Gloucester Shire Council v Fitch Ratings, Inc

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Counsel for the Applicants: Mr C Withers with Ms E Bathurst

Solicitor for the Applicants: Squire Patton Boggs

Counsel for the Respondents: Mr T G R Parker SC with Mr D Habashy

BETWEEN: GLOUCESTER SHIRE COUNCIL ABN 39 690 038 002 First Applicant

DIVISION CCMF LIMITED ABN 29 113 941 343 Second Applicant

AND: FITCH RATINGS, INC (A COMPANY INCORPORATED IN DELAWARE, USA) First Respondent

DERIVATIVE FITCH, INC (A COMPANY INCORPORATED IN DELAWARE, USA) Second Respondent

FITCH RATINGS, LTD (A COMPANY INCORPORATED IN THE UNITED KINGDOM) (and another named in the Schedule) Third Respondent

JUDGE: WIGNEY J DATE OF ORDER: 16 March 2017

1. Leave be granted to the applicants to amend the Amended Statement of Claim by filing a Further Amended Statement of Claim in the form of exhibit 4 tendered at the hearing of the applicants' interlocutory application.
2. The amendments to the pleading effected by the filing of the Further Amended Statement of Claim take effect from the date of the filing of the Statement of Claim, being 1 October 2014.
3. The respondents' amended interlocutory application dated August 2016, seeking the summary dismissal of the proceeding, or the striking out of the Amended Originating Application and Amended Statement of Claim, be dismissed.
4. Within 7 days of the date of the judgment, the parties are to confer with a view to agreeing on orders in respect of the costs of the parties' respective interlocutory applications, in light of these orders and the reasons for judgment.
5. In the event that the parties are unable to agree on orders in relation to costs, the parties are to exchange and file written submissions in relation to costs, not exceeding 3 pages in length, within 14 days of the date of judgment. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WIGNEY J: 1 This interlocutory battle arises in the context of a complex and substantial commercial representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth). The respondents are corporations involved in a major global ratings agency business known generally as "Fitch". The representative applicants, Gloucester Shire Council and Division CCMF Limited (who for the sake of simplicity will generally be referred to collectively as Gloucester), allege that they suffered loss and damage as a result of their investment in sophisticated financial products called synthetic collateralised debt obligations. They claim that in making that investment, they relied on credit ratings that Fitch assigned to the products. Gloucester's case, in simple terms, is that Fitch's ratings were misleading and deceptive, or were the product of a negligent ratings process. 2 The representative proceeding is at a very early stage, though there have already been significant delays, both in the commencement and the prosecution of the proceeding. In the present dispute, Fitch applied for the proceeding to be summarily dismissed, or alternatively for the pleading to be struck out, on the basis of what was said to be a fundamental deficiency in Gloucester's pleaded case in relation to reliance. Gloucester appeared to accept that there was a deficiency in its pleaded case. It sought to meet that deficiency by applying for leave to further amend its pleading. Should Gloucester be allowed to amend? Or should leave be refused and the existing pleading be struck out or the proceeding summarily dismissed? 3 The duelling interlocutory applications raise two substantive questions. The first is whether the proposed amendment would cure the identified deficiency in the existing pleading. Does the proposed amended pleading raise a case which is at least reasonably arguable or has reasonable prospects of success? 4 The second question, which effectively only arises if the first question is answered in favour of Gloucester, is whether leave to amend should nonetheless be refused on discretionary grounds. In that context, the issue of delay, and whether such delays as have occurred have been adequately explained by Gloucester, loomed large in Fitch's opposition to leave to amend. Voluminous affidavit and documentary evidence was adduced through Gloucester's solicitor in an endeavour to explain the apparent delays. That evidence was the subject of vigorous and extensive challenge. Other factors, including prejudice, are also required to be weighed in the balance. Has any relevant delay been adequately explained? Should leave to amend be refused on discretionary grounds in all the circumstances? 5 For the reasons that follow, leave to amend should be granted and Fitch's application for summary dismissal should be refused. The proposed amended pleading raises a claim which is at least reasonably arguable or has reasonable prospects of success, and the relevant circumstances weigh in favour of permitting the amendment.

Procedural background 6 The progress of this matter has been far from satisfactory. More will be said later concerning aspects of the procedural chronology. It suffices at this stage to provide a basic outline of the course of the proceeding so far. 7 It was common ground, at least for the purposes of resolving the applications at hand, that Gloucester's causes of action accrued on 1 October 2008, when the financial products it had acquired first sustained losses. Gloucester commenced this proceeding on 1 October 2014, exactly six years after the accrual of its causes of action, by filing an Originating Application and Statement of Claim. 8 The matter was initially listed for a directions hearing on 30 October 2014. That hearing was adjourned on the application of Gloucester. Similar adjournment applications were made and granted on 12 November 2014, 11 December 2014, 11 February 2015, 14 April 2015, 19 - 26 May 2015 and 3 June 2015. Each of those adjournments was applied for ex parte as Fitch had not been served. 9 On 26 June 2015, Gloucester filed an application for leave to serve Fitch outside the jurisdiction. Orders granting that leave were made on 15 July 2015. Those orders were subsequently amended on the application of Gloucester to permit it to serve an amended application and pleading. Gloucester filed an Amended Originating Application and Amended Statement of Claim on 28 August 2015. The Amended Statement of Claim is the existing pleading that Fitch has applied to strike out. Service on Fitch was effected in September or October 2015. It is unnecessary to resolve the apparent dispute concerning the precise date of service. 10 The matter was listed for case management hearings in November and December 2015, including a joint case management hearing with other proceedings involving another ratings agency, Standard & Poor's. 11 Fitch filed its application for summary dismissal on 29 March 2016. On 4 April 2016 orders were made for the filing of evidence in relation to the dismissal application and the application was set down for hearing on 6 June 2016. 12 The summary dismissal application was not heard on 6 June 2016. Shortly prior to the hearing, Gloucester served Fitch with a notice to produce documents and obtained leave to have a subpoena issued to the Commonwealth Bank. The notice to produce and subpoena both sought the production of documents that Gloucester contended would be relevant to the dismissal application. Fitch disputed that contention and applied to have the notice and subpoena set aside on the basis that there was no legitimate forensic purpose in requiring production of the documents. That application was heard and dismissed in May 2016. It was, however, necessary to vacate the hearing of the summary dismissal application to allow Gloucester sufficient time to consider the documents produced in answer to the notice and subpoena. 13 Gloucester filed its application seeking leave to further amend its pleading on 14 July 2016. Somewhat confusingly, Gloucester then filed a further interlocutory application on 1 September 2016. The effect of the second application was to seek leave to file a different version of the further amended pleading to that which was the subject of the first application. 14 Regrettably there was then yet another interlocutory dispute between the parties concerning a further notice to produce. Argument in relation to that dispute was heard in September 2016. 15 The summary dismissal and amendment applications were listed for hearing on 14 October 2016. At the hearing, Fitch relied on an amended interlocutory application, dated August 2016, which added an alternative claim that the existing pleading be struck out. The hearing eventually ran for four days: 14 and 19 October and 9 and 10 November 2017. A good deal of the hearing time was taken up by the cross-examination of Gloucester's solicitor.

SUMMARY OF gloucester's case as currently pleaded 16 The general nature of the representative proceeding is outlined in a judgment in relation to the earlier interlocutory stoush concerning Gloucester's notice to produce and subpoena: Gloucester Shire Council v Fitch Ratings, Inc [2016] FCA 587 at [2]-[9]. It is, however, necessary to provide some more detail in relation to Gloucester's pleaded case against Fitch. The following summary of Gloucester's case follows the general scheme and structure of Gloucester's existing pleading.

Synthetic Collateralised Debt Obligations 17 The proceeding concerns Fitch's rating, and Gloucester's acquisition, of financial products known as synthetic collateralised debt obligations, or SCDOs for short. SCDOs are particularly complex, some would say bewildering, financial products. One wonders whether anyone at the time ever truly understood or appreciated exactly what they were, or how they worked, other than perhaps the Wall Street masterminds who conjured them up. Following is a brief, general and highly simplified summary of the nature and operation of SCDOs. It is based largely on paragraphs 12 to 59 of Gloucester's existing pleading. As no defence has been filed to date, it is not known whether the description of the general features of SCDOs in the pleading is contentious. No issue was taken with that description in the context of the resolution of the interlocutory applications. 18 A collateralised debt obligation, or CDO, is a structured financial product through which investors acquire the right to receive interest and principal payments from a number of underlying debt securities, mainly bonds, in return for bearing the risk in relation to certain defaults in respect of those securities. A SCDO is a form of CDO in which the investors do not actually obtain any direct or indirect interest in the underlying debt securities; rather, the performance of the securities operates as a sort of benchmark which ultimately determines the performance of the SCDO. This "synthetic" feature of SCDOs has led some pundits to describe them as a "trading strategy". Others, perhaps those more inclined towards cynicism, would call them a bet. 19 An investor in a SCDO, upon payment of the purchase price, is issued with notes by an issuer. The issuer is ordinarily a special purpose vehicle established by the arranger of the notes, usually an investment bank. The investor generally acquires the notes from a distributor who acquires title to, or at least an interest in, the notes from the arranger. 20 The notes in question in this matter were called Palladin Portfolio Notes AA and Palladin Portfolio Notes AAA. The issuer of the notes was a special purpose company called Credit-Linked Enhanced Asset Repackagings (C.L.E.A.R.) plc. The arranger of the notes was Merrill Lynch International, a company associated with the major international investment bank Merrill Lynch. The distributor in Australia was the Commonwealth Bank of Australia. 21 The funds invested by the investor are used by the issuer to acquire collateral, usually in the form of bonds or debt securities. The intention is that the issuer will earn interest from those bonds or securities. The issuer then enters into a contract, called a credit default swap, with another party, called the swap counterparty. The swap counterparty is often the investment bank that is the arranger of the notes. Under the terms of the credit default swap, the issuer receives periodic payments, called the swap premium, in return for agreeing to pay the swap counterparty certain amounts if certain events defined in the agreement occur. The defined events are typically defaults by the issuers of certain specified credit instruments. The issuers of those credit instruments are referred to as the reference entities and the portfolio of credit instruments is referred to as the reference portfolio. The bonds or other debt securities acquired by the issuer from the invested funds are held by the issuer as collateral in respect of any payments the issuer is required to make to the swap counterparty under the terms of the credit default swap as a result of defaults by the reference entities. The bonds and securities that comprise the collateral can be liquidated for the purpose of making payments due under the terms of the credit default swap. 22 In simple terms, in entering into the credit default swap, the issuer of the notes sells credit protection to the swap counterparty. In consideration of receiving the periodic swap premium payments, the issuer agrees to indemnify the swap counterparty (usually the arranger) for losses arising from defaults by the reference entities in respect of the instruments in the reference portfolio. As noted earlier, however, the "synthetic" aspect of a SCDO (as opposed to a CDO) is that the issuer does not have any actual interest or rights in respect of the obligations of the reference entities. Rather, the performance by the reference entities of their obligations under the instruments in the reference portfolio operates as a sort of notional benchmark to crystallise the obligations of the issuer of the notes under the terms of the credit default swap. 23 The periodic interest payments payable by the issuer of the notes to the investor are generally called coupons. The coupons are paid by the issuer to the investor from the funds generated both from the interest earned from the bonds held by the issuer as collateral, and from the swap premium payable to the issuer under the terms of the credit default swap. If the issuer of the notes is required to liquidate any of the collateral in order to pay amounts due to the swap counterparty under the credit default swap, the result ordinarily is that the coupons received by the investors are reduced, and less funds are available for payment to the investors upon maturity of the notes. 24 An investor in SCDOs is exposed to the risks to which the issuer of the notes is exposed through its investment in the debt securities that form the collateral and, perhaps more significantly, through its entry into the credit default swap. The creditworthiness of the reference entities within the reference portfolio at any given time is, accordingly, likely to affect the rating and market value of the SCDO. 25 The arranger of the SCDO ordinarily structures the SCDO to ensure that it achieves a particular rating from a rating agency. The arranger does this by adjusting the reference entities in the reference portfolio. As will be seen, the allegation that the arranger, Merrill Lynch, was able to structure the Palladin notes to achieve the intended or expected AAA and AA ratings is important to the viability of Gloucester's amended pleading. 26 The arranger ordinarily arranges for the SCDOs to be issued in tranches. The different tranches expose the investors in those tranches to differing degrees of risk arising from credit events or defaults by the reference entities. Investors in tranches at the lowest level bear the impact of the first credit events or defaults up to a specified number. Investors in the higher tranches only bear the impact of defaults after the investors in the lower tranches have lost their investment. The point at which an investor in a particular tranche will begin to experience losses as a result of defaults is known as the attachment point: the proportion of the total principal that must default before the investor bears any loss of principal. The detachment point is the proportion of the total principal that must default before the investor experiences a total loss of principal. 27 Not surprisingly, the lower tranche notes generally have lower credit ratings and the notes in the higher tranches have higher credit ratings. In this matter, the Palladin AA notes were the lower tranche notes and the Palladin AAA notes were the higher tranche notes. 28 To make things even more complex, a manager is generally appointed in respect of the note issue. The manager in the case of the Palladin Notes was Ixis Asset Management. In simple terms, the manager is responsible for managing the reference portfolio within certain defined parameters.

Fitch's rating of the SCDOs - the alleged "Fitch Representations" 29 As already indicated, the SCDOs in issue in this proceeding were called Palladin Portfolio Notes AAA and Palladin Portfolio Notes AA. Fitch assigned a AAA rating to the Palladin AAA notes on 7 June 2007. It assigned a AA rating to the Palladin AA notes on the same day. 30 The AAA rating is the highest rating that can be assigned by Fitch and denotes the lowest expectation of default risk. Gloucester alleges that in assigning the AAA rating to the Palladin AAA notes, Fitch communicated and represented to investors or potential investors in the Palladin AAA notes that: Fitch had concluded that the capacity of the Palladin AAA notes to pay coupons and the principal amount at the end of the term of the notes was exceptionally strong; Fitch had concluded that the capacity of the Palladin AAA notes to pay coupons and the principal amount at the end of the term was highly unlikely to be adversely affected by foreseeable events; those conclusions were based on reasonable grounds; and in reaching those conclusions and assigning the notes a AAA rating, Fitch had exercised reasonable care and skill. 31 The AA rating is the second highest rating that can be assigned by Fitch and denotes expectations of very low default risk. It differs from the AAA rating only to a small degree. Gloucester alleges that in assigning the AA rating to the Palladin AA notes, Fitch communicated and represented to investors or potential investors in the Palladin AA notes that: Fitch had concluded that the capacity of the Palladin AA notes to pay coupons and the principal amount at the end of the term of the notes was very strong; Fitch had concluded that the capacity of the Palladin AA notes to pay coupons and the principal amount at the end of the term was not significantly vulnerable to foreseeable events; those conclusions were based on reasonable grounds; and in reaching those conclusions and assigning a AA rating, Fitch had exercised reasonable care and skill. 32 The existing pleading defines the representations that were said to flow from Fitch's assignment of AAA and AA ratings to the Palladin AAA and Palladin AA notes as the "Fitch AAA Representations" and the "Fitch AA Representations" respectively. Collectively they are defined as the "Fitch Representations". Those alleged representations formed an important component of Gloucester's pleaded cause of action for negligence and negligent misstatement. 33 The pleading contains considerable detail concerning the ratings process which, on Gloucester's case, was undertaken by Fitch in rating the Palladin AAA and AA notes. For present purposes, it is sufficient to note that Gloucester's case was that, to a large extent, Fitch's ratings process essentially involved inputting certain data concerning the reference entities and reference portfolio into a program called Vector. In very simple terms, Vector was a computer program which ran a simulation model to produce a rating output. The simulation model was used to estimate the likelihood of credit events or defaults occurring in the reference portfolio, the distribution of losses across tranches of the SCDOs caused by credit events, and the level of losses that a tranche must be able to withstand in the simulation in order to achieve a given rating. 34 The assessment of defaults likely to be experienced by reference entities involved both an assessment of the likelihood of a reference entity defaulting individually, and the assessment of the likelihood of events occurring in which more than one of the reference entities defaulted. The assessment of individual defaults was based on historical data of default probabilities for assets of the same rating and class as the reference entities. The assessment of the likelihood of events causing joint defaults was determined by the employment of a particular mathematical model or concept known as a copula. The Vector model employed a copula known as the Gaussian copula. The Gaussian copula was characterised by a correlation matrix which assessed the probability that multiple reference entities would default at the same time, based on common exposure to external events. This assessment relied on various "correlation" assumptions that reference entities operating in the same industry or regional area had a higher correlation, and therefore likelihood of simultaneous default. 35 An important point, which was emphasised by Gloucester in support of its amendment application, was that the Vector model was available on Fitch's website. Arrangers of SCDOs, such as Merrill Lynch, were able to download the model and run a simulation using various reference entities and assumptions to see what rating was produced by the model and would therefore be assigned by Fitch. The arranger was therefore able to change the mix of reference entities in the reference portfolio to produce a desired rating. It could therefore safely predict what rating the rating agency would eventually assign upon the issue of the notes. This in turn allowed it to communicate the expected rating to prospective investors prior to the issue of the notes.

