Gray v Indianic Diving Services Pty Ltd
[2023] WASC 166
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: GRAY -v- INDIANIC DIVING SERVICES PTY LTD [2023] WASC 166
CORAM: LUNDBERG J
HEARD: 18 MAY 2023
DELIVERED : 23 MAY 2023
FILE NO/S: COR 206 of 2022
BETWEEN: MICHAEL JAMES GRAY
Plaintiff
AND
INDIANIC DIVING SERVICES PTY LTD
First Defendant
INDIANIC SERVICES PTY LTD
Second Defendant
INDIANIC ASSETS PTY LTD
Third Defendant
INDIANIC GROUP PTY LTD
Fourth Defendant
JESSIE LEE STREET PARTNERSHIP
Fifth Defendant
NIGEL DAVID REES
Sixth Defendant
ROSSCOMMON NOMINEES PTY LTD
Seventh Defendant
Catchwords:
Corporate law - Practice and Procedure - Oppression action combined with partnership claims - Application to strike out paragraphs of a Statement of Facts Issues and Contentions document - Nature of a Statement of Facts Issues and Contentions document relative to a formal pleading - Challenge to plaintiff's standing to seek relief under the Partnership Act 1895 (WA) - Allegation that certain paragraphs irrelevant and scandalous - Importance of case management considerations - Paragraphs struck out with leave to replead - Turns on own facts
Legislation:
Corporations Act 2011 (Cth), ss 232 and 233
Partnership Act 1895 (WA), s 46
Property Law Act 1969 (WA), s 126
Result:
Application granted, with certain paragraphs struck out, with leave to re-plead
Category: B
Representation:
Counsel:
| Plaintiff | : | C M Slater |
| First Defendant | : | S Penglis SC |
| Second Defendant | : | S Penglis SC |
| Third Defendant | : | S Penglis SC |
| Fourth Defendant | : | S Penglis SC |
| Fifth Defendant | : | S Penglis SC |
| Sixth Defendant | : | S Penglis SC |
| Seventh Defendant | : | S Penglis SC |
Solicitors:
| Plaintiff | : | Morgan Alteruthemeyer Legal Group |
| First Defendant | : | Bennett |
| Second Defendant | : | Bennett |
| Third Defendant | : | Bennett |
| Fourth Defendant | : | Bennett |
| Fifth Defendant | : | Bennett |
| Sixth Defendant | : | Bennett |
| Seventh Defendant | : | Bennett |
Case(s) referred to in decision(s):
Bell Group NV (in liq) v Insurance Commission of Western Australia [2018] WASCA 179
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
DFD Rhodes Pty Ltd v Hancock Prospecting Pty Ltd [2022] WASCA 97
English v Vantage Holdings Group Pty Ltd [2021] WASCA 47
Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431; (2014) 103 ACSR 137
Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 3] [2021] WASC 260
Kimberley Downs Pty Ltd v Western Australia (Unreported, WASC, Library No 6414, 25 August 1986)
Legal Practice Board v Said (Unreported, WASC, Library No 940003, 12 January 1994)
Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 84 ACSR 121
Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398
Table of Contents
A. Introduction and summary
B. Background
Materials relied upon
Factual context
Originating process
C. Relevant principles
General
The role of the SFIC
D. SFIC [3] and [96] - [98] - Allegations as to the partnerships
Submissions
Disposition
E. SFIC [21], [22] and [23] - Irrelevant and scandalous allegations
Submissions
Disposition
Additional observation as to SFIC [22]
F. SFIC [24] - Allegation concerning the Department of Defence
Submissions
Disposition
G. Orders
ATTACHMENT A
LUNDBERG J:
A. Introduction and summary
These reasons relate to the defendants' application to strike out various paragraphs of the plaintiff's Statement of Facts, Issues and Contentions (SFIC) dated 12 January 2023. The application was brought pursuant to Order 20 rule 19(1) Rules of the Supreme Court 1971 (WA) (RSC) and the inherent jurisdiction of the court. The application was heard on 18 May 2023, at which hearing the defendants were represented by Mr S Penglis SC. Mr C M Slater appeared for the plaintiff.
The defendants' application was originally filed on 6 February 2023, but was sought to be amended shortly before the hearing. At the hearing on 18 May 2023, and in the absence of any discernible prejudice to the plaintiff, I granted the defendants leave to amend the application in terms of the minute dated 17 May 2023, allowing the defendants to challenge [3], [97] and [98] of the SFIC in addition to the originally challenged paragraphs, being [21], [22], [23], [24] and [96].[1]
[1] ts 17.
To put this interlocutory application in context, I observe that the plaintiff seeks various forms of relief in this proceeding pursuant to the Corporations Act 2001 (Cth) (CA), the Partnership Act 1895 (WA) (Partnership Act), and the Property Law Act 1969 (WA) (PLA). The relief arises from the alleged breakdown in the relationship of the parties and their management of the 'Indianic Companies' (as those companies are described by the parties)[2] and a breakdown in a partnership which holds land in Henderson and in Port Hedland.[3]
[2] I will employ the term Indianic Companies in these reasons as a collective reference to the first to the fourth defendants, being Indianic Diving Services Pty Ltd, Indianic Services Pty Ltd, Indianic Assets Pty Ltd and Indianic Group Pty Ltd.
