International Pacific Seafoods Inc. v Georgetown Fisheries P/L

[1993] FCA 908

JUDGMENT No. .....

@ )

GENERAL DIVISION	)	NO QG 170 of 1992
QUEENSLAND DISTRICT REGISTRY

BETWEEN:  INTERNATIONAL PACIFIC SEAFOODS INC.
(First Applicant)

AND:  SHRIMP-CO PTY LIMITED

(Second Applicant)

AND:  GEORGETOWN FISHERIES PTY LTD

(First Respondent)

AND:  MANTZARIS FISHERIES PTY LTD

( Second Respondent)

AND:  PETER MANTZARIS

(Third Respondent)

AND:  STEVEN MANTZARIS

(Fourth Respondent)

AND:  IRENE MANTZARIS

(Fifth Respondent)

-:  Ryan J

Place: Brisbane

Date :  8 December 1993

paragraphs 13, 14 and 46 of the statement of claim.

MINUTE OF ORDERS

TKE COURT ORDERS:

1. That liberty be reserved to the respondents to apply, if so advised, on not less than 72 hours notice in writing to the applicants for a stay of so much of the proceeding in this Court as involves the matters alleged in

2. That the applicants file and serve within 28 days of this order further and better particulars of their statement claim in response to paragraphs 23 and 24(d), (e), (g) and (h) of the respondents' request therefor dated 15

February 19 9 3.

1. That the amended motion on notice filed on 31 May 1993 be otherwise refused.

4.    That the second, third, fourth and fifth respondents pay two-thirds of the applicants' costs of and incidental to the said motion on notice, such costs to be taxed in default of agreement.

NOTE :	Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA	)
1
GENERAL DIVISION	)  NO QG 170 of 1992
)
QUEENSLAND DISTRICT REGISTRY	1

BETWEEN:	INTERNATIONAL PACIFIC SEAFOODS INC. (First Applicant)
AND:	SHRIMP-CO PTY LIMITED

(Second Applicant)

AND:  GEORGETOWN FISHERIES PTJl LTD

(First Respondent)

AND:  MANTZARIS FISHERIES PTY LTD

(Second Respondent)

AND:  PETER MANTZARIS

(Third Respondent)

AND:  STEVEN MANTZARIS

(Fourth Respondent)

AND:  IRENE MANTZARIS

(Fifth Respondent)

Coram:  Ryan J

Place: Brisbane

Date :  8 December 1993

REASONS FOR JUDGMENT

Rvan J: By their application filed on 16 November 1992, the applicants seek damages and other relief from the various respondents against whom several causes of action have been pleaded, including breach of contract, breach of trust, contravention of Part V1 of the Trade Practices Act, deceit, conversion and breach of s.233 of the Corporations Law. The statement of claim alleges that the first respondent, Georgetown Fisheries Pty Ltd ("Georgetown Fisheries") was the

trustee of the Georgetown Fisheries Unit Trust ("GFUT")
pursuant to which the applicants, which were shareholders in
Georgetown Fisheries, were unit holders. The trust was
apparently established to carry on the business of a fish
processing factory at Georgetown in Tasmania which had
formerly been conducted by the second respondent Mantzaris
Fisheries Pty Ltd ("Mantzaris Fisheries").

It is alleged in the statement of claim that Mantzaris Fisheries has at all times conducted its own fish processing business at Geelong in Victoria. It then seems to be alleged by paragraph 24 of the statement of claim that an undertaking was given to the applicants by the third and fourth respondents, Peter and Steven Mantzaris, that in the event of a shortage of fish for processing, priority would be given to Georgetown Fisheries to allow it, as far as possible, to maintain a high level of production. It is further alleged that Mantzaris Fisheries and the Mantzaris family agreed to

manage the processing operation of Georgetown Fisheries for a	fee of 10 cents per kilogram of fish processed.
The statement of claim goes on to plead that in breach of the undertaking as to priority and the management agreement, approximately 43 metric tons of whole fish were shipped to Geelong between December 1990 and March 1991 for processing by Mantzaris Fisheries instead of being processed by Georgetown Fisheries. An allegation of fraud is then contained in
paragraphs 36 to 39 of the statement of claim which are in the following terms:

"36. Between the months of July 1990 and September 1991 105,192 kg.

of nett frllet weight of processed fish fillets, the property of the Second Respondent or others in assocratron wrth the Second Respondent, was processed by the Georgetown Plant operated by the First Respondent as trustee for the GFUT.

37. The sard frsh fillets were later resold by the Second, Thlrd, Fourth and Fifth Respondents at a proflt wrthout any proper accountrng or rndeed any accountrng at all to the First Respondent or the beneficiaries of the GFUT.

38. such processing was carried out wlthout the proper authorrty of the directors of the First and Second Applicants or Rodger John Crossman as the representatrve of such Applrcant or without the knowledge of Rodger John Crossman a Director of the First Respondent.

39.	(a)	Such processing was fraudulently concealed by the Second, Third, Fourth and Fifth Respondents from the sard Rodger John Crossman who had been appointed as the Applicants' representatrve and the records of the Georgetown Plant and the GFUT were falsrfied to cover that fact by them and the processing was not disclosed to the said Rodger John Crossman despite therr duty to do so;
(b)	Such processing was carried out at the direction of the Fourth Respondent at the Georgetown Plant m concert wrth the Second, Thrrd and Frfth Respondents wrth the fraudulent intention to the extent that the First Respondent as trustee of GFUT should not be paid proper remuneration for the use of rts fish processing servaces."

