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[2026] QSC 13
General information, not legal advice.
Supreme Court of Queensland
2026-02-17
Cooper J
Original judgment source is linked above.
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COURT SUPERVISION - AMENDMENT - ORIGINATING PROCESS, PLEADINGS ETC - where the first plaintiff provided litigation funding to the defendant under a funding agreement - where the defendant admits it entered into a funding agreement with the first plaintiff but denies it is liable to pay the amount claimed by the plaintiffs - where the defendant applies for leave to amend its defence under rule 375 of the Uniform Civil Procedure Rules 1999 (Qld) to plead a further term of the funding agreement - where the defendant's application to amend is heard approximately three months before trial is listed to commence - whether the effect of the defendant's proposed amendments is to withdraw admissions previously made by the defendant in their defence - whether the defendant's proposed amendments are deficient in form - whether the defendant's proposed amendments disclose a reasonable defence to the plaintiff's claim - whether the defendant's proposed amendments would have a tendency to prejudice or delay the fair trial of the proceeding - whether the discretion to grant leave to amend the defence under rule 375 of the Uniform Civil Procedure Rules 1999 (Qld) should be exercised in the circumstances of the case
Uniform Civil Procedure Rules 1999 (Qld) rr 5, 165, 166, 171, 187, 188, 189, 190, 292, 375, 470
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27, cited
Barr Rock Pty Ltd v Blast Ice Creams Pty Ltd [2011] QCA 252, cited
Hartnett v Hynes [2009] QSC 225, applied
Monto Coal 2 Pty Ltd v Sanrus Pty Ltd as trustee of the QC Trust [2014] QCA 267, considered
Nyoni v Patterson [2012] WASCA 171, considered
Menegazzo v Pricewaterhousecoopers (a Firm) [2016] QSC 94, considered
Rigato Farms Pty Ltd v Ridolfi [2001] 2 Qd R 455; [2000] QCA 292, cited
Yao v Fang [2025] QCA 86, cited
[1] The first plaintiff (JustKapital) carried on the business of litigation funding by providing disbursement funding to law firms. The second plaintiffs (Receivers) were appointed as the joint and several receivers and managers of JustKapital on 30 April 2021. The defendant (Compo Legal) is a law firm which obtained disbursement funding from JustKapital.
[2] The plaintiffs seek payment from Compo Legal of the sum of $1,074,557.42 said to be owed under invoices issued by JustKapital which have not been paid, plus interest in the amount of $1,113,102.08 claimed under the funding agreement.
[3] Compo Legal admits that it entered an agreement for disbursement funding with JustKapital, and that it has not paid the invoices which are the subject of the proceeding. However, it denies it is liable to pay the amount claimed by the plaintiffs, on the basis that the terms of the funding agreement pleaded by the plaintiffs did not apply to the disbursement funding which JustKapital provided.
[4] The proceeding has been managed on the Commercial List since May 2025. In September 2025, it was listed for trial for three days commencing on 6 May 2026.
[5] Compo Legal now applies for leave to amend its defence to plead a further term of the funding agreement. The effect of this further term is that Compo Legal's obligation to repay principal amounts which JustKapital advanced for matters which were unsuccessful did not crystallise, in the sense that these principal amounts did not become due and payable, unless and until Compo Legal received sufficient cashflow from successful matters funded by JustKapital to repay the principal amounts. As explained in more detail below, the first time that Compo Legal asserted that this term formed part of the funding agreement was when it filed affidavit material in response to an application by the plaintiffs for summary judgment in respect of the principal amounts JustKapital advanced in respect of unsuccessful matters.
[6] The plaintiffs oppose the grant of leave to amend. They advance three reasons why leave should be refused:
(a) the effect of the proposed amendments is to withdraw admissions made by Compo Legal in its amended defence and no application has been made for leave to withdraw those admissions;
(b) the proposed amendments are deficient in form such that they would be liable to be struck out if leave should be granted;
(c) the lack of an adequate explanation for the failure to make the proposed amendments at an earlier stage of the proceeding and the delay and inconvenience which would result from the amendments are factors which weigh firmly against granting leave.
[7] For the reasons which follow, I am satisfied that it is appropriate to grant leave to amend. I do not accept that any of the reasons put forward by the plaintiffs justifies preventing Compo Legal from raising what I have found to be an arguable defence.
The existing pleadings and relevant procedural history
[8] In the statement of claim filed on 29 February 2024, the plaintiffs plead that the general process by which JustKapital provided disbursement funding to Compo Legal was as follows:
(a) Compo Legal would submit an invoice in respect of services to be provided by a services provider (Disbursement Invoice);
(b) JustKapital would pay the amount stipulated in the Disbursement Invoice to the service provider;
(c) JustKapital would then issue an invoice to Compo Legal in respect of the funding for the disbursement, enclosing a copy of the agreement governing the terms of that funding (Terms of Trade);
(d) Compo Legal would then be required to repay the amount in accordance with the Terms of Trade.
[9] The statement of claim pleads the material parts of the Terms of Trade as follows:
(a) by cl 2, the Terms of Trade were to be incorporated into all contracts for the supply of goods and services by JustKapital and Compo Legal and superseded all prior agreements between Compo Legal and JustKapital and any previous versions of the Terms of Trade.
(b) by cl 3, unless JustKapital agreed in writing, payment of the amount invoiced to Compo Legal became immediately due upon the earliest of:
(i) 14 days after settlement of a legal claim by a client of Compo Legal for which JustKapital provided disbursement funding (Client Claim);
(ii) 14 days after determination of a Client Claim by a court;
(iii) 14 days after a Client Claim is discontinued;
(iv) immediately upon Compo Legal being the subject of an insolvency event;
(v) 30 months from the date of JustKapital's invoice to Compo Legal.
