Australian Metal Exports Pty Ltd v Diversified Mineral Resources Nl
[1992] FCA 187
•16 APRIL 1992
Re: AUSTRALIAN METAL EXPORTS PTY LTD; TWYNAM COMMODITIES PTY LTD and AUSMET
INVESTMENTS PTY LTD
And: DIVERSIFIED MINERAL RESOURCES N.L.; WAYNE MITCHELL McCRAE; JOHN
HENDERSON; NEIL DRAPER; RICHARD COWAN and KALDIG PTY LTD
No. N G292 of 1991
FED No. 187
Practice and Procedure - Corporations
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J.(1)
CATCHWORDS
Practice and Procedure - statement of claim - inadequate pleadings and particularisations - failure to sufficiently set out facts and circumstance relied upon - circumstances where striking out may be ordered - circumstances where re-pleading may be ordered.
Corporations - companies - management and administration - shareholders derivative claims - the rule in Foss v Harbottle - whether s 1324 of the Corporations Law creates exception to the rule.
Corporations Law - s 777, s 1324
Foss v Harbottle (1843) 2 Hare 461; 67 ER 189
Howard Smith Limited v Ampol Petroleum Limited (1974) 1 NSWLR 68
HEARING
SYDNEY
#DATE 16:4:1992
Counsel for the applicant: Mr A.W. Street
Instructed by: Norton Smith and Co
Counsel for the first, second and third
respondents: Mr C.D. Curtis
Instructed by: Hagan and Co
ORDER
The Court orders:
1. that in so far as the proceedings depend upon the causes of action alleged in paragraphs 1 to 24 of the statement of claim, they be stayed until the further order of the Court;
2. that leave be granted to the applicants to re-plead the causes of action alleged in paragraphs 1 to 24 of the statement of claim;
3. that liberty to apply be granted to all parties on two days notice;
4. that the applicants pay the respondents costs of the motion.
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.
JUDGE1
This is a Notice of Motion brought by the first second and third respondents. It seeks the stay or dismissal of the whole of the proceedings brought by the applicants in their application and amended statement of claim. Alternative orders are sought for the striking out of particular paragraphs of the amended statement of claim. In the event of such orders not being made, orders are sought for the supply of particulars previously requested in correspondence between the solicitors for the parties.
Finally, it is sought, as a further alternative, that certain separate questions be decided separately prior to trial of the main proceedings.
It is convenient to consider, in the first instance, the claim for stay or general dismissal of the whole of the proceedings.
These proceedings were accurately described in argument as being of an intricate nature. The applicants' claims fall into three distinct groups which it is convenient to consider separately. Counsel for the respondent argued the matter on the basis of referring to the particulars which had been sought and the answers thereto as, in themselves, indicating, as he submitted, the fundamentally untenable nature of the claims. It will be convenient to follow a somewhat similar course in considering the matter in these reasons.
The first part of the statement of claim is contained in the first 15 paragraphs, with the relief sought being contained in the first three paragraphs of the application. It is necessary that I set them out in full, as follows:-
"1A. Each of the Applicants is, and at all material times has been:-
(a) a company incorporated in New South Wales;
(b) a shareholder of the First Respondent ("DMR"). PARTICULARS
(i) the first named Applicant ("AME") is the registered holder of 2,501,000 fully paid ordinary shares of 25 cents each;
(ii) the second named Applicant ("Twynam") is the registered holder of 2,500,000 fully paid ordinary shares of 25 cents each;
(iii) the third named Applicant ("Ausmet") is the registered holder of 12,111,112 fully paid ordinary shares of 25 cents each and is the holder of the shares referred to in paragraph 6.
1B. Each of Twynam and Ausmet is, and at all material times has
been, a wholly owned subsidiary of Australian Metal Holdings Pty. Limited ("AMH"), a company incorporated in the State of New South Wales.
