Ingot & Ors v Macquarie & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50169/01 INGOT CAPITAL INVESTMENTS PTY LIMITED & ORS v MACQUARIE EQUITY CAPITAL MARKETS LIMITED & ORS JUDGMENT 1 HIS HONOUR: The power of the Court to grant a party leave to amend a pleading is ample. The discretion to do so is not one that can, or should, be closely circumscribed. The essential aim of the power is to enable all claims that may properly be brought to be litigated in the one proceeding. However, the exercise of the power must always take into account the position of the other parties; and an application for leave to amend may be refused where to grant it would cause irremediable prejudice, and thereby injustice, to the other parties. The question for decision is whether, having regard to those broad principles and the many cases in which their application has been discussed, the plaintiffs should have leave to amend, for the seventh time, their summons. Background 2 These proceedings arise out of the collapse of New Cap Reinsurance Corporations Holdings Limited ("NCRH"). NCRH, a company incorporated in Bermuda and registered as a foreign corporation in Australia, was listed on the Australian Stock Exchange. It carried on business as an international reinsurance underwriter. In late 1998, NCRH determined to raise capital through an issue of converting notes. The issue proceeded, and the plaintiffs, by various means and in various capacities, acquired a large number of the converting notes that were issued. Shortly after the issue was completed, NCRH collapsed. The plaintiffs say that the notes are valueless and that they have lost the full value of their investment. In these proceedings, they sue a number of parties connected with the notes issue to recover their losses. 3 It is the plaintiffs' case that they were induced to invest in the convertible notes (and for present purposes, it matters not whether that investment was by way of subscription, purchase, sub underwriting or otherwise) by a number of representations that were, the plaintiffs say, false, misleading or deceptive; and by conduct that the plaintiffs say was, in all the circumstances, misleading or deceptive. 4 The representations upon which the plaintiffs rely are said to have been made in a prospectus issued by NCRH on 18 November 1998, and prior to that day. The misleading and deceptive conduct relied upon is said to have occurred prior to the issue of the prospectus, in and by the issue of the prospectus, and thereafter (including, specifically, by reason of the alleged failure of various persons or entities to correct or update information contained in the prospectus). 5 The case that the plaintiffs seek by their 5th further amended summons (5 FAS) to make against the various defendants, or groups of defendants, may be summarised as follows:

(1) The first to third defendants ("the Macquarie parties") are said to have been retained as lead manager, placement agent or underwriter to the capital raising that was contemplated and as broker to the proposed renounceable rights issue whereby that was to be undertaken. It is said that the Macquarie parties made a number of representations in the performance of their retainers, including in a draft prospectus that was prepared and provided to an intermediary to give to the plaintiffs, and in the final prospectus. It is said that those representations were false, misleading or deceptive under s 52 of the Trade Practices Act and analogous provisions in other legislation. Further, it is said, the Macquarie parties owed, and breached, duties of care owed to the plaintiffs in connection with their analysis of the assets and liabilities of NCRH. Further, as against the first defendant, there is an alleged breach of the sub underwriting agreements between it and the plaintiffs.

(2) Of the fourth to eleventh defendants ("the directors"), the fourth and sixth defendants were executive directors of NCRH. The fifth, sixth, seventh and eighth defendants were non executive directors of NCRH. The ninth defendant was also a non executive director of NCRH; he was then a partner in the fourteenth defendant (Phillips Fox). The tenth and eleventh defendants were not directors of NCRH. They were executive officers of its operating subsidiary, New Cap Reinsurance Corporation Limited ("NCRA"). However, for present purposes, it is convenient to group them under the (inaccurate from their perspective) title of "the directors". The plaintiffs say that the directors made a number of false, misleading or deceptive representations in the draft and final prospectus, and that they thereby breached s 52 and analogous sections; and that they contravened ss 996(1), 999 and 1022(1) of the then Corporations Law. The plaintiffs say further that NCRH should have, but did not, issue a supplementary prospectus, and thereby contravened ss 995(2), 1023B(2) and 1024(2) of the Corporations Law. The plaintiffs say that the directors are persons involved, or knowingly concerned, in the various contraventions of the Corporations Law alleged against NCRH. Finally, the plaintiffs allege that the directors owed them, and breached, a duty of care.

(3) The twelfth defendant ("Trowbridge") is a firm of actuaries. It is said to have made a number of representations, as to actuarial matters or matters based upon its actuarial analysis, in the prospectus. Those representations are said to have been false, misleading or deceptive. Further, it is said that after the prospectus was issued, Trowbridge became aware of matters by reason of which it should have given, but did not give, certain advice to NCRH. As a result, it is said, Trowbridge has contravened s 1023A of the Corporations Law; and, further, that it has contravened s 52 of the Trade Practices Act and analogous provisions; and has contravened s 996(1) of the Corporations Law. Finally, it is said that Trowbridge owed the plaintiffs, and breached, duties of care.

(4) The thirteenth defendant ("PwC") audited NCRH's financial statements for the year ended 31 December 1997 and reviewed its financial statements for the six months ended 30 June 1998. It issued an audit report in respect of the former work and a half year report in respect of the latter. It was retained to review financial information contained in the prospectus. It is said that PwC made a number of representations in and by the draft and final prospectus and those representations were false, misleading or deceptive so that PwC is liable under s 52 and analogous provisions. Further, it is said, PwC owed the plaintiffs, and breached duties, of care.

(5) As to the fourteenth defendant ("Phillips Fox"), the plaintiffs say that Mr Peck accepted his directorship of NCRH in the ordinary course of business of that partnership, and that, accordingly, the partnership is liable for his alleged wrongful acts. 6 Thus, it will be seen, the plaintiffs did not by 5 FAS allege that the Macquarie parties or PwC themselves contravened any provision of the Corporations Law, or that they were involved or knowingly concerned in any other person's contraventions of the Corporations Law. The statutory causes of action that the plaintiffs maintained against the Macquarie parties and PwC were limited to claims under s 52 or its cognate provisions. 7 Perhaps not surprisingly, there are a very large number of cross-claims. The defendants have each brought cross-claims against the other defendants claiming, among other things, contribution or indemnity. A number of the defendants have also brought cross-claims against entities that were not, until the filing of such cross-claims, parties to the proceedings; and cross-defendants thus joined have themselves brought cross-claims. For example, NCRA has been joined as a cross-defendant by the 30th, 31st and 32nd cross-claims and has itself cross-claimed against the directors (who of course were already parties), and (by the 33rd cross-claim) against Guy Carpenter & Company Pty Limited and Guy Carpenter & Company Limited. In all, at last count, there were some thirty six cross-claims. History of the litigation 8 Some of the tangled procedural history of this litigation is recorded in my judgment on the previous application for leave to amend ([2003] NSWSC 1012) and in the judgment of McLellan J on the anterior application for leave to amend ([2002] NSWSC 1129). 9 The summons was filed on 16 November 2001. An amended summons was filed on 13 February 2002, and a further amended summons was filed on 19 February 2002. After numerous drafts were exchanged and were discussed in correspondence, and after the hearing before McLellan J that resulted in the judgment to which I have just referred, the third further amended summons was filed on 20 December 2002. (The second further amended summons seems to have disappeared in the smoke of litigation.) Again after drafts were exchanged and commented on, and after the hearing before me that resulted in the judgment to which I have just referred, the 5 FAS was filed on 1 December 2003. It may be noted that the form of the 5 FAS was changed substantially from that which was the subject of the debate before me; and that it was supported by consolidated particulars the effect of which was to relate, to allegations made in it, particulars given in respect of equivalent allegations in previous versions of the summons. Those consolidated particulars were updated in June 2004. 10 The draft sixth further amended summons ("6 FAS") was circulated in October 2004 and was the subject of correspondence between the parties. Some changes (none of a substantial nature) were made. It is however fair to note that, thereafter but before the hearing of the application for leave to amend, further changes were notified. Some of those changes were significant in that they addressed significant complaints made by one or other of the defendants. 11 At the conclusion of the first round of the hearing, the plaintiff intimated a desire to revise further the draft 6 FAS in respect of which they sought leave. A revised draft 6 FAS was prepared and circulated; the defendants were given the opportunity to make (and some did make) written submissions; and there was further argument on 10 December 2004. 12 It cannot be suggested that the procedural history thus briefly summarised is satisfactory; and the plaintiffs accept that it is not. Further, the plaintiffs accept in substance that responsibility for that unsatisfactory procedural history is to be attributed to them or their legal advisers. I will deal later with the role of the plaintiffs' legal advisers.

