Karl Suleman Enterprizes Pty Ltd (in liquidation) v Pham

Supreme Court of NSW|2012-10-26|Before: Beech-Jones J

rie Equity Capital Markets Ltd [2008] NSWCA 206; 73 NSWLR 653 - Rennie Gollegde Pty Ltd v Ballard [2012] NSWCA 376 - Sent v Jet Corporation of Australia Pty Ltd [1986] HCA 35; 160 CLR 540 Category: Procedural and other rulings Parties: Karl Suleman Enterprizes Pty Ltd (in Liquidation) (Plaintiff) Philip Viet Dzung Pham (First Defendant) Nedelkja Borak (Second Defendant) Pham & Associates Pty Ltd (Fourth Defendant) Pham Atic Pty Ltd (Fifth Defendant) Representation: M Ashhurst SC with s Duggan (Plaintiff) D R Pritchard SC with M Newton (First, Fourth & Fifth Defendants) N Maley (Solicitor) (Second Defendant) Swaab Attorneys (Plaintiff) HWL Ebsworth (First, Fourth & Fifth Defendants) Gilchrist Connell (Second Defendant) File Number(s): 2002/69495

Judgment 1On 22 June 2012 I allowed an appeal by the first, fourth and fifth defendants (the "Pham" defendants) against a decision of an Associate Justice granting leave to the plaintiff, Karl Suleman Enterprizes Pty Ltd ("KSE"), to amend its statement of claim (Karl Suleman Enterprizes Pty Ltd (in liquidation) v Philip Viet Dzung Pham [2012] NSWSC 645 ("Suleman (No 1)")). I set aside the Associate Justice's orders and refused the application to amend. KSE had settled its claim against the third defendant, Alexander Atic, prior to the hearing of the appeal. The second defendant, Nedeljka Borak, played no part in the appeal and has since been dismissed from the proceedings. 2Following the decision in Suleman (No 1) KSE filed a further notice of motion seeking leave to amend. It was accompanied by a revised version of the proposed third further amended statement of claim. A further revision was provided just prior to the hearing of the application and it is that which became the subject of the application (the "Proposed FASOC"). It has been placed with the Court file and marked "MFI 1". The Pham defendants oppose the amendments being granted. 3In summary I have concluded that the Court has the power to make all of the amendments sought, but in the exercise of the Court's discretion, they will be refused. To explain these conclusions it is first necessary to outline the proposed amendments.

