Amann Aviation P/L (in Liq.) v Continental Venture Capital Limited

[2004] NSWSC 228

CITATION:	AMANN AVIATION P/L (IN LIQ.) & ANOR v. CONTINENTAL VENTURE CAPITAL LIMITED & ORS [2004] NSWSC 228
HEARING DATE(S):	24/02/2004
JUDGMENT DATE:	30 March 2004
JURISDICTION:	EQUITY
JUDGMENT OF:	Bryson J at 1
DECISION:	Proceedings dismissed - see [46]
CATCHWORDS:	PRACTICE and PROCEDURE - Particulars - Plaintiffs (company and liquidator) claimed legal and equitable remedies against Directors and shadow directors relating to pre-liquidation transactions alleged to be in fraud of creditors - Statement of Claim did not contain particulars of creditors and debts - after lengthy inaction pending outcome of Wakim litigation, series of Registrar's directions required particulars and were not adequately complied with - defendants applied for stay or dismissal when proceedings pending over 7 years - plaintiffs contended that particulars should be required only after subpoenas and discovery - proceedings dismissed under Pt.33 r.6(6).
LEGISLATION CITED:	Judiciary Act 1903 (Cth) s.23(2)(a) Federal Courts (State Jurisdiction) Act 1999 (NSW) Conveyancing Act 1919 s. 37A
CASES CITED:	Mackay v. Douglas (1872) LR14Eq 106 Noakes v. J. Harvy Holmes & Son (1979) 37 FLR 5
PARTIES :	Amann Aviation Pty Ltd (In Liquidation) - First Plaintiff Martin Russell Brown in his capaicty as Liquidator of Amann Aviation P/L (in Liq) - Second Plaintiff Continental Venture Capital Limited - First Defendant CVC Investments Pty Ltd - Second Defendant CVC Investment Managers Limited - Third Defendant Vanda Russell Gould - Fourth Defendant John Scott Leaver - Fifth Defendant Joseph Paul Shlegeris - Sixth Defendant Nigel Cameron Stokes - Seventh Defendant Russell Vanda Gould - Eighth Defendant Southsea Investments Pty Ltd - Ninth Defendant Wenola Pty Ltd - Tenth Defendant Penalton Pty Ltd - Eleventh Defendant
FILE NUMBER(S):	SC 1897/1996
COUNSEL:	N. Cotman SC & A. Bulley - Plaintiffs C.R. Newlinds SC & D. Pritchard - 1-10 Defendants
SOLICITORS:	Nash O'Neill Tomko Lawyers - Plaintiffs Henry Davis York - 1-10 Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

TUESDAY 30 MARCH 2004

1897/96 AMANN AVIATION PTY LTD (IN LIQUIDATION) & ANOR v. CONTINENTAL VENTURE CAPITAL LIMITED & ORS

JUDGMENT

1 HIS HONOUR: These reasons relate to the Notice of Motion filed by the first to tenth defendants on 10 February 2004 claiming the following orders:

1. That pursuant to Supreme Court Rules Pt 33 r 6(2) and by reason of the default by the plaintiffs in complying with the orders of Registrar Berecry made on 18 November 2003, and, further or alternatively, not prosecuting the proceedings with due despatch, these proceedings be stayed or, alternatively, dismissed;
2. Alternatively, that pursuant to Supreme Court Rules Pt 13 r 5 or, alternatively, Pt 15 r 26, these proceedings be stayed or dismissed;
3. In the alternative, that the plaintiffs provide further and proper particulars of the paragraphs of the Statement of Claim in these proceedings requested by the defendants and identified in the schedule sent to the solicitors for the plaintiffs by letter from the solicitors for the defendants dated 5 February 2004;

2 The present proceedings were commenced by Statement of Claim filed on 19 April 1996. The Statement of Claim has not been amended although on 18 February 2002 the plaintiffs were given leave to amend it. The significant events out of which the plaintiffs’ claims arise occurred between 12 March 1987, when Amann Aviation entered into the Coastwatch Contract with the Commonwealth, and 30 November 1992 when the Federal Court made an order that Amann Aviation be wound up and that Mr Martin Russell Brown the second plaintiff be appointed liquidator. Under the Coastwatch Contract Amann Aviation was to provide aerial surveillance operations for the Commonwealth. Preparing for and providing aerial surveillance operations was the principal business activity of Amann Aviation until the Commonwealth terminated the Coastwatch Contract on 12 September 1987. Since then the principal business activity of Amann Aviation has been the pursuit of claims for damages against the Commonwealth and the conduct of other litigation. Amann Aviation brought an action in the High Court against the Commonwealth for damages on 14 September 1987; the action was remitted to the Federal Court and was successful; Beaumont J awarded Amann Aviation $410,000 damages. See (1988) 100 ALR 267. Later in 1990 the Full Court of the Federal Court increased the award to $6,600,207. See 22 FCR 527. On appeal the High Court affirmed this decision on 12 December 1991; see 174 CLR 64.

