Bicheno Investments Pty Ltd v Winterbottom [2017] NSWSC 402 (11 April 2017)

Last Updated: 12 April 2017

Supreme Court New South Wales

Case Name:	Bicheno Investments Pty Ltd v Winterbottom
Medium Neutral Citation:	[2017] NSWSC 402
Hearing Date(s):	11 April 2017
Decision Date:	11 April 2017
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	Application to amend Commercial List Statement allowed in part
Catchwords:	PRACTICE AND PROCEDURE – imminent hearing date – application to amend particulars and pleadings
Category:	Procedural and other rulings
Parties:	Bicheno Investments Pty Ltd (First Plaintiff) Stock Suppliers Australia Pty Limited (Second Plaintiff) David John Winterbottom (First Defendant) Rahul Goyal (Second Defendant)
Representation:	Counsel: P Reynolds (Plaintiffs) J Williams (Defendants) Solicitors: Kemp Strang Lawyers (Plaintiffs) Quinn Emanuel Urquhart & Sullivan (Defendants)
File Number(s):	SC 2015/163627

EX TEMPORE JUDGMENT (REVISED)

1. On 10 June 2016, over 10 months ago, these proceedings were fixed for hearing for 8 days commencing 1 May 2017.
2. The plaintiffs were secured creditors of DSG Holdings Australia Pty Limited. The plaintiffs appointed the defendants as receivers to DSG.
3. On the current pleadings, there are two issues to be determined. The first is whether the defendants are entitled to what has been called a "success fee" or "incentive fee" of some $2 million arising out of the receivership. Evidently, that question depends on the proper construction of one of the documents executed by the plaintiffs and the defendants when the defendants were appointed as receivers (being a document that the parties have referred to as “the Fee Deed”).
4. The second issue is whether the plaintiffs were induced to appoint the defendants as receivers to DSG, and to pay their fees at a particular level, by allegedly misleading or deceptive representations made by the first defendant about the likely recoveries from the receivership.
5. The plaintiffs contend that by making those representations, the defendants significantly understated what those recoveries were likely to be. The plaintiffs claim that but for that allegedly misleading or deceptive conduct, they would have appointed other receivers who would have charged far less than did the defendants.
6. Now, by a notice of motion filed yesterday, the plaintiffs seek to amend their claim in a number of ways.
7. The first amendment that the plaintiffs wish to make is to the particulars given (at par 26 of the Commercial List Statement) of the manner in which the representations said to have been made by defendants were misleading or deceptive.
8. The current particulars assert that the defendants conducted their modelling as to the likely recoveries of the receivership on the basis that recoveries from the sale of stock would be at or below the cost of stock; whereas, it is said that the defendants knew or should have known that the recoveries were likely to be a 30 per cent margin on the cost of stock.
9. The claim that is now sought to be made is that the modelling by the defendants was not that the stock would be sold at cost but rather at a margin of 3.41 per cent or 12.70 per cent.
10. Currently, the proposed particulars do not refer to those precise figures but, rather, refer to an "inadequate margin" or a margin "significantly below" 30 per cent.
11. However, in discussion with counsel this afternoon, Mr Reynolds, who appeared for the plaintiffs, accepted that the particulars can be reformulated to incorporate the two percentile figures that I have referred to, rather than those less precise descriptors.
12. Mr Williams, who appeared for the defendants, submitted that the real problem with the proposed changes is not so much as to the manner in which the claim is put in the pleadings but as to the evidence that the plaintiff has foreshadowed is to be adduced to complement the amendments.
13. What is proposed to be served is an affidavit by Ms Cameron on behalf of the plaintiffs, whose evidence will go to reliance. Ms Cameron will, as I understand it, depose that had she known that the defendants' modelling was to be as now particularised, she would not have authorised the appointment of the receivers.
14. Mr Williams submitted that there was some doubt as to whether, between now and the hearing, the defendants could adequately put themselves in a position to meet and test that evidence.
15. The conclusion to which I have come is that this is a matter which should be considered by the trial judge when determining whether to allow the further evidence to be adduced by Ms Cameron.
