Smith and Donamis Consultants (Vic) Pty Ltd v J Z Lee Interiors Pty Ltd [2017] VSCA 65

Court of Appeal (Vic)|2017-03-22|Before: Elliott J, Mr J, Osborn JA, Santamaria JA, Tate JA

Smith v J Z Lee Interiors Pty Ltd (Unreported, Supreme Court of Victoria, Elliott J, 26 August 2016)

PRACTICE AND PROCEDURE - Application for leave to appeal against the grant of leave to further amend a statement of claim - Proper role of Court of Appeal in matters of practice and procedure - Case management role of the trial judge - Whether error demonstrated in the exercise of the trial judge's discretion - Whether substantial injustice - Whether proposed grounds of appeal have real prospect of success - Judgments of fact and degree - Leave to appeal refused - applied.

1 The Court has arrived at a determination of this matter and I invite Osborn JA to deliver the first judgment.

2 On 26 August 2016, Elliott J sitting in the Commercial Court made orders that the plaintiff file and serve a second further amended statement of claim in accordance with rulings made by the Court on that date. He made further orders with respect to defences, any counterclaim, any reply and defence to counterclaim and fixed a date for further discovery. He also made a series of incidental and consequential orders, including orders that the respondent pay the costs relating to the amendment.

3 The applicants now seek leave to appeal these orders.

4 In so doing, they must confront the principles summarised by Santamaria JA and Riordan AJA in Swan Hill Chemicals Pty Ltd v M A & J Tripodi Pty Ltd:[1]

On an application for leave to appeal, the Court is required to take into account the following considerations:

(a) The power to order an amendment to a pleading is discretionary and is therefore subject to the limitations identified in House v The King.[2]

(b) The decision of the trial judge was interlocutory in character. In Livingspring Pty Ltd v Kliger Partners,[3] this Court recognised the legislative policy in respect of the hearing of appeals against interlocutory orders and endorsed the statement of the Full Court in Perry v Smith,[4] that 'the object [of cutting down the number of interlocutory appeals] which Parliament had should be recognised by

this Court in a liberal manner, and not begrudgingly'.[5] As a consequence, appeals from interlocutory orders should not be permitted except in special circumstances.[6]

(c) The exercise of the discretion to allow an amendment does not determine substantive rights. It is a matter of practice and procedure. Accordingly, an appellate court should exercise particular caution in considering an application for a grant of leave to appeal decisions of that kind.[7] In Livingspring's case,[8] the Court said that we should be guided by the following statement of Sir Frederick Jordan in Re Will of Gilbert:

If a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.[9]

Accordingly, leave to appeal should only be granted where there is sufficient doubt attending the decision below and substantial injustice would be done were the decision to stand.[10] These are stringent requirements.[11]

5 The extent of a trial judge's powers in a complex commercial dispute such as the present one is underpinned by ss 47 and 48 of the Civil Procedure Act 2010.

6 The overarching purpose of the Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[12]

7 Section 47 relevantly provides:

(1) Without limiting any other power of a court, for the purposes of ensuring that a civil proceeding is managed and conducted in accordance with the overarching purpose, the court may give any direction or make any order it considers appropriate, including any directions given or orders made -

(a) in the interests of the administration of justice; or

(b) in the public interest.

...

(3) Without limiting subsection (1) or (2), a court may actively case manage civil proceedings by -

...

(b) identifying at an early stage the issues involved in the civil proceeding, including any issues that have not been resolved in accordance with any mandatory or voluntary pre-litigation processes;

8 Section 48 relevantly provides:

(1) In addition to any other power a court may have, a court may make any order or give any direction it considers appropriate to further the overarching purpose in relation to pre-trial procedures.

(2) Without limiting subsection (1), a court may give any directions or make any orders it considers appropriate with respect to -

...

(e) defining issues by pleadings or otherwise, including requiring parties or their legal practitioners to exchange memoranda, or take other steps to clarify questions;

9 To like effect, r 2.04 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 provides:

A Commercial List Judge may, at any time, give any directions for the conduct of the proceeding which the Judge thinks conducive to its effective, complete, prompt and economical determination.

10 In my view, the grant of leave to amend the statement of claim given by his Honour was amply justified by these powers and their proper exercise involved contextual judgments of fact and degree with which this Court should not interfere as clear error has not been shown and I am not satisfied that substantial injustice would result from permitting the procedural orders to stand.

