Clarke v Sandhurst Trustees Limited

Background 1 These proceedings are concerned with an application by the plaintiffs filed on 30 January 2017 (described as an amended interlocutory application) to further amend the amended statement of claim in the principal proceeding (being an amended statement of claim filed on 16 May 2016 pursuant to leave granted on 12 May 2016), in terms of a further amended statement of claim in the form annexed to the affidavit of Ms Janice Saddler, the solicitor for the plaintiffs, sworn 27 January 2017 and filed on 30 January 2017. 2 That application, however, was overtaken by a further amended interlocutory application filed on 27 February 2017 by which the plaintiffs now seek leave to file a further amended statement of claim in the form annexed to the affidavit of Ms Saddler sworn and filed on 27 February 2017. Unfortunately, the present applications (by which I refer to both applications) have a particular pre-history which needs to be explained to properly contextualise the applications for leave to amend. I will describe the various Statements of Claim ("SOC") by reference to versions of the pleadings as follows: (a) Statement of Claim Version 1 ("SOCV1"), the statement of claim filed on 15 July 2015; (b) Statement of Claim Version 2 ("SOCV2"), the amended statement of claim filed on 16 May 2016 with leave; (c) Statement of Claim Version 3 ("SOCV3"), the proposed amended statement of claim annexed to the affidavit of Ms Saddler sworn and filed 19 January 2017; (d) Statement of Claim Version 4 ("SOCV4"), the proposed statement of claim annexed to the affidavit of Ms Saddler sworn 27 January 2017; (e) Statement of Claim Version 5 ("SOCV5"), the proposed statement of claim annexed to the affidavit of Ms Saddler sworn and filed 27 February 2017; and (f) Statement of Claim Version 6 ("SOCV6"), the proposed statement of claim handed up to the Court on the hearing of the application for leave on 8 March 2017. 3 The plaintiffs in the principal proceeding (Mr Clarke and Mrs Clarke as Trustees of the G & M Clarke Superannuation Fund) bring the proceeding as a representative party of "Group Members" under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the "FCA Act"). The Group Members are defined in all versions of the SOC as those persons and entities ("Noteholders") who were a holder of unsecured deposit notes ("Notes") issued by Wickham Securities Limited (in liquidation) ("Wickham") as at 21 December 2012; and who have suffered loss and damage by reason of the conduct of the defendant ("Sandhurst") as pleaded in the statement of claim; and who have signed a relevant funding agreement with Litman Holdings Pty Ltd: para 5 of each SOC version. 4 Sandhurst was at all relevant times the trustee under Ch 2L of the Corporations Act 2001 (Cth) (the "Act") for the holders of Notes issued by Wickham. Sandhurst was appointed Trustee for the holders of Notes pursuant to an Unsecured Note Trust Deed between Wickham and Sandhurst of 7 June 2005 which was amended by a Supplemental Note Trust Deed No 1, dated 7 July 2006, and Supplemental Unsecured Note Trust Deed No 2, dated 23 April 2009. The plaintiffs have been the holders of Notes since 4 September 2008 issued on: 4 September 2008; further Notes on 4 September 2008; 9 August 2010; and 3 September 2012, to the value of $220,000.00 in all. 5 During the period 8 June 2005 to 22 December 2010 (approximately five and a half years), Wickham issued to investors Prospectuses for an offer of Notes pursuant to Ch 6D.2 of the Act. All versions of the SOC plead the issue of 11 Prospectuses. The first Prospectus was lodged with ASIC on 8 June 2005. The last was lodged by Wickham with ASIC on 22 December 2010 as a Supplementary Prospectus. The Group Members are those persons and entities who were a holder of Notes as at 21 December 2012 issued by Wickham pursuant to any one or more of these 11 Prospectuses (apart from any other qualifying factor mentioned earlier). 6 I will return to the way in which the claims made against Sandhurst by the Group Members are framed later in these reasons. For present purposes, it should be noted that Wickham entered into voluntary administration by resolution of its directors on 21 December 2012 under Div 2 of Pt 5.3A of the Act and subsequently went into liquidation pursuant to a resolution of the creditors under s 439C of the Act on 6 February 2013. 7 The plaintiffs plead in SOCV5 and SOCV6 that there are 138 Group Members holding Notes to the face value of in excess of approximately $23,667,403.00 and that the liquidators' estimated net dividend to Group Members in the liquidation will be in the range of 3.43 cents to 6.0 cents in each dollar invested: para 28(c) and (g); Annual Report to ASIC by the liquidators, PPB Advisory, 15 February 2016. 8 It should also be noted that the principal proceeding was set down on 27 April 2016 for trial for three weeks commencing on 10 April 2017. Having regard to the circumstances described later in these reasons, it became clear that the proceedings were not in a proper state to proceed to trial and the trial dates were vacated on 1 December 2016. The proceeding is now set down for trial for three weeks commencing on 4 September 2017. 9 It is accurate to say that Sandhurst trenchantly opposes leave to amend the SOC. That opposition is based, put simply, upon the following contentions. First, SOCV5 (and these contentions equally apply to SOCV6) fails to comply with the Federal Court Rules 2011 (the "Rules") as to pleadings. 10 Second, the plaintiffs have failed to explain the delay in formulating the changes. Sandhurst says that the plaintiffs have had the relevant documents and lay statements since November 2014. 11 Third, the plaintiffs have failed to address the likely impact of the proposed substantial changes to the case upon the trial and the trial dates. 12 Fourth, the plaintiffs have failed to address the nature of any further lay and expert evidence that will be required by reason of the proposed changes. 13 Fifth, Sandhurst says it will suffer "clear prejudice" if leave is granted, having regard to the substantial nature of the proposed amendments and the proximity of the trial. 14 It is now necessary to address the history of the proceedings.

The history of the proceedings 15 In December 2013, the plaintiffs commenced proceedings seeking orders for preliminary discovery before action from Sandhurst under the Rules. The application was resisted by Sandhurst. Orders for preliminary discovery were made. Sandhurst's appeal was unsuccessful. 16 On 12 March 2015, Sandhurst gave discovery of 11 lever-arch folders of documents containing the files maintained by Sandhurst in its role as Trustee for the Noteholders of Wickham. Apart from seeking preliminary documents from Sandhurst (ultimately obtained by order of the Full Court), the plaintiffs as "eligible applicants" (having obtained authority from ASIC, Div 1, Pt 5.9 and s 6 of the Act) commenced proceedings in the Supreme Court of New South Wales under Pt 5.9 of the Act on 8 August 2014. They sought orders for the production by the liquidators of Wickham, of the "books and records" of the company in the possession of the liquidators. Orders were made returnable on 29 September 2014. 17 On 9 February 2015, the plaintiffs obtained orders for the examination of a Trust Officer employed by Sandhurst, Mr Hayden Williams, and for the production of documents. Mr Williams was examined on 18 March 2015. Documents were produced on 11 March 2015. 18 Although the question of delay and the forensic response by the solicitors and counsel for the plaintiffs to the documents produced up to the point of the formulation of SOCV1 (and thereafter) is a matter addressed in the written submissions put on by Sandhurst, this topic loomed large in the course of the oral hearing and was ultimately the subject of an application for leave to cross-examine Ms Saddler about aspects of her affidavit of 8 September 2016 and particularly her affidavit of 27 February 2017. After some argument, I gave leave to cross-examine Ms Saddler about confined topics relevant to the question of delay as a question in issue going to whether leave ought to be granted. In order to be clear about the documents which were available to the lawyers for the plaintiffs, it is necessary to say something about the oral evidence of Ms Saddler. Ms Saddler accepted that an application had been made in August 2014 in the New South Wales Supreme Court Equity Division for the production of documents from the liquidators of Wickham and that the liquidators produced documents in their possession comprising the books and records of Wickham. Ms Saddler thought that negotiations took place between her firm and the liquidators which resulted in a targeted form of production of documents confined to particular categories. Production was also obtained from an administrative entity under the control of the liquidators which had played a role as "investigating accountants". Ms Saddler accepted that documents had been produced by Sandhurst and that an examination of Mr Williams had occurred. Ms Saddler accepted that by sometime in late 2014 or early 2015, 30,000 documents had been produced which represented "the body of discovered documents in the proceedings available to [the plaintiffs' solicitors]": T, p 31, lns 32-35. Ms Saddler and her team were responsible for reviewing those documents. All of those documents were reviewed in that way and some of them were reviewed by counsel. Ms Sadler could not recall whether counsel had been briefed with the entirety of the 30,000 documents or a selection of the material. Ms Saddler says that counsel was certainly provided with a lot of the material. 19 The documents fall into three categories. The first category is the documents discovered by Mr and Mrs Clarke themselves. The second category is the list of documents obtained from the liquidators. In Ms Saddler's affidavit of 8 September 2016, she observes that upwards of 30,000 documents have been produced in this proceeding and it has been necessary for those documents to be reviewed. They had to be categorised by loan and they had to be arranged in date order. Duplicates had to be eliminated. In the course of a case management hearing on 12 September 2016, Mr Martin SC for the plaintiffs, in addressing questions of delay, made these observations about the documents (T, p 4, lns 24-39): … it wasn't fully realised the nature, and extent, and the state of the documents of Wickham Securities. Firstly - that's the first point. The second point is that those documents consist of nearly 30,000 documents. The state in which those documents were in were, to put it mildly, deplorable, your Honour. Those documents were incomplete, were out of order, they had to be reconstructed, it was a slow and painful process to do so. They had to be reviewed. They had to categorised by loan. They had to be [put] in date order, duplicates eliminated. That's before the documents were submitted to the trustee expert. 20 Mr Martin said that the documents were produced to the plaintiffs' solicitors out of order and mixed up with duplicates. Mr Martin said that the bulk of the 30,000 documents came from the liquidator. The documents were not "in good order". The documents produced by Gadens, the solicitors for Wickham, "were, effectively, what you would ordinarily expect to be found in solicitor's offices, being files, conveyancing files, relating to the underlying securities": Mr Martin, T, p 5, lns 30-32. 21 The third category, as Mr Martin mentioned, is the collection of files produced by the solicitors for Wickham, Gadens. Those files amounted to 16 boxes of files converted by Ms Saddler into 127 lever-arch folders. Those files were organised according to the particular transaction in question and organised as a file according to the particular borrower engaging in the transaction with Wickham: T, p 33, lns 24-29. Within the records produced by the liquidators sourced from Wickham, there were also some loan files: T, p 33, lns 31-33. 22 On 15 July 2015, the plaintiffs commenced these proceedings.

