Forge Group Ltd (in Liq) (Receivers and Managers Appointed) v Clough Ltd
[2021] WASC 136
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FORGE GROUP LTD (IN LIQ) (RECEIVERS AND MANAGERS APPOINTED) -v- CLOUGH LTD [2021] WASC 136
CORAM: LE MIERE J
HEARD: 16 APRIL 2021
DELIVERED : 4 MAY 2021
FILE NO/S: COR 52 of 2019
BETWEEN: FORGE GROUP LTD (IN LIQ) (RECEIVERS AND MANAGERS APPOINTED)
Plaintiff
AND
CLOUGH LTD
First Defendant
CLOUGH OPERATIONS PTY LTD
Second Defendant
KEVIN THOMAS GALLAGHER
Third Defendant
NEIL SIFORD
Fourth Defendant
Catchwords:
Practice and procedure - Particulars - Originating process - Amended statement of claim - Application for order disallowing or striking out amended statement of claim due to new facts - Whether amendments advance new cause of action - Whether amendments are time-barred by Corporations Act 2001 (Cth) - Application dismissed
Legislation:
Corporations Act 2001 (Cth)
Judiciary Act 1903 (Cth)
Rules of the Supreme Court 1971 (WA)
Supreme Court (Corporations) (WA) Rules 2004
Result:
Application to strike out or disallow dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Ms P E Cahill SC & Ms C E McKay |
| First Defendant | : | Dr R C A Higgins SC & Mr A C Willinge |
| Second Defendant | : | Dr R C A Higgins SC & Mr A C Willinge |
| Third Defendant | : | Dr R C A Higgins SC & Mr A C Willinge |
| Fourth Defendant | : | Dr R C A Higgins SC & Mr A C Willinge |
Solicitors:
| Plaintiff | : | Chew & Matthews |
| First Defendant | : | Ashurst Australia |
| Second Defendant | : | Ashurst Australia |
| Third Defendant | : | Ashurst Australia |
| Fourth Defendant | : | Ashurst Australia |
Case(s) referred to in decision(s):
Belgravia Nominees Pty Ltd v Lowe Pty Ltd (2017) 51 WAR 341
Callite Pty Ltd v Peter John Adams [2001] NSWSC 52
Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431
Litmus Australia Pty Ltd (in liq) v Canty (2006) 198 FLR 184
QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2017] QCA 297
R v Hannes (2000) 158 FLR 359
Rayney v The State of Western Australia [No 3] [2010] WASC 83
LE MIERE J:
Summary
On 18 March 2019 the plaintiff, Forge Group Ltd (in liquidation) (Receivers and Managers Appointed) (Forge), by originating process commenced proceedings against Clough Ltd (Clough), Clough Operations Pty Ltd (COPL), Kevin Gallagher and Neil Siford.
By the originating process, the plaintiff applied for orders against the defendants in respect of contraventions, or involvement in contraventions, of provisions of the Corporations Act 2001 (Cth) which prohibit insider trading. The plaintiff's case relates to the sale by COPL of shares in Forge. COPL is a wholly owned subsidiary of Clough. Gallagher and Siford were directors of Forge and officers and directors of Clough and COPL.
The originating process stated the sections of the Corporations Act under which the application was made; that the application was for orders that the defendants compensate the plaintiff for damage suffered by the plaintiff resulting from the defendants' contraventions, or involvement in contraventions, of Corporations Act s 1043A(1) in respect of Division 3 financial products issued by the plaintiff; and that, on the facts stated in the supporting affidavit, the plaintiff claimed relief in the form of compensation for damage suffered pursuant to Corporations Act s 1317HA. The supporting affidavit was an affidavit sworn by Martin Jones, one of the liquidators of Forge (the Jones affidavit. Mr Jones annexed to his affidavit a draft statement of claim (DSOC) which he stated the material facts upon which Forge intended to rely to establish its claims for compensation.
On 20 May 2019 the court ordered that the action proceed on pleadings. On 4 June 2019 the plaintiff filed a statement of claim (SOC) which is in substantially the same terms as the DSOC. On 6 September 2019 the defendants filed a defence. On 4 October 2019 the plaintiff filed a reply.
