Wheatfield Services Pty Ltd v Danias Holdings Pty Ltd

This proceeding was commenced by statement of claim filed on 19 September 2019. The defendants filed their defence on 1 November 2019 and the plaintiff filed its reply on 15 November 2019.

The plaintiff, Wheatfield Services Pty Ltd, operates a mortgage broking business. Mr Kevin Wheatley is the sole director and secretary of the plaintiff. The defendants are engaged in the business of timber, flooring and building supplies as well as property development.

The proceedings concern a dispute arising from a document entitled “Mandate Agreement” addressed to Bayside Commercial Mortgages Pty Ltd and signed by the third to sixth defendants on 13 January 2017. The plaintiff says that Bayside Commercial Mortgages is the registered business name under which it conducts its mortgage broking business.

On the basis of the pleadings filed to date, there is a dispute between the parties about whether the plaintiff was a party to the Mandate Agreement and whether the defendants breached those terms or repudiated the Mandate Agreement, whether the Mandate Agreement should be rectified to include the trustee of the Danias Family Trust as a party on the grounds of common mistake, and what damages the plaintiff is entitled to in the event that the defendants are found to have breached or repudiated the Mandate Agreement.

The plaintiff alleges that it undertook work in performance of the Mandate Agreement from January 2017 which ultimately resulted in St George Bank making an offer of finance to the defendants in late December 2017 in the amount of $58.16 million. The plaintiff alleges that the defendants breached implied terms of the Mandate Agreement in about March 2018 by declining to accept the loan facility offered by St George Bank and insisting on a loan facility in an increased amount of $70 million and by obtaining a loan of $14 million from Assetline Capital at some time prior to March 2018 contrary to the plaintiff’s advice which the defendants wished to refinance by increasing the loan facility offered by St George Bank to 70 million.

The plaintiff alleges that the defendants repudiated the Mandate Agreement by indicating by their conduct from 27 March 2018 that they considered they were no longer bound by the Mandate Agreement. The plaintiff relies on the defendants’ conduct in failing to accept the loan facility offered by St George Bank, failing to progress a loan approval or finance application through the plaintiff thereafter, and ceasing to communicate with the plaintiff after 11 April 2019.

The evidence closed on 5 May 2020 and, on 28 May 2020, the proceeding was listed for hearing commencing on 5 August 2020 with an estimated hearing time of two days. On 3 August 2020, the plaintiff filed a notice of motion seeking leave to amend the statement of claim. That application to amend was first notified to the defendants at about midday on 3 August and was supported by an affidavit of Mr Wheatley sworn on 4 August and filed on that date.

The proposed amendments fall into four categories. First, amendments are proposed to the implied terms that the plaintiff alleges were included in the Mandate Agreement. Those amendments affect paragraphs 49 to 51 of the proposed amended statement of claim and also paragraph 17. The defendants do not oppose leave being granted in relation to those amendments.

Second, amendments are proposed to plead the following alleged conduct of the plaintiffs in the period after May 2018 in paragraphs 41 to 48 of the proposed amended statement of claim:

The defendants oppose leave being granted in respect of that second category of amendments.

Third, the proposed amended statement of claim includes an additional formulation of the alleged breach of one of the alleged implied terms arising from conduct said to have occurred in the period from March 2018 to May 2018 being conduct that was already pleaded in paragraphs 34 to 40 of the statement of claim and also in the period after May 2018 being conduct that is proposed to be pleaded in paragraphs 41 to 48 of the proposed amended statement of claim. The defendants oppose leave being granted in respect of that third category of amendments.

Fourth, the proposed amended statement of claim includes a new cause of action for unconscionable conduct at general law and in contravention of s 21 of the Australian Consumer Law (Competition and Consumer Act 2010 (Cth), Sch 2) based on the same conduct that I have referred to immediately above, and claims for damages for that unconscionable conduct. Those amendments are set out in paragraphs 56 to 60 and 67 to 70 of the proposed amended statement of claim. The defendants oppose leave being granted in respect of that fourth category of amendments.

In Mr Wheatley’s affidavit sworn on 4 August 2020, he gives evidence to the effect that the amendments arise out of matters revealed by documents produced by St George Bank in response to a subpoena that was issued by the plaintiff on 28 May 2020. The subpoena required production of all documents in the possession of St George Bank relating to an application for finance between St George Bank and the defendants during the period from 15 August 2017 to 30 June 2018.

I accept the plaintiff’s submission that the subpoena was directed to the issues in dispute on the existing pleadings, however, the documents produced by St George Bank revealed to the plaintiff that the defendants had continued negotiating for finance with St George Bank after May 2018 without the involvement of the plaintiff. The plaintiff says that this was not previously known to it, and there was no evidence on the amendment application which suggested to the contrary. Both parties were given access to the St George Bank documents from 14 July 2020 pursuant to a general access order. The plaintiff submits that leave to amend should be granted for the following reasons.

