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[2016] VSC 61
General information, not legal advice.
Supreme Court of Victoria
2016-03-01
DERHAM AsJ
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Leave to amend statement of claim - Extent to which plaintiff can depart from indorsement on writ - Renowden v McMullin [1970] HCA 24; (1970) 123 CLR 584 -
Supreme Court (General Civil Procedure) Rules 2015 Order 14, Order 36.
1 The plaintiff, Willmott Forests Ltd ('WFL'), was a publically listed company carrying on a business operating managed investment schemes concerning forestry. WFL is now in liquidation. Speaking very generally, WFL sues its former auditor, Armstrong Dubois Pty Ltd ('Auditor' or 'defendant'), for its failure to conduct a proper audit of WFL's financial statements, and provide audit reports as required under the Corporations Act 2001 (Cth) ('Corporations Act'), in respect of three financial periods ending 30 June 2007, 2008 and 2009 ('Relevant Audit Years').
2 By summons filed 9 April 2015, WFL seeks leave pursuant to r 36.04 of the Supreme Court (General Civil Procedure) Rules 2015 ('Rules') to file and serve a proposed further amended statement of claim dated 30 January 2015 (and served on the Auditor on 9 February 2015) ('FASOC').
3 The Auditor opposes the grant of leave and in so doing raises a number of questions which, together with my short answers, are as follows:
(a) does the FASOC seek to revive claims made in the indorsement to the writ filed on 14 August 2013 ('indorsement'), which were subsequently abandoned in the statement of claim filed 24 September 2014 ('SOC') and the amendment statement of claim filed 5 November 2015 ('ASOC')? ('the abandonment argument').
(b) does the FASOC makes allegations which travel beyond the perimeter set by the indorsement on the writ? ('the perimeter argument').
Answer - No - with one exception - being the claim under s 1041H of the Corporations Act in respect of the 2009 audit year. That claim was not statute barred when first introduced in the SOC and there is no good reason why an amendment to it in the FASOC should not be allowed;
(c) does the FASOC fail to disclose justiciable causes of action or is it embarrassing as a pleading; ('the pleading points').
Answer - Yes, and the following paragraphs are embarrassing: 24D, 24E, 25, and 26 to 38.
4 In consequence, WFL will not be given leave to file or serve the FASOC in its current form. There will be orders for the filing and service of a second proposed FASOC and, having regard to my observation below, the paragraphs of the ASOC that correspond with the paragraphs of the FASOC I have indicated to be embarrassing will also be struck out.
5 The proceeding was commenced by a generally indorsed writ filed on 14 August 2013. The writ was not served until 14 August 2014, there having been an order extending the validity of the writ. The SOC was served on 24 September 2014. The defendant identified a number of alleged defects in the SOC and invited WFL's solicitors to file an amended pleading which remedied the defects.[1] WFL's solicitors indicated they would do so and with the concurrence of the solicitors for the defendant WFL filed its ASOC on 5 November 2015. It did not require leave of the Court to do so.[2]
6 The filing and service of the ASOC led the defendant to apply to strike it out (by summons filed 14 November 2014). The application was based on the grounds that: the claims were beyond the indorsement of claim to the writ, did not disclose a cause of action, may prejudice, embarrass or delay the fair trial of the proceeding, and/or are otherwise an abuse of process of the Court. The defendant's summons came on for directions before Associate Justice Zammit[3] on 2 December 2014. Directions were then made for the filing of outlines of submission and the hearing was fixed for 15 December 2014.
7 The defendant provided submissions in support of that application dated 8 December 2014. There then followed exchanges of correspondence on a without prejudice basis in consequence of which on 12 December 2014, Zammit AsJ ordered by consent that the Auditor's summons filed 14 November 2014 be dismissed (but that the plaintiff should pay the costs of that summons up to and including 11 December 2014), and that WFL should file and serve a proposed FASOC by 30 January 2015. On 2 February 2015, WFL filed its proposed FASOC. No complaint is made concerning the late filing and service of the proposed FASOC.
8 The parties engaged in further correspondence regarding the sufficiency of the FASOC but reached no agreement. It is apparent that the Auditor continued to object to the form and substance of the proposed FASOC. This lead to WFL filing a summons on 9 April 2015 seeking leave to file and serve the FASOC. In support of its summons, WFL filed an outline of submissions on 29 June 2015 ('WFL submissions') and an affidavit of Shaun Stuart Clement affirmed 6 July 2015.[4] In opposition to the summons, the Auditor filed an outline of submissions on 22 June 2015 ('Auditor's submissions') and affidavits of Andrew Charles Brennan sworn 19 June and 13 July 2015. Mr Brennan's affidavit of 19 June 2015 gives an account of the events leading to the application by WFL to file the FASOC, which I have drawn upon to give the account above. It also includes material relating to the prejudice that will be suffered by the defendant by the amendments because of documents that can't be found, the limited assistance that can be given by persons involved in the audits because of their illness, unavailability or death.[5]
9 Counsel for the Auditor, Mr Harris QC, contended that the objections to and criticisms of the FASOC applied, in most cases, also to the ASOC. He therefore contended that to the extent they did apply the ASOC should be struck out as if the hearing included an application to strike out the ASOC. Counsel for WFL, Mr Craig, resisted this proposition. In the end, Mr Harris QC made oral application to strike out the ASOC to the extent that his submissions concerning the FASOC applied to it.
10 Because the questions raised by the Auditor involve a detailed consideration of the indorsement and the pleadings, and the consideration of a range of substantive and pleading matters, it is in my view clearly in the interests of the just, efficient, timely and cost effective resolution of the disputes between WFL and the Auditor regarding the claims, and their formulation, raised in both the ASOC and the FASOC that the determinations I make in respect of the FASOC, and whether leave should be given to file and serve it, should apply so far as is applicable to the ASOC. The result will be that certain paragraphs of the ASOC will be struck out with a right to replead.
11 The hearing of WFL's application took place on 13 and 17 July 2015 and judgment was reserved. On 10 August 2015, because of the anticipated delay in delivering judgment, I granted the Auditor leave under r 11.05(2) of the Rules to issue a third party notice against several former Directors of WFL.
12 It is necessary for the purposes of understanding the parties' arguments to give a brief account of the claims made in the indorsement, the SOC, the ASOC and the FASOC.
13 The indorsement is set out rather like a statement of claim but is headed 'Indorsement of Claim' so as to make clear that it is not a pleading under the Rules. It alleges the incorporation of the plaintiff and defendant and their identities. It then alleges:
(a) a retainer entered into in about July 1999 by which WFL engaged the auditor to audit the financial reports of WFL and its controlled entities ('the 1999 Retainer');
(b) the terms of the 1999 Retainer, including that the Auditor would perform the 1999 Retainer with all due care and skill and in accordance with its obligations under the Corporations Act, the Australian Accounting Standards and the Corporations Regulation 2001 ('Regulations');
(c) that the defendant was obliged to audit WFL's affairs in order to form the opinion required by s 307 of the Corporations Act, provide the report required by s 308 of that Act and use reasonable care and skill in the conduct of the audit and in making the audit report;
(d) that the defendant provided audit reports to WFL for the Relevant Audit Years and in relation to each audit report sets out the substance of that report;
(e) that in breach of the 1999 Retainer the defendant failed to exercise due care and skill and failed to perform the audit in accordance with the relevant legislation and accounting standards;
(f) by reason of the breaches, WFL has suffered loss and damage. The particulars of loss and damage are that WFL relied on the audit reports in continuing to trade and incurring increased liabilities;
(g) that in undertaking the audits and making the audit reports the Auditor was in breach of a tortious duty to use reasonable care and skill in the conduct of the audits and in the making of the audit reports by reason of which WFL has suffered loss and damage;
(h) that the defendant represented to WFL that its financial reports were in accordance with the relevant legislation and accounting standards and that the defendant had exercised due care and skill in forming the opinions expressed in the audit reports;
(i) that these representations were made in trade or commerce and were false and by reason of making those representations the defendant engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 and/or s 53 of the Trade Practices Act 1974 ('the Trade Practices Act') and/or s 9 or 12 of the Fair Trading Act 1999 (Vic) ('the Fair Trading Act'); and
(j) that in consequence of these contraventions WFL suffered loss and damage.