On 4 February 2021 the plaintiff filed an amended statement of claim (ASOC). The defendants have applied to disallow, or alternatively strike out, the whole or part of ASOC [65], [66], [69], [78], [79], [80] and [96] (the contested amendments) on the ground that they introduce new facts, including inconsistent facts, to those that underpinned the originating process. The defendants submit that the contested amendments advance a new cause(s) of action based on new, and inconsistent, items of alleged inside information and are time‑barred by Corporations Act s1317K, which prescribes a six year limitation period for proceedings for a compensation order.
For the reasons which follow the defendants' application will be dismissed.
The statutory framework
Corporations Act pt 7.10 div 3 creates prohibitions on insider trading. Section 1043A(1) provides that if:
(a)a person (the insider) possesses inside information (ie, the information is not generally available and if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of particular Division 3 financial products); and
(b)the insider knows, or ought reasonably to know, that the information is inside information;
the insider must not:
(c)apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or
(d)procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products.
Division 3 financial products includes securities, which includes shares in Forge.
Section 1043A(1) is a civil penalty provision. Under s 1317HA, where s 1043A(1) has been contravened, the court may order a person to compensate another person for damage suffered by the person where that damage resulted from the contravention. This general compensation provision is supplemented by s 1043L, the effect of which is that a breach of s 1043A may give rise to civil liability to disgorge any profit made by insider trading in a financial product to the issuer of the product.
The contested amendments introduce new, modified or refined facts relating to the 'inside information'. The defendants submit, correctly, that the identified 'information' is an essential integer of any alleged contravention of Corporations Act s 1043A and, consequently, any cause of action under s 1043L. The New South Wales Court of Appeal has held that the 'statutory scheme establishes the central significance of identified "information" in any proceedings for an offence for contravention' of the section.[1]
[1] R v Hannes (2000) 158 FLR 359 [26], made in relation to Corporations Law s 1002G which was in substantially the same terms as Corporations Act s 1043A.
Section 1317K is a limitation provision which provides, in relation to contravening civil penalty provisions, that proceedings for a compensation order may be started no later than six years after the contravention. The parties agree that s 1317K is a substantive limitation provision; it does not merely bar the remedy, it extinguishes the right. As the Corporations Act creates a cause of action that would not have existed had it not been enacted, failure to commence proceedings within the time specified extinguishes the right to a compensation order under s 1317HA.
The defendants' approach
The defendants contend that the contested amendments introduce a new cause(s) of action which is outside the scope of the proceedings constituted by the originating process and the facts deposed to in the Jones affidavit. There are notionally two steps in the defendants' argument. First, the originating process in combination with the material facts deposed to in the Jones affidavit define 'the four corners of the proceedings and form the reference point for whether a cause of action is within the boundaries of the proceedings'. Secondly, the new causes of action are outside the scope of the originating process so defined.
The scope of the originating process
Corporations Act s 1317K requires that proceedings for a compensation order must be started within six years of the contravention in respect of which compensation is sought. The reference in s 1317K to commencing proceedings is to the issue in the appropriate court of an originating application seeking compensation in relation to the contravention.
The plaintiff commenced proceedings in this court in the exercise of its federal jurisdiction. Section 79 of the Judiciary Act 1903 (Cth) applies to a proceeding commenced in this court the applicable law of the State except to the extent to which it is inconsistent with federal laws. The Supreme Court (Corporations) (WA) Rules2004 (Corporations Rules) apply to the commencement of proceedings in this court for compensation in respect of a contravention of s 1043A(1) of the Corporations Act.
Rule 2.2(1) of the Corporations Rules provides that unless these rules otherwise provide, a person must make an application required or permitted by the Corporations Act to be made to the court by filing an originating process. It is the filing of an originating process which commences proceedings and stops time running for the purposes of Corporations Act s 1317K.
Rule 2.2 (3) provides that an originating process must:
(a)be in accordance with Form 2; and
(b)state ‑
(i)each section of the Corporations Act … under which the proceeding is brought; and
(ii)the relief sought.
Form 2 requires relevantly, as 'Details of application', the section number of the Corporations Act under which the application is made and a brief statement 'of the proceeding, eg application for winding up on ground of insolvency; or complaint about a receiver'. The form then says: 'On the facts stated in the supporting affidavit(s), the plaintiff claims: ...'