3 The order of the Federal Court on 30 November 1992 for winding up Amann Aviation was made on the application of BP Australia Limited, a creditor. In July and August 1995 the Federal Court made orders upon the application of the liquidator, Mr Brown, for summonses for named persons to attend for examination about the affairs of the company. One of the examinees was Mr Vanda Russell Gould, who is the fourth defendant in the present proceedings and one of the applicants in the Notice of Motion filed on 10 February 2004. Mr Gould and other examinees applied to the Federal Court for declarations establishing that the Federal Court had no jurisdiction to make the winding up order or to order and conduct examinations. The Full Court of the Federal Court refused to make those declarations on 24 June 1996: see 62 FCR 451, and this decision was affirmed by the High Court on 2 February 1998: see 193 CLR 346. The decision of the High Court was inconclusive in the sense that the High Court was evenly divided, and there was no majority for either affirming or overruling the decision under appeal, so the appeal was dismissed: see s.23(2)(a) of the Judiciary Act 1903 (Cth). Soon after 2 February 1998, on a date not shown in the law report, Mr Gould and Mr Robert Otto Amann, who was also an examinee but is not a party to the present proceedings, applied to the High Court for orders setting aside the winding up and examination orders on the ground that the Federal Court lacked jurisdiction to make the orders. This application, and other applications relating to the jurisdiction of the Federal Court in proceedings associated with a bankruptcy, were determined by the High Court on 17 June 1999: Re Wakim, Ex Parte McNally (1999) 198 CLR 511. Mr Gould did not obtain any order but Mr Amann obtained a writ of prohibition against any further steps in the Federal Court under the order for winding up Amann Aviation. Although the order for winding up itself was not quashed, the opinions of the majority in the High Court established that the winding up order, which had purportedly been made under the Corporations Law of New South Wales had been made without jurisdiction. The High Court’s order of 17 June 1999 took effect as amended on 19 August 1999. Notwithstanding Mr Gould’s lack of success the decision of the High Court brought a practical end to any further steps by the Federal Court under the winding up order.

4 In the present proceedings the first to tenth defendants applied by Notice of Motion on 20 August 1999 for an order that the proceedings be dismissed, struck out or permanently stayed. This application was dismissed by Hodgson CJ in Eq on 10 December 1999 (see 1999 NSWSC 1212), a decision affirmed on appeal by the Court of Appeal on 14 December 2001 (see 2001 NSWCA 476). The Federal Courts (State Jurisdiction) Act 1999 (NSW) conferred effect under State law on winding up orders made without jurisdiction by the Federal Court, of which there were many, and the winding up order of Amann Aviation was in the unique situation that although the High Court had held that it was made without jurisdiction, the High Court had declined to quash it.

5 These events and the lack of jurisdiction of the Federal Court to make the winding up order made it reasonable for the plaintiffs to delay prosecution of the present proceedings for some time as the title of Mr Brown the second plaintiff was dependent on the winding up order and there was no authority for Amann Aviation to commence or continue these proceedings. Further the winding up of Amann Aviation is a central element in the facts on which the claims in the current proceedings are based.

6 The Federal Courts (State Jurisdiction) Act 1999(NSW) commenced on 9 July 1999. This commencement, together with the dismissal of proceedings before Hodgson CJ in Equity on 10 December 1999 and the appeal on 14 December 2001 ended much of the difficulties in the present proceedings. These proceedings were commenced on 19 April 1996, a few days before the expiry of six years from some of the events referred to in paras 61 to 68 of the Statement of Claim. The Statement of Claim was not served until 2 April 1998 when service was accepted by solicitors for these defendants. Apart from the Notice of Motion heard by Hodgson CJ in Equity and the Court of Appeal, there was no significant step in the conduct of the proceedings until 18 February 2002. Thereafter there was a series of directions hearings before the Registrar in Equity.