[3] This is the Jessie Lee Street Partnership, which is the fifth defendant to the action. On occasions, the parties refer to this partnership as simply the Jessie Lee Partnership.
In essence, the parties had, many years ago, incorporated these companies and acquired land as part of a business venture which provided services in the nature of moorings, salvage, underwater construction and related matters. It appears the venture began in around 2004.
The relationship between the parties has now deteriorated to the point, according to the plaintiff, that he is being unfairly oppressed and discriminated against and orders should be made, again according to the plaintiff, to facilitate the separation of the parties' interests.
The defendants' interlocutory application does not require the court to express any concluded opinions or findings as to the respective contentions of the parties, or the substantive merits of their claims or defences. I am concerned only with pleading challenges which have been raised by the defendants. In approaching these pleading issues, and speaking generally, I am required to treat the allegations in the pleading as true.
The paragraphs under challenge on this application may be classified in three broad groups. The first group (found in [3] and [96] ‑ [98] of the SFIC) are paragraphs which concern an alleged partnership between the Indianic Companies, which is an allegation that is said by the defendants to not only travel beyond the boundaries of the originating process, but which effectively seeks relief for which the plaintiff has no standing. The second group (found in [21] - [23] of the SFIC) are paragraphs said to be irrelevant to the matters in issue, or scandalous. The final group (consisting only of [24] of the SFIC) is a singular paragraph which is said to raise matters which are wholly immaterial and irrelevant to any of the causes of action or relief sought.
In my view, for the brief reasons that follow, the pleading challenges are sound and should be upheld. I will order that the following paragraphs of the SFIC be struck out, with leave to replead, namely: [3] (part only), [21], [22], [23], [24], [96], [97] and [98] (part only). I provided the parties with a draft copy of these reasons on 22 May 2023 and having heard from the parties, I made orders in the terms set out in [80] on 22 May 2023. In addition, I also gave the parties a short opportunity to make submissions as to whether any passages in the draft reasons should be modified to avoid unnecessary prejudice to any person. Having heard from the parties, I agreed it was appropriate to modify certain passages in my draft reasons and informed the parties I would publish my final reasons on 23 May 2023.
I observe that the SFIC as filed was not signed by counsel or by the solicitor on the record. I apprehend that Mr Slater, who appeared as counsel for the plaintiff at the hearing on 18 May 2023, was not the author of that instrument. As with all pleadings filed in this court, the SFIC ought to have been signed by the lawyer responsible for the document. Order 20 rule 7(5) RSC provides that every pleading of a party 'must be signed by counsel, if settled by him, and, if not, by the party's solicitor or by the party, if he sues or defends in person'. When the amended SFIC is filed and served, it should be signed in accordance with Order 20 rule 7(5) RSC, or by the method indicated in Order 20 rule 7(5A) RSC.
B. Background
Materials relied upon
The materials which were before the court for the purposes of the strike out application consisted of the following documents:
(a)the originating process dated 17 November 2022;
(b)the affidavit sworn by the plaintiff dated 17 November 2022 and the affidavit of Peter Bengtsson sworn on 3 August 2022, both of which were filed in support of the originating process;
(c)the SFIC;
(d)the defendants' reply to Plaintiff's SFIC dated 16 March 2023 (Reply to the SFIC);
(e)the defendant's chamber summons to strike out part of the SFIC, dated 6 February 2023;
(f)the defendants' outline of submissions 20 April 2023; and
(g)the plaintiff's outline of submissions dated 4 May 2023.
Factual context
Drawing upon the background factual material in the affidavit sworn by the plaintiff dated 17 November 2022, and the uncontentious facts contained in the SFIC and the Reply to the SFIC, and to assist in the understanding of these reasons, I have prepared a diagram of the relevant parties and the key interests (Attachment A to these reasons).
As the diagram demonstrates, the parties which hold interests in the companies and in the land holdings are: the plaintiff, the sixth defendant (Mr Rees) and the seventh defendant (Rosscommon Nominees Pty Ltd). The plaintiff and the sixth defendant hold equal shares in Indianic Diving Services Pty Ltd. As to the remaining three of the Indianic Companies, the interests are slightly different, with the plaintiff holding a 40% interest, the sixth defendant holding a 40% interest, and Rosscommon Nominees Pty Ltd holding a 20% interest.
With respect to the Jessie Lee Street Partnership, which holds the land in Henderson and Port Hedland, the plaintiff holds a 40% interest, the sixth defendant holds a 40% interest, and Rosscommon Nominees Pty Ltd holds a 20% interest.
The plaintiff was formerly a director of each of the Indianic Companies, but resigned from that position in about February 2022 with respect to all but Indianic Diving Services Pty Ltd.[4] The other directors of the four Indianic Companies at present are the sixth defendant and Ms Natalie Dawson. Ms Dawson is not a party to these proceedings.
[4] SFIC [39].
