The Arthur T George Foundation Ltd v Goudie [2011] NSWSC 199 (25 March 2011)

Last Updated: 27 May 2011

Supreme Court New South Wales

Case Title:	The Arthur T George Foundation Ltd v Goudie
Medium Neutral Citation:	[2011] NSWSC 199
Hearing Date(s):	23 March 2011
Decision Date:	25 March 2011
Jurisdiction:
Before:	Schmidt J
Decision:	1. The defendant has leave to file the proposed cross-claim against the plaintiff. 2. Leave to file the proposed cross-claim against Baccus Investments Pty Limited is refused. 3. The defendant should bear the plaintiff's costs of the motion, as agreed or assessed.
Catchwords:	PROCEDURE - cross-claims - notice of motion - leave sought to file further proposed cross-claim against plaintiff - leave granted - leave sought to file proposed cross claim against alleged agent for the plaintiff - delay and other impact on hearing considered - leave not granted - costs
Legislation Cited:	Contracts Review Act 1980 Consumer Credit (New South Wales) Code 1995 National Credit Code Civil Procedure Act 2005
Cases Cited:	Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Bank of Queensland Ltd v Dutta [2010] NSWSC 574 Perpetual Trustees Victoria Limited v Bianka Monas [2011] NSWSC 57
Texts Cited:
Category:	Procedural and other rulings
Parties:	The Arthur T George Foundation Limited (Plaintiff) Jennifer Amy Goudie (Defendant)
Representation
- Counsel:	Counsel: Mr A Rogers (Plaintiff) Mr P Batley (Defendant)
- Solicitors:	Solicitors: Baccus Legal (Plaintiff) Hassett Dixon Solicitors (Defendant)
File number(s):	2006/266323
Publication Restriction:

Judgment

1. These proceedings were commenced by statement of claim filed in December 2006. They are now pursued pursuant to an amended statement of claim filed on 27 September 2010. Now before the Court is a motion filed by the defendant on 29 October 2010, by which leave is sought to file a cross-claim against the plaintiff; a cross-claim against Finance Information Centre Pty Limited and Paul Michaels; and a further cross-claim against Baccus Investments Pty Limited ('Baccus Investments'). Leave in relation to the cross-claim against Finance Information Centre Pty Limited and Paul Michaels has already been granted. The plaintiff opposes the leave sought in relation to the cross-claim proposed to be brought against it and Baccus Investments.
   
2. There is no issue that the proceedings have a most unfortunate procedural history. It was not in dispute that the plaintiff is a charity established by Sir Arthur George in 1972. It loaned the defendant $162,000 in November 2005, repayable in 12 months, after she had completed a statutory declaration before a solicitor that the borrowings were for business/investment purposes and provided a declaration as to having an income of $55,000. Neither interest nor the principal was repaid and so the proceedings for possession of the mortgaged property were commenced in December 2006. The defendant obtained legal aid and filed her defence in January 2007.
   
3. In February 2007 directions were given requiring the defendant to file an amended defence and any cross-claim by 12 March 2007. No cross-claim was brought against the plaintiff. An attempted mediation failed and in August the defendant filed a motion seeking separate determination of whether the Consumer Credit (New South Wales) Code 1995 governed the mortgage. That motion was dismissed in April 2008. The matter came before McCallum J in September 2008. Further directions were given as to the filing of evidence. In March 2009 another mediation failed to produce an agreement and in May the plaintiff sought a hearing date. The defendant again sought an opportunity to file a cross claim. In June 2009, she was directed to file and serve any cross-claim by 29 June 2009. In August 2009 a cross-claim was brought against her former solicitor.
   
4. In July 2010, a third mediation failed to produce an agreement and in September 2010 the defendant consented to the filing of the amended statement of claim. The amendments sought damages for alleged misleading and deceptive or fraudulent conduct by the defendant in relation to the entry into the loan contract and mortgage.
   
5. The defendant was directed to file and serve any motions to amend her pleadings (including joining any other party) by 1 October 2010. On 29 October 2010 the present motion was filed. A draft defence to the amended statement of claim was also prepared, but leave to rely on it has never been sought and it has never been filed or served. The draft defence was first shown to the plaintiff at the hearing of the defendant's motion on 23 March 2011.
   

THE PROPOSED CROSS-CLAIM AGAINST THE PLAINTIFF

6. The draft defence and the proposed cross-claim raise similar issues. They defend the fresh claims of fraud and misleading and deceptive conduct alleged in the September 2010 amended statement of claim and plead both the Contracts Review Act 1980 and the National Credit Code ('the Code') as grounds upon which the mortgage should not be enforced. T he cross-claim also adds a further element which has not been pleaded before, it was explained for the defendant, because it was not available as relief in this Court until the New South Wales Consumer Credit Code was replaced on 1 July 2010 with the Code. The new relief sought is for the imposition of a civil penalty for breaches of the disclosure requirements of the Code. Until 1 July 2010 exclusive jurisdiction to determine such questions was vested in the Consumer Trader and Tenancy Tribunal.
   
