Supreme Court of WA|2003-05-27|Before: Mr P, Seaman J, Hasluck J

Custom Credit Corporation Ltd v Dallas Development Corporation Pty Ltd & Ors [2003] WASC 98 (27 May 2003)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : CUSTOM CREDIT CORPORATION LTD -v- DALLAS DEVELOPMENT CORPORATION PTY LTD & ORS [2003] WASC 98

Practice and procedure - Leave to amend pleadings during trial - Allegations of misleading conduct, breach of contract and negligence raised by counterclaim - Incongruities in the pleaded case raised in the course of cross-examination - Trial adjourned due to insufficiency of time allowed for trial - Application for leave to amend pending resumption of trial - Whether amendments should be allowed in era of case flow management - Amendments allowed to bring into issue matters truly in issue between the parties

Rules of the Supreme Court 1971, O 1 r 4A, O 1 r 4B, O 21 r 5

First defendant's application to amend counterclaim allowed

Atkinson v Fitzwalter [1987] 1 WLR 201

Baume v Commonwealth [1906] HCA 92; (1906) 4 CLR 97

Clough & Rogers v Frog; R P M Transport Pty Ltd v Frog (1974) 48 ALJR 481

Farrell v Secretary of State for Defence [1980] 1 WLR 172

Grljusich v Grljusich, unreported; SCt of WA (Seaman J); Library No 930253; 6 May 1993

Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32

Ketteman v Hansel Properties Ltd [1987] AC 189

Northampton Coal Iron & Waggon Company v Midland Waggon Company (1878) 7 Ch D 500

Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405

Re registered Trade Marks Certina & Certina DS (1970) 44 ALJR 191

Shannon v Lee Chun [1912] HCA 52; (1912) 15 CLR 257

Sinclair v James [1894] 3 Ch 554

Southern Resources Limited v Technomin Australia NL [1990] WAR 72

White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806; (1998) 156 ALR 169

1 HASLUCK J: The plaintiff, Custom Credit Corporation Ltd, commenced proceedings against the defendants in 1991. The plaintiff sought to recover certain moneys said to be due pursuant to four mortgages executed by the first defendant, Dallas Development Corporation Pty Ltd. The trial of the action commenced on 18 February 2003 but had to be adjourned, part-heard, because the eight days allowed for the hearing proved to be not sufficient. While the matter stands adjourned, Dallas has applied to amend its counterclaim. In order to deal with this application, and a related application by Custom Credit to strike out the Dallas pleading and enter judgment, it becomes necessary to describe the respective cases at some length. I note in passing that the second defendants have ceased to play any active part in the proceedings and the Custom Credit claim is being defended by Dallas alone.

2 The first of the four mortgages executed by Dallas as mortgagor is dated 26 June 1989, although this mortgage was described in the pleadings as the "third mortgage". The second defendants executed the mortgage in question as covenantors and guarantors. The mortgages, described in the pleadings as the first, second and fourth mortgages, were executed subsequently.

3 It is apparent from the re-amended statement of defence and counterclaim filed on behalf of the first defendant and the second-named second defendant, Barry Daniel O'Rourke, that these defendants deny that they are indebted to the plaintiff in the amounts claimed. In essence, these defendants contend that even if they are found to be liable to the plaintiff in the amounts claimed, or as to any other amounts, they are entitled to relief against such liability pursuant to their counterclaim.

4 It was a matter of acute controversy between the parties at the trial of the action as to the order in which certain events took place. Accordingly, for ease of exposition, I will commence by providing an overview of the main events drawing upon uncontested facts and the dates appearing in various documents. I will then turn to the cases of the respective parties as reflected in the pleadings.

5 In adopting this course, I take account of the fact that as a consequence of pre-trial orders and directions arrangements were made for the Dallas case to be presented first at trial. This reflected a recognition on the part of both parties that the matter principally in controversy at the trial concerned certain representations which were said to have been made by or on behalf of the plaintiff prior to the parties entering into the mortgage agreements. The representations were said to have been made by Mr Phillip Lewis who was a senior officer with Custom Credit.

6 For ease of reference, I will identify relevant documents by citing not only the exhibit number but also the agreed bundle number.

7 Custom Credit was incorporated in the State of New South Wales and carries on business as a financier. Mr Lewis joined the company in June 1981 and was promoted to the position of Operations Manager of the Property Finance Division in 1987. In the following year he joined with his wife and his brother-in-law, Mr Brian Conway, in the purchase of a shelf company, Telbe Holdings Pty Ltd, which played a part in a transaction concerning Irwin Street Chambers in the Perth Central Business District. By mid-1989 Mr Lewis had been promoted to the position of Business Development Manager, being second in charge to the State Manager of Custom Credit, Graham Exton.

8 Dallas was formed in 1985 and was established to facilitate construction, development and joint ventures. It was the parent company to Dynasty Constructions Pty Ltd and was involved in various developments within the metropolitan area of Perth. Mr O'Rourke became a director of Dallas soon after the formation of the company but ceased to be so on 1 July 1986. Thereafter, he appears to have acted as the de facto manager of the company. Directors of Dallas at all material times included Mr O'Rourke's son-in-law, Gordon Carruthers, and his daughter, Suzanne Carruthers.

9 During the course of 1988 Dallas acquired land known as the "St Michaels land" which was to be used for the staged development of 37 strata titled units. The initial finance was provided by the financier, Esanda.

10 Dallas also contracted to purchase from the Joondalup Corporation land known as the "St Andrews land" being Lot 530 adjoining the Joondalup Golf Course. Dallas had in mind to establish luxury units upon the St Andrews land but finalisation of the purchase remained in abeyance while the vendor corporation completed road works and other facilities in the area. The contract in question was conditional upon the purchaser being able to obtain finance.

11 On 14 January 1989 Dallas contracted to purchase land at West Coast Highway, Scarborough for $950,000 with a view to establishing housing upon the land.

12 By mid-1989 Dallas was looking for finance to proceed further with the St Michaels development. In addition, it required finance to complete the purchase of the St Andrews land and to proceed with the development of that land. It was against this background, on the plaintiff's case, that Mr O'Rourke commenced to deal with Custom Credit.

13 By a letter dated 6 June 1989 (D47 at 1/380) Custom Credit approved a loan of $1,460,000 to Dallas for a term of 6 months to be secured over 12 strata titled units forming part of the St Michaels land. $1,000,000 was to be advanced at settlement with $300,000 to follow progressively on pre-sale of 4 units. The balance of the loan was attributed to an interest capitalisation facility. In effect, this represented a partial refinancing of the project previously financed by Esanda. This loan was effected by mortgage E142583 dated 26 June 1989 known as "the third mortgage" (P5 at 2/510).

14 At some stage in mid-1989 Dallas formed a view that it would be useful to obtain a commercial property in the Central Business District of Perth. It was a matter of acute controversy between the parties at the trial as to how this notion came into being. The representations allegedly made by Mr Lewis are relevant to this issue.

15 It is a matter of undisputed fact that by an offer and acceptance dated 19 June 1989 Dallas contracted to purchase the strata title to Floor 3 of a property known as Irwin Chambers in the CBD of Perth ("the Irwin property") for a price described in the contract as $1,475,000 (D20 at 2/503). Simultaneously, the vendor of the Irwin property, Westminster Holdings Pty Ltd contracted to purchase the West Coast land from Dallas for the same price (D21 at 2/505). In effect, the two vendor companies had agreed to swap their respective pieces of land. In each case, the offer was described as a cash offer and settlement was to be effected on 18 August 1989. I will refer to this as "the swap transaction".

