Ehsman v Nutectime

5189/05 PATRICIA MARY EHSMAN v NUTECTIME INTERNATIONAL PTY LTD & ORS EX TEMPORE JUDGMENT 1 The Plaintiff, Patricia Mary Ehsman, seeks leave to amend the statement of claim and her defence to first cross-claim. 2 No issue is taken with respect to the amendments to the prayers for relief in paragraphs 4A, 13A and 13B of the statement of claim, nor to the amendments of the pleading and particulars in paragraphs 61A and 81 and the insertion of a heading to paragraph 74. 3 In proposed paragraph 19A of the prayers for relief, an order is sought avoiding the alienation of assets by the fifth defendant to the first defendant pursuant to an asset sale agreement and a deed of assignment of licence. The basis for that relief is pleaded in new paragraphs 73A to 73E. What is raised is an allegation that there has been a contravention of s 37A(1) of the Conveyancing Act 1919. That provision is as follows: "Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced." 4 To seek to raise an allegation of fraud at the commencement of a hearing is a serious matter. 5 Mrs Ehsman also seeks to insert a new paragraph 70A in the statement of claim in the following terms: "The proceeds from the sale of the Sale Assets, after payment of solicitor's costs and disbursements, were applied to the benefit of the Second Defendant and the Third Defendant to the exclusion of Timentel and its other creditors." 6 That is a new allegation that also raises the question of fraud. 7 It was submitted in support of the application that the amendments merely rephrase the relief sought on the evidence to be lead and do not involve any occasion for fresh evidence. 8 Mr Corsaro SC, who with Mr Bradley appears for the First, Second and Fourth Defendants, says, fairly, that he does not know whether the amendments, if allowed, would cause him to seek an adjournment. He says he has not turned his mind to the effect of the amendments. It may be that he can deal with the amendments within the compass of the evidence about to be lead. 9 There is no explanation for the failure to raise these matters in the original pleading or by way of application for amendment of the pleading before the commencement of the hearing. Mr Docker, who appears for Mrs Ehsman, candidly says that he thought of the fraud allegations when he was preparing written submissions for the five-day hearing that commenced today. But there is no evidence of whether or not a pleading of fraud had been considered earlier and rejected. 10 In Ehsman v Nutectime International Pty Ltd [2006] NSWSC 887; (2006) 58 ACSR 705, Austin J gave consideration to an application for leave to file and serve amended points of claim in this matter. Mrs Ehsman was represented by senior counsel. His Honour went carefully through the proposed pleading paragraph by paragraph, offering comment in relation to various paragraphs. As to paragraph 17, for example, an allegation that the first to fourth defendants were estopped from asserting that Timentel Pty Limited was entitled to assign its rights under the licence agreement, his Honour said at [31]: "The document does not reveal how the allegation can be made against any defendant other than Mr Brady, given that the assumption is said to have been created and acted upon at the time of the licence agreement, which was made well before Mr Frasca and Mr Paix became involved." 11 His Honour went on to say at [40] that the amended points of claim were "seriously defective". He did not accede to Mrs Ehsman's application. He said what was needed was a carefully considered pleading by statement of claim. His Honour said that the amended points of claim identified in broad terms, though imprecisely and at times in a confused way, some derivative and personal causes of action that emerged on Mrs Ehsman's account of the evidence. 12 The statement of claim, having had the advantage of his Honour's views on the amended points of claim, was filed in October 2006. There having been a precise analysis of the amended points of claim and then the filing of a statement of claim, it is not beyond the realms of probability that somebody gave consideration to s 37A(1) of the Conveyancing Act and decided not to proceed with it. 13 It was submitted that the evidence about to be lead is known to the defendants and there is no need for further evidence. I reject that submission. Having been told by senior counsel that there may be a need for further evidence, but that cannot be decided until the proposed amendments have been considered in detail, I do not propose to act upon the basis that the evidence that is to be lead is the only evidence that could relate to the issue of fraud. 14 It was submitted that there was no evidence of prejudice that might be suffered by the defendants. That is a matter that needs to be taken into account but it is by no means the only matter that should be taken into account. 15 In State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1996-1997) 189 CLR 146, the High Court held that case management considerations should not prevent a party litigating an issue that was fairly arguable provided any prejudice could be compensated by costs. At 155 the court said that justice was the paramount consideration. 16 While the attitude of courts to adjournment applications or amendment applications based on JL Holdings has been lenient, they have not always been successful. In Sali v SPC Ltd [1993] HCA 47; (1993) 67 ALJR 841, the High Court held that a refusal to grant an adjournment on the basis of an inability to obtain the services of senior counsel was not a miscarriage of justice. And a lack of preparedness of a party's legal adviser did not justify an adjournment in Dekkan v Picciau [2008] NSWCA 18. 17 In Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 83 ALJR 951 the High Court has recently restored case management principles as relevant considerations in such matters and has held, in that respect, that JL Holdings is not authoritative. The ANU brought proceedings in the ACT against its insurers and against Aon, its insurance broker. It settled against the insurers and then sought an adjournment to raise extensive amendments of its pleading against Aon. The adjournment was granted and leave to make the amendments was subsequently granted, notwithstanding that the explanations for delay were not entirely satisfactory, according to the trial judge. On appeal, indemnity costs were substituted for ordinary costs. The High Court ordered that leave to amend should be refused. 18 The ACT rules of court contain an equivalent of s 56(1) of the Civil Procedure Act 2005 in its r 21. Gummow, Hayne, Crennan, Kiefel and Bell JJ concluded as follows at [111-112]: "An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.

Then at [114] their Honours said: " Rule 21 of the Court Procedures Rules recognises the purposes of case management by the courts. It recognises that delay and costs are undesirable and that delay has deleterious effects, not only upon the party to the proceedings in question, but to other litigants. The Rule's objectives, as to the timely disposal of cases and the limitation of cost, were to be applied in considering ANU's application for amendment. It was significant that the effect of its delay in applying would be that a trial was lost and litigation substantially recommenced. It would impact upon other litigants seeking a resolution of their cases. What was a "just resolution" of ANU's claim required serious consideration of these matters, and not merely whether it had an arguable claim to put forward. A just resolution of its claim necessarily had to have regard to the position of Aon in defending it. An assumption that costs will always be a sufficient compensation for the prejudice caused by amendment is not reflected in r 21. Critically, the matters relevant to a just resolution of ANU's claim required ANU to provide some explanation for its delay in seeking the amendment if the discretion under r 502(1) was to be exercised in its favour and to the disadvantage of Aon. None was provided." 19 French CJ and Heydon J, while agreeing with the joint judgment, added their own observations. 20 In this case there is not the immediate prospect of an adjournment, but that cannot be ruled out. In my view, if there is to be an adjournment and the matter is to recommence at some later stage, the principal objective of s 56 of the Civil Procedure Act will not be met. 21 What I propose to do is this. I disallow the amendments to paragraphs 70A and 73A to 73E of the statement of claim, with liberty to reapply during the five days of this trial should the defendants reach the view that the matter can be dealt with on the existing evidence. I will allow the other amendments. 22 I disallow the amendments to the defence to first cross-claim with liberty to reapply should the defendants reach the view that the matter can be dealt with on the existing evidence.

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