Rosscommon Nominees Pty Ltd is a company of which Mr Walter Zorzi is a shareholder and a director.[5] Mr Zorzi is the father in law of the sixth defendant.[6] Rosscommon Nominees Pty Ltd acquired its interest in the Indianic Companies and the Jessie Lee Street Partnership in around 2013, when a former shareholder (Mr Butler) sold his interests.[7]
[5] Plaintiff's affidavit, [47] - [51] and Attachment MG5.
[6] SFIC [5] (table subjoined to this paragraph).
[7] SFIC [20].
In general terms, the plaintiff alleges that the defendants 'adopted a process of making Mr Gray's management of the Indianic Companies increasingly difficult to the point where he could not continue as it affected his health'.[8] The plaintiff contends 'he was and is treated differently to other directors, shareholders, and employees' and his 'day-to-day involvement in the affairs of the Indianic Companies has ended'.[9] The plaintiff complains in these proceedings that he is 'not able to participate in the management of the Indianic Companies, he is not afforded the same access to information in relation to the affairs of the Indianic Companies as is afforded to other shareholders and is not receiving his entitlements as an employee, director, or shareholder either at all in some cases or on a timely basis'.[10]
Originating process
[8] SFIC [2].
[9] SFIC [2].
[10] SFIC [2].
The originating process filed by the plaintiff contains three broad claims for relief, as follows:
1.Pursuant to sections 232 and 233 of the Corporations Act 2001 (Cth) in the circumstances of the conduct of the first four corporate defendant's affairs, or the actual or proposed acts by or on behalf of the first four corporate defendants or a resolution of the first four corporate defendants being contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff it is ordered that:
1.1 The first four corporate defendants be would up [sic - wound up].
1.2 The shares of the first four corporate defendants of the plaintiff be purchased from the plaintiff by the defendants or the relevant first four corporate defendant and if by a relevant first four corporate defendant by an appropriate reduction of that company's capital.
1.3 A receiver and manager be appointed to the first four corporate defendants.
1.4 Other orders as appropriate.
2. Pursuant to section 46(d) or (g) of the Partnership Act 1895 (WA) the partnership constituted by the Jessie Lee Street Partnership be dissolved by reason that:
2.1 The partners other than the plaintiff so conducted themselves in matters relating to the partnership that it is not reasonably practicable for the plaintiff to carry on the business of the partnership with them.
2.2 The circumstances have arisen that render it just and equitable that the partnership be dissolved.
3. Pursuant to section 126 of the Property Law Act 1969 (WA), unless the sixth and seventh defendants or any of them undertake to purchase the share of the plaintiff and on such undertaking being given the plaintiff shall procure a valuation of the Henderson Property and the Port Hedland Property and seek further orders for the sale then the Henderson Property and the Port Hedland Property be sold and the proceeds distributed to the owners according to their proportionate share subject to any further orders for the sale.
As can be seen from the foregoing, the originating process identifies only one partnership, being the Jessie Lee Street Partnership. Relief is sought with respect to this partnership pursuant to s 46(d) and (g) Partnership Act. In relation to the Indianic Companies, the relief which is sought is pursuant to ss 232 and 233 CA. Those are the provisions which afford remedies arising from oppressive conduct. There is no contention or allegation in the originating process that the Indianic Companies were or are being conducted as a partnership, nor that there is some other partnership in existence other than the Jessie Lee Street Partnership.
C. Relevant principles
General
The principles governing strike out applications brought pursuant to Order 20 rule 19(1) RSC, and the inherent jurisdiction of the court, are well established and can be briefly stated. They were summarised in Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398 [60(d)] - [60(j)] (Smith J), and approved by the Court of Appeal in English v Vantage Holdings Group Pty Ltd [2021] WASCA 47 [56] (Murphy, Mitchell and Vaughan JJA) and in DFD Rhodes Pty Ltd v Hancock Prospecting Pty Ltd [2022] WASCA 97 [226] (Quinlan CJ, Beech and Vaughan JJA). The passages below are extracted from the decision of Smith J, with footnotes and citations omitted.
It is well accepted that the court should proceed with caution before striking out a pleading on the ground that it does not disclose a reasonable cause of action. While the court may determine a difficult question of law on such an application, it would usually be appropriate to leave the determination of such questions for trial.[11]
[11] Vantage Holdings Group [60(d)] (Smith J). See also Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431; (2014) 103 ACSR 137 [26] (Beech J).
Further, in alleging there is no reasonable cause of action, the question to be decided is not whether the facts pleaded are in themselves sufficient to give rise to a cause of action. Rather, the correct question is whether it would be open to the party (on its pleadings) to prove facts at the trial which would constitute a cause of action.[12] In this sense, 'reasonable' means reasonable according to law. If the facts pleaded conceivably give rise to relief, then the cause of action should be held to be reasonable.[13] Moreover, the mere fact that a case appears weak is not of itself sufficient to strike out the action.[14]
[12] Vantage Holdings Group [60(e)] (Smith J).
[13] Vantage Holdings Group [60(e)] (Smith J).
[14] Vantage Holdings Group [60(f)] (Smith J).
As a general rule, a party is entitled as of right to have his or her case heard, to have the facts found and then to argue the question of law as it arises before the trial judge upon the facts as found. It is only in cases in which it can be seen from the outset that, however the facts be found, there is no basis for the legal conclusion contended for by the party, that the pleading should be struck out on the ground there is no reasonable cause of action.[15]
[15] Kimberley Downs Pty Ltd v Western Australia (Unreported, WASC, Library No 6414, 25 August 1986).