The proposed amendments 13 The draft 6 FAS is a complete reworking of 5 FAS. In appearance and, in some ways, in substance it is a completely different document. One immediate and obvious point is apparent on even a cursory inspection. 5 FAS pleaded the case against the parties discretely. (I use the verb "plead" and its cognate forms in these reasons not because what are propounded are pleadings - they are not - but because it was the parties' usage and because it is convenient, although inaccurate, to adopt that usage.) 14 After defining the parties and their basic roles, 5 FAS set out the case against the Macquarie parties, the case against the directors, and so on. Although that led to some degree of repetition, it meant that the case pleaded against each party, or group of parties, was in substance self- contained. 15 By contrast, 6 FAS would abandon that structure and replace it by a chronological pleading of matters that are said to be common to all parties. (In fact, as the following allegations made against individual parties or groups of parties make clear, not all those matters are common.) Thus, for the discrete and complete but repetitious pleading of the case against individual groups of defendants, there is substituted a chronological narrative of material facts. That chronological narrative is followed by a pleading, against each party or group of parties, of the consequences that are said to follow. Of necessity, the adoption of that structure requires a vast amount of cross-referencing. Further, because of some manifest inadequacies in the drafting, it has given rise to criticism by the defendants of the adequacy of the disclosure of the case against them. 16 However, there are further changes. Specifically, against the Macquarie parties and against PwC, there are pleaded cases that they respectively themselves contravened, or were involved in the contraventions by others of, the Corporations Law. 17 So far as PwC is concerned, those allegations are entirely new. So far as the Macquarie Parties are concerned, however, those allegations had been made in prior versions of the summons (up to and including the fourth further amended summons) but were dropped in 5 FAS. 18 There is another aspect of the claim that is now sought to be brought against Phillips Fox. Previously, the claim was (as I have said) one of vicarious liability for the acts of Mr Peck. In the version of the draft 5 FAS that was debated before me in October last year, there was a claim pleaded in negligence. After the hearing concluded, that claim was dropped (see para [21] of my judgment on costs: [2003] NSWSC 1102). 6 FAS seeks to allege, against Phillips Fox, a claim that not just Mr Peck but also Mr Andrew Mutton (another partner of Phillips Fox, who was said also to have participated in at least some of the relevant events) were involved in NCRH's contraventions of the Corporations Law and themselves contravened, or were involved in the contraventions of others by, various provisions of the Corporations Law. Thus, particularly by the inclusion of the claim against Mr Mutton, and by the inclusion of further claims of contraventions of the Corporations Law (including by him), the claim against Phillips Fox is substantially expanded. Approach to application for leave to amend 19 The basis upon which the Court approaches an application for leave to amend has been considered on many occasions. The parties pressed me with the decision of the High Court of Australia in The State of Queensland v J L Holdings Pty Limited (1977) 189 CLR 146. The plaintiffs relied upon what the majority said at 152-154 (where, among other things, their Honours cited with approval the judgment of Bowen LJ in Cropper v Smith (1884) 26 Ch D 700, 710 and the decision of the High Court in Clough and Rogers v Frog (1974) 48 ALJR 481, 482). The defendants laid stress on the summary of the competing factors listed by Kirby J (in a separate but concurring judgment) at 169-172. The defendants also relied upon the judgment of Kirby J in Jackamarra v Krakouer (1998) 195 CLR 516, 541-542, where his Honour referred to the cyclical waxing and waning, as a consideration relevant to the exercise of the discretion, of "a larger judicial concern to ensure the efficient despatch of court business". 20 It is apparent from the reasons of the majority in J L Holdings at 152-154 that the starting point is that a party seeking leave to amend should have it in the absence of fraud or "overreaching" (to use a cognate form of Bowen LJ's expression) if the grant of leave could be done without injustice to the other party. It is also clear, from their Honours' citation from Clough and Rogers, that matters which go to delay and irregularity only, or are relevant only to costs, do not constitute injustice to the other party as that expression had been used by Bowen LJ. I think that the reference to "costs" in this context must mean "costs that can be compensated by an appropriate order". 21 However, as Heydon JA (with the concurrence of Sheller JA and Studdert AJA) pointed out in Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [63], when the majority said that "[j]ustice is the paramount consideration in determining an application such as the one in question", they did not mean that "complete justice to the party in default is the paramount consideration". Further, as his Honour pointed out, "[i]t is questionable whether they were intending to create an absolute rule even in that field [of late amendment to a pleading], for that would be antithetical to the idea of a discretion." 22 Further, as Heydon JA pointed out at [64], "while the ultimate obligation of a court is to seek to attain justice, the justice that is to be striven for is justice between the parties." It follows, as his Honour said, that where the default of one party prejudices the chances of achieving justice for others, it may be appropriate to refuse to exercise the relevant discretion in favour of the party in default. 23 In J L Holdings at 154-155, the majority referred to the speech of Lord Griffiths in Ketteman v Hansel Properties Ltd [1987] AC 189, 220, where his Lordship referred to the need to take into account "the strain the litigation imposes on litigants, particularly if they are personal litigants rather than business corporations … ." Their Honours said that those considerations were not sufficient in the present case to justify the refusal of leave; because the case was of a commercial nature, the litigants were on the one side a developer and on the other government, "and there is nothing which would indicate any personal strain which would justify the conclusion that costs are not an adequate remedy for prejudice … ." 24 Earlier, at [62], Heydon JA had said that the judgment of Kirby J in J L Holdings "can be read as an extended analysis of the huge variety of factors which a court may have to take into account in arriving at a discretionary decision on a matter of practice and procedure having an impact on substantive rights." 25 Kirby J dealt with what he called the approach to pleading amendments at 167 and following. As I have indicated, he listed factors for and against at 169-172. I will not set out in detail the factors to which his Honour referred. However, for present purposes, it is relevant to note that factors which may tend to favour the exercise of discretion in favour of the party applying for it are that "this is the only way in which the true issues and the real merits, factual and legal, can be litigated and artificiality avoided", and that "the proposed amendment is of considerable importance to the rights of a party". 26 Among the considerations arguing the other way, his Honour included "the strain which litigation may place upon those involved … and the natural desire of most litigants to be freed, as quickly as possible, from the anxiety, distraction and disruption which litigation causes", and the possibility that "costs orders are not necessarily an adequate balm to the other party". His Honour stressed at 172 the need to retain flexibility, balancing in an appropriate way the various competing private and public considerations. The essential issues 27 At the conclusion of the first round of argument before me (ie, before the plaintiffs propounded their revised draft 6 FAS), it seemed that the essential issues on the application came down to the following:

(1) The alleged failure of the plaintiffs to explain why it was only now that the application was made, in a context where it was not suggested that any new evidence or document had come to their attention and where, during the hearing of the previous application for leave to amend, their legal advisers asserted (including on oath) that in substance the claim propounded by 5 FAS was the claim that the plaintiffs wished to take to trial and that the plaintiffs were substantially ready to take that claim to trial (including that their evidence was substantially complete).

