Knights Capital Group Ltd v Bajada and Associates Pty Ltd - [2016] WASC 69

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: KNIGHTS CAPITAL GROUP LTD -v- BAJADA AND ASSOCIATES PTY LTD [2016] WASC 69

CORAM: PRITCHARD J

HEARD: 18 DECEMBER 2014, 25 FEBRUARY 2015 & ON THE PAPERS

DELIVERED : 4 MARCH 2016

FILE NO/S: CIV 1875 of 2014

BETWEEN: KNIGHTS CAPITAL GROUP LTD
Plaintiff
AND
BAJADA AND ASSOCIATES PTY LTD
First Defendant
SELWYN JOHN BAJADA
Second Defendant
(BY ORIGINAL ACTION)
BAJADA AND ASSOCIATES PTY LTD
Plaintiff
AND
KNIGHTS CAPITAL GROUP LTD
First Defendant
GRANT BARTLEY HODGETTS
Second Defendant
MICHAEL JOHN BRITTON
Third Defendant
GREGORY JAMES PARAMOR
Fourth Defendant
GRANT CHARLES PRIEST
Fifth Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Pleadings - Strike out - O 20 r 19(1)(a) Rules of the Supreme Court 1970 (WA) - Application to strike out part of counterclaim - Where counterclaim discloses no reasonable cause of action - Where party concedes that pleading should be struck out - Where application for leave to amend - Unnecessary to determine application for leave to amend because summary judgment granted

Practice and procedure - Summary judgment - Application for summary judgment brought by defendants by counterclaim - Application of O 16 Rules of the Supreme Court 1970 (WA) to counterclaim - Whether defendants by counterclaim have good defence on the merits - Where state of law unsettled - Inappropriate to grant summary judgment on basis that counterclaim defective in law - Where defendants make out prima facie case for summary judgment - Evidentiary onus on plaintiff to show real question to be tried - Where plaintiff cannot show real question to be tried - Where affidavit in opposition to application for summary judgment discloses insufficient facts to support defence - Where affidavit contains only speculation - Summary judgment granted

Torts - Inducing breach of contract - Interference with contractual relations - Where counterclaim against directors for inducing breach of contract by company - Rule in Said v Butt - Directors not generally liable for inducing breach of contract by company - Exceptions to rule in Said v Butt - Whether directors liable for inducing breach of contract by company in circumstances where directors acting in breach of their duties to the company - Whether evidence sufficient to establish that directors not acting in best interests of company - Where evidence not sufficient to displace directors' assertions that they acted in best interests of company

Legislation:

Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Application for summary judgment granted

Category: B

Representation:

Original Action

Counsel:

Plaintiff:     No appearance
First Defendant              :     No appearance
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     No appearance
First Defendant              :     No appearance
Second Defendant         :     No appearance

Counterclaim

Counsel:

Plaintiff:     Mr A V Vinciullo
First Defendant              :     No appearance
Second Defendant         :     Mr J A Thomson SC
Third Defendant            :     Mr J A Thomson SC
Fourth Defendant           :     Mr J A Thomson SC
Fifth Defendant              :     Mr J A Thomson SC

Solicitors:

Plaintiff:     HopgoodGanim
First Defendant              :     No appearance
Second Defendant         :     Wilson & Atkinson
Third Defendant            :     Wilson & Atkinson
Fourth Defendant           :     Wilson & Atkinson
Fifth Defendant              :     Wilson & Atkinson

Cases referred to in judgment:

Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Allstate Life Insurance Company v Australia and New Zealand Banking Group Ltd (1995) 58 FCR 26
Anderson v Effexseven (1999) 10 ANZ Ins Cas 61 ‑ 424
Bankwest (a division of CBA) v Mann [2015] WASC 187
Barnes v Addy (1874) LR 9 Ch App 244
Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256
Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874
Boase v Seven Network (Operations) Ltd [2005] WASC 269
Bradshaw v McEwans (1951) 217 ALR 1
Briginshaw v Briginshaw (1938) 60 CLR 336
Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1
Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319
Cook Strait Skyferry Ltd v Dennis Thompson International Ltd [1993] 2 NZLR 72
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Daebo Shipping Company Ltd v The Ship Go Star [2012] FCAFC 156; (2012) 207 FCR 220
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1
Gel Custodians Pty Ltd v Dewar [2014] WASC 177
General Steel Industries Inc v Commissioner for Railways (NSW) (1964)112 CLR 125
Hamilton v Whitehead (1988) 166 CLR 121
Hee v Nyoni [2014] WASC 44
Holloway v Mc Feeters (1956) 94 CLR 470
HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153
Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328
Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 485
Imperial Oil Ltd v C & G Holdings Ltd (1989) 62 DLR (4th) 261
Jones v Dunkel (1959) 101 CLR 298
Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449
Kimberley Downs Pty Ltd v The State of Western Australia (Unreported, WASC, Library No 6414, 25 August 1986)
King v Milpurrurru [1996] FCA 237; (1996) 66 FCR 474
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115
LED Technologies Pty Ltd v Roadvision Pty Ltd [2012] FCAFC 3; (2012) 199 FCR 204
Lumley v Gye (1854) 3 El & Bl 114; (1854) 118 ER 1083
Mentmore Manufacturing Company Ltd v National Merchandising Manufacturing Company Inc (1978) 89 DLR (3d) 195
Microsoft Corporation v Auschina Polaris Pty Ltd [1996] FCA 1069; (1996) 71 FCR 231
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
O'Brien v Dawson (1941) 41 SR (NSW) 295
O'Brien v Dawson (1942) 66 CLR 18
Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1
Permanent Building Society (In Liq) v Wheeler (1994) 11 WAR 187
Rustic Haven Sdn Bhd v The Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) (In Liq) [2005] WASC 88
Rutherford v Poole [1953] VLR 130
Said v Butt [1920] 3 KB 497
SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138
Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118
Theseus Exploration NL v Foyster (1972) 126 CLR 507
Trustees of the Property of Cummins v Cummins [2006] HCA 6; (2006) 227 CLR 278
Tsaprazis v Goldcrest Properties Pty Ltd [2000] NSWSC 206
WA Country Builders Pty Ltd v Premium Coastal Property Pty Ltd [2012] WASC 236
Wah Tat Bank Ltd v Chan Cheng Kum [1975] AC 507
Wallingford v Mutual Society (1880) 5 App Cas 685
Webster v Lampard (1993) 177 CLR 598
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Wright v Wright [2002] WASC 30

Text cited:

P Watts and F M B Reynolds, Bowstead and Reynolds on Agency (Sweet and Maxwell, 19th ed, 2010)

Table of Contents

Introduction
1. Overview of the dispute between the parties to the action

Board meeting 14 March 2013
Board meeting 3 May 2013
The Review Report
Board meeting 30 May 2013
The Notice of Default
BA's purported termination of the Management Agreement
KCGL's purported termination of the Management Agreement

2. The disputed pleading and BA's concession that relevant paragraphs should be struck out

The concession that the Challenged Counterclaim should be struck out

3.     Grounds for the application for Summary Judgment Application
4.     The principles applicable to summary judgment applications
5.     Why two of the grounds for the Summary Judgment Application do not succeed
6.     Can the applicants be liable for the causes of action pleaded in the Challenged Counterclaim?

Whether it is open to BA to contend that the Applicants committed the torts of inducing a breach of contract or interfering with contractual relations

The rule in Said v Butt
The basis for BA's contention that this case falls outside the limits of the rule in Said v Butt
Is it open to BA to pursue a case against the Applicants on this basis?

7. Why the application for summary judgment on the Challenged Counterclaim should be granted

(i) The premise for the Challenged Counterclaim is inconsistent with the premise for BA's cause of action against KCGL
(ii) BA has not discharged its evidentiary onus

(I)      Overview of the evidence on the Summary Judgment Application, and of the objections to that evidence
(II)     Why the Applicants' evidence, if accepted at trial, would establish a prima facie case that the Applicants were acting in the best interests of KCGL when the Directors resolved to issue the Notice of Default
(III)       Why BA did not discharge its evidentiary onus of demonstrating that a triable issue exists on its case against the Directors
(IV)       Why BA did not discharge its evidentiary onus of demonstrating that a triable issue exists on its case against Mr Priest

Conclusion
Appendix 1: Summary of the Challenged Counterclaim

PRITCHARD J:

Introduction

Knights Capital Group Ltd (KCGL) is an unlisted public company which manages investment funds. Mr Hodgetts, Mr Britton and Mr Paramor (the Directors) are directors of KCGL. Mr Priest is the company secretary of KCGL.
Mr Bajada is the director of Bajada and Associates Pty Ltd (BA). Until 19 July 2013, he was also the managing director of KCGL.
In 1996, KCGL entered into an agreement with BA by which BA agreed to provide KCGL with investment and financial management services, and accounting, secretarial and general management services (the Management Agreement). The Management Agreement came to an end in July 2013.
KCGL commenced this action against BA and Mr Bajada, alleging a number of breaches of the Management Agreement and of the Corporations Act 2001 (Cth) (the Act), and seeking to recover monies it alleges were overpaid to BA, damages for breach of the Management Agreement, or compensation pursuant to the Act.
BA and Mr Bajada deny any breach of the Management Agreement or of the Act. In addition, BA counterclaims against both KCGL, and against Mr Hodgetts, Mr Britton, Mr Paramor and Mr Priest (the Applicants) personally (the Counterclaim).[1] In that part of the Counterclaim which pertains to KCGL, BA contends that KCGL has failed to pay management fees to BA, and that KCGL wrongfully repudiated the Management Agreement, as a result of which BA suffered the loss of the income that BA would have received for its continued performance of the Management Agreement.
[1] Further Re-Amended Defence and Counterclaim, dated 15 December 2014.
In the Counterclaim at par [54] ‑ [72] and the second prayer for relief (to which I will refer, collectively, as the Challenged Counterclaim), BA claims that the Applicants induced KCGL to wrongfully repudiate the Management Agreement and that they thereby interfered with KCGL's performance of the Management Agreement, and are liable to BA for damages and aggravated damages. BA claims that the Applicants' conduct was not in good faith, or for a proper purpose, or in the best interests of KCGL; was in breach of their duties as officers of KCGL; was outside the scope of their authority as officers of KCGL; and constituted acts in their personal capacities and for their personal benefit.
In the present application (the Summary Judgment Application), the Applicants applied to strike out the Challenged Counterclaim pursuant to O 20 r 19 of the Rules of the Supreme Court 1971 (WA) (RSC) on the basis that the Challenged Counterclaim does not disclose a reasonable cause of action. In the alternative, the Applicants applied for summary judgment on the Challenged Counterclaim, pursuant to O 16 r 1 RSC on the grounds that the Applicants have a good defence on the merits.
At the hearing of the Summary Judgment Application, counsel for BA conceded that the Challenged Counterclaim was inadequately pleaded and should be struck out. He sought leave to file further amendments to the Challenged Counterclaim. The Applicants resisted that application for leave on the basis that the Challenged Counterclaim did not disclose a reasonable cause of action, and in the alternative, that they have a good defence to the action. They submitted that summary judgment should instead be entered in their favour on the Challenged Counterclaim.
For the reasons set out below, I have concluded that the Applicants' Summary Judgment Application should be granted, and that judgment should be entered for the Applicants on the Challenged Counterclaim.
In these reasons, I deal with the following matters:
1.overview of the dispute between the parties to the action;
2.the disputed pleading and BA's concession that relevant paragraphs should be struck out;
3.grounds for the Summary Judgment Application;
4.the principles applicable to summary judgment applications;
5.why two of the grounds for the Summary Judgment Application do not succeed;
6.whether the Applicants can be liable for the causes of action pleaded in the Challenged Counterclaim; and
7.why the Summary Judgment Application on the Challenged Counterclaim should be granted.

