Durban Roodepoort Deep Ltd v Mostert
[2003] WASC 104
DURBAN ROODEPOORT DEEP LTD -v- MOSTERT & ORS [2003] WASC 104
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 104 | |
| Case No: | CIV:1772/2002 | 19 MAY 2003 | |
| Coram: | MASTER SANDERSON | 30/05/03 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | DURBAN ROODEPOORT DEEP LTD (ACN 086 277 616) CHARLES PHILIP MOSTERT JOHN STRATTON NOBLE INVESTMENTS PTY LTD (ACN 007 998 914) LEADENHALL AUSTRALIA LTD (ACN 007 997 248) ADVENT INVESTORS PTY LTD (ACN 008 134 209) TIMOTHY OWEN LEBBON |
Catchwords: | Practice and procedure Application to strike out statement of claim Turns on own facts |
Legislation: | Nil |
Case References: | Barnes v Addy (1874) 9 LR Ch App 244 Elkington v Shell Australia Ltd (1993) 32 NSWLR 22 Gambotto & Anor v WCP Ltd & Anor (1995) 182 CLR 432 Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255 Twinsectra Ltd v Yardley & Ors (2002) 2 AC 165 ACCC v Bio Enviro Plan Pty Ltd [2003] FCA 232 Adsteam Building Industries v Queensland Cement (1985) 1 Qd R 127 Australian Securities Commission v AS Nominees Ltd (1995) 133 ALR 1 Beach Petroleum NL v Johnson (1993) 115 ALR 411 Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 Belmont Finance Corporation Ltd v Williams Furniture & Ors [1979] 1 Ch 250 Bostock v Edgar (1899) 24 VLR 677 Bruce v Odhams Press Ltd [1936] 1 KB 697 Cadwalder v Badges [2002] NSWCA 328 Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413 Chew v R (1992) 173 CLR 626 Coe v Commonwealth (1979) 24 ALR 118 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Dalgety Australia Ltd v Rubin, unreported; SCt of WA; Library No 5485; 24 August 1984 Davy v Garrett (1877) 7 Ch D 473 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Edwards v The Queen (1992) 173 CLR 653 Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 Equiticorp Industries Group Ltd v Hawkins [1991] 3 NZLR 700 Farrow Finance Co Ltd (In Liq) v Farrow Properties Pty Ltd (In Liq) (1997) 26 ACSR 544 Freeman v Rabinov [1981] VR 539 General Steel Industries Inc v Commissioner for Railways NSW (1964) 112 CLR 125 Hospital Products Ltd v United States Surgical Corp [1983] 2 NSWLR 157 Hospitals Contribution Fund of Australia v Hunt (1983) 44 ALR 365 Howard Smith Ltd v Ampol Petroleum Ltd (1974) AC 821 Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 599 Kenny v Scholl (1905) 7 WALR 197 Kimberley Downs Pty Ltd & Ors v State of Western Australia & Anor, unreported; SCt of WA; Library No 6414; 25 August 1986 LKH Nominees Pty Ltd v Kenworthy & Anor [2002] WASCA 291 Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110 News Ltd v Australian Rugby Football League Ltd (1996) 135 ALR 33 Niven v Grant (1903) 29 VLR 102 Packard v Transport Trading Agency Co Ltd (1912) 14 WALR 1941 Phillips v Phillips (1878) 4 QBD 127 Porteous v Rinehart & Ors (1996) 22 ACSR 364 Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691 R v Argus (1988) 165 CLR 87 R v Exall (1866) 4 F & F 922 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 Rubenstein v Truth & Sportsman Ltd [1960] VR 473 Turner v Bulletin Newspaper Co Pty Ltd (1974) 131 CLR 69 Trade Practices Commission v David Jones (Aust) Pty Ltd (1985) 7 FCR 109 Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 Williamson v L & N W Railway Co (1879) 12 Ch D 787 Wilson v Dun's Gazette Ltd [1912] VR 342 Yorke v Lucas (1985) 158 CLR 661 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
CHARLES PHILIP MOSTERT
First Defendant
JOHN STRATTON
Second Defendant
NOBLE INVESTMENTS PTY LTD (ACN 007 998 914)
LEADENHALL AUSTRALIA LTD (ACN 007 997 248)
ADVENT INVESTORS PTY LTD (ACN 008 134 209)
Third Defendants
TIMOTHY OWEN LEBBON
Fourth Defendant
(Page 2)
Catchwords:
Practice and procedure - Application to strike out statement of claim - Turns on own facts
Legislation:
Nil
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr W S Martin QC & Mr D J Martino
First Defendant : Mr P G Clifford
Second Defendant : Mr G I Macnish
Third Defendants : Mr D M Stone