(2) Prejudice to the defendants in relation to costs, in the context that even though the plaintiffs' solicitors offered to pay the defendants' costs of and incidental to and thrown away by the amendment, it was suggested that it would be very difficult (the defendants said, virtually impossible) to assess those costs and where there would be substantial delay in the assessment process.

(3) Prejudice to the defendants (specifically, PwC and individuals within the Macquarie parties who were directly involved in the transaction) for which costs could be no compensation: namely, the allegations of personal contraventions, and involvement in the contraventions of others, of the Corporations Law.

(4) Serious (indeed, the defendants said, fatal) defects in the draft pleading that was propounded. 28 On analysis, the first of those issues does not of itself justify the refusal of leave to amend. I can deal with it relatively briefly. The second, third and fourth appear (as to the fourth, at the conclusion of the first round of the hearing) to be in a different category. However, although I deal with the issues separately, I think that it is necessary to consider them not just in isolation but cumulatively. Alleged absence of explanation 29 When the previous application for leave to amend was made, the partner in Deacons who had carriage of the matter on behalf of the plaintiffs was Mr Mitchell Mathas. He gave evidence before me and, in my earlier reasons for judgment, I referred to some aspects of his evidence. In mid 2004, another partner in Deacons, Mr Grant Bonner, assumed responsibility for the matter on behalf of the plaintiffs. He is now the solicitor on the record. Mr Bonner arranged for further counsel to be retained (Mr F M Douglas QC and Mr B F Katekar of Counsel had been retained; Mr Bonner arranged for Mr W G Muddle of Counsel to be retained in addition). 30 It is I think reasonably apparent that Mr Muddle reviewed the pleadings after he was retained and that he provided advice to Mr Bonner. At the same time, Mr Bonner was, obviously enough, taking steps to familiarise himself with what is on any view an extremely complex piece of litigation. 31 The immediate task for Mr Bonner was to prepare the plaintiffs' case for a court ordered mediation, which was due to commence on 7 September 2004. In the course of doing this, and by the end of July 2004, Mr Bonner came to hold the view, at least in general terms, that if the mediation did not lead to a resolution of the proceedings then it would be desirable for the plaintiffs further to amend their summons. It would appear that Mr Bonner formed that view as a result of his review of the material available to the plaintiffs (as I have said, it is not suggested that any of that material had not been available to the plaintiffs or their legal advisers beforehand). Mr Bonner said, and I accept, that not all of this material had been provided to Mr Douglas; but when it was, Mr Douglas agreed that there was a sufficient basis for the plaintiffs to make the new allegations that they seek to propound by 6 FAS. 32 The mediation did not lead to a resolution of the proceedings. Accordingly, on 14 September 2004 (having been asked by Mallesons Stephen Jaques, the solicitors for the Macquarie parties) Mr Bonner stated that the plaintiffs were considering seeking leave further to amend their summons "to ensure that all issues between the parties are clearly before the Court and may be determined in these proceedings". That letter also foreshadowed that the plaintiffs might seek to supplement the lay and expert evidence that they had filed. 33 The notice of motion for leave to amend was filed on 1 October 2004. However, the draft 6 FAS that was thereby propounded was not circulated until 7 October 2004. In a letter of that date, Mr Bonner said: "Whilst we do not propose to read any Affidavit evidence on that application our firm accepts that: (a) it came to the writer's attention upon our preparation for the recent mediation that our clients [sic] claim required some amendment and reformulation; (b) any criticism that could be made by the Defendants arising from such amendment and reformulation should not be made against the Plaintiffs themselves; (c) if there is any fault it is likely that such fault is the fault of the Plaintiffs [sic] legal advisers; and (d) accordingly, to ensure the future efficient management of the Plaintiffs [sic] claim, new Senior Junior Counsel Mr Muddle has been briefed … We are instructed that our clients are content, cognisant of the above, to give the usual undertaking to meet the costs thrown away occasioned [sic] by amendment on the usual basis … Our clients' current amendments have been undertaken also to seek to re-organise the pleadings to make its [sic] current allegations clearer and simpler to understand." 34 The reference to the change from 5 FAS to the draft 6 FAS as involving "some amendment and reformulation" was a masterpiece of understatement. The assertion that the proposed amendments made the plaintiffs "allegations clearer and simpler to understand" may depend upon the perspective from which clarity and simplicity are to be assessed; but if they are to be assessed from the perspective of the defendants, then the statement was incorrect. 35 In a further letter of the same date, Mr Bonner said that he did not "presently understand the basis on which [the Macquarie parties] seek that the costs be assessed on an indemnity basis". 36 Because the reformulation of the summons was wholesale, it could not be marked up in the orthodox way to show where the changes lay: the entire document would have been marked up. Deacons sought to ameliorate this on 13 October 2004, in a letter that pointed out some of the changes between 5 FAS and the draft 6 FAS and, more importantly, pointed out where allegations that had been made in 5 FAS were located in draft 6 FAS. 37 There was thereafter an exchange of correspondence dealing with the adequacy of the proposed pleading. I will return to that when considering the fourth issue. 38 Although Mr Bonner had said in his letter of 7 October 2004 that it was not proposed to read any affidavit evidence on the hearing of the application for leave to amend, he did in fact swear an affidavit dated 5 November 2004. In that affidavit, he set out the reasons why, from his perspective, the amendments were necessary or desirable. It would appear that he had formed a different view to Mr Mathas of the adequacy of the existing pleading. 39 In para 21 of that affidavit, Mr Bonner said that if the plaintiffs were given leave to amend, Deacons would submit to an order that it (as a firm) pay the costs thrown away and of the application for leave to amend on an indemnity basis, with those costs to be assessed forthwith. 40 Mr Bonner's evidence was challenged vigorously in cross-examination. However, in substance, I accept it. That is to say, I accept both the substance of what he said in his affidavit and the substance of the concessions that, very properly, he made in cross-examination. 41 At this stage, it is necessary to refer back to what the plaintiffs' legal advisers had said on the previous application for leave to amend. 42 Mr Mathas said that all filed versions of the summons had been settled by senior counsel. He sought to explain the amendments then propounded as not materially altering the plaintiffs' pleaded case: a proposition that I rejected in my judgment on costs at paras [10] and [11]. Mr Mathas further suggested that the amendments were made following the review of a substantial amount of material, and with the benefit of having prepared the plaintiffs' lay and expert evidence. However, as he conceded in cross-examination, the material that prompted the redrafting exercise had been available to his firm or the plaintiffs for a considerable time: since November 2001 for the greater part of it (see ibid, para [14]). 43 In that context, Mr Mathas said that the summons was (in the form then propounded, but subject to "further tinkering") in the form that the plaintiffs wished to take to trial, and that the plaintiffs had filed and served all the evidence on which they intended to rely. 44 In similar vein, Mr Douglas said that the version of 5 FAS then propounded was "99.9%" final, subject only to "minor tinkerings" as a result of matters that emerged in argument. Nonetheless, the draft propounded was revised in certain significant respects to take account of the defendants' objections. 45 There can be little doubt that the defendants took, both from what had been said during the course of the last amendment application and from the fact that the draft 5 FAS then propounded was revised, that the plaintiffs would not seek to make any further substantial amendments to the summons. Certainly, no one has suggested that the amendments now proposed affect only 0.1% of, or amount only to "minor tinkerings" to, 5 FAS. 46 It is unfortunate that the plaintiffs' solicitors sought at first to downplay the significance of the amendments now proposed (see paras [33] and [34] above). A similar, and equally unjustified, attitude was taken on the previous occasion: see paras [10] and [16] of my judgment on costs. However, the plaintiffs should not be punished because of their solicitors' efforts to downplay the significance of the amendments; indeed, I think, to the extent that questions of blame are relevant, it is necessary to draw a distinction between blame that may be attributed to the plaintiffs personally, and blame that may be attributed to them only because of some act or omission on the part of their legal advisers. See Stollznow v Calvert [1980] 2 NSWLR 749, 753 (11) (Moffitt P, with whom Hope and Mahoney JJA agreed). 47 Mr Bonner has given an explanation of why it is that, despite what was said last year, the plaintiffs now wish to amend. As I have said, I accept his evidence. It is not for me to decide whether Mr Mathas' view or Mr Bonner's is to be preferred. It is sufficient to say that if Mr Bonner (apparently with the concurrence of counsel) has formed the view that the further arguments are reasonably open on the available material, then the plaintiffs should not be shut out from advancing those arguments unless to permit them to do so would cause substantial and irremediable injustice to the defendants (subject, of course, to the independent argument as to the alleged defects in the amendments). 48 It is unsatisfactory that the explanation was given late; but, it having been given and accepted, the first issue, as an independent source of objection to the amendments, must be decided in favour of the plaintiffs. Prejudice: costs 49 The plaintiffs accept that the defendants are entitled to their costs thrown away by the amendments and of the notice of motion for leave further to amend. Mr Bonner said in his affidavit, having recited the history that led to the decision to seek leave to amend: "21 … [I]n the event the Court grants the Plaintiffs leave to amend in the form of the 6th Further Amended Summons, Deacons consents to the Court ordering that it pay the costs thrown away by these amendments and of the Notice of Motion filed on 1 October 2004 on an indemnity basis with liberty to assess those costs forthwith." 50 The defendants submitted that even an order in these terms would not compensate them adequately for the costs thrown away by reason of the amendment (assuming, of course, that leave to amend were granted). Mr Ashley Black, the solicitor for the Macquarie Parties, said in evidence that if the plaintiffs were granted leave further to amend their summons, then a significant amount of work performed by his firm and counsel for the Macquarie Parties since the filing of 5 FAS would be wasted. He referred to that as "work which was dependent on the structure of the plaintiffs' claims as advanced in" 5 FAS. He said that "A substantial amount of the work conducted by the Macquarie Parties in preparing the Defence to the claims made against them in these proceedings, since the filing of the [5 FAS], has been dependent upon the manner and form of the plaintiffs' case as pleaded against them." 51 Mr Black instanced, as work the costs of which would be wholly or substantially wasted, the following:

