Plaintiff v Defendant

1 The trial of this matter commenced on 21 April 2020. During the course of the trial the plaintiff made two applications to amend its statement of claim, the first application made orally on 22 April (the First Amendment Application) and the second application made by a "supplementary outline of opening submissions of the plaintiff" provided on 25 April 2020 (the Second Amendment Application). On 23 April 2020 I refused the First Amendment Application. On 30 April 2020 I refused the Second Amendment Application.

2 My reasons for each of those rulings follow below. Before dealing with each application it is convenient to briefly describe the context in which the applications arose.

3 As to the nature of the plaintiff's claim it is sufficient to note the following:

(a) The plaintiff (KSG) is a minority shareholder in the defendant (Openmarkets) which operates a digital platform for trading in Australian securities markets and provides brokerage and related services.

(b) Factually, the plaintiff's claim focuses on the provisions of a shareholder's agreement dated October 2012 between the six initial shareholders including KSG (Shareholders Agreement). Before the events the subject of the claim, KSG held 9.5% of the shares in Openmarkets. The Shareholders Agreement conferred pre-emption rights on the original shareholders in respect of new share allocations, by requiring, in substance, that new shares be offered first to the original shareholders in proportion to their respective shareholdings, and that where any allocation was not wholly subscribed, the original shareholders would have "mop up" rights to acquire those remaining shares, again in their respective proportions. KSG says that Openmarkets, in breach of the Shareholders Agreement, did not notify KSG of share allocations made by it during the period of July 2013 to March 2016 or offer it the opportunity to acquire shares in accordance with its rights under the Agreement. Openmarkets has admitted breaches of the Shareholders Agreement. KSG says that it has lost the opportunity to acquire shares, which it could and would have acquired (and would have subsequently sold).

(c) Legally, the claim has two limbs: breach of contract, and a claim for relief under s 233 of the Corporations Act (2001) (Cth) (the Act), (the Oppression Claim). The conduct of the affairs of the company is said to have been contrary to the interests of the members as a whole, and oppressive to, or unfairly prejudicial to the plaintiff. The scope of the plaintiff's Oppression Claim is the subject of the First and Second Amendment Applications.

4 The proceeding was commenced in May 2018 and in June 2019 was fixed for trial commencing on 23 March 2020. The plaintiff's statement of claim has not been amended at any time since the commencement of proceedings.

5 On 26 February 2020 Openmarkets filed a summons seeking orders vacating the trial date and striking out the plaintiff's statement of claim or alternatively, that the plaintiff provide complete particulars of the allegations in its claim as to the breaches of Shareholders Agreement and the loss and damage said to have been suffered as a result of each of those breaches.

6 The summons was heard on 3 March 2020. On that occasion, the plaintiff's counsel accepted that there were inconsistencies between the pleaded claim and the claim described in the evidence. Consequent upon orders made on that day, KSG filed further and better particulars of its claim. The trial was at that time, adjourned to commence on 20 April 2020 (and was later adjourned to 21 April 2020).

7 In opposing the First and Second Amendment Applications the defendant said that at the hearing on 3 March 2020 and by the filing of particulars dated 8 March 2020, the plaintiff had confined its claim to the facts then alleged in the statement of claim, and specifically that the plaintiff had confined its Oppression Claim to the facts then pleaded, which were accepted as not travelling beyond the facts said to found the breach of contract claim, and that it had done so in the context of the defendant having expressly raised the question of the scope of the plaintiff's case and its desire to avoid commencing the trial with any uncertainty about the case being run against it. The defendant said in that context, neither of the amendment applications ought be permitted; to allow them at this late stage would be unfairly prejudicial to it.

8 The plaintiff said in response, that the defendant's application heard on 3 March had been focussed on the question of which share transactions were the subject of its loss claim, and that it had not had the effect of confining the plaintiff's claim in any other respect. It also said that the defendant could not be surprised by the plaintiff's intended reliance on the facts the subject of the applications.

9 Pursuant to order 36.01 of the Supreme Court (General Civil Procedure) Rules 2015 the Court may grant leave to amend a pleading at any time in a proceeding for the purposes of determining the real questions in controversy between the parties. The relevant principles are well understood. The decision whether or not to grant leave is discretionary, and the appropriate disposition will naturally depend on the facts of the instant case. Factors that should inform the exercise of the discretion include the following:

(a) A starting point for determining an application to amend is that all amendments should be made and allowed as are necessary to ensure that the real questions in controversy between the parties are decided. So much follows from the language of Order 36 rule 1. Other considerations also apply, however.