The Proposed Amendments 4The background to these proceedings is set out in Suleman (No 1) at [4] to [16]. It suffices to state that in its current pleading, the further amended statement of claim ("FASOC"), KSE alleges that, from late 1999 to late 2001 and at the direction and behest of Karl Suleman, it operated a form of "Ponzi scheme" that depended upon the continuing investment by members of the public in a trolley collection business. KSE alleges that the first defendant, Mr Pham, was the solicitor retained by KSE to assist it in establishing the scheme and providing advice as to its operation. 5In Suleman (No 1) at [26] to [28] I described the structure of the FASOC prior to the disallowed amendments as follows: "[T]he FASOC pleaded causes of action against the Pham interests (and Ms Borak) in negligence, breach of contract and for breach of fiduciary duty. The structure of the FASOC was that paragraphs 27 to 51 pleaded that KSE conducted, inter alia, a form of investment business described as the "Scheme" in a manner contrary to the corporations legislation. The rest of the FASOC then breaks up the allegations against the Pham interests and Ms Borak depending upon which entity Mr Pham worked for in the period December 1999 to December 2001. Paragraphs 52 to 105 relate to the period December 1999 to April 2000 when Mr Pham was employed by Borak & Co. Paragraphs 106 to 126 concern the period 30 April 2000 to June 2001 when Mr Pham practised as Pham and Associates and paragraphs 127 to 160 concern the period July 2001 to October 2001 when he was engaged by Pham Atic Pty Ltd. In respect of each such period the FASOC pleads that, in breach of contract and acting negligently, Mr Pham and the firm he worked for caused various losses to KSE arising from the conduct of its investment business. In short, it is pleaded that the losses occurred because Mr Pham prepared and provided the documentation for it to continue that business and that he failed to advise KSE of the numerous non-compliant aspects of its business. It is not necessary to describe here the allegations of breach of fiduciary duty. Paragraph 170 of the FASOC pleads the occasioning of damage to KSE and paragraph 171 specifies the forms of relief claimed namely damages, equitable compensation, interest and costs." (The proposed FASOC renumbers some of the paragraphs referred to in this extract.) 6Thus while the FASOC pleaded various breaches of the corporations legislation by KSE, including the prohibition on the conduct of unregistered managed investment schemes, no such breach or involvement in any such breach was alleged against Mr Pham or the Pham defendants. 7The amendments that I disallowed sought to add a claim for relief against Mr Pham under s 1325(2) of the Corporations Act on the basis that he was said to be a person "involved" in various contraventions (Suleman (No 1) at [29]). I disallowed them because, on the proper construction of s 1325(2), KSE could not make claims for relief under that provision in respect of its own contraventions of the Corporations Act. Contrary to KSE's submissions, I found that the FASOC did not plead contraventions by anyone else including Mr Suleman (Suleman (No 1) at [31] to [45]). 8The proposed FASOC seeks to address the difficulty identified in Suleman (No 1) by pleading breaches of the Corporations Act by Mr Suleman and alleging that Mr Pham was "involved in" those breaches. In combination these allegations are said to engage a claim against Mr Pham under s 1325(2) of the Corporations Act. The proposed amendment also seeks to plead a new cause of action under former s 1005 of the Corporations Act for a breach of s 999. 9The proposed amendments can be conveniently separated into six sets. 10The first set of proposed amendments seeks to plead allegations of contraventions by Mr Suleman of provisions of the Corporations Act that correspond to alleged contraventions by KSE of the same provisions presently pleaded in the FASOC. Thus paragraphs 28, 33, 45 to 51 of the proposed FASOC allege that Mr Suleman personally undertook various steps in the operation of the "Investment Business" and the "Scheme", being in effect the unregistered managed investment scheme said to be constituted by the trolley business. These were previously pleaded as only having been conducted by KSE. Paragraph 53 now alleges that it was Mr Suleman who breached s 601ED(5) of the Corporations Act by operating an unregistered managed investment scheme. An allegation that KSE had contravened those provisions was previously to be found within former paragraphs 48.1 to 48.2 and 49 of the FASOC (see Suleman (No 1) at [37]). 11Similarly the combination of the proposed amendments to paragraphs 28, 33, 45 to 51 and 60 allege that Mr Suleman contravened the prohibition in s 727 of the Corporations Act on making an offer of securities without a current disclosure document under Part 6D.3 of the Corporations Act. Paragraphs 48.3 and 49.3 of the FASOC made a similar allegation against KSE (Suleman (No 1) at [37]). One difficulty with these amendments is that they assume that s 727 was in force throughout the period December 1999 to December 2001 whereas it was only enacted on 13 March 2000 (see [89] to [90] below). If I decided to allow the amendment concerning s 727 it would be subject to the condition that the allegation of a breach of s 727 only operates from 13 March 2000. 12The second set of amendments seeks to plead allegations of contraventions by Mr Suleman of provisions of the Corporations Act that do not correspond to any of the contraventions by KSE pleaded in the FASOC. Thus proposed paragraphs 58 to 59 allege that, by issuing various "Investment Contracts" to investors, Mr Suleman contravened former s 999 of the Corporations Act. For the period 15 July 2001 to 7 December 2001 s 999 of the (newly enacted) Corporations Act was to be found in Part 7.11. It provided: "False or misleading statements in relation to securities 999 A person must not make a statement, or disseminate information, that is false in a material particular or materially misleading and: (aa) is likely to induce other persons to subscribe for securities; or (a) is likely to induce the sale or purchase of securities by other persons; (b) is likely to have the effect of increasing, reducing, maintaining or stabilising the market price of securities; if, when the person makes the statement or disseminates the information: (c) the person does not care whether the statement or information is true or false; or (d) the person knows or ought reasonably to have known that the statement or information is false in a material particular or materially misleading." 13For the period 17 December 1999 to 14 July 2001 a relevantly identical provision was to be found in s 999 of the Corporations Law. Thus any rights or liabilities arising from a breach of it prior to 15 July 2001 were carried over into the Corporations Act regime pursuant to s 1400 of the Act. Section 999 was removed from the Corporations Act with effect from 13 March 2002 (by the Financial Services Reform Act 2001 (Cth), Sch 1, Part 1, s 1). 14A similar set of amendments alleging a breach of former s 995 was ultimately not pressed by KSE. No allegation concerning s 999 or s 995 is to be found in the FASOC. 15The third set of amendments is consequential on the first two. Paragraph 63 of the proposed FASOC recites that the conduct of Mr Suleman as pleaded in the first and second set of amendments constituted conduct in contravention of Chapter 5C (in the case s 601ED(5)), Chapter 6D (in the case of s 727) and Chapter 7 (in the case of s 999) "within the meaning of s 1325(2) of the Corporations Act". As I will explain, I understand this to be a reference to the form of s 1325(2) as in force during the period 17 December 1999 to 7 December 2001. Paragraph 63A of the proposed FASOC alleges, in the alternative, that the conduct of Mr Suleman in breach of s 999 was conduct in contravention of Part 7.11 within the meaning of former s 1005 of the Corporations Act. Paragraph 64 alleges that Mr Suleman's breaches caused loss and damage of between $22,797,362.00 and $157,492,52.00 to KSE. 16The fourth set of proposed amendments alleges that Mr Pham and the other Pham defendants were involved in Mr Suleman's alleged contraventions of ss 727, 999 and 601ED(5) of the Corporations Act (presumably as in force during the relevant period). Proposed paragraphs 65 to 77 allege various conduct by, and knowledge of, Mr Pham in allegedly assisting Mr Suleman and KSE. Paragraph 78 pleads that, by reason of paragraphs 65 to 77, Mr Pham was "involved, within the meaning of ss 79(c), 1325(2) or alternatively s 1005(1) of the Corporations Act", in the alleged contraventions by Mr Suleman of ss 601ED(5), 999 and 727. Detailed particulars are provided. Proposed paragraphs 79 to 84 plead various facts said to give rise to vicarious liability on the part of other defendants for Mr Pham's conduct in so far as it is alleged that he was involved in Mr Suleman's alleged contraventions of ss 601ED(5), 27, 780 and 781. The references to ss 780 and 781 appear to be an oversight as there is no separate allegation that Mr Pham was involved in any breach of s 780 or 781. 17The fifth set of amendments is to be found in paragraphs 38 and 85 to 86C of the proposed FASOC. They relate to separate proceedings previously conducted by the Australian Securities and Investments Commission ("ASIC"). Paragraph 36 of the FASOC recites that the proceedings were commenced in November 2001 against KSE seeking various forms of relief under ss 601EE, 1323 and 1324 of the Corporations Act. Paragraph 38 of the proposed FASOC contends that they were proceedings for a contravention of Chapters 5C, 6D and 7.3 within the meaning of s 1325(1) of the Corporations Act. Paragraph 86 of the proposed FASOC in combination with existing paragraph 85 alleges that various consent declarations and orders were made in those proceedings in 2002 that required, inter alia, Mr Suleman (and his wife) to pay amounts of compensation pursuant to s 1317H(1) of the Corporations Act. Little attention was given to these provisions during argument. Their fate appears to depend on the outcome of the application to add a claim under s 1325. 18The sixth set of amendments are the claims for relief. The opening prayers for relief are sought to be amended to seek "damages pursuant to s 1325(5)(e)" and "damages pursuant to s 1005" of the Corporations Act. The proposed amendment to KSE's claims for relief in paragraph 207 omits any reference to s 1005 but this appears to be an oversight. 19Thus, the structure of the amendments is to expand upon the allegations against Mr Suleman and to specifically allege that he breached ss 601ED(5), 727 and 999 of the Corporations Act in his own right. Next they plead that Mr Pham was involved in those breaches and that other defendants are vicariously liable for his conduct. In the end result two extra "causes of action" are sought to be pursued against the Pham defendants in respect of Mr Pham's conduct, one under s 1005 (in respect of Mr Suleman's alleged breach of s 999) and the other under ss 1325(2) and 1325(5)(e) (in respect of Mr Suleman's alleged breaches of ss 601ED(5), 999 and 727). 20For the period 15 July 2001 to 7 December 2001 s 1005 of the Corporations Act provided: "Civil liability for contravention of this Part (1) Subject to the following sections of this Division, a person who suffers loss or damage by conduct of another person that was engaged in contravention of a provision of this Part may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention, whether or not that other person or any person involved in the contravention has been convicted of an offence in respect of the contravention. (2) An action under subsection (1) or under subsection 1013(5) may be begun at any time within 6 years after the day on which the cause of action arose. (3) This division does not affect any liability that a person has under any other law. ... " For the period 13 March 2000 to 14 July 2001 s 1005 of the Corporations Law was in the same form as the above. For the period prior to 13 March 2000 the reference to "this Part" in s 1005(1) read "this Part or Part 7.12". Part 7.12 was repealed with effect from 13 March 2000 (Financial Services Reform Act, Sch 1, Part 1, s 1). 21Both parties approached the matter on the basis that the relevant form of s 1325 was that in force at the time of the enactment of the Corporations Act 2001 (15 July 2001), namely: "1325 Other orders (1) Where, in a proceeding instituted under, or for a contravention of, Chapter 5C or 6D or Part 7.11, the Court finds that a person who is a party to the proceedings has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of Chapter 5C or 6D of Part 7.11, the Court may, whether or not it grants an injunction, or makes an order, under any other provision of this Act, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (2) The Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of Chapter 5C or 6D or Part 7.11, or on the application of ASIC in accordance with subsection (3) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person. (3) Where, in a proceeding instituted for a contravention of Chapter 5C or 6D or Part 7.11 or instituted by ASIC under section 1324, a person is found to have engaged in conduct in contravention of Chapter 5C or 6D or Part 7.11, ASIC may make an application under subsection (2) on behalf of one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct, but ASIC must not make such an application except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made. (4) An application under subsection (2) may be made within 6 years after the day on which the cause of action arose. (5) The orders referred to in subsections (1) and (2) are: (a) an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after a specified day before the order is made; and (b) an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after a specified day before the order is made; and (c) an order refusing to enforce any or all of the provisions of such a contract; and (d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage; and (e) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage; and (f) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at the person's own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage. (6) Where an application is made for an order under this section against a person, the Court may make an order under section 1323 in respect of the person." 22Two matters should be noted about the relevance of this form of s 1325. First, there were material amendments to s 1325 and other parts of the Corporations Law during the period of KSE's short and ill-fated business life, namely 17 December 1999 to 7 December 2001. They are explained below at [89] to [90] but their effect is that s 1325 cannot be involved in respect of an allegation of a breach of s 727 for the period prior to 13 March 2000. 23Second, there is scope for argument that, as s 1325(2) is only directed to conferring a right to apply for the relief rather than vesting an entitlement to relief, then the applicable form of the section is that in force at the time the application under s 1325(2) is made. I address this further at [94]. For the reasons there explained, nothing turns on this.