11 Accordingly, the appeal has no real prospect of success and leave to appeal should be refused. My reasons for this conclusion are as follows.

12 In between 1994 and 2013, Josip Vrapcenjak and the first applicant ('Smith') had a business relationship. Smith was at all relevant times the sole director and shareholder of the second applicant ('Donamis'). The respondent ('J Z Lee') is and was a company of which Vrapcenjak was the sole director and a trustee for his family trust was at all relevant times the only shareholder.

13 For many years, up until mid-2013, Smith held the position of General Manager of the business of J Z Lee. Vrapcenjak has filed an affidavit deposing to the trust and confidence he reposed in Smith. The applicants allege that Smith effectively acted as CEO of J Z Lee. Prior to 30 June 2007 Smith did so as the employee of an administrative company, J Z Lee Administration Services Pty Ltd. From 2007 to 2013, Donamis provided administration and management services to J Z Lee. Smith and Donamis ceased providing services in mid-2013 following a breakdown in the relationship between Smith and Vrapcenjak. In July 2014, Vrapcenjak and J Z Lee commenced two proceedings in the County Court against Smith and Donamis arising out of their former business relationship. One of these proceedings was subsequently transferred to this Court. This was after the decision of the Court of Appeal in Smith and Donamis Consultants (Vic) Pty Ltd v J Z Lee Interiors Pty Ltd.[13]

14 As originally formulated, J Z Lee made three claims:

(a) a claim for unauthorised use of J Z Lee's funds to pay building suppliers for materials provided to three properties in which Smith had an interest, being a claim for $525,409.17;

(b) a claim that between 14 June 2011 and 20 December 2011, Smith directed J Z Lee personnel to carry out building works at one of the properties in which he had an interest - a claim for $122,663.18; and

(c) a claim that Smith caused an amount of a rebate ($39,300), which J Z Lee was entitled to receive from a third party to be applied to the acquisition by Donamis of Volkswagen Golf car.

15 The history of the proceeding since its institution is summarised in an agreed summary of 23 pages. It may fairly be described as tortuous and it is unnecessary to recount it in detail. I note only the following relevant matters:

(a) the applicants have a substantial counterclaim against the respondent arising out of the same arrangements upon which the respondent relies;

(b) the respondent has made a series of attempts to satisfactorily articulate an additional claim for excessive payments by J Z Lee to Donamis for administration services and in particular the remuneration of Smith and two other persons. Elliott J rejected the initial attempt to plead this expanded claim in the Trial Division in December 2015 (the proceeding having been initiated in the County Court and then transferred to the Supreme Court). He rejected as unsatisfactory a further form of proposed amendment in March 2016. He rejected as unsatisfactory a further form of proposed amendment on 22 July 2016. He rejected as unsatisfactory a further form of proposed amended statement of claim on 5 August 2016 and came to consider the amendments now in issue on 26 August 2016.

16 On 26 August 2016, in the ruling which leave to appeal is now sought, his Honour granted and refused leave to J Z Lee on an 'item by item' basis, ie, a paragraph by paragraph treatment of the proposed pleading.

17 Leave was granted subject to a variety of conditions including the addition and deletion of particular words and paragraphs from the pleading; the provision of additional particulars; and the correction and insertion of dates in particular paragraphs.

18 His Honour gave a series of rolling rulings throughout the hearing of the summons seeking leave to amend the pleading which dealt with particular matters of detail such as whether the employment of Amy Smith should be described as 'part-time' at one point in the pleading or, as his Honour suggested, 'casual and irregular'.

19 His Honour also dealt with arguments as to the substance of some claims. Thus a proposed amendment alleging that payment of wages were not disclosed to J Z Lee made in the context of a claim of misleading and deceptive conduct by silence was not granted leave:

The evidence before me presently is that from 1 July 2005 through to 30 June 2013 there was disclosure of the wages of, amongst other people, Mr Smith from 2005, Amy Smith, her first entry being the period commencing 1 July 2006, and Ms Nguyen, the first disclosure being for the period commencing 1 July 2007. The evidence is that those disclosures were on the accounting system used by J Z Lee Administration and then Donamis, which is also the accounting system used by J Z Lee. The accountants of J Z Lee used that same system. The accountants in question were, at the relevant times respectively, the accountants of J Z Lee Administration and J Z Lee, and then Donamis and J Z Lee, thereby giving rise to, at the moment on the available evidence, the almost irrefutable inference that there was disclosure by Smith to the accountants of J Z Lee of the matters referred to in paragraph 9.34 of the proposed statement of claim.