In considering a strike out application, it is now necessary to consider the role of pleadings in the context of case management techniques. Case management considerations are not, however, necessarily antithetical to the observance of pleading rules. The objects of Order 1 rules 4A and 4B RSC are often promoted by a clear and precise statement of the issues for decision.[16]
[16] Vantage Holdings Group [60(g)] (Smith J).
Provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action (or defence), and apprising the parties of the case that has to be met, the court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleading rules that evolved in, and derive from, a very different case management environment.[17]
[17] Vantage Holdings Group [60(h)] (Smith J).
Pleadings may be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general.[18]
[18] Vantage Holdings Group [60(i)] (Smith J).
Irrelevant or unnecessary pleas in a statement of claim will be struck out on the grounds that they will prejudice, embarrass or delay the fair trial of the action where the defendant must traverse the allegations and, thereby, raise false issues.[19]
The role of the SFIC
[19] Vantage Holdings Group [60(j)] (Smith J).
A SFIC is a pleading within the meaning of the Supreme Court Act 1935 (WA) and remains liable to be struck out under Order 20 rule 19 RSC, as with any other pleading. However, as was explained by the Court of Appeal in Bell Group NV (in liq) v Insurance Commission of Western Australia [2018] WASCA 179, the approach to strike out applications where the instrument under challenge is a SFIC, rather than a statement of claim or a more traditional pleading, should be tempered somewhat:
While I accept that an SFIC is a pleading and subject to amendment, in accordance with O 21 RSC, and strike out, in accordance with O 20 RSC, it is plainly a less formal way of proceeding than conventional formal pleadings and should be viewed for the purpose of amendment and strike out in that way.[20]
A SFIC is a pleading as defined in the Supreme Court Act 1935 (WA), and subject to strike out under O 20 r 19. But in applying those rules, in our opinion, the court should take into account the nature of the document, the considerations that led the primary judge to proceed by SFIC rather than traditional pleadings, and also case management considerations relating to the management of an action of this size and complexity together with the proceedings brought by the liquidators of The Bell Group Ltd and Bell Group Finance (the Liquidator's Application). In the Liquidator's Application, the liquidator applies for orders pursuant to s 564 of the Corporations Law, including orders as to how they are to apply amounts recovered in the liquidation of The Bell Group Ltd and Bell Group Finance. The decision to proceed by SFIC was made to address the number and complexity of the issues, and the potential and actual overlap between this action and the Liquidator's Application.[21]
[20] Bell Group NV (in liq) [9] (Mazza J).
[21] Bell Group NV (in liq) [25] (Le Miere and Allanson JJ).
The present action does not give rise to the size and complexity considerations alluded to by Le Miere and Allanson JJ, and which were unique features of the Bell Group litigation.
In the present case, consent orders were executed by the parties to programme the filing of pleadings in the form of a SFIC and a reply to the SFIC (rather than a statement of claim and a defence).[22] It seems to me, therefore, that the SFIC under challenge in the present proceeding needs to be viewed through the correct prism, as being a less formal instrument than a conventional form of pleading and due allowances should be made in this regard.
[22] Consent Orders made by Master Sanderson on 12 December 2022.
I also recognise this proceeding was commenced in accordance with the Supreme Court (Corporations) (WA) Rules 2004 (WA). Those Rules permit the proceeding to be commenced by an originating process supported by an affidavit (Rules 2.2(1)(a) and 2.4(1)). In an appropriate case, a plaintiff may elect to also file a statement of claim in order to fully articulate the allegations of fact and the relief sought, although that is not a formal requirement of the Rules.
Whilst recognising a degree of flexibility should be permitted in considering the adequacy of a SFIC, relative to a formal pleading, the defendants nonetheless submit that the paragraphs under challenge are objectionable and should be struck out. The plaintiff opposed the application and maintained that the SFIC ought not be struck out in any respect pursuant to any of the grounds raised by the defendants.
In my view, whilst I accept the SFIC is intended to be a less formal style of pleading, the core pleading and strike out propositions which I have extracted from Smith J's decision in Vantage Holdings Group should not be ignored. In particular, case management considerations remain an important touchstone, which as a matter of experience are almost always promoted by a clear and precise statement within a pleading of the issues for decision.
D. SFIC [3] and [96] - [98] - Allegations as to the partnerships
Submissions
I will first turn to the paragraphs which concern the partnership issues. As already noted, the plaintiff's originating process alleges the existence of only one partnership, being the Jessie Lee Street Partnership. In several paragraphs of the SFIC, the plaintiff refers to the existence of an additional partnership, being 'the partnership between the Indianic Companies'. This appears in [3], [7], and [96] ‑ [98] SFIC. Under the heading 'Contentions for Partnership Act relief', the plaintiff alleges in [96] that:
Mr Gray contends that the majority shareholders in Indianic Companies and the Indianic Companies themselves have, in the circumstances set out above, so conducted themselves in matters relating to the partnership business that it is not reasonably practicable for Mr Gray as a shareholder in those companies or the Indianic Companies themselves to continue to carry on the same business in partnership.
