Alan Timothy Prowse v Rocklands Richfield Limited

[2012] NSWSC 799

Supreme Court

New South Wales

Medium Neutral Citation:	Alan Timothy Prowse -v- Rocklands Richfield Limited [2012] NSWSC 799
Hearing dates:	22 June 2012
Decision date:	22 June 2012
Jurisdiction:	Equity Division - Commercial List
Before:	Hammerschlag J
Decision:	Plaintiffs be permitted to plead their case so as to bring it into line with the evidence which has been led
Catchwords:	PRACTICE AND PROCEDURE - Application to amend pleadings - concurrent application to strike out particular paragraphs of the pleadings and to amend granted - Strike out application partially successful
Cases Cited:	Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437
Category:	Procedural and other rulings
Parties:	Alan Timothy Prowse - First Plaintiff Frank Stewart Farrall (ABN 85 524 880 202) - Second Plaintiff Rocklands Richfield Limited (ABN 82 057 121 749) - First Defendant Jian He - Third Defendant Pun Yan Wu - Fourth Defendant Nai Ming Li - Fifth Defendant
Representation:	Counsel: N.J. Kidd - Plaintiff J. Giles - First, Third, Fourth and Fifth Defendants Solicitors: Allens Linklater - Plaintiffs Minter Ellison - First, Third, Fourth and Fifth Defendants
File Number(s):	2010/422209

Judgment

1. HIS HONOUR:In a contested application last week I gave the plaintiffs leave to amend their Commercial List Statement and they duly filed an amended pleading.

1. At that time there was also on foot an application on behalf of the first, third, fourth and fifth defendants, whom I will call the "Rocklands defendants", to strike out a number of paragraphs of the pleading as it existed before leave to amend was granted. The field of debate concerns a claim that the third, fourth and fifth defendants ("the personal defendants") intentionally procured the breach by the second defendant company ("HLM") of the Shareholders Agreement.

1. The Motion was stood over until today to allow those defendants to consider the strike out application in the light of the amendments and also because the plaintiff was due to serve an expert report which might have had a bearing on it.

1. The plaintiffs moved today further to amend their Commercial List Statement to introduce new averments which they submit meet the objections which had been telegraphed by the defendants. Leave to amend is opposed and the defendants persist in their strike out application.

1. The trial is set down on an estimate of 10 days commencing on 17 September 2012.

1. The application to amend and the application to strike out are wrapped up with one another. I have reached the following conclusions on both applications, the parties being content for me to give abbreviated reasons.

1. I propose to disallow the amendments for the following reasons:

(a)   I am not satisfied that the plaintiffs have pleaded a cognisable breach of the agreement by HLM which the personal defendants could have procured in that they have not identified a contractual obligation resting on HLM which it has breached;

(b)   the plaintiffs were met with the argument that the personal defendants were not susceptible to an action for procuring HLM's breach because they were acting as directors of HLM. The plaintiffs sought to meet this by pleading that the personal defendants were not acting bona fide and within the scope of their authority as directors of HLM. I am not satisfied that the claim has sufficient prospects of success to warrant allowing the amendment because even if a contractual obligation resting on HLM were identified, if the acts and omissions complained of were purportedly done on behalf of HLM by the personal defendants acting outside their authority, the acts would not be acts of HLM in the first place and therefore would not be a breach;

(c)   in order to assert that the personal defendants were acting other than bona fide and were acting outside the scope of their authority as directors, the amendments seek to aver that the conduct by those defendants amounted to specific breaches of duty which involve assertions (and would require particulars to be provided) of subjective intention on their part. This is a paradigm shift in the plaintiffs' case and I do not think that it should fairly be permitted at this stage in the proceedings; and

(d)   the allegations of breach of duty by the personal defendants are more properly allegations to be motivated by the company in proceedings by it. They are also capable of being relied upon in support of the oppression suit.

1. Counsel for the plaintiffs accepted that the consequence of this ruling was that the entire claim for tortious procurement of breach had to go. It follows that I disallow the amendments proposed to be pleaded in paragraphs 56A through to 56D of the Proposed Amended Commercial List Statement and I strike out paragraphs [55] to [58] of the current Commercial List Statement.

1. The defendants also took exception to paragraphs 59(i) and (ii) which contain allegations of loss and damage. I do not propose to strike these paragraphs out but the plaintiffs are directed to provide particulars as to how the damages alleged to have been suffered flow from the breaches which are alleged to have been committed.

1. During the course of debate I conveyed to the parties my view that there are difficulties with respect to the manner in which certain of the contractual breaches have been pleaded with respect to the failure to appoint to the board Mr Parker, a director nominated by the plaintiffs. It seems clear to me that the plaintiffs had the untrammelled right to appoint nominee directors to the board and that if they exercised that right, the appointment would follow as a matter of course.

1. I have emphasised that it is incumbent upon the parties and the Court to ensure that the real issues are tried. Hence, it is appropriate that the plaintiffs be given a further opportunity to reconfigure the Commercial List Statement to ensure that this occurs at the hearing.

1. There would be no difficulty, it seems to me, with the plaintiffs amending to plead the facts and circumstances particularised in the disallowed amendments as particulars of or facts relevant to the oppression claim, as opposed to forming the basis for an allegation of breach of fiduciary duty.

1. The plaintiffs' evidence is on. Counsel for the plaintiffs has made it clear no further evidence is intended to be led. The plaintiffs should be permitted to plead their case so as to bring it into line with the evidence which has been led, ensuring that the particulars which it now pleads are brought into line with that evidence: see Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437.

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