(b) Leave will not be granted where the amendment will cause an irreparable element of unfair prejudice to the opposite party.[1]

(c) Parties are to be afforded a sufficient opportunity to identify the issues they seek to agitate. However, parties are not entitled to an unlimited opportunity to amend their case, subject to the price of paying the costs thrown away by reason of the amendment in order to "cure" any prejudice. That is particularly so where litigation is advanced.[2]

(d) Delay and adjournments may raise questions not only of private prejudice (impacting the rights of parties) but of the public interests in the administration of justice. Undue delay, wasted costs and adjournments may (depending upon the circumstances of the case) undermine confidence in the rule of law.[3]

(e) A party seeking leave is expected to provide a satisfactory explanation of the reasons for the amendment.[4] A late application for leave to amend, such as shortly before trial, must overcome the fact of substantial delay, wasted costs and court time.[5]

10 The primary question remains, what is it that the interests of justice dictate?[6] As the Court of Appeal said in Northern Health, "Aon reminds courts that 'the prism through which these interests are viewed is wider than just that of the moving party'."[7]

11 The Civil Procedure Act 2010 (Vic) (CPA) is pivotal to the resolution of disputes about case management issues in proceedings to which the act applies.[8] Section 9(1) of the CPA sets out the objects to which I am required to have regard in furthering the overarching purpose of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute[9] and s 9(2) sets out further matters to which I may have regard.

12 The plaintiff applied for leave to amend its statement of claim by adding the allegations that the defendant purported to vary the Shareholders Agreement by a deed of variation dated 28 April 2013 but the amendment was invalid because it did not comply with the requirements for amendment set out in the Shareholders Agreement, and that that conduct (attempting to amend the agreement) was oppressive, unfairly prejudicial and unfairly discriminatory, within the meaning of s 232 of the Act.

13 The First Amendment Application arose in this context. In advance of my ruling on objections taken by the defendant on relevance grounds, to parts of the plaintiff's evidence, the defendant sought a determination in relation to the scope of the case that the plaintiff was permitted to open. The plaintiff had not at that point commenced its oral opening, which had been deferred because of the need to hear and rule on the plaintiff's application made on the first day of the hearing, to file and to call additional evidence. The plaintiff's written outline of opening submissions (filed 5 days before the start of the trial) set out the conduct said to comprise the basis of the plaintiff's application for relief under s 233 of the Act. Paragraph 44 of the opening read as follows:

KSG says the following conduct was oppressive and in contravention of s 232 of the [Corporations] Act:

(a) the breaches of the Shareholders Agreement, including each issue of new allotments in breach of the Shareholders Agreement and the dilution of KSG's shareholding as a result;

(b) the attempts to amend the Shareholders Agreement on 28 April 2013, referred to above, in breach of the Shareholders Agreement; and

(c) failure to respond to KSG's requests for books and records of the defendant.

14 After some argument, the defendant's complaints in relation to subparagraphs (a) and (c) of paragraph 44 were resolved. It maintained, however, that attempts to amend the Shareholders Agreement had never been part of the pleaded claim and should not now be permitted to be opened. Paragraph 44(b) of the plaintiff's written opening referred to attempts to amend the agreement "referred to above". The earlier reference in the written opening was to the fact that the agreement was purportedly varied by a deed of agreement signed only by one shareholder; to the amendments purportedly affected by that deed and to the fact that the plaintiff denied that there had been any effective variation of the agreement, because the variation had not been agreed in writing and signed by all shareholders or such number and combination of shareholders as would be sufficient to pass a major shareholders resolution within the meaning of the Shareholders Agreement. The written opening did not otherwise discuss the purported amendment to the Agreement.

15 The plaintiff initially maintained that the attempts to amend the Shareholders Agreement had been pleaded as a fact or circumstance relevant to the Oppression Claim. During argument the plaintiff's Senior Counsel conceded that that matter had not been pleaded but said that that fact had been raised in the defence and in the plaintiff's reply, and accordingly was always a fact in issue, which meant that the defendant could not possibly have been taken by surprise by the plaintiff indicating in its written opening that the purported amendment was the subject of the Oppression Claim. The essence of the plaintiff's application was that there could be no prejudice to the defendant by a grant of leave.

