PRACTICE AND PROCEDURE – application for leave to appeal – whether decision of primary judge attended by sufficient doubt to warrant grant of leave – whether substantial injustice would result from a refusal of leave – where interlocutory orders have practical effect of finally determining the rights of a party to proceeding – whether claim involves speculation or conjecture, obviating any purported substantial injustice – leave to appeal granted
PRACTICE AND PROCEDURE – application for leave to file and serve proposed further amended statement of claim – where proceeding involves numerous corporate entities and multiple complex commercial transactions – where proceeding raises questions of fact and law in relation to pleading of a dishonest and fraudulent design under the second limb of so-called rule in Barnes v Addy – relevant principles concerning the amendment and striking out of pleadings and summary dismissal – whether primary judge erred in concluding that claim of knowing assistance in dishonest and fraudulent design was not maintainable – appeal dismissed
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
KTC v David [2022] FCAFC 60
Case
[2022] FCAFC 60
Decision Date
CaseChat Overview and Summary
In KTC v David, the plaintiff, KTC, sought leave to appeal a decision of the primary judge and to file a further amended statement of claim. The proceedings involved multiple corporate entities and complex commercial transactions, raising questions of fact and law concerning allegations of dishonest and fraudulent design under the rule in Barnes v Addy. The primary judge had dismissed KTC's interlocutory application for leave to file an amended statement of claim, concluding that the pleading was insufficiently clear and explicit about the alleged breaches of fiduciary duty and the requisite knowledge of the respondents.
The central legal issues for the court were whether the primary judge's decision to refuse leave to appeal and to file the proposed amended pleading was attended by sufficient doubt to warrant the grant of leave, and whether a substantial injustice would result from a refusal of leave. Additionally, the court had to consider whether the interlocutory orders had the practical effect of finally determining the rights of a party to the proceeding, and whether the claim involved speculation or conjecture that would obviate any purported substantial injustice. The court also examined whether the primary judge had erred in concluding that the claim of knowing assistance in a dishonest and fraudulent design was not maintainable.
The court granted leave to appeal but dismissed the appeal, finding that the primary judge's exercise of discretion in refusing leave to file the proposed amended pleading did not miscarry. The court held that the interlocutory orders did not finally determine the rights of a party to the proceeding, but the proposed pleading was still speculative and conjectural. The court concluded that the primary judge's decision was not attended by sufficient doubt, and that no substantial injustice would result from a refusal of leave. Therefore, the appeal was dismissed, and the proceeding was remitted to the primary judge with directions. The appellant was ordered to pay the respondents' costs of the appeal.
Orders
Orders of the court
1. Leave to appeal be granted.
2. The appeal be dismissed.
3. The proceeding as against the first, second and third respondents be remitted to the primary judge.
4. The appellant pay the respondents’ costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
I would grant leave to appeal but dismiss the appeal.PROCEDURAL BACKGROUND KTC has had many attempts at drafting a pleading which articulates its case against Mr Bullock and G+T in a way which is capable of withstanding a strike-out application. The following short summary of the relevant procedural background is drawn from an affidavit sworn by a solicitor acting on behalf of G+T. While KTC objected, albeit faintly, to the affidavit on the grounds of relevance, the procedural background is to some extent relevant to the question of whether the primary judge’s exercise of the discretion to refuse leave to file the proposed amended pleading miscarried as KTC contended. The factual background would also appear to be relatively uncontentious.In the Supreme Court The first iteration of KTC’s pleading against Mr Bullock and G+T was filed in the Supreme Court on 25 July 2018. KTC applied for freezing orders against Mr Singh, XALT and others shortly after the filing of the pleading. That application was dismissed by White J in the Supreme Court: KTC v Singh & Ors [2018] NSWSC 1510. On 24 October 2018, Mr Bullock and G+T applied to strike out the pleading against them. On 22 February 2019, KTC applied for and was granted leave to file an amended statement