Overview of the dispute between the parties to the action

It is convenient to set out some further facts surrounding the dispute between the parties. The matters referred to below are drawn from the affidavit evidence relied upon by the parties on the Summary Judgment Application and do not appear to be contentious.
An Annual General Meeting of the members of KCGL was held on 1 March 2013 (the AGM). The AGM was initially called at the request of Australian Executive Trustees Limited (AET) (a subsidiary of IOOF Holdings Ltd (IOOF)). AET was the majority shareholder in KCGL at the time. It called for the AGM to be held to consider resolutions to remove two of KCGL's then directors and to replace them with three new directors, namely Mr Hodgetts, Mr Paramor and Mr Britton.[2] It appears that this course of action was pursued because AET held concerns about the management and governance of KCGL.[3] The resolutions were passed and Mr Hodgetts, Mr Paramor and Mr Britton were appointed to the board of directors of KCGL (the Board), joining Mr Bajada, who remained as the Managing Director of KCGL.
[2] Affidavit of Grant Bartley Hodgetts sworn 7 October 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Hodgetts Affidavit), Annexure GBH12.
[3] Hodgetts Affidavit, Annexure GBH2.
On 4 March 2013, Mr Hodgetts wrote (on behalf of the Directors) to Mr Bajada, in his capacity as the Managing Director of KCGL. That letter stated that the new Directors 'intend to undertake a full review of the Company and its operations on an urgent basis' and requested that Mr Bajada provide copies of various documents, and other information in relation to KCGL's financial position. The letter also advised that 'until the full review has been completed, with immediate effect, your fellow directors require that you fulfil a "caretaker" role only and do not without the consent of either [Mr Paramor], [Mr Britton] or myself do any of the following', which things included making any material decisions affecting KCGL or its investments.

Board meeting 14 March 2013

At a meeting of the Board on 14 March 2013, the Board resolved to appoint Mr Priest as company secretary.[4] Mr Priest is a partner of Sothertons Chartered Accountants (Sothertons).
[4] Hodgetts Affidavit, Annexure GBH14.
Also at the meeting of the Board on 14 March 2013, the Board (Mr Bajada abstaining) resolved to appoint Sothertons to undertake 'an investigative review' (the Review) in accordance with a letter from Sothertons of 11 March 2013, which set out the scope of the Review. A copy of that letter was annexed to Mr Hodgetts' affidavit.[5] That letter was signed by Mr Priest on behalf of Sothertons. It was addressed to 'the Directors' of KCGL. It referred to a meeting between Mr Priest and the directors of KCGL on 6 March 2013, in which there was discussion of the fact that 'the new directors wished to undertake a limited investigative review of a number of aspects of [KCGL]' including the Management Agreement and BA's accrued fees.

Board meeting 3 May 2013

[5] Hodgetts Affidavit, Annexure GBH14.

At a meeting of the Board on 3 May 2013, the Board (Mr Hodgetts abstaining) resolved that expenses incurred by Mr Hodgetts in connection with his investigation of issues relating to the Management Agreement, the finalisation of KCGL's accounts, and familiarisation with the management of KCGL and its interests, should be approved at a full Board meeting.[6] The Board (Mr Hodgetts abstaining) also resolved that a recommendation by Mr Hodgetts concerning the remuneration of Mr Britton, Mr Hodgetts, Mr Paramor and Mr Priest be accepted. The minutes record that Mr Bajada opposed that motion.[7]
[6] Hodgetts Affidavit, Annexure GBH16.
[7] Hodgetts Affidavit, Annexure GBH16.
In addition, at the Board meeting on 3 May 2013, the Board resolved that:
1.The Company seek a negotiated termination of the Management Agreement and the settlement of all claims involving [BA] on terms to be approved by the Board; and
2.In parallel, the Company is to issue a breach notice and take steps to pursue claims against [BA] and Mr Bajada.
The minutes of the Board meeting on 3 May 2013 also record that the meeting considered a recommendation from Messrs Iffla Wade (a firm of solicitors) that Mr Brahma Dharmananda SC be appointed as counsel to advise on the proposed actions to be taken by KCGL in relation to the Management Agreement and to settle various notices prepared by Iffla Wade.[8] The Board resolved to appoint Mr Dharmananda.[9]
[8] Hodgetts Affidavit, Annexure GBH16.
[9] Hodgetts Affidavit, Annexure GBH16.
I note that the minutes record that Mr Bajada had absented himself from the meeting while the latter items on the agenda were discussed.

The Review Report

On or about 29 May 2013,[10] the Directors received a copy of a draft report prepared by Sothertons as a result of the Review (the Review Report).[11] The Review Report identified numerous matters which appeared to constitute breaches of the Management Agreement, including overpayments by KCGL of the management fees to which BA was entitled under the Management Agreement, and payments by KCGL for expenses which should have been borne by BA under the Management Agreement (the Alleged Overpayments).[12] However, the Review Report recommended that legal advice be obtained in relation to the construction of various provisions of the Management Agreement; to confirm that BA had made an incorrect calculation of its entitlements; to confirm that BA and Mr Bajada had been overpaid; and to obtain advice as to any remedies open to KCGL.[13]

Board meeting 30 May 2013

[10] Hodgetts Affidavit [42].

[11] Hodgetts Affidavit, Annexure GBH23.

[12] Hodgetts Affidavit, Annexure GBH23.

[13] Hodgetts Affidavit, Annexure GBH23.

The minutes of a meeting of the Board on 30 May 2013 indicate that KCGL had received a request from shareholders holding at least 5% of the votes at a general meeting to convene a general meeting pursuant to s 249D of the Act to consider two resolutions. The resolutions were to terminate the Management Agreement and to remove Mr Bajada as a director. The minutes record that the Board resolved that Mr Priest should review the register of shareholders to confirm that the requisitioning shareholders in fact held 5% or more of the shares entitled to vote at a general meeting, and if satisfied that that was so, that he should convene a general meeting of shareholders to consider the resolutions.[14]
[14] Hodgetts Affidavit, Annexure GBH22.
The Board also resolved that:[15]
the Manager [that is, BA] be given notice requiring the Manager to remedy the breaches [of the Management Agreement] and that the notice reserved the right to terminate the Management Agreement if the breaches were not remedied within the required timeframe.
[15] Hodgetts Affidavit, Annexure GBH22.

I note that the minutes record that Mr Bajada had absented himself from the meeting while these items on the agenda were discussed.

The Notice of Default

A notice of default dated 4 June 2013 was then served on BA by KCGL (the Notice of Default).[16] The Notice of Default was signed by Iffla Wade, purportedly on behalf of KCGL. (There is a dispute between the parties as to whether Iffla Wade was instructed by KCGL or by the directors personally.)
[16] Hodgetts Affidavit, Annexure GBH25.
The Notice of Default alleged that BA had breached the Management Agreement in numerous respects and required that BA remedy those defaults within 30 days (by repaying the Alleged Overpayments), failing which KCGL reserved its rights to terminate the Management Agreement and to take further action in respect of the alleged breaches.

BA's purported termination of the Management Agreement

In a letter to KCGL dated 19 July 2013,[17] BA denied that it had breached its obligations under the Management Agreement as alleged in the Notice of Default or at all. The letter continued:
Since 1 March 2013, the Company has sought to restrict the powers of the Manager without complying with clause 3.4 of the Management Agreement …
The conduct of the Company, as referred to above, as well as the issue of the Notice evidences a clear intent by the Company not to be bound by the Management Agreement and constitutes a repudiation by the Company of the Management Agreement.
The Manager hereby accepts the Company's repudiation and terminates the Management Agreement with effect from the date of this Notice of Termination.
[17] Hodgetts Affidavit, Annexure GBH30.
On the same date, Mr Bajada resigned as a director of KCGL.[18]

KCGL's purported termination of the Management Agreement

[18] Hodgetts Affidavit, Annexure GBH29.

By letter dated 22 July 2013, Iffla Wade, purportedly on behalf of KCGL, wrote to BA advising that BA's termination of the Management Agreement (by its letter dated 19 July 2013) constituted a repudiation of the Management Agreement. Iffla Wade advised that KCGL terminated the Management Agreement for that reason and because BA had failed to remedy some or all of the breaches specified in the Notice of Default.[19]
[19] Hodgetts Affidavit, Annexure GBH31.

The disputed pleading and BA's concession that relevant paragraphs should be struck out

At the time the Summary Judgment Application was filed, an Amended Defence and Counterclaim[20] had been filed.  By the time of the first special appointment for the hearing of the Summary Judgment Application, the Counterclaim had been amended on two further occasions.[21]  The parties' initial written submissions addressed the Counterclaim which had by then been filed.[22]  However, in the course of the hearing, counsel for the Applicants referred to the most recent iteration of the Challenged Counterclaim.[23]  In these reasons, it has been convenient to refer to the latter document because the additional amendments it contains do not alter the tenor of the Challenged Counterclaim in any respect which is material for present purposes.
[20] Amended Defence and Counterclaim, dated 2 October 2014.
[21] Re-Amended Defence and Counterclaim, dated 25 November 2014; Further Re-Amended Defence and Counterclaim, dated 15 December 2014.
[22] That is, Re-Amended Defence and Counterclaim, dated 25 November 2014:  see, eg, Outline of Submissions by Second to Fifth Defendants to Counterclaim in support of Application for Summary Judgment, Alternatively to Strike Out Parts of the Counterclaim, dated 27 November 2014 (Applicants' Submissions) [17] and Plaintiff to Counterclaim's Outline of Submissions in Reply to the Second to Fifth Defendants to Counterclaim Submissions, dated 9 December 2014 (Plaintiff to Counterclaim's Submissions) [2].
[23] See, eg, ts 31, 43.
The relevant paragraphs of the Challenged Counterclaim are summarised in Appendix 1 to these reasons.
The Challenged Counterclaim pleads two causes of action against the Applicants: the tort of inducing a party to a contract to breach that contract (namely the Management Agreement); and the tort of interfering in the contractual relations between KCGL and BA.
The Challenged Counterclaim was, with respect, very poorly pleaded. It was difficult to see the connection between the written submissions filed on BA's behalf on the Summary Judgment Application, and the case pleaded in the Challenged Counterclaim. Accordingly, I gave leave to BA to file further submissions summarising its case and the evidence on which it relied as the foundation for that case (by reference to the affidavit material filed for the purposes of the Summary Judgment Application).
It appears that although the Challenged Counterclaim relies on the issue of the Notice of Default as the conduct by which the Applicants are alleged to have procured KCGL to breach the Management Agreement, BA seeks to rely on other material facts (most of which are not presently pleaded) which it says permit the inference that when the Notice of Default was issued, the Directors were not acting in good faith in the best interests of KCGL, but rather were acting in the interests of AET or IOOF, or in the interests of another company ‑ Folkestone Limited (Folkestone) ‑ or in their own best interests.[24]
[24] Plaintiff to Counterclaim's Summary of Evidence, dated 13 January 2014 [5].
In so far as Mr Priest is concerned, BA's case appears to be that Mr Priest also procured KCGL to issue the Notice of Default, or assisted the Directors to do so, and in that way also interfered with the contractual relations between KCGL and BA. It appears that BA also wishes to contend that other aspects of Mr Priest's conduct permit the inference that when the Notice of Default was issued, Mr Priest was not acting in the best interests of KCGL and its shareholders, but rather for his own personal interest or benefit, or in the interests of Sothertons, or in the Directors' pursuit of the interests of AET or IOOF, or of Folkestone, or of the Directors' own best interests.[25]
[25] Plaintiff to Counterclaim's Summary of Evidence, dated 13 January 2014 [6].
Counsel for BA submitted that BA should have leave to re-plead, effectively to include matters raised in Mr Bajada's affidavit in opposition to the Summary Judgment Application and in the written submissions filed on BA's behalf.[26] He submitted that the Challenged Counterclaim '[formed] a skeleton which need[s] to be bolstered by the background information which has been outlined in the affidavit [of Mr Bajada] and in the submission'.[27] The submissions by counsel for BA thus focused on the case BA intended to advance, rather than its case as presently pleaded in the Challenged Counterclaim. In dealing with the Summary Judgment Application, I have taken into account BA's intended case, having regard to those submissions and the affidavit evidence adduced by the parties.