14 In the SOC dated 24 September 2014, after preliminary matters (including the statutory obligations imposed upon WFL to prepare financial reports which complied with the provisions of the Corporations Act and which were required to be audited in accordance with that Act) it is pleaded that:
(a) the Auditor was retained by WFL to audit the financial report of WFL and provide an independent audit opinion to WFL in respect of each of the Relevant Audit Years. Each audit period is pleaded separately and defined as the 2007 Retainer, 2008 Retainer and 2009 Retainer, respectively. There is no express reference to the 1999 Retainer. The particulars are that each retainer is evidenced by a performance of the audit by the Auditor in each financial year and the provision of the independent audit report;
(b) the terms of each retainer are set out compendiously in one paragraph and are that the Auditor would:
(i) conduct the audit pursuant to the Corporations Act and other relevant statutory and other requirements with the objective of expressing an opinion on the financial report;
(ii) conduct the audit in accordance with the Auditing Standards to provide reasonable assurance as to whether the financial report for the relevant year is free from material misstatement;
(iii) undertake procedures to form an opinion whether in all material respects the financial report for the relevant year is presented fairly in accordance with the Corporations Act, Regulations, Accounting Standards and International Financial Reporting Standards;
(iv) report to WFL and its members whether in its opinion the financial report for the relevant year is prepared in accordance with the Corporations Act, complies with the Accounting Standards and gives a true and fair view of the financial position and performance of WFL;
(v) use reasonable skill and care in the performance of the audit and in the provision of the independent audit opinion; and
(vi) comply with the auditor's statutory obligations in conducting the audit;
(c) the Auditor was obliged to comply with various statutory requirements under the Corporations Act, with particular reference to ss 307, 307(b) and 308 ('Statutory Auditing Obligations');
(d) the Auditor held itself out as having special skills, knowledge and expertise in relation to auditing and the provision of audit services and facts are set out with a view to establishing a tortious duty to exercise reasonable care and diligence in carrying out the audit and review work, expressing the opinions in respect of WFL and its financial reports, providing audit reports and complying with the Auditor's Statutory Auditing Obligations;
(e) in each of the Relevant Audit Years an individual, acting on behalf of the Auditor, signed an independent audit report providing an unqualified audit opinion in respect of WFL's financial reports. The content of the audit reports are set out in a summary way, and are alleged to constitute representations by the Auditor that:
(i) in his opinion they were prepared in accordance with and complied with the Corporations Act, Regulations and applicable Accounting Standards and gave a true and fair view of the financial performance and position of WFL as at the end of that year ('Financial Report Representations');
(ii) that the Auditor conducted the audit in accordance with the Australian Accounting Standards, had exercised reasonable care, skill and diligence in performing the audits and in making the Financial Report Representations, and/or there existed a reasonable basis for the Auditor to state his opinion that the Financial Reports were prepared in accordance with the Corporations Act and Regulations and Standards and gave a true and fair view of the financial performance of WFL at the end of each relevant year ('Financial Conduct Representations'); and
(f) each financial report represented that WFL had non-current assets consisting of freehold land at cost with certain carrying values, rising each year from 2007;
(g) between 2007 and 2009 WFL was conducting registered and unregistered managed investment schemes ('Schemes'). The structure of the Schemes is then set out as involving 20 to 25 year-long lease agreements between WFL and investing Growers and the payment by the Growers of below market rent under those long-term leases. By reason of the long-term leases and the rental obligations under them, it is alleged that certain freehold land was impaired for the purposes of AASB 136, being one of the relevant accounting standards. In the result, that freehold land was carried in each of the relevant years' financial reports at a value in excess of the recoverable amount calculated in accordance with that Standard. It is alleged that if the accounting standard was properly applied, each financial report should have recorded an impairment loss in respect of the freehold land calculated by reference to the amount by which the carrying value exceeded the recoverable amount;
(h) in consequence of these allegations it is further alleged that in the 2007 financial report the carrying value of the 2007 freehold land ought to have been reduced by about $49 million, the value of the 2008 freehold land by about $58 million and the 2009 freehold land by about $79 million;
(i) because of these matters, the Auditor failed to provide an audit report which was the product of the exercise of reasonable skill and care, and failed to provide an audit report which was in accordance with the Corporations Act and the Accounting Standards, and thus breached the retainer for each relevant year, as defined, and was negligent in breach of the tortious duty of care;
(j) in the alternative, because there was no reasonable basis for each of the representations contained in the audit reports the Auditor engaged in misleading or deceptive conduct, or conduct which was likely to mislead or deceive, in contravention of the relevant provisions of the Trade Practices Act, the Fair Trading Act and/or s 1041H of the Corporations Act in respect of each Relevant Audit Year;
(k) as a consequence of the breaches of the retainers, the negligence and the statutory contraventions in respect of each Relevant Audit Year, WFL suffered loss and damage. Particulars are that the three financial reports in question recorded that WFL had sufficient profits to pay dividends under s 254T of the Corporations Act and, had an impairment loss been recognised as it should have been, in 2007 it would have carried forward to the 2008 and from the 2008 to the 2009 valuations of freehold land which would have reduced the ability of WFL to pay all or a part of the cash dividends paid between 2007 and 2010. Different sums apply in respect of each year, the sum of about $32 million arising from the breaches in the 2007 year, $24 million arising from the breaches in the 2008 year and $15 million from the breaches in the 2009 year.
15 The prayer for relief claims damages at common law, pursuant to s 82 of the Trade Practices Act or s 159 of the Fair Trading Act or s 1041L of the Corporations Act.
16 The ASOC is substantially the same as the SOC with minor changes so that:
(a) where previously it was alleged that the financial reports represented that WFL had non-current assets of freehold land at cost in a certain amount in relation to each financial year, it is now alleged that the financial report 'stated' that fact;
(b) that the allegation that the Growers paid below market rent was changed to a de minimis rent;
(c) changes are made to include an allegation that the Auditors knew or ought to have known that the freehold land was impaired for the purposes of AASB 136 and to include particulars of the alleged knowledge; and
17 The FASOC follows the structure of the SOC and ASOC but introduces in relation to the separate allegations of a retainer in each of the relevant financial years that the Auditor was retained pursuant to a general retainer which commenced in or about July 1999 and which required the Auditor, in respect of each relevant financial year to audit WFL's financial reports and provide an independent audit opinion in respect of each financial year. It also anchors the representations which are alleged to be constituted by the audit reports to conduct in trade or commerce for the purposes of the Trade Practices Act or the Fair Trading Act. Further, it alleges that these representations constituted statements of opinion which could reasonably be regarded as intended to influence a person or group of persons in making a decision in relation to WFL's share or its managed investment schemes for the purposes of ss 766A(a) and 766B of the Corporations Act and therefore constituted conduct in relation to a financial service for the purposes of s 1041H of that Act.
18 After the pleading of the structure of the Schemes, the following additional allegations are made:
(a) that in the course of the 2007 audit, a model for lease income (defined as the Lease and Maintenance Model) was prepared by WFL and was reviewed or available for review by the Auditor for the Relevant Audit Years;
(b) the Lease and Maintenance Model revealed a very significant negative difference between the revenue stream from the long term leases under the Schemes and the cost of the freehold land leased;
(d) applying AASB 136 to the difference between the revenue stream from the long term leases under the schemes and the cost of the freehold land, that land exhibited indications of impairment for the purposes of that Standard and the value of the land in each financial report was not revalued as it should have been;
(e) the Auditors knew or ought to have known that the freehold land was impaired in each Relevant Audit Year;
(f) these allegations then feed into the existing allegations (made in the SOC) that the freehold land was carried in each financial report for 2007, 2008 and 2009 at a value in excess of the recoverable amount calculated under AASB 136 and should have been carried at lower value resulting in a loss in the profit and loss account; and
(g) after the pleading of breach by the Auditors of the retainers, tortious duty of care and statutory duties, it is alleged that had the impairment loss been recognised in each financial report, WFL would not have been able to and would not have paid dividends in fact paid in respect of the 2007-2010 financial years.
Indorsement of claim on writ
(1) A writ shall contain an indorsement of claim.
(2) The indorsement of claim shall be -
(a) a statement of claim; or
(b) a statement sufficient to give with reasonable particularity notice of the nature of the claim and the cause thereof and of the relief or remedy sought in the proceeding.
(3) An indorsement of claim on a writ shall constitute a statement of claim if, but only if, it is headed "Statement of Claim".
20 Thus, if a proceeding is commenced by writ it must be done in one of two methods. Either the writ must be endorsed with a statement of claim, which is a pleading,[6] or an indorsement, which is not a pleading. They are different in kind and consequences. The indorsement must comply with r 5.04(2)(b), that is it must be a statement sufficient to give with reasonable particularity notice of three things:
(a) first, the nature of the claim. This refers to the foundation for the relief or remedy claimed;[7]
(b) second, the cause thereof. The word 'cause' is not directed to the physical acts which caused the injury or loss in question but to the cause of action;[8] and
(c) third, the relief or remedy sought in the proceeding.
21 The reference in the sub-rule to 'reasonable particularity' is not a reference to 'particulars' in the sense that word is used in pleadings, to distinguish between material facts and particulars. The word is used in its natural and ordinary meaning of 'detailed', so that reasonable detail is given sufficient to give notice of the three elements referred to above.
22 Order 14 of the Rules provides for the service of pleadings. Rule 14.01 provides that no statement of claim shall be served where the indorsement of claim on a writ constitutes a statement of claim in accordance with r 5.04. Because the indorsement in this case does not constitute a statement of claim in accordance with r 5.04, r 14.02 applies. It provides that where the indorsement of claim on a writ does not constitute a statement of claim in accordance with r 5.04 and a defendant files an appearance, the plaintiff shall serve a statement of claim on that defendant within 30 days after the appearance, unless the Court otherwise orders.
23 Rule 14.03 makes provision for the alteration of claims endorsed on the writ, and provides:
Alteration of claim endorsed on writ
(1) Where a statement of claim is served in a proceeding commenced by writ, the plaintiff may therein alter, modify or extend the claim as endorsed on the writ without amendment of the indorsement.
(2) The Court may, by order, allow the plaintiff to serve a statement of claim the effect of which will be to add a new cause of action to or substitute a new cause of action for a cause of action disclosed in the writ.
(3) Where the Court makes an order under paragraph (2), it may further order that the plaintiff shall amend the indorsement of claim on the writ to make it conform to the statement of claim.
24 The effect of an indorsement after the filing and service of a statement of claim was discussed by Justice Croft in NLC Holdings Pty Ltd (in Liquidation) v State of Victoria,[9] where his Honour, referring to Renowden v McMullin,[10], held that an indorsement may be resorted to, for the purpose of resolving ambiguity of expression in the statement of claim but not otherwise. He went on to state:
Additionally, r 14.03(1), which provides that a proceeding may be modified or extended by a statement of claim without the need to amend the indorsement, does, in my view, indicate that subject to recourse to the indorsement for the purposes of resolving an ambiguity, the statement of claim is to be taken as the base or commencement of proceedings for all other purposes.[11]
25 The logic of this was explained by Owen J in Renowden.[12] It follows from the application of r 14.03(1). That rule, authorises a statement of claim served under r 14.02 to "alter, modify or extend the claim as endorsed on the writ without amendment of the indorsement." Where the statement of claim delivered does alter or modify the claim endorsed on the writ, for example by omitting a claim based on a breach of contract (as was the case in Renowden), then that claim is taken to have been abandoned even though the indorsement on the writ may be wide enough to include it, as it was in Renowden. If, later on, the plaintiff seeks to amend the statement of claim to re-introduce the abandoned claim, leave will be refused if at that date the action is statute barred, following the settled practice that previously existed because of the decision in Weldon v Neal.[13]
26 In Renowden the majority (Kitto, Menzies and Owen JJ) came to this conclusion, upholding the Full Court of the Supreme Court of Victoria. The minority judgment of Chief Justice Barwick and Justice McTiernan dissented on this vital point. It is from their reasons that the explanation of the role of the indorsement is often taken, as was the case for both parties in this application. But in reading those dissenting reasons it is necessary to bear in mind that it is the statement of claim first delivered (or filed) that is the base or commencement of proceedings for all other purposes, subject to recourse to the indorsement for the purposes of resolving an ambiguity. The reasons for the dissent, compendiously expressed, was that:
....O.20 r. 2 [the equivalent of r 14.03(1)] does not provide that the statement of claim amends the indorsement on the writ.... The rule in substance provides no more than that the plaintiff may set out in different ways the claim he has indorsed on the writ and that these changes in the expression of the claim and of the suggested legal explanation of it may be made without amending the indorsement. But of necessity they must be within the indorsement. To say the statement of claim may alter, modify or extend the plaintiff's claim without amendment of the indorsement does not justify the conclusion that when the statement of claim is delivered it does amend it: in particular it does not justify the conclusion that it amends the indorsement so as to make it no more than co-extensive with the assertions of the statement of claim. With due respect we are quite unable to accept the Full Court's reasoning or the conclusion to which it is said to lead. In our opinion because the claims sought to be inserted into the statement of claim were within the indorsement, time in respect of them had ceased to run and they were the proper subject of leave to amend.[14]
27 One might be forgiven for thinking that this approach makes more sense than the majority position. In their reasons leading up to this statement Barwick CJ and McTiernan J referred to the observation of Holroyd Pearce LJ[15] in argument in Pontin v Wood[16] that the Court, after making the rules of 1875 "believed that they had fore ever shaken off the shackles of technicality."
