Duke Group Ltd (in liq) v Pilmer

DUKE  v  PILMER & ORS

Mullighan J

1. PRELIMINARY

In this action, commenced on the 19th August 1992, the plaintiff claims damages against the defendants for the losses allegedly sustained in consequence of the acquisition of the shares in a company in late 1987 and early 1988.

The plaintiff is The Duke Group Limited (In Liquidation), formerly known as Kia Ora Gold Corporation NL (“Kia Ora”).  The name of the company was changed on 26th July 1988.  Kia Ora was incorporated in South Australia on 13th September 1954 and, at all material times, listed on the Australian Stock Exchange.  It carried on business principally as a gold mining company in Western Australia, in mineral, oil and gas exploration and as an investor.  Eventually it became insolvent and on 11th July 1989 it was placed in liquidation by order of this Court.

The first defendants are Angus Claymore Pilmer, Alan Robert Crawford, Dominic Vincent Martino, Peter John Messer, Peter Lawson Munachen, Geoffrey James Stokes and Robert John Gray.  They were, at all material times, practising accountants and it is alleged that all of them carried on practice in partnership, with others, under the style or firm name of Nelson Wheeler in Perth.  I shall refer to them as the first defendants and to the firm as “Nelson Wheeler Perth”.  As will be seen later, it is asserted by the first defendants that Munachen and Stokes were not partners at material times having earlier retired from the partnership.

Kia Ora made a successful takeover bid for Western United Limited (“Western United”) in late 1987 and by early 1988 had acquired all of the issued capital of that company.  Prior to commencing the takeover procedure, there were four directors of Kia Ora, Alfred Carl Schneider-Paas, who died in May 1988 well before this action commenced, the third defendant Harold Abbott, the fourth defendants Sir Ernest Henry Lee-Steere and Kevin Clarence Somes and one alternate director Gary Ross Abbott who is not a party to these proceedings.  All of these men were also directors of Western United.  They owned or controlled substantial parcels of shares in Western United.  For the purpose of the takeover, two other directors of Kia Ora were appointed.  They are the second defendants Francis Anthony Quilty and Keith David Singleton.  They remained as directors for a time after the takeover was completed.

Kia Ora was obliged to comply with the main board listing rules of the Australian Stock Exchange Limited (“the Listing Rules”) by reason of s42(2) of the Securities Industries Code. Rule 3J(3) of the Listing Rules provided, inter alia, that the proposed takeover could not take place without the prior approval of the shareholders of Kia Ora in general meeting and that notice of the meeting had to be accompanied by a report from an independent qualified person sufficient to establish that the takeover price of Western United shares to be paid by Kia Ora was a fair price. Kia Ora retained Nelson Wheeler Perth for that purpose. A…