FEDERAL COURT OF AUSTRALIA
KTC v David (Pleadings) [2019] FCA 1566
File number: NSD 555 of 2019 Judge: PERRAM J Date of judgment: 24 September 2019 Catchwords: PRACTICE AND PROCEDURE – application for leave to file and serve further amended statement of claim – where allegations made that fourth and fifth defendants liable under second limb of Barnes v Addy (1874) LR 9 Ch App 244 – whether pleadings sufficiently allege dishonest and fraudulent designs – whether pleadings sufficiently allege knowledge of fourth and fifth defendants – where fourth and fifth defendants challenge pleading of underlying fiduciary duties – where fourth and fifth defendants oppose granting leave to replead Legislation: Federal Court Rules 2011 (Cth) r 16.02 Cases cited: Barnes v Addy (1874) LR 9 Ch App 244
Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; 87 NSWLR 609
KTC v David (No 1) [2019] NSWSC 281
KTC v David (No 2) [2019] NSWSC 330
Date of hearing: 21 May 2019 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 53 Counsel for the Plaintiff: Ms M Loughnan QC with Mr B Carew Solicitor for the Plaintiff: HWL Ebsworth Lawyers Counsel for the First Defendant: Mr J A Hogan-Doran Solicitor for the First Defendant: Aitken Lawyers Counsel for the Second and Third Defendants: Mr R A Jedrzejczyk Solicitor for the Second and Third Defendants: Ashurst Australia Counsel for the Fourth and Fifth Defendants: Mr M Darke SC with Mr G Ng Solicitor for the Fourth and Fifth Defendants: YPOL Lawyers ORDERS
NSD 555 of 2019 BETWEEN: KTC
Plaintiff
AND: RODRIC DAVID
First Defendant
NAVEEN DAVID SINGH
Second Defendant
XALT PTY LTD ACN 147 571 033 (and others named in the Schedule)
Third Defendant
JUDGE:
PERRAM J
DATE OF ORDER:
24 SEPTEMBER 2019
THE COURT ORDERS THAT:
1.The plaintiff’s interlocutory application of 26 April 2019 be dismissed.
2.Costs be reserved.
3.The plaintiff file and serve any final application for leave to amend by 5 November 2019.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
Introduction
The plaintiff, KTC, seeks leave to file and serve a further amended statement of claim. This is opposed by the fourth defendant, the law firm comprising partners trading under the business name Gilbert + Tobin (‘G+T’) and the fifth defendant, Mr Bullock, who was at the times relevant to this litigation, but no longer is, a partner of that firm. Where I refer in these reasons to G+T, it should be taken to include Mr Bullock unless otherwise indicated.
The case pleaded against G+T is said to lie under the second limb of the so-called rule in Barnes v Addy (1874) LR 9 Ch App 244 (‘Barnes v Addy’). A previous…
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Details
- AGLC
- KTC v David (Pleadings) [2019] FCA 1566
- Case
- [2019] FCA 1566
- Decision Date
CaseChat Overview and Summary
The case before the court involves KTC, the plaintiff, seeking leave to file and serve a further amended statement of claim against several defendants, including David, the fourth and fifth defendants. The dispute pertains to allegations of liability under the second limb of Barnes v Addy, concerning dishonest and fraudulent involvement in breaches of fiduciary duty. The primary legal issue before the court was whether the pleadings sufficiently alleged the required elements of dishonest and fraudulent designs, and whether they adequately identified the knowledge and involvement of the fourth and fifth defendants. Additionally, the court had to consider the defendants' challenges to the pleading of the underlying fiduciary duties and their opposition to the granting of leave to replead.
The court meticulously examined the proposed further amended statement of claim, noting that despite the detailed allegations, the pleadings still fell short in certain critical areas. The court emphasised that while there was a potential case within the pleading, the current form was insufficiently clear and precise to meet the required standards. The court highlighted the need for a final, well-drafted version that accurately and comprehensively alleged the necessary elements of the claim. The court dismissed the application for leave to amend but granted the plaintiff a final opportunity to resubmit a properly drafted statement of claim.
