Fairfax International Ltd v Commonwealth Bank of Australia [2001] QSC 260

k1.l\.."1 0,1-1.00 . State Reporting Queensland Government ~ .. Bure au ~ Department of fustlcun<l Attom«y~ral Transcript of Proceedings Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION WHITE J No 812 of 1995 FAIRFAX INTERNATIONAL LTD and COMMONWEALTH BANK OF AUSTRALIA BRISBANE .. DATE 19/7/2001 , JUDGMENT Floor, The Law Courts, Georye Street, Brisbane, a. 4000 1 REVISED COPIES ISSUED State Reporting Bureau Date J $I I o I Plaintiff Defendant Telephone: (07) 3247 436-0 Fax: (07) 3247 5532 -- 1 of 8 -- 19072001 T4/TW12 M/T 1/2001 (White J) HER HONOUR: The plaintiff wishes to amend its statement of claim to add a cause of action in fraud and to add what Mr Stephens, for the plaintiff, characterises as a particular of negligence and to make minor amendments and to claim relief in United States dollars. No objection is taken on behalf of the defendant bank by Mr Barlow, who appears for it, in respect of the latter two matters. This action has a history of delay. A chronology is contained in the file in a document headed, "Outline of argument" which was prepared for the previous occasion on which the matter was before the Court and reference can be had to that chronology which I do not discern to be, at least in its material aspects, in dispute and it is unnecessary to recite it again. 1 10 20 30 Suffice it to say that there have been very long periods 4 where nothing seems to have happened in this matter for years. The plaintiff alleges that it sent United States $250,000 to the bank on 20 September 1993 to be held in escrow in respect of a contract between the plaintiff and another company. The plaintiff was a foreign company and it relates to matters not within this jurisdiction. 2 JUDGMENT . 50 60 -- 2 of 8 -- 19072001 T4/TW12 M/T 1/2001 (White J) The funds were lost to the plaintiff due to the fraud of one of the bank's officers, one Smith, and another. Mr Smith was charged and convicted of that fraud in December 1996. There had been, it would appear on the material, an extensive committal proceeding preceding the trial in the District Court. The action based on breach of contract was commenced in May 1995. The pleadings were amended in May 1995 as a consequence of reasons given by Justice Fryberg on a summary judgment application brought by the plaintiff. The action pleaded against the bank was for breach of contract and/or negligence. The alleged negligence was failure by the bank to advise that it did not have an account of the kind sought by the plaintiff when it deposited its money and also a failure to keep the money safe. At the time when the pleadings were amended there was an express decision not to plead fraud. The new pleading seeks to allege fraud against the bank and associated with that vicarious liability for its officer's fraudulent conduct. The plaintiff also seeks to add a claim in negligence relating to the manner in which the bank supervised the actions of its employee, Smith. 3 JUDGMENT 1 10 20 30 40 - 50 60 -- 3 of 8 -- 19072001 T4/TW12 M/T 1/2001 (White J) The particulars of that allegation, which appear as particulars to paragraph 20 are extensive, but an example will suffice. Particular (b) "The international activities of Smith were well known to bank officers yet nothing was done to stop his activities and/or to monitor his activities." And, further, in (e) "Co-workers and Smith's supervisor were aware of the activities of Smith with NPPL and Avenel and yet his activities were not checked, monitored or supervised." Mr Stephens submits that paragraph 20 is just a particular of negligence and no leave is needed because negligence has previously been pleaded. It is clearly a new cause of action and not a particular of that which has already been pleaded. Just because it comes within the umbrella description of negligence does not bring it within the existing pleading, and examples would abound as to why that must be so. 1 10 20 30 4 The amendment is opposed because of extreme delay which is · 50 effectively unexplained and prejudice to the bank. Delay of itself, of course, will not necessarily be a basis for refusing an amendment even after the expiration of the period of limitation, but delay does imply that there will be, or may be things which are lost to a party which it is 60 4 JUDGMENT -- 4 of 8 -- 19072001 T4/TW12 M/T 1/2001 (White J) unaware that it has been lost. The well known expression, "When did you first remember that you had forgotten" comes immediately to mind. The bank has deposed through one of its officers that many of its employees who would have been concerned in the activities to which paragraph 20 refers have retired or left. That again in itself may not preclude an amendment, but it indicates that they are people