Tred Consultants Pty Ltd v Kirana Training Pty Ltd

District Court of NSW|2021-04-26

BACKGROUND

By a notice of motion filed on 22 April 2021, the plaintiff applies for leave to further amend its pleading.
This proceeding commenced on 4 July 2018. On 29 October 2020, the matter came before me for hearing. On the first day of the hearing, after hearing opening addresses from Counsel, the proceeding was partially referred to a referee, to consider accounting questions raised by the defendant. The circumstances in which that referral occurred are set out in Tred Consultants Pty Ltd v Kirana Training Pty Ltd [2020] NSWDC 690. It is not necessary to repeat them here.
Following some delays, on 22 March 2021, the referee has reported and the defendant has, separately, formally applied for adoption of that report. Prior to the hearing of the amendment application, Counsel for the plaintiff indicated that it was common ground that the referee's report should be fully adopted. In response to that indication, after raising my view with Counsel, I decided to defer the question of adoption until after my determination of the amendment application, a course which neither party disputed. As I will now indicate, the contents of the referee's report underpin the present amendment application.
Notably, the defendant has submitted in its application for adoption of the report, that one basis for calculation should be accepted but not another, being what the defendant refers to as the referee's 'Second Calculation'. This calculation was identified as being based upon the amount that would have been owed to the plaintiff, if it had received the benefit of claims invoiced for, but in respect of which, the defendant did not make claims to the government. The "first" calculation - the results of which the defendant seeks to have adopted - was, in contrast, directed to assessing what was owed by the defendant to the plaintiff if this was based upon funding actually received by the defendant. In this way, it may be seen that the contentious 'Second Calculation' was framed as being additional to the First Calculation. In the supporting affidavit for the adoption of the referee's report, the defendant makes a submission that the Court should disregard the Second Calculation. This was because the defendant has only ever had to meet a case that its liability to the plaintiff was based upon the funding it had received from government (at state and/or federal level). It says that although the referee properly considered the matter, within the terms of the reference, it had made it clear throughout the reference that, formally, it objected to the referee doing so, since it fell outside the scope of the pleading.

Why the amendment application is made now

As has become abundantly plain, the question whether the Court accepts the referee's 'Second Calculation' in addition to the First Calculation may have a material bearing upon the quantum of the plaintiff's money claim. This explains why the plaintiff now seeks to amend its pleading. Both parties referred to the referee's report, including parts of Appendix 1, in the hearing of the amendment application.
The plaintiff has set out its proposed amendments in a proposed Further Amended Statement of Claim. In the affidavit in support of the application, the plaintiff's director, Mr Sabharwal, acknowledges that the amendment application has been occasioned only by the content of the referee's report.
Mr Sabharwal argues that the amendments in effect, only pick up, the conclusions, ie essentially the Second Calculations, made by the referee which were already "in play", with the parties having had fair opportunity to place before the referee the evidence they relied upon. Implicitly, he argues that the defendant had full opportunity to assist the referee with evidence in relation to the Second Calculations; even if it did lodge a formal objection to the referee dealing with that as part of the subject matter of the report. That being so, it cannot say that it is now prejudiced if amendments are brought to reflect the results of the Second Calculation.
The plaintiff argues, further, that the amendments, in the terms that they are pleaded, are not apt to occasion prejudice. They amount, generally, to allegations of implied terms, either of law or mixed matters of law and fact which should be uncontroversial; and which, arguably did not require any pleading at all. Mr Sabharwal says that has been open to both parties at all times to rely upon implied terms of the written 'co-operation agreement'.
Mr Sabharwal adds that he has received instructions that the plaintiff will not press for any time to conduct an audit of the claims or invoices. This was in aid of its argument that the plaintiff would not rely upon any further evidence, beyond the content of the referee's report, should its amendments be permitted, thus practically obviating any need for evidence from the defendant and consequentially, obviating any need for an adjournment.