28 Both parties relied on oft quoted statements of Barwick CJ and McTiernan J in Renowden where they explained the role of the indorsement as follows:
The indorsement on the writ not being a statement of claim is not in the nature of a pleading. In our opinion, it should not be construed as such but read for what it is, namely, a notice of the nature of the plaintiff's claim, of the cause thereof and of the relief sought in the action. It suffices if it conveys that information generally and without particularity save where and to the extent to which particularity is indispensable to notify the required elements of the indorsement, e.g. on some occasions identification of the instrument upon which a claim is founded. But insufficiency of the indorsement does not render the writ a nullity. On the other hand, the indorsement marks out the perimeter or range of the area within which the plaintiff may express his claim in a formal fashion in his statement of claim whether as originally filed or as sought to be amended "The statement of claim is the specific way of stating the claim he has endorsed on the writ" per Dowse B. in Moore v. Alwill.
Where it is sought to strike out a statement of claim on the ground that it asserts a claim not included in the writ or to amend a statement of claim the indorsement of the writ governs or determines whether the statement of claim should be struck out or amended as the case may be. The right given to the plaintiff by O. 20, r. 2, of the Victorian Rules does not in our opinion require any modification of that statement. The alteration, modification or extension of the claim pursuant to this rule must, in our opinion, remain within the area marked out by the indorsement. The basic nature of the claim in respect of which the action has been commenced may not be changed, however much room there is under the Rules for variation in the statement of facts, or the extent of the remedy or relief sought. "A plaintiff may amend his statement of claim once without leave by which I understand that he may widen it or lessen it or express it in better terms, so long as he keeps it in substance consistent with what he claims in his writ" per Dowse B. in Moore v. Alwill. Notwithstanding the terms of O. 20, r. 2, a defendant, in our opinion, could properly object to an amended statement of claim which was sought to be justified by reference to that Rule, if it transcended the area of claim notified by the indorsement of the writ by bringing in a new and independent cause of action. Such a conclusion is, in our opinion, quite in conformity with the liberalisation in procedure which the introduction of the Judicature Act system is generally claimed to have intended and to have effected. A plaintiff whose statement of claim is struck out as exceeding the indorsement is not thereby deprived of the right to issue another writ. He could have no complaint if his statement of claim had asserted a claim which was outside the indorsement and was statute barred at the date of the delivery of the statement of claim, for as Lord Esher pointed out in Weldon v. Neal he could not employ his writ inadequately indorsed to cover the claim which had become statute barred....
"But, while the indorsement of the writ determines the essential nature of the action, it does not define, nor necessarily form part of the definition of the issues for trial. That is done by the pleadings of which the writ does not form part. When a statement of claim has been delivered it will in its finally amended form determine the issues for trial. It will not normally be necessary to refer to the indorsement on the writ of summons to ascertain such issues. Possibly, however, where there is ambiguity in the statement of claim the indorsement may serve to throw light upon the meaning of the statement of claim or of expressions in it. Only inasmuch as the statement can be said to be the initiation of specific issues for trial in the action, can it be properly said that the statement of claim supersedes the indorsement of the writ".[17]
29 A little later in the joint judgment, Barwick CJ and McTiernan J referred to the terms of Order 20, r 2 of the then Rules of the Supreme Court of Victoria which were, in substance, the same as r 14.03(1) of the current Rules:
Order 20, r. 2, of the Rules of the Supreme Court of Victoria which we have already mentioned provides that 'whenever a statement of claim is delivered the plaintiff may therein alter, modify or extend his claim without any amendment to the indorsement of the writ'. This, in our opinion, has the same effect as O. 18, r. 15(2), of the English Rules of the Supreme Court 1965 which says that 'A statement of claim must not contain any allegation or claim in respect of a cause of action unless that cause of action is mentioned in the writ, or arises from facts which are the same as, or included or form part of, facts giving rise to a cause of action so mentioned; but subject to that, a plaintiff may in his statement of claim alter, modify or extend any claim made by him the indorsement of the writ without amending the indorsement"[18]
30 It is convenient to summarise the principles that can be drawn from Renowden and the authorities referred to in it:
(a) an indorsement is notice of the plaintiff's claim, cause of action and relief sought and is not a pleading;
(b) an indorsement is general in nature, and need not identify the plaintiff's claim with any particularity;
(c) insufficiency of the indorsement does not render the writ a nullity;
(d) the indorsement marks out the perimeter or range of the area within which the plaintiff may express its claims later in the statement of claim;
(e) the statement of claim is the specific way of stating the claim the plaintiff has indorsed on the writ;
(f) the alteration, modification, or extension of the claim in the statement of claim must remain within the area marked out by the indorsement;[19]
(g) the basic nature of the claim contained in the indorsement cannot be changed, but the plaintiff has broad authority to widen, lessen or express in better terms its claim so long as the substance is consistent with the original claims contained in the indorsement;
(h) the indorsement on the writ determines the essential nature of the action, but neither defines, nor necessarily forms part of, the definition of the issues for trial;
(i) once a statement of claim is served it is the base document and, subject to recourse to the indorsement for the purposes of resolving an ambiguity, for all other purposes;[20] and
(j) unless the claims that are notified by the statement of claim fall within the notice given by the indorsement then the indorsement is required to be amended.
31 An amendment properly made takes effect from the date of the original document which it amends and not from the date when the amendment is made.[21] Thus, a new cause of action introduced by amendment will operate as if originally included in the proceeding when first commenced, and the defendant will thus be deprived of any limitation defence which might have been available if the plaintiff had been required to raise the cause of action in a fresh proceeding.[22]
32 The rule of practice in Weldon v Neal[23] has been displaced by statute and rules of court in Victoria. Rule 36.01 of the Rules provides, so far as relevant to the present matter:
General
(1) For the purpose of -
(a) determining the real question in controversy between the parties to any proceeding; or
(b) correcting any defect or error in any proceeding; or
(c) avoiding multiplicity of proceedings -
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.
(2) In this Order "document" includes -
(a) originating process;
(b) an indorsement of claim on originating process; and
(c) a pleading.
........
(6) Notwithstanding the expiry of any relevant limitation period after the day a proceeding is commenced, the Court may make an order under paragraph (1) where it is satisfied that any other party to the proceeding would not by reason of the order be prejudiced in the conduct of that party's claim or defence in a way that could not be fairly met by an adjournment, an award of costs or otherwise;
.....
(8) Paragraph (6), with any necessary modification, applies to an application under Rule 14.03(2).
33 Section 34 of the Limitation of Actions Act 1958 provides:
Abrogation of rule in Weldon v. Neal (1887) 19 Q.B.D. 394
(1) If a court would, but for the expiry of any relevant period of limitation after the day a proceeding in the court has commenced, allow a party to amend a document in the proceeding, the court must allow the amendment to be made if it is satisfied that no other party to the proceeding would by reason of the amendment be prejudiced in the conduct of that party's claim or defence in a way that could not be met by an adjournment, an award of costs or otherwise.
34 In relation to the operation of r 36.01(6) and s 34, the following propositions have been established:
(a) the rule and the section are remedial and should be given a beneficial interpretation - the widest interpretation which its language will permit;[24]
(b) although r 36.01(6) does not refer to the addition or substitution of a cause of action outside the limitation period, the power of the Court to allow an amendment which adds or substitutes a cause of action after expiry of the relevant limitation period is made clear by the reference in r 36.01(8) to r 14.03(2);
(d) together r 36.01(6) and s 34 direct the court in exercising its discretion to allow a party to amend a document in a proceeding to disregard the expiry of any limitation period provided it is satisfied that any other party to the proceeding would not by reason of the amendment be prejudiced in the conduct of that party's claim or defence in a way that could not be fairly met by an adjournment, an award of costs or otherwise;
(e) prejudice to the opposing party by reason of the amendment proposed is prejudice in the conduct of the other party's claim or defence, that is, in the handling or management of the claim or defence, for instance, arising from the death or disappearance of a vital witness;[27] or prejudice in the exercise of rights against other parties who might be liable to contribute;[28]
(f) an amendment which merely deprives the other party of a limitation defence does not give rise to such prejudice;[29] and
(g) although neither the rule nor the section identify upon whom the burden of satisfaction is cast, the fact that the Court must be satisfied that if the amendment sought were allowed no other party would thereby be prejudiced in any relevant sense, the burden effectively rests with the plaintiff.[30]
35 In Wardley Australia Limited v The State of Western Australia,[31] the High Court made it clear that it did not approve of applications concerning limitation questions on an interlocutory basis. Chief Justice Mason, Dawson, Gaudron and McHugh JJ said:
We should, however, state in the plainest of terms that we regard it as undesirable that limitation question of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question.[32]
36 After referring to these authorities, Croft J in NLC Holdings held:
In my opinion it is not appropriate to take the limitation of actions issue further in the present proceeding for two reasons. The first is that the pleadings have not been completed and, consequently, it would be inappropriate to form any view on the limitation of actions issues prior to the matter being informed by a filed defence and a filed reply. Secondly, the shutting out of a claim on the basis of the operation of statutes of limitations is a serious matter affecting the position of all parties to a proceeding. In this respect I am very mindful of the position indicated by the High Court in Wardley Australia Limited v The State of Western Australia...[33]
37 I was referred to the decision of Ormiston JA in Agtrack (NT) Pty Ltd v Hatfield,[34] and particularly to the consideration of that decision by Croft J in NLC Holdings. In Agtrack, the Court of Appeal considered an application to amend pleadings, and the effect that would have on a limitation period. In NLC Holdings, Justice Croft considered Agtrack and made the following observations:
In my opinion the judgment of Ormiston JA in Agtrack (NT) Pty Ltd v Hatfield does not, in the present circumstances, detract from the general position as indicated in Wardley Australia Limited v The State of Western Australia. The question with respect to the application of the limitation of actions legislation is generally a matter for determination at trial, rather than in the course of interlocutory proceedings.[35]
38 His Honour then referred to passages from Agtrack, where Ormiston JA held:[36]
In my opinion, notwithstanding the very close similarity between the inserted section in each Limitation Act and the provisions of the 1986 rules, I am not persuaded that the new Rule was intended to have other than a procedural effect, or to do more than alter the nature of the discretion to be applied to a much broader discretion when considering amendments, which might otherwise appear to defeat limits laid down in limitations legislation....