1C. AME is, and at all material times has been, a company
associated with AMH within the meaning of Section 15 of the Corporations Law.
2. DMR is, and at all material times has been:-
(a) a no liability company incorporated in the State of Queensland;
(b) a company admitted to the Official List of the Australian Stock Exchange Limited.
3. The Second Respondents (called together herein the
"Directors") are, and at all material times have been, directors of DMR.
4. The Third Respondent ("Kaldig") is, and at all material
times has been:-
(a) a company incorporated in the State of Queensland;
(b) the holder of 9,292,000 ordinary shares of 25 cents each paid to 1 cent in the capital of DMR (the "First Parcel").
5. The Fourth Respondent ("UCL") is, and at all material times
has been, a company incorporated under the laws of Hong Kong.
6. Ausmet is, and at all material times has been, the holder of
2,500,000 ordinary shares of 25 cents each paid to 1 cent in the capital of DMR (the "Second Parcel").
7. The first named Second Respondent ("McCrae") is, and at all
material times has been:-
(a) the managing director of DMR;
(b) the beneficial owner of not less than 50% of the issued capital of Kaldig.
PARTLY PAID SHARES
8. The First Parcel and the Second Parcel were issued by DMR
pursuant to a resolution of the Board of Directors of DMR passed on 30 October, 1986 (the "Resolution") upon terms and conditions which included the following terms and conditions:-
`(b) That the directors must make a call upon the unpaid liability in respect of each share within five (5) years from the date hereof.
(c) That the holder of any of the said partly paid shares for the time being be entitled to pay up such shares at any time whether in full or in part.
(d) That prior to any call made by the directors, six (6) month's notice in writing to the holder of such partly paid shares for the time being be given and in that event payment of the call shall not be due until six (6) months after the date of giving such notice.' The Applicants will at the hearing rely upon the Resolution as if the same were fully set out herein.
9. At all material times Ausmet held the Second Parcel pursuant
to a contract with DMR the terms of which contact were contained in the Resolution.
10. No call upon the unpaid liability in respect of the First
Parcel or the Second Parcel has been made by the Directors.
11. No notice has been given by the Directors of their intention
to make a call upon the unpaid liability in respect of the First Parcel or Second Parcel to the holders of such Parcels.
12. By letter dated 26 April, 1991 DMR notified Ausmet that in
relation to the Second Parcel the time by which DMR was entitled to make a call had been extended to 31 October, 1993.
13. Upon the proper construction of the Resolution, in the event
that the directors of DMR fail to give notice of a call prior to 31 April 1991, DMR is not entitled to require payment of the said call.
14. In the premises, the Directors by failing to give Kaldig and
Ausmet notice of their intention to make a call upon the unpaid liability in respect of the First Parcel and the Second Parcel prior to 31 April, 1991 are no longer entitled to make a call upon the unpaid liability in respect of the First Parcel and the Second Parcel.
15. In the premises, the Directors have failed to exercise a
reasonable degree of care and diligence in the exercise of their powers and the discharge of their duties in contravention of Section 232 of the Corporations Law."
The relevant claims in the application are as follows:-
"1. A declaration that the second respondents are not entitled
to make a call upon the unpaid liability in respect of the partly paid shares in the first respondent held by the third named applicant and the third respondent.
2. A declaration that the second respondent in failing to give
notice of their intention to make a call upon the unpaid liability in respect of the partly paid shares held by the third named applicant and the third respondent prior to 30 April, 1991 have failed to exercise a reasonable degree of care and diligence in the exercise of their powers and the discharge of their duties in contravention of Section 232(4) of the Corporations Law.
3. An order that the second respondents pay to the first
respondent damages in respect of the contravention referred to in paragraph 2 of these Orders.