7 On 18 February 2002 directions were made which included direction for the plaintiffs to provide an amended Statement of Claim by 2 April 2002. On 15 April 2002 the directions hearing was adjourned to 12 June 2002. On 12 June 2002, while there was no amended Statement of Claim, the Court made orders setting times for request and provision of particulars of the claim and for other interlocutory steps. These defendants requested further and better particulars of the claim by letter on 15 October 2002; on 17 October 2002 the Court directed the plaintiffs to give a reply and other information by 2 December 2002. On 10 December 2002 the plaintiffs applied for an extension of time to respond and were directed to provide a reply to the request for particulars by 7 February 2003. The particulars were not furnished within that time. On 27 February 2003 these defendants applied by Notice of Motion for dismissal for want of prosecution. On 28 February 2003 the Court directed the plaintiffs to provide particulars by 7 March 2003, and on that day the plaintiffs by letter furnished particulars. These defendants regarded the particulars as inadequate and pressed for proper responses by letter of 19 March 2003. On 3 April 2003 the Court made a direction for the plaintiffs to reply by 10 April 2003. The plaintiffs in fact replied on 16 April 2003. Then by letter of 26 May 2003 these defendants pressed their request for further and better particulars and on 27 May 2003 orders were made that the plaintiffs respond to the letter of 26 May 2003 by 10 June 2003, that these defendants file and serve their defences by 22 July 2003; and for further directions on 22 July 2003. The plaintiffs responded to the letter of 26 May 2003 on 24 June 2003. On 22 July 2003 the Court ordered these defendants to file verified defences by 2 September 2003 and stood the proceedings over to 9 September 2003.

8 On 1 September 2003 these defendants applied by Notice of Motion for an order for the provision of further and better particulars. On 9 September 2003 the Court made a direction requiring these defendants to specify by letter, by 16 September 2003, the basis on which it was alleged that request for particulars had not been adequately answered, and on which it was alleged that the lack of an adequate answer precluded these defendants from filing a defence. These defendants provided the basis of their objections by letter of 16 September 2003. They filed a further Notice of Motion on 17 September 2003 relating to particulars; that motion was heard by the Registrar in Equity on 13 November 2003 and on 18 November 2003 the Registrar ordered that the plaintiffs provide, by 16 December 2003, particulars of 33 requests, that the plaintiffs provide particulars of a further request no. 103 after discovery and that the plaintiffs pay the costs of these defendants. The plaintiffs dealt with these requests in letters of 24 December 2003 and 30 January 2004. These defendants by letter of 5 February 2004 contended that the information furnished was deficient. The present Notice of Motion followed on 10 February 2004.

9 It is necessary to give a summary of the allegations and claims in the Statement of Claim. As ever, a summary is less than rigorously accurate.

10 CONTROL BY CVC, CVC INVESTMENTS AND CVC INVESTMENT MANAGERS (Statement of Claim paras. 32 to 34) The first, second and third defendants, companies referred to as CVC, CVC Investments and CVC Investment Managers are alleged to have had a full and effective control over all management affairs of Amann Aviation from mid to late 1987 onwards, to have been persons in accordance with whose instructions the directors of Amann Aviation were accustomed to act, and therefore to have been shadow directors and subject to the duties and obligations of directors.

11 SHAREHOLDERS AGREEMENT (Statement of Claim paras. 24 to 31) Under a shareholders’ agreement CVC was entitled to beneficial ownership of up to 90 percent of the issued capital of Amann Aviation and was allotted 650,000 ordinary shares in April 1987. (Statement of claim paras. 8 – 12) Mr V R Gould the fourth defendant, Mr Scott Leaver the fifth defendant, Mr Joseph Paul Shlegeris the sixth defendant, Mr Nigel Cameron Stokes the seventh defendant and Mr Russell Vanda Gould the eighth defendant held office as directors and some other offices in Amann Aviation throughout the period from 1987 to 1992 or at various times during that period.

12 CVC AND OTHER VICARIOUS LIABILITY (Statement of Claim paras. 35 to 36) Mr Shlegeris acted as a director of Amann Aviation and as an employee of CVC and CVC Investment Managers, which are vicariously liable for his conduct as director.

13 DUTIES AS DIRECTORS OF THE COMPANY (Statement of Claim para. 37) Each of the first to eighth defendants was alleged to have had equitable duties of honesty and good faith, reasonable care and diligence and similar statutory duties under s.229 of the Companies Code and s.232 of the Corporations Law of New South Wales.

14 ADVANCES BY SECURED CREDITORS (Statement of Claim paras. 38 to 42) CVC, CVC Investments, Mr V R Gould and Mr Lever were secured creditors under fixed and floating charge created on 1 December 1987. Arrangements were made for Southsea Investments the ninth defendant and Wenola the tenth defendant to provide bridging finance until (as was contemplated) the Commonwealth Bank would take over the debt on the safe arrival of aircraft in Australia. Advances under the Deeds of Charge were made from time to time for various purposes including the purchase of planes, funding litigation and other purposes, and the secured creditors borrowed funds from Southsea Investments, Wenola and Penalton the eleventh defendant. Prior to 28 March 1989 Amann Aviation was indebted to CVC for $3,757,107.07 and to CVC Investments for $4,979,400.