History of the application to amend 24As it is material to the exercise of any discretion that I have to allow the amendments it is appropriate that I set out the history of the application to amend and the evidence, such as it is, that might be said to justify the delay in making it. 25As I have already stated, the events the subject of these proceedings occurred between late 1999 and late 2001. The proceedings were commenced on 23 December 2002. An amended statement of claim was filed on 22 September 2003 and the FASOC was eventually filed in August 2006. The Pham defendants filed their defence in November 2006. Since that time the parties have exchanged evidence including experts' reports and undertaken discovery. An affidavit by the Pham defendants' solicitor explained the significant effort involved in the completion of those steps. No doubt they were undertaken in the context of the issues raised by the existing pleadings. As at July 2011 the proceedings had been listed before the Court on more than 63 occasions. 26The matter has now been listed for final hearing on 3 June 2013. The proceedings are estimated to occupy four weeks of hearing time. A version of KSE's tender bundle served in June 2011 contains 18 lever arch folders. The parties have exchanged a substantial number of lay affidavits and expert reports. At the hearing of this application KSE referred me to the detailed affidavits of Mr Pham and another person as well as to the transcripts of previous examinations. This was undertaken in an effort to establish that the evidentiary battlefield has already been laid to waste. I address this further below. 27A number of orders have been made requiring KSE to provided substantial amounts by way of security for costs. There have been delays in compliance but as I understand it there are currently no orders for security that have not now been complied with. In her affidavit sworn 24 September 2012, the Pham defendants' solicitor stated that the costs incurred have exceeded the security provided and that, if the amendments were allowed, consideration would need to be given to making a further application for the provision of additional security for costs. 28The first indication that KSE gave that it wished to amend the FASOC was by a letter dated 12 May 2011 when it notified the Pham defendants of a proposal to add a claim against them for allegedly being involved in a contravention of the Corporations Act. No further details were provided at that time. A notice of motion seeking leave to amend was filed on 31 May 2011. It was that notice of motion which was heard by Harrison AsJ in November 2011 and was the subject of the appeal in Suleman (No 1). As I have stated, that application sought to add a claim for relief under s 1325(2). 29At the hearing of the application to amend before Harrison AsJ, Mr Ashhurst SC advised her Honour that the rationale for the amendments then being sought was to overcome a matter specifically pleaded in the defence of the Pham defendants. This was a reference to the assertion that, even if Mr Pham had advised Mr Suleman of the non-compliant nature of the investment scheme, it still would have been implemented anyway (Suleman (No 1) at [76]). The defence specifically pleading that contention was filed in late 2006. 30The amendments considered in that application did not seek to add a cause of action based on a breach of s 999 of the Corporations Act or anything similar. Amendments to this effect were not notified to the defendants in the first revised version of the pleading that was sent on 10 July 2012 after my judgment in Suleman (No 1). No allegation of a breach of s 999 is to be found in the version of the pleading attached to the notice of motion that was filed on 24 July 2012 seeking leave to amend. The first time that the Pham defendants were notified of any amendment alleging a breach of s 999 was sometime around October 2012. 31It is not clear whether the rationale for seeking to add a claim under s 1005 arising out of a breach of s 999 is the same as for the attempt to add a claim under s 1325(2). No different rationale was suggested. However, the Pham defendants' pleaded assertion that Mr Suleman would have continued to operate the "Scheme" even if he had been advised of its non-compliant nature appears to represent a problem for proving causation for this claim as well as for the existing pleaded case of negligence (see below). 32KSE read two affidavits from its solicitor in support of the application to amend. In her affidavit sworn 9 November 2011, the solicitor recounts that a senior counsel was briefed to "advise generally" in "late 2004/early 2005" and another senior counsel was retained in early 2008. She states that Mr Ashhurst SC was briefed in February 2011. He reviewed the FASOC and on or around 11 April 2011 advised that KSE should consider making a claim for relief under s 1325. This led to the correspondence and the notice of motion that I have referred to above (at [28]). 33In her second affidavit sworn 20 July 2012 the solicitor merely recounts sending a further version of the FASOC containing revised amendments raising the s 1325 claim to the Pham defendants in July 2012 following the publication of the judgment in Suleman (No 1). Her correspondence invited the Pham defendants to advise if they had any objections to, inter alia, the form of the proposed amendments. 34Beyond this there was no evidence put forward to explain the delay in bringing forward the proposed amendments. To the extent that I can draw any conclusion from the material it is that either KSE was aware or should have been aware around sometime within a year of filing its first pleading that there was a causation issue of the kind I have described. It is likely that they were so aware no later than late 2006 being soon after the time when the Pham defendants filed the defence specifically alleging that Mr Suleman would have acted as he did regardless of the advice he received from Mr Pham. 35The most likely position is that no application to amend to add a claim under s 1325(2) was made prior to 2011 because, until Mr Ashhurst SC was retained, no one thought of it. Further I expect that if Mr Ashhurst SC had advised about the potential availability of any form of action in respect of a breach of s 999 in early 2011 then an application to that effect would have been made at that time. It seems that aspect of the proposed FASOC was only conceived of in the third quarter of 2012. The only matter potentially favourable to KSE in this analysis is that I am not prepared to conclude that it deliberately held back on making an application to amend for any tactical reason. I cannot conceive of any.

The proposed action under s 1005(1) for a breach of s 999 36It is not in dispute that the application to add a cause of action against the Pham defendants under s 1005(1) of the Corporations Act for an alleged breach of s 999 is being made well outside the time period provided for in s 1005(2). Both parties proceeded on the basis that it expired no later than December 2007. In both its notice of motion and written submissions KSE made it clear that the application to amend to add that cause of action is being made pursuant to s 64 of the Civil Procedure Act 2005 (the "CPA") presumably as expanded upon in s 65. KSE did not seek to invoke s 1322(4)(d) of the Corporations Act in relation to this aspect of its proposed amendments.

Power to allow the amendments 37One basis upon which the Pham defendants opposed this application is that they contend that ss 64 and 65 of the CPA cannot operate to effect an extension of the time limit on commencing an action specified in s 1005(2) of the Corporations Act. It was submitted that, as these proceedings involve the exercise by this Court of federal jurisdiction, ss 64 and 65 are only applicable by the operation of s 79 of the Judiciary Act 1903 (Cth) and cannot operate to the extent that a Commonwealth law "otherwise provide[s]" (see Suleman (No 1) at [50] to [52]). It is submitted that s 1005(2) of the Corporations Act "otherwise provide[s]". 38I addressed a similar argument in Suleman (No 1) at [46] to [72]. At that time I was addressing an argument made by the Pham defendants that any amendment could not be allowed to introduce a claim for relief under s 1325(2) outside the six year period because s 1325(4) "otherwise provided" for the purposes of s 79 of the Judiciary Act 1903 (Cth). I did not address the entirety of the argument for various reasons but I did reject part of it. I concluded that I would follow the dicta of Mason P and Beazley JA in Air Link Pty Ltd v Paterson (No 2) [2003] NSWCA 251; 58 NSWLR 388 ("Air Link (No 2)") to the effect that the District Court's powers of amendment enabled the making of an amendment to add to an existing proceeding a cause of action under a federal statute whose limitation provision had expired, but only in circumstances where the relevant limitation provision operated as a bar to enforcement of the remedy and did not extinguish it (see Suleman (No 1) at [57] and [69]). I concluded that, to that extent, their dicta had survived the subsequent High Court judgments in Air Link Pty Ltd v Paterson [2005] HCA 39; 223 CLR 283 ("Airlink") and Agtrack (NT) Pty Ltd v Hatfield [2005] HCA 38; 223 CLR 251 ("Agtrack"). I have not altered the views I expressed on those issues. 39KSE seeks to rely on the conclusion I expressed in Suleman (No 1). In particular it submits that s 1005(2) is not materially different to the former s 82(2) of the Trade Practices Act 1974 (Cth) ("TPA") which was considered in Australian and New Zealand Banking Group Ltd v Larcos (1987) 13 NSWLR 286, one of the decisions discussed by Mason P in AirIink (No 2) at [42] to [43], [91], [140] and [167] (see Suleman (No 1) at [54] to [57]). I agree. Provisions such as the former s 82(2) of the TPA and s 1005(2) operate to bar the enforcement of the remedy (see Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd [2001] FCA 703; 112 FCR 336). They stand in contrast to the limitation provisions of the Civil Aviation (Carriers Liability) Act (1959) (Cth), considered in Agtrack and Airlink, which were found to be a "condition which is of the essence of the right to damages" (Agtrack at [51]). 40It follows that I reject the Pham defendants' contention that the Court does not have the power to allow the amendments which seek to add a cause of action under the former s 1005 of the Corporations Act.

Discretion 41This brings me to a consideration of the power conferred by s 64 of the CPA to allow the amendments. Whether the amendments should be allowed depends upon the "dictates of justice" (s 58(1)), which include the matters set out in ss 58(2), 56 and 57. Those provisions specifically require that the interests of case management, including the effect on other litigants, be considered in deciding whether to allow an amendment (s 58(2)(a) and ss 57(1)(b) to (d)). In this sense they reinforce the statements in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175 at [97] to [98] and [111] per Gummow, Hayne, Crennan, Kiefel and Bell JJ. 42In relating the various factors affecting the exercise of the discretion to allow an amendment the plurality in Aon stated (at [102] to [103]): "It is 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, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment. ...Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case." 43I have already described the delay in bringing the application. The result is that the exercise of any discretion to allow or refuse the amendments presently being considered is to be approached on the basis that they were first notified in October 2012. This was almost 11 years after the last relevant event that is pleaded, just under 10 years after the proceedings were commenced and nearly five years after the last possible date upon which the limitation period expired. They were not notified until that time although active consideration was given to the amendment of the FASOC from the time Mr Ashhurst SC was retained in early 2011. There is no explanation for why they have been proposed so late.

