Ken Tugrul v Tarrants Financial Consultants Pty Limited

The parties 6The plaintiffs are four individuals and a company associated with some of them. The plaintiffs sue the defendants in relation to, putting it broadly, financial advice which they received and which they allege was negligent, causing them loss. The first defendant is a financial advisory company which is now in liquidation. The fourth defendant is the first defendant's professional indemnity insurer. The second and third defendants are natural persons who in different ways and at different times were connected with the first defendant and were concerned in giving the financial advice which is the subject of complaint by the plaintiffs.

A short history 7These proceedings have had a somewhat tortured interlocutory history. 8The relevant events said to give rise to the defendants' liability took place in 2006. A statement of claim was first filed on 29 October 2009. Between the commencement of the proceedings in October 2009 and today, there have been propounded with various degrees of formality fifteen versions of the plaintiffs' claim. Some of those versions have been prepared pursuant to orders made by the Court. Other versions appear to have been brought into existence as part of an informal process of exchanges between the plaintiffs and the defendants, the latter complaining about the form of proposed pleadings and the former attempting to deal with those complaints. 9In recent times there has been a change in legal representation for the plaintiffs. This has led to the latest iteration of their claim in the form of the Draft Claim which has been the subject of argument before me today. It was candidly conceded in the plaintiffs' written submissions that they "wish to make a 'fresh start' and to move the proceedings forward as quickly as possible. The proposed pleading is intended to simplify and expose with greater clarity and precision the material facts and the causes of action that are alleged".

The principles relating to amendments 10I considered the principles which apply in the case of an application to amend pleadings in Macquarie International Health Clinic Pty Ltd v Sydney Local Health District [2013] NSW SC 764 at [48] to [35]. The parties before me today have helpfully accepted the summary in that case as an acceptable statement of the relevant principles. 11In short, one starts with s 64 of the Civil Procedure Act 2005 (NSW) (the "CP Act"), subs (2) of which requires "all necessary amendments...to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings". That mandatory requirement is expressed to be subject to s58 of the CP Act. Section 58 requires the Court to act in accordance with the dictates of justice. Those are determined, pursuant to s 58(2), by a mandatory consideration of the provisions of ss 56 and 57 and the discretionary consideration of the matters enumerated in s 58(2)(b). 12I propose to apply the principles in the way I set them out in Macquarie International Health Clinic.