A supporting affidavit is not part of the originating process. This follows from the description of the affidavit as 'supporting' the originating process and from r 2.4(1) which provides that an originating process 'must be supported by an affidavit stating the facts in support of the process' 'unless the Court otherwise directs'.
Both parties sought support for their respective submissions in the judgment of Justice Barrett in Litmus Australia Pty Ltd v Canty.[2] The plaintiff filed an originating process against the defendants. The plaintiff sought orders on the bases that the defendants had breached their statutory duties under the Corporations Act and breached their general law duties. The originating process was not accompanied by a supporting affidavit. The defendants brought an application to have the originating process struck out on two bases. One was that it was an abuse of process because it was not accompanied by a supporting affidavit deposing to facts material to proof of the allegations central to the claims in the originating process.
[2] Litmus Australia Pty Ltd (in liq) v Canty (2006) 198 FLR 184.
The defendants contended that the supporting affidavit is the vehicle by which contentions of fact which are analogous to pleadings are advanced by the plaintiff and serve the purpose of a pleading. Barrett J agreed that an affidavit may serve the purpose of advancing contentions, but 'generally speaking, an affidavit does not outline a case'. Justice Barrett said that there was no reason why the plaintiff could not and should not have filed a supporting affidavit, and he would be minded to strike out the originating process 'were it not for the significant point that the claims (or some of them) arguably became statute barred in June 2005'.[3] The originating process was not a nullity, it was sufficient to commence proceedings so as to stop time running.
[3] Litmus Australia Pty Ltd (in liq) v Canty (2006) 198 FLR 184 [30].
The essential averments in an originating process are the two matters required by r 2.2(3) and set out in Form 2. The first is each section of the Corporations Act under which the proceeding is brought. The second is the relief sought or a brief statement of the nature of the proceeding, eg application for winding up on ground of insolvency or complaint about receiver, or relevantly in this case:
an application for orders that the defendants compensate the plaintiff for damage suffered by the plaintiff within the meaning of section 1043L(5) of the Act resulting for the defendants contraventions, further or alternatively involvement in contraventions, of section 1043A(1) of the Act in respect of Division 3 financial products issued by the plaintiff
and a statement of relief sought.
In my opinion, a claim of the nature stated in the plaintiff's originating process and brought under the sections of the Corporations Act specified in the originating process is a claim commenced by the originating process.
The claim made by the plaintiff in its ASOC is a claim of the nature stated in the plaintiff's originating process and is brought under the sections of the Corporations Act specified in the originating process. Therefore, the claim made by the ASOC is a claim commenced by the plaintiff's originating process. The claim in the ASOC is in proceedings started no later than six years after the contravention. It is not time-barred.
ASOC claims do not introduce a new cause of action
It is unnecessary to consider the defendants' submission that the causes of action advanced by the ASOC are outside the scope of the originating process in combination with the material facts deposed to in the Jones affidavit. However, if I am wrong and the facts stated in the DSOC are incorporated in the originating process or statements made in the Jones affidavit define the plaintiff's causes of action for the purposes of Corporations Act s 1317K, I find that the causes of action advanced by the ASOC are not outside the scope of the proceedings constituted by the originating process and the facts deposed to in the Jones affidavit, and do not introduce a new cause(s) of action. I will set out briefly my reasons for that finding.
Amending pleadings and limitation of actions
Order 21 r 3(1) of the Rules of the Supreme Court 1971 (WA) (RSC) provides that a party may amend any of its pleadings, without the leave of the court, by filing its amended pleading no later than seven weeks before the date fixed for the start of the trial of the case. The plaintiff filed its ASOC more than seven weeks before the date fixed for the start of the trial and hence the amendment is permitted by the rules.
The doctrine of 'relation back' that assumes an amendment, if allowed, takes effect as if included in the originating process does not apply in Western Australia.[4] A cause of action which has been extinguished is not resuscitated by an amendment of the pleadings to add the new cause of action in proceedings commenced before the new cause of action became time-barred. The defendants submit that the contested amendments introduce a new cause(s) of action which is time-barred, and therefore should be disallowed or struck out.
[4] Belgravia Nominees Pty Ltd v Lowe Pty Ltd (2017) 51 WAR 341.