(c) by cl 4, that in the event Compo Legal did not pay an invoiced amount in full when it became due the overdue amount would accrue compound interest at the rate of 20% pa calculated and payable on a daily basis from the due date for payment until the date full payment was made.
(d) by cl 6, that the Terms of Trade could not be amended except in writing, signed by Compo Legal and an authorised representative of Just Kapital.
(a) on 7 March 2023, it sent a letter to Compo Legal demanding payment of $1,070,287.77 in relation to invoices which were older than 30 months and, accordingly, had become due and payable under cl 3 of the Terms of Trade;
(b) Compo Legal failed to comply with that demand in breach of cl 3 of the Terms of Trade;
(c) Since the issue of the demand, further invoices had become due and payable under cl 3 of the Terms of Trade and Compo Legal had failed to pay those additional amounts;
(d) Compo Legal also failed to pay interest in the amount of $1,113,102.08 which had accrued on the unpaid invoice amounts under cl 4 of the Terms of Trade.
[11] The invoices said to be older than 30 months, and for that reason to have become due and payable under cl 3 of the Terms of Trade, are particularised in a schedule to the statement of claim.
[12] In its defence filed on 5 April 2024, Compo Legal pleaded that the Terms of Trade were varied in about 2017. By paragraph 13 of the defence, it pleaded the varied Terms of Trade as follows:
(a) when a matter settled and costs were recovered in full, the total principal and interest was repayable by Compo Legal to JustKapital;
(b) where a matter failed and there was no cost recovery, the principal was repayable, but no interest was payable;
(c) where a matter was compromised and only a proportion of the costs were recovered a similar proportionate reduction would be applied to the interest payable to JustKapital with the principal being repayable in full;
(d) where loan periods continued beyond the 30-month period initially envisaged, the loan would not become due and payable;
(e) where a matter resolved within 12 months of funding, a 10% discount was applied to the invoiced amount;
(f) where Compo Legal took over files from other law firms that had been funded by JustKapital, it would not be liable to repay the funded amount if the matter was not successful.
[13] Based on those varied Terms of Trade, Compo Legal denied that any amount invoiced by JustKapital, or any debt claimed in the proceeding, had become due and payable (paragraphs 6(b)(ii), 6(c)(iii), 7(b) and 17). The explanation for this denial was that the condition upon which JustKapital relied to plead that the debts had become due and payable under cl 3 of the funding agreement - the expiration of 30 months from the date of JustKapital's invoice to Compo Legal - had been replaced when the Terms of Trade were varied (paragraphs 8(c), 9(b) and 10). Compo Legal pleaded that all amounts it owed to JustKapital had been paid, and would continue to be paid, in accordance with the varied Terms of Trade (paragraphs 6(b)(iii), 6(c)(iv) and 18).
[14] At that stage of the proceeding, Compo Legal did not assert that any of the matters the subject of JustKapital's invoices had resolved, either successfully or otherwise.
[15] In August 2024, the plaintiffs' solicitors wrote to Compo Legal's solicitors seeking information on the status of each relevant matter for which JustKapital had issued an invoice, including whether the matter had settled, failed or remained ongoing, and the disclosure of documents relevant to that issue. Compo Legal provided its initial disclosure in January 2025 and supplementary disclosure in April 2025.
[16] On 6 June 2025, following complaints by the plaintiffs, Compo Legal was ordered to provide further disclosure concerning the status of the matters the subject of the proceeding.
[17] On 2 July 2025, Compo Legal filed and served a further supplementary list of documents. Many of the documents Compo Legal disclosed in the further supplementary list were letters to its clients in matters the subject of the proceeding. Those letters were created after the order for further disclosure was made on 6 June 2025.
[18] On 6 August 2025, Compo Legal was ordered to file and serve affidavit material addressing the status of each matter the subject of the proceeding.
[19] Pursuant to that order, Rhodri Williams, the legal practitioner director of Compo Legal, affirmed an affidavit on 15 August 2025. In paragraph 10 of that affidavit, Mr Williams included a table which listed each invoice the subject of the proceeding and the status of the matter to which that invoice related. In summary, by that table, Mr Williams deposed that:
(a) 8 of the 319 invoices the subject of the proceeding were "untraceable", by which Mr Williams meant that Compo Legal holds no records in relation to the matters for which those invoices were issued;
(b) 19 of the 319 invoices the subject of the proceeding related to claims by children and for that reason the claims had not yet commenced;
(c) the balance of the matters (292 of 319 matters) had been discontinued and Mr Williams included the date of discontinuance for each such matter in the table. Mr Williams deposed that none of the matters the subject of the proceeding has been the subject of a court judgment or a settlement in favour of the client.
[20] On 25 August 2025, Compo Legal filed an amended defence.
[21] By paragraphs 11A to 11D of the amended defence, Compo Legal alleged that it had never agreed to the standard Terms of Trade pleaded in the statement of claim. Instead, Compo Legal alleged that it accepted JustKapital's offer of funding on the Agreed Terms of Trade as follows:
(a) JustKapital's standard mark-up would be 65% of the amount funded (Mark-up Component);
(b) JustKapital would charge a $100 establishment fee for each invoice funded (Establishment Fee);
(c) a 10% discount would be applied to the Mark-up Component for matters settled within 12 months from the date of funding (Discount Term);
(d) no discounts would apply for matters successfully settled after 12 months from the date of funding;
(e) if a matter was unsuccessful, only the principal amount funded would be repayable and the Mark-up Component would be written off (Write Off Term).
