Gujarat NRE India Pty Ltd v Wollongong Coal Ltd [2017] NSWSC 1221 | Case summary

Application to amend defence

I will deal first with the defendant's application to amend its defence.
As I understand the plaintiff's position: 1. The plaintiff does not object to the addition of particulars to par 45(h) 2. The defendant does not object to the addition of sub-par (b) to par 85 of the defence. 3. The defendant does not object to the addition of sub-pars (c) to (e) and the deletion of sub-par (f) to par 85, and the addition of par 86, provided: (1) the plaintiff is given leave to join an additional plaintiff in accordance with a draft amendment to its statement of claim that has been provided to the defendant, and (2) the amendment by the defendant is allowed on the condition that when it files a defence to the plaintiff's new statement of claim, the defendant is not entitled to plead any part of its proposed amended defence that the court does not give it leave to file. 4. The defendant does not object to the addition of particulars to sub-pars (a), (b) and (j) of par 97 of the proposed amended defence. (I may have misunderstood the plaintiff's position in relation to pars 85 and 86 of the draft amended defence. This matter will be confirmed before I make orders on the defendant's notice of motion).
Otherwise, the plaintiff objects to be defendant being given leave to make the amendments in the proposed amended defence.
The defendant has stated that, if it is given leave to amend par 85 of the defence, it will consent to the plaintiff filing a statement of claim that joins the additional plaintiff, and it will submit to the condition that it will not file a defence that pleads any amendments that it is not given leave to make.
The first contentious amendment is in par 84 of the draft amended defence.
If the amendment to this paragraph is allowed, then par 84 will provide: 84. As to paragraphs 138 to 142 of the Statement of Claim, the defendant: a denies the allegations; b denies that the plaintiff and Wonga Coal Pty Ltd entered into a Sub-Underwriting agreement on or about 22 June 2013 or at all; c denies that the document purporting to be a Sub-Underwriting agreement: (i) was signed on or about 22 June 2013; (ii) was intended to give rise to legally enforceable obligations; and d says that the alleged to Sub-Underwriting agreement is not referred to in any contemporaneous business records; e says that the existence of the alleged to Sub-Underwriting agreement was not known to the directors of Wonga Coal Pty Ltd, other than Arun Jamatranka and Mona Jamatranka, until WCL was served with the Affidavit of Arun Jamatranka affirmed on 26 May 2014 in Federal Court of Australia Proceeding No. NSD 376 of 2014; f says that there was no notice of any directors meeting of Wonga Coal Pty Ltd called to consider or approve the entry into the alleged Sub-Underwriting agreement; g says that the alleged Sub-Underwriting agreement was purportedly signed by Mr Arun Jamatranka on behalf of Wonga Coal Pty Ltd and Mr Arun Jamatranka and his wife Mona Jamatranka on behalf of the plaintiff, GNRE India Pty Ltd; h says that there was no legitimate commercial purpose in the parties entering into the alleged Sub-Underwriting agreement; i says that Mr Jamatranka has previously knowingly participated in the use of fabricated and fraudulent documents to advance the interests of entities with which he was associated in a court case. Particulars (i) See British Marine PLC v Wollongong Coal Ltd [2015] FCA 403 (Buchanan J) in particular at [27]-[30] (Fixture Note dated 26 July 2013), [37]-[39] (Wollongong Coal invoice dated 30 September 2013), [38], [79]-[91] (Invoice dated October 2013 and email dated 23 October 2013), [97]-[102], [155]-[210] (letters dated 3 October 2013, 5 October 2013 and invoice dated 8 October 2013), [346]-[348]. j in the premises says that the document purporting to be a Sub-Underwriting agreement was a sham and fabricated document drafted and executed well after 22 June 2013.
Sub-par (i) essentially concerns the defendant's wish to tender tendency evidence, which will be considered below.
Of the balance of the sub-pars, (a) is a denial, and sub-pars (b) and (c) essentially allege that the sub-underwriting agreement referred to was a fabrication.
Sub pars (d) to (h) essentially allege the basis upon which the defendant would seek to prove that the sub-underwriting agreement was a fabrication. Sub-par (j) alleges the conclusion that the sub-underwriting agreement was a sham and a fabricated document drafted and executed well after 22 June 2013.
Counsel for the defendant confirmed in argument that sub-par (h), in-so-far as it would allege that there was no legitimate commercial purpose in the parties in entering into the alleged sub-underwriting agreement, is not intended to introduce a new claim that the sub-underwriting agreement is ineffective for want of legitimate commercial purpose. Rather, it is put forward as an additional ground for the court to conclude that the sub-underwriting agreement was a sham and a fabrication.