The defendant's opposition to the application

As indicated, the defendant opposes the amendment application. It relies upon the affidavit of Mr Zeeshan Rana affirmed on 25 April 2021. Mr Rana is the Chief Executive Officer of the defendant. The gist of Mr Rana's evidence is that, contrary to the plaintiff's expectation, if the amendments were to be permitted, the defendant would wish to have the opportunity of adducing evidence of whether it breached any posited implied duty to co-operate; as well as marshalling other arguments on quantum. In particular, and without being exhaustive, Mr Rana foreshadowed that if the new allegations were permitted, the defendant would wish to say that it was not in breach of any obligation to co-operate at all, and that the information or claims which it submitted to the government reflected the quality and quantity of the information given to it by the plaintiff; or, alternatively, some of the funding related to students who the defendant had trained. The defendant would also wish to say that some of the plaintiff's invoices were more than the maximum amount of funding available.
The defendant also says that it would not be an appropriate exercise of the Court's discretion to permit the plaintiff to change its case now, after so long. It also argues that to permit the amendments would give rise to futility, since the referee's opinions about the second calculation were materially qualified by the reservation that they could not be verified and, indeed, should not be accepted without a further audit which could only take place on the basis of an adjournment of the matter and very likely require further evidence and possibly, also, the re-opening of the reference.

In reply, Counsel for the plaintiff says that once the defendant has indicated its acceptance of the content of the referee's report, as it has, it is stuck with the findings made by the referee; which were based upon source material essentially supplied by the defendant. Similarly, he argues that if the evidence which Mr Rana says he would like to put on is relevant now, if the plaintiff's amendments were permitted, it was also evidence that was relevant during the reference. It is now too late for him to say that the defendant should have opportunity of putting on further evidence.