The concession that the Challenged Counterclaim should be struck out

[26] ts 48.

[27] ts 48.

As I have already mentioned, counsel for BA conceded that the Challenged Counterclaim was 'deficient' and should be struck out but submitted that BA should have leave to re-plead.
Having regard to the well-established principles in relation to strike out applications,[28] the concession that the Challenged Counterclaim should be struck out was properly made. However, the question of leave to re-plead falls away in view of my conclusion that summary judgment should be granted on the Challenged Counterclaim.
[28] Kimberley Downs Pty Ltd v The State of Western Australia (Unreported, WASC, Library No 6414, 25 August 1986) 6 ‑ 7 (Staples M).

Grounds for the application for Summary Judgment Application

The Applicants advanced three grounds for their application for summary judgment, namely:
(a)the issue of the Notice of Default was not a repudiation of the Management Agreement;
(b)although termination of the Management Agreement may have been the ultimate effect and (arguably) the design of the Notice of Default, the operative intention of the Applicants was not to breach the Management Agreement; and
(c)the conduct of the Applicants was conduct in their capacity as officers of KCGL and therefore the conduct of the company, for which they cannot be personally liable. (This ground encompassed the submission that BA had no evidence to support its case that the conduct of the Applicants could be characterised as conduct other than conduct in their capacity as officers of KCGL.)

The principles applicable to summary judgment applications

A defendant to an action may apply to the court for summary judgment pursuant to O 16 r 1 RSC. Although the Applicants are defendants to the Counterclaim, in my view it is open to them to bring the present application pursuant to O 16 r 1.[29] BA did not contend otherwise.
[29] Cf WA Country Builders Pty Ltd v Premium Coastal Property Pty Ltd [2012] WASC 236 [11] (Sanderson M).
O 16 r 1 requires the court to be satisfied either that the action is frivolous or vexatious, or that the defendant has a good defence on the merits, or that the action should be disposed of summarily. The principles in relation to the determination of applications for summary judgment are well established. A party should not ordinarily be denied the opportunity to have his or her case determined following trial, and for that reason, the jurisdiction to grant summary judgment should be reserved for the clearest of cases, where there is a high degree of certainty about the ultimate outcome of the action if it were allowed to go to trial.[30] In other words, the question is whether, on the material before the court, it has been demonstrated that the plaintiff's action should not be permitted to proceed to trial because it is apparent that it must fail.[31]
[30] Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57] (Gaudron, McHugh, Gummow & Hayne JJ); Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46] (Gleeson CJ, Gummow, Hayne & Crennan JJ); Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 [24] (French CJ & Gummow J); Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99; Webster v Lampard (1993) 177 CLR 598, 602 ‑ 603 (Mason CJ, Deane & Dawson JJ).
[31] Webster v Lampard (1993) 177 CLR 598, 602.
However, that does not mean that summary judgment will be given only where the case is so hopeless as not to require argument. Extensive argument may be necessary to demonstrate that a party's case is so clearly untenable that it cannot possibly succeed.[32]
[32] General Steel Industries Inc v Commissioner for Railways (NSW) (1964)112 CLR 125, 130 (Barwick CJ).
The defendant bringing the summary judgment application bears the legal onus of establishing that there is no serious question to be tried on any cause of action raised by the plaintiff.[33] Under O 16 r 1(2) the defendant is required to file an affidavit verifying the facts upon which the application is based.
[33] Anderson v Effexseven (1999) 10 ANZ Ins Cas 61 ‑ 424, 74,757 (Parker J, Owen J agreeing).
The plaintiff is also entitled, under O 16 r 2, to file an affidavit to show cause against the application. If the plaintiff shows cause against the application for summary judgment by filing an affidavit in response, the plaintiff may assume an evidentiary onus to show why summary judgment should not be given. In other words, the plaintiff needs to show, on the evidence, that there exists a 'triable issue'.[34] In doing so, the affidavit must 'condescend upon particulars' ‑ that is, it must set out facts which establish that it is reasonable to permit the plaintiff to pursue the action.[35]
[34] See Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109, 110 (Brinsden J) in relation to applications under O 14 r 1 RSC; see also Bankwest (a division of CBA) v Mann [2015] WASC 187 [46]; HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153 [26]; Gel Custodians Pty Ltd v Dewar [2014] WASC 177 [25]; Hee v Nyoni [2014] WASC 44 [25]; Wright v Wright [2002] WASC 30 [19].
[35] Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109, 110 (Brinsden J), citing Wallingford v Mutual Society (1880) 5 App Cas 685, 704 (Lord Blackburn).
While the plaintiff may assume an evidentiary onus, the defendant retains the legal onus of demonstrating that there is no real question to be tried.[36]
[36] Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18, 24.

Why two of the grounds for the Summary Judgment Application do not succeed

It was apparent from the submissions of counsel that BA's intended case is that the Board's resolution to issue the Notice of Default, when viewed in light of the surrounding circumstances, supports the conclusion that the Notice of Default should be viewed as a 'non-discretionary ultimatum' by which KCGL signalled that it was of the view that it was entitled to terminate the Management Agreement, that it intended to do so, and thus that the issue of the Notice of Default should properly be viewed as a repudiation of the Management Agreement.[37]
[37] Plaintiff to Counterclaim's Submissions [22].
The term 'repudiation' may be used in a number of different senses. It may refer to conduct (express or implied) which evinces an unwillingness or an inability to render substantial performance of the contract, or it may refer to a breach of a contract which justifies termination by the other party.[38] The present case involves an alleged instance of the former. The principles governing a repudiation of this kind were discussed by Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd.[39] His Honour said:
(i)A party will have repudiated a contract if, by words or conduct, it evinces an intention no longer to be bound by it or if that party shows it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and not in any other way …
(ii)The party's conduct is to be judged objectively by reference to the effect it would be reasonably calculated to have upon a reasonable person …
(iii)A party that acts on a genuine but erroneous view of its obligations under the contract will not for that reason alone have repudiated it. That party may still be willing to perform the contract according to its tenor; to recognise its heresy; or to accept an authoritative exposition of the contract … But persistence in an untenable construction will ordinarily be regarded as repudiatory … (citations omitted)
[38] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 [44] (Gleeson CJ, Gummow, Heydon & Crennan JJ).
[39] GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 [888] ‑ [891].
Counsel for the Applicants submitted that the resolution to issue the Notice of Default was not capable of constituting a repudiation of the Management Agreement because the notice did not manifest an intention not to comply with the Management Agreement, but rather simply reserved KCGL's rights to act in accordance with the Management Agreement if BA's (alleged) breaches of the Agreement, as identified in the notice, were not remedied. Furthermore, counsel for the Applicants pointed to the fact that the resolution which was in fact made at the meeting of the Board on 30 May 2013 was not to terminate the Management Agreement, but rather simply to issue the Notice of Default, with reservation of the right to terminate if the breaches were not remedied.[40] Finally, counsel for the Applicants submitted that it was BA, not KCGL, which first terminated the Management Agreement, and thereby repudiated it.[41]
[40] Applicants' Submissions [38].
[41] Applicants' Submissions [40].
I am not persuaded that summary judgment on the Challenged Counterclaim should be granted on those grounds, for two reasons. First, the determination of BA's case will require the determination of the proper construction of the Management Agreement and of the Notice of Default. The latter determination will require consideration of the evidence concerning the circumstances in which the Notice of Default was given. The question will be whether the terms of the Notice of Default, understood in the context in which that notice was issued, manifested an intention by the Board not to perform the Management Agreement. That question should be determined in light of all of the evidence at trial.
Secondly, in that part of the Challenged Counterclaim which pertains to KCGL, BA alleges that the issue of the Notice of Default constituted a wrongful repudiation of the Management Agreement by KCGL itself.[42] Whether the Notice of Default constituted a wrongful repudiation of the Management Agreement is thus an issue which will need to be resolved at trial in any event. That consideration, of itself, militates strongly against the grant of summary judgment on these grounds.
[42] Amended Defence and Counterclaim [10.4], [52].

Can the applicants be liable for the causes of action pleaded in the Challenged Counterclaim?

The conduct which BA alleges constituted the Applicants' procurement of KCGL's breach of contract, and their interference with its contractual relations, was the resolution made on 30 May 2013 by the Board (comprising Mr Hodgetts, Mr Paramor and Mr Britton, with Mr Bajada having absented himself from the discussion) to issue the Notice of Default to BA. When they voted in favour of that resolution, Mr Hodgetts, Mr Paramor and Mr Britton were directors of KCGL. At the time, Mr Priest was the company secretary of KCGL.
The Applicants say that BA's case against them cannot succeed for two reasons. First, the Applicants contend that the conduct on which the causes of action in the Challenged Counterclaim are based was conduct which was undertaken by them in their capacity as officers of KCGL, and therefore must be equated to conduct of KCGL itself. They say that they cannot be personally liable for the tort of procuring a breach of contract by KCGL or for interfering with its contractual relations. Secondly, the Applicants contend that if those causes of action can be pleaded as against them, BA has not pointed to the existence of any facts which, if proved, would be capable of establishing those causes of action.
The thrust of the submissions of counsel for BA was that BA can point to evidence sufficient to establish that when the Directors resolved to issue the Notice of Default, and when Mr Priest allegedly assisted them to do so, the Applicants were not acting in good faith in the best interests of KCGL but rather were acting in the interests of AET or IOOF, or of Folkestone, or in their own best interests. BA's case is that in those circumstances, the Applicants' conduct cannot be regarded as conduct in their capacity as officers of KCGL and that they can therefore be liable for the tort of procuring a breach of contract by KCGL, or for the tort of interfering with its contractual relations.

Whether it is open to BA to contend that the Applicants committed the torts of inducing a breach of contract or interfering with contractual relations

There was no dispute that the elements of the tort of procuring a breach of contract are those set out by the Full Court of the Federal Court in Daebo Shipping Company Ltd v The Ship Go Star.[43]The gravamen of the tort is the defendant's intention to induce or procure the breach in the knowledge that such a breach will interfere with the plaintiff's contractual rights.[44]
[43] Daebo Shipping Company Ltd v The Ship Go Star [2012] FCAFC 156; (2012) 207 FCR 220 [88] (the Court).
[44] Daebo Shipping Company Ltd v The Ship Go Star [2012] FCAFC 156; (2012) 207 FCR 220 [89] (the Court); Allstate Life Insurance Company v Australia and New Zealand Banking Group Ltd (1995) 58 FCR 26, 43 (Lindgren J, Lockhart & Tamberlin JJ agreeing); Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473 [159] ‑ [171] (the Court); LED Technologies Pty Ltd v Roadvision Pty Ltd [2012] FCAFC 3; (2012) 199 FCR 204 [40] - [54] (Besanko J, Mansfield & Flick JJ agreeing).