Absence of reasonable grounds and reasonable care 36 Gloucester alleges that Fitch did not have reasonable grounds for concluding that the Palladin AAA notes should be assigned a AAA rating, or for concluding that the Palladin AA notes should be assigned a AA rating. It contends that the methodology utilised by Fitch to assess the SCDOs could not reliably form the basis for the ratings assigned. Detailed particulars of the alleged deficiencies in the methodology are provided. It is unnecessary to refer to those particulars in any detail. The particulars include that the Gaussian copula model used by Fitch was inappropriate for a number of reasons; that in its modelling Fitch used estimates of the number of individual defaults and correlation that were too low and underestimated the impact of individual defaults and correlation; that Fitch failed to test the performance of the SCDOs in scenarios involving "exceptional but plausible" or severe or extreme stress; and that there were other deficiencies or shortcomings in respect of the assumptions and predictions used in Fitch's modelling.

Reliance on the ratings 37 The allegations in the existing pleading concerning reliance are central to Fitch's application for summary judgment. 38 It is alleged that on or about 24 May 2007, Gloucester agreed to acquire a $500,000 investment in the Palladin AA notes. The acquisition was completed on 7 June 2007. More significantly, it is alleged in paragraph 88 of the existing pleading that prior to investing in the Palladin AA notes, Gloucester became aware that Fitch "intended" to assign a AA rating to the product on the issue date of that product. The particulars provided in respect of paragraph 88 of the existing pleading state that in May 2007, Gloucester was told by the Commonwealth Bank of Australia that Fitch "was expected to" assign a AA rating to the Palladin AA notes. 39 It is clear from evidence tendered in respect of the summary judgment application that the particulars to paragraph 88 were based on two documents that the Commonwealth Bank provided to prospective investors in the Palladin notes in May 2007. The first document was a presentation or marketing document. That document stated that the rating for the notes was "AAA rating for principal and coupon for the AAA tranche and AA rating for principal and coupon for the AA tranche". There was, however, a footnote to that statement. It stated: "Expected rating by Fitch. Commonwealth Bank does not guarantee the rating of the Note." 40 The second document was a product brochure. It too referred to the AAA and AA rating of the coupon and principal of the two tranches of Palladin notes. It too included a footnote in essentially the same terms as the marketing document. 41 Paragraph 91 of the existing pleading is in the following terms: In deciding to invest in the Palladin AA SCDO, the First Applicant [Gloucester] relied substantially on the ratings assigned to those SCDOs by Fitch, on the basis of the First Applicant's belief that those ratings were a reliable indicator of the creditworthiness of those SCDOs. (Emphasis added.) 42 As can be seen, in the existing pleading Gloucester alleges that it relied on the ratings assigned by Fitch in "deciding to invest" in the Palladin notes. That aspect of the pleading is critical to Fitch's case for summary judgment. Gloucester's decision to invest is alleged to have been made on or before 24 May 2007. Fitch did not assign the ratings until 7 June 2007. Gloucester therefore could not have relied on the ratings assigned by Fitch when it decided to invest. In short, Fitch contended that there was a clear chronological flaw in Gloucester's reliance case. 43 The allegations in the existing pleading concerning the acquisition of Palladin AAA notes by CCMF, and CCMF's alleged reliance on the ratings assigned by Fitch, are in essentially identical terms to the allegations concerning acquisition and reliance by Gloucester. 44 CCMF agreed to acquire a $1,000,000 investment in the Palladin AAA notes on or about 21 May 2007. The acquisition was completed on 7 June 2007. Prior to investing in the Palladin AAA notes, CCMF became aware that Fitch "intended to" assign a AAA rating to the product on the issue date. That awareness came about as a result of the Commonwealth Bank documents. In "deciding to invest", CCMF was alleged to have "relied substantially" on the ratings assigned by Fitch. Fitch did not, however, assign a AAA rating to the Palladin AAA notes until 7 June 2007, well after CCMF decided to invest.

The statutory causes of action 45 The existing pleading alleges three statutory causes of action, each arising from an alleged contravention of provisions of the Corporations Act 2001 (Cth) or the Australian Securities and Investments Commission Act 2001 (Cth).

Misleading or deceptive conduct 46 The first statutory cause of action is detailed in paragraph 106 of the existing pleading. It involves alleged contraventions of s 1041H of the Corporations Act and ss 12DA and 12DF of the ASIC Act. Section 1041H(1) and (2) of the Corporations Act relevantly provides as follows: 1041H Misleading or deceptive conduct (civil liability only) (1) A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. Note 1: Failure to comply with this subsection is not an offence. Note 2: Failure to comply with this subsection may lead to civil liability under section 1041I. For limits on, and relief from, liability under that section, see Division 4. (2) The reference in subsection (1) to engaging in conduct in relation to a financial product includes (but is not limited to) any of the following: (a) dealing in a financial product; (b) without limiting paragraph (a): (i) issuing a financial product; (ii) publishing a notice in relation to a financial product; …. 47 Section 12DA of the ASIC Act is in similar terms to s 1041H, though it only concerns conduct in relation to financial services. Section 12DF of the ASIC Act concerns misleading conduct in relation to financial services. 48 The apparent elegant simplicity of s 1041H of the Corporations Act and s 12DA and s 12DF of the ASIC Act is belied by the complex maze of definitional provisions that must be waded through in order to understand what is meant by a financial product and a financial service. The term "financial product" is broadly defined in ss 763A of the Corporations Act and ss 12BAA of the ASIC Act. The circumstances in which a person provides a "financial service" are defined in s 766A of the Corporations Act and s 12BAB of the ASIC Act. The definition of the provision of a financial service in turn refers to various other defined terms and circumstances, which also include defined terms and circumstances and so on. Relevantly, the provision of a financial service includes the provision of financial product advice, which is defined in s 766B of the Corporations Act and s 12BAB(5) of the ASIC Act, and dealing in a financial product, which is defined in s 766C of the Corporations Act and s 12BAB(7) of the ASIC Act. It is little wonder that the provisions have been described as a "legislative morass" or, more colourfully, as "legislative porridge": Wingecarribee Shire Council v Lehman Brothers Australia Limited (in liq) [2012] FCA 1028 at [948]. Fortunately, it is unnecessary, for present purposes, to closely analyse the operation of the relevant provisions. 49 Gloucester alleges that the publication of Fitch's assignment of the AAA and AA ratings was conduct in relation to a financial product, or a financial service, or both. It is not entirely clear from the pleading exactly how that is said to be so, but no complaint is made about that apparent lack of particularisation in the present context. Gloucester alleges that the publication of the rating was conduct that occurred in Australia for the purposes of s 1041H(1). 50 The conduct that is alleged to have been misleading and deceptive is described in paragraph 106 of the pleading as being Fitch's conduct in "assigning the ratings …. to the SCDOs and causing and/or permitting publication and/or communication of that fact to a class of potential purchasers of the SCDOs in Australia". That conduct is said to have been misleading and deceptive because Fitch did not have reasonable grounds for assigning the ratings and the ratings were not the product of the exercise of reasonable care.

False or misleading statements 51 The second statutory cause of action is detailed in paragraph 107 of the existing pleading. It arises from an alleged contravention of s 1041E of the Corporations Act and s 12DB(1)(a) of the ASIC Act. Section 1041E(1) of the Corporations Act provides as follows: 1041E False or misleading statements (1) A person must not (whether in this jurisdiction or elsewhere) make a statement, or disseminate information, if: (a) the statement or information is false in a material particular or is materially misleading; and (b) the statement or information is likely: (i) to induce persons in this jurisdiction to apply for financial products; or (ii) to induce persons in this jurisdiction to dispose of or acquire financial products; or (iii) to have the effect of increasing, reducing, maintaining or stabilising the price for trading in financial products on a financial market operated in this jurisdiction; and (c) when the person makes the statement, or disseminates the information: (i) the person does not care whether the statement or information is true or false; or (ii) the person knows, or ought reasonably to have known, that the statement or information is false in a material particular or is materially misleading. Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1)). For defences to a prosecution based on this subsection, see Division 4. Note 2: Failure to comply with this subsection may also lead to civil liability under section 1041I. For relief from liability under that section, see Division 4. 52 Section 12DB(1)(a) of the ASIC Act relevantly provides that a person must not, in trade or commerce, in connection with the supply of financial services, make a false or misleading representation that those services are of a particular standard, quality, value or grade. 53 The conduct that was said to contravene s 1041E of the Corporations Act is again described as Fitch's conduct in assigning the ratings in circumstances where it did not have reasonable grounds for assigning those ratings and where the ratings were not the product of the exercise of reasonable care. This conduct is alleged to have contravened s 1041E because: first, it involved the making of a statement or the dissemination of information which was materially misleading; second, the misleading statement was likely to induce persons in Australia to apply for or acquire financial products, being the Palladin notes; and third, Fitch ought reasonably to have known that the statement or information was materially misleading. The same allegations are presumably relied on in support of the claim that the conduct contravened s 12DB(1)(a) of the ASIC Act.

Failing to disclose material information 54 The third statutory cause of action, which is pleaded in paragraph 108 of the pleading, again involves an alleged contraventions of ss 1041E and 1041H of the Corporations Act and ss 12DA and 12DF of the ASIC Act. Fitch is alleged to have contravened those provisions by "causing, permitting or authorising the fact of each of its ratings to be published or disseminated in Australia". That conduct is said to contravene the provisions because "Fitch failed to disclose to potential investors in the SCDOs material information that would have been highly relevant to their decision whether to rely upon Fitch's rating of the SCDOs". The material information that was not disclosed is particularised as being, in short, Fitch's allegedly deficient or defective methodology. 55 Importantly, s 1041I of the Corporations Act imposes a causation element in any civil action for loss or damage for a contravention of ss 1041E and 1041H. Section 12GF of the ASIC Act imposes the same causation element in respect of contraventions of ss 12DA, 12DB(1)(a) and 12DF of the ASIC Act. Section 1041I(1) provides that "a person who suffers loss or damage by conduct of another person that was engaged in in contravention of s 1041E…or s 1041H may recover the amount of loss or damage by action against that other person". 56 Paragraphs 109 and 110 of the existing pleading appear to be intended to address the causation element. It is alleged in those paragraphs that Gloucester was "induced by the assignment of the SCDO ratings by Fitch to the SCDOs to acquire the SCDOs" and that if Gloucester had been told of the deficiencies or defects in Fitch's ratings methodology, or that its ratings could not be relied on, Gloucester would not have purchased the SCDOs. 57 Fitch contended that there is a flaw in Gloucester's pleaded case in respect of causation. The short point again is that Gloucester agreed to acquire the Palladin notes before the ratings were assigned. Fitch contended that the assignment of the ratings therefore could not have induced Gloucester to acquire the notes.

Causes of action in negligence and for negligent misstatement 58 Gloucester alleges, in paragraph 86 of the existing pleading, that in "engaging in assigning the ratings" and in making the so-called "Fitch AAA Representations" and "Fitch AA Representations" referred to earlier, Fitch owed to the members of the class of potential purchasers of the Palladin notes, including Gloucester, a duty to exercise reasonable care in forming and publishing its opinion as to the creditworthiness of the notes. This duty of care is alleged to have arisen because Fitch was aware, or ought to have been aware, of certain matters, including that: Fitch had been retained for the very purpose of enabling the arranger (Merrill Lynch) to communicate that rating to potential investors; that Fitch held itself out as having specialised expertise in assessing the creditworthiness of financial products; that potential investors would believe that Fitch's ratings would be a very good predictor of default risk; and that "it was reasonable for any potential investor in the SCDOs to rely upon the rating in deciding whether to invest". 59 In paragraph 120 of the existing pleading Gloucester alleges that, in "forming and publishing" the ratings and "causing and/or permitting the fact of the assignment of the ratings … to be published and/or communicated to the class of potential investors", Fitch breached its duty of care. 60 For Fitch to be held liable to Gloucester in negligence, it is necessary for Fitch's negligence to have caused Gloucester to suffer loss or damage. Gloucester addresses that element of the cause of action by alleging that it relied on the ratings assigned by Fitch. In paragraph 121 of the existing pleading, Gloucester alleges that Fitch's breach of its duty of care caused Gloucester to suffer loss or damage because it "relied on Fitch's assignment of the AA rating to Palladin AA and the Fitch Representations in deciding to acquire the SCDOs". It alleges that if it had been told that Fitch did not have reasonable grounds for assigning the ratings, or that its ratings could not be relied on, it would not have purchased the Palladin notes. 61 Gloucester also alleges that Fitch breached its duty of care in making the "Fitch Representations" - the representations said to be implicit in Fitch's assignment and publication of its ratings. Reliance is again an element of this cause of action as pleaded. Gloucester alleges that it relied on the Fitch Representations in deciding to acquire the Palladin notes and would not have acquired them if it had been told that Fitch did not have reasonable grounds for assigning the ratings, or that its ratings could not be relied on. 62 It is to be noted again that, in both the negligence and negligent misstatement causes of action, Gloucester alleges that it relied on Fitch's assignment of the ratings, which occurred on 7 June 2007, in deciding to acquire the Palladin notes. As presently pleaded, that decision was alleged to have been made on 24 May 2007, when Gloucester agreed to acquire the notes. Fitch contended that this chronological flaw was fatal to the pleaded causes of action in negligence and negligent misstatement.