The foregoing paragraph includes a footnote, as do most of the paragraphs of the SFIC. Those footnotes are references to either paragraphs of the affidavit of the plaintiff which was filed in support of the originating process, or references to statutory provisions. In the case of [96], the footnote is to s 46(d) Partnership Act.
Section 46 Partnership Act is headed 'Dissolution by court'. The chapeau to the provision states 'On application by a partner the court may decree a dissolution of the partnership in any of the following cases'. The circumstance identified in s 46(d) is:
when a partner, other than the partner suing, wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with him.
The defendants contend that the SFIC fails to disclose a reasonable cause of action or is embarrassing in this respect because the plaintiff is not a partner in the pleaded partnership between the Indianic Companies and thus does not have standing to bring an application for relief pursuant to s 46 Partnership Act.[23] On the face of the pleading, the partners are the corporate entities themselves.[24]
[23] Defendants' submissions [15].
[24] SFIC [7].
Further, the defendants submit the SFIC is objectionable because it relies on the alleged conduct of the sixth and seventh defendants (Mr Rees and Rosscommon Nominees Pty Ltd) in their capacity as shareholders of the first to fourth defendants, being the partners of the partnership.[25] The defendants contend that the conduct of the shareholders in a partner to a partnership (as opposed to the conduct of a partner in a partnership) is not relevant for the purposes of an application under s 46(d) Partnership Act.[26] As a universal proposition, this seems to me to put the matter too high.
[25] Defendants' submissions [15.2].
[26] Defendants' submissions [15.2].
Further still, the defendants complain that it is objectionable for the plaintiff to contend that it is not reasonably practicable for him to continue as a shareholder in the first to fourth defendants. Senior Counsel for the defendants submits that this is irrelevant for the purposes of s 46(d) Partnership Act.[27] That provision employs the language that it is 'not reasonably practicable for the other partner or partners to carry on the business in partnership with him'.
[27] Defendants' submissions [15.3].
The plaintiff responds to the pleading challenge identified above by focusing attention on the status of the plaintiff as a partner in the land-owning partnership (namely, the Jessie Lee Street Partnership). This is, as I have noted, not contested. The plaintiff highlights the contention that the land purchased as part of that partnership was purchased for the purposes of the business of the Indianic Companies. The plaintiff next submits that it is a reasonable contention for relief that he has standing as a partner of the Jessie Lee Street Partnership to seek dissolution of that partnership, 'with the result that the continuation of the Jessie-Lee Partnership's partnership with the Indianic Companies is also no longer reasonably practicable and requires dissolution'.[28]
[28] Plaintiff's submissions [27].
The plaintiff's argument, as I followed it, was next to highlight the wide scope of the relief that may be granted under s 233 CA. The plaintiff submits that the powers in the CA permit the court to make orders for the Indianic Companies to institute specified proceedings under the Partnership Act for dissolution or to restrain a person from specified conduct or requiring a person to do a specified act. The plaintiff relies upon s 233(f), (i) and (j) CA in this regard.
The plaintiff thus submits that, as he is a partner of the Jessie Lee Street Partnership which is operating jointly for profit with the Indianic Companies, the plaintiff arguably has standing to seek the dissolution of the partnership of Indianic Companies.
As to the relevance of the conduct of the shareholders of the Indianic Companies (from a partnership perspective), the plaintiff submits that the conduct of these shareholders (acting through their human agents both formal and informal) is relevantly the conduct of those Indianic Companies. The plaintiff submits that the question of the authority of the human actors for the Indianic Companies is a matter that is better resolved at a final hearing in the context of the whole of the evidence.[29]
[29] Plaintiff's submissions [28] and [29].
Further, the plaintiff submits that his inability to continue as a shareholder of the partners is highly relevant to a claim for relief under s 46(d) Partnership Act.[30] This is for the reason that, once he is no longer a shareholder (because of the allegedly oppressive conduct) there is no reasonable prospect of the partnership continuing, either among the Indianic Companies or between those companies and the Jessie Lee Street Partnership.
[30] Plaintiff's submissions [30].
The plaintiff asserts, in his submissions, that it is not possible to continue 'the whole integrated business of the Indianic Companies'. The plaintiff submits, in resisting the strike out application, that this is a matter to be assessed on the whole of the evidence at a trial.[31]
Disposition
[31] Plaintiff's submissions [30].
The written submissions filed by the plaintiff and the oral submissions advanced by counsel for the plaintiff at the hearing demonstrate that the plaintiff intends to develop a case which is not presently pleaded in, nor apparent from, his pleading. It is also a case which travels beyond the originating process. It would seem the plaintiff wishes to contend that there were three partnerships in existence between the parties, or between some of them.
First, there is the Jessie Lee Street Partnership, which holds the land interests. This partnership is expressly referred to in the originating process and the SFIC, and no objection is raised by the defendants that the plaintiff does not have standing to seek relief in respect of this partnership. It appears to be uncontentious that the plaintiff is one of the alleged partners of this partnership and has the necessary standing.
