Kefalianos v Bell

[2021] VCC 592

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-20-04555

WILLIAM KEFALIANOS & ORS	Plaintiffs
v
TONY BELL & ORS	Defendants

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JUDGE:	HIS HONOUR JUDGE WOODWARD
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers, final submission 26 April 2021
DATE OF JUDGMENT:	14 May 2021
CASE MAY BE CITED AS:	Kefalianos v Bell
MEDIUM NEUTRAL CITATION:	[2021] VCC 592

REASONS FOR RULING
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APPEARANCES:	Counsel	Solicitors
For the plaintiffs	E Moon	Baker McKenzie
For the defendants	M J Harris	Harrick Lawyers

HIS HONOUR:

Application and outcome

1The first defendant (“Mr Bell”) applies by summons filed 19 March 2021 for leave to file an amended defence and counterclaim. The plaintiffs oppose the application.

2For the reasons below, I am satisfied that Mr Bell should have leave to file and serve the third version of the proposed amended defence and counterclaim, exhibited to the affidavit of Ms Harrick dated 26 April 2021 (“PADC”), and will make an order accordingly.

3On the question of costs, it seems to me that the amendments to the PADC were for the most part (if not entirely) prompted and informed by the submissions and supporting material filed on behalf of the plaintiffs on or before 19 April 2021. Further, correspondence since then suggests that the plaintiffs have done no further work of any substance in connection with the application after that date. In the circumstances, and despite the granting of the application, my preliminary view is that the plaintiffs should have their costs of and incidental to the application.

4However, Mr Bell has asked to be heard on the question of costs once the application is determined. If Mr Bell maintains that position, he should file written submissions limited to 3 pages by 19 May 2021 at 4.00pm, and the plaintiffs may file written submissions in reply (also limited to 3 pages) by 21 May 2021 at 4.00pm. The parties should also consult and propose orders re-setting the timetable for the remaining interlocutory stages of the proceeding and submit those by 21 May 2021 at 4.00pm.  Orders on the costs and timetable will thereafter be made on the papers.

Background to the application

5Mr Bell had filed his defence to the plaintiffs’ amended statement of claim on 15 September 2020. By letter dated 16 October 2020, the plaintiffs’ solicitors wrote to Mr Bell’s solicitors referring to a number of alleged deficiencies in the amended defence. On 11 December 2020, Mr Bell’s solicitors sent a draft amended defence and counterclaim to the plaintiffs’ solicitors requesting the plaintiffs’ consent to the filing of that document. The plaintiffs’ solicitors did not respond to that letter, and on 15 February 2021, Judicial Registrar Burchell made orders directing the parties by 5 March 2021 to communicate with a view to reaching consent on proposed pleadings. The Judicial Registrar further ordered that any application by Mr Bell for leave to file a further amended defence and counterclaim be made by 12 March 2021.

6On 24 February 2021, the plaintiffs’ solicitors again wrote to Mr Bell’s solicitors pointing out deficiencies in his draft amended defence and counterclaim. Mr Bell later prepared a further (second) version of his proposed amended defence and counterclaim. It seems that there were communications between the parties concerning this document (possibly including discussions between counsel) and the parties consented to orders extending the deadline for applying for leave to file it, until 19 March 2021. The application was duly made on 19 March 2021, with a hearing date of 20 April 2021.

7In the days leading up to the hearing, the parties’ legal representatives participated in a case conference and other communications with the division lawyer, and on 19 April 2021, they agreed to a timetable for the filing of affidavits and submissions in relation to the application. The plaintiffs had filed and served an affidavit of their solicitor Mr De Bono on 16 April 2021. The plaintiffs’ submissions of counsel Mr Moon are dated 19 April 2021. Mr Bell responded with an affidavit of his solicitor Ms Harrick sworn 26 April 2021 attaching a further (third) version (being the PADC) and submissions of counsel Ms M Harris, also dated 26 April 2021.

8The PADC incorporates a number of material amendments to the earlier (second) version, apparently in response to many of the matters raised in Mr Moon’s detailed submissions. Ms Harris’s submissions, on the other hand, are based on the PADC. Despite this, by further correspondence with the division lawyer on 29 April 2021, the plaintiffs’ solicitors indicated that the plaintiffs maintained their opposition to Mr Bell’s application for leave to file and serve the PADC, but did not seek to file any further material addressing that latest document. Further, both sides indicated that they were content for the application to be determined on the papers, subject to seeking to be heard further on the question of costs once the application was determined.

Plaintiffs’ submissions

9Mr Moon’s submissions confirm that the plaintiffs oppose the application on the grounds that Mr Bell, as a mere beneficiary, does not have standing to prosecute the proposed counterclaim on behalf of the Alphington Property Trust (“APT”). Mr Moon adds that the plaintiffs also say that the pleading is deficient in other respects, although many of the deficiencies relate to the standing point. Mr Moon’s submissions then provide a summary of the background to the relationship of the parties and the history of the proceeding, before setting out the legal principles applicable to the right of a beneficiary to sue on behalf of a trust. Mr Moon notes that it is not in dispute that Mr Bell “needs to establish exceptional or special circumstances to stand in the shoes of the trustee and prosecute the claim the subject of the proposed counterclaim”.”

