[2009] HCA 27
Boardman v Phipps [1967] 2 AC 46
Clay v Clay (2001) 202 CLR 410
Source
Original judgment source is linked above.
Catchwords
[2009] HCA 27
Boardman v Phipps [1967] 2 AC 46
Clay v Clay (2001) 202 CLR 410
Judgment (4 paragraphs)
[1]
Solicitors:
Woolf Associates (Plaintiffs)
Coyne Legal (First Defendant)
Aubrey F Crawley & Co (Second and Third Defendants)
K&L Gates (Second Cross-Defendant)
File Number(s): 2015/362975
[2]
Judgment
GLEESON JA: On the eighth day of the trial of this proceeding and immediately prior to the commencement of the plaintiff's closing oral argument, Ms King, counsel for Mrs Helen Bega, made an oral application to re-open her case to amend the second cross-claim by Mrs Bega to include two further particulars of alleged breach of fiduciary duty by the cross-defendant, Mr Charles Ciappara. The only evidence relied upon in support of that application was an affidavit of Mr Glenn Coyne, the solicitor for Mrs Bega, sworn on 7 June 2017.
The application was opposed by Mr Emmett, counsel for Mr Ciappara.
At the conclusion of oral argument, I refused Mrs Bega's application to amend her second cross-claim and indicated I would deliver my reasons in due course. My reasons for refusing that application follow.
By way of background, Mrs Bega is the first defendant in the proceeding commenced on 10 December 2015 by Lauvan Pty Ltd and Mittabell Pty Ltd (the lenders) seeking to recover a loan of $1,000,000 plus interest purportedly advanced by the lenders to Mrs Bega under a facility agreement dated 2 April 2015, and to enforce a mortgage given by Mrs Bega over her property at Denham Court as security for her obligations under the facility agreement.
On 6 October 2016 the proceeding was fixed for trial for five days to commence on 8 May 2017. On 5 April 2017, Mrs Bega was ordered to file any proposed cross claim against Mr Ciappara by 10 April 2017. She did so on 11 April 2017, obtaining leave to file out-of-time. Mr Ciappara is a solicitor and partner of the firm known as Sarvaas Ciappara Lawyers.
By her second cross-claim, Mrs Bega asserted that on or about 1 April 2015 she retained Mr Ciappara to provide legal advice in relation to the mortgage and the facility agreement. Mrs Bega pleaded that Mr Ciappara owed her duties as a fiduciary and to exercise reasonable care, that he breached those duties, and that she has suffered loss and damage as a result of those breaches of duty.
The allegation of breach of fiduciary duty was pleaded and particularised in par 10, which is set out below. The underlined particulars (c) and (d), are the additional particulars which were sought to be added on the amendment application:
[10] In breach of the fiduciary duty not [sic] to avoid conflict with the duties owed to the client, the Cross-Defendant had a material personal interest in the transaction on which he was advising.
Particulars
(a) The cross-defendant was a director of Causidicus Fessus Pty Ltd which had purchased units 602 and 702 in the Allure Apartments (as defined in the Statement of Claim).
(b) The wife of the cross-defendant was a 50% shareholder of Causidicus Fessus Pty Ltd which had purchased units 602 and 702 in the Allure Apartments.
(c) Causidicus Fessus Pty Ltd had signed an Offset Deed with South Townsville Developments Pty Ltd in relation to legal services provided by the cross-defendant to parties other than South Townsville Developments Pty Ltd.
(d) The cross-defendant was or should have been aware that in the event of South Townsville Developments Pty Ltd's liquidation that the Offset Deed might be regarded by a liquidator of South Townsville Developments Pty Ltd as being a voidable transaction.
By his defence filed 9 May 2017, Mr Ciappara denied the allegations in par 10 of the second cross-claim.