Second, there is an alleged partnership between the Indianic Companies. This partnership is not referred to in the originating process but is referred to in the SFIC. The plaintiff is not pleaded to be a partner of this partnership. Accordingly, I presently fail to see how the plaintiff can seek the relief he claims in respect of this partnership, under s 46 Partnership Act.
The plaintiff attempts to escape from this difficulty by referring in his submissions, but not within the SFIC, to the availability of relief through the device of s 233 CA. The plaintiff proposes, it would seem, to move the court for orders that the Indianic Companies institute specified proceedings under the Partnership Act for dissolution or to restrain a person from specified conduct or requiring a person to do a specified act. As I have noted, this intention is not apparent from the SFIC itself, nor the originating process.
There is, or at least there may be, a third partnership. This partnership emerges from the relationship between the Jessie Lee Street Partnership and the Indianic Companies.[32] The plaintiff refers in his submissions to 'the whole integrated business of the Indianic Companies'.
[32] Plaintiff's submissions [28].
The primary difficulty with the foregoing, and a sufficient reason for the pleadings to be struck out, is that the plaintiff's claim as it emerged during this strike out application is not apparent on the pleaded case. The disparity between the pleaded case and the case which I apprehend the plaintiff intends to run at trial is so marked as to require the relevant paragraphs to be struck out, and to require the plaintiff to articulate his claim with proper precision.
This is required at least as a matter of fairness to the defendants, but is necessary from a case management perspective as well, recognising that the processes of discovery and exchange of expert and non-expert evidence are yet to occur (and will need to be undertaken within the boundaries of the pleaded claim). The pleading should lay down the framework for the claim which is to be advanced, particularly in respect of fundamental matters such as the partnerships which are to be alleged, the persons who are said to be the partners of those partnerships, and the precise relief which is to be sought (including whether one of those partnerships is not sought to be dissolved directly in this proceeding, but rather is sought to be the subject of dissolution orders which will be sought through separate proceedings). None of the matters to which I have just referred are either matters of pleading nicety or mere form. They are all matters of substance which ought to be carefully identified in the pleading, whether that is a statement of claim or a SFIC.
On the case as presently pleaded in the SFIC, I cannot discern the basis on which the plaintiff has standing to seek relief with respect to the partnership alleged to exist between the Indianic Companies. That is no doubt because the case which the plaintiff intends to advance is not identified in the SFIC. This requires correction.
Further, as I have alluded to above, the matters pleaded in the SFIC concerning a partnership between the Indianic Companies fall outside the boundaries of the originating process. The relevant paragraphs which travel beyond the originating process should be struck out for this reason as well. If the plaintiff intends to maintain these claims, he will in due course also need leave to amend the originating process.
E. SFIC [21], [22] and [23] - Irrelevant and scandalous allegations
Submissions
The defendants submit that [21], [22] and [23] of the SFIC should be struck out because these paragraphs raise matters which are wholly immaterial and irrelevant to any of the causes of action prosecuted or the relief sought by the plaintiff.
Within [21] of the SFIC, the plaintiff alleges that, from 2018, Mr Zorzi insisted on more meetings with the plaintiff and often with Mr Rees. The plaintiff alleges that Mr Zorzi offered his opinions on matters of management, although he was not a director. It is pleaded that Mr Zorzi disrupted the management of the plaintiff of the Indianic Companies and was aggressive towards the plaintiff.[33]
[33] The paragraph includes a footnote, which is to [66] to [85] of the plaintiff's affidavit.
Within [22] of the SFIC, the plaintiff pleads that Mr Zorzi attended a meeting in October 2018 where the plaintiff and two other persons were present. It is alleged they were discussing a project for the Indianic Companies. The plaintiff alleges that, by reason of the conduct of Mr Zorzi at the meeting, the plaintiff was threatened and intimidated by him.[34] In deference to the nature of the matters pleaded in this paragraph, and the fact this is an interlocutory pleading challenge, I will refrain from detailing the precise conduct on the part of Mr Zorzi which is alleged.
[34] The paragraph includes a footnote, which is to [86] to [105] of the plaintiff's affidavit.
Finally, within [23] of the SFIC, there is an overly general allegation pleaded that in the period from October 2018 to 2019 Mr Zorzi raised issues about payments to Mr Rees.[35]
[35] The paragraph includes a footnote, which is to [106] to [110] of the plaintiff's affidavit
The defendants submit that these pleadings raise false issues which may embarrass or delay the fair trial of the action and obscure the real questions in controversy. In part, the defendants' complaint is that these paragraphs make allegations about the conduct of someone who is not and was not a director, employee or other agent of any of the Indianic Companies. I am not persuaded this last point adds anything of significance to the defendants' arguments.
In addition, the defendants complain that [22] is scandalous in that it makes an irrelevant allegation against a non‑party who is not, and was not a director, employee or other agent of any of the Indianic Companies.[36] As to [23], the defendants submit this paragraph fails to confine the issues or state the case with reasonable particularity and is too general.
[36] Defendants' submissions [8], [9], [10.1].