Fourth Defendant : Mr D M Stone
Solicitors:
Plaintiff : Allens Arthur Robinson
First Defendant : Haydn Robinson
Second Defendant : Cocks Macnish
Third Defendants : Williams & Hughes
Fourth Defendant : Williams & Hughes
Case(s) referred to in judgment(s):
Barnes v Addy (1874) 9 LR Ch App 244
Elkington v Shell Australia Ltd (1993) 32 NSWLR 22
Gambotto & Anor v WCP Ltd & Anor (1995) 182 CLR 432
Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34
McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409
(Page 3)
Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255
Twinsectra Ltd v Yardley & Ors (2002) 2 AC 165
Case(s) also cited:
ACCC v Bio Enviro Plan Pty Ltd [2003] FCA 232
Adsteam Building Industries v Queensland Cement (1985) 1 Qd R 127
Australian Securities Commission v AS Nominees Ltd (1995) 133 ALR 1
Beach Petroleum NL v Johnson (1993) 115 ALR 411
Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393
Belmont Finance Corporation Ltd v Williams Furniture & Ors [1979] 1 Ch 250
Bostock v Edgar (1899) 24 VLR 677
Bruce v Odhams Press Ltd [1936] 1 KB 697
Cadwalder v Badges [2002] NSWCA 328
Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association of Western Australia (1987) 13 FCR 413
Chew v R (1992) 173 CLR 626
Coe v Commonwealth (1979) 24 ALR 118
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373
Dalgety Australia Ltd v Rubin, unreported; SCt of WA; Library No 5485; 24 August 1984
Davy v Garrett (1877) 7 Ch D 473
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Edwards v The Queen (1992) 173 CLR 653
Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193
Equiticorp Industries Group Ltd v Hawkins [1991] 3 NZLR 700
Farrow Finance Co Ltd (In Liq) v Farrow Properties Pty Ltd (In Liq) (1997) 26 ACSR 544
Freeman v Rabinov [1981] VR 539
General Steel Industries Inc v Commissioner for Railways NSW (1964) 112 CLR 125
Hospital Products Ltd v United States Surgical Corp [1983] 2 NSWLR 157
Hospitals Contribution Fund of Australia v Hunt (1983) 44 ALR 365
Howard Smith Ltd v Ampol Petroleum Ltd (1974) AC 821
Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 599
Kenny v Scholl (1905) 7 WALR 197
Kimberley Downs Pty Ltd & Ors v State of Western Australia & Anor, unreported; SCt of WA; Library No 6414; 25 August 1986
LKH Nominees Pty Ltd v Kenworthy & Anor [2002] WASCA 291
Marshall Futures Ltd v Marshall [1992] 1 NZLR 316
(Page 4)
Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110
News Ltd v Australian Rugby Football League Ltd (1996) 135 ALR 33
Niven v Grant (1903) 29 VLR 102
Packard v Transport Trading Agency Co Ltd (1912) 14 WALR 1941
Phillips v Phillips (1878) 4 QBD 127
Porteous v Rinehart & Ors (1996) 22 ACSR 364
Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691
R v Argus (1988) 165 CLR 87
R v Exall (1866) 4 F & F 922
Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378
Rubenstein v Truth & Sportsman Ltd [1960] VR 473
Turner v Bulletin Newspaper Co Pty Ltd (1974) 131 CLR 69
Trade Practices Commission v David Jones (Aust) Pty Ltd (1985) 7 FCR 109
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Williamson v L & N W Railway Co (1879) 12 Ch D 787
Wilson v Dun's Gazette Ltd [1912] VR 342
Yorke v Lucas (1985) 158 CLR 661
(Page 5)
1 MASTER SANDERSON: It is cases such as this that give strike-out applications a bad name. The statement of claim which is under attack is, in my view, on any fair reading, both comprehensive and comprehensible. It deals with a transaction which can be best described as strange. It may well be that there is a perfectly reasonable explanation for why the transaction took place. That is not for me to decide. This is a pleading summons and all that is at issue is the propriety of the statement of claim. One might have expected that when confronted with this strange transaction the defendants would have explained, by way of a defence, why it took place. Rather, they seem to have reacted with self-righteous indignation and mounted a highly technical attack on a perfectly adequate pleading. That is unfortunate.