In those circumstances, the allegation in paragraph 9.35 has no real prospects of success and therefore leave ought not be granted.[14]

20 On 5 September 2016, the plaintiffs filed and served version 13 of the second further amended statement of claim in reliance upon his Honour's order granting leave. Some further limited criticism is made of that pleading by the applicants but the nub of the present application is that his Honour erred in granting leave to plead the excessive remuneration claim at all. The applicants' case addresses the pleading in the form in which it was when considered by his Honour and in particular the 19 pages containing paragraphs 9.1 to 9.30.

21 The applicants now seek to re-agitate a series of matters raised on their behalf during the course of the hearing before the trial judge.

The learned Judge erred in not holding that the claims at paragraphs 9.1 to 9.30 of the Proposed Second Further Amended Statement of Claim No. 6 (PFASOC6) (Version 12) have no real prospects of success.
The learned Judge erred in failing to adhere to the principles identified by this Honourable Court in Mandie v Memart Nominees Pty Ltd [2016] VSCA 4 [36]-[47] in respect of the claims at paragraphs 9.1 to 9.30 of the PSFASOC6 (Version 12).[15]

23 The applicants submit that the grant of any leave by the trial judge to raise the excessive remuneration claim would be futile because the claim would be susceptible to a summary judgment application. It is submitted that the claim pleaded has no real prospect of success.[16] The Court should have shut out a claim which will inevitably fail having regard to the key documents, the uncontested facts and the state of the law.[17]

24 The applicants rely on nine matters which are said to found the inference that J Z Lee gave fully informed consent to the payments by way of wages which are now in issue. The trial judge accepted that the proposed pleading required tightening up and further amendment in a number of respects but was not persuaded that the criticisms made on behalf of the applicants justified the refusal of leave to amend as a whole.

25 In my view, his Honour was correct in this conclusion. The matters raised by the applicants do not rise to the level of establishing that the applicants will necessarily establish fully informed consent to the payment of the monies in issue or that the respondent's claims are fanciful.

26 The applicants place particular emphasis on statements made by the judge early in the hearing that this was not the occasion for definitive resolution of disputed factual matters and that such matters would be resolved at trial or perhaps on a subsequent application for summary judgment.

27 The applicants submit that his Honour was bound to consider whether the excessive remuneration claim was fraught with problems and had no real prospect of success.

28 There are two answers to this submission. First, in the course of discussion with counsel his Honour acknowledged three times that it was open to the applicants to contend the claims in issue had no real prospect of success.[18] Moreover, as the ruling with respect to the non-disclosure allegation shows, his Honour did in fact refuse leave to allege matters which he held had no real prospect of success. Further, he ultimately considered global submissions as to the amendments as a whole and was not satisfied the applicants' submission was made out.

29 Secondly, I would in any event be loath to hold that a Commercial Court judge could never determine the appropriate form of a pleading before going on to deal with the prospects of success. It is plain that nothing said by the judge at any stage foreclosed the prospect of consideration of the substance of a summary judgment argument prior to trial. The judge was entitled to proceed in the way that appeared most expedient and efficient to him in all the circumstances of the case including the time available to him. The decision in Mandie v Memart Nominees Pty Ltd[19] does not shackle the Court in the procedures which it adopts, but establishes a proper basis on which the Court may refuse to exercise its discretion to give leave to amend.

30 No arguable error in his Honour's overall approach has been demonstrated.

31 It is further submitted that Vrapcenjak could not have accepted and endorsed the financial statements which he did as a director of the respondent unless he understood and consented to the payments made to Mr Smith and others which are the subject of the excessive remuneration claim.

