Dog At the Bridge Pty Ltd (ACN 154 906 377) v Bridge Bar Investments Pty Ltd (ACN 154 906 377) and Byrn McMurray
[2017] VSCA 45
•7 March 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0138
| DOG AT THE BRIDGE PTY LTD (ACN 154 906 377) | Applicant |
| V | |
| BRIDGE BAR INVESTMENTS PTY LTD (ACN 154 906 377) and BYRN MCMURRAY | Respondents |
---
| JUDGES: | WHELAN and BEACH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 7 March 2017 |
| DATE OF JUDGMENT: | 7 March 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 45 |
| JUDGMENT APPEALED FROM: | [2016] VSC 455 (John Dixon J) |
---
EQUITY – Fiduciary duties – Alleged joint venture – Application by defendant for summary judgment or dismissal or striking out – Whether plaintiff must plead facts which show an interest of theirs was vulnerable to the exercise of a special power or discretion – Whether action should be dismissed for non-compliance with an order – Applications dismissed by primary judge – No real prospect of success – Application for leave to appeal refused.
PRACTICE AND PROCEDURE – Application for leave to appeal from refusal to order further and better particulars and costs order – No substantial injustice – Leave to appeal refused.
---
| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr A M J Meagher | Blue Rock Partners |
| For the Respondents | Mr A Herskope with Ms C M Pierce | JBT Lawyers |
WHELAN JA:
By a judgment delivered on 5 August 2016,[1] a judge in the Trial Division determined applications by the first defendant in the proceeding (‘Dog at the Bridge’) for summary judgment, for dismissal of the claim against it for non-compliance with an order of Almond J made 11 March 2016, for the striking out of the allegations against it in the second further amended statement of claim, and for an order that the plaintiffs provide further and better particulars. The primary judge described these applications as ‘cascading relief’. The primary judge struck out certain paragraphs of the second further amended statement of claim with leave to re-plead, but otherwise dismissed the applications. By a judgment delivered on 31 August 2016[2] the primary judge made determinations as to costs consequent upon his decision on those applications.
[1][2016] VSC 455 (‘Reasons’).
[2][2016] VSC 521.
Dog at the Bridge applies for leave to appeal the order dismissing its various applications, and also seeks leave to appeal the costs order.
We have determined that leave to appeal should be refused. Insofar as the applicant seeks summary judgment, dismissal, or striking out we do not consider that the proposed appeal has a real prospect of success. Otherwise, we would refuse leave to appeal because the proposed appeal concerns matters of practice and procedure and no substantial injustice will be done if the orders below are permitted to stand.
Summary of the plaintiffs’ claim against Dog at the Bridge
The second plaintiff, Mr McMurray, claims that he entered into a joint venture agreement with a number of other individuals including the second defendant, Mr McKirdy, and the third defendant, Mr Boyle. The subject matter of the alleged joint venture agreement was a restaurant and bar at South Wharf. The lease of the relevant premises was held by a company named Sugar Loaf Corporation Pty Ltd which is now in liquidation (‘Sugar Loaf’) and the business was conducted by a company named Bridge Bar Hospitality Holdings Pty Ltd which is also now in liquidation (‘Bridge Bar’).
It is alleged that the parties to the joint venture agreement made an arrangement for the fitting out of the premises by McMurray or by two other individuals who were also parties to the joint venture (McDonald and Tattam) or by a company associated with McMurray named Ezi-Rapid Solutions (Vic) Pty Ltd (‘Ezi-Rapid’). It is alleged that it was agreed that ‘in due course’ the parties would establish a unit trust.
The plaintiffs plead that in breach of fiduciary obligations which it is alleged McKirdy and Boyle owed to the plaintiffs, they devised and carried out a dishonest and fraudulent design, in which the fourth to sixth defendants were allegedly knowingly involved, to deliver the assets which were the subject of the joint venture to Dog at the Bridge, it being liable to the plaintiffs as a knowing recipient. The claims against Dog at the Bridge and the fourth to sixth defendants are claims of the kind usually referred to by reference to Barnes v Addy.[3]
[3](1874) LR 9 Ch App 244.
The relevant issue
It is unnecessary to address the allegations made in the second further amended statement of claim, or the primary judge’s reasons for rejecting the applications made by Dog at the Bridge, in detail, because the applicant seeks to contend that the judge made a fundamental error of law in the approach which he took to what needs to be pleaded and proved in order to establish the existence of the fiduciary duties which are the foundation of the claim against Dog at the Bridge. If the law is as the applicant contends it to be, it is clear that the judge did not apply it.