The oral submissions by counsel for Mrs Bega in support of the amendment application were relatively brief. It was submitted that there had been no tactical decision to exclude the additional particulars which were sought to be added in sub-pars (c) and (d). It was argued that it only became clear that Mr Ciappara had the interest in South Townsville Developments Pty Ltd (STD), the subject of the new particulars, through the cross-examination of Mr Mullins on the fourth day of the trial (11 May 2017) (T301, line 22-T303, line 23), and cross-examination of Mr Ciappara on the sixth day of the trial (1 June 2017) (T439, line 49-T440, line 23). It was further submitted that the affidavit of Mr Coyne established that the legal representatives for Mrs Bega did not know of the existence of the offset deed until the evidence of Mr Mullins given in cross-examination on 11 May 2017.
In opposing the amendment application, counsel for Mr Ciappara relied upon three matters. First, that the proposed particulars do not establish a conflict between Mr Ciappara's personal interest and duty. The second matter is delay, and the third matter is material prejudice.
The first matter is essentially a pleading point directed to the need for the alleged conflict of interest and duty to amount to "a real and sensible possibility of conflict": Boardman v Phipps [1967] 2 AC 46 at 124; or a "sensible, real or substantial possibility of conflict in the necessary sense": Clay v Clay (2001) 202 CLR 410; [2001] HCA 9 at 436. Mr Emmett submitted that there are a number of additional facts which would need to be pleaded as material facts, rather than particulars, to establish a conflict of interest and duty based on the additional particulars in sub-par (c) and (d), including that there was an extant threat of a liquidator being appointed to STD at the time the facility agreement was entered into and that Mr Ciappara had knowledge of that matter and the matters referred to in particulars par 10(c) and (d).
There is substantial force in the submission that the proposed additional particulars are deficient, however, it is not necessary to determine this question in light of the other objections raised by Mr Ciappara.
As to delay, Mr Emmett submitted that there was no adequate explanation for the delay in making the amendment application. It was emphasised that Mrs Bega was on notice of the existence of offsets against the purchase price for units 602 and 702 in the Allure Apartments, if not a specified deed, because that information was elicited when counsel for Mrs Bega cross-examined Mr Mullins on the fourth day of the trial. That may be accepted. Mr Mullins gave evidence in cross-examination concerning the settlement statement for unit 602, which included an offset amount against the purchase price. Mr Mullins indicated that although he was not certain of the detail, he was told by Peter Bega that it related to legal fees which were outstanding to Mr Ciappara and that Peter Bega had agreed to give him some offset against (the purchase price of) a unit.
Notwithstanding notice of those matters, Mrs Bega took no step at that time, either to call for production of any document recording the "offset", or to issue a notice to produce or subpoena for any such document.
In response, Ms King, counsel for Mrs Bega, submitted that it would have been a fishing exercise to subpoena documents relating to the "offset" amounts after Mr Mullins had given his evidence. I do not agree. Given the evidence of Mr Mullins, a notice to produce to Mr Ciappara or a subpoena to Causidicus Fessus Pty Ltd, would have been for a legitimate forensic purpose.
Ms King also argued that Mrs Bega's legal representatives were only on notice about an offset, not a deed. That distinction is not compelling. Mrs Bega's legal representatives were aware, from the evidence given by Mr Mullins, that there was an arrangement between Peter Bega and Mr Ciappara to offset monies owed by Mr Bega to Mr Ciappara for legal fees against the purchase price of unit 602. No steps were taken by Mrs Bega's lawyer to seek to obtain any relevant documents recording the offset arrangement, and there is no affidavit evidence explaining the inaction on the part of Mrs Bega's lawyers.
Next, Mr Emmett submitted that since Peter Bega knew from the beginning about the offset that is now sought to be advanced by Mrs Bega as the basis for a conflict of interest and duty, and given Mrs Bega's evidence in cross-examination that her husband is in charge of the litigation on her behalf, there is no reason for the delay in raising the new claim.