SOCV1 23 In SOCV1, the plaintiffs frame the case in the following way: (1) At para 8, elements of the Trust Deed are pleaded. Paragraph 8 describes the rights held on trust by Sandhurst for the Noteholders; the issue of Notes according to Prospectus conditions; the purposes for which money raised through the issue of Notes could be applied; the provision of finance according to the "Lending and Security Criteria"; the 15 essential features of those criteria; the binding nature of the Trust Deed's conditions on Sandhurst, Wickham and each Noteholder; Wickham's covenants with Sandhurst for the benefit of Noteholders; Wickham's financial covenants and its obligations to keep "financial records" correctly, recording and explaining its financial position. (2) Paragraph 8 also pleads Wickham's obligation to provide information to Sandhurst within five business days of Sandhurst having made a reasonable request; Sandhurst's covenant to exercise reasonable diligence to ascertain whether the (cl 12.1(a)) property of Wickham would be sufficient to repay amounts due; Sandhurst's covenant to exercise reasonable diligence to ascertain whether Wickham had committed any breach of the terms of the Notes, the Trust Deed or Ch 2L of the Act (described as the "Reasonable Diligence Covenant") (cl 12.1(b)); Sandhurst's covenant to do everything in its power to ensure that Wickham remedied any breach, known to Sandhurst, of the terms of the Notes, the Trust Deed or Ch 2L of the Act, unless satisfied that any breach does not materially prejudice the interests of the Noteholders or any security for the Notes (cl 12.1(c)); Sandhurst's covenant to notify ASIC as soon as possible if Wickham has not complied with ss 283BE, 283BF, 318(1) or 318(4) of the Act (cl 12.1(e)). (3) Paragraph 8 also pleads Sandhurst's entitlement to apply to the Court for directions in relation to any questions arising either before or after relevant monies become payable; its entitlement to assent to and approve, or oppose, any application to a Court by any Noteholder; its entitlement to apply to the Court for an order that the trusts under the Trust Deed be carried into effect; and that the Reasonable Diligence Covenant is held on trust for the benefit of the Noteholders: para 9. (4) At para 10, the 11 Prospectuses are pleaded. (5) At para 11, particular obligations required to be performed by Wickham under various sections of particular Prospectuses from time to time are set out. (6) The matters set out at para 11 of the SOCV1 are said to be the manner in which Wickham was to comply with the "Business Conduct Obligation" and obligations arising under s 283BB(a) of the Act: para 12. (7) At para 13, Wickham's duties under s 283BB(a), 283BB(c) and 283BF(1)(a) are pleaded. (8) At para 14, four obligations on the part of Sandhurst are pleaded by reference to provisions of the Act. The obligations are an obligation to exercise reasonable diligence to ascertain whether the property of Wickham that was or should have been available (whether by way of security or otherwise) would be sufficient to repay the amount deposited or lent when it became due: s 283DA(a); an obligation to exercise reasonable diligence to ascertain whether Wickham had committed any breaches of the provisions of the Trust Deed or Ch 2L of the Act: s 283DA(b)(i); an obligation to do everything in its power to ensure that Wickham remedied any breach known to Sandhurst of any provision of the Trust Deed or Ch 2L (unless Sandhurst was satisfied that the breach would not materially prejudice the Noteholders' interests or any security for the Notes): s 283DA(c)(ii); and an obligation to notify ASIC as soon as possible if Wickham had not complied with s 283BF of the Act: s283DA(e)(i). (9) At para 15, the plaintiffs plead that Wickham, between 8 June 2005 and 21 December 2012, used money subscribed by Noteholders to provide loans to 62 identified borrowers (the "Wickham Loans"). The pleading identifies the facility instrument (dated or undated) and the date, where dated. (10) At para 16, 15 breaches by Wickham of the Lending and Security Criteria are pleaded. In each case, the breach is pleaded and particulars of the relevant loan transactions are given by reference to the Wickham Loans pleaded at para 15. For example, at para 16(a), it is said that Wickham failed "to ensure that all Wickham Loans were fully documented": 37 of the para 15 Wickham Loans are given as particulars of that breach. Other breaches of the Lending and Security Criteria are pleaded at para 16. The breaches at paras 16(d), (e), (f), (g), (h), (i), (j), (k), (m), (n) and (o) are, respectively, cross-referenced to 30, 32, 33, 45, 36, 40, 38, 22, 23, 61 and 58 identified para 15, Wickham Loans. (11) At para 17, the plaintiffs plead that Wickham breached the Business Conduct Obligation and s 283BB(a) of the Act by engaging in particular conduct. The plaintiffs plead at para 17(a) that Wickham provided finance in a manner that did not comply with the Lending and Security Criteria and, in that regard, the plaintiffs rely upon all of the contentions and particulars set out at para 16. They plead that Wickham failed to properly conduct and manage its business operations: para 17(b). As to that, 33 contentions are pleaded. There is no utility in reciting those 33 contentions in these reasons. However, the plaintiffs contend, for example, that Wickham did not maintain or keep records that correctly recorded or explained its loan transactions; Wickham failed to maintain or keep records that would enable true and fair financial statements to be prepared and audited; Wickham held loan files which did not contain a copy of the loan approval by its Board or its Investment Committee; Wickham did not maintain any loan files for loans made in 2012; Wickham held loan files which did not contain current correspondence between it and its borrowers; Wickham held loan files the majority of which contained no approvals of loan extensions beyond the initial approved term. At para 17(c), Wickham is said to have failed to establish and maintain adequate systems and management control processes to monitor and ensure Wickham's compliance with the Trust Deed, the Act and the Lending and Security Criteria. As to that, 27 matters are pleaded. Again, there is no utility in reciting this sequence of contended failures by Wickham. (12) At para 18, the plaintiffs plead that a trustee exercising reasonable diligence in the position of Sandhurst, would have done a range of things in order to discharge its obligations to the Noteholders to ensure that Wickham complied with the provisions of the Trust Deed. It would have: (a) prior to, or at least soon after its appointment, reviewed the terms of the Trust Deed to identify and understand the covenants, duties and constraints imposed upon Wickham in carrying on its business undertaking; (b) reviewed each Prospectus (issued or proposed to be issued) so as to understand the representations made to Noteholders about the way in which Wickham's business would be conducted; (c) made enquiries about the experience and qualifications of the directors and senior managers at Wickham and its business operations, systems, procedures and resources deployed in carrying on the business undertaking especially in relation to establishing and managing Wickham Loans, financial management practises, core management functions and reporting to Noteholders. (13) At para 18(a)(v), a trustee exercising reasonable diligence in Sandhurst's position would have inspected the physical records maintained by Wickham in respect of: at least the largest non-performing Wickham Loan; or, if not that, then at least one of the two next largest non-performing Wickham Loans; and, at least two conforming Wickham Loans, so as to determine that each such Wickham Loan complied in all material respects with the requirements of the Trust Deed. (14) At para 18(b), such a trustee in Sandhurst's position would, after its appointment as trustee, from time to time but at least every 12 months, have made inquiries about the business operations of Wickham so as to be reasonably satisfied that the systems, procedures and resources were adequate to enable Wickham to carry on and conduct its business undertaking with particular emphasis upon the features of that undertaking at (A) to (E) as pleaded; and it would have inspected the physical records maintained by Wickham of Wickham Loans of the character described at (13) above. (15) At para 18(c), such a trustee in Sandhurst's position would have required Wickham to provide it with a monthly report providing, for the previous month, details of each Wickham Loan entered into during the month and the securities taken in support of that loan; and particulars of mortgage arrears at the end of the month and action taken to recover the arrears. (16) At para 18(d), such a trustee, upon receipt of each quarterly report by Wickham, would have considered the information having regard to s 283BF(4) of the Act and exercised reasonable diligence to satisfy itself that the information was complete and accurate in all material respects. (17) At para 19(a), if a trustee, exercising reasonable diligence, in the position of Sandhurst, had done the things pleaded in para 18, it would have, prior to, or at least soon after, its appointment as trustee, ascertained all or at least many of the matters referred to in para 18(a) (as to which see (12) and (13) above). (18) At para 19(b), after its appointment as trustee and in or about 12 months thereafter, it would have ascertained all or at least many of the matters referred to in paras 18(b), (c) and (d) (as to which see (14), (15) and (16) above); and/or it would have ascertained the matters described in paras 16 and 17 of the pleading (as to which see (10) and (11) above) that had occurred prior to "that time" in respect of one or more of the three largest non-performing Wickham Loans and at least two conforming Wickham Loans. (19) As to para 19(c), such a trustee, upon ascertaining all or any of the matters referred to in para 18(b) (as to which see (14) above), would have inspected the physical records maintained by Wickham in respect of all or at least many of the other Wickham Loans and thereby ascertained all or at least many of the matters referred to in paras 16 and 17 (as to which see (10) and (11) above) of the pleading that had occurred prior to that time in respect of those Wickham Loans. (20) At para 20, from 8 June 2005 until 21 December 2012, Sandhurst failed to do the things and did not make any, or at least any adequate, inquiries of the kind referred to in paras 18 and 19 of the pleading (as to which see (12) to (19) above) and therefore did not, at any time prior to 31 December 2007, or alternatively by no later than 21 December 2012, ascertain any of the matters referred to in paras 16 and 17 of the pleading (as to which see (10) and (11) above). (21) These matters at (17) to (20) are described as Sandhurst's failure to exercise reasonable diligence. (22) Sandhurst is said to have breached the Reasonable Diligence Covenant and to have contravened s 283DA(b)(ii) of the Act, in this way. By reason of the matters at para 20 of the pleading (as to which see (20) above), Sandhurst breached the Reasonable Diligence Covenant and contravened s 283DA(b)(ii) of the Act by failing to exercise reasonable diligence to ascertain whether Wickham had committed breaches of the Lending and Security Criteria and the Business Conduct Requirement and the provisions of s 283BB(a) of the Act. (23) As to the loss and damage flowing from these breaches and contraventions, at para 22 of the pleading it is said that if Sandhurst had exercised reasonable diligence (as required of it) it would have ascertained that Wickham had committed the breaches described in paras 16 and 17 of the pleading (as to which see (10) and (11) above). (24) At para 23 of the pleading, upon ascertaining all, or at least many, of the matters referred to in paras 16 and 17 of the pleading (as to which see (10) and (11) above), a trustee exercising reasonable diligence in the position of Sandhurst would have served on Wickham a notice specifying the breaches and requiring Wickham to remedy them within 21 days consistent with cl 12.1(c) of the Trust Deed and s 283DA(c)(ii) of the Act. (25) At para 24, such a trustee after requiring Wickham to remedy the breaches, would have determined whether those breaches had been remedied. (26) At para 25, if such a trustee had ascertained that Wickham had failed to remedy such breaches, it would have applied to the Court for an order appointing a receiver to the property of Wickham. (27) At para 26, if Sandhurst had required Wickham to remedy the breaches and determined whether such breaches had been remedied, or had such a trustee applied to the Court for the appointment of a receiver to the property of Wickham representing security for the Notes, then the Noteholders would not have suffered any loss of their "Note Money". (28) At para 26, it is said that if Wickham had remedied the breaches, then the amount of each loan of Note Money would have been repaid or recovered in full: para 26(c)(i). If Wickham had been placed into receivership, the amount of each loan of Note Money would have been repaid or recovered in full: para 26(c)(ii). (29) At para 26(c)(iii), at all material times up to and including 31 December 2007, the value of the assets of Wickham that would have been realised by a receiver and manager would have exceeded all of Wickham's liabilities, including the amount of the "Outstanding Money" as defined. (30) At para 27, prior to 31 December 2007, or alternatively at about 21 December 2012, Sandhurst did not do any of the things described in para 26 of the pleading (as to which see (27) to (29) above). (31) At para 28, the Group Members suffered loss and damage because, but for the breaches and contraventions, the assets of Wickham that would have been sold were ultimately realised for amounts significantly less than the amounts that those assets would have realised, had Sandhurst done the things described in para 26 of the pleading (as to which see (27) to (29) above). 24 On 16 May 2016, the plaintiffs filed SOCV2, no doubt, against the background of access to the documents earlier described.