On 6 April 1993, a defence and cross-claim was filed on behalf of all respondents. The defence commences with this paragraph:

"1. They deny that the Applrcants have standing to sue on behalf of

the shareholders of the First Respondent. The shareholders of the First Respondent have not authorised the Applicants to commence this proceeding. The First Respondent has not authorised the Applicants to commence this proceeding."

The cross-claim alleges that one Crossman, an agent of the applicants was retained by Georgetown Fisheries to provide financial and accounting advice and, by various breaches of that retainer, caused loss and damage to Georgetown Fisheries.

By an amended motion on notice filed on 31 May 1993, the respondents have sought the following orders:

"1. That International Pacrf ic Seafoods Inc. Ltd. ( " the F i r s t

appl icant") provide secur i ty fo r t h e c o s t s of t h e Respondents

rn t h r s proceedmg.

2 . Declarrng t h a t t h e a p p l ~ c a n t s have no standing t o br ing t h i s

proceedrng	on	behalf	of	t h e	shareholders	of	t h e	F r r s t
Respondent.

3 . Declarrng t h a t t h e Applicant a r e unable t o b r ~ n g any ac t ion i n

t h i s proceedrng agains t t h e F r r s t Respondent.

4.          That t h i s proceedrng be permanently stayed agains t t h e F i r s t Respondent pursuant t o t h e Arbrtratron Clause contained i n t h e Trust Deed of 4 th June, 1987 t o whrch t h e F i r s t Respondent and

t h e Applicants a r e pa r t r e s .

5.          That paragraphs 37, 39 & 48 of t h e Applicants ' Statement of claim f i l e d i n t h r s proceeding be s t ruck out a s f a i l i n g t o

provide p a r t i c u l a r s of fraudulent conduct o r dece i t a s required

by t h e Rules."

It is convenient to deal separately and in order with each of the four issues raised by those paragraphs.

SECURITY FOR COSTS The first applicant is incorporated in the United States of America where it carries on business. It is not registered in Australia as a foreign company. It is asserted that it has no assets in Australia where its commercial activities are	carried on solely through the agency of the second applicant	or Mr Crossman.
The discretion conferred by s.56 of the Federal Court of
Australia Act 1976 is a wide one and is not necessarily
exercised in favor of a respondent where an applicant is resident, or carries on business outside the jurisdiction. See eg Energy Drilling Inc v Petroz NL [l9891 ATPR 40-954 per Gummow J at 50,422. That is so, even though residence outside Australia is one of the pre-conditions for the making of an order for security specified in 0 . 2 8 r. 3 of the Federal Court Rules; CBS Records Australia Limited v Telmark Teleproducts
(Aust) Pty Ltd ( 1 9 8 7 ) 72 U R 270 at 285.
The present application has not progressed far through its interlocutory stages and I do not regard any delay in making the application as of such magnitude, that, of itself, it would disentitle the respondents to an order for security. I am unable, on the present state of the evidence to form an impression of the respective prospects of the applicants and the respondents for success in the action. In these circumstances I am persuaded to exercise my discretion adversely to the application for security by the fact that the second applicant is incorporated in Australia and carries on business here. There is no suggestion it has insufficient assets to meet any order for costs which might be made in favour of the respondents. Accordingly, this case attracts the application of the principle which was distilled in these
terns by Connolly J, with whom the other members of the Full Court agreed, in Harpur v Ariadne Australia Limited [l9841 2

"Against t h i s background, what i s t h e r u l e where t h e r e is more than

one p l a i n t i f f ? In such a case, a l l p l a r n t i f f s suing i n t h e same

i n t e r e s t and by t h e same s o l i c i t o r s and counsel, t h e r e i s but one set

of cos t s . I f t h e defendants have an opponent who i s worth powder and

sho t they have as much a s any l i t i g a n t is f a i r l y e n t r t l e d t o . The cour t cannot by i ts orders guarantee a successful outcome i n a p r a c t i c a l sense t o any party. It is thus no answer when s e c u r i t y f o r c o s t s i s sought t o say t h a t a person of apparent substance may be ab le t o make away with h i s a s s e t s wi th in t h e ju r i sd ic t ion before a

judgment	f o r c o s t s can be executed:	Re Apol l ina r i s Company's	Trade
Marks [l8911 1 Ch.	1 per Lord Halsbury LC	a t p.3	s i t t i n g i n t h e Court

of Appeal. The "two plaintiff" cases start with the Srtuation in which one is out of the jurisdrction. Prima facie he ought to be ordered to provide securrty but his CO-plaintiff is withrn the 3~rrsdictron. In such a case at was considered that there was no ground for ordering security. See Sykes v Sykes (1869) LR 4 CP 645 at p.648 per Byles J and Montague Smith J. This principle was held to apply even where the plaintiff within the jurisdictron was insolvent. I take the underlying reason to be that the defendant was really in no worse positron than if he had been sued by a ssngle plarntiff resident wrthrn the jurisdrctron and insolvent. AS Brett J remarked at p.650, the cases show that, unless there rs ground for making an order for security against all the plaintiffs, ~t cannot be made aga~nst any. One of the earlier cases was McConnell V Johnston [l8011 1 East 431; 102 ER 167 where rt was held that if one of the plaintiffs ressde wsthrn reach of the process of the court, security will not be required for the costs although the other plaintsff be a forergner residrng abroad and though the first mentioned plarntiff be

a bankrupt in execution for debt. In D'Hormusgee v Grey (1882) 10

QBD 13 the same result was reached by Denman and Manrsty JJ affirming Cave J in an actron brought against a defendant as a common carrrer by two plaintrffs, one resident abroad. The statement of claim alleged a contract by the defendant wrth the plaintrffs jointly and rn the alternative wrth each of the plaintiffs separately. Although their Lordships cited no authority both referred to the practice in relation to security for costs before the Judicature Act. The critical point was that each plaintiff was liable for the whole of the defendant's costs. Now m John Bishop (Caterers) L t d v National CInlon Bank Ltd [l9731 1 All ER 707 Plowman J made an order for security agarnst a company although there was a CO-plaintiff within the jurisdiction who was a natural person. HLS Lordship d~strnguished the earlrer cases on the footing that there was in those cases a Complete overlap as he put rt of the causes of actron. Accordrngly, as he was not satisfred that the natural person would necessarrly be ordered to pay all of the defendant's costs he ordered security. That is concededly not thrs case."

