Cosmetic Laser Clinic Pty Ltd v Pirintji

Amended Notice of Motion

1. By an Amended Notice of Motion filed on 12 December 2014, Mr Pirintji seeks, relevantly for the purposes of this judgment, that leave be granted to him to file a further Amended Defence. That leave is opposed in part by Cosmetic Laser.
2. Other orders are sought with respect to the ongoing conduct of the proceedings in the Amended Notice of Motion which must, appropriately, await the outcome of this amendment application.
3. This judgment deals with the sole issue of whether the defendant, Mr Pirintji, should be allowed to amend his defence.

Proposed Amended Defence

1. It is necessary to consider the proposed amendments, leaving aside matters which are inconsequential.
2. First, the Amended Defence in paragraphs 29 to 34 seeks to add a pleading of contributory negligence against the two plaintiffs. That pleading asserts that Cosmetic Laser failed to follow Mr Pirintji's advice with respect to the terms of the agreement, and entered into the agreement notwithstanding the advice of Mr Pirintji. It is pleaded that in so doing, the plaintiffs failed to take reasonable care for their own interests and that the entirety of their loss should be attributed to their failure to take reasonable care. Cosmetic Laser does not oppose leave being granted to amend the Defence to include this allegation, which does not differ factually from the allegation of proportionate loss with respect to Mr Moini.
3. Secondly, the proposed Amended Defence, in paragraphs 35 to 39, pleads that it is the plaintiffs themselves who have caused their loss by their own breach of contract. It is said that because of their breach of the sale contract constituted by a failure to effectively assign a number of leases to HBI, Cosmetic Laser was not entitled to payment of the deferred component and, accordingly, has suffered no loss. Cosmetic Laser opposes this amendment.
4. Thirdly, the proposed pleading raises two new additional bases for the allocation of proportionate liability thereby seeking to diminish the amount, if any, by which the defendant would be liable. The first of those which is set out in paragraphs 40 to 47 relates to HBI, the purchaser company which is now in liquidation. The proposed pleading asserts that, pursuant to the sale contract, HBI was obliged to take all relevant steps to grant the charge to Cosmetic Laser by way of first ranking security with respect to the deferred component and that it failed to do those things, thereby being in breach of the sale contract. It is pleaded that that breach resulted in loss and damage to Cosmetic Laser, and that HBI is a concurrent wrongdoer within the meaning of s 34 of the Act.
5. The second proposed pleading of proportionate liability which is set out in paragraphs 59 to 64, pleads that Dr Mark Kohout, Dr Piera Kohout and Body Technology (being the purchaser of the business, and the two directors of that company) are concurrent wrongdoers.
6. This proposed pleading of proportionate liability is based upon allegations of fact which are also pleaded in proposed amendments which are not objected to, and which relate to a claim by Mr Pirintji to entitlement by way of reduction in any damages awarded to, or any sum paid to, Cosmetic Laser by the liquidator. As will soon be apparent, that additional defence is not objected to.
7. Those allegations include that the two directors of Body Technology were at the time of the sale by HBI to Body Technology, of assets purchased from Cosmetic Laser, also directors of HBI. It seems that Mr Pirintji would rely in part on the shared directors of HBI and Body Technology as the basis of his earlier pleading of "uncommercial transactions" with respect to the validity of the sale of assets by HBI to Body Technology to which I have referred in [20] above.
8. The factual basis of that pleading is said to arise from the detail contained in proceedings commenced by the liquidator of HBI in December 2012, against these two directors and the company, asserting that the sale of HBI's assets to Body Technology occurred at an under-value, and that this sale constituted a breach by the two individuals of their statutory and fiduciary duties as directors of HBI ("the Liquidator's proceedings").
9. It is also alleged that the intention of the two directors in entering into the sale was to prevent Cosmetic Laser, the plaintiffs in the present proceedings, from being able to enforce any judgment against HBI for the deferred component of the purchase price. It is alleged in the Liquidator's proceedings that the Body Technology was culpably involved in the breaches of statutory duty by the directors.
10. Mr Pirintji's proposed Amended Defence relies upon this conduct as indicating that the company, Body Technology, and the two nominated directors are concurrent wrongdoers for the purpose of s 34 of the Act, who caused the same loss and damage as Cosmetic Laser claims.
11. As adverted to earlier, the proposed amended pleadings in paragraphs 48 to 58 plead that if any sums of money are recovered by reason of the Liquidator's proceedings, and Cosmetic Laser becomes entitled to some or all of those sums, then that entitlement will reduce any damages which Mr Pirintji may be ordered to be paid. Cosmetic Laser does not oppose this amendment.
12. Finally, the proposed Amended Defence includes at paragraph 65 a pleading that an identified event, or events, were a novus actus interveniens which broke the claim of causation which might otherwise exist. This amendment is not opposed by Cosmetic Laser.
13. The issue which stands for decision in this judgment is whether Mr Pirintji ought be permitted to amend his Defence in the way just outlined for those allegations which are opposed.