32 In my view, his Honour was correct to observe that the notion of a director's legal duties does not preclude a claim for unconscionable conduct based on particular facts involving some special disadvantage against another person on whom the director relies.[20] Further, the fact that someone signs a document does not necessarily refute evidence that he did not appreciate its contents.[21]

33 Proposed grounds 1 and 2 have no real prospect of success.

The learned Judge erred in not holding that the claim relating to Amy Smith at paragraphs, among others, 9.15 to 9.17, 9.22(b) and 9.23 of PSFASOC6 (Version 12) (Amy Smith claim) has no real prospects of success.
The learned Judge erred in not holding that the Amy Smith claim is: (i) fundamentally flawed or defective; and/or (ii) embarrassing because it is speculative, of a fishing nature and likely to prejudice, embarrass or delay the fair trial of the proceeding in the trial division.
The learned Judge erred in failing to hold that the Amy Smith claim did not constitute a cause of action.[22]

35 Amy Smith was Mr Smith's sister-in-law. The claim is that she was overpaid because she was paid a fulltime salary during an initial period when she did not work at all and over a further period commencing 4 August 2010 during which she worked one day a week.

36 The applicants submit that the claim is bad because J Z Lee cannot quantify precisely how many hours Amy Smith worked.

37 Donamis kept no timesheets.[23] As the trial judge noted, it is open to the respondent to subpoena Ms Smith to give evidence herself (and presumably to produce her taxation and other work records).

Then let's move on. Based on the evidence that is available to me, there does appear to be a basis for pleading what has been pleaded. Consistent with the Civil Procedure Act, there is a duty to cooperate. A request can be made by the plaintiff as to whether the defendants have any basis for stating how many hours of work and that requested can be responded to and I will revisit the position as to the basis on which the claim is put after those enquiries have been made and a response has been given. In the meantime, leave can be granted in relation to the allegations in paragraph 9.22.[24]

The learned Judge erred in granting leave to amend in relation to the claims at paragraphs 9.1 to 9.30 of the PSFASOC6 (Version 12) as they relate to alleged payments by J Z Lee Administration Services Pty Ltd and J Z Lee made prior to 26 August 2010 (6 years before the date of the learned Judge's decision), alternatively 11 July 2008 (6 years before the date of the commencement of the proceeding), because such claims are statute-barred.[25]

J Z Lee's proposed claim includes/concerns:

(a) alleged payments by J Z Lee Administration to Smith and Lisa Smith totalling $178,106.39 as well as 31 alleged payments by J Z Lee to Donamis totalling $3,868,233.68, all of which took place more than 6 years before the date of the learned Judge's decision on 26 August 2016; alternatively

(b) alleged payments by J Z Lee Administration to Smith and Lisa Smith totalling $178,106.39 as well as 13 alleged payments by J Z Lee to Donamis totalling $1,433,036.32 , all of which took place more than 6 years before the commencement of the proceeding on 11 July 2014.

J Z Lee made no claim that the 6 year limitation period in section 5 of the Limitation of Actions Act 1958 (Vic) may have been postponed with respect to its claim, including the alleged payments in paragraph 24 above. Accordingly, the learned Judge should have held that any action in respect of these payments was statute barred. The learned Judge's ruling did not address this matter.[26]

41 Insofar as the respondent's pleading seeks to raise Corporations Act claims relating to payments made before 11 July 2008, the respondent concedes that the applicant has a good defence.[27]

42 Insofar as the contractual claims are concerned, the respondent submits that if a Limitations of Actions Act 1958 defence is pleaded on behalf of the applicants, then the respondent will rely on s 27 of the Wrongs Act 1958. In substance it will allege concealed fraud ie unconscionable conduct as between the parties.[28] In my view, this is a proper matter for reply.

43 There was no error in permitting the respondent to further plead this aspect of the matter.

44 His Honour expressly accepted that the pleading in relation to limitation issues might require further resolution prior to trial.[29]

The learned Judge erred in not holding that if the proposed amendment were allowed the applicants would be prejudiced in the conduct of their defence in a way that could not fairly be met by an adjournment, an award of costs or otherwise (rule 36.01(6)), that is, the applicants would suffer prejudice as they have lost the opportunity to seek contribution or indemnity pursuant to section 24(4)(a) of the Wrongs Act 1958 from the firm of accountants Rudolf Horvat & Associates.[30]

46 Rule 36.01(6) of the Supreme Court (General Civil Procedure) Rules 2015 provides with respect to the amendment of a pleaded claim:

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.

47 This rule complements s 34 of the Limitations of Actions Act 1958.

(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.

(2) This section does not apply to an amendment in a proceeding commenced before 1 January 1987.