Because limitation issues are best decided at trial, an amendment will only be disallowed on the basis of a limitation issue in the clearest case. Both the plaintiff and the defendants submit that this is a clear case and urge the court to determine the issue.
The principles concerning allowing pleadings to be amended to include a cause of action that, although not time-barred when the proceedings began, have become so by the time the amendment is sought, are authoritatively stated by the Court of Appeal in Belgravia Nominees Pty Ltd v Lowe Pty Ltd.[5] The court stated that the following principles (amongst others) can now be taken to be established:
(a)limitation legislation, and the defences provided by limitation legislation, operate by reference to the commencement of proceedings in relation to a cause of action, and not by reference to subsequent steps in the course of proceedings, unless that subsequent step is seen as the 'commencement' of a proceeding by the addition of a new cause of action;
(b)if an amendment does not involve the addition of a new cause of action, no question of limitation arises; and
(c)in assessing, as a matter of impression and degree, whether an amendment involves the addition of a new cause of action, the court will not undertake an overly technical and rigid investigation, and will construe an indorsement generously, rather than narrowly.
[5] Belgravia Nominees Pty Ltd v Lowe Pty Ltd (2017) 51 WAR 341.
The court expounded principle (c) in the context of RSC O 21 r 5(5), which has subsequently been repealed. However, it is apparent from the judgment that the principle applies independently of the rule. An amendment to plead additional facts, or existing facts in a different way, will not add a new cause of action if the new or modified facts arise out of substantially the same facts as a cause of action in respect of which relief has already been claimed in the proceeding. Questions of fact and degree are involved in the judgment that has to be made in determining whether the new or modified facts give rise to a new cause of action. A value judgment has to be made as to whether the cause of action asserted by the amendment arises out of the same or substantially the same facts as previously asserted. Each case will depend upon its particular facts and circumstances.[6] In applying the value judgment, the court will not undertake an overly technical and rigid investigation and will construe an indorsement of claim or originating process generously rather than narrowly.
[6] See Rayney v The State of Western Australia [No 3] [2010] WASC 83 [34] (Martin CJ).
Outline of plaintiff's case
In its DSOC the plaintiff asserted that COPL contravened Corporations Act s 1043A by each sale of Forge shares to the purchasers, by reason of the matters pleaded in [74] to [77], [89] and [91] to [94].
DSOC [74] to [77] plead that COPL possessed the information in [78] to [82]. Paragraph 89 pleads that COPL knew that the information pleaded in [78] to [82] was not generally available, and if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of the listed shares in Forge. Paragraphs 91 to 94 plead that COPL sold the shares to the purchasers who did not possess the information pleaded in [78] to [82].
The claim against Clough in the DSOC is that, for the same reasons, Clough procured each sale of Forge shares by COPL to the purchasers.
The claims against Gallagher and Siford in the DSOC are that each of them was involved in COPL's and/or Clough's contraventions of s 1043A of the Corporations Act.
The contested amendments
The contested amendments fall into three categories. The first category of amendments are amendments to [65] to [66] and [69], which the plaintiff describes as Background Amendments. These amended paragraphs form part of the large portion of the DSOC and the SOC that functions both to plead material facts in their own right, and as particulars of the possession of information pleaded in [74] and [75]. The Background Amendments further refine and particularise how Forge says the defendants came to possess (ie know) the inside information pleaded at [78] ‑ [82] which the plaintiff describes as the Information Pleadings.
Paragraphs 65 to 66 and 69 plead facts relating to the management of the Forge Group's material business risks, including the risks arising from its contracting operations, Forge's failure to address those risks and the knowledge of Gallagher and Siford that statements made by directors of Forge about Forge Group's system of risk management were unreliable and incorrect.
The defendants submit that the amendments to these paragraphs are not factual allegations forming the integers of Forge's cause of action. Rather, the defendants say, these are new factual allegations that have been pleaded in order to support those factual integers, namely, the new information pleaded in the Information Pleadings which the defendants describe as the New Information.
The second category of amendments are the amendments to SOC [78] to [81] which plead new, modified or refined facts constituting or relating to the 'inside information' which COPL possessed; which was not generally available; which, if it were generally available, a reasonable person would expect to have a material effect on the price of Forge shares; and which COPL knew or ought reasonably to have known was not generally available and that, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of Forge shares. The defendants refer to these amendments as the New Information Amendments and the information pleaded in those paragraphs as the New Information.