15 CONVERSION OF SECURED CREDITOR DEBT TO EQUITY (Statement of Claim paras. 43 to 44) The Statement of Claim alleges that on or about 29 March 1989 Amann Aviation agreed to convert $2,500,000 of the debt owed to CVC to equity in Amann Aviation and all the debt owed to CVC Investments to equity in Amann Aviation; however the Statement of Claim does not allege in a clear way that the arrangements for converting a debt to share capital were actually carried out.

16 CVC GUARANTEE (Statement of Claim paras. 45 to 51) CVC by a guarantee dated 22 May 1989 guaranteed to Amann Aviation payment of $2,252,420.39 then owing to Amann Aviation by companies (not parties to these proceedings) referred to as Holdings and Industries. On 4 August 1989 directors of Amann Aviation resolved to absolve CVC from complying with the guarantee. In doing this each of the directors and shadow directors is alleged to have acted in breach of the duties of directors earlier referred to. It is further alleged that extinguishing the CVC Guarantee amounted to an equitable fraud on the creditors of Amann Aviation including future or contingent creditors.

17 REDEMPTION OF PREFERENCE SHARES (Statement of Claim paras. 52 to 56) On 16 February 1990 the directors of Amann Aviation resolved to redeem the shares into which the debt of $4,979,400 owed to CVC Investments had earlier been converted; Amann Aviation thus became indebted to CVC Investments for $4,979,400. In doing this each of the directors and shadow directors is alleged to have acted in breach of the directors’ duties earlier referred to. The particulars which support the allegation of breach of duties include para.54.5 of the Statement of Claim that “[t]he directors acted in the interest of CVC Investments and thereby in the interests of certain of the directors of [Amann Aviation] (including CVC), in preference to the interests of creditors (including future or contingent creditors) of [Amann Aviation]”. Redemption of the shares is alleged to have been an equitable fraud on creditors.

18 PROCEEDS OF LITIGATION (Statement of Claim paras 58 to 68) On 20 April 1990 the Commonwealth paid Amann Aviation $4,154,650 in part payment of the damages (hereinafter 1990 damages payment) awarded by the Full Court of the Federal Court. On 19 April 1990 when this payment was expected the directors of Amann Aviation resolved to forward to Trimbush Limited $4,000,000 from the moneys to be received. Trimbush, the United Kingdom company, was then deregistered and the bank account in the name of Trimbush into which $4,000,000 was paid was controlled by persons unknown to the plaintiffs. The directors also resolved on 19 April 1990 to assign all remaining proceeds from the outcome of the claims to CVC, CVC Investments or their nominees. It is alleged that this assignment was champertous and unenforceable. There is however not any clear allegation of facts which would make the assignment champertous. The expected damages payment was paid on 20 April 1990, and $4,000,000 was paid on to Trimbush and the balance to CVC. It is alleged that the assignment and the payments were breaches of the duties of the directors and shadow directors. This allegation is supported by particulars including para.64.5 in the Statement of Claim which states that “[t]he directors acted in the interest of Trimbush, CVC and CVC Investment and thereby in the interests of certain of the directors of [Amann Aviation] in preference to the interests of [Amann Aviation] and its creditors (including future and contingent creditors).” It is further alleged that these events constituted an equitable fraud on creditors.

19 SALE OF HOLDINGS AND INDUSTRIES TO AMANN AND MRS AMANN (Statement of Claim paras. 69 to 75) It is alleged that on or about 22 January 1990 CVC proposed to Mr and Mrs Amann (who are not parties to these proceedings) that the Amanns would acquire from CVC 90 percent of the issued capital of Industries and Holdings and all loan funds advanced by CVC and Amann Aviation to Industries and Holdings. The terms proposed included that the purchase price be paid only to CVC, not to Amann Aviation. The proceeds of Amann Aviation’s litigation including litigation against the Commonwealth were to be assigned to CVC and CVC was to receive no consideration for assigning the loans due to it by Industries and Holdings. The Statement of Claim does not allege that there was any such agreement as proposed but says that if any such agreement was entered into it would be void and unenforceable, and that by entering into it the directors and shadow directors of Amann Aviation would be acting in breach of their duties as directors, and that the making of the agreement would amount to an equitable fraud on the creditors of the company including future and contingent creditors.

20 1992 DAMAGES PAYMENTS (Statement of Claim paras.76 to 82) It is alleged that on 8 January 1992 the Commonwealth paid Amann Aviation $4,668,829 as damages, and that sum was paid into Amann Aviation’s bank account and $2,865,000 was paid out to CVC which then paid $1,000,000 to Trimbush. Similarly $1,800,000 was paid out to another bank account of Amann Aviation, thence transferred to Yale Investments, thence to Penalton the eleventh defendant and thence to Trimbush. In February 1992 three payments of costs totalling $872,586.50 were paid to Amann Aviation and then paid by Amann Aviation to CVC. It is alleged that the directors and shadow directors of Amann Aviation acted in breach of their duties as directors in making these payments, and that the payments amounted to an equitable fraud on the creditors including future and contingent creditors.

