Genworth Financial Mortgage Insurance Pty Limited v Peter Clisdell Pty Limited

REASONS FOR JUDGMENT 1 This is the first day of a six day hearing which is scheduled for 7 to 11 September 2009, as well as 17 September 2009 (if that proved necessary). 2 This morning, I granted leave to the first, second and third respondents to file in Court a notice of motion seeking leave to amend the defence in accordance with a draft amended defence, being annexure "Y" to an affidavit of Richard Andrew Oldfield sworn 4 September 2009, which affidavit was read in support of the application to amend. 3 The amended defence proposes amendments which fall in two classes. 4 The first class is extremely limited. Indeed, no party addressed me on this class. The amendment (para 5A) is simply to include in answer to the applicant's claim a contention that the representations alleged by the applicant and said to found its right to damages were representations as to a future matter and that there were reasonable grounds for making those representations. That amendment plainly falls within the existing scope of the proceedings. 5 However, the proposed amended defence also includes, in new paras 21 to 168, a detailed set of allegations against various parties, in effect, alleging fraud and misleading and deceptive conduct in relation to the obtaining of loans for the purchase of the properties which are the subject of this proceeding. In short, the defendant says that the various persons nominated in those paragraphs are concurrent wrongdoers, in the sense that the applicant would not have issued lenders mortgage insurance but for the false and fraudulent misrepresentations made as to the identity of the borrower, the borrower's employment, and the borrower's income (or, at the least, the borrower's employment and borrower's income) in respect of all of the properties the subject of the application, perhaps bar one involving a purchase by a Mr Siegel. 6 It follows from these allegations that the respondents say that the proceeding gives rise to apportionable claims within the meaning of the relevant provisions of the Trade Practices Act 1974 (Cth), in particular, ss 87CA to 87CH, and the Civil Liability Act 2002 (NSW), in particular ss 34 and 35. The consequence, from the respondents' point of view, is that they cannot be liable for more than their proportionate share of any damages, should they be found to be liable at all. 7 All of the parties recognise that these new claims are substantial and amount to a large amendment to the scope of the existing pleadings involving, as they do, allegations of fraud and misleading and deceptive conduct against a range of people who previously had no involvement whatsoever in the proceeding. 8 The affidavit of Mr Oldfield establishes that the reason for the application for the amendment at this stage is that the solicitors for the respondents issued a subpoena on 14 May 2009 to FirstMac Limited. The purpose of issuing this subpoena was to obtain documents relevant to the question of damages or quantum of damages. After a protracted dispute between FirstMac, the lender, the mortgage insurer Genworth Financial Mortgage Insurance Pty Ltd (the applicant in these proceedings), and the respondents, the validity of the subpoena was ultimately upheld, and documents produced on 23 July 2009. Apparently, the documents were produced in a not particularly helpful way. Be that as it may, the solicitors for the respondents analysed the documents. From that analysis, to their surprise, they uncovered information which suggested to them the existence of potentially fraudulent as well as misleading and deceptive conduct by the borrowers, which, the respondents say, must have affected the decision of the applicant to grant mortgage insurance. 9 As a consequence of their analysis of those documents, the solicitors for the respondents took various steps, including obtaining statements from two people who were said to be in one way or another victims of the alleged fraud. These statements are annexed to the affidavit of Mr Oldfield in support of the application to amend. 10 It suffices to say for present purposes that the applicant, through its counsel Mr Newton, accepts that on the evidence that I have before me there is a cogent claim as set out in the amended defence that there may well be concurrent wrongdoers as claimed in that document. I am satisfied that this must be the case, given the evidence to which I have been taken in support of the application to amend, even though that evidence is incomplete at this stage. 11 The respondents say that they should be permitted to amend the defence. 12 First, although the subpoena was only issued on 14 May 2009, and thus more than a year after the proceedings were commenced (6 May 2008), the subpoena was only issued for the purpose of obtaining material relevant to the question of damages. The information that became available through a close analysis of the documents produced under the subpoena in support of the allegations of fraud and misleading and deceptive conduct came as a surprise to the respondents. They were not looking for that information. They had not made any tactical decision to delay the issuing of the subpoena. They simply obtained information which they had not expected, and which provided or provides a cogent basis for the amendments, insofar as they claim the existence of concurrent wrongdoers who, if any liability is found, should be proportionately responsible for any damages. 13 Second, the respondents say that between 14 May and 23 July 2009 there was delay in answering the subpoena, for which the respondents are not responsible. In short, the lender, and subsequently the applicant, refused to produce documents under the subpoena and ultimately filed a notice of motion seeking to set the subpoena aside altogether. That motion was heard on 15 July 2009. Registrar Hedge ordered that all the documents sought in the schedule to the subpoena be produced by 24 July 2009. 