The third category of amendments is [96]. That amendment raises a discrete and narrow point which I will address later.
The Background Amendments
The Background Amendments are made to allegations of fact which underpinned particulars of possession by Gallagher and Siford of the information pleaded in SOC [78] ‑ [80].
The defendants submit that ASOC [65.2] pleads that there was a 'review [of] Forge's risk management processes' in June 2012 which is inconsistent with DSOC [66] and [78] which stated, in effect, that Forge had no risk management system.
The ASOC pleading is different from the DSOC pleading, but it is not inconsistent. It is not, as the defendants submit, implicit in the DSOC pleading that Forge's directors had not designed, documented, implemented or maintained any system for the management of Forge's material business risks, such that Forge had no risk management measures in place at all. The allegation was as to the lack of a system. The plea did not say that there did not exist any individual, disparate entity or activity‑specific risk management measures or procedures within the group that may have existed. It is not implicit in the amended allegation that the directors agreed to review Forge's risk management procedures, that any relevant measures or procedures existed, or were believed to exist, before agreement to conduct a review was reached.
I will not go through every one of the Background Amendments. I find that the facts pleaded by the Background Amendments are not inconsistent with the facts pleaded in the DSOC. I find that they arise substantially from the facts pleaded in the DSOC. The changes do not sufficiently change the formulation of the plaintiff's case so as to amount to a new cause of action.
The New Information Amendments
The defendants submit that the information pleaded at ASOC [78.1], [78.1A], [79.1] and [80.1] (the New Information) is information which is both new and different information to the information pleaded in the DSOC, and that the amendment changes both the content and character of the alleged insider information.
DSOC and SOC [78.1 ] pleaded that in the relevant period:
the Forge Group had not designed, documented, implemented or maintained any system for the management of its material business risks arising from its contracting operations, including the risk that the costs to complete projects that were being carried out by members of the Forge Group under fixed price contracts with external parties could exceed those which would enable forecast, or any, profits to be earned or losses avoided.
ASOC [78.1 ] pleads that:
the directors of Forge recognised the need for the Forge Group to adopt and implement a comprehensive, Forge group-wide risk register and risk management program for the management of its material business risks arising from its contracting operations, and knew that no such register or program had been formally adopted, implemented or maintained; and
The defendants submit that DSOC and SOC [78.1] pleaded a factual matter as to the absence of any risk management system, whereas ASOC [78.1] pleads the directors' state of mind, their alleged recognition of an alleged state of affairs, being the need to adopt a certain kind of risk management program, and an allegation of a separate state of mind directed at a compound factual proposition ‑ the Forge directors alleged knowledge that no 'comprehensive' and 'group‑wide' risk register or risk management program had been 'formally adopted, implemented or maintained'.
The amendment does not change the pleading so as to introduce a new cause of action. When read together with SOC [74] and [75], SOC [78.1] pleaded that Gallagher and Siford possessed information about Forge's risk management to the effect that the Forge Group had not designed, documented, implemented or maintained any system for the management of its material business risks. ASOC [78.1] refines and narrows that plea by alleging that Gallagher and Siford possessed information about Forge's risk management to the effect that the directors of Forge had recognised the need to adopt and implement a comprehensive, Forge-wide risk register and risk management program but had not done so prior to March 2013.
I do not accept that the DSOC pleaded a factual matter as to the absence of any risk management system. The Information Pleadings in the DSOC were pleadings about Gallagher and Siford's state of mind. ASOC [78.1], like DSOC [78.1], particularises the information possessed by Gallagher and Siford in light of the facts alleged in [74] and [75].
ASOC [78.1A] pleads that the directors of Forge sought a proposal for the evaluation of Forge group-wide risks and knew that no such proposal had been provided to them. The new paragraph alleges Gallagher and Siford knew of a related, but differently described, deliverable concerning risk management ‑ the proposed meeting/work plan to evaluate group-wide risks. That knowledge is said to be inferred from the minutes of Forge's board meetings referred to in ASOC [65.2A], [65.2B] and [65.4] and which were relied upon by Mr Jones to support DSOC [65], [66] and [69].