who are working outside the bank systems would have to be traced and will have to be interviewed. It appears that the transcript of the fraud trial is 1 10 20 available. Numerous witnesses from the bank gave evidence 30 and there is a reference to those witnesses in the affidavit of Mr Potts, the solicitor for the plaintiff. The detail of the fraud would seem to me to have been always, 11 in the area" of this action. The pleading about 40 negligent supervision is, in my view, a different matter. The bank deposes that it now has different systems in place with respect to its workplace supervision. It is expecting too much that the bank can reconstruct, if it can, how · 50 things were then. Disclosure would be expected to be expensive and onerous in doing so. It would certainly be likely if the documents were retrievable that they would have to be obtained from archives. 60 5 JUDGMENT -- 5 of 8 -- 19072001 T5/MT1 M/T 1/2001 (White J) The approach to Rules 375 and 376 of the Uniform Civil Procedure Rules and section 81 of the Supreme Court of Queensland Act, 1991, are discussed in the judgments of Pincus and Thomas JA in Draney v. Barry, BC, 990, 7784. At paragraph 23 of his reasons for judgment, Pincus JA, said this: "In my opinion that when applications do not pass the test set out in Rule 376(4) (b) the Court has a general discretion under section 81 of the Supreme Court of Queensland Act, 1991, to add a cause of action out of time. In exercising that discretion the Court should have regard to the fact that the effect of adding a new cause of action out of time is equivalent to an evasion of the provisions of the Limitation of Actions Act, 1974. So some adequate ground will be required in order to justify such an amendment. Since the discretion given by section 81 is not however the subject of any express limitation it appears to me that the Court must always have a discretion to add a cause of action out of time where the interests of justice demand that." Thomas JA commented at paragraph 58 of the judgment: "By its very nature such an application requires an indulgence for the applicant with a corresponding 1 10 20 30 detriment for the respondent and it is hardly 40 surprising that Courts in the past have associated such applications with the need for 'special circumstances'. However, I do not think it necessary or desirable to spoil this fresh charter by the reimposition of such phrases. The discretion will no doubt be exercised according to the circumstances of particular cases upon the relevant criteria in Rule 376 with the Court fully conscious of the nature of the application, of its relative effect on the parties, and of any factor (including prejudice) that may make the order · 50 'appropriate' or inappropriate." Although the limitation period has passed for the proposed new causes of action I am not persuaded that it would be unjust to allow the amendments to plead fraud and associated with it vicarious liability since those matters have always 6 JUDGMENT 60 -- 6 of 8 -- 19072001 TS/MTl M/T 1/2001 (White J) been ventilated between the parties and there would appear to be an extensive body of evidence available to the bank. However, I am of the view that it would be onerous to allow the new negligence claim which is proposed and I would not permit that amendment. It is perhaps unnecessary to observe that there is nothing in the conduct of the defendant which has caused any of these delays which have been evidenced by the plaintiff so far as I can ascertain. The order will be then that the plaintiff/applicant have leave to amend its statement of claim in the terms set out in the document exhibit "A" to the affidavit of J. Potts filed 13 July 2001. MR STEPHENS: Yes, thank you, your Honour. HER HONOUR: But not to include paragraph 20. And I suppose that also includes 21 as well. Are there any other paragraphs that would be excluded. MR BARLOW: Twenty-six (f), your Honour. HER HONOUR: Excluding paragraph 20, 21, 26(f) and I suppose there will be something in the prayer for relief. HER HONOUR: The plaintiff has indeed come seeking an indulgence, particularly against the background of facts which suggested that this pleading could many years ago have been cast into a form which is satisfactory to itself and its legal advisers, and it was not inappropriate to oppose it. Indeed, the opposition was successful in part. 7 JUDGMENT 1 10 20 30 40 . 50 60 -- 7 of 8 -- 19072001 T06/MV16 M/T 1/2001 (White J) In my view the appropriate order is that the plaintiff/applicant pay the defendant's/respondent's costs of and incidental to the application to be assessed. Any costs thrown away by the need to respond to the amendment, of course, I think will just be costs in the ordinary course of the litigation. 8 JUDGMENT 1 10 20 30 40 . 50 60 -- 8 of 8 --