Reference was made by Mr Robert Miller of Counsel for the respondents to Slazengers Ltd v Seaspeed Ferriers International Ltd [l9871 3 All ER 967 where there were over one hundred plaintiffs being shippers or consignees of cargo

An alignot share of the estimated costs of the defendants was	lost when a vessel owned by the defendants capsized and sank.
ordered at first instance to be paid by each of the foreign plaintiffs. That order was set aside by the Court of Appeal for reasons which were stated as follows by Dillon LJ at 970 and 971:

"If therefore the case in which security is sought, where there are some English plaintiffs and some foreign plaintiffs, was a case where there was a realistic possibrlity that the court at the trial might make an order if the plaintiffs failed, orderrng each merely to bear an aliquot share of the costs, an order such as Webster J made ordering security for aliquot shares of the costs would in my view be highly appropriate. My difficulty in this case, however, is in marrying that order to the way this case is constituted.

The foreign plaintiffs are some of them the consignees of cargo shipped by United Kingdom shippers, and I cannot see how m those cases there is any likelihood of an order for costs being made against the foreign consignees and not against the Englrsh shrppers. The two have ~oined in the action to cover the questron of trtle to

use. If they fail, both wrll be the subject of an order fo costs rather than lust the foreign consrgnees.

There being the jurisdrction to make an order for securrty as there are CO-plarntrffs outside the jurrsdrctron, and it not being a case in whrch rssues affecting only the CO-plaintiffs outsrde the 3urrsdiction can be easrly identified, or in which there is in my view any lrkelrhood of the court ordering each rndrvidual plaintrff to bear an alrquot share only of costs, is it right that there should be an order somewhat Ln the way of a blunt instrument for the provrsion of aliquot shares for security, or is thrs a case in which security is not really requrred by the defendants because it is a case in whrch, if they succeed, they wrll be bound to get an order for costs agarnst plarntrffs resrdent withrn the jurisdiction? There is no suggestion that the plaintiffs within the lurrsd~ctron, wrth or wrthout the support of their underwrrters, would not be able to meet any order for costs that mrght be made. They include several

apparently very substant~al companies.

I have no doubt in these circumstances that the form of order which the judge made rs inappropr~ate to this action. It is an underwrrters' actron in which the plaintrffs stand together as I have said, and it rs plarn that if when matters come to trial the plarntiffs fail and the defendants are entitled to an order for costs they are bound to get it as agarnst plaintiffs within the jurisdiction as well as against the plaintiffs outside the jurisd~ctron. Therefore, whrle I entirely approve the judge's decision that he is not limited by an inflexrble rule as stated hrtherto rn The Supreme Court P r a c t x e , I think he was wrong to order the security which he did order."

It will be apparent, therefore, that the Court of Appeal did

by Connolly J in the passage from Harpur v Ariadne Australia	not regard the case as coming within the exception identified
Limited which is quoted above. Likewise I do not regard it as a reasonable possibility that this Court might make an order if the applicants failed, making the second applicant liable for something less than the whole of the costs to be awarded to the respondents. Moreover, the refusal of the present application for security would provide another cogent reason for declining to make an order of that kind.
For these reasons, the respondents' application for security for costs is refused.
STANDING OF APPLICANTS TO SUE ON BEHALF OF THE SHAREHOLDERS IN GEORGETOWN FISHERIES The criticism is made on behalf of the respondents other than the first respondent, Georgetown Fisheries, that the applicants have purported to sue on behalf of Georgetown Fisheries, without having any authority from that company, its directors or shareholders to do so. In that context it is contended, first, that it is not clear whether the proceeding, to the extent that it has been brought on behalf of Georgetown Fisheries, is by way of a representative action or a derivative action. However, it is clear that no attempt has been made, in formulating either the application or the statement of claim, to frame the proceedings as a representative action pursuant to 0.6 r.13 of the Rules of this Court.
brought by way of a derivative action which is permitted as Moreover, the applicants expressly assert that their claim is
falling within an exception to the rule in Foss v Warbottle (1843) 2 Hare 461; 67 ER 189. Accordingly, I am content to assess the standing of the applicants solely on that basis without regarding them as bringing a representative action.
In an affidavit sworn 29 April 1993, the third respondent, Peter Mantzaris, has sworn, amongst other things, that:

"12. The shareholders in the First Respondent are:

(a) myself as to 245 shares;

(b)	the First Applicant as to 192 shares;
(c)	the Second Applicant as to 43 shares.

13.    The D~rectors of the Flrst Respondent are myself and Mr Rodger Crossman of 29 Limetree Parade Runaway Bay in the State of Queensland.

14.    At no time has any rneetlng of Directors been convened for the purpose of in~t~ating the actlon brought by the Applicants in this proceeding or to authorise any other person to brrng thrs action or any other action on behalf of the Flrst Respondent or

any of the shareholders of the F ~ r s t Respondent.