16 I pause to note that Dallas was obliged to obtain funding in order to carry into effect the swap transaction, for the West Coast land was subject to a mortgage to Perpetual Finance. Further, as I noted previously, Dallas required finance in order to complete its purchase of the St Andrews land. The nature of the discussions between Mr O'Rourke for Dallas and Mr Lewis for Custom Credit concerning these and related matters is at the heart of the controversy between the parties. However, it is common ground that at some stage in June or July 1989 the firm Hillier Parker, being a firm of valuers often used by Custom Credit, was engaged by Dallas to prepare valuations of the St Michaels land, the St Andrews land and the Irwin property.

17 The Hillier Parker valuation in writing of the St Andrews land is dated 27 June 1989 and was signed by Mr Collins of that firm (P7 at 2/528). It fixed the value of the land at $1,500,000. The Hillier Parker valuation of the Irwin property is dated 12 July 1989 and was signed by Mr Loughnan of that firm (D19 at 2/652). It assessed the value of the property at $1,530,000. Dallas delivered these valuations to Custom Credit.

18 It was common ground at the trial that by letter dated 26 July 1989 Custom Credit confirmed approval in principle of a loan to Dallas of $1,440,000 on the security of the St Andrews land and the Irwin property for a period of 12 months (D3 at 3/782). The letter suggests that of the amount in question $530,000 was to be applied to completing the purchase of the St Andrews land and $760,000 was to be used in paying out Perpetual Finance. The latter payment meant that Dallas would be able to discharge the mortgage on the West Coast land and complete the swap transaction.

19 In due course the advance of $1,440,000 was secured by mortgage E154845 dated and stamped 20 July 1989 affecting the St Andrews land (P9 at 2/749). This is described in the pleadings as the first mortgage. The advance in question was secured also by mortgage E182823 dated 20 July 1989 affecting the Irwin property (P10 at 3/765). These mortgages were duly registered. The relevant payments were made by Custom Credit via the St Andrews/Irwin account 15644025345. The account created earlier in time in respect of the third mortgage was described in the books of Custom Credit as the St Michaels' account 156445025244.

20 The funding arrangements with Custom Credit enabled Dallas to complete the purchase of the St Andrews land. Settlement was effected on 21 July 1989. Dallas became the registered proprietor of the subject land. Settlement pursuant to the two offer and acceptances comprising the land swap transaction was effected on 31 August 1989 with the result that thereafter Dallas became the registered proprietor of the office premises comprising the Irwin property. Dallas alleges that in the months that followed it was unable to lease the Irwin property in the manner envisaged by the Hillier Parker valuation.

21 Towards the end of 1989, while steps were still being taken by Mr O'Rourke to proceed with the various Dallas projects, Custom Credit terminated the services of Mr Lewis. It was common ground at the hearing before me that Mr Lewis was thought to have misconducted himself during the course of his employment. He was in fact subsequently charged with 13 criminal offences arising out of his employment by Custom Credit with respect to the period 3 November 1988 to 19 May 1989. He was later found guilty of 8 out of the 13 counts.

22 In the months following the departure of Mr Lewis, Mr O'Rourke and the directors of Dallas were in contact with other senior officers at Custom Credit including Mr Simon Adams, Mr Hubbard and Mr Bonwick.

23 Dallas eventually applied to Custom Credit for a loan of $2,950,000 to proceed with the development of the St Andrews land. On 1 May 1990 Mr Bonwick arranged for a further mortgage to be executed by Dallas to cover all outstanding interest payments, which amounted to the sum of $115,000. This mortgage (P38 at 6/2123) affected the St Andrews land, the Irwin property and various units within the St Michaels project. Mortgage E388742 is described in the pleadings as the fourth mortgage.

24 Shortly after the execution of the fourth mortgage Custom Credit proceeded to lodge three caveats against the titles of properties owned by Dallas and Mr O'Rourke on the grounds that it was an equitable chargee. These caveats were lodged on 25 June 1990.

25 Some months later, notices of demand dated 31 October 1990 were served upon Dallas for payment of the whole of the moneys secured by the third and fourth mortgages (P40 at 6/2104 and P41 at 6/2158).

26 At the same time, on 31 October 1990, Custom Credit lodged Caveat E478108 (P42) against the titles to various Dallas properties claiming an estate or interest as equitable chargee pursuant to cl 14(c) of registered Mortgage E142583, that is to say, the third mortgage.

27 Then, a notice of demand dated 25 January 1991 was served upon Dallas for payment of the whole of the moneys secured by the first and second mortgages.

28 In due course, Custom Credit took steps to exercise its powers of sale pursuant to the various mortgages. In 1991 it commenced legal proceedings against Dallas and the second defendants as parties to the relevant documentation. This led to Dallas setting up a claim for damages against Custom Credit. As I noted earlier, Dallas and Mr O'Rourke say that any liability that might arise to the plaintiff should be set off against moneys due by Custom Credit to Dallas and Mr O'Rourke pursuant to the counterclaim.

29 Put shortly, the defendants say that they were induced to enter into the swap transaction as a consequence of misrepresentations made by Mr Lewis. Custom Credit's misconduct was compounded by the lodgement of caveats against land held by Dallas, with the result that Dallas was deprived of any capacity to meet its obligations or to realise the profits that might otherwise have been available to it.

30 Mr O'Rourke was the principal witness for Dallas at the trial of the action. He submitted a witness statement and supplementary witness statement to the Court and gave additional verbal evidence concerning the events described in his statement.

31 Mr O'Rourke was cross-examined at considerable length. In the course of that cross-examination, as will appear later, various discrepancies arguably emerged between the Dallas pleaded case and the evidence presented at trial. The stance of counsel for Dallas was that the so-called discrepancies pointed to by counsel for the plaintiff did not detract from the defence case and went principally to chronology and the sequence in which certain events are said to have occurred. Nonetheless, for the sake of an orderly exposition, it will be useful at this point to summarise the Dallas pleaded case and related evidence.

32 Dallas pleaded at par 26 of its counterclaim that it had contracted to purchase vacant land in Joondalup known as the St Andrews land which was purchased for the purpose of developing 29 residential units. This is a reference to the offer to purchase made by Dallas on 14 June 1988 which, 12 months later, had not yet been settled. As at mid-1989, Mr O'Rourke was conscious that he would have to obtain finance in order to complete the purchase and to proceed with the development of the St Andrews land.

33 Dallas pleaded that "in or about June 1989" Mr O'Rourke approached Mr Lewis of Custom Credit for finance to purchase and develop the St Andrews land and to finance the cost of developing the West Coast land. Further, "on or about 13 June 1989" Mr O'Rourke met with Mr Lewis and Mr Graham Exton, the then State Manager of Custom Credit, on the site of the St Andrews land at which time the Dallas financing requirements were discussed. Mr Lewis requested Dallas to prepare feasibility studies for the development of the two properties and these studies were presented to Custom Credit.

