Lumby v Akbarian

HIS HONOUR: At the conclusion of the evidence and submissions yesterday I gave reasons for judgment in which I held that Lumby's claim as articulated in its Commercial List statement should fail. Because Mr Cotman of senior counsel had indicated a desire to seek leave to amend, I did not then direct entry of judgment in favour of the defendants on Lumby's claim.

The foreshadowed application for leave to amend has now been made. It needs to be considered against the background not only of what I said yesterday but also what I said in reasons given on 24 October 2008 in the course of rejecting an application then made for vacation of the date.

The claim propounded by the list statement was a simple one. Lumby sought to recover amounts that it said it had advanced to Sharjade pursuant to a trade finance agreement dated 10 February 2000. Further, it sought to recover from Mr Akbarian, pursuant to a guarantee that he had given of Sharjade's liabilities to Lumby, the amount said to be owing by Sharjade.

The trade finance agreement was for a term of twelve months. It contained provisions for extension, including reasonably detailed mechanisms whereby an extension might be effected. There is no suggestion in the evidence (and I include in that the evidence that was tendered but rejected as well as the evidence that was tendered and admitted) that the contractual mechanism for extension was ever brought into operation.

The amendments that Lumby seeks would add, by my count, some five different ways of articulating its claim against Sharjade. The amendments fall into two broad categories (at least, according to Mr Cotman). The first category is that comprised in paras 14 to 20 of the draft amended Commercial List statement. Those paragraphs set out two different articulations of Lumby's case.

The first articulation (paras 14 to 17) asserts that between 29 March and 20 April 2001 Lumby invoiced Sharjade for services. The services are not specified, nor is there specified any mechanism by which those services were (as one assumes is the case) said to have been requested by Sharjade.

It is then asserted that in respect of each invoice Sharjade acknowledged its indebtedness by accepting a bill of exchange. A table is given in which the invoices and bills are identified by a number of factors. It is then said to follow that by reason of that acknowledgement Sharjade is liable to Lumby on an account stated in the total amount of those invoices: The amount of the claim is $299,713.16 before interest pursuant to s 100 of the Civil Procedure Act 2005.

The second articulation in the first category is found in paras 18 to 20. It is alleged that Sharjade "sought indulgence of" Lumby, by a fax transmission that is specified, in relation to the sum of $19,081.58 in respect of an identified bill. That is said to amount to a further acknowledgement of indebtedness. Then, by what Mr Kerr of counsel (for the defendants) described as a leap of faith - a description with which I wholly concur - it is said that by reason of these matters Sharjade is indebted to Lumby not just in the sum of $19,081.58 but in the whole amount of the claim, $299,713.16.

Mr Cotman sought to support this first category of amendments by the submission that they amounted to no more than amendments to bring the "pleadings" (as he persisted in calling the Commercial List statement) into line with the evidence that had been admitted. I do not accept that submission. The evidence that has been admitted was evidence that was said to show the advance of funds from time to time pursuant to the trade finance agreement. That claim failed, partly because it was not shown that the funds had been advanced to or for the benefit of Sharjade and partly because all the matters relied upon arose after the expiration of the trade finance agreement (there being, as I said, no evidence of extension pursuant to its contractual mechanism) and after the time when Mr Smith, Lumby's receiver, had said in an affidavit filed in other proceedings that all moneys due under the trade finance agreement had been repaid.

What is sought to be articulated by paras 14 to 20 is a free-standing case either in respect of a number of agreements each evidenced by the individual invoices and alleged acceptance thereof through the bills of exchange, or by an agreement for extension of time (which I assume is what is intended to be conveyed by the word "indulgence"). To be sure, those further articulations of Lumby's case are founded in part on the evidence that has been admitted to date. But there is more to be proved before those further articulations can be made good. For example, in respect of the first articulation (based on the invoices and the indebtedness said to have been acknowledged by acceptance of the bills) it would be necessary to look at the agreements underlying each of the individual invoices.

Mr Cotman sought to get around that by the submission that an action on an account stated did not require Lumby to prove the underlying transactions. It was enough, he said, that the accounts had been stated between the parties. That is so as a matter of technicality. But it does not mean that the details of the underlying transactions are irrelevant. Nor does it mean that the case can succeed purely on the evidence that has been adduced - in particular, bearing in mind the evidence that Mr Akbarian has given, or would if it were necessary to do so give, as to the circumstances in which his signature, on behalf of Sharjade, was placed upon the bills of exchange in question.

Further, in relation to the second articulation, one would need some evidence of the leap of faith involved in the proposition that an indulgence in question of $19,000 odd becomes an admission, or acknowledgement, in respect of $299,000 odd.

In any event, before I leave this category of case, the fact that Lumby may wish to run it purely on the basis of the evidence led to date does not mean that the defendants are bound to rest their defence purely on the basis of the evidence led to date. I have little doubt that if these alternative claims had been formulated in the case that was notified to the defendants as being the case that Lumby wished to take to trial, the defendants might have reconsidered the question of the evidence on which they intended to rely. Further, in this context they might have sought (and, one way or another obtained) particulars in respect of the extremely vague allegations included in a number of the paragraphs in question, including in particular the basal para 14.

