Emanuel Management Pty Ltd v Foster's Brewing Group Limited
[2000] QSC 430
•28 November 2000
SUPREME COURT OF QUEENSLAND
CITATION: Emanuel Management Pty Ltd & Ors v Foster’s Brewing Group Limited & Ors [2000] QSC 430 PARTIES: Emanuel Management Pty Ltd (in liquidation) & Ors
(plaintiffs/respondents)
v
Foster’s Brewing Group Limited & Ors
(first defendants/applicants)
Coopers & Lybrand & Ors
(second defendants)FILE NO/S: 3723 of 2000 DIVISION: Trial Division DELIVERED ON: 28 November 2000 ORIGINATING
COURT:Supreme Court of South Australia
DELIVERED AT: Brisbane HEARING DATE: 9, 10 and 11 August 2000 JUDGE: Williams J ORDER: Application dismissed. CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – PLEADING – STATEMENT OF CLAIM – application by defendants to strike out statement of claim – allegation that judgment of Supreme Court of Queensland was obtained by fraud and collusion – whether pleading sufficient to have that judgment set aside – where voluminous allegations of fraud and collusion contained in pleading – whether those allegations were embarrassing – held precise and succinct particulars should be supplied
PROCEDURE – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE – ACTIONS TO REVIEW OR SET ASIDE JUDGMENT – WHERE FRAUD, MISREPRESENTATION OR SUPPRESSION OF MATERIAL FACTS – pleading sufficient to discharge onus of establishing a reasonable probability of the fraud alleged being proved at trial – whether Anshun principle precluded plaintiffs from raising certain claims – whether plaintiffs estopped from setting aside judgment on basis it was relied on in an earlier action by liquidator – whether plaintiffs required to undertake to restore status quo position existing prior to impugned transactions before judgment could be set aside.
Addstead Pty Ltd & Orsv Simionato Holdings Pty Ltd [1997] SASC 6117, considered
Alati v Kruger (1995) 94 CLR 216, followed
Birch v Birch (1902) P 130, followed
Cabassi v Vila (1940) 64 CLR 130, followedKing v Weaver (1931) 45 CLR 321, considered
Langman v Handover (1929) 43 CLR 334, distinguished
Ling v Commonwealth (1996) 68 FCR 180, considered
Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428, distinguished
Maguire v Makaronis (1996) 188 CLR 449, distinguished
McHarg v Woods Radio Pty Ltd (1948) VLR 496, followed
Monroe Schneider Associates v No 1 Raberem Pty Ltd (1992) 37 FCR 234, followed
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, distinguishedRe Ross ex parte Attorney-General for Northern Territory (1980) 54 ALJR 145, applied
Vadasz v Pioneer Concrete (SA)Pty Ltd (1995) 184 CLR 102, followed
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, followedCOUNSEL: D R Meagher QC with P H Morrison QC and M C Livesey for the plaintiffs/respondents
P A Keane QC with J C Sheahan SC and J D McKenna for the first defendants/applicants
J A McDonnell (sol) for the second defendantsSOLICITORS: Bennett & Philp (Brisbane) acting as town agents for Ward & Partners (Adelaide) for the plaintiffs/respondents
Clayton Utz for the first defendants/applicants
Mallesons Stephen Jacques for the second defendants
WILLIAMS J: This is an application by the first group of defendants (often referred to as the “Foster’s defendants”) for orders that the pleading referred to as the Amended Consolidated Statement of Claim be struck out or, alternatively, that certain paragraphs therein be struck out.
The original consolidated statement of claim was delivered in 1998, when the action was pending in the South Australian Supreme Court; the application filed 9 July 1999 and initial supporting affidavit were directed to that pleading. However, the statement of claim was amended pursuant to leave I granted on 4 April 2000 and the Amended Consolidated Statement of Claim is dated 19 May 2000. The hearing of the application took place on 9, 10 and 11 August 2000, and all submissions were directed to the amended pleading. The body of that pleading comprises in excess of 300 paragraphs extending over 218 pages, and the attached schedules extend over a further 140 pages.
The action was cross vested to this court by order of Debelle J of 26 February 1999. His reasons for judgment contain an accurate summary of the claims made by the plaintiffs. More about the history and background to the litigation can be gleaned from my reasons for judgment delivered 25 February 2000 in the associated proceeding S7360 of 1999.
The original statement of claim, amongst other relief, sought orders effectively setting aside what is referred to as the “1995 Scheme”, an agreement which involved many of the parties to this litigation. Shortly before that Scheme was formally documented the second, third and fourth defendants in this proceeding obtained judgment in the Supreme Court of Queensland in action 2070 of 1994 on 27 February 1995 against the first 27 plaintiffs in this proceeding and Guiseppe Emanuele for an amount of $186,880,302.71. As Debelle J pointed out, in seeking to have the “1995 Scheme” set aside the plaintiffs herein raised issues which questioned the validity, enforceability and effect of that judgment. In the initial statement of claim the attack on that judgment was collateral rather than direct. Debelle J pointed out that the only court which properly had jurisdiction to set aside the judgment was the Supreme Court of Queensland, and it was essentially for that reason that the matter was cross vested.
The attack on the pleading mounted by the application and supporting affidavit of 9 July 1999 concentrated on the fact that there was no proceeding on foot in which an order setting aside the Queensland judgment was sought. That material focussed on the proposition that the “1995 Scheme” could only effectively be set aside if the judgment was set aside, and unless and until proper proceedings were taken to achieve that end the existing statement of claim was not viable.