34 Mr O'Rourke addressed these matters in his evidence in chief. He said that on 13 June 1989 he, Mr Exton and Mr Lewis went to the St Andrews land which lay close to the entrance to the Joondalup Golf Club. They went on to play a game of golf and had lunch at the clubhouse. He said that he was able to fix the date as 13 June 1989 because he had arranged to take possession of a special golf buggy. A local television station had filmed the buggy and the relevant video recording of the incident is dated 13 June 1989 (D1). Mr O'Rourke went on to say that discussion at the lunch turned to the Dallas financing requirements and the nature of its properties. Mr O'Rourke arranged for feasibility studies to be brought to the clubhouse by his daughter and they were handed over.

35 It is pleaded in par 31 of the counterclaim that about two weeks after the Joondalup meeting Mr Lewis informed Mr O'Rourke by telephone that he was aware of a purchaser who would acquire the West Coast Highway land on the basis that it would be exchanged for a commercial property in the Perth CBD. If that happened Custom Credit would then advance moneys to Dallas on higher ratio against the security of a commercial property than it would on a development property for the purpose of purchasing the Perth CBD property and financing the purchase and development of the St Andrews land.

36 Mr O'Rourke informed Mr Lewis during the course of this conversation that neither he nor any of the defendants had any previous experience with commercial properties. Mr Lewis identified the subject property as a strata title of the third floor of Irwin Chambers on the corner of Hay and Irwin Streets, being the property I have called the Irwin property.

37 In his witness statement Mr O'Rourke said that the identity of the other party was not revealed by Mr Lewis. Mr O'Rourke told Mr Lewis that he would consider the matter but any action would have to be taken through an estate agent, Mal Dempsey, of the Satterley Agency. Mr O'Rourke said further that later, about mid-June, he was invited to play golf with Mr Lewis at the Burswood course as a farewell to Mr Exton. On that occasion Mr Lewis asked if Mr O'Rourke had considered the swap proposal and urged Mr O'Rourke to give the matter serious consideration. Within three or four days of playing golf with Mr Lewis, Mal Dempsey telephoned Mr O'Rourke about the matter.

38 Dallas pleaded in par 32 that in the course of a telephone conversation with Mr Lewis, Mr O'Rourke agreed to inspect the Irwin property in conjunction with a licensed valuer from the firm Hillier Parker. It is said in par 33 that Mr Lewis said that Custom Credit regularly used Hillier Parker to value properties as one of the company's accepted panel of valuers and he requested Mr O'Rourke to obtain valuations from Hillier Parker of the St Andrews land and the Irwin property. Acting on the Lewis request Mr O'Rourke engaged Hillier Parker to undertake the valuations as a consequence of which the St Andrews land was valued at the sum of $1,500,000 by a valuation prepared for Mr O'Rourke dated 27 June 1989 (P7 at 2/528). The Irwin property was valued at $1,530,000 by a valuation prepared for Mr O'Rourke dated 12 July 1989 (D19 at 2/652).

39 These paragraphs of the pleading also contain an assertion that Mr O'Rourke did inspect the Irwin property. In his evidence in chief he said that within three or four days of playing golf with Mr Lewis, he was contacted by Mal Dempsey, his real estate agent. He proceeded to inspect the third floor of the Irwin property with his wife Carol, his daughter Suzanne Carruthers, Mal Dempsey and a valuer from Hillier Parker.

40 Dallas pleaded in par 34 of the counterclaim that "on or about 12 July 1989" Mr O'Rourke gave the Hillier Parker valuations to Mr Lewis whereupon he [Lewis] orally represented to Mr O'Rourke that upon Dallas selling the West Coast Highway land to Westminster Properties Pty Ltd in exchange for the purchase of the Irwin property from Westminster Custom Credit would lend to Dallas 85 per cent or thereabouts of the Hillier property valuation of the Irwin property to finance the purchase of the Irwin property and the plaintiff would finance the purchase and development of the St Andrews land. This is described as "the first representation".

41 It is said that at or about the same time Mr Lewis further represented orally to Mr O'Rourke that the Irwin property constituted an excellent investment, a net rental of $122,400 per annum could be expected, cash received from rentals would provide an excellent cash flow which would contribute to the payment of interest on the proposed financing and there would be no difficulty in obtaining the tenant for the Irwin property. This was described as "the second representation".

42 Dallas pleaded in par 36 that at or about the same time Mr Lewis further represented that Dallas had to be an owner of Perth CBD property before Custom Credit would lend any moneys for the purchase and development of the St Andrews land, no advance would be made for the purchase and development of the St Andrews land unless Dallas purchased the Irwin property, and Dallas had to exchange the West Coast Highway land for the Irwin property for any advance to be made. This was described as "the third representation".

43 It is pleaded in par 37 and par 38 that acting upon and induced by these representations Dallas entered into agreements to sell the West Coast Highway land to Westminster and buy the Irwin property from Westminster whereupon Custom Credit approved finance for the purchase of the Irwin property and the purchase of the St Andrews land such finance being secured by the first and second mortgages and guarantees. The swap transaction was completed by the registration of transfers on 1 September 1989.

44 These assertions were rendered more specific by answers provided by Dallas to a request for particulars. When I draw together the various answers to the request in question it emerges that on the Dallas pleaded case the swap transaction was allegedly effected by offer and acceptances executed on 19 June 1989. The Irwin property was inspected by Mr O'Rourke on or about 12 July 1989 in the company of Mr Keith Collins from Hillier Parker. The alleged oral representations were said to have been made at a meeting between Mr Lewis and Mr O'Rourke in Mr Lewis' office, and by telephone, on or about 12 July 1989.

45 I note in passing that Dallas provided further and better particulars of claim on two occasions. The answers provided are not always entirely consistent with the result that there appear to be certain incongruities in the Dallas pleaded case. For present purposes, it is material to note that the answers dated 21 February 2001 contained a general description of certain key events in mid 1989 ("the 21 February particulars of counterclaim"):

"A5(a)(ii)(C) In or around June 1989, Lewis telephoned and advised the second named Second Defendant that the Plaintiff could not develop both the St Andrews and West Coast Highway developments at the same time and that he had a buyer interested in the Scarborough property.

On or around the end of June 1989, at a golf game, Lewis advised the second named Second Defendant that the Plaintiff would be able to lend a higher ratio on the Irwin Street Property to him.

In or around June/July 1989, the second named Second Defendant met with Lewis who told him that the Plaintiff would lend him $1,200,000.00 on the valuation of the Irwin Street Property, as set out by Hillier Parker. Further Lewis confirmed that, should the second named Second Defendant proceed to swap the West Coast Highway property for the Irwin Street property he would also be able to lend funds for the development of the St Andrews site. Lewis indicated that on the purchase of the Irwin Street Property, the Plaintiffs would lend money for the purchase of St Andrews.

In or around August September 1989 the second named Second Defendant telephoned Lewis and informed him that funds for St Andrews were not forthcoming, to which he was advised by Lewis that he would fix it."

46 Mr O'Rourke said in his witness statement at par 40 that Hillier Parker valued the Irwin property at $1,500,000 "at the end of June/beginning of July 1989". He spoke to Mr Lewis in the presence of his daughter and Mr Simon Adams of Custom Credit in Mr Adams office at Custom Credit and it was at this meeting that Mr Lewis said that if the swap proceeded Custom Credit would be able to lend funds for the purchase and development of the St Andrews land.