Applicant's Evidence

1. In support of his application, Mr Pirintji relied on an affidavit of his solicitor, Mr Malcolm John Cameron.
2. It is apparent from the affidavit that Mr Cameron became aware of the Liquidator's proceedings in or around 30 April 2014, although the proceedings had been first commenced in 2012. Mr Cameron says, and this is not disputed, that the Liquidator's proceedings are being funded by Mr Moini, who is the only director of each of the two plaintiff companies in these proceedings, Cosmetic Laser Clinic Pty Ltd and Barodo Investments Pty Ltd.
3. What follows is a short chronology of steps taken by Mr Pirintji's solicitor to investigate the matters which he says arise from the Liquidator's proceedings.
4. On 18 June 2014, namely just under two months after learning of the existence of the Liquidator's proceedings, Mr Cameron wrote to the solicitors for Cosmetic Laser seeking a copy of the pleadings filed in the Liquidator's pleadings, and an update as to the status of those proceedings. The letter indicated that if the information was not forthcoming, an application would be made to inspect the file.
5. In a response on 27 June 2014, Mr Cameron was informed that the solicitors for Cosmetic Laser did not act in the Liquidator's proceedings, did not have the conduct of them, and had never seen any pleading or other documents associated with those proceedings. They responded that they were unable to provide any information of the kind sought.
6. About four weeks later, on 31 July 2014, Mr Pirintji's solicitors caused a subpoena to be issued to the Liquidator seeking, amongst other things, the pleadings in the Liquidator's proceedings. The subpoena was first returnable on 12 August 2014.
7. Eight weeks later, on 25 September 2014, an application was made to this Court by Mr Pirintji's solicitors to access the Court file of the Liquidator's proceedings. Mr Pirintji's solicitors inspected the pleadings in the Liquidator's proceedings held in the Court file on 1 October 2014.
8. On 20 November 2014, a further application was made to access the entire Court file of the Liquidator's proceedings. On 26 November 2014, leave was granted to Mr Pirintji's solicitors to access the entire Court file in the Liquidator's proceedings.
9. Whilst these steps were taking place, on 14 November 2014, in the context of an email exchange about directions for the further conduct of these proceedings, the solicitors for Mr Pirintji alerted the solicitors for Cosmetic Laser about their proposed Amended Defence in the following way: "There are some additional matters that we will need to raise at the directions hearing. Amongst those is the need for our client to file an amended Defence that pleads proportionate liability. We are hopeful of having a draft to you shortly."
10. That email was promptly responded to by the solicitors for Cosmetic Laser, seeking the basis of a claim for proportionate liability, and the names of the other "parties" to which the pleading would refer.
11. This was responded to on 17 November 2014, with the following: "In relation to the proposed Amended Defence, and by way of background, the proposed amendments relate largely to the matters pleaded in Supreme Court proceedings 2012/364677 (liquidator's proceedings). The process of obtaining information in relation to the liquidator's proceedings has been drawn out. On 18 June 2014, we requested documents from your clients in relation to the liquidator's proceedings, but none were provided. We then obtained incomplete documents relating to those proceedings from Jirsch Sutherland. However, as a result of obtaining those documents we were able to apply for and gain access to part of the Court's file in the liquidator's proceedings. Having done that, it has become apparent that our client's Defence should be amended in a number of ways, including to plead proportionate liability. Our client intends to name as concurrent wrongdoers Mr Moini, the defendant parties to the liquidator's proceedings and HBI."
12. It has to be said that the reference to Mr Moini is curious. He was already named as a concurrent wrongdoer in the Defence which had been filed. He is not named in any of the amendments which are sought to be added.
13. On 24 November 2014, a proposed draft Amended Defence was provided by the solicitors for Mr Pirintji to Cosmetic Laser. On 28 November 2014, a further draft was provided which contained some relatively minor changes. It is that final draft in respect of which leave is now sought.
14. In his affidavit, Mr Cameron says that the Defence required amendment "… as a result of knowledge ascertained in the preceding seven months in relation to the liquidator's proceedings …". That knowledge is, he says, set out in the affidavit.
15. In correspondence of 5 December 2014, the solicitors for Mr Pirintji included the following assertions with respect to the need to amend the Defence. They said, dealing with the proportionate liability defence, this: "23. As you are aware, the amendments to our client's Defence proposed to you on 24 November 2014 and 28 November 2014, principally arise out of the Liquidator's Proceedings. … (c) Our client seeks to amend to plead proportionate liability, naming the Liquidator's Proceedings Defendants as concurrent wrongdoers for the purposes of Part 4 of the Civil Liability Act. The facts giving rise to that proposition are pleaded in the Liquidator's Proceedings. For the reasons set out at 7 to 18 above, our client was not able to ascertain the existence of those facts any earlier than he did (having first been put on notice by Dr Kohout's solicitor and subsequently conducting the investigations set out in this letter). We anticipate Mr Moini has had knowledge of those facts for a number of years. (d) Our client seeks to amend to plead proportionate liability, naming HBI as a concurrent wrongdoer for the purposes of Part 4 of the Civil Liability Act. In doing so our client relies on the High Court authority in Hunt & Hunt, which applies for the reasons set out at paragraphs 2 to 4 of this letter. The decision in Hunt & Hunt was handed down on 3 April 2013. Prior to that time, the leading authorities on proportionate liability were St George Bank Ltd v Quinerts Pty Ltd (2009) 25 VR 666 and Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390. Those authorities did not support a finding that HBI's breach of contract and our clients (alleged) breach of duty and contract resulted in the same loss (that being the necessary condition to characterize concurrent wrongdoing). Now that the High Court authority exists to the contrary, our client seeks to make the amendment. (e) Our client seeks to amend to plead that you clients caused their own loss by breaching the Avana sale contract with HBI. The factual basis for that pleading is that four leases, which were required to be assigned by your clients to HBI under the Avana sale contract, were never assigned. This matter was raised by the Liquidator's Proceedings Defendants in their Defence to the claim in those proceedings. Our client was not on notice that HBI and its directors considered that your clients breached the Avana sale contract in this manner until the enquiries set out at paragraphs 7 to 18 of this letter were conducted. Your clients must have known of HBI's claim that they breached the sale contract - the allegation of breach is relevant to the Pirintji proceedings and was not brought to our attention by your clients. …" (Footnotes omitted).
16. Based upon those matters, the solicitors for Mr Pirintji argued that their client was "… only recently placed in a position where the above amendments could be investigated and drafted".