(1) Preparation of the Macquarie Parties' defence to 5 FAS.

(2) Preparation of a lengthy advice as to the plaintiffs' prospects of success on 5 FAS.

(3) Amendment of the cross-claims by the Macquarie Parties against various cross-defendants and the preparation of a cross-claim against NCRA. Mr Black said that "Each of these cross-claims will have to be redrafted, since the plaintiffs have now made new allegations (including new allegations of factual matters) which are not reflected in those cross-claims".

(4) Preparation of defences to cross-claims against the Macquarie Parties.

(5) Preparation of the Macquarie Parties' witness statements. (Mr Black said that those statements were "presently in advanced draft form", but that parts of them responded to particular paragraphs in 5 FAS which were not repeated in draft 6 FAS.) 52 Mr Black accepted that some costs could be readily identified as thrown away by the amendments. He gave, as examples, the costs of amending the Macquarie Parties' defence and cross-claims and defences to cross-claims. However, he said, "It would be extremely difficult to allocate the remainder of the costs incurred by the Macquarie Parties as costs either thrown away by the amendments or costs which would have been incurred in any event". He gave as examples:

(1) The need to reinspect (yet again) other parties' discovery, in particular the documents held by NCRA in more than 300 boxes. He said that it would be "complex, time wasting and expensive (if not impossible) … to allocate that inspection into inspection wasted by, or which would have to be repeated as a result of, the plaintiffs' proposed amendments and inspection which would have been required in any event."

(2) The costs of seeking advice on prospects. Some of this advice, he said, would remain relevant; but some would not and "It would be extremely difficult (if not impossible) to allocate these costs" into one or other category.