16 In this connection, the plaintiff denied that the scope of its case had been confined in the course of or in response to the defendant's application heard on 3 March 2020. It was implicit in the plaintiff's application that if it were refused leave it would not have the opportunity to run that part of its intended case, but the prejudice to the plaintiff flowing from a refusal of a grant of leave was not articulated in any specific way.

17 I do not consider that the reference in the defendant's defence, to the purported amendment to the Shareholders Agreement, or the corresponding reference in the plaintiff's reply, had the effect of bringing this issue into contention in any relevant way for the purposes of the Oppression Claim.

18 In response to the plaintiff's allegations that the initial shareholders entered into the Shareholders Agreement and that that Agreement contain terms that were breached by Openmarkets, the defendant had said in its defence of October 2018 that (among other things) the Shareholders Agreement was varied by a deed of variation dated 28 April 2013. On 17 April 2020 I granted leave to the defendant to add certain paragraphs to its defence. Those amendments concerned the allocation of shares to one particular investor (Mr Thoo), which the defendant said did not attract the notice provisions of the Shareholders Agreement in respect of pre-emption rights of the original shareholders, because Mr Thoo was a "major new investor" within the meaning of the Shareholders Agreement. By way of reply, the plaintiff set out the relevant provisions of the Shareholders Agreement on which it relied in relation to the share allocation to Mr Thoo. The plaintiff then said, in its reply (dated 20 April 2020), that the Shareholders Agreement had been purportedly but invalidly varied on 28 April 2013. The relevant parts of the amended Agreement were then set out.

19 In argument on this application the defendant's Senior Counsel indicated that the defendant no longer pressed the parts of its defence that made reference to the variation to the Shareholders Agreement.

20 The effect of the allegation in the defence dated October 2018 that the Shareholders Agreement had been varied in April 2013 was to put into contention the question of which version of the Shareholders Agreement governed the transactions the subject of the plaintiff's claim. The evident purpose of the references to the purported variation in the plaintiff's reply, was to cover the plaintiff's bases by contending that in any event, whether under the original Shareholders Agreement or under the purportedly varied agreement, the allocation of shares to Mr Thoo was not supported by the shareholders resolution on which the defendant relied. Neither of those pleadings put in issue whether the fact of the variation amounted to conduct of the company's affairs that was unfairly prejudicial to, or discriminatory against the plaintiff or contrary to the interests of the members as a whole. That conclusion is unaffected by the defendant's indication that it did not press the relevant paragraph of its defence. The relevant question (the significance, if any, of the fact of the purported variation to an application for relief under s 233 of the Act) was never in contention.

21 Further, I consider that were the amendment permitted at this stage of proceedings, and irreparable element of unfair prejudice to the defendant would result.

22 In the face of an allegation that a variation of the Shareholders Agreement was oppressive to, unfairly prejudicial to or unfairly discriminatory against the plaintiff (or contrary to the interests of the members as a whole) the defendant would have been entitled to seek particulars of that allegation. Had it been provided proper notice of that allegation it would have had the opportunity to investigate the circumstances of the purported variation and to make a decision about whether to adduce evidence about those circumstances and if so advised, to prepare and seek to call that evidence . That opportunity has not been afforded to the defendant because it has not been provided with adequate notice of the plaintiff's case. Whilst it can be inferred that the plaintiff's case is that oppression flows from the fact of the purported variation and nothing more, it does not follow that the defendant did not, in fairness, require the opportunity to consider further facts that might be relevant to the characterisation of that fact for the purposes of assessing it under s 232 of the Act.

23 The defendant supported its application for a determination in respect of the scope of the plaintiff's case by an affidavit of its solicitor sworn on 22 April 2020, on which it also relied in opposition to the plaintiff's application to amend.

24 In that affidavit Mr Sperber, the defendant's solicitor, referred to the hearing on 3 March 2020 and to statements by counsel for the plaintiff appearing on that application which he said were to the effect that the oppression case pressed by the plaintiff would be limited and confined to the same matters which were the subject of the plaintiff's claim for breach of the Shareholders Agreement, as alleged in paragraphs [6] and [7] of the statement of claim. Mr Sperber went on to say that on that basis, in preparing for the trial and in taking instructions from potential witnesses (including Mr Scott and Mr Marani for whom witness statements had been filed and who were subsequently called at the trial) the defendant's legal team had made the decision not to seek to enquire about or adduce evidence addressed to any allegations of oppressive conduct other than in respect of the breaches of the Shareholders Agreement as set out in the statement of claim.