21 PARTICIPATION BY CVC AND OTHERS IN BREACHES OF DUTY (Statement of Claim paras. 83 to 89) It is alleged that CVC, CVC Investments and CVC Investment Managers were knowing participants in breaches of director’s duties and thus should hold all moneys and benefits received by them on constructive trust for Amann Aviation.

22 (Statement of Claim paras.90-93) It is alleged that the directors and shadow directors of Amann Aviation were liable for damages resulting from their breaches of director’s duties and in respect of the dispositions of property referred to earlier in the Statement of Claim.

23 Basal to all claims in the Statement of Claim is the plaintiffs’ underlying general position that the directors and shadow directors of Amann Aviation were not in a position to deal with and dispose of the company’s assets and resources in ways suitable to themselves and to the members of Amann Aviation, and that they were obliged to act in the interests of the present future and contingent creditors as well as of other persons interested in the company and its affairs. The plaintiffs’ case cannot be presented for adjudication, and no decision could be made on the plaintiffs’ case unless it is established, in a relatively concrete fashion, that there were present future or contingent creditors whose interests ought to have been considered when the directors made decisions about disposition of Amann Aviation’s assets and resources. There is no allegation in the Statement of Claim about the existence of any particular creditor in any of these classes. This is a very striking absence from the Statement of Claim which at many points alleges that conduct was fraudulent in relation to Amann Aviation’s creditors. Allegations of fraud should be made and should be proved with appropriate particularity; this is not a subject on which consideration in the abstract is possible or fair, and these defendants should not, as a matter of procedural justice, be required to make preparations for trial, or to file defences to such a claim except in the presence of clear and concrete statement of the facts which are alleged to show that their conduct was fraudulent. The requests for particulars largely relate to matters which ought to have been given as particulars in or delivered with the Statement of Claim. Many but not all of the requests for particulars with the answers to which these defendants expressed grievances and complaints relate to the identification of creditors or propositions relating to the existence and interests of creditors.

24 Defendants’ counsel produced a schedule in which what these defendants contended are outstanding requests for particulars are tabulated with the replies. I have left this document with the papers as it is a much more convenient means of reference than picking one’s way through all the correspondence.

25 Statement of Claim para.40.2 alleges that “[f]urther advances were made to enable [Amann Aviation] to fund the Proceedings and the Supreme Court Actions.” Request 81 asked “[p]lease identify the date of each advance by each secured creditor to the company.” There have been four answers to this request; earlier answers were to the effect that it was a matter for evidence, and that full particulars would be given after discovery and interrogatories, but the most recent answer was to the effect that “the advances referred to were made after 14 September 1987 and continued until after the conclusion of all the proceedings in about February 1992.” This is not an answer to the request. Request 82 asked for the amount of each advance; there have been various responses but no true reply.

26 The plaintiffs’ senior counsel contended that request no. 81 does not relate to a relevant matter; that the pleading alleges aggregated indebtedness by a particular date which predated each disposition. This submission attributes greater particularity and precision to the Statement of Claim that it in fact has. In any event, the submission does not meet the need for particularity; indebtedness and also aggregated indebtedness are the sum of a great number of facts and of legal conclusions drawn from those facts, and a statement of conclusion does not convey information about what the facts alleged are and what case the opponent is to meet.

27 Paragraph 43 of the Statement of Claim refers to the alleged agreement to convert debt to equity on or about 29 March 1989. Request 92 asked for copies of the applications. This has been dealt with in various ways but no copies have been produced. This was a reasonable request having regard to the provisions of former Pt.23 r.9 of the Supreme Court Rules 1970 which continues to apply as the proceedings were commenced before 1 October 1996.

28 Paragraph 64 of the Statement of Claim relates to alleged breaches in causing Amann Aviation to assign the 1990 damages payment and to make a payment to Trimbush and, the particulars include para.64.3 which states that “[Amann Aviation] had no liability to the secured creditors, or alternatively its liability to the secured creditors were substantially less than the amount paid.” Request 130 sought particulars of “[h]ow and when is it alleged that each director became aware of the particular contained in paragraph 64.3?” The answer first given was “[a]s to how, by virtue of their position as a director of the company. As to when, at least by 30 April 1990”. This answer was in substance adhered to several times; later when the Registrar ordered particulars to be answered for request 130 by an order of 18 November 2003 the plaintiffs on 24 December 2003 replied: “[a]s to how each director became aware of the particular in paragraph 64.3, the plaintiffs say that each director had actual knowledge, or deemed knowledge, by reason of their position as a director of the Company. As to when, the plaintiffs can currently do no better than to say that each director became aware on or by the date of the final payment relied upon, namely, 30 April 1990.” In my opinion this answer conveys no information, and is in substance a refusal to answer.