Paragraph 84 of the draft amended defence is a response to pars 138 to 142 of the statement of claim. Those paragraphs provide: 138 On 22 June 2013, the Plaintiff and Wonga Coal entered into a Sub-Underwriting Agreement pursuant to which the Plaintiff agreed to sub-underwrite up to 30% of the shortfall under the Offer (being the shares not subscribed for under the Offer) (the "Shortfall") up to the sum of $13,207,170 (the "Sub-Underwriting Agreement"). Particulars Sub-Underwriting Agreement dated 22 June 2013 from Wonga Coal Pty Limited to Gujarat NRE India Pty Ltd. 139 It was a further term of the Sub-Underwriting Agreement that the Plaintiff would also apply for 100% of its Entitlement Shares (as defined therein) that were offered to it by the Defendant pursuant to the Offer in its capacity as a shareholder in the Defendant. Particulars Clause 2 of the Sub-Underwriting Agreement 140 It was a term of the Sub-Underwriting Agreement that the Plaintiff's obligation as sub-underwriter would be terminated only if the Defendant's obligations under the Underwriting Agreement ceased or were terminated. Particulars Clause 6 of the Sub-Underwriting Agreement 141 It was a further term of the Sub-Underwriting Agreement that Wonga Coal, as underwriter could at its own discretion rely on its right that its obligation shall cease or to terminate its obligations as contemplated under the Underwriting Agreement in accordance with the terms as set out therein or as otherwise mutually agreed between it and the Defendant as parties to the Underwriting Agreement. Particulars Clause 6 of the Sub-Underwriting Agreement 142 It was a further term of the Sub-Underwriting Agreement that any funds paid by the Plaintiff to the Defendant, before such funds became due, for meeting any urgent cash requirements of the Defendant, would be considered as payment and partial satisfaction the Plaintiff's commitment under the Sub-Underwriting Agreement. Particulars Clause 8(c) of the Sub-Underwriting Agreement
In its defence that is on the court's file, the defendant's response to these paragraphs was a simple denial.
There was an issue that arose at various times during the first three days of the hearing as to whether this bare denial entitled the defendant to run the defence that the sub-underwriting agreement was a sham and the fabrication that it now wishes to plead explicitly by its amendment to par 84 of the defence.
Time does not permit a detailed analysis of what occurred by reference to the transcript.
It is sufficient to note that what I will call the "fabrication issue" was not mentioned in the parties' agreed statement of issues that was prepared shortly before the commencement of the hearing.
Nor was the issue raised in the eight pages of the defendant's outline of opening submissions.
On the other hand, one of the defendant's witnesses, who was a director of one or more of the parties to the sub-underwriting agreement at relevant times, Mr Sharma, had sworn an affidavit in which he gave evidence to the effect that he did not learn of the existence of the sub-underwriting agreement until well after its date. The import of Mr Sharma's evidence was that, if the sub-underwriting agreement had been prepared on the date it bears, then as a director he would have been expected to be aware of it.
Senior counsel for the defendant raised the issue of fabrication in his opening, and in due course senior counsel for the plaintiff objected to the defendant being able to run the fabrication issue in its defence, because the allegation of sham and fabrication had not specifically been pleaded in the defence.
Essentially, the defendant took the stance that bare denial allowed it to run the fabrication issue, while the plaintiff submitted that the fabrication issue was in essence an allegation of fraud that was required by the pleading rules to be pleaded expressly and fully.
The parties took different positions as to how the principles discussed by Mahoney JA in Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 347B to 349B applied. The plaintiff's position was that the matter was pleadable so that it may not be raised unless pleaded. The defendant took the position that the issue was not pleadable, so it was sufficient that the defendant had made the nature of the allegation clear in its opening.
During the course of the initial days of the hearing, I took the view that I should not make a final ruling on this pleading point, but should defer it until I gave my reasons for judgment in the case. I took that course because, if it was subsequently held that I had wrongly rejected the defendant's right to run the fabrication issue on its existing defence, then the whole of the trial might miscarry.
As I understand the position that the parties took, neither objected to the course I proposed, and I assume that the parties took the view that they could accommodate the alternative possibilities in the way they conducted the case.
Be that as it may, towards the end of the initial hearing, after it had become obvious that the hearing would not be completed in the allotted time, I made observations to the effect that the defendant could formulate particulars of the fabrication issue and provide those particulars to the plaintiff for the purpose of enabling the court to decide whether the defendant should be given leave to amend its defence to expressly plead the fabrication issue based upon those particulars.