[22] Further, by paragraphs 12 and 13 of the amended defence, Compo Legal pleaded that from about 2017, these Agreed Terms of Trade were varied such that:
(a) the Establishment Fee would be written off for invoices to which the Write Off Term applied;
(b) no annual interest rate would be charged;
(c) a loan would not become due and payable if the loan period continued beyond 30 months.
[23] By paragraph 16 of the amended defence, Compo Legal pleaded that the parties conducted themselves on the basis that:
(a) Compo Legal did not pay the Establishment Fee for any matter subject to the Write Off Term;
(b) Compo Legal never paid interest on the invoices for any matter;
(c) JustKapital did not require payment of the amount funded after the expiry of 30 months from the date of advance, unless the amount became payable under the Agreed Terms of Trade;
(d) JustKapital and Compo Legal had proceeded in accordance with the Agreed Terms of Trade and the Varied Terms of Trade and not the terms pleaded in the statement of claim;
(e) Compo Legal is not liable to pay the Establishment Fee or interest, but only the amount owing under the Agreed Terms of Trade together with the Varied Terms of Trade.
[24] Consistently with Mr Williams' affidavit of 15 August 2025, paragraph 8(d) of the amended defence pleaded that Compo Legal:
"Says that the majority of claims subject to [JustKapital's] invoices have all failed and were unsuccessful, therefore the Write Off Term pleaded at 11B(e) applies and only the principal amount is repayable."
[25] On 3 September 2025, the plaintiffs applied for summary judgment in the amount of $540,367.10, being the total of the principal amounts which JustKapital had advanced in respect of matters which Mr Williams had deposed, in paragraph 10 of his affidavit of 15 August 2025, had been discontinued. The plaintiffs submitted that, based upon Compo Legal's plea in the amended defence that the Write Off Term applied to those discontinued matters, the principal amounts funded by JustKapital in respect of those discontinued matters had become due and payable.
[26] In response to that summary judgment application, Mr Williams affirmed a further affidavit on 26 September 2025, in which he deposed, in paragraph 23, to ongoing discussions he had with Anthony Hersch (on behalf of JustKapital) in which it was agreed that Compo Legal's liability to repay the principal amount would be subject to the availability of cashflow from successful matters; that is, the principal amount which JustKapital funded on unsuccessful matters would not become due and payable until Compo Legal's cashflow was able to absorb it. In paragraph 26 of the same affidavit, Mr Williams deposed that:
"... in the light of the discussions that the principal for failed matters would be paid subject to cashflow, Mr Hersch and I also discussed that JustKapital would not demand payment of the principal, or the Mark-Up once 30 months expired from the date of finance. Instead, the usual practice would continue, that successful matters would be paid in full, and unsuccessful matters would be paid when cashflow permitted: usually when another matter was successful."
[27] On 7 October 2025, I heard the summary judgment application and, based on Mr Williams' evidence concerning discussions about when the principal amounts for discontinued matters would become due and payable, was not satisfied that Compo Legal has no real prospect of defending that part of the claim for which summary judgment was sought. At the hearing of the summary judgment application, Compo Legal accepted that, if summary judgment was not granted, it would have to further amend its defence to plead the term regarding payment subject to cashflow. That is what has brought about the present application for leave to amend.
[28] Compo Legal seeks leave to amend by including the following further paragraphs in its defence:
"14A. From 2017 Mr Williams and Mr Hersch participated in numerous meetings, the dates of which cannot be particularised, whereby the objectives of [JustKapital]'s and [Compo Legal]'s business were discussed, which included:
(a) the volume of files which [Compo Legal] accepted, and [JustKapital] funded, was the primary objective;
(b) by increasing volume, the intention was that a higher number of successful settlements would follow;
(c) in the event the file was unsuccessful, the Write Off Term applied and [Compo Legal] would not need to pay the principal amount unless, and until, other funded matters were successful, resulting in a sufficient payment to pay the principal on the unsuccessful funded matters.
Mr Williams and Mr Hersch met regularly during the business relationship on approximately a monthly basis usually for a coffee in Sydney CBD. During those meetings, the above matters were discussed, repeated and confirmed.
14B. Within the meetings referred to in paragraph 14A Mr Williams and Mr Hersch said words to the effect that:
(a) Mr Hersch: 'the more files we can fund for you, the more claims you can take on. This will help you grow your practice. We would like to fund all of your work. For this model to succeed it is a numbers game and all about the volume of cases you can take on.';
(b) Mr Williams: 'I can take on more, but they won't all succeed. It's very difficult to know if a file has good prospects of success at the outset of the case when the funding is provided. Many things can go wrong on a matter. It's a concern how many cases might not succeed meaning no cost recovery and a resultant impact on cashflow in addition to time written off';
(c) Mr Hersch: 'We are conscious of that. We can take the good with the bad. Where funded files are unsuccessful the principal can be repaid at the same time as other successful funded matters are repaid to prevent an adverse impact on Compo's cashflow';
(d) Mr Williams: 'I don't mind dealing in the volume you request and recommend, but am concerned about the risks. I'd only be able to pay the principal amount on a failed case when other funded matters succeed and that settlement money had been received. Otherwise this isn't viable for me';
(e) Mr Hersch: 'That works for us. This is to be a long-standing business relationship and partnership. If you need to scale capacity within the practice at any stage to be able to increase the volume of work taken on, we can also fund paralegal engagement so long as it can be facilitated as a funded disbursement like the other funding we provide. Keep this in mind'.
14C In the premises of the matters pleaded in paragraphs 14A and 14B:
(a) an oral agreement was made that an additional term was incorporated into the Varied Terms of Trade, that in the event the file was unsuccessful, and the Write Off Term applied, [Compo Legal] would not need to pay the principal amount unless, and until, other matters were successful, resulting in a sufficient payment to pay the principal on unsuccessful matters (Cashflow Term); and
(b) [Compo Legal] accepted more matters than it otherwise would have in reliance of the representations made by Mr Hersch as pleaded in paragraph 14B and the agreement to the Cashflow Term.
