Addenbrooke Pty Ltd v Duncan (No 2) - [2013] FCA 820

FEDERAL COURT OF AUSTRALIA
Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820

Citation: Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820

Parties: ADDENBROOKE PTY LIMITED ACN 055 973 576 v TRAVERS WILLIAM DUNCAN, PETER GRAY, SOUTHERN CROSS EQUITIES PTY LTD
ACN 071 935 441, ARTHUR PHILLIP PTY LTD
ACN 100 908 101, ARTHUR PHILLIP NOMINEES PTY LTD ACN 111 862 358, CASCADE COAL PTY LTD ACN 119 180 620, RICHARD JONATHAN POOLE, JOHN VERN MCGUIGAN, JOHN CHARLES ATKINSON, JOHN ALAN KINGHORN, COAL AND MINERALS GROUP PTY LTD ACN
144 641 092 and AMANDA POOLE

File number: NSD 2243 of 2012

Judge: JACOBSON J

Date of judgment: 14 August 2013

Catchwords:
PRACTICE AND PROCEDURE – pleadings – application to strike out statement of claim for failure to properly plead basis of claim in accessorial liability – principle in Yorke v Lucas – actual knowledge of the essential elements of the contravention is required

CORPORATIONS LAW – misleading and deceptive conduct – accessorial liability – claim of accessorial liability against director of respondent company – requirement to plead elements of accessorial liability – requirement to plead actual knowledge of representation and knowledge of falsity of representation

Legislation: Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
Trade Practices Act 1974 (Cth)

Cases cited: Australian Automotive Repairers’ Association v NRMA Insurance Ltd [2002] FCA 1568
Beach Petroleum NL v Johnson (1991) 105 ALR 456
Caple v All Fasteners (WA) [2005] FCA 1558
Fernandez v Glev Pty Ltd [2000] FCA 1859
Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1
Roumanus v Orchard Holdings (NSW) Pty Limited (in liq) (2012) 90 ACSR 677
SAS Financial Services Pty Ltd v Trew [2006] WASCA 252
Yorke v Lucas (1985) 158 CLR 661

Date of hearing: 13 August 2013

Date of last submissions: 13 August 2013

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 23

Counsel for the Applicant: Mr FM Douglas QC with Mr G O’Mahoney

Solicitor for the Applicant: Gye & Associates

Counsel for the First Respondent: The First Respondent did not appear

Counsel for the Second Respondent: The Second Respondent did not appear

Counsel for the Fourth, Fifth, Seventh, Eleventh and Twelfth Respondents: The Fourth, Fifth, Seventh, Eleventh and Twelfth Respondents did not appear

Counsel for the Sixth, Eighth, and Ninth Respondents: The Sixth, Eighth and Ninth Respondents did not appear

Counsel for the Tenth Respondent: Mr DFC Thomas

Solicitor for the Tenth Respondent: King & Wood Mallesons

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 2243 of 2012

BETWEEN:
ADDENBROOKE PTY LIMITED ACN 055 973 576
Applicant

AND:
TRAVERS WILLIAM DUNCAN
First Respondent

PETER GRAY
Second Respondent

SOUTHERN CROSS EQUITIES PTY LTD ACN 071 935 441
Third Respondent

ARTHUR PHILLIP PTY LTD ACN 100 908 101
Fourth Respondent

ARTHUR PHILLIP NOMINEES PTY LTD ACN 111 862 358
Fifth Respondent

CASCADE COAL PTY LTD ACN 119 180 620
Sixth Respondent

RICHARD JONATHAN POOLE
Seventh Respondent

JOHN VERN…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] FCA 820
Decision Date

CaseChat Overview and Summary

Addenbrooke Pty Ltd, as the plaintiff, brought an action against Duncan, and others, alleging breaches of the Australian Securities and Investments Commission Act 2001 (ASIC Act) and seeking damages, declarations, and other remedies. The central issue in the dispute revolves around whether the first defendant, Mr Kinghorn, was involved in the contraventions of the ASIC Act by Cascade Coal Pty Ltd and Southern Cross Equities Pty Ltd. This involves the interpretation and application of the accessorial liability provisions under the Corporations Act, specifically s 79, which aligns with the Trade Practices Act 1974. The court needed to determine whether Mr Kinghorn had actual knowledge of the falsity of the representations made by Cascade and Southern Cross and whether he intentionally participated in the contraventions.

The court found that the plaintiff's claim of accessorial liability against Mr Kinghorn was deficient in its pleadings. The plaintiff had alleged that Mr Kinghorn was a person involved in the contraventions, but the particulars did not sufficiently allege that Mr Kinghorn had actual knowledge of the falsity of the representations or that he intentionally participated in the contraventions. The court noted that the authorities require these essential elements to be properly pleaded. The plaintiff’s reliance on particulars and an email from Mr Kinghorn was insufficient to establish the necessary elements of accessorial liability. The court emphasised that while pleadings serve a purpose, they must still adequately allege the material facts necessary to support the claim, and this requirement is particularly stringent for claims involving quasi-criminal standards of civil liability.

