Bozic v Rand Mining Limited [No 3]
[2021] WASC 239
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BOZIC -v- RAND MINING LIMITED [No 3] [2021] WASC 239
CORAM: ALLANSON J
HEARD: ON THE PAPERS
DELIVERED : 16 JULY 2021
PUBLISHED : 16 JULY 2021
FILE NO/S: CIV 2485 of 2018
BETWEEN: FRANJO BOZIC
Plaintiff
AND
RAND MINING LIMITED
Defendant
Catchwords:
Practice and procedure - Application to strike out amended writ and statement of claim - Where dispute between plaintiff and second defendant about beneficial ownership of shares in first defendant - Where plaintiff seeks declaration about ownership of shares - Whether statement of claim discloses a reasonable cause of action
Practice and procedure - Case management - Where dispute between plaintiff and second defendant about beneficial ownership of shares in first defendant - Whether proceedings should be stayed pending resolution of that dispute
Legislation:
Nil
Result:
Application by second defendant dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Westmont Legal |
| Defendant | : | Nova Legal |
Case(s) referred to in decision(s):
Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564
Plaintiff M61/2010 v Commonwealth of Australia [2010] HCA 41; (2010) 243 CLR 319
ALLANSON J:
Introduction
The plaintiff, Franjo Bozic, commenced these proceedings by writ, with indorsed statement of claim, filed 23 August 2018.
The statement of claim - before amendment - claimed that:
1.the plaintiff holds 250,000 ordinary fully paid shares in the defendant, Rand Mining Limited;
2.on 25 August 2016, by resolution of its directors, Rand Mining resolved to prohibit the registration of transfer of the plaintiff's shares until a dispute between the plaintiff and Anthony Billis regarding the legal and beneficial ownership of the shares was resolved;
3.the resolution was ultra vires.
The plaintiff sought a declaration that the resolution was void, an order to compel the defendant to register any share transfer of the shares forthwith, and costs.
On 18 June 2020, the Rand Mining filed a defence. Relevantly, it pleaded that the plaintiff's claims were not justiciable without joinder of Mr Billis.
At the time of the defence, Mr Bozic was pursuing the question of ownership of the Rand Mining shares in other proceedings in this court: CIV 2557 of 2017. Rand Mining was also the second defendant in that action.
By amendment to the statement of claim in CIV 2557 of 2017, filed 25 September 2020, Mr Bozic deleted all pleaded claims against Rand Mining, leaving only a prayer for relief for 'the orders sought by the Plaintiff in CIV 2485 of 2018 [that is, in this action]'.
On 7 May 2021, the plaintiff filed an amended writ of summons and statement of claim in the present action. The amended writ adds Mr Billis as second defendant and makes other changes, not all of which are consequential on the addition of the new party.
The plaintiff now pleads:
(1)Mr Billis was a director and the managing director of Rand Mining at material times;
(2)the resolution was made 'without just cause' and 'for an improper purpose';
(3)the shares are held by him legally and beneficially and he is entitled to sell and transfer them on the ASX and is being prevented from doing so by the resolution;
(4)Rand Mining must pay him fully franked dividends by reason of his ownership of the shares for the following dividend dates: 11 November 2020, 10 October 2019, 25 September 2018, 30 August 2018, and 6 July 2017.
The plaintiff claims relief, including an order declaring the shares are not subject to the equitable claim of Mr Billis; and (against Rand Mining) payment of the dividends not paid.
On the plaintiff's case, Mr Billis has relied on his influence with the directors of Rand Mining to create a situation in which the plaintiff cannot enjoy the incidents of beneficial ownership of the shares. The plaintiff has been put in the position where he needs to establish his beneficial ownership of the shares.
The plaintiff is entitled to seek a declaration about beneficial ownership of the shares. The question raised by the defendants' challenge to the proposed statement of claim is whether the plaintiff has gone about it the right way.
The plaintiff does not clearly plead any claim against Mr Billis. His claim against Mr Billis is consequential on the plea, in [5], that the Rand Mining resolution was made without just cause and/or made for an improper purpose in the following circumstances:
(a) The Second Defendant informed Mr Sklenka[1] that the Shares were pledged to the Second Defendant as security for a loan by the Second Defendant to the Plaintiff to assist the Plaintiff with a project that the Plaintiff was instigating in Indonesia.
[1] A director of Rand Mining.
(b) The Second Defendant informed Mr Demis[2] that the Second Defendant had loaned the Plaintiff a substantial amount of money for a project in Indonesia and the Plaintiff’s shares were to be used as security for that loan.
[2] A director of Rand Mining.
Particulars of Falsity
Contrary to the assertions of the Second Defendant pleaded in paragraph 5(a) and 5(b) herein the Plaintiff had:
(i)not pledged the Shares to the Second Defendant in exchange for any loan funds.
(ii)nor visited Indonesia for the purposes of a project in Indonesia with the Second Defendant.
(iii)nor participated in a project in Indonesia with the Second Defendant.
(iv)nor instigated a project in Indonesia with the Second Defendant.
(c) At the time of making the assertions pleaded in paragraph 5(a) and 5(b) herein to either Mr Sklenka or Mr Demis, the Second Defendant provided no documentary proof or substantial details to either director
(d) At the time of signing the Circular Resolution:
(i)Neither Mr Sklenka nor Mr Demis had obtained documentary proof or substantial details of the assertions pleaded in paragraph 5(a) and 5(b) herein from the Second Defendant.
(ii)Neither Mr Sklenka nor Mr Demis had requested any documentary proof or substantial details of the Second Defendant’s assertions pleaded in paragraph 5(a) and 5(b) herein from the Second Defendant before signing the Circular Resolution.