That issue has been addressed in the amended pleading. Paragraph 266A now alleges that the judgment in question “was obtained and entered by fraud” and “obtained and entered by collusion” and in consequence it is claimed that either it should be set aside or declared to be a nullity. The pleading also alleges that because of matters particularised therein the parties who obtained that judgment are estopped from relying on it.
Counsel for the applicant/defendants conceded that for present purposes it was appropriate to seek that relief in the existing proceeding; in other words, no separate proceeding was required claiming that relief.
But the applicants still contend that there are reasons why the amended pleading (particularly in so far as it seeks an order setting aside the judgment) is deficient and should be struck out either wholly or in part.
Pursuant to orders of Moynihan SJA the parties prepared a document akin to a Scot Schedule detailing the objections made by the defendants to the statement of claim, the response of the plaintiffs thereto, and the defendants’ position in the light of that response. That Schedule became the basis of submissions addressed to the court. Not all matters in dispute on the face of that document were the subject of submissions.
The critical attack on the pleading is centred on the claim to have the Queensland judgment set aside. The submission by counsel for the defendants was that the pleading does not allege any proper basis for this court making such an order. Alternatively, it was contended that any such allegation was not properly particularised.
The contention of the plaintiffs is that the judgment must be considered in the context of the “1995 Scheme” and that seems proper. As ultimately carried into effect that Scheme is alleged to comprise the steps and documents particularised in paragraph 215 of the pleading. Critically that included the judgment of 27 February 1995; a deed between the first to twentyninth plaintiffs herein and the second, third and fourth defendants herein described as the Deed of Forebearance and Release (DOFR); the deed between Guiseppe Emanuele and the second, third and fourth defendants (“the Emanuele Deed”); and the deed between Simionato Holdings Pty Ltd and the second, third and fourth defendants (“the Simionato Deed”). The plaintiffs allege (for example, paragraph 227 of the pleading) that Simionato Holdings Pty Ltd was accustomed to act in accordance with the directions of Guiseppe Emanuele; other matters relevant to that allegation are pleaded, but it is not necessary to particularise them.
According to the case for the plaintiffs the following matters found in those Deeds are of particular relevance (the second, third and fourth defendants herein were therein described as the EFG Group):
1. The Deed of Forebearance and Release provided:
(i)the first to twentyninth plaintiffs admitted indebtedness to the EFG Group for the judgment debt together with accruing interest;
(ii)the first to twentyninth plaintiffs admitted that the securities granted to the EFG were valid and enforceable in every respect;
(iii)the first to twentyninth plaintiffs admitted that the EFG Group had not adopted or consented to be bound by the Softwoods Agreement;
(iv)the first to twentyninth plaintiffs released, discharged and forever held harmless the EFG Group and its past and present employees, servants, agents and solicitors in respect of “any causes of action and claims of any kind whatsoever which accrue to or are accrued by the Emanuel Group or any of them at any time in the future against the EFG Group or any of its past or present employees, servants, agents or solicitors which arises out of or are in any way connected with any act, omission, circumstance, representation or conduct with respect to the Securities, including entry into of any of the Securities, or in relation to the advancing or lending of any monies, or in relation to the Softwoods Agreement or any royalties thereunder or in relation to any other dealings whatsoever and howsoever arising between the EFG Group and the Emanuel Group”;
(v)the first to twentyninth plaintiffs agreed to discontinue forthwith an appeal from a Federal Court judgment;
(vi)the first to twentyninth plaintiffs agreed and undertook to arrange “for Emanuel (No 14) Pty Ltd to transfer those parts of the APM Lands listed in item 2 of the Schedule hereto to the nominees of the EFG Group listed in item 2 of the Schedule hereto”. The Schedule contained a description of several parcels of land, the consideration for those transfers, and an acknowledgment that such consideration was to be applied in reduction of the judgment debt;
(vii)the first to twentyninth plaintiffs agreed to arrange for the transfer to the EFG Group or its nominee of any of the Security Property if the EFG Group made such a request, and further covenanted that the EFG Group could enforce any security rights without any interference from the those plaintiffs;
(viii)that if there was no earlier default the covenants and undertakings of the first to twentyninth plaintiffs would expire and be of no further force or effect on and from 17 March 1997;
(ix)if the first to twentyninth plaintiffs performed their obligations pursuant to the Deed the EFG Group would forebear from enforcing the Supreme Court Judgment in 2070 of 1994 and not commence any fresh action against those plaintiffs;
(x)the EFG Group agreed to pay $650,000 for the benefit of the Emanuel Group and further to pay $322,313 to a named creditor of the Emanuel Group for work done;
(xi) the EFG Group agreed to release certain securities;
(xii)if the Emanuel Group performed all obligations imposed by the Deeds, in relation to any meeting of creditors called for the purposes of Part 5.3A of the Corporations Law, the EFG Group would support any resolution proposed by any of the Emanuel Group and not participate in any dividend payable to creditors under any Deed of Company Arrangement;
(xiii)the terms of the Deed would be strictly confidential.