25 As to the hearing on 3 March 2020, on that day the defendant's summons of 26 February 2020 was returned. By that application the defendant sought to strike out the entirety of the statement of claim and in the alternative, sought further and better particulars of paragraphs [6] and [7] of the claim and, in any event, an adjournment of the trial. That application is also relevant to the Second Amendment Application and so I set out the relevant elements of it in some detail here.

26 The written submissions in support of that application stated that the defendant was not clear as to whether the Oppression Claim was being pursued, but did not address the Oppression Claim generally. The application was supported by an affidavit of Mr Sperber dated 27 February 2020, in which he said that to proceed with the case in its then current form would unfairly prejudice the defendant by forcing it to defend a case that is incomprehensible; that the defendant was unaware of what specific allegations are part of the plaintiff's case and which are not and that without the issues being further clarified and narrowed, the defendant was not in a position to properly assess whether it needs to call evidence and if so who those witnesses will be. Sperber said that the defendant should not be forced to prepare evidence to respond to several alternative cases that currently appear in the plaintiff's pleadings, statements and expert report.

27 I accept the plaintiff's submission that much of the defendant's argument at the hearing on 3 March 2020 was concentrated upon the need for the plaintiff to identify which of the share allocation transactions was the subject of its claim. The same was true of its written material. At the time of the application there was a disconformity between the transactions identified in paragraphs [6] and [7] of the statement of claim and the evidence that had been filed for the plaintiff in December 2019, which identified a greater number of share allocations, on dates beyond those identified in the claim. The need for that problem to be resolved was crystallised by the defendant's application for further and better particulars of those paragraphs of the statement of claim.

28 In that respect, the discussion that occurred at the hearing on 3 March was at least in part reflected in the matters recorded in my orders of 3 March 2020 (under the heading, "other matters"), namely that "the plaintiff confirms that its allegations of loss and damage as set out in paragraph [7] of the statement of claim dated 20 August 2018 is limited to ordinary shares issued during the period between 25 July 2013 and March 2016 as outlined in the expert report of Mr Smith filed on 23 December 2019. In the event that the plaintiff wishes to advance a claim which is broader than this, it will need to seek leave from the Court".

29 On 3 March I ordered that the plaintiff file further particulars of its claim, in response to the defendant's request dated 28 February 2020. On 8 March 2020 the plaintiff filed those particulars, in which it set out the clauses of the Shareholders Agreement that it contended had been breached, the particular share allotments the subject of its claim, and the basis for the calculation of its loss. That calculation was, briefly, that the loss was assessed based on the plaintiff participating in each and every share issue by the defendant including any shortfall shares or alternatively on participation without the plaintiff taking up any shortfall shares.

30 However, that being so, the defendant nevertheless, by its application of 26 February 2020 and at the hearing on 3 March 2020, plainly and squarely raised its concern about the lack of clarity as to the scope of the Oppression Claim and specifically whether the facts said to support relief under s 233 of the Act travelled beyond those facts alleged in support of the breach of contract claim. I do not accept the plaintiff's submission that those concerns were themselves narrowed or limited to the need for the plaintiff to identify which transactions were in issue, by my Order requiring further and better particulars, or by the matters recorded in my Orders of 3 March 2020 (under "other matters"). Although the identification of the share transactions in issue and the loss claimed by the plaintiff were an important part of the application and of the hearing, the issues canvassed were not so limited, and pointedly addressed the scope of the Oppression Claim.

31 On 3 March 2020 the following exchanges occurred:[10]

MR EVANS: ... What we have sought to do, through bringing a strikeout application, is to require the plaintiff to pin its colors to the mast and say exactly what it is it wants to pursue at the trial of this proceeding.

...

MS PLAIN: ...I can say definitively that the loss claimed by the plaintiff is as set out in Mr Smith's report, and I can accept what Your Honour has indeed put in respect of the inconsistencies on the face of the documents, but it is undoubtedly the case ... [that] the relevant period is that July 2013 to March 2016 period ... And the plaintiff's case, Your Honour, is essentially one of the shareholder's agreement says that you are entitled to notice in respect of an issue of new securities, of a pre-emptive right, if you will. We were denied ... a provision of notice and as a consequence we suffered loss of opportunity which is calculated on the alternative two bases set out in Mr Smith's report. That is the plaintiff's case.

...

HER HONOUR: ... As I read your statement of claim, the oppression claim doesn't travel any further than the same conduct said to give rise to a breach of the shareholder's agreement, that's right, isn't it?