This application 13I am satisfied that amendments of the kind contained within the Draft Claim are "necessary" within the meaning of s 64(2) of the CP Act. 14In those circumstances, unless the considerations encompassed within s 58 dictate a different conclusion, the C P Act requires me to allow the amendments. Section 58, to the extent it informs and overrides what might otherwise be the case under s 64(2), requires me to look at the dictates of justice. Section 56 invokes the overriding purpose of the CP Act, namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings (the "overriding purpose"). Allowing amendments of the nature contained in the Draft Claim will clearly facilitate the overriding purpose. However, in doing so I will also bear in mind the objects of case management as set out in s 57 of the CP Act. Of particular relevance amongst those considerations in the present case is s 57(1)(d), being "the timely disposal of the proceedings ... at a cost affordable by the respective parties". 15Having taken account of those mandatory matters, I am also of the view that the following discretionary matters set out in s 58(2)(b) are relevant: (1)Subsection (i) refers to the degree of difficulty or complexity to which the issues in the proceedings give rise. I accept there is both difficulty and complexity about these proceedings. While they do not justify 15 or 16 iterations of the pleading, nevertheless I accept that there are issues of difficulty and complexity which have stood in the way of the plaintiffs adequately expressing the case which they wish to bring. (2)Subs (ii) directs attention to the degree of expedition with which the respective parties have approached the proceedings. The earlier history of this matter would suggest that the plaintiffs have not approached the proceedings with the degree of expedition that this Court would expect. However, on the evidence before me there appears to have been a change in relation to the assiduousness with which the plaintiffs' new legal team now addresses these proceedings. This, of itself, invites consideration of subs (iii) being the degree to which any lack of expedition in approaching the proceedings has arisen in circumstances beyond the control of the respective parties. While I acknowledge that Mr Martin of Senior Counsel, appearing for the third defendants, submits that there was not a great deal of evidence on which the Court could act in this regard, it does appear to me that more than a little of the reason for the delay can properly be visited on the plaintiffs' former legal representatives rather than the plaintiffs themselves. (3)Subsection (vi) brings attention to the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction. If amendment is not allowed, it is the plaintiffs who will suffer a considerable degree of injustice in so far as they would be required to press on with a pleading which does not adequately or appropriately advance the case which they have now been advised they should advance. On the other hand, none of the defendants has been able to point to any particular injustice that would be suffered by them (not otherwise remediable by a costs order) if the amendments are allowed. The only element of injustice to the defendants to which they have adverted of which I will take account is that, in its present form, there still do seem to be some inadequacies in the formal pleading of the plaintiffs' case. I will now deal with those with a view to setting out the Court's decision in relation to particular matters of complaint raised in relation to the pleading by the defendants. 16Having taken all of the foregoing matters into account, they do not detract from my initial conclusion that the amendments are necessary, subject to dealing with the remaining pleading deficiencies. While I have carefully considered each of the particular grounds of complaint made in relation to the Draft Claim, in the interests of keeping these reasons as concise as possible, I will only direct my attention to those which I consider have been established. 17Paragraph 19 of the Draft Claim is: 19. Following the making of the Recommendations, each plaintiff: (a) made the investments in the Agribusiness Schemes (the Agribusiness Investments), and (b) took out the Loans, the subject of the Recommendations. Particulars Details of the investments and loans made by the plaintiffs are set out in the following affidavits and reports: (i) affidavit of Ken Tugrul sworn 21 April 2010 (in the case of Ken and K Bricks); (ii) affidavit of Kellie Tugrul sworn 21 April 2010 (in the case of Kellie); (iii) affidavit of Daniel Tugrul sworn 21 April 2010 (in the case of Daniel); (iv) affidavit of Nassrin Tugrul sworn 21 April 2010 (in the case of Nassrin); (v) expert report of Brett Goodyer of Impact Forensics dated 4 July 2011 (all plaintiffs). 18Paragraph 11 of the Draft Claim is: 11. In or about June 2006, Tarrant and TFC advised and recommended that each plaintiff: (a) make investments in or related to various agribusiness schemes offered, managed and/or promoted by Palandri Limited, Palandri Investment Management Limited, Great Southern Plantations Limited and Great Southern Managers Australia Limited (Agribusiness Schemes); and (b) finance the purchase of those investments by taking out fixed interest loans to the value of 100 per cent of the recommended investments in the Agribusiness Schemes (Loans). (the Recommendations) Particulars The investments the subject of the Recommendations were identified in: (i) application forms for the Agribusiness Schemes and loans prepared by TFC and/or Tarrant or their employees or agents, copies of which documents are exhibited to the affidavits of Ken, Kellie, Daniel and Nassrin in each case sworn 21 April 2010; and (ii) in the case of Ken, Kellie, Daniel and Nassrin, Limited Statements of Advice prepared by Tarrant and TFC dated 5 June 2006 (in the case of Ken and Kellie) and 12 June 2012 (in the case of Daniel and Nassrin), although not provided to or received by those plaintiffs. 19The reference to Agribusiness Schemes in paragraph 11(a) is to be contrasted with the reference in paragraph 19(a) to the investments in the Agribusiness Schemes that are there defined as the "Agribusiness Investments". 20I accept the criticism made of paragraph 19 that, for lack of particularity, it does not make clear whether the Agribusiness Schemes which were ultimately the subject of investment were coextensive with the schemes that were the subject of the recommendations referred to in paragraph 11(a). 21It will be necessary for the plaintiffs to identify with greater precision both the Agribusiness Schemes referred to in paragraph 11(a) and the particular investments in particular Agribusiness Schemes which are referred to in paragraph 19(a) of the Draft Claim. 22The same lack of particularity affects the rolled up references to the loans in paragraph 11(b) and the reference to recommendations in paragraph 11. 23I accept that the plaintiffs have endeavoured to particularise the investments, the schemes, the loans and the recommendations by reference to material in affidavits and expert reports that have been filed in the proceedings. However, that is both insufficient and not in compliance with the basic requirements for a pleading. 24It will be necessary for the plaintiffs to be more precise, identifying each of those elements individually. I am not prescribing whether this should be done by substantive amendment to the terms of the pleading or simply by more detailed particularisation. That will be a matter for them, depending on what is more convenient, having regard to what it is about which particulars are being given. For example, it may be possible to identify particular schemes both recommended and invested in by reference to a precisely described product disclosure statement. Insofar as particular items are to be found in the affidavits particularised in the paragraphs to which I have referred, I would expect the additional details which the plaintiffs will provide to include a cross-reference to where precisely in that affidavit material the matter particularised can be found. 25Once the plaintiffs have teased out with greater particularity the matters to which I have just referred, the next matter for their attention is to be more precise in relation to the representations which they plead at various stages of the Draft Claim, commencing at paragraph 27 of the pleading. The difficulty to which the defendants have pointed, and which I accept is a point well made, is that the representations as pleaded either roll up or do not make sufficiently clear whether the particular representation is alleged to be a representation of a present fact or a future matter. It will be necessary for these to be split out so that there is a single allegation in each relevant case of whether a representation is as to a present or future matter. 26A consequence of doing this will then flow through into paragraphs such as paragraphs 29(b) and 31(a). That is to say, the teasing out of the particular representations will put beyond doubt which are those said to be as to future matters and attracting the reversal of the onus of proof set out in its original form in s 51A of the Trade Practices Act and re-enacted in various forms in more recent legislation and the precise identification of the counterfactual said to make the representation misleading and deceptive. This will enable the defendants to plead particular defences with greater precision in relation to each such representation. 27Because of the repetition of basic allegations as to misleading and deceptive representations later in the Draft Claim, the points which I have just made will apply equally to paragraphs such as paragraphs 34, 36 and 38 of the pleading. 28These are the matters which seem to me to require attention in the light of the submissions which the defendants have made. An appropriate way to bring this about is that I will grant the plaintiffs leave to bring in an amended notice of motion attaching a further draft second further amended statement of claim by a date to be fixed. That further draft should deal with the matters I have raised.