My prima facie conclusion therefore is that r 36.01(6) was intended only to have a procedural effect designed to ensure the proper and fair consideration of applications to amend pleadings where, if the amending claim had been brought independently and out of time, that claim would have been automatically rejected as statute-barred pursuant to existing authority. The court now in the exercise of its discretion may look at the totality of the circumstances to resolve whether it is in fact fair to permit that claim to be introduced by way of amendment. It would never have been proper for the rules to have attempted more, but the concern was that the 'rule in Weldon v Neal' had been given so rigid an interpretation, especially in this State in Cutrona, that it might be perceived that, if amendment were effected solely by changes to rules of court, then a defendant's immunity or other rights pursuant to a limitations statute would be invalidly defeated by the abrogation of that 'rule', at least in certain circumstances. I would not, however, interpret a rule of court, such as the new Order 36, as permitting an amendment which clearly and directly took away rights given under a limitations act, with one, not unimportant, exception. For better or for worse, instead of merely ratifying and sanctioning the rules of court so that they might, as rules of practice have statutory force, Parliament went further in relation to the Victorian Limitation of Actions Act and, so it would seem, did that of the Northern Territory by its Limitation Act. To that extent the new rule should be treated as having a greater ambit, consistent with those Acts, namely that, in relation to limitation periods laid down by each Act and probably, though it is unnecessary for the present appeal to so decide, those otherwise laid down by the relevant legislature, a wider power has been given. That wider power does require the consideration of potential prejudice, although the new provisions appear to concentrate on the conduct of the trial rather than any inherent unfairness in allowing stale claims to be litigated, but again it is not necessary to resolve that for the purpose of this appeal.....
Here it is necessary to construe the rules only so far as will permit the court to exercise its discretion unfettered by the view formerly taken in this jurisdiction as to the 'rule in Weldon v Neal'. There must therefore, in my opinion, be a close connection between the claim which has already been instituted by the filing of the writ with the indorsed statement of claim and the claim which the respondent wishes to add by way of amendment, unless, of course, she wishes, and is able, to call in aid s 34 of the Limitation of Actions Act or its Northern Territory equivalent. In essence, for the discretion to be exercised favourably towards her under the rules, the new claim must arise out of the same facts or substantially the same facts as support the claims already pleaded. In truth, there will then be a mere amendment of an existing claim, albeit in the present case it involves a characterisation of the claim in a different way and in the form of a different cause of action, so long as it is a mere recategorisation (or change of legal theory) of the claim or a restatement in different legal terms of the alleged outcome of the essential pleaded facts."[37]
39 Finally, the principles applicable to the pleading points raised by the Auditor are well known. Both parties referred to Hoh v Frosthollow Pty Ltd,[38] where I have previously summarised the relevant principles. It is unnecessary to repeat them.
40 The Auditor argues that WFL is attempting to revive claims made in the indorsement that were abandoned in the SOC and the ASOC. It submits that leave to amend should be refused.
41 The Auditor points to several claims abandoned by WFL, which it is now 'trying to revive'. It submits:
(a) that WFL abandoned its reliance on the 1999 Retainer, alleged in the indorsement, when it delivered the SOC;
(b) in the SOC and the ASOC, WFL alleged three distinct retainers, one for each audit of the financial statements for the years ending 30 June 2007, 2008 and 2009. These alleged retainers include different and additional obligations to those pleaded in respect of the 1999 Retainer in the indorsement; and
(c) in the proposed FASOC WFL now seeks to return to those claims made in the indorsement under the July 1999 Retainer. WFL abandoned its claims under the 1999 Retainer when it filed and served its SOC (and affirmed this election in the ASOC), and should not be allowed to 'approbate and reprobate' in this way.[39]
42 Mr Harris QC, who appeared for the Auditor, illustrated the difference between the contract claim in the indorsement and the SOC by comparing the situation in Hall v Meyrick[40] as that case was explained by Owen J in Renowden,[41] and by reference to several other leading authorities.[42] The difference between the indorsement and the statement of claim in that case was that the indorsement alleged a retainer by the plaintiff alone of the defendant solicitor whilst the statement of claim alleged a joint retainer by the plaintiff and her deceased husband. After the expiry of the limitation period, the trial judge allowed an amendment back to a retainer solely by the plaintiff. On appeal this was reversed because the statement of claim was the only document to be looked at to see what the plaintiff was claiming, and the amendment had introduced a different cause of action after the limitation period had expired.
43 In this case, it was submitted that the retainer proposed to be pleaded in the FASOC, going back to a general retainer in 1999 as the base for the work performed in the three Relevant Audit Years, was a different cause of action from that pleaded in the SOC, which set out three separate and distinct retainers, one for each year. The Auditor also relied on the content of the duty of care alleged in the SOC (paragraphs 10 and 11) when compared with the indorsement (paragraphs 5 and 6) as revealing that the retainers pleaded in the SOC were different from the retainer referred to in the indorsement.
(a) although the SOC makes no express mention of a retainer by WFL of the Auditor in 1999, a fair reading of it does not identify any particular date for the retainer. It alleges that "the Auditor was retained to audit the financial report of WFL for the 2007 Financial Year and provide an independent audit opinion to WFL" in respect of that year. It then defines this as the 2007 Retainer, and pleads in the same form in relation to the other Relevant Audit Years. The particulars of the retainer are limited to the fact that the audit was conducted and the provision of the audit report (and that further particulars may be provided). The retainer is not said to have been a retainer entered into in 2007. It is merely defined as a 2007 retainer. The definition is an aid to cross referencing not for the purpose of identifying the date of the contract of retainer; and
(b) the re-introduction of the reference to the 1999 Retainer falls comfortably within the substance of the causes of action pleaded in the indorsement.[43] The SOC, ASOC and FASOC perform the role envisaged by the High Court in Renowden, namely, altering, modifying or extending the claims as indorsed on the writ but keeping them, in substance, consistent with those claims. WFL submits that the Auditor's approach ignores the differing roles between an indorsement and a pleading as explained by Barwick CJ and McTiernan J in Renowden, as referred to above.
45 The question is whether the plaintiff's reliance upon a retainer entered into in 1999 has been abandoned. This depends on whether the contractual claim in the proposed FASOC is within the claim notified in the SOC, as the base or commencement document, or is it a different one; and whether the contractual claim in the SOC is within the indorsement?
46 In my view the pleading in the SOC of the retainer or retainers is unclear and ambiguous. Each of the three defined retainers are equally capable of being based on a general retainer of the kind set out in the indorsement as they are capable of being three separate retainers. The particulars to paragraphs 7, 8 and 9 of the SOC, do not unequivocally anchor the retainer alleged to a separate retainer for each of the three audit years. Complaint could have been made, and perhaps was, that it was unclear from the SOC whether or not the plaintiff was moving away from the 1999 Retainer and alleging separate retainers for each year.[44]
47 Because the pleading of the three defined retainers for each Relevant Audit Year can be read as depending on three independent retainers, or as deriving from an implied general retainer, the pleading is ambiguous. In those circumstances, in order to resolve the ambiguity, it is open to have recourse to the indorsement. That recourse makes clear that there was a general retainer that preceded the audit work undertaken and the audit reports given in each of the years, and that general retainer was entered into in about July 1999.
48 The content of the contractual duty pleaded in the SOC when compared with the content of the duty outlined in the indorsement does not change this conclusion. The indorsement is in this regard general, alleging a duty to perform the retainer with care and skill and in accordance with the Auditor's obligations under the Corporations Act, the Regulations and the Accounting Standards. The SOC expands on these very general obligations and fleshes them out somewhat. But in my view, the particular content of the contractual duty pleaded in the SOC is within the generality of the indorsement.
49 In my view, there has been no abandonment of the 1999 Retainer. The SOC does not clearly and unambiguously plead a different cause of action to that notified in the indorsement. It is in each case a claim between the same parties for negligent breach of a contract in the conduct audits and provision of audit reports regarding WFL's financial reports in three particular accounting periods. There are of course other causes of action, but it is only in relation to the cause of action in contract that the claim of an abandonment is made.
50 The Auditor argues that, in the FASOC, WFL is proposing to make claims that travel beyond those notified by the indorsement. In respect of the new or substitute causes of action not contained in the indorsement, it submits that leave is required to amend the indorsement before those claims can be made and contends that leave should not be granted.
51 The Auditor submits that WFL seeks to make several new or substitute claims in the FASOC and that these depart significantly from that notified by the indorsement. The Auditor submits that in the FASOC:
(b) new and substitute material facts are relied on in support of the tortious duty of care compared to those in the indorsement ('Different Material Facts');[47]
(c) a new statutory cause of action not notified by the indorsement is relied on - a claim for damages under s 1041I of the Corporations Act by reason of a contravention of s 1041H of that Act ('New Statutory Cause of Action');[48]
(d) new representations not notified by the indorsement are relied on ('New Representations');[49]
(e) substitute causes of action based on contracts not notified by the indorsement are relied on ('Substitute Contract Claims').[50] This is essentially the same point as is made in the abandonment issue;
(f) breaches of new contractual obligations not notified by the indorsement are relied on ('Substitute Breaches of Contract');[51]
(g) there is reliance on new provisions of the Corporations Act imposing obligations not relied upon in the indorsement ('New Corporations Act provisions Relied on');[52]
52 The Auditor argues that the new pleadings (including the ASOC and SOC), both individually and collectively, are not mere modifications or extensions to the claims notified by the indorsement, but constitute new and/or substitute claims for which leave is required under r 14.03 of the Rules.
53 WFL submits that the Auditor is attempting to invoke a 'narrow and stringent'[53] approach as to whether the FASOC extends beyond the indorsement. In support of its contention, WFL relies on the observations of Barwick CJ and McTiernan J in Renowden to which I have referred above.[54] WFL submits, based on those observations, that:[55]
(a) the indorsement is not a pleading and cannot, and ought not, be construed as such;
(b) the role of the indorsement is to give notice of the nature of the plaintiff's claim with reasonable particularity and in general terms; and
(c) the indorsement marks out the perimeter or range within which the claim is to be formally expressed. No complaint can be made about the FASOC provided it is in substance within that range, and it can be widened or lessened.