47 The witness statement bears upon matters the subject of the pleaded representations and includes reference to an assertion by Mr Lewis that as the Irwin property was across the road from the Central Law Courts there would be no difficulty in securing tenants as solicitors favoured this location. Mr O'Rourke then agreed to proceed with the swap proposal. After the meeting in the Custom Credit office Mr Lewis and Mr O'Rourke went out for lunch at the Mediterranean Restaurant.

48 Mr O'Rourke said in par 68 of his witness statement that a few days after the meeting in Simon Adams' office he and his daughter and Gordon Carruthers attended Custom Credit to sign the loan agreement.

49 Mr O'Rourke said in his witness statement that when the loan agreement was presented it only allowed $760,000 paid interest for Irwin Chambers and the balance of the loan was for the purchase of the St Andrews land. Dallas never had written confirmation about the finance for the development of St Andrews. Mr O'Rourke only had a verbal approval from Mr Lewis. On the basis of assurances from Mr Lewis the directors of Dallas signed the loan document and Mr O'Rourke guaranteed the loan agreement on behalf of Dallas.

50 I pause to observe that in his evidence in chief Mr O'Rourke identified the loan agreement as being a letter dated 26 July 1989 from Custom Credit to Dallas which spoke of a first mortgage of $1,440,000 (D3 at 3/782). The principal figure of $1,440,000 is broken down in the letter as $530,000 at settlement in respect of Connolly, $760,000 at settlement in respect of Irwin Chambers and $150,000 security deposit to cover interest. The period of loan is said to be 12 months. This letter evidencing the agreement was executed by Dallas under its common seal and by Dynasty under its common seal.

51 It emerges, then, to this point that the Dallas pleaded case, when it is drawn together in a summary form, appears to proceed from the premise that subsequent to a golf game and lunch at the Joondalup Golf Course on 13 June 1989 Mr Lewis invited Mr O'Rourke to consider the swap proposal. This led to an inspection of the Irwin Street property and to the bringing into existence of the Hillier Parker valuation dated 12 July 1989 concerning the Irwin Street property which valued that property at $1,530,000 (D19 at 2/652).

52 The Hillier Parker valuation of 12 July 1989 suggested that the West Coast land and Irwin property were of much the same value. Accordingly, it was then, "on or about 12 July 1989" that Mr Lewis made various representations in the office of Mr Adams at Custom Credit which induced Mr O'Rourke on behalf of Dallas to proceed with the swap proposal in the belief that the Irwin property was an excellent investment and that funds to purchase and develop the St Andrews land could only be obtained from Custom Credit on that basis. The witness statement and the evidence in chief of Mr O'Rourke as the principal witness for Dallas was generally consistent with the Dallas pleaded case.

53 I note in passing at this stage that as a matter of chronology one can see, with the benefit of hindsight, that there is a puzzling feature of the Dallas pleaded case when some of the matters mentioned in my overview are taken into account. In particular, as I noted in the overview, the documents adduced in evidence seem to establish that the offer and acceptances that were executed simultaneously in order to effect the swap transaction were executed on 19 June 1989. The execution of these contracts suggests that by 19 June 1989 Dallas had taken a decision to commit itself to proceed with the swap transaction.

54 It seems to follow that the Dallas decision to proceed with the swap transaction was taken prior to preparation of a written valuation by Hillier Parker dated 12 July 1989 concerning the Irwin property and yet, as I have indicated, the Dallas pleaded case, especially in par 34 and related particulars, proceeded from the premise, that the crucial representations and consequential decision by Dallas to enter into the swap transaction were taken on or about 12 July 1989, that being the date of the Hillier Parker valuation pertaining to the Irwin property. However, I feel obliged to note in passing that the 21 February 2001 particulars of counterclaim set out the alleged sequence of events in a more general or looser form. These particulars speak of certain key events happening "[i]n or around June 1989".

55 Incongruities concerning the Dallas pleaded case, especially as to the sequence of events, were raised with Mr O'Rourke in the course of his lengthy cross-examination. I will come to that aspect of the matter shortly. In the meantime, it will be useful to round off my summary of the Dallas pleaded case.

56 Dallas pleaded in par 43 that by making the first, second and third representations Custom Credit created an overall impression that the purchase of the Irwin property was a good investment and Dallas would have no difficulty in quickly tenanting the same. Further, Dallas would be able to meet its financial commitments if it borrowed from Custom Credit for the purchase of the Irwin property and the purchase and development of the St Andrews land, it would be regarded as more creditworthy, it would be in a sounder financial position to borrow from Custom Credit in order to purchase and develop the St Andrews land and it would be able to borrow sufficient money from Custom Credit to proceed accordingly.

57 It is pleaded in par 44 that in fact the purchase of the Irwin property was a bad investment, tenants could not be obtained quickly or within a reasonable time, with the result that no cash flow was received from the Irwin property to contribute to interest payments due to Custom Credit, the holding and developing of the West Coast Highway was a better investment for Dallas than proceeding with the swap transaction.

58 It is said further that Dallas lost its creditworthiness as a borrower from Custom Credit and was not able to meet its financial commitments resulting from the swap transaction. It is said also that Dallas was not able to borrow from Custom Credit sufficient money to meet the cost of developing the St Andrews land and, importantly, in par 44(e) it is said that in fact Custom Credit did not intend to and did not finance the cost of development of the St Andrews land. For ease of reference I will call the latter assertion the "par 44(e) allegation that Custom Credit failed to finance the St Andrews development".

59 Dallas pleaded in par 45 that at all material times Mr Lewis had an interest in the Irwin property and in the swap transaction which he failed to disclose to the defendants in that Westminster, as the registered proprietor of the Irwin property, had mortgaged the property to Custom Credit to secure an advance of $11,000,000 to Telbe. Further, as a facet of the swap transaction Westminster mortgaged the West Coast Highway land to Custom Credit to secure the advance of $11,000,000. It is said that Mr Lewis was a shareholder of Telbe and a shareholder and director of Madella Holdings Pty Ltd which was also a shareholder of Telbe. The wife of Mr Lewis was a director of Telbe and a shareholder and director of Madella. The principal activity of Madella was that of financial manager. The principal activity of Telbe was property development.

60 Dallas pleaded in par 46 that by reason of the matters previously pleaded Mr Lewis was under a duty to disclose his and the interest of Telbe and Madella in the swap transaction and in the Westminster mortgages. It is alleged in par 47 of the counterclaim that Mr Lewis at all times remained silent about and failed to disclose his interest which silence constituted misleading or deceptive conduct by Custom Credit or conduct likely to mislead or deceive Dallas and the guarantors into believing that the exchange was a bona fide requirement of Custom Credit if the lending company was to lend money to Dallas for the development of the St Andrews land. This assertion is described in par 47(a) as the "fourth representation".

61 Dallas pleaded in par 50 that in reliance upon the first, second, third and fourth representations and the impressions pleaded in par 43 Dallas borrowed the moneys secured by the securities, entered into and completed the swap transaction, completed the purchase of the St Andrews land, gave securities to the plaintiff, and undertook the development of the St Andrews land. The second defendants entered into the supporting guarantees.

62 Dallas asserted in its pleading that by reason of the facts and matters relied upon Mr Lewis engaged in misleading and deceptive conduct or conduct likely to mislead or deceive contrary to the operation of s 51A of the Trade Practices Act and s 9 of the Fair Trading Act and Custom Credit was deemed to have engaged in the misleading and deceptive conduct of Mr Lewis.