SOCV2 25 A change is made to para 17 (see [23] (11) above) (concerning contended breaches of the Business Conduct Obligation and s 283BB(a) of the Act by failing to comply with the Lending and Security Criteria), so as to identify in respect of each of the 15 contended breaches, the time period of each breach cross-referenced to the Wickham Loans relevant to each breach. Also, the time period for each of the 33 examples of Wickham's contended failure to properly conduct and manage its business operations (para 17(b) of SOCV2) are set out, by the amendment, where not pleaded in SOCV1. 26 As to the pleading of loss and damage, SOCV2 amends para 22 (see [23] (23) above) to introduce a cascading sequence of dates by which Sandhurst (had it exercised reasonable diligence in the way said to be required of it), would have ascertained that Wickham had committed all or at least many of the breaches pleaded at paras 16 and 17 of the SOC (see [23] (10) and (11) above) which occurred prior to each relevant sequential date. For example, the sequence is "by no later than about 31 December 2005" but if not then, "by no later than about 30 June 2006", but if not by then, "by no later than about 31 December 2006" and so on, on six monthly rests until 30 June 2012. 27 As to the loss itself, SOCV2 continues to assert that up to and including 31 December 2007, the value of Wickham's assets that would have been realised by a court appointed receiver (had Sandhurst acted in the way it is said it should have acted) would have exceeded all of Wickham's liabilities. The newly introduced particulars of that contention are, first, that the financial statements for Wickham for the financial years ending 30 June 2005, 30 June 2006 and 30 June 2007 and the half-yearly statements to 31 December 2005, 31 December 2006 and 31 December 2007 show it to be so, because, at each balance date Wickham's assets exceeded its liabilities. 28 Second, had Wickham been placed into receivership on Sandhurst's application to the Court (according to the method pleaded at para 26), "Group Members who were issued debentures after the date receivers were appointed [or, more correctly, after the date receivers would have been appointed, according to the hypothesis], would not have acquired those debentures": para 26, sub-particulars (iii) and (iv). 29 Apart from those matters, these new matters are added: if Wickham had been placed into receivership (according to the sequence and method pleaded) all loans of debenture monies would have been recovered in full; because Group Members have received 3.43 cents in each dollar of the value of their Notes and the net dividend will not exceed 6.0 cents in each dollar, Group Members holding Notes at the postulated likely date of appointment of receivers, have suffered loss measured by the difference between the likely net dividend and an actual full return of the face value of their Notes (that is, a loss of between 94 cents and 96.57 cents in every dollar). Similarly, those Noteholders who subscribed after the postulated date of likely appointment of receivers, have also suffered a loss measured by the difference between full recovery and the final net dividend likely to be received (again, a loss between 94 cents and 96.57 cents in each dollar). 30 These matters, the subject of SOCV2, seem to be uncontroversial.

The various Orders made at Directions/Case Management Hearings 31 Further directions orders were made on 27 April 2016. Relevantly, a Summary of the plaintiffs' expert evidence (at least as contemplated on 27 April 2016) was to be served on Sandhurst by 27 May 2016. The plaintiffs' expert evidence was to be served on Sandhurst by 1 August 2016. Sandhurst's expert evidence was to be served on the plaintiffs by 28 November 2016 and expert evidence in reply was due by 23 December 2016. A private mediation was supposed to occur by 23 December 2016. The plaintiffs' tender bundle list, for trial, was to be served on Sandhurst in electronic form by 17 January 2017. Sandhurst was to serve its list by 24 January 2017. Other procedural directions for trial were made. Most significantly however, the proceedings were set down provisionally for trial for three weeks commencing on 10 April 2017. 32 A number of appearances before Deputy District Registrar Lynch occurred after 27 April 2016 relating to documents. 33 On 12 September 2016, the proceeding came before the Court for review and further directions. The plaintiffs relied upon an affidavit of Ms Saddler sworn 8 September 2016. In that affidavit, Ms Saddler says that the summary of expert evidence was served by email on 30 May 2016 rather than 27 May 2016. The summary attached two Schedules ("A") and ("B") which describe some of the properties which were a security, in each case, for the relevant Wickham Loan. Schedule A recites 17 non-development properties and Schedule B recites 31 other properties (and in all cases the name of the borrower). These Schedules contemplated that a valuation would be undertaken at particular dates for each property. Apart from this, Ms Saddler says in her affidavit that the plaintiffs had engaged three experts to provide expert evidence upon which the plaintiffs would rely at trial. 34 As at 8 September 2016, the plaintiffs had been unable to serve any of the expert evidence from these three experts notwithstanding the Order to serve expert evidence by 1 August 2016. The trial at this point was seven months away on 10 April 2017 (including the late December/early January period). The explanation for the delay was this. 35 First, the plaintiffs had engaged Mr Clive Guthrie. Mr Guthrie has "specialised knowledge and experience in the supervisory activities of a trustee company in relation to debenture schemes": Ms Saddler, para 7. Ms Saddler does not say when Mr Guthrie was engaged. Mr Guthrie's evidence would address (Ms Saddler, para 8) "the loan practices and procedures in place at Wickham in light of various loans advanced by Wickham". Mr Guthrie would express an opinion on the steps a trustee, exercising reasonable diligence, would have taken between June 2005 and December 2012 (the SOCV2 dates) to ascertain whether Wickham had engaged in conduct in breach of the provisions of the Trust Deed or the Act. 36 The evidence of Mr Guthrie was said to have been delayed due to the scale of the task involved in analysing, recovering, categorising, chronologising and eliminating duplicates from the 30,000 documents produced to the plaintiffs as earlier described: Ms Saddler, para 9. Ms Saddler says that after receiving the documents she caused approximately 2,230 of them comprising approximately 2,170 documents related to 26 loan files (out of the 62 loan files pleaded) to be briefed to Mr Guthrie. Almost all of those documents were "in Wickham's possession at the time and are now in the possession of the liquidator of Wickham or in the possession of Wickham's solicitors". Ms Saddler says that Wickham's documents were "incomplete" and in "many cases" had to be "reconstructed and augmented" with documents from Wickham's solicitors' files prior to briefing Mr Guthrie. The plaintiffs sought leave to serve Mr Guthrie's Report by 30 September 2016. 37 Second, the plaintiffs proposed to rely on expert valuation evidence. Ms Saddler had originally engaged Jones Lang LaSalle ("JLL"). Ms Saddler, on 31 May 2016, sent JLL copies of Schedules A and B to the summary describing the properties to be valued at particular dates. A further Schedule ("C") was given to JLL on 11 July 2016 referring to the same properties listed on the other Schedules but reciting additional dates on which valuations would be required. However, on 12 July 2016, JLL advised Ms Saddler that 18 of the properties could not be valued due to their location and property type; JLL could not provide the valuations within an acceptable timeframe; and the fees would be in excess of $450,000. Thus, on 14 July 2016, Ms Saddler retained Mr Joeseph Clune of Taylor Byrne Valuers (TB). On 18 July 2016, Mr Clune said that he could undertake all valuation exercises and accepted the appointment. Mr Clune said that he would be able to provide a valuation report by 24 October 2016. 38 Third, the plaintiffs proposed relying upon the expert evidence of a forensic accountant. That evidence would have two elements to it. First, the expert would express an opinion as to the net value of Wickham and its assets and liabilities in or about 30 June 2005, 2006 and 2007 on the basis of a "going concern" and on the basis of an "orderly winding-up" on those dates. Second, he would offer an opinion as to what he would have found if he had been appointed as an "investigating accountant" to report upon the state of the mortgage loan portfolio of Wickham: Ms Saddler, para 18. Ms Saddler says in her affidavit that the plaintiffs could not "fully brief" the forensic accountant until the valuations of the relevant properties had been completed. Moreover, Ms Saddler said that it had only become apparent, on conferring with Mr Guthrie when his review of the loan files was "well under way", that a separate investigating accountant's report would also be required, thus involving a further retainer of such an expert and instructions being given to that expert. The report of the forensic accountant would be filed and served, it was said, by 31 October 2016. 39 The plaintiffs also foreshadowed that three additional loans had become relevant and would be relied upon in addition to the 62 Wickham Loans earlier pleaded. The plaintiffs contended that Sandhurst would suffer no prejudice because it would soon have the actual expert evidence (not just a pleading), to be relied upon by the plaintiffs at trial. The case sought to be maintained at trial was put this way by Mr Martin SC for the plaintiffs (T, p 7, lns 17-44) on 12 September 2016: The way we put the case ... is that the plaintiffs' case is primarily that the - that a reasonably diligent trustee would have ascertained loan value ratio breaches, amongst others, in respect of many loans of [Wickham]. It's our case, upon ascertaining that a reasonably diligent trustee had so ascertained that matter, the reasonably diligent trustee would have given notice to [Wickham] to remedy those breaches. Upon being given notice, [Wickham] would then have 21 days to remedy that breach, if in fact the breach was a breach of the LVR covenants. We regard it as part of our case to prove that that breach would not have been remedied. In relation to establishing that we do so by proving what the underlying - or the value of the underlying security was. In other words, it was incapable of being remedied because … - the value of the underlying security was such that the LV average would not have been remedied, and that's our case. It would then have led to a reasonably diligent trustee appointing a receiver to the - well, making an application to the [C]ourt to appoint a receiver over the assets of [Wickham] in order to protect the interests of the unit holders. So - and, nextly, it is also relevant ... to whether any loans in the financial statements of [Wickham] should be treated as impaired. We won't know that until we get the valuations … because it's an important part of our case that if a receiver had been appointed prior to 31 December 2007 the value of the assets of [Wickham] would have been such that the receivers would have sold those assets, and there would have been a full return to debenture holders, or a significant return to debenture holders. But because the receiver was not appointed at the appropriate time prior to 31 December [2007], until much later, there was a significant deterioration in the state of the loan book leading to a very poor return to debenture holders once a receiver had been appointed. 40 Not surprisingly, Mr Hoffmann QC expressed emphatic concern about receiving Mr Guthrie's Report on 30 September 2016, the forensic accountant's report on 31 October 2016 and a valuation report on 24 October 2016. However, the underlying concern was this. The proposed valuation evidence suggested that the foundation for the plaintiffs' loss and damage claim would now engage an analysis of the net assets of Wickham by the forensic accountant, by reference to, and aided by, valuations of particular properties at particular times so as to assess the affect those valuations might have upon Wickham's balance sheet at 30 June 2005, 2006 and 2007 on a going concern basis and an orderly winding-up basis. Mr Hoffmann protested that until 12 September 2016, Sandhurst had been preparing its defence on the footing that the plaintiffs were relying upon the audited financial statements of Wickham (at least up until December 2007) as "truly and fairly stated" with no need to go behind them. Mr Hoffmann accepted that at p 6 of the plaintiffs' "summary" of 30 May 2016 there is some mention of Wickham's failure to honour the "loan to value ratio" criterion of the "Lending and Security Criteria" and in turn, proof of that notion would engage a valuation exercise. However, Mr Hoffmann contended that it was not "front and centre" as a notion. 41 More fundamentally, Sandhurst contended that there was no pleading that a reasonably competent trustee would have engaged an "investigating accountant"; the report would have revealed certain things; and thereafter particular steps would have been taken by a reasonable trustee. Sandhurst says that the framing of the case on the basis that an "investigating accountant" would have come in, found and disclosed to the trustee particular things and that, in light of such a report, a trustee in Sandhurst's position would have done certain things, is "a fundamental shift" in the case. That led to this question by the Court: "So what is this leading to? Are you suggesting the pleading needs to be amended to frame a case which is actually the case being advanced?" Mr Hoffmann responded: "Yes. Precisely, your Honour. And that's the fundamental concern we've got …" (T, p 10, lns 33-37). 42 Apart from that matter, Sandhurst contended that a "loss case" based on the "net asset values" of Wickham's assets at particular points in time is not pleaded. And, apart from the pleading point, Sandhurst contended that such a case engages 126 separate valuations said by Mr Hoffmann to be "a massive undertaking". 