RSD Chartered Accountants v Bolitho [2014] VSCA 186

The Victorian Court of Appeal has refused an application for leave to appeal against a decision of a trial judge to allow a plaintiff to amend his statement of claim in a group proceeding.  The amended pleading relates to the interpretation of section 729 of the Corporations Act 2001 (claim for loss and damage arising from misleading or deceptive statements in a disclosure document). 

The Court of Appeal has dismissed an application for leave to appeal against a trial judge’s decision to allow a plaintiff in a group proceeding to amend his statement of claim.

The proceeding arises out of the collapse of Banksia Securities Ltd (Banksia).  The plaintiffs deposited money with Banksia on the security of debentures issued pursuant to product disclosure statements that were provided to the public.  The applicant (a defendant at trial) (RSD) was the auditor of Banksia and was the investigating accountant in respect of its public prospectuses.

The lead plaintiff sought to plead against RSD that that:

  • there were statements in the prospectuses that an audit report for a particular year was unqualified;

  • other statements quoted were based upon RSD’s independent accountant’s report;

  • such statements were misleading or deceptive under section 728 of theCorporations Act 2001 (which provides that a person must not offer securities under a disclosure document if there is a misleading or deceptive statement in it). The plaintiff claimed against RSD under section 729 of the Corporations Act 2001 in respect of loss and damage suffered.

The plaintiff contended that it is sufficient to establish a cause of action under section 729 of the Corporations Act 2001 to show that RSD consented to the inclusion in the disclosure statement of statements on which the impugned statements were based.

By contrast, RSD argued that in order for the plaintiff to succeed under section 729, he had to show that RSD had consented to inclusion in the disclosure statement of both statements on which the impugned statements were based, as well as the actual statements that were made.

As there is no authority on the abovementioned question, the Court of Appeal refused to grant leave to appeal against the trial judge’s decision to allow the pleading amendment to be made.

Of note, on appeal Justice Hansen commented that as the matter was not only an interlocutory appeal, but also an order made in a specialist managed list on a matter of practice or procedure, the applicant had to show an even greater “degree of clarity as to the order (below) being erroneous” than the usual requirement to establish that the trial judge’s order is attended with doubt as to warrant the grant of leave to appeal.

Justice Hansen further noted that “in a case such as the present which involves substantial claims and multiple defendants, courts should exercise caution in refusing to grant leave to file an amended pleading and should not do so unless it is clear that the proposed claim has no reasonable prospect of success.”