63 By reason of such conduct Dallas was unable to meet its recurrent financial commitments or to service and satisfy the borrowings from Custom Credit under the first, second, third and fourth mortgages or to undertake or complete development projects upon which Dallas was then commercially engaged. Further, Custom Credit lodged caveats against any dealings by Dallas on all land of which Dallas was the registered proprietor and which were encumbered by mortgages in favour of financiers other than Custom Credit thereby preventing Dallas from carrying on its business as a project property developer.

64 Dallas pleaded in par 55 that by reason of conduct complained of Dallas and Mr O'Rourke have suffered loss and damage in the manner reflected in the particulars of loss and damage set out in the counterclaim. I will return to the particulars of loss and damage in due course. However, broadly described, specific amounts are claimed in respect of the various projects including loss of profit and outgoings in respect of the Irwin property. Dallas relied upon expert evidence given at the trial in support of the particulars of loss and damage.

65 I pause to say that the claims under the Trade Practices Act and Fair Trading Act, which centred upon the four representations complained of, was the matter principally in controversy at the trial of the action. For ease of reference, I will call these the "misleading conduct claims". However, in summarising the Dallas pleaded case, I must also give attention to related claims that were said to arise out of the circumstances surrounding the swap transaction.

66 Dallas pleaded in par 39, as a plea in the alternative, that there was on or about 12 July 1989 a concluded agreement between Custom Credit and Dallas whereby it was agreed that in consideration of Dallas entering into contracts to effect the exchange of properties Custom Credit agreed to lend to Dallas 85 per cent of the Hillier Parker valuation of the Irwin Street property (namely $1,300,500) or thereabouts and other moneys required to purchase the Irwin property and complete the purchase and development of the St Andrews land as proposed in the feasibility study. This agreement was described in the pleading as "the financing agreement".

67 In par 40 of the counterclaim Dallas alleged that in breach of the financing agreement Custom Credit, at the settlement of the exchange on or about 16 August 1989, advanced only $760,000 on the security of the Irwin property and did not advance moneys under the securities for the development of the St Andrews land. It is said Mr Lewis promised Mr O'Rourke that, notwithstanding the alleged breach, Custom Credit would advance to Dallas finance for the cost of developing the St Andrews land as proposed in the feasibility whereupon, in consideration of this promise, Dallas completed the settlement of the exchange and the defendants gave securities to Custom Credit. In breach of this further agreement Custom Credit failed to advance to Dallas finance for the cost of developing the St Andrews land as proposed in the feasibility.

68 Dallas pleaded in par 55 that by reason of Custom Credit's breaches of agreement Dallas and Mr O'Rourke suffered the loss and damage described in that paragraph which I referred to earlier. I will call this the "breach of agreement claim".

69 Dallas pleaded in par 51, as a further plea in the alternative, that the first, second and third representations and the statements referred to in par 41 constituted misstatements made by Custom Credit negligently in that the misstatements were made by Custom Credit when it possessed special skill knowledge concerning the said representations and statements, or was otherwise in a special relationship with Dallas.

70 It is said these statements were made with the intention of inducing Dallas to borrow money from Custom Credit and in making statements Custom Credit failed to use reasonable care to ensure the accuracy of the representations whereby Dallas was induced to enter into and complete the swap transaction and borrow moneys from Custom Credit.

71 This plea is supported by particulars to the effect that Mr Lewis made the representations in circumstances in which he or Custom Credit never believed or never should on any sound commercial basis have believed that the statements were in fact true and accurate. It is said he made no or no sufficient enquiries to establish that the statements were reliable and well informed and knew of no or no sufficient facts which justified the making of the statements.

72 Dallas pleaded in par 52 that at all material times Custom Credit knew or ought to have known that Dallas and Mr O'Rourke were engaged in the business of project property development and obtained and had obtained finance for such activities from the plaintiff and other financiers. Again, the loss and damage said to flow from the alleged negligence is that pleaded in par 55 of the counterclaim. I will call this the "claim in negligence".

73 In essence, then upon the basis of various discrete causes of action which I have called the misleading conduct claim, the breach of agreement claim and the claim in negligence, Dallas and Mr O'Rourke by the counterclaim seek damages and interest at the rate of 23.5 per cent per annum pursuant to s 32 of the Supreme Court Act. In addition, they seek relief from any liability to Custom Credit under the securities and the third and fourth mortgages. They seek to set off damages recovered pursuant to the counterclaim against the moneys claimed by Custom Credit against Dallas and Mr O'Rourke.

74 The trial of the action was listed initially for eight days commencing 18 February 2003. At the conclusion of the initial eight listed days Dallas had presented its two principal witnesses, namely, Mr O'Rourke and his daughter, Suzanne Carruthers, and had adduced evidence from a chartered accountant, Kathal Kester Spence, who gave expert evidence concerning the loss and damage allegedly suffered by Dallas. Mr O'Rourke and Mrs Carruthers had been cross-examined at length but the cross-examination of Mr Spence was deferred until further hearing dates were obtained. As I indicated earlier, the cross-examination of Mr O'Rourke and Mrs Carruthers raised a number of evidentiary issues as to the order in which certain events occurred and this in turn gave rise to evidentiary issues of a more general kind.

75 At the conclusion of the first phase of the hearing counsel for Dallas foreshadowed amendments to the Dallas pleaded case, no doubt with a view to ensuring that the final Dallas pleaded case reflected and took account of evidence given at the trial. I will come to these amendments in due course. However, for the time being, it will be useful now to look at some of the matters put to the Dallas witnesses.

76 I have already observed that the Dallas pleaded case and the evidence in chief of Mr O'Rourke including his witness statement appeared to proceed from the premise that the first significant discussion between Mr O'Rourke and Mr Lewis of Custom Credit took place on 13 June 1989 at the Joondalup Golf Course. On the Dallas case, it was then that Mr O'Rourke canvassed the prospect of obtaining funds from Custom Credit to complete the purchase and development of the St Andrews land. A feasibility study concerning the St Andrews land is said to have been delivered to Mr Lewis at the lunch on that day. It was at about that time that Mr Lewis raised the prospect of the swap transaction as a means of facilitating increased funding to Dallas via Custom Credit.

77 A central feature of the Dallas case was that the swap transaction could not proceed until it was established by a valuation from Hillier Parker that the West Coast land and the Irwin property were of the same value. It was an undisputed fact that the written valuation obtained from Hillier Parker concerning the Irwin property is dated 12 July 1989 (D19 at 2/652). The Dallas pleaded case and related evidence indicated that the representations made by Mr Lewis were made on or about 12 July 1989 in the office of Mr Adams at Custom Credit. Mr O'Rourke said in his evidence in chief that it was on that day, and as a consequences of the representations, that he on behalf of Dallas, in the presence of Mrs Carruthers, made a commitment to proceed with the swap transaction. This commitment was confirmed at a lunch attended by Mr O'Rourke and Mr Lewis at the Mediterranean Restaurant on that day.