MS PLAIN: Yes. Yes, Your Honour. That's right. And as I understand it, securities that were issued were convertible notes that have the capacity to have further dilute or to dilute my client's shareholding. Now, that is, in essence, the oppression that is complained of. But in any event, the loss is what is described as a result in Mr Smith's report.

...

MS PLAIN: ... I have firm instructions in that regard that the loss pleaded and particularised in paragraph 7 is as confined in Mr Smith's report.

HER HONOUR: Yes. All right. But more importantly, there's no other claim for loss articulated in the statement of claim and that will be the extent of the claim your client's permitted to run at trial.

MS PLAIN: Yes, Your Honour.

HER HONOUR: ... Mr Evans... I think that deals with pleading. Are there any other matters you need to raise in relation to the pleading?

MR EVANS: Regrettably. Yes.

HER HONOUR: Yes.

MR EVANS: Because what we want to do is to be clear that if there is an oppression remedy which is sought and the logical oppression remedy which would be sought would be by app order, we can accept that, then it should be limited and confined, without a further application being made, to the facts giving rise to the claim for damages.

HER HONOUR: Yes, yes.

MR EVANS: In other words, paragraph 10 of the statement of claim should be seen as at trial being limited to a claim based on the matters in paragraphs 6 and 7, rather than 6 to 9 and we are expecting that the particulars which were to be provided by 4 pm on Friday will be limited to a claim related to ordinary shares issued during the period between 25 July 2013 and March 2016.

HER HONOUR: Yes.

MR EVANS: If that's done, then no, I have nothing more to say about the pleading.

HER HONOUR: Well, all right. I think that's sensible. Ms Plain, can I hear from you on that point?

MS PLAIN: Yes, Your Honour. Your Honour, I must say that notwithstanding that I'm not briefed for the trial, that was my understanding when I got across the matter yesterday.

32 I accept, particularly in view of Mr Sperber's affidavit of 22 April 2020, and having regard to his earlier affidavit, that the defendant has made forensic choices in view of its understanding of the plaintiff's stated position in relation to the scope of its claim (specifically including its Oppression Claim), which I regard as a reasonable understanding.

33 It should be recalled that the defendant's efforts to seek clarification about the scope of the plaintiff's case were made in the context of the plaintiff, on its own admission, never having pleaded the fact of the variation of the Shareholders Agreement as a factor giving rise to an entitlement to relief under s 233 of the Act.

34 It should also be recalled that the plaintiff's application to amend was made in the context of it having maintained at all relevant times that the interests of justice would not be served by the grant of an adjournment of the trial, and its having opposed the defendant's recent application to amend its defence, on that basis.[11]

35 Finally, it should be observed that the plaintiff did not proffer any explanation for it not having alleged that the fact of the purported amendment to the Shareholders Agreement amounted to the conduct of the affairs of the company in a manner that was oppressive to, unfairly prejudicial to or unfairly discriminatory to the plaintiff or contrary to the interests of the members as a whole, at any earlier time.

36 Turning specifically to the factors identified in the authorities as bearing on an application to amend pleadings:

(a) on the question of delay, were the application to amend granted, it would necessitate a grant of time to the defendant to investigate the question, including by taking further instructions from the witnesses intended to be called in this trial, who otherwise would be called within a matter of days. It is inevitable that if that occurs the trial will be adjourned;

(b) for the reasons I have articulated, the forensic prejudice to the defendant in allowing the amendment at this point would be meaningful;

(c) in view of the defendant's pointed efforts to obtain clarity about the factual basis and confines of the Oppression Claim, made on notice to the plaintiff, and made 7 weeks before the commencement of the trial (after the grant of the adjournment sought by the defendant) the plaintiff's failure to proffer any explanation about the circumstances of its application to amend is significant. It would be manifestly unfair in these circumstances to permit the amendment;

(d) on the question of wasted cost, it is reasonable to infer that some costs would be wasted by the defendant having to re-interview personnel who have already been interviewed on more limited subjects. That consideration by itself is not significant.

37 By reference to the overarching purpose described in s 7 of the CPA and the objects described in s 9(1) of the CPA, I consider that the plaintiff has had a fair and adequate opportunity to articulate the real issues in dispute, prior to the commencement of the trial; that it would not be just to permit an amendment of the claim at this time and in these circumstances, and that efficient use of judicial resources to enable the just determination of the proceeding in a proportionate manner, supports a refusal of the application to amend. I have had regard to these factors in a composite way, considering the importance of each in relation to the other.