2 Having said all of that, I do acknowledge that the claims put against the defendants involve allegations of breach of fiduciary duty and equitable fraud. These are serious matters which ought be properly pleaded and ought be properly particularised: see Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255 at 41, 93. But as counsel for the plaintiff pointed out, in cases where fraud is alleged, it is rare that a party will have direct evidence of the state of mind that the party against whom the dishonesty is alleged. The dishonest intention must be established by inferences drawn from pleaded material facts. Those pleaded facts must be properly particularised. A plaintiff cannot be expected to know and to plead what a party was thinking at a particular moment and why. There must be a balance. In my view this pleading strikes the correct balance.
3 It is necessary to begin with a broad statement of the nature of the case brought by the plaintiff against the defendants. Because there are allegations of fraud made in the statement of claim, it is not appropriate that I provide close detail of the allegations made by the plaintiff against the defendants: see O 6 r 3(a). Accordingly I will keep the summary of the facts as broad and general as is consistent with a proper understanding of these reasons.
4 The plaintiff is a public company incorporated in South Africa and listed on the Johannesburg Stock Exchange. It is registered in Australia as a foreign company in line with the appropriate legislation. The first defendant was at all material times an Australian-based director of the plaintiff. The second defendant is alleged to be an experienced director of public companies listed in both Australia and South Africa. He is also said to have been the director of a number of companies, including Continental Goldfields Ltd (rather strangely in the statement of claim
(Page 6)
- designated "CNF") and Lavender Overseas SA ("Lavender"). It is alleged that the second defendant served on a number of company boards with the first defendant and that they were in daily contact. It is pleaded that they shared the same offices.
5 The third defendants are a group of companies referred to by counsel for the plaintiff as the "Lebbon companies". The fourth defendant, it is alleged, was the controlling hand of the Lebbon companies. All of these matters are pleaded in par 1 through to 6 of the statement of claim.
6 The plaintiffs plead that by agreement in writing made 1 July 1999 ("the Lavender Agreement") Lavender agreed to pay the sum of $7,050,000 to the third defendants to purchase 11,150,000 shares in CNF then held by the third defendants. It is pleaded that certain security was provided by various companies of which the second defendant was a director to ensure the performance of the Lavender Agreement. The plaintiff pleads that late in 1999 an agreement ("the Agreement") was reached which effectively substituted the plaintiff for Lavender in the Lavender Agreement. This plea is central and is to be found in par 11 of the statement of claim. I will quote the paragraph in full:
"11. On or about 7 December 1999:
(a) the second defendant on behalf of Lavender and the third defendants signed an agreement whereby the third defendants agreed to release Lavender from its obligations under the Lavender Agreement, upon the plaintiff first executing and completing an agreement with the third defendants to purchase the CNF shares (the Lavender Release Agreement);
(b) the first defendant, purportedly on behalf of the plaintiff, and the third defendants signed an agreement (the Agreement) whereby it was agreed that the plaintiff was to pay:
(i) the sum of $1,115,000 to the third defendants in return for share transfer forms executed by each company for the transfer to the plaintiff of the CNF shares: clause 5.1;
(Page 7)
- (ii) the sum of $5,910,000 to Noble for 'facilitating the acquisition' of the CNF Shares by the plaintiff (the facilitation fee): clauses 2.2 and 7.1;
(iii) a non-refundable deposit of $1,000,000, receipt of which was thereby acknowledged: clause 6.1."
7 It can be seen immediately why I described this transaction as strange. The plaintiff thought it appropriate to pay a facilitation fee of $5,910,000 to acquire shares said to have a value of $1,115,000. As I say, there may be a perfectly reasonable explanation for this transaction. But that explanation does not emerge from the way the agreements are pleaded in par 11. Moreover, a reading of that paragraph immediately ties in all of the defendants with the strange transaction. The first and second defendants are said to have signed the agreements and presumably in doing so knew the details of the transactions to which they were committing companies of which they were directors. The whole scheme could not have been affected unless the third defendants agreed. Given their strong position, the third defendants could have been expected to enquire why the plaintiff should become involved at all. If the enquiries were to be made it is reasonable to expect the controlling hand of the third defendants, that is to say, the fourth defendant, to be aware of the relevant facts. Up to this point there is nothing confusing about the pleading.