2. The Emanuele Deed provided:
(i)Emanuele admitted that the EFG Group had on 27 February 1995 obtained judgment against him in the sum of $186,880,302.71 and that such judgment was enforceable against him;
(ii)Emanuele intended to use his best efforts to secure compromises with his creditors other than the EFG Group and wished to avoid bankruptcy or any bankruptcy arrangement with such creditors;
(iii)Emanuele released, discharged, and would forever hold harmless the EFG Group and its past and present employees, servants, agents and solicitors in respect of any causes of action or claims of any kind whatsoever which he has or considers he may have against such persons which arise out of or are in any way connected with any act, omission, circumstance, representation or conduct with respect to the Securities or in relation to the advancing or lending of any moneys or in relation to any other dealings whatsoever and howsoever arising;
(iv)Emanuele covenanted and undertook that the EFG Group was entitled to and could by its employees and agents from time to time enforce its rights under the Securities (except for its rights under any personal guarantees given by himself to the EFG Group or in respect of any other personal liability which he may have to the EFG Group under the Securities) and deal with the Security Property without any interference or any claim by or from him whatsoever, whether by caveat, other process, or any other direct or indirect means of conduct whatsoever, and he further covenanted and undertook that he would provide any assistance, co-operation or information to the EFG Group which it may reasonably require to enforce its rights under the Securities including, and without limiting the generality of the foregoing, executing any documents which the EFG Group may, in its absolute discretion, require;
(v)the EFG Group released discharged and forever held harmless Guiseppe Emanuele in respect of any causes of action or claims whatsoever (save and except for the liability of Guiseppe Emanuele to the EFG Group for the judgment debt together with interest accruing thereon at the rate of 20.5% per annum from 27 February 1995) which the EFG Group considered it had or may have against him which arose out of or was in any way connected with any act, omission, circumstances, representations or conduct of or by Guiseppe Emanuele with respect to the Securities, the Security Property or in relation to the Softwoods Agreement or any royalties thereunder;
(vi)if Emanuele performed strictly all the covenants and undertakings relating to him in the Deed the EFG Group would forebear from enforcing the judgment of 27 February 1995 against him and in the absence of default would release and discharge Emanuele from any further liability under that judgment on and from 30 June 1998;
(vii)if Emanuele complied with obligations imposed on him by the deed the EFG Group agreed “in relation to any meeting of creditors called for the purposes of Part X of the Bankruptcy Act 1966 as amended … to vote in support of any resolution proposed by or on behalf of Guiseppe Emanuele and … not to participate in any dividend which may be payable to the creditors of Guiseppe Emanuele in the event that the creditors of Guiseppe Emanuele resolve to accept a deed of assignment or a deed of arrangement or a composition;
(viii)each party to the deed covenanted with the others that there would be no disclosure of any terms, conditions or other provisions of the Deed except in certain specified circumstances.
3. The Simionato Deed provided:
(i)that the EFG was desirous of paying a gratuity in recognition of the commercial relationship between the EFG Group and Emanuele over 30 years and the co-operation and assistance Emanuele would give the EFG Group when enforcing its securities.
(ii)in consideration of Simionato Holdings causing Guiseppe Emanuele to enter into the Emanuele Deed and certain other matters the EFG Group agreed to pay to Simionato Holdings the sum of $4.6M;
(iii)that the EFG Group consented to the payment by Simionato Holdings to Guiseppe Nominees Pty Ltd of the sum of $1.3M for the purpose of completing the acquisition by and transfer to Simionato Holdings of certain properties described in the deed;
(iv)that each party to the deed would keep the contents confidential.
The allegation is that the $4.6M referred to in the Simionato Deed was money the EFG Group agreed to pay to Guiseppe Emanuele. That emerges from correspondence and dealings evidenced by documents to be found exhibited to the affidavits of G J Jenkins and also documents included in exhibit 1. It also seems clear that one of the motivations behind the DOFR and the judgment of 27 February 1995 was that the judgment creditors, being the second, third and fourth defendants herein, would be able by their voting power to dominate creditors’ meetings held with respect to any of the plaintiff companies or Guiseppe Emanuele personally.
The material just referred to also supports the allegation of the plaintiffs herein that the original intention was that the defendants in action 2070 of 1994 would consent to judgment. Such a provision was found in drafts of the DOFR; for example, document 72 in exhibit 1. It is the case for the plaintiffs herein that the consent was not forthcoming because Guiseppe Emanuele was still as at 27 February 1995 seeking to obtain from the EFG Group more than $4.6M as his part of the bargain. There is support for that proposition in the documents particularised; he was seeking $10M up to the signing of the Deeds.
The material relating to the obtaining of the judgment in action 2070 of 1994 on 27 February 1995 indicates that the application for summary judgment was not seriously contested. No material was filed in response to that of the plaintiffs therein. No findings of fact were made, and it would appear there was no detailed consideration of the background facts. An adjournment was sought by the defendants therein; the allegation now is that was part of Guiseppe Emanuele’s tactic of seeking more money for himself. When the adjournment was refused the only submission made was that the agreement sued on was not adequately stamped. No question of fraud or collusion was raised or considered.
In the lead up to the judgment the solicitors for the defendants therein sought particulars as to how the amount of the claim of the 3 plaintiffs was calculated. Those particulars were denied, essentially on the ground that the defendants to the proceeding well knew what was due and owing. Ultimately the judgment was granted in favour of the second, third and fourth defendants in this action. That meant that each of those three companies was able to assert it was a judgment creditor for an amount in excess of $186M. Understandably that put the EFG Group in a strong position when it came to voting at any relevant creditors’ meeting.