(3) The cost of redrafting witness statements, in the context that the draft 6 FAS (so Mr Black said) "does not identify which facts are alleged to falsify any individual representation." He said that "It would be extremely difficult (if not impossible) to allocate the costs incurred in meeting with witnesses and preparing draft witness statements into costs of the work relating to this part of the statements (which will be wasted if the plaintiffs are given leave to amend) and the work relating to other parts of the statements which may still be relevant to matters in issue in the proceedings." 53 Mr Black was not challenged on this evidence. Mr Bonner agreed with much of it: for example, with the proposition that the identification and classification of costs as wasted or not wasted by reason of the amendments would be very difficult; and with the proposition that work such as reinspection of discovered documents would be necessary if leave to amend were granted. I accept Mr Black's evidence. Further, although it relates in terms only to the Macquarie Parties, I accept that its substance may be taken to apply to the other defendants. Indeed, the plaintiffs did not suggest otherwise. 54 There are three particular issues relating to costs. The first relates to the cost of the mediation. Mr Black said, and I accept, that had he known before the mediation that the plaintiffs would seek leave to amend if the mediation did not lead to a resolution of the disputes, then he would have advised the Macquarie Parties to apply to the Court to defer the mediation so that it "could deal with the case which the plaintiffs in fact intended to press against the Macquarie Parties"; and that, if the Court had not acceded to such an application, he would have advised the Macquarie Parties to approach the mediation in a different (and, I infer, less expensive) manner. Although Mr Black was challenged as to the underlying premise (which was that he had no notice of "any intention of the plaintiffs to further amend the Summons if the matter did not settle at the mediation"), I accept his evidence that he did not. I also accept his evidence as to the position that he would have taken had he been given notice, prior to the mediation, of that intention. 55 Mr Black said that the Macquarie Parties had incurred very substantial costs in relation to the mediation. It is clear, and one would in any event infer from the nature of the proceedings and the issues in dispute, that a very substantial amount of work was necessary to prepare for the mediation; and the mediation itself occupied three days. Presumably, the costs would include not just legal costs but the costs of the mediator (the Hon G E Fitzgerald QC), and perhaps associated costs such as the costs of hiring an appropriate venue. In addition, of course, every party would have invested a substantial amount of time and resources (for example, management time) into its preparation for and conduct of the mediation. 56 None of the other defendants gave evidence that they would have taken a different approach to the mediation had they known of the plaintiffs' intention to seek leave to amend if the mediation did not lead to resolution of the disputes. In the absence of that evidence, I do not think I should draw the inference that they would have. I can understand that some parties, had they known of that, might nonetheless have thought that it was worth attending the mediation to see if settlement, with all its benefits, could be achieved. But I have no difficulty in inferring that all parties who attended the mediation incurred substantial costs, and devoted substantial resources, to their preparation for and attendance at the mediation. 57 The defendants submitted that the costs related to the mediation were wasted costs that should be included in any order for indemnity costs. The plaintiffs submitted that they were not. Mr Bonner said in cross-examination that he did not accept that costs relating to the mediation should be regarded as wasted. It would be open to me to resolve this dispute (if I were otherwise minded to grant leave further to amend) by ordering that the defendants should have, as part of their wasted costs, their costs of and incidental to the mediation. Even if it is not clear that some or all of those costs (and, if some only, the proportion) could strictly speaking be regarded as "wasted", such an order would ensure that, where doubt exists, the benefit of the doubt goes to the innocent party. In other words, it would ensure that, as between the party causing the problem and the party suffering it, it is the former that bears the burden. Such an approach could be criticised as being somewhat arbitrary; but, I think, there is much to be said for the proposition that, in seeking to dispel prejudice, the Court should act with resolution rather than hesitation. An approach that requires the drawing of nice distinctions is unlikely to achieve that result. 58 The next issue is that, although the application for leave to amend involves directly only the defendants, there is another class of party (cross-defendants and cross-claimants who are not defendants) that will be affected. If the plaintiffs are given leave further to amend their summons, it will be necessary for the cross-claims against those cross-defendants to be redrafted (where the cross-claimants are defendants to the summons then their costs of doing so would be picked up by an appropriate costs order). However, those cross-defendants will incur costs in preparing defences to the revised cross-claims; and, to the extent that any of those cross-defendants are themselves cross-claimants, they will incur costs in revising their cross-claims and the cross-defendants to those cross-claims will incur costs in revising their defences. It would be open to me, I think, to make an order that the plaintiffs (or Deacons) should pay the costs not only of the defendants but of any party where those costs may properly be regarded as wasted by reason of the amendments, and to make it clear that those costs include the costs of non defendants in relation to any cross-claim by them, or defence to cross-claim against them, that requires revision as a result of the further amendments. 59 The last issue relating to costs is that the defendants, although having the benefit of indemnity costs orders in relation to the prior application for leave to amend, have not been able to procure payment of their costs. Mr Black gave evidence of the challenges that the plaintiffs have made to the Macquarie Parties' bill of costs. In saying this, I intend no criticism of the plaintiffs. An order for indemnity costs does not oblige the party against whom it is made to pay every item of costs that the party having the benefit of the order may claim. A party against whom an indemnity costs order is made is as much entitled to have those costs assessed on a proper basis as is a party against whom any other costs order is made. Mr Bonner said that, if an indemnity costs order were made in relation to this application, Deacons would, to the extent that it thought there were proper reasons to do so, challenge individual items (or classes) of costs in any defendant's bill of costs. Again, I mean no criticism of Mr Bonner or Deacons in saying this; it reflects no more than their entitlement at law. Deacons' acceptance of responsibility for costs should not be understood to offer the defendants a blank cheque. 60 It is clear, both from the history of the previous indemnity costs orders and from a consideration of the process of assessment and appeal, that the realisation of any entitlement to indemnity costs might take some time to achieve. Mr Bonner agreed that "It could be many months if not years before [Deacons'] liability crystallises." I accept that this is so. 61 The consequence is that the defendants, having incurred costs, will be out of pocket for "many months if not years" before they are recouped. No doubt, some of the defendants have the means to carry that position. However, not all do. Until recently, the conduct of the proceedings on behalf of a number of the defendants (the fourth defendant, Mr Ghose; the sixth defendant, Mr Daya; the ninth defendant, Mr Peck; the tenth defendant, Mr Williams; and the eleventh defendant, Mr Aroney) had been conducted by solicitors retained on their behalves by an insurer under a directors and officers' liability policy. However, the insurer has purported to avoid the policy against those defendants and has stopped advancing their defence costs. They are faced with the prospect of funding their own defences, or making other arrangements; and this will be so whether or not the plaintiffs are given leave to amend. If, however, the plaintiffs are given leave to amend, then those defendants will be forced in addition to fund the further performance of work that has already been done (in relation to the plaintiffs' case as it presently stands), but will have to wait for some (perhaps substantial) time to recoup so much of their expenditure as has been wasted. Further, to the extent that the wasted expenditure relates to costs advanced by the insurer, there will be a real question as to who is entitled to the benefit of the costs order. 62 It is, therefore, very difficult to see how a costs order could be framed that would satisfactorily protect the defendants against prejudice. Mr Bathurst QC, who appeared with Mr Peter Brereton of Counsel for PwC, submitted that the appropriate costs order would be that the plaintiffs (or Deacons) pay the whole of the defendants' costs to date on an indemnity basis. Not surprisingly, the plaintiffs did not accept that this was an appropriate measure of the wasted costs. Indeed, such an order would be overgenerous to the defendants: it is not difficult to see that there must have been some, and perhaps considerable, work that has been performed to date that will be of enduring benefit (for example, the preparation by each defendant for, and the giving of, discovery). Other defendants submitted that any indemnity costs order should be framed so as specifically to include particular items of work or classes of work (including, by way of example only, costs relating to the mediation). However, there was no unanimity among the defendants as to how such an order could be framed so as to give them complete protection; and in any event, the plaintiffs did not accept any of the proposed orders. 