54 WFL submits that each of the causes of action pleaded in the FASOC 'fall comfortably within the substance of the causes of action pleaded in the indorsement."[56] It submits that the FASOC performs the role envisaged by the High Court in Renowden, namely, widening, lessening and expressing the claims in better terms but keeping them, in substance, consistent with the claims in the writ. WFL submits that the Auditor's approach ignores the differing roles between an indorsement and a pleading.
55 It is necessary to deal with each of the contentions of the Auditor separately. I will use the short descriptions given at the end of each sub-paragraph of paragraph 51.
56 In the indorsement, WFL claimed it had suffered loss and damage (injury) by the breach of the retainer (contract), by the tortious breach of the duty of care and by the misleading or deceptive conduct and gave particulars of damage in relation to the breach of retainer and misleading or deceptive conduct, being "in reliance on the Relevant Audit Reports, WFL continued to trade and incur increased liabilities. Further particulars will be provided prior to trial."[57]
57 In the SOC (and in the ASOC and FASOC) the loss and damage for all causes of action is particularised by reference to a more elaborate pleading that involves the freehold land recorded in the financial reports of WFL being over valued (it being impaired) with the result that WFL was enabled to pay dividends out of its profits (under s 245T of the Corporations Act). In respect of the 2007 Audit, if the freehold land had been recognised as impaired, as it should have been, a loss would have been carried forward to the 2008 and 2009 years and WFL would not have been able to pay the dividends in fact paid between 2007 and 2009. Similar particulars are given in respect of the loss and damage suffered in respect of the 2008 and 2009 years.
58 The Auditor contends that the loss and damage in the SOC (and in the ASOC and FASOC) are different in kind from the indorsement and as damage is the gist of the tortious and statutory (misleading or deceptive conduct) claims, therefore these claims in the SOC are outside the 'perimeter' of the indorsement. They are new causes of action because they concern a different injury to the economic interests of WFL.[58]
59 In my view, the generality of the damage claimed in the indorsement is capable of encompassing the damage claimed in the SOC and the subsequent pleadings, including the FASOC. The reasons for coming to this view are:
(a) first, the notion of continuing to trade and incurring increased liabilities is a very general proposition that encompasses a vast range of possible consequences in terms of particular damage incurred. Continuing to trade brings with it the possibility of paying dividends from profits which would not have been paid had the Auditor not breached the retainer, or the tortious and statutory duties. It is thus not foreign to the notion of continuing to trade to instance as a component that in doing so dividends were paid which would not otherwise have been paid. I see no difficulty with the further element in the indorsement that WFL, in continuing to trade, incurred increased liabilities as the declaration of a dividend incurs a liability which the payment discharges;[59] and
(b) second, the so called 'particulars' given of the loss and damage in the indorsement are no doubt intended to provide 'reasonable particularity' as required by r 5.04(2)(b). They give a basic indication that but for the breach by the Auditor of the retainer, or the tortious of statutory duties, the trade or operations of WFL would have stopped. That is the clear implication to be derived from the particular. I see no logical reason why that should not be understood as including that the payment of dividends would have stopped, along with everything else. The greater loss described in general terms in the indorsement includes the lesser and greatly narrower loss alleged in the subsequent pleadings.
60 In reaching this conclusion I am applying the approach signalled by Barwick CJ and McTiernan J in Renowden and bearing in mind that the indorsement is required to give, with reasonable particularity, only notice of the nature of the plaintiff's claim, of the cause thereof and of the relief sought in the action. Because it will suffice if it conveys that information generally and without great particularity it is necessary to read it not as a pleading might be read but with a view to understanding the substance of the claims.
61 The indorsement gives notice of the claim based on breach of tortious duty by alleging, under the heading "Negligence/Negligent Misstatement" that WFL:
(a) relied on the Auditor to undertake the audits with reasonable skill and care and, putting it briefly, in accordance with s 307 and 308 of the Corporations Act;[60] and
(b) was vulnerable to any acts or omissions of the Auditor in performing its obligations as Auditor,[61]
and alleging that by reason of these matters the Auditor owed WFL a duty of care.[62]
62 There are particulars to the allegation of duty, however, which add more matters of fact to those identified as the foundation for the duty of care (which are referred to in paragraphs 61(a) and (b) above). The particulars identify:
(a) the foreseeability of WFL suffering pure economic loss if the Auditor is negligent in undertaking the audits with reasonable skill and care and in accordance with s 307 and 308 of the Corporations Act;
(b) that the risk of such loss was known or ought to have been known to the Auditor and as a reasonable person the Auditor would have taken precautions against such loss;
(c) that the relationship between WFL and the Auditor was sufficiently proximate that the Auditor knew or ought to have known that it was being trusted by WFL to give its best information and advice as a basis for WFL's decision whether or not to continue to trade; and
(d) that it was reasonable for WFL to rely on the audit reports as a basis for WFL's decision whether or not to continue to trade.
63 In the FASOC, the corresponding pleading is as follows:
13. By reason of:
(a) the relationship of auditor and client between the Auditor and WFL;
(b) the reliance placed and to be placed by WFL, its directors, creditors and shareholders upon the Auditor as auditors with expertise in auditing WFL;
(c) the knowledge and intention of the Auditor that WFL and/or its members did and would place reliance upon them as auditors;
(d) the reasonable foreseeability that WFL might suffer loss if audit and review work and opinions expressed were carried out negligently;
The Auditor owed WFL a duty to exercise reasonable care and diligence in:
(e) the carrying out of audit and review work in respect of WFL;
(f) expressing opinions in respect of WFL and its financial reports;
(g) providing the audit report in respect of WFL and its financial report for the relevant year; and
(h) complying with the Auditor's Statutory Auditing Obligations in respect of each audit of WFL.
64 The Auditor submitted that the FASOC deploys significantly different factual matters as founding the tortious duty of care and these underscore the fact that the injury is different. I disagree. One could only arrive at this conclusion by reading the indorsement as if it were a statement of claim - but it is not and should not be construed as such but read for what it is, namely, a notice of the nature of the plaintiff's claim, of the cause thereof and of the relief sought in the action. The terms of paragraphs 12 and 13 of the FASOC set out above fall comfortably within the terms of paragraphs 13 and 14 of the indorsement having regard to a reasonable reading of the particulars to paragraph 14 of the indorsement. The only possible new element introduced by the FASOC is the allegation that the Directors, creditors and shareholders relied on the expertise of the Auditors in carrying out the audits, as distinct from WFL so relying. This in my view, is still within the substance of the indorsement and merely extends it to the people within WFL, the Directors and members, or those persons outside the Company the Directors and Auditors must have in mind when performing their respective duties under the Corporations Act - the creditors of WFL.
65 The SOC introduced a claim for damages under s 1041I by reason of a breach of s 1041H of the Corporations Act. That claim turns on a person suffering damage by misleading or deceptive conduct[63] of another person that was engaged in "in relation to a financial product or a financial service." In law that is a new cause of action, it being entirely based on provisions of the Corporations Act and having no formal connection to the alleged contraventions of the Trade Practices Act and the Fair Trading Act set out in the indorsement. Because the writ was not served until 14 August 2014, and the SOC was not served until 24 September 2014, there is a prospect that in respect of the 2007 and 2008 audits the damage claimed was suffered more than six years before the SOC was served.
66 In the SOC, the claim for misleading or deceptive conduct was based on the Financial Report Representations and the Conduct of Audit Representations in each of the Relevant Audit Years as constituting a breach of the Trade Practices Act, Fair Trading Act and s 1041H of the Corporations Act.[64] In the ASOC, the claim raised for contravention of s 1041H of the Corporations Act was made only in respect of the 2009 year. In other words, in so far as that claim may be statute barred in respect of the 2007 and 2008 years, it is not now relied upon.
67 Although the claim for contravention of s 1041H of the Corporations Act is a new cause of action, it turns on the largely similar allegations as the claims under the Trade Practices Act and the Fair Trading Act, with the principal difference being that the representations constituted statements of opinion which could reasonably be regarded as intended to influence a person or group of persons in making a decision in relation to WFL's share or its managed investment schemes for the purposes of ss 766A(a) and 766B of the Corporations Act and therefore constituted conduct in relation to a financial service for the purposes of s 1041H of that Act.
68 By including this claim in the SOC, and, in a reduced way, in the ASOC and FASOC, WFL seeks leave to amend the indorsement. If the claim under s 1041H were statute barred, for the discretion to be exercised in favour of WFL, the new claim must have arisen out of the same facts or substantially the same facts as support the claims in the indorsement. There is then an amendment of an existing claim, albeit in the present case it involves a characterisation of the claim in a different way and in the form of a different cause of action. Because it is a recategorisation (a change of legal theory) of the claim or a restatement in different legal terms of the alleged outcome of the essential pleaded facts, it would in my view be permissible to allow it,[65] whether it is considered as an amendment to the indorsement or the SOC.
69 Because the new claim under s 1041H in respect of the 2009 year was not statute barred when introduced in 2014, I can see no reason why the amendment to introduce it should not be allowed. An amendment to the indorsement in those circumstances is a mere formality.
70 The Auditor submits that in the indorsement there are representations of fact and of an opinion but nothing more is said. In the SOC, ASOC and FASOC, there are extensive and further representations pleaded that were not included in the indorsement, in particular, that the pleading moves the claim in the indorsement from a fact based representation case to an opinion based representation case. It was submitted that this is an additional fundamental element that puts quite a different complexion on the nature of the representational case pleaded against the Auditor.
71 In my view, this turns on an overly technical reading of the indorsement. The claim there made is that by the audit reports for each year the Auditor represented that the financial reports of WFL were in accordance with the Corporations Act, including giving a true and fair view of WFL's financial position and of its performance,. and complied with the Accounting Standards and Regulations, and the Auditor had exercised due care and skill in forming the opinions expressed in the reports. This is general in its terms and brings with it as a necessary component that the representation involved an opinion. It is well within the substance of that general claim to flesh it out by pleading an opinion based representation.
72 For these reasons, there is, in my view, no substance to this criticism.
73 This criticism is based on the difference between the contract claim in the indorsement[66] and the contract claim in the FASOC.[67] For the reasons I have given in relation to the abandonment claim, I consider the claim now proposed in the FASOC to be within the indorsement. It is appropriate to make clear the factual basis of the alleged contract and whether there is one, or more than one. The pleading in the SOC and ASOC is unclear and ambiguous and it is appropriate to make it clear. The Ambiguity is resolved by reference to the indorsement.