It is understandable, given that judgment, that the legal representatives of the plaintiffs in this proceeding, when it came to drafting the original pleading, alleged in paragraph 15 that: “In 1987 the first four defendants or one or other of them advanced loan funds to the Emanuel Group” amounting to $43M. By letter dated 27 November 1998 the solicitors for the defendants asserted that paragraph 15 was embarrassing because, as alleged later in the statement of claim, the money was only advanced by the fourth defendant. In consequence the plaintiffs amended paragraph 15 to allege that the fourth defendant advanced the $43M. But if it was embarrassing to the defendants to allege that the second, third and fourth defendants advanced that sum, it is equally arguably embarrassing to the first to twentyseventh plaintiffs to have the second, third and fourth defendants claiming a valid judgment against them based on an advance by them of $43M.
Arguably that tends to show that the judgment was not based on a true accounting position between the parties to that proceeding, but was rather some arranged judgment designed to further and implement what has been described as the “1995 Scheme”.
These issues were canvassed to some extent in proceedings in the Supreme Court of South Australia which are outlined in paragraph 118 of my judgment in S7360 of 1999. It is sufficient again to quote from the judgment of Perry J in the proceedings in the Full Court reported 70 SASR 21 at 43:
“… one wonders at what could properly have prompted a public company, or group of public companies, gratuitously to pay several million dollars at the direction of the managing director of a group of companies indebted to them to the extent of in excess of $186M as a gesture made in recognition of a pre-existing commercial relationship which had ended with litigation and heated and acrimonious settlement negotiations.
The answer emerges from the circumstances to which I have referred at length and which led up to the settlement. In particular, the course of events after the middle of February 1995 can only be explained on the footing that there was a deliberate decision taken to divert most of the settlement monies to Mr Joe Emanuele for his benefit, at the expense of the creditors of the Emanuel Group, and that that diversion be disguised by separating out the elements of the transaction into the three deeds to which I have referred.
…
The transaction was nothing but a transparent fraud on the creditors of the Emanuel Group, and the participation by the directors of the Group amounted to a gross breach of the fiduciary and other duties which they owed.”
This, of course, is neither the time nor the place to decide whether or not all those observations are correct. That must await the trial of the action. But those observations reinforce my view that there is a sufficient basis raised by the pleading to have the Queensland judgment set aside.
Whilst superior courts in particular are reluctant to set aside a judgment properly obtained, they are also, at least in my view, reluctant to allow the judicial process to be abused in order to secure protection for a group of persons from legitimate claims. Here the allegation is that the judgment was entered into in the form in which it was in order to protect the second, third and fourth defendants in this action from possible claims (including claims of the type made in Parts 2 and 3 of the amended consolidated statement of claim herein). The alleged consideration for that being a substantial gratuitous payment to the individual behind the companies against whom judgment was entered. A perusal of the three Deeds providing the basis of the “1995 Scheme” raises a number of serious questions affecting the judgment. What were the concerns of the EFG Group which led to them extracting from the other parties to the DOFR and Emanuele Deed releases from causes of action relating to the making of loans and the taking of securities? The legal advisers to EFG Group (who interestingly were also released from such actions) must have considered that the judgment for $186M was not sufficient protection. Why did the EFG Group give the undertaking to release the judgment debtors from the judgment after a relatively short period of time? Was the property transferred absolutely to the EFG Group more than sufficient to satisfy any indebtedness? Why agree to vote at creditors’ meetings apparently against interest? It may not matter that the fourth defendant had an entitlement to judgment for $186M if the judgment in fact obtained was procured by fraud or collusion.
Considerations of all of those issues could well result in a conclusion that the “1995 Scheme” was a fraud on other creditors and that the judgment was not a true judgment but a ruse to provide a basis for the “1995 Scheme” and a means of defeating any challenge subsequently made by a liquidator on behalf of creditors to the conduct of the EFG Group with respect to the loan moneys.
There is ample authority that where a judgment is procured by fraud or collusion it may be set aside; indeed in some circumstances it appears a judgment so procured may be regarded as a nullity. Both sides in argument referred to the decision in Cabassi v Vila (1940) 64 CLR 130 as the leading Australian authority in point. The following passage from the judgment of Williams J at 147 amply states the law – it is not necessary to refer in more detail to the authorities he has cited:
“A judgment which is procured by fraud is tainted and vitiated throughout. If the fraud is clearly proved the party defrauded is entitled to have the judgment set aside in an action (Hip Foong Hong v H Neotia & Company (1918) AC 888; Jonesco v Beard (1930) AC 298). In some of the older cases in the House of Lords it has been stated that where a judgment has been so obtained it may be treated as a nullity (Shedden v Patrick (1854) 1 Macq HL 535; R v Saddlers’ Co (1863) 10 HLC 404; 11 ER 1083). In the last mentioned case [10 HLC at 431; 11 ER at 1093-4] Willes J said: “A judgment or decree obtained by fraud upon a court binds not such court, nor any other; and its nullity upon this ground, though it has not been set aside or reversed, may be alleged in a collateral proceeding (Phillipson v Lord Egremont (1844) 6 QB 587; 115 ER 220; Bandon v Becher (1835) 3 Cl and Fin 479; 6 ER 1517; Shedden v Patrick; see also Tommey v White (1853) 4 HLC 313; 10 ER 483).” In all these cases the judgment had been procured by collusion, and in Boswell v Coaks[No 2] (1894) 86 LT 365 the Earl of Selborne said that the whole proceeding in such a case may be described as “fabula non judicium”.”