In my view I clearly conveyed that the particulars should be provided promptly. In fact, I explored the issue with counsel as to whether it would be convenient for the parties and the court to deal with the issue on the fourth day that had been set aside, which would otherwise not be used for the hearing. I accepted the advice from counsel that that would not be convenient course.
As I have observed above, in fact the defendant did not provide the proposed amended defence to the plaintiff until 17 August 2017. On any view, that was much later than I contemplated when I made the suggestion concerning the provision of particulars on the third day of the hearing.
The question is whether the defendant should now be permitted to file a defence that contains the express allegations that support the fabrication issue, given the defendant's conduct in delaying in the provision of the proposed draft defence to the plaintiff.
On this issue, the defendant relied upon an affidavit of its solicitor, Mr Harold Werksman, sworn on 24 August 2017. The plaintiff responded by relying upon an affidavit of its solicitor, Mr Brian James Gillard affirmed 28 August 2017.
The only explanation given by Mr Werksman for the delay was his statement in par 13 of his affidavit that between March 2017 and August 2017, there have been outstanding fees owed to his firm by the defendant and anticipated future professional fees and disbursements that needed to be provided for in respect of the present and five other court proceedings in which Mr Werksman is retained by the defendant. Mr Werksman's firm has not been prepared to undertake work on these matters unless immediately pressing or unless some acceptable arrangement was forthcoming to address the fee position. It was not until the first week of August 2017 that an acceptable arrangement was reached with the defendant to allow Mr Werksman's firm to recommence work on this matter.
Mr Gillard responded to this explanation in pars 32 to 38 of his affidavit. He noted that the defendant is a publicly listed company that trades on the Australian Stock Exchange. He also noted that during the period of the adjournment of the present proceedings, the defendant prepared and appeared in two matters in the Commercial List of the Equity Division.
Mr Gillard also deposed to work having been done on behalf of the defendant in certain other matters.
Mr Gillard said that Mr Werksman was retained by the defendant, and one or both of the counsel briefed to appear for the defendant in these proceedings were involved in various respects with aspects of those matters. I have taken into account the whole of Mr Gillard's evidence on this issue, and have not fully summarised it in this judgment.
I accept the evidence given by Mr Werksman for the reason why the defendant did not provide a proposed amended defence to the plaintiff until 17 August 2017.
I do not regard that explanation to be an adequate justification for the delay in terms of the principles discussed by the High Court in AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27. The evidence justifies a finding that the defendant selectively funded other proceedings and chose not to comply with the court's requirement concerning the prompt provision of particulars of the fabrication issue to the plaintiff. In my view, it was plain from the observations that I made that procedural fairness to the plaintiff required the particulars to be provided promptly. That would be necessary to enable the plaintiff to consider its position, and if necessary any dispute ruled upon by the court. Such a ruling would have taken into account the time required by the plaintiff to respond to the new particulars.
Mr Gillard gave evidence of the communications that took place between the solicitors for the parties, by which the solicitors for the plaintiff tried to cause the defendant to provide the particulars promptly.
On 10 May 2017, the plaintiff's solicitors sent proposed consent orders to the solicitors for the defendant. Those orders provided for the defendant to serve on the plaintiff the further and better particulars of par 84 (and also par 97) by 29 May 2017, and for the plaintiff to serve any further evidence it wished to rely upon in light of the further and better particulars by 17 July 2017. That would have given the plaintiff about 48 days to prepare the evidence.
On 5 July 2017, the plaintiff's solicitors sent a further draft of consent orders to the defendant's solicitors. The orders were in the same form, but the defendant was required to provide the particulars by 14 July 2017, and the further evidence was to be given by 28 July 2017. That gave the plaintiff 14 days to prepare the evidence.
A solicitor for the plaintiff made a follow-up call on 13 July 2017, and was told by a lawyer on behalf of the defendant that the issue needed to be followed up.
On 14 July 2017, the same solicitor for the plaintiff was told that the issue of the consent orders was still being progressed.
On 26 July 2017, the plaintiff's solicitor was told that the matter would be followed up again and that the lawyer for the defendant would speak with someone about the matter that day.
On 28 July 8, 2017, the plaintiff's solicitors advised the defendant's solicitor's by email that in the absence of agreement to any proposed consent orders the matter should be relisted for directions.
The defendant's solicitors responded on 31 July 2017 by saying that they expected to be in a position to provide the defendant's proposed orders by the following Thursday, which was 3 August 2017.
On 3 August 2017, the defendant's solicitors provided draft consent orders to the plaintiff's solicitors. The proposed consent orders provided for the defendant to file and serve a second further amended defence by 11 August 2017. The defendant had therefore moved beyond giving further particulars of its existing defence, to requiring the plaintiff's agreement that the defendant have leave to file a new defence. The plaintiff would be given a further 14 days to 25 August 2017 to file any further evidence, and the defendant would file any evidence in response by 1 September 2017.