New issues raised by the proposed amendments 44In addressing the effect of delay in applying to amend including any "prejudice which might reasonably be assumed to follow" (Aon at [102]) it is material to consider whether the issues raised by the proposed amendments have the potential to require further evidential inquiry or are such that the lapse of time may have affected the innocent party's ability to meet the new case sought to be made. 45In its written submissions KSE contended that all of its proposed amendments were supportable under s 65(2)(c) of the CPA in that they "[arise] from the same (or substantially the same) facts as those giving rise to an existing cause of action". In so far as the pleading contains an allegation of a breach of s 999 and a claim for relief under s 1005(1) I do not accept that submission. I regard the source of the power to allow the amendments as s 64 of the CPA which is not constrained by s 65(2) (s 65(4); Greater Lithgow City Council v Wolfenden [2007] NSWCA 180). 46Two potential issues raised by these amendments are causation and reliance. The allegation of a breach of s 999 contends that the issuing of investment contracts by Mr Suleman was misleading because they did not disclose that they were seeking an investment in an "illegal and unregistered" managed investment scheme and that to offer the contracts Mr Suleman needed to be licensed and he was not. The next relevant allegation is that Mr Suleman's conduct in contravention of s 999 caused KSE loss. No other facts are pleaded that suggest any connection between those two matters. 47In oral submissions Mr Ashhurst SC explained that this allegation of loss occasioned "by" a breach of s 999 does not seek to "rely on any act by the investor". Rather, it was said to rely on the premise that "[i]f the contract wasn't there, the contract would never have been executed" and "[i]f the company wasn't issuing them, the company would never have been liable". Thus, KSE seeks to argue that its loss was caused at the point of the dissemination of misleading investment contracts by Mr Suleman because "but for" that conduct no contracts would have been issued at all. This appears to involve an attempt to avoid the necessity to adduce evidence of the investors' response to the contracts and thus avoid a suggestion that a significant new evidential line of inquiry was being raised by these parts of the proposed amendments. 48For the present, I will leave aside the difficulty that this claim appears to involve KSE in effect seeking recovery under s 1005 for its own breaches of s 999. At the very least this submission assumes that the word "by" in s 1005 enables a party to obtain damages for a breach of s 999 in circumstances in which they were not misled. The contrary was found to be the case with respect to the equivalent provision of s 1005 in the former TPA, s 82(1), and an alleged breach of s 52 of the TPA (Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; ATPR 46-248). Digi-Tech was followed in relation to the former s 995 of the Corporations Law, (which was similar to the former s 52 of the TPA) and s 1005(1) in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; 73 NSWLR 653 at [2] to [22] (per Giles JA) and [612] to [619] (per Ipp JA). Hodgson JA was inclined to the opposite view without deciding it finally (at [78] to [83]) but noted that "if the investors actually know the truth concealed by the misleading conduct, it would be difficult if not impossible to characterise their loss as being loss or damage suffered 'by' the misleading conduct" (at [81]). 49The appellant in Ingot sought to make a similar argument to that put forward by Mr Ashhurst SC in relation to the former s 996 of the Corporations Law which prohibited the authorising or causing the issue of a prospectus which, inter alia, contained a material statement that was false or misleading or had a material omission (so called "case 2.1"). Giles JA rejected that contention applying the reasoning in Digi-Tech and concluding that "[t]he vice [identified in former s 996] is not issuing misleading prospectuses, but misleading investors by issuing misleading prospectuses" and that to recover the investor had to be misled (at [37]). Ipp JA was prepared to assume the contrary (at [590]). Nevertheless his Honour found that the appellant's case failed because it could not demonstrate that, had the section not been contravened, either the corporation concerned would not have issued the prospectus but instead would have issued a compliant one which would have caused the relevant investor not to invest or the corporation concerned would not have issued any prospectus (at [591] and [594]). 50It should also be noted that Ipp JA found some support for the appellant's contention that ss 1005 and 996 have a different operation to ss 1005 and 995 by reason of the presence of the former s 1007 of the Corporations Law which excluded liability under s 1005(1) for a breach of s 996 in respect of a person who was aware of the falsity of the prospectus. His Honour considered that that might be taken as indicating that the investor need not show that they were misled before recovering for a breach of s 996(1). Instead the onus was on the relevant defendant to prove that the plaintiff was not misled (at [588] to [589]). I note that there never was any equivalent to s 1007 for s 999. Further s 1007 was repealed with effect from March 2000 (Corporate Law Economic Reform Program Act 1999 (Cth) ("CLERP")). I have described the position of Hodgson JA which was equally applicable to this part of the appellant's case in Ingot. 51The appellant in Ingot was a disaffected investor but one who had encountered difficulties in having his evidence of reliance accepted by the trial judge. KSE is another and potentially far step removed from the appellant in Ingot. As I have stated, Ipp JA (at [590]) was prepared to countenance the possibility that a breach of s 996 might be actionable without proof that an investor relied on the prospectus or was misled by it but only because that circumstance: "...would be within the mischief addressed by s 996, because the investor who did not read the prospectus, would nevertheless expect that, if the truth were such that it was not likely that a prospectus containing this truth would be issued, a prospectus which did contain that truth would be likely to receive such adverse publicity as to warn this investor off." 52It is difficult to see how any of this reasoning could be of assistance to a plaintiff in KSE's position. Even if some analogy could be drawn between KSE and an investor who suffered loss, KSE would still find itself in the position of an investor who knew the true position given that it is alleged that its own Director and operating mind prepared and disseminated the offending prospectus. In my view KSE's attempt to formulate a claim for recovery under s 1005 for a breach by its own director of s 999 in issuing investment contracts in its name hangs by the slimmest of jurisprudential threads. 53In any event I am far from satisfied that the proposed new case under s 1005 based on a breach of s 999 does not raise a number of potentially new factual issues which might warrant a consideration of the position of investors. Just because KSE does not want to bring forward investor evidence does not mean that the impact of the investment contracts on investors and whether they were aware of the matters said to be omitted is not relevant to this part of the case (see Ingot at [81] per Hodgson JA). 54Another potential new issue raised by these amendments concerns Mr Suleman's conduct and state of mind. Consistent with the terms of s 999, paragraph 58(c) of the proposed FASOC alleges that Mr Suleman "knew or ought reasonably to have known" that the information disclosed in the Investment Contracts was materially misleading. An affidavit from the Pham defendants' solicitor states that there has not been an attempt to contact Mr Suleman. The implication appears to be that that step might need to be considered if the amendments were allowed. While there may be reasons to doubt whether Mr Suleman would meet with them that possibility cannot be ruled out. In any event a pleading that alleges actual or imputed knowledge on his part of the misleading nature of a document appears to me to raise a significant new factual issue. 55The consequence of new issues of this kind potentially arising if these proposed amendments were allowed is that I am not sufficiently satisfied that the passage of time since the events the subject of these proceedings has not affected the availability of evidence relevant to meeting it.

Effect of delay and prejudice 56I have just described some aspects of the presumptive prejudice that can arise from allowing amendments of the kind presently being considered (Aon at [102]). The Pham defendants submitted that they would suffer actual prejudice should the amendments be allowed. They read two affidavits from their solicitor on the application, one sworn on 8 July 2011 and the other sworn on 24 September 2012. In her first affidavit the solicitor described the history of the proceedings and parts of it are summarised at [24] to [28]. 57In her second affidavit the solicitor described the further inquiries that would be undertaken if the amendments seeking to add a claim under s 1325(2) were allowed. She estimated that it would take approximately 70 hours and cost around $11,000.00 in solicitors' costs to take those steps. In addition if further discovery were undertaken by KSE she estimates another $11,000.00 would be expended in reviewing the discovered documents. KSE seized upon this as a relatively small amount in the scheme of this litigation and submitted that it could be accommodated by the provision of further security for costs. 58However the solicitors' evidence needs to be placed in context. The steps she described involved taking instructions and then "consider[ing]" further evidentiary sources. She did not purport to estimate the time and cost involved following the process of "consider[ing]" that material presumably because, until she reviews the material and discusses it with Counsel, she will not know. For example, her description of the tasks involved did not extend to the preparation of further affidavits or even an amended defence. Her estimates made no provision for extra Counsel's fees. Her description of the steps involved only highlights the difficulty in gauging the effect of considering amendments made so late after the events in question and so close to a hearing date. 59These affidavits did not specifically address the steps proposed to be taken if the proposed amendments seeking to add a cause of action under s 1005 for a breach of s 999 were allowed presumably as they were only notified after the affidavits were prepared. Nevertheless the matters stated in the Pham solicitor's affidavit are illustrative of the type of cost, expense and further delay that arise from allowing amendments that raise further issues. 60Further it seems to me that if these amendments are allowed then it is likely that the hearing date will need to be vacated. At the very least, the Pham defendants will be placed in the invidious position of deciding whether to concertina their preparation to maintain the trial date or apply to vacate the hearing. The vacation of the trial date has the potential to significantly prejudice the interests of other litigants.