[29] Further, Compo Legal seeks leave to amend to plead, in paragraphs 21A to 21C of the proposed further amended defence, that each discontinued matter the subject of the proceeding was discontinued after the Receivers were appointed and, further, that because Compo Legal did not take on any new matters funded by JustKapital after that appointment, no settlements from funded matters produced sufficient funds to repay the principal amount for each of the discontinued matters. On that basis, the Cashflow Term applies such that the principal amount for each of the discontinued matters did not, and has not, become due and payable.
[30] Pursuant to r 375 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), the court may allow a party to amend a pleading at any stage of a proceeding. However, by reason of r 470, Compo Legal requires leave to amend its defence in circumstances where a trial date has been set.
[31] In determining whether to grant leave, the court must have regard to the considerations raised by r 5. Those considerations are that: pursuant to r 5(1), the overriding purpose of the UCPR identified is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense; pursuant to r 5(2), the court must apply the rules set out in the UCPR with the objective of avoiding undue delay, expense and technicality and facilitating the purpose of the rules; pursuant to r 5(3) each party impliedly undertakes to the court and to the other parties to proceed in an expeditious way; and, pursuant to r 5(4), that the court may impose appropriate sanctions if a party breaches the implied undertaking.
[32] The principles which apply to the exercise of the court's discretion on an application for leave to amend are not in dispute. Those principles, which derive principally from the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University,[1] were discussed by Applegarth J in Hartnett v Hynes,[2] where His Honour observed:[3]
"...UCPR 5 seeks to facilitate the just and expeditious resolution of 'the real issues in civil proceedings' at a minimum of expense. The just resolution of proceedings remains paramount, but speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. Parties should have a proper opportunity to plead their case, but limits may be placed upon re-pleading when delay and costs are taken into account. The need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.
The objectives of the rules of civil procedure do not require that every application for amendment should be refused, or amendments for which leave is not required should be disallowed, because the amendment involves the waste of some costs and some degree of delay. The nature and importance of the amendment is relevant. The extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, are to be weighed against the grant of permission to a party to alter its case. Much depends upon the point the litigation has reached relative to a trial when the amendment is made or application to amend is made."
[33] Applegarth J then proceeded to identify the following 12 principles which assume importance on an application such as the present:[4]
"1. An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation.
[34] These principles are a guide in the sense that their application will vary from case to case depending upon the circumstances of each case.[5]
[35] The plaintiffs also rely on the principle expressed by the Western Australian Court of Appeal in Nyoni v Patterson[6] that the court ought not grant leave to amend a pleading into a form which is liable to be struck out. To similar effect, in Menegazzo v Pricewaterhousecoopers (a Firm),[7] Applegarth J noted that an application for leave to amend may be refused on grounds which would justify the striking out of the proposed pleading, including a plea which is bad in law or defective due to its non-compliance with rules of pleading.
[36] The principles which the court is to apply in considering whether a pleading is deficient due to its non-compliance with the rules of pleading were summarised as follows in Barr Rock Pty Ltd v Blast Ice Creams Pty Ltd:[8]
"...Considerations relevant in deciding if a pleading is deficient include whether it fails to fulfil the function of pleadings, which are 'to state with sufficient clarity the case that must be met' and thus define the issues for decision thereby ensuring procedural fairness. A pleading will lack sufficient clarity if it is 'ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him'. Likewise a pleading will be deficient if the pleader's case is not 'advanced in a comprehensible, concise form appropriate for consideration both by the court, and for the purpose of the preparation of a response'.
A pleading must contain all the material facts relied upon and a deficiency in pleading material facts needed to establish a cause of action may not be remedied through the use of particulars, which are intended to meet a further and quite separate requirement. On the other hand, a pleading may be liable to be struck out where it includes irrelevant allegations which, by their nature, will affect the expeditious determination of the proceeding."
[37] The plaintiffs also submit that, if leave to amend is granted, the effect of the proposed amendments would be to withdraw an admission by Compo Legal that the Write-Off Term applies to matters which had been discontinued. If that submission is accepted, r 188 provides that the admissions can only be withdrawn with the leave of the court.
[38] In its written outline of submissions, Compo Legal rejected the suggestion that the effect of the proposed amendments is to withdraw any admission. However, during the hearing Ms Philippou, who appeared as counsel for Compo Legal, indicated that to the extent that the court considered that leave to withdraw an admission is required then Compo Legal applied instanter for such leave.
The evidence of Mr Williams on the application for leave to amend
[40] In an affidavit affirmed on 13 November 2025, Mr Williams deposed to the content of the conversations sought to be pleaded in paragraphs 14A and 14B of the proposed further amended defence. He summarised the effect of those conversations as follows:
"6. I was encouraged to take on as many cases as possible as it was offered as a 'volume / margin game'. Losers would be written off, and I was urged to bring the money home of the winners. This was to allow for self-sufficiency of the JustKapital matters in the practice.
[41] Mr Williams then gave the following explanation for Compo Legal not having pleaded the Cashflow Term at an earlier time:
"11. It has always been my position that the invoices which the [Receivers] seek to recover have not been due and owing at any time. It was only upon conducting an audit of the files for this proceeding in September 2025 did I realise:
(a) the volume of files subject to this proceeding which fall within the category of being discontinued; and
(b) that it had not been properly explained why the finance for each of those files was not due and owing.
[42] Over the objection of Compo Legal, I granted leave to JustKapital and the Receivers to cross-examine Mr Williams on his affidavit.