In response, Ms King submitted that the legal representatives for Mrs Bega do not take instructions from Peter Bega. Whether that is so or not is not really to the point. What is significant is the close relationship between Peter Bega and his wife, Mrs Bega, and Peter Bega's involvement with respect to the decision by Mrs Bega to bring the cross-claim against Mr Ciappara alleging a breach of fiduciary duty. Further and importantly, Mr Coyne's affidavit is silent on the question of whether any enquiry was ever made of Peter Bega (and if so, when, and if not, why not) concerning the offset arrangement between Peter Bega and Mr Ciappara, referred to by Mr Mullins in cross-examination.
Next, Mr Emmett submitted that the latest that the existence of the offset deed and therefore, the facts underlying the proposed additional particulars, would have been known to Mrs Bega's lawyers was 24 May 2017, when Mr Ciappara's affidavit was served exhibiting a copy of the two offset deeds. That was over a week prior to the second tranche of cross-examination of witnesses by counsel for Mr Ciappara, which commenced on 1 June 2017. No explanation was given by Mr Coyne for the delay between 24 May 2017 and 7 June 2017.
As to prejudice, Mr Emmett submitted that Mrs Bega had allowed Mr Ciappara to cross-examine Peter Bega, Mrs Bega and Aidan Bega during the second tranche of cross-examination and to take the forensic decision not to cross-examine other witnesses (Mr Mullins and Mr Stathakis), before seeking leave to amend her cross-claim after the conclusion of the evidence. It was submitted that Mrs Bega should not be heard to complain about the speed with which the second cross-claim had come on for hearing, given that Mrs Bega is responsible for the late joinder of Mr Ciappara.
Ms King did not dispute that Mr Ciappara would be prejudiced if the late application to amend the second cross-claim was permitted. Nor did Ms King suggest that such prejudice could be remedied, such as by imposing as a condition of the grant of leave to amend the cross-claim that witnesses be recalled (for a second time) and made available for cross-examination by counsel for Mr Ciappara. Even if that course had been suggested by Mrs Bega and such a condition was imposed as a condition of the grant of leave to amend that would have necessitated an adjournment of the proceeding. Putting aside the matters next referred to there was no offer by Mrs Bega to pay the costs of all parties thrown away by reason of any adjournment, if that course had been taken.
Section 56 of the Civil Procedure Act 2005 (NSW) provides that the overriding purpose of the Act and the rules of Court is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. The Court is required to give effect to that overriding purpose, and parties are under a duty to assist the Court in furthering that purpose: s 56(2) and (3). Section 58 requires the Court to act in accordance with the dictates of justice, set out in sub-sec (2), in deciding whether to allow the amendment of a document.
Section 64 deals with amendment of documents generally. Subject to s 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings: s 64(2).
It is well-accepted that the considerations relevant on an amendment application include the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction: Civil Procedure Act 2005 (NSW), s 58(2)(vi); Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303 at [51]-[57]; see also Itek Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207; [2002] NSWCA 104.
It has been said following the High Court's decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27, that the statutory duty imposed under the Civil Procedure Act and in particular, s 56, "constitutes a significant qualification of the power to grant leave to amend a pleading under s 64 of the Civil Procedure Act 2005": Dennis v Australian Broadcasting Corp [2008] NSWCA 37; see also Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [36]-[41].
The interests of justice require balancing the interests of the cross-claimant in permitting amendment against doing justice to the cross-defendant with regard to the overriding purpose specified in s 56.
Here, the explanation for the delay by Mrs Bega in making the amendment application is inadequate; Mr Ciappara's inability to cross-examine relevant witnesses on the new allegations amounts to significant prejudice in both nature and degree; and such prejudice could not be remedied having regard to the stage which the trial had reached, and given the absence of any offer by Mrs Bega (as a condition of the grant of leave to amend) to pay the costs of all parties thrown away by reason of the adjournment that would have been necessary to facilitate the recalling of all relevant witnesses required for cross-examination by counsel for Mr Ciappara.
For the above reasons, the application by Mrs Bega was refused.
[3]
Amendments
23 February 2018 - Typographical errors to the following:
[4]
[8], [84], [114], [145], [176], [251], [252], [286], [288], [305], [306], [367], [368], [381], [384], [392], [458].
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Decision last updated: 26 February 2018