15.    At no time has a meeting of shareholders been convened for the purpose of init~ating the action brought by the Applicants in this proceedrng or to authorise any other person to bring this action or any other actlons on behalf of the Frrst Respondent

or any of the shareholders of the F ~ r s t Respondent."

By way of reply to that ev~dence Mr Crossman has, on 15 June 1993, sworn an affidavit deposing that the shareholdings in Georgetown Fisheries is as set out in paragraph 15 of the affidavit of Peter Mantzaris just quoted. Mr Crossman then goes on to exhibit to his affidavit minutes of a general meeting of Georgetown Fisheries held on 14 September 1992 in

Mr Crossman, a Paul Kelly "Representative Shrimp CO &	Sydney. Those minutes show that the meeting was attended by
International Pacific Seafoods" and a Richard Berry "representing Mr P. Mantzanis" (sic). So far as relevant the minutes recite:

"Discrepancies were found by Mr Benson that showed excess fillets produced which amounted to about 105,000 kilos. In addition analysis of offal dumped showed that about 110,000 kg of excess fillets were produced. A copy of the offal report was handed to Mr Berry which would be handed down for comment.

Mr Crossman stated that he believed that the company processed fish

which it did not own and that the frsh was distributed and money made from this not paid to the company. The company has been disadvantaged as a result of Steve Mantzanis' mismanagement as well as the mismanagement of other officers of the company.

PROPOSED MOTION: A motion was presented to take actron against the officers of the company responsrble. A motron was tabled proposing

action to be taken. The grounds for thrs action read as follows:

(1) Damages as a result of unfair trading practrces together with

damages for mrsleadrng and deceptrve conduct;

( L ) Damages for breach of contract;
(irr) Damages for decert;
(iv) Damages for conversron;

(v ) Damages for breach of their obligatrons to the unitholders for

breach of therr obligatrons to the company and to the unitholders of
the Trust.

Mr Berry rejected this motron on behalf of Mr Mantzanis.

Was also suggested that a meetrng should be tabled between directors whereby Mr Crossman stated that this was almost impossrble as a suitable meeting location could not be agreed upon - Mr Mantzanrs wrll only meet in Geelong which rs inconvenrent for Mr Crossman."

Also exhibited to Mr Crossman's affidavit is a transcript of

the meeting of 14 September 1992. By a further affidavit

sworn 22 June 1993 MI: Peter Mantzaris has contended that the

minutes quoted above do not accurately reflect the proceedings

of the meeting of 14 September as recorded in the transcript

which it is deposed:

was tabled by Mr. Crossman and the lack of ability by myself or any	".... clearly demonstrates the lack of notice of documentation which
other Respondent to assess and respond to that documentation in the context of that meetzng; the exhibit demonstrates the vagaries of the proposed resolution and the uncertainty as to what action was actually contemplated and against whom by Mr. Crossman; and the exhibit demonstrates the flimsy endeavours by Mr. Crossman to have the issues raised by hrm resolved outside the context of that particular meeting. I believe that Mr. Crossman was through the medium of the meeting referred to in Paragraph 24 of his Affidavit aforesaid seeking to obtain open approval to have an indefinite action taken by him through Georgetown Fisheries Pty. Ltd. against Respondents of his choice and the motion was quite properly rejected.
I respectfully submit that the said meeting was convened by Mr.
Crossman as an artificial formality in order to create a basis for endeavouring to bring action in some type of representative or derivative nature."

I agree with the submission of Mr Thompson of Counsel for the

applicants that the question of standing has to be decided only provisionally at this stage on the assumption that the facts alleged in the statement of claim are correct; see e.g. Hurley v BGH Nominees Pty Ltd (1982) 6 ACLR 791 per King C. J. at 794-5 and Enomanga Hydrocarbons N.L. v Australis Mining N.L. (1988) 14 ACLR 486 at 490-491.

Approaching the matter in that way it is necessary to observe that notwithstanding the general rule in Foss v Harbottle that the proper plaintiff in an action for a wrong done to a company is the company itself and not a member or group of members, an exception is recognized where the cause of action involves unfairness, prejudice or oppression to the shareholders or a group of them on which the company, through its directors, will not sue. As noted by the Court of Appeal in Prudential Assurance CO Ltd v Newman Industries Ltd 119821 Ch 204 at 211: applying the judgment of Jenkins L.J. in Edwards vHalliwell [l9501 2 All E.R. 1064:

"(5) There is an exception to the rule where what has been done

company. In this case the rule is relaxed in favour of the aggrieved	amounts to fraud and the wrongdoers are themselves in control of the
minorzty, who are allowed to brrng a minority shareholders' actzon on behalf of themselves and all others. The reason for this is that, if they were denied that right, their grievance could nevez reach the court because the wrongdoers themselves, being in control, would not allow the company to sue."

There is a clear allegation on the face of the pleadings that,

in order to advance the interests of the Mantzaris family,

GFUT has been deprived of a contractual priority for the processing of fish. Secondly, it is alleged in paragraphs 36

to 39 of the statement of claim which are quoted above that the processing resources of GFUT were fraudulently used to generate profits for the benefit of Mantzaris family interests.