78 It was put to Mr O'Rourke in the course of cross-examination that a case of this kind was fundamentally inconsistent with the fact that the offer and acceptances designed to carry into effect the swap transaction were dated 19 June 1989, that is to say, only a few days after the meeting on the golf course and a fortnight or so prior to receipt of the Hillier Parker written valuation dated 12 July 1989. The tenor of the cross-examination was that Mr O'Rourke could not possibly have been influenced by representations made on or about 12 July 1989 because Dallas had committed itself to the swap transaction some weeks prior to that date. This line of cross-examination was reinforced by reference to various copy letters subsequently discovered on the files of Dallas which indicated that throughout June and thereafter Dallas made approaches to financiers other than Custom Credit with a view to obtaining finance to complete the purchase and development of the St Andrews land. Finance of this kind would not have been required if, in fact, as a consequence of the alleged Lewis representations, Dallas had obtained a firm assurance of support from Custom Credit.

79 Counsel for Custom Credit put to Mr O'Rourke also that the funding of $1,440,000 actually obtained from Custom Credit was inconsistent with the case being advanced by Dallas. If the purpose of the swap transaction was to ensure that Dallas obtained funding of up to 85 per cent of the Irwin property that would suggest that the sum of $1,275,000 should have been advanced to Dallas on the security of the Irwin property alone. This sat inconsistently with the fact that an advance of $1,440,000 was made secured by the first and second mortgages over the St Andrews land and the Irwin property jointly. Further, and in any event, the contents of the loan approval letter dated 26 July 1989 (D3 at 3/782) suggested that no portion of the amount advanced had been specifically earmarked for development of the St Andrews land.

80 Counsel for Custom Credit put to Mr O'Rourke that Dallas did not appear to have made any convincing protest about a supposed inadequacy in the funding being provided by Custom Credit. There was a protest of sorts reflected in the Dallas letter dated 10 November 1989 (D5 at 4/1107) concerning the advance of $500,000 but that protest seemed to be limited to a degree of confusion concerning the account through which the funds were provided to Dallas.

81 The cross-examination of the two principal Dallas witnesses went on to suggest that the representations had not been made as alleged. There was no promise of funding from Custom Credit of the kind contended for by Dallas. This was borne out not only by inconsistencies in the Dallas pleaded case and evidence as to the order in which certain events occurred. It was borne out also by the fact that in early 1990 Dallas applied to Custom Credit for funding to develop the St Andrews land.

82 It was put to Mr O'Rourke that the swap transaction simply arose out of arrangements made between Dallas and Westminster direct. It was put to Mr O'Rourke that the Dallas case was an elaborate reconstruction of the 1989 events prompted by the conviction of Mr Lewis for certain criminal offences and the prospect that Mr Lewis would therefore not make a convincing witness if the Dallas case were brought to trial.

83 Mr O'Rourke continued to affirm that Dallas had been misled by misrepresentations made by Mr Lewis in mid-1989 concerning the supposed benefits of the swap transaction and the availability of funding from Custom Credit for the St Andrews project. He said that he had not at any stage met with Mr Simcock of Westminster and had not made any arrangement direct with Westminster as to the swap transaction. He continued to affirm that he had entered into the swap transaction in reliance upon the representations made by Mr Lewis.

84 However, as the cross-examination proceeded, Mr O'Rourke did concede that, upon reflection, his memory might not have served him well in regard to the order in which certain events occurred. He acknowledged that he had probably been influenced by the dates appearing on various documents as, for the purpose of the litigation, he sought to reconstruct the order in which events occurred. However, having thought about the matter further, he was of the view that the initial discussion with Mr Lewis had taken place at the Joondalup Golf Course prior to 13 June 1989. There had been a subsequent, and less consequential meeting at the golf course on 13 June 1989, which was an occasion when Mr O'Rourke was taking possession of a golf buggy delivered to him from Queensland and this was filmed by the Channel 9 Television Station. It was the date upon the video recording of that incident which had led him into error.

85 Mr O'Rourke recognised that he would not have entered into the swap transaction without obtaining an assurance that the value of the Irwin property was the same as the West Coast land. However, the tenor of his evidence was that, encouraged by Mr Lewis, he met with a valuer from Hillier Parker, Mr Collins, at the Irwin property, in the company of his estate agent, Mr Dempsey, and his daughter, and inspected the premises not long after the initial golf game. It was on the occasion of that inspection that he received verbal assurances from Mr Collins as to the value of the Irwin property. It was these figures which became the background against which Mr Lewis made his representations at the Custom Credit office that persuaded Mr O'Rourke to proceed with the swap transaction. That meeting preceded delivery of the formal written valuation on 12 July 1989, being an event which occurred sometime later. Thus, when all these matters were put together, Mr O'Rourke asserted, it became apparent that the Lewis representations were made prior to the signing of the offer and acceptances dated 19 June 1989 which marked the commencement of the swap transaction.

86 It is against this background, prior to the relisting and resumption of the trial, that Dallas applies for leave to amend its statement of defence and counterclaim. The proposed amendments are reflected in a minute of further re-amended defence setoff and counterclaim of first defendant and second defendant dated 24 March 2003 which is directed to the principal pleading only. Counsel for Dallas has foreshadowed that if leave to amend is allowed in terms of the minute, consequential amendments will be made to particulars of the Dallas case with a view to bringing the particulars into conformity with the principal pleading.

87 I pause to re-iterate that the application is brought prior to completion of the trial and closure of the Dallas case which was presented first at trial. It is brought two months after the trial was adjourned owing to an insufficiency in the days listed for trial. The relisting of the trial has been deferred until the outcome of this and the related application made by Custom Credit to strike out the counterclaim is known. Counsel for Dallas observed in the course of debate that he was not minded to apply for leave to amend in these terms while the cross-examination of Mr O'Rourke was continuing because debate about the amendments may have had the effect of prompting the two principal witnesses for Dallas, namely, Mr O'Rourke and his daughter Suzanne Carruthers, to review their evidence in the light of the debate.

88 I will not traverse the Dallas minute of proposed amendment in detail. Counsel for Dallas submits that the proposed amendment does not change the Dallas counterclaim in any essential respect. He says that the four misrepresentations complained of remain the same. The causes of action relied upon by Dallas remain the same. It is said that the amendments are directed to straightening out a rather confused position concerning the timing of certain events. Dallas relies upon the precept that prior to closure of its case, Dallas should be permitted to ensure that its pleadings conform to the evidence given at the trial: Leotta v Public Transport Commission (1976) 50 ALJR 666 at 668.

89 As the pleadings presently stand Dallas contended that as a consequence of certain discussions commencing at the Joondalup Golf Course on or about 13 June 1989 Dallas was subsequently induced to enter the swap transaction as a result of representations made by Lewis of Custom Credit to O'Rouke of Dallas on or about 12 July 1989, being the date on which the Hillier Parker valuation concerning the Irwin property came to hand. On the Dallas case, the misrepresentations complained of allegedly amounted to misleading conduct causing loss or, alternatively, to negligence, or to the breach of a contract containing terms reflecting the representations made by or on behalf of Custom Credit.

90 Counsel for Dallas submits that the effect of the proposed amendments is to rely upon essentially the same facts and matters but within the framework of a different chronology. The case reflected in the amendments is that discussions between Lewis and O'Rouke concerning the provision of finance to Dallas commenced at Joondalup Golf Course prior to 13 June 1989. These discussions led to the making of the misrepresentations complained of and to an inspection of the Irwin property by O'Rouke in the company of his agent, Mr Dempsey and the valuer, Mr Collins from Hillier Parker on 19 June 1989. It is said that the offer and acceptances effecting the swap transaction were executed on 19 June 1989 following the inspection.