The defendants' assertion that the inclusion of ASOC [78.1A] changes the plaintiff's case so as to introduce a new cause of action is an overly technical and rigid analysis of the plaintiffs causes of action advanced in the DSOC. Approaching the issue generously, rather than narrowly, I find that [78.1A] does not introduce a new cause of action.
DSOC and ASOC [79] plead that Forge made false statements in its 2012 annual report which it relies upon as inside information. DSOC [79.1] pleads two statements or a compound statement with two parts. The first is 'to the effect' that a system had been designed, documented, implemented and maintained for the management of the Forge Group's material business risks. ASOC [79.1] pleads that the directors of Forge had formalised and documented the management of the Forge Group's material business risks. The second part of the statement pleaded in DSOC [79.1] is 'to the effect' that it had been reliably reported to the directors that the system was operating effectively in all material respects in relation to risks relevant to Forge's financial reports. ASOC [79.1] avers that it had been reliably reported to the directors that a sound system of risk management and internal control was operating effectively in all material respects in relation to risks relevant to Forge's financial reports. The descriptions of the statements are different but the substance of the allegation is not sufficiently different to amount to a new cause of action.
Similarly, the changes to [80] do not sufficiently change the formulation of the plaintiff's case so as to amount to a new cause of action.
Paragraph 96
The ASOC amends [96] as follows:
Had some or all of the information pleaded in each of paragraphs 78 to 82 above been generally available on or about 25 March 2013, the price at which the shares in Forge would have been likely to have been sold by COPL on that date would have been substantially less than $6.05 per share.
The defendants submit that the amendment to refer to some or all of the information pleaded in each of the cross-referenced paragraphs is a significant change to the plaintiff's case for the following reasons. There is a material difference between an allegation concerning the cumulative effect of information in an aggregated form and the effect of information in a disaggregated form. The amendments to ASOC [96] would change Forge's case from one relying upon a single, aggregated allegation on the price differential issue, to one advancing a large (and unspecified) number of potential alternative claims with different combinations of separate pieces of information. This is an amendment of a similar nature to that considered in Dye v Griffin Coal Mining Co Pty Ltd.[7]
[7] Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431, 434.
The plaintiff submits that the amendment clarifies but does not change that aspect of the plaintiff's case. The plaintiff says that the purpose of the amendment is to clarify that the information pleaded by Forge at ASOC [78] ‑ [82] is prefaced by the words 'each of' and the amendment is consistent with those preceding paragraphs.
In making the value judgment as to whether the amendment introduces a new cause of action the court will not undertake an overly technical and rigid investigation, and will construe the originating process generously, rather than narrowly. Applying that approach I find that the amendment clarifies the plaintiff's case and does not introduce a new cause of action.
The affidavit in support
In [9] ‑ [13] of his affidavit, Mr Jones sets out:
(a)the 'background to the application' in which he refers to the business of the Forge Group;
(b)transactions by which COPL acquired approximately 33% of Forge's issued ordinary shares and the right to appoint nominees to the board;
(c)that Forge acquired CTEC and COPL increased its shareholding in Forge to just under 36%;
(d)that COPL later sold its entire shareholding in Forge by way of a block trade;
(e)that Forge's shares were placed into a trading halt while Forge investigated concerns in relation to potential underperformance on two power station projects being undertaken by CTEC; and
(f)that Forge subsequently announced a profit write down in connection with those projects which led to the appointment of administrators.
The next section of the affidavit consists of [14] ‑ [20] described as 'the facts in support of the relief sought in the application', including:
[14]As I consider, for reasons I set out later in this affidavit, that Forge's application for the relief sought by way the originating process (Application) should continue on pleadings, I have instructed Forge's solicitors to prepare a draft statement of claim which states the material facts upon which [Forge] intends to rely to establish its claims for compensation under ss1043L(5) and 1317HA of the Act.
[15]I understand that I am required in this affidavit to state the facts in support of the originating process. In order to do that, I have annexed to this affidavit a copy of Forge's draft statement of claim as it stands at the date of this affidavit (which is in substantially the same form as that I intend to file if this Honourable Court makes orders that the Application continue on pleadings) (Draft SOC), which is attached and marked MBJ2.
[16]I believe the facts stated in the Draft SOC to be true on the basis set out in paragraphs 17 to 19 below and in attachment MBJ3 to this my affidavit.
