Jiang v Slater & Gordon Ltd

Case [2024] FCA 617

FEDERAL COURT OF AUSTRALIA

Jiang v Slater & Gordon Ltd [2024] FCA 617

File numbers: NSD 442 of 2023
NSD 443 of 2023
Judgment of: SHARIFF J
Date of judgment: 12 June 2024
Catchwords:

PRACTICE AND PROCEDURE – summary dismissal – shareholders commenced proceedings against target of successful compulsory takeover bid seeking relief under s 661E of the Corporations Act 2001 (Cth) – where s 661E allows minority shareholder subject to compulsory acquisition notice to apply to Court for an order that shares not be compulsorily acquired – held that causes of action in both proceedings under s 661E have no reasonable prospects of success against defendant – defendant’s applications for summary dismissal granted with costs

PRACTICE AND PROCEDURE – leave to amend – where one shareholder sought leave to amend – held that proposed causes of action do not disclose a reasonable cause of action, have no reasonable prospects of success or are embarrassing – application for leave dismissed with costs
Legislation:

Australian Securities and Investments Commission Act 2001 (Cth) ss 12BB, 12DA, 12DB(1)(a), 12DB(1)(b), 12 DB(1)(g), 12DB(1)(h), 12GF

Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) ss 18, 21(1), 29(1), 236

Corporations Act 2001 (Cth) ss 180, 181, 182, 183, 619, 623, 631, 632, 633, 635, 661A, 661B, 661E, 670A, 670B, 674, 1041A, 1041C, 1041E, 1041F, 1041H, 1041I, 1317HA

Federal Court of Australia Act 1976 (Cth) ss 31A(2), 37M, 37N

ASX Listing Rules rr 3.1, 3.1A, 17.4, 17.14, Guidance Note 8

Federal Court Rules 2011 (Cth) rr 4.01(2), 6.01, 8.21, 9.08, 16.02(4), 16.21(1), 16.51, 16.53, 26.01(1)
Cases cited:

Abela v Minister for Home Affairs [2021] FCA 96

Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 [2021] FCAFC 121; 287 FCR 388

Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 [2022] HCA 38; (2022) 97 ALJR 1

Allstate Life Insurance Company v Australia and New Zealand Banking Group Ltd (1995) 58 FCR 26

Australia Securities and Investment Commission v Cassimatis [2013] FCA 641; (2013) 220 FCR 256

Chadwick v State of New South Wales (Amendment Application) [2022] FCA 1138

DPP v JM [2013] HCA 30; (2013) 250 CLR 135

Dudley (Liquidator) v RHG Construction Fitout & Maintenance Pty Ltd [2019] FCA 1355

Eddy v WR Carpenter Holdings Ltd (1985) 10 ACLR 316

Electronic Industries Imports Pty Ltd v Public Curator of the State of Queensland [1960] VR 10

Elkington v Shell Australia (1992) 10 ACSR 568

Elkington v Shell Australia Ltd (1993) 32 NSWLR 11

Elkington v Vockbay Pty Ltd (1993) 10 ACSR 785

Flightdeck Geelong Pty Ltd v All Options Pty Ltd [2020] FCAFC 138; (2020) 280 FCR 479

General Steel Industries v Commissioner of Railways (1964) 112 CLR 125

Grant-Taylor v Babcock & Brown Ltd (in liq) [2016] FCAFC 60; (2016) 245 FCR 402

Huon Aquaculture Group Ltd v Secretary,Dept of Primary Industries, Parks, Water and Environment (No 2) [2018] FCA 89

Oztech Pty Ltd v Public Trustee of Queensland[2019] FCAFC 102

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Details
AGLC
Jiang v Slater & Gordon Ltd [2024] FCA 617
Case
[2024] FCA 617
Decision Date

CaseChat Overview and Summary

The matter of Jiang v Slater & Gordon Ltd involved two shareholders, Jiang and Koshib, who sought relief under section 661E of the Corporations Act 2001 (Cth) objecting to a compulsory acquisition of their shares in Slater & Gordon. The shareholders had commenced proceedings against Slater & Gordon, the target of the takeover bid, rather than Wright NomineeCo, the party that had made the compulsory acquisition offer. The central issue before the court was whether the proceedings had reasonable prospects of success against Slater & Gordon and whether Jiang should be granted leave to amend his claims.