Given that the applications are for summary judgment, dismissal, or striking out of all of the relevant allegations, for Dog at the Bridge to succeed on appeal it would be necessary for it to persuade the Court that the applicant’s contention as to the state of the law is unarguably correct and that there is no real prospect that the plaintiffs can succeed on the case as pleaded.[4] Further, particularly given the nature of this case, the Court would need to be satisfied that the legal analysis could not conceivably be altered by factual matters which might arise at trial.[5]
[4]De Saram v Brown [2015] VSCA 142 [42]-[45].
[5]Mutton v Baker [2014] VSCA 43 [55]; CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd [2017] VSCA 11 [27].
The fundamental proposition of law upon which the proposed appeal is based is expressed as follows in Dog at the Bridge’s written case:
The plaintiffs must allege facts which show an interest of theirs was vulnerable to the exercise of a special power or discretion by McKirdy and Boyle to establish the fiduciary obligations alleged.
Analysis of the applicant’s fundamental proposition
The proposition contended for in the written case is drawn from a passage in the judgment of Mason J (as he then was) in Hospital Products Limited v United States Surgical Corporation.[6] Mason J said:
The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v Boardman), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions ‘for’, ‘on behalf of’, and ‘in the interests of’ signify that the fiduciary acts in a ‘representative’ character in the exercise of his responsibility … [7]
[6](1984) 156 CLR 41.
[7]Ibid 96–7 (citations omitted).
Mason J in the passage relied upon was addressing the circumstances in which fiduciary duties might be extended to relationships outside the ambit of traditional fiduciary relationships. His Honour was discussing the sorts of characteristics of a relationship which might lead to such an extension.
The unqualified proposition that what Mason J said in the passage relied upon imposes, as a matter of law, an obligation to plead, and eventually establish, the existence of an ‘interest’ which was ‘vulnerable’ to the exercise of a ‘special power or discretion’ by the party or parties against whom the claim is made seems to me to be, at the least, apparently inconsistent with the analysis of the circumstances in which fiduciary duties might arise in the context of an actual or proposed joint venture in relevant text books,[8] in at least one High Court authority specifically addressing joint ventures (Mason J himself being a member of the majority in that case),[9] and in other relevant authorities relied upon by the respondents and set out in their written case.[10]
[8]Halsbury’s Laws of Australia, 305 Partnerships and Joint Ventures, ‘Fiduciary Obligations’ [305–1065] (at 7 March 2017); W D Duncan, Joint Ventures Law in Australia (Federation Press, 3rd Edition, 2012) 47 [2.1.2].
[9]United Dominions Co Ltd v Brian Pty Ltd (1985) 157 CLR 1, 10–11.
[10]News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410; Red Hill Iron Ltd v Api Management Pty Ltd [2012] WASC 323.
In oral submissions the matter was put somewhat differently. Before setting out how the matter was put in oral submissions it is necessary to say something about the order made on 11 March 2016 by Almond J.
One of the applications made by Dog at the Bridge, which was dismissed by the primary judge, was an application to have the proceeding against Dog at the Bridge dismissed because the plaintiffs had failed to comply with an order made by Almond J on 11 March 2016 requiring the plaintiffs to give further and better particulars. At the time Almond J made his order, the plaintiffs’ statement of claim alleged that McMurray had caused Ezi-Rapid to complete the construction and fit out of the premises. Particulars of this allegation were ordered. After the order was made the allegation was amended so as to simply allege that Ezi-Rapid did complete the construction and fit out of the premises. Dog at the Bridge contended that this response to Almond J’s order ought to have resulted in the proceeding being dismissed because the allegation as originally made had been capable of constituting the kind of ‘interest’ which Dog at the Bridge contends is necessary to be established as a matter of law before fiduciary duties could be imposed upon McKirdy and Boyle, whereas the amended allegation was not capable of constituting the requisite ‘interest’.
As is apparent, the complaint as to non-compliance with Almond J’s order has always been inter-related with the contention as to the asserted requirement to plead an ‘interest’ which is ‘vulnerable’ to the exercise of a ‘special power or discretion’. In the oral submissions the two matters merged into one.
In his oral submission, counsel for Dog at the Bridge accepted that a relationship of trust and confidence giving rise to fiduciary duties might be alleged and established without pleading an ‘interest’ which is ‘vulnerable’ to the exercise of a ‘special power or discretion’. But it was submitted that the absence of such allegations was fatal in this case because the pleading itself, as it stood, revealed that the plaintiffs had undertaken no action themselves pursuant to the alleged joint venture agreement, and had had nothing ‘at risk’ in the venture. This was said to be because Ezi-Rapid had done the fit out, and the allegation that McMurray had procured that action had been removed. Counsel could not point to any authority establishing this specific proposition.