The amendments adding a claim under s 1005 are refused 61The extent of the delay in bringing forward these amendments has been addressed at [24] to [35] and [43] above. It can only be described as gross. The amendments raise significant new factual issues. They are likely to require further factual investigation and occasion further expense and delay to the Pham defendants. To allow the amendments carries with it an appreciable risk that the hearing date will be lost. The impact on other litigants from the continued utilisation of Court resources by a case of this size is significant. 62I am conscious that KSE is in liquidation and the refusal of an amendment is likely to affect the interests of individual creditors. To the extent that I am in a position to assess the significance of this amendment to KSE, then for the reasons outlined at [46] to [52] it seems to me that the claim sought to be raised by these amendments is of doubtful strength. 63The application to make these amendments is simply too late, too poorly explained and of such doubtful utility when weighed against its likely impact on the Pham defendants and the interests of other litigants for leave to amend to be granted. I refuse to allow them. 64This conclusion results in the refusal of KSE's application to amend in so far as it seeks to add the second set of amendments described in [12] to [14], namely paragraphs 58 to 59 of the proposed FASOC. It also has the necessary consequence that the application to add those parts of the third, fourth and sixth sets that depend upon an allegation of a breach of s 999 by Mr Suleman are also refused, namely parts of proposed paragraphs 63, 64 and the opening words of paragraph 78 and the entirety of proposed paragraphs 63A, 78.2 and prayer 4. 65In light of this conclusion it is not necessary to consider the Pham defendants' objection to the form of these amendments.

Revised pleading of s 1325(2) 66The next sets of amendments to consider are those that allege that Mr Suleman breached ss 601ED(5) and 727 of the Corporations Act (ie the first set), that allege that Mr Pham was "involved" in those contraventions (ie the balance of the fourth set) and that seek relief against him under s 1325(2) (ie the balance of the third and sixth sets). 67A number of issues arise in relation to these amendments. First, the Pham defendants submit that the amendments are futile. They contend that, on its proper construction, s 1325(2) can only be invoked in another proceeding commenced under the Corporations Act of the kind mentioned in s 1325(1) (the "Pham construction"). As no other such proceeding has been brought they contend that s 1325(2) cannot be engaged. KSE contends that s 1325(2) confers a free standing right to a person to apply to the Court in accordance with its terms irrespective of the existence of any other proceedings ("the KSE construction"). 68Second, if the first issue was resolved in favour of KSE, the parties are in dispute about whether the Court has the power to grant the amendments given that the six year time limit referred to in s 1325(4) has expired. 69Third, if the first two issues were resolved in KSE's favour, I must then consider whether to exercise the discretion to allow the amendments. It is in that context that I address the objections of the Pham defendants to the form of some of these of amendments.

First issue: scope of subsection 1325(2) 70To resolve the competing constructions of s 1325(2) it is first necessary to discuss the High Court's decision in Sent v Jet Corporation of Australia Pty Ltd [1986] HCA 35; 160 CLR 540 and then consider the legislative history of s 1325.

Sent and Section 87 of the TPA 71The form of s 87 of the TPA considered in Sent provided as follows: "(1) Without limiting the generality of section 80, where, in a proceeding instituted under, or for an offence against, this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IV or V, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 80a or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (1A) Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part V, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2)) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (2) The orders referred to in subsections (1) and (1A) are- ... (d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage; ..." 72Subsection 82(1) of the TPA conferred an entitlement to recover damages "by action" in respect of loss or damage by conduct in contravention of Part IV or V. Subsection 82(2) specified a three year limitation period for proceedings seeking loss or damage for a breach of Part IV or V of the TPA. Section 87 did not include any limitation period. 73In Sent, the High Court found that compensation could only be ordered under s 87(1A) if another proceeding is or had been instituted under or for an offence against a provision of Part VI of the TPA in respect of conduct that contravened a provision of Part V. Subsection s 87(1A) was found not to enable any aggrieved party to seek relief independent of the existence of a proceeding of the kind referred to in s 87(1). 74The Court accepted that, considered "in isolation", s 87(1A) "might be regarded" as creating such a stand alone right (at 544.2). The Court noted that this construction was favoured by the Full Federal Court in Fenech v Stirling (1984) 4 FCR 372 at 377 (at 544.3). Nevertheless the Court considered that the construction favoured in Fenech v Stirling was outweighed by three "countervailing indicia" (at 544.6). 75The first indicium was the discretionary nature of the relief available under s 87(1A) compared with the entitlement to relief under s 82(1). The Court considered it was "curious" to confer a right to recover under s 82(1) but only a discretionary power to award relief under s 87(1A) (at 544.8). It was said to be even "more curious" to have a time limitation on the former but none on the latter (at p 544.9). On the other hand, a right to seek the exercise of a discretion to obtain relief was seen as "more likely" to be a right exercised by a third party intervening in proceedings between others (at 544.11). 76The second indicium was that s 87 appeared immediately after s 86 in Part 1 of the TPA which conferred jurisdiction on the Federal Court to determine "actions, prosecutions and other proceedings" under that Part. The Court considered that, if s 87(1A) was meant to confer a stand alone entitlement to commence proceedings, then it would have been appropriately located prior to s 86 (at 545.3). If that were to occur s 86 would then be addressing all of the various actions etc that were created by the preceding provisions including, on this hypothesis, s 87(1A) (renumbered). 77The third indicium was that the language of s 87(1A) was considered to be complementary to s87(1). Both conferred a right to seek a discretionary order, with s87(1) applying to parties and s 87(1A) to "persons generally whether parties or not" (at 545.9). 78One consequence of the construction adopted in Sent was that, although s 87 did not have any limitation provision, the "proceeding on which the power to grant the relief under s 87 depends will be barred if it is instituted outside the time, if any, limited for instituting that proceeding" (at 546.2). 79I address the reasoning in Sent in the context of s 1325 below. 80Soon after judgment was delivered in Sent various amendments to s 87 made prior to the decision came into effect (Trade Practices Revision Act 1986 (Cth), s 55: see ACCC v Shell Company of Australia Ltd (1997) 72 FCR 386 at 572 per Drummond J). A new subsection 87(1B) was included which enabled the then Trade Practices Commission to make an application "under sub-section (1A)" in certain circumstances (ie similar to s 1325(3)) and subsection 87(1A) was amended to contemplate such an application being made. 81Later, s 87 of the TPA was amended by the inclusion, inter alia, of a new s 87(1C) which declared that an application could be made under s 87(1A) notwithstanding that a separate proceeding had not been instituted for a contravention of Part V (Statute Law (Miscellaneous Provisions) Act (No 2) 1986 (Cth), Sch 1). This overcame the effect of Sent (ACCC v Shell Company of Australia Ltd at 392 to 393 per Drummond J). 82The amendments inserting a new s 87(1C) also included a new s 87(1CA) which provided a limitation provision fixing the time in which an application under s 87(1A) maybe commenced by reference to "the day on which the cause of action accrued."