It will be seen, at the outset, that the applicants' claim is a derivative claim. It makes no claim for payment of damages to the applicants but seeks that damages be paid by the second respondents, as directors of the first respondent, to the first respondent, being the company of which they are directors. General criticisms were made by counsel for the respondent that the claim was novel, convoluted, and amounted to a device to circumvent the rule in Foss v Harbottle (1843) 2 Hare 461; 67 ER 189, in circumstances where no facts were pleaded sufficient to bring the claim within any of the established exceptions to that rule. It was further put that endeavours on the part of the respondents to ascertain from the applicants, through requests for particulars, the exact nature of their claim had been met with inadequate answers.
Various answers to questions were said to be either inadequate or illustrative of the fact that there was no basis to the applicants' claims. I turn, therefore, to consider these matters.
The Resolution referred to in paragraph 8 contained the provisions as set out in that paragraph. The text of the Resolution provoked a response from the respondents' solicitors to the effect that none of the applicants were named in it as allottees and the statement that they reserved the respondents' rights "in relation to the question of privity thereby arising and the concomitant question as to the standing of the applicants to seek the relief contained in Prayers one, two and three of the application".
It should be noted that the copy of the relevant Resolution shows the third respondent "Kaldig" as being an allottee although not in the amount of shares referred to in paragraph 4(b) of the amended statement of claim. There is no reference to Ausmet as being an allottee, although there is reference to Central Victorian Gold Mines N.L. as being the allottee of 5,808,000 ordinary 25 cent shares paid to one cent.
In further answer to the question relating to paragraph 8 the applicants' solicitors affirmed that "the terms and conditions upon which the First Parcel and the Second Parcel were issued are contained wholly within the Resolution".
A question asked in relation to paragraph 9 elicited the information, which, it would appear, applies throughout the amended statement of claim that the "material times" referred to constitutes the period from 8 April 1991 up to and including 31 April 1991. I should say that, so far as any argument presented to me was concerned, nothing appears to turn upon these dates except that they were repeated in an unresponsive way in answer to a later question.
The next request for particulars related to paragraph 13. In answer to a question inquiring as to whether the applicants relied upon "any facts or circumstances in placing the construction on the Resolution as alleged" stated that they relied "on the facts and circumstances pleaded". In answer to the following question which inquired as to "what precisely are those facts and circumstances?" they stated unresponsively in a manner which merely provided the dates already referred to. I can only assume that this answer was some sort of error. It was unexplained, so far as I can make out, in argument before me.
These answers provoked a further question from the respondents in the following terms:-
"Your answer to Questions 10(a) and (b) of the request for particulars are (sic) unsatisfactory. The specific facts and circumstances as pleaded should at least be identified. However, any such identification, without more, would be insufficient: The allegations contained in paragraphs 13 and 14 of the Statement of Claim that in the circumstances, DMR or its directors is or are not or are no longer entitled to require payment of the said call is essential to the relief claimed in Prayers 1, 2, and 3 of the Application. As such, it is a matter of which full particulars should be provided: particularly in view of the novelty of such a proposition. To date, no particulars have been forthcoming. As they stand, the relevant allegation in Paragraph 13 is confined to the construction of the Resolution whilst the allegations in Paragraph 14 are prefaced by the amorphous catch - all "in the premises". If those allegations are really based on a point of law, whether at general law or under specific provisions of the Companies Legislation, you are required to say so. If they are based on some construction of the Memorandum and/or Articles of Association of DMR, we ask that you at least verify all those provisions or the absence of any provisions. It is not the Respondents' task to devise a series of questions in an attempt to divine the basic nature of the case pleaded against them."
This communication evoked the response from the applicants that "the facts and circumstances referred to are those set out in paragraphs 1A, 2, 3, 4, 6, 8, 9, 10, 11 and 12".
Finally, in relation to this aspect of the statement of claim, the respondents sought particulars of paragraph 15. They asked which of the allegations contained in that paragraph were alleged to constitute a contravention of s 232(4) of the Corporations Law and of the basis for so alleging. They received the reply that the applicants relied on paragraphs 8 to 14 of the statement of claim.