In my view those allegations fall within the exception to the rule in Foss v Harbottle noted above. The alleged wrongs are said to have been perpetuated by members of the Mantzaris family or by Mantzaris Fisheries which they controlled. The victims of the wrongs are the unitholders in GFUT who would normally look to Georgetown Fisheries to prosecute an action to remedy those wrongs. I find it unnecessary to decide whether what happened at the meeting of 14 September 1992 amounted to an unequivocal refusal to allow Georgetown Fisheries to take an action of that kind. It is sufficient to draw the more general inference, which I do in the absence of any expression of willingness by Mr Peter Mantzaris to allow Georgetown Fisheries to commence the proposed action, that he as the controller of more than half the shares in Georgetown Fisheries will not allow it, as trustee, to sue himself,	Mantzaris Fisheries and other members of his family who have	presumptively benefited from the wrong done to GFUT.
For these reasons the challenge to the standing of the applicants to bring the substantive application fails.
EFFECT OF ARBITRATION CLAUSE Clause 28 of the deed pursuant to which the GFUT is constituted provides a mechanism for the determination by an arbiter of "any question which involves the calculation or determination of amounts of money payable or the value of assets or services". Clause 29 then provides:

"Subject to the foregoing clause all questions and disputes whrch arise between the parties both after as well as before the Vesting Date or other determlnatron of this Deed after the determlnatron Of this Deed and whether in relation to the rnterpretation of this agreement or in relat~on to any act or omissron of any party to the dispute or as to any act which ought to be done by the parties m dispute or any of them or in relatlon to any other matter whatsoever touching this Deed shall be referred to the arbitration of a single arbitrator if the parties agree upon one, but otherwise to arbitrators to be appointed by each of the parties to the dispute m accordance with the provisions of the Arbitration Act 1892 and the arbitration shall be otherwise conducted in accordance and sublect to the provisions of that Act."

It has been submitted on behalf of the respondents other than

the first respondent that cl. 29 is a true Scott v Avery

clause which makes reference to arbitration a condition precedent to the commencement of an action raising questions which are the subject of the submission to arbitration. However, the Tasmanian Arbitration Act 1892 has been repealed by the Commercial Arbitration Act 1986 of the same State which provides by s.3(2)(b) that:

"a reference rn an arbrtration agreement to the Arbitration Act 1892,

or a provision of that Act shall be construed as a reference to this
Act or to the corresponding provision (if any) of this Act."

Section 55 of the Commercial Arbitration Act 1986, so far as is relevant, is in these terms:

"(1) Where it is provided (whether in an arbitration agreement or some other aareement. whether oral or written) that arbitration or an award pursua%t to arbitration proceedings or the happening of some other event in or in relation to arbitration is a condition precedent to the bringing or maintenance of legal proceedings in respect of a matter or the establishing of a defence to legal proceedings brought in respect of a matter, that provision, notwithstanding that the condition contained in it has not been satisfied -

(a)

shall not operate to prevent -

(L) legal proceedings being brought or maintained in respect	of that matter; or
(ii)	a defence being establrshed to legal proceedings brought

Ln respect of that matter; and

(b) shall, where no arbltratlon agreement relating to that matter

LS subsisting between the parties to the provrsion, be

construed as an agreement to refer that matter to arbrtration.

(2) Subsection (1) does not apply to an arbitratron agreement

unless all the partles to the agreement are domiciled or ordinarily resident in Australra at the time the arbrtratlon agreement is

entered into. ''

By s.56(3) of the Commercial Arbitration Act it is provided:

"For the purposes of this Part, a body corporate shall be taken to be ordinarily resident in a country if, and only if, it is incorporated or has its principal place of business in that country.''

It has been submitted on behalf of the respondents that since the flrst-named applicant, a party to the deed pursuant to which the GFUT was constituted, is incorporated in the United States of America all the parties to the arbitration agreement embodied in cl 29 of that deed are not domiciled in Australia so that s.55(1) of the Commercial Arbitration Act does not operate to deprive cl 29 of its efficacy as a Scott v Avery clause making arbitration a condition precedent to litigation.

The short answer to this submission is that cl 29 of the GFUT	trust deed is not a true Scott v Avery clause. Unlike the
clause considered in Scott v Avery (1856) 5 H.L. Cas 811: 10
ER 1121 itself and those in certificate cases like South
Australian Railways Commission v Egan (1973) 130 CLR 506, cl 29 does not expressly make determination by an arbitrator a condition precedent to litigation or to a legal right to

recovery of some benefit under the trust deed. As noted, for example, in Mustill and Boyd, Commercial Arbitration 2nd Edn p. 161, an implication of such a condition is likely to be rare in the context of a commercial contract.

Even if, contrary to the view just expressed, cl 29 of the trust deed were capable of being construed as a Scott v Avery clause, for the reasons indicated below, I would not regard most of the questions and disputes raised by the application to this Court as being within the class of questions and disputes required by cl 29 to be referred to arbitration.

The alternative basis of the respondents' application for a stay pending arbitration also invoked the status of the first applicant as a deemed resident of the United States of America. From that premise, it was sought to attract the application of s.7 of the Arbitration (Foreign Awards and Agreements) Act 1974 the name of which was changed by Act No 25 of 1989 to "International Arbitration Act". That Act, so

far as is relevant, provides: 

"7. (1) Where -

(a) t h e procedure i n r e l a t i o n t o a r b i t r a t i o n under an a r b i t r a t i o n

agreement is governed, whether by v i r t u e of t h e express terms

of t h e agreement o r o t h e r w ~ s e , by t h e law of a Convention

country;

(b) t h e procedure i n r e l a t i o n t o a r b i t r a t i o n under an a r b i t r a t i o n

agreement i s governed, whether by v i r t u e of t h e express terms of t h e agreement o r otherwise, by t h e law of a country not being Aust ra l ia o r a Convention country, and a pa r ty t o t h e

agreement i s Aus t ra l i a o r a S t a t e o r a person who was, a t t h e

time when t h e agreement was made, domiciled or o r d i n a r i l y

res ident m Austral ia;

(c) a par ty t o an a r b i t r a t i o n aareement is t h e Government of a

~o iven<ion country o r of par< of a Convention country o r t h e Government of a territory of a Convention country, being a

territory to which the Convention extends; or

(d) a party to an arbitration agreement 1s a person who was, at the time when the agreement was made, domiciled or ordinarily resident in a country that is a Convention country,

this sectron applies to the agreement.