The court held that the proceedings had no reasonable prospects of success against Slater & Gordon as Slater & Gordon was not the party that had made the compulsory acquisition offer. The shareholders had not commenced proceedings against Wright NomineeCo, the actual party responsible for the acquisition. Furthermore, the proposed amended claims did not disclose a reasonable cause of action, had no reasonable prospects of success, and were considered embarrassing. Consequently, the court granted Slater & Gordon's applications for summary dismissal and dismissed Jiang's application for leave to amend with costs.

The final orders of the court were that Jiang's interlocutory application be dismissed, the proceedings be summarily dismissed, and Jiang pay the defendant's costs of the proceedings as agreed or taxed. Similarly, Koshib's proceedings were summarily dismissed, and Koshib was ordered to pay the defendant's costs of the proceedings as agreed or taxed. The court also noted that if Slater & Gordon did not seek a determination of its costs of an interlocutory application filed by Jiang to be payable on a lump sum basis, those costs would be the defendant's costs as agreed or taxed.

Orders

Orders of the court

1. In NSD 442 of 2023:

(a) The plaintiff’s interlocutory application filed on 31 January 2024 be dismissed.

(b) The proceedings be summarily dismissed.

(c) The plaintiff pay the defendant’s costs of the proceedings as agreed or taxed.

2. In NSD 443 of 2023:

(a) The proceedings be summarily dismissed.

(b) The plaintiff pay the defendant’s costs of the proceedings as agreed or taxed, other than the defendant’s costs of or incidental to the interlocutory application filed by the plaintiff on 8 June 2023.

(c) By 4.00pm on 14 June 2024, the defendant is to indicate to my Associate via email whether, consistently with Order 2 of Halley J’s Orders of 7 July 2024, it seeks a determination of its costs of or incidental to the interlocutory application filed by the plaintiff on 8 June 2023 to be payable on a lump sum basis and, if not, the costs of that application will be the defendant’s costs as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, I have decided that the proceedings should be summarily dismissed and Mr Jiang should not be granted leave to rely upon the Proposed Jiang AOP and Proposed Jiang FACS.B. BACKGROUND Based on the evidence before, I set out below the background facts. On 23 February 2023, Slater & Gordon entered into a Bid Implementation Agreement with Wright NomineeCo which provided for Wright NomineeCo to make an off-market takeover offer for 100% of the ordinary shares in Slater & Gordon. Thereafter, Wright NomineeCo issued a Bidder’s Statement and Slater & Gordon issued a Target’s Statement. By 11 April 2023, Wright NomineeCo had acquired 97.42% of the shares in Slater & Gordon. On 17 April 2023, Wright NomineeCo served notices of compulsory acquisition under s 661B(1)(d) of the Corporations Act 2001 (Cth) (Corporations Act) on the remaining shareholders of Slater & Gordon, including the plaintiffs. On 28 April 2023, the ASX removed Slater & Gordon from the Official List on the ASX pursuant to ASX Listing Rules 17.4 and 17.14, those rules providing for the removal of an entity from the ASX when a compulsory acquisition notice has been issued. On 14 and 17 May 2023, Koshib and Mr Jiang respectively lodged their Originating Processes and a Concise Statement, which were accepted for filing on 22 May 2023, seeking relief under s 661E of the Corporations Act objecting to the compulsory acquisition. Slater & Gordon was the only named defendant in respect of both actions. On 31 May 2023 and 2 June 2023 respectively, WrightNominee Co acquired Mr Jiang’s and Koshib Investment’s shares in Slater & Gordon pursuant to s 661B(1)(d) of the Corporations Act. Neither Koshib nor Mr Jiang have at any time commenced proceedings against the bidder, Wright NomineeCo, being the party that sought to compulsorily acquire their shares and has since done so.C. SUMMARY DISMISSAL PRINCIPLESC.1 General principles Section 31A of the FC Act relevantly provides:(2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a) hopeless; or(b) bound to fail;for it to have no reasonable prospect of success. The introduction of s 31A departed “radically” from earlier relevant heads of power, which required a finding that challenged proceedings, or aspects of those proceedings, would necessarily fail: Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 at [53]; cf General Steel Industries v Commissioner of Railways (1964) 112 CLR 125. The Court’s discretion under s 31A is supported by r 26.01(1)(a) and (c) of the FC Rules. In Spencer, Hayne, Crennan, Kiefel and Bell JJ stated at [25] that s 31A(2):… requires a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The balance of the new and additional assertions raised in the Amended Jiang CS at [31]-[34] are allegations, at best, as against the directors of Slater & Gordon. Leaving to one side whether any of these assertions meaningfully disclose a cause of action, I am not satisfied that they disclose any cause of action as against Slater & Gordon. Accordingly, I am not satisfied that the Amended Jiang CS at [31]-[34] discloses a cause of action that has reasonable prospects of success.D.6 Conclusions as to summary dismissal In the Jiang Proceedings, I am satisfied that, by reference to the case articulated in the Original Jiang OP, the Original Jiang CS and Amended Jiang CS, the proceedings as presently constituted against Slater & Gordon have no reasonable prospects of success. It follows that unless I grant leave to Mr Jiang to file the Proposed Jiang AOP and the Proposed Jiang FACS, the Jiang Proceedings should be dismissed. In the Koshib Proceedings, I am satisfied that, by reference to the case articulated in the Koshib OP and the Koshib CS, the proceedings as presently constituted against Slater & Gordon have no reasonable prospects of success. It follows that the Koshib Proceedings should be dismissed.E. ALTERNATIVES – STRIKE OUT AND REMOVAL OF SLATER & GORDON Given the findings I have made and the conclusions I have reached about summary dismissal, it is not necessary for me to address Slater & Gordon’s contention that the concise statements in the Jiang and Koshib Proceedings should be struck out or that it be removed as a party from both proceedings. For completeness, had I not been satisfied as to summary dismissal, I would have ordered that the concise statements in each of the Jiang and Koshib Proceedings (being the Original Jiang CS, the Amended Jiang CS and the Koshib CS) be struck out under r 16.21(1) of the FC Rules. That is because these concise statements do not disclose a reasonable cause of action and are embarrassing. I would have also ordered that Slater & Gordon be removed as a party to both proceedings. That is because I am satisfied that Slater & Gordon is not a proper party to the cause of action pleaded by Mr Jiang and Koshib Investment and no relief could be sought against Slater & Gordon in respect of the claims (such as they are) that have been raised in both proceedings: see Electronic Industries Imports Pty Ltd v Public Curator of the State of Queensland [1960] VR 10 at 10-11; Dudley (Liquidator) v RHG Construction Fitout & Maintenance Pty Ltd [2019] FCA 1355 at [52]-[53]; Huon Aquaculture Group Ltd v Secretary,Dept of Primary Industries, Parks, Water and Environment (No 2) [2018] FCA 89 at [44].F. LEAVE TO AMEND IN THE JIANG PROCEEDINGSF.1 Identifying the proposed claims in the Proposed Jiang AOP and the Proposed Jiang FACS The Proposed Jiang FACS makes a number of assertions of fact and thereafter intermingles these with a number of allegations as to contraventions of various provisions of the Corporations Act, the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