The authorities to which reference was there made, and also Birch v Birch (1902) P 130 and McHarg v Woods Radio Pty Ltd (1948) VLR 496, establish that there is an onus on the plaintiff to establish reasonable probability of the fraud alleged being proved if the plaintiff is to defeat an application seeking to have the proceeding struck out on the ground that no reasonable cause of action is disclosed. That proposition is accepted, but in my view the plaintiffs here have discharged that onus. Those cases, together with Monroe Schneider Associates v No 1 Raberem Pty Ltd (1992) 37 FCR 234 and Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, clearly establish that the principles must be applied in the light of the facts of each case, which almost by definition will be rather unusual. Here, in my view, when the circumstances in which the judgment was obtained are considered in the light of the contents of the various deeds comprising the “1995 Scheme” there are arguable grounds upon which a court at trial may find fraud or collusion such as to call for the setting aside of the judgment. Counsel for the defendants relied heavily on Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, and submitted that the plaintiffs would, in accordance with the principle discussed therein, be precluded from now raising by way of defence the claims raised in Parts 2 and 3 of the statement of claim. Two observations must be made thereon. Firstly, Anshun was concerned with a situation where there had been a fully contested hearing at the first trial. That is not the case here. Secondly, Anshun was not concerned with a situation where a case was put forward for having the earlier judgment set aside as being procured by fraud or collusion. Central to the Anshun principle is that it was unreasonable for the party not to have relied on the defence in the first action (Anshun at 602). Such a consideration is arguably not relevant where the judgment in the first action was procured through collusion. In any event, courts will be reluctant to apply the Anshun principle in circumstances where serious injustice would be created (cf Ling v Commonwealth (1996) 68 FCR 180). Further, it is doubtful the Anshun principle could affect the liquidator’s claims.
It was also submitted on behalf of the defendants that the liquidator had elected to affirm the Queensland judgment by relying on it in the action he brought in the South Australian Supreme Court (Addstead Pty Ltd and Ors v Simionato Holdings Pty Ltd – the judgment of Lander J is exhibit 12 to the affidavit of Jenkins filed 9 July 1999) and was in consequence now estopped from seeking to have it set aside. At paragraph 144 of that judgment it was said that the liquidator relied on the fact of the Queensland judgment as primary evidence of the insolvency of the Emanuel Group. Largely based on that the trial judge made such a finding.
The reference by the learned trial judge was to the affidavit of the liquidator sworn in that action on 2 September 1996. In paragraphs 59 and 60 thereof the liquidator referred to the proceedings in Queensland and to the fact that judgment had been obtained for in excess of $186M plus costs. Further reference to the judgment is to be found in paragraphs 234 to 236 thereof. The liquidator expressed the view that the twentyseven companies who were defendants to the Queensland action were insolvent because of the judgment for in excess of $186M against them. He mentions in paragraph 236 that there was no appeal from the judgment, and no application made to have it set aside. In consequence of that he swore that the judgment debt was “therefore, due and payable”.
As noted above the judgment was that of a superior court of record and it was in consequence (at least in the absence of clear fraud) enforceable until such time as it was set aside in appropriate proceedings. There is nothing to suggest that as at 2 September 1996 the liquidator was aware of all the matters now alleged in support of the allegation that the Queensland judgment was obtained by fraud and collusion. Certainly insofar as the liquidator is concerned I cannot see that the ingredients of estoppel are made out as contended for by counsel for the defendants. At the material time in 1996 the judgment stood and the companies in question clearly had no capacity to satisfy it. It was not the only indicia of insolvency relied on by the liquidator. A reading of the affidavit tends to suggest that even disregarding the Queensland judgment the companies were insolvent, but that is a question which does not call for an immediate answer. I do not consider that in the circumstances the attack on the Queensland judgment constitutes a collateral attack on Addstead v Simionato.
In the circumstances I reject the contention of the defendants.
This, of course, is not the place finally to determine whether or not the plaintiffs will succeed in having the judgment set aside. It is sufficient to say that after having considered the relevant authorities, the statement of claim and the material before the court I am satisfied that there is sufficient to enable the court to now say that there is a reasonable probability of the plaintiffs succeeding so that the action should proceed.
In my view (subject to matters dealt with later in these reasons) I am satisfied that the amended consolidated statement of claim alleges with sufficient particularity grounds upon which a court might set aside the judgment in question.
The other significant point taken by the applicant defendants in relation to the claim to have the “1995 Scheme” and the judgment set aside is that the plaintiffs have not undertaken, and are not in a position to undertake, to restore the status quo position existing prior to the impugned transactions. Referring to cases such as Langman v Handover (1929) 43 CLR 334, Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428 and Maguire v Makaronis (1996) 188 CLR 449, it was submitted that the plaintiffs in this action had to demonstrate a willingness and ability to pay back all of the loan moneys before the “1995 Scheme” or the judgment of February of 1995 could be set aside.
Without in any way doubting the correctness of the decisions referred to, it seems to me that the situation here is distinguishable. As part of the DOFR the plaintiffs transferred to the defendants substantial valuable properties. The defendants acquired them outright; it was not a case of the defendants as mortgagees entering into possession. Paragraph 255 of the statement of claim alleges that some of those properties have been extensively developed at considerable profit to the defendants. The defendants, of course, say that only the consideration specified in the DOFR should be taken in reduction of the judgment debt. But if the DOFR were set aside then arguably in equity the defendants would have to bring into account profits subsequently generated which the plaintiffs contend would far exceed the amount of the judgment debt with interest. The statement of claim also alleges that the values ascribed to the transferred properties as part of the “1995 Scheme” was well below their market value. If the “1995 Scheme” were struck down the value to be attributed to those properties would be a matter for evidence. (Particulars need to be provided of the allegation that the transfers were at an undervalue.)