48 Despite the decision in Wintle v Conaust (Vic) Pty Ltd[31], there may be some doubt that the alleged prejudice relied upon is prejudice 'in the conduct of that party's ... defence' because it is really a matter between Smith and Donamis, as defendants, and a potential third party, rather than strictly a matter that Smith and Donamis could rely upon in their defence against J Z Lee. But this is not the occasion to re-examine that issue. The trial judge accepted that prejudice of the kind alleged was potentially relevant.

49 The applicants assert that they have lost the opportunity to seek contribution or indemnity from the accountants who may have advised the parties with respect to the administration expenses in issue, nevertheless the basis of a potential claim against the accountants was not properly articulated or evidenced before the trial judge.[32] It appears to be entirely speculative. At one point counsel for the applicants submitted to the trial judge:

So Mr Pantelidis [one of the accountants], who is acting for both Smith, the whole of the J Z Lee group and Donamis is completely on top of all these transactions. It is incredible that he wouldn't have been more conscious of Mr Vrapcenjak's interests than Mr Smith's, and that he wouldn't have been looking out for rorting. And we don't have any evidence or anything about what Mr Pantelidis' advice [was] about these matters.[33]

50 Likewise, an earlier attempted articulation of a possible contribution claim in an outline of argument of 22 July 2016 does not have a satisfactory evidentiary basis. The affidavit of Lyndal Gaye Mews sworn 24 March 2015[34] simply states that Smith formulated charges on the basis of annual expenses of Donamis following 'a suggestion' of Pantelidis.

51 Ultimately, his Honour disposed of this aspect of the matter on the basis that there was no reason to conclude that the accountants could not have been joined in 2015 before the relevant limitation arose.[35] It appears that, to use the language of counsel for the applicants, the excessive remuneration claims were first 'dumped on' the applicants in January 2015 and the relevant limitation date expired in July 2015.

52 An initial form of proposed amendment raising the excessive remuneration claim was served on 13 January 2015 and rejected by Judge Anderson on 25 January 2015. But a second version was accepted by Judge Kennedy in April 2015. The agreed statement of facts records:

The further hearing of the First Amendment Application came before her Honour Judge Kennedy on 27 March 2015. Her Honour reserved the decision as to whether J Z Lee was to be given leave to file and serve P ASOC2. Her Honour granted the First Amendment Application on 16 April2015, delivering reasons for ruling ([2015] VCC 426) and ordering, among other things, that J Z Lee 'have leave to file and serve, by 23 April 2015, an amended statement of claim substantially in the form delivered to the defendants on 4 February 2015'. This leave included the proposed claim for excessive payments.

On 23 April2015, J Z Lee filed and served an Amended Statement of Claim (ASOCl (Version 3)).[36]

53 The trial judge also had regard to the allegations by the applicants against the respondent of non-payments of remuneration in 2008 and 2009. A defence and counterclaim seeking amongst other things $697,838 in respect of such non-payments was filed and served on 16 September 2014. This aspect of the matter is further elaborated below in respect of grounds 9, 10 and 11. It establishes a context in which the applicants knew of and must have turned their minds to the role of the accountants.

54 In April 2013, it was apparent there was a real risk of a properly formulated claim proceeding with respect to excessive remuneration. In turn, the Court of Appeal contemplated that a reformulated claim might go forward in July 2015 prior to the expiration of the limitation period.

55 In my view, it was open to his Honour to reason as he did and this ground has no real prospect of success.

The learned Judge erred in failing to take into account or give sufficient weight to a material consideration, namely the inadequacy of a costs award to meet the actual expense incurred by the applicants as a result of an amendment: the respondent is impecunious, so that there is no discernible prospect of recovering the applicants' costs under previous costs orders and future costs orders.

57 The applicants submit that the trial judge failed to consider the capacity of the respondent to pay the applicants' costs if the respondent is unsuccessful in its claim.

58 As the trial judge noted in the course of discussion with counsel,[37] there is an existing order for security for costs. There is also an obvious capacity to make further orders for security for costs prior to the trial. The amendment of the pleadings does not deprive the applicants of this remedy.