The group members and the common questions 63 As noted at the outset, the proceeding is a representative proceeding under Part IVA of the Federal Court Act. Gloucester and CCMF commenced the proceeding on the basis that they represented other persons who had claims against Fitch that arose out of the same, similar or related circumstances. The group members to whom the proceeding relates are described in the following terms in the existing originating application and the existing pleading as persons who: [D]uring the period between 2007 and 2008 acquired interests in one or more synthetic collateralised debt obligations identified in Schedule 1 ('the SCDOs'), each of which was assigned a credit rating issued by or on behalf of the Respondents; and acquired the interests pleaded in the preceding paragraph in reliance upon the that [sic] credit rating and have suffered losses as a result. 64 Fitch submitted that this description of the group members highlighted the centrality of reliance in the case as pleaded. It should be noted, however, that the common questions of fact or law identified in the pleading do not include any question concerning reliance.

FITCH'S APPLICATION FOR SUMMARY JUDGMENT 65 Fitch's application was that the proceeding, insofar as it concerned the claims brought by Gloucester and CCMF, be dismissed. It relied in that regard on s 31A(2) of the Federal Court Act and r 26.01 of the Federal Court Rules 2011 (Cth). Alternatively, Fitch applied for the existing pleading to be struck out pursuant to r 16.21 of the Rules. 66 Section 31A(2) of the Federal Court Act provides as follows: (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. 67 Importantly, s 31A(3) provides that a proceeding, or part of a proceeding, need not be hopeless or bound to fail for it to have no reasonable prospect of success. 68 Rule 26.01 of the Rules provides that a party may apply to the Court for an order that judgment be given against another party in certain circumstances. Those circumstances include, relevantly, where the applicant has no reasonable prospect of successfully prosecuting the proceeding or a part of the proceeding, or that no reasonable cause of action is disclosed. 69 Rule 16.21 of the Rules separately provides that a party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading, amongst other things, fails to disclose a reasonable cause of action or defence, or other case appropriate to the nature of the pleading. 70 Even though it is not necessary for a party seeking summary dismissal of a proceeding to show that the proceeding is hopeless or bound to fail, the party nevertheless bears a heavy onus: Australian Competition and Consumer Commission v FDRA Pty Ltd [2016] FCA 429 at [27]. That is because to summarily dismiss a proceeding, and thereby preclude a person from having their case determined on its merits at a final hearing, is a serious step that should only be taken with great care and only where it is possible to conclude with confidence that there is no reasonable prospect of success: Danthanarayana v Commonwealth of Australia [2016] FCAFC 114 at [4]. 71 In Spencer v The Commonwealth (2010) 241 CLR 118, the High Court was required to determine whether a single judge of the Federal Court correctly dismissed a proceeding summarily under s 31A(2). Hayne, Crennan, Kiefel and Bell JJ said the following in relation to the meaning of the expression "reasonable prospects of success" at 141 [58]-[60]: How then should the expression "no reasonable prospect" be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is "no reasonable prospect". The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like "no reasonable prospect" is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes, as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt. In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like "clearly", "manifestly" or "obviously") as "frivolous", "untenable", "groundless" or "faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word "reasonable", in the phrase "no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a "frivolous", "untenable", "groundless" or "faulty" claim. Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes. (Footnotes omitted.) 72 French CJ and Gummow J adopted a broadly similar approach at 130-132 [22]-[26]. Their Honours noted (at 131-132 [24]-[25]) that s 31A(2) requires both the exercise of a practical judgment and the need for caution: The exercise of powers to summarily terminate proceedings must always be attended with caution … Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a 'fanciful' prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue". 73 It is difficult to see why a different approach should be taken to the expression "reasonable cause of action" in r 16.21 of the Rules. Like the power to summarily dismiss a proceeding, the power to strike out pleadings or portions of pleadings should generally be employed sparingly, with caution, and only in a clear case "lest one deprive a party of a case which in justice it ought to be able to bring: Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164 at 175. 74 Fitch's case that the proceeding, as presently pleaded, should be dismissed or struck out was relatively straightforward. As already adverted to, Fitch contended that there was a fundamental flaw or deficiency in Gloucester's pleaded case concerning reliance and causation. 75 In both the statutory causes of action, and the negligence causes of action, Gloucester alleges that it suffered loss or damage by Fitch's conduct in assigning and publishing its ratings of the Palladin notes because it was induced by, in the case of the statutory causes of action, or relied on, in the case of the negligence causes of action, Fitch's assignment or publication of the ratings. The flaw in those pleaded allegations, in Fitch's submission, was that Gloucester decided to acquire the Palladin notes prior to Fitch's assignment of the ratings. It agreed to acquire the notes on 24 May 2007. While the acquisition was not settled or completed until 7 June 2007, Gloucester's decision to acquire or invest in the notes must have been made on or before 24 May 2007. Fitch did not assign the ratings, and those ratings were not published or disseminated, until 7 June 2007. Gloucester therefore could not have been induced by, and could not have relied on, the assignment or publication of the ratings in deciding to acquire the notes. 76 Fitch submitted that, having regard to the way that the alleged inducement and reliance has been pleaded, it is immaterial that the distributor of the notes, the Commonwealth Bank, may have said that it was expected that Fitch would assign AA and AAA ratings to the notes. Gloucester does not allege that it was induced by, or relied on, an expectation that the notes would be assigned particular ratings by Fitch. It alleged that it was induced by, or relied on, the assignment of the rating. Nor, it might be added, is it alleged that Fitch directly or indirectly communicated its expected rating to Gloucester on or before 24 May 2007. 77 There is considerable merit in Fitch's contentions concerning this chronological flaw in the existing pleading. Gloucester did not suggest otherwise. Gloucester did not seek to defend the existing pleading, or at least did not defend it with any real conviction or vigour. Rather, following Fitch's filing of its application for summary judgment, Gloucester sought leave to further amend the pleading so as to correct the flaw or deficiency identified by Fitch. Gloucester's application to amend was opposed by Fitch. 78 In the circumstances, it was not surprising that Gloucester's application for leave to amend became the main battleground. Gloucester appeared to concede, at least implicitly, that if leave to amend was refused, either the existing pleading was liable to be struck out, or it was liable to have summary judgment entered against it and CCMF, as representative parties, on the basis that they had no reasonable prospect of successfully prosecuting their claims against Fitch. Irrespective of whether or not Gloucester made that concession, there could be little doubt that the existing pleading was flawed for the reasons advanced by Fitch. If leave to appeal were to be refused, and the existing pleading remained, it is difficult to see how it could be concluded that Gloucester and CCMF had a reasonable prospect of successfully prosecuting their claims as pleaded. They would have no reasonable prospect of establishing that their decisions to acquire the Palladin notes were induced by, or made in reliance upon, Fitch's assignment of AAA and AA credit ratings to the notes. 79 It should be noted in this context that the summary dismissal or striking out of the claims by Gloucester and CCMF, as representative parties, would not necessarily bring the representative proceeding to an end. It is at least conceivable that there are some persons who may fall within the description of group members and whose claims are not flawed in the same way as those of Gloucester and CCMF. For example, there may be persons who acquired Palladin notes on secondary markets after Fitch assigned the ratings on 7 June. If leave to amend was refused, and the claims by Gloucester and CCMF were summarily dismissed, it would have been necessary to give consideration to whether there were any group members who could be substituted as representative parties pursuant to s 33T of the Federal Court Act. 80 In any event, the outcome of Fitch's summary dismissal or strike out application, and the further conduct of the proceeding, hinged on Gloucester's application for leave to amend.

Gloucester's application for leave to amend 81 Gloucester applied for leave to file a Further Amended Statement of Claim which sought to meet the chronological flaw identified by Fitch. Fitch opposed that application. It submitted that leave to amend should be refused on two bases. 82 First, Fitch contended that the proposed amended pleading was itself deficient and flawed, and would be liable to be struck out or summarily dismissed, had it constituted the original pleading. It submitted, in effect, that the pleading "device" by which Gloucester had attempted to cure the chronological flaw was itself flawed or ineffective. Leave to amend would accordingly be futile. 83 Second, Fitch contended that leave to amend should in any event be refused on discretionary grounds. In short terms, it contended that there had already been significant delays encountered in the matter, and that it should be presumed that it will be prejudiced by those delays and the further passage of time if the amendments were permitted. The proceeding was not commenced until the very last day before the expiry of the limitation period, and even then no attempt was made to serve the originating process for many months. Fitch contended that the explanations for those delays provided by Gloucester's solicitor, Ms Amanda Banton, should not be accepted and in any event were inadequate. It also submitted that Ms Banton had not provided a satisfactory explanation for why the causation and reliance case now proposed to be pleaded was not included in the original pleading.

Relevant principles 84 The power of the Court to grant or refuse leave to amend under rr 8.21 and 16.51 of the Rules must be exercised in the way that best promotes the Court's overarching purpose to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: s 37M(3) of the Federal Court Act; Caason Investments Pty Ltd v Cao (2015) 236 FCR 322 at 326 [19] and the cases there cited. The Court's power to grant leave to amend is broad and has the remedial objective of ensuring that any defect in the pleading is cured and that the real questions in the controversy are properly agitated: Aon Risk Services Australia v Australian National University (2009) 239 CLR 175 at 185 [14]. The object of the Court is not to punish parties for mistakes made in the course of their case, but to correct errors with the result that a decision can be made on the real matters in controversy: Clough v Frog (1974) 48 ALJR 481 at 482; (1974) 4 ALR 615 at 618; Caason Investments at 327 [20]. 85 Leave to amend should be granted unless the proposed amendment is futile, such that the issue sought to be raised by the amendment has no reasonable prospects of success, or would be liable to be struck out as not raising a reasonable cause of action, or where the amendment would cause substantial prejudice or injustice to the opposing party in a way that cannot be compensated by the award of costs: Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at 69-70 [21]-[22]; Ron Medich Properties Pty Ltd v Bentley-Smythe Pty Ltd [2010] FCA 494 at [8]; Caason at 327 [21]. 86 There are limits to be placed upon re-pleading. An amendment application should not be approached on the basis that a party is entitled to raise an arguable claim subject to the payment of costs by way of compensation: Aon at 217 [111]. An order for costs may not always provide sufficient compensation and therefore achieve a just resolution. Parties are also entitled to expect that litigation be resolved with reasonable despatch: Richards v Cornford (No 3) [2010] NSWCA 134 at [44]. 87 In Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (a firm) [2015] FCA 1098 at [127], Gleeson J provided a useful summary of the types of matters that the Court should consider in exercising its discretion whether or not to grant leave to amend. The principles articulated by the High Court in Aon apply to matters in this court: Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101; (2010) 187 FCR 261 ("Cement Australia") at [43]. Relevant matters the court is to consider include: • The nature and importance of the amendment to the party applying for it: Aon at [102]; • The extent of the delay and the costs associated with the amendment: Aon at [102]; • The prejudice that might be assumed to follow from the amendment, and that which is shown: Aon at [5], [100] and [102]; • The explanation for any delay in applying for that leave: Aon at [108]; and • The parties' choices to date in the litigation and the consequences of those choices: Aon at [112] and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 ("Luck") at [44]; • The detriment to other litigants in the court: Aon at [93], [95] and [114] and Luck at [44]; and • Potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification: Aon at [5], [24] and [30]. 88 Gleeson J did not suggest that this list was exhaustive, or that each of the matters in the list would necessarily be material in every case. At [128] her Honour noted that the weight to be given to these considerations, individually and in combination, and the outcome of the balancing process generally, may vary depending on the particular facts of the case. 89 The onus is on the party seeking leave to amend to persuade the Court that such leave should be given: Dye v Commonwealth Securities Ltd (No 2) [2010] FCAFC 118 at [17].

Evidence 90 The evidence read and tendered in respect of Fitch's summary dismissal application was taken as read and tendered in respect of Gloucester's application for leave to amend and vice versa. The evidence was, on just about any view, lengthy and voluminous, particularly considering the nature of the interlocutory applications. 91 Gloucester read two affidavits sworn by its solicitor, Ms Banton. In her first affidavit, sworn 1 September 2016, Ms Banton gave a detailed description of her involvement in the investigation of the claim against Fitch and a chronological account of the progress of the proceeding from its commencement. She gave an explanation, albeit a fairly brief one, for why the amendment application was made when it was. A voluminous bundle of documents referred to in Ms Banton's first affidavit was tendered. Those documents primarily related to the progress of the proceeding. 92 Ms Banton's second affidavit, sworn 13 October 2016, was largely responsive to a number of contentions concerning Ms Banton's evidence that were advanced in Fitch's written outline of submissions. Those contentions, which are addressed in detail later, concerned Ms Banton's explanation for why the proceeding against Fitch was only commenced at the very end of the limitation period, and her explanation for the fact that the amendment application was not made earlier. 93 Ms Banton was cross-examined at length, particularly in respect of the issues addressed by her in her second affidavit. 94 Gloucester also tendered a large number of documents not otherwise referred to in the affidavit evidence. Many of the documents related to the terms and conditions of the Palladin notes issue and Fitch's rating of the notes. Those documents were relevant to the issues raised by Gloucester's proposed amended pleading. They will be addressed in that context later. Other documents included in the tender related primarily to issues addressed in the course of the cross-examination of Ms Banton. 95 Fitch read two affidavits sworn by its solicitor, Mr Norman Lucas. Those affidavits gave a largely uncontentious account of the course of the proceeding and the dealings between the parties in respect of Fitch's summary dismissal application. Mr Lucas was not cross-examined. 96 Fitch also tendered a number of documents, primarily in the course of the cross-examination of Ms Banton. It is unnecessary to detail those documents. To the extent that any of them were material, they will be addressed later in the context of the consideration of Ms Banton's evidence.

Fitch's call for documents and the alleged waiver of privilege by Gloucester 97 Before dealing with the substantive issues in relation to Gloucester's application for leave to amend, it is necessary to briefly address a ruling that was made in the course of the cross-examination of Ms Banton. 98 As has already been noted, in her first affidavit Ms Banton referred to her involvement in the investigation of the claim against Fitch and the commencement of the proceeding on 1 October 2014. Amongst other things, she stated that she caused investigations to be undertaken into the ratings methodology adopted by the ratings agencies, including Fitch, and that by September 2014 she was aware from those investigations that there was a potential claim against Fitch. In her second affidavit, Ms Banton stated that the analysis and investigations that were undertaken, and which enabled her to conclude that there was an available claim against Fitch with reasonable prospects, were not complete until September 2014. It was not until that time that Ms Banton held the view that the proceedings could and should be commenced against Fitch. Ms Banton's evidence in that regard is considered in detail later. Suffice it to say at this stage that she said nothing about the specific nature of the investigations undertaken by her, let alone the substance or effect of the results of her investigations, other than that it enabled her to form a view in relation to the availability of a claim against Fitch. 99 Ms Banton was cross-examined at length about the investigations conducted by her. She was asked when those investigations were commenced. Ms Banton said that she could not remember but it was a "significant period of time" before September 2014. She was asked about the nature of the inquiries. She said, in effect, that the inquiries involved a "range of experts", and that the purpose of the inquiries was to enable her to form a view about whether or not "there was a reasonable basis to put on the pleading". Ms Banton agreed that the experts provided some information that was relevant to her determination that there was a reasonable basis to commence the proceeding against Fitch. Ms Banton also referred to obtaining information for that purpose from other documents, from members of her team and from counsel. 100 Senior Counsel for Fitch called for the production of all documents which Ms Banton referred to or relied upon for the purpose of deciding that there was a reasonable basis to commence proceedings against Fitch. In response to the call, counsel for Gloucester indicated that there were documents that fell within the terms of that call, but that Gloucester claimed legal professional privilege in respect of all of those documents. Senior Counsel for Fitch in turn submitted that Ms Banton's evidence concerning her investigations had resulted in a waiver of any privilege. 101 The Court ruled that there had been no waiver and that the reasons for that finding would be included in the judgment in respect of the substantive applications. Following are those reasons. 102 Privilege may be impliedly waived where the court, informed by considerations of fairness, perceives that, by its conduct, the privilege holder has acted inconsistently with the maintenance of the confidentiality which the privilege is intended to protect: Mann v Carnell (1999) 201 CLR 1 at 13 [29]. In Commissioner of Taxation v Rio Tinto Limited (2006) 151 FCR 341 the Full Court explained the guiding principle in the following terms (at 356 [52]): These authorities show that, where issue or implied waiver is made out, the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. Where the privilege holder has put the contents of the otherwise privileged communication in issue, such an act can be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication. 103 In DSE (Holdings) Pty Limited v Intertan Inc (2003) 127 FCR 499, Allsop J said (at 519 [58]) that an implied waiver will arise where: the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication. (Emphasis in original.) 104 Allsop J's "somewhat more descriptiv[e]" statement of the governing principle was approved by the Full Court in Rio Tinto at [61]. 105 In Council of the NSW Bar Association v Archer (2008) 72 NSWLR 236, Hodgson JA said (at 252 [48]): What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind. 106 Fitch contended that Ms Banton had acted inconsistently with the maintenance of the confidentiality of the documents upon which she relied in forming her view about the viability of the claim against Fitch. It submitted, in effect, that Ms Banton had given evidence concerning her state of mind in circumstances where the documents in respect of which privilege was claimed were likely to, or had, influenced her state of mind. She had thereby impliedly made assertions concerning the contents of those documents and had laid the contents of the documents open to scrutiny. Moreover, in Fitch's submission, maintenance of the privilege would be unfair because it would effectively deprive it of the ability to test or challenge Ms Banton's evidence. 107 There was and is no merit in Fitch's submissions concerning implied waiver. 108 Ms Banton did not act inconsistently with the maintenance of the confidentiality of the relevant documents. She was studious, not only in her affidavit evidence, but also in the course of cross-examination, not to expressly or impliedly make any assertion about the contents of the privileged documents. In her affidavit evidence she referred only to causing investigations to be undertaken. She said nothing about any documents, let alone their contents. Senior Counsel for Fitch managed to extract from Ms Banton during cross-examination that some of her investigations involved experts, and that some of the information obtained as a result of the investigations was available to Ms Banton, or had potentially been used by her, for the purpose of making her decision. That is, however, a far cry from Ms Banton making express or implied assertions about the contents of the privileged documents, or deploying those documents in support of her explanation. The evidence remained at a very high level of generality. 109 Fitch contended that Ms Banton's evidence concerned her state of mind at the time she decided that there were reasonable grounds to commence the proceeding. Her evidence was, in effect, that some of the information in some of the privileged documents might have affected her state of mind in that regard. Fitch submitted, relying on Bar Association v Archer, that Ms Banton's evidence was therefore inconsistent with the maintenance of the confidentiality of the documents. In Bar Association v Archer, however, Hodgson JA said only that circumstances of that sort "may" be sufficient to give rise to an implied waiver. Each case must be decided on its own facts. The mere fact that a privileged document might be relevant to the state of mind of the person claiming privilege does not alone necessarily result in a waiver of privilege: Macquarie Bank Limited v Arup Pty Ltd [2016] FCAFC 117 at [37]; Archer Capital 4A Pty Limited as trustee for the Archer Capital Trust 4A v Sage Group plc (No 3) [2013] FCA 1160; (2013) 306 ALR 414 at [24]. The position might be different if the contents of the privileged document, and not merely its existence, was specifically put in issue by the privilege holder relying on the contents of the document to vindicate a claimed state of mind: Ferella v Official Trustee in Bankruptcy (2010) 188 FCR 68 at [65]. This was not, however, such a case. 110 Fitch's resort to the contention that it was unfair for the privilege to be preserved because it could not challenge or test Ms Banton's evidence in cross examination was also not persuasive. It is doubtful that Fitch needed access to the documents to challenge Ms Banton's evidence. That was demonstrated by the fact that Ms Banton's evidence was vigorously challenged in cross examination to the point where Fitch ultimately submitted that her evidence concerning contested matters should not be accepted. That submission was based, in part, on the fact that Ms Banton's evidence about certain matters was vague and general. The point is that Ms Banton's evidence may have been vague and general in part because she chose not to waive privilege and rely on the contents of privileged documents to support her position. The end result was that Fitch was not materially prejudiced by its inability to access the documents the subject of the call: it was able to, and did, submit that Ms Banton's evidence should be rejected because of its generality. 111 Fitch's contention that there had been an implied waiver of privilege in respect of the documents subject to the call for production was accordingly rejected.

The case pleaded in the proposed amended pleading 112 As indicated earlier, in deciding whether to exercise its discretion, the Court must determine whether the proposed amendments disclose a reasonable cause of action: Tamaya at [142]. The Court will not exercise its discretion in favour of amendment where a pleading would be liable to be struck out had it appeared in the original pleading: Tamaya at [143]; Research in Motion at 69-70 [21]-[22]. 113 In order to address Fitch's contention that the grant of leave to amend would be futile, it is necessary to give close consideration to the proposed amended pleading. As outlined earlier, Gloucester has had a number of attempts at formulating its proposed amended pleading. 114 The first iteration of the proposed amended pleading was annexed to Gloucester's first interlocutory application, filed on 14 July 2016. 115 The second iteration was annexed to Gloucester's second interlocutory application, which was filed on 1 September 2016. Somewhat confusingly, the second interlocutory application sought to amend the first interlocutory application, though its effect was that leave to amend was sought by reference to the new draft of the pleading which was annexed. 116 The third and final iteration of the proposed amended pleading was proffered on the final day of the four day hearing. It is perhaps fair to say that the third iteration reflected, or took into account, issues concerning the clarity and coherence of the pleadings that had been raised by the Court during the parties' submissions. Fitch did not object to the tender of the third iteration of the proposed amended pleading. It was marked as exhibit 4. The following summary of the proposed amended pleading is based on that document. 117 In summary and simple terms, the proposed amended pleading makes three important changes or additions to the allegations that form the basis of Gloucester's case that Fitch's conduct in assigning the impugned ratings caused it to acquire the Palladin notes and thereby suffer loss and damage. 118 First, Gloucester alleges in the proposed amended pleading that the agreement that it entered into to acquire Palladin AA notes on 24 May 2007 was conditional on Fitch assigning a AA rating to the Palladin AA notes. That condition was allegedly fulfilled on 7 June 2007, when Fitch assigned the AA rating. As a result, on that day settlement of the acquisition occurred and the purchase price became payable, and was paid, by Gloucester to the Commonwealth Bank. The same allegation is made in respect of CCMF's agreement to acquire Palladin AAA notes. 119 Second, Gloucester no longer alleges, as it does in the existing pleading, that it was induced by, or relied upon, the assignment of the rating in deciding to acquire the Palladin notes on 24 May 2007. Rather, it is alleged that Gloucester was induced by, and relied upon, the assignment of the rating in proceeding with the acquisition and paying the purchase price once the rating was assigned on 7 June 2007. There is thus, on Gloucester's case as pleaded in the proposed amended pleading, no longer any chronological problem with its reliance case. In short, Gloucester claims that if Fitch had not assigned a AA rating to the Palladin notes which it had conditionally agreed to acquire, it would not have paid for the notes and completed the acquisition on the issue or settlement date, 7 June. Nor could it have been compelled to complete the acquisition and pay for the notes given the conditional nature of the contract. It therefore relied on Fitch's assignment of the rating when it acquired the notes on 7 June. 120 Third, the proposed amended pleading includes additional or alternative formulations of the causes of action that do not involve any allegation of inducement or reliance. It is alleged that, irrespective of, or notwithstanding, Gloucester's conditional agreement to acquire the Palladin notes on 24 May 2007, the actual issue of the notes was dependent on Fitch assigning the expected AA rating to the notes. If that rating was not assigned, the notes would not have been issued. Accordingly, Gloucester alleges that if Fitch had not assigned the expected ratings to the notes on 7 June 2007, Gloucester would not, and indeed could not, have acquired an investment in them, and therefore would not have incurred the loss or damage that it alleges it suffered as a result of the acquisition. 121 In support of its application for leave to amend, Gloucester adduced evidence to support the reasonableness or viability of these new allegations and the proposed amended pleading generally. In particular, it adduced evidence which was said to support the allegation that its agreement to acquire the notes was conditional on Fitch's assignment of the expected ratings by Fitch, and that the issue would not have proceeded if the notes had not been assigned the expected ratings. 122 It is unnecessary to refer to that evidence in any detail. Suffice it to say that documentary evidence adduced by Gloucester tended to suggest, or at least provided a reasonable basis for alleging, that the arranger of an issue of SCDOs, in this case Merrill Lynch, engages in a form of reverse engineering of the notes so as to ensure that it secures particular ratings from a ratings agency such as Fitch. That reverse engineering of the notes is facilitated by the ratings agency making its ratings model or calculator available to the arranger. As noted earlier, in Fitch's case the ratings model or calculator was called Vector. The details of the reference entities and reference portfolio are important inputs in the ratings calculator. The arranger is able to make changes to the reference entities and reference portfolio so that, when they are fed into the ratings calculator, the desired ratings result for the notes is able to be achieved. In short, the arranger can structure the notes so as to ensure that they will achieve a particular rating when a rating is formally assigned on the issue or settlement date. The arranger can therefore document the notes, and the distributor can market them, on the basis that when they are eventually issued, they will be assigned that rating. 123 That perhaps explains how SCDOs like the Palladin AAA and Palladin AA notes can effectively incorporate the credit rating in their names. It would be somewhat unusual if notes called Palladin AAA were in fact rated BB when issued. It also explains how distributors, such as the Commonwealth Bank, can issue marketing documents and term sheets that refer to the AAA or AA rating of the notes. While the footnotes or "fine print" in the marketing documents described the ratings as "expected" ratings, and expressly stated that the Commonwealth Bank did not guarantee that the notes would be assigned those ratings, the reality was that the arranger and distributor effectively proceeded on the basis that the issue would not go ahead if the notes did not achieve those ratings, and that investors who had agreed to acquire notes with that expected rating would not be required to proceed with the acquisition if those ratings were not assigned. It would be somewhat incongruous if an investor like Gloucester, who agreed to acquire Palladin AA notes which were priced on the basis of an expected rating of AA, was required to proceed with the acquisition if the notes were in fact assigned a BB rating on the settlement date. 124 This brief description of the structuring of a SCDO issue is undoubtedly in highly simplistic terms. It may turn out to be contentious, though it was not disputed by Fitch for the purposes of the summary dismissal and amendment applications. In any event, the documentary evidence adduced by Gloucester provided some prima facie evidentiary support for its contentions concerning the process by which the Palladin notes were structured so as to attain the assignment of AAA and AA ratings by Fitch. It also provided some support for the critical allegations in the proposed amended pleading that Gloucester's agreement to acquire the notes was conditional on them attaining the expected or intended ratings, and that the issue would not have proceeded if Fitch had not in fact assigned the expected ratings. 125 Fitch's contention that the proposed pleading would be liable to be summarily dismissed, and that leave to amend should be refused for that reason, was not based so much on the absence of any factual or evidential basis for the new claims. Rather, Fitch contended that, when carefully and closely analysed, the proposed pleading does not overcome the fundamental chronological difficulties with Gloucester's claim that it was induced by, or relied on, Fitch's assignment of the rating. Fitch also pointed to what it asserted were deficiencies or flaws in Gloucester's proposed non-reliance based causation pleading. It contended, in short, that the proposed pleading is futile because its deficiencies were such that it would be liable to be struck out or summarily dismissed.

Is the proposed pleading futile? 126 It would perhaps be fair to say that parts of the proposed amended pleading are somewhat awkwardly or clumsily drafted and contain some ambiguities and inconsistencies. That is particularly so in respect of those parts of the pleading that are the subject of the proposed amendments. While it would be an overstatement to call the pleading a gallimaufry (cf. James v Phillips [2017] NSWSC 148 at [8] per Pembroke J), it certainly could not be held out to be an exemplar of clear and concise legal pleading. Nor does it have to be. 127 For summary judgment to be given on the basis of a defective pleading, or for a pleading to be struck out, the moving party must demonstrate that the defects in the pleading are such that there is no reasonable prospect of success in respect of the pleaded claims, or no reasonable cause of action is disclosed. As the authorities referred to earlier reveal, the power to summarily dismiss a proceeding, or strike out a pleading, and thereby preclude a person from having their case determined on its merits at a final hearing, is a serious step taken only with great care. While it is not necessary to demonstrate that the pleaded case is hopeless or bound to fail, nonetheless the power should ordinarily only be exercised in plain and obvious cases. 128 Are there defects or deficiencies in the proposed amended pleading (in its third iteration) such that, if permitted to be filed, it would be liable to be struck out or the proceeding summarily dismissed? That question must be addressed separately in respect of the proposed amended inducement and reliance case, and the new non-reliance based causation case. Do the proposed amendments cure the identified flaws and deficiencies in the existing pleading in relation to inducement and reliance? Do the proposed amendments that add a non-reliance based causation case disclose a reasonable cause of action with reasonable prospects of success?