Evidence of the Respondents

1. In response to that affidavit, the solicitor for Cosmetic Laser, Mr Timothy Crumpton, also swore an affidavit which was read in the proceedings.
2. Mr Crumpton noted that it was his view that the proposed amendments to the Defence would alter "… and expand radically the factual areas of dispute in these proceedings at a very late stage on the eve of allocation of a hearing date …".
3. Mr Crumpton noted that the proceedings were ready for the allocation of a hearing date, and that all evidence had been served by all of the parties. He contended that different factual and expert evidence would be required to deal with the circumstances giving rise to, and surrounding, the loss said to have arisen from the conduct of HBI.
4. The affidavit went on to say: "88. If the defendant raised the proportionate liability defence now sought to be included at the time it raised the proportionate liability defence against Mr Moini in his Defence filed on 23 April 2012 or 5 October 2012, that may have influenced the position of the plaintiffs in pursuing these proceedings. As such the plaintiffs have been significantly prejudiced in pursuing these proceedings and incurred their own costs of nearly $400,000 in that period. 89. The defendant could and should have made such relevant inquiries of the liquidator at a much earlier time in circumstances where the defendant asserts the plaintiffs have suffered no loss by reason of HBI failing to pay the deferred component. Had he done so and brought the claim he now wishes to bring at a much earlier time, the plaintiffs may not have proceeded with these proceedings and/or the proceedings would have been conducted very differently having regard to the different legal and factual issues now proposed to be raised by reason of the Amended Defence."
5. Neither Mr Cameron nor Mr Crumpton was cross-examined on the contents of their affidavits.

Submissions by the Applicant

1. The submissions by Mr Pirintji relied, essentially, upon the proposition that the principal amendments to do with proportionate liability were derived from the allegations made in the Liquidator's proceedings, that Mr Pirintji's lawyers had made reasonably prompt enquiries about those proceedings once they came to their notice and that, accordingly, the Amended Defence being brought forward now did not involve any "culpable delay" on the part of the applicant. Accordingly, it was argued that since the allegations were properly pleaded, they ought be allowed.
2. There is no need to describe, or examine, the submissions of the applicant relating to the amendments which were not opposed.
3. Insofar as the Amended Defence seeks to add a pleading that the plaintiff's loss was caused by their own breach of contract with respect to the assignment of the leases, it was submitted that this information arose from the detail obtained from the Liquidator's proceedings, and could not arguably have been pleaded at any earlier time.
4. Dealing with the issues of proportionate liability, insofar as the proportionate liability claims are proposed to be made against the two directors of, Body Technology, and the company itself, counsel for Mr Pirintji submitted that these arose directly out of the Liquidator's proceedings, that the details of those proceedings were not disclosed to Mr Pirintji, and that when they did come to his attention, steps were taken reasonably promptly to investigate and plead the matters.
5. Insofar as the proportionate liability defence with respect to HBI being in liquidation is concerned, in the course of submissions, counsel for Mr Pirintji accepted that it was known that HBI was in liquidation at the time of the commencement of the proceedings and it was known at the time when the original Defence was filed. He also accepted that it was open to Mr Pirintji to have pleaded a defence of proportionate liability with respect to HBI at that time. He accepted that no explanation was offered in the affidavit of Mr Cameron as to why that defence had not been included in any earlier form of pleading.
6. To the extent that he was able from the bar table to properly put an explanation, counsel for Mr Pirintji sought to persuade the Court that the proportionate liability defence, in effect, came more into focus as the claim by Cosmetic Laser increased in value. Even if this was so, such reason is hardly adequate. The value of the claim from the beginning was over $1.395M.

Submissions of Cosmetic Laser

1. As I have already noted, Cosmetic Laser did not oppose the amendments proposed, which I have described as the contributory negligence pleading (paragraphs 29-34 of the proposed Amended Defence), the causation pleading (paragraph 65 of the proposed Amended Defence), and the recovered proceeds pleading (paragraphs 48-58 of the proposed Amended Defence). Nothing further needs to be said with respect to these amendments.
2. Counsel for Cosmetic Laser however opposed the proposed proportionate liability defences, and the breach of contract defence.
3. In respect of those defences, counsel for Cosmetic Laser submitted that the proposed amendments raised significant additional factual issues with a consequent increase in costs and delay. Counsel submitted that the amendments were being raised after a substantial delay, were inadequately explained and, in terms of case management considerations, were not properly justified.
4. As well, counsel for Cosmetic Laser submitted that the pleading of proportionate liability was not reasonably arguable and would, if permitted, be liable to be struck out on that basis.
5. The submissions in support of this contention focused on whether a person claimed to be a concurrent wrongdoer for the purposes of Part 4 of the Act, needed to be a person against whom a plaintiff in such an action had a cause of action. In this respect, counsel relied upon the decision of the High Court of Australia in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613 ("Mitchell Morgan").
6. Finally, counsel for Cosmetic Laser pointed to the evidence of Mr Crumpton about the prejudice that would arise if the proposed amendments were allowed. He submitted that the course of decided cases addressing proportionate liability involving solicitors, as this case was, generally resulted in a court attributing to a solicitor a very small percentage (10% to 15%) of the total liability picture. Accordingly, he submitted that based on the affidavit evidence, his client would have considered the ongoing conduct of the litigation from an entirely different perspective if the defence of proportionate liability had been pleaded originally, rather than that with which he is now confronted.