I turn now to the second category of amendments: the three (as I think they are) in respect of which Mr Cotman conceded they were not merely amendments to bring the "pleadings" into line with the evidence.

The first of those (comprised in paras 21 to 25 of the draft amended Commercial List statement) would seek to sue upon an alleged oral agreement between Lumby and Sharjade "made on or about March 2001". The precise date in March 2001 on which the alleged oral agreement was made is of some significance because one of the transactions said to flow from it was dated 9 March 2001 and three others were dated on 29 or 30 March 2001. Mr Cotman has indicated that the reference in the amendment to "9 March" is a "typo" and that it was intended to refer to 29 March. I proceed on the basis that this is what was intended and that it applies both to the schedule to para 15 (insofar as it is relevant) and to the schedule to para 22.

The so called particulars of the oral agreement are in no way capable of answering that description. They say that was "oral between the plaintiff and the second defendant". Those entities of course are both corporations. Presumably, they spoke through human voices. It might be thought that the defendants were entitled to know between whom the relevant conversation or conversations took place, when they took place and what was the substance of them. They are said to have been "evidenced in writing in a note signed by" Mr Akbarian on behalf of Sharjade. That note is not identified in the particulars, although no doubt this could be done.

The agreement alleged does not in any way rely on the trade finance agreement. It is a free-standing agreement that if Lumby procured the payment of amounts due under certain bills, then Sharjade would pay those amounts to Lumby and would acknowledge its indebtedness by accepting further bills.

There are then given details of the various invoices and bills and allegations of acceptance by reason of which, it is said, Sharjade is liable to Lumby.

It is clear, in respect of this articulation of the case, that further factual investigation would be required. It is I think likely that Sharjade would wish to review the evidence that it has so far filed and supplemented.

The next articulation in this category is comprised in paras 26 and 27. That relates again to the facsimile transmission referred to in para 18 requesting "indulgence". However, this time, that is said to be an acknowledgement only of the sum of $19,000 odd and not of the total sum of $299,000 odd. There is no explanation of why the facsimile, and the request for indulgence, might operate in two such markedly different ways.

The next articulation is set out in para 28. It is based on a conversation said to have occurred between Mr Akbarian and a Mr Beikoff, a representative of the plaintiff. In that conversation Mr Akbarian is said to have admitted Sharjade's indebtedness to Lumby in the sum of $300,000. The consequences that flow from that alleged admission are not stated and on the face of things it would appear to be no more than an assertion of an evidentiary nature, rather than of a material fact.

The final articulation alleged an agreement for extension of the trade finance agreement by a period of twelve months. Apparently, that agreement was oral; the parties are specified but not the date. It is then asserted that the various bills in question were paid pursuant to the trade finance agreement as extended. It does not appear that the alleged extension sought to invoke the contractual mechanism set out in the trade finance agreement. Again, that is an articulation of the claim in respect of which, one might expect, the defendants would wish to review their evidence.

Relevantly for present purposes, the question of amendment is governed by ss 64 and 65 of the Civil Procedure Act .

By s 64(1) the Court is empowered to order that any document in the proceedings be amended, or that a party have leave so to amend. By subs (2), all necessary amendments are to be made for the determination of the real questions in dispute and for other purposes. However, that is subject to s 58. By subs (3), an order may be made even if the amendment would add a statute barred cause of action but in that case, subject to s 65, the date of commencement of proceedings is taken to be the date on which the amendment is made.

By s 65(1), the Court may at any time give leave to amend to add or substitute a new cause of action if that cause of action arises on the same or substantially the same facts as those giving rise to an existing cause of action and claim for relief. Further, by subs (3), an amendment made under s 65 is taken to have had effect as from the date on which the proceedings were commenced.

Finally, and travelling back to s 58, the Court is required to follow the dictates of justice in deciding (relevantly) whether to grant leave to amend, and in doing so must have regard to ss 56 and 57. That brings into consideration the overriding purpose - the facilitation of the just, quick and cheap resolution of the real issues in dispute - that is set out in s 56(1).

In this case, the only evidence in support of the application for leave to amend is the affidavit relied upon on 24 October 2008 in support of the application to vacate the date. (In saying that, I assume that it was intended to read that affidavit in support of the application for leave to amend. If it were not so intended then there is no evidence in support of the application).

That affidavit, assuming it to be relevant, was summarised in my reasons given on 24 October 2008. The most that it reveals which is relevant for present purposes, is that as at 30 May 2008, a solicitor employed by Lumby's solicitor on the record, who then had the conduct and carriage of the matter on behalf of Lumby, formed the view that Lumby's evidence was capable of supporting its claim.