74 The submission of the Auditor under this heading is that the pleading of the terms of the contract in the FASOC (and the SOC and ASOC) at paragraph 10 is outside the terms of the contract or retainer pleaded at paragraph 5 of the indorsement. The latter alleges in a general way that the terms of the retainer were that the Auditor perform its role with all due care and skill and in accordance with the statutory obligations. The FASOC fleshes this broad allegation out so that it is pleaded that the Auditor would:
(a) conduct the audits in accordance with the auditing standards "to provide reasonable assurance as to whether the financial report is free from material misstatement";
(b) undertake procedures to form an opinion whether the financial report is presented fairly in accordance with the relevant legislation and Standards;
(c) report to WFL and its members whether in its opinion the financial report is prepared in accordance with the Corporations Act, the Accounting Standards and gives a true and fair view of the financial position and performance of WFL;
(d) use reasonable skill and care in the performance of the audit and the provision of the audit report; and
(e) in conducting the audit, comply with the Auditors statutory obligations.
75 I consider that all of this is within the generality of the indorsement. There is nothing in the terms pleaded in the FASOC that is not encompassed by the indorsement read with ss 307 and 307A of the Corporations Act.
New Corporations Act provisions Relied on
76 The Auditor submits that the FASOC includes new sections of the Corporations Act not relied on in the indorsement. In my view, the general allegations made in paragraph 6 of the indorsement lays a sufficient general net so as to encompass the more particular allegations in paragraphs 4-7 and 11 of the FASOC.
77 The Auditor submits that leave to amend the ASOC should be refused because the FASOC does not comply with the pleading rules, in that the pleading does not disclose the causes of action alleged and/or is embarrassing. There are a variety of complaints at a pleading level. I will deal with them under short descriptive headings.
(a) the pleading in the FASOC confuses the role of Auditor with the role of the Directors and the accountants and proceeds on the footing that mere identification of an impairment of the value of the freehold land would, ipso facto, have resulted in correction of the alleged error in values; and
(b) more needs to be pleaded to establish the counterfactual both in terms of the identification of the indicators referred to in the Standard (AASB 136) that when applied would or should have shown reason to impair the values, and in terms of the chain of causation from identification of the ground for impairment of values and what that would have led to, whether it be qualification of the financial reports or changes to them.
79 In order to make good its criticisms of the counterfactual as pleaded, the Auditor produced the relevant accounting standard, AASB 136, so as to show that the pleading does not allege the indicators that under that standard should give rise to the recognition of an impairment to the carrying values of the freehold land of WFL. Mr Harris QC sought to demonstrate that the factual substratum for recognition of an impairment to the carrying values of the freehold land was not pleaded. In substance, he submitted, what the standard requires is that WFL, at each reporting date, is to look for indicators of impairment and, if some are identified, then the company moves to the next phase. If none are identified, then no impairment is warranted.[68] If some indictors are identified, then the Standard prescribes the way in which to calculate any impairment.
80 The Auditor complains that it is necessary for WFL to plead precisely what is being alleged in relation to the application of the standard over the relevant years in the preparation of the financial reports.[69]
81 It is not permitted in considering the adequacy of a pleading, such as when application is made to strike out a pleading under r 23.02 or for leave to amend a pleading, for extraneous material to be deployed, such as AASB 136, so as to show as a matter of substance that the requisites for establishing non-compliance with the Standard have not been properly pleaded. I understand, however, that reference to AASB 136 was used by the Auditor merely to demonstrate the gaps in the pleading of the counterfactual that make it unclear - and therefore embarrassing.
82 Subject to the pleading being clear and giving proper notice of the matters relied on to constitute non-compliance with the Standard, whether or not the ground work, as it were, that needs to be established for the impairment to be required by the Standard is fully set out or not can be a matter to be pleaded by way of defence. If it is right that the pleading does not expose error on the part of the Directors in applying the Standard, then the result will be that the Auditors have not themselves fallen into error. Subject to some matters of pleading, the answer to this criticism of the FASOC lies in putting WFL to proof of the error it alleges as against the requirements of AASB 136. If Mr Harris QC's arguments are correct, WFL will fail.
83 Some matters of the pleading of the counterfactual are, however, unclear and embarrassing:
(a) first, the allegation in paragraph 24 that the Growers paid a de minimis rent under the Long Term Leases (as defined) is both unclear and unnecessary in light of Annexure A, which sets out in summary the rental in respect of each Scheme;
(b) second, the pleading in paragraph 24D, which concerns the applicable provisions of AASB 136, leaves the reader without all the material apparently relied upon. In particular in sub-paragraph (a) it is said that paragraphs 12 to 24 of the Standard describe some indication that an impairment loss may have occurred and that "if any of those indications is present, an entity is required to make a formal estimate of [the] recoverable amount (clause 8 of AASB 136)." None of the applicable indications is identified, either in that paragraph or elsewhere, so far as I can see. It may be that it is intended that paragraph 24E is the place where the indications are identified, as seems to be the case (see 24E(d)), but that is not made clear by reference to the indications referred to in the Standard (albeit they are 'some indications': see paragraph 24D(a)) and if the submissions of the Auditors are correct the matters pleaded in that paragraph may not be capable of constituting relevant indications under the Standard;
(c) third, in sub-paragraph 24D(b), it is said that an entity shall assess at each reporting date whether there is any indication that an asset may be impaired and if any such indication exists, the entity shall estimate the recoverable amount of the asset. Neither in that paragraph or elsewhere is it clear that such an indication as is referred to in the Standard, identifying it, existed and what was the appropriate estimate of the recoverable amount. Again it may be intended that paragraph 24E achieves this objective, but for myself I find it impossible to say whether the matters alleged in paragraph 24E(a) to (c) constitute a relevant indication under the Standard; and
(d) fourth, in paragraph 24D(d) it is alleged that the recoverable amount (referred to in paragraph 24D(c)) is "the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use." It is unclear whether the Freehold Land is treated as an asset or as a cash-generating unit, although the very next sub-paragraph would indicate it is treated as an asset.
84 In answer to these criticisms, WFL submitted that the indications referred to in the standard, and referred to in paragraph 24D(a) without identifying any particular ones, are not exhaustive and the case made by WFL is that the indications referred to in paragraph 24E, namely, the present value of the Long Term Lease Rent Obligation revenue stream; the discounted return on investment; the acquisition costs; and the fact that the land could not be sold unencumbered by the Long Term Leases, were the indicators of impairment.
85 That may be so, but by pleading in paragraph 24D that it is by reference to the presence of indications identified in the Standard that a formal estimate of the recoverable amount must be made leaves the defendant wondering what indications are relied upon that derive from the Standard and whether it is said the indications in paragraph 24E qualify as such indications or not. All this must be clarified, in my view.
(a) in each of the causes of action for tortious breach of duty of care and misleading or deceptive conduct, loss or damage as a consequence of the breach or contravention is an element of the cause of action;
(b) the material facts establishing the necessary causal link between the breach or contravention and the loss or damage should be pleaded;
(c) in cases of contravention of s 52 (and its analogues) said to be constituted by misrepresentation this will generally require more than "by reason of such conduct..."; and
(d) it is necessary to set out as material facts (not particulars) the facts and circumstances that lead to a reasonable inference that the conduct and the damage stood to each other in the relation of cause and effect.
87 What needs to be alleged, if it be the contention of the WFL, is that:
(a) the Directors, in reliance upon the unqualified opinion of the Auditors, continued to believe that the proper carrying value of the land was as stated in the financial report;
(b) therefore they reasonably believed, and proceeded on the basis that, the profit was as stated in the financial report;
(c) therefore they were entitled to declare a dividend and make the payment which they did; and
(d) the counterfactual might be that if the Auditors had identified the reason for recognising an impairment of the freehold land carrying value and, perhaps, brought it to the attention of the Directors prior to expressing a final opinion, the Directors would have recognised the impairment, reduced the profit and, by reason of the restriction in s 254T that would have then impacted on the amount of the dividends.
88 The Auditor demonstrated why the chain of causation is important, it being a reliance-loss case. The factual allegations in the FASOC include two that are significant:
(a) the first is the preparation by WFL in the course of the 2007 audit of a Lease and Maintenance Model which revealed that the present value of the Long Term Lease Rent Obligation was $40 per hectare in 2007, $45 in 2008 and $90 in 2009, while the average acquisition costs were $2,000 per hectare up to 2007, $4,419 in the 2007 year, $5,693 in the 2008 year and $3,837 in the 2009 year; and
(b) the second is the existence of a valuation report dated 14 September 2007 (referred to in the particulars to paragraph 25(a)) which revealed a detrimental impact of the lessee's encumbrances on the value of the freehold land in 2007 at $47.09 million.
89 Both these documents are alleged to have been known to the Auditors. There very presence, however, indicates they were, or ought, to have been known to the Directors. The Directors nevertheless approved the financial statements and notes and Director's report, neither of which identified any impairment of the freehold land carrying values. The Directors' reliance on the Auditors Report, in the face of the existence within WFL of these critical documents, needs to be spelled out.
90 It was submitted further that, as a matter of pleading, the allegation of reliance and damage in paragraph 36 is conclusory. It assumes facts which are not stated. It alleges WFL relied on the 2007 audit report (that is the Auditors report under s 308 of the Corporations Act) and the matters in it and that the 2007 financial report was free of material misstatement and gave a true and fair view of the financial performance and position of WFL, and in consequence of that reliance WFL suffered loss and damage. It is not the corporate entity that relies on the audit report but the Directors and members. The statutory scheme requires the Auditors to opine on the financial report approved by the Directors. But the evident assumption upon which the FASOC proceeds is that either an indication of the Auditor qualifying the report, or the impact of the qualification on subsequent years financial reports, would have led to the recognition of the impairment to the freehold land carrying values with the resultant reduction in profit and inhibition on declaration of dividends. This is impermissible. If something of this kind is alleged it must be spelt out with material facts and particulars.
91 In answer, WFL submitted the links in the chain of causation are sufficiently set out, there are indicators of impairment, allegations of actual or constructive knowledge of impairment; allegations of breach by reference to the failure to recognise the need for impairment and provide an audit report that was the product of the exercise of reasonable skill and care and, especially, failing to require the recognition of an impairment loss.[72] There is, of course, more in the FASOC than this. But Mr Craig properly conceded on behalf of WFL that to reveal a compensable loss, it is desirable and clearly possible to identify the chain of causation in the counterfactual. So for example, if the audit report had, without change to the financial statements, identified in 2007 that an impairment to the carrying value of the freehold land should have been recognised in the financial report of WFL, and that did not occur, and in the result the financial statements were qualified by the Auditor, that may or may not have induced the Directors not to pay a dividend but it would be very material for the following year.[73]
92 It seems to me that the pleading of the chain of causation leading to the damage is deficient for the reasons advanced by the Auditor and the pleading needs some amendment to rectify this deficiency.