8 It is alleged by the plaintiff that the first defendant signed the Agreement at the request of the second defendant. Further, it is alleged that the execution of the Agreement took place without the approval of the plaintiff's board and without authorisation by the plaintiff.
9 Paragraphs 15 through to 27 of the statement of claim deal with payments allegedly made pursuant to the Agreement. These paragraphs did not feature in the application and can be put to one side. Paragraph 28 of the statement of claim deals with the issue of the value of the CNF shares and the payment of the facilitation fee. Once again it is a key paragraph and I will quote it in full:
"28. As at December 1999:
(a) the CNF shares had a value of no more than $1,115,000;
(Page 8)
- (b) there were no circumstances justifying the payment by the plaintiff of the facilitation fee;
(c) shares in CNF were listed on the Australian Stock Exchange, had last traded at no more than 10 cents per share, and had traded in the previous 12 months at between 6.5 cents and 12 cents per share."
10 Paragraph 29 of the statement of claim deals with the matters allegedly known to the first defendant when he executed the Agreement. I will not set out this paragraph in any detail. It is sufficient if I say that the plaintiff alleges that the first defendant's knowledge is to be inferred from matters pleaded earlier in the statement of claim. Paragraph 30 deals with the alleged purpose for which the first defendant is said to have executed the Agreement. It is pleaded that the execution of the Agreement was for the benefit of Lavender. Once again it is said this inference is to be drawn from matters pleaded earlier in the statement of claim. Paragraph 31 pleads matters, it is said, are known to the second defendant and par 32 pleads matters, it is said, were known to the third and fourth defendants. Once again the alleged knowledge of these defendants is said to arise from inferences drawn from pleaded facts. Paragraph 33 deals with alleged breaches of duty by the first defendant - such duty being pursuant to statute, fiduciary duties and common law duties. Paragraphs 37, 38 and 39 deal with alleged dishonest involvement by the second, third and fourth defendants, with the first defendant's breaches of duty. Paragraphs 40 and 41 plead conspiracy. The pleas of breach of duty on the part of the first defendant and dishonesty on the part of the second, third and fourth defendants were subject to particular criticism. So was the plea of conspiracy. However, it is sufficient if at this point I simply refer to the nature of the pleas without giving details and then deal with the defendants' complaints.
11 I will deal first with complaints made about par 28. All of the defendants submitted that the plea in par 28(a) to the effect that the CNF shares had a value of no more than $1,115,000 was a plea of a "conclusion" and not a plea of material fact. With respect, it is a plea of material fact. The fact is that the plaintiff asserts that the CNF shares had a certain value. It is true that evidence must be led to establish that fact but that does not alter that the plea itself is entirely proper. During the course of argument it was said by counsel for the defence that the plea was bad because it was not particularised. Counsel for the plaintiff maintained that the plea was proper without particulars. This rather arid
(Page 9)
- argument occupied some good deal of counsel's time. In my view particulars of par 28(a) were required and they should have been given in the pleading as the allegation is central to the cause of action. Having said that, there are a number of points to be made about the defendants' complaints.
12 First, it is rather odd that the defendants should complain about a plea that the CNF shares have a value of $1,115,000 when that is the price put on the shares in the Agreement. Secondly, if as asserted by the defendants and as seems likely, the value of the shares as at December 1999 is a central issue between the parties, then the defendants would need to obtain expert evidence on that issue. One would imagine that such evidence would have been required before a defence was filed. Thirdly, if particulars were required before a defence was filed, they could have been requested. To date there has been no request. Fourthly, the value of the shares as pleaded by the plaintiff may be admitted by the defendants. If that were so, no particulars would be required.
13 No particulars are required of par 28(b). That is a perfectly proper plea of material fact. Paragraph 28(c) is not a pleading of material fact. The material fact is the pleading of the value of the CNF shares to be found in par 28(a). How the value of the shares is to be proved is another matter. All parties accepted that the market price of listed securities does not necessarily equate to their stock exchange value: see Gambotto & Anor v WCP Ltd & Anor (1995) 182 CLR 432 per McHugh J at 457. The stock exchange price may be cogent evidence of value, particularly when the shares have traded in a fairly narrow band over an extended period: see Elkington v Shell Australia Ltd (1993) 32 NSWLR 22. But other matters would need to be taken into account. The asset backing of the shares might be one factor; the strategic value of a particular parcel of shares might be another. Doubtless in a particular case there will be other matters. Having said that, the inclusion of par 28(c) does not poison the whole of the paragraph. In fact, what is pleaded in that subparagraph is picked up elsewhere in the pleading and provided as particulars of knowledge of certain matters. For instance, in relation to the first defendant it is pleaded (by par 29(c)) that he was aware of the value of the CNF shares as pleaded in par 28(a). As a particular of the first defendant's knowledge, par 28(c) is repeated. Looked at in that way it may be that the plaintiff took the proper course in pleading the contents of par 28(c) as a material fact.