29 Requests 131, 132 and 133 also pursued matters referred to in particulars of para.64 of the Statement of Claim, dealing with how and when each director became so aware of matters alleged. To these requests the plaintiffs eventually gave the same answer as to request 130.

30 In para.65 of the Statement of Claim it is alleged that the resolution of 19 April 1990 for assignment of the proceeds of Amann Aviation’s claim amounted to an equitable fraud on creditors. Request 135 asked “[p]lease identify the creditors of the company as at

(a) the making of the assignment …

(b) the making of the payment to Trimbush and CVC …”

Request 136 asked for the identity of the future or contingent creditors as at the same time. At first these requests were answered to the effect that it was a matter for evidence and full particulars would be given after discovery and interrogatories. After the Registrar’s order of 18 November 2003 request 135 was answered “[we] are continuing to search for records and believe there are more creditors that the following but at this stage the plaintiffs say the creditors were [at] least the Deputy Commissioner of Taxation and BP Australia Ltd. We will advise you of any further creditors when we complete our searches shortly.”

31 Then on 30 January 2004 the following was added: “[f]urther creditors are Airservices Australia and the Northern Territory of Australia.” Request 136 relating to future or contingent creditors was eventually answered “[the] Deputy Commissioner of Taxation” for each time under request. After I reserved judgment the plaintiffs’ solicitors on 12 March 2004 gave by letter further information about the allegation relating to the Deputy Commissioner of Taxation and sent me a copy, I take it with a view to my treating it as part of the evidence in the application. I find the letter difficult to follow; it incorporates tables headed “Broad assessment of income and expenditure Coastwatch Project” and I have not been able to trace in its statements about the present, future or contingent liability to the Deputy Commissioner of Taxation as referred to in requests 135 and 136.

32 In my opinion requests 135 and 136 have not been answered.

33 Statement of Claim para.91 alleges that the termination of CVC guarantee, the redemption of shares, the assignment of proceeds of litigation, the agreement of the sale of Holdings and Industries, and a number of payments earlier alleged were dispositions of property made with intent to defraud creditors, and not made for valuable consideration in favour of a person who acted in good faith. Requests 163 to 166 sought particulars. In request 163 these defendants sought particulars identifying who were the unpaid creditors at the time of the termination of the CVC Guarantee and what was the amount owing to each of them. This was answered in several ways asserting that the answer was a matter for evidence and full particulars would be provided after discovery and interrogatories. Eventually after the Registrar’s order the plaintiffs answered by referring to the answer to request 135, that is to say that at the relevant time, “the creditors were [at] least the Deputy Commissioner of Taxation and BP Australia Ltd” and “further creditors are Airservices Australia and the Northern Territory of Australia.” In addition to the answer to request 135, the plaintiffs also answered that “[t]he amounts owing at that time will be the subject of expert opinion in due course.” The same responses in substance were made to request 163(d) relating to the future or contingent creditors at the time of termination of the CVC Guarantee; the responses eventually referred to the Deputy Commissioner of Taxation. Request 163(e) referred to unpaid creditors at the time of the redemption of preference shares and was eventually answered in the same way as 163(c). Request 163(f) inquired for particulars for future or contingent creditors at the time of the redemption of preference shares and was eventually answered by referring to the Deputy Commissioner of Taxation and saying “[t]he amount owing at that time will be the subject of expert opinion in due course.” Request 164(c) relating to unpaid creditors at the time of redemption of the preference shares was eventually answered by referring again to the Deputy Commissioner of Taxation, BP Australia Ltd, Airservices Australia and the Northern Territory of Australia without giving reference to the relevant amounts owing. Request 164(d) relating to future or contingent creditors at the time of the redemption of the preference shares was eventually answered referring to the Deputy Commissioner of Taxation without, again, any reference to the amounts owing. Further request for particulars with respect to creditors at the time of the assignment in Statement of Claim para.59 (request 165 (c) and (d)) was answered in the same way as the answers to request 163 (e) and (f) for unpaid creditors and future or contingent creditors. Replies to request 166 which relates to Statement of Claim paras.69, 70, 71 and 72 were answered in the same fashion.