In these circumstances, it was not until 17 August 2017 that the defendant's solicitors wrote the letter to the plaintiff's solicitors enclosing the proposed second further amended defence, and raising the issue about the defendant being given leave to rely upon tendency evidence.
By this stage, by reason of the delay on the part of the defendant, the plaintiff had changed its position and opposed the defendant being given leave to make various of the amendments to its defence for which leave is now sought.
Mr Gillard explained the difficulties which the grant of leave would now cause the plaintiff. Those difficulties are set out in par 17 of Mr Gillard's affidavit, in relation to the proposed amendment to par 84 of the defence. In outline, the plaintiff would wish to call evidence from Mrs Mona Jagatramka, who is the wife of Mr Jagatramka, who was also a signatory to the sub-underwriting agreement. Mr Gillard said that Mrs Jagatramka is not able to fly out to Australia at late notice to give evidence in these proceedings as, among other things, she is currently in India caring for her sick and hospitalised son.
As to this matter, senior counsel for the defendant responded that the defendant would not object to Mrs Jagatramka giving evidence by video link from India.
I do not think that this concession on the defendant's part would fairly resolve the difficulty imposed upon the plaintiff by reason of the need to arrange a video link and for Mrs Jagatramka to be able to provide a fully considered affidavit within the remaining hearing time. I do not think it is a matter of Mrs Jagatramka simply saying by a video link that she executed the sub-underwriting agreement on the day that it bears. Ordinarily, the solicitors for the plaintiff would need to obtain full instructions from Mrs Jagatramka concerning the surrounding circumstances, in order to ensure that her evidence was as fully corroborated as possible.
Mr Gillard then said that the plaintiff would wish to adduce evidence from a computer expert to examine the first electronic copy of the executed sub-underwriting agreement and determine from the meta data of that electronic file when it was first created. Mr Gillard explained why that would not be possible in the time available by reason of the investigations that would be necessary in order to obtain the relevant electronic files.
Senior counsel for the defendant responded to this argument by saying that the defendant had already served a notice to produce on the plaintiff seeking the information that the plaintiff would now wish to give to the computer expert, and that material had not been produced. The submission was that the plaintiff's objective is futile because there will be no electronic data to give to the computer expert.
The evidence that is before the court on the hearing of the notice of motion does not permit the court to safely reject Mr Gillard's claim that further investigation might enable the plaintiff to obtain evidence from a computer expert that supports the sub-underwriting agreement having been prepared on the date that it bears.
Mr Gillard then said that the plaintiff would wish to investigate whether there was any other employee of the group of companies of which the plaintiff was a part who could give corroborating evidence as to when the sub-underwriting agreement came into existence. The plaintiff has not been able to undertake these enquiries.
The plaintiff would also wish to adduce further evidence from Mr Jagatramka, supported by appropriate documentation, outlining the commercial reason for the sub-underwriting agreement. Mr Gillard gave practical reasons as to why this evidence could not realistically be obtained in the available time.
Finally, Mr Gillard said that the plaintiff would also wish to adduce further evidence as to where the text of the sub-underwriting agreement came from, as he had been instructed that it came from a document already in existence prior to the execution of the sub-underwriting agreement on the date that it bears.
I acknowledge that the plaintiff could have obtained all of this evidence after the end of the initial part of the hearing, as it is on notice that the defendant proposes to run the fabrication issue on the basis that the denial in the existing defence permits it to do so. The plaintiff is at risk that if the defendant is correct on the pleading point, the plaintiff will have failed to adduce evidence in answer to the evidence relied upon by the defendant on the fabrication point. Also, it seems from the draft consent orders that the plaintiff provided to the defendant that it was initially not going to object to the provision of the additional particulars, on the basis that it would be given time to obtain and serve evidence responsive to those particulars.
However, on the other hand, the plaintiff may have made the strategic decision to rely upon its stance on the pleading issue being correct, so that the need to obtain and serve the additional evidence would not be necessary.
Further, notwithstanding the nature of the fabrication issue explained by senior counsel for the defendant during the initial hearing days, in my view it was reasonable for the plaintiff to defer actually obtaining the additional evidence until it knew specifically what the particulars of the fabrication issue on which the defendant proposed to rely were. It would be standard and sensible litigation practice for a party not to anticipate a claim foreshadowed by the other party, as to do otherwise would invite error and waste.