Costs 29The present application gives rise to three aspects in relation to costs: the costs of the application, the costs thrown away by reason of the amendments and whether any of those costs ought to be ordered to be assessed and paid forthwith. I will deal with each of these aspects in turn.

The costs of the application 30There is no issue between the parties that I should make an order that the plaintiffs pay the second to fourth defendants' costs of the notice of motion for leave to amend.

Costs thrown away 31Similarly, there is no debate between the parties at the level of principle that an order should be made that the plaintiffs pay the second to fourth defendants' costs thrown away by reason of the amendments which I anticipate they will ultimately be granted leave to make by reference to the amended notice of motion to which I have just referred. The difficulty is not at the level of principle, it is rather at the level of what that order should encompass. 32There is no doubt that the plaintiffs, by their Draft Claim, are abandoning a number of causes of action which were pleaded in earlier versions of their pleadings. In a broad sense, costs incurred by the defendants in relation to causes of action which have been abandoned would fall within the scope of an order for costs thrown away by reason of the amendment. The devil, however, is in the detail. 33It was submitted by the third defendant that I should make an order for costs thrown away by reason of the amendment, adding the words "such costs to include but not be limited to all costs incurred by the third defendant solely in relation to causes of action now abandoned by the plaintiffs in the proposed Draft Claim". In the interests of disclosure, I should indicate that I suggested to Mr Martin SC that he should add the word "solely", a proposition to which he generously acquiesced. 34However, after the opportunity for further reflection, a concern arose as to whether it would do justice to the defendants, and produce an order that was practical in its working out, if the costs thrown away were expressed to include costs incurred "solely" in relation to the abandoned causes of action. This led the third defendant to propose an alternative approach to dealing with costs, namely an order that the plaintiffs pay a specified percentage of the defendants' costs incurred to date (save and except for matters already the subject of costs orders). 35Mr Martin SC submitted that these matters were necessarily impressionistic and, on that basis, drew my attention to the fact that there had been five causes of action in earlier iterations of the plaintiffs' pleading, four of which were now abandoned. He submitted that an order should therefore be made in relation to his client for 80% of the costs incurred to date. Ms Hogan-Doran, for the second defendant, accepted that her client was in a slightly different position, which would justify an apportionment of somewhere between 60% and 70%. Mr Newton, for the fourth defendant, accepted that his client was in a different position again, but would require an opportunity to consider what an appropriate percentage would be. 36The Court's discretion to fashion an appropriate costs order in any particular circumstances is necessarily one which involves a wide discretion. Notwithstanding the width of that discretion, it must still be exercised judicially. There are many cases when justice can be done by some form of apportionment of the costs that a party has incurred. Unfortunately, in this case, there is so little evidence before me as to the extent to which any particular cause of action may have taken up time and therefore generated legal costs that I am unable to adopt the apportionment approach. Putting it another way, given the lack of evidence before me, a resort to the "impressionistic approach", which is perfectly acceptable in other cases, would, in my view, run the serious risk of being nothing more or less than haphazard and irrational. That would give rise to a serious risk of injustice to one or other party, or perhaps even both. Accordingly, I decline the invitation to adopt the apportionment approach to the costs order. 37This necessarily brings the Court back to attempting to fashion an order that does justice between the parties in relation to costs thrown away. I accept the force of Mr Martin SC's submissions that an order which expressly refers to costs incurred by a party "solely" in relation to causes of action that have been abandoned may itself be productive of injustice. In those circumstances, I have come to the view that the appropriate exercise of my discretion is do no more than make the time-honoured order that the plaintiffs should pay the defendants' costs thrown away by reason of the amendments. That is a form of order which is well understood by costs assessors, although perhaps giving rise in particular cases to difficult decisions about how particular costs are to be regarded. That is unavoidable. Nevertheless, it seems to me to be the proper business of costs assessors and a task with which they are well familiar.