14 As to other complaints made on behalf of the first defendant I am not satisfied that any has merit. It is pleaded against the first defendant that
(Page 10)
- he signed the agreement and that he was not authorised to do so. There can be no dispute that the first defendant was under the duties pleaded in par 33. That being the case, the allegation of breach of duty is properly pleaded. In relation to the plea of conspiracy, I accept that the elements of the tort are as set out in Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 at 102 - 107 and McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at par 130 - 154. But what the plaintiff says about the conspiracy is clearly pleaded in par 40. In my view the plea is in all respects proper and complete.
15 On behalf of the first defendant it was further submitted that par 2(b) and 2(c) were insufficiently particularised. In my view both paragraphs are pleas of material fact and are proper pleas without further particulars. However, if the first defendant is at a disadvantage, further particulars can be requested.
16 During the course of his submissions counsel for the first defendant made the point that the price paid by the plaintiff for the CNF shares was no more than the price Lavender had agreed to pay in the Lavender Agreement. As I understood the submission, it was suggested that the plaintiff on that basis had suffered no loss and that there was no real claim disclosed by the statement of claim. I have said enough about the strange nature of the transaction pleaded by the plaintiff already. I need say only that in my view there is no substance in this aspect of the complaint made on behalf of the first defendant.
17 On behalf of the second defendant it was said that the basis of the claim made against him was to be found in par 37, 38 and 40. Paragraph 40 deals with the conspiracy claim. I have already concluded that plea is adequate and I need say nothing more on that issue.
18 Paragraph 37 deals with the second defendant's alleged dishonest involvement in the first defendant's breaches of duty. The plaintiff pleads in par 9 that the second defendant gave instructions to one Pocock, a solicitor who acted in relation to the Lavender Release Agreement and the Agreement. It is also pleaded that the second defendant asked the first defendant to sign the Agreement. It is said that these two actions, in conjunction with par 31, lead to the conclusion that the second defendant was dishonestly involved in the first defendant's breaches of duty. Paragraph 31 details matters, it is said, were known to the second defendant. It is said the second defendant was aware of the Lavender Agreement (par 7(a)) and was aware of the Lavender Release Agreement
(Page 11)
- (par 11(a)). It is pleaded that the second defendant knew the first defendant, purportedly on behalf of the plaintiff, signed the Agreement (par 11(b)). Reference is made to par 15 and the terms of the Agreement relating to security. Reference is then made to par 28(a) and par 28(b). Each of these pleaded material facts is properly particularised. In my view there can be no complaint properly made by the second defendant as to the case pleaded against him.
19 In relation to the third and fourth defendants, much the same criticisms were directed at the statement of claim as were put by counsel for the second defendant. The submissions were variations on a theme. Principally it was said that what was not pleaded were material facts which established a dishonest involvement by the third and fourth defendants in a breach of fiduciary duty by the first defendant. In other words, the pleading did not contain sufficient material facts to satisfy the second limb of the rule in Barnes v Addy (1874) 9 LR Ch App 244. Reference was also made to the recent decision of the House of Lords in Twinsectra Ltd v Yardley & Ors (2002) 2 AC 165. With respect, that seems to me to ignore the way in which the claim is structured as against the third and fourth defendants. It is alleged that pursuant to the Lavender Agreement, Lavender had agreed to pay $7,050,000 to the third defendants for the CNF shares that were then held by Lavender. Security in favour of the third defendants had been provided. Why then, it may be asked, should the third defendants, under the control of the fourth defendant, agree to the Lavender Release Agreement and the Agreement? This is particularly the case when the matters set out in par 32 were allegedly known to the fourth defendant. If it is established by the evidence that those matters were indeed known to the fourth defendant, and through him the third defendants, then there is, in my view, adequate material to sustain the plaintiff's claim against these two defendants. That, I think, is enough to dispose of the third and fourth defendants' objections to the statement of claim.
20 In all of the circumstances I am not satisfied that there is any basis upon which the statement of claim should be struck out. I would dismiss the defendants' application with costs.
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