43 So, by 12 September 2016, Sandhurst's central concern was that the case sought to be made good in reliance upon the foreshadowed expert evidence simply was not pleaded and aspects of the case would engage a significant (perhaps massive) valuation exercise. 44 Apart from the pleading issue, Sandhurst contended that the plaintiffs had had the documents since November 2014. Mr Guthrie received his initial brief in September 2015. On 4 August 2016, 11 months later, Mr Guthrie was briefed with 10 further loan files and, it seems, another 16 loan files on 2 September 2016. Thus the plaintiffs, it was said, had had the documents for two years with a 12 month hiatus occurring. Sandhurst contended that the delay had not been explained. 45 However, Mr Hoffmann accepted, on 12 September 2016, that provision of Mr Guthrie's Report by 30 September 2016 would not give rise to material prejudice to Sandhurst. It also became clear in the course of the directions hearing that day that Mr Guthrie would not require the valuations in order to complete his report. The forensic accountant would, however, require the valuations for the purposes of his report. Ultimately, Mr Hoffmann's position was this (T, p 13, lns 39-47): … according to Ms Saddler's evidence, the valuation material is to come in by 24 October [2016]. So I wouldn't want it to be thought that we are of the view that that order can be complied with reasonably and rationally when there's 126 valuations to be provided to the investigating accountant, who I understand is a Mr Potter, and to Mr Samuel of Sapere, but putting all of that to one side …, none of it is presently relevant in the way that has now been described by Ms Saddler, and the pleadings really ought to be regularised so that we have clear vision of just what this case is. That's our fundamental concern, and that should be done as a matter of priority. [emphasis added] 46 Mr Martin SC contended that Sandhurst may well be "boxing at shadows" because once Sandhurst has the expert reports at the end of September and October 2016, it will be able to see all of the actual evidence and will understand not only the case it has to meet but the evidence as well. 47 In the end result, the plaintiffs were ordered to serve the expert report of Mr Guthrie by 30 September 2016 and serve any expert evidence on which they intended to rely, by 31 October 2016. The matter was adjourned for further directions on 4 November 2016. 48 The report of Mr Guthrie dated 28 September 2016 was served on Sandhurst's solicitors on 28 September 2016. On 31 October 2016, the report of Mr Tony Samuel, the forensic accountant, was served on Sandhurst's solicitors. On 31 October 2016 the valuation reports of Mr Joseph Clune were served on Sandhurst's solicitors. 49 On 3 November 2016, the Court ordered the plaintiffs to serve on Sandhurst any expert evidence of an investigating accountant by 10 November 2016. The plaintiffs were unable to do so. A further order was made on 10 November 2016 that the plaintiffs serve any further expert evidence by 24 November 2016. The plaintiffs were also ordered to file and serve any application to further amend the statement of claim to bring the pleaded case into line with the expert evidence, by 24 November 2016. The proceeding was adjourned to a further directions hearing on 1 December 2016 (as a date a short time after the further compliance date of 24 November 2016). 50 By 1 December 2016, the plaintiffs had failed to comply with a number of the Court's orders all directed to the production of the expert evidence in preparation for a procedurally fair trial to commence on 10 April 2017, for three weeks. By 1 December 2016, Sandhurst had received the reports of Mr Guthrie, Mr Samuel and Mr Clune. Having looked at those reports, Sandhurst's central complaint, on 1 December 2016, was put this way by Mr Hoffmann (T, p 3, lns 10-33): But that evidence [the three expert reports] is, in most respects, not subject to the pleaded case. And so the pleaded case, so far as the trustee expert is concerned [Mr Guthrie], does not plead that a trustee exercising reasonable diligence in accordance with s 203HA would have inspected every loan file of [Wickham] and had done so in June of each year, notwithstanding that an auditor was to be doing such a thing. Secondly, that that inspection would involve senior management of the trust company and legal advisers. Thirdly, that, were there to be issues identified, there would be created a watch list of loan files that the trustee would keep under review. Fourthly, that if that review, after a period of about 12 months, according to Mr Guthrie, did not see improvement - this is entirely contrary to what's pleaded - then a trustee exercising reasonable diligence would take steps to engage an investigating accountant, and one of the hold ups here and one of the fundamental defaults by the plaintiff[s] is the failure to adduce the investigating accountant's report. But it's not simply that, because Mr Guthrie deposes and opines in his report that, in addition, external legal advice ought be obtained by the so-called reasonable, competent trustee exercising its statutory duty, and next, that that trustee exercising that duty would approach the court on the assumption, not exposing any of the material and not pleaded, that some advice would have been given by the investigating accountant and the external lawyer to that reasonable, competent trustee that it should approach a court and seek directions as to whether it ought exercise its rights pursuant to the terms of the [Trust Deed]. That's the - if you like, the way the case has unfolded. None of that is pleaded. [emphasis added] 51 Those observations resulted in this question from the Court: "Well, your point is that might all be true or not true, or contentious or non-contentious, but it's not the case that has been pleaded". Mr Hoffmann responded: "Precisely, and therefore it places us in an impossible position of trying to deal with that aspect of the case" (T, p 3, lns 35-39). 52 Mr Hoffmann also observed that Mr Clune's valuation report now addresses 31 properties only and consists of approximately 71 separate valuations rather than the exercise foreshadowed on 12 September 2016 about which Sandhurst had complained. The further consideration was said to be that Mr Samuel, the forensic accountant, had published an expert opinion founded upon, in part, the valuations in which he expresses views about the state of Wickham's loan book and thereby its balance sheet relying upon the assumptions given to him based upon the valuations. That report and the approach it takes was said to be inconsistent with the pleaded case which relies upon the financial position, as stated at 31 December 2007, in the audited accounts, as "true and fair". Mr Samuel expresses an opinion for the period from 2005 onwards, none of which is pleaded, it was said. The final point made by Mr Hoffmann was that a report from an "investigating accountant" had still not arrived notwithstanding the orders made by the Court and thus the plaintiffs had failed to comply with their obligations under ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). Mr Hoffmann described the failings of the plaintiffs over time as "serial default", without proper explanation. Mr Hoffmann contended that the plaintiffs had had eight months to get their expert evidence in and there remained no explanation of the difficulty in obtaining the report from the expert investigating accountant. 53 Mr Drew of counsel appeared for the plaintiffs on 1 December 2016. Mr Drew recognised "that there have been successive delays": T, p 6, lns 22-23. Mr Drew said that three expert reports had been served and they represented the "more substantive expert reports" not the least of which was the report of Mr Guthrie. Obtaining that report and doing the things that led to it, was described as "a very time-consuming exercise, unexpectedly so in truth": T, p 6, ln 26. As to the report of the "investigating accountant", Mr Drew said this (T, p 6, lns 27-32): .. we had an expert witness who withdrew at a late stage in relation to the investigating accountant's report. Nevertheless, the investigating accountant could not seriously embark upon their work in compiling the report until the report by Mr Guthrie had been completed because that's, if you like, the catalyst for the appointment of an investigating accountant and informs the instructions that would be forthcoming to that hypothetical investigating accountant". [emphasis added] 54 Mr Drew said that the investigating accountant was briefed with Mr Guthrie's Report on the day that it was issued. Preliminary instructions were given prior to that. There was a previous expert engaged to provide an investigating accountant's report. Mr Drew said that the plaintiffs were advised on 28 September 2016 that that expert could not undertake the task due to a conflict and it took about 19 days to find another expert to take on the retainer. The new expert, Bentleys, were briefed on a preliminary basis and provided with documents within a couple of days thereafter. Bentleys gave a "rather optimistic estimate" that they could have the work completed within about three weeks. Mr Drew observed (T, p 6, lns 42-45): What they hadn't probably fully appreciated is the state of the books of Wickham and the fact that the investigating accountant's report has to deal not so much [with] the existence of documents as the non-existence of documents. [emphasis added] 55 Mr Drew added this (T, p 7, lns 1-13): The other thing is that the issues that have been identified by the investigating accountant is that the affairs of Wickham appear to have been in such a state of disarray [that] it is taking a great deal of time to analyse those things and report upon them accurately for the purposes of being adduced as evidence. They've been well underway on this for about a month now or six weeks, working as hard as they can, and they've been repeatedly pressed on producing the report. … I think they've been overwhelmed by the logistics of it, frankly. The date of 23 December [2016 - the date foreshadowed] in having this report served is actually the result of pressure being applied upon the expert. We need to have that report … every bit as much as the defendant does … - but we're confident that can be achieved now … - in fact we're assured absolutely that the timetable will be achieved. [emphasis added] 56 The Court pressed Mr Drew with the sequence of failures on the part of the plaintiffs to comply with orders and Mr Drew ultimately responded in this way (T, p 8, lns 9-18): I understand, your Honour. The situation is that the experts have unfortunately repeatedly expressed their confidence that they [could or would] complete the evidence and then the more they go into it the more they find themselves in a quagmire. Mr Guthrie found that and that's why his report was late and we eventually got that on 31 October [2016] and that was with the best endeavours that could be made at the time. I think it's fair to say that Bentley[s] stepped into this perhaps a little naively. We probably shouldn't have accepted their assurances that they could get it completed within the timeframe we were looking for but we were pressing to adhere to the timetable and they gave us reason to believe that that could be adhered to. [emphasis added] 57 The Court expressed grave reservation about the state of the evidence from Bentleys; earlier non-compliance by the plaintiffs; and the need to amend the pleading to bring the case into line with the case sought to be advanced in reliance upon the expert evidence. The Court also expressed reservation about there being sufficient time to enable the defendant to address evidence in response. Mr Drew responded in this way (T, p 9, lns 16 and following): Your Honour, had my friend allowed me to speak first, I would have addressed [those concerns] and put forward the notion that, firstly, the plaintiff recognises that it is highly unlikely that the date could be retained … We accept much of what the defendant says in terms of gathering together the evidence because we've just been through that whole process ourselves and we recognise the difficulties it incurs. [emphasis added] 58 Mr Drew also added this (T, p 14, lns 32-33): "There has been a great deal of difficulty in assembling the evidence on this case, it has to be frankly acknowledged". In the result, the trial dates were vacated. The discussion at the case management hearing contemplated that the plaintiffs, in February 2017, would bring on an application to amend the statement of claim. Mr Hoffmann observed that: "… we're going to have a dispute about these pleadings and who knows where that may end up …" (T, p 11, lns 40-42). Mr Drew accepted that the presently prudent course would be to ensure that Bentleys provided their report by 23 December 2016 in any event. 59 In order to keep the matter under review, the proceeding was listed for a further case management hearing on 8 December 2016. 60 At that case management hearing the proceeding was listed for trial on 4 September 2017 for a period of three weeks. 61 The hearing of an application to further amend the amended statement of claim was listed for 24 February 2017 at 10.15am. 62 On 29 December 2016, Ms Saddler caused the investigating accountant's report to be served on the solicitors for Sandhurst. That report is a report of Ms Katherine Elizabeth Barnet of Bentleys dated 24 December 2016. Ms Saddler, in her affidavit sworn 27 February 2017, says that the proposed further amended statement of claim could not be finalised until after the receipt of Ms Barnet's report. Due to the intervening Christmas and New Year break, the task of formulating the amended pleading was not completed until 20 January 2017. Ms Saddler says that she was concerned to ensure that any proposal to further amend the amended statement of claim ought to take account of all of the reports of the experts so that a further application to amend would not be necessary. The interlocutory application to amend was served on Sandhurst's solicitors on 20 January 2017 supported by Ms Saddler's affidavit of 19 January 2017 attaching SOCV3.