93 Paragraphs 15A and 15B of the FASOC allege in relation to the defined 2007 Financial Report Representations and Conduct of Audit Representations that the making of the representations constituted conduct in trade or commerce for the purposes of the relevant sections of the Fair Trading Act and the Trade Practices Act. The equivalent allegations for the 2008 and 2009 years are in paragraphs 18A and 18B and 21A and 21C, respectively. The Auditor submitted that to properly plead that the conduct was engaged in "in trade or commerce' it is necessary for the material facts establishing the elements of the concept to be set out. It was submitted that the allegation of a conclusion is a common means of making the allegation, and it is often not challenged. Here the Auditor does challenge the form of the allegation. It was submitted that a mere recitation of the verbiage of the section in each Act is insufficient, embarrassing and should not be allowed.[74]
94 WFL counters that the allegation is not a bare conclusion at all. The allegation in each case is that the relevant representation (the Financial Report Representations and the Conduct of Audit Representations) was itself made in trade or commerce. In each case, the representation itself, as defined earlier in the FASOC, gives it the necessary character of being in trade or commerce and particularly when the context in which they were made is taken into account. In summary, WFL submitted by reference to various authorities that:
(a) the terms 'trade' and 'commerce' are not terms of art. They are expressions of fact and terms of common knowledge. While the particular instances that may fall within them will depend upon the varying phases of development of trade, commerce and commercial communication, the terms are clearly of the widest import;[75]
(b) section 52 of the Trade Practices Act and s 9 of the Fair Trading Act are concerned with the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character;[76]
(c) where the conduct of a profession involves the provision of services for reward, then there is no conceivable attribute of that aspect of professional activity which will take it outside the class of conduct falling within the description 'trade or commerce';[77]
(d) the provision of legal services for fee and reward to a client is capable of being covered by the expression 'in trade or commerce';[78] and
(e) the question of whether conduct in the course of providing professional services is conduct 'in trade or commerce' requires an assessment of the essential character of those services.[79]
95 It seems to me that WFL is correct in identifying the relevant material facts as turning on the character of the relevant representations and the context in which they were made. There are several material facts pleaded in respect of these allegations that reveal the essential character of the services provided by the Auditor as being commercial, particularly having regard to the other allegations of fact regarding the special skills of the Auditor and the context of the contractual and tortious duties allegedly owed. At present, however, they are not clearly identified as relevant to the allegation of conduct in 'trade or commerce'.
96 The representations referred to themselves take the matter some of the way. They take their character partly from the fact that they concern the audit of the financial reports of a trading corporation, and partly from the relationship between the Auditor and WFL as a consumer of the Auditor's services that are themselves impliedly provided in its, the Auditors, trade or commerce.[80] As counsel for WFL conceded in argument:
True it is...if one wants to delve into pedantry - and we say it is pedantry - we can cross reference this paragraph to other paragraphs in the pleading. But...we are a long way from getting to the heart of the controversy if it becomes necessary to cross-reference that paragraph to other paragraphs in the pleading, having regard to the fact that the representations - the conduct itself is defined.[81]
97 It may well be more complete to cross-reference the allegations of the conduct in 'trade or commerce' to several other material facts already appearing in the FASOC, or to repeat those relevant in the allegations. But this is not a case where the pleading of the allegation of conduct in 'trade or commerce' should be dissected and viewed in its several parts divorced from a reading of the pleading as a whole. In my view, in a case of this kind, to set out the facts, again, by reason of which the conduct is alleged to be in 'trade or commerce', would be to take the pleader to unnecessary lengths. Whilst as a matter of strict pleading the facts underpinning the conclusive allegation should be set out as material facts, any cross referencing to the other relevant parts of the FASOC, if pressed, can be adequately dealt with in particulars.
98 It is not necessary at this time to determine whether the making of the representations alleged by WFL, in the context of the retainer and the duties of care, do amount to conduct in 'trade or commerce'. That is a matter for trial.[82]
Financial Service Allegations - Section 1041I of the Corporations Act
99 In relation to the 2009 Financial Report Representations and Conduct of Audit Representations, WFL pleads that these are conduct in relation to a 'financial service' (by reference to the meaning of that phrase in s 766A and 766B of the Corporations Act) for the purpose of s 1041H of the Corporations Act, which proscribes misleading or deceptive conduct, or conduct likely to mislead or deceive, in relation to a financial service.[83] The Auditor submitted that these matters are pleaded as conclusions, without the supporting material facts. They do little more than repeat the text of the relevant sections of the Corporations Act.
100 WFL submits that the particular paragraphs set out rather more than a mere conclusion and a great deal more than the words of the relevant section, because they refer back to the representations and bring with them all the material facts identified in the defined representations, being the 2009 Financial Report Representations and the 2009 Conduct of Audit Representations. They are representations which could reasonably be regarded as being intended to influence a person or group of persons in making a decision in relation to the particular products in question, being WFL shares (it being publicly listed as previously alleged) or managed investment schemes conducted by WFL (also as previously alleged). WFL submitted that the only remaining matter to be established is that the representations on their face, or objectively, are capable of being regarded as having been intended to influence a person or group of persons in making a decision in relation to these shares. That is purely a matter for evidence and submission.
101 I agree with the submissions made by WFL. At first blush, the pleading in paragraphs 21A and 21D of the FASOC look conclusory, but when the elements stated in those paragraphs are properly extracted and analysed they are not embarrassing and should be allowed.
102 Paragraph 25(a) pleads that by reason of certain matters the Auditors knew or ought to have known that in each of the Relevant Audit years the freehold land was impaired for the purposes of the Standard. The allegation is capable of meaning that the audit opinion was knowingly false, an allegation akin to alleging the Auditors committed the tort of deceit, or fraud, although it is evident from the pleading as a whole that such is not the intent of the allegation. If, however, it is intended to be an allegation of knowing falsity, then greater specificity and particularity is required.[84] If it is an allegation of fraud, it is incumbent on WFL to identify the case to be made clearly and distinctly.[85]
103 Where the case is not one of deliberate falsity, then perhaps the real burden of the allegation is an absence of a reasonable basis for the Auditors opinion (in the audit reports) that the financial reports comply with the accounting standards and give a true and fair view of financial position and performance if WFL. Whatever is the allegation, it needs to be made clear and at present it is not.
104 Other criticisms of paragraph 25 include that the particulars to paragraph 25(a) do not support the allegation of knowledge or constructive knowledge that the freehold land was impaired for the purposes of AASB 136 and that material facts are set out in the particulars and they should not be.
105 I have some difficulty understanding paragraph 25(a). It pleads conclusions. First, actual or constructive knowledge and, second, that the freehold land was impaired for the purpose of the standard (another conclusion). The elements need to be broken down so that the reader and pleader can properly deal with them. The particulars attempt to refer back to the prior pleading of the matters that give rise to the impairment, but for the reasons I have already given do not properly achieve that objective.
106 Paragraphs 15(b)(i), 18(b)(i) and 20(b)(i) allege that by giving the audit report the Auditor represented that he had conducted the audit in accordance with the Accounting Standards. This is embarrassing, and clearly a mistake.
107 The Auditor complained that the allegations of a want of due care made in paragraphs 27(a), 28, 30(a), 31, 33(a) and 34 of the FASOC are each pleaded as conclusions and are thereby embarrassing. That is true. But there are some other difficulties arising out of an examination of these paragraphs. I take paragraph 27 as an instance. It provides:
By reason of the matters set out in 14, 16, 23-25 and 26(a) above, in providing the 2007 Audit Report without recognising the fact that the 2007 Freehold Land was impaired and requiring the recognition of an impairment loss in the 2007 Financial Report, the Auditor:
(a) failed to provide and audit report which was the product of the exercise by the Auditor of reasonable skill and care in the provision of audit services;
(b) failed to provide an audit report which was the product of the Auditor conducting the 2007 Audit in accordance with:
(i) the Corporations Act; and
(ii) AASB 136; and
(iii) the obligation to provide reasonable assurance as to whether the financial report for the relevant year is free of material misstatement;
And so breached the 2007 Retainer (2007 Breach of Contract).
108 This paragraph, when closely analysed, rolls together a number of separate allegations to give rise to the conclusions identified in sub-paragraphs (a) and (b) and thereby gives rise to a lack of clarity and consequential embarrassment. The audit report is alleged to have been provided:
(a) without recognising the fact that the 2007 Freehold Land was impaired - an allegation that brings with it the difficulties identified in relation to the allegations said to show the need to impair the carrying value of the Freehold Land; and
(b) without requiring the recognition of an impairment loss in the 2007 Financial Report - when there are no material facts or legal basis established for the Auditor to require recognition of the need to impair - presumably by the Directors of WFL.
109 The paragraph then states the conclusion that by reason of the matters in the specified other paragraphs and because of the two matters mentioned in paragraphs 108(a) and (b) above, the Auditor "failed to provide an audit report which was the product of the exercise by the Auditor of reasonable skill and care in the provision of audit services" ('negligent report'). Perhaps the allegation is that the negligent report is made negligent by the failure to require somebody to recognise the impairment, but that is not clear and may be a little unlikely. It is more likely that what is intended is that it was negligent not to qualify the report in some way.
110 The difficulty of applying the opening words of paragraph 27 to the conclusion stated in sub-paragraphs 27 (a) also applies to sub-paragraph 27(b). Similar difficulties arise in respect of paragraphs 28, 30, 31, 33 and 34 of the FASOC. Different but analogous problems arise in respect of paragraphs 29, 32 and 35 of the FASOC because of the reliance placed in those paragraphs on paragraphs 23 to 25. Paragraph 36 particularises as WFL's loss and damage the total of the dividends paid between 2007 and 2010 financial years where the individual dividends paid each year should be separately identified.
111 When considering allowing the service of a statement of claim that has the effect of adding or substituting a new cause of action,[86] and when it is thereby necessary to amend the indorsement,[87] both r 36.01(6) and s 34 of the Limitations of Action Act 1958 require that the Court is satisfied that that no other party to the proceeding would by reason of the amendment be prejudiced in the conduct of that party's claim or defence in a way that could not be met by an adjournment, an award of costs or otherwise, unless the claim arises out of the same facts or substantially the same facts as support the claims already pleaded. In that case there is a mere amendment of an existing claim.[88]
112 There is, as it turns out, no amendment of the indorsement that introduces a cause of action at a time when it is statute barred. The claim made under s 1041H of the Corporations Act has been limited to the 2009 audit. At the time the claim was introduced regarding that audit (September 2014) it was not statute barred.