Such considerations could, in my view, justify a conclusion that the present case was distinguishable from the situations considered in the High Court decisions relied on by counsel for the defendants.
Cases such as Vadasz v Pioneer Concrete (SA)Pty Ltd (1995) 184 CLR 102 at 111 and Alati v Kruger (1995) 94 CLR 216 at 223-4 demonstrate that often the doing of equity will be accommodated by an accounting exercise moulded to achieve practical restitution and justice in the circumstances of the case.
I am not satisfied that there is any basis for preventing the plaintiffs from pursuing their cause of action to have the “1995 Scheme” and the judgment of February 1995 set aside on the ground that they have not demonstrated a capacity to restore the defendants to their original position if those transactions are in fact set aside.
As already noted the initial pleading was drawn whilst the action was pending in the South Australian Supreme Court. In consequence the then South Australian Rules of Court applied. Some time was taken up in argument dealing with those Rules and how they had been interpreted in South Australia at the material time. Since then there have been some further amendments to the South Australian Rules bringing them more into line with those applicable in Queensland. It was generally agreed that the Queensland Rules now applied to the proceedings, but it was also accepted that the pleading should be assessed according to the Rules applicable when it was originally drafted.
It appears that because of the practice followed in South Australia at the time, it was considered necessary to provide very extensive particulars of the acts and conversations ultimately giving rise to what was alleged to be the “1995 Scheme”. Paragraph 214 of the pleading alleges that: “In and between July 1993 and March 1995 there was an arrangement or understanding made, reached or formed by …”. After certain particulars are alleged thereafter in paragraph 214 there appears under the subheading “Particulars” the statement: “Particulars of the 1995 Scheme are contained in Schedule 18.” Schedule 18 extends over 25 pages and there are 391 items specified therein. I marked as exhibit 1 on the application a folder containing the documents referred to as items 1 to 103 therein. Those documents are about 5 centimetres thick.
Those matters are essentially, as is made clear in paragraphs 265 and 266A of the pleading, also particulars of the fraud or conspiracy pursuant to which the Queensland judgment of 27 February 1995 was obtained.
It must be said that the style of pleading adopted tends to confuse rather than elucidate issues if only because of the volume of the allegations contained therein. Paragraphs 214 to 275 inclusive outline the facts which form the basis of the allegation of fraud and conspiracy. As an exercise in pleading Schedule 18 is not all that helpful. On one view it does make known to the defendants all of the matters to which reference will be made in evidence by the plaintiffs when seeking to establish that fraud or conspiracy. But a reading of the schedule does not make it immediately obvious how or why a particular conversation or letter mentioned therein advances the plaintiff’s case. As documents each of the items in Schedule 18 would be clearly discoverable, but that does not mean that each constitutes a particular of the allegations in question. (cf King v Weaver (1931) 45 CLR 321 at 333.)
In my view Schedule 18 should be withdrawn as particulars of the allegations made in paragraph 214 and 266A and replaced with a more precise and succinct statement of particulars. Because of the contents of Schedule 18 and Ex 1 the defendants are fully aware of the documents available to the plaintiffs in that regard and the statement of particulars should be drafted and read in the light of the fact that such documents are out in the open.
The applicants have submitted that paragraph 32 of the statement of claim is not a proper pleading that each of the 64 plaintiff companies throughout the period 1988-1992 was in a continuous state of insolvency or was at least at material times insolvent. The former appears to be what the plaintiffs intended to assert by that paragraph. In my view there is nothing wrong with the pleading in paragraph 32 if the allegation is properly particularised. The particulars relied on are those matters set out in Schedule 9. Fortyfive particular allegations are made in that Schedule. Some are more specific than others; items 7, 8, 11, 15, 16, 17, 18, 19, 24 and 28 at least appear on their face to be possible particulars of insolvency. However, some at least of even those allegations are so general as to hardly merit the description of a particular. Whilst such matters must be considered in the light of other allegations in the statement of claim (for example, as alleged in paragraph 27 of the statement of claim, there were deeds of cross guarantee and indemnity executed between various of the plaintiff companies whereby each undertook to meet the liabilities of the other or others as if it was its own liability) it is sometimes difficult to see the connection between an item in Schedule 9 and the pleading of insolvency in paragraph 32.
It is not necessary to provide particulars of each company’s financial position on a daily basis in order to substantiate the allegation that throughout a period of some years all the companies were in a state of insolvency. If that can be demonstrated by particularising a series of key relevant facts throughout that period that, in my view, is sufficient.
It is also important when considering these allegations to also bear in mind that it is the plaintiffs’ contention that throughout most if not all of the period representatives of the applicants were acting as de facto directors of the plaintiff companies. The plaintiffs’ case is that one of the reasons that was done was because the applicants appreciated that the Emanuel Group was in a state of insolvency and they were using the business expertise of their own employees in order to protect their investment in the Emanuel Group.
Again it is my view that Schedule 9 should be withdrawn as particulars of the allegation of insolvency made in paragraph 32 and replaced with a more precise and succinct statement of particulars. Such a statement could refer to discoverable documents (for example, financial statements) without actually incorporating such document as part of the particulars.