The learned Judge erred in failing to take into account or give sufficient weight to a material consideration, namely the respondent's delay in bringing the new proposed claims and the absence of any or any satisfactory explanation for the delay.
The learned Judge erred in failing to find that the respondent had not given an explanation, alternatively a satisfactory explanation, for its delay.
The learned Judge erred in failing to take into account or give sufficient weight to a material consideration, namely the respondent's failure to show that its application for leave to amend is brought in good faith (given its delay in bringing the new proposed claims).[38]

60 His Honour noted that an affidavit had been filed on behalf of the respondent 'explaining the delay to some extent'. He considered it adequate in the circumstances of the case. This judgment was a classic judgment of fact and degree. The relevant factors included the following:

One of the critical factors, with respect to granting the leave sought, is what is alleged in paragraph 92 of the defence to the further amended statement of claim and the counterclaim dated 18 February 2016. In that pleading, it is alleged that, in breach of the Admin Agreement, J Z Lee refused, failed or neglected to pay Donamis the amount of $697,838.48 in respect of the whole of the fees payable to Donamis between July 2008 and June 2009 pursuant to the term referred to in sub-paragraph 25 2C(ii) (c) hereof, which subparagraph alleges that there was an agreement entered into in or about May 2007, which is defined as the Admin Agreement, due to commence from 1 July 2007.

By reason of the allegations made by the defendants, there is already in issue in this proceeding the nature, terms and extent of the Administration Agreement entered into effective 1 July 2007. Much of the material the subject of the allegations that have been the subject of leave today is dealing with the same subject matter, albeit the allegations go back a little bit earlier because the plaintiff says that this underlies the basis of the agreement in July 2007. So, in my view, the issues concerning prejudice which might have otherwise applied absent the allegations in paragraph 92 of the defence and counterclaim do not apply nearly to the extent in this case when the area of the existing dispute already traverses a time back to as early as 2008.[39]

62 The applicants' complaint is essentially one with respect to the weight accorded a particular factor by the judge in the exercise of his discretion. In effect, the applicants assert that the judge failed to give the factor of delay sufficient weight. Such an attack is not open upon an appeal of this kind.

The learned Judge erred in failing to take into account or give sufficient weight to a material consideration, namely the strain the proposed claims in the litigation would impose upon the individual applicant, Brendon Smith, and in particular, the irreparable prejudice in the form of inconvenience and stress to Brendon Smith and disruption to his business that the proposed amendment would cause.[40]

64 It may be accepted that the judge was entitled to balance the stress the amendments would impose upon the litigants with the interests of justice,[41] but he was not bound to regard delay and its consequences for the first applicant as decisive.

65 The overlap between the matters raised in the counterclaim and the proposed amended claim to which the judge referred in his rulings was a material matter in this regard. Once again, it could not be concluded that the factor of stress to Mr Smith compelled refusal of the amendments. The applicants' real complaint is that the judge did not give this consideration sufficient weight. Such a ground has no prospect of success.

The learned Judge erred in failing to take into account or give sufficient weight to a material consideration, namely the requirement of substantial further discovery before trial.[42]

67 The same factors bearing on the assessment of delay bore on the assessment of the fairness of the prospect of additional discovery.

68 The material before the judge did not establish that the prospect of further discovery rendered the amendment unfair.

The learned Judge erred in not holding that no weight was to be put on the hearsay expert evidence of Simon Hare, Managing Principal, HaRe Group.[43]

70 The trial judge had regard to expert reports from an accountant exhibited to an affidavit of a solicitor filed on behalf of the respondent.

71 The evidence in issue went to reasonable rates of remuneration. It went to an alternative secondary basis on which the claim for excessive remuneration with respect to Smith is made. In the first instance, that claim is made with respect to Smith by reference to an alleged agreed pay standard. It also went to the reasonable remuneration of the employee Nguyen.

72 Such material was admissible on an interlocutory application.[44]

73 The case upon which the applicants rely, Safari Automotive Technology Pty Ltd v Ironman 4x4 Pty Ltd,[45] related to an interlocutory injunction and does not assist them. The applicants have not pointed to any requirement in ss 76 or 79 of the Evidence Act 2008 that has not been met. It was submitted by the applicants that the case is authority for the proposition that in every interlocutory application 'no weight is to be put on hearsay expert evidence where [the] evidence is important and the party relying on it has had a clear opportunity to present the evidence directly from the expert'. It is not an authority for such a proposition. That was the conclusion of the judge as to the weight of the evidence there in issue having regard to the circumstances of that case,[46] but it was not a statement of principle which is to be applied in all interlocutory applications.