[43] During cross-examination, Mr Williams gave the following evidence:
(a) He received the letter of demand dated 7 March 2023, which the Receivers had sent to Compo Legal (see [10](a) above) and he understood from that letter that the Receivers were contending that Compo Legal owed JustKapital an amount greater than $1 million. Shortly after he received that letter, he appointed Compo Legal's present solicitors to act in relation to that demand.
(b) After receiving the letter of demand, he sent an email to Mr Hersch on 20 May 2023. He sent that email because he believed that the Receivers, who had not been appointed at the time the funding the subject of the proceeding was provided, had no knowledge or understanding of the funding terms which Compo Legal (by Mr Williams) had agreed with JustKapital (by Mr Hersch). The purpose of the email to Mr Hersch was to attempt to obtain Mr Hersch's confirmation as to the content of the terms which applied. In the email, Mr Williams set out his understanding of those terms in a form consistent with that later pleaded in paragraph 13 of the defence filed on 5 April 2024 as set out at [12] above. He accepted that he made no reference to the Cashflow Term in the email to Mr Hersch but explained that the sole purpose of the disbursement funding provided by JustKapital was to assist with managing Compo Legal's cashflow and the reference in the email to there being circumstances where loan periods continued beyond the 30-month period initially envisaged was consistent with the parties' concern not to jeopardise that cashflow.
(c) He read the statement of claim which the plaintiffs filed and served on Compo Legal and understood the allegations set out in it.
(d) He provided instructions to Compo Legal's solicitors to send an email on 13 March 2024 to the solicitors for the plaintiffs. That email asserted that the debts the plaintiffs alleged were due and payable were not due and payable on the terms which had been confirmed by Mr Hersch. The terms set out in that email included that where a matter failed and there was no cost recovery only the principal amount was repayable. He accepted that the email did not refer to any condition concerning cashflow but explained that the email did not deal with the timing of repayments, which he considered to be a different issue; the email was focussed on the terms which governed the repayment amount.
Does Compo Legal require leave to withdrawal any admissions?
[44] I do not accept the plaintiffs' submission that the proposed amendments require the withdrawal of admissions as to the operative effect of the Agreed Terms of Trade, and specifically the Write-Off Term.
[45] This follows from a consideration of the rules concerning admissions as they apply to a defendant to a claim. In responding to a statement of claim, a defendant may plead a denial, a non-admission, an admission or another matter: r 165(1). If the defendant pleads a denial or a non-admission in response to an allegation of fact, that must be accompanied by a direct explanation for the defendant's belief that the allegation is untrue or cannot be admitted: r 166(4). If the defendant's denial or non-admission of an allegation does not comply with r 166(4), the defendant is taken to have admitted the allegation: r 166(5). In addition to an admission in a pleading, the defendant may also admit facts by notice served on the plaintiff: r 187. The plaintiff may serve a notice on the defendant asking the defendant to admit the facts specified in the notice. If the defendant does not serve a notice on the plaintiff within 14 days disputing the facts, the defendant is taken to admit those facts: r 189(1) and 189(2). Where a defendant makes an admission, the court may make an order to which the plaintiff is entitled on the admission, including giving judgment: r 190(1) and 190(2). That is, the court may give judgment on the facts pleaded by the plaintiff and admitted by the defendant without the need for proof of those facts.
[46] In that context, it seems clear that the requirement in r 188 that a party (here the defendant) obtain the court's leave to withdraw an admission, applies to the admission of an allegation made in the pleading to which the party is responding (here the statement of claim).
[47] The plaintiffs submit that Compo Legal made admissions as to the operative effect of the Agreed Terms of Trade in paragraphs 6(c)(ii), 8(d), 11B(e) and 16(c) and 16(d).
[48] Paragraph 11B(e) of the amended defence pleads the Write Off Term as one of the Agreed Terms of Trade (see [21](e) above). Paragraphs 16(c) and 16(d) plead the basis upon which Compo Legal alleges the parties conducted themselves regarding the terms upon which JustKapital provided disbursement funding (see [23] above). However, these paragraphs are not pleaded as a response to any specific allegation of fact in the statement of claim. Nor are they pleaded in the form of an admission of any allegation of fact in the statement of claim. In terms of r 165(1), the matters pleaded in paragraphs 11B(e), 16(c) and 16(d) are "another matter" which Compo Legal has pleaded as part of its positive case regarding the terms on which JustKapital provided disbursement funding.
[49] Paragraph 6(c) of the amended defence is pleaded in response to the allegation in paragraph 6(b) of the statement of claim about the amount of interest owing under the invoices issued by Just Kapital. In paragraph 6(c)(i) of the amended defence, Compo Legal denies the allegation that interest is owed in the amount pleaded in paragraph 6(b) of the statement of claim. Paragraph 6(c)(ii) of the amended defence is then pleaded in the following terms:
"In relation to paragraph 6(b) of the statement of claim, [Compo Legal]:
(ii) Says that under the Agreed Terms of Trade where a matter failed and there was no cost recovery, only the principal was repayable, and no interest is payable, which applies to each invoice issued by [JustKapital] subject to its claim, excluding invoice #2050 dated 3 November 2016"
[50] This is not pleaded as an admission of an allegation of fact pleaded in paragraph 6(b) of the statement of claim. This is also "another matter" which Compo Legal has pleaded as part of its positive case in defence of the claim.
[51] Paragraph 8(d) of the amended defence is pleaded in response to the allegations pleaded in paragraph 8 of the statement of claim, of which there are several: that Compo Legal did not comply with the letter of demand sent on 7 March 2023 in that it did not pay the amount demanded; that the amount demanded was due and payable pursuant to cl 3 of the Terms of Trade pleaded in the statement of claim because it concerned invoices which remained unpaid at the expiry of 30 months from the date of issue of the invoice; accordingly, by reason of not complying with the letter of demand, Compo Legal breached the Terms of Trade pleaded in the statement of claim.