38 For the foregoing reasons the First Amendment Application is refused.

39 By the Second Amendment Application the plaintiff applied for leave to amend its Oppression Claim by adding proposed new paragraphs [7A] and [7B] to its statement of claim which, in substance, allege that:

(a) the defendant was aware of the unfairness to the plaintiff arising from the pleaded breaches of the Shareholders Agreement. It is said that the defendant's awareness may be inferred from:

(i) the extent of the alleged breaches of the agreement;

(ii) the attempt to amend the agreement in April 2013;

(iii) the fact of the dilution of the plaintiff's shareholding from 9.5% to 3.8% of ordinary shares;

(iv) the defendant's failure to respond to the request for books and records (as alleged elsewhere in the claim);

(v) the defendant's failure to provide to the plaintiff certain documents with respect to capital raisings;

(vi) the fact that shares were otherwise allotted to parties associated with the original shareholders;

(vii) the defendant's failure to comply with s 249A of the Act;

(b) one of the purposes of the breaches of the Shareholders Agreement in respect of capital raising was to dilute KSG's shareholding; which purpose may be inferred from the above-mentioned matters and from statements made in the witness statement of Emlyn Scott. That evidence is discussed below.

40 The application to amend arose in the following circumstances.

41 The plaintiff's statement of claim has at all relevant times alleged in substance that:

(a) the Shareholders Agreement was breached in that:

(i) the parties to the agreement failed, refused and/or neglected to ensure that the company complied with the agreement (paragraph [6(a)] of the claim);

(ii) the process followed in the issue of new share allotments breached the relevant clauses of the Shareholders Agreement in that the plaintiff received no notice of the new allotments and was deprived of its rights to participate in the new allotments in accordance with the agreement;

(b) as a result of the breaches of the Shareholders Agreement the plaintiff has suffered loss and damage;

(c) despite repeated requests for access to books and records of the company, Openmarkets has failed, refused and/or neglected to provide such documents;

(d) by reason of the breaches of the Shareholders Agreement, the loss suffered by the plaintiff and the company's failure to produce books and records on request, the affairs of the company have been conducted in a manner that was contrary to the interests of the members as a whole and oppressive to or unfairly prejudicial to the plaintiff;

(e) by reason of the "breach" of s 232 of the Act and by reason of the breaches of the Shareholders Agreement the plaintiff is entitled to relief pursuant to s 233 of the Act.

The claim makes other allegations which are not material to the disposition of the present application. The claim makes no allegation that the breaches of the Shareholders Agreement (or the refusal to provide documents) occurred pursuant to any purpose or that they were knowing, deliberate or intentional. The plaintiff contends that the allegation at subparagraph [6(a)] of the statement of claim (specifically, failure to ensure that the company complied with the Agreement) was capable of conveying a mental state. That contention is dealt with below.

42 The scope of the plaintiff's oppression case was raised by the defendant's 26 February 2020 application and at the hearing on 3 March 2020, as discussed above. After the commencement of the trial the scope of the plaintiff's oppression case was again raised, in the context of the plaintiff's written opening at paragraph [44(b)], as is also discussed above.

43 In the course of the plaintiff's opening, Senior Counsel for the plaintiff said that the failure of the company to give notice to the plaintiff was not an oversight. Mr Clarke QC said that the plaintiff had simply been "left out" of the resolutions directed to the issue of new shares, at least insofar as those resolutions were in evidence. There had clearly been no intention to give notice to KSG. Separately, in the course of addressing the elements of the breach of the Shareholders Agreement, Mr Clarke QC adverted to the fact that whilst the defendant had said in its written opening that it admits the alleged breaches of contract, the defence still maintained denials in respect of the allegations of breach and that it was unclear what was being admitted. Upon my raising this, Mr Evans QC said that the defendant had not intended to indicate that all of the alleged breaches were admitted but rather the concession had been intended to found the existence of a cause of action in contract.

44 In order to avoid any lack of clarity about what was in contest, I directed the plaintiff to incorporate its particulars of 8 March 2020 into its statement of claim (given they had been supplied in a separate document and the claim had not been amended to remove any inconsistent allegations), with the objective of having the defendant re-submit its defence in response to that document, so that any admission could be expressed unambiguously in a way that corresponded precisely to the claim, as narrowed by the particulars of 8 March 2020. The plaintiff's document was prepared and circulated before the defendant commenced its opening.