SOCV3 63 On 19 January 2017, Ms Saddler caused her affidavit affirmed on 19 January 2017 to be filed. It attaches SOCV3. At para 15, which pleads each of the Wickham Loans, the plaintiffs introduce six additional loans to borrowers in the names of Allville; Cleary, Clements and Radford; JAR Developments; CJ & ML Kahler (Kahler); SEQ Developments; and Zinlarge. "BHG Securities" previously pleaded as a Wickham Loan is deleted from para 15. Paragraph 16, which pleads breaches of the Lending and Security criteria, is amended to introduce, where relevant, in respect of the pleaded breaches, further cross-references to Wickham Loans. Some of the cross-referencing adds one or other of the additional loans. Some Wickham Loans previously pleaded are deleted from the cross-referencing of various breaches. 64 The Schedule at para 17(a)(ii) which pleads that in the period 8 June 2005 until 21 December 2012 Wickham breached the Business Conduct Obligation and s 283BB(a) of the Act by providing finance in a manner that did not comply with the Lending and Security Criteria, is amended to introduce the six new Wickham Loans and also some of the other Wickham Loans previously pleaded at para 15, (all cross-referenced to the period in which each breach in respect of each loan is said to have occurred). 65 Paragraph 17(b) pleads that, in the period 8 June 2005 to 21 December 2012, Wickham breached the Business Conduct Obligation and s 283BB(a) of the Act by failing to "properly conduct and manage its business operations". Thirty-three particulars of that breach are pleaded, as before. Consistent with the notion put at the case management hearings that the issue about the documents had become one of whether documents had existed at all, the SOCV3 particulars of para 17(b)(i) assert, for example, that Wickham had failed to maintain or keep "any, or any proper", records (the character of the records varying according to each of the 33 subparagraphs of para 17(b)) and that the relevant records "do not now exist in Wickham's books and records and there is no evidence that such [records] were maintained or kept by Wickham during that period". 66 And so it goes in relation to each of the other 32 categories of subject matter in para 17(b). 67 Paragraph 17(c) pleads that, from 8 June 2005 to 21 December 2012, Wickham failed to establish and maintain adequate systems and management control processes to monitor and ensure Wickham's compliance with the Trust Deed, the Act and the Lending and Security Criteria. Twenty-seven particulars of that allegation are given, as before, and in each case the amended particulars assert throughout, relevantly varied as to the subject matter of each of the 27 particulars (for example, as follows at para 17(c)(i), as to system and management control processes): (i) There was no system or management control process to ensure that all Wickham Loans were fully documented and made on an arm's length, commercial basis as to interest, terms and security. Sub-pParticulars (A) The pleadings and particulars at paragraphs 8(f)(i) & (g)(i) are repeated. (B) Report to creditors dated 16 June 2014 by PPB Advisory, p17. (C) There is no evidence in Wickham's books and records, or in the loan files, that any such system or management control process had been established and followed by Wickham during that period. (D) It is to be inferred from Wickham's systematic and repeated failure to comply with this Lending and Security Criteria, as pleaded and particularised at paragraph 16(a) above, that no such system or management control process had been established or followed by Wickham during that period. 68 And so it goes from para 17(c)(i) to para 17(c)(xxvii). 69 As earlier mentioned, para 18 pleads the Trustee's obligation to ensure Wickham's compliance with the Trust Deed and the Act and in that regard the plaintiffs say (and have added) that a trustee exercising reasonable diligence would have, prior to, or at least soon after, its appointment as trustee, "attended the offices of Wickham" and made the enquiries previously pleaded at para 18(a)(iv). A particular of the whole contention at para 18a(iv) is the Guthrie Report at paras 22-59 (37 paras). 70 Sandhurst objects to particulars based on cross-references to the Guthrie Report, in that way. 71 Consistent with the notion that a trustee in the position of Sandhurst would have attended the offices of Wickham, the plaintiffs add at para 18(b) that, "about six months" after its appointment and from time to time thereafter but at least every 12 months after its appointment, a reasonable trustee would have "attended the offices of Wickham" and made the pleaded enquiries. Paragraph 18(b) is cross-referenced to paras 60 to 178 (118 paras), 185 to 276 (91 paras) and 283 to 295 (12 paras) of the Guthrie Report. Paragraph 18(d) is cross-referenced to six paragraphs of the Guthrie Report. Objections are taken to this form of cross-referencing. 72 Paragraph 18(c) is deleted. 73 The cascading series of dates formerly contained in para 22 of SOCV2 have been amended to reflect, from 30 June 2006 to 30 June 2012, annual dates rather than the earlier pleaded six monthly rests as the dates by which Sandhurst would have ascertained material matters. 74 Paragraph 22A is new and asserts that in or about June 2005 and again in or about December 2005, upon Sandhurst ascertaining all, or many, of the matters pleaded in paras 16 and 17 that had occurred prior to the applicable date, a trustee exercising reasonable diligence would have required Wickham to have remedied the deficiencies in a timely way and to have reported accordingly to the trustee. 75 Paragraph 22A is based upon nine paragraphs of the Guthrie Report. 76 Paragraph 22B is new and it says that, from about 30 June 2006, a trustee exercising reasonable diligence, upon ascertaining all, or many, of the matters pleaded at paras 16 and 17 "would have appointed an investigator to enquire into, and report upon", at least the matters identified at (a) to (i), the last of which is "any other matter considered to be relevant". Each of these matters might be described, put simply, as contentions as to the trustee exercising supervisory investigation into the systems, processes, mortgage loans, financial and accounting records, financial position of Wickham and any matters materially prejudicial to the interests of the Noteholders. This new paragraph is cross-referenced to three paragraphs of the Guthrie Report. 77 Paragraph 22C is new and it says that upon investigation into the para 22B matters, a competent and diligent investigator would have reported the matters pleaded at (a) to (e) to the trustee. Those matters which would have been reported include: that Wickham likely had insufficient assets to repay all of the funds owed to Noteholders; that Wickham had systematically and materially failed to comply with the Lending Criteria in making loans to borrowers; that Wickham had not adequately maintained financial records in its mortgage lending business; that Wickham had not carried out its mortgage lending business in a proper and efficient way; and that, having regard to these matters (all of which placed the Noteholders' funds in a position of considerable risk of loss), an investigator would have reported that the trustee should obtain legal advice, as a matter of urgency, to: prevent further fund-raising by Wickham through the issue of Notes; disclose the asset deficiency in documents provided to potential new Noteholders; and have an independent person such as a receiver appointed to Wickham. Paragraph 22C is particularised by reference to paras 4.2, 7.114 to 7.116, 8.109 to 8.111 and 9.105 to 9.107 of Ms Barnet's report. 78 There is no para 22D. 79 Paragraph 22E is new and says that within about 28 days after receiving an investigator's report of the kind referred to in para [22C], a trustee exercising reasonable diligence would have sought and obtained legal advice about the matters referred to in the investigator's report. Three paras of the Guthrie Report are relied upon for that paragraph. 80 Paragraph 22F is new. It says that such a lawyer, so consulted, would have advised the trustee that all or many of the para 22C matters comprised evidence of failures by Wickham to comply with the provisions of the Trust Deed and Chapter 2L of the Act. 81 Paragraph 23 is amended to add that, "within about 7 days after obtaining the legal advice [referred to above]", such a trustee would have served a notice on Wickham specifying the breaches and requiring Wickham to remedy such breaches "as were reasonably capable of remedy", within 21 days. 82 Paragraph 25 is amended to add that, put simply, upon a failure by Wickham to remedy the relevant breaches being breaches which had the consequences set out in para 25, a trustee exercising reasonable diligence in the position of Sandhurst, would have applied, "within about 7 days after the expiry of the 21 day notice period" for an order appointing a receiver to the property of Wickham. Three paras of the Guthrie Report are relied upon to support that pleading. 83 At para 26, if Sandhurst had taken the steps pleaded earlier and applied to the Court for the appointment of a receiver, then the Noteholders would not have suffered any loss, "or at least not so much" (added), loss of their Note Money. At para 26, the particulars at para 26(c)(ii) set out the amount that would have been available to be distributed to Noteholders, at 31 December 2006 and six monthly thereafter to 31 December 2008, had a receiver been appointed within the timeframes described in the pleading (that is, consequent upon an order made on an application to the Court made within about seven days after the expiry of the 21 day notice period). Reliance, as a sub-particular, is placed upon para 26 of Mr Samuel's report of 31 October 2016.

SOCV4 84 The hearing of the application to amend the amended statement of claim had been set down (on 8 December 2016) for 27 February 2017. On 30 January 2017, Ms Saddler filed her affidavit sworn 27 January 2017 annexing SOCV4. That version of the pleading introduces a new contended breach of the Lending and Security Criteria at para 16(gi). More particularly, amendments are introduced into para 18 which, as already mentioned, addresses the topic of the trustee's obligation to ensure Wickham's compliance with the Trust Deed and the Act. In addressing the application, it is necessary for the Court to examine each of the paragraphs and identify the significance of the changes. 85 The things a reasonably diligent trustee in the position of Sandhurst would have done are pleaded at paras 18(a), 18(b) and 18(d). Each of those things are introduced by amended governing words that a trustee, exercising reasonable diligence in the position of Sandhurst (in order to discharge its obligations to ensure that Wickham complied with the provisions of the Trust Deed and the Act), would have done the pleaded things "by its senior business manager, supervised subordinates or professional advisors" (the new "chapeau"). 86 As to para 18(a) there remain four things such a trustee would have done. There is no change to para 18(a)(i) except that SOCV4 adds as particulars, paras 22, 35 to 37 of the Guthrie Report. 87 As to para 18(a)(ii), SOCV4 adds, as particulars, paras 29 to 31 of the Guthrie Report. 88 As to para 18(a)(iii), SOCV4 adds, as particulars, paras 25, 26 and 41 of the Guthrie Report. 89 As to para 18(a)(iv), SOCV4 deletes paras 22 to 59 of the Guthrie Report, and inserts paras 41 to 59 of the Guthrie Report. 90 As to para 18(b)(i), the contention is that such a trustee, about six months after its appointment and every 12 months thereafter, would have attended the offices of Wickham and made enquiries about its business, systems, procedures and resources and the proper and efficient manner of conduct of the undertaking. SOCV4 deletes as matters, the subject of those enquiries, the areas of activity by Wickham described at A, B, C, D and E of SOCV3. The reframed particulars of that contention now are paras 60 to 63, 99, 102 to 104, 193, 196 to 198, 283, and 286 to 287 of the Guthrie Report. 91 SOCV4 amends para 18(b)(ii) so as to provide that such a trustee (at the times described in para 18(b), but nevertheless), would have "in about December 2005" inspected the physical records maintained by Wickham in respect of "all, or at least most, of the existing Wickham Loans" so as to ascertain that such Wickham Loans complied with the requirements of "the Lending and Security Criteria, Trust Deed and Prospectus". The particulars added in respect of that re-formulation are paras 60 and 64 to 92 (28 paras) of the Guthrie Report. 