34 Part.16, r.2 of the Supreme Court Rules 1970 requires particulars to be given of any fraud on which the plaintiff relies. Part 16 r.3(2) requires particulars to be given of any fraudulent intention. After extended correspondence, attendances for directions and applications to the Registrar from October 2002 onwards relating to matter which ought to have been particularised in the Statement of Claim, these defendants have got no more particulars in substance of the many references to present, future or contingent creditors than the names of four alleged creditors, without any particularity of amounts, dates and sources of obligations; while a relatively high degree of particularity would be essential for these defendants to understand and prepare to answer the allegations and to prepare evidence in reply. The whole process including Registrar’s orders has achieved next to nothing. The plaintiffs have made extensive allegations of fraudulent behaviour relating to the conduct of the defendants over some years, and the process of obtaining particularity in these allegations has been tested as fully as it reasonably could be. As no particularity is forthcoming it must be concluded that the plaintiffs are unable to give any and that their case will depend on whatever information they may encounter at later stages of the litigation through processes of discovery, inspection, interrogatories or otherwise. This is not a just or fair basis on which to require these defendants to answer allegations of fraudulent behaviour.

35 Section 37A of the Conveyancing Act 1919, which is the successor provision to the statute 13 Elizabeth Ch.5, avoids alienations of property with intent to defraud creditors. This extends to possible creditors to whom obligations have not yet been incurred; see Mackay v. Douglas (1872) LR14Eq 106. I would think that the interests of potential creditors would also be relevant for more generally expressed claims of breach of director’s duties to which the interests of creditors are relevant. In the absence of direct proof of intention to defraud creditors, such intention may be inferred from consideration of the value of the settlor’s property and the amount of the settlor’s debts; see Noakes v. J. Harvy Holmes & Son (1979) 37 FLR 5 at 10 and cases there cited. There is a need for considerable particularity when pleading a claim of these kinds. It is necessary to provide particulars of what was due at the time of each transaction the plaintiff alleges was fraudulent, and also what was contingently due to each creditor at each of those times. A list of creditors’ names falls far short of stating the plaintiff’s claim with particularity. The list is of no real use unless accompanied by times and amounts due so that each allegation of fraud can be related to the array of obligations to creditors which is said to mean that the transaction was fraudulent; so for each of the various transactions so alleged. The supposed particulars furnished by the plaintiff are in my opinion no more than a gesture towards performing the plaintiffs’ duty to give particulars, including particulars of allegations of fraud. The events happened far in the past; at least twelve years ago and in some case almost fifteen years ago. There could not be procedural justice if the present proceedings went further on the basis of the generalisation to which the plaintiffs have offered. These defendants have been told next to nothing about the claims of fraud made against them.

36 About two and a half years passed between the winding up order and the first emergence of a challenge to its validity; about three and a half years passed between the winding up order and the issue of the Statement of Claim. This, I would think, was more than ample time for the plaintiffs to address the facts on which their claim was to be based and stated in a clear way, even allowing for the change of control over the affairs of Amann Aviation which came with the winding up order. The series of proceedings in which the effectiveness of the winding up order was challenged furnished a reasonable explanation for giving limited attention to the present proceedings, and also for not taking the present proceedings past the stages of effecting service and obtaining these defendants’ appearance. These defendants’ counsel conceded that there was a reasonable explanation for the case not to proceed between April 1998 and December 2001. However the circumstances which brought about this delay did not explain or excuse giving no attention whatever to the substance of the plaintiffs’ claims and the way in which the claims were formulated during that period; the years which passed conferred on the plaintiffs, in my opinion, an unusually extended opportunity to consider the grounds of their claims, and to state them in a fully considered and adequate way when finally called upon by correspondence to give particulars. From the particulars actually given it must in my view be understood that no advantage was taken of this unusually extended opportunity.

37 The directions relating to the filing of a Defence were plainly inter-dependent with the directions for giving of particulars and were made on the assumption that the directions would be complied with and that the defences would then be filed. This assumption was not borne out by events. Consideration of these defendants’ correspondence and the series of directions made by the Registrar makes it plain that no further attempts to compel giving particulars should be undertaken. The process has been exhausted.

38 These defendants have some information relating to the status of the Deputy Commissioner of Taxation as a creditor; their solicitor produced adjusted taxable net income assessments of Amann Aviation for the tax years ending 30 June 1990 and 30 June 1992; the adjusted assessments appeared to have been issued on 13 January 1995 and the assessments do not clearly say that they are amended assessments. Although I do not find the documents easy to follow they appear to show that, for 1990, taxable net income before adjustments was returned or assessed at a loss of $1,525,687 and that after adjustments it was assessed at $3,281,872. The assessments show that for 1990 tax and additional tax were assessed at $2,292,433.76. For 1992 taxable net income was at first returned or assessed at zero, and income adjustments produced a taxable net income of $5,468,829. In 1992 tax and additional tax were assessed at $4,265,688.62. The assessments themselves cannot have any bearing on what was known or should have been known at the times of the various transactions complained of about contingent liability to the Deputy Commissioner of Taxation, and they show very slight basis on which to infer what could have been foreseen.