Discernment

1. It is convenient to turn first to the proportionate liability defence naming HBI as a concurrent wrongdoer. This is a proportionate liability defence which asserts that HBI's failure to provide the security required by the sale contract was a cause of the loss suffered by Cosmetic Laser, and that because that failure was in breach of a contract entered into with Cosmetic Laser, HBI is a concurrent wrongdoer within the meaning of Part 4 of the Act.
2. In order to deal with this proposed amendment, it is sufficient to accept for present purposes, without finally deciding, that HBI was a concurrent wrongdoer within the meaning of Part 4, whose conduct contributed to the same loss as that claimed against Mr Pirintji.
3. However, the evidence and submissions make it clear that this is a proportionate liability defence which could have, and should have, been pleaded at the time the original Defence was drafted and filed. Now, some two years later, without any explanation at all, the defendant for the first time seeks leave to amend the Defence to include such a pleading.
4. In Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175, the majority (Gummow, Hayne, Crennan, Kiefel and Bell JJ) said at [103]: "The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in [Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 152]. Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached … to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the Court's attention, so that they may be weighed against the effects of any delay of the objectives of the Rules. There can be no doubt that an explanation was required in this case."
5. Those remarks, although made in a case dealing with the Rules of the Supreme Court of the Australian Capital Territory, are nonetheless applicable to the circumstances here. The Uniform Civil Procedure Rules 2005 ("the UCPR") are, relevantly, to the same substantive effect.
6. The position here is that a party who, as a solicitor, is a defendant in professional negligence proceedings, seeks to add a defence two years after it ought have been considered, which defence if added will have a significant effect upon the litigation, including delaying it to enable additional evidence to be obtained, seeks that amendment without proffering any explanation at all for what has occurred.
7. In submissions, counsel for Mr Pirintji accepts that no explanation has been offered in evidence. The explanation sought to be proffered from the bar table does not alleviate the absence of an explanation. If anything, it compounds the situation by suggesting that this defence was only considered or thought about when the claim was assessed as having a particular monetary value, and was ignored prior to that time. So stated and so starkly put, there is simply no basis for this Court to grant leave to Mr Pirintji to amend his Defence to enable this pleading to be included.
8. On the basis of the extent of the delay in seeking these substantive amendments, the absence of any explanation for that delay and the wholly unpersuasive submissions of counsel for Mr Pirintji, I would not be prepared to grant leave to make these amendments.
9. I turn now to the proposed defence relating to proportionate liability with respect to the directors of Body Technology and the company itself. It is said that it was their conduct that also caused the loss claimed by Cosmetic Laser.
10. Counsel for Cosmetic Laser submits that the decision of Mitchell Morgan to which I have earlier referred, based upon the terms of the legislation, requires for the purposes of Part 4 of the Act, that the loss be the same: see Mitchell Morgan at [21]. He submits that it also requires that the plaintiff in the suit has a cause of action against the person nominated as the concurrent wrongdoer.
11. Section 34(2) of the Act provides that concurrent wrongdoers are persons whose acts or omissions either independently of each other, or jointly, caused "…the damage or loss that is the subject of the claim".
12. The provisions of s 34(1A) of the Act also make clear the need for an apportionment claim to address the same loss or damage, even if the causes of that loss or damage may be different causes of action.
13. In Mitchell Morgan, Bell and Gageler JJ, in a joint judgment which dissented as to the outcome, said at [91] of the concept of a concurrent wrongdoer, that in order for a person to be a concurrent wrongdoer under Part 4 of the Act, it is necessary that such a person "… must be (or have been) legally liable to [the plaintiff] for the damage or loss which is the subject of the claim". The view of the plurality seems to accord with this: see Mitchell Morgan at [47]. However, it is unnecessary for the purposes of this judgment to reach a concluded view on this question of law.
14. In the circumstances of this case, the categorisation of the loss and an exploration of whether the loss and damage caused by the directors and Body Technology, was the same or substantially the same as the loss suffered by the plaintiff, is a complex matter of fact which is not suitable for determination on an amendment application. Put differently, if the Court were to allow this amendment, the complexity of the questions of fact and law are such that it would not be appropriate for a court to deal with the matter summarily, or on a strike out basis. These are matters which properly must await a final hearing.
15. For that reason, I would not be prepared to accede to the submission of counsel for Cosmetic Laser that the amendment ought be refused on those bases.
16. In my assessment, the defendant, Mr Pirintji, offers an explanation for his failure to seek to adduce these defences but only in the period between when he first found out about the Liquidator's proceedings and when the proposed pleading was first served. In short, he puts that until the Liquidator's proceedings came to his notice, and he had reasonable access to the pleadings and allegations being made in those proceedings, he was not in a position to join these parties as concurrent wrongdoers.
17. Although criticism can be made of the alacrity with which Mr Pirintji's solicitors attended to obtaining details of the Liquidator's proceedings and having those details formulated into a proposed Amended Defence, I am not satisfied that such was the additional delay in these circumstances that it would count of itself as a reason not to permit the amendment.
18. However, the explanation which is proffered seems to me to be based upon an unstable premise, namely, that the awareness of the solicitor on the record for Mr Pirintji (Mr Cameron) about the existence and the content of the Liquidator's proceedings, ought to be equated with Mr Pirintji's (or Mr Cameron's) first knowledge of conduct on the part of Body Technology (or its directors) and which was sufficient to constitute it, or them, as concurrent wrongdoers, or else sufficient to enable a defence to be pleaded.
