Ballard v Multiplex Ltd

[2008] NSWSC 1019

CITATION:	David Ballard v Multiplex Limited [2008] NSWSC 1019
HEARING DATE(S):	11 August 2008
JUDGMENT DATE :	3 October 2008
JUDGMENT OF:	McDougall J at 1
DECISION:	See para [99] of the judgment.
CATCHWORDS:	PRACTICE – Application further to amend statement of contentions – adequacy of statement of contentions – whether statement notifies opposing party of the case to be made against it. - DAMAGES – “Prudential” principle – shareholders cannot recover damages reflective of a loss suffered by a company – shareholders may recover damages for a loss which the company would not have sustained itself – shareholders in their capacity as guarantor of a company’s obligations may recover damages for loss. - DAMAGES – Conspiracy – actual pecuniary loss must be established to recover damages – damages for injury to reputation can not be awarded in an action for conspiracy – plaintiff may recover damages for physical injury where conspiracy is proved.
LEGISLATION CITED:	Civil Procedure Act 2005 Industrial Relations Act 1988 Industrial Relations Act 1991 Industrial Relations Act 1996 Limitation Act 1969 Trade Practices Act 1974 Workplace Relations Act 1996
CATEGORY:	Principal judgment
CASES CITED:	Bell-Booth Group Ltd v Attorney General [1989] 3 NZLR 148 Brambles Australia Ltd v Tatale Pty Ltd [2006] NSWSC 204 Chen v Karandonis [2002] NSWCA 412 Crofter Handwoven Harris Tweed Co Ltd v Veitch [1942] AC 435 Foss v Harbottle (1843) 2 Hare 461; (1843) 67 ER 189 Gould v Vaggelas (1985) 157 CLR 215 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No.6) (2007) 63 ACSR 1 Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 Lonrho v Fayed [1992] 1 AC 448 Lonrho PLC v Fayed (No.5) [1993] 1 WLR 1489 McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 Prudential Assurance Co Ltd v Newman Industries Ltd (No.2) [1982] Ch 204 Quinn v Leathem [1901] AC 495 Thomas v D’Arcy (2005) 52 ACSR 609 Arthur Young v Teico International (1995) 182 LSJS 367
PARTIES:	David Ballard (Plaintiff) Multiplex Limited (ACN 008 687 063) (First Defendant) Multiplex Corporate Agency Pty Ltd (ACN 003 070 120) (Second Defendant) Construction Forestry Mining and Energy Union (Third Defendant) Construction Forestry Mining and Energy Union (New South Wales Branch) (Fourth Defendant) Andrew Ferguson (Fifth Defendant)
FILE NUMBER(S):	SC 50207/07
COUNSEL:	I M Neil SC / G A Sirtes (Plaintiff) B W Walker SC / S A Kerr (First and Second Defendants) M Condon (Third, Fourth and Fifth Defendants)
SOLICITORS:	Carlisle Attorneys (Plaintiff) Clayton Utz (First and Second Defendants) Taylor & Scott (Third, Fourth, Fifth and Sixth Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

3 October 2008

50207/07 DAVID BALLARD v MULTIPLEX LTD & ORS

JUDGMENT

1 HIS HONOUR: The plaintiff (Mr Ballard) worked in the construction industry as a demolition contractor. Through a company, Stoneglow Pty Limited, he enjoyed contracts with one or other of the first and second defendants (the Multiplex defendants). Mr Ballard claims that he was driven out of the construction industry, and has been prevented from working in it, by an unlawful conspiracy and other unlawful acts of the Multiplex defendants and the third, fourth and fifth defendants (the CFMEU defendants).

2 There are before the Court three interlocutory applications. In logical, if not in chronological, order they are:

(1) Mr Ballard’s application for leave further to amend his statement of contentions; this is opposed by all defendants;

(2) the Multiplex defendants’ application to strike out Mr Ballard’s existing process and for summary judgment; and

(3) the CFMEU defendants’ application to like effect.

3 For convenience, the debate was conducted by reference to Mr Ballard’s draft further amended summons (draft FAS). The defendants submitted, in brief, that the further amendments propounded by Mr Ballard did not overcome what they said were fundamental defects in his case.

The parties

4 According to the draft FAS, Mr Ballard was a director of Stoneglow and a director, shareholder and employee of Wingrove Pty Limited. Wingrove held one-half the issued shares in Stoneglow. Wingrove provided Mr Ballard’s services to Stoneglow. Stoneglow paid management fees to Wingrove in consideration for those services. Wingrove paid wages and other monies to Mr Ballard.

5 Stoneglow was placed into liquidation by a resolution passed on 17 March 1997. It was dissolved on 15 July 2002, and has been deregistered.

6 The Multiplex defendants are corporations carrying on business as builders in the building and construction industry. From time to time, in the course of their business, they contract with demolition contractors for the performance of demolition works. Of present relevance, they entered into demolition contracts with Stoneglow for projects known as the Chatswood Chase Project, the Grace Plaza Hotel Project and the Pitt Street Mall Project. Those contracts are said to have been current in about August and September 1996.

7 The third defendant is a trade union registered, successively, under the Industrial Relations Act 1988 and the Workplace Relations Act 1996. Its members include persons who performed work in the building and construction industry.

8 The fourth defendant is a trade union registered, successively, under the Industrial Relations Act 1991 and the Industrial Relations Act 1996. Its members also include persons who performed work in the construction industry.

9 The fifth defendant was an officer and employer of each of the third and the fourth defendants.

The conspiracy case

10 Mr Ballard alleges that in August or September 1996 the CFMEU defendants agreed with the Multiplex defendants to force Mr Ballard out of the industry, and to deprive him of his occupation. The terms of the conspiracy are set out in para 9 of the draft FAS:

Conspiracy to Injure

9. In or about August or September 1996, the Federal and/or NSW CFMEU, Ferguson, and other officers and/or employees of the Federal and/or NSW CFMEU agreed and/or combined with Multiplex to force the plaintiff out of the Industry, and deprive him of his Occupation, by

(a) procuring and ensuring that, inter alia , the plaintiff, whether by himself or in connection with Stoneglow or any other firm or corporation (an Associate ), would not provide demolition services or perform demolition work in connection with the Chatswood Contract, the Grace Plaza Contract, the Pitt Street Mall Contract and any other current or future contract with Multiplex, and/or

(b) procuring and ensuring that the plaintiff, whether by himself or in connection with Stoneglow or an Associate, would be removed or, as the case may be, excluded, from any and all involvement in the Chatswood Contract, the Grace Plaza Contract, the Pitt Street Mall Contract and the opportunity to provide demolition services or perform demolition work in relation to any other current or future contract with Multiplex,

which agreement and combination is called ‘ the Conspiracy ’.

11 That bald and uninformative statement of the conspiracy is amplified by particulars. Those particulars read as follows:

Particulars of the Conspiracy


(i) In or about late 1995, shortly after a video recording of a confrontation between the plaintiff and Mr John Henderson (an organiser of the Federal and/or NSW CFMEU) was broadcast during an episode of ‘A Current Affair’, Ferguson informed Mr Craig Bates ( Bates ) , Mr Peter McClelland and Mr Daniel Reice (all of whom were officers or employees of the Federal and/or NSW CFMEU) (the CFMEU Conspirators ) that Ferguson intended to, and would, approach major builders in the Industry and threaten them with industrial action if they engaged, the plaintiff or Stoneglow to provide services to them, with the express purpose of ensuring that, inter alia , the plaintiff would be driven out of the Industry, which intention, conduct and purpose were countenanced by all of the other CFMEU Conspirators.

(ii) Further to the facts and matters particularised in (i), in or about August or September 1996, at a meeting (the Meeting ) between Ferguson (who, it will be contended, acted throughout the Meeting for himself and for and on behalf of the Federal and/or NSW CFMEU), Bates, and, on behalf of Multiplex, Mr Ross McDiven ( McDiven ) and Mr David Higgins ( Higgins ) (who was employed as Multiplex’ industrial relations manager), Ferguson threatened McDiven and Higgins to the effect that if Multiplex continued to engage the plaintiff or Stoneglow to provide services to Multiplex, the CFMEU would procure or engage in industrial action on building and construction sites on which Multiplex was engaged as a builder (the Threat ). McDiven stated, in effect, that he would ensure that Multiplex did not enter into any further contracts with the plaintiff or Stoneglow, but that he would need some further time before he could ensure that the plaintiff or Stoneglow ceased to provided [sic] services in connection with the contracts that were then on foot (namely, the Chatswood Contract, the Grace Plaza Contract and the Pitt St Mall Contract) ( McDiven’s Assurance ). Ferguson accepted McDiven’s Assurance and, with the acquiescence of Bates, McDiven and Higgins, stated, in effect, that an agreement had been made.

12 Paragraph 10 alleges the “intention” of the conspiracy or of those who made it. It reads as follows:

10. The Conspiracy was intended to injure or harm the plaintiff by:

(a) ensuring the plaintiff, whether by himself in connection with Stoneglow or an Associate, ceased to provide demolition services or perform demolition work to, or for the benefit of, Multiplex;
(b) damaging or destroying Stoneglow’s Business; and/or
(c) forcing the plaintiff and Stoneglow out of the Industry.

13 Paragraph 11 alleges overt acts done in execution of the conspiracy. It reads as follows:

11. In execution of the Conspiracy, the following overt acts were done:

(a) After August or September 1996, Multiplex unlawfully refused to pay progress and/or final payment claims submitted by Stoneglow in compliance with the Chatswood Contract, the Grace Plaza Contract or the Pitt St Mall Contract.
Particulars
Stoneglow’s invoices for the period after August or September 1996 were not paid. Further particulars will be provided after discovery and/or interrogatories.
(b) On or about 8 November 1996, Multiplex unlawfully purported to terminate the Pitt St Mall Contract.

Particulars
From on or about 8 November 1996, the plaintiff and Stoneglow’s employees, contractors and agents were refused entry to the Pitt St Mall site and were informed that Multiplex had terminated the Pitt St Mall Contract.
(c) From on or about 8 November 1996, Multiplex unlawfully locked the plaintiff and Stoneglow’s employees, contractors and agents out of the Pitt St Mall Site such that they could not perform any services in connection with the Pitt St Mall Contract.
Particulars
From on or about 8 November 1996, the plaintiff and Stoneglow’s employees, contractors and agents were refused entry to the Pitt St Mall site.
(d) On or about 8 November 1996, Multiplex unlawfully seized, and thereby took, detained and/or converted, all of Stoneglow’s plant and equipment which was then located on the Pitt St Mall Site, including 4 bobcats, 3 excavators, 1 caterpillar bulldozer, 2 trucks, various compressors, jackhammers, chainsaws hoses and generators (Stoneglow’s Property) .
(e) Multiplex procured the plaintiff’s agreement to bring about the liquidation of Stoneglow by representing to the plaintiff in or about early 1997 that he, or an Associate, would receive demolition work from Multiplex, including in connection with the Finger Wharf Project in Woolloomooloo, if he brought about the liquidation of Stoneglow ( the Finger Wharf Representation) .
Particulars
The Finger Wharf Representation was made orally to the plaintiff by Mr David Hicks by or on behalf of Multiplex.
(f) Notwithstanding
(i) the Finger Wharf Representation, and
(ii) the plaintiff’s reliance on the Finger Wharf Representation in bringing about the liquidation of Stoneglow as aforesaid,
the plaintiff received no further demolition work from Multiplex, or any opportunity to provide demolition services or perform demolition work to or for Multiplex, including in connection with the Finger Wharf Project, after about 8 November 1996, whether by himself or in connection with an Associate.

14 Paragraph 12 alleges that the overt acts alleged in para 11 were unlawful, although it seems, from the way this allegation is expressed, that it does not extend to para 11(f). The first three acts are said to have been unlawful as breaches of contract or alternatively unlawful interference with contractual relations. The fourth is said to be unlawful because it amounts to detinue or conversion. The fifth is said to be unlawful because it amounted to misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974. I pause to note that no damages are claimed in respect of that alleged misleading or deceptive conduct. The only purpose of the allegation is to establish that the conduct to which it refers was unlawful.

15 Paragraph 13 alleges in the alternative that the conspiracy was one that “executed by lawful means predominately [sic] with” the purpose alleged in para 10.

16 Paragraph 14 alleges the damages said to have been suffered by Mr Ballard as a result of the conspiracy. It reads as follows:

14. In consequence of the execution of the Conspiracy in whole or in part, the plaintiff suffered loss and damage.

Particulars

In consequence of the execution of the Conspiracy:

(i) Stoneglow was deprived of funds, and so was unable to make payments that the plaintiff had guaranteed and/or for which he was liable as a director of Stoneglow, with the result that the plaintiff became liable to, and did, make those payments, and lost the use of the money that he thereby paid.

Particulars

The plaintiff made payments to the Westpac Banking Corporation and the Australian Taxation Office that in total amounted to about $115,000. Further particulars will be provided in due course.


(ii) The plaintiff was deprived of the income, earnings and dividends that he would have received or become entitled to receive arising from the performance of work by him and/or Stoneglow under or as a consequence of the Contracts.

Particulars

Further particulars will be provided after discovery and/or interrogatories.

(iii) The plaintiff was deprived of the opportunity, and/or the capacity, to carry on his Occupation.
(iv) His reputation in the Industry was substantially diminished, impaired or damaged.
(v) He lost his capacity to earn an income from his Occupation, or to promote or enhance his reputation and future earning capacity in the Industry.
(vi) He lost the satisfaction and enjoyment of pursuing his Occupation.
(vii) He suffered anxiety, distress, unhappiness, chronic or severe depression and a post-traumatic stress disorder, which substantially diminished, impaired or damaged his enjoyment of life, his family relationships, and his capacity to perform work and earn an income in any occupation.

The intimidation case

17 Paragraphs 15 to 19 allege that the CFMEU defendants made the threat alleged in paragraph (ii) of the particulars to para 9 with the intention of harming Mr Ballard by causing Multiplex to comply with the demands made by the CFMEU defendants. The threat is said to have been unlawful by reasons of the matters specified in para 16. Subparagraphs (a) and (b) of para 16 are freestanding allegations of unlawful industrial action. Subpara (c) however is not freestanding. It asserts that the threat was unlawful, as a threat to enter into an unlawful conspiracy.

The case of interference with Mr Ballard’s business

18 Paragraph 20 asserts what is said to be the tort of interference with business with the predominant purpose of causing harm. It cannot be said to be clearly expressed:

Interference with the plaintiff’s trade or business

20. Further, or in the alternative, by reason of the facts and matters set out in paragraphs
(d) [sic] 9, 10, 11, 12 and 13; and/or
(e) [sic] 16, 17 and 18,

the defendants, or in the alternative any one or more of them, interfered with the plaintiff’s occupation with the predominant purpose of injuring or harming the plaintiff (the Interference ).

Particulars
The plaintiff repeats the facts and matters particularised at paragraphs 9, 10, 11, 12, 13, 15, 16, 17 and 18.

Concealment

19 Mr Ballard apprehends that the defendants may raise a limitation defence. Accordingly, and presumably as some sort of pre-emptive strike, paras 22 to 25 allege facts which are said to amount to fraudulent concealment for the purposes of s 55 of the Limitation Act 1969.

The analogy with pleadings

20 The proceedings are entered in the commercial list. Mr Ballard was therefore required to comply with the requirements of Practice Note SC Eq 3. He was thus required, by paragraph 8 of the Practice Note, to file a commercial list statement setting out among other things his contentions. By para 9, those contentions were required to avoid formality, to state the allegations on which he relied “with adequate particulars” and to identify the legal grounds for the relief claimed.

21 A statement of contentions is not a “pleading”. Nonetheless, it serves essentially the same functions. In particular, it should enable the opposing party to have adequate notice of the case to be made against it, and (in conjunction with other documents) should enable the real issues to be defined. See Brambles Australia Ltd v Tatale Pty Ltd [2006] NSWSC 204 at [9] and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No.6) (2007) 63 ACSR 1 at 91 [277], [278].

22 However, as Lander J said in Arthur Young v Teico International (1995) 182 LSJS 367 at 370, the question of the adequacy of pleadings should be approached not by looking with a critical eye for some deficiency but by reference to what his Honour regarded as “the ultimate question”, which was whether the pleading notified the opposing party of the case to be made against it.

23 The statement of contentions, including that propounded in the draft FAS, mimics the form of a pleading. It has therefore invited the defendants to attack it as though it were a pleading. This problem – as I think it is – is particularly clear in relation to para 9. That paragraph asserts the conspiracy in a bald and uninformative way, and relegates the statement of material facts, from which the existence of the conspiracy is said to be inferred, to “particulars”. If the matter were treated as one involving pleading then there would be a pleading to the bald statement in para 9, but no pleading to the particulars: a process that would conceal rather than help to expose the real issues for decision.

24 No doubt emboldened by the approach taken by the drafter of the contentions, the defendants’ submissions – in particular, the submissions for the Multiplex defendants – undertook a detailed and technical analysis. Those submissions certainly looked at the statement of contentions “with a critical eye for some deficiency” (Ingot at 91 [279]). It took some time for the debate to move away from the technicalities of pleadings properly so called, and to become focused on what I think is a central problem in the way that the conspiracy case is sought to be propounded.

The problem with the conspiracy case

25 As has been seen, para 9 identifies the conspiracy as being one to force Mr Ballard out of the building and construction industry, and to deprive him of his “Occupation” (as earlier defined). The only material facts alleged in support of that bald allegation are those set out in the particulars to para 9. Paragraph (i) of those particulars alleges that it was the intention of the CFMEU defendants that Mr Ballard should be driven out of the industry. However, there is nothing in the particulars to suggest that this intention was communicated to, let alone accepted or agreed to by the Multiplex defendants. The only “agreement or combination” to which Multiplex is said to have been a party is that set out in para (ii) of the particulars. That paragraph goes no further than asserting an agreement or combination to the effect that the Multiplex defendants would ensure that Mr Ballard or Stoneglow would cease to provide services in connection with the existing contracts, and would get no further work from the Multiplex defendants.

26 It cannot be suggested that the Multiplex group, substantial as it is, is coextensive with the building and construction industry. An agreement of the kind alleged in para (ii) of the particulars is not in terms or in substance an agreement to drive Mr Ballard out of the building and construction industry, or one to deprive him of his occupation. (I note in passing that even para (i) of the particulars does not refer expressly to depriving Mr Ballard of his “Occupation”.)

27 Again, para 10 attributes an intention to the “Conspiracy”. The asserted intention is one “to injure or harm” Mr Ballard. The first subparagraph is effectively coextensive with the agreement or combination alleged in para (ii) of the particulars to para 9. The second subparagraph may readily be viewed as a necessary consequence of the first. However, the third subparagraph again relates to forcing Mr Ballard and Stoneglow out of the industry. There is nothing in the particulars of the conspiracy to suggest that the parties agreed to this.

28 It follows that the draft FAS does not notify the defendants in any, let alone any acceptable way, of the case that is to be made against them as to the extent of the conspiracy alleged in para 9 and at least the third subparagraph in para 10. In my view, that is a sufficient basis for refusing leave to amend.

29 The problem is compounded by the nature of the overt acts alleged by para 11 to have been done in execution of the conspiracy. With the possible exception of the overt acts alleged in subpara (d) (which relate to the alleged unlawful seizure, detention and conversion by the Multiplex defendants of Stoneglow’s plant and equipment) none of them seems to be referable to a conspiracy of the wide kind alleged, as opposed to the more narrow kind particularised. I accept that subpara (e) refers to the liquidation of Stoneglow. However, that allegation is made in the context of the provision (or promise of provision) of work by the Multiplex defendants to Mr Ballard.

30 In my view the conspiracy case, as it is propounded through the draft FAS, does not adequately notify the defendants – in particular, but not limited to, the Multiplex defendants – of the case to be made against them.

The problem with the damages case

31 The defendants submitted that at least aspects of the damages case were so flawed that leave to amend should not be granted. The defendants’ submissions focused on:

(1) The principle, said to be derived from Prudential Assurance Co Ltd v Newman Industries Ltd (No.2) [1982] Ch 204, denying to members of a company the right to recover for themselves damages for wrongs done to the company, or damages reflective of damages suffered by the company. (This is a brief and inexact summary; I deal with the principles, insofar as the cases establish them, in the following paragraphs).

(2) The claim for damages for psychological or psychiatric illness said to have resulted from the events of which Mr Ballard makes complaint.

The “Prudential” principle

32 In Prudential, the plaintiff was a shareholder in the first defendant Newman Industries. The plaintiff alleged that two directors of Newman Industries had entered into a conspiracy, for the benefit of a third party, to injure Newman Industries and, indirectly, its shareholders. The trial judge found that the conspiracy had been made good, and awarded damages. In substance, the Court of Appeal exonerated the directors. Along the way, their Lordships considered the rule in Foss v Harbottle (1843) 2 Hare 461; (1843) 67 ER 189. After an extensive review of the authorities, their Lordships said at 222-223 that a shareholder in a company cannot recover damages simply because the company itself has suffered damage which results in diminution in the market value of the shares, or in dividends. Such loss, their Lordships said, was “merely a reflection of the loss suffered by the company”. Their Lordships said:

… if directors convene a meeting on the basis of a fraudulent circular, a shareholder will have a right of action to recover any loss which he has been personally caused in consequence of the fraudulent circular; this might include the expense of attending the meeting. But what he cannot do is to recover damages merely because the company in which he is interested has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a “loss” is merely a reflection of the loss suffered by the company. The shareholder does not suffer any personal loss. His only “loss” is through the company, in the diminution in the value of the net assets of the company… .

33 The principle has been considered on a number of occasions. The House of Lords considered it in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1. Lord Bingham of Cornhill considered that the decision in Prudential, and a number of other decisions to which his Lordship referred, established three propositions. His Lordship said at 35-36 that:

Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholders’ shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if that company’s assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss. …
Where a company suffers loss but has no cause of action to sue to
recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding…
Where a company suffers loss caused by a breach of duty to it, and
a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by the breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other...

34 Lord Millett (with whose analysis on this point Lord Goff of Chieveley expressly agreed) expressed himself to similar effect at 62:

Where the company suffers loss as a result of a wrong to the shareholder but has no cause of action in respect of its loss, the shareholder can sue and recover damages for his own loss, whether of a capital or income nature, measured by the dimension in the value of his shareholding. He must, of course, show that he has an independent cause of action of his own and that he has suffered personal loss caused by the defendant’s actionable wrong. Since the company itself has no cause of action in respect of its loss, its assets are not depleted by the recovery of damages by the shareholder.

The position is, however, different where the company suffers loss caused by the breach of a duty owed both to the company and to the shareholder. In such a case the shareholder’s loss, in so far as this is measured by the diminution in value of his shareholding or the loss of dividends, merely reflects the loss suffered by the company in respect of which the company has its own course of action.

If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders. Neither course can be permitted. This is a matter of principle; there is no discretion involved.

35 Lord Millett returned to the question of “reflective loss” at 66. He said that it “extends beyond the diminution of the value of the shares; it extends to the loss of dividends… and all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds’. At 67, his Lordship noted that the rule did not prevent the shareholder (subject to the principles governing remoteness of damage) from recovering “in respect of a loss which he has sustained by reason of his inability to have recourse to the company’s funds and which the company would not have sustained itself”.

36 The decision in Prudential was considered in Gould v Vaggelas (1985) 157 CLR 215 (a case of deceit). Gibbs CJ referred to Prudential at 219 and affirmed the principle, which his Honour stated at 220, that the shareholders in a company could not recover damages merely because the company had suffered damage, “and cannot recover damages which are merely a reflection of a loss suffered by the company”. However, his Honour pointed out, the shareholders “may recover damages for the loss which they personally have suffered and which is separate and distinct from the loss suffered by the company.” The other members of the majority in that case expressed themselves in terms emphasising the distinction between a cause of action personal to the individual plaintiff, and a cause of action belonging in truth to the company. See Murphy J at 231; Wilson J at 245-246; and Brennan J at 257. Dawson J, who dissented, did so because of his Honour’s view of the application of the rule to the facts, not because he denied the existence of the principle: see for example at 269.

37 In Chen v Karandonis [2002] NSWCA 412, Beazley JA (with whom Heydon and Hodgson JJA agreed) referred to Johnson at [36] and following. Her Honour at [39] referred to the speech of Lord Bingham, and at [40] to [43] to the speech of Lord Millett. It is I think clear that her Honour accepted their Lordships’ statement of the relevant principles as applicable in this State.

38 In Thomas v D’Arcy (2005) 52 ACSR 609, McPherson JA (with whom Williams JA and White J agreed) considered, among many other cases, the decisions in Prudential and Johnson. His Honour treated Lord Bingham’s statement of the relevant principles as commanding the support of Lord Millett and Lord Goff. I respectfully agree.

39 At 615 [15], McPherson JA pointed to the need to analyse claims for damages to establish that a particular claim is not in reality one to recover a loss suffered by the company. This, his Honour said, was required by “the point of principle… that a shareholder will not be permitted to recover damages for a loss caused by a breach of duty owed both the company and the shareholder where the shareholder’s loss reflects the diminution in the value of his shareholding”.

40 At 615 [16], McPherson JA noted that loss suffered by a shareholder in his capacity as a guarantor of the company’s obligations may be recoverable. That, I think, is consistent with the observations of Lord Millett in Johnson at 67 (see at [35] above).

41 At 616 [18], McPherson JA reinforced the proposition that the application of the principle was to be determined as a matter of substance, not of form; the Court should not countenance “legerdemain”.

Application of the principle to the heads of damage claimed

Paragraph (i): liability as a guarantor

42 I do not think that the Prudential principle, as explained in the cases to which I have referred, would deny recovery of the payments in question. From the particulars to the particulars, it would appear that Mr Ballard claims to have paid amounts owed by Stoneglow to its bank or to the Australian Taxation Office. Stoneglow did not suffer any loss by not making those payments. Presumably, it was legally obliged to pay them, and would have paid them but for its lack of funds. Mr Ballard paid them, pursuant to legal obligations which for present purposes must be assumed to have bound him, because Stoneglow, being incapable of paying them, did not. If Mr Ballard recovers judgment for the payments, there will be no question of the defendants’ being exposed to double liability. Nor will there be any question of Stoneglow’s assets being depleted by Mr Ballard’s recovery. (In each case, I leave aside the not insignificant practical consideration that Stoneglow has been wound up and dissolved.)

43 This head of claim seems to me to fall within the exception recognised by Lord Millett in Johnson at 67, and recognised – at least as a possibility – by McPherson JA in Thomas (see, respectively, at [35] and [40] above).

44 I conclude that this aspect of Mr Ballard’s claim for damages is not barred by what I have called the Prudential principle.

Paragraph (ii): deprivation of income and dividends

45 This aspect of Mr Ballard’s claim appears to be that, because Stoneglow lost earnings from its three contracts with the Multiplex defendants and could not obtain other work, Mr Ballard was deprived of the amounts that otherwise he would have earned through Stoneglow.

46 This seems to me to be a recovery of a kind that is barred by the Prudential principle. Assuming for the moment that the defendants’ activities caused loss to Stoneglow for which Stoneglow could have recovered damages, that loss was the cause of this head of Mr Ballard’s loss. His claim to recover in his own right is in truth a reflective claim.

47 It was submitted for Mr Ballard that, because Stoneglow has been wound up and dissolved, there is no prospect that it will sue for or recover the underlying losses. Thus, it was submitted, the policy reasons underlying the Prudential principle do not apply, and the principle itself should not apply.

48 I do not accept those submissions. The underlying policy considerations explain the principle. They neither define it, nor limit its application. If effect is to be given to this aspect of the submissions for Mr Ballard, it is a matter for an intermediate, or perhaps final, appellate court.

Remaining heads of claim

49 None of the remaining heads of claim asserts a loss that is referable to, or reflective of, an underlying loss suffered by Stoneglow. They are not barred by the Prudential principle. There are however separate arguments in respect of them, to which I now turn.

Paragraphs (iii) and (v): loss of earning capacity and reputation

50 Paragraphs (iii) to (vii) allege, in various ways, that Mr Ballard lost the opportunity to pursue his “Occupation” as defined, to earn an income from that occupation, and to earn an income in any occupation. They further allege loss of reputation, loss of the satisfaction and enjoyment of pursing his occupation, and psychological or psychiatric illness.

51 There are drafting complications in the way these aspects of the claim are pressed. There are also particular objections, in relation to the claim for loss of reputation and the claim for psychological or psychiatric illness.

52 The drafting difficulty relates to the definition of Mr Ballard’s “Occupation”. In para 3 of the contentions, that is defined as “the trade, business or occupation of performing demolition work in the” building and construction industry. The particulars to para 3 note that Mr Ballard was a director of Stoneglow, and that “[h]is services in performing demolition work in the [building and construction industry] were provided to Stoneglow in that capacity and/or as director, shareholder and employee of Wingrove…”.

53 As was submitted for the defendants, there is some confusion in the specification of Mr Ballard’s “Occupation”. Thus, it was submitted for the defendants, it was unclear whether the claim for loss of earning capacity and the like related only to Mr Ballard’s earnings as a director of Stoneglow or a director, shareholder and employee of Wingrove; or whether it was intended to go further.

54 I accept that the drafting of the contentions is less than clear. However, as I understand it, Mr Ballard’s case is that:

(1) at all material times, he worked as a demolition contractor in the building and construction industry; and

(2) for at least some time, he did so (as a matter of substance rather than legal form) through Stoneglow.

55 When this aspect of Mr Ballard’s claim for damages is considered in a context that includes both the specification of the extent of the conspiracy (para 9) and what was intended thereby (para 10) it is I think reasonably clear that Mr Ballard is asserting that he has lost the capacity to work, directly or through any corporate or partnership structure, as a demolition contractor in the building and construction industry.

56 On that basis, I do not think that paras (iii) and (v) of the particulars are defective. If Mr Ballard establishes a conspiracy of the width alleged, having the purpose alleged, then one would expect it to follow, upon successful execution of the conspiracy, that he would be deprived of the opportunity or capacity to earn an income by working as a demolition contractor.

57 However, expressing the matter in that way indicates another and more fundamental problem. The problem is that although the conspiracy is framed as being in effect one to drive Mr Ballard out of the industry, the particulars that are given do not support it. They support, at the most, a conspiracy to deprive Mr Ballard, directly or through a corporate or partnership structure, work from Multiplex. It would not follow as a result of the execution of such a conspiracy that Mr Ballard would lose all opportunities to derive income as a demolition contractor in the building and construction industry.

58 In short, I think, this aspect of the claim for damages is defective for the same reason that the conspiracy claim is defective.

Paragraph (iv): the claim for loss of reputation

59 For the defendants, it was submitted that a claim for loss of reputation could be vindicated only through an action for defamation. Thus, it was submitted, the claim should not be allowed to go forward in these proceedings. The defendants relied on the decisions in Lonrho PLC v Fayed (No.5) [1993] 1 WLR 1489 (the CA decision in Lonrho v Fayed) and McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409.

60 The former was a case alleging a “lawful means” conspiracy: an agreement by two or more persons to do acts, lawful in themselves, for the sole or predominant purpose of injuring the plaintiff, and which do cause pecuniary loss to the plaintiff. The existence and elements of that form of conspiracy were established in a number of cases including Crofter Handwoven Harris Tweed Co Ltd v Veitch [1942] AC 435 and (another branch of the litigation between Messrs Rowland and Al-Fayed) Lonrho v Fayed [1992] 1 AC 448 (the HL decision in Lonrhov Fayed).

61 McKellar was a case alleging a number of causes of action including misleading or deceptive conduct, breach of contract, conspiracy, misfeasance in public office and negligence. The conspiracies alleged were both a “lawful means” conspiracy and what is sometimes called an “unlawful means” conspiracy. The “unlawful means” conspiracy, reaffirmed in the HL decision in Lonrho v Fayed, is constituted by combining to do an unlawful act with the intention of injuring the plaintiff and which does in fact cause pecuniary loss to the plaintiff.

62 For each kind of conspiracy, damages are of the gist of the action. It follows, as Weinberg J said in McKellar at 436 [140], that for either to succeed the plaintiff must prove “at least one overt act causing actual pecuniary loss”.

63 Once a plaintiff in a civil action for conspiracy proves actual pecuniary loss, it is said that “damages are at large”. This does not mean that any kind of loss whatsoever is recoverable. It means, as Dillion LJ said in the CA decision in Lonrho v Fayed at 1494, that the damages “are not limited to a precise calculation of the amount of the actual pecuniary loss actually proved”. His Lordship referred to Quinn v Leathem [1901] AC 495. In that case, the trial judge directed the jury that for the plaintiff to establish a cause of action, he must show “pecuniary loss, directly caused by the conduct of the defendants… to a substantial amount”. Further, he instructed the jury that once actual and substantial pecuniary loss was proved, they need not limit damages to the precise sum so proved, but could take into account all of the circumstances of the case, including the conduct of the defendants, in assessing the amount of damages. That direction was expressly approved in the House of Lords: see the Earl of Halsbury LC at 508; Lord Brampton at 540; and Lord Lindley at 540.

64 One of the heads of damage sought to be alleged in Lonrho v Fayed was injury to reputation. The Court of Appeal decided unanimously that such damages could not be claimed or awarded in an action for conspiracy. See Dillon LJ at 1496; Stuart-Smith LJ at 1502, 1504; and Evans LJ at 1509. Each of their Lordships said that injury to reputation or injury to feelings must be vindicated, if at all, in an action for defamation. They pointed out that defamation was a field of its own, with its own established principles and its own established defences. They said that a plaintiff should not be able to sidestep those established principles and defences by suing in conspiracy. If it were otherwise, they said, a person could recover damages by having the truth told about him, with the result that he was deprived of a reputation that he did not deserve.

65 Stuart-Smith LJ pointed out at 1504 that in cases of malicious prosecution and false imprisonment, damages could be awarded for injury to reputation. His Lordship said that this could be explained because “the wrongful act of the defendant casts an imputation on the reputation of the plaintiff which… is not justified”. Further, his Lordship pointed out, they were “also cases in which the plaintiff probably cannot sue for defamation, since statements in Court are absolutely privileged and in false imprisonment there may be no statement at all”.

66 In McKellar, Weinberg J said at 436 [141] that damages for conspiracy “do not, it would seem, extend to damage to reputation and injury to feelings”.

67 In the CA decision in Lonrho v Fayed, Evans LJ drew attention at 1509 to what he called a “matter of semantics”. His Lordship pointed out “the need to distinguish between loss of reputation in the defamation sense and loss of reputation which is synonymous with a loss of customer goodwill resulting in a loss of business which can therefore be measured in money terms”. He said that the former could not be made the subject of an award of damages but the latter could: by application of “the proposition that the plaintiff is not limited to damages which can be precisely measured and specifically proved, but is entitled more generally to damage representing the court’s best assessment of financial loss in fact suffered and proved”.

68 Mr I M Neil of Senior Counsel, who appeared with Mr G A Sirtes of counsel for Mr Ballard, did not submit that the damages for loss of reputation claimed by paragraph (iv) were for loss of customer goodwill. The argument proceeded upon the basis that the damages claimed were for “loss of reputation in the defamation sense”.

69 The submissions for the defendants focused on the general principle. It was submitted that the principle should be applied in this case, with the result that Mr Ballard should not be able to press the claim for damages for loss of reputation.

70 The submissions for Mr Ballard drew attention to the availability of damages for injury to reputation in cases of malicious prosecution and false imprisonment, recognised by Stuart-Smith LJ in the CA decision in Lonrho v Fayed (see at [65] above).

71 In my view, the limiting principle – that in an action for conspiracy, damages cannot be awarded for injury to reputation – is so well established that it should be applied in this case. To paraphrase Cooke P in Bell-Booth Group Ltd v Attorney General [1989] 3 NZLR 148 at 156, to do otherwise would be to introduce the law relating to actionable conspiracies “into a field for which it was not designed and it is not appropriate”. It is not appropriate, because as his Honour had said earlier at 156, “the law as to injury to reputation and freedom of speech is a field of its own.” The principles that have been established – whether by the common law or by statute – represent a balancing exercise in which personal reputation and freedom of trade on the one hand weigh against freedom of speech and criticism on the other.

72 To my mind, if the position established by the authorities to which I have referred, and the authorities cited in them, is to be changed, that is a job for an intermediate or ultimate appellate court.

73 Mr Neil drew attention to what he said was “the rather tentative language employed by Weinberg J in McKellar. This was a reference to his Honour’s use of the words “it would seem” at 436 [141] (see at [66] above). When the sentence is read in context, I do not think that those words indicate any doubt in his Honour’s mind, or that the conclusion expressed is tentative. His Honour followed by saying that “[s]uch damage is compensable only in an action for defamation”. He referred to the CA decision in Lonrho v Fayed, and to those parts of the judgments of the members of the Court of Appeal in that case to which I have referred at some length above.

74 Thus, I think, the claim for damages for injury to reputation should not be allowed to proceed.

Paragraph (vi): the claim for loss of enjoyment

75 This claim is defective for the reason that paras (iii) and (v) are defective: it cannot be supported by reference to the width of the alleged conspiracy.

76 In addition, it appears to be a claim for injury to feelings. If so, it fails for the reason given by Weinberg J in McKellar at 436 [141] (see at [66], [73] above). If it is not, I do not understand on what basis it is said to be recoverable.

77 For any of these reasons, this aspect of the claim for damages should not be allowed to proceed.

Paragraph (vii): the claim for psychological and psychiatric illness

78 In McKellar, Weinberg J said at 436 [142] that “[i]t is at least arguable that physical injury which is parasitic upon pecuniary loss, including “psychological injury” and “post traumatic stress” is compensable if conspiracy is proved, and pecuniary loss results”. Accordingly, his Honour was “not prepared to dismiss the applicants’ claim for this head of damages as disclosing no reasonable cause of action”.

79 In this case, the defendants did not seek to persuade me to a contrary view. Their submissions focused on the way that the claim was framed.

80 The claim is framed as being one leading to a diminution in Mr Ballard’s earning capacity. It was submitted for the defendants that the claim was so lacking in specificity or particularity that they could not meet it. The failure to allege facts relating to the onset of the symptoms, their relationship to one or more of the overt acts alleged, and their consequences in terms of diminution of earning capacity was said to mean that the defendants could not know the case to be made out against them, and that they could not (for example) consider whether any particular limitation defence might be available.

81 The submissions for Mr Ballard made the point that in principle damages of the kind claimed were recoverable. They did not meet the defendants’ criticisms of the way in which this aspect of the claim for damages was formulated.

82 In my view, the complaints made by the defendants are justified. I think that they are entitled to know a lot more about the essential elements of the claim. In substance, I accept that the contentions should state (so far as is possible) what is Mr Ballard’s factual case as to the onset of the various symptoms, their relationship to one or more of the overt acts alleged and their relationship to the alleged diminution in his earning capacity.

83 Thus, although I am not be prepared to strike out this aspect of the claim as being bad in law, I think that it needs to be reformulated.

No problem with the claim for intimidation

84 This claim is asserted only against the CFMEU defendants. The principal criticism made of it is the way that it incorporates the matters “pleaded in paras 9 to 14” (see para 16(c)). This, it was said, repeated in relation to the intimidation claim the vices to be found in the conspiracy claim.

85 I do not think that this complaint is justified. The intimidation claim is a freestanding claim. The reference to paras 9 to 14 is for the purpose of showing that the threat was unlawful because it amounted to an unlawful conspiracy to carry out industrial action on “Multiplex sites”. I do not think that this relatively limited adoption of paras 9 to 14 is sufficient to carry across the vice, in relation to the claim for conspiracy, that I have said exists in those paragraphs.

The problem with the claim for interference with trade or business

86 In my view, the way in which this claim is raised is hopelessly inadequate. It is based on “the facts and matters set out in paras… 9, 10, 11, 12 and 13, and/or… 16, 17 and 18”. The reader – and in particular the defendants – are left to guess for themselves which particular paragraphs, and what allegations in those paragraphs, are said to make good the case. The confusion is not assisted by the use of the unhappy expression “and/or”.

87 That confusion is compounded by the following words. Those words allege that “the defendants, or in the alternative any one or more of them, interfered with the plaintiffs’ occupation…”. It is entirely unclear from this formulation which paragraphs are said to show which particular defendant (bearing in mind that the allegation is made in the alternative against “any one or more of them”) interfered with Mr Ballard’s occupation as alleged.

88 Finally, the confusion is compounded further by the particulars which, completely unhelpfully, repeat “the facts and matters particularised” in the paragraphs already referred to in the body of para 20.

89 If this aspect of the claim is to proceed, it should be formulated in such a way that the defendants have a reasonable opportunity of knowing what is alleged against each of them.

Conclusion

90 I am not prepared to grant Mr Ballard leave to amend in terms of the draft FAS that has been propounded. That follows from what I have found are the vices in the way that the conspiracy claim – which lies at the heart of his case – is formulated.

91 If Mr Ballard were to be given an opportunity to try again, I would not in any event give him leave to amend to include damages of the kind claimed in paras (ii) and (iv) of the particulars to para 14. Nor would I permit him to claim damages for loss of capacity to carry on his occupation, or to earn an income from it, as claimed in paras (iii) and (v) unless the fundamental problem in the conspiracy case – that the material facts alleged (by way of particulars) in support of it do not make good a conspiracy of the width asserted. For the reasons that I have given, that vice necessarily flows through to these aspects of the claim for damages.

92 It flows through also to the claim in para (iv). These are also separate problems with that claim.

93 Further, I would not be prepared to give leave to amend to include a claim for damages of the claim alleged in paragraph (vii) of the particulars unless it is formulated in a way that gives the defendants adequate notice of the case that they have to meet.

94 Finally, I would not give leave to amend to include a claim for interference with Mr Ballard’s business in the manner in which it is presently formulated.

95 Mr Neil submitted that, if I were to come to conclusions such as these, Mr Ballard should be given yet another opportunity to reformulate his claim. For the defendants, it was submitted that Mr Ballard had had ample opportunity to formulate his claim, and that I could assume that what was attempted in the draft FAS was the best that he could do.

96 The question is difficult, and the considerations are finely balanced. On the one hand, it is a serious thing to shut a plaintiff out from taking his case to trial. On the other hand, in considering whether to grant Mr Ballard another opportunity to amend (an application which, if made, would be governed by s 64 of the Civil Procedure Act 2005) I must consider the overriding purpose of the Civil Procedure Act set out in s 56(1) and the dictates of justice (see s 58(1)).

97 On balance, I think, particularly having regard to the nature of the defects in the draft FAS, the dictates of justice do not require that Mr Ballard be shut out from one last attempt at formulating a viable claim. In saying this, I bear in mind the gravity of the allegations that he wishes to make: a circumstance which seems to me to weigh evenly as between the parties.

98 In consequence, I think, it is appropriate to order that the application for leave to amend be dismissed, to provide that any further application for leave to amend be made within a limited time, and to stand over the defendants’ notices of motion until after that time has expired.

Orders

99 I make the following orders:

(1) Dismiss the plaintiff’s notice of motion filed in court on 16 April 2008.

(2) Subject to order 3, order the plaintiff to pay all the defendant’s costs.

(3) Direct any parties seeking to discharge or vary order 2 to notify the other parties thereof in writing by 17 October 2008; any such notice to specify both the orders sought and, in brief, the reasons why they are sought; a copy of any such notification to be given to my Associate.

(4) Grant the plaintiff leave to file a further notice of motion seeking leave to amend.

(5) Direct that any such further notice of motion be filed and served by 17 October 2008 and be made returnable for 24 October 2008.

(6) Direct that there be served with or as an annexure to any such notice of motion a draft further amended summons and further amended commercial list statement setting forth in full all amendments that the plaintiff desires to make.

(7) Stand over to 24 October 2008 the first and second defendants’ notice of motion filed on 29 February 2008 and the third, fourth and fifth defendants’ notice of motion filed on 11 March 2008.
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