The 1999 Business Plan
· failure to permit and provide all things necessary for JMG to prepare and submit the 1999 Business Plan [paragraph 50.5]
74 The new proposed paragraph 54BU seeks to plead that in about September to November 1998, 1999 and 2000 respectively, the Boards of the NMG and of Ausmaq Systems decided not to adopt and disapproved the 1999, 2000 and 2001 JMG Business Plans. The following paragraphs seek to plead this conduct as breaches of terms of the Consultancy Agreement.
75 Hence it is put by the defendants that the effect of the amendments now sought to be propounded is that the plaintiffs wish to litigate the alleged fact and consequence of the failure to adopt (and indeed the disapproval of) the 1999, 2000 and 2001 JMG Business Plans.
76 The defendants submit that from a review of the pleadings these matters were not in the issue up to this point in time.
77 The defendants submit that in order to litigate these issues it would be necessary for an investigation to be carried out as to the respective merits of each of the subject plans and as to whether and to what extent NMG may have been better off had NMG proceeded to adopt one or more of the proposed 1999, 2000 and/or 2001 Business Plans.
78 Mr Lovell in his affidavit of 2 March 2001 dealt with the question of prejudice as follows:
'Paragraph 54BT of the draft 4FASOC pleads, amongst other things, that NAB approved business plans prepared and submitted by NMG and AUSMAQ System for the years ended 30 September 1999 and 30 September 2000, and it is pleaded in paragraph 54BU that the JMG business plans for those years, and for the year ending 30 September 2001, were rejected. It is alleged that, by so acting, each of Mr Krasnostein, Mr McKimm and Mr Courtney procured breaches of contract, and participated in breaches of fiduciary duty.
If leave is granted to the plaintiffs to amend the statement of claim by adding paragraphs 54BM to 54BX, and subject to some specificity in particularisation, the defendants would investigate whether it may be necessary to adduce additional evidence to address those allegations.
Those investigations would, in my view, need to deal with, amongst other things, the following matters:
(a) the business plan process for the 1998/1999, 1999/2000 and 2000/2001 financial years, including NMG's and AUSMAQ System's reasons for adopting the business plans which were adopted in preference to the JMG plans;
(b) major business decisions made by AUSMAQ during those financial years, including technical, marketing, financial and strategic decisions;
(c) major business initiatives undertaken during those financial years, including clients targeted, clients signed up, key staff engaged and IT initiatives pursued;
(d) the performance of the business during those financial years, including in relation to technical, marketing and financial issues;
(e) contact with JMG;
(f) the performance of JMG; and
(g) the conduct of JMG.
Paragraph 54BH, if leave is granted, would also (again subject to some specificity in particularisation) necessitate consideration of various of the factors outlined above, including (e) to (g) above.
As well as dealing with these matters by initially considering whether it may be necessary to obtain evidence from potentially a number of witnesses at AUSMAQ, it would be necessary to take instructions from at least Mr Krasnostein, Mr McKimm and Mr Courtney on these matters, particularly their reasons for making the business decisions they did in those financial years. It would also be necessary to consider whether expert evidence is required as to the operations of the business for the period 1999 to 2001.
It would also be necessary in this area to consider, in conjunction with Counsel, whether the matters revealed in the investigations, and in any evidence prepared, may need to be put in cross examination to witnesses, including Mr Maconochie, Mr Hume, Mr McMullan, Mr Bray and the sales and dealer witnesses.'
79 Mr Lovell gave evidence at transcript page 6489 as follows:
Q "In relation to the matters you refer to, the investigation and possible evidence you refer to in paragraph 83, that's as to the business plans, who would be involved in that?"