91 The Dallas proposed amendments appear to accept that the Hillier Parker valuation concerning the Irwin property was brought into existence in written form after 19 June 1989, that is to say, on 12 July 1989 as previously pleaded. However, under the proposed amendments the making of the misrepresentations complained of and the consummation of the swap transaction is no longer linked to publication of the Hillier Parker valuation on 12 July 1989. These amendments are clearly designed to conform to evidence given by Mr O'Rourke under cross-examination and take account of an incongruity in the Dallas case as previously pleaded, namely, that the misrepresentations complained of, upon a close analysis of the previously pleaded case, could be seen to have post dated the offers and acceptances dated 19 June 1989 whereby the swap transaction was effected.

92 I note in passing at this stage a submission made by counsel for Custom Credit that apart from the evidence of Mr O'Rouke given under cross-examination the contemporary documentation is of little assistance in corroborating the case reflected on the proposed amendments save for a reference in the offer and acceptance concerning the Irwin property which suggests that the document was signed on the day the property was inspected. Further, the evidence of Mr O'Rourke's daughter, Suzanne Carruthers, does not bear directly upon the dating of certain events.

93 Counsel for Dallas submits that pursuant to O 21 r 5 of the Supreme Court Rules an amendment to the pleadings may be made with leave at any stage of the proceedings. He submits that an amendment may be made as a matter of discretion, and even after evidence has been led. It should not be thought that principles of case management stand in the way of allowing amendments so that the true issues in controversy can be tried. The overriding principle is the attainment of justice: Finnimore v Slater & Gordon (1994) 11 WAR 250; Commonwealth v Verwayan (1990) 170 CLR 394; The State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146.

94 Counsel submits that leave to amend is ordinarily given, even at a late stage, so long as this can be done without injustice to the other party. Nevertheless, it is appropriate to refuse leave to amend, if to grant leave may bring about an injustice to the other party which cannot be compensated by an adjournment or an order for costs: Commonwealth v Verwayan (supra) Toohey J at 464.

95 Put shortly, counsel submits it is a well established principle that the object of courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. It was said in Cropper v Smith (1884) 26 Ch D 700 by Bowen LJ that there is virtually no kind of error or mistake which, if not fraudulent or intentioned to overreach, the court ought not to correct, if it can be done without injustice to the other parties. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and an amendment should not be regarded as a matter of favour or of grace.

96 Thus, counsel for Dallas contends, as the proposed amendments do not alter the substantive issues raised by the counterclaim then, prima facie, the amendments should be allowed. He relied upon the circumstances leading to the proposed amendments as described in the affidavits of Mr O'Rourke sworn 24 March 2003 and 7 April 2003.

97 Counsel submitted that in this case no injustice would be done to Custom Credit by the proposed amendments which rely on evidence already given for Dallas. They do not raise any new issue. The principal witnesses of fact for Dallas concerning the alleged misleading and deceptive conduct of Lewis were both extensively cross-examined on the facts as originally pleaded and upon the facts as would be pleaded by the proposed amendment, for it came to light in the course of the cross-examination that Mr O'Rouke was minded to review the sequence of events in June and July 1989.

98 It is said further that Messrs Collins, Dempsey, Loughnan, the Burswood Golf Course and the Joondalup Country Club were always persons or places known to Custom Credit as being relevant to evidences and circumstances surrounding the allegations in the counterclaim. It was therefore open to Custom Credit to have made wide ranging enquiries from those sources of information in the course of preparing the case for trial.

99 It is said further that the proposed amendments will not cause Custom Credit to alter the witnesses it proposed to call of whose evidence witness statements have been exchanged, namely, Lewis and Adams. They were, and no doubt will continue to be, Custom Credit's principal witnesses as their proposed evidence denies not only the alleged misleading and deceptive statements complained of but also deny any occasion when the statements were allegedly made.

100 Counsel for Dallas noted also that the fourth representation alleged by the counterclaim concerning the interest of Lewis in the companies Telbe, Madella and Westminister are not affected by the proposed amendments. The evidence of Lewis in that regard cannot be expected to change by reason of the proposed amendments.

101 Dallas therefore submits that any reproofing of the Custom Credit witnesses will be of a limited kind, and as the trial presently stands adjourned (not due to any default on the Dallas side) there will be ample time for Custom Credit to attend to reproofing of witnesses. It cannot be said on behalf of Custom Credit that it will suffer irremediable prejudice and injustice by reason of the proposed amendments: Rebolledo v Royal Sun Alliance Financial Services [2002] NSWSC 104 at pars 28 to 33. Further, this is not a case of the proposed amendments imposing any personal strain or anxieties on Custom Credit such that justice could not be done by appropriate orders as to costs or other directions bearing in mind that Custom Credit is a corporation. It is said further that no postponement of the trial will be required by the proposed amendments.

102 Counsel for Dallas went on to submit that if the amendments are allowed it must follow that the plaintiff's related application to strike out the defence and counterclaim will fall away. It cannot be thought that answers given by Mr O'Rourke in the course of cross-examination in the present case can be characterised as admissions sufficient to found an application for judgment.

103 Counsel for Custom Credit reminded the Court that pleadings play an essential part in civil actions in defining the issues to be dealt with at trial before the trial commences so that a party opposing the case is not taken by surprise. A trial is not at large, but deals with those issues joined by the pleadings: Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491 at 496.

104 Counsel for Custom Credit accepted that the grant or refusal of an application to amend is a matter of discretion. However, applications to amend pleadings after the commencement of the trial should be considered in the light of case flow management. It is more difficult for a party to obtain leave to make substantial amendments during a trial in the era of case flow management. Counsel reminded the Court that the observations of the High Court in Queensland v JL Holdings (supra) involved the practice in a court which did not have express rules to the like effect of O 1 r 4A and O 1 r 4B. Those rules give expression to the objects of case flow management. Thus, it arguably remains open to this Court to respond to an application to amend of the present kind by giving weight to the case flow management approach as appears from Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323 at 335 and 336; Hall Chadwick Corporation Finance (WA) Pty Ltd v Axiom Properties Ltd [2002] WASC 179 per Pullin J at par 28 and par 29. Put shortly, it is in the public interest that litigation is disposed of efficiently, and with a view to maximising the economical use of judicial and administrative resources, bearing in mind that it is notorious that parties incur expenses in litigation which are not recoverable by way of party and party costs.

105 Counsel for Custom Credit submitted also that amendments may be refused where the necessity for amendment was obviously apparent long before trial and was not then asked for: Hipgrave v Case (1885) 28 Ch D 356 at 361.

106 This brings me to the principal submission of counsel for Custom Credit. He said that it became apparent during cross-examination that both Dallas and Mr O'Rourke had failed to confront the temporal paradox inherent in the Dallas counterclaim, to the effect that the first three representations complained of, allegedly made on 12 July 1989, could somehow have had an influence upon the entering into of unconditional contracts (save for a requirement for simultaneous settlement) on 19 June 1989 designed to effect the swap transaction. This failure, which became apparent during cross-examination of Mr O'Rourke, gave rise to repeated attempts by Mr O'Rourke and to some extent by Suzanne Carruthers to reconstruct a sequence of events consistent with the documents so as to patch up flaws in the pleaded case which should have been evident prior to the commencement of the trial. In effect, Dallas is now seeking to remedy the effect of the cross-examination by late amendments to its pleadings.