The amended inducement and reliance case 129 Fitch maintained that Gloucester's pleaded case involving inducement and reliance in the proposed amended pleading was fundamentally flawed. Its submissions in that regard were primarily directed to paragraph 110 of the pleading, which relates to the statutory causes of action arising from the alleged breach of s 1041H of the Corporations Act or ss 12DA, 12DB(1)(a) and 12DF of the ASIC Act. In its second iteration, paragraph 110 of the proposed amended pleading was in the following terms (omitting the underlining and strike-throughs): 110 As pleaded in paragraphs 88B and 90A herein, the Applicants' agreements to acquire the SCDOs became unconditional on 7 June 2007 and thereby the Applicants were induced to acquire the SCDOs by the assignment of the ratings by Fitch to the SCDOs. 130 Fitch submitted that there were a number of problems with Gloucester's inducement and reliance case encapsulated in paragraph 110. First, it contended that the factual allegation of inducement in paragraph 110 involved nothing more than a deemed or "fictive" inducement. To "induce" a person means to persuade or influence them to act in a particular way. Fitch submitted that the allegation in paragraph 110 amounted to nothing more than an allegation that the assignment of the rating by Fitch caused Gloucester to acquire the Palladin notes because its agreement to acquire them became unconditional. It is not alleged that the assignment of the rating actually persuaded or influenced Gloucester to do anything. It is not alleged that Gloucester was required to do anything once the agreement became unconditional. 131 Second, Fitch submitted that the allegations in paragraph 110 do not establish any causative link between the alleged contravening conduct - the alleged misleading or deceptive conduct, or the alleged dissemination of materially misleading information - and the loss or damage that is said to have flowed from Gloucester's acquisition of the Palladin notes. In Fitch's submission, there is a discrepancy between the pleaded misleading and deceptive conduct, which is alleged to involve the publication of the ratings, and the pleaded inducement, which involved Fitch's assignment of the rating and the fact that the assignment made the agreement to acquire the notes unconditional. 132 The first of those two arguments may have had some merit in respect of paragraph 110 in its second iteration. Paragraph 110 in the second iteration of the proposed amended pleading was, at the very least, ambiguous. It was unclear what, if anything, Gloucester was induced to do in relation to the acquisition of the Palladin notes as a result of Fitch's assignment of the ratings and the agreement to acquire becoming unconditional. The difficulty for Fitch, however, is that the third iteration of paragraph 110 introduced an additional allegation in respect of inducement. The additional allegation clarified what the assignment of the rating by Fitch induced Gloucester to do. Paragraph 110 in its third and final iteration is in the following terms (with the new words underlined and strikethroughs omitted): 110 As pleaded in paragraphs 88B and 90A herein, the Applicants' agreements to acquire the SCDOs became unconditional on 7 June 2007 and thereby the Applicants were induced to acquire the SCDOs by the assignment of the ratings by Fitch to the SCDOs and were induced by and relied upon the ratings in proceeding with the acquisition of the Palladin SCDOs (by the payment of the purchase price) once the rating was confirmed on 7 June 2007. 133 The additional words in this version of paragraph 110 are mirrored in other paragraphs of the third iteration of the proposed amended pleading. Paragraph 91, for example, alleges that "in proceeding with the acquisition of the Palladin AA SCDO (by the payment of the purchase price) once the rating was confirmed on 7 June 2007, Gloucester relied substantially on the ratings assigned to those SCDOs by Fitch". Paragraph 92 contains the same allegation in relation to CCMF's acquisition of the Palladin AAA notes. Paragraph 112.2 of the proposed amended pleading alleges that if Fitch had not assigned the AA and AA ratings to the Palladin AAA and AA notes, Gloucester would not have agreed to proceed with the acquisition of the SCDOs and paid the purchase price. 134 The additional words included in paragraph 110 of the proposed amended pleading (in its third and final iteration), read together with the allegations in paragraphs 91, 92 and 112.2, provided a reasonable factual foundation for the allegation that Gloucester was induced to acquire the notes by Fitch's assignment of the ratings. The allegation is that the assignment of the ratings by Fitch on 7 June 2007, considered in the context of the expected rating and Gloucester's conditional agreement to acquire the notes, influenced or persuaded Gloucester to do something: to complete the acquisition and hand over the purchase money. That is not, as Fitch contended, a deemed or fictive inducement. Gloucester was induced to enter into the conditional contract by the expectation that Fitch would assign an AA rating to the notes. But if Fitch had not assigned the rating, Gloucester would not have paid for the notes and completed the acquisition. Nor, having regard to the conditional nature of the agreement, would it have been obliged to. That amounts to an at least arguable or viable allegation that Gloucester relied on Fitch's rating, or was induced by it, when it came to completing its acquisition of the notes. 135 Fitch's second argument in relation to paragraph 110 involves an unduly technical and restrictive reading of the pleading, in particular the allegations concerning the assignment and publication of the ratings. It may perhaps be accepted that there is a degree of imprecision, if not ambiguity or inconsistency, in the way the pleading deals with the assignment of the rating, as apparently distinct from the communication or publication of the rating. Nevertheless the division between the allegations concerning assignment, and the allegations concerning publication, are not as stark as Fitch would have it. 136 First, contrary to Fitch's submission, the alleged contravening conduct by Fitch is not restricted to the publication or communication of the ratings. It also includes, in terms, the assignment of the rating: see in particular paragraphs 107 and 108. 137 Second, it is implicit in the notion of assignment, as pleaded, that the act of assigning effectively involves or includes the communication of the rating, and the representations that are alleged to flow from it, to investors and potential investors. That is apparent, in particular, from paragraphs 60 to 63. The pleaded conduct that is alleged to have constituted misleading and deceptive conduct, and the dissemination of misleading information, is not limited to Fitch's assignment of the ratings. It includes the publication or communication of the ratings to a class of potential purchasers, including Gloucester. Other paragraphs of the pleading also clearly link the assignment of a rating with the publication of the rating and the representations conveyed by the rating to potential investors. 138 Third, and on an even more practical or common sense level, while the allegation concerning inducement in paragraph 110 refers only to the assignment of the rating, it is equally clear that the rating must have been communicated to Gloucester for it to have been persuaded to act on it by proceeding with the acquisition and paying the purchase money. It is tolerably clear that Gloucester's case is that Fitch's assignment of the rating was communicated to it and it was thereby induced to complete the acquisition. 139 The tenor of Gloucester's case, as reflected in the proposed amended pleading, is that one of the main reasons that the arranger, in this case Merrill Lynch, obtains a rating from a ratings agency, in this case Fitch, is so the rating can be communicated to prospective investors, including those who, like Gloucester, had agreed to acquire the notes subject to the condition that they would be assigned a particular rating which had been referred to in the marketing and explanatory materials. Gloucester's submission is that it would be fanciful to suggest that Merrill Lynch would procure a rating from Fitch, only to put the formal communication of the assignment of the rating in the desk draw and not communicate it to investors and prospective investors. 140 Read reasonably and in context, paragraph 110 pleads a sufficiently arguable causal link between the contravening conduct and the alleged inducement of Gloucester to complete the acquisition of the Palladin notes. 141 Overall, the new allegations concerning inducement in paragraph 110, read in context and together with the allegations concerning the conditional nature of Gloucester's agreement to acquire Palladin notes, are reasonably capable of overcoming the chronological flaw identified by Fitch in respect of the existing pleading. The proposed amended pleading raises a tenable contention that Gloucester suffered loss or damage by Fitch's conduct that is alleged to have contravened s 1041E and 1041H of the Corporations Act. It cannot be concluded that Gloucester has no reasonable prospect of successfully prosecuting the statutory causes of action, or that no reasonable cause of action involving contraventions of ss 1041E and s 1041H is disclosed, by reason of some deficiency in the proposed amended pleading concerning Gloucester's allegations of inducement and reliance. 142 The same can be said in relation to the allegations of reliance made in the context of the causes of action in negligence and for negligent misstatement. Paragraph 123 of the proposed pleading, which relates to the cause of action in negligence, is in relevantly the same terms as paragraph 110. Paragraph 128 of the proposed pleading, which relates to the cause of action for negligent misstatement, is also in the same terms as paragraph 110. Fitch maintained that the pleaded allegations concerning negligence and negligent misstatement were directed at Fitch's conduct in publishing its ratings opinion, whereas the reliance allegations in paragraphs 123 and 128 alleged reliance only in respect of the assignment of the ratings. That submission is rejected for the reasons given earlier in the context of the attack on paragraph 110. The assignment of the rating and the publication of the rating are really two sides of the same coin, at least in the context of the rating of SCDOs. That is because, as the pleading makes tolerably clear, one of the reasons an arranger retains a ratings agency to assign a rating to an SCDO is so the rating can be communicated to potential purchasers. The duty of care, which is pleaded in paragraph 86, also encompasses Fitch's conduct in assigning the ratings. 143 Finally, Fitch submitted that it was "questionable" that Gloucester could succeed in demonstrating that its agreement to acquire the Palladin notes was conditional on them being assigned AA ratings by Fitch. It relied, in that regard, primarily on the fact that, in its presentation or marketing documents, the Commonwealth Bank expressly stated that it did not guarantee the rating of the notes. That may ultimately turn out to be a persuasive argument. However, in light of the evidence concerning the way the notes were structured by the arranger so as to achieve the desired rating, it is at the very least arguable that, while the Commonwealth Bank may not have guaranteed the rating, the agreement to acquire was subject to the condition that Gloucester would not be required to complete the acquisition if a AA rating was not in fact assigned to the notes by Fitch. The implication of that term is arguably necessary to give business efficacy to the agreement. It is also difficult to see how or why Gloucester would or could unconditionally commit to acquire financial products that were no doubt priced on the basis of the expected AA ratings, and were called AA notes, if in fact the ratings were uncertain or unknown. It should also be noted, in that regard, that Gloucester alleged that its investment policy would not have permitted it to acquire the notes unless a condition of the acquisition was that they were rated AA. 144 In all the circumstances, Gloucester's proposed amended inducement and reliance case is reasonably arguable. It cannot be concluded that it does not have reasonable prospects of success. If the amendment is permitted, this aspect of Gloucester's case would not be liable to be struck out or summarily dismissed.

The pleaded case not involving reliance 145 It would perhaps be fair to say that Gloucester's pleaded non-reliance based causation case is novel. It does not follow, however, that it does not have reasonable prospects of success. 146 As noted earlier, inducement is not a necessary element in establishing a contravention of s 1041E or s 1041H. Nor is reliance. A person cannot, however, recover loss or damage for a contravention of s 1041E or s 1041H unless it can be shown that the loss or damage was suffered "by" the contravening conduct: s 1041I Corporations Act. In its primary case, Gloucester pleads inducement or reliance to satisfy that causation element. 147 Gloucester contended, however, that it can also satisfy the causation element without alleging inducement or reliance. It alleges, in paragraphs 85A and 112.1 of the proposed amended pleading, that the issuance of the Palladin notes was dependent on Fitch assigning AAA or AA ratings to the notes at or around the issue or trade date, that the notes would not have been issued at all if those ratings had not been assigned and that, in those circumstances, Gloucester would not, indeed could not, have acquired the notes. In simple terms, Gloucester alleges that if Fitch's conduct in assigning and communicating the rating contravened s 1041E and s 1041H, any loss or damage suffered by it as a result of its acquisition of the notes was caused by the contravening conduct because, but for the assignment of the rating, the notes would not have been issued and Gloucester could therefore not have acquired them. That was so, in Gloucester's submission, even if Gloucester did not rely on Fitch's rating, or was not induced by it. 148 Fitch contended that paragraph 112 did not allege the necessary causative link for the purposes of the statutory claims. That was because, in its submission, the pleaded contraventions of s 1041E and 1041H are based on alleged misleading information or misleading representations conveyed by the publication of the ratings, not the mere assignment of the rating. Paragraph 112, on the other hand, simply alleges that the notes would not have been issued if the ratings had not been assigned. That allegation, in Fitch's submission, does not engage with the alleged contravening conduct. 149 That submission is rejected. It again relies on a false dichotomy between the assignment of the ratings and the alleged misleading information or misleading representations conveyed by the assignment and publication of the ratings. Paragraphs 107 and 108 of the proposed amended pleading allege that the contravening conduct includes both the assignment of the ratings and the publication and communication of the ratings to potential purchasers, in circumstances where Fitch did not have reasonable grounds for assigning the ratings, and where the ratings were not the product of the exercise of reasonable care. It is also tolerably clear from, for example, paragraphs 62 and 63, that the act of assigning a rating is alleged to convey certain representations to potential investors, including representations that the ratings were based on reasonable grounds and were the product of the exercise of reasonable care. It is, in those circumstances, at least arguable that paragraph 112 sufficiently engages with the alleged contravening conduct and pleads a causal link for the purposes of the statutory claims. 150 While Gloucester's non-reliance case in respect of the statutory claims may be novel, it does not follow that it would be liable to be struck out or summarily dismissed if the amendment is permitted. It is, at the very least, reasonably arguable. Much will of course hinge on the evidence and the detailed argument based on it, but those are matters for trial. 151 The same can be said of the non-reliance based negligence and negligent misstatement causes of action. Importantly, paragraphs 85A and 85B of the proposed amended pleading allege, in the context of the duty of care that Fitch allegedly owed to potential purchasers of the Palladin notes, that Fitch was aware, or ought to have been aware, that the issuance of the notes was dependent upon Fitch assigning AAA and AA ratings to the tranches of the notes at around the issue date, and that the notes would not be issued unless and until Fitch assigned those ratings. Gloucester's case is that, having regard to Fitch's knowledge of those matters, Fitch's duty of care effectively extended to any investor who acquired the notes when they were issued with AAA and AA ratings. If Fitch breached that duty of care because its ratings were not the product of reasonable care or involved negligent misstatements, the loss or damage suffered by investors, like Gloucester, who purchased the notes was relevantly caused by the breach, irrespective of whether they relied on the ratings or the representations conveyed by them. That is because, on Gloucester's case, if the ratings had not been assigned, the notes would not have issued and it and other investors not only would not, but could not have acquired the notes. Gloucester submitted that, on this case, it is not required to plead or prove reliance. 152 Once again, this non-reliance based negligence claim could fairly be described as novel. It involves the somewhat wide-ranging proposition that Fitch owed a duty of care in assigning its ratings to any purchaser of Palladin notes, not just purchasers who might rely on its ratings, because it knew that the Palladin notes would not be issued if it did not assign AAA and AA ratings to the tranches of those notes. Despite its novel nature, Fitch did not advance any persuasive argument that Gloucester's case in this respect did not have reasonable prospects of success, or that the pleading in this regard did not disclose a reasonable cause of action. 153 Fitch submitted that the pleading of this cause of action was defective because it was not alleged that the mere assignment of the rating by Fitch, as opposed to the publication or communication of the rating, was negligent. It relied, in that regard, on paragraph 122, which pleads that Fitch's conduct that breached its duty of care was its conduct in forming and publishing its opinion as to the creditworthiness of the notes, and permitting the assignment of the rating to be published or communicated. 154 That submission is rejected for the reasons already given the context of the statutory causes of action. It involves an overly technical and narrow reading of the pleading as a whole. Read reasonably and in context, paragraph 122 includes the allegation that Fitch's assignment of the ratings was negligent. That is apparent from the particulars, which state that Fitch's ratings were not the product of the exercise of reasonable care and refer back to paragraph 82 of the pleading. Paragraph 82 alleges, in effect, that Fitch's assignment of the ratings was negligent because the ratings were not based on reasonable grounds and were not the product of the exercise of reasonable care. 155 In all the circumstances, Fitch has not succeeded in demonstrating that the proposed amended pleading is futile, in the sense that, if permitted to be filed, it would be liable to be summarily dismissed or struck out. The proposed amended pleading discloses reasonable causes of action. There is no basis for concluding that Gloucester does not have a reasonable prospect of successfully prosecuting the proceeding based on the proposed amended pleading.

