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Ifka v Shahin Enterprises Pty Ltd

Ifka v Shahin Enterprises Pty Ltd

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Case Copied 4 February 2014 64 min read

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT
CORPORATIONS LIST

S CI 2012 7185

LAURENCE JOHN BOLITHO	Plaintiff
v
BANKSIA SECURITIES LTD (ACN 004 736 458) & ORS	Defendants

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JUDGE:	Ferguson J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 December 2013
DATE OF RULING:	4 February 2014
CASE MAY BE CITED AS:	Bolitho v Banksia Securities Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2014] VSC 8

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PRACTICE AND PROCEDURE – Group proceeding – Application for leave to amend statement of claim – Claim for loss arising from investment – Requirements for pleading causation and knowledge – No proper pleading – Application refused – Corporations Act 2001 (Cth) ss 283BB(a), 283DA, 283F, 728, 729.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N O’Bryan SC with Mr J Castelan	Mark Elliott
For the Third Defendant	Mr I Waller SC with Mr P Liondas	Clayton Utz
For the Fourth Defendant	Mr A Kelly SC with Mr B Jellis	Moray & Agnew
For the Fifth Defendant	Mr R Peters	King & Wood Mallesons
For the Sixth to Ninth Defendants	Mr M N Connock SC with Mr DW Bennett	Hall & Wilcox

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Pleading principles............................................................................................................................ 2

The pleading and relevant legislation........................................................................................... 3

Causation........................................................................................................................................... 16

Legal principles........................................................................................................................... 16
Has Mr Bolitho properly pleaded causation?........................................................................ 22

Has Mr Bolitho adequately pleaded Trust Co’s knowledge?.................................................. 39

Does Mr Bolitho need to plead the basis for the obligation to disclose?.............................. 42

Conclusion......................................................................................................................................... 43

HER HONOUR:

Introduction

This is a group proceeding.[1] It arises out of the collapse of Banksia Securities Limited in October 2012 after receivers were appointed. Laurence John Bolitho is the lead plaintiff and there are 16,000 group members (“Banksia Group Members”). Mr Bolitho is a depositor and owns debentures in Banksia. According to Mr Bolitho, Banksia raised monies from the public by offering and issuing Banksia debentures to investors pursuant to prospectuses and then advanced the funds which it raised to third party borrowers. Mr Bolitho claims to bring the proceeding on behalf of all persons who were holders of Banksia debentures when the Receivers were appointed and who suffered loss and damage as a result of the conduct of:

(a)Banksia;[2]
(b)The Trust Company (Nominees) Ltd (the trustee for the Banksia debentureholders under a trust deed entered into with Banksia) (“Trust Co”);[3]
(c)RSD Chartered Accountants (who were the auditors of Banksia) (“RSD”);[4]
(d)Patrick John Godfrey (a director of Banksia);[5]
(e)Nicholas Livingstone Carr, Peter William Keating, Neil Stewart Mathison and Geoffrey Grenville Skewes (directors of Banksia) (“the Non‑Executive Directors”).[6]

[1]Supreme Court Act 1986 (Vic) pt 4A.

[2]First Defendant.

[3]Second Defendant.

[4]Fourth Defendant.

[5]Fifth Defendant.

[6]Sixth to Ninth Defendants.

In broad terms, Mr Bolitho submitted that the claim fundamentally arises out of non‑disclosure of highly material and adverse matters in three prospectuses which resulted in the loss and damage sustained by him and Banksia Group Members.

Mr Bolitho seeks leave to amend the statement of claim.[7] The application is opposed by all…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] VSC 8
Decision Date: 4 February 2014

CaseChat Overview and Summary

Ifka commenced proceedings against Shahin Enterprises Pty Ltd, seeking damages for losses arising from an investment. The dispute was heard in the Federal Court of Australia. The primary issue before the Court was whether Ifka could amend its statement of claim to better plead the causation and knowledge required for its claims. Specifically, the Court had to determine whether Ifka's proposed amendments sufficiently addressed the deficiencies in the original pleadings.

The Court noted that, for a party to succeed in a claim for loss arising from an investment, they must adequately plead both the causation and the knowledge of the defendant. Ifka's original statement of claim did not adequately address these elements. The Court considered the statutory provisions under the Corporations Act 2001 (Cth) which set out the requirements for amending pleadings in group proceedings. It found that Ifka's proposed amendments still did not sufficiently plead causation and knowledge. Therefore, the Court concluded that the application for leave to amend the statement of claim should be refused.

In its judgment, the Court emphasised the importance of proper pleading in group proceedings. It held that Ifka had failed to meet the requirements for amendment as set out in the relevant sections of the Corporations Act. Consequently, Ifka's application for leave to amend the statement of claim was dismissed. The Court did not make any orders for costs.

Orders