19. I accept that the Liquidator's proceedings, when first accessed, provided a ready chart of the allegations against Body Technology and its directors. The proceedings also provided material in a form which could be readily accessed and easily used. Some, but not all, of the material in those pleadings has been used in the proposed amendments.
20. But one central factual matrix around which the Liquidator's proceedings turned, is the allegation that the sale by HBI of its assets to Body Technology was for a price which was various described as less than reasonable, an undervalue, and a price which was less than a reasonable replacement value.
21. It is to be recalled that it is, and was at all relevant times, a matter of public record that HBI and Body Technology were both companies which had common directors. Shareholding of both companies was a matter of public record, the relationship between the companies was also, at all times, a matter of public record. Those public records were readily accessible and could be searched without difficulty.
22. The evidence on this Motion includes the report to creditors by the Liquidator dated 16 January 2012. The report was to be presented to the annual meeting of creditors of the company, which was to be held pursuant to s 508 of the Corporations Act on 31 January 2012.
23. The obligation of a liquidator under the Corporations Act is to either convene a meeting of creditors at which an account of the liquidator's conduct and the conduct of the winding up is presented or, alternatively, if a meeting of creditors is not convened, the liquidator is obliged to prepare a report giving such an account and lodging a copy of the report with ASIC: s 508 Corporations Act.
24. Here, the Liquidator presented a report to an annual meeting of creditors. Each of the plaintiff companies were creditors. They had so pleaded. They had also pleaded that, according to the information provided by the Liquidator, they were unlikely to recover any dividend in the liquidation.
25. The Liquidator's report to creditors was a document which was capable of being accessed by the solicitor for the defendant by ordinary means in these proceedings. One such means would have been to serve a notice to produce pursuant to r 21.10 of the UCPR upon the plaintiffs requiring production of the annual reports of the liquidator. Another would have been to seek by way of discovery of identified documents pursuant to r 21.2 of the UCPR, the discovery of this material, and a third would have been to subpoena the liquidator to produce to the Court for inspection by the solicitors for the defendant, the contents of each of the reports. The evidence does not suggest that any of these typical methods of obtaining information was engaged in by the solicitors for the defendant here.
26. In the usual preparation of proceedings such as these, involving as a central feature, the failure of the defendant to take steps to ensure that Cosmetic Laser would be a secured creditor, rather than an unsecured creditor, it is difficult to understand why the defendant would not have attempted to establish by an examination of the financial policies of the company in liquidation, whether there would have been any difference in the dividend from the liquidation between secured and unsecured creditors. The annual reports of the Liquidator were the obvious source of that information.
27. The Liquidator's report contains material directly relevant to the proposed pleadings. The Liquidator noted that the sale by HBI to Body Technology of the assets of HBI was a transaction between related corporations. The report made these further comments: "The transaction for the sale of business would be considered uncommercial as it appears to have the intention to defeat creditors. … The total consideration paid by [Body Technology] for the company's business was $395,000. The Grays Valuation values the company's assets on an existing use basis at $1,045,110 which amount does not include intangible assets the subject of the Sale Agreement, namely goodwill and intellectual property assets. In the entirety of the circumstances, the sale of the business by the company constitutes a sale for less than market value. If one adopts the existing use value of the company's tangible assets, the sale appears to be for at least $650,110 less than the market value of the tangible assets which form of the sale."
28. As I have noted above, it is to be recalled that in the defence first filed by Mr Pirintji on 23 April 2012, and repeated in the Defence to the Amended Statement of Claim filed on 5 October 2012, it was pleaded that the transaction of sale from HBI to Body Technology was an uncommercial transaction which was void as against the Liquidator. The term "uncommercial transaction" in the Defence was used by reference to s 588FE of the Corporations Act.
29. That phrase is defined in s 588FB of the Corporations Act in this way, "A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (a) the benefits (if any) to the company of entering into the transaction; and (b) the detriment to the company of entering into the transaction; and (c) the respective benefits to other parties to the transaction of entering into it; and (d) any other relevant matter."
30. When both of these Defences were filed in April and October 2012 respectively, the solicitor for the defendant certified that there were reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law, that these Defences had reasonable prospects of success.
31. An investigation to enable these Defences to be filed, and those certificates to have been given, must have occurred prior to April 2012. That investigation must have included, at the very least, the discovery of the value of the assets which were sold in HBI's hands, the terms of the sale of those assets to Body Technology, and whether there were any other parties to the transaction who may have received any, and if so what, benefits. On one view, depending upon the terms of the transaction, the common directors of HBI and Body Technology may have fallen into that description. The fact of the common directors was no doubt a relevant matter, which the definition of uncommercial transaction was permitted to be taken into account.
32. If, as asserted in the Defences, the transaction of sale was an uncommercial transaction then, having regard to the commonality of directors, there was then raised an obvious question as to whether those directors were, in their capacity as directors of HBI, in breach of their directors' duties to HBI in a way which made them concurrent wrongdoers within the meaning of the Civil Liability Act, as is now sought to be pleaded.