Discretionary considerations 156 Gloucester bears the onus of persuading the Court to exercise its discretion and grant leave to amend. Has Gloucester discharged that onus? 157 It is convenient to address that question, as the parties did, largely by reference to the list of relevant matters identified by Gleeson J at first instance in Tamaya, though not in precisely the same terms or in the same order. That is not to suggest that the question of leave should be approached by ticking off matters in a checklist. Each case must be considered having regard to its own particular or peculiar facts and circumstances. Some of the matters in the Tamaya list may not be particularly relevant or material having regard to the particular facts and circumstances of the case. There may also be matters that may not fall within the Tamaya list that may assume particular significance in the particular circumstances. 158 In this matter, Fitch placed considerable emphasis on what it contended was Gloucester's delay in commencing the proceeding. It contended that the explanation for the delay given in evidence by Gloucester's solicitor, Ms Banton, should not be accepted. Gloucester countered this argument by submitting, amongst other things, that any delay in commencing proceedings was not relevant delay. It pointed out that the law permitted it to bring its claim within 6 years of the date when the cause of action accrued. That it did. The only relevant delay, in Gloucester's submission, was the delay between the date of commencement and the application for leave to file the proposed amended pleading. 159 That submission is rejected. Issues such as the delay, cost and prejudice occasioned by the proposed amendment must be considered in context. That context generally includes the procedural history, including any previous delays or procedural irregularities. A party who has commenced proceedings at the very end of a limitation period, and has thereafter not prosecuted the proceedings with due diligence, may carry a significantly heavier burden when it comes to explaining the delay occasioned by an amendment and persuading the Court to allow the amendment: cf Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Hoskins & Sells [1999] 3 VR 363 at [31]-[32] and [52]; Tamaya at [129]. It might also be relevant for the Court to consider the facts that the party applying for the amendment knew, or should with due diligence have known, before and at the time the proceedings were commenced: Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu [2016] FCAFC 2; (2016) 332 ALR 199 at [156]. 160 Given the emphasis that Fitch placed on the alleged pre-commencement delay, that issue will be addressed first. Attention will then be given to the other relevant considerations.

Delay prior to the commencement of the proceeding 161 There could be no doubt that the proceeding was commenced at the very end of the limitation period, and even then was not, at least initially, vigorously pursued. The Palladin notes are alleged to have failed in October 2008. The proceeding was commenced on 1 October 2014. No steps were taken to serve Fitch until May 2015. Why was that so? And does it matter? 162 Gloucester, or its advisers, plainly considered that the pre-commencement and pre-service history of the matter was of some relevance. As has already been outlined, Ms Banton swore two affidavits which together provided a detailed chronology of the investigation and prosecution of the action against Fitch. Voluminous documentary evidence was also tendered in support of the chronology. That evidence sought to explain the delays in commencing and prosecuting the action, and the apparent delay in bringing the amendment application. Ms Banton was subjected to extensive and at times vigorous cross-examination. Fitch ultimately submitted that her evidence should not be accepted on any contested issue. Before addressing the challenge to Ms Banton's credibility, the basic chronology of events referred to in her evidence should be summarised. 163 Gloucester and a number of other persons who had acquired certain financial products from the Commonwealth Bank, including the Palladin notes, first contacted Ms Banton at her previous firm in February 2009. Over the following year Ms Banton and other solicitors at her firm investigated the claims and identified other potential claimants. CCMF contacted Ms Banton in March 2010. Around that time, Ms Banton sought litigation funding for a potential representative proceeding. That funding was refused in August 2010. Further detailed investigations were then conducted into the claims of the thirteen individual claimants who had retained Ms Banton. 164 In October 2011, Ms Banton wrote to the Commonwealth Bank on behalf of those claimants demanding that the bank make good their losses. The Commonwealth Bank engaged with Ms Banton in relation to the demand, however by February 2012 it became apparent to Ms Banton that the demand would not be resolved unless and until proceedings were commenced. A representative proceeding was commenced against the Commonwealth Bank on 4 June 2012. Gloucester was one of the representative applicants. The financial products the subject of the claim included the Palladin notes. 165 The Commonwealth Bank was not, however, immediately served. Ms Banton was instructed to propose mediation to the Commonwealth Bank prior to formal service. The Commonwealth Bank agreed. Between late 2012 and late 2014, without prejudice discussions and a number of mediations took place between the parties and their respective lawyers. In the meantime, in November 2012, Ms Banton secured litigation funding in respect of the representative proceedings against the Commonwealth Bank. That funding extended to making claims against other parties if Ms Banton recommended, and the funder agreed to, their joinder. 166 During the period that Ms Banton was engaging with the Commonwealth Bank in respect of the claims made by Gloucester and others, she also acted for a number of local government bodies in a representative action against a local government financial service provider, Local Government Financial Services Pty Ltd. Those proceedings concerned losses that the councils had suffered as a result of investing in highly leveraged financial products known as constant proportion debt obligations, or CPDOs. Importantly, in July 2010 the ratings agency that had assigned AAA ratings to the CPDOs acquired by the councils, Standard & Poor's, was joined to the proceedings. Local Government Financial Services alleged, amongst other things, that Standard & Poor's was a concurrent wrongdoer arising from their rating of the CPDOs. 167 The claim against Standard & Poor's was successful. In November 2012 the Court found, amongst other things, that Standard & Poor's acted negligently and engaged in misleading and deceptive conduct, in assigning a AAA rating to the relevant CPDOs: Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200. An appeal against that decision was dismissed by the Full Court of the Federal Court of Australia in June 2014: ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65. 168 No doubt encouraged by the findings that had been made against Standard & Poor's, Ms Banton caused investigations to be undertaken into the ratings methodology utilised by the ratings agencies who assigned ratings to the financial products the subject of the proceedings against the Commonwealth Bank. As already indicated, those financial products included the Palladin notes which were rated by Fitch. It was, however, unclear from Ms Banton's evidence exactly when those investigations commenced and what they involved. All that Ms Banton said was that the investigations were undertaken in the context of her "dealings" with the Commonwealth Bank. 169 Ms Banton's evidence was that by September 2014 she was aware from the investigations that had been conducted that there was a potential claim against Fitch. In her second affidavit, Ms Banton provided more detail in relation to the formulation and timing of her opinion that there was a potential claim against Fitch. She deposed as follows (at paragraphs 9-10): To clarify the above, in my view, the first possible limitation period for any claim against the Fitch Respondents did not expire until at least October 2014 and that the Applicants would have until then to commence any claim. The analysis and investigations that were undertaken which enabled me to conclude that the Fitch Leads had a claim against the Fitch Respondents with reasonable prospects sufficient to warrant its institution were not complete until September 2014. I did not hold the view any earlier than September 2014 that proceedings could and should be commenced against the Fitch Respondents. Further, for much of the time prior to commencement of the Fitch Proceedings, I was focussed upon settling the CBA claim. The negotiation and resolution of the CBA claim was the most protracted and complicated settlement process that I have ever been involved in. While I had caused the investigation and formulation of claims against S & P in relation to other kinds of SCDOs in 2013, that was far simpler because I was aware of and understood S & P's ratings processes because of my understanding of the expert evidence given in the LGFS Proceedings. I did not have that background in relation to the Fitch Respondents' ratings methodologies. 170 That evidence, in particular, prompted Fitch's call for the production of documents. As detailed earlier, Ms Banton claimed privilege in respect of the documents the subject of the call. Fitch's contention that privilege had been waived was rejected, and the privilege claim was upheld. 171 Ms Banton's evidence that it was not until September 2014 that she came to hold the view that proceedings could or should be commenced against Fitch was the subject of significant challenge in cross-examination. 172 Ms Banton's evidence was that she initially intended to join the ratings agencies, including Fitch, to the proceedings that had been commenced against the Commonwealth Bank. That did not occur because an in principle settlement agreement was reached with the Commonwealth Bank in September 2014. This proceeding was ultimately commenced on 1 October 2014 because Ms Banton was aware that the Commonwealth Bank proceedings were not likely to continue and "in view of potential upcoming limitation dates". 173 Despite the fact that, on any view, the proceeding was commenced at the very end of the limitation period, no immediate steps were taken to serve Fitch. Ms Banton wrote to the Court on a number of occasions seeking an adjournment of the initial directions hearing. The reasons for the adjournment requests included: that Fitch had not been served; that Ms Banton wanted to seek instructions to engage in pre-service mediation; that Ms Banton wanted to seek instructions concerning the consolidation of the proceeding with the Commonwealth Bank proceeding; that a decision could not be made as to whether the proceedings should be consolidated until the settlement of the Commonwealth Bank proceedings had been finalised and approved by the Court; and that further time was required to enable an application to be made to serve Fitch outside Australia. The first case management hearing was adjourned on no less than seven occasions. 174 The final terms of settlement of the Commonwealth Bank proceedings were agreed in mid-December 2014. The application to approve the settlement was heard on 7 and 13 May 2015. 175 It was not until 22 May 2015 that Ms Banton wrote to Fitch requesting it to indicate whether it would instruct Australian lawyers to accept service. On 2 June 2015, Fitch advised that it would not instruct Australian lawyers to accept service in Australia. Ms Banton then took steps to apply for leave to serve Fitch outside Australia. Leave was granted on 15 July 2015. 176 Thus, while this proceeding was commenced on 1 October 2014, no significant steps were taken to prosecute the proceeding for a further nine months. The progress of the proceeding from July 2015 up to the hearing of the amendment application is considered later. 177 As already indicated, much of Ms Banton's evidence concerning the chronology of events leading up to the decision to commence proceedings against Fitch was vigorously challenged in cross-examination. Fitch ultimately submitted that Ms Banton's evidence should not be accepted on any contested issue. The basis of that submission was said to be that Ms Banton's evidence took the form of a series of assertions without any documentary support; that in cross-examination Ms Banton was evasive, argumentative and failed to make appropriate concessions; that Ms Banton was vague on some matters when pressed; and that some of her evidence was nonsensical. Fitch's written submissions gave specific examples of those parts of Ms Banton's evidence that, in its submission, made good those particular contentions. 178 The submission that Ms Banton's evidence should not be accepted on any contested issue is rejected. That is not to say that Ms Banton's evidence was entirely satisfactory and above reproach. It cannot be gainsaid that there were some occasions where Ms Banton's responses to questions during cross examination were somewhat non-responsive, argumentative, vague and in some cases not entirely plausible. It does not follow that her evidence about contested matters should be rejected in its entirety. The fact that some aspects of a witness's evidence may be found to be wanting in some respects does not mean that the credibility and reliability of the witness' evidence as a whole must be doubted. 179 In the particular circumstances of this case, it is neither necessary nor desirable to identify, or dwell at length on, those parts of Ms Banton's evidence during cross-examination that were open to the criticisms levelled by Fitch. Suffice it to say that the deficiencies in, or problems with, specific aspects of Ms Banton's evidence were not such as to warrant the wholesale rejection of all her evidence concerning contested matters. In that regard, allowance must also be made for the fact that Ms Banton was cross-examined over the course of two days. The questioning concerned not only her involvement in this matter, but also her involvement in three other substantial and very complex class actions over a six year period. The questioning on those topics occurred in circumstances where Ms Banton was plainly conscious of the need not to inadvertently waive privilege. In those circumstances, it is perhaps not surprising that Ms Banton's evidence at times appeared to be somewhat vague and uncertain, or to lack clarity and specificity. It is equally not difficult to understand why at times Ms Banton may have appeared somewhat defensive, if not combative, when her recollection about her knowledge of, or involvement in, aspects of these major actions was questioned during cross-examination. 180 In any event, it is unnecessary to make specific findings about all of the many parts of Ms Banton's evidence that were challenged during cross examination or were otherwise contested. That is because, despite the submission that Ms Banton's evidence should not be accepted on any contested issue, Fitch ultimately only submitted that Ms Banton's evidence about two specific matters concerning the events leading up to the commencement of the proceeding should be rejected. 181 First, Fitch submitted that the Court should not accept Ms Banton's evidence that she believed she did not have sufficient information in order to bring a claim against Fitch until September 2014. It submitted that the strong inference that should be drawn from Ms Banton's involvement in the proceedings against Local Government Financial Services and Standard & Poor's was that Ms Banton had access to sufficient information to commence proceedings against Fitch well before September 2014. In that regard, Fitch relied in particular on the fact that the statement of claim originally filed in this proceeding appeared to have been "cut and pasted" from a pleading that was filed in proceedings against Standard & Poor's that were commenced in April 2013. Fitch also pointed to evidence that indicated that Ms Banton was aware from some time in 2012 that the Commonwealth Bank was claiming that it had relied on the ratings agency. 182 Second, Fitch submitted that the Court should not accept Ms Banton's "suggestion" that the claim was not pursued against Fitch before September 2014 because of a belief that the Commonwealth Bank would join Fitch in the proceedings commenced against it. It was, in Fitch's submission, hard to see how Ms Banton could reasonably have been believed that the Commonwealth Bank had a cross claim against Fitch, and there was in any event no evidence that the Commonwealth Bank ever asserted that it had such a claim. The fact that the Commonwealth Bank had told Ms Banton that it relied on Fitch's rating may reasonably have led Ms Banton to believe that the Commonwealth Bank might rely on a defence of proportionate liability, but it provided no basis for her to believe that the Commonwealth Bank intended to file a cross claim. Moreover, Fitch pointed out that the Commonwealth Bank was never served. Unless and until it was served, the Commonwealth Bank was in no position to join Fitch. 183 Fitch submitted that the clear inference that should be drawn was that Ms Banton had decided to pursue the claim against the Commonwealth Bank and put the possible claim against Fitch on the "back-burner". There were, in Fitch's submission, obvious forensic and commercial reasons why such a course may have been considered to be advantageous, particularly to the litigation funder. Fitch also went so far as to submit that, once commenced, the Fitch proceeding was not vigorously pursued because it was perceived or believed to be a weak case. 184 There is, on balance, no proper or sufficient basis to disbelieve Ms Banton's evidence that she did not have enough information or material in order to bring a claim against Fitch until September 2014. It may be accepted that the proceeding against Fitch was not commenced before that date at least in part because Ms Banton had not satisfied herself from the information available to her that there was a proper basis to commence the proceedings. 185 That is not to say, however, that Ms Banton provided an entirely adequate or convincing explanation for why the proceeding against Fitch were not commenced until shortly before the expiry of the limitation period. There could be little doubt that Ms Banton was aware of the possibility of a claim against Fitch from as early as 2012. She knew that the Commonwealth Bank was claiming that it had relied on Fitch's rating. She was involved in the successful proceeding against Standard & Poor's that arose in not dissimilar circumstances and involved the rating of a similar species of financial product. While there may have been some material differences between the case against Standard & Poor's and the potential claim against Fitch, including potential differences between the respective ratings methodologies of Standard & Poor's and Fitch, it is extremely difficult to see why, if Ms Banton had acted with due diligence and dispatch, it would have taken her until September 2014 to obtain sufficient information to satisfy herself that there was an arguable or viable case against Fitch. 186 Ms Banton's evidence concerning the investigations into the claim against Fitch and, perhaps more importantly, when they commenced, was unfortunately very vague and lacking in detail. In her affidavit, she said only that the investigations into a potential claim against Fitch were made in the context of her "dealings" with the Commonwealth Bank. During cross-examination, she was unable to say when she commenced her investigations. The best she could do was to say that it was a "significant period of time" before September 2014. When pressed, she agreed that it was "at least months", but was unwilling to say that it was years. At one stage, Ms Banton appeared to accept that the investigations by her or her team may have commenced as early as the first half of 2012, however exactly how much investigating was done at that time remained entirely unclear. 187 Ms Banton's evidence was even more vague and general when it came to describing the nature, scope and results of her investigations. The evidence rose no higher than the general assertion that the investigations involved obtaining information from certain experts and other unspecified sources. It may well be the case, as Gloucester effectively submitted, that Ms Banton's evidence about these matters was vague and general because she was concerned not to waive privilege over any documents recording the investigations or the information obtained as a result of them. Nevertheless, it was Ms Banton's election to maintain the privilege claim and the Court can only act on the evidence she ultimately gave: cf. Giannelli v Wraith (1990-1991) 171 CLR 592 at 605. 188 Ultimately, it is not possible to be satisfied, on the available evidence, that Ms Banton investigated the potential claim against Fitch with due diligence and dispatch, or with any sense of urgency or haste. 189 It does not necessarily follow, however, that it can be inferred that this was the result of a conscious decision to put the matter on the "back-burner". There are a number of possible competing available inferences, including that Ms Banton and her staff were preoccupied with other matters, including, perhaps, the appeal in the matter involving Standard & Poor's and, perhaps more significantly, the proceeding against the Commonwealth Bank. Indeed, that inference was supported by Ms Banton's own evidence. In her second affidavit, Ms Banton said that during much of the time prior to commencing the proceedings against Fitch, she was focussed on settling the case against the Commonwealth Bank, which she indicated was the most protracted and complicated settlement process she had ever been involved in. 190 It may also be inferred that the apparent delay in investigating and commencing the potential claim against Fitch may have been due in part to Ms Banton's belief that Fitch may in some way have been drawn into the proceedings against the Commonwealth Bank. That, indeed, was the general tenor of Ms Banton's evidence. The belief that the Commonwealth Bank may have joined Fitch perhaps led Ms Banton to give less priority to the investigation into the potential claim against Fitch. She may, in those circumstances, have effectively thought that she could leave any detailed investigations into the prospective claim against Fitch to the Commonwealth Bank, at least until it became apparent to her in or around September 2014 that the Commonwealth Bank may not in fact join Fitch. 191 While it may be the case, as Fitch effectively submitted, that Ms Banton had no sound or reasonable basis for believing that the Commonwealth Bank had an available cross-claim against Fitch, or actually intended to file a cross-claim against Fitch, there is no sound basis to disbelieve her evidence that she thought that Fitch would or might be joined. Ms Banton's belief in that regard appeared to be based on what had happened in the proceedings commenced against Local Government Financial Services, combined with the fact that the Commonwealth Bank had told her that it relied on Fitch's ratings. In those circumstances, it is perhaps not surprising that Ms Banton may have formed an initial belief that, if the Commonwealth Bank was eventually served, it might seek to join Fitch. What is somewhat surprising, and was not fully explained in Ms Banton's evidence, is exactly what, if anything, she did to ascertain whether the Commonwealth Bank did in fact intend to file a cross-claim against Fitch and why it apparently took until September 2014 or thereabouts for her to realise that this was not going to happen. The available inference, consistent with other findings that have been made concerning Ms Banton's investigation of the potential claim against Fitch, is that, at least before September 2014, Ms Banton did not give careful or considered thought to whether there was any real and reasonable prospect that Fitch would be joined by the Commonwealth Bank. 192 There was other evidence that tended to suggest that careful or considered thought and attention may not have been given to the commencement of proceedings against Fitch until the potential expiry of the limitation period became an issue. That evidence concerned the manner in which the pleading in its original form was drafted and settled. The available inference is that the pleading was drafted and settled in great haste and perhaps with insufficient care. 193 As was noted earlier, it is readily apparent that the statement of claim filed in this proceeding was essentially copied from pleadings that had been filed in earlier proceedings commenced against Standard & Poor's. Ms Banton accepted that the Standard & Poor's pleading was used as a "template" when it came to drafting the pleading against Fitch. What is also readily apparent, however, is that apart from the particulars of names and dates, the Fitch pleading, as originally filed, was essentially identical to the Standard & Poor's pleading. There was essentially one minor, but undoubtedly material, change. That change related to the allegations of reliance. In the Standard & Poor's pleading it was alleged that, before investing, the applicant had become aware that Standard & Poor's had assigned a particular rating to the relevant financial product. In the pleading against Fitch, as discussed in detail earlier, it was alleged that prior to investing in the Palladin notes, Gloucester was aware only that Fitch "intended" to assign a rating. Thus, the drafter of the Fitch pleading appeared to be aware that the rating had not been assigned at the time that Gloucester decided to invest. The significance of the fact that this was known at the outset is considered later in the context of the delay in making the proposed amendment. 194 Of more immediate relevance is the fact that the pleading initially filed in this proceeding included a series of allegations concerning representations by Fitch that its credit ratings were objective, independent and uninfluenced by any conflicts of interest. Those representations were alleged to be false, misleading and deceptive. In August 2015, after Gloucester was granted leave to serve Fitch outside Australia, but before the pleading was served, Gloucester filed an amended pleading which deleted the allegations concerning the independence representations. Ms Banton was cross-examined at length concerning the inclusion, then removal, of the independence representation. It is unnecessary to detail the evidence she gave on that topic. Nor is it necessary to make any specific findings concerning Ms Banton's knowledge of, and reasons for, the inclusion and subsequent removal of the allegations concerning the independence representations. Suffice it to say that some aspects of her evidence were, on just about any view, far from convincing. 195 Putting aside the specific criticisms of Ms Banton's evidence, the main point that flows from the evidence as a whole concerning the drafting of the pleading, including the inclusion and subsequent removal of the independence representation allegations, is that it can be inferred that the pleading was prepared in considerable haste because of the approaching expiry of the limitation period. As a result, some aspects of the case against Fitch were perhaps not given the thought or attention that they deserved. 196 On the whole, Ms Banton's evidence concerning the pre-commencement history of this proceeding was neither particularly cogent nor persuasive. That is not to say that Ms Banton's evidence about any particular matter is positively disbelieved or rejected. It is just that her explanation for why the proceeding was commenced at the last minute is not particularly satisfactory, let alone compelling or convincing. In particular, it is not possible to conclude that the potential availability of a case against Fitch was investigated with any real diligence or dispatch, or with any particular sense of urgency, at least until the expiry of the limitation period approached. Even then, it is difficult to be satisfied that the prospective case was investigated and assembled with the sort of attention that one would expect ought be given to a significant and complex commercial cause. Ultimately the pleading seemed to be prepared in great haste and in circumstances where insufficient attention appeared to be given to certain important aspects of the pleaded case. 197 It is relevant to have regard to those aspects of the pre-commencement handling of the matter in considering whether leave should be granted to further amend the pleading. It tends to weigh against the grant of leave. 198 It should also perhaps be noted that, even after commencing the proceeding against Fitch, no particular sense of urgency was displayed in the prosecution of the proceeding. As stated earlier, no immediate steps were taken to serve Fitch. Prior to serving Fitch, Gloucester applied to adjourn the first return date on many occasions for various different reasons. Those applications were granted. Ultimately Fitch was not made aware of the proceeding until May 2015, and was not formally served until October 2015. Fitch contended that the claim was not vigorously pursued, even after it was commenced, because it was perceived to be a weak claim. That submission is rejected. There is no sound evidentiary basis to make such a finding. Nevertheless, the delay between commencement and service is also a relevant contextual consideration. It effectively adds to the pre-commencement delay.