A "You're probably also then looking at taking statements from the directors were this amendment to be made. Again, you would need at least, I would have thought, two partners and probably three or four solicitors. The problem is they are going to be the same sort of partners and solicitors that are going to be working on the other matters as well, and particularly in circumstances where you have got individual defendants you have to take a fair bit of time, obviously, to explain what you're doing and why you're doing it because they are the individual defendants. They actually take longer in one sense than getting instructions just from the Bank"
80 Mr Garnsey QC submitted that the sole evidence which the plaintiffs would seek to adduce in respect of the 2000 and 2001 Business Plans was to be found in paragraphs 22.1 - 22.28 and 23.1 - 23.13 of Mr Maconochie's statement of 8 March 2001 MFI P116. [Transcript at page 7033].
81 The burden of Mr Garnsey's submissions was that the plaintiffs have always pleaded a breach of terms of the Consultancy Agreement by way of a failure of the relevant corporate defendants to adopt and implement scenario 2 initially (at a point in time when only scenario 1 had been adopted) and that the plaintiffs had always pleaded the defendants relevant breach as including adoption of what has been referred to as the Meikle/Clark Business Plan in about August of 1997. His submission was that the plaintiffs claims were grounded upon and went no further than the proposition that the failure of the relevant corporate defendants to approve scenario 2 excluded the technical and commercial development of the Ausmaq System, excluded the global exploitation of that System and resulted in loss and damage occasioned to the plaintiffs which simply continued over the years. The submission was that the plaintiffs do not "seek to adduce any evidence in addition to the evidence that is already there about scenario 2 and the Meikle/Clark Business Plan,….to say the 2000 or the 2001 business plans have any effect on the damages that have otherwise been accrued". [Transcript at 7034].
82 Mr Garnsey put the matter as follows: "our case is that there has been a continuing failure to implement scenario 2 and we say, yes, there is the failure. You adopted the Meikle/Clark Business Plan which was diametrically opposed to our business plan and scenario 2, and that is evidence of the failure. You adopted your plan for the next year, which is the same as Meikle/Clark and that is evidence of the failure. We say at the same time we have asked you to adopt scenario 2 in the form of the next business plan for the next year and you have refused, and that is further evidence of the failure and likewise, if your Honour pleases." [Transcript at 7037].
83 On the plaintiffs' case the proposed amendments to introduce the new allegations concerning the additional Business Plans do not change the quantum of damages at all. [Transcript at 7032]. This was "because of the nature of the business plans, the nature of the Meikle/Clark Business Plan, and the fact that [JMG's business plans] had not been at all adopted, and the [adoption of] Meikle/Clark abandoned scenario 2 and just resulted in the stultification." [Transcript at 7032].
84 At the same time Mr Garnsey answered in the affirmative the question from the Court: "Do the plaintiffs claim that there was a breach of contract or of fiduciary obligation in failure of the NMG to adopt or appropriately deal with in some way the 1999, 2000 and 2001 business plans?" [Transcript at 7034].
85 To my mind the position is quite clear in that if the plaintiffs are to be granted leave to raise the new allegations in a pleading which pleads new breaches of the Consultancy Agreement then there can be no question of limiting the ambit of the issue. Either the plaintiffs are to be permitted to plead identified breaches of the Agreement and are then to be entitled to litigate the issue of whether those breaches occurred and whether any, and if so what, consequential loss flows from those breaches or they are not entitled to so plead and hence to litigate that issue.
86 The principles which are to be applied by the Court in dealing with an application for leave to amend have been referred to on a number of occasions in interlocutory judgments delivered in these proceedings. It suffices to simply repeat paragraphs 42-45 of the judgment delivered on 7 December 2000 [2000] NSWSC 1141 which were in turn set out in paragraph 12 of the Judgment delivered in relation to the first tranche of the amendments [2001] NSWSC 142:
"In State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146 the High Court carefully analysed the development up to January 14 1997, of approaches taken to the exercise of the discretion to permit amendments to pleadings. Generally that judgment of the High Court, without purporting to be exhaustive, serves to set out the types of consideration which ought to direct the mind of the decision maker on such applications. However, the court accepted that the trial judge is afforded a large discretion in relation to the exercise and that it would be unwise and contrary to principle to seek to fetter that discretion with rigid rules. The special significance of the decision is to direct the mind of the decision maker to many of the considerations which may be taken into account in exercising the discretion and to emphasise, if it needed to be emphasised, that justice is the paramount consideration in determining such an application.