63 As to the defendants affected by their insurer's purported avoidance of the D & O policy, it was submitted (in some cases) that the plaintiffs (or Deacons) should be required to pay the assessed costs, or some proportion thereof, immediately upon presentation of a bill in assessable form, upon an undertaking by the respective solicitors for those defendants to refund any costs that were disallowed following completion of the assessment process. This, it was said, would avert the particular prejudice to those defendants. However, the plaintiffs did not accept that such an order would be appropriate; and in any event, as I have pointed out in para [61] above), it could lead to complications in the identification of the entity entitled to the real benefit of such an order. 64 In all the circumstances, I have come to the conclusion that it is unlikely that any order for costs could adequately protect the defendants against prejudice without unduly sacrificing the rights of the plaintiffs or Deacons (as would be the case if an order of the kind suggested by Mr Bathurst were made). The agreed extreme difficulty of identification of wasted costs, and the delays inherent in the assessment process (including appeals), suggest that no defendant is likely to be compensated in full for wasted costs; and, certainly, that such compensation as can be achieved will not be achieved quickly. That is so, I think, even if I ordered specifically that the costs payable include the costs of the mediation. Further, no order for costs can compensate the defendants for their individual time and effort (including, in the case of corporate defendants) management time. Finally, in the case of those defendants affected by the (purported) avoidance of the D & O policy, no order either for costs or for payment on account of costs is likely to retrieve for their benefit the costs of all wasted work to date. In their case, it is likely that they will have to bear, out of their own pockets, the costs (which may be substantial) of reperforming wasted work. 65 In substance, therefore, I accept the defendants' submissions that regardless of the orders that may be made as to costs, they will suffer prejudice, in relation to wasted costs and time, for which they cannot be compensated adequately if leave to amend is granted. Prejudice apart from costs 66 The Macquarie parties and PwC in particular pointed to the fact that the proposed amendments would allege cases of actual breach of the law, or involvement in breaches of the law, both against entities (the Macquarie Parties) and individuals. They pointed to the decision of the Appeal Division of the Supreme Court of Victoria in Bishopsgate Insurance Australia Ltd (In liq) v Deloitte Haskins & Sells [1999] 3 VR 863. In that case, Tadgell and Ormiston JJ (with whom Brooking J agreed) dealt with prejudice of this kind at (in particular) 887-888 [60]-[62]. Their Honours said that, even in the absence of direct evidence, prejudice could be inferred where claims were made against individuals relating to their honesty or their professional competence. This, their Honours said, was a head of prejudice that could be inferred even without direct evidence and that was relevant to be taken into account: "Where a claim is made against individuals relating to their probity or their competence, especially their professional competence, and the claim is for many millions of dollars, then it is not hard to infer that defendants against whom such allegations are made are under a heavy burden. When that burden is not merely deferred but then unjustifiably drawn out over many years, it is easier still to infer serious prejudice of the relevant kind to a defendant. … [W]here a claim extends beyond mere casual negligence to acts which reflect upon the competence or probity of a defendant, especially when that competence or probity is critical to the defendants' future livelihood, then the delay in bringing an action on for hearing will properly be held to impose severe additional prejudice on a defendant. This is particularly the case in claims alleging professional negligence, although such a description is not to be confined merely to the negligence of accountants, solicitors, doctors and the like for it is relevant to any person in respect of whom an unfavourable finding will be likely to place at risk his or her capacity to earn a living. … Thus, it is not so much the size of the claim as the effect on a person's reputation which is critical to prejudice of this kind. In this case the variety of serious claims made against the defendant is such that the inordinate and inexcusable delay of the plaintiff since the issue of the writ has caused real prejudice of the relevant kind to the defendant, as we would infer. … The real issue is fairness to the defendant in the light of inordinate and inexcusable delay on the part of the plaintiff. …" 67 That was a case where proceedings instituted in February 1989, relating to events that occurred in the year ending 31 December 1982, were the subject of many procedural orders intended to produce a statement of claim that set out the plaintiff's case clearly and without pleading deficiencies. Their Honours at 882 [49] drew attention to the way in which the amendments sought to elaborate on the variety of duties and obligations said to have been broken, and to the fact that the proposed amendments were not apparently based on "one new fact discovered". Understandably, their Honours reminded themselves of the observation of Gleeson CJ in Trau v University of Sydney (1989) 34 IR 466, 475 that "[i]f one sees that a plaintiff's lawyers are experiencing extreme difficulty in formulating with clarity and particularity their client's cause of action then that is often a very good indication that there is no cause of action." 68 The ultimate decision was that the proceeding should be dismissed for want of prosecution. Clearly, there is no real comparison between the facts in Bishopsgate and the facts of the present case. On any view, in the present case, the plaintiffs have produced a satisfactory formulation of their claim: namely, 5 FAS. On any view, the plaintiffs have undertaken a great deal of work to bring their claim to a hearing. Discovery and inspection of documents have been undertaken; and the plaintiffs have filed a substantial amount of evidence. 69 Further, I think, there is in the reasons in Bishopsgate at least a trace of allocation to the plaintiffs of blame for the defaults of their legal advisers: see, for example, what the majority said at 878 [39]. If their Honours did proceed on that basis, then what they say would need to be read with extreme care, bearing in mind what the Court of Appeal in this State said in Stollznow (see para [46] above). 70 For a number of reasons, I think, the decision in Bishopsgate needs to be treated with some care. The facts before the Court in that case were substantially different (and, from the plaintiff's perspective, worse) than the facts in this: the delays were greater and the progress was less. The application decided by the Court was not one for leave to amend (although, I think, that had been involved), but to strike out for want of prosecution. Nonetheless, I accept in principle that, as their Honours said, delay may of itself cause prejudice of the kind to which they referred where allegations are made against the honesty and competence of people, bearing directly on their employment or profession, and where those allegations are not swiftly dealt with. Further, I accept in principle that prejudice of this kind may be inferred, in an appropriate case, without direct evidence. 71 In this case, the relevant events occurred six years ago. It was three years after the occurrence of those events that proceedings were commenced. Some of the defendants sought to point to that, and to the making of this and the previous application for leave to amend, to suggest that the plaintiffs were only galvanised into action by the imminence of an arguable limitation period. I am not sure that this is an appropriate inference to draw. In any event, when I granted leave to amend on the previous occasion, I did so on terms that, in effect, reserved to the trial judge a decision as to when the amendments should take effect. It was agreed that this would not prejudice, at least until the decision of the trial judge on the point, any limitation defence that might be available to any defendant. The plaintiffs accepted that if they were given leave to amend now, it should be on the same basis. Nonetheless, the fact is that proceedings relating to events that occurred six years ago have not yet been set down for hearing although (prior to the last application for leave to amend) the trial was fixed to start in March this year. The defendants were entitled to think, on the basis of what was said on the previous application for leave to amend, that the plaintiffs were in substance ready to proceed. They were entitled to think that, once the work necessitated by the previous amendment was complete, the proceedings would be given a further date for trial. If leave to amend is granted now, the trial date will be put back still further. In the meantime, the defendants would have most serious allegations hanging over their corporate and individual heads. 