14 According to the respondents, they have therefore acted very promptly since receiving the documents on 23 July 2009. I accept that submission, because it is clear from the affidavit of Mr Oldfield that: - (i) it took some time to analyse the documents, and (ii) the respondents, during the time since production, have taken significant steps to obtain evidence which prima facie strongly supports the proposed amendments. 15 Third, the respondents say that there is no other way except through this amended defence that the respondents can put in issue the question of potential proportionate liability. They have no alternative in order to claim proportionate liability other than to plead the amended defence which they have done on the basis of the evidence currently in existence. They say, accordingly, that the amendments, while significant in extent, are significant to the ultimate issue of their potential liability. Accordingly, the importance of the amendment in this case cannot be overlooked. 16 Inevitably my attention has been drawn to the recent decision of the High Court in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 (Aon), particularly at [5], [35] and [96]-[103]. The respondents have noted that there are many differences between the facts in Aon and the present case. First, this is an application to amend a defence by a defendant, not, as in Aon, an application to amend by an applicant which already had the advantage of consent orders reached through a process of mediation. Second, the Federal Court Rules, specifically Order 13 r 2, are different from the rules of the ACT Supreme Court (Court Procedure Rules 2006 (ACT)), particularly the inclusion therein of the requirement in r 21(1) that in civil proceedings there be a just resolution of the real issues with minimum delay and expense. Third, in Aon, it seems that there was no adequate explanation for the delay in the application to amend, and indeed the delay may have been a tactical decision. The same certainly could not be said in the present case. Finally, in Aon, the majority of the High Court noted at [102] that even where r 21 of the Court Procedure Rules, or a rule to that effect, applied, not every application for an amendment should be refused because it will involve the waste of some cost, and some degree of delay. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Hence, as the majority recognised at [102]: It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. That is the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the Court's discretion. 17 In this case, there has been an explanation for the delay. The only issue of concern, it seems to me, in terms of delay, is that it was not until 14 May 2009 that the respondents issued the subpoena when, as Mr Newton, counsel for the applicant properly said, the issue of damages was always alive and accordingly, the subpoena could have been issued at any time. 18 That having been said, I need to weigh that issue of delay against the nature and importance of the amendment. The amendment is of fundamental importance to the respondents and their potential liability. If the amendments are established, and ultimately succeed, then the respondents' liability will be subject to the apportionment provisions of the Trade Practice Act and the Civil Liability Act. It is true that the granting of the amendment, as I reluctantly accept, will lead to the vacation of the hearing dates. Inevitably, therefore, there will be delay in the resolution of these proceedings. Given the nature of the amendments, and the need for further evidence to support them, I accept that the delay will be measured in the order of months, and not weeks. 19 I also accept that the interests of the applicant and the cross-defendant will not wholly be addressed by orders for costs. They will suffer prejudice which, as the High Court recognised in Aon, is not wholly curable by a costs order. The simple fact of the delay in the resolution of the proceedings will cause them prejudice. 20 That having been said, I am persuaded that the amendment should be allowed. I am persuaded to this conclusion because of the nature and importance of the amendment to the respondents, which I have already explained. 21 Also, while there was delay in the issue of the subpoena, there is an explanation for that delay which, while not wholly satisfactory, is credible. It is clear that the respondents did not expect to obtain documents capable of making out a case of concurrent wrongdoers when they issued the subpoena. Since obtaining the documents, they have acted with due expedition. The documents give rise to an issue which the respondents did not, and could not have, reasonably expected at the time they issued the subpoena. 22 The important of the amendments is real and in these circumstances it seems to me that it would be unjust to deny the respondents the opportunity to run this case, even though the consequence is the vacation of the current hearing dates. I accept the submissions Mr Jones, counsel for the cross-defendant, has made, that I cannot immediately seek to determine the issue of his client's responsibility under the professional indemnity insurance contract, because I may then be involved in a hypothetical factual determination. The consequence is that other than case management and the resolution of the costs issue, nothing useful can happen this week. That is unfortunate, but it seems to me to be an inevitable consequence of what has occurred today. 23 Accordingly, I grant leave to the respondents to amend their defence in accordance with the draft amended defence which is annexure "Y" to the affidavit of Mr Oldfield. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.