(2)	Subject to thrs Act, where -
(a)	proceedrngs rnstituted by a party to an arbrtration agreement to whrch this sectlon applres against another party to the agreement are pending in a court; and
(b)	the proceedlngs rnvolve the determination of a matter that, rn pursuance of the agreement, is capable of settlement by arbltratlon, on the appllcat~on of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks flt, stay the proceedrngs or so much of the proceedings as lnvolves the determination of that matter, as the case may be, and refer the partres to arbitration in respect of that matter.

(5) A court shall not make an order under sub-section (2) if the

court finds that the arbitratron agreement is null and void,

inoperative or rncapable of being performed."

In Elders CED L t d v Dravo Corporation (1984) 59 ALR 206,

Foster J, as a Judge of the Supreme Court of New South Wales

upheld a similar application which invoked an arbitration clause (cl 49) in a civil construction contract. His Honour

observed, at 210:

"In my view the very nature of the proceedings which are sought to be stayed rndlcate that they constitute a matter within the meaning of the section. What is sought in the summons is declaratory relief and

determination in this court. declaratory relief is of course relief of a kind proper for	I am quite satisfied that the relevant sections of the Act apply in
this case. The result is that I have no option but to order the stay
that is sought. I do so with some reluctance as havrng regard to the
nature and content of the arbrtration agreement constituted by cl 49 it would seem fa~rly obvious that pursuant to sub-para (d) thereof it is, to say the least, not unlikely that the very matters sought to be determined by this summons will be raised during the course of the arbitration and may very well find themselves back in this court by way of stated case. However, that is a consideration which can have no influence whatever in my construction of the section and in my application of it as so construed in these proceedings."

See also White Industries L t d v Trammel (1983) 51 ALR 779 where Lockhart J granted a stay of "so much of the proceeding

in this Court as involves the matters alleged in" certain specified paragraphs of the statement of claim. However, his Honour did not stay the claims based on s.45D of the Trade Practices Act.

In Tanning Research Laboratories Inc v O'Brien ( 1990) 169 CLR

332 it was observed by Deane and Gaudron JJ, at 350:

"As earlier mentioned, s.7(2) of the Act rs mandatory in rts terms. ~hus, it is only ~f the d~fferent estoppels claimed by T.R.L. and the lrquidator fall outside the scope of s.7(2) that they can fall for determinatlon rn the proof of debt proceedlngs or in any appeal m such proceedings.

To ascertain whether s.7(2) operates in respect of proceed~ngs pending in a court lt 1s necessary to first identify the subject matter of the controversy which falls for determinatlon in those proceedings. Only when that has been done is it posslble to identrfy whether the proceed~ngs "invo~ce the determination of a matter ...

capable of settlement by arbrtration": s.7(2)(b). That process of

~dentification is also necessary to ascertain whether, if a party to the proceedings rs not a party to the arbitration agreement, he or

she is a person "clalm~ng through or under a party": s.7(4)."

In the present case, despite the width of cl 29 of the trust deed, I have been able to identify only one of the claims raised by the statement of claim as coming within it. The trust deed is in a familiar form and creates rights and obligations as between the trustee and unit holders in respect	of the trust fund and the conduct of any business utilizing	the assets of the fund. Typically wide powers are conferred
on the trustee, including a power to distribute and retain moneys and redeem units. As might be expected, provision is made for the valuation of the units from time to time and for the trustee to be indemnified out of the assets of the fund.
The statement of claim, although pleading the applicants' standing as unit holders and the first respondent's as trustee of the GFUT, discloses only one cause of action arising out of that relationship. That is pleaded by paras 13, 14 and 46 which are in these terms:

"13. The said Deed of Trust prov~ded Ln clause 10 thereof that the First Respondent as trustee of GFUT should use its best endeavours to ensure that the management of the Fund is carried on and conducted in

a proper and eff~cient manner.

14. Such Deed of Trust created rights for the benefit of the unit holders zn GFUT including the Applicants and the First Respondent was under an obligation to fulf~l the covenant herelnbefore referred to to the unit holders includrng the Appl~cants.

46. The F~rst Respondent is liable for the default of the Second Respondent and the Mantzaris Family for breach of the covenant of the Deed of Trust referred to in paragraph 13 hereof."

The remaining causes of action pleaded against the second, third, fourth and fifth respondents include claims for damages for contravention of the Trade Practices Act and the Fair

Trading Act of the various States of Australia, fraudulent use

of the first respondent's resources, breaches of what had been called "the management contract" and "the collateral contract", breaches of duty as directors or officers of the first respondent, and conversion of cartons belonging to the

first respondent.

None of those claims can properly be stayed pursuant to s.7 of the International Arbitration Act. That section was invoked in the course of submissions in support of a stay in all claims involved in the present proceedings before this Court. Since I am able to uphold the submission in respect only of the claim embodies in paras 13, 14 and 46 of the statement of

claim, I shall reserve liberty to the respondents, if so advised, to apply for a stay on that limited basis subject to what has become the usual condition that the stay may be terminated upon application by the applicants in the events that the respondents do not do all things necessary to be done on their part to have the matters the subject of the claims in paras 13, 14 and 46 of the statement of claim determined in accordance with the arbitration constituted by cl 29 of the trust deed with reasonable expedition. (See White I n d u s t r i e s

L t d v Trammel ( s u p r a ) and A l l e r g a n Pharmaceuticals Inc v

Bausch & Lomb Inc (1985) 7 ATPR 40-636 per Beaumont S ) .