Section 1325 of the Corporation Law 83At the time of its commencement the Corporations Act 1989 (Cth) included s 1325 in a form similar to that set out above (at [21]). Subsection 1325(1) could be invoked in respect of "a proceeding instituted under, or for a contravention of, Part 7.11 or 7.12". Subsection 1325(2) referred to conduct in "contravention of Part 7.11 or 7.12". Similarly subsection 1325(3) referred to "a proceeding instituted for a contravention of Part 7.11 or 7.12 or instituted by the Commission under section 1324". 84The Explanatory Memorandum to the Corporations Bill 1988 (Cth) stated that clause 1325 of the Bill was a "new provision" that "finds a parallel in TPA s 87" (at [3956]). The form of s 87 of the TPA referred to in the memorandum was that in force following the two sets of amendments that came into force following the decision in Sent that I have described in [80] to [82]. Unlike the provisions considered in Sent but in common with those in force after Sent, s 1325 included a limitation provision (s 1325(4)) and a provision enabling ASIC's predecessor to make an application (s 1325(3)). There was no equivalent to s 87(1C) but, critically, in my view, s 1325 was followed by s 1326 which provided: "Nothing in any of sections 1323, 1324 and 1325 limits the generality of anything else in any of those sections." 85At the time of its enactment Part 7.11 contained various provisions proscribing certain conduct in relation to securities. It included provisions such as ss 995, 996 and 999 which have been addressed above. Part 7.12 was headed "Offering securities for subscription or purchase". It included provisions addressing, inter alia, prospectus requirements and securities hawking. Section 1005 was in a form similar to that set out above in [20]. It created a right to recover damages by action for a contravention of Part 7.11 or Part 7.12. Thus, at the time that s 1325 was enacted, every contravention of Part 7.11 or Part 7.12 could be the subject of an action under s 1005(1) and had its own time limit of six years prescribed by 1005(2). 86With effect from 1 January 1991 the reference to three years in s 1325(4) was changed to six years (by Schedule 4 to the Corporations Legislation Amendment Act 1990 (Cth)). 87With effect from 1 July 1998 the Corporations Law was amended to include a new Chapter 5C regulating managed investment schemes (Managed Investments Act 1998 (Cth), Sch 1). On the day before it came into effect regulation 5C.11.07 was made (by the Corporations Regulations (Amendment) 1998, Item 13). It provided that a "reference in section 1325 to Part 7.12 of the Corporations Law is taken to include a reference to Chapter 5C of the Law". The regulation did not make a similar change to s 1005(1). 88Chapter 5C regulated managed investment schemes. It included provisions proscribing particular forms of conduct in relation to such schemes. Section 601MA(1) was in similar terms to s 1005. It conferred a right of action upon a person who was "a member of a registered scheme" and who suffered loss and damage "because of conduct of the scheme's responsible entity" in contravening a "provision of this Chapter". Subsection 601MA(2) created a six year limitation period. According to KSE there is, however, an important difference between this provision and s 1005. Subsection 601MA(1) did not create a cause of action for all conduct that was proscribed by the new Chapter 5C whereas s 1005 had that effect so far as Parts 7.11 and 7.12 were concerned. The most obvious example of the difference related to the new subsection 601ED(5) which precluded a person from operating an unregistered managed investment scheme that was required to be registered. Subsection 601MA(1) did not confer a right of action for a contravention of that provision. The civil remedies for its contravention were the power conferred on the Court to grant injunctions by s 1324 and, according to KSE, s 1325. 89With effect from 13 March 2000 the Corporations Law was amended by the CLERP. Amongst other changes Part 7.12 was repealed and the reference to it in s 1005 was removed. Instead of Part 7.12, Chapter 6D was inserted into the Corporations Law which dealt with fundraising. The reference to "Part 7.12" in s 1325 was removed and was replaced by "Chapter 5C or 6D". Thus s 1325(1) now referred to "a proceeding instituted under, or for a contravention of, Chapter 5C or 6D or Part 7.11" and s 1325(2) referred to "conduct ... engaged in, in contravention of Chapter 5C or 6D or Part 7.11". A similar change was made to s 1325(3). 90Chapter 6D included Part 6D.3 entitled "Prohibitions, liabilities and remedies". As its title indicates it includes a number of provisions proscribing various conduct in relation to the offering of securities including offering securities that do no exist (s 726), offering securities without a current disclosure document (s 727), offering securities under a disclosure document that is misleading (s 728), certain forms of advertising (s 734) and securities hawking (s 736). Subsection 729(1) conferred a right of recovery for a contravention of s 728(1) only. Subsection 729(3) specified a six year limitation period for such an action. 91This form of s 1325 and Part 7.11 together with Chapters 5C and 6D were all included in the Corporations Act 2001 from the time of its enactment on 15 July 2001. As I have explained each of Part 7.11, Chapters 5C and 6D contained a provision, respectively ss 1005, 601MA and 729, which expressly conferred a right of action to recover damages for a contravention of at least one of the proscriptions found within the Chapter or Part and a limitation period. In addition some of the provisions in Chapters 5C and 6D conferred rights to commence civil proceedings for remedies other than damages such as the right to apply for the winding up of an unregistered managed investment scheme (eg s 601EE). Chapters 5C and 6D also proscribed various conduct for which no express right of civil recovery was provided for outside of Part 9.5 of the Corporations Act such as the prohibition on the operation of unregistered managed investment schemes (s 601ED(5)) or the offering of securities without a current disclosure document (s 727). 92I have already stated that the parties proceeded on the basis that the relevant form of s 1325 was that which was in force during the period late 1999 to late 2001. I am content to adopt that approach except that I will narrow the period to the form of s 1325 as in force from 13 March 2000 to December 2001 which spans the period during which the Corporations Act 2001 was enacted. As I have explained on that date Chapter 6D (which included s 727) was inserted on 13 March 2000. In the end result that change is not material to the conclusion at [126]. 93Since December 2001 s 1325 has been amended by the addition to and subtraction from ss 1325(1) and (2) of references to various other parts of the Corporations Act. Two matters should be noted. First each of the observations I have made in [91] concerning the operation of Part 7.11, Chapters 5C and 6D apply to the totality of the provisions referred to in ss 1325(1) and 1325(2) from time to time since July 2001. 94Second, if the correct form of s 1325 to be considered is not that which was in force at the time of the alleged contravention but say the applicable form of s 1325 at the time of the application to the Court referred to in s 1325(2), then it makes no difference to the outcome of this application. Since December 2001 s 999 has been repealed and s 1325 makes no reference to the former Part 7.11 which contained it. However I have already refused leave to allow any amendment alleging a breach of that provision to be pleaded. Otherwise ss 601ED(5) and 727 have been continuously in force from at least December 1999 (in the case of ss 601ED(5)) and 13 March 2000 (in the case of s 727) until the present. Subsections 1325(1) and (2) have referred to Chapter 5C (which includes s 601ED(5)) continuously since December 1999 and Chapter 6D continuously since March 2000. Thus the form of s 1325 now in force is capable of operating upon a breach of s 601ED(5) or s 727 that occurred at the time of the events the subject of these proceedings.