39 In his submissions senior counsel for the plaintiffs pointed to what he contended was knowledge available to these defendants arising from their participation in the events and drew a contrast with the knowledge and means of knowledge available to the liquidator. I do not regard these observations as directed to the point of the application. These defendants’ means of knowledge of the underlying events will not give them any information about the terms of the allegations made against them. While the liquidator’s opportunities for action have been limited by the series of challenges to the winding up order it remains true that he has now been the liquidator for over eleven years and that these proceedings have been on foot for almost eight years. The long pendency of the challenges to the winding up order has lost much of its force when these periods are considered. These defendants have conducted the proceedings with vigour and it cannot be said that they have created or contributed to an atmosphere in which passage of time has been treated as unimportant. Quite otherwise they have several times applied for orders staying or dismissing the proceedings.

40 In his oral submissions senior counsel for the plaintiffs said to this effect “What we are … saying is that on any view of things the directors of these companies knew that there was, as was ultimately confirmed by the flows of money, a large income out of the litigation which would give rise to a revenue consequences.” A proposition of that generality cannot, in my view, be fairly used to test whether there was fraud within the meaning of s.37A of the Conveyancing Act 1919, or in any of the senses referred to in the Statement of Claim. The particulars given in the correspondence do not go any further than this general formulation, if indeed they go that far. The adjusted assessments of taxable net income, issued some years after the alleged events, do not have any real standing in support of the plaintiffs’ case and it is for the plaintiffs to allege and prove the underlying facts on which the proposition that there was a large contingent liability to the Deputy Commissioner of Taxation is based, and to prove those facts in relation to the relevant times.

41 To my mind it is not enough to say, as is clear enough, that BP Australia must have been a creditor at the time when the winding up order was made. Knowledge of that fact gives no understanding of what the plaintiffs allege with respect to indebtedness at the times of each of the various transactions alleged to have been in fraud of creditors.

42 Counsel also put in evidence and referred to an affidavit made by Mr V R Gould in proceedings 3735 of 1988, which appeared to be related to a statutory demand, in which Mr Gould put in evidence accounts including balance sheets and profit and loss accounts for companies including (or perhaps only) Amann Aviation and CVC. These accounts may reflect the decision to capitalise debt. In my opinion the state of Mr Gould’s knowledge of the company’s affairs at that time has no real bearing on the claim for particulars.

43 As explained by the plaintiffs’ senior counsel, the plaintiffs contended that directorial knowledge should be imputed to these defendants from their general position as directors. As I understood him, it is the plaintiffs’ position that they can and will give no further particulars of the allegations of knowledge of directors.

44 In the context of the plaintiffs’ claim it is the existence of creditors which gives any force to irresponsible dealings with Amann Aviation’s assets. Senior counsel for the plaintiffs referred to an expectation that the plaintiffs may have to subpoena documents from third parties in order to establish their case with particularity. The plaintiffs’ senior counsel contended that instead of requiring compliance with the orders for particulars the case should be taken forward by requiring the defences to be filed and making some orders for discovery which would, in his words, “flush out from both sides” the documents in relation to the critical turning points, including the state of the accounts at points which according to the plaintiffs’ allegations are critical for ascertaining Amann Aviation’s debt position. This inverted the function of particulars. It is quite important for these defendants to have particulars when they come to formulate their defences, which they are to verify, and when the parties address discovery of documents interrogatories and other interlocutory steps for eliciting information. The pleadings and the particulars have the function of shaping these later steps. Counsel’s submissions appear to me to assume or to come close to assuming that the plaintiffs are entitled to fish about for a case in the interlocutory proceedings before formulating what their case is. I do not accept that this is appropriate.

45 I conclude that the plaintiffs have made default in complying with orders or directions for the conduct of the proceedings, last and most significantly with the Registrar’s direction of 18 November 2003. There is no prospect of obtaining compliance by further extending time for compliance: the plaintiffs contend that delivering further particulars is not appropriate. They look forward to ascertaining more about the facts from other interlocutory processes. Grounds exist for stay or dismissal of the proceedings under Pt 33 r.6(2). I was also asked to act under Pt 13 r.5 and Pt 15 r.26: these grounds have not been made out. In the circumstances I have reviewed in this judgment I am of the view that I should dismiss the proceedings.

46 Orders:

(1) The proceedings are dismissed pursuant to Pt 33 r.6(2) of the Supreme Court Rules 1970.

(2) Order that the plaintiffs pay the costs of the first to tenth defendants of the Notice of Motion of 10 February 2004.

(3) Save as aforesaid, costs reserved.

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Last Modified: 03/31/2004