Consideration

In determining amendment applications, the Court must, of course, have regard to the case-management objectives referred to in s 56 of the Civil Procedure Act 2005 (NSW) (the 'CP Act') and, more specifically, the considerations relating to the dictates of justice set out in s 58 of the CP Act.
I do not accept Counsel for the plaintiff's somewhat counter-intuitive submission that the plaintiff was spared the requirement to even plead an entitlement to funding beyond the existing pleaded case, that is, that the plaintiff was entitled to a percentage of funding actually received by the defendant from the state or federal government, and that the point could have been raised by it in submission supporting the existing case. The case on breach of implied obligation not only depended upon a duty recognised in law, but for the case to be sustainable, it was apt to give rise to factual matters as to how the posited duty was breached. In other words, whilst an allegation that a party to a commercial contract may owe an implied duty to co-operate may not surprise the other party, an allegation that such duty was breached would surprise; and therefore was required to be pleaded (r 14.14(2)(a) of the Uniform Civil Procedure Rules 2005 (NSW)).
Three considerations principally have significant weight in the circumstances I have alluded to. First, the plaintiff was aware of the defendant's objection, during the reference, to the referee treating with the 'Second Calculation' on the basis that it went beyond the plaintiff's hitherto pleaded case. That reference was on foot for the period from November 2020 until April 2021. But the plaintiff did not do anything to amend its case before now, when the results of the referee have come in. The plaintiff has, in other words, taken a 'wait and see' approach to what the referee had to say. Not being satisfied with the referee's opinions on the First Calculation, it now seeks avowedly to take advantage of favourable opinions upon the Second Calculation the opinions of which were only expressed in the face of the defendant's objection to the referee considering it at all. But if, as the plaintiff correctly argues, it was foreseeable that it was open to the parties at all times to argue for implied terms from a written agreement, it may be said to be obviously also foreseeable that the Second Calculation would only augment the quantum of the plaintiff's money claim. No explanation has been offered why it took the publication of the referee's report for the plaintiff to make its application now, just over one business day before the hearing. It is not as if the pleading of the implied terms depended upon the referee's ultimate calculations. The delay in bringing the amendment application before now is, in my view, antithetical to the case-management objects.
Even if this particular point lacked validity, because the plaintiff could not agitate an argument based upon breach of an implied obligation any earlier than it did, the problem remains that even if it may be accepted that the defendant owed implied obligations of the kind posited in the proposed amended pleading, there is nothing in what the referee did which will assist the plaintiff to allege, and thereafter prove, that such obligations were breached. There is force in the defendant's submission that in the circumstances in which this application is made, the plaintiff has identified a beneficial finding from the referee, made in the context of pleadings as they stood, and now seek to agitate a separate and distinct action for breach of contract on the premise that because of the referee's arithmetical calculations that more money is owed to the plaintiff, that necessarily must have resulted from a breach of obligation by the defendant. However, the arithmetic underlying the 'Second Calculations' contained in the referee's report does not relieve the plaintiff from the obligation of identifying how the new, or re-stated contractual obligations, were breached.
Secondly, I accept the defendant's evidence that if an action of breach of an implied obligation to co-operate was allowed to run, it would be entitled to have opportunity to put on evidence in the conventional way and, further, that it is very likely, that this evidence would be supplementary to the defendant's evidence that was put before the referee. I do not accept the plaintiff's submission that the defendant should, as it were, be hoist on the petard of the evidence that it placed before the referee. That was evidence based upon the defendant's reasonable view (vindicated by the making of the present application) as to what fell within the plaintiff's then pleaded case. I do not accept that the defendant should fairly be shut out from an argument that the information it supplied to levels of government was directly affected by the quality and/or timing for the supply of information which the plaintiff had supplied to it. Contrary to the plaintiff's submission, I cannot discount the possibility that this evidence of the kind foreshadowed by Mr Rana exceeds the scope of evidence that the parties placed before the referee, on the basis of the current iterations of the pleading. In this regard, Counsel for the defendant identified, as one example, of the proposed further amended pleading, the particulars to paragraph 5A.4, which spoke of the defendant's obligation to make a claim for government funding on the basis of 'education data' as well as invoices. But when considering paragraph 15 of Mr Rana's affidavit, which was not challenged, the cooperation agreement provided certain requirements for the provision of information by the plaintiff to the defendant before a claim could be advanced, including a temporal requirement. The defendant would want the opportunity not only to have clarity as to what 'education data' the plaintiff alleged had been supplied to it, but would want the opportunity to disprove any breach asserted by it in failing to make a claim. As Counsel for the defendant submitted, there may be multiple reasons why a claim was not made for government funding. I reject the plaintiff's submission that the defendant should have thought about this evidence earlier during the referral. The short answer is that, on the basis of the pleadings as they then stood, the defendant did not need to.
Thirdly, although the plaintiff says that it will not argue for any adjournment to allow for an audit, or other evidence, to occur or be compiled to substantiate the 'Second Calculation', the Court would be in left in the invidious position where those findings of the referee would not be capable of being tested. This was one of the objectives of the referral in the first place. It is undesirable not only for the defendant, but also for the Court to make findings on the basis of evidence that is not capable of verification; to say nothing of the public's confidence in the administration of justice. I do not regard acceptance of findings based upon the unverified conclusions of the referee as conducive to a "just" result. I do not find persuasive the plaintiff's argument that, in any application to adopt the referee's report, the Court might 'accommodate' the present difficulties by 'adjusting' amounts owed to the plaintiff to reflect the absence of audit. It was not suggested how such accommodation might be made. Indeed, there may be a question whether the principles applicable to the adoption of a referee's report could permit the Court to accept such conclusions, at least without the matter going back to the referees for supplementary opinion. In this way, I am also concerned whether to permit the amendments, without further audit, or supplementary opinion by the referee, would give rise to a futility.
In my view, it is possible that there may be no other fair way to permit the amendments but to allow for an audit and then to re-open the scope of the evidence. That would then lead to a fourth concern about the significant lapse of time that has already passed in a case commenced on 4 July 2018; which has already been amended once, on 19 September 2018. Permitting further amendments - and a consequential re-opening of the evidence out of court - would be antithetical to the timely disposal of proceedings. If this appears harsh from the perspective of the plaintiff, then it is to be noted that at least since November 2020, if not beforehand, it has been on notice of the defendant's contention that the assumption underlying the Second Calculation has been contested; that it has had opportunity to take action to apply to further amend its pleading before now, but has not availed itself of that opportunity. There is force in the defendant's allusion to the view expressed by the plurality in Aon Risk Services Australia v Australian National University (2009) 239 CLR 175 at [112] (citations omitted), that: "A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate."
Neither party was in favour of a further adjournment of this proceeding to allow the new action to be investigated and proven. Counsel for the plaintiff expressly submitted that 'nobody' sought that result. But permitting the amendments, which amount to a new action, would properly require further delay and, in all probability, a further reference back to the referee to confirm second calculations on the basis of verified information; and require further consideration by the Court as to whether to adopt such supplementary report. The prudent course, indeed, would be to then defer consideration as to whether the first report of the referee should be adopted until the referee had reconsidered the information. To consider the proposed new action properly would require the allocation not only of the further resources of the parties, and the referees, but also of the Court, at the expense of other litigants and the consideration of their causes.
In the circumstances, I am not satisfied that the dictates of justice indicate that the amendments be permitted. The plaintiff's application to further amend is refused. That application is dismissed with costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 April 2021

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