APPLICATION TO STRIKE OUT PARAGRAPHS 37. 39 and 48 OF
STATEMENT OF CLAIM
Paragraphs 37 and 39 are among those reproduced in the
introduction to these reasons. Paragraph 48 is a collection
of particulars of damages calculated according to various
measures including loss of profit by the first respondent,

interest, loss of opportunity for alternative investment of

GFUT and advances paid to Mantzaris Fisheries and the	funds, loss of production, diminution of value of units in
Mantzaris family.
I consider that paragraphs 36 to 39 embody an allegation that the Georgetown processing factory was used to process fish for reward without accounting to the first respondent as trustee and legal owner of the factory for the benefits derived by the second, third, fourth and fifth respondents from that processing. The pleading then goes on to plead fraudulent concealment of the fact of such processing and a failure to pay proper fees for it. Those allegations are sufficient in my view to make out a cause of action for breach of the fiduciary duty imposed by the management agreement, the existence of which is pleaded as follows in paragraph 29 of the statement of claim:

"Thereafter the Second, Thlrd, Fourth and Fifth Respondents traded (inter a l ~ a ) as an entrty known as "Mantzarrs Management" which was nominated by the Mantzarrs Family pursuant to the agreement referred to rn ~ a r a a r a ~ h 27ta) and ib) and appointed to provide management services CO-th'e ~ i r s t .~es~ondent rn the consrderation of remunepation at the rate of 10 cents per kilo of fish processed at the Georgetown ProcessLng Plant the property of GFUT ("the management agreements").

Indeed, Mr Miller for the respondents did not contend that the impugned paragraphs should be struck out as not disclosing a cause of action. Rather, he contended that they should be struck out because of the failure of the applicants to provide particulars of the allegations of fraud and the suffering of loss and damage which they embody.

On 15 February 1993, the respondents made these requests for

statement of claim:  further and better particulars of paragraph 37 of the "(a) State when the fish fillets were resold;

(b) state to whom the fish fillets were resold giving full details of purchasers, prices and amounts;

(c) what profit amount was realised on the resale;

(d)	what accounting of the resale was provided to the First
Respondent or the beneficiar~es of the GFUT."

In response to that request the applicants indicated that save

that the resale of fish fillets occurred in 1991 they were unable to supply the further particulars requested "at least until further discovery".

The respondents' request for further and better particulars of paragraph 39 was in these terms:

"(a) Give the usual partrculars of the fraudulent concealment

alleged therein;

(b) describe as fully and precisely as possible the nature of the fraudulent concealment;

(C) describe as fully and precrsely as possible how the Second, Third, Fourth and Fifth Respondents fraudulently concealed such processrng from Mr Crossman;

(d) say over what period of time the Second, Third, Fourth and Fifth Respondents fraudulently concealed such processing from Mr crossman;

(e) gLve the usual particulars of the fals~fication of the records;

(f)	describe as fully and prec~sely as possible how the Second, Thrrd, Fourth and Frfth Respondents falsrfied the records;
(g)	state, providing full particulars of which record or records were falsifred;
(h)	identrfy which document, book of account, ledger journal, bank statement or other processing records that were falsified by them;

(i)  give full part~culars of which records were provided to Mr crossman;

(j) state what processed records were disclosed to Mr Crossman;

(k) describe as fully and precisely as possrble the directions

given by the Fourth Respondent;

(1) state when did the Fourth Respondent act in concert with the other named Respondents;

(m)	state what acts, facts, matters or thangs constituted such acting in concert;
(n)	describe as fully and as precisely as possable the fraudulent intent of the Fourth Respondent;

(0) state how the fraudulent intent was made manifest."

That request elicited the following response from the

applicants :

Particulars of Fraudulent Concealment are that no record of fish production has been documented in the books and records of the First Respondent while the books and records of the First Respondent record expenses incurred in respect of such unrecorded processing. The Applicants say that such Omasslon in the books and records of the First Respondent was delrberate.

Particulars of Fraudulent Concealment are that the Second, Third, Fourth and Fifth Respondents dad not record deliveries of fash not the property of the Frrst Respondent nor recorded by fish processing which was conducted at the George Town Plant.

The Respondents erther jorntly or severally (as the case required) only suppl~ed to Mr Crossman particulars of fash processed by the George Town Plant whach was recorded in the books and records of such plant. No partrculars of other fish product handled or processed at the George Town Plant were supplaed.

The Applicants are not able to precisely state the period of t ~ m e over whach the Second, Third, Fourth and F ~ f t h Defendants concealed such processang from Mr Crossman at least until completron of discovery procedures save that such concealment took place rn 1991.

The Applrcants are unable to particularise the falsification of such records at least until completion of drscovery procedures

save that which as here~n particularised.

The Second, Thard, Fourth and Fifth Respondents falsified the records by failure to accurately record the ownership of fish product del~vered to the George Town Plant and/or to accurately record production at the George Town Plant or accurately record transportation of all processed fish product arrrving and leavrng the George Town Plant.

The Applicants are unable to particularise at least until completion of discovery procedures.