First, the plaintiff says that the amendments in respect of which the defendants oppose leave arise from the new factual matters revealed by the St George Bank documents. Those matters were not previously known to the plaintiff, although they would have been known to the defendants in the plaintiff’s submission.

Second, the plaintiff submits that the overriding purpose and the dictates of justice favour the grant of leave to amend to facilitate the just determination of the real issues in the proceedings.

Third, it is submitted that the plaintiff has moved promptly to seek leave to amend after becoming aware of the additional facts revealed by the St George Bank documents. In particular, the subpoena was issued on 28 May, reasonably promptly after the close of evidence in accordance with the Court’s Practice Note. The amendment application was made within two weeks of the parties being granted access to the subpoenaed documents. There has been no prior amendment to the pleadings in this matter.

Fourth, the plaintiff submits that it would be unjust if it were to be shut out from raising these issues of which it first became aware on reviewing the St George Bank documents. By the end of its submissions in support of the amendment application, the plaintiff accepted that it would have to pay the defendants’ costs of any adjournment of the hearing necessitated by the amendments if leave to amend is granted. However, the plaintiff submitted that the hearing should continue today and tomorrow to reach a part-heard state and then be stood over to some further dates to allow the defendants time to put on evidence in response to the proposed amendments.

The defendants submitted that leave to amend should be refused, save in respect of those amendments that I have indicated earlier were not opposed. The principal reason advanced by the defendants for refusing leave was that the new claims based on the post-May 2018 matters are flawed, in the defendants’ submission, because the damages claimed are a loss of opportunity for the plaintiff to earn commission on a loan and the defendants ultimately did not proceed with the loan from St George Bank. I note that the plaintiff says in response that the loss of opportunity arose at the time of the alleged breach of implied term or the alleged unconscionable conduct and it is, therefore, irrelevant whether the St George Bank loan materialised thereafter.

The defendants also submit that they will require four to six weeks to file a defence to the proposed amended statement of claim and put on further evidence if leave is granted, and they may also seek orders for discovery. As I understood the submission, the majority of the four to six-week period is required in order for the defendants to explore with representatives of St George Bank the possibility of putting on evidence from those representatives. The defendants submit that the hearing will need to be adjourned if leave to amend is granted in respect of the amendments opposed by the defendants. The defendants frankly acknowledge that if leave to amend is granted and the proceeding is adjourned, there is no prejudice to the defendants that cannot be cured by a costs order.

The Court’s power to grant leave to amend a pleading under s 64 of the Civil Procedure Act 2005 (NSW) must be exercised in a manner that seeks to give effect to the overriding purpose in s 56 of the Act and that is consistent with the dictates of justice in s 58 of the Act. In my opinion, the overriding purpose and the dictates of justice in the particular circumstances of this matter favour the grant of leave to amend. Both parties have conducted the proceedings expeditiously to date. With the benefit of hindsight, the plaintiff could have moved a few weeks earlier than it did to issue the subpoena to St George Bank, which might have facilitated the amendment application being made a few weeks earlier than it has been made.

However, it is unfair to apply a hindsight test when the plaintiff had no reason at that time to expect that the material produced in response to the subpoena may trigger an amendment application. In any event, the defendants would have still required an adjournment of the hearing in order to meet the amendments if the application for leave had been made a couple of weeks earlier, given their estimate of the four to six weeks required to explore putting on further evidence and seeking orders for discovery.

The amendments arise out of matters known to the defendants, but not known to the plaintiff prior to the production of documents by St George Bank. There is no evidence to suggest that the plaintiff could reasonably have discovered those matters earlier. In referring to matters in the defendants’ knowledge, I do not overlook the fact that the defendants have this morning foreshadowed a dispute about some of those matters and/or their characterisation by the plaintiff.

In my opinion, the dispute between the plaintiff and the defendants about whether the plaintiff’s new claims based on the post-May 2018 factual material are flawed, in circumstances where the St George Bank loan ultimately did not proceed, should be determined on its merits at a contested hearing rather than in the context of an amendment application. The consequence of granting leave to amend is that the hearing that was listed to determine the substantive matter today and tomorrow must be vacated. The course that the plaintiff proposed of commencing the hearing to at least reaching the end of the plaintiff’s evidence and then allocating further dates in the future to conclude the hearing once the defendants have addressed the amendments is, in my opinion, an inefficient use of the Court’s resources, inefficient from the point of view of the parties, and may turn out to be disadvantageous to the defendant in a manner that cannot now be foreseen.

Much will depend on the nature of the further evidence that the defendants put on, if any, and the evidence, if any, that the plaintiff may serve in reply. It is untenable, in my opinion, for the plaintiff to be called to give evidence and to be cross-examined where there is a prospect that the plaintiff may in due course put on further evidence in reply to evidence to be adduced by the defendants. The plaintiff’s amendments should not result in the defendants suffering the forensic disadvantage of having to commence the hearing before they have had the opportunity to prepare their response to the plaintiff’s new claims (in terms of pleadings and evidence).

For those reasons, I make the following orders: