Barker v Duke Group Ltd (in liq)

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SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

BARKER & ORS v THE DUKE GROUP LTD (IN LIQ); HAMBROS AUSTRALIA LTD & ORS v THE DUKE GROUP LTD (IN LIQ)

Judgment of The Full Court

(The Honourable Justice Perry, The Honourable Justice Duggan and The Honourable Justice White)

11 March 2005

EQUITY - GENERAL PRINCIPLES - EQUITABLE DEFENCES - LACHES AND DELAY

LIMITATION OF ACTIONS - CONTRACTS, TORTS AND PERSONAL ACTIONS - THE PERIOD OF LIMITATION

LIMITATION OF ACTIONS - APPLICATION OF STATUTES OF LIMITATION

APPLICATION OF STATUTORY LIMITATION BY ANALOGY TO A REMEDY IN EQUITY

The appellants, the defendants in proceedings in the Supreme Court, appealed against the dismissal by a single judge of applications brought by them seeking the dismissal of the proceedings, or an order that they be stayed as an abuse of process - the respondent, a company in liquidation, claimed equitable compensation on the ground that the appellants knowingly assisted the respondent's directors in breaches by them of fiduciary duties which they owed to it - the action was based upon the appellants' involvement in transactions which took place in 1987 and 1988 - the appellants claimed that the actions would inevitably fail by reason of the direct application of the Limitation of Actions Act 1936 (SA), or having regard to the application in equity of a statutory limitation period by analogy - alternatively, the appellants claimed that the equitable defence of laches was bound to succeed, or that the action should be stayed as an abuse of process - held on appeal that the judge at first instance had correctly dismissed the appellants' applications - appeal dismissed.

Limitation of Actions Act 1936 (SA), s 26, s 34, s 38(1), s 35(c), s 47 and s 48; Companies (South Australia) Code s 229(1) and s 229(7); Trade Practices Act 1974 (Cth), s 82(1); Companies and Securities (Interpretation and Miscellaneous Provisions) Act 1980 (Cth), s 38, referred to.
Barnes v Addy (1874) LR 9 Ch 244; Clay v Clay and Ors [2001] HCA 9; (2001) 202 CLR 410; International Vending Machines Pty Ltd and the Companies Act [1962] NSWR 1408; Mulkana Corporation NL (In liq) v Bank of New South Wales (1983) 1 ACLC 1143; Sealy, The Director as Trustee [1967] Cambridge Law Journal; Knox v Gye (1872) LR 5 HL 656; 90-5 Pty Ltd (In liq) v Banque Nationale de Paris [1988] WAR 132; Spry, Equitable Remedies (6th Ed) LBC Information Services (2001); Spry, Equitable Remedies (5th Ed) LBC Information Services (1997); Williams v Minister, Aboriginal Land Rights Act 1983 and Anor (1994) 35 NSWLR 497; Carabelas and Anor v Scott (2003) 177 FLR 334; Wardley Australia Ltd and Anor v State of Western Australia (1992) 175 CLR 514; Young v Waterways Authority of New South Wales (Unreported) [2002] NSWSC 612-VC200203758; Equity Doctrines and Remedies (4th ed) Butterworths LexisNexis (2002; Cia de Seguros Imperio v Health (REBX) Ltd [2001] 1 WLR 112; Lindsay Petroleum Co v Hurd (1874) LR5PC…

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Details
Case
[2005] SASC 81
Decision Date

CaseChat Overview and Summary

The parties involved in this case are Duke Group Ltd, in liquidation, as the plaintiff, and various defendants including Alamain Investments Pty Ltd, Trevor Barker, Michael David Abrahams, Peter Ian Dent, Hambros Australia Ltd, Hambros Securities Ltd, David Owen Ewart-James, and John Anthony Corcoran. The dispute revolves around the takeover of Western United Limited by Kia Ora Gold Corporation NL in 1987 and the subsequent legal proceedings against Nelson Wheeler, a firm of accountants, and the directors of Kia Ora Gold Corporation NL. The defendants in this case have raised arguments regarding the applicability of the Limitation of Actions Act, as well as the doctrine of laches and delay in equity.

The primary legal issues addressed in this case pertain to the application of the Limitation of Actions Act and the equitable defences of laches and delay. The defendants argued that the plaintiff's claims were subject to a six-year limitation period under section 38(1) of the Limitation of Actions Act, which applies to actions for the recovery of money based on restitutionary grounds. The plaintiff, on the other hand, submitted that section 32(1) of the Limitation of Actions Act applied, which imposes no time limit on actions for equitable compensation or damages for breach of duty.

In considering these arguments, Doyle CJ held that the claim by Kia Ora Gold Corporation NL against the defendants was similar in character to the claim against the directors themselves, that is, it was a claim for equitable compensation or equitable damages for breach of duty by the directors. As such, the claim could not properly be characterised as a claim "for the recovery of money paid" and therefore was not subject to the six-year limitation period under section 38(1) of the Limitation of Actions Act. The court also noted that none of the defendants challenged this finding on appeal, making it unnecessary to refer to the argument further.

The court's reasoning in this case is grounded in the nature of the plaintiff's claim, which is for equitable compensation or damages for breach of duty by the defendants. By characterising the claim in this way, the court was able to determine that the Limitation of Actions Act did not apply to limit the plaintiff's right to pursue the claim. The court's decision, therefore, provides clarity on the applicability of the Limitation of Actions Act to claims for equitable compensation or damages for breach of duty, and sets a precedent for future cases involving similar claims.

In light of the court's decision, the final orders made in this case were that the applications for a permanent stay or dismissal of the proceedings were dismissed, and the applications to strike out the plaintiff's statement of claim were allowed. The plaintiff was ordered to file a further statement of claim, and the application for staying the proceedings in the United Kingdom was dismissed in light of undertakings offered by the plaintiff.

Orders

Orders of the court

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Background

Background to the litigation

The judge at first instance, Doyle CJ, dealt with the matter by reference to the statement of claim and a substantial volume of affidavit evidence.Background circumstances This summary of the factual background is based largely upon the allegations in the statement of claim. For ease of expression I will simply set out a narrative of the various facts, without qualifying the account to indicate that many of the matters have not at this stage risen above the status of allegations. The case has its genesis in the circumstances surrounding the takeover by Kia Ora Gold Corporation NL (“KO”) of Western United Limited (“WU”), the preliminaries to which took place in the last quarter of 1987, and the completion of which was effected on 28 January 1988. At the relevant time, the directors of KO were Harold Abbott, Gary Abbott, Alfred Schneider-Paas, Sir Ernest Lee-Steere, Kevin Somes, Francis Quilty and Keith Singleton. Five of them, Harold and Gary Abbott, and Messrs Schneider-Paas, Lee-Steere and Somes were directors of, and held 85 per cent of the shares in, WU. The take over offer was four shares in KO for one share in WU, or five shares in KO for two shares in WU, plus $1.20 per share. For the purposes of the takeover, Nelson Wheeler, a firm of accountants, provided a report pursuant to Stock Exchange Listing rule 3J(3) for the information of KO’s shareholders. The report valued WU at $82.6 million. Nelson Wheeler reported that the proposed takeover offer was in the interests of KO. The takeover offer valued WU at between $101 million and $112 million. The true value of WU was $6.4 million. In 1992, KO began proceedings against Nelson Wheeler. Later the directors of KO were joined as defendants. Following a long trial, Mullighan J found that the directors of KO were in serious breach of the fiduciary duties owed by them to the company. In particular, he found that Harold Abbott, Lee-Steere and Somes supported KO’s acquisition of WU’s shares dishonestly, in preferment of their own interests above the interests of the company, and with knowledge that the Nelson Wheeler report was based on misleading and inaccurate information, and did not accurately value the WU shares. Mullighan J found also that both Quilty and Singleton dishonestly acquiesced in the wishes of the “common directors”, without exercising an independent judgment, and without making diligent and proper inquiries as to the propriety of the Nelson Wheeler report. KO later became The Duke Group Limited (“Duke”), the plaintiff in these proceedings. Duke was placed in liquidation by order of the Supreme Court on 11 July 1989. John Sheahan was appointed liquidator. The defendants to these proceedings are as follows:1. Alamain Investments Pty Ltd (“Alamain”)2. Trevor Barker3. Michael David Abrahams4. Peter Ian Dent5. Hambros Australia Ltd6. Hambros Securities Ltd (in liquidation)7. David Owen Ewart-James8. John Anthony Corcoran Alamain, which is now in liquidation, was formerly known as Autocure Ltd (“Autocure”). At the relevant time, Autocure owned 2.9 million shares in KO and was KO’s largest single shareholder.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

PERRY J DUGGAN J (dissent) WHITE J (dissent)
The plaintiff states in the statement of claim, that it will give credit for recoveries from other parties liable for the same loss. At the time of the filing of the statement of claim other recoveries amounted to $41.8 million.The Judgment under Appeal Doyle CJ had before him applications by both the Hambros defendants and separately by the Autocure defendants. The applications sought orders that the action be stayed as an abuse of process. The Hambros defendants also sought an order that the proceedings be dismissed. In their application, the Autocure defendants, as well as seeking an order for a stay, sought an order striking out the plaintiff’s statement of claim. There was a further application by Barker, Abrahams and Dent for orders restraining Duke from continuing with proceedings commenced in the High Court of Justice in the United Kingdom, which were, apparently, proceedings which duplicated the proceedings now in question. Doyle CJ dismissed the applications for a permanent stay or dismissal of the proceedings. In light of undertakings offered by the plaintiff, he dismissed the application for staying the proceedings in the United Kingdom. He allowed the applications to strike out the statement of claim and ordered that the plaintiff file a further statement of claim.Direct application of the LAA The direct application of the LAA was argued in two contexts. Before Doyle CJ, the Hambros defendants submitted that s 38(1) of the LAA applied, with the result that KO’s claims were subject to a time limit of six years. Relevantly, the section provides:“38Limitation on actions for recovery of money(1)Subject to subsection (2), an action for the recovery of money paid under a mistake (either of law or of fact) or otherwise based on restitutionary grounds must be commenced-(a) if the cause of action arose on or after the commencement of this section - within 6 years after the cause of action arose; or(b) if the cause of action arose before the commencement of this section - within the limitation period that would have been applicable if this section had not been enacted or 6 years after the commencement of this section (whichever expires first).(2)…..” The Hambros defendants submitted that the claim by KO against the directors was an action “for the recovery of money … based on restitutionary grounds” within the meaning of the section. Doyle CJ rejected that submission and held that the claim by KO against the defendants was similar in character to the claim against the directors themselves, that is, it was a claim for equitable compensation or equitable damages for breach of duty by the directors. Such a claim could not properly be characterised as a claim “for the recovery of money paid”. On the hearing of the appeal, none of the defendants challenged that finding, so that it is unnecessary further to refer to that argument. The other contention which was advanced as to the direct application of the LAA was put forward by the plaintiff. Mr Karkar QC for the plaintiff submitted that s 32(1) of the LAA applied, with the result that no time limit was imposed on KO’s claim.

Ratio Decidendi

Legal Principle Established

Established by: PERRY J,

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