The learned Judge erred in failing to give effect to the overarching purpose pursuant to section 7 of the Civil Procedure Act 2010 in the exercise of the power to grant leave to amend.[47]

76 When the transcript of the hearing before the trial judge is read as a whole, it is apparent the judge was cognisant of the overarching purpose for which he should exercise his powers. Indeed, he exercised significant diligence and care in seeking to identify the real issues in dispute and expedite the matter. It cannot be said that the overarching purpose compelled complete rejection of the proposed amendments.

The learned Judge erred in failing to apply the principle that it is not the function of the Court to draw or settle a party's pleading, the Court being confined to the function of ensuring that pleadings are within the rules and fulfil the functions for which they exist.
The learned Judge erred in failing to apply the principle that where a pleading or an amended pleading is particularly bad the Court would not be astute to go through it piece by piece to pick up paragraphs that can stand, and other paragraphs that should be struck out.
The learned Judge erred in granting leave to amend subject to J Z Lee: (i) inserting material facts in Version 12; and (ii) identifying matters in material facts and particulars.[48]

78 The powers granted to a judge managing commercial litigation pursuant to ss 47 and 48 of the Civil Procedure Act 2010 and the rules governing the Commercial Court[49] mandated and justified intervention which enabled the identification of the real issues in the case to be clarified by the pleadings. There is nothing in these grounds.

79 In my view, the application for leave to appeal should be refused.

80 I agree that the application for leave to appeal should be refused for the reasons given by Osborn JA.

81 The orders of the Court will be that the application for leave to appeal is refused.

82 The application for the stay having become unnecessary, there will be an order by consent that the application for the stay is dismissed.

83 The third order of the Court is the following: The applicants are to pay the respondent's costs of the application for leave to appeal including the stay application (including reserve costs).

[1] [2016] VSCA 264 [21]-[22] (citations in original).

[3] [2008] VSCA 93; (2008) 20 VR 377 (Maxwell P and Buchanan JA) ('Livingspring's case').

[5] [2008] VSCA 93; (2008) 20 VR 377, 379 [6] citing Perry v Smith [1901] ArgusLawRp 51; (1901) 27 VLR 66, 68. See also Niemann v Electronic Industries Ltd [1978] VicRp 44; [1978] VR 431, 437; Darrel Lea (Vic) Pty Ltd v Union Assurance Society of Australia Ltd [1969] VicRp 50; [1969] VR 401, 408.

[6] Livingspring's case [2008] VSCA 93; (2008) 20 VR 377, 379 [6] citing Niemann v Electronic Industries Ltd [1978] VicRp 44; [1978] VR 431, 438 (Murphy J).

[7] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177 (Gibbs CJ, Aickin, Wilson and Brennan JJ).

[10] Niemann v Electronic Industries Ltd [1978] VicRp 44; [1978] VR 431, 433 (McInerney J).

[15] Application for leave to appeal dated 23 September 2016 paragraph 6.

[17] See Mandie v Memart Nominees Pty Ltd [2016] VSCA 4 generally and in particular at [43]-[47].

[22] Application for leave to appeal dated 23 September 2016 paragraph 6.

[25] Application for leave to appeal dated 23 September 2016 paragraph 6.

[26] Written case for the applicant dated 22 October 2016 paragraphs 24 and 25 (citations omitted).

[27] Written case for the respondent dated 28 October 2016 paragraph 18.

[28] Levey v Watt (2014) 308 ALR 748.

[30] Application for leave to appeal dated 23 September 2016 paragraph 6.

[36] Summary for Court of Appeal dated 16 November 2016 [28]-[29] (citation omitted).

[38] Application for leave to appeal dated 23 September 2016 paragraph 6.

[40] Application for leave to appeal dated 23 September 2016 paragraph 6.

[41] Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, 214 [100]-[101].

[42] Application for leave to appeal dated 23 September 2016 paragraph 6.

[43] Application for leave to appeal dated 23 September 2016 paragraph 6.

[47] Application for leave to appeal dated 23 September 2016 paragraph 6.

[48] Application for leave to appeal dated 23 September 2016 paragraph 6.

Court (Miscellaneous Civil Proceedings) Rules 2008

Limitations of Actions Act 1958

Supreme Court (General Civil Procedure) Rules 2015

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