(iii)Neither Mr Sklenka nor Mr Demis had made any attempt to contact the Plaintiff with 10 details of the assertions of the Second Defendant pleaded in paragraph 5(a) and 5(b) herein or requested a response from the Plaintiff.
The pleaded 'particulars of falsity' appear to be directed to the claims made by Mr Billis in an affidavit he swore on behalf of Rand Mining, on 20 November 2018, in response to the plaintiff's application for summary judgment.
The plaintiff says the Shares are held by him legally and beneficially;[3] that he is entitled to sell and transfer the shares on the ASX and is being prevented from doing so by the resolution;[4] and the second defendant has no entitlement to the Shares in equity or at law.[5]
[3] Amended statement of claim [6].
[4] Amended statement of claim [7].
[5] Amended statement of claim [8].
The plaintiff claims an order declaring that the shares are not subject to Mr Billis' equitable claim.
He also claims an order declaring the resolution of the directors of Rand Mining void, and an order compelling them to register any share transfers forthwith.
The challenge by Rand Mining
Rand Mining challenges the amended statement of claim on three bases: first, it says that the decision of the directors is not amenable to judicial review in the manner of an administrative decision; second, the amended statement of claim discloses no contractual or other legal right for the plaintiff to review the board's decision; third, the claim for dividends, other than for the 2017 year, are for debts alleged to have accrued after the issue of the writ commencing these proceedings.
Rand Mining also submits that the claim for unpaid dividends, including the 2017 year, should more appropriately be the subject of separate proceedings and the plaintiff, by the amendment, is seeking to change an action to 'review' the decision of the board into an action of a different character.
The challenge by Mr Billis
Mr Billis contends that [5] and [8] of the amended statement of claim fail to disclose a reasonable cause of action; are scandalous, frivolous or vexatious; and/or may prejudice, embarrass or delay the fair trial of the action.
More particularly, Mr Billis submits that [5] of the amended statement of claim does not state how he is said to have informed the directors that the shares were pledged to him as security, when it is alleged that he so informed the directors, and whether that information is wrong and why.
Mr Billis submits that the 'particulars of falsity' in [5] do not cure the omission to plead falsity nor set out the elements of any cause of action. He challenges the relevance of the particulars (ii) ‑ (iv).
The plaintiff's position
The plaintiff submits, correctly, that he is seeking only a declaration against Mr Billis. The action is not open to challenge on the basis that only declaratory relief is sought.[6]
[6] Supreme Court Act1935, s 25(6).
The power of the court to grant discretionary relief was described in Ainsworth v Criminal Justice Commission, in the joint reasons of Mason CJ, Dawson, Toohey and Gaudron JJ, in these terms:
It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which '(i)t is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise.' However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have 'a real interest' and relief will not be granted if the question 'is purely hypothetical', if relief is 'claimed in relation to circumstances that (have) not occurred and might never happen' or if 'the Court's declaration will produce no foreseeable consequences for the parties.' [7]
[7] Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564, 581 - 582 (references to authority omitted). See also see Plaintiff M61/2010 v Commonwealth of Australia [2010] HCA 41; (2010) 243 CLR 319 [101] [103].
There is clearly a controversy about the beneficial ownership of the Rand Mining shares which is within the power of the court to resolve. Rand Mining did not adopt a neutral position and seek relief on an interpleader summons, but chose to apply the holding lock, thereby compelling the plaintiff to establish his claim despite the fact that he was registered as the legal owner of the shares.
The plaintiff does not have to establish fraud or some other cause of action against Mr Billis. He is the legal owner of the shares. There is a real dispute about beneficial ownership, which is not abstract or hypothetical. While Mr Billis maintains his claim to a beneficial interest in the shares, the plaintiff is precluded from dealing with them. A declaration as to the beneficial ownership of the shares will resolve the question between the plaintiff and Mr Billis and should resolve any issues that lie between the plaintiff and Rand Mining.
I would, however, accept the submission on behalf of Mr Billis that pars (ii), (iii) and (iv) of the particulars of falsity are irrelevant. The plaintiff is pleading to evidence and to a case which has not yet been advanced against him.
The other complaints by Mr Billis - as to whether the plaintiff has adequately pleaded how and when he informed the directors of Rand Mining about his claim to the shares - are not material to who is entitled to the beneficial interest in the shares. That is the issue that must be resolved between the plaintiff and Mr Billis.
Resolution
The case against Mr Billis should proceed on the basis of the plaintiff's pleaded claim. The pleaded case is that he holds at least 250,000 ordinary fully paid shares in Rand Mining;[8] on 25 August 2016, the board of Rand Mining resolved to prohibit registration of a transfer of the shares until a dispute regarding legal and beneficial ownership of the shares is resolved;[9] Mr Billis has claimed that the shares were pledged to him as security for a loan to assist the plaintiff with a project the plaintiff was instigating in Indonesia;[10] contrary to the assertions of Mr Billis, the plaintiff had not pledged the shares to Mr Billis as surety for loan funds. The plaintiff claims the shares are held by him legally and beneficially,[11] and Mr Billis has no entitlement to those shares in equity or at law.[12]
[8] Amended statement of claim [1].
[9] Amended statement of claim [4].
[10] Amended statement of claim [5(a)(b)].
[11] Amended statement of claim [6].
[12] Amended statement of claim [8].
I will strike out pars (ii) ‑ (iv) of the particulars of falsity, but otherwise dismiss Mr Billis' application.
I will hear the parties as to the programming of a defence and any counterclaim by Mr Billis.
In furtherance of proper case management, I propose to stay the balance of the proceedings until the underlying dispute between the plaintiff and Mr Billis is resolved. I will, however, hear the parties should any of them object to that course.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MG
Associate to the Honourable Justice Allanson
16 JULY 2021
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