10Mr Moon’s discussion of the pleadings commences with the acknowledgement that r23.04(2) of the Rules provides that no evidence shall be admissible on the question of whether a pleading offends against r23.02 but, he submits, the court may look at the pleading itself and the documents referred to in the pleading. Mr Moon then sets out numerous factual matters on which he relies to establish, in substance, that the claims sought to be brought by Mr Bell in his capacity as a beneficiary of APT are misconceived. He concludes this part of his submissions by asserting that none of the matters referred to in paragraph 100 of the PADC constitute special or exceptional circumstances.

11Finally, Mr Moon identifies in respect of most of the paragraphs of the proposed counterclaim, particular alleged pleading deficiencies. These include matters such as rolled-up pleas, inconsistent or irrelevant claims, asserted factual errors and insufficient or absent particulars. Mr Moon submits that the court ought to refuse Mr Bell’s application with costs, and order that Mr Bell file and serve an amended defence forthwith and re-set the timetable to trial orders of Judicial Registrar Burchell made 16 February 2021.

Mr Bell’s submissions

12Ms Harris for Mr Bell submits that the three issues of substance have been raised by the plaintiffs in opposition to the PADC. First, “general” pleading deficiencies. Second, references in the PADC of emails that are subject to legal professional privilege. And, third, that is a matter of fact and law, there are no exceptional circumstances which permit Mr Bell, as a beneficiary of the APT, to bring a cause of action in his name.

13On the issue of the general pleading deficiencies, Ms Harris submits that these are addressed in the PADC. In relation to the privileged communications, Ms Harris relies on and repeats matters set out in a letter from her solicitors setting out grounds for refuting the privilege claims. Finally, on the issue of Mr Bell’s standing to bring the proceeding in his capacity as a beneficiary of the APT, Ms Harris submits in substance that the exceptional circumstances have been sufficiently pleaded in paragraph 100 of the PADC, and whether those circumstances are sufficient is a matter for trial. She continues:

“The summons is not a summary judgment application which requires Bell to depose to any matters as to why he, who is no longer a director or shareholder of the former Trustee, Alphington Manor Pty Ltd, has not ‘resurrected’ the company from ASIC’s deregistration process”

14Ms Harris concludes her submissions by foreshadowing by reference to paragraphs of the PADC the basis for Mr Bell’s standing to pursue the counterclaim.

Analysis

15My analysis of the issues in dispute on this application has been hampered somewhat by (through no fault of Mr Moon) the disconnect between, on the one hand, Mr Moon’s detailed submissions and, on the other, the PADC on which Mr Bell now relies. However, this mainly affects the general pleading deficiencies and I will return to those shortly.

16Dealing first with the issue of greatest prominence in Mr Moon’s submissions (the standing issue), there appears to me to be considerable force in many of the criticisms raised in paragraph 32 of those submissions. However, I agree with Ms Harris that these, for the most part, do not fall for determination on what is, in effect, a pleadings summons under r23.02. As noted above, Mr Moon concedes (correctly, in my view) that this is how I should approach the application. While some of the matters are arguably determinable on the pleadings and documents referred to alone, it is not feasible or appropriate on an application of this kind to untangle these from those that are ultimately fact based.

17In particular, the primary standing pleading at paragraph 100 self-evidently depends on the proof of multiple and interrelated factual allegations which, if proved, may or may not amount to exceptional circumstances as a matter of law. In many cases, Mr Moon’s criticism of these allegations amount to saying either that they are illogical or improbable (or both). However, they still ultimately depend on allegations of fact which in my view cannot be resolved on the pleadings alone or the documents referred to in them.

18On the question of reliance on privileged material, I am not presently persuaded that the documents concerned so clearly attract legal professional privilege that paragraphs of the pleadings purporting to rely on them should be excluded at this stage of the proceeding. It will be a matter for the trial judge to deal in due course with any objections to admissibility based on legal professional privilege, if and when Mr Bell seeks to tender the documents concerned at trial in support of the impugned allegations.

19Finally, I agree with Ms Harris that the PADC has addressed many of the particular alleged pleading deficiencies set out in Mr Moon’s submissions, and those that persist are either minor or technical and do not justify an order preventing Mr Bell from filing the PADC in its current form. I note in this regard that Mr Moon concedes in his submissions that the plaintiffs well understand the counterclaim that Mr Bell wishes to bring. Further, any ongoing deficiencies in particulars can be addressed by the plaintiffs serving a request for further and better particulars in due course. I have read the PADC in its entirety and I am satisfied that it adequately discloses a cause of action and will not prejudice, embarrass or delay the fair trial of the proceeding.