92 Paragraph 18(b)(iii) of SOCV4 is new. 93 It says (at para 18(b)(iii)(A)) that such a trustee (at the times described in para 18(b), but nevertheless), "in or about June 2006", would have: "inspected the physical records maintained by Wickham in respect of all, or at least most, of the existing Wickham Loans so as to ascertain that such Wickham Loans complied in all material respects with the requirements of the Lending and Security Criteria, Trust Deed and Prospectus". The particulars are paras 99 and 108 to 178 (70 paras) of the Guthrie Report. 94 Apart from inspecting the physical records in the way just described, such a trustee in or about June 2006 would have placed "any such Wickham Loans" on a "watch list" if the trustee was not satisfied that the relevant loan had been conducted in a manner in compliance with the Lending and Security Criteria, Trust Deed and Prospectus: para 18(b)(iii)(B). 95 The particulars are 12 paras of the Guthrie Report. 96 Paragraph 18(b)(iv) is also new. 97 It says that such a trustee (at the times described in para 18(b) but nevertheless), "in or about June 2007", would have "inspected the physical records maintained by Wickham in respect of:" (A) most, if not all, of the existing Wickham Loans that had been placed on the trustee's "watch list" as a result of the June 2006 monitoring visit; and (B) at least 6 other mortgage loans including one or more of the 3 largest Wickham Loans and one or more of the next 3 largest Wickham Loans, so as to ascertain that such Wickham Loans complied with the requirements of the Lending and Security Criteria, Trust Deed and Prospectus; and Particulars Guthrie Report, paras 193 and 202 to 276 (C) placed any such Wickham Loans on a "watch list" if the trustee was not satisfied that it had been conducted in a manner that complied with the requirements of the Lending and Security Criteria, Trust Deed and Prospectus and required Wickham to provide progress reports (at least together with each quarterly s283F report) on the steps being taken to ensure that each of the loans complied with those requirements; Particulars Guthrie Report, paras 208, 215(b), 221(d), 233(c), 244(b), 247(d), 252(b), 257(b), 262 (b) and 275(f) [emphasis added] 98 The particulars are those paragraphs of the Guthrie Report recited in the quote above. 99 Paragraph 18(b)(v) is also new. 100 It provides that a trustee exercising reasonable diligence in the position of Sandhurst would have (at the times described in para 18(b) but nevertheless), in or about June from 2008 to 2012, inspected physical records maintained by Wickham in respect of: (A) most, if not all, of the existing Wickham Loans that had been placed on the trustee's "watch list" as a result of the preceding monitoring visits; and (B) at least 6 other mortgage loans including one or more of the 3 largest Wickham Loans and one or more of the next 3 largest Wickham Loans, so as to ascertain that such Wickham Loans complied with the requirements of the Lending and Security Criteria, Trust Deed and Prospectus; and Particulars Guthrie Report, paras 283, 292 and 294 (C) placed any such Wickham Loans on a "watch list" if the trustee was not satisfied that it had been conducted in a manner that complied with the requirements of the Lending and Security Criteria, Trust Deed and Prospectus and required Wickham to provide progress reports (at least together with each quarterly s283BF report) on the steps being taken to ensure that each of the loans complied with those requirements; Particulars Guthrie Report, paras 295(b) & (c) [emphasis added] 101 The particulars are those paragraphs of the Guthrie Report recited in the quote above. 102 There is no change, by SOCV4 to para 18(d) of SOCV3 nor any change to the particulars. 103 Paragraph 19 addresses Sandhurst's failure to exercise reasonable diligence and says that if a trustee exercising reasonable diligence in the position of Sandhurst had done the things recited at para 18, it would have ascertained many of the para 17(c) matters and about six months after its appointment (and thereafter each anniversary of its appointment), it would have ascertained all or many of the matters at paras 18(b) and 18(c). The reference to para 18(c) in para 19, is thus reinstated. 104 As to the cascading dates of para 22 by which Sandhurst would have ascertained the paras 16 and 17 matters (had it acted as required, as alleged), SOCV4 now adds as particulars paras 41 to 92 (51 paras), 94 to 178 (84 paras) 193 to 276 (83 paras) and 283 to 285 of the Guthrie Report. As to para 22A, SOCV4 refines the references to paragraphs of the Guthrie Report as particulars. As to para 22B, SOCV4 slightly broadens the references to paragraphs of the Guthrie Report: paras 179 to 181, 277 to 279 and 296 to 298. 105 As to para 26, which addresses the notion that had Sandhurst acted in the way required, as contended, the Noteholders would not have suffered loss of their Note Money (or not so much of it), the quantification at para 26(d)(ii) is now said to be supported, as particulars, by paras 24, 73 and 75 of the Samuel Report in addition to the earlier particularised para 26 of that report. 106 There is no change to the loss formulation theory and the quantification of the loss according to that theory in para 28 except that one step in the quantification now relies upon the report of PPB Advisory (the liquidators) to ASIC dated 15 February 2016.

SOCV5 (and SOCV6) 107 On 27 February 2017, Ms Saddler filed a further affidavit attaching SOCV5. Ms Saddler says that SOCV5 addresses a number of contended "deficiencies as to form" raised by Sandhurst's solicitors concerning SOCV4. The changes are described by Ms Saddler in the following way. 108 First, one loan transaction is deleted and six new ones are added. This was already done by SOCV4. There are now 67 "Wickham Loans" pleaded at para 15 (62 less one, plus six), not 65 as Ms Saddler says. 109 Second, para 16 now incorporates the six additional loans but also incorporates other para 15 loans said to be relevant to any one of the pleaded Lending and Security Criteria breaches by Wickham (and also deletes some of the para 15 loans from each breach list of loans in para 16). This was already done by SOCV4. 110 Third, as to the para 17 breaches by Wickham of the Business Conduct Obligation and s 283BB(a) of the Act, by providing finance in a manner that failed (as set out at paras 16(a) to (o)) to comply with the Lending and Security Criteria, during the period 8 June 2005 until 21 December 2012, additional Wickham Loans have been adopted now in the Schedule at para 17(a) cross-referenced to the time period of each breach in respect of each Wickham Loan. However, there is no change to this Schedule as between SOCV4 and SOCV5. 111 Fourth, as to the loans to Allville, JAR and Kahler, Ms Saddler says that they had been identified in the Wickham Loans register but not brought within the proceeding because there were "no loan files nor other sufficient documentary evidence to support an allegation that funds had actually been advanced". The making of the loans was established by "cross-checking against Wickham's bank statements that were produced on subpoena … on 18 December 2015". It seems therefore that the existence of the loans became apparent on 18 December 2015. These three loans (together with the other new three of six loans) first appear in SOCV3 (19 January 2017) and again in SOCV4. 112 Fifth, as to the other three loans (Cleary, SEQ and Zinlarge), they were not brought within the proceeding earlier, it is said, as they had been overlooked in the course of reviewing the 30,000 documents produced for inspection. However, these six loans were identified in the plaintiffs' "summary" of 30 May 2016. 113 Sixth, as to the other loans (apart from the six new loans) now relied upon as material to, or evidence of, each of the breaches of the Lending and Security Criteria at para 16 and corresponding breaches of the Business Conduct Obligation at para 17 (by reason of the para 16(a) to (o) failures to comply with the Lending and Security Criteria), Ms Saddler says that they had been listed at para 15 as Wickham Loans in any event and had now been "identified" as "additional breaches". The Schedule at para 17(a) of SOCV5 is in the same terms as SOCV4 and SOCV3. 114 As to para 16 and all of the particulars of it, SOCV5 is in the same terms as SOCV4 and SOCV3. 115 The matters recited as particulars of para 17(b) in SOCV2 had, by SOCV3, become translated into material facts of each of the 33 paragraphs with those matters that were previously "sub-particulars", becoming the particulars of the new paragraphs. That continued in SOCV4. In SOCV5 and SOCV6, the pleading of those matters at para 17(b) is amended and so too are the sub-particulars. 116 The allegation at para 17(b)(i) of SOCV4 was that during the period from about 8 June 2005 until 21 December 2012, Wickham breached the Business Conduct Obligation and s 283BB(a) of the Act by failing to conduct and manage its business operations including that: (i) from 8 June 2005 to 21 December 2012, Wickham did not maintain or keep any or any proper management accounts or loan balance records. Sub-pParticulars (A) Report to creditors dated 29 January 2013 by PPB Advisory, p15; (B) Email sent at 3.22pm on 28 November 2012 from M. Griffin, Bendigo and Adelaide Bank Ltd, to H. Williams, Sandhurst.; (C) Proper management accounts and loan balance records do not now exist in Wickham's books and records and there is no evidence that such accounts and records were maintained or kept by Wickham during that period. [emphasis added] 117 SOCV5 now puts those matters in this way: (i) from 8 June 2005 to 21 December 2012, Wickham did not maintain or keep any or any proper management accounts or loan balance records that correctly recorded and explained its loan transactions and financial position and performance. Sub-pParticulars (A) Report to creditors dated 29 January 2013 by PPB Advisory, p15; (B) Email sent at 3.22pm on 28 November 2012 from M. Griffin, Bendigo and Adelaide Bank Ltd, to H. Williams, Sandhurst.; (C) Proper Such management accounts and loan balance records were never prepared by Wickham do not now exist in Wickham's books and records and there is no evidence that such accounts and records were maintained or kept by Wickham during that period. 118 The proposition now is first, that Wickham did not maintain or keep any management accounts or loan balance records correctly recording and explaining the relevant matters and second, such accounts and loan records were never prepared. 119 SOCV6 adds at para 17(b)(i)(C), after the phrase "Such management accounts and loan balance records", the phrase "(to be kept and maintained by Wickham)". So, the proposition by the time of SOCV6 now is, first, Wickham did not maintain or keep any management accounts or loan balance records correctly recording and explaining its loan transactions and financial position and performance and second, such management accounts and loan balance records, that it was required to keep and maintain, were never prepared. 120 Of the 33 subparagraphs of para 17(b), 17(b)(x) is deleted by SOCV5 and SOCV6. Each of the remaining subparagraphs of para 17(b) are amended along the same lines and to the same effect as para 17(b)(i) is amended, adapted of course, to the relevant subject matter of each subparagraph. 121 Paragraph 17(c) pleads that Wickham breached the Business Conduct Obligation and s 283BB(a) in the period 8 June 2005 to 21 December 2012 by failing to establish and maintain adequate systems and management control processes to monitor and ensure Wickham's compliance with the Lending and Security Criteria, the Trust Deed and the Act. As already mentioned, para 17(c) pleads 27 subparagraphs as expressions of that breach. SOCV5 and SOCV6 delete para 17(b)(ii) and, as to each of the remaining 26 subparagraphs, the asserted fact is that there is no evidence in "any of" Wickham's "books and records, or loan files" of the relevant subject matter having been attended to, done, established, followed or complied with, put simply. SOCV5 and SOCV6 thus assert no evidence of the relevant compliance in any of Wickham's books and records or loan files and asserts an inference arising out of the failure to comply (in the case of each subject matter obligation) to the effect that no such compliance system had been established or followed by Wickham. The change by SOCV5 and SOCV6 is that the inference was formally said to arise out of "Wickham's systematic and repeated" failures. Now it is based upon the particular primary failure in question, having been made good. 122 And, so it goes throughout all of the 26 subparagraphs of para 17(c). 123 As to para 22, the pleading now is that had Sandhurst exercised reasonable diligence it would have ascertained the paras 16 and 17 matters by no later than 31 December 2005 or if not then, by 30 June 2006. Thereafter, the annualised dates continue to be adopted to 30 June 2012. Paragraph 22A also adopts December 2005 rather than June 2006 as the material date for Sandhurst requiring Wickham to remedy breaches and report to Sandhurst.