There was also no dispute that the principles in relation to the tort of interference with contractual relations are those summarised by Master Newnes (as he then was) in Boase v Seven Network (Operations) Ltd.[45]
[45] Boase v Seven Network (Operations) Ltd [2005] WASC 269 [32] - [33].
In a case where, as here, the interference with contractual relations is an actual breach of contract, there is little material difference in the case which needs to be established for the purposes of either tort. In this case, BA must establish that the Applicants knew of the Management Agreement between BA and KCGL; that the issue of the Notice of Default constituted a breach of the Management Agreement; that the Applicants knew that issue of the Notice of Default would constitute a breach of the Management Agreement; that the Applicants procured KCGL to issue the Notice of Default to BA; that the Applicants intended to induce KCGL to breach the Management Agreement by issuing the Notice of Default; and that that breach of the Management Agreement caused loss or damage to BA.
What is in issue in this application is whether the Applicants can be liable for either tort.
It is a trite proposition that a company can only act through its officers and agents.[46] The application of that principle has been held to have the consequence that where a director of a company, acting within the scope of his or her authority, causes the company to breach a contract with a third party, the director cannot be held liable for inducing or procuring the company to breach the contract[47] (the rule in Said v Butt).
[46] O'Brien v Dawson (1942) 66 CLR 18, 32 (Starke J).
[47] Said v Butt [1920] 3 KB 497, 504 - 506 (McCardie J); O'Brien v Dawson (1942) 66 CLR 18, 32 (Starke J), 34 (McTiernan J); Rustic Haven Sdn Bhd v The Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) (In Liq) [2005] WASC 88 [24] - [25] (Newnes M) and see the cases cited by his Honour at [24].
Counsel for BA submitted that the Applicants' conduct in this case fell outside the scope of the rule in Said v Butt. BA's intended case is that when the Directors resolved to issue the Notice of Default they did not act in good faith in the best interests of KCGL but rather were acting in the interests of AET or IOOF, of or Folkestone, or in their own best interests, and that Mr Priest was acting in his personal interest, or in the interests of Sothertons, or in the interests of the Directors (or the interests in which the Directors were acting).[48]
[48] Plaintiff to Counterclaim's Summary Evidence [5].
For completeness, I note that although Said v Butt was a case concerning the tort of procuring a breach of contract, the parties appeared to proceed on the basis that the rule in Said v Butt also applies in relation to actions for the tort of interference with contractual relations. Although the parties did not refer to any authority in which the rule in Said v Butt has been applied in the context of the tort of interfering with contractual relations, there is authority for the proposition that the defendant in an action of that kind must be a third party, who stands outside the contractual relationship being interfered with.[49] At least in a case where the interference in contractual relations is said to have occurred through an actual breach of contract, it is difficult to see any rationale for why the rule in Said v Butt would not apply to the tort of interference with contractual relations also. I am content to proceed on that basis.

The rule in Said v Butt

[49] Rustic Haven Sdn Bhd v The Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) (In Liq) [2005] WASC 88 [17] (Newnes M); Rutherford v Poole [1953] VLR 130, 135 (Herring CJ); Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874 [101] (Einstein J).

In order to explain the basis for the case advanced by BA, it is necessary to consider the basis for the rule in Said v Butt and its application in Australia.
In Said v Butt,[50] Mr Said brought an action against Sir Alfred Butt, the managing director of Palace Theatre Ltd, for procuring a breach of contract. Mr Said alleged that the contract between him and the company arose by virtue of Mr Said's acquisition of a ticket to a play being performed at the theatre. Sir Alfred had directed that Mr Said be refused entry to the theatre. McCardie J held that Mr Said had not established that a contract existed between himself and the company, and that he had consequently failed to prove that Sir Alfred had caused any breach of the alleged contract in refusing Mr Said admission to the theatre.[51] However, McCardie J went on to consider whether Mr Said could have succeeded had he established that there existed a valid contract between him and the Palace Theatre Ltd and that that contract had been breached.[52] McCardie J concluded that Sir Alfred Butt acted within his wide powers as managing director when he directed that the plaintiff should be refused admission to the theatre, and that when he did so he 'meant to act and did act bona fide for the protection of the interests of his company'.[53]
[50] Said v Butt [1920] 3 KB 497.
[51] Said v Butt [1920] 3 KB 497, 503.
[52] Said v Butt [1920] 3 KB 497, 503 - 506.
[53] Said v Butt [1920] 3 KB 497, 504.
His Honour noted that Lumley v Gye,[54] and the line of cases which established the elements of the tort of procuring a breach of contract, involved defendants who stood wholly apart from the parties to the contract.[55] His Honour then explained why it was not possible for an agent of a principal to commit the tort of procuring a breach of a contract to which the principal was a party. His Honour observed:[56]
the servant who causes a breach of his master's contract with a third person seems to stand in a wholly different position [to that of a stranger to the contract]. He is not a stranger. He is the alter ego of his master. His acts are in law the acts of his employer. In such a case it is the master himself, by his agent, breaking the contract he has made, and in my view an action against the agent under the Lumley v Gye principle must therefore fail, just as it would fail if brought against the master himself for wrongfully procuring a breach of his own contract.
[54] Lumley v Gye (1854) 3 El & Bl 114; (1854) 118 ER 1083.
[55] Said v Butt [1920] 3 KB 497, 505.
[56] Said v Butt [1920] 3 KB 497, 505 - 506.
For that reason, McCardie J concluded that the action brought by Mr Said was not sound, and observed:[57]
[I]f a servant acting bona fide within the scope of his authority procures or causes the breach of a contract between his employer and a third person, he does not thereby become liable to an action of tort at the suit of the person whose contract has thereby been broken. I abstain from expressing any opinion as to the law which may apply if a servant, acting as an entire stranger, or wholly outside the range of his powers, procures his master to wrongfully break a contract with a third person. (emphasis added)
[57] Said v Butt [1920] 3 KB 497, 506.
The words I have emphasised in this passage are the basis for what BA submits marks the limits of the rule in Said v Butt.
The rule in Said v Butt was applied in Australia in O'Brien v Dawson.[58] In that case, a company had entered into two contracts with Mr O'Brien, namely an agreement to sublet to him two picture theatres, and a subsidiary agreement to let him into possession as its agent pending completion of the leases. After he had been in possession for some time (pursuant to the subsidiary agreement), the company claimed that he had committed a breach of the main agreement as to the time for its performance, which entitled the company to terminate the agreement. It did so, and resumed possession. Mr O'Brien brought an action against the company and two of its directors, alleging that the directors had conspired with the company to injure him. Mr O'Brien was successful at trial, but the judgment was set aside on appeal to the Full Court of the New South Wales Supreme Court, in part because the Court held that there was no evidence that the directors did not believe that the company was legally entitled to terminate the contract.
[58] O'Brien v Dawson (1942) 66 CLR 18.
In the course of discussing the elements of the tort of conspiracy to breach a contract, Jordan CJ (with whom Halse Rogers and Roper JJ agreed) discussed the question whether the directors could be liable, with the company itself, for that tort. In doing so, his Honour referred to the rule in Said v Butt by way of comparison. He said:[59]
The next question is whether, if an ordinary limited liability company is a party to a contract, and its directors acting as such, and in the course of conducting the company's business at a Board meeting, resolve that the company shall refuse to perform a contract to which it is a party, the directors knowing that the refusal cannot be legally justified, and effect is given to this resolution, the directors concerned are guilty of the tort … of conspiracy. I am of opinion that in such a case it is entirely artificial to speak of the directors as 'procuring' the company to break its contract in the sense in which this word is used in the Lumley v Gye type of case. An incorporated company is a figment of the law. It is incapable of acting except through agents. Its directors are persons who have been authorised by the constituent members of the corporation to cause acts to be done on its behalf. They are its agents who have power to control its acts. It cannot act at all except through them or through some other authorised agents. They are not in the position of outsiders who are influencing the independent volition of a contracting party who is capable of exercising volition for himself. It is their volition and theirs only which determines the making, the performance, or the breach of the company's contracts … [T]here is authority for the proposition that the fact that one or more directors of a company, acting as such, are the instruments by which the company, without just cause, refuses to perform a contract does not confer on the other party to the contract a right to sue the directors in tort on the footing that they have procured a breach of contractual rights: Said v Butt ...
[59] O'Brien v Dawson (1941) 41 SR (NSW) 295, 307 - 308.
That decision was the subject of an appeal to the High Court, which was dismissed. Williams J (with whom Rich J agreed) held that Jordan CJ had not erred in concluding that there was no evidence that the directors knew that the company was not entitled to terminate.[60] His Honour did not discuss the question whether directors could be liable, together with the company, for the tort of conspiracy, or the general rule that a director cannot be liable for the tort of procuring a breach of contract by the company. However, the other two members of the Court did discuss these principles. Starke J observed:[61]
A company 'cannot act in its own person for it has no person'. So it must of necessity act by directors, managers, or other agents. The company, if it were guilty of a breach of its contracts in this case, acted through its director the respondent Doyle but it is neither 'law nor sense' to say that Doyle in the exercise of his functions as a director of the company combined with it to do any unlawful act or become a joint tortfeasor. Again, it is equally fallacious to assert that Doyle knowingly procured the company to break its contract. The acts of Doyle were the acts of the company and not his personal acts which involved him in any liability to the plaintiff. (citations omitted)
[60] O'Brien v Dawson (1942) 66 CLR 18.
[61] O'Brien v Dawson (1942) 66 CLR 18, 32.
However, his Honour went on to note:[62]
But I would add that it does not follow that a director of a company would escape personal liability under cover of the company's responsibility if he himself became an actor and invaded the plaintiff's rights, as by trespassing on his land, or seizing his goods and so forth. (citations omitted, emphasis added)
[62] O'Brien v Dawson (1942) 66 CLR 18, 32.
McTiernan J also referred to Said v Butt and noted that an action for the tort of procuring a breach of contract could not lie against a company for breach of its own contract or against its directors. However, his Honour noted that that would only be the position if the directors:[63]
were acting in pursuance of their authority as directors (Said v Butt). There is no evidence that they were not acting in pursuance of that authority. (emphasis added)

The basis for BA's contention that this case falls outside the limits of the rule in Said v Butt

[63] O'Brien v Dawson (1942) 66 CLR 18, 34.