The Applicants are not able to gave a complete list of which documents, books of account, ledger journals bank statements or other processing records were falsified at least until completion of discovery procedures.

relevant income and expenditure of the Dlant were the records	Production records of recorded processing together with the	supplied to Mr crossman on a regular bascs.
Processing records which related to information actually recorded only were disclosed to Mr Crossman.
The Fourth Respondent was darectly in control of the purchasing of raw fish product bv the First Reanondent. recordina of production, and the shipping of processed fish product, ani any direction glven by the Fourth Respondent would have been as a result of such delegated responsibility.
The Applicants (can) are not in a position to say when the Fourth Respondent acted in concert with the other named Respondents.
Such acting in concert constituted the failure by the Third, Fourth and Fifth Respondents in accordance with their respective agreements and duties thereunder to record all information in the books and records of the Trust which would

otherwise be requlred to gzve a full and accurate statement of the Trust's affa~rs; the fa~lure by the Third, Fourth and Fifth Respondents in accordance with their respective agreements and duties thereunder to record or report other transactions and dealings with the Trust property coming to therr attention and which knowingly were not recorded or reported.

(n) The fraudulent rntent was deliberately concealing the amount of fish product being delrvered and processed through the George Town Plant and sold as processed fish product as a result of processLng through the George Town Plant.

(0) Such intent is manrfest by the failure of the Fourth Respondent to record the delrvery and ownership of fish product and the processrng of fish product carried on at the GeOrge Town Plant. "

The respondents also delivered a detailed request containing some fourteen sub-paragraphs for further and better particulars of the particulars of loss and damage contained in paragraph 48 of the statement of claim. The response to that request indicated in one part that "further particulars cannot be given at least until discovery procedures are completed".

Some valid criticisms can be made of the particulars provided by the applicant in response to the respondents' request but those criticisms have not been advanced in detail before me. Rather it has been put that the particulars which have been

provided, viewed as a whole, were so manifestly inadequate as	particulars of allegation of fraud, that paras 37, 39 and 48
should be struck out. I have been referred to a great number of authority, not all of which deal with particulars in the sense in which they are required to be considered here. Nevertheless, it remains true that an allegation of fraud must be pleaded with "the utmost particularity"; Blay v Pollard and
Morris [l9301 1 KB 628 at 640.
However, it is clear that the provision of particulars may be postponed in an appropriate case until after discovery; see e.g.: Whyte v Abrens (1884) 26 Ch D 717, Leitch v Abbott (1886) 31 Ch D 374 and Arab Monetary Fund v Hashim (No 2) [l9901 1 All ER 673 where Hoftmann J observed, at 679:

"It seems to me that, subject to partrcularisation, the pleadrng is adequate to support an allegatron of accountability as a constructive trustee. The facts on which the knowledge allegatrons are based are matters which entirely concern the Hashims. The bank can obtain such infonnatron only by mvestigatron and discovery. I do not accept that the bank has already had so much information about what happened to the money after rt left Sw~tzerland that there is nothing more to be found on discovery. It rs accepted that a farr amount of information about the movements of the money has not yet been disclosed and no doubt the productron of further bank documents will rarse more questions. This is, in my view, a case in which the fund is entrtled to plead in general terms and to defer particularisation

of its case untrl after discovery:  see eg Leitch v llbbott (1886) 31

Ch D 374. Of course, by the time the case comes to trial Mrs Hashim wrll be entitled to full particulars of the detailed allegations on whrch the fund will rely. But the absence of such particulars rs not, in my judgment, a ground for strrking the claim out now."

In the present case the request for particulars was filed on 15 February 1993 and the response to it was filed on 18 March 1993, both before either side had provided a list of documents. The applicants' list of documents was filed on 16 June 1993 and that of the second, third, fourth and fifth respondents on 23 June 1993, both of them after the	respondents' notice of motion had been taken out. In the	circumstances, I consider that the applicants should now
provide, in the light of discovery, further and better particulars in response to paras 23 and 24 (d) (e) (g) and (h) of the respondents' request for particulars dated 15 February 1993. It may be that other complaints of the respondents about the sufficiency of particulars will be satisfied by the particulars to be supplied pursuant to the order which I have just foreshadowed. It is also likely that the applicant will
seek to prove most elements of the damages claimed in para 48 of the statement claim by expert accounting evidence. If that supposition be right, I would be disposed, subject to any submissions which Counsel might make on the question, to order that a written statement of the evidence to be given by any expert witness of that kind together with copies of any documentary evidence to be tendered through each such witness, be supplied to the respondents before trial. That course may obviate the need for further and better particulars of the loss and damage allegedly suffered by the applicants. However, neither the order which I now make nor the course suggested in respect of para 48 should be taken as precluding the respondents from filing and serving a refined request for particulars in respect of those parts of the applicants' claim where it remains unclear, after completion of all interlocutory steps, what case the respondents have to meet.
CONCLUSION
declarations applying the Rule in Foss & Harbottle raised by In the result the claims for security for costs and for
the amended notice of motion must be dismissed. As indicated above, I shall reserve liberty to the respondents to apply for a stay of so much of the proceeding in this Court as involves the matters alleged in paras 13, 14 and 46 of the statement of claim. I shall order that the applicants provide further and better particulars of their statement of claim in response to paras 23 and 24(d), (e), (g) and (h) of the respondentsf request therefor dated 15 February 1993. Since the
respondents have failed completely on two of the four issues raised by their notice of motion, and have achieved only part of the relief which they sought by raising each of the other two issues, it is appropriate that they pay two-thirds of the applicants' costs of and incidental to the motion.

I certify that this and the preceding twenty five (25) pages are a true copy of the the reasons for judgment of the Honourable

Mr Justice Ryan.

Associate:	U&\
Date:	I \q3

Counsel for the Applicants:	Mr Thompson
Solicitor for the Applicants:	Drake Walker Leahy
Counsel for the Respondents:	Mr R Miller
Solicitors for the Respondents:	Coulter Bourke