However, as I have said in my earlier reasons, the affidavit does not explain why it was not until October 2008 that Lumby accepted the eminently sensible advice given to it on 16 May 2008 to brief counsel to advise on prospects having regard to the evidence that had been served.

There is no evidence from the solicitor on the record as to what was his understanding of the case, as to why counsel was not briefed, or as to what (if any) forensic decisions were made as to the way in which the case would be run.

When the matter commenced yesterday, the case for Lumby was sought to be advanced on the basis of the evidence that had been filed together with certain further evidence which, for various reasons given in the course of the hearing, I rejected. No application for leave to amend was made until after I had given reasons in which I concluded that the claim as "pleaded" must fail. Nor, at any time before the evidence was complete and submissions were well advanced, was any application for leave to amend foreshadowed.

It is open from all this to infer, and I do infer, that Lumby and those advising it made a deliberate tactical decision to proceed with the case as articulated in the Commercial List statement, and to hold back any application for leave to amend until it was seen how that case fared. I do not have a great deal of sympathy for a party that makes tactical decisions of that nature and then seeks, in effect, to have its consequences alleviated.

For those reasons alone, I do not think that the interests of justice require that the application for leave to amend should be granted. There are other considerations that support the same conclusion. One of them is the position of the defendants, and the prejudice to them if the application were granted. I referred to that, in the different context of the application to vacate the date, in my reasons given on 24 October 2008, and I remain of the view that what I there said is relevant. In circumstances where one party is the author of its own misfortunes, and the author of any prejudice that will follow, I think that the interests of justice suggest that the party not responsible for the situation should be protected so far as possible from the consequences of the other's acts and omissions.

It is clear that if leave to amend were granted, the matter could not be dealt with today. An adjournment would follow. Further evidence would be adduced. There would be a further hearing. None of that seems to me to be consistent with the just, quick or cheap resolution of the real issues in dispute, particularly having regard to what I infer was the tactical decision made to seek to run the case that had been articulated and, in effect, see what happened.

Further, I take into account in this context, the sketchy nature of some of the allegations on which Lumby now wishes to rely. I do not regard that as of itself posing any insuperable obstacle to the grant of the relief sought; but it is certainly not conducive to it.

Finally, in this context, I take into account that in my view the real thrust of the amendments is to introduce new causes of action. Mr Cotman conceded - at least, in respect of those falling into what I have called the second category - that they would be statute barred if sought to be advanced now in fresh proceedings. If that is the case then, prima facie, s 64(3) would dictate that the date of commencement of the proceedings is, in relation to those further causes of action, the date on which the amendment is made. Unless the Court otherwise ordered - and there is no evidentiary or other basis for doing so - any amendment to introduce statute-barred causes of action would be futile, on the likelihood (which I think to be very strong indeed) that the defendants would plead limitation defences.

For those reasons, as I have said, I conclude that the application for leave to amend should be dismissed.

It follows, as I foreshadowed yesterday, that the defendants are entitled to judgment in their favour. I direct entry of judgment for the defendants against the plaintiff. I order the plaintiff to pay the defendants' costs. I direct that the exhibits and the documents marked for identification be retained for 28 days and that they be held or disposed of thereafter in accordance with the rules. COUNSEL ADDRESSED ON COSTS

I order that the first defendant's cross-claim against the plaintiff be dismissed. I order the cross-claimant to pay the cross-defendant's costs of that cross-claim. I direct that costs be set off.

Mr Kerr seeks indemnity costs of today. He says that it should have been evident that the application was doomed and that it would fail. I do not think that is necessarily correct. Having regard to the history of this matter, I do not think that the circumstances in which the application was pressed today exhibit "some relevant delinquency" (to adopt the phrase of Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 89. It seems to me that it is sufficient that costs be assessed on the ordinary basis.

Mr Kerr raised two further issues. One was the immediate release to the defendants of the amount of the security for costs given by Lumby (it being a company in receivership). The other was the discharge of a charge held by Lumby over the assets of Sharjade.

As to the former: it is an application that should be made on evidence. The Court would need to be comfortably satisfied that the costs recoverable by the defendants, after allowing for the set-off of costs that I have directed, would exceed the amount of the guarantee. There is no such evidence; and Lumby is entitled to consider the proposition when that evidence is available.

As to the latter: prima facie, there is now nothing that the charge secures. I say that because as I understand it, the cross-claim (in respect of which costs were ordered in favour of Lumby) was a cross-claim brought by Mr Akbarian and not by Sharjade. But even if that understanding is incorrect, it is perfectly clear that when costs are set off there will be a substantial balance in favour of the defendants. Thus, whoever is the particular debtor in respect of the cross-claim costs, it is clear that there is nothing further secured by the charge.

Again, however, the receiver is entitled to consider his position and that is an application that should be brought on notice in the usual way.

Accordingly, I reserve liberty to apply on seven days notice in respect of the release of security for costs and the discharge of the charge over the assets of the second defendant in favour of the plaintiff.