BA's case is that the rule in Said v Butt does not apply where an officer of a company engages in conduct which would ordinarily be within the scope of the officer's authority ‑ such as when a director votes on a resolution at a meeting of the board of directors[64] ‑ if it can be said that the director's conduct was not engaged in in good faith or in the best interests of the company. Counsel for BA submitted that it was arguable that this formulation fell within an 'exception' to the rule in Said v Butt,[65] was consistent with the limits of the principle as recognised in O'Brien, and was 'an arguable point of law that has otherwise not been determined in Australia'.[66]
[64] Corporations Act 2001 (Cth) s 198A, s 248G.
[65] Plaintiff to Counterclaim's Submissions [43].
[66] Plaintiff to Counterclaim's Submissions [51].
BA sought to draw support for its case from Idoport Pty Ltd v National Australia Bank Ltd.[67] In that case, Einstein J granted leave to a plaintiff to re‑plead its cause of action against two directors of a company for procuring a breach of the company's contract with a third party, on the basis that the acts in question were not in the interests of the company. Although his Honour 'very much doubted'[68] the correctness of the proposition that acts of a director, which were apparently within his or her authority as a director, but which were carried out other than in the interests of the company, could result in the director being liable for inducing a breach of contract, nevertheless his Honour considered that the questions of principle raised by the pleading were appropriate for decision as part of the final judgment of the court.[69]
[67] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 485 [6] (Einstein J); see also Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [65] - [68] (Einstein J).
[68] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [65] (Einstein J).
[69] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 485 [6] (Einstein J).
In the course of his judgment, his Honour referred to Canadian[70] and New Zealand[71] cases in which it had been accepted that a director could be liable for procuring a breach of contract by a company if it were shown that the director's dominant concern was to deprive the plaintiff of his or her contractual benefits. However, his Honour noted that no Australian case had dealt with a claim that a director was liable for the tort of inducing a breach of contract on the basis that the acts of the director were not bona fide in the interests of the company.[72] The Idoport case does not appear to have proceeded to trial.
[70] Imperial Oil Ltd v C & G Holdings Ltd (1989) 62 DLR (4th) 261, 266 (Marshall JA) referred to in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [57] (Einstein J).
[71] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [60] (Einstein J), referring to Cook Strait Skyferry Ltd v Dennis Thompson International Ltd [1993] 2 NZLR 72, 78 (Kennedy-Grant M).
[72] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [62].
Counsel for BA also relied on the decision of Hodgson CJ in Eq in Tsaprazis v Goldcrest Properties Pty Ltd.[73] In Tsaprazis, the plaintiffs leased premises from a company, Dernu Pty Ltd. The plaintiffs used the premises as a restaurant. The lease contained covenants that the landlord would maintain the premises in a structurally sound condition, and that the landlord could terminate the lease in the event of damage to the premises which the landlord considered made repairs impracticable or undesirable. The property was sold and the purchaser (a company, Goldcrest Properties Pty Ltd) assumed the landlord's obligations under the lease. Following water damage to the premises, Goldcrest terminated the lease on the basis that it considered it impracticable or undesirable to repair the premises. The plaintiffs brought an action against Dernu and Goldcrest, and against Mr Micola, a director and shareholder of Dernu. The cause of action alleged against Mr Micola was a breach of a common law duty of care to ensure that the landlord company complied with its obligations under the lease to keep the premises in good repair, so as to avoid the plaintiffs suffering economic loss. Mr Micola applied to strike out the pleading against him. Hodgson CJ in Eq struck out the pleading, because it did not plead a proper basis for the existence of a duty of care on Mr Micola's part. In reaching that view, his Honour referred to the contractual context, and to the general principle that:[74]
only the company is liable under such a contract, not its shareholders or directors … Consistently with this general approach, directors are not liable for the tort of inducing breach of contract, where, in exercising their functions as directors, they have caused the company to breach its contract: see Said v Butt and O'Brien v Dawson.
[73] Tsaprazis v Goldcrest Properties Pty Ltd [2000] NSWSC 206.
[74] Tsaprazis v Goldcrest Properties Pty Ltd [2000] NSWSC 206 [11].
Tsaprazis does not advance BA's position. The case did not involve an action for the tort of inducing a breach of contract, or interference with contractual relations. The references by Hodgson CJ in Eq to Said v Butt and O'Brien v Dawson were simply obiter observations made by way of comparison to demonstrate the common law's reluctance to impose liability on directors in other contexts apart from that of the common law duty of care.
Counsel were unable to identify any Australian case in which a director of a company has been found liable for the tort of inducing a breach of contract between the company and a third party, or for interference with contractual relations, either on the basis that the individual was acting outside the scope of his or her authority as a director, or on the basis that the individual was exercising the powers of a director but was not acting bona fide in the interests of the company.
Counsel for BA did not explain precisely the basis on which it could be determined that a director's conduct was not bona fide in the interests of the company. In the Challenged Counterclaim, and in the submissions, a number of different possibilities appeared to be canvassed. By way of example, counsel for BA submitted that where a director's actions had mixed purposes, the director's conduct would be 'invalidated' if an impermissible purpose caused the director to engage in the conduct.[75] He also submitted that a court might conclude that a director was not acting bona fide in the interests of the company if the 'director has procured a company to breach a contract through a breach of his director's duties … [t]his proposition remains to be further explored or tested by the court.'[76] Counsel for BA also submitted that in determining whether an officer of a company was acting other than bona fide in the interests of the company, some assistance could therefore be drawn from the principles summarised by Ipp J in Permanent Building Society (In Liq) v Wheeler.[77]Counsel for BA acknowledged that:[78]
breaches of director's duties are ordinarily enforceable by the company and not third parties. However, where a director breaches his duties this is demonstrative that the director acted outside of his powers. Where a director breaches his duties to act for a proper purpose or in good faith, this accords with the proposition that the director is not acting bona fide in the scope of his authority. (emphasis in original)

Is it open to BA to pursue a case against the Applicants on this basis?

[75] Plaintiff to Counterclaim's Submissions [50] citing Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285, 292 (Mason, Deane & Dawson JJ).

[76] Plaintiff to Counterclaim's Submissions [46].

[77] Permanent Building Society (In Liq) v Wheeler (1994) 11 WAR 187, 218 (Ipp J, Malcolm CJ & Seaman J agreeing).

[78] Plaintiff to Counterclaim's Submissions [51].

I have considerable reservations as to whether it is open to BA to pursue the Challenged Counterclaim on the basis set out above. The rule in Said v Butt emerges from obiter in the judgment of McCardie J. Further, the limits of the rule in Said v Butt upon which BA seeks to rely are set out in obiter of only two of the members of the High Court in O'Brien v Dawson. Furthermore, within the factual context in O'Brien v Dawson (where the appeal to the High Court was dismissed expressly on the basis that that dismissal was without prejudice to the plaintiff's rights to pursue other actions against the defendants, including actions for other torts) it appears to be arguable that both Starke J and McTiernan J were simply intending to emphasise that the mere fact of being a director of a company does not absolve a person from liability as a joint tortfeasor with a company (apart from liability for the tort of procuring a breach of contract). Furthermore, at least in a case where the director's conduct is of a kind which prima facie is within the scope of his or her authority, the evidentiary difficulties in establishing that the director's conduct was not in the best interests of the company may well render success more of a theoretical, rather than a real, possibility.
Nevertheless, despite these reservations, I am not persuaded that it is beyond argument that the rule in Said v Butt is subject to the limits for which BA contends. I have reached that view for three reasons.
First, on the face of what was said in both Said v Butt and in O'Brien v Dawson (in the passages italicised above), it is difficult to deny the possibility, at least in theory, that in a case where it is established that a director is acting outside the scope of his or her authority as a director, and in doing so engages in conduct which procures the company to breach a contract with a third party, the director may not be able to rely upon the rule in Said v Butt to resist liability for that tort.
Secondly, although there have been a number of cases in which it has been recognised that the rule in Said v Butt applies in Australia,[79] there has been little case law concerning the application of the rule. The scope of the rule in Said v Butt thus remains largely unexplored.
[79] See Rustic Haven Sdn Bhd v The Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) (In Liq) [2005] WASC 88 [17] (Newnes M) and cases cited therein.
Thirdly, outside the realm of the torts of procuring a breach of contract, or interfering with contractual relations, a director can be personally liable for a tort committed by the corporation. Directors may also be liable in equity, or under some statutes, for procuring a corporation to engage in a breach of trust,[80] or a breach of a statutory duty.[81] And it has been observed that 'the principle in O'Brien v Dawson does not sit entirely comfortably with the body of law which recognises that a director may be personally liable for procuring other wrongs by the corporation'.[82] That suggests that there may be room for further judicial exploration of the basis for, and limits of, the rule in Said v Butt, and the place of that rule within the common law's approach to the tort liability of directors more generally. Furthermore, the test for determining when a director is involved in the company's tortious conduct beyond merely being a director of the company, so that the director may be found liable as a joint tortfeasor with a company, for torts committed by that company, is not settled.[83] The unsettled state of the law in that context also provides some support for the view that the potential development of the limits of the rule in Said v Butt should not be stifled by summary judgment in this case.
[80] Under the second limb of the rule in Barnes v Addy (1874) LR 9 Ch App 244.
[81] See the discussion in Hamilton v Whitehead (1988) 166 CLR 121, 128.
[82] M Christie SC, 'Breaches of contract by corporations - Potential liabilities of directors and controllers for inducing breach' (2013) 28 Australian Journal of Corporate Law 304, 314 - 315; see also P Watts and F M B Reynolds, Bowstead and Reynolds on Agency (Sweet and Maxwell, 19th ed, 2010) 627.
[83] Wah Tat Bank Ltd v Chan Cheng Kum [1975] AC 507, 514 - 515. Two main tests are used: whether the person 'directed and procured' the company to commit the tort (see Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1, 14; Microsoft Corporation v Auschina Polaris Pty Ltd [1996] FCA 1069; (1996) 71 FCR 231, 246 (Lindgren J); Keller v LEDTechnologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449 [272] (Besanko J)) and whether the person 'made the wrongful act their own', as distinct from its being an act of the company, see, for example, White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61, 91; Mentmore Manufacturing Company Ltd v National Merchandising Manufacturing Company Inc (1978) 89 DLR (3d) 195, 203; King v Milpurrurru [1996] FCA 237; (1996) 66 FCR 474, 495 (Beazley J); Keller v LEDTechnologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449 [405] (Jessup J), and see also at [83] - [84] (Emmett J). In some cases, both tests have been applied (see eg Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319 [99] (Kenny J).
For present purposes, it suffices to say that the fact that the legal principles concerning the application and scope of the rule in Said v Butt are not yet settled weighs strongly against the grant of summary judgment. It is well established that the court should leave the determination of questions of law for trial, rather than undertake that determination in the course of an application for summary judgment.[84] Had that been the only basis for the Summary Judgment Application, I would have refused to grant summary judgment.
[84] Theseus Exploration NL v Foyster (1972) 126 CLR 507, 514 - 515 (Gibbs CJ); Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1 [36]; SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 [20].

Why the application for summary judgment on the Challenged Counterclaim should be granted

However, as I explain below, having reflected on the affidavit evidence relied upon by the parties, together with the submissions by counsel for BA as to the nature of the case that BA seeks to advance, I have come to the view that BA has not demonstrated that there exists a 'triable issue' and the Challenged Counterclaim should therefore be dismissed. I have reached that view for three reasons. First, the premise for the Challenged Counterclaim is inconsistent with the premise for BA's cause of action against KCGL. Secondly, BA has not identified any evidence which, if accepted, would be capable of establishing that the Applicants acted other than in the best interests of KCGL. Thirdly, at least in so far as the Challenged Counterclaim pertains to Mr Priest, BA has not identified any evidence that Mr Priest, as the company secretary, participated in the conduct which is said to have procured the alleged breach of contract, namely the resolution issue of the Notice of Default.

The premise for the Challenged Counterclaim is inconsistent with the premise for BA's cause of action against KCGL

In the Further Re-Amended Defence and Counterclaim, BA's cause of action against KCGL is that KCGL wrongfully repudiated the Management Agreement and thereby caused loss to BA. BA's case is that the wrongful repudiation of the Management Agreement occurred when KCGL issued the Notice of Default.[85] In other words, BA seeks to rely on the conduct of the Directors (in making the resolution at the Board meeting on 30 May 2013 to issue the Notice of Default) as binding on KCGL.
[85] Further Re-Amended Defence and Counterclaim [10].
In contrast, in the Challenged Counterclaim, BA's cause of action against the Directors for the tort of procuring the breach by KCGL of the Management Agreement is premised on the propositions that the Directors procured KCGL to issue the Notice of Default,[86] and that in doing so the Directors were acting outside the scope of their authority as directors and not in the best interests of KCGL.[87]
[86] Further Re-Amended Defence and Counterclaim [69].
[87] Further Re-Amended Defence and Counterclaim [68].
BA thus seeks to contend that the Directors' conduct was within the scope of their authority for the purpose of establishing KCGL's liability for breach of the Management Agreement, and at the same time to contend that the Directors' conduct was outside the scope of their authority for the purpose of establishing that they are liable for the tort of procuring that alleged breach of the Management Agreement. While the cases are run in the alternative, in my view it is not open to BA to advance both claims where the evidentiary foundation for them is so fundamentally inconsistent. The Applicants should have summary judgment on the Challenged Counterclaim for that reason.[88]

BA has not discharged its evidentiary onus
[88] Cf Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [65] - [66] (Einstein J).