72 The plaintiffs relied in submissions on the cross-claims filed by Mr Peck. Mr Peck has filed two cross-claims. By his amended 12th cross-claim, he seeks contribution or indemnity from the Macquarie parties, Trowbridge and PwC. In the other, the 29th cross-claim, he seeks contribution or indemnity from Phillips Fox. The plaintiffs submitted that the claims that they wished to bring against the defendants had already been brought by Mr Peck in those cross-claims, so that even if leave to amend were refused, the defendants would be put to the anxiety and stress of defending such claims. 73 The amended 12th cross-claim alleges, among other things, that the cross-defendants made various representations in the course of performing their duties relating to the convertible notes issue; that those representations were misleading or deceptive; and that, accordingly, the cross-defendants have each contravened s 52 of the Trade Practices Act or analogous provisions in other legislation. However, Mr Peck does not allege against those cross-defendants that they were themselves guilty of breaches of any other provisions of the Corporations Law, or that they were involved in the breaches by others of other provisions of the Corporations Law. That is to say, Mr Peck does not allege, against those cross-defendants, the matters now sought to be raised by the plaintiffs against the Macquarie parties, Trowbridge and PwC. Mr Peck's case against those cross-defendants essentially reflects the case that the plaintiffs by 5 FAS seek to make against them (see the summary in para [5] above). 74 Likewise, by the 29th cross-claim, Mr Peck seeks contribution or indemnity from Phillips Fox by reason of (among other things) its conduct in making a number of representations that, Mr Peck says, were misleading or deceptive. Thus, again, he claims pursuant to s 42 of the Fair Trading Act or its analogous provisions in the Corporations Law. He does not make allegations of other breaches of the Corporations Law, or of involvement in breaches by others of the Corporations Law. 75 I therefore do not accept the submission that the expanded case that the plaintiffs seek by 6 FAS to make against the relevant defendants is no more than the case sought to be made against them by Mr Peck in his cross-claims. The case that the plaintiffs now seek to make involves, in a very real and direct way, allegations that strike at the probity, or honesty, of the relevant defendants. It is, I think, appropriate to infer that the making of those allegations, at a relatively late stage in the proceedings, and some 6 years after the relevant events occurred, is likely to cause some significant prejudice to those defendants. That is prejudice that cannot be cured by any order, whether for costs or otherwise. 76 The existence of this prejudice is, I think, a serious matter. Its significance is compounded when considered in conjunction with the other head of prejudice. That is because, as I have indicated, I do not think that it is possible to formulate a costs order (other than one requiring the plaintiffs to pay the whole of the costs of the proceedings to date, with perhaps specified "carve outs" for work that on any view can be seen not to have been wasted) that would compensate the defendants for the wasted costs that they would incur by reason of the amendments; and even such an order would leave unresolved difficulties to the prejudice of at least some defendants. Prejudice to the plaintiffs 77 In the course of argument, Mr Douglas was asked to identify the benefit to his clients in the proposed amendments. Specifically, he was invited to indicate how it was that the plaintiffs, on the assumption that they failed to make out the claims propounded by 5 FAS, could succeed on the fresh claims propounded by the draft 6 FAS. That issue was raised because, as indicated in the course of argument, it did not seem appropriate to grant leave to amend simply to enable the summons to be reorganised in a fashion that the plaintiffs or their legal advisers felt to be more convenient: particularly where the defendants did not share that view and where the proposed reorganisation makes the summons more rather than less difficult for individual defendants to follow. 78 Mr Douglas submitted that the proposed amendments would be of benefit to the plaintiffs because they would give the plaintiffs a chance of success on the new claims if they failed on the old. Thus, he said, the plaintiffs might fail in their present cases based on allegations of negligence and misleading or deceptive conduct, but succeed on cases based on involvement or knowing concern in statutory breaches by others. 79 That submission sits uneasily with the proposition advanced by Deacons that the amendments were aimed "to ensure that all issues between the parties are clearly before the Court … " (letter of 14 September 2004 - see para [32] above). It sits equally uneasily with the proposition that what was involved is "some amendment and reformulation" and was done "to reorganise the pleadings to make [the plaintiffs'] current allegations clearer and simpler to understand" (letter of 7 October 2004 - see para [33] above). 80 In any event, on reflection, I do not think that the submission is correct. The structure of the draft 6th FAS (both as propounded in the hearing before me, and as revised thereafter) makes it clear that substantially the same facts are relied upon to support both the negligence/misleading or deceptive conduct cases and the proposed new cases. (There are some fresh matters of fact alleged, and some further particulars relied upon, but these go only to the detail, not the substance, of the analysis.) It may be necessary to draw a distinction between the negligence case on the one hand and the misleading or deceptive conduct case on the other. For example, a negligence case could fail because the plaintiffs could not establish that a particular defendant owed them a duty of care. However, if the negligence case were to fail not on this ground but because the plaintiffs fail to establish that a particular defendant breached a duty of care found to be owed, it is likely, to the point of near certainty, that the same facts would result in a conclusion that a case of involvement in statutory breaches of others must also fail. Equally, if a case of misleading or deceptive conduct fails on the facts, it is difficult to see how, on the same facts, case of involvement in the statutory breaches of others could succeed. 81 Thus, the only real area of operation of the proposed new cases would be where a negligence case failed on the basis that no duty of care was owed. However, that would not affect a case based on misleading or deceptive conduct: the establishment of misleading or deceptive conduct, and of the suffering of damages by that conduct, does not require the demonstration of a duty of care. As I have said, if a case based on misleading or deceptive conduct fails on the facts, it is likely, to the point of near certainty, that a case of contravention of the Corporations Law, or involvement in contraventions of the Corporations Law by others, would also fail. Thus, even on the view of the possibilities that is most favourable to the plaintiffs, I do not think that it is likely that the proposed amendments give them a real, as opposed to theoretical, prospect of success in circumstances where their case as presently articulated fails. 82 I accept, in general terms, that where a case is fairly arguable a party is entitled to put it and have it heard and determined. It is not for the Court, in the ordinary circumstance, to tell the party that the case really adds nothing of practical value to what is already pleaded, and that it should not be pursued. Where, however, the introduction of that alternative case is sought in circumstances that require the exercise of the Court's discretion, then I do think that it is open to the Court to take into account whether the refusal of leave is likely to occasion significant prejudice to the party seeking it. See Kirby J in J L Holdings at 169. In the present case, because I do not accept the submission for the plaintiffs that the proposed amendments give them a real prospect of success that they would not have if their case as presently pleaded fails, I think that the refusal of leave to amend is unlikely to occasion any significant prejudice to the plaintiffs. Such prejudice as is caused is properly characterised, in my judgment, as theoretical rather than real; and it is this theoretical prejudice that is to be weighed against the real prejudice that would be caused to the defendants if leave were to be granted. The alleged pleading defects 83 The criticisms made of the draft 6 FAS, in its original form, are contained in the defendants' written submissions. In essence, those defendants who chose to put submissions focussed on the lack of pleading or particularisation of knowledge and on the pleading of a case of misleading or deceptive conduct by omission that did not make clear that the omission was advertent (see s 4 of the Trade Practices Act; and see, for example, McHugh J in Butcher v Lachlan Elder Realty [2004] HCA 60 at [99] to [101]). In addition, there were complaints about the use of verbal formulae such as "to the extent that", "by the conduct" and "by reason of". 84 It could not be said that the defendants sought to understate the problems that, they said, they faced. Given that, firstly, the draft was substantially amended and, secondly, the orders that I have made, it is unnecessary for me to say more than that, notwithstanding the zeal with which the defendants constructed defects in the initial draft of the pleading, the substance of their complaints was justified. 85 The revised draft retained the basic structure of alleging the entirety of (what was said to be) the material facts chronologically and then moving to the cases propounded against each defendant or group of defendants. But, when it set out the case against each defendant or group of defendants, it made a number of significant changes. 86 Firstly, the allegations of knowledge were clearly defined, in that:

(1) There was a specification of the pleaded material facts of which, the plaintiffs said, the relevant defendant or group of defendants had knowledge; and

(2) There were detailed particulars given of the basis upon which it was alleged that those defendants or groups of defendants had the knowledge alleged. 87 Generally, the particulars of knowledge were given by reference to documents. The plaintiffs, in relation to individual paragraphs or subparagraphs alleging material facts said to be known to the defendant or defendants, said that the knowledge "is to be inferred from" documents that were then specified. Although there was some criticism made of this, I think, in a complex commercial dispute, it is not an inappropriate way of putting the defendants on notice of the precise case (as to knowledge) to be made against them. 88 Secondly, the revised draft then set out (in cases of misleading or deceptive conduct by omission) matters that particular defendants or groups of defendants were said to have "considered". Those pleadings were supplemented by particulars of "advertence". Again, in general, the particulars of advertence referred to documents that (it may be assumed) either came from the defendant or defendants in question or were put before them. It is clear that the reference to "considering" or "advertence" was intended to show that the defendant or defendants in question knowingly omitted to do the relevant matters. Again, I think, in complex commercial litigation this is not an unacceptable method of putting the relevant defendants on notice of the case to be made against them. 89 It is correct to note that the verbal formulae referred to above were retained. However, when one reads the revised draft 6 FAS as a whole, (something that the defendants in their written submissions conspicuously failed to do), it is clear that these were in effect summary paragraphs that caught up the detailed allegations that had been made and particularised. For example, one formulation to which objection was taken was to the effect that "to the extent that defendant X knew of matters 1, 2 and 3, then … " certain specified consequences followed. This was said to be a conditional allegation. However, it is quite clear that paragraphs cast in this form were intended to be read in conjunction with the paragraphs where knowledge of the various matters was alleged against the defendant in question. 90 Generally, similar comments may be made about the other verbal formulations of which complaint was made. 91 I do not mean to suggest that I found the structure of the revised draft 6 FAS easy to follow. On the contrary, it was my impression, both upon first reading it, and upon considering it thereafter, that it was far more confusing than 5 FAS, and that it was harder both for the defendants and the Court to appreciate, without close and detailed study, the case proposed to be made against each defendant. But that of itself did not seem to me to be a sufficient basis for refusing leave to amend. Nor, if I were otherwise minded to grant leave to amend to incorporate the fresh claims, did it seem to me to afford a basis for doing so conditionally: the condition being that the revised structure be abandoned and that the amendments be incorporated into the structure of 5 FAS. 92 Further, there were complaints that particular representations alleged to have been made by particular defendants were falsified by matters of which those defendants were not alleged to be aware; or that particular representations were alleged to be falsified by matters that could not in reality falsify them; and that there were other incongruities or discongruities in the pleading. Those matters may be acknowledged, but they do not seem to me, of themselves, to be a sufficient basis for refusing leave to amend. 93 There were a number of other criticisms pressed by the defendants. However, none of them, either by themselves or considered in conjunction with the others, seemed to me to be sufficient to justify the refusal of leave to amend. 94 In summary, therefore, had the draft propounded been unchanged, I would have concluded that the criticisms made of it were justified and, of themselves, a sufficient ground for refusal of leave to amend. But the revisions to the draft that was initially propounded deal sufficiently with those criticisms so that, although the document is still not a model of clarity or pleading perfection, the defects that remain do not of themselves justify refusal of leave to amend. Analysis and conclusion 95 I have found, in substance, that leave further to amend should not be refused only because of the lack of, or belated, explanation offered. However, I have concluded that if leave to amend were granted, the defendants would suffer prejudice in a number of ways. Firstly, I have concluded that no order for costs could be drafted (save one requiring the plaintiffs to pay the whole of the defendants' costs to date) that would completely compensate the defendants for costs wasted by reason of the further amendment. Secondly, even if such an order could be drafted, it would be a considerable time before the defendants could be recouped for the costs so wasted. Thirdly, in the case of those defendants whose insurer has avoided the relevant policy, there is particular prejudice because they are now funding the defence of the proceedings against them and because an order for payment of costs wasted (even if accompanied by an order for advancement of those costs, subject to later adjustment) might not operate for their benefit. 96 I have also found, in substance, that the Macquarie Parties, PwC and Phillips Fox will suffer further prejudice of a kind that could not be compensated by any order for costs (even one requiring the plaintiffs to pay the whole of their costs to date) if leave to amend were granted. That is because the amendments would make, or revive, allegations striking directly at the honesty or probity of those entities and individuals within them. I am not to be taken as saying that a case of "mere" negligence, or "mere" misleading or deceptive conduct, does not impose stress on those against whom it is pleaded. That is inevitable. But I do think, consistent with the reasoning in Bishopsgate, that the enhancement of such a case by allegations in effect of dishonesty and knowing breach of the law imposes stresses of a substantially different, and substantially greater, kind. Those considerations are of particular significance, in relation to events occurring six years ago, where the inevitable consequence of granting leave to amend would be to push back yet further the trial date for proceedings that are (absent the amendments) ready for hearing. Particularly in the context where those allegations were made against the Macquarie Parties up to and including the 4th further amended summons, and dropped in 5 FAS, I think that their revival needs very substantial justification. 97 In my judgment, the incurable prejudice to the defendants, of the kinds that I have identified, is such that the application for leave further to amend should be dismissed. That is so even if - which I doubt, for reasons that I shall shortly give - refusal of leave further to amend would cause real, rather than theoretical, prejudice to the plaintiffs. The prejudice to the defendants is real and, in many cases, severe. There is no practical way that the entirety of the identified prejudice can be cured. In those circumstances, the application being made late (after the plaintiffs have been afforded very many opportunities to get their pleadings into order), and there being no basis for concluding that the need to amend arose from some recently discovered material, I think that the consequences, if any, should be borne by the plaintiffs rather than the defendants. 98 The defendants raised other specific issues, particularly in their written submissions. Some of those issues were explicitly abandoned; and others did not feature at the forefront of oral argument. I shall not deal in detail with all those other issues. That is because I think that the issues that I have dealt with are those that dictate the outcome of the plaintiffs' application. 99 In summary, and leaving entirely to one side the complaints as to the sufficiency of the revised draft 6 FAS that is now propounded, I think that the nature, extent and incurability of the prejudice to the defendants dictate that the application for leave further to amend should fail. 100 As against the prejudice to the defendants, there is my conclusion that the refusal of leave would not cause more than theoretical prejudice to the plaintiffs. That is because, against the submission put for the plaintiffs, I do not think that the fresh or additional cases sought to be propounded by 6 FAS offer the plaintiffs a real, rather than theoretical, prospect of success in the event that the claims presently propounded by 5 FAS fail. In other words, adopting the language of the marketplace, I do not think that the amendments (in so far as they seek to introduce differently articulated causes of action) really "add value". 101 Thus, if the question fell to be considered by balancing the prejudice to the defendants should leave further to amend be granted against the prejudice to the plaintiffs should that leave be refused, I would conclude that the balance lay in favour of the defendants. That is to say, I do not think that such prejudice as the plaintiffs might suffer by the refusal of leave goes near to outweighing the prejudice that the defendants will suffer by the grant of leave. In this context, if it is necessary to consider questions of responsibility, then it is the plaintiffs who bear responsibility for the situation and who should, therefore, suffer the consequences. That is because the plaintiffs have had more than ample opportunity to amend already, and because it is not suggested that the current application is based upon the discovery of some new and vital material (let alone, material that could not with reasonable endeavours have been obtained at some earlier stage). Costs 102 Mr Douglas accepted that, the plaintiffs or their solicitors (and the distinction is irrelevant for present purposes) having accepted that the defendants should have their costs of the application for leave to amend on an indemnity basis if leave were granted, the same position should obtain if (as has happened) leave to amend were refused. Mr Douglas also stated that it was not necessary, in making an order for costs, to distinguish between the plaintiffs and their solicitors because the matter would be adjusted between them without the need for the Court to intervene. Orders 103 It was for the foregoing reasons that on 10 December 2004 I made the following orders:

(1) I order that the plaintiffs' notice of motion filed on 1 October 2004 for leave further to amend their summons be dismissed.

(2) I stand the proceedings over to the Directions List on Friday 17 December 2004.

(3) I order the plaintiffs to pay the defendants' costs of the application for leave to amend on an indemnity basis.

(4) The exhibits are to be retained and disposed of in accordance with the Rules.

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