In the matter of Brickworks Limited v M.H. Carnegie and Co Pty Limited
[2014] FCA 1313
•26 November 2014
FEDERAL COURT OF AUSTRALIA
Brickworks Limited; In the matter of Brickworks Limited v M.H. Carnegie & Co Pty Limited [2014] FCA 1313
Citation: Brickworks Limited; In the matter of Brickworks Limited v M.H. Carnegie & Co Pty Limited [2014] FCA 1313 Parties: BRICKWORKS LIMITED v M. H. CARNEGIE & CO. PTY LIMITED, MHC FUND SERVICES A PTY LIMITED, MHC FUND SERVICES B PTY LIMITED, PERPETUAL INVESTMENT MANAGEMENT LIMITED and RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED; MHC FUND SERVICES A PTY LIMITED, MHC FUND SERVICES B PTY LIMITED and RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED AS NOMINEE FOR RBC INVESTOR SERVICES TRUST IN ITS CAPACITY AS CUSTODIAN FOR PERPETUAL INVESTMENT MANAGEMENT LIMITED; BRICKWORKS LIMITED and WASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED File number: NSD 2387 of 2013 Judge: JAGOT J Date of judgment: 26 November 2014 Legislation: Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth) s 31ADate of hearing: 26 November 2014 Place: Sydney Division: GENERAL DIVISION Category: No Catchwords Number of paragraphs: 17 Counsel for the Plaintiff: I M Jackson SC and D F C Thomas Solicitor for the Plaintiff: King & Wood Mallesons Counsel for the First and Third Defendants: P M Wood and S M Nixon Solicitor for the First and Third Defendants: Arnold Bloch Leibler Counsel for the Fifth Defendant: A J L Bannon SC and I J M Ahmed Solicitor for the Fifth Defendant: Clayton Utz Counsel for the Second Cross-Respondent: N C Hutley SC and D Sulan Solicitor for the Second Cross-Respondent: Baker & McKenzie
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2387 of 2013
BETWEEN: BRICKWORKS LIMITED
PlaintiffAND: M. H. CARNEGIE & CO. PTY LIMITED
First DefendantMHC FUND SERVICES A PTY LIMITED
Second DefendantMHC FUND SERVICES B PTY LIMITED
Third DefendantPERPETUAL INVESTMENT MANAGEMENT LIMITED
Fourth DefendantRBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
Fifth DefendantAND BETWEEN: MHC FUND SERVICES A PTY LIMITED
First Cross-ClaimantMHC FUND SERVICES B PTY LIMITED
Second Cross-ClaimantAND: BRICKWORKS LIMITED
First Cross-RespondentWASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
Second Cross-RespondentAND BETWEEN: RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED AS NOMINEE FOR RBC INVESTOR SERVICES TRUST IN ITS CAPACITY AS CUSTODIAN FOR PERPETUAL INVESTMENT MANAGEMENT LIMITED
Cross-ClaimantAND: BRICKWORKS LIMITED
First Cross-RespondentWASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
Second Cross-Respondent
JUDGE:
JAGOT J
DATE OF ORDER:
26 NOVEMBER 2014
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The interlocutory application (WHSP interlocutory application) filed by Washington H Soul Pattinson and Company Limited (WHSP) on 31 July 2014be dismissed.
2.The interlocutory process (Brickworks interlocutory application) filed by Brickworks Limited (Brickworks) on 22 July 2014 be dismissed.
3.WHSP pay the cross-claimants’ costs of the WHSP interlocutory application as agreed or taxed.
4.Brickworks pay the cross-claimants’ costs of the Brickworks interlocutory application as agreed or taxed.
5.RBC Investor Services Australia Nominees Pty Limited, the cross-claimant in the second cross-claim, be granted leave to file and serve its further amended statement of cross claim in the form set out in annexure “LCB21” to the affidavit of Luke Cameron Buchanan dated 31 October 2014.