Part 9.5 and section 1325 95Section 1325 of the Corporations Act as in force from 13 March 2000 to December 2001 was found within Part 9.5 which was entitled, "Powers of Courts". It was preceded by Part 9.4 which was entitled "Offences" and included s 1311(1) which created an offence for contravening a provision of the Corporations Act unless the section or another part of the Act specifically states that to contravene the provision is an offence or is not offence. Within Part 9.5 there was to be found s 1324 which conferred a power on the Court to grant injunctive and other types of relief in respect of, inter alia, contraventions of the Corporations Act at the behest of ASIC's predecessor or an affected person. It also included s 1326 which was in the same form as it was when first enacted in the Corporations Act 1989 (see [84] above). 96The first part of s 1325(1) refers to "a proceeding instituted under, or for a contravention of, Chapter 5C or 6D or Part 7.11". Proceedings "under" Chapter 5C, 6D or Part 7.11 encompass proceedings the cause of action of which is to be found in a section within that Chapter or Part such as s 1005 in the case of Part 7.11, ss 601EE and 601MA in Chapter 5C and s 729 in Chapter 6D. Proceedings "for" a contravention would include criminal proceedings for an offence created by s 1311(1) "for" a contravention of any of the proscriptions in Chapters 5C, 6D or Part 7.11 or injunctive proceedings under s 1324(1) alleging a breach of those provisions. 97I have referred above to three indicia found by the High Court in Sent to warrant a departure from the ordinary reading of s 87(1A) of the former TPA "in isolation". They are but three matters relevant to a process of statutory construction of a similar but not identical provision in different legislation. They obviously demand particular attention but at this point I note that all the principles of statutory interpretation are engaged. The indicia from Sent are not a checklist such that the answer is dictated by an analysis of how many of the indicia are applicable to s 1325. 98The first indicium in Sent when considered in this context is the curiosity that arises from the conferral by provisions such as ss 1005, 601MA and 729 of rights to recover loss and damage by "action" at the same time as a conferral by s 1325(2) of a right to only apply to the Court for relief which is discretionary. As noted in Sent (at 544.11) "[a] right to seek the exercise of the Court's discretion is more likely to be a right which a person not a party might seek incidentally to a proceeding instituted by and against other persons". However this consideration is weakened when it is noted that not every provision in Part 7.11, Chapter 5C or Chapter 6D that is contravened gives rise to a right of recovery. In addition the types of relief available under s 1325(2) are broader than the mere recovery of loss or damage. A regime conferring a right to recover damages for certain branches with a right to apply for a discretionary grant of other forms of relief is not that "curious" especially when s 1325(2) is also applicable to breaches of provisions that do not confer a right to recover loss and damage. 99KSE also pointed to the existence of the time limit in s 1325(4) as a matter suggesting that s 1325(2) conferred a stand alone right to apply to the Court. It contrasted that with the provisions considered in Sent. In my view, the existence of a time limitation provision in s 1325(4) is neutral as to which of the competing interpretations is to be preferred. 100If s 1325(2) confers an entitlement to bring an application without the necessity for there to be some other form of proceedings then the operation of s 1325(4) is relatively straightforward. If it does not then s 1325(4) still has utility in relation to an application by a non-party under s 1325(2) to recover damages. As I have explained, Chapters 5C and 6D contain legislative proscriptions for which there is no cause of action for damages and thus no accompanying limitation provision to be found within Chapter 5C or 6 (eg s 601ED(5)). However they can be the subject of an application for injunctive relief under s 1324 and, according to the Pham construction, a non-party can join in these proceedings under s 1325(2) and seek damages while being subject to a six year time limit under s 1325(4). 101If the Pham construction is correct, the limitation found within s 1325(4) also has utility in circumstances where the principal proceedings relate to a provision that is the subject of a separate action under a provision such as s 1005. Absent s 1325(4) the non-party's ability to make the application would be governed by the applicable limitation provision for that principal cause of action. Although that was identified as a preferable outcome in Sent it is still suboptimal because the non-party's loss or damage may have been occasioned at a different time to when the claimant to the principal cause of action incurred loss or damage. In such a case, s 1325(4) would operate to ensure that the limitation provision applicable to the non-party's application for damages is determined by their own circumstances. 102The second indicium in Sent was the location of s 87 after s 86 which conferred jurisdiction on the Federal Court to determine "actions, prosecutions and other proceedings". I explained some of the provisions conferring jurisdiction on this Court to entertain such applications in Suleman (No 1) at [50]. In my view no assistance is to be found from those provisions for the Pham construction. 103The third indicium noted in Sent was the "complementary" nature of s 87(1A) to 87(1) with the latter applicable to parties and the former to parties and non-parties. The Pham defendants submitted that if ss 1325(1) and (2) operated in the same manner it would give a sensible construction to the section as a whole. I agree that this is a significant consideration that points towards an acceptance of the Pham construction. Subsection 1325(1) clearly supplements the remedies available to an existing "party" to a proceeding of the kind referred to. According to the Pham defendants, if KSE's construction is correct, then s 1325(1) would be entirely superfluous as s 1325(2) could be invoked by the party to the principal proceeding referred to in s 1325(1). In effect s 1325(2) would become a provision of general operation that would swamp s 1325(1). The Pham defendants submitted that their construction preserves a separate operation for s 1325(1) so that it is available to a party to existing proceedings and s 1325(2) is available to non-parties. 104A similar consideration of s 1325(3) also supports the Pham defendants' construction. Subsection 1325(3) allows for ASIC to make an "application under subsection (2)" on behalf of affected persons "in a proceeding instituted for a contravention". It also enables ASIC to make an application "under subsection (2)" on behalf of affected persons in a proceeding instituted by ASIC under s 1324. Both examples of an application under 1325(2) given by the subsection involve intervening in an existing proceeding. Subsection 1325(3) appears to assume that applications under subsection 1325(2) are made by third parties to existing proceedings. It expands the circumstances in which an application can be made under s 1325(2) so that it can be made not just by third parties but on their behalf by ASIC. 105These aspects of s 1325 point to an acceptance of the Pham construction. They preserve a separate operation for s 1325(1), treat s 1325(2) as conferring rights on non-parties and respect the assumption upon which s 1325(3) operates, namely that applications under s 1325(2) are made by third parties to existing proceedings. 106However the common starting point for this analysis is that the plain words of s 1325(2) support KSE's construction. It was accepted in Sent that similar words considered "in isolation" suggested that the provision conferred a right to make an application unconstrained by whether other proceedings have been commenced. The Pham defendants have pointed to a number of aspects of s 1325 which suggest a reading down of s 1325(2) is warranted. Each of these considerations involves the drawing of implications from the text and structure of s 1325 as a whole to limit the language of s 1325(2) considered in "isolation". Ordinarily there is nothing in principle wrong in doing so, however in this context s 1326 must also be given effect to. It does not permit the reading down of one part of s 1325, namely, s 1325(2), by reference to the other parts, namely s 1325(1) and (3). 107The modern approach to statutory interpretation requires that primary consideration be given to the context in which a provision is found and not just at the point when ambiguity is said to arise. Context includes the existing state of the law and the mischief that the statute was intended to remedy (Baini v R [2012] HCA 59; 87 ALJR 180 at [42] per Gageler J, citing CIC Insurance Ltd v Bankstown Football Club (1997) 187 CLR 384 at 408). A critical part of the "context" in this case is s 1326. It evinces an intention that the conferral of broad powers on Courts by, inter alia, ss 1324 and 1325 should not be read down by drawing implications from "anything else" in ss 1323 to 1325. It precludes an acceptance of the Pham defendants' arguments and requires an acceptance of the KSE construction. 108The Pham defendants argued that the enactment of s 1325 in 1989 after the decision in Sent and without an express equivalent to s 87(1C) of the TPA suggested a legislative intention at least at the time of enactment to restrict the scope s 1325(2) in the manner they contend. This submission seeks to invoke the principle that, if statutory language is re-enacted in an identical form after it has acquired a settled judicial meaning, it is taken to have the same meaning (Baini at [43] per Gageler J). However this principle has no application in this case. It follows from the above that the enactment of s 1325 did not constitute the re-enactment "in identical form" of the provisions considered in Sent. Amongst other differences (see above at [80] to [82]) there was no equivalent to s 1326 in the TPA at the time Sent was decided. 109I accept KSE's construction. It follows that I reject the Pham defendants' contention that it would be futile to make the amendments adding a claim for relief under s 1325(2).

Second Issue: Adding a claim for relief under s 1325(2) outside the time in s 1325(4) 110It was common ground that the six year limitation period referred to in s 1325(4) expired long before KSE applied to add its claim for relief under s 1325(2). KSE relied on the power of amendment conferred by ss 64 and 65 of the CPA. In particular they contended that these amendments fell within s 65(2)(c) in that they are said to arise out of the same or substantially the same facts as its existing causes of action (see Suleman (No 1) at [49]). Further to the extent that the Court's powers of amendment may be found not capable of being exercised to allow the addition of a claim under s 1325(2) by reason of s 1325(4), KSE also relied on s 1322 (4)(d) of the Corporations Act. It provides: " (4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes: ... (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit. " 111It did not appear to be disputed that the proposed amendments arose out of the same or substantially the same facts as were already pleaded. However the Pham defendants contended that ss 64 and 65 cannot operate to allow an extension of the time limitation provided for by s 1325(2) of the Corporations Act. This contention had two limbs. The first limb was the submission that I have already rejected above at [38] by relying on the dicta of Mason P and Beazley JA in Air Link (No 2). 112The second limb was an argument I left open in Suleman (No 1) at [72] namely whether compliance with s 1325(4) is a condition or an "essence" of the "right" to apply conferred by s 1325(2) rather than a mere "time stipulation of a procedural nature" (Gordon v Tolcher [2006] HCA 62; 231 CLR 334). If the former is correct then the amendment power conferred by ss 64 and 65 of the CPA cannot be relied on to add a claim for relief under s 1325(2) outside the six year time limit in s 1325(4). This would follow either because s 79 of the Judiciary Act 1903 does not operate to pick up a state law, in this case ss 64 and 65 of the CPA, that purported to alter the nature of the "right" conferred by ss 1325(2) and (4) (Agtrack at [58] to [59] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ) or because s 1325 of the Corporations Act is taken to have "otherwise provided" for the purposes of s 79 (Agtrack at [60]). 113However I do not consider that s 1325(4) is an "essence of the right" conferred by s 1325(2). It is the case that s 1325(2) only confers a right on a party to make an application for the exercise of a discretionary power in their favour. By contrast s 1005(1) confers an entitlement to recover damages. It is more likely that a time limit upon a right to recovery does not go to its "essence" as opposed to a time limit upon a mere right to apply. However, s 1325(4) nevertheless describes the exercise of the right to apply conferred by s 1325(2) as a "cause of action" which is suggestive of something more substantive than the conferral of a mere permission to ask. Further s 1325(4) can be contrasted with a number of other provisions in the Corporations Act which provide that a particular type of "application" can "only be made" within a specified period (eg ss 588FF(3) and 459G(2)). In a number of cases such a provision has been held to be an "essence" of the right or a jurisdictional precondition to the making of the relevant application with the result that the time for making it cannot be extended under s 1322(4)(b) of the Corporations Act (Gordon v Tolcher; David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 276.6 per Gummow J) or under any powers of amendment conferred on a State court (see Austin Australia Pty Ltd (in liq) v A & G Scaffolding & Rigging Services Pty Ltd [2007] NSWSC1077 at [20] per White J). While the presence of the word "only" is not determinative (Emanuele v Australian Securities Commission [1997] HCA 20; 188 CLR 114) its absence is a strong indicator that s 1325(4) is not a jurisdictional barrier to the invocation of the right conferred by s 1325(2). 114Accordingly I am satisfied that the power conferred by ss 64 and 65 of the CPA can be exercised to allow the amendments which seek to add a cause of action under s 1325(2). Given that conclusion it is not strictly necessary to determine whether s 1322(4)(d) can be invoked to extend the time specified in 1325(4) but that conclusion would appear to follow as well. The next question that arises is whether the power to allow the proposed amendments should be exercised.