113 I have held against the Auditor on the first two substantive grounds of opposition to the grant of leave to file and serve the FASOC:
(a) the FASOC does not seek to revive claims made in the indorsement which were subsequently abandoned in the SOC and ASOC; and
(b) the FASOC does not make allegations which travel beyond the perimeter set by the indorsement - with one exception - being the claim under s 1041H of the Corporations Act in respect of the 2009 audit year. That claim was not statute barred when first introduced in the SOC and there is no good reason why an amendment to it in the FASOC should not be allowed.
114 I have found, however, that the proposed FASOC is embarrassing as a pleading, in some respects, and that paragraphs 24D, 24E, 25, and 26 to 38 should be struck out. WFL will not be given leave to file or serve the FASOC in its current form. There will be orders for the filing and service of a second proposed FASOC and the paragraphs of the ASOC that correspond with the paragraphs of the FASOC I have indicated to be embarrassing will also be struck out.
115 My preliminary view is that each party has had substantial success in relation to the application and that costs should lie where they fall (there should be no order as to costs), but I will hear the parties on the question of costs should they require it.
116 I will also ask WFL to bring in short minutes of orders giving effect to these reasons.
[1] Affidavit of Andrew Charles Brennan sworn 19 June 2015 at [18].
[2] Rule 36.01 of the Rules provides that a party may amend any pleading served by that party (a) once before the close of pleadings; or (b) at any time by leave of the Court or with the consent of all other parties.
[4] The affidavit mainly concerns the exchanges between the solicitors in an effort to find a date for the hearing suitable to Counsel.
[5] Most of the exhibits to the affidavit were not relied on or provided to the Court.
[6] See the definition of pleading in rr 1.13 and 5.04(3).
[7] Elsum v Jameson [1974] VicRp 65; [1974] VR 529 at 539 per Gowans J.
[8] Ruzeu v Massey-Ferguson (Aust) Ltd [1983] VicRp 69; [1983] VR 733 at 737 per Young CJ; Elsum v Jameson [1974] VicRp 65; [1974] VR 529 at 542 per Gowans J. An indorsement may give sufficient notice of the cause of action even though it does not employ the precise legal name of a cause of action, such as breach of contract: Buttigieg v VL Finance Pty Ltd [1986] VicRp 39; [1986] VR 392 at 397.
[9] [2009] VSC 603 ('NLC Holdings').
[10] [1970] HCA 24; (1970) 123 CLR 584 ('Renowden').
[12] Owen J delivered the leading judgment for the majority.
[13] (1887) 19 QBD 394 at 395; See also for its application before the introduction of s 34 of the Limitation of Actions Act 1958 and r 36.01(6), amongst other authorities: Rubenstein v Truth & Sportsman Ltd [1960] VicRp 75; [1960] VR 473 where at 475 Adam J said "In accordance with settled practice, the Court would not allow an amendment of the indorsement which would have the effect of depriving the defendants of defences based on the statute of limitations."
[16] [1962] 1 QB 594 at 607; Renowden at 599.
[18] See also Moore v Alwill (1881) 8 LR Ir (CL) 245_._
[19] See also Dundas v Incorporated Nominal Defendant [1976] VicRp 71; [1976] VR 667 at 669.
[20] NLC Holdings at [16]; Renowden at 595-6.
[21] Baldry v Jackson [1976] 2 NSWLR 415 at 419; Sneade v Wotherton Barytes and Lead Mining Co Ltd [1904] 1 KB 295; Anglo Irish Beef Processors International v Federated Stevedores Geelong [1997] 2 VR 676 at 680; Williams, Civil Procedure Victoria, paragraph 36.01.20.
[22] Agtrack (NT) Pty Ltd (t/as Spring Air) v Hatfield (2003) 7 VR 63; [2003] VSCA 6 ('Agtrack'); Nesnah Nominees Pty Ltd v Blackwell (VSC, Eames J, No 90, 10 November 1998, unreported, BC9806044); Williams, Civil Procedure Victoria, paragrapjhs 36.01.20 and 36.01.
[24] Bridge Shipping Pty Ltd v Grant Shipping SA & Anor [1991] HCA 45; (1991) 173 CLR 231 at 260-261 per McHugh J when considering r 36.01(4) (Brennan and Deane JJ agreeing). The history of the rule suggests the same approach is to be taken in the construction of r 36.01 as a whole.
[25] Agtrack; PSL Industries Ltd v Simplot Aust Pty Ltd (2003) 7 VR 106; [2003] VSCA 7.
[26] Lloyd Steel Co (Aust) Pty Ltd v Jade Shipping SA (1985) 1 NSWLR 212; Dyno Wesfarmers Ltd v Knuckey [2003] NSWCA 375 at [36].
[27] Duncan Davis (Sales) Pty Ltd v Davis [2008] VSC 127 at [36].
[28] Wintle v Conaust (Vic) Pty Ltd (2001) VSC 315 at [16].
[29] Pyramid Building Society (in liq) v Farrow (VSC, Beach J, No 2057/92, 30 April 1993, unreported); Murphy v BPTC Ltd (in liq) (VSC, Smith J, No 12377/91, 7 May 1993, unreported); Re WM Train & Co Pty Ltd (VSC, Beach J, No 8341/94, 24 January 1995, unreported); Wintle v Conaust (Vic) Pty Ltd [2001] VSC 315; Williams, Civil Procedure Victoria, paragraph 36.01.230.
[30] Wintle v Conaust (Vic) Pty Ltd [2001] VSC 315.
[34] Agtrack, Chernov JA and O'Bryan AJA agreeing.
[35] [2009] VSC 603 at [35].
[37] [2003] VSCA 6; (2003) 7 VR 63 at 91-92, [49]- [52].
[41] [1970] HCA 24; (1970) 123 CLR 584 at 611.
[42] Marshall v London Passenger Transport Board [1936] 3 All ER 83; Patterson v Richards [1963] VicRp 29; [1963] VR 179; Ruzeu v Massey-Ferguson (Aust) Ltd [1983] VicRp 69; [1983] VR 733; Rossen v Airey [2012] WASCA 26.
[44] The exhibits to the affidavits of Mr Brennan tendered in Court did not include the correspondence between solicitors.
[45] Mahoney v J Kruschich (Demolitions) Pty Ltd [1985] HCA 37; (1985) 156 CLR 522 at 527; Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd (2103) [2013] HCA 10; 247 CLR 613 at [24] ('Hunt').
[46] Compare [36]-[38] of the FASOC with [12], [17] and [24] of the indorsement.
[47] Compare [12]-[13] of the FASOC and [13]-[14] of the indorsement.
[48] Compare [35(c)] and B of the prayer for relief of the FASOC with [23] and A of the prayer for relief of the indorsement.
[49] Compare [15], [18] and [21] of the FASOC and [19] of the indorsement.
[50] Compare [7]-[9] of the FASOC and [4] of the indorsement.
[51] Compare [10] of the FASOC and [5] of the indorsement.
[52] Compare [4]-[7] and [11] of the FASOC and [14] of the indorsement.
[57] The particulars are in fact given in relation to the breach of retainer and the misleading or deceptive conduct claims, but not the negligence claim. No particulars are given in respect of the negligence claim and in this respect WFL contended that the nature of the damage in the SOC did not and could not travel outside the perimeter of the indorsement in respect of that cause of action. Because of the view I take of the ambit of the particulars given for the breach of retainer (paragraph 12 of the indorsement) and the misleading or deceptive conduct claims, I do not need to deal with that aspect of the submissions.
[58] In the course of doing so, I was taken to a range of authorities dealing with the importance of identifying the relevant damage (in the sense of injury) when analysing breaches of tortious and statutory duties including Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424; Hunt; and Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd [1987] FCA 230; (1987) 75 ALR 271.
[59] See s 254V of the Corporations Act 2001 (Cth). See also Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; (1999) 200 CLR 1 at [137]- [139]; Willmott Forests Ltd (Receivers & Managers Appointed) (In Liq) v Willmott Growers Group Inc [2012] VSCA 202 at [36]- [37].
[60] Indorsement paragraph 12 read with paragraph 6.
[61] Indorsement paragraph 13 read with paragraph 6.
[63] The conduct includes, of course, conduct that is likely to mislead or deceive.
[64] SOC Paragraphs [29], [32] and [35].
[71] [1987] FCA 84; (1987) 14 FCR 215 at 222.
[73] Transcript, 17 July 2015 pp. 90 - 91.
[74] McKellar & Anor v Container Terminal Management Services Ltd & Ors [1999] FCA 1101; (1999) 165 ALR 409 at [23] per Weinberg J; Giraffe World Australia Pty Ltd v Australian Competition and Consumer Commission [1998] FCA 1560(1999) ATPR 41-699 at 42,540 per Lindgren J.
[75] Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134 at 167 per Deane J; Goddard Elliott v Fritsch [2012] VSC 87 at [499] ('Goddard').
[76] Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594, at 604 (Mason CJ, Deane, Dawson and Gaudron JJ); Goddard at [500].
[77] Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd [1987] FCA 84; (1987) 14 FCR 215 at 220 per French J (as he then was) when speaking of the giving of advice by a professional engineer; Goddard at [503]
[78] Goddard at [504], although there are circumstances where it is not in trade or commerce: Goddard at [505]-[508].
[79] LT King Pty Ltd v Besser (2002) 172 FLR 140; [2002] VSC 354 at [24]; Goddard at [509].
[80] Goddard at [516] - [517]; Colin Lockhart, The Law of Misleading or Deceptive Conduct, LexisNexis Butterworths, 2011, [2.23], p.48-9.
[82] I note in passing that in the indorsement reliance was also placed on the extended operation of s 52 of the Trade Practices Act 1974 in reliance on ss 6(2)(a) and 6(3)(a), the latter involving the use of postal, telegraphic or telephonic services.
[84] Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279.
[85] Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (In Liq) [2003] HCA 25; (2002) 214 CLR 514 at [38].
[88] [2003] VSCA 6; (2003) 7 VR 63 at 91-92 [49]- [52].
Willmott Forests Ltd (Receivers & Managers appointed) (In Liq)
Armstrong Dubois Pty Ltd [2016] VSC 61
(1970) 123 CLR 584
(2003) 7 VR 63
(1991) 173 CLR 231
(2003) 7 VR 106
(1985) 1 NSWLR 212
(1992) 175 CLR 514
(1985) 156 CLR 522
(1985) 157 CLR 424
(1987) 75 ALR 271
(1999) 200 CLR 1
(1987) 14 FCR 215
(1999) 165 ALR 409
(1978) 36 FLR 134
(1990) 169 CLR 594
(2002) 172 FLR 140
(1990) 169 CLR 279
(2002) 214 CLR 514