In this section of my reasons, I deal with the following matters:
(I)overview of the evidence on the Summary Judgment Application, and of the objections to that evidence;
(II)why the Applicants' evidence, if accepted at trial, would establish a prima facie case that the Applicants were acting in the best interests of KCGL when the Directors resolved to issue the Notice of Default;
(III)why BA did not discharge its evidentiary onus of demonstrating that a triable issue exists on its case against the Directors; and
(IV)why BA did not discharge its evidentiary onus of demonstrating that a triable issue exists on its case against Mr Priest.

Overview of the evidence on the Summary Judgment Application, and of the objections to that evidence

Each of the Applicants swore an affidavit in support of the Summary Judgment Application.
Mr Bajada also swore an affidavit in opposition to the Summary Judgment Application. BA also relied on an affidavit sworn by one of its solicitors, annexing correspondence which disclosed that there is a dispute between the parties in relation to whether Iffla Wade was engaged by the Directors on behalf of KCGL, or by the Directors in their personal capacities. BA also relies on a concession made by counsel for the Applicants in the course of his oral submissions that the Board did not make a resolution that Iffla Wade be appointed the solicitors for KCGL.

Objections to the affidavit evidence

Numerous objections were made to the affidavit evidence. I have dealt with the evidence, having regard to the objections, in the following way.
First, BA objected to various paragraphs in the Applicants' affidavits on the basis that those paragraphs contained self-serving statements, as to each Applicant's belief that he was acting in the best interests of KCGL and its shareholders. I have approached this evidence on the basis that it simply constitutes evidence of the subjective belief of each of the Applicants as to the basis for his conduct.
Secondly, BA objected to various paragraphs in the Applicants' affidavits on the basis that those paragraphs contained evidence as to the content or import of particular documents. I have given no weight to that evidence, but have instead had regard to the content of the documents themselves (which were annexed to Mr Hodgetts' affidavit).
Thirdly, BA objected to certain paragraphs in the Directors' affidavits on the basis that they contained hearsay (as to conversations in which some of the Applicants were advised that AET and IOOF had concerns about the performance of KCGL under Mr Bajada's leadership, and the basis for those concerns). I have taken this evidence into account only as evidence of each Director's understanding of the reasons why AET and IOOF approached him to stand for election as a director. I have not taken such statements into account as evidence of the truth of the underlying facts.
Fourthly, the Applicants objected to numerous paragraphs within Mr Bajada's affidavit on the basis that they were speculative, did not constitute evidence, or were in the nature of Mr Bajada's opinions or constituted submissions. To the extent that Mr Bajada sets out his views in relation to the motivation or purpose for the conduct of the Applicants, or of IOOF or AET, or Folkestone, I have taken his evidence into account simply as his belief, based solely on the matters to which he refers, and as yet untested.

Why the Applicants' evidence, if accepted at trial, would establish a prima facie case that the Applicants were acting in the best interests of KCGL when the Directors resolved to issue the Notice of Default

The Applicants' evidence dealt with the key issues raised in the Challenged Counterclaim. It is convenient to outline the Applicants' case by reference to those issues.

Evidence of the Applicants as to their management experience, appointments, and previous association

Mr Hodgetts deposed that he is the executive director of KCGL and its related entities. Mr Hodgetts deposed to his previous experience in corporate management and regulatory roles, including roles as a director of various companies. Mr Hodgetts deposed that he is currently the executive chairman of Folkestone Funds Management Limited and a non‑executive director of Folkestone Investment Management Limited. Mr Hodgetts deposed that he has known Mr Paramor professionally for many years.
Mr Paramor deposed that he is a director of a number of Australian companies, and is the managing director of Folkestone.
Mr Britton set out his experience in corporate management and regulation, including his role as the director of a number of companies.
Mr Priest deposed that he has been a partner of Sothertons since 1988. Mr Priest deposed that he and Mr Paramor had had about a 30‑year professional association, acting as director and secretary on many companies.

Evidence of the Applicants as to the circumstances of their appointment

Mr Hodgetts deposed that in mid‑2012 he was approached by Mr Sweeney, a director of a company which subsequently became known as Folkestone Limited. Mr Hodgetts deposed that Mr Sweeney told him that AET and IOOF had 'concerns over the management and direction of KCGL'[89] and were interested in replacing the existing board and executive management of KCGL, and that Mr Bajada had refused a request to resign.[90] Mr Hodgetts deposed that he agreed to stand for election to the Board together with Mr Britton and Mr Paramor.
[89] Hodgetts Affidavit [13].
[90] Hodgetts Affidavit [14].
Mr Paramor deposed that in 2012 he was approached by Mr Hilton, who worked for IOOF, and was informed that IOOF held concerns about KCGL's performance under the leadership of Mr Bajada, who had rejected a request to resign as a director. Mr Paramor attended a meeting between Mr Bajada and representatives of IOOF in May 2012. Mr Paramor deposed that IOOF subsequently asked him to accept its nomination as a director of KCGL, and he agreed to do so.
Mr Britton deposed that in May 2012 he was approached by Mr Sweeney, who told him that shareholders in KCGL were unhappy with the performance of the company, its board and of its Managing Director, Mr Bajada. Mr Britton deposed that Mr Sweeney invited him to join 'a ticket [with Mr Paramor and Mr Hodgetts] to replace 2 of the 3 then current members of the board at a general meeting of KCGL'.[91] Mr Britton said that 'in the most general terms I understood that subject to a strategic review, the objective of the exercise was to ultimately re-unite investors with what was left of their capital in a cost effective manner'.[92]

Association with Folkestone

[91] Application of Michael Britton sworn 21 October 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Britton Affidavit) [12].

[92] Britton Affidavit [13].

When he gave his consent to be appointed as a director, Mr Paramor indicated that he was a shareholder in Folkestone and its managing director. He also noted that 'Folkestone may be entering into a management agreement (or similar arrangement) with [KCGL]'.[93]
[93] Hodgetts Affidavit, Annexure GBH3.
When he gave his consent to be appointed as a director, Mr Hodgetts indicated that he was a 'non-material shareholder in Folkestone Ltd as well as occupying a number of positions within the Folkestone Group' and that 'Folkestone may be entering into a management agreement (or similar arrangement) with [KCGL]'.[94]

Applicants' evidence as to their role in, and reasons for, resolving to issue the Notice of Default

[94] Hodgetts Affidavit, Annexure GBH3.

Mr Priest deposed that in March 2013 he was approached by Mr Paramor to act as company secretary for KCGL. Mr Priest deposed that Mr Paramor told him that if he agreed, he was:[95]
to provide secretarial services and undertake a review of various reporting anomalies that had been identified in the 30 June 2012 full year report to shareholders, including assisting as required in reviewing the assets of KCGL and generally to assist in the tidy up [of] the affairs of KCGL.
[95] Application of Grant Charles Jefferis Priest sworn 14 October 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Priest Affidavit) [14].
Mr Hodgetts deposed that in his view, 'the decisions made by the board of KCGL to cease its relationship with [BA] was consistent with and in furtherance of the duty to ensure that the investors of KCGL were protected.'[96] He also deposed that:[97]
In all respects my conduct, and my dealings with [BA and Mr Bajada] (including the resolution to issue the notice of default) was in my capacity as an independent director of [KCGL], and for the benefit of KCGL and its shareholders.
At no stage in relation to any of those dealings (or in relation to any other dealing with KCGL, [Mr Bajada and BA]) in my opinion, have I … acted in any other way than in the best interests of shareholders.
[96] Hodgetts Affidavit [70].
[97] Hodgetts Affidavit [73].
Mr Paramor deposed that when he voted in favour of the resolution that KCGL should issue the Notice of Default, he was 'acting as a director of KCGL for the benefit of KCGL and its shareholders'.[98] He deposed that he voted in favour of that resolution as a result of the breaches of the Management Agreement by BA, the findings set out in the Review Report and Mr Bajada's refusal to abide by instructions of the Board.[99]
[98] Application of Gregory James Paramor sworn 14 October 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Paramor Affidavit) [22].
[99] Paramor Affidavit [18].
Mr Britton deposed that 'in regard to the issue on behalf of KCGL of the notice of default, I was only ever acting in my capacity as an independent, non‑executive director of KCGL and in what I believed and still believe to be the best interests of KCGL and its shareholders'.[100] Mr Britton deposed that he voted in favour of the resolution to issue the Notice of Default for a number of reasons including that the Review Report indicated that there were existing and outstanding breaches of the Management Agreement by BA; a number of requests for information from Mr Bajada or BA had not been complied with; Mr Bajada had not complied with directions from the Directors; and Mr Bajada had failed to advise the Board of information concerning one of KCGL's investments.[101]
[100] Britton Affidavit [26].
[101] Britton Affidavit [18].

•Par 59:  In July 2012, Mr Hodgetts, Mr Britton and Mr Paramor were nominated as directors of KCGL by AET and IOOF.
•Par 60:  At all material times, AET was an unlisted public company which was a subsidiary of and controlled by IOOF; carried on the business of providing trustee services; was a majority shareholder of KCGL holding 74% of KCGL's share capital in its name as at 1 March 2013; held those shares in its capacity as a nominee or bare trustee; and did not have any beneficial interest in any KCGL shares and acted in an administrative capacity on behalf of the beneficial shareholders for which it held KCGL shares.
•Part 61:  At all material times, IOOF was an Australian public company listed on the ASX, which was the parent and controlling company of AET, and which carried on the business of providing financial planning services.
•Par 62:  At a meeting of the directors of KCGL on 14 March 2013, Mr Hodgetts, Mr Paramor and Mr Britton appointed Mr Priest as KCGL's company secretary, and sought to formally engage Sothertons, on behalf of KCGL, to undertake a limited investigate review into (amongst other things) the management of KCGL by BA and whether BA had breached the Management Agreement (the Review).  At that meeting, Mr Hodgetts, Mr Paramor and Mr Britton failed to admit or disclose any interest or affiliation with IOOF, AET or Folkestone.
•Par 63:  At a meeting of the directors of KCGL on 3 May 2013, Mr Hodgetts, Mr Paramor and Mr Britton resolved to seek a negotiated termination of the Management Agreement, to simultaneously issue a breach notice and pursue claims against BA, and to adopt recommendations made by Mr Hodgetts regarding the remuneration of Mr Hodgetts, Mr Paramor, Mr Britton, Mr Priest and Sothertons.
•Par 64:  At a meeting of the directors of KCGL on 30 May 2013, Mr Hodgetts, Mr Paramor and Mr Britton resolved to issue the Notice of Default on BA based on the preliminary findings of the Review, their alleged difficulty in dealing with Mr Bajada and BA and their inability to reach a commercial settlement for BA to agree to resign as the manager of KCGL.
•Par 65:  On 4 June 2013, Mr Hodgetts, Mr Paramor and Mr Britton caused KCGL to issue the Notice of Default.
•Par 66:
Based on paragraphs 57 to 65 it can be inferred that Hodgetts, Paramor and Britton sought to terminate the Management Agreement in the best interests of:
66.1:Paramor and Britton to allow them to obtain directors' fees from [KCGL];
66.2:Hodgetts to obtain remuneration for directors' fees and management services at the exclusion of [Mr Bajada] and [BA]; and
66.3:Folkestone and IOOF to gain control and influence over the board, management and assets of [KCGL].

•Par 67:
Based on paragraphs 55 and 62 to 65, it can be inferred that in accepting his position as company secretary, Priest acted in the best interests of:
67.1:Paramor and Folkestone in taking control of the board and the management of [KCGL];
67.2:Sothertons in obtaining remuneration for [the Review] and ongoing fees from [KCGL] for the provision of accountancy, taxation and compliance services; and
67.3:Priest to obtain remuneration for company secretary fees from [KCGL] at the exclusion of [BA].