6.The matter be listed for further directions at 9.30am on Wednesday 10 December 2014.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2387 of 2013
BETWEEN: BRICKWORKS LIMITED
PlaintiffAND: M. H. CARNEGIE & CO. PTY LIMITED
First DefendantMHC FUND SERVICES A PTY LIMITED
Second DefendantMHC FUND SERVICES B PTY LIMITED
Third DefendantPERPETUAL INVESTMENT MANAGEMENT LIMITED
Fourth DefendantRBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
Fifth DefendantAND BETWEEN: MHC FUND SERVICES A PTY LIMITED
First Cross-ClaimantMHC FUND SERVICES B PTY LIMITED
Second Cross-ClaimantAND: BRICKWORKS LIMITED
First Cross-RespondentWASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
Second Cross-RespondentAND BETWEEN: RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED AS NOMINEE FOR RBC INVESTOR SERVICES TRUST IN ITS CAPACITY AS CUSTODIAN FOR PERPETUAL INVESTMENT MANAGEMENT LIMITED
Cross-ClaimantAND: BRICKWORKS LIMITED
First Cross-RespondentWASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
Second Cross-RespondentJUDGE:
JAGOT J
DATE:
26 NOVEMBER 2014
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Each of the cross-respondents (Brickworks Limited and Washington H Soul Pattinson and Company Limited, referred to below as Brickworks and WHSP respectively) moved on interlocutory applications seeking to summarily dismiss and/or strike out the statements of cross-claim filed by MHC Fund Services A Pty Ltd and MHC Fund Services B Pty Ltd (referred to below as the MHC cross-claim) and RBC Investor Services Australia Nominees Pty Ltd (referred to below as the RBC cross-claim).
The cross-claims involve allegations of cumulative oppressive conduct by WHSP and Brickworks and seek consequential relief under the Corporations Act 2001 (Cth).
In the matter of the MHC cross-claim, I am satisfied that the pleading as it stands is sufficient and that none of the points which have been made against the pleading should be sustained.
First, in terms of the tax ruling, which applies equally to the RBC cross-claim, I accept the submissions which are being advanced for MHC. That is, the cross-respondents may have an effective and substantive defence, but the existence of a defence cannot be converted into any problem with the pleading itself.
I also do not accept that it is incumbent upon the cross-claimants positively to plead the methods by which they contend the tax ruling is not determinative. This is so not only for the reason submitted that the tax ruling is not an impenetrable barrier to the oppression claims, but also it is clear from the pleadings as they currently exist that the cross-claimants rely upon conduct anterior to and separate from the tax ruling as the materials facts which advance the argument of oppression. I am unable to see any basis upon which it can be concluded the pleadings are deficient in relation to the tax ruling. It may be the case that the cross-claimants ultimately fail, but that is a matter for trial rather than a matter for determination on the pleadings.
Next, dealing with paragraphs 37 to 40 of the MHC cross-claim, the value differential point, again I accept what was advanced for MHC that it is not necessary or essential that there be any pleading about the balance of the value differential (that is, the part outside the 10 to 30 per cent lowered value upon which MHC relies). Accordingly, I do not accept that in order to understand the case as pleaded it is necessary for MHC also to identify the source of the balance of the reduced value.
Although I was initially concerned about the relationship between what was pleaded in paragraph 41, in particular 41.1 and 41.2, and paragraph 40 of the written submissions, the ultimate answer to that seems to me to be the one that was given on behalf of MHC. In short, there was no attack made on paragraphs 41.1 or 41.2 of the cross-claim, and that is the case which MHC puts. The pleading is the pleading irrespective of what might be said in paragraph 40 of the submissions about the influence of the non-Millner family directors. The relevant point is that there appears to be no ambiguity in paragraphs 41.1 and 41.2 of the cross-claim. Those paragraphs clearly relate to the composition of the board of each of the relevant companies. Absent some ambiguity in that pleading, I cannot see an argument that the cross-respondents do not know the case they must meet, even though there may be some tension with paragraph 40 of the written submissions.
For these reasons the substantive arguments put against the MHC cross-claim are not sustainable. I am satisfied that the cross-respondents are given effective notice of the case they have to meet by reason of the cross-claim, and there is no reason why that case should not proceed in the ordinary course.
I come then to the proposed cross-claim of RBC. Although that cross-claim contains more issues which were raised by the cross-respondents, I am not satisfied that on any of the bases raised the cross-claim is embarrassing and thereby liable to be struck out or that the facts pleaded do not bear a rational relationship to the alleged arrangement or understanding, either implied or actual, said to exist between the Millner family and the other (non-Millner family) directors.