The plaintiff maintains that the conduct of Mr Zorzi may be attributed to Rosscommon Nominees Pty Ltd, one of the shareholders of three of the Indianic Companies. The plaintiff observes that shareholders act through a range of formal and informally appointed human agents, and emphasises that Mr Zorzi is a director and shareholder of Rosscommon Nominees Pty Ltd.
The plaintiff submits that the allegations in [22] concern conduct which occurred at a business meeting of the Indianic Companies, and asserts that the conduct is relevant for the same reasons the matters in [21] are relevant. The conduct is said by the plaintiff to form part of the background to the oppressive conduct which the plaintiff says he has suffered.
Overall, the plaintiff rejects the criticisms of these paragraphs and submits that the SFIC, when viewed in totality and in the context of the affidavit of the plaintiff which has been filed, apprises the defendants of the case that must be met. The plaintiff emphasises that the facts which the defendants challenge in these paragraphs are relevant to conduct which the court will need to assess as relevantly oppressive or unfairly discriminatory in the context of the whole of the matter.[37]
Disposition
[37] Counsel for the plaintiff emphasised in oral submissions the important context which these paragraphs provide in terms of the overall case: ts 33 - 37.
Within the SFIC, the plaintiff sketches out a course of events concerning the parties' history together and the development of the business of the Indianic Companies from 2006 through to 2022, although the focus of the plaintiff's concerns admittedly gains a degree of intensity in the period from November 2021 onwards. It is, however, not surprising that, within an oppression action, the plaintiff seeks to plead some historical events in order to demonstrate how the original foundation of the business has changed over time.
The paragraphs under challenge form part of a broad narrative in the SFIC under the heading 'Management'. The matters alleged in these paragraphs pre-date the particular events which the plaintiff focuses upon in late 2021 and thereafter, which are pleaded at SFIC [33] - [60]. Can it fairly be said these paragraphs are relevant to the causes of action and relief which is pleaded? If these paragraphs are not at least arguably relevant to the claims which are advanced in the SFIC, or if they raise a case in terms which are too general, then they should be struck out, even after giving due allowance to the informal nature of the pleading.
On one view, and perhaps a generous view, these paragraphs form part of the factual background to the plaintiff's oppression claim. The plaintiff complains in this proceeding that the conduct of the affairs of the Indianic Companies were contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff. The matters alleged to have occurred in 2018 and 2019 provide context for the events which followed and show (according to the plaintiff) the changes within management which began in 2018 through the role played by Mr Zorzi.
Mr Zorzi is not a stranger to these proceedings. He is a director and shareholder of the seventh defendant, which is itself a shareholder of three of the Indianic Companies (being the second, third and fourth defendants). I accept he is not a director or employee of the Indianic Companies, but the fact he occupies no specific role in this sense does not elevate the need for the court to be sensitive to the allegations made as to his conduct (as compared to any other person identified in this proceeding).
On my reading of [21] - [23] of the SFIC, the plaintiff is alleging that the role of Mr Zorzi began to change in around 2018 and he became disruptive and aggressive towards the plaintiff. These allegations provide some context, from the plaintiff's perspective, for the later events.
In my view, however, there is a missing component of the pleading insofar as these paragraphs are concerned. It is not enough to say that the matters in these paragraphs provide context or background to the ultimate claims which are advanced. If that were all that was required, oppression actions might permissibly become vehicles for plaintiffs to dredge up the entire history of the company's affairs under the guise of 'context'. Something more is required. There is a need for the conduct which is identified, especially where that conduct is separated in time from the core events, to be expressly pleaded as having a particular impugned effect or purpose, or as forming part of the conduct which is said to have the particular impugned effect or purpose. By this I mean - to refer to, or connect with, the matters in ss 232(d) and 232(e) CA, as well as the matters in ss 46(d) and 46(g) Partnership Act.
Senior Counsel for the defendants submitted that 'something needs to be made of' this conduct. He described the defect in the pleading as being a failure by the plaintiff to pin his colours to the mast.[38] I respectfully agree with this assessment.
[38] ts 52.
The matters in [21], [22] and [23] may well have a logical connection and relevance to the relief which is sought, in that they may have a tendency to evidence or explain the change in the management of the company from 2018 onwards, all of which appears to form part of the plaintiff's oppression complaint. At present, though, it is not possible to so conclude because the pleading offers little more than allegations as to isolated events said to have occurred in 2018 and 2019. The connection between these paragraphs and the claims and relief which are advanced should be made clear and express within the SFIC.
I therefore propose to strike out [21], [22] and [23] of the SFIC. In reaching this conclusion, I am conscious that the factual enquiry which is permitted by s 232 CA can be wide ranging, and the language of the statute is to be read broadly, without imposing judge-made limitations: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [72] (French CJ). Further, it may be the effect of cumulative events which produces the ultimate consequence of oppressive, prejudicial or discriminatory conduct. The conduct as a whole must be considered: Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 84 ACSR 121 [331] (Young JA). All of these propositions may be accepted. Indeed, Senior Counsel for the defendants described oppression actions as being somewhat 'amorphous' in nature. That is a fair description of such actions, in my experience. Nonetheless, a plaintiff advancing an oppression claim must plead how it is alleged the conduct grounds the commercial unfairness which it is contended should be found. Where the conduct is separated in time from the core conduct of the claim, as it is in the present case, the failure to plead the conduct in the manner I have mentioned leads to a pleading that is not properly anchored.