45 On receipt of the document (which in fact, was not an amended claim but rather a document incorporating the particulars, in accordance with my direction), Mr Evans QC said that he was concerned that subparagraph [6(a)] remained in the pleading because he suspected that the plaintiff may attempt to use that paragraph as a foothold to say that they may submit that the breach of the Shareholders Agreement was in some way intentional or that there was a purpose on the part of the defendant in not giving notice and that the defendant had not come to meet that case, which had never been pleaded. No objection had been taken earlier, to sub-paragraph [6(a)]. The defendant's point was crystallised in this way: that the plaintiff ought not be allowed in final submissions to make any submissions which are directed to the state of mind of Openmarkets with respect to any breaches of contract which are pleaded by it, as a ground or as a fact relevant to the court's determination of a contravention of s 232 of the Act.

46 The plaintiff, by a written submission dated 25 April 2020, said that subparagraph [6(a)] of the statement of claim was capable of conveying a mental element including the purpose of the defendant, and knowledge of unfairness and in the alternative the plaintiff sought leave to amend its statement of claim, ultimately in the form of proposed new paragraphs [7A] and [7B], which I have described above.

47 The plaintiff submitted that the application to amend should be allowed because:

(a) Paragraph [6(a)] of the claim is capable of conveying a mental element including the purpose of the defendant or its knowledge or awareness of unfairness to the plaintiff. It was implicit in this submission that the application to amend was characterised as a fuller articulation of the allegation already made;

(b) The defendant could not have been taken by surprise by the amendment and therefore it was not prejudiced by it;

(c) The plaintiff's case was not narrowed or confined as a consequence of the defendant's application of 26 February 2020 or the hearing on 3 March 2020.

48 The defendant said that neither the existing pleading nor the amendment adequately articulated the basis for a claim of purpose or intent and that it would be prejudiced if the allegation of purpose or intent were allowed in circumstances where it had not come to trial ready to meet that issue. The defendant's opposition to the proposed amendment was supported by a further affidavit of Mr Sperber sworn 29 April 2020.

49 As to paragraph [6(a)], the plaintiff submitted that the word, "fail" is capable of conveying a mental state. That may be so, but, as the cases on which the plaintiff relied demonstrated, the word may have a number of meanings depending upon its context. It may be capable of conveying an element of responsibility, or a mere omission.[12] Even if the word itself were not so context-sensitive, that would not advance the plaintiff's position. The allegation at paragraph [6(a)] is that, in breach of the Shareholders Agreement, the parties (meaning the parties to the Agreement, including Openmarkets) failed, refused and/or neglected to ensure that Openmarkets complied with the Agreement. That allegation is picked up by paragraph [10], in which it is said that by reason of the matters in paragraphs [6] to [9], the affairs of the company were conducted in a matter that was oppressive to the plaintiff (and so on). Even if it be assumed that the use of the word "failed" in paragraph [6(a)] is capable of conveying a mental element, no-where in the claim is there any identification of which mental state is invoked: whether purpose (and if so, what purpose), knowledge or intention. Nowhere are the facts from which a mental state may be inferred, identified. Nowhere is there any identification of the natural persons whose states of mind are to be attributed to the company. Nowhere is there an articulation of which aspects of the breaches of the Shareholders Agreement are said to have been known, or which occurred intentionally or for a particular purpose.

50 As to the proposed amendment, the gist of the claim in relation to awareness of unfairness appears to be that the conduct (including failure to comply with the Shareholders Agreement which caused a dilution of the plaintiff's shareholding) essentially speaks for itself - that it must have been apparent to the company that the conduct was unfair. The allegation as to purpose is that an inference that one of the purposes of the failure to comply with the Shareholders Agreement was to dilute KSG's shareholding can be drawn from the conduct itself, and from the evidence of Mr Scott (set out in his witness statement) that had KSG begun to amass a significant shareholding Mr Scott would have recommended to the board that it revoke the Shareholders Agreement to prevent KSG from exercising its rights under the Agreement. He would have done so because he believed that Mr Galtos was toxic to the company. The defendant says that the proposed pleading would be liable to be struck out, including because it does not identify whose state of mind is to be attributed the company.[13] I accept that the proposed pleading is liable to criticism, at least on that basis. Had it been proposed at an earlier stage in the proceeding, its defects may have been capable of being remedied by refinement and particularisation.