The complexity of the claims made and the long period of time over which relevant events occurred, necessarily makes the statement of claim somewhat lengthy and complicated. Whilst parts of the pleading could be described as verbose, one ought not be pedantic in mounting criticisms of it. The drafters of the pleading adopted the course of providing a glossary of terms used. That is a permissible approach, and when a term defined in the glossary is used in the pleading it should bear that meaning unless the context makes it clear that something else was intended.
Such considerations are relevant when dealing with the applicants’ submissions with respect to paragraph 63. The applicants contend that there is uncertainty as to whether the persons alleged to be de facto directors are those referred to in paragraph 63.3 or the wider group of persons referred to in Schedule 12. The point is of some significance because of the reference to “Emanuel Foster’s Directors” in later paragraphs; for example, paragraphs 190, 200, 201 and 274.
The glossary defines the “Foster’s Officers” as: “O’Grady, Crosby, Peter Grier, Noel Jaenke, Thomas Norman Booker [paragraph 63]” and then the term “Emanuel Foster’s Directors” as “the Foster’s Officers and the first four defendants [paragraph 66]”.
In consequence when it is said in paragraph 63: “Particulars of the Foster’s Officers occupying or acting in the position of Directors are set out in Schedule 12” that is not expanding the definition of “Foster’s Officers” by including other persons whose names appear in that Schedule. The ambiguity suggested by the applicants is not established.
The defendants attack a number of paragraphs in the statement of claim on which the plaintiffs relied to base a claim for relief against the first defendant Foster’s Brewing Group Ltd; in particular that submission concentrated on the allegations in paragraphs 40 and 41 of the statement of claim. The argument was to the effect that such allegations pointed to no more than “apparent authority” which was not sufficient; it was said, correctly in my view, that “express authority” had to be alleged and established before relief could be claimed against the first defendant. But the statement of claim must be read as a whole and, in my view, in paragraph 45 there is a sufficient allegation that the Residual Asset Management Committee (RAMCO) acted, inter alia, as the agent of the first defendant. As the pleading subsequently alleges it was essentially the activities of RAMCO which resulted in the “1995 Scheme”. Further in this context it must also be noted that the plaintiffs allege that certain employees of the “Fosters Group” (defined as the first eight defendants) were de facto directors of the plaintiff companies and, in that capacity, acted as agents of and took directions from the “Fosters Group”. When all of that is taken together it appears to me that there is a sufficient basis alleged in the statement of claim for relief against the first defendant.
Those submissions on behalf of the defendants relied to some extent on the judgment of the High Court in Re Ross ex parte Attorney-General for Northern Territory (1980) 54 ALJR 145 especially at 149. That decision was referred to because of the use in paragraph 45 of the statement of claim of the phrase “acted for and on behalf of”. As was said in Ross such an expression “bears no single and constant significance”. That is beyond question. But as the judgment goes on to say: “Context will always determine to which of the many possible relationships the phrase “on behalf of” is in a particular case being applied.” In my view when the statement of claim is read as a whole it is clear that here agency is being alleged and the particulars thereof are set out. I do not accept the argument of the defendants with respect to those issues.
Counsel for the defendants also attacked paragraph 182 of the statement of claim. It was asserted that a number of allegations contained therein were embarrassing. In the circumstances it is necessary to deal with a number of points argued with respect to that paragraph:
(i) It was said that the phrase “the liabilities arising thereunder” was embarrassing because it was not clear what liabilities were referred to. The response on behalf of the plaintiffs is that, when the statement of claim is properly construed, the liabilities are those of the first to twentyseventh plaintiffs as set out in the earlier paragraphs dealing with the 1988-1994 Transactions. Read in that light the allegation is not embarrassing. I am of the view that the statement of claim can be so construed and on that basis there is nothing embarrassing in the pleading. The response of the plaintiffs to the contention of the defendants operates as a further particular defining for future purposes what is meant by the allegation;
(ii) It was said that paragraph 182.2 was deficient because of the failure to identify the “directions and instructions” alleged. I accept the response of the plaintiffs that, reading the statement of claim as a whole, those “directions and instructions” are those fully particularised in paragraph 63 of the statement of claim;
(iii) It was asserted that paragraph 182.3 was embarrassing for failure to identify the “purpose” referred to therein. Again I accept the contention of the plaintiffs that this is a reference back to Schedule 10, and in consequence there is no embarrassment in the pleading;
(iv) Objection was taken to the term “incited” in paragraph 182.4. I am of the view that that term adds nothing to the associated term “encouraged”. Nothing would really be achieved by striking out the term “incited” in those circumstances. The pleading in that light is not embarrassing;
(v) The complaint with respect to paragraph 182.5 is essentially that it does not identify the debts incurred which remain unsatisfied. That is so, but no request for particulars thereof has been made. The complaint can, in my view, be cured by the provision of proper particulars;
(vi) It is also alleged that paragraph 182.10 is embarrassing because there are no particulars of the enrichment. That is answered by the plaintiffs by saying the enrichment is “the improvement in the value of the securities held by the Fosters Finance Group”. That response in the Schedule should be taken as the giving of a particular, and in the light of that there is, in my view, no embarrassment.
I therefore reject, subject to the above observations in relation to particulars, the challenge to paragraph 182.
There was also an attack on the use of the expression “implicitly threatened” in paragraph 55 of the statement of claim. In response the plaintiffs have asserted that there were particular threats, but that particulars thereof have not been requested. In my view the use of the word “implicitly” makes the pleading embarrassing. If that one word is struck out and particulars of actual threats provided then the pleading will be satisfactory.