In response to this oral submission, counsel for the respondents submitted that the submission made orally was not one which had been made to the primary judge. They submitted that, in any event, the case which is pleaded is that these parties had formed a joint venture in which each reposed trust and confidence in the others, and that one party’s contribution to the venture could not alter the nature of the fiduciary duties which arise from the joint venture agreement itself. Reliance was placed on the authorities governing the circumstances in which summary judgment, having the effect of precluding a claimant from going to trial, will be ordered.
I cannot conclude that there is a real prospect of persuading a Court of Appeal that Dog at the Bridge’s legal analysis is so clearly correct as to warrant summary judgment on, or the striking out of, the plaintiffs’ claim against it. The legal position seems to me to be, at the least, clearly open to argument. Further, this is just the sort of case where a full account of the factual circumstances at trial might well result in an altered legal analysis.
Once it is accepted that Dog at the Bridge’s contentions as to what must be pleaded and established in this case are not unarguable, the complaint as to non-compliance with the order of Almond J loses its significance. As the primary judge explained, the particulars ordered became unnecessary because the relevant allegation had been removed.[11] There was no relevant sense in which the order had been ‘disobeyed’. The plaintiffs could not have been expected to provide particulars of an allegation they did not make any longer.
[11]Reasons [58].
Other submissions on behalf of the applicant
In oral submissions counsel for Dog at the Bridge also sought to address submissions to what was said to be the different positions of the two plaintiffs. He accepted that the matter had not been put in that way to the primary judge and, given that position, we did not permit him to advance contentions which had not been made below.
Finally, Dog at the Bridge contended that the primary judge had mischaracterised the nature of the plaintiffs’ case by stating that the relevant fiduciary duties were alleged to have been owed by Sugar Loaf and Bridge Bar, rather than McKirdy and Boyle. The primary judge did appear to do that at one point in his judgment[12] but reading the reasons as a whole it seems to me that he correctly understood the nature of the plaintiffs’ case and that he determined the applications on that basis.[13]
[12]Reasons [65].
[13]Reasons [13]-[16] and [43].
Other applications and substantial injustice
In addition to the applications which relied upon the contention of law concerning fiduciary duties, before the primary judge Dog at the Bridge also sought to have specific allegations struck out and an order for further and better particulars. The primary judge did strike out some of the allegations. He refused to order further and better particulars. The primary judge considered the particulars provided to be sufficient. Counsel for Dog at the Bridge frankly conceded that if the legal analysis put was not accepted, so that leave was not to be granted to contend that summary judgment or dismissal or striking out of the entire claim ought to have been ordered, leave should be refused on the application as he could not then contend that any substantial injustice would arise if the orders sought to be appealed were to stand. This concession was properly made.
In Kennedy v Shire of Campaspe[14] this Court set out principles which apply on leave applications.
[14][2015] VSCA 47.
Leave to appeal can only be granted where there is a ‘real’ as opposed to ‘fanciful’ chance of success. A ‘real prospect of success’ is a necessary condition for the grant of leave. But it is not always sufficient. The Court has a residual discretion to refuse leave even where a proposed appeal has a real prospect of success. Leave might be refused in a case where no substantial injustice would be done if the decision was to stand. That might well be the case where the order sought to be appealed concerned a matter of practice and procedure.
Conclusions
Insofar as the applicant seeks leave to appeal in order to contend that the applications for summary judgment, dismissal, and the striking out of all of the allegations against it, were wrongly refused because the judge made an error of law in relation to the requirements necessary to be pleaded in order to establish fiduciary duties owed by McKirdy and Boyle, we refuse leave to appeal because we do not consider that the applicant has a real prospect of establishing that its relevant contention is so clearly correct as to warrant summary judgment on, or dismissal or striking out of, the plaintiffs’ claim against it
Insofar as the applicant seeks leave to appeal in order to pursue complaints about the pleading which do not result in the termination of the claim against it (particular paragraphs of the pleading and further and better particulars), and the costs order, we refuse leave as there will be no substantial injustice if the primary judge’s decision stands. The proper administration of justice is potentially undermined when decisions of primary judges on matters of practice and procedure which do not give rise to substantial injustice, even if incorrect, are appealed, given the potential consequences in terms of delay and cost.
BEACH JA:
I agree.
9
0