The nature and importance of the amendment 199 There could be no doubt that the amendment is important, if not critical, to Gloucester's case. As discussed at length in the context of Fitch's summary dismissal application, but for the amendment there was a real prospect that Gloucester's case would be summarily dismissed, or the pleading struck out. 200 This is an important consideration which weighs in favour of the grant of leave to amend. A party should ordinarily be given a sufficient opportunity to plead its case. If leave to amend is not granted, Gloucester will effectively be denied that opportunity. Indeed, if leave to amend is not granted, Gloucester's case against Fitch may effectively be at an end. 201 By the same token, this is not a case where the effect of the proposed amendment is to open up a "whole new case": cf. Tamaya (Full Court) at [45]. Rather, the proposed amended pleading largely reframes Gloucester's case in relation to the causation and reliance elements of the causes of action already pleaded. The amendments do not in substance add new causes of action or introduce a large number of new factual allegations. In that respect, the amendments are unlikely, in the end, to add significantly or at all to the evidence that will be led at trial. This is also a consideration that weighs in favour of allowing the amendment.

Delay in making the amendment application 202 The delay in making the amendment application is an important consideration in the particular circumstances of this matter. So too is the explanation for the delay. 203 As already discussed at length, Gloucester's need to amend the pleading arose because Fitch identified a defect in the pleaded allegations concerning Gloucester's reliance on Fitch's rating of the Palladin notes. In simple terms, the existing pleading alleges that Gloucester relied on Fitch's rating when it agreed to acquire the Palladin notes on 24 May 2007. At that time, however, it was only aware that Fitch intended or expected to assign the rating. The rating was not issued or assigned until 7 June 2007. 204 That potential difficulty with the reliance pleading should, in all the circumstances, have been apparent to the drafter at the time the pleading was first drafted. That is particularly the case if careful and considered thought and attention had been given to the issue at that time. It was known at the time the pleading was first drafted that Gloucester had entered into an agreement to acquire Palladin notes on 24 May 2007. It would also appear that it was known at the time the pleading was first drafted that Fitch did not formally assign the AA rating to the notes until 7 June 2007. 205 During cross examination Ms Banton appeared to be reluctant to accept that she was aware that the rating was not assigned until 7 June 2007. It is difficult to comprehend that reluctance. The pleading as originally filed appeared, in paragraph 60, to allege that the rating was assigned on or about 7 June 2007. It is also difficult to accept that prior to finalising the pleading Ms Banton, or members of her team, would not have sought to ascertain, and would not have been able to ascertain, the date the rating was assigned by Fitch. In any event, the drafter of the original pleading was plainly aware, no doubt based on the Commonwealth Bank promotional documents, that as at 24 May 2007, Gloucester had only been told that it was intended or expected that Fitch would assign a AA rating to the notes. It was not alleged that Gloucester knew that the rating had been assigned as at 24 May 2007. As noted earlier, one of the few significant changes made to the "template" Standard & Poor's pleading related to that fact. 206 Why, then, was the reliance case that Gloucester now wishes to plead not formulated in October 2014 when the pleading was first drafted in late September 2008? Equally, why did Gloucester not plead the non-reliance based case in relation to causation that it now wishes to advance? It would appear that the answer to these questions is that Ms Banton, or those that assisted or advised her in relation to the pleading, did not fully understand or appreciate the chronological difficulty arising from the way reliance was initially pleaded, and did not appreciate that reliance and causation could and should be pleaded in the way Gloucester now wishes to put its case. That inference may readily be drawn from the correspondence that passed between the parties in relation to the pleading issue, as well as from Gloucester's initial response to Fitch's summary dismissal application. 207 On 13 November 2015, about a month after the pleading was first served on Fitch, Fitch's solicitors wrote to Ms Banton and raised a number of issues concerning the pleading. The letter specifically adverted to the fact that the pleading alleged that Gloucester had agreed to acquire the Palladin notes on 24 May 2007, that prior to that date Gloucester became aware that Fitch "intended" to assign a AA rating to the notes, and that the representation that Gloucester relied on concerned Fitch's intended rating. The letter requested details of how and when Gloucester relied on that representation. The letter also drew attention to the fact that the particulars of how Gloucester became aware of the intended rating referred to Commonwealth Bank documents. It was pointed out that the pleading did not indicate how the conduct of the Commonwealth Bank resulted from Fitch's conduct. 208 It appears that Fitch's lawyer assumed that Gloucester's case involved some sort of alleged indirect causation: that is, that Fitch advised the Commonwealth Bank of its rating, or intended rating, and authorised or permitted the Commonwealth Bank to convey that rating, or intended rating, to prospective investors, including Gloucester. While it could perhaps be said that the letter from Fitch's solicitor did not squarely or directly identify the chronological flaw in the reliance pleading, it certainly did enough to raise the issue. Indeed, it foreshadowed that Fitch would apply for summary dismissal. 209 Unfortunately, Ms Banton's response to the letter appears to have entirely missed the point. In her letter in reply, dated 25 November 2015, Ms Banton asserted that the alleged deficiencies pointed out by Fitch's solicitor in his letter were misconceived. She provided the following specific response to the queries concerning reliance: 8 Deficiencies arising from the above paragraphs (…) 8.2 First, the question as to how the conduct of the CBA resulted from the conduct of the Respondents is irrelevant insofar as our clients' pleaded case relates to the misrating of the Palladin SCDOs by the Respondents. That is, the Respondents' alleged negligence/misleading and deceptive conduct is claimed to have occurred at the time the credit ratings were assigned to the Palladin SCDOs, and not at the time when the CBA (or any other relevant distributor) disseminated the ratings assigned to each of the SCDOs in Australia. 8.3 Following from the above, the CBA is not a party to these proceedings and so any pleading as regards the conduct of the CBA and how that conduct resulted from the conduct of the Respondents is not material to the present proceedings. As noted above, the crux of our clients' case is that your clients acted negligently/engaged in misleading and deceptive conduct in publishing the rating of the SCDOs and, in reliance on those ratings (which were communicated to them by CBA), the Applicants purchased the SCDOs, leading them to suffer loss and damage. (Emphasis in original.) 210 The apparent failure of Ms Banton, and perhaps those who assisted and advised her, to appreciate the pleading deficiency that is now recognised appears to have persisted for some time. That inevitably led to delay. That said, Fitch's conduct also led to some delay. Fitch filed its application for summary dismissal on 29 March 2016, almost four months after the exchange of correspondence. 211 Gloucester's initial response to the summary dismissal application was to serve a notice to produce on Fitch, and to obtain leave to issue a subpoena to the Commonwealth Bank. That occurred in April 2016. Both the notice to produce and subpoena were directed to obtaining documents disclosing communications between Fitch and the Commonwealth Bank in relation to the assignment of ratings to the Palladin notes. Thus it would appear that, at least initially, Ms Banton, and those who assisted and advised her, thought that Gloucester could meet the issues raised by Fitch concerning the pleading by providing further or better particulars in support of an indirect causation case. Gloucester appears to have been after documents that showed that Fitch had effectively told the Commonwealth Bank what rating it would assign, and had authorised the Commonwealth Bank to communicate that fact to prospective investors. Fitch's response was to file an application seeking to set aside the notice to produce and subpoena on the basis that there was no legitimate forensic purpose to require the production of the documents sought. That application was dismissed on 25 May 2016. 212 As has already been discussed in detail, Gloucester's next response to the summary dismissal application was to seek to amend its pleading. Unfortunately, even that exercise was beset by delays. Gloucester initially foreshadowed applying for leave to amend in early June 2016. Orders were made requiring Gloucester to file any such application by 4 July 2016. No application was filed by that date. An application was, however, filed on 14 July 2016. That application annexed the first iteration of the proposed amended pleading. Following a case management hearing, at which Fitch's counsel asserted that the proposed amended pleading was deficient, Gloucester served a second iteration of the proposed amended pleading in late August 2016, followed in early September 2016 by an application to amend its original leave application. For its part, Fitch served notices to produce which were directed to Ms Banton's evidence in support of the amendment application. Gloucester promptly moved to set aside those notices to produce. 213 Given the series of seemingly interminable and intractable interlocutory battles, the hearing of Fitch's application for summary dismissal, and Gloucester's application for leave to amend, was not concluded until mid-November 2016. The key points to emerge from this lamentable chronology are: first, Gloucester's application for leave to amend was filed almost two years after the proceeding was commenced and almost one year after Fitch first raised an issue about Gloucester's pleaded case in respect of reliance and causation; and second, by the time the application was finally heard, over two years had passed since the commencement of the proceeding. In that time, and primarily because of the issue with the pleading, the matter has not even progressed to the point where Fitch has been required to file a defence. While some of that delay may be attributed to Fitch's application to set aside Gloucester's notice to produce and subpoena, and other interlocutory fights, much of the delay is attributable to Gloucester and its failure to appreciate what is now correctly recognised as a deficiency in the existing pleading. 214 Ultimately, Ms Banton acknowledged in her evidence that the delay in filing the amendment application arose because she did not appreciate the difficulties with the pleaded reliance case until those difficulties were pointed out to her by Fitch's solicitors. In her second affidavit, Ms Banton said (at paragraph 11): In response to paragraph 45 of Fitch's submissions I can say, categorically, that I did not turn my mind to the issues raised by the Fitch Respondents' criticism of the pleading (and the fact that the Applicants' purchase agreements preceded the formal notification of the rating) until Fitch raised those issues. The Applicants acknowledge that the pleadings need refinement to make it clear how the case based on reliance is put forward, but this "difficulty" (such as it is) was not appreciated by me at the outset and did not contribute to my decision to pursue the CBA proceedings first. It had no bearing on my decision when to commence and serve the Fitch Proceedings. 215 Ms Banton's explanation is corroborated and supported by the correspondence between the parties and the sequence of events just described. It is clear that the need for the amendment was not appreciated until the issues of reliance and causation were given detailed consideration in the context of Fitch's summary dismissal application. It should be added, however, that as the discussion earlier in the context of the operation of the proposed amendment makes plain, the issues of reliance and causation in this case are far from simple and straightforward. It is by no means entirely implausible or inexplicable that the problem was not fully appreciated at the outset. It is equally not surprising that it took some time for Ms Banton, and those who assisted and advised her, to grapple with the problem and properly formulate Gloucester's claim concerning reliance and causation. It would seem that the final iterations of the proposed amended pleading did not emerge until senior counsel became involved. 216 The lengthy delay between the commencement of the proceeding and the making of the amendment application, though explained, is a significant consideration weighing against the grant of leave to amend.