33. In those circumstances, I am wholly unpersuaded that Mr Pirintji or his solicitors did not have sufficient material to have considered whether Body Technology and its directors were concurrent wrongdoers for the purposes of a proportionate liability defence by, at the latest, April 2012 when the first Defence was filed.
34. On this Motion, there is no explanation offered as to what, if anything, the defendant or his solicitors did with respect to making enquiries, or seeking to investigate, the existence of a proportionate liability defence of the kind now pleaded, prior to his first learning in April 2014 of the existence of the Liquidator's proceedings. If an investigation was done, and done reasonably, and that investigation did not reveal the existence of any factual material, then such a fact ought to have been led in evidence. It was not.
35. The Court is left in the position where, on this Motion, no explanation is proffered by the defendant or his solicitor with respect to the absence of any investigation into these issues at any time prior to the end of April 2014. A period of no less than two years during which nothing seems to have been done, requires an explanation if an amendment is to be successfully obtained. No explanation was proffered. The failure of the defendant, or his solicitor, to offer an explanation with respect to this two year period was specifically adverted to in the affidavit of Mr Crumpton sworn 25 March 2015, and which was read on this application. In paragraph 40, Mr Crumpton said: "The defendant was at all material times aware that on 27 November 2009, the liquidator was appointed as liquidator to HBI. The liquidator's proceedings were commenced in this honourable court on 2 May 2012. At any time since the commencement of the liquidator's proceedings, the defendant could have made enquiries as to whether the liquidator was seeking to set aside the uncommercial transaction of transferring the assets of HBI to Body Technology, or otherwise enquire if the liquidator was pursuing any claim on behalf of HBI against Body Technology and/or its directors. It would appear no such enquiries were made until on or about 30 April 2014. …"
36. In light of this clear assertion in the affidavit of the solicitor for the plaintiff, which was filed and served about a month before the Motion, the absence of any evidence to address this issue directly leads me to have greater confidence in drawing the conclusion that no investigation was in fact carried out, nor were any reasonable enquiries made with respect to the position of Body Technology and its directors as concurrent wrongdoers, and that the defendant is unable to proffer any explanation as to the absence of such enquiries.
37. In those circumstances, whilst I accept that having access to the Liquidator's proceedings has meant that a more ready source of material for the pleading of concurrent wrongdoing on the part of Body Technology and its directors has become available, and has been relied upon as the basis for the pleading of this issue in the proposed Amended Defence, I do not accept that if acting with reasonable diligence, the defendant was unable prior to April 2014, to plead the fact that Body Technology and its directors were concurrent wrongdoers and that, as a consequence, even if the plaintiff succeeded, Mr Pirintji would only be liable for a limited proportion of the loss. Had a reasonable investigation been carried out, the factual material would have been available.
38. Accordingly, I am not persuaded that there is any basis for permitting the amendment sought with respect to the proportionate liability of Body Technology and its directors to be permitted.
39. The remaining additional defence which is sought to be added is that set out in paragraphs 35 to 39, which plead that Cosmetic Laser had breached the contract which it entered into with HBI by failing to assign to HBI leases over four shop premises as required by a condition of the sale contract. The assignments were due to be effected upon completion of the sale contract, i.e. at a time when Mr Pirintji was still acting for Cosmetic Laser.
40. The pleading claims that by reason of the failure to complete these assignments, Cosmetic Laser materially breached the sale contract and was therefore not entitled to the payment of the deferred component.
41. If such breaches occurred then, according to the pleading, they must have occurred at the time of completion of the sale contract. As I have just noted, Mr Pirintji was acting for Cosmetic Laser at that time. As their solicitor, he either was, or else should have been, involved in securing the effective assignment of the leases as called for in the contract. Alternatively, if for any reason that fell outside the parameters of his retainer, it was something he must have been aware at the time.
42. As well, the Statement of Claim when first served contained in paragraph 19(b)(iv) a reference to the fact that the real property leases relevant to the operation of the business should have been transferred subject to their terms at the time of settlement. In his defence to this pleading, and in the defence to the Amended Statement of Claim, Mr Pirintji referred specifically to this allegation and responded by pleading that, in effect, he denied that he owed any duty with respect to these matters because they "concerned risks other than legal risks or the plaintiff's interests other than legal interests". In short, the issue about the failure to assign effectively the real property leases was drawn specifically to his attention, and was responded to by Mr Pirintji in the way indicated.
43. It seems to me that, given that Mr Pirintji must have had knowledge that at the time the sale contract was completed, no assignments of these properties were handed over, or put differently, that the assignments were only handed over for some of the properties and not all of them, and given that against that knowledge the plaintiff's Statement of Claim drew attention to the failure of the assignment of all of the real property leases, then the additional defence which is now sought to be pleaded, asserting that the plaintiff's failure to assign the leases constituted a breach of the sale contract, with the consequence that the plaintiff was not entitled to payment of the deferred component, was a matter well within Mr Pirintji's knowledge at the time the defence was first filed in April 2012.
44. Again, no adequate explanation is proffered as to the reason why this was not addressed prior to this proposed amendment.
45. I cannot accept the assertion of Mr Cameron that the knowledge of the lack of effective assignment was first raised after access to the Liquidator's proceedings.
46. Accordingly, I would not be prepared to allow this proposed amendment.