Observations 124 The end result of all this is that one can see the change in the structure and content of the case to be made against Sandhurst as the pleading migrated from SOCV2 to SOCV3 on 19 January 2017 to SOCV4, SOCV5 and SOCV6 on 27 January, 27 February and 8 March of this year respectively. The change in the content of the obligations said to be cast upon a trustee exercising reasonable diligence in the position of Sandhurst to undertake the sequence of things pleaded is undoubtedly a significant change in the case. The pleading as it has emerged is based on the collection of expert reports all of which came late in the day. It is difficult to imagine the source of the fanciful expectations under which the plaintiffs' legal advisers laboured in thinking that expert reports due by 1 August 2016 could be delivered in late September 2016, late October 2016 and late December 2016 substantially changing the case to be run at a trial commencing on 10 April 2017 for three weeks. Just exactly how would Sandhurst be expected to be in a position to respond in the timeframe available even assuming Sandhurst treated the totality of the substantial expert evidence as containing within it all the elements of what might become a pleaded case although not synthesised as a set of key material facts to be made good about which lay and expert evidence would then be called? 125 Had the trial not been adjourned (ultimately as a matter of consensus between the parties), leave to amend in the terms now sought would have been refused, had the question of leave to amend arisen as it must necessarily have done, in very early January 2017. The pleading was not even able to be put in final form by then. 126 The trial has been adjourned now to 4 September 2017 for three weeks. I will return to those dates shortly. Before I do so, something needs to be said about the dislocation caused by applications of this kind made necessary by the failure to comply with the Court's orders and the statutory overarching purpose set out in s 37M of the Federal Court of Australia Act 1976 (Cth) and the corresponding obligations in s 37N. 127 I heard this application on 8 March 2017. I had hoped to decide the questions in issue within about a week to 10 days. It became clear at the hearing, however, that the delay was significant: the delay was only partly explained and in relatively superficial terms with no precision as to the actual timing of critical events; the change in the case was significant, if not fundamental; and the case plainly needed to be re-pleaded to bring it into line with the collection of expert reports representing the foundation of the case now to be made. 128 This is not the way litigation in this Court is to be conducted. 129 Apart from the transparently obvious reasons why that is so, conducting litigation in a way that fails to meet the statutory overarching purpose; fails to meet the elements of the Court's "Central Practice Note: National Court Framework and Case Management"; fails to "engage" with the Court co-operatively in distilling early the essential character of the case and the contentions to be made as the case goes along its essential preparation to either trial or a mediated outcome; and fails to engage the parties one to the other in eliminating irrelevancies and distractions from the proceeding and enabling focus upon the critical or central issues, has two immediate effects (apart from many others). 130 The first is that applications are then made usually late in the life of the matter, as here, to substantially amend the content and structure of the case. By definition, that application then itself becomes urgent. It necessarily seeks to shoulder its way ahead of other things. 131 Second, in that vein, other proceedings that determine the final resolution of the rights, entitlements, duties and obligations of citizens who have had a hearing or a trial or an appeal may have to be put to one side (often in the course of writing) to address the urgency, artificially created due to the failure to engage as described above, of deciding the best and most appropriate method of dealing with the inter-parties' position that has emerged having regard to all factors that inform the exercise of the discretion. 132 In that regard, I should note that I have had regard to the authorities which have been put to me and, in particular, I have had regard to Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 and Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu [2015] FCA 1098 and the Full Court decision in Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (2016) 332 ALR 199. 133 Plainly enough, in this proceeding, much was left to a late stage in the preparation continuum leading to the 10 April 2017 trial. The experts should have been briefed much earlier. The central analysis of the contended obligations said to have been cast upon Sandhurst to act in a particular way in all the relevant circumstances should have emerged in a disciplined way much, much earlier. No doubt, the analytical discipline required to de-construct the facts and events and frame the scope of the legal obligations said to fall to Sandhurst is an intellectual exercise informed by conversations and conferences with relevant experts and ultimately reports prepared by those experts to be called as expert witnesses. Nevertheless, it is an exercise that should have been undertaken much, much earlier. I am not in a position to identify a date by which it could have reasonably been done because I do not have the benefit of a comprehensive explanation of the delay. I do, however, have some views expressed by Ms Saddler and comments made at case management hearings by Mr Martin and then, later on, by Mr Drew. Some of these I have quoted. I accept that Ms Saddler's views and the observations made by Mr Martin and Mr Drew are made in an attempt, in good faith, to explain the delay. Not surprisingly, they put the best construction they can on the events in question and diminish the impact of the relevant matters on Sandhurst. Much is laid at the foot of the disorderly state of the 30,000 documents. No doubt they were in a mess. So much is reasonably clear from the earlier report of the liquidators. However, surely "the team" could have come to grips with that problem sometime between November 2014 and December 2015. 134 Notwithstanding all of these considerations, the exercise of the discretion on an application to amend is not informed by any sense of punishment or retribution (whether "Old Testament" as former Chief Justice French made reference, or otherwise) for unacceptable behaviour in the conduct of the litigation. I have no doubt that neither the plaintiffs (Mr and Mrs Clarke) nor any of the Group Members have contributed to the difficulties discussed in these reasons. Should they be penalised in the exercise of the discretion? Should they be penalised in circumstances where the amendments are critical to the case to be made? SOCV6 as it has evolved in the way described is not just the embodiment of an amended claim. It is the claim to be made. It is the case to be propounded. Should the plaintiffs and the Group Members be told to go away and run and propound a case they do not wish to advance, especially in circumstances where such a case would be at odds with the views of their expert witnesses? Should the Court's time be wasted in such a process? If the old case cannot be run or is not thought to have any merit having regard to the opinions of the plaintiffs' experts, should the plaintiffs be refused leave and left with a remedy against their legal advisers? In the context of this particular case at least, the answer to this sequence of questions is "no", subject to the qualifications mentioned later in these reasons. 135 Although the problems which have emerged can be laid squarely at the feet of the plaintiffs' side of the record, Sandhurst is not free of a lack of co-operation either. In the course of the hearing on 8 March 2017, Mr Hoffman observed that there are some aspects of the proposed amendments to which objection might not be taken. That caused the Court to ask which of the proposed amendments fell into that category. Mr Hoffman took the view that it was not for Sandhurst to say and that the plaintiffs bore the onus of satisfying the Court as to the merits of the leave application. The Court pressed Mr Hoffman to say why he could not say which of the amendments might not be objectionable to Sandhurst and did it follow that it was Sandhurst's position that the plaintiff should be refused leave to amend as sought (on the footing that the plaintiffs had not made good the grounds for the exercise of the discretion in their favour) and be forced to run a trial on the basis of the earlier pleading. Mr Hoffman says that that is not Sandhurst's position. It seems to be Sandhurst's position that leave should be refused as the basis for the exercise of the discretion has not been made good and the plaintiffs, in effect, ought to have another attempt at formulating amendments which, when considered, might not be objectionable and might not draw objection in fact. 136 That seems to me to be both unhelpful and a waste of time, effort, energy and money. 137 Having said that, I nevertheless entirely understand the frustrations confronting Sandhurst in seeking to deal with delays; non-compliance by the plaintiffs with the earlier orders; and particularly the late delivery of the expert reports coupled with the corresponding change in the case. 138 Apart from issues of delay and prejudice, Sandhurst raises some particular objections to aspects of the pleading.

The Prospectus plea 139 Sandhurst says that paras 18(b)(ii), (iii), (iv) and (v) of SOCV5 and SOCV6 introduce allegations that Sandhurst was required to inspect all of Wickham's physical records and ensure compliance with the Lending and Security Criteria, Trust Deed "and Prospectus". Sandhurst says that out of the 11 pleaded Prospectuses, the particular Prospectus is not identified; no duty is pleaded on the part of Sandhurst to ensure Wickham's compliance with any Prospectus; the "duty to inspect" Prospectuses is not a pleaded Sandhurst duty; and no breach of a duty to ensure compliance with a Prospectus is pleaded against Sandhurst. 140 The plaintiffs plead, at para 8, the material terms of the Trust Deed. Paragraph 8(c) pleads that Wickham could issue Notes in accordance with the terms and conditions of the Trust Deed and subject to applicable conditions. Paragraph 8(d) pleads that Notes, so issued, would be issued subject to the Trust Deed and upon the terms and conditions set out in a Prospectus. Money raised through the issue of Notes could only be applied (apart from the para 8(e)(i) to (v) matters) for any purpose disclosed in the Prospectus: para 8(e)(vi). 141 Paragraph 8(v)(ii) pleads, as a material term of the Trust Deed, that Sandhurst had an obligation to exercise reasonable diligence to ascertain whether Wickham had committed any breach of the "terms of the Notes", the Trust Deed or the Act: the "Reasonable Diligence Covenant". 142 Paragraph 10 pleads each Prospectus issued from 8 June 2005 to 22 December 2010. Paragraph 11 pleads 13 material terms of the Prospectus cross-referenced to a particular Prospectus containing that term. 143 Having pleaded that it was a material term of the Trust Deed that Notes be issued subject to the Trust Deed and upon the terms and conditions of the Prospectus, and having pleaded para 8(v)(ii), the plaintiffs plead at para 14(b) that Sandhurst had "an obligation" to exercise reasonable diligence to ascertain whether Wickham had committed any breach of the Trust Deed (which is said to include an obligation on Wickham's part to issue Notes in compliance with the terms and conditions of the Prospectus) and (at para 14(c)) an obligation to do everything in its power to remedy breaches (unless non-materially prejudicial). Paragraph 18(b)(ii) operates on the footing that in order to discharge its obligation to ensure Wickham's compliance with the Trust Deed, Sandhurst, as a reasonably diligent trustee, ought to have inspected, in about December 2005, Wickham's physical records relating to "all of the existing Wickham Loans" to ascertain compliance with, relevantly, the Prospectus. That inspection step is not pleaded as a separate "duty" but is said to be an expression of the proper performance of the obligation to "ensure that Wickham complied with the Trust Deed (and the Act)". To the extent that Sandhurst is said to have a duty in December 2005 to inspect all of Wickham's physical records concerning existing Wickham Loans to determine compliance with the material terms of the relevant Prospectus, it does so, it is said, as conduct in discharge of the obligation framed at the chapeau to para 18 having regard to paras 8 and 14. The same is true as to paras 18(b)(iii), (iv) and (v). 144 Paragraph 19 says that if Sandhurst had done the things at para 18(b) in discharge of the obligation so framed, it would have ascertained the pleaded things. Paragraph 20 says that Sandhurst failed to do the things at para 18 (and 19). Paragraph 21 says that by reason of those failures, Sandhurst breached the "Reasonable Diligence Covenant" and s 283DA(b)(ii) of the Act in that, it failed to exercise reasonable diligence to ascertain whether Wickham had committed breaches of the Lending and Security Criteria (pleaded at para 16) and the Business Conduct Obligation and s 283BB(a) of the Act (pleaded at para 17). 145 Wickham's obligation, contained in the Trust Deed, to provide finance raised by the issue of Notes only in accordance with the Lending and Security Criteria is pleaded at para 8(e). Some of the pleaded breaches (at para 16) seem to suggest obligations along the lines of some of the conditions of the relevant Prospectus obligations pleaded at para 11. However, a breach of the Lending and Security Criteria is not also pleaded as a breach of the conditions of the relevant Prospectus (pursuant to which particular Notes were issued), as a breach of the Trust Deed. Nor does the Business Conduct Obligation capture that formulation. Nor does s 283BB(a) of the Act, as pleaded, bring in a breach based on a failure to comply with the Trust Deed based on a failure to comply with the terms and conditions of the relevant Prospectus. 146 It therefore seems correct to say that para 21 does not plead a breach on the part of Sandhurst engaging a failure to exercise reasonable diligence to ascertain whether Wickham had failed to comply with the terms and conditions of a relevant Prospectus. Unless further amended, the SOC fails to plead a case relevantly related to a breach by Sandhurst engaging Wickham's failure to comply with Prospectus conditions. 147 Sandhurst also says that the relevant Prospectus is not identified. 148 As to para 18(b)(ii), as at December 2005, it could only be the Prospectus issued on 8 June 2005. 149 As to para 18(b)(iii), as at June 2006, it might be the Prospectus issued on 8 June 2005 or possibly the one also issued on 28 June 2006, or both. 150 As to para 18(b)(iv), as at June 2007, it could be either or both of the Prospectuses issued on 8 June 2005 and 28 June 2006. 151 As to para 18(b)(v), as to the period 2008 to 2012, it could be any one or all of the Prospectuses issued from 8 June 2005 to 22 December 2010 or more probably some or all of those Prospectuses issued between 29 February 2008 to 22 December 2010. 152 Again, the SOC needs to be clear about the Prospectuses engaged by these paragraphs. A further amendment would be required.