Third Issue: discretion 115I have summarised the evidence concerning delay and prejudice above at [24] to [35] and [56] to [60]. It is necessary that I address those topics by reference to the proposed claim for relief under s 1325(2) as the circumstances are different for the application to add this claim, compared with the claim for relief under s 1005 by reason of an alleged breach of s 999. 116I have already described the evidence from KSE's solicitor concerning the delay and the rationale for the amendments adding a claim under s 1325(2) that was given to Harrison AsJ (at [32] to [34] and [29] respectively). The Pham defendants were first notified that a claim for relief under s 1325(2) would be made in May 2011 being almost nine and a half years after the final events the subject of the proceedings, eight and half years after the proceedings were commenced, four and half years after a defence was filed specifically pleading the matter noted in [29] above and three and a half years after the last date upon which the limitation period expired. From May 2011 until present those responsible for the conduct of the proceedings have pursued the application to amend with reasonable diligence although the first attempt to amend failed because the amendments were bad in form. The Pham defendants did not receive the present form of the proposed amendments adding a claim under s 1325(2) that pleaded contraventions by Mr Suleman until July 2012 and did not receive the proposed FASOC until October 2012. Those circumstances still warrant a description of the delay as "gross" especially having regard to the inaction during the period prior to the retention of Mr Ashhurst SC, which included the date the limitation period expired. The material explaining the delay does not justify it. 117I have already summarised the evidence given by the Pham defendants' solicitor about the further expense and delay that would be occasioned if these amendments were allowed. I repeat the comments at [56] to [60]. I note three further matters about the effect of the delay. 118First, although I have acted on the basis that these proposed amendments fall within s 65(2)(c) of the CPA, they still raise matters that warrant further inquiry. The Pham defendants' submissions contend that they represent a "radical shift" in the case in that they are now alleging that Mr Suleman contravened the Corporations Act with the consequence that he "becomes a centrally important figure in the litigation". I consider that this overstates the position. Mr Suleman has always been a "centrally important figure in the litigation". Nevertheless the change from alleging breaches by KSE to breaches by Mr Suleman means that evidence concerning the capacity in which Mr Suleman acted at a particular point in time may be highly material. This type of evidence is the very type of material that the passage of time may make difficult to find or even to know whether it ever existed. 119Another new issue raised directly by the proposed amendments is Mr Pham's state of mind. Subsection 1325(2) only applies to Mr Pham if he is a person "involved" in the contraventions. As I have stated, at the very least this requires him to have been "knowingly concerned" in Mr Suleman's alleged contraventions (see s 79(c) of the Corporations Act). Proposed paragraph 78 provides particulars of the allegation of Mr Pham's involvement. The particulars include assertions as to his state of mind at various times. With some matters they assert that he "[t]urned a blind eye and shut his eyes to the obvious". This could only be relevant if it is in effect an assertion that he knew or strongly suspected the truth of what it is said he "blinded" himself from. 120The only similar allegations to be found in the FASOC are allegations that by May 2000 Mr Pham knew or ought to have known that the "Scheme operated by KSE was in contravention of the MIS provisions, the Disclosure provisions and the Securities Provisions" which, as defined, appear to include ss 601ED(5) and 727. These allegations are retained in paragraphs 150 to 151 of the proposed FASOC. This allegation that the "Scheme" was operated by KSE is inconsistent with the proposed amended paragraph 51 which alleges that "the Scheme was operated by [Mr] Suleman". Leaving that inconsistency aside, the movement from alleging that Mr Pham was aware of contraventions by KSE to alleging that he was knowingly involved in contraventions by Mr Suleman is not an insubstantial change. 121The making of a serious allegation about a person's state of mind for the first time ten years after the event is capable of causing unfairness even in circumstances where a similar allegation has been in the pleading for some time. I have already noted KSE's reference to the detailed affidavit of Mr Pham and the liquidator's examination. It seems that there is a considerable amount of material available to enable Mr Pham to refresh his memory including contemporaneous documents. However in this context the delay is capable of diminishing Mr Pham's ability to give oral evidence as to his state of mind at the time of the subject events based on an independent recollection. Memories degrade over time. It is often more difficult for a person to remember what they were thinking at a particular point in the past compared with what they were doing. 122Second, the Pham defendants made a number of sustained attacks on the form of the proposed amendments. Properly considered some of the complaints only concern an absence of particulars. For example proposed paragraph 33.4 alleges that Mr Suleman "promoted" the scheme. The Pham defendants complain that they need further detail of what is meant by "promoted". I do not accept that this is a defect in the pleading but it suggests that the Pham defendants are legitimately entitled to further detail and thus further delay will be occasioned if the amendments are allowed. The defect I have just identified in [120] also confirms the need for further refinement of the pleading if the amendments were allowed. 123Some of the Pham defendants' complaints about the form of the proposed FASOC are more fundamental. Critically the Pham defendants complain that the proposed FASOC does not contain a proper pleading of what constituted the "managed investment scheme" and how it satisfied the definition in s 9 of the Corporations Act. This is a significant defect. The Pham defendants have not raised this complaint previously even though an allegation of the existence of an unregistered managed investment scheme has been in the FASOC for many years. For that reason I do not regard this as a matter fatal to the application to amend as the amendments could be allowed on some form of condition that the issue be addressed. However it illustrates that allowing the amendment will lead to further delay and potentially further pleading disputes. Further, in the absence of these matters being pleaded with complete clarity, I cannot be satisfied that there are not further factual issues to be raised if the amendments are allowed. 124Third, if the amendments are allowed I consider it very likely that the hearing date will need to be vacated. At the very least the Pham defendants will be faced with the choice that I referred to in [60]. 125A consideration of whether to exercise the discretion to grant the amendments necessary to mount a claim under s 1325(2) is more finely balanced than the consideration of whether to allow the amendments pleading a cause of action under s 1005 for an alleged a breach of s 999. In light of the conclusion I have reached at [109] the claim cannot be characterised as being of doubtful strength. In light of the explanation given to Harrison AsJ as to its rationale I accept that the proposed cause of action under s 1325(2) is likely to be "importan[t]" to KSE (Aon at [102]) or "critical" as asserted in its written submissions. However I am still left with an application that is made far too late with no proper explanation for the delay. The proposed amendments raise new factual issues. If granted they will require further particularisation and clarification which will cause additional delay and may expose more factual issues not previously raised by the pleadings. The matter is now close to the allocated hearing date. If the application is granted, it is likely to lead to its vacation. To allow the amendments is otherwise capable of causing prejudice to the Pham defendants. To paraphrase Aon at [102] this is a case where it can "properly be concluded that [KSE] has had sufficient opportunity to plead [its] case and that it is too late for a further amendment, having regard to [the interests of the Pham defendants] and other litigants awaiting trial dates". 126I refuse to allow the amendments supporting a claim for relief under s 1325(2) of the Corporations Act. This addresses the first set of amendments and the balance of the third, fourth and sixth set of amendments.

The Fifth Set of Proposed Amendments 127As best I can ascertain the utility of the fifth set of proposed amendments (see [17]) rests upon the fate of the amendments seeking to add a claim for relief under s 1325(2). I refuse to allow them.

Conclusion 128It follows that KSE's notice of motion will be dismissed. 129I will fix a date for the matter to be mentioned before me to make directions necessary to have the matter ready for the hearing on 3 June 2013. 130Accordingly the Court orders that: (i)The Plaintiff's notice of motion filed 24 July 2012 be dismissed; (ii)The Plaintiff pay the first, fourth and fifth defendants' costs of the notice of motion; (iii)The proceedings be listed for mention on 22 March 2013 at 9.30am before Beech-Jones J; and (iv)There be liberty to apply on 1 days notice. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 February 2013

Corporate Law Economic Reform Program Act 1999(Cth)

Corporations Legislation Amendment Act 1990(Cth)

Financial Services Reform Act 2001(Cth)

Trade Practices Act 1974(Cth)

Trade Practices Revision Act 1986(Cth)

(Corporate Law Economic Reform Program Act 1999(Cth)

(Trade Practices Revision Act 1986(Cth)

(Managed Investments Act 1998(Cth)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (19 paragraphs)

Parties

Legislation Cited (11)

Cases Cited (19)

Cited By (7)