of claim. That second iteration of the pleading was then the subject of the strike-out application. On 18 March 2019, Kunc J in the Supreme Court struck out the amended statement of claim and transferred the proceeding to this Court: KTC v David (No 1) [2019] NSWSC 281. In striking out the pleading, Kunc J noted (at [24]) that the “Court resolutely rejects an approach to pleading which entails the indiscriminate recitation of large numbers of facts and detailed but insignificant particulars combined with rolled up conclusions, and which is then defended on the basis that at the end of the hearing at least one of the causes of action can be expected to have been established”. His Honour also observed (at [48]) that KTC and its representatives bore a “serious onus” and that, as the case that KTC wished to plead involved allegations of fraud against Mr Bullock, it was required to be “properly pleaded and particularised”. In that context, Kunc J said (at [50]) that “the question of what Mr Bullock is alleged to have known (in the relevant sense) that would have indicated that the breach [by Mr David] was a dishonest and fraudulent design will require particular attention”. His Honour rejected a submission advanced on behalf of G+T that leave to re-plead should not be granted and stated (at [47]) that KTC should be given a “final opportunity” to plead its case. In this Court On 26 April 2019, KTC filed an interlocutory application in this Court seeking leave to file an amended statement of claim. The interlocutory application annexed what was, by that stage, the third iteration of KTC’s pleading. Prior to the hearing of the interlocutory application, however, KTC served a fourth iteration of its pleading. The leave application was heard and determined on the basis of that fourth iteration of the pleading.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
On 24 September 2019, the primary judge dismissed KTC’s interlocutory application: KTC v David (Pleadings) [2019] FCA 1566 (the pleadings judgment). His Honour ordered KTC to file and serve any “final application for leave to amend” by 5 November 2019. The pleadings judgment is not the judgment that is the subject of this application for leave to appeal. It concerned a different iteration of the pleading to the pleading that is the subject of this application. It is, in those circumstances, unnecessary to consider the pleadings judgment in detail. There are, however, three aspects of the judgment that should be noted. First, the key difficulties with the pleading which led the primary judge to dismiss the application were that there was no clear or explicit pleading that the alleged breaches of fiduciary duty were part of a dishonest and fraudulent design (see in particular [17]-[19]) and no clear or explicit pleading that Mr Bullock and G+T had requisite knowledge of any dishonest and fraudulent design (see in particular [21]-[24]). His Honour did, however, appear to accept (at [34]) that there was a “trial to be had” in respect of the allegation that Mr Bullock and G+T had the requisite knowledge because “[t]here is something quite striking about these transactions and one’s interest can only be piqued by the fact that G+T is alleged to have advised that it was lawful”. More will be said about those observations later. Second, the primary judge concluded (at [52]) that the proposed pleading – in its then current form – breached r 16.02(1)(b) and (c) and r 16.02(2)(d) and (c) of the Federal Court Rules 2011 (Cth). His Honour reasoned that the pleading breached r 16.02(1)(b), which provides that the pleading must “be as brief as the nature of the case permits”, because it was “at least three times as long as it needs to be”; it breached r 16.02(1)(c), which provides that the pleading must “identify the issues that the party wants the Court to resolve”, because it “obscures rather than identifies the issues”; it breached r 16.02(2)(d), which provides the pleading must not be “likely to cause prejudice, embarrassment or delay in the proceeding”, because “it is certain to cause prejudice and embarrassment”; and it breached r 16.02(2)(c), which provides a pleading must not “be evasive or ambiguous”, because “it is incomprehensible” . His Honour had earlier noted (at [48]), in that regard, that “the pleading is in many parts simply incomprehensible” and that it had taken him “an entire week to understand its arcane obscurities”. Third, in the context of determining that KTC should be given one final chance to file a satisfactory pleading, his Honour (at [52]) implored those advising KTC to “have a long think about the next version and how it is drafted” and noted that “[o]ne view might be that it is beyond repair in its current form”. It would seem from what followed that his Honour’s pleas in that regard were not heeded.