Prejudice

1. There are other matters which are relevant to the issues to be considered as to whether the amendments should be allowed.
2. Mr Crumpton, the solicitor for Cosmetic Laser, addressed the question of prejudice in his affidavit. He asserted that if the opposed amendments were allowed, there would, in a number of ways, be significant prejudice to his clients. In the first place, there would be a considerable delay to the hearing of the proceedings because of the need for additional lay and expert evidence to be obtained by the defendant to establish that the concurrent wrongdoers behaved in a way which meant that the conduct fell into that category, and that their conduct caused the loss of Cosmetic Laser. No doubt Cosmetic Laser would wish to have the opportunity of responding to that evidence.
3. It may be that some of that delay could be ameliorated by having the Liquidator's proceedings and these proceedings, heard and determined together. Such an order has been sought, but it is inappropriate to consider and deal with that order until the pleadings in the present case have been finalised. But even if that course were to be followed, and Mr Pirintji could simply adopt the evidence given in the Liquidator's proceedings, there would nevertheless be expense and delay incurred by the plaintiffs in responding to those claims, and dealing with the question of whether or not the parties nominated are concurrent wrongdoers.
4. As well, the hearing of the proceedings together would not address the claim that HBI is a concurrent wrongdoer because it is not part of the Liquidator's proceedings. So, there would necessarily be further delay and expense incurred by gathering and filing the evidence necessitated by these amendments.
5. Secondly, I accept Mr Crumpton's evidence, accompanied by submissions from the bar table, that the real prejudice to be found in allowing the amendments is that, as a matter of the perception about the likelihood, where other concurrent wrongdoers are found to have caused loss in cases involving solicitors, courts have generally but not universally, found that the percentage of contribution by the solicitors was relatively small. Mitchell Morgan is one such example where the solicitors were found to be proportionally liable to the extent of 12.5%. That perception or belief is not an unreasonable one.
6. Obviously, a plaintiff confronted with a defence of proportionate liability would be required to assess, in a timely manner upon first receipt of the defence, the strength of the defence, the likelihood of the defendant establishing the existence of the concurrent wrongdoers pleaded, and then to make a rational assessment of the value of the claim against the defendant. In other words the plaintiffs, assisted by their lawyers, would need to determine whether it was commercially realistic and financially viable to proceed with the litigation having regard to the prospects of the defendant establishing the existence of concurrent wrongdoers and if so, what proportion of any loss or damage was likely to be recovered from the defendant.
7. Here, it is submitted that, given the identity of the defendant, and at least the perception that in many cases where solicitors are found to be proportionately liable, they bear only a relatively modest proportion, the plaintiffs have been deprived of the opportunity at an early point in the litigation, and before incurring substantial costs, of considering the commercial reality of continuing with the litigation, because of the absence of any proportionate liability pleading of the kind now sought to be added in the proposed Amended Defence. It is submitted that such prejudice is extensive, and it is too late for the plaintiffs to be now put in such a position.
8. Counsel for the applicant submits that, to the extent that such prejudice exists, it can be dealt with by an appropriate order for costs.
9. The majority judgment in Aon noted that an award of costs is not always a panacea. They said at [99] ff: "99. In the past it has more readily been assumed that an order for the costs occasioned by the amendment would overcome injustice to the amending party's opponent … The modern view is that even an order for indemnity costs may not always undo the prejudice a party suffers by late amendment. In the present case it is difficult to see that such an order could be sufficient compensation given that Aon would be required to again defend litigation which was, effectively, to be commenced afresh. 100. The views expressed by Lord Griffiths in Ketteman v Hansel Properties Ltd, that justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes upon litigants, are also now generally accepted. … 101. In Ketteman Lord Griffiths recognised … that personal litigants are likely to feel the strain more than business corporations or commercial persons. So much may be accepted, but it should not be thought that corporations are not subject to pressures imposed by litigation. … And whilst corporations have no feelings, their employees and officers who may be crucial witnesses, have to bear the strain of impending litigation and the disappointment when it is not brought to an end. The stated object in the Court Procedures Rules of minimizing delay, may be taken to recognise the ill effects of delay upon the parties to proceedings, and that such effects will extend to other litigants who are also seeking a resolution in their proceedings."
10. I accept that, as a general proposition, there being no specific evidence of this fact, the existence of this litigation and the length of time which it has taken will undoubtedly have caused some anxiety and distress to the directors and officers, if any, of the plaintiff companies. However, in the absence of specific evidence, I am unable to give very much weight to this consideration in the balancing of all of the factors. Particularly is this so when it is apparent that Mr Moini, the principal of Cosmetic Laser, is voluntarily funding the Liquidator's proceedings.
11. In those circumstances, I accept that in this case, the prejudice can be compensated for by an appropriate order for costs.
12. The usual costs order of any amendment is that the amending party pays the costs of and occasioned by the amendment. Here the usual order would not be sufficient to put beyond argument the remedying of the plaintiffs' prejudice. It is necessary to craft an order if this prejudice is to be addressed, which enables the plaintiffs to be restored to the position in which they were at the time the Defence was first served in April 2012.
13. So far as can presently be determined, an appropriate order for costs would be that the defendant pays all of the plaintiffs' costs on an indemnity basis since that time. However, the basis for such an order would be that the plaintiffs would not have continued with the proceedings at that time, and thus the financial prejudice of Cosmetic Laser would be addressed.
14. If, on the other hand, the plaintiffs would have continued with the proceedings notwithstanding receiving such a Defence, then such an order would over‑compensate the plaintiffs and would be a penalty upon the defendant.
15. The foregoing analysis reveals that in respect to the amendments which are opposed, they could have been, and should have been, pleaded at the time the Defences were first drafted. It also reveals that no adequate explanation has been provided for the failure of the defendant to plead these Defences in a timely manner. As well, the analysis has revealed that there is significant financial prejudice to the plaintiffs if the amendments are permitted, but that such prejudice can be addressed by an appropriate order for costs. There will be a delay in the proceedings as the parties gather evidence to deal with the proposed amendments, if they are allowed.
16. It is convenient to identify the correct legal approach.
17. Section 64(1) of the Civil Procedure Act 2005 permits the Court to order that any document in the proceedings be amended, or that leave be granted to a party to amend any document in the proceedings.
18. Section 64(2) provides that all necessary amendments are to be made: "… for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoid multiplicity of proceedings."
19. In making such a decision, the Court is obliged by s 58(1) of the Civil Procedure Act to act in accordance with the dictates of justice. This necessarily includes having regard to the provisions of s 56 of the Civil Procedure Act which obliges a court to seek to give effect to the overriding purpose when it exercises any power given to it by the Civil Procedure Act or the rules of court. As well, the court is obliged by the provisions of s 57 of the Civil Procedure Act to have regard to four objects, namely, the just determination of proceedings, the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources and the timely disposal of the proceedings and all other proceedings in the Court at a cost affordable by the respective parties.
20. Section 58(2) suggests a non-exclusive list of matters to which the court may have regard in determining what the dictates of justice are in any particular case.
21. In Kelly v Mina [2014] NSWCA 9, Barrett JA (with whom Ward and Leeming JJA agreed) said at [47]: "47. … his Honour was required to take into account a combination of factors identified by the High Court in Aon … and usefully summarised by Vickery J in Namberry Craft Pty Ltd v Watson [2011] VSC 136 at [38] as follows: '(a) whether there will be substantial delay caused by the amendment; (b) the extent of wasted costs that will be incurred; (c) whether there is an irreparable element of unfair prejudice caused by the amendment, arising, for example, by inconvenience and stress caused to individuals or inordinate pressures are placed upon corporations, which cannot be adequately compensated for, whatever costs may be awarded; (d) concerns of case management arising from the stage in the proceeding when the amendment is sought, including the fact that the time of the court is a publicly funded resource and whether the grant of the amendment will result in inefficiencies arising from the vacation or adjournment of the trial; (e) whether the grant of the amendment will lessen public confidence in the judicial system; and (f) whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought." 48. As this court has emphasised more than once, Part 6 Division 1 of the Civil Procedure Act made substantive and important changes to the law so that considerations of promptness and efficiency in the conduct of civil litigation are afforded a new and special importance which may sometimes provoke a sense of injustice in a party who has failed to proceed with dispatch …"
22. As the legislative provisions and the authorities to which I have drawn attention make clear, it would be wrong to allow a party, in effect, to purchase an amendment. By that I mean the mere fact that a party is willing and able to pay for the costs occasioned by an amendment is not, without more, a sufficient basis for a court to permit an amendment.
23. On the other hand, if a party wishes to litigate an important issue in proceedings, and the issue is one of substance, the interests of justice may suggest that the party ought be entitled so to do.
24. As is apparent from the legislation and the authorities that the factors which a court may, and does, take into account in considering whether to grant an amendment, are often intention. Although a decision is made in the interests of justice, that very decision itself about whether to grant or refuse an amendment, may provoke a sense of injustice in a party who or which has failed.
25. The Court is obliged in each individual case to assess all of the relevant factors, evaluate the weight which is to be given and to make a decision which, in those circumstances, best accords with the dictates of justice.