•Par 68:
The conduct of Hodgetts, Britton, Paramor and Priest outlined in paragraphs 62 to 67 above was:
68.1:not in good faith or for a proper purpose or in the best interests of [KCGL];
68.2:in breach of their duties as officers of [KCGL] as outlined in paragraph 56 above;
68.3:outside the scope of their authority as officers of [KCGL]; and
68.4:acts in their personal capacities and for their personal benefit.

•Par 69:
Through their positions as officers of [KCGL] and in their personal capacity, Hodgetts, Britton, Paramor and Priest induced [KCGL] to wrongfully repudiate the Management Agreement by procuring [KCGL] to resolve to issue the Notice of Default to [BA].
Particulars
BA relies upon the conduct and intentions of:
A.Hodgetts, Paramor and Britton from May 2012; and
B.Priest in conducting [the Review] and otherwise assisting Hodgetts, Paramor and Britton in inducing [KCGL] to terminate the Management Agreement;

as outlined in paragraphs [57] ‑ [68] above. [BA] will provide further particulars following discovery and inspection.
•Par 70:
In the premises, in causing [KCGL] to wrongfully repudiate the Management Agreement, Hodgetts, Britton, Paramor and Priest acted:
70.1:knowingly and intentionally;
70.2:wrongfully and without justification;
70.3:for the purpose of breaking or interfering with the performance by [BA] and/or [KCGL] of the Management Agreement and/or procuring [KCGL] to breach the Management Agreement;
70.4:with the knowledge that their actions would break or interfere with the performance of the Management Agreement and/or cause [KCGL] to breach the Management Agreement; and
70.5:for the purpose of obtaining their own commercial benefit at the expense, loss and damage of [BA] and [KCGL].

Particulars: BA will provide particulars following discovery and inspection.
•Par 71:
As a result of the matters outlined in paragraphs 68, 69 and 70 above, [BA] suffered loss and damage and claims against Hodgetts, Britton, Paramor and Priest damages for economic loss.
•Par 72:
In the premises, [BA] is also entitled to claim aggravated damages for the knowing and intentional contractual interference of [KCGL and BA] by Hodgetts, Britton, Paramor and Priest, in which they each:
72.1:had knowledge that their actions were without justification;
72.2:had knowledge that their actions would cause loss, damage and harm to [BA]; and
72.3:caused the wrongful interference for personal gain.

•In the second prayer for relief, BA seeks special damages for economic loss, aggravated damages and costs.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: KNIGHTS CAPITAL GROUP LTD -v- BAJADA AND ASSOCIATES PTY LTD [2016] WASC 69 (S)

CORAM: PRITCHARD J

HEARD: ON THE PAPERS

DELIVERED : 29 SEPTEMBER 2016

FILE NO/S: CIV 1875 of 2014

BETWEEN: KNIGHTS CAPITAL GROUP LTD
Plaintiff
AND
BAJADA AND ASSOCIATES PTY LTD
First Defendant
SELWYN JOHN BAJADA
Second Defendant
(BY ORIGINAL ACTION)
BAJADA AND ASSOCIATES PTY LTD
Plaintiff
AND
KNIGHTS CAPITAL GROUP LTD
First Defendant
GRANT BARTLEY HODGETTS
Second Defendant
MICHAEL JOHN BRITTON
Third Defendant
GREGORY JAMES PARAMOR
Fourth Defendant
GRANT CHARLES PRIEST
Fifth Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Costs - Indemnity costs - Successful application for summary judgment by defendants to counterclaim - Whether counterclaim was hopeless - Whether plaintiff by counterclaim's conduct warranted disapprobation of court - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Indemnity costs order made as to costs of hearing on 18 December 2015
Application otherwise dismissed

Category: B

Representation:

Original Action

Counsel:

Plaintiff:     No appearance
First Defendant              :     No appearance
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     No appearance
First Defendant              :     No appearance
Second Defendant         :     No appearance

Counterclaim

Counsel:

Plaintiff:     No appearance
First Defendant              :     No appearance
Second Defendant         :     No appearance
Third Defendant            :     No appearance
Fourth Defendant           :     No appearance
Fifth Defendant              :     No appearance

Solicitors:

Plaintiff:     HopgoodGanim
First Defendant              :     No appearance
Second Defendant         :     Wilson & Atkinson
Third Defendant            :     Wilson & Atkinson
Fourth Defendant           :     Wilson & Atkinson
Fifth Defendant              :     Wilson & Atkinson

Cases referred to in judgment:

Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397
Knights Capital Group Ltd v Bajada and Associates Pty Ltd [2016] WASC 69
Re Malley SM; Ex parte Gardner [2001] WASCA 83
Said v Butt [1920] 3 KB 497
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S)
Trafalgar West Investments Pty Ltd (as trustee for The Trafalgar West Investments Trust) v Superior Lawns Australia Pty Ltd [No 5] [2014] WASC 70

PRITCHARD J: Earlier this year, I delivered reasons for judgment[162] in which I concluded that the application by the second to fifth defendants by counterclaim (the Applicants) for summary judgment on the counterclaim pursuant to O 16 r 1 of the Rules of the Supreme Court 1971 (WA) (the Summary Judgment Application) should be granted, on the basis that the Applicants had a good defence on the merits. These reasons should be read in conjunction with those reasons for decision. The same abbreviations have been used.
[162] Knights Capital Group Ltd v Bajada and Associates Pty Ltd [2016] WASC 69.
Following the delivery of my reasons for granting the Summary Judgment Application, I ordered that there be judgment for the Applicants on the counterclaim and that BA pay the Applicants' costs of the proceedings. In addition, as the Applicants had foreshadowed their intention to make an application for indemnity or other special costs orders, I made orders by consent that any such application be determined on the papers.
The Applicants subsequently sought an order for indemnity costs (the Costs Application), in the following terms (the Proposed Costs Orders):
1.The first defendant / plaintiff by counterclaim [BA] pay all of the costs incurred by the Applicants of and incidental to:
1.1the [Summary Judgment Application] including all reserved costs and the costs of this application;
1.2the costs thrown away by reason of [BA's] amendment, re‑amendment and further re-amendment of its defence and counterclaim,
except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that subject to the above exceptions the [Applicants] are completely indemnified by [BA] for their costs.
BA opposed the Costs Application.
For the reasons set out below, I am not persuaded that an order for indemnity costs should be made in respect of the Applicants' costs of the Summary Judgment Application as a whole. However, I am satisfied that an order for indemnity costs should be made in respect of the Applicants' costs of the hearing on 18 December 2014.

The agreed factual background

There was no dispute in relation to the following background facts which the Applicants submitted were relevant to the Costs Application.[163]
[163] Applicants' submissions [2] ‑ [29]; BA's submissions [2].
By a writ of summons issued on 24 June 2014, with statement of claim indorsed, KCGL sued BA and Mr Bajada for damages for breach of the Management Agreement, or compensation pursuant to the Corporations Act 2001 (Cth), and seeking to recover monies it alleged were overpaid to BA. By an amendment made on 17 September 2014 the amount of damages claimed was reduced.
On 4 August 2014, BA and Mr Bajada filed a defence and BA filed a counterclaim. As against KCGL, the counterclaim was for $1,864,331.61 in damages (which was said to be the amount owing pursuant to the Management Agreement between KCGL and BA) and for special damages in the sum of $6,877,993.92 (in respect of profits allegedly lost as a consequence of KCGL's alleged repudiation of the Management Agreement). The alleged loss of profits was also pleaded as against the Applicants, on the basis that they caused KCGL to repudiate the Management Agreement. At that stage, the defence and counterclaim did not plead any lack of good faith or any exception to the rule in Said v Butt.[164]
[164] Said v Butt [1920] 3 KB 497.
By letter dated 29 August 2014 and by means of conferral, the Applicants explained why, in their view, the counterclaim against them did not disclose a cause of action and sought BA's agreement to dismiss that part of the counterclaim. The same deficiencies in the counterclaim were raised by the Applicants in a strategic conference held on 5 September 2014, in the course of which the Applicants indicated their intention to make the Summary Judgment Application. At that point, BA indicated its intention to amend the counterclaim.
An amended defence and counterclaim, including amendments to the parts of the counterclaim relating to the Applicants, was filed on 25 September 2014.[165]
[165] The amended pleading was uplifted and refiled on 2 October 2014 to remedy deficiencies in the marking up of the amendments.
On 10 October 2014, the Applicants filed the Summary Judgment Application which included, in the alternative, an application to strike out part of the amended counterclaim. Each of the Applicants swore an affidavit in support of that application.
On 22 October 2014, the Applicants filed their defence to the amended counterclaim.
On 19 November 2014, Mr Bajada swore an affidavit in opposition to the Summary Judgment Application.
On 25 November 2014, BA filed an amended defence and counterclaim which included substantial amendments to the parts of the counterclaim relating to the Applicants.
On 27 November 2014, the Applicants filed their submissions in support of the Summary Judgment Application.
On 9 December 2014, BA filed its submissions in opposition to the Summary Judgment Application.
On 15 December 2014, BA filed a further re‑amended defence and counterclaim which included further amendments to the parts of the counterclaim relating to the Applicants.
The Summary Judgment Application was heard on 18 December 2014. At the commencement of his submissions, counsel for BA conceded that the pleading of the counterclaim was deficient and sought leave to re‑plead the counterclaim. I regarded that concession as properly made and expressed the view that the counterclaim did not adequately plead BA's case and that BA's submissions on the Summary Judgment Application did not clearly identify its case against the Applicants.
In view of the concession by counsel for BA, the balance of the hearing on 18 December 2014 focused on whether BA had identified sufficient evidence to demonstrate that a triable issue existed in relation to its case against the Applicants so as to justify the dismissal of the Summary Judgment Application and the grant of leave to re‑plead the counterclaim.
At the conclusion of the hearing on 18 December 2014, I made orders giving BA the opportunity to provide a written summary of those parts of the evidence it had filed which it contended could support an inference of a lack of good faith by the Applicants, (so as to demonstrate the existence of a triable issue in relation to the existence of an exception to the rule in Said v Butt) and orders permitting the Applicants the opportunity to file a response to that summary. I also made orders vacating a mediation conference which was then listed for a date about two months after the hearing.
On 13 January 2015, BA filed its summary of evidence. The Applicants filed their response on 21 January 2015. BA then filed an amendment to its summary of evidence on 23 January 2015.
At BA's request, the matter was re-listed before me on 25 February 2015, at which point I made orders for the parties to file further written submissions in respect of the Summary Judgment Application.
I subsequently published my reasons for concluding that summary judgment should be granted to the Applicants on the counterclaim in so far as it pertained to them.

Principles in relation to indemnity costs orders

The principles in relation to orders for costs on an indemnity basis are well-established. They were set out by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd.[166] After pointing out that an order for indemnity costs will only be made in exceptional circumstances,[167] the Court summarised the relevant principles as follows (case citations omitted):[168]
[166] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S).
[167] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [7] referring to Re Malley SM; Ex parte Gardner [2001] WASCA 83.
[168] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10] (citations omitted).
1.[The Court], in its inherent jurisdiction, may make an indemnity costs order.
2.An indemnity costs order departs from the usual costs disposition order, whereby costs are awarded on a party/party basis.
3.The court's discretion as to the making of an indemnity costs order is a discretion that must be exercised judicially. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd Woodward J said:
Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where "there is some special or unusual feature in the case to justify the court exercising its discretion in that way". (emphasis added)
4.To obtain an indemnity costs order, it is not the case that the successful party needs to show a collateral purpose, or establish some species of fraud against the unsuccessful party. In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) French J by reference to the observations of Woodward J in Fountain Selected Meats, said:
It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
5.Furthermore, in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd French J observed:
The categories in which the discretion may be exercised are not closed.
6.Competing principles need to be balanced in assessing the making of a potential award of indemnity costs. In Quancorp Pty Ltd v MacDonald, Wheeler J observed:
On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as "hopeless" so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full.
7.An indemnity costs order may be appropriate in situations which are shown to involve some element of improper, or at least unreasonable, conduct by a party or the party's legal advisers.
8.A properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling.
9.An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance. In Unioil (No 2), Ipp J observed:
However, counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs. An order for indemnity costs on this ground is therefore not warranted.
10.Nonetheless, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct. In Flotilla, Pullin J said:
A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party.

