leaving it to the referee to complete the subject reference and in the fullness of time to report to the Court. On that occasion the plaintiff may elect to seek to have the Court reject the whole of the Report on the basis of the very same complaints as have been litigated before me in terms of the referee having declined to permit leave to amend in the manner above described. In that circumstance all the evidence having been taken on the basis of the case presently pleaded, one can imagine very particular problems in terms of the matter being remitted by the Court to the referee, with a direction to then permit the amendments and to then permit the recalling of relevant witnesses. The unscrambling of the egg by that stage may well be a total impossibility. 67 In terms of the relevant prejudice to the defendants in terms of the amendments sought to be permitted today, I have made the point to the bar table that it is quite plainly impossible for the Court to seriously treat with any suggested prejudice when the whole of the transcript has not been tendered and when the defendants have not sought to point up particular prejudice said to be suffered by them qua particular witnesses already called (in terms of specificity by way of the approach taken to them). 68 Clearly the plaintiff has the overall onus of establishing an entitlement to have the Court set aside the rulings by the referee and an order that the subject amendments be allowed. That having been said, it seems to me that it is appropriate to regard the defendants, in terms of a shifting evidentiary onus of proof, as being obliged to identify with precision such prejudice as they may claim to suffer [cf U.S Surgical Corporation v Hospital Products (1983) 2 NSWLR 157 at 258 per Glass JA]. 69 In another context in Eydmann v Premier Accumulator Company Limited (1916) 85 LJKB 1037, Earl Loreburn at 1041 said: "... The safe and right course is that those who best know whether there is prejudice or not, if they maintain that there is prejudice, should show it and submit the evidence that they offer for it to cross-examination." 70 Ultimately, in my view, the matters of generality put by the defendants in terms of the suggested prejudice remain inchoate, the defendants having effectively eschewed the course of going into evidence on this issue and having effectively eschewed the course of being precise about any matter of prejudice in particular. 71 At the end of the day I also take into account that counsel for the defendants has maintained from the Bar table that, all other things being equal, the current intent as I have understood it, had been to continue the reference hearing up to 30 June 2003 and then to have the reference hearing adjourned to recommence likely in August, and then to continue until its conclusion, arguably anticipated to continue until the end of August. Apparently the reference hearing was fixed to commence and to continue for approximately three to five weeks, although of course the notion of a report by 30 June 2003 is said now to be out of the question. 72 I further take into account the reference by Dawson, Gaudron and McHugh JJ in Queensland v J L Holdings Pty Limited (1996) 189 CLR 146 at 152 to the judgment of Bowen LJ in Cropper v Smith (1884) 26 ChD at 710:

[46]

"Now, I think it is a well-established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline , but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace." [emphasis added] 73 In my view and notwithstanding the relatively extended time which the reference hearing has already occupied, bearing in mind that the plaintiff is still in its case and the amount of time taken in dealing with the applications for leave to amend, and bearing in mind that the parties are likely now to have a real period of time in the course of which the defendants clearly require to be given an opportunity to examine and to prepare to answer the additional allegations sought to be propounded by the new further amended statement of claim, that opportunity may be afforded to them by appropriate case management procedures. Even if the reference must recommence later in the year than the beginning of August, then consistently with the interests of justice and the entitlement of each party to present its case, there being, as it seems to me, a clear balance in favour of permitting the amendments, and notwithstanding that the form of the amendments sought to be propounded today slightly expand in certain paragraphs, beyond those amendments put to the referee, subject to the plaintiff furnishing proper particulars of paragraph 57(a), they should be allowed. Generally the form of amended statement of claim sought to be propounded today includes usefully a number of more detailed particulars and precision than the referee had before him. Particularly is this the case in relation to paragraph 55. 74 In my view the appropriate order, subject to the plaintiff providing proper particulars of paragraph 57 (a), [the claimed amendment to that paragraph requiring to abide the provision of those particulars], is to allow the plaintiff to otherwise amend the statement of claim in accordance with the pleading appended to the notice of motion. 75 The appropriate order is to require the plaintiff to pay such costs of the defendants as are thrown away by reason of the amendment to the pleadings now permitted including costs occasioned by any vacation of the reference hearing which may be necessary by reason of the amendment. See Trevor Howse Associates Pty Limited v Dessmann (2003) NSWCA 148 at 68-69 (delivered on Friday, 13 June 2003). 76 Finally it is appropriate to make clear that in the course of the exercise of the discretion to allow the amendment the Court has taken into account the overriding purpose rule, part of the Supreme Court Rules. Part 1 of the Supreme Court Rules as modified by amendment no. 337 elucidates the overall objectives of practices and procedures as specified in the rules. The overriding purpose of the rules is to facilitate the "just, quick and cheap resolution of the real issues in civil proceedings". The overriding purpose clause imposes an obligation on the court to give effect to the overriding purpose when it exercises any of its powers. 77 Standing back from all the detail, in all of the circumstances, it having been quite clearly demonstrated that the referees exercise of the relevant discretion miscarried in: · the refusal to grant leave to amend sought as earlier outlined in these reasons; · the manner in which with the question of application for leave to amend was in some cases dealt with, as earlier outlined in these reasons,