107 Counsel went on to submit that Custom Credit has spent 12 years and a substantial amount of money preparing for a trial and exploring settlement alternatives. The proposed amendments totally reconstruct a sequence of events relied upon by Dallas by introducing a wholly new sequence of events and rendering much of Custom Credit's preparation and expenditures to date on the currently pleaded case redundant.

108 Counsel for Custom Credit underpinned the submissions by reliance upon the affidavit of the plaintiff's solicitor, Christian Robert Ainslie which describes the preparation of the Custom Credit case and refers to the difficulties which are likely to be encountered in reproofing witnesses and obtaining information from witnesses such as Mr Dempsey and Mr Collins many years after the transaction. Reference is made to the relevant files having long since been disposed of. In the course of argument reference was made also to the fact that the Dallas pleaded case has been visible on the face of the existing pleadings since mid-1995. Thus, the application to amend in a way which reconstitutes the sequence of events comes almost eight years after the sequence initially contended for was pleaded.

109 It is said that all these considerations will give rise to an injustice to Custom Credit if leave to amend is granted. The grant of leave will require the recall of witnesses, extend the time provided for the hearing and delay the conclusion of the trial. In these circumstances, the amendments should not be allowed: Finnimore v Slater & Gordon (supra).

110 Counsel submitted further that it was, in any event, a dangerous thing to allow an amendment which raises a point founded on some oral statement by a witness which may be perfectly complete so far as it is relevant to the issues being tried, but which if given in relation to different issues would be incomplete: Gordon v MacGregor [1909] HCA 26; (1909) 8 CLR 316 at 321. Custom Credit is fundamentally prejudiced in a real sense by the passage of time and the loss of potentially relevant documents from Hillier Parker, Mal Dempsey and Burswood Golf Club as described in the affidavit of Christian Robert Ainsley affirmed 31 March 2003.

111 It is said further that the Court ought not to grant leave to amend a pleading into a form which ought to be struck out. Hence, it will not give leave to a party to make a defective amendment. Some of the amendments sought involve issues of evidence rather than fact and some are directly inconsistent with the oral testimony and sworn statements of Mr O'Rourke, as emerged in the course of cross-examination.

112 Counsel went on to say that Custom Credit has issued a cross application for judgment based on the assumption that the amendments are not allowed, since the Dallas causes of action, including those predicated upon the fourth alleged representation, are equally flawed upon analysis. It is said, as to the fourth representation, that there is no plea that Mr Lewis ever advised Custom Credit of his involvement in Telbe Pty Ltd. It is impossible accordingly for Custom Credit to advise Dallas of Mr Lewis' interest in the transaction, when it itself was not aware of Mr Lewis' personal involvement in the transaction. Further, there is no plea that the conduct of Mr Lewis was intended to or did benefit the plaintiff. In those circumstances, the fourth representation, made by silence, cannot possibly be attributed to Custom Credit.

113 As I review the respective contentions for the parties, I am conscious that in the era of case flow management a party to civil litigation should generally be held to its pleadings upon the basis outlined by counsel for Custom Credit. I do not see the reasoning of the High Court in Queensland v JL Holdings (supra) as being inconsistent with that view of the matter. It is important to recall that the High Court in that case was not speaking of an application to amend in the course of trial. It would subvert the precepts upon which the civil trial process depends if, after cross-examination, a party was too easily permitted to reconstitute its case by a late amendment to the pleadings with a view to patching up any deficiencies that had emerged as a result of intensive questioning.

114 It follows from these observations that I would certainly be opposed to any amendment in the circumstances of the present case which had the effect of introducing new causes of action or raising evidentiary issues which fundamentally transformed the nature of the pleaded case or which would oblige the opposing party to undertake a fresh and very extensive round of factual enquiries, especially in respect of a transaction which occurred many years ago.

115 Ultimately, it appears to be a matter of degree as to whether amendments of the kind proposed in the circumstances of the present case should be allowed in the exercise of the discretion afforded to the trial Judge. If the amendments will give rise to a significant transformation of the case being advanced, either as to causes of action or as to evidence, then they should not be allowed, bearing in mind that for the reasons given by counsel for Custom Credit further time and expense will be involved in reviewing the evidence in the light of the amendments. If, however, the proposed amendments can be characterised as an adjustment to what was to a certain extent inherent in the nature of the case reflected in the Dallas counterclaim, then, in my view, it is appropriate to adopt the approach reflected in the reasoning of the High Court in Leotta (supra) and Queensland v JL Holdings (supra) which allows for the pleadings to be brought into conformity to the evidence so that the Court will be able to make a determination of the matters truly in controversy. However, this approach, in the circumstances of the case in hand, must be examined closely with a view to ensuring that the effect of allowing the amendments is not to impose a specific injustice upon Custom Credit as the opposing party.

116 In the present case, somewhat reluctantly, I have come to the conclusion that the proposed amendments should be characterised as an adjustment to the previously pleaded case. In arriving at that conclusion, I am strongly influenced by the fact that no attempt is made to introduce new causes of action or to alter to any significant degree the misrepresentations and circumstances relied upon by Dallas. The amendments are directed principally to timing and chronology. In that respect, it is significant that there has always been a degree of elasticity in the Dallas pleaded case in that key events are said to have occurred "on or about" certain dates. In various respects the previous pleading and the related particulars (especially the 21 February 2001 particulars of counterclaim) reflect a degree of ambiguity as to when certain events are alleged to have taken place, but without ever departing from the basic notion that the critical events took place in the months of June and July 1989.

117 It will undoubtedly be open to Custom Credit as the trial proceeds, and in closing, to make submissions upon the credibility of Mr O'Rourke in appearing to adjust the sequence of events while under cross-examination. However, it seems to me that in a case of this kind, concerning events happening many years ago, it is not altogether surprising that there should be a degree of confusion about dates that are not specifically tied to related documents, and, notwithstanding the provision of particulars, the possibility of some amendment of the pleadings as the evidence unfolded must have been allowed for as Custom Credit proofed its witnesses and gave consideration to the presentation of an opposing case at trial.

118 Accordingly, I am inclined to allow the amendments. The application to strike out was predicated upon the impossibility of Dallas making out a case in circumstances where the misrepresentations complained of were made prior to the execution of the documents effecting the swap transaction. Counsel for Custom Credit recognised that if the application to amend was allowed then it would not be open to Custom Credit to proceed with the application to strike out because, in that event, the effect of the amendments would be to place the misrepresentations complained of prior to the making of the agreements comprising the swap transaction. It will then be a matter for trial as to whether the evidence relied upon by Dallas was sufficient to support findings that the swap transaction was induced by the alleged misrepresentations.

119 Accordingly, I will say nothing further about the Custom Credit application to strike out, and will dismiss the same.

120 The Dallas application for leave to amend will be allowed subject to further discussion concerning the appropriate terms in that regard as to costs and programming orders. The Custom Credit application to strike out and enter judgment will be dismissed.

Custom Credit Corporation Ltd v Dallas Development Corporation Pty Ltd & Ors [2003] WASC 98

At a glance

Court

Decision date

Before

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Judgment (146 paragraphs)

Custom Credit Corporation Ltd v Dallas Development Corporation Pty Ltd & Ors [2003] WASC 98 (27 May 2003)

Parties

Legislation Cited (3)

Cases Cited (14)