The court concluded that the first claim of accessorial liability was not adequately pleaded and thus dismissed it. The court did not find it necessary to address the other claims in the proceeding as the dismissal of the first claim was sufficient. The final order was that the first claim of accessorial liability was dismissed, and the proceeding was to continue on the other claims against the defendants.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

It is well established that the expression “any person involved in the contravention” in s 12GF of the ASIC Act, as defined in s 79 of the Corporations Act 2001 (Cth) (Corporations Act) is relevantly identical to s 75B(1) of the former Trade Practices Act 1974 (Cth) and that jurisprudence that has been developed in relation to that section is applicable to the meaning of the phrase: see Roumanus v Orchard Holdings (NSW) Pty Ltd (in liq) (2012) 90 ACSR 677 at [178]. Thus, what is required to give rise to accessorial liability in the present case is actual knowledge of the falsity of the representation comprising the primary contravention and intentional participation in the contravention. These are essential matters which must be alleged and pleaded: Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 at [10]-[15]; SAS Financial Services Pty Ltd v Trew [2006] WASCA 252 at [12]. Where, as in the present case, the primary contravention is alleged to involve a misrepresentation as to a future matter it is necessary for a plaintiff or applicant to allege that the accessory had actual knowledge that the person alleged to have made the representation had no reasonable grounds for making it: Quinlivan at [15]. It is important to bear in mind that the concept of accessorial liability under s 79 of the Corporations Act and its analogues imports quasi criminal standards in imposing civil liability: Yorke v Lucas at 667-669. Thus, while I accept that pleadings are a means to an end and that technical objections to pleadings are now received with less enthusiasm than in the past, the authorities to which I have referred make it clear that the essential elements of the claim must be properly pleaded. Observations made by judges as to the blurring of the distinction between a pleading of material facts and a statement of particulars have little or no application to claims of the type made against Mr Kinghorn in the present proceeding: cf Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466; Australian Automotive Repairers’ Association v NRMA Insurance Ltd [2002] FCA 1568 at [13]-[17].The first accessorial liability claim The first claim of accessorial liability is pleaded in paragraph 49 of the Statement of Claim. It pleads that Mr Kinghorn and others were “persons involved in the contraventions” of s 12DA of the ASIC Act by Cascade Coal Pty Ltd (Cascade) and Southern Cross Equities Pty Ltd (Southern Cross). The only primary contraventions by Cascade and Southern Cross which are relied upon are written representations made in a representational document and a subscription agreement described as the Addenbrooke Subscription Agreement. Mr Douglas QC who appears for Addenbrooke submits that the necessary elements for accessorial liability on the part of Mr Kinghorn are contained in the particulars to paragraph 49 which include reference to the matters pleaded in paragraphs 51 to 126 as well as to an email sent by Mr Kinghorn to the ABC 4 Corners program dated 25 February 2013.

Citation:		Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820
Parties:		ADDENBROOKE PTY LIMITED ACN 055 973 576 v TRAVERS WILLIAM DUNCAN, PETER GRAY, SOUTHERN CROSS EQUITIES PTY LTD ACN 071 935 441, ARTHUR PHILLIP PTY LTD ACN 100 908 101, ARTHUR PHILLIP NOMINEES PTY LTD ACN 111 862 358, CASCADE COAL PTY LTD ACN 119 180 620, RICHARD JONATHAN POOLE, JOHN VERN MCGUIGAN, JOHN CHARLES ATKINSON, JOHN ALAN KINGHORN, COAL AND MINERALS GROUP PTY LTD ACN 144 641 092 and AMANDA POOLE
File number:		NSD 2243 of 2012
Judge:		JACOBSON J
Date of judgment:		14 August 2013
Catchwords:		PRACTICE AND PROCEDURE – pleadings – application to strike out statement of claim for failure to properly plead basis of claim in accessorial liability – principle in Yorke v Lucas – actual knowledge of the essential elements of the contravention is required CORPORATIONS LAW – misleading and deceptive conduct – accessorial liability – claim of accessorial liability against director of respondent company – requirement to plead elements of accessorial liability – requirement to plead actual knowledge of representation and knowledge of falsity of representation
Legislation:		Australian Securities and Investments Commission Act 2001 (Cth) Corporations Act 2001 (Cth) Trade Practices Act 1974 (Cth)
Cases cited:		Australian Automotive Repairers’ Association v NRMA Insurance Ltd [2002] FCA 1568 Beach Petroleum NL v Johnson (1991) 105 ALR 456 Caple v All Fasteners (WA) [2005] FCA 1558 Fernandez v Glev Pty Ltd [2000] FCA 1859 Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 Roumanus v Orchard Holdings (NSW) Pty Limited (in liq) (2012) 90 ACSR 677 SAS Financial Services Pty Ltd v Trew [2006] WASCA 252 Yorke v Lucas (1985) 158 CLR 661
Date of hearing:	13 August 2013
Date of last submissions:	13 August 2013
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	23
Counsel for the Applicant:	Mr FM Douglas QC with Mr G O’Mahoney
Solicitor for the Applicant:	Gye & Associates
Counsel for the First Respondent:	The First Respondent did not appear
Counsel for the Second Respondent:	The Second Respondent did not appear
Counsel for the Fourth, Fifth, Seventh, Eleventh and Twelfth Respondents:	The Fourth, Fifth, Seventh, Eleventh and Twelfth Respondents did not appear
Counsel for the Sixth, Eighth, and Ninth Respondents:	The Sixth, Eighth and Ninth Respondents did not appear
Counsel for the Tenth Respondent:	Mr DFC Thomas
Solicitor for the Tenth Respondent:	King & Wood Mallesons

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 2243 of 2012