J L Holdings dealt, of course, with the particular circumstances before the court and whilst the general statements to be found in the joint judgment of Dawson, Gaudron and McHugh JJ and in the judgment of Kirby J assist a decision maker considerably, the obvious fact is that each and every case in which an application for leave to amend is pursued requires the court to deal with the special and peculiar matrix of circumstances which obtain at the material point in time in the litigation in respect of which such application is pursued.
To my mind the following statements of principle affirmed in JL Holdings are fundamental and clearly and succinctly express the general approach to be taken:
(a) "Now, I think it is a well established principle that the object of Courts is to decide the right of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself, and in conformity with what I have heard laid down by the under division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment has a matter of favour or of grace"
[Cropper v Smith (188 4) 2 6 CH D 700 per Bowen LJ at 710]
(b) "As the defence, if established, would be a complete answer in the either action, the amendments sought should have been an amount unless it appeared that injustice would thereby have been an occasion to the respondent, there being nothing to suggest fraud or improper concealment of the defence on the part of the appellants. With the exception of the suggestion of prejudice arising in respect of the loss of the possible claim against the nominal defendant, the matters relied upon by the respondent in opposition to the amendments sought go at the most to delay and irregularity only, matters which are relevant to costs by do not constitute injustice to the respondent in the sense in which that expression is used"
[Clough v Rogers (1974) 48 ALJR 481 at 482]
A recent development in this State, which the Court is also entitled and indeed required to take closely into account, relates to Part 1 of the Supreme Court Rules as modified by Amendment No 337, which elucidates the overall objectives of practices and procedures as specified in the Rules. The overriding purpose of the Rules is to facilitate the "just, quick and cheap resolution of the real issues" in civil proceedings. The overriding purpose clause imposes an obligation on the Court to give effect to the overriding purpose when it exercises any of its powers."
87 I have come to the view that the exercise of the court's discretion should be in favour of permitting these amendments on the basis only that there is to be a three week hiatus in the continued hearing. I take into account the defendants concession at transcript 8104.28 as well as the dynamic situation in which the extancy of the Consulting Agreement means that obligations such as requiring JMG to submit business plans, only crystallise following the commencement of the hearing. The situation is clearly an unusual one. The court will not sit during the last week of June or during the first two weeks of July. Consistently with the evidence given by Mr Lovell this period should in my view suffice to permit the defendants to stand back from the ongoing hearing and have a proper opportunity to work through precisely how to approach the new causes of action. It seems to me that the court is able within the constraints of the litigation to accommodate any prejudice to the defendants by appropriate orders. As pointed out in Idoport Pty Ltd v NAB [2000] NSWSC 1141 where the defendants obtained leave to amend although late to plead a substantive issue, a somewhat flexible approach is required to be taken in these proceedings where the scale of the litigation, the stakes in issue and the public interest most particularly require the Court to permit the parties to litigate substantive issues wherever practical and wherever case management procedures, as a matter of protecting the fair interests of the other party, seem capable of permitting this to occur. Whilst the 'enough is enough' proposition [see [2000] NSWSC 1141] is carefully taken into account, justice remains the paramount consideration in determining the application for leave to amend. The plaintiffs' evidence is the evidence served. The plaintiffs have accepted that if and to the extent that these amendments will lead to the defendants having to complement their evidence by additional statements and to the defendants having an entitlement at an appropriate time to recall earlier witnesses who have already been cross examined so as to further cross-examine those witnesses on the new issues, the grant of leave to amend must carry with it that entitlement. On that basis only leave to amend is granted. Costs of and occasioned by the amendment seem appropriate to be reserved.