A further question related to particulars of the alleged damage. It was conceded in argument that these particulars would be provided, at least so far as possible before discovery and interrogatories. I do not understand that any relief is sought in respect of this aspect of the case.
The further question was asked, however, in relation to paragraph 15, "Please specify the basis on which it is alleged that the applicants are entitled by these proceedings to obtain an order in favour of the first respondent in respect of the alleged damages?". This question received the cryptic answer "Section 1324 of the Corporations Law."
This answer provoked a further question from the respondents in the following form (so far as relevant):-
"We note ...
...
(b) that your clients rely on section 1324 of the Corporations Law. In view of that reliance:
(i) We also note that you do not seek injunctive relief under that section. As such, please specify all facts, matters and circumstances upon which your clients rely in support of the allegation which, by virtue of your answer to Question 11(c) of the request for particulars must now be taken to be incorporated by reference into your clients pleading, that the court has power under Section 1324 to grant an injunction restraining the directors; and
(ii) Please supply full particulars of the manner and extent to which the applicants' interests have been affected by the alleged conduct within the meaning of the expression as appearing in the Section 1324(1) of the Corporations Law."
Sub-paragraph (i) received the reply that this was not a proper request for particulars. Sub-paragraph (ii) was replied to as follows, "The applicant's interest as members of the First Respondent have been affected by the conduct of the Second Respondent".
In my opinion, there is undoubted difficulty in determining what is precisely the cause of action alleged on behalf of the applicants in the paragraphs which constitute this first portion of the statement of claim. Although s 232 of the Corporations Law is mentioned in paragraph 15, there is no mention of s 1324 in any of the paragraphs relied on nor do they assert facts which could bring that section into play in favour of the applicants. The final answer referred to above which speaks of the applicants' interest as having been "affected" does no more than repeat in terms the relevant portion of s 1324(1).
The role that may be played by s 1324 in circumstances where applications are brought by shareholders which might otherwise be debarred by the rule in Foss v Harbottle, Supra, is not clear. I feel it to be sufficient in this application merely to set out a passage from Ford, Principles of Company Law, 5th Ed., p 566 as follows:-
"Companies legislation in s 574/1324 seeks to police contraventions of the companies legislation by allowing `any person whose interests have been, are or would be affected by' conduct in contravention as well as the Commission to apply for an injunction. There has been a similar provision in SIA s 419. The words quoted have been given a broad interpretation. In The Broken Hill Propriety Co Ltd v Bell Resources Ltd (1984) 8 ACLR 609 were held to allow standing to a target company to apply for an injunction to restrain circulation amongst its members of documents which did not comply with the prospectus requirements of companies legislation. The provision authorizes the court that has power to grant an injunction under the section to order the defendant to pay damages to any other person in addition to or in substitution for the grant of an injunction. There is a question whether damages can be obtained when no injunction is sought. That question may be similar to questions that have arisen under Lord Cairns' Act: Dempster v Biala Pty Ltd (1989) 15 ACLR 191. The extent to which the section represents an exception to Foss v Harbottle has not yet ben determined: Scarel Pty Ltd v City Loan and Credit Corporation Pty Ltd (1988) 17 FCR 344 at 348, 12 ACLR 730 at 734, Dempster v Biala Pty Ltd (1989) 15 ACLR 191. It would seem to be open to a court to hold that when s 574/1324 gives standing to `any person whose interests have been, are or would be affected by the conduct', it means that for some contraventions the company is the proper plaintiff and that a member has standing only where the member has an individual membership right to be vindicated or is relying on an exception to the rule in Foss v Harbottle."
In view of the obvious complexity of the law, I would not be prepared to strike out this part of the statement of claim. However, I am clearly of the view that it has been inadequately pleaded and particularised. I do not think that an order directing that the particulars sought should be provided is really sufficient. This portion of the statement of claim must be re-pleaded. In all the circumstances I think that the appropriate order to make is that proceedings in respect of this portion of the statement of claim be stayed and that leave be granted to the applicants to further plead their cause of action as they may be advised. The stay should be until the further order of the Court. This will enable the matter to be placed back in the list for directions when amendments have been made.
The next portion of the amended statement of claim which is the object of attack in these proceedings is that comprised in paragraphs 16 to 24. They read as follows:
"LISTING RULE 3E(6)
16. At all material times DMR was under an obligation to comply
with the listing rules of the Australian Stock Exchange Limited.
PARTICULARS
Section 777(2) of the Corporations Law
17. Listing rule 3E(6) of the Australian Stock Exchange Limited
provides that a company shall not issue any equity securities if the nominal value of those securities, when aggregated with the nominal value of any other securities of the same class which it has issued, exceeds 10 per cent of the nominal value of that same class of security on issue at the commencement of that period of 12 months except where the securities are issued during the previous 12 months with the prior approval by the company in general meeting of the precise terms and conditions of the issue or the shares are issued in certain other defined circumstances.
18. On 15 June, 1990 DMR allotted 3,503,484 ordinary shares of
25 cents each fully paid (the "First Allotment") in the capital of DMR pursuant to a scheme of arrangement between DMR and Central Victorian Gold Mines N.L. which was approved by the Western Australian Supreme Court on 4 July, 1989.
19. In April 1990 the nominal value of ordinary shares issued by
DMR was $21,435,533 comprising 68,142,135 ordinary shares of 25 cents each fully paid and 17,600,000 ordinary shares of 25 cents each paid to 1 cent.
20. By an agreement made between McCrae on behalf of DMR and UCL
on or about 8 April, 1991 (the "Share Allotment Agreement"), it was agreed, inter alia, that :-
(a) UCL would apply for 7,244,562 ordinary shares of 25 cents each fully paid in the capital of DMR and DMR would allot such shares to UCL;
(b) the allotment price of each such share would be 12 cents.
21. On 8 April, 1991, DMR allotted, and the Directors procured
the allotment by DMR, of 7,244,562 ordinary shares of 25 cents each fully paid (the "Second Allotment") in the capital of DMR to UCL pursuant to the terms of the Share Allotment Agreement.
22. The nominal value of the First Allotment and the Second
Allotment is $2,687,011.50 which exceeds 10 per cent of the nominal value of ordinary shares issued by DMR as referred to in paragraph 18 of the Statement of Claim.
23. In the premises, the Second Allotment was made in breach of
listing rule 3E(6).
24. In the premises, the Directors have failed to exercise a
reasonable degree of care and diligence in the exercise of their powers and the discharge of their duties in contravention of Section 232 of the Corporations Law."
The relief sought in respect of these paragraphs is set out in the application as follows:-
"4. A declaration that the allotment by the first respondent to
the fourth respondent on 8 April, 1991 of 7,244,562 ordinary shares of 25 cents each fully paid in the capital of the first respondent was made in breach of Listing Rule 3E(6) of the Listing Rules of the Australian Stock Exchange Limited.
5. A declaration that the second respondents in procuring the
making of the allotment referred to in paragraph 5 of these Orders failed to exercise a reasonable degree of care and diligence in the exercise of their powers and the discharge of their duties in contravention of Section 232(4) of the Corporations Law.
6. An order that the second respondents pay to the first
respondent damages in respect of the contravention referred to in paragraph 5 of these Orders."
There was some argument before me as to whether paragraphs 7 to 10 of the declaration also applied to this portion of the statement of claim. Although this matter is not, in my view, made clear in the pleadings, I am satisfied, on balance, that these paragraphs in the declaration must properly be read as applying only to the third portion of the statement of claim to which reference will be made later.
Particulars of this portion of the statement of claim were sought and supplied in the following manner.
In reply to a request to specify the allegations in paragraph 24 relied upon as constituting a contravention of s 232(4) of the Corporations Law, in paragraph 24, the applicants stated that they relied on the matters pleaded in paragraphs 16 to 24.
In answer to a request that they specify "the basis on which it is alleged the applicants are entitled by these proceedings to obtain an order in favour of the first respondent for damages, the applicants replied that this was not a proper request for particulars.
This latter response provoked a lengthy rejoinder on the part of the respondents which indicated that they were "at a loss to understand that answer in view of the answer which had previously been given to a similar request in relation to paragraph 15. That answer had involved s 1324 of the Corporations Law. They said that, in view of this, they were "entitled to and do assume" that no reliance was placed upon that section in relation to paragraph 24 of the statement of claim. The applicant replied that "the logic behind your conclusion is misconceived. In any event, no such assumption should be made".
Despite all this rather unhelpful interplay, it was made tolerably clear in argument that reliance was in fact placed upon s 1324 in this aspect of the statement of claim as in the first one.
In light of that fact attention must be focused upon the paragraphs of the statement of claim to see whether, in accordance with normal pleading practice, they sufficiently allege facts such as to bring that section into play. It is not suggested that factual issues are not properly raised in these paragraphs as to a breach or potential breach of Listing Rule 3E(6). Moreover, s 777 of the Corporations Law is shortly but no doubt adequately referred to, especially if read with the note that appears at the end of the application. This reads as follows:-
"In so far as this application is made under Section 777 of the Law, the applicants are aggrieved by the failure of the first respondent to comply with Listing Rule 3E(6) of the Australian Stock Exchange Limited in relation to the allotment of shares referred to in paragraph 21 of the accompanying statement of claim because: A. The applicants' aggregate proportionate shareholding in the first respondent has been reduced from 25.33% to 23.16%.
B. The allotment was made by the second respondents in breach of their fiduciary duties to the first respondent.
In argument it appeared that reliance was placed on both s 777 and s 1324, it being accepted that s 777 was not adequate, in itself, to enable the applicants to claim damages in a derivative way on behalf of the first respondent. It is clear that it would be fundamental to claims brought under either section to establish that the applicants were persons "aggrieved" (s 777) or "affected" (s 1324).
I am satisfied that the paragraphs pleaded fall short of setting out adequately the facts and circumstances relied upon to bring these sections into play in favour of the applicants. It is not sufficient that the problems be brushed aside as they were in answering particulars or that reliance simply be placed upon matters raised in argument before me. I consider that the pleading is defective. I do not propose to strike it out. In my view I should make similar orders to those made in respect of the first portion of the statement of claim.
The remainder of the statement of claim is comprised by paragraphs 25 to 33. They provide as follows:
"THE SECOND ALLOTMENT
25. AMH has, and at all material time has had, an entitlement
(within the meaning of the Corporations Law) to not less than 23.16% of the issued capital of DMR.
26. At all material times, the Directors were under a duty to
DMR to act honestly and in the best interests of DMR and to exercise the powers conferred upon them by the Articles of Association of DMR for a proper purpose.
27. The Directors procured the making of the Second Allotment
for the following purposes:-
(a) to reduce the proportionate entitlement of AMH to shares in DMR;
(b) to maintain their control over DMR. PARTICULARS
The Applicants rely on the following facts and matters:-
(i) DMR had no immediate need for further working capital;
(ii) the Directors had purported to postpone the making of a call upon the unpaid liability in respect of the First Parcel and the Second Parcel;
(iii) the allotment was made in breach of listing rule 3E(6) of the Australian Stock Exchange Limited;
(iv) McCrae was the managing director of DMR and was the beneficial owner of not less than 50% of the issued capital of Kaldig.