[52] In paragraphs 8(a) and 8(b) of the amended defence, Compo Legal pleads admissions to the allegations that it did not comply with the letter of demand, and that it did not pay the amount demanded. Those admissions are qualified by the plea that the amount demanded was not due and payable by reason of the Agreed Terms of Trade pleaded in paragraph 11B of the amended defence. Paragraph 8(d) is then pleaded in the terms set out at [24] above. This is not pleaded as an admission of an allegation of fact pleaded in paragraph 6(b) of the statement of claim. It too is "another matter" which Compo Legal has pleaded as part of its positive case in defence.
[53] In short, Compo Legal has not pleaded an admission to any allegation by the plaintiffs that the Write Off Term formed part of the terms upon which JustKapital provided disbursement funding. The statement of claim does not plead such an allegation. In those circumstances, the paragraphs of the amended defence identified by the plaintiffs do not plead admissions which Compo Legal must withdraw if it is to amend to plead the Cashflow Term.
[54] It remains to consider whether leave should be granted to Compo Legal to amend to change the positive case concerning the terms on which JustKapital provided disbursement funding.
Should leave to amend be refused because of deficiencies in form?
[55] The plaintiffs' submission that leave to amend should be refused on the basis that the proposed further amended defence is deficient in form has two aspects.
[56] First, the plaintiffs submit that the proposed amendments result in an inconsistency in the pleading of the operative effect of the contractual terms to which the parties agreed. In the proposed further amended defence, Compo Legal continues to plead both the Agreed Terms of Trade in paragraphs 11A to 11D and the Varied Terms of Trade in paragraphs 12 and 13. The Cashflow Term is pleaded as an additional term incorporated into the Varied Terms of Trade such that it is alleged to operate as part of, not instead of, the other terms, including the Write Off Term. The plaintiffs submit this gives rise to an inconsistency because the Write Off Term and the Cashflow Term cannot both be enforced at once. They submit this is prohibited by r 154(1) which provides that a party may make inconsistent allegations or claims in a pleading only if they are pleaded as alternatives. On this submission, if Compo Legal wishes to plead the existence of the Cashflow Term in addition to the Write Off Term it must plead that it was liable to repay JustKapital in accordance with the Write Off Term, or alternatively in accordance with the Cashflow Term.
[57] I do not accept this submission. The Write Off Term and the Cashflow Term are directed towards different aspects of Compo Legal's obligation to repay JustKapital. The Write Off Term deals with the amount Compo Legal is obliged to repay in respect of a particular matter. The Cashflow Term deals with the time at which the amount to be paid in accordance with the Write Off Term becomes due and payable. This can be seen in the pleading of the content of the Cashflow Term in paragraph 14C(a) of the proposed further amended defence at [28] above. In that sense I accept that, as Compo Legal submits, the Cashflow Term is pleaded as operating cumulatively upon (or, put another way, as a condition on the operation of) the Write Off Term. There is no inconsistency when the pleading of the Write Off Term and the Cashflow Term is understood in that way.
[58] However, the proposed amendments have not addressed the unqualified way in which Compo Legal would continue to plead:
(a) in paragraph 6(c)(ii) of the further amended defence, that the Write Off Term "applies to each invoice issued by [JustKapital]" (see [49] above); or
(b) in paragraph 8(d) of the further amended defence, the Write Off Term "applies" to the "majority of claims subject to [JustKapital's] invoices" and "only the principal amount is repayable" (see [24] above).
[59] To properly reflect the amended case, those paragraphs (at least) should also be amended to plead the conditional application of the Write Off Term, subject to the satisfaction of the Cashflow Term.
[60] I do not consider that the failure to amend these paragraphs to take account of the cumulative operation of the Cashflow Term would be a sufficient reason to refuse leave to amend if I were otherwise minded to grant leave. If that is the position I reach, the appropriate course would be to grant leave on condition that Compo Legal further amend its defence as it may be advised to address the issue raised in [58] and [59] above.
[61] The second aspect of the plaintiffs' submission on the form of the proposed amendments relies on r 171 which provides that the court may strike out a pleading, or part of a pleading which:
(a) discloses no reasonable cause of action or defence; or
(b) has a tendency to prejudice or delay the fair trial of the proceeding; or
(c) is unnecessary or scandalous; or
(d) is frivolous or vexatious; or
(e) is otherwise an abuse of the process of the court.
[62] The plaintiffs submit that the pleading of the new defence based on the operation of the Cashflow Term offends almost each limb of r 171. That submission overstates matters. I can see no basis upon which to conclude that the proposed pleading of the Cashflow Term would be either: unnecessary or scandalous; frivolous or vexatious; or, otherwise an abuse of the process of the court.
[63] I am also satisfied that, if leave is granted, the proposed further amended statement of claim would disclose a reasonable defence to the claim. This is essentially the same issue I considered previously on the plaintiffs' summary judgment application under r 292 - whether Compo Legal has no real prospect of defending the part of the claim concerning repayment of the principal advanced by JustKapital in respect of unsuccessful matters. I do not consider that the proposed amended pleading is bad in law; that is, I do not consider that, even if Mr Williams' evidence about his discussions with Mr Hersch, as pleaded in paragraphs 14A and 14B of the proposed further amended defence (see [28] above) is accepted, the proposed defence based on the operation of the Cashflow Term has no real prospect of succeeding.