All of these matters have caused me to conclude that at this late stage it would be inappropriate and unfair to the plaintiff for the court to allow the defendant to formally amend par 84 of its defence in the manner set out in par 84 of the proposed amended defence (insofar as the plaintiff takes objection to the amendment).
For the court to give the defendant leave to make that amendment, it would retrospectively formalise the entitlement of the defendant to run the fabrication issue, and also have the effect of denying the plaintiff the benefit of its pleading argument that the fabrication issue could not be run by the defendant without a pleading which expressly put the plaintiff on notice of that issue. I am satisfied that there is too great risk of procedural unfairness to the plaintiff for the court to take that course at this late stage.
Of course, the approach that was originally available during the initial days of the hearing, whereby each party would proceed upon the basis of its own view of the pleading argument will remain open to the defendant.
Essentially, I am of the view that, as a result of the unjustified delay on the part of the defendant, the court should not give any leave to amend the defence that will give a formal advantage to the defendant, in circumstances where there is a very real risk that the plaintiff will not be able to respond properly.
Realistically, over the remaining five days of the hearing, the plaintiff would not be able to tender any significant evidence, or comprehensively alter the nature of its response to the defence, to deal with the effect in the change in the pleadings.
The next aspect of the draft amended defence that needs to be considered is the proposed addition of sub-par (i) to par 97. That sub-par provides: i the Defendant changed its position by making payments to AXIS bank at the direction of Mr Jagatramka shortly after receipt of the said sums;
Paragraph 97 of the defence is a further answer to pars 135 to 164 of the statement of claim.
Those paragraphs allege a restitution reclaim on a number of bases.
It must be noted that there is no explanation for the defendant's delay in seeking to raise this defence in terms of the principle in AON. This matter has nothing to do with the particulars issue in relation to par 84 of the defence that was discussed during the initial hearing.
The proposed amended defence does not provide any detail of the alleged change in position, but as I understand it the reference to the making of payments to AXIS bank is a new case that has not been fully or adequately explained in the existing evidence.
In the circumstances I would not give leave to the defendant to include par 97 (i) in the amended defence on the first day of the renewed hearing, as that would be procedurally unfair to the plaintiff.
The final aspect of the proposed amended defence that requires consideration is sub-par (k) that the defendant wishes to add to par 97. That sub-par would provide: k it is unconscionable for the Plaintiff to demand payment for the amounts payable to it when the Plaintiff's parent company owes the Defendant the sum of $59,718,101.53 and owed it substantially more than the amount claimed in these proceedings as at June 2013. Particulars (i) the Defendant repeats the particulars to paragraph 45(h).
The effect of the particulars is that the defendant will rely upon the fact that on 27 March 2017 it obtained a judgment in the amount of USD 59,718,101.53 against the Indian parent company of the plaintiff in proceedings in the Supreme Court of New South Wales. The evidence is to the effect that the Indian parent company of the plaintiff is in some form of external administration.
If the court were to permit the inclusion of par 97(k), that would introduce a new defence based on an allegation that it would be unconscionable for the plaintiff to demand payment of the amount that the plaintiff seeks to recover in these proceedings from the defendant, because the plaintiff's parent company owes the defendant an amount that is substantially more than the amount claimed from the defendant.
Senior counsel for the defendants supported this amendment by saying that it was based upon the decision of the Court of Appeal of this State in Hawes v Dean [2014] NSWCA 380.
Senior counsel explained that the claim in sub-par (k) is really no more than an elaboration of the claim in sub-par (j) whereby it is alleged that the defendant is entitled to set off any amount payable to the plaintiff in these proceedings against the amount owed by the defendant to the plaintiff's Indian parent company.
I would be concerned about granting the defendant leave to raise a new 'unconscionability' defence at this late stage of the proceedings, if the defendant intended to rely upon any facts and circumstances that have not been identified by specific particulars. As matters stand, I take the case that the defendant wishes to make to be based solely upon the fact that the defendant has obtained a judgment against the Indian parent company of the plaintiff that is greater than the amount of the claim made by the plaintiff against the defendant in these proceedings. The defendant asserts that it has a defence based upon a principle that it would be unconscionable for the plaintiff in those circumstances to recover the amount that it claims from the defendant. The new 'unconscionability' defence is in that respect tantamount to set off.
In my view the defendant should be given leave to amend to add par 97(k) to its defence, but only on the basis that the defence can be made out solely by proof that the defendant has the judgment against the Indian parent company of the plaintiff that has been referred to. The leave will not permit the defendant to seek to establish a defence that requires proof of any additional facts to establish unconscionable conduct on the part of the plaintiff for which specific particulars have not been given.

Gujarat NRE India Pty Ltd v Wollongong Coal Ltd

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