Costs to be assessed and payable forthwith? 38This brings me to the third aspect of the costs applications, namely whether any or all of the costs which I propose to order the plaintiffs to pay should be ordered to be assessed and payable forthwith. 39This question is governed by UCPR part 42 rule 42.7: (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including: (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. (2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings. 40It will be apparent from the terms of that rule that the usual position in relation to the costs which I am considering is that they do not become payable until the conclusion of the proceedings, unless the Court orders otherwise. 41The factors which generally inform the exercise of the discretion to otherwise order were considered by Barrett J (as his Honour then was) in Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1. His Honour identified three categories of cases: (1)where the particular application the subject of the costs order is made before the conclusion of the proceedings and represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect; (2)whether there has been some unreasonable conduct on the part of the party against whom costs have been ordered; (3)whether the costs order is being made at a stage of the proceedings when their final disposition was a long way off. 42The third defendant also drew my attention to a fourth category referred to by Professor Dal Pont in his work on the Law of Costs, namely that the order would not work hardship on the party liable but not making it would prejudice the party entitled to the costs. 43It was submitted for the third defendant that the present case fell within the first category considered by Barrett J in Morningstar, ie that the present application represents a separately identifiable matter or could be viewed as the completion of a discrete aspect. On the other hand, Mr Campbell SC, for the plaintiffs, submitted that this was an amendment application which, like many such applications, was a step along the road in the overall management of the proceedings and did not bear a character which brought it within the first category referred to by Barrett J. 44In my view, the answer to this question turns upon how substantial the particular application is in its effect upon the proceedings. While I acknowledge that in many respects the underlying factual substratum of the case which is now sought to be brought is exactly the same as that which underpinned earlier iterations of the plaintiffs' pleading, there can be no doubt, to adopt the plaintiffs' own language, that the present pleading represents a fresh start. Substantial conceptual changes have been made which do, in my view, allow the present application to be substantially characterised as the completion of a discrete aspect of the proceedings. 45Turning to the second factor referred to by Barrett J, I am not persuaded that there has been any unreasonable conduct on the part of the plaintiffs themselves. 46In relation to the third factor, whether or not the ultimate disposition of the proceedings is a long way off, I accept that these proceedings obviously have a long way to go. 47In relation to the fourth factor suggested by Prof Dal Pont, I do not have sufficient evidence before me to make a proper finding as to the respective positions of the parties in terms of hardship to one and lack of prejudice to the other. 48However, the exercise of the discretion is not as simple as using the factors identified by Barrett J as a checklist. The satisfaction of any one or all of them in any combination in a particular case may or may not be sufficient to justify the discretion being exercised to make costs payable forthwith. For example, in this case the factor of the completion of a discrete aspect is, in my view, satisfied, but not as clearly as it might be in other proceedings. I accord some determinative weight to Mr Campbell's submission that, at least in part, the present applications do bear the character of a step along the way. 49Another matter which I need to take into account is the general requirement for the discretion under rule 42.7 to be exercised having regard to the overriding purpose of s56(2) of the CP Act. In the circumstances of this case, I give that consideration paramount weight for this reason. In my view, putting the parties in a position where what might be termed a satellite dispute will be generated if an order for the assessment and payment of costs forthwith is made will be contrary to the overriding purpose. What will facilitate that purpose is not the opening up of a second front in relation to the assessment of what could be a very large amount of costs covering a very long period of time, but rather managing these proceedings in a way that will focus the minds and efforts of the parties on actually getting on with the case as ultimately pleaded by the plaintiffs. 50The scope of the subject matter of a costs to be assessed and paid forthwith order is an important part of the exercise of the discretion. My attention was drawn to an order made by the Chief Judge earlier in these proceedings for the costs of a particular hearing day to be assessed and paid forthwith. That is understandable when the scope of the inquiry as to what those costs were is relatively contained. In this case, if I were to accede to a costs forthwith order, the scope of the inquiry would cover a great deal of work over a period of years since the inception of the proceedings. I regard diverting the parties' attention to such matters at this stage as being inimical to managing these proceedings to achieve the overriding purpose. 51For these reasons, I decline the application to make the costs, which I will otherwise order to be paid by the plaintiffs, costs which should be assessed and paid forthwith.

Amendments 10 February 2014 - Number one judgment in a series of judgments Amended paragraphs: Case title - [No 1] added to end of case title 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: 10 February 2014