An attack was directed to paragraph 57 of the statement of claim as amended. Objection is taken to the pleading in paragraph 57.4 that the defendants “became aware of at least” certain matters. In my view it is embarrassing to plead that the defendants knew “at least” certain things. The pleading should be limited to matters particularised. That particular problem can be overcome by striking out the words “at least” in paragraph 57.4.
However, I am not satisfied that there is any substance to the complaint of the defendants that in paragraph 57 there is a failure to distinguish “between facts known and means of knowledge of those facts”. When the pleading is read as a whole there is ample particularity in paragraph 57; the defendants are made aware of what is in issue. That seems to be borne out by the fact that the defence which has been delivered makes a detailed response to the allegations in question.
Then there is an attack on paragraphs 113 and 114 (as amended) of the statement of claim. In my view the approach of the defendants here is to disregard the context in which the paragraphs appear, and to construe each of them in isolation. When the paragraphs are read with the statement of claim as a whole they are, in my view, intelligible. The defendants are in a position to respond to the allegations. I can see no basis for striking out anything in either of those paragraphs.
There is also an attack on paragraph 123 of the statement of claim. The first point taken is that the reference to the “Emanuel Fosters Directors and Crosby” is embarrassing because by definition Crosby is included in the expression “Emanuel Foster’s Directors”; in consequence it was asserted the pleading is confusing. That, in my view, is a pedantic submission. There was no need for Crosby to be specifically referred to, but by doing so the pleading is not rendered ambiguous or embarrassing. I cannot see there is any substance in the other matters raised by the defendants with respect to this paragraph in its amended form.
The complaint taken by the defendants with respect to paragraph 184 is also answered, in my view, by saying that the argument is based on a reading of the paragraph in isolation from the balance of the statement of claim. When the paragraph is read, as it should be, with allegations in paragraphs 182 and 183 it can be seen that the complaint is without substance. Whether, of course, the plaintiffs ultimately establish a causal connection between the unconscionable conduct pleaded and the transactions in question is another matter.
The defendants also attacked paragraph 204 of the statement of claim. Essentially their complaint is of lack of particularity, but no particulars have apparently been sought with respect to this paragraph. The plaintiffs maintain that further particulars can only be given after the disclosure process has been completed. In my view the alleged want of particularity does not warrant the striking out of the paragraph in question. I have already indicated that particulars should be given with respect to the value of lands transferred pursuant to the DOFR supporting the allegation that the lands were transferred at an undervalue.
Finally attacks were mounted against paragraphs 263, 264 and 265 of the statement of claim. When those paragraphs are read as part of the overall statement of claim they are, in my view, intelligible and not oppressive. Because this is linked to the issues raised with respect to the Queensland judgment Schedule 18 is relevant. I have already indicated that it should be withdrawn and replaced with a more precise and succinct statement of particulars. If that were done, and if the plaintiffs responded to any specific request for relevant particulars, there would be no problem with the paragraphs in question.
Submissions were made that paragraph 43 of the statement of claim did not plead a material fact, and further that the last part (“were available for the benefit of the shareholders of Fosters”) was misconceived. I am of the view that essentially the paragraph does plead a fact which is of relevance. The concluding words, quoted above, are rather vague and general and could be read in a number of ways. Certainly the point the plaintiffs are seeking to make could be more clearly stated. Properly construed the pleading does not, in my view, infringe the proposition that assets and liabilities of a subsidiary are not assets and liabilities of the parent company. But that principle does not mean that the shareholders of the parent company may not ultimately derive benefit (or incur losses) from the assets (and liabilities) of a subsidiary. The pleading really does no more than say that was the situation here.
The written objections in the schedule of complaints addressed a number of other paragraphs in the statement of claim and those issues were not abandoned although they were not made the subject of extensive oral argument. I have considered the following paragraphs in the statement of claim and the complaints made with respect thereto, but have come to the conclusion that there is nothing in any complaint which would call for the paragraph being struck out. The paragraphs in question are: 53, 61, 101, 110, 112, 115, 117, 119, 121, 122, 128, 176, 183, 186, 189, 191, 192, 196, 199, 200, 205 to 211 inclusive, 227, 237, 249, 252, 254, 256, 257, 268 to 272 inclusive, and 273 to 293 inclusive. That is not to say that I regard the wording in each of those paragraphs as in all instances above criticism. Certainly some allegations could have been more clearly or more succinctly expressed; on other occasions it is arguable that the choice of words left something to be desired. But when considered in the overall context of the pleading such criticisms do not, in my view, justify striking out either the statement of claim as a whole or any particular paragraph thereof.
With respect to those paragraphs in some instances the complaint of the defendants would be met by the supply of further particulars, but in most (if not all) instances no such request has formally been made. It is also true that in some instances the plaintiffs have maintained with some justification that further particulars could only be supplied after completion of the disclosure process. The following paragraphs fall into the category where consideration should be given to the provision of further particulars: 61, 112, 122, 183, 186, 189, 191, 192, 196, 199, 205 to 211 inclusive, 237, 252, 254, 256, 257, and 273 to 293 inclusive. I am not suggesting that the defendants could not properly ask for particulars of allegations in other paragraphs.
It follows that the application in so far as it seeks an order that the statement of claim or certain paragraphs thereof be struck out should be dismissed. However, I will hear submissions as to what other orders and directions should be made, including as to costs, in the light of my reasons.
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