51 However, that is not to the point. The real difficulty that confronts the plaintiff is that it is seeking to advance a case of purpose and intention, introduced for the first time in an informal way in the plaintiff's opening at trial, and by pleading, several days into the trial.

52 The defendant's solicitor says, by his affidavit of 29 April 2020, that had the proposed amendments at paragraphs [7A] and [7B] been pleaded in the statement of claim he would have asked for particulars as to who it was said on behalf of the defendant had the alleged awareness; and for particulars as to the facts, matters and circumstances giving rise to the allegations of awareness and as to the attribution of mental state to the company. He then would have sought internal documents from the defendant and made enquiries of all particular personnel at Openmarkets during the relevant period, including any person identified as having a state of mind attributable to the company. He would have undertaken the same process in relation to any allegation of purpose. He said that the defendant's legal team had not taken any of those steps because it had not considered that that was a case it was required to meet. That evidence was not challenged, either directly or indirectly. I accept it, and consider that it reflects a reasonable and expected approach to the management of the forensic decisions necessary to conduct a case of this kind.

53 The refusal of the application will mean that the plaintiff is not permitted to run the purpose or awareness point. Although that is implicit, the plaintiff did not articulate its prejudice in any particular way.

54 The plaintiff submitted that the defendant could not have been taken by surprise by an allegation concerning the defendant's mental state because the defendant had itself put on evidence about its own mental state. That evidence was to the effect that each of Mr Scott and Mr Marani were not aware at the time that Mr Galtos did not receive notice of the July 2013 share issue. Further, Mr Scott's evidence was to the effect discussed above, in relation to what he would have done had Mr Galtos sought to acquire a significant stake in the company. That evidence could be characterised as being relevant to the defendant's mental state, but it was not adduced for the purposes of meeting any case that had been articulated against it, of the kind now sought to be made. On its face it is confined, and is evidently not directly addressed to the company's purpose in engaging in share allocations without complying with the Shareholders Agreement, or to the question whether the company understood that the process it adopted was unfair to the plaintiff.

55 The plaintiff did not proffer any explanation for having made the application to amend (and having advanced the contention that paragraph [6(a)] of its claim was intended to convey a mental element of sorts) at this point of the proceeding.

56 The plaintiff said that its case was not relevantly narrowed or confined by the application heard on 3 March 2020. In one sense the confining of the plaintiff's case is beside the point because the matter that the plaintiff now wishes to run was never pleaded or otherwise raised. But in another sense, as I have said above, the fact that the defendant pointedly sought clarity about the parameters of the plaintiff's Oppression Claim, putting the plaintiff on notice of its concerns, in circumstances where, had the plaintiff intended to run a then un-pleaded element of its claim, it ought to have made an application to amend, underscores the unfairness of the plaintiff being permitted to run that case at trial on an application made days into the trial.

57 For the reasons articulated above, I consider that the defendant would suffer real forensic prejudice were the amendment allowed at this stage. Were the amendment permitted it would necessitate an adjournment of the trial in order to allow the defendant to prepare for a case that it has not come prepared to meet. The question of purpose and awareness is a substantive question that I accept would require more than superficial consideration by the defendant. While every case is different, and sometimes adjournments are warranted, there is no sufficient justification for an adjournment of this trial. It is not possible to estimate the extent of wasted costs, but that factor is not determinative, given the other factors relevant to the exercise of my discretion. The interests of justice do not favour the plaintiff being permitted to change its course now, where the scope of the case was raised by the defendant in the circumstances described.

58 My observations at paragraph 37 in relation to the overarching purpose described in s 7 of the CPA and the objects described in s 9(1) of the CPA, are also applicable to the disposition of the Second Amendment Application.

59 For the foregoing reasons, the Second Amendment Application is refused.

[1] Thomas v Powercor Australia Limited [2011] VSC 391 (Thomas), [12] (per J Forrest J).

[2] Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon) at 217, [111] - [113].

[6] Thomas, [12]; Northern Health v Kuipers [2015] VSCA 172 (Northern Health), [33].

[9] Civil Procedure Act 2010 (Vic) (CPA), s 7.

[10] Transcript (3 March 2020), 1, 10, 11, 16,-7.

[11] KSG Investments Pty Ltd v Openmarkets Online Trading Pty Ltd [2020] VSC 186.

[12] See Hill v Homes [1999] FCA 760; (1999) 92 FCR 120, 132 [34] (per Goldberg J).

[13] See Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563.