Conclusion

1. In my opinion, Mr Pirintji has not discharged his onus of persuading the Court to exercise its discretion to grant the opposed amendments.
2. Whilst the proceedings have not yet been fixed for hearing, they are at the stage when a hearing date will be allocated for the hearing to take place over the next few months. A grant of the amendments would delay by a significant period, the allocation of a hearing date. The application for amendments has come after the proceedings have been on foot for a number of years, and the defendant has had more than an adequate opportunity of fully investigating the proceedings and forming a view as to the defences which are available to be properly pursued. The defendant offers no explanation for their failure to address these matters earlier than they have.
3. I cannot see that the exercise of discretion to allow the amendments would further the overriding purpose to ensure the just and speedy resolution in a cost effective way of these proceedings, and other proceedings in the Court.
4. I am not prepared to permit the amendments which are opposed.
5. The orders which will be made will need to permit the filing of an Amended Defence, because a number of the amendments were not opposed.
6. It will also be necessary for the parties to consider what they wish to do, if anything, with respect to the balance of the orders sought in the Notice of Motion. It will be necessary to make an order providing for this.

Costs

1. I do not see any reason why costs should not follow the event, both of the permitted amendments and of the Motion to date.

Orders

1. I make the following orders: 1. Grant leave to the defendant to file and serve an Amended Defence in accordance with the proposed pleading annexed to the Amended Notice of Motion, except for paragraphs 35 to 39 (inclusive), 40 to 47 (inclusive) and 59 to 64 (inclusive). 2. Defendant to pay the costs of and occasioned by the amendment. 3. Defendant to pay the costs of the Amended Notice of Motion filed 12 December 2014 to date. 4. Stand over the Motion to 9.30am on 17 August 2015 before Garling J for further directions.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 July 2015