[64] That leaves the question whether, if leave to amend is granted, the amended pleading would have a tendency to prejudice or delay the fair trial of the proceeding. This seems to be the real basis for the plaintiffs' submission regarding the prospective engagement of r 171. As to this, the plaintiffs argue that the Cashflow Term is pleaded as being temporally unlimited and no attempt is made to identify what cashflow was required before the term would be satisfied - that is, what would be a sufficient payment from successful matters for Compo Legal to repay the principal on unsuccessful matters.
[65] I accept that the proposed amendments plead the Cashflow Term in a general way, and do not provide any detail about the circumstances in which the term would be satisfied and principal amounts for unsuccessful matters would become due and payable. That seems to be the consequence of the general nature of the discussions between Mr Williams and Mr Hersch from which the term is said to have arisen. However, if the plaintiffs' criticisms of the general way that Compo Legal proposes to plead the Cashflow Term are to be accepted, I consider that they go towards matters which should be determined at trial (if leave to amend is granted) as to whether the term was intended by the parties to have binding effect or could have such effect.
[66] I do not accept the plaintiffs' submission that the form of the proposed amendments does not permit them to plead a sensible response, or that they cannot understand the case they must meet. Leaving aside complaints about what is meant by the phrase "sufficient payment" in the proposed pleading of the Cashflow Term, it seems tolerably clear from the form of the proposed amendments that the substance of the case Compo Legal seeks to advance if leave is granted is that: (i) principal amounts on unsuccessful matters would not become due and payable unless settlements occur on other matters which result in payments to Compo Legal; and (ii) in respect of the discontinued matters the subject of this proceeding, because Compo Legal stopped taking on new matters funded by JustKapital after the appointment of the Receivers, from the time those matters were discontinued there have not been any settlements (and will not be any settlements) of other matters which could result in any payments to Compo Legal that might satisfy the Cashflow Term. On my reading of the proposed amendments, Compo Legal is not seeking to run a case that there were successful matters funded by JustKapital, on which settlements occurred and payments were made to Compo Legal after the matters the subject of the proceeding were discontinued but the payments to Compo Legal were not "sufficient" to allow for repayment of principal amounts on the discontinued matters. The plaintiffs might respond to that case at different levels without having to grapple with the meaning of the phrase "sufficient payment": for example, whether the discussions relied on as the basis for the Cashflow Term occurred; whether those discussions were intended to be legally binding; and whether the Cashflow Term is sufficiently certain. Again, those would all be matters to be determined at trial (if leave to amend is granted).
[67] Ultimately, I am not persuaded that leave to amend should be refused because of deficiencies in the form of the proposed amendments.
Exercise of the discretion in the circumstances of this case
[68] The proposed amendments to plead the operation of the Cashflow Term concern the issue whether the principal amounts advanced by JustKapital for matters which were later discontinued are due and payable by Compo Legal. In that sense, I consider the proposed amendments to be necessary for the just and expeditious resolution of the real issues in the proceeding. The preceding discussion of the basis upon which the plaintiffs sought summary judgment for such amounts demonstrates the importance of the proposed amendments to Compo Legal's defence. It was Compo Legal's assertion that the Cashflow Term operated in respect of those principal amounts which caused me to dismiss the summary judgment application, and I have already concluded in these reasons that the proposed further amended defence discloses a reasonable defence. Accordingly, if leave to amend is refused, Compo Legal would be prevented from relying upon what I have determined to be a reasonable defence. That does not mean that Compo Legal has an entitlement to make the proposed amendments. However, in determining whether granting leave to amend would facilitate the just and expeditious resolution of the real issues in the proceeding, it is an important factor weighing in favour of granting leave.
[69] Against this, the plaintiffs principally rely on two matters said to warrant refusing leave to amend.
[70] First, the plaintiffs submit that Compo Legal has not provided an adequate explanation for not pleading the Cashflow Term in its defence filed on 5 April 2024 or in its amended defence filed on 25 August 2025.
[71] As I understood Mr Williams' evidence, his explanation for Compo Legal not pleading the Cashflow Term earlier is that, until the summary judgment application, he wrongly believed that, by pleading that loans did not become due and payable after 30 months, the defence and the amended defence sufficiently pleaded a case that Compo Legal's repayment obligations were conditioned on its cashflow. That understanding seems to reflect the reason pleaded in the statement of claim for the invoice amounts becoming due and payable - the passing of more than 30 months from the invoices being issued (see [10](a) above). It was not until Mr Williams understood the basis upon which the plaintiffs sought summary judgment for principal amounts on discontinued matters - such amounts being due and payable once the matter was discontinued - and realised how many matters had been discontinued (and, I infer, how few matters might proceed to a successful conclusion), that he appreciated that the Cashflow Term applied and had not been pleaded as an explanation for why principal amounts on discontinued matters were not due and payable.
[72] I consider that Mr Williams' characterisation of the basis for the summary judgment application as a new allegation raised by the plaintiffs is misconceived. The plaintiffs' argument on the summary judgment application was based entirely on Mr Williams' evidence in his affidavit of 15 August 2025 concerning the matters which had been discontinued, and Compo Legal's pleading in the amended defence filed on 25 August 2025 that the Write Off term applies to those discontinued matters. To that extent, Mr Williams failed to appreciate the effect of Compo Legal pleading the application of the Write Off Term without reference to any condition about cashflow. That might seem surprising given that Mr Williams is a solicitor. Nevertheless, it must be accepted as I can see no other explanation for Mr Williams having provided instructions to file the amended defence in that form.