Having regard to the submissions made by the Applicants in this case (which I discuss below), the following additional principles should also be mentioned.
An order for costs on an indemnity basis may be made on the basis that an action was 'hopeless' in the sense that the action was 'commenced or continued in circumstances where the plaintiff, properly advised, should have known that the action had no prospect of success'.[169] An action which appears to have been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success, may be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts or clearly established law.[170] In assessing whether a party engaged in improper or unreasonable conduct, attention needs to be focused on what the party knew, or ought reasonably to have known, in the circumstances.[171]
[169] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [84] (Newnes JA, Murphy JA & Hall J agreeing).
[170] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 401.
[171] Trafalgar West Investments Pty Ltd (as trustee for The Trafalgar West Investments Trust) v Superior Lawns Australia Pty Ltd [No 5] [2014] WASC 70 [12] (K Martin J).
Finally, it must also be borne in mind that simply because a case is weak or marginal, or unlikely to succeed, does not make it a 'hopeless' case which merits the sanction of an indemnity costs order.[172]
[172] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [86] (Newnes JA, Murphy JA & Hall J agreeing).

The parties' submissions

The Applicants' submissions

The Applicants submitted that the Proposed Costs Orders should be made as a sign of the Court's disapproval of BA's conduct in bringing and maintaining the counterclaim against the Applicants. The Costs Application effectively rested on three planks.
First, the Applicants submitted that BA acted unreasonably in prosecuting the counterclaim generally, and that that conduct resulted in a considerable waste of time for the Court and for the Applicants and increased the Applicants' costs.[173] This plank of the argument focused on the inadequacy of the way in which the counterclaim was pleaded.
[173] Applicants' submissions [37], [38].
The Applicants' submissions attached a copy of a letter written by their solicitors to BA's solicitors, after the defence and counterclaim was filed, in which they explained why, in their view, the counterclaim (as it stood at that point) was deficient and referred to the rule in Said v Butt and other relevant authorities.
The Applicants noted that the counterclaim was amended three times: on 25 September 2014, before the Summary Judgment Application was brought, on 25 November 2014, after the Summary Application was filed, and again on 15 December 2014, shortly before the hearing of the Summary Judgment Application and after the Applicants had filed their submissions.
The Applicants also relied on the fact that very early in his submissions at the hearing of the Summary Judgment Application, counsel for BA conceded that BA's pleadings were deficient. At the very least, that was because even after three amendments, the counterclaim still did not plead all of the material facts on which BA wished to rely in support of its claim that the Applicants had induced KCGL wrongfully to repudiate the Management Agreement and thereby interfered with KCGL's performance of the Management Agreement, so that they were liable for the torts of procuring a breach of contract or interfering with KCGL's contractual relations. In order to establish that the Applicants were personally liable for those torts, BA had to establish that there was an exception to the rule in Said v Butt[174] and that the Applicants' conduct fell within that exception. At the hearing on 18 December 2014, it became clear that BA's intended case against the Applicants on the counterclaim was that the Applicants' conduct was not in good faith, or for a proper purpose, or in the best interests of KCGL, and stood outside the scope of their authority as officers of KCGL, so that it could be characterised as conduct in their personal capacity. It also became clear, however, that the facts on which BA wished to rely to establish that case were simply not pleaded in the counterclaim. The hearing of the Summary Judgment Application was thus adjourned to enable BA to put further submissions before the Court which identified the evidence upon which BA wished to rely. In due course it filed a lengthy summary of that evidence.
[174] Said v Butt [1920] 3 KB 497, 504 - 506 (McCardie J).
The Applicants submitted that BA nevertheless failed to identify a sufficient factual basis for the exception to the rule in Said v Butt on which it relied and observed that it is unusual for a case to be dismissed summarily by reason of its factual inadequacy. They point to those circumstances as an unusual feature of this case which warrants an order for costs on an indemnity basis.
Secondly, the Applicants submitted that BA's case, as pleaded, was never arguable and that, properly advised, BA should have been aware that it had no reasonable chance of success. The Applicants submitted that BA should always have known of the deficiencies in its case, and that the result of the Summary Judgment Application suggests that either those advising BA did not properly analyse the claim or BA proceeded knowing the likely result.
Thirdly, the Applicants submitted that because the counterclaim as against the Applicants exposed them to the prospect of personal liability where there was no apparent benefit to BA in taking that step, it was open to the Court to infer, in all the circumstances, that BA's purpose in joining the Applicants was 'to apply pressure to the directors of the plaintiff, in their personal capacity'.[175]
[175] Applicants' submissions [40].

BA's submissions

BA submitted that the Applicants had not established that indemnity costs were warranted in this case. It submitted that the fact that it did not ultimately succeed in the counterclaim was not a basis for the exercise of the discretion to make an indemnity costs order. BA submitted that this case lacked the special or unusual features that would warrant the making of such an order.
BA also submitted that it did not prolong the proceedings by making unmeritorious contentions and could not be said to have acted unreasonably in commencing or continuing the counterclaim. In this respect, BA submitted that by the time of the hearing on 18 December 2014, the counterclaim had been amended to allege that the Applicants were not acting in good faith, and that their conduct fell within an exception to the rule in Said v Butt. BA noted that I observed in my reasons for granting the Summary Judgment Application that I would not have granted summary judgment on the basis that it was not open to BA to argue that there was an exception to the rule in Said v Butt, and that I would have left that question to trial.
Finally, BA submitted that the Applicants carried a heavy burden of proof in relation to the allegation that BA joined the Applicants to the counterclaim to apply pressure to the directors of KCGL, and that the Applicants had not discharged that burden of proof as there was no evidence to support the allegation.

Why an order for indemnity costs should not be made with respect to the Applicants' costs on the counterclaim generally

I am not persuaded that an order for indemnity costs should be made with respect to the Applicants' costs on the counterclaim generally. I have reached that view for three reasons.
First, as I explained in my reasons for granting the Summary Judgment Application, I was not persuaded that the claim BA advanced against the Applicants was beyond argument, having regard to the state of the authorities. This was not a case where BA advanced a claim which was manifestly not arguable.
Secondly, one of the key bases on which I concluded that summary judgment should be granted was that BA had not discharged its evidentiary onus of demonstrating that a triable issue existed on its case against the Applicants. That was because I concluded that the evidence relied upon by BA could not, if accepted at trial, support an inference that the Applicants were not acting in good faith and in the interests of KCGL when they resolved to issue the Notice of Default to BA, or that they were acting in their own self-interest, rather than in the interests of KCGL, when they resolved to issue the Notice of Default, or that they never intended to be bound by the Management Agreement, and so issued the Notice of Default other than in the best interests of KCGL.
This was one of those rare cases where detailed argument demonstrated that summary judgment should be granted.[176] But that does not, of itself, constitute a special or unusual feature about the case which is sufficient to warrant the making of an indemnity costs order. The position is quite to the contrary. I concluded that summary judgment should be granted only after careful consideration of the evidence on which BA relied to demonstrate that there existed a triable issue, and with the assistance of detailed submissions by counsel for the parties. That serves to confirm, in my view, that it cannot be said that the case was so obviously hopeless that it should not have been advanced or maintained.
[176] Cf General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125, 130 (Barwick CJ).
The most that can be said is that it should have been obvious to BA that its case against the Applicants was weak, and that its prospects of success were therefore poor, having regard to the state of the law and to the evidence (limited as it was) on which BA relied. But as I have already pointed out, the fact that a case is weak or unlikely to succeed is not enough to merit the sanction of an indemnity costs order. For the same reason, BA's conduct in prosecuting the counterclaim against the Applicants at all cannot be regarded as so unreasonable as to warrant an indemnity costs order being made as a sign of the Court's disapproval of that course.
Thirdly, I am unable to accept the Applicants' submission that the Court can infer that BA's purpose in joining the Applicants was to apply pressure to the directors of KCGL. I understand that submission to mean effectively that BA brought the counterclaim against the Applicants with a view to placing pressure on the Applicants, in their capacity as the directors of KCGL, to settle the counterclaim. The Applicants relied on three aspects of the circumstances as the basis for that inference.[177] The Applicants contended that there was some evidence before the Court that KCGL had the capacity to pay BA's claim, if BA was wholly successful, so that BA could have recovered its claimed loss and damage as against KCGL, without taking action against the Applicants. Further, they pointed to the fact that the counterclaim as against the Applicants could not succeed unless BA's claim against KCGL (and specifically the allegation that KCGL repudiated the Management Agreement, thereby causing loss and damage to BA) was successful. Finally, they pointed to the fact that the claim against the Applicants involved the proof of further issues beyond those involved in BA's claim against KCGL.
[177] Applicants' submissions [40].
I accept the submission by counsel for BA that the Applicants bear a heavy burden of proof in making a submission of this kind. I am not persuaded that the Applicants have established an adequate evidentiary basis to draw such a serious inference. There is no reason why a litigant may not proceed against more than one party to recover for the same loss and damage simply because one of those parties may have the capacity to pay the entirety of an award of damages in respect of the loss and damage.
There is one further matter which should be mentioned. In so far as the Costs Application sought indemnity costs in respect of the Applicants' costs thrown away by reason of the fact that the counterclaim was amended three times prior to the hearing of the Summary Judgment Application, that part of the application held some initial attraction. However, in the end I have concluded that such an order is not warranted. It is far from apparent that the Applicants actually incurred any costs which were thrown away by the amendments. That is because the amendments to the counterclaim on each occasion sought to develop the same claim as against the Applicants and the Applicants' response to the counterclaim appears to have been the same throughout (having regard to the submissions it filed in respect of the Summary Judgment Application). The costs orders I have already made should permit the Applicants to recover their costs, at the scale rate, of preparing their defence to counterclaim and their costs of preparing for the Summary Judgment Application, in which they advanced the same fundamental point (namely that the rule in Said v Butt applied and there was no exception to the rule).
However, in so far as the Applicants incurred costs at the hearing of the Summary Judgment Application on 18 December 2014, I am persuaded that they should be wholly indemnified in respect of those costs. That is because it was apparent (as I observed at the time) that the amended counterclaim, as it then stood, was manifestly inadequate to plead the case that BA advanced, which rendered the hearing, in large part (although perhaps not entirely), a waste of the Court's time and of the Applicants' time and money. In my view, counsel for BA should have had formed the view prior to the hearing, having reflected on the Applicants' submissions and on the state of its pleading, that the amended counterclaim was still deficient and required further amendment (at least to plead the material facts upon which BA sought to rely). That being so, the appropriate course was to confer with the Applicants' solicitors and to seek an adjournment of the hearing to permit that amendment to be made. That would have ensured that the hearing of the Summary Judgment Application could, in due course, have proceeded on the basis of a pleading which represented the case which BA actually advanced. In my view, it was unreasonable for BA not to have taken that course and it is appropriate to make an order for indemnity costs in respect of the hearing on 18 December 2014 to signal the Court's disapproval of that conduct.

Conclusion

The order which should be made is that:
1.The first defendant / plaintiff by counterclaim pay all of the costs incurred by the second to fifth defendants to counterclaim of and incidental to the hearing on 18 December 2014, except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that subject to the above exceptions the second to fifth defendants to counterclaim are completely indemnified by the plaintiff by counterclaim for their costs in respect of that hearing.