Delay and the costs occasioned by the amendment 217 The question here is whether the amendment, if made, will cause any further delay and wasted costs going forward. Such delay and costs may arise, for example, from the need to vacate a listed trial date, or if any new issues raised by the amendment will result in the need for further evidence and further interlocutory steps. 218 There is no evidence that the amendment itself will give rise to any further significant delays or costs for Fitch. While the proceeding has been on foot for some time, Fitch has not yet filed a defence. There is no indication that the amendment will give rise to any additional interlocutory steps, though given the history of the matter to date, it is almost inevitable that further interlocutory disputes about other matters will arise in the future. Obviously there is no need to adjourn any hearing date. These and other similar considerations are also dealt with in the context of the question whether there is any prejudice to Fitch from the amendment.

Prejudice that may arise from the amendment 219 Fitch did not contend that the amendment will cause it any specific or "palpable" prejudice of the sort referred to by McHugh J in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551. Given the delays occasioned to date, however, Fitch submitted that the possibility of prejudice could not be excluded. In Taylor, which involved an application for an extension of time in which to commence an action outside the limitation period, McHugh J said (at 551): The enactment of time limitations has been driven by the general perception that "[w]here there is delay the whole quality of justice deteriorates". Sometimes that deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists. As the United States Supreme Court pointed out in Barker v Wingo, "what has been forgotten can rarely be shown". So, it must often happen that important, perhaps decisive, evidence has disappeared without anybody now "knowing" that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance because its relationship to the cause of action is no longer as apparent as it was when the cause of action arose …. The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose. (Footnotes omitted.) 220 Fitch submitted that the delays were such that it might reasonably be expected that the recollections of witnesses will be impaired. 221 For its part, Gloucester contended that not only was there no evidence of any demonstrable or tangible prejudice, but in the particular circumstances of this case the Court would be slow to accept that there may be some form of presumptive or possible prejudice arising from the amendments. In that regard, Gloucester emphasised two matters. First, the question is whether the amendment will or may cause any prejudice, not whether delay prior to the commencement of the proceedings, or delay generally, may cause prejudice. It was submitted that in this matter the amendment itself will not occasion any, or any significant, delay. Second, Gloucester submitted that evidence adduced by it in relation to Fitch's ratings methodology indicated that the methodology was essentially quantitative, not qualitative. It largely involved inputting data concerning the reference entities and reference portfolio into a computer model. Accordingly, even if it might be accepted, in general terms, that the memories of witnesses diminish over time, the effluxion of time in this matter is unlikely to have any prejudicial effect because Fitch's case is unlikely to rely on witness recollections about the ratings process. 222 There is some merit in both parties' submissions concerning prejudice. On the one hand, no specific or palpable prejudice has been demonstrated. Nor has Fitch shown that the amendment itself will occasion any further delay, or pointed to any specific aspect of its case which it might be presumed will or might be adversely affected by the general effluxion of time and delay by Gloucester in the commencement and prosecution of its case. Fitch simply relied on the general proposition that, while there may be no known or knowable prejudice, the delay is such that it should be inferred that there is likely to be some negative impact on its ability to gather and adduce cogent evidence in its defence of Gloucester's claim. 223 On the other hand, the approach to prejudice advocated by Gloucester would appear to be unduly narrow. For the reasons given earlier, the actual and potential effect of the proposed amendment must be looked at in context. The relevant context may include delay generally, including any delay not directly occasioned by the amendment itself. In any event, it is not strictly correct that the proposed amendment has not given rise to any delay. The amendment application was filed in response to Fitch's application for summary dismissal. As a result of various other related interlocutory disputes, it has taken the better part of a year for the summary dismissal and amendment applications to be heard and determined. That delay must be factored into the equation. 224 Gloucester's focus on evidence relating to ratings methodology is also too narrow. It is unlikely that the evidence and issues in the matter will be limited to Fitch's ratings methodology and the assignment of the particular ratings in question. As Fitch pointed out, there may be issues and evidence concerning Fitch's duty of care, communications and dealings between Fitch and the arranger and distributor, as well as potential issues concerning proportionate liability. Even if it might be accepted that the ratings methodology was primarily quantitative not qualitative, it does not necessarily follow that Fitch will not be potentially disadvantaged by the delay, albeit that it is not possible to identify that disadvantage. 225 On balance, the fact that there is no specific or palpable prejudice occasioned by the amendment is an important consideration that weighs in favour of allowing the amendment. Despite having been on foot for some time, the proceeding is at an early stage. There is no need for Fitch to file an amended defence as no defence has been filed to date. No hearing date has to be vacated as a result of the amendment. 226 Nevertheless, for the reasons already outlined, some consideration must be given to delay generally and the presumptive prejudice that might arise from it. The delays have been significant and the possibility of some prejudice arising from the delays cannot be excluded. 227 It should, of course, be noted in the context of prejudice that Gloucester accepted that it will have to pay any costs thrown away by Fitch as a result of the amendment should leave be granted.

The conduct of the proceeding generally - "the parties' choices" 228 Fitch contended that the evidence supported the inference that Gloucester made a deliberate and conscious decision to delay the commencement and prosecution of the proceeding, and a deliberate and conscious decision to file a pleading which did not properly grapple with the reliance and causation case that Gloucester now wishes to advance. That submission is rejected for the reasons already given. While the proceeding was commenced just prior to the expiry of the limitation period, and Fitch was not immediately served, the evidence does not support the inference that this was the result of a deliberate decision to put the matter on the "back-burner". Nor can it be inferred that the failure to properly grapple with the reliance case was conscious or deliberate. 229 That said, it can be inferred, again for the reasons already given, that the case against Fitch has not been investigated and prosecuted with any particular dispatch and diligence. The pleading seems to have been hastily drafted shortly prior to the expiry of the limitation period in circumstances where insufficient thought and attention appears to have been given to the reliance and causation case. Even when issues were raised about the pleaded reliance case, it took Gloucester, or more particularly its lawyers, some time to come to grips with the issue. As has already been explained, some weight must be given to these facets of Gloucester's prosecution of the proceeding.

Detriment to other litigants and public confidence in the legal system 230 Fitch did not contend that any particular weight should be given to these considerations, beyond a somewhat cursory assertion that permitting the proposed amendment would substantially risk causing a loss of public confidence in the legal system. As has already been noted, the amendments, if made, will not lead to any hearing date being vacated. It is difficult to see how, in those circumstances, it could be said that there was any likely detriment to other litigants. That said, public confidence in the legal system is hardly likely to be fostered by the somewhat unsatisfactory conduct of this proceeding to date. The apparent lack of diligence and dispatch that has been displayed in the conduct of this matter, the interminable interlocutory disputes between the parties, and the resulting glacial pace in which the proceeding has creaked forward, is not to be encouraged.

Conclusion in relation to discretionary considerations 231 When all these considerations are weighed in the balance, the preferable decision is to allow the proposed amendment. In all the circumstances, the dominant considerations are the importance of giving Gloucester sufficient opportunity to plead the arguable case it now wishes to agitate in relation to reliance and causation, the nature and importance of the proposed amendment and the absence of any identifiable or palpable prejudice to Fitch given the fact that the proceeding is at a very early stage. 232 It may be accepted that Gloucester's prosecution of the case to date has, in certain respects, been found to be wanting. The proceeding was commenced at the very end of the limitation period and, since commencement, has been the subject of various delays. The failure to fully appreciate the significance of the identified deficiency in the pleading, which led to the amendment application, contributed to the delays. These are weighty considerations. Nevertheless, the authorities referred to earlier make it plain that the object of the Court when considering an amendment application is not to punish the party seeking the amendment for mistakes that may have been made in the conduct of the case. The main object is to correct those mistakes so that the real questions in the controversy are properly agitated. 233 In all the circumstances, the just resolution of the dispute favours the granting of the amendment application.

Timing of the amendment 234 Gloucester sought an order that the amendments to the pleading "shall be taken to have effect from the date of filing of the Statement of Claim". The Statement of Claim was filed on 1 October 2014. The apparent purpose of seeking this order was to avoid any potential limitation issues that might arise if the amendments were to be taken to have effect from the date that the amendments were made. 235 There appears to be a lacuna in the current Rules on the question of when an amendment made by leave, not as of right, takes effect. Rule 16.54 provides that an amendment made under r 16.51, which deals with amendments that do not require the leave of the Court, takes effect on the date the amendment is made. There is no equivalent rule in respect of amendments made with the leave of the Court under r 16.53. In the former rules, Order 13 Rule 2 and 3A effectively provided that, other than in the case of amendments that added new claims for relief based in whole or in part on facts or matters that occurred or arose since the commencement of the proceedings, the amendment was to take effect on the date when the pleading was first filed, unless the Court otherwise ordered. Thus, the default position was that an amendment of a pleading by leave that was based on the same, or substantially the same facts as those already pleaded, was to take effect on the date of filing of the original pleading. That was consistent with the position taken in circumstances where there was no express provision in the rules of court dealing with the timing of an amendment: see Baldry v Jackson [1976] 2 NSWLR 415 at 419; Oztech Pty Ltd v Public Trustee of Queensland (No 2) [2015] FCA 1485 at [61]. 236 Fitch opposed the making of an order concerning the timing of the amendment in the terms sought by Gloucester. It submitted that such an order should not be made because the amendments raised new causes of action. 237 It is at least doubtful that it is correct to describe the amendments as raising new causes of action. Rather, the effect of the amendments is to change the way an element or elements of existing causes of action are pleaded. The amended pleading pleads the same statutory causes of action and causes of action in negligence and negligent misstatement as did the existing pleading. The amended pleading simply changes the nature and content of the allegations in relation to reliance and causation, including by adding a new and alternative non-reliance based case in relation to causation. 238 In any event, even if the amended pleading does raise new causes of action, those causes of action are based on the same, or substantially the same facts as those already pleaded. The Court has the power to grant leave to amend a pleading under r 16.53 so as to add a new claim for relief arising out of the same or similar facts, even if that relief is statute barred: Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (No 2) (2013) 213 FCR 289 at 293-294 [17]-[19]; McGrath v HNSW Pty Ltd [2014] FCA 165 at [46]-[54]; Caason Investments Pty Limited v Cao [2014] FCA 1410 at [34]. Under the previous Rules, when leave was granted to amend a pleading in such circumstances, unless the Court otherwise ordered, the amendment would take effect on the date the pleading was first filed, not on the date when the amendment was made. There is no reason to think that the current Rules were intended to operate differently. The Explanatory Statement that accompanied the introduction of the current Rules stated that "[t]he new Rules do not substantially alter existing practice and procedure but rather explain it in a way that it can be more easily followed and applied". 239 On one view, if the default position is that the amendments take effect on the date the original pleading was filed, it is unnecessary to make a specific order concerning the timing of the amendment. On the other hand, given the absence of any express rule in the current Rules concerning the timing of amendments by leave, there is something to be gained by making the order sought by Gloucester. It would at least provide some certainty and clarity in relation to the operation of the amendments. In that respect, an order confirming that the amendments take effect on the date of the filing of the original pleading is appropriate in the interests of justice and can be made pursuant to r 1.32 of the Rules.

Separate questions 240 While Fitch's interlocutory application for summary dismissal sought an order pursuant to rule 30.01 of the Rules that the Court separately hear and determine two questions concerning reliance, its written submissions made it clear that it only sought that order if the proceeding, insofar as it concerned Gloucester and CCMF, was summarily dismissed. Since the proceeding is not to be summarily dismissed, no further consideration need be given to the separate questions. In any event, the proposed separate questions have essentially been overtaken by the amendment.

Conclusion and disposition 241 In all the circumstances, Gloucester should be granted leave to amend its pleading in the form of exhibit 4 tendered on the last day of the hearing. The date the amendment takes effect should be taken to be 1 October 2014, being the date that Gloucester's pleading was first filed. The effect of permitting Gloucester to amend is that Fitch's application that the proceeding be summarily dismissed, or the pleading be struck out, must be dismissed. 242 The question of costs may require some further attention. Gloucester conceded that it should be ordered to pay the costs thrown away by Fitch as a result of the amendment. That concession is properly made. Gloucester also submitted, however, that Fitch should pay its costs in respect of both the summary dismissal application and the amendment application. While it did not advance any submissions in support of that contention, it presumably relies on the fact that it was the successful party in respect of both interlocutory applications. The position may not, however, be quite that simple. 243 The difficulty for Gloucester is that, but for the successful amendment application, which was filed after Fitch's summary dismissal application, Fitch's summary dismissal application would most likely have succeeded. Moreover, the final iteration of the proposed amended pleading only emerged on the final day of the four day hearing. In those circumstances, one possible view is that Fitch's costs in respect of some or all of what occurred prior to that day were effectively thrown away by the ultimately successful amendment application. The opposing view, perhaps, is that the final iteration of the pleading simply clarified certain parts of the earlier draft. Questions may also arise in relation to the reasonableness or otherwise of Fitch's opposition to the amendment application. 244 The parties did not make detailed submissions in relation to costs. The appropriate course would be to allow some time for the parties to confer with a view to agreeing on an appropriate costs order having regard to the orders that have been made and the reasons that have been given in respect of the duelling interlocutory applications. If the parties cannot agree on an appropriate costs order, they should exchange and file brief written submissions in relation to costs, not exceeding 3 pages in length, within 14 days of this judgment. It is both unnecessary and undesirable for there to be a further oral hearing. I certify that the preceding two hundred and forty-four (244) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.

SCHEDULE OF PARTIES NSD 995 of 2014 Respondents Fourth Respondent: DERIVATIVE FITCH LTD (A COMPANY INCORPORATED IN THE UNITED KINGDOM)