In any event, quite apart from the relevance concern, I consider the allegations in [21] and [23] are imprecise and not properly explained by the matters which are cross-referenced in the plaintiff's affidavit material. These paragraphs should fairly set out the allegations which the plaintiff will maintain at trial. If repleaded by the plaintiff, these paragraphs should be supplemented with greater particularity. Those particulars should identify at least the following matters:
(a)the occasions on which Mr Zorzi is alleged by the plaintiff to have insisted on more meetings and the additional meetings which are alleged to have been held as a result;
(b)the matters on which Mr Zorzi offered his opinions;
(c)which payments were being raised by Mr Zorzi and when did he raise the issues in question; and
(d)most importantly, how it is alleged these matters are connected to the causes of action pleaded and the relief which is sought.
As presently pleaded, there is a risk that the allegations in these paragraphs may lead to a disproportionate focus on the two year period which these paragraphs cover (i.e. the period from 2018 to 2019), in terms of future interlocutory steps in this proceeding. This risk should be avoided or minimised if possible.
Additional observation as to SFIC [22]
I wish to make an additional observation about the allegations in [22] of the SFIC. I recognise that the matters in [22] will be of particular concern to Mr Zorzi. Oppression actions can, and often do, give rise to allegations as to the conduct of business people and involve personal attacks. This can occur when business relationships break down and former business associates seek to persuade the court that relief should be granted in their favour as a result of unfair, improper, unlawful, or overbearing conduct of some description.
It is important to remember though that, at present, the court is faced with an untested allegation concerning the events which the plaintiff contends took place at a business meeting in October 2018. I am proposing to strike out this paragraph with leave to replead. If an adequate pleading is filed in due course, Mr Zorzi will be entitled to respond to the allegations in the usual way.
I repeat that these are merely untested allegations at this stage. As this is a pleading challenge, I must assume the matters in the paragraph are true, and assess their relevance accordingly. In my view, although I consider the matters in [22] should be struck out for the reasons expressed above, I would not characterise the matters in [22] as rising to the level of scandalous allegations.[39]
[39] As to the test for whether a pleaded allegation is scandalous, I refer to the statement of Seaman J in Legal Practice Board v Said (Unreported, WASC, Library No 940003, 12 January 1994) (Seaman J) 3, quoted recently by Hill J in Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 3] [2021] WASC 260 [61] (Hill J).
F. SFIC [24] - Allegation concerning the Department of Defence
Submissions
The defendants submit that [24] of the SFIC should be struck out for similar reasons to [21] - [23].[40] The plaintiff submits that this paragraph identifies matters which are relevant and provides context for the whole of the matter. The paragraph pleads:
24. In about 2019 Mr Gray developed contacts with the Department of Defence. Obtaining clearance for some work was difficult given the third parties connected to businesses outside of Australia who were associated with the shareholders other than Mr Gray.
Disposition
[40] Defendants' submissions [11].
The matters raised in [24] relate to the work undertaken by the plaintiff concerning the Department of Defence. The extent of the paragraph is that the plaintiff had some, unstated, difficulty in obtaining clearance for this work by reason of some, unstated, association between either or both of Mr Rees and Rosscommon Nominees Pty Ltd and certain unnamed businesses outside Australia which were in turn connected to certain unnamed third parties. To describe this paragraph as enigmatic would be an understatement.
The paragraph should be struck out. It is embarrassingly vague and gives no real insight into how the allegations are relevant to any of the claims pleaded or the relief sought. The allegations in the paragraph may well provide some overall context to the plaintiff's claims, but I cannot reach that conclusion on the strength of this paragraph as presently pleaded.
G. Orders
The orders I made on 22 May 2023, having heard from counsel on that day, were:
1.Pursuant to Order 3 rule 5 RSC, the time for filing and serving the chamber summons seeking orders to strike out paragraphs of the plaintiff's Statement of Facts, Issues and Contentions dated 12 January 2023 (SFIC), be extended to 6 February 2023.
2.Pursuant to Order 21 rule 7 RSC, the defendants have leave to amend the chambers summons dated 6 February 2023 in the form of the minute of amended chambers summons dated 17 May 2023.
3.Pursuant to Order 20 Rule 19(1) RSC, the following paragraphs of the SFIC be struck out, with leave to replead:
(a)paragraph 3 (as to the words 'the partnership between the Indianic Companies');
(b)paragraph 21;
(c)paragraph 22;
(d)paragraph 23;
(e)paragraph 24;
(f)paragraph 96;
(g)paragraph 97; and
(h)paragraph 98 (as to the words 'the partnership between the Indianic Companies').
4.Within 14 days of the date of these orders, the parties should confer as to the timing for the filing of the plaintiff's amended SFIC and as to any application for leave to amend the originating process dated 17 November 2022.
5.The plaintiff forthwith pay the defendants' costs of and incidental to the application, to be taxed if not agreed.
ATTACHMENT A
DIAGRAM OF RELEVANT PARTIES AND INTERESTS
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SAO
Associate to the Honourable Justice Lundberg
23 MAY 2023
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