[73] The plaintiffs submit that Compo Legal's explanation, and Mr Williams' evidence of that explanation, should not be accepted because it is inconsistent with his own evidence (which I understand to be a reference to his affidavit of 15 August 2025) and correspondence concerning the terms of Compo Legal's funding arrangement with JustKapital which made no reference to the Cashflow Term (see [43](b), [43](d) and [43](f) above). I do not accept that submission. The issue it raises goes to the question whether Mr Williams' evidence about his discussions with Mr Hersch should be accepted. That is not a matter that should be decided on this application. I do not consider it is a basis to reject Mr Williams' evidence as to why (on the assumption he had the discussions with Mr Hersch to which he has deposed, and which Compo Legal proposes to plead if leave to amend is granted) Compo Legal did not plead the Cashflow Term earlier.
[74] Ultimately, having considered that evidence, I accept Compo Legal's explanation for the purposes of this application. Contrary to the plaintiffs' submission, this is not a case where granting leave to amend would involve acceding to such an application made without adequate explanation or justification.
[75] Secondly, the plaintiffs submit that if Compo Legal is permitted to make the proposed amendments, they might respond by pleading that any entitlement Compo Legal might have to rely on the Cashflow Term would be subject to an implied obligation to act reasonably in seeking to prosecute the various matters funded by JustKapital to a successful conclusion so as not to deprive JustKapital of the benefit of the funding agreement. That would involve investigating the circumstances in which the matters funded by JustKapital were discontinued and whether Compo Legal acted reasonably in that regard. The plaintiffs submit that the delay and inconvenience involved in that process tell firmly against granting leave to amend.
[76] Although Compo Legal's written submissions state that the present trial dates can be met if leave to amend is granted, during the course of oral argument Ms Philippou frankly accepted that it was open to the plaintiffs to raise such an issue in reply to the proposed amendments and that, if this happened, it would be likely to derail the present trial listing.
[77] I do not know, at this stage, whether the plaintiffs will take such an approach in responding to the proposed amendments if leave is granted. Nevertheless, I accept that the risk that this might occur, and that the trial might not proceed on the dates that are presently allocated, is a factor that weighs against granting leave.
[78] The critical question is whether the prejudice that would be caused to the plaintiffs, other litigants and the court if the proposed amendments are allowed is such as would warrant preventing Compo Legal from raising an arguable defence. Ultimately, I do not consider that the additional costs and delay that would follow a grant of leave to amend would justify refusing leave to amend, even if the delay meant that the presently allocated trial dates could not be maintained. The allocated trial dates are still approximately three months away. In those circumstances, it seems unlikely that the plaintiffs will suffer significant prejudice by reason that costs of preparing for trial are wasted. Likewise, it is likely that the trial dates can be made available for another proceeding so that court time is not wasted and other litigants are not unduly inconvenienced.
[79] On balance, I consider that it is appropriate in the circumstances of this case to grant leave to Compo Legal to amend to plead the operation of the Cashflow Term, on the condition that it make such further amendments as it may be advised to address the issue raised in [58] and [59] of these reasons.
[3] [2009] QSC 225, [20]-[21] (citations omitted).
[4] [2009] QSC 225, [27] (citations omitted). This summary was recently endorsed by the Court of Appeal in Yao v Fang [2025] QCA 86, [36].
[5] Monto Coal 2 Pty Ltd v Sanrus Pty Ltd as trustee of the QC Trust [2014] QCA 267, [74].
[6] [2012] WASCA 171, [38].
[7] [2016] QSC 94, [47].
[8] [2011] QCA 252, [27]-[28] (citations omitted).
[9] [2025] QCA 86, [37].
[10] [2001] 2 Qd R 455, [19]-[20], [27] and [32].
JustKapital Financing Pty Ltd (Receivers & Managers appointed) (In liquidation)
Compo Legal Pty Ltd [2026] QSC 13
(2009) 239 CLR 175
(e) He provided the instructions to plead the defence filed on 5 April 2024, including the pleading of the Varied Terms of Trade in paragraph 13 of that defence. He accepted that he did not provide specific instructions to Compo Legal's solicitors that the obligation to repay the principal amount where matters were discontinued was conditional upon there being sufficient cashflow to make such repayments. However, he maintained that the parties' concern to protect Compo Legal's cashflow was clear from the term which permitted loans to extend beyond 30 months.
(f) By the time he affirmed his affidavit on 15 August 2025 (see [19] above), he had undertaken an audit of the matters the subject of the claim and identified that many those matters had been discontinued. He accepted that he did not say anything in that affidavit to the effect that repayment of the principal amount in respect of discontinued files was subject to cashflow but explained that, when he prepared the affidavit, he did not understand that the plaintiffs were advancing a case that discontinuance of a matter triggered an immediate obligation to repay the principal amount; that only became clear to him when the summary judgment application was filed.
(g) The audit he undertook before he prepared his affidavit of 15 August 2025 did not include all matters which JustKapital had funded (only those matters the subject of this proceeding). The audit continued after he had affirmed his affidavit on 15 August 2025.
(h) Although Compo Legal did not make specific reference to the Cashflow Term in the two versions of the defence filed before the summary judgment application, his understanding was that the link between cashflow and the obligation to repay the principal amount on discontinued matters was sufficiently raised in those earlier pleadings, particularly through pleading the term which permitted loan periods to extend beyond 30 months.
(i) He had raised the Cashflow Term as a response to what he considered to be a new allegation raised by the plaintiffs in the summary judgment application, namely that discontinuance of a matter acted as a trigger for immediate repayment of the principal amount. Once he became aware of the issue raised by the summary judgment application, he realised that his belief that Compo Legal had sufficiently pleaded that its repayment obligation was conditioned on its cashflow was incorrect.
(j) He disagreed that when he received the summary judgment application, he realised that Compo Legal had admitted to having a liability to repay principal amounts in the order of $500,000.
(k) He denied the suggestion that the proposal to plead the Cashflow Term was nothing more than a response to the summary judgment application.