I deal first with the price differential issue which arises in paragraph 143. I do not accept the submission that there needed to be pleaded either a quantification of the price or a methodology by which the price differential is to be quantified. The material fact is that which is pleaded in paragraph 143, subparagraph (d) - the allegation that the price at which shares in Brickworks are traded is lower than it would be in the absence of the cross shareholding between WHSP and Brickworks. I accept the submission for RBC that anything beyond this is a matter for evidence. At this stage of the proceeding, based on the pleadings, I cannot see any basis upon which it should be said that any of the cross-respondents do not know the case they will be required to meet given the terms of paragraph 143.
Next, there was a series of issues relating to the use of certain terms, which reappear throughout the pleading, the first being that of “customarily act”, it being alleged variously that different persons have “customarily acted” in accordance or consistent with the Millner family (a defined group). In the context of the pleading I cannot see any particular issue with understanding the meaning of “customarily act”. It is clear that what is said is that there has been a consistent pattern of voting in accordance with how the Millner family votes and that is the basis upon which the “customarily act” pleading is put. The relevant case is thereby effectively disclosed. In this regard, I accept also that it is potentially relevant to the oppression case that there are other material facts set out in the pleading concerning the existence and maintenance of the cross-shareholding arrangement between the two companies, Brickworks and WHSP, which are said to form an important part of the context.
I am also not concerned about the repeated use in the RBC cross-claim of the “close or significant connection” said to exist between the other non-Millner family directors and the Millner family. It seems to me again that the material fact is pleaded and any legal significance of the fact, if proved, is properly a matter for the trial. The fact will either be established or not on the evidence and equally the fact will either have some legal significance or it will not, but it cannot be said that the cross-respondents do not know the case which must be met.
I am equally unconcerned by that part of the RBC cross-claim which is based upon the current state of knowledge of RBC. Again, it is not in breach of any rule of pleading to plead facts based upon the current state of knowledge of a party. If the facts turn out to be different, then no doubt that will be relevant at the hearing.
This leaves the essential point of complaint about the RBC cross-claim, which is the existence or otherwise of the arrangement or understanding between the Millner family and the non-Millner family directors. It has been made clear through the course of the hearing today that there is alleged, contrary to what was set out in the answer to a request for particulars, not only an implied arrangement, but also an actual arrangement or understanding that is pleaded in the relevant paragraphs.
Essentially, I accept the submission that the inference that might rationally be drawn from the facts which are pleaded is a matter for the trial, rather than appropriate for dealing with at the interlocutory stage. I am unable to reach any state of satisfaction on the basis of the face of the cross-claim that the inference of an arrangement or understanding is not able to be drawn based on the material facts that are pleaded. I also do not accept the contention that the pleading (of which paragraph 63 and 64 are an example, but is otherwise repeated throughout the cross-claim) enables RBC, in effect, to run any case that it wants to run. The case as pleaded in the RBC cross-claim is sufficiently clear. Without some amendment to the pleadings, that is the case to which the cross-respondents are entitled to hold the cross-claimant. But to conclude that the facts as pleaded are incapable on any view of rationally supporting the inference of an arrangement or understanding as set out for example, in paragraph 63, subparagraph (2A) through to (D) of the cross-claim, seems to me to be a bridge well too far to cross on an interlocutory application.
As a result, I cannot accept the submission that the RBC cross-claim is embarrassing. I do not accept the submission that the cross-respondents are left not knowing the case they have to meet. Again, in common with the MHC cross-claim, the case that has to be met is sufficiently disclosed in the pleading as it currently exists, and the majority of the points that have been made by the cross-respondents will be relevant to the question whether the cross-claimants ultimately succeed or fail on the evidence that is adduced. None of the points seem to me to be sufficiently clear to result in either the striking out of any part of the cross-claims or indeed the summary dismissal of the RBC cross-claim on the basis that it is embarrassing or has no reasonable prospect of success as set out in s 31A of the Federal Court of Australia Act 1976 (Cth).
For these reasons, I am minded to dismiss both interlocutory applications.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate:
Dated: 3 December 2014
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