(v) prior to 8 April, 1991 Kaldig owned 20,682,067 voting shares in DMR being 26.71% of the total number of voting shares in DMR;
(vi) prior to 8 April, 1991 AMH had an entitlement to 19,612,113 voting shares in DMR being 25.33% of the total number of voting shares in DMR;
(vii) none of the shares the subject of the allotment were offered to other shareholders of DMR;
(viii) McCrae did not obtain the prior approval of the Board of Directors of DMR before entering into the Share Allotment Agreement. Further particulars will be provided after discovery and interrogatories.
28. The said purpose was the dominant or substantial purpose for
the Second Allotment.
29. Alternatively, the Second Allotment would not have been made
but for the said purpose.
30. At all material times, UCL was aware of the facts, matters
and circumstances set out in paragraphs 27, 28 and 29 hereof.
PARTICULARS
This is to be inferred from the facts and matters set forth in the particulars to paragraph 27 and from the fact that the Share Allotment Agreement was negotiated by McCrae on behalf of DMR.
Further particulars will be provided after discovery and interrogatories.
31. The Directors in procuring the making of the Second
Allotment acted in breach of their said duties to DMR.
32. Further, and in the alternative, the procuring by the
Directors of the making of the Second Allotment was an improper exercise by them of their powers as directors of DMR.
33. By reason of the matters alleged in paragraphs 27, 28, 29,
30, 31 and 32 hereof, the Second Allotment if voidable and ought to be set aside."
The corresponding portions of the application are paragraphs 7 to 11 which read as follows:-
"7. A declaration that the allotment of shares referred to in
paragraph 4 of these Orders is voidable.
8. An order that the allotment of shares referred to in
paragraph 7 of these Orders be set aside and that the register of shareholders of the first respondent be rectified accordingly.
9. Such further or other orders as may be necessary to restore
the first and fourth respondents to the positions which they held prior to the allotment referred to in paragraph 7 of these Orders.
10. Alternatively, damages against the second respondents and
interest thereon pursuant to Section 51A of the Federal Court of Australia Act.
11. Costs."
In relation to these paragraphs the following particulars were sought:
"22. As to the allegations contained in paragraph 27:
(a) What specifically is meant by the expression `proportionate entitlement'?
(b) What specifically is meant by the expression `their control'?"
The answer given to each request was that it was not a proper request for particulars.
In relation to this latter matter, I am satisfied that the request for particulars was itself in a very imprecise form which invited the answer it received.
So far as the submission made on behalf of the respondents that the paragraphs do not disclose, or sufficiently disclose a cause of action, I am of the view that this submission fails. Whilst the allegations of fact are certainly sparse they are, in my view, sufficient to assert relevant breaches of fiduciary duty on behalf of the defendants in relation to the allotment of shares in question. (Howard Smith Limited v Ampol Petroleum Limited (1974) 1 NSWLR 68 at 76-80). The relevant improper purpose is sufficiently stated. It can be pleaded to without embarrassment.
It may well be that this part of the statement of claim could be improved by its being re-pleaded. As I am staying the proceedings in so far as they depend upon the matters asserted in the first two portions of the statement of claim, it may well be that the applicants may avail themselves of the opportunity of amending the last portion of it. So far as it may be necessary I grant leave to them so to do. However, I do not stay the proceedings in relation to the cause of action alleged by paragraphs 25 to 33, when read, as they must necessarily be, with paragraphs 19, 20 and 21.
As the respondents have been substantially successful in this notice of motion, it is appropriate that the applicants pay their costs.
It is not appropriate, in my view, that I come to any decision as to whether the questions referred to in paragraph 4 of the notice of motion be decided separately. Consideration of this matter is not appropriate until pleadings are complete.
I therefore make the following orders:
1. that in so far as the proceedings depend upon the causes of action
alleged in paragraphs 1 to 24 of the statement of claim, they be stayed until the further order of the Court;
2. that leave be granted to the applicants to re-plead the causes of
action alleged in paragraphs 1 to 24 of the statement of claim;
3. that liberty to apply be granted to all parties on two days
notice;
4. that the applicants pay the respondents costs of the motion.
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