7. The plaintiff opposed the leave sought by the plaintiff in the face of the sorry history of the progress of the litigation; what is in dispute, a $162,000 loan by a charity in respect of which neither interest nor any principal has been paid since the money was borrowed in 2005; the prospect that the value of the property is now far eclipsed by what is owed, let alone the costs which the plaintiff has incurred, which will not be recoverable in the circumstances; that the litigation is being driven by the settlor of the charitable foundation, Sir Arthur George, who is now aged 96 years and is being faced with further delay and cost flowing from the extension of the defendant's claims into new areas not previously raised; and, where there is no proper explanation for the course which the litigation has taken.
   
8. It does not seem to me likely that if the defendant seeks to file the proposed defence to the amended statement of claim, that she is likely to be precluded from doing so. There has certainly been a regrettable failure to pay necessary attention to these proceedings, including in relation to the filing of this defence. That this was as the result of the defendant's inaction has not, however, been suggested. Representative error is usually a basis for granting leave such as that foreshowed in relation to the defence. A costs order in favour of the plaintiff, in relation to the belated motion, albeit potentially of limited real benefit to this plaintiff in the circumstances, is still an order which may also go some of the way to balancing the parties' competing interests.
   
9. That being so, the submission that the only real additional issue which the cross-claim will raise is the claim for the imposition of a civil penalty for breaches of the disclosure requirements of the Code , may be accepted. The parties have put on evidence. The defendant does not wish to lead further evidence in support of the cross claim, but accepts that the plaintiff would have to be given that opportunity. It may then be necessary for her to put on evidence in reply. It seems to me that this would give rise to but little further delay, particularly having in mind the directions which I now propose to make.
   
10. The parties estimate that all of the issues presently lying between them, would require three days to hear. If all of the cross claims were permitted to be brought and were heard together, the hearing could expand to two weeks. The plaintiff took the view that if the leave sought were to be granted to the plaintiff, in the circumstances the Court should require the defendant to relinquish her claim in relation to s 80 of the New South Wales Consumer Credit Code and that all of the cross claims which the defendant wishes to pursue against other parties, should be heard separately. The s 80 point was submitted to be a highly technical, weak point, given the judgment of Davies J in Bank of Queensland Ltd v Dutta [2010] NSWSC 574.
    
11. The defendant refused to make any concession in relation to her s 80 claim, arguing that it was a live issue, which she wished to litigate. The question of the hearing of the other cross claims could not be determined. There has been no application made about those matters. It would require other parties to be heard, before it could be determined.
    
12. I am satisfied that the concession in relation to the s 80 claim may not be justly required as a condition of the leave sought, consistently with the requirements of s 56 of the Civil Procedure Act 2005, which requires that the Court always has regard to the overriding purpose of the Act, the just, quick and cheap resolution of the real issues in the case. It must be accepted that the defendant wishes to argue the s 80 point and in my view may not be deprived of that opportunity. Nevertheless, I do not see that it is a point which will take much time in the proceedings, given that there is unlikely to be much evidentiary contest as to this issue and that the defendant not only faces the judgment of Davies J on the point, but also the concurring view, recently given for additional reasons, by Hoeben J in Perpetual Trustees Victoria Limited v Bianka Monas [2011] NSWSC 57 (see at [34] to [88]) . The arguments ought to be able to be shortly put.
    
13. In the circumstances, I take the view that subject to the imposition of a strict timetable for preparation of any further evidence and an order for costs, the defendant must have the leave sought in relation to the bringing of her cross-claim against the plaintiff.
    

The proposed cross-claim against Baccus Investments

14. I am not able to come to the same conclusion in relation to the proposed claim against Baccus Investments.
    
15. The defendant has repeatedly had opportunities to bring cross claims. This cross-claim is said to be brought on the basis that Baccus Investments was the agent for the plaintiff in relation to the entry into the credit contract and mortgage; that a representation was made in a supplementary product disclosure statement which was provided to the plaintiff before the credit contract and mortgage were entered into; that the supplementary product disclosure statement contained a representation which was not true; if that untrue statement had not been made, the plaintiff would not have entered the credit contract and mortgage and the defendant would not have suffered the loss that she suffered, as a result of entering the credit contract and mortgage. It was explained that the terms of the product disclosure statement had only come to be known to the defendant in August 2010.
    
16. It was accepted by the defendant that if the leave sought was given, the hearing of the plaintiff's claim would be considerably affected. Evidence would have to be prepared and the hearing would be considerably lengthened. The alternative course was for the defendant to bring her claim against Baccus Investments by a separate statement of claim. That might involve some additional expense for her, but when contrasted to the expense and delay which would result for the plaintiff, if the leave sought were granted, when considered together with the expenses and delays which have already resulted from the defendant's approach to the conduct of these proceedings, I am satisfied that the leave sought may not justly be permitted.
    