[17]in respect of all of the allegations of fact in parts A-F of the Draft SOC, except the allegations in paragraphs 35, 65.5, 66 and 67, I believe those allegations to be true on the basis of the documents identified in relation to each paragraph in those parts of the Draft SOC in the table that is attached and marked MBJ 3 (Reference Table), true copies of which are in turn contained behind the tabs noted in the Reference Table within the compilation of documents which is attached and marked MBJ 4 (Document Compilation).
In [18] and [19] Mr Jones states the basis for the allegations of fact in [35], [65.5], [66], [67] and parts G-I of the DSOC.
Mr Jones states that the attached DSOC is a draft 'as it stands at the date of this affidavit' and that it is 'in substantially the same form' as that he intends to file if the court orders the application to continue on pleadings. Thus, Mr Jones states that the DSOC is provisional or conditional, and not the certain or final statement of claim on which the plaintiff will rely. Furthermore, Mr Jones annexes to his affidavit documents which support the plaintiff's application.
In relation to DSOC [78] to [82], the reference table states that these paragraphs do not allege any new fact but particularise the information possessed by the defendants in light of the facts alleged in [74] and [75] and the relevant paragraphs referenced in the particulars to those paragraphs which cross reference paragraphs in the DSOC pleading the Background Information. The reference table identifies documents in the Document Compilation that support the allegations in those Background Information paragraphs of the DSOC. The documents include minutes of Forge board meetings and other documents which are capable of supporting the allegations of fact in the contested amendments.
The originating process, together with the supporting affidavit annexing the DSOC and the documents in the Document Compilation, sufficiently allege or disclose the facts and matters that underpin the contraventions alleged in the ASOC.
The defendants contend that the facts or matters stated in the documents in the Document Compilation are not facts asserted in the Jones affidavit. I disagree. Insofar as the documents disclose facts or matters, they are facts in the affidavit on which the plaintiff claims the relief set out in the originating process.
That conclusion is supported by analogy by the authorities concerning the requirements of an affidavit supporting an application to set aside a statutory demand under Corporations Act s 459G. An application to set aside a statutory demand must be filed within 21 days of service of the statutory demand and accompanied by an affidavit 'supporting the application'. In Callite Pty Ltd v Peter John Adams[8] Santow J held that an affidavit filed within time need not expressly state the facts relied upon; it was sufficient that the facts arise from exhibited material. In QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd[9] Holmes CJ and Fraser and McMurdo JJ in a joint judgment of the Queensland Court of Appeal said:
The requirement in s 459G(3) that the application to set aside a statutory demand and the affidavit supporting the application must both be filed within 21 days of the demand itself goes to the jurisdiction of the court to deal with the application. The affidavit must provide support for the application in the sense that it discloses the ground of the application; in the case of an application made in reliance on s 459H, by identifying the dispute. It has been said that it will suffice if that dispute is identified 'expressly, by necessary inference, or by reasonably available inference'. [fn: Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd (2007) 61 ACSR 321 at 326, an approach referred to with apparent approval by the New South Wales Court of Appeal in Infratel Networks Pty Ltd v Gundry's Telco & Rigging Pty Ltd (2012) 297 ALR 372 at 377].
Courts have been prepared to accept that a ground evidenced by a document annexed to the supporting affidavit can properly be said to be raised by the affidavit, [fn Canon Australia Pty Ltd v Yong Bros Pty Ltd [2009] NSWSC 842 at [8]; Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143 at [25]; GoConnect Ltd v Sino Strategic International Ltd (in liq) [2016] VSCA 315 at [40] [52] ‑ [53].
[8] Callite Pty Ltd v Peter John Adams [2001] NSWSC 52.
[9] QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2017] QCA 297.
In my opinion, facts or matters asserted in or disclosed by documents annexed to the supporting affidavit are facts or matters raised by the affidavit. Insofar as the facts stated in the supporting affidavit define or confine the plaintiff's causes of action for the purposes of Corporations Act s 1317K, those facts include facts asserted in or disclosed by the documents annexed to the supporting affidavit.
For that reason as well, the amendments may be allowed without any question of the amendments introducing an extinguished right of action.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
BR
Associate to the Honourable Justice Le Miere
4 MAY 2021
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