16. In the meantime, I am prepared to hear submissions from Mr Williams, either now or in the next day or so, as to what steps I can take to make orders for disclosure and/or service of subpoenas that might assist the defendants to meet the evidence proposed to be adduced from Ms Cameron. I do not mean to suggest that the making of those orders would necessarily provide an answer to the difficulty that Mr Williams has foreshadowed concerning the proposed evidence.
17. In the result, I propose to allow the amendment to the particulars albeit only in the manner refined in the course of submissions.
18. I defer for the consideration of the trial judge, the question whether any evidence from Ms Cameron be permitted.
19. The next amendment the plaintiffs seek to make is to add a new claim.
20. That new claim is to the effect that, assuming (contrary to the plaintiffs' primary case) that the defendants are entitled to a "success fee", there has been an arithmetical error in the manner in which that fee has been calculated. Mr Reynolds submitted, and the proposed pleadings make clear, that the plaintiffs' case is simply that there has been an arithmetical error made and that is a matter that can be readily ascertained from the evidence already sought to be adduced in the proceedings.
21. Mr Williams submitted that in effect, the claim was hopeless, had no reasonable prospects of success and should not be allowed.
22. I do not think it appropriate that I deal with the rights and wrongs of those contentions on this application. It appears unlikely that the matter will impact significantly on the hearing time.
23. I propose to allow the amendment and let the trial judge deal with it.
24. The final, and most significant, amendment that the plaintiffs seek is to add a new claim arising out of the agreed fact that the defendants have used the proceeds of the receivership to meet their legal costs of these proceedings to date. The amount that has been utilised so far in that regard is something in the order of $530,000.
25. The proposed pleading deals in detail with the proper construction of a deed of indemnity dated 30 June 2016 made between the parties. It is contended that on the proper construction of that deed, the defendants are not entitled to recover from the receivership assets the costs of these proceedings.
26. The pleading goes on to contend that the payment of those costs was “wrongful” and that the funds so paid are held by the defendants on trust for the plaintiffs.
27. Those contentions assume, however, that the only basis upon which the defendants could recover their costs from receivership funds is the deed of indemnity. That document, as I understand it, deals with the plaintiffs’ liability for the defendants’ costs, as distinct from the liability of the chargor company (DSG) for those costs.
28. The defendants’ position is that even if, on its proper construction, the deed of indemnity does not provide a basis for the defendants to recover their costs from the receivership assets, such entitlement arises from the provision of various other documents, including the deed of charge by which they were appointed; or indeed under the general law.
29. Thus, Mr Williams submitted that for the plaintiffs to maintain the claim currently proposed, they would have to impugn each of the various bases upon which the defendants seek to establish their entitlement to recover their costs; and not merely contend for a particular construction of the deed of indemnity (which is all the proposed pleading contemplates).
30. That raises a large number of issues and I doubt they could be accommodated at the forthcoming hearing. I think it too late to raise them for determination at the hearing.
31. The defendants have in any event undertaken not to take an “Anshun” point should the plaintiffs choose to pursue the point in separate proceedings.
32. If the defendants are successful in the proceedings, the question will be largely moot.
33. For those reasons, I am not prepared to allow this amendment.
34. My conclusions are as follows.
35. I propose to allow the amendments proposed to the particular in par 26 of the proposed Further Amended Commercial List, as refined in argument today.
36. I propose to allow the proposed addition of pars 32 to 34 of the Commercial List Statement (and the consequential amendments proposed to the Commercial List Summons).
37. I do not propose to allow the proposed addition of pars 35 to 46 to the Commercial List Statement (nor the consequential amendments proposed to pars 29, 30 or 31).
38. l order that the plaintiffs pay the costs thrown away by the amendments and otherwise order that the costs of this application be costs in the cause.
39. The plaintiffs should bring in a form of Summons and List Statement to give effect to these reasons.

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