17. I am satisfied that in these circumstances, as discussed by the Chief Justice in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [35], the further delay in hearing the plaintiff's claim occasioned by the leave sought in this respect would result in further delay, which in the circumstances of this case, 'would be such as to undermine confidence in the administration of civil justice'. In the circumstances here arising the following observations of Gummow, Hayne, Crennan, Kiefel and Bell JJ are apt to be repeated:
    

"98 Of course, a just resolution of proceedings remains the paramount purpose of r 21; but what is a "just resolution" is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.

99 In the past it has more readily been assumed that an order for the costs occasioned by the amendment would overcome injustice to the amending party's opponent. In Cropper v Smith Bowen LJ described an order for costs as a panacea that heals all. (Cropper v Smith (1884) 26 Ch D 700 at 711.) Such a view may largely explain the decision of this Court in Shannon v Lee Chun, (Shannon v Lee Chun (1912) 15 CLR 257; [1912] HCA 52. See the reasons of Barton J at 262-263, O'Connor J at 264 and Isaacs J at 266.) which upheld a decision allowing the plaintiff to raise a new case at the second trial, but which imposed a condition as to costs. The modern view is that even an order for indemnity costs may not always undo the prejudice a party suffers by late amendment. (See The Commonwealth v Verwayen (1990) 170 CLR 394 at 464-465 per Toohey J; [1990] HCA 39.) In the present case it is difficult to see that such an order could be sufficient compensation, given that Aon would be required to again defend litigation which was, effectively, to be commenced afresh.

100 The views expressed by Lord Griffiths in Ketteman v Hansel Properties Ltd,( Ketteman v Hansel Properties Ltd [1987] AC 189 at 220, referred to in The Commonwealth v Verwayen (1990) 170 CLR 394 at 464-465 per Toohey J, 482 per Gaudron J.) that justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes upon litigants, are also now generally accepted. (Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364 at 376-377 [37] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; [2006] HCA 32; GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710 at 715-716 per Samuels JA; Worldwide Corporation Ltd v GPT Ltd [1998] EWCA Civ 1894.) In Bomanite Pty Ltd v Slatex Corp Aust (Bomanite Pty Ltd v Slatex Corp Aust [1991] FCA 536; (1991) 32 FCR 379 at 392.) French J said of Bowen LJ's statements in Cropper v Smith:

" ... That may well have been so at one time, but it is no longer true today ... Non-compensable inconvenience and stress on individuals are significant elements of modern litigation. Costs recoverable even on an indemnity basis will not compensate for time lost and duplication incurred where litigation is delayed or corrective orders necessary."

101 In Ketteman Lord Griffiths recognised, as did the plurality in J L Holdings, that personal litigants are likely to feel the strain more than business corporations or commercial persons. (Ketteman v Hansel Properties Ltd [1987] AC 189 at 220; Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 155.) So much may be accepted. But it should not be thought that corporations are not subject to pressures imposed by litigation. A corporation in the position of a defendant may be required to carry a contingent liability in its books of account for some years, with consequent effects upon its ability to plan financially, depending upon the magnitude of the claim. Its resources may be diverted to deal with the litigation. And, whilst corporations have no feelings, their employees and officers who may be crucial witnesses, have to bear the strain of impending litigation and the disappointment when it is not brought to an end. The stated object in the Court Procedures Rules, of minimising delay, may be taken to recognise the ill-effects of delay upon the parties to proceedings and that such effects will extend to other litigants who are also seeking a resolution in their proceedings.

102 The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Whilst r 21 assumes some ill-effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.

103 The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in J L Holdings.(Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 152.) Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case."

18. In this case the explanation for delay lies in the consequences of information which came to light in August 2010. While that may be accepted, the result of the leave sought, further delay of this plaintiff's pursuit of the proceedings it initiated in December 2006, in respect of a loan for which neither the principle nor interest had ever been paid, in my view may not be justly countenanced.
    

Orders

19. For the reasons given, I make the following orders:
    

1. The defendant has leave to file the proposed cross-claim against the plaintiff.

2. Leave to file the proposed cross-claim against Baccus Investments Pty Limited is refused.

3. The defendant should bear the plaintiff's costs of the motion, as agreed or assessed.

20. I also make the following directions as to the further preparation of the matter for hearing:
    

1. The defendant should forthwith file and serve the cross-claim against the plaintiff.

2. If there is any remaining opposition to the defendant relying on the proposed defence to the amended statement of claim, the plaintiff should forthwith advise the defendant of its objection and the defendant should then forthwith file and serve her application in relation to that defence.

3. Any further application which any party seeks to bring, should be filed and served within 7 days of the date of this judgment.

4. The plaintiff should file its defence to the cross-claim within 28 days.

5. The plaintiff should serve any further evidence on which it wishes to rely within 28 days.

6. The defendant should serve any evidence in reply within 7 days of service of the plaintiff's further evidence.

7. The matter is listed before me at 9.30am on Wednesday, 27 April 2011 for further direction, when the parties should anticipate that the matter will be given a hearing date.

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