Ratio Decidendi

Legal Principle Established

On 17 April 2023, Wright NomineeCo served notices of compulsory acquisition under s 661B(1)(d) of the Corporations Act 2001 (Cth) (Corporations Act) on the remaining shareholders of Slater & Gordon, including the plaintiffs. On 28 April 2023, the ASX removed Slater & Gordon from the Official List on the ASX pursuant to ASX Listing Rules 17.4 and 17.14, those rules providing for the removal of an entity from the ASX when a compulsory acquisition notice has been issued. On 14 and 17 May 2023, Koshib and Mr Jiang respectively lodged their Originating Processes and a Concise Statement, which were accepted for filing on 22 May 2023, seeking relief under s 661E of the Corporations Act objecting to the compulsory acquisition. Slater & Gordon was the only named defendant in respect of both actions. On 31 May 2023 and 2 June 2023 respectively, WrightNominee Co acquired Mr Jiang’s and Koshib Investment’s shares in Slater & Gordon pursuant to s 661B(1)(d) of the Corporations Act. Neither Koshib nor Mr Jiang have at any time commenced proceedings against the bidder, Wright NomineeCo, being the party that sought to compulsorily acquire their shares and has since done so.C. SUMMARY DISMISSAL PRINCIPLESC.1 General principles Section 31A of the FC Act relevantly provides:(2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a) hopeless; or(b) bound to fail;for it to have no reasonable prospect of success. The introduction of s 31A departed “radically” from earlier relevant heads of power, which required a finding that challenged proceedings, or aspects of those proceedings, would necessarily fail: Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 at [53]; cf General Steel Industries v Commissioner of Railways (1964) 112 CLR 125. The Court’s discretion under s 31A is supported by r 26.01(1)(a) and (c) of the FC Rules. In Spencer, Hayne, Crennan, Kiefel and Bell JJ stated at [25] that s 31A(2):… requires a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.