Equuscorp Pty Ltd v Lah & ors [1999] ACTSC 87 (13 August 1999)

Last Updated: 6 October 1999

Equuscorp Pty Ltd v Lah & ors

[1999] ACTSC 87 (13 August 1999)

CATCHWORDS

PRACTICE & PROCEDURE - Application for leave to file a further amended defence and counterclaim - Debt recovery action - Proposed substantial changes to defence - Newly alleged oral aspect of the loan agreement entered into 10 years ago - Prejudicial value a relevant consideration - Case management a relevant consideration - Justice is the paramount consideration - Costs penalty - No issue of principle.

No. SC 884 of 1994

Coram: Master T Connolly

Supreme Court of the ACT

Date: 13 August 1999

IN THE SUPREME COURT OF THE )

) No. SC 884 of 1994

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: EQUUSCORP PTY LTD

(formerly EQUUS FINANCIAL SERVICES LIMITED)

(ACN 006 012 344)

Plaintiff

AND: FRANCIS XAVIER LAH

Defendant

AND: RURAL FINANCE PTY LIMITED

First Third Party

AND: JOHNSON FARM MANAGEMENT

PTY LIMITED

Second Third Party

ORDER

Judge Making Order: Master T Connolly

Where Made: Canberra

Date of Order: 13 August 1999

THE COURT ORDERS THAT:

1. Leave is granted to the defendant to file and serve a further amended defence and counterclaim within 7 days.

2. The defendant pay the plaintiff's costs thrown away resulting from the amendments.

3. The parties have leave to relist the matter for any further directions on three days notice.

1. This is an application by way of Notice of Motion of 1 April 1999 for leave to file and serve a further amended defence and counter claim. There were also claims for discovery against the first third party in the Notice of Motion, but this claim was abandoned when the matter came on for hearing on 5 August 1999.

2. The proceedings relate to a loan agreement dated 30 June 1989 in which it is claimed that the defendant, Dr Lah, borrowed funds from the first third party for the purposes of acquiring units in a limited partnership venture known as Red Claw Partnership No 1. The purpose of the partnership venture was to farm and harvest freshwater crayfish on land near Innisfail in Queensland. It is claimed that Dr Lah borrowed some $52,080 to invest in this project.

3. On 8 January 1991 it is claimed that the plaintiff had assigned to it the rights title and interest under the loan agreement between Dr Lah and the first third party, Rural Finance Pty Limited. This company had receivers and managers appointed in July 1991 and has since been placed in liquidation. In August 1993 the plaintiff commenced action against the defendant in the County Court of Victoria at Melbourne, claiming money owing under the loan agreement assigned from the first third party to the plaintiff. Dr Lah objected to these proceedings in the County Court on the basis that the ACT Supreme Court was the appropriate jurisdiction, and this objection was upheld, and confirmed by the Victorian Court of Appeal in September 1994. In December 1994 the plaintiff commenced these proceedings in this court, again claiming money owing under the loan agreement.

4. The defendant filed a defence on 13 January 1995. Directions hearings occurred during the first half of 1995, and in July of that year the defendant successfully applied to have the third parties joined. The matter was set down in the progressive list following a listing conference in late 1995, and on 29 February 1996 it was set down for three days commencing on 20 May 1996.

5. On that day the matter commenced before the Chief Justice, but counsel for the defendant applied to amend the defence as pleaded. To that stage the defendant had admitted that the monies claimed to have been advanced and received by the defendant pursuant to the loan agreement had in fact been so advanced and received. The amendment sought to be made to the pleadings on that occasion was to substitute that admission with a pleading that the defendant did not admit this fact.

6. The amendment was strenuously objected to, but was granted, with the consequence that the trial dates were vacated. His Honour the Chief Justice was critical of the consequences of an amendment being sought at that stage in the proceedings, being the first day of a three day listing. He said

"I think in New South Wales at least these days adjournments are not granted as easily as they once were because of the public interest in keeping parties to the dates set aside for the consideration of their litigation. I express the view, which at this stage is not a considered view, the court really ought to have powers in this respect not only to order costs to be paid by the party at fault to the other party, but some sort of penalty ought to be payable to the public revenue. However, putting that aside, it seems to me that justice cannot be done between the parties unless the amendment is allowed, which means that the case would have to be taken out of today's list and eventually restored...So I propose, as far as today's proceedings are concerned, to allow the proposed application for an amendment, but it will be subject to a stringent costs order."

His Honour ordered the defendant to pay the plaintiff's costs thrown away on a solicitor and own client basis.

7. The amendments proposed by the defendant are substantial. In relation to the plaintiff's claim that the monies had been advanced and received which had been admitted and then, by amendment on the date of the trial, not admitted, this is now proposed to be denied. More fundamentally, it is now sought to be pleaded that the terms of the agreement between the defendant and the lender were partly in writing and partly oral, and that by the oral agreement the personal liability of the defendant to repay the loan of $52,080 was said to be limited to one payment of $8,400 on 30 June 1989 and two payments of $4,260 each on 30 September 1989 and 31 December 1989,

"...whereafter the income generated by the limited partnership would meet and be applied in extinguishment of the balance of the said loan."

8. It is further pleaded that, in effect, the claimed loan agreement did not really occur as it amounted to a round robin of cheques within a group of companies and partnerships. It is further pleaded that the assignment agreement between the first third party and the plaintiff did not cover the loan agreement between the first third party and the defendant said to give rise to the obligation to pay monies to the plaintiff.

9. The defendant counterclaims for declarations that he is not indebted to the plaintiff, or a declaration that any debt is unenforceable.

10. These are very substantial changes, and would fundamentally alter the way the trial of the matters would proceed. The proposed amendments set up new defences, and include assertions of an oral term that the obligation to repay the loan was limited. At trial, no doubt there will be substantial cross examination as to why such matters were not raised until now, some 10 years after the loan agreement was entered into.

11. The defendant argues that it would be unjust to deny him the opportunity to put his best defence forward, and that accordingly the amendments should be allowed. He has recently changed solicitors (after a protracted dispute wherein the plaintiff objected to a former solicitor on the grounds of a claimed conflict of interest), and I was told that the present solicitors are acting for a number of former investors in this and similar freshwater crayfish ventures, and that the proposed amendments will bring this defence into line with the strategy being adopted by those other defendants.

12. Late amendments to pleadings undoubtedly create delay, and add to a public perception that it takes too long to bring a matter to final determination in our civil courts. This court, together with the courts in other parts of Australia, has over recent years adopted a number of case management procedures designed to ensure that matters are properly pleaded out before a hearing date is fixed. There have been indications that these will be strenuously enforced, and it seems that this is what the Chief Justice was referring to in his remarks when this matter was formerly sought to be amended on the date of trial. On that occasion His Honour formed the view despite the delay that the justice of the matter required leave to be granted, subject to costs penalties.

13. The High Court has confirmed that, while case management practices are a relevant consideration in determining requests for leave to amend pleadings, they cannot be properly used to prevent a party from litigating an issue which is fairly arguable, and that a party should be permitted to raise an arguable defence even at a late stage in the proceedings provided any prejudice to other parties could be compensated by costs (State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146). Justices Dawson, Gaudron and McHugh reaffirmed the authority of the passage in the judgment of Bowen LJ in Cropper v Smith (1884) 26 Ch D 700 at 710 where His Lordship said

"Now, I think it is a well established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights."

They concluded (at 155):

"Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties."

14. Counsel for the plaintiff argued that it would be unjust to allow the substantial amendments to be pleaded. He pointed to evidence in an affidavit that indicated that documents could be hard to locate, and submitted that the proposed oral agreement would lead to factual difficulties in relation to a conversation between the defendant and an unnamed person over ten years ago. I am not satisfied that these considerations are conclusive. Undoubtedly it will be necessary for the defendant to further particularise the defence to identify with some precision the circumstances of the alleged oral aspect of the loan agreement, but I am not satisfied that these factors outweigh the overwhelming prejudice to the defendant if he is prevented from making these amendments, and thus is shut out from an arguable defence.

15. Leave is granted to file the amended defence and counter claim. These substantial changes are being made at a late stage in these proceedings, and after a previous trial was vacated following an earlier, and less fundamental, change to the nature of the pleaded defence. It seems to me that in these circumstances the position of the plaintiff ought to be protected as far as it can be while allowing all of the issues between the parties to be fairly put to trial by way of an order for costs. The amendment, while late, has been sought by way of Notice of Motion well before a new trial date has been set and so the more stringent form of costs order made by the Chief Justice on the earlier occasion is not appropriate. I order that the defendant pay the plaintiff's costs of this application and the costs thrown away by reason of the amendments. The plaintiff may need further particulars of the defence before finalising its Reply to these amendments, and I will give each party liberty to apply for any directions on three days notice.

I certify that this and the five (5) preceding pages are a true copy of the Reasons for Judgment herein of the Master, Mr T Connolly.

Associate:

Date: 13 August 1999

Counsel for the Plaintiff: Mr C Erskine

Instructing Solicitors: Meyer Clapham

Counsel for the Defendant: Mr C Whitelaw

Instructing Solicitors: James Gralton

as agent for:

Lees Marshall Warnick

Dates of hearing: 5 August 1999

Date of judgment: 13 August 1999