Wickham's "books and records and loan files" 153 Sandhurst isolates each of the 27 paragraphs of SOCV5 and SOCV6 (at para 17(c)) which refer to there being "no evidence" in any of Wickham's "books and records or loan files" of the relevant matter and that an inference arises from the pleaded failure to comply with the Lending and Security Criteria at para 16 that no relevant step (according to each subparagraph) had been taken, established or followed by Wickham. The complaint is that the phrase is not defined by the pleading. Sandhurst says that para 17(b)(viii)(D) contains a reference to "[n]one of the valuation reports contained in any of the loan files" having been addressed or assigned to Wickham and thus the plaintiffs have in mind "particular loan files". At para 17(b)(ix), SOCV6 says that from 11 August 2005 to 21 December 2012 Wickham "had loan files" which did not contain a required loan approval. The Particulars identify 41 Wickham Loans in respect of which Wickham was to hold a loan approval on the corresponding "loan file". The same approach is taken at para 17(b)(xiii) at Particulars (C). There is no good reason why the "loans" and the corresponding "loan files" are not identified for the purposes of para 17(c), where relevant to any one of the 27 subparagraphs. 154 Similarly, the "books and records" of Wickham should be identified for the purposes of the pleading.

Importation of paragraphs of the Expert Reports as Particulars 155 Because the amended SOC seeks to bring the pleading of the case "into line" with the expert evidence (as was required of the plaintiffs by Sandhurst at case management hearings), many of the subparagraphs of para 18 and paras 22, 22A, 22B, 22D, 22E and 25 rely upon, as Particulars, paragraphs of the Guthrie Report. Paragraph 22C cites as Particulars, a number of paragraphs of the Barnet Report and para 26 cites paragraphs of the Samuel Report as Particulars. 156 Sandhurst says that adopting this approach is inconsistent with r 16.02(1)(d) of the Federal Court Rules 2011. That rule, of course, engages the formulation of a pleading based on material facts and not the evidence probative of those facts. The purpose of the rule is to tell the other side the material facts which, if made good, would give rise to a remedy sought in respect of a cause of action or contravention established by those facts. Particulars may be required. Documents and oral evidence, lay and expert, would be adduced to prove the facts. The pleadings, when closed, will frame the controversy. 157 Here, however, the aim of the exercise is to bring the SOC into line with the expert evidence served on Sandhurst. Thus, these questions arise at a much later point in the proceedings. Now, Sandhurst has the evidence said to be probative of each of the pleaded matters. I accept that in the context of the history of these proceedings at least, cross-references to the relevant, synthesised, paragraphs of the reports is (or at least has) the potential to be efficient and useful. 158 The more substantial criticism is that para 17 sets out three broad categories of breach by Wickham as earlier described between 8 June 2005 and 21 December 2012 of the Business Conduct Obligation and s 283BB(a) of the Act many of which assert that relevant records were never prepared by Wickham. Paragraph 18 pleads the contended steps Sandhurst ought to have taken to discharge the obligation recited at para 18 which governs all of the subparagraphs of para 18. Those steps include inspecting the physical records of Wickham in December 2005, June 2006, June 2007 and June of each year between 2008 and 2012 to ascertain pleaded things. One proposition seems to be that para 17 and para 18 are internally inconsistent. That seems to be said partly because one paragraph says there were no documents and the other says the non-existent physical records should have been inspected. The pleaded point seems to be that whatever physical records might have existed, Sandhurst ought to have inspected them at the times pleaded and if those inspections revealed the non-existence of records or files, that circumstance would have been ascertained. More importantly, however, the other proposition is that Mr Guthrie's opinion is relied upon at para 18 but his opinion rests upon a review of a collection of files briefed to him by Shine Lawyers. For example, Mr Guthrie is relied upon for the general proposition that Sandhurst ought to have inspected the physical records of Wickham in June 2006 in respect of all, or at least most, of the existing Wickham Loans. Mr Guthrie's opinion that a trustee exercising reasonable diligence in the position of Sandhurst would have done so is referenced to paras 99 and 108 to 178 of the Guthrie Report. Paragraphs 112 to 178 are concerned with Mr Guthrie's observations concerning particular files briefed to him. Ms Barnet's Report is also based upon particular files briefed to her. Sandhurst says that neither Mr Guthrie nor Ms Barnet was provided with all of the books and records or loan files of Wickham upon which para 17 is now based. 159 Mr Guthrie's Report does these things: (1) At para 16, Mr Guthrie sets out what he calls the "common core responsibilities and tasks" of an entity performing the role of trustee for unsecured Noteholders. At paras 20 to 40, Mr Guthrie describes the things a trustee exercising reasonable diligence in the position of Sandhurst would have done in the period December 2004 to June 2005. (2) At paras 41 to 58, Mr Guthrie describes the things such a trustee would have done in June 2005 as part of the tasks performed in undertaking an initial monitoring visit. Paragraph 49 contains a conclusion based on an assumption in para 48 about a "typical process" which ought to have been documented as part of a "loans policy procedure". (3) At para 59, Mr Guthrie identifies the follow-up actions such a trustee would have taken having regard to paras 47 to 49. (4) At paras 60 to 63, Mr Guthrie identifies the steps such a trustee would have taken concerning a "follow-up monitoring visit" in "about December 2005". (5) At paras 64 to 68, Mr Guthrie describes the loan file review process and its elements that such a trustee would have undertaken when conducting its December 2005 follow-up monitoring visit. (6) Mr Guthrie then sets out at paras 69 to 91 his observations on what such a trustee would have found in reviewing, in about December 2005, particular loans (and loan files) between Wickham and five borrowers: Trihedral No. 3; George; King; Lynch; and MSN. In each case, Mr Guthrie expresses an opinion about whether such a trustee would have been satisfied that the transactions were conducted in accordance with the Lending and Security Criteria, Trust Deed and Prospectus. (7) At paras 94 to 98, Mr Guthrie describes the "continuing and compounding" role of such a trustee during the "life" of a trust and at para 96 specific steps that such a trustee would take. At para 99, Mr Guthrie discusses the first annual monitoring visit that such a trustee would have undertaken in June 2006 at Wickham's Brisbane office. At such a visit, such a trustee would have called for the loans and policy procedures documents and the Loan Register. The Loan Register in June 2006 ought to have disclosed 12 mortgagee loans made by Wickham, identified in date of settlement order, at para 107. Such a trustee would have reviewed all, or at least most, of the 12 loan files according to Mr Guthrie: para 108. (8) At paras 112 to 178, Mr Guthrie sets out the things such a trustee would have ascertained upon reviewing the documents contained in the loan files concerning each of those 12 borrowers. Conclusions about those matters are reached. All 12 matters would have been put on a "watch list" by such a trustee according to Mr Guthrie. (9) A trustee not being satisfied of the matters at paras 112 to 178 would have appointed an investigator who would have, or would have been required by such a trustee, to investigate and report about particular matters: paras 179-192. The application by such a trustee to the Court for the appointment of a receiver is discussed at para 183. (10) As to the June 2007 monitoring visit, such a trustee would have taken the same steps earlier mentioned and would have reviewed again all of, or most of, the loan files on the watch list from June 2006 and would have noted from the Loan Register the six largest current mortgage loans. Mr Guthrie says that such a trustee reviewing those six loan files would have ascertained the matters at paras 206 to 247. (11) At paras 248 to 275, Mr Guthrie sets out the things such a trustee would have ascertained in conducting another review of eight of the loans on the watch list from June 2006. 160 It is true that Mr Guthrie's Report expresses opinions about what such a trustee would have ascertained and what it should have done based on a review of particular files provided to him by Shine Lawyers, assembled and augmented as described by Ms Saddler and that those files are not all of the loan files pleaded at para 17. However, that just means that the probative value of the report stands or falls on the integrity of a particular loan file at a relevant date about which opinions have been expressed, as at that date, and whether what might have been revealed by such loan files (although not all of the para 17 loan files) gives rise to the conclusions asserted by Mr Guthrie. To the extent that the references to paragraphs of the Guthrie Report do not correspond to a proposition pleaded and said to be supported by those paragraphs, as particulars, the paragraphs of the report need to be re-examined so as to isolate precisely the correct paragraphs which can be given as Particulars of the pleaded matter. The plaintiffs concede that at para 18(a)(iii), paragraphs 26 to 41 should be deleted; at para 18(a)(iv), the reference "to 59" should be deleted; at para 18(b)(iii)(A), paras 108 to 178 should be replaced with paras 108 to 110, apparently. There may be other changes at para 22C(a). 161 Sandhurst has other criticisms of the proposed amended pleading. 162 It says that the new pleading at subparagraphs of para 17 to the effect that Sandhurst never prepared the records relevant to each pleaded subject matter broadens the case from one focusing upon the content of Wickham's books and records as found by the liquidators at about the time of their appointment as administrators, to one in which from June 2005 to 21 December 2012, Wickham is said to have never prepared the relevant records. 163 I accept that the plaintiffs ought to give the best particulars they can of the various contentions throughout para 17. 164 Sandhurst also says that it will suffer very considerable prejudice in responding to the proposed amended case. I accept that there will be dislocation and perhaps significant dislocation suffered by Sandhurst in adjusting and responding to the case. However, it seems to me that there will be sufficient time between now and the proposed trial dates to respond to the case to be propounded. It seems to me that Sandhurst ought to be in a position to marshal the evidence it needs in answer notwithstanding that some of the steps of the kind described by Mr Horne will be required. 165 As to the trial dates, I propose to vacate the September dates and set the matter down for three weeks in either October or December this year. This will postpone the trial briefly but provide further time to enable the parties to be ready for trial. The proceeding will be listed for case management at 9.30am on 28 April 2017. 166 In the result, I refuse leave to further amend the amended statement of claim in terms of SOCV6. I give leave, however, to amend the amended statement of claim in terms of an amended pleading that once and for all consolidates the proposed changes over time, subject to the qualification that the proposed amended statement of claim addresses these matters: (1) As to the Prospectus pleading, the SOC either plead (presumably at para 21) a breach by Sandhurst engaging an obligation engaging a relevant Prospectus and its terms and conditions, or not. If the formulation of Sandhurst's breach of duty does not comprehend reliance upon a relevant Prospectus or Prospectuses, there seems little point in pressing the documents as part of the pleaded case. (2) Each Prospectus relied upon by the plaintiffs in respect of each contended breach by Sandhurst of an obligation engaging the terms and conditions of a Prospectus, be identified. (3) The paragraphs of the Guthrie Report relied upon to support any pleaded contention be properly identified as paragraphs of that Report going to that contention. (4) Each of the Wickham Loans and related loan files relied upon for the purposes of para 17(c) be identified. (5) The "books and records" of Wickham be identified. (6) The plaintiffs give the best particulars they can of the basis for their contention that Wickham never prepared the relevant records related to the particular subject matter of a relevant paragraph where that contention is to be pleaded. 167 There may be other matters that need to be addressed by the plaintiffs arising out of these reasons. 168 The plaintiffs will be given leave to make the necessary consolidated amendments taking account of the qualification above, within 14 days. 169 The costs will be reserved. Directions will be made in relation to submissions in relation to costs. 170 In principle, Sandhurst ought to have its costs thrown away by reason of the amendments on an indemnity basis and the question of which parties or entities ought to be the subject of such an order will be raised at the case management hearing. I certify that the preceding one hundred and seventy (170) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.