In summary, the court dismissed the interlocutory application but allowed the plaintiff one last chance to file a final application for leave to amend. The court reserved costs and set a deadline of 5 November 2019 for the submission of the final application. The orders issued were clear and definitive, providing the plaintiff with a strict timeline to rectify the pleadings and ensuring that any further applications would need to meet the court's exacting standards.
The court meticulously examined the proposed further amended statement of claim, noting that despite the detailed allegations, the pleadings still fell short in certain critical areas. The court emphasised that while there was a potential case within the pleading, the current form was insufficiently clear and precise to meet the required standards. The court highlighted the need for a final, well-drafted version that accurately and comprehensively alleged the necessary elements of the claim. The court dismissed the application for leave to amend but granted the plaintiff a final opportunity to resubmit a properly drafted statement of claim.
In summary, the court dismissed the interlocutory application but allowed the plaintiff one last chance to file a final application for leave to amend. The court reserved costs and set a deadline of 5 November 2019 for the submission of the final application. The orders issued were clear and definitive, providing the plaintiff with a strict timeline to rectify the pleadings and ensuring that any further applications would need to meet the court's exacting standards.
Orders
Orders of the court
1. The plaintiff’s interlocutory application of 26 April 2019 be dismissed.
2. Costs be reserved.
3. The plaintiff file and serve any final application for leave to amend by 5 November 2019.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The proposed further amended statement claim was annexed to the interlocutory application filed by KTC on 26 April 2019. Before turning to the particular pleading problems, it is useful to explain the detailed allegations made in it.Background to the dispute as pleaded In around mid-2008, Charif and Tarek Kazal (‘the Kazals’) entered into a joint venture with the first defendant, Rodric David, in which they would each have respectively a 50% interest. The purpose of the joint venture was to invest in businesses with a particular focus either on businesses located in the United Arab Emirates and/or engaging in waste management and disposal. Mr David was to act as the manager of the joint venture. The joint venture vehicle was to be a Cayman Islands company, Emergent Capital Limited (‘Emergent’). The Kazals held their interest in the joint venture vehicle through their entity, the present plaintiff KTC, and Mr David held his through his entity RAAL Limited (‘RAAL’). KTC alleges that there was a joint venture agreement but this is not alleged to have been in writing. A number of terms are alleged in this agreement including that the Kazals and Mr David would be equally represented on the board of Emergent and that Mr David (and RAAL) would provide services to Emergent as necessary for its day to day operations. It is then alleged that the joint venture vehicle Emergent invested in another joint venture with an Abu Dhabi developer. Ultimately, this investment was conducted through an entity called IPS (International Property Services) Limited. Emergent also invested in a waste management facility at Eastern Creek in Sydney (‘the Waste Facility’). It is alleged by KTC that it was Mr David who managed Emergent’s interests in these two businesses. Originally, the directors of Emergent were Mr David on the one hand and the Kazals on the other. However, the Kazals between them had only one vote. Mr David acted as chairperson and also as chief executive officer. KTC and RAAL held the equity in Emergent in equal shares. Returning then to the Waste Facility, it is alleged that in August 2008 the Kazals and Mr David identified it as a suitable investment. At that time, that business was being conducted by several entities all ultimately owned by Global Renewables Australia Pty Limited (‘GRA’). Its managing director was Mr Singh, the second defendant to this proceeding. The pleading does not spell this out but there appears to have been a business proposal between Mr Singh and Mr David for Emergent and Mr Singh to form an entity to acquire GRA. This entity was known as Global Renewables Limited (‘GRL’). GRL was owned as to 80% by Emergent and as to 20% by Mr Singh’s vehicle, Singh Investments Pty Limited (‘SIL’). GRL acquired all of the shares in GRA on or about 21 January 2009 for $1. Although the pleading does not appear to allege this, there is material which suggests that GRL also took over GRA’s debt to the Commonwealth Bank of Australia.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
The course I propose to adopt therefore is this. I will dismiss the application to amend in the form proposed but I will give KTC one more chance. And by that I mean final. This is the end of the line; there are no more stops after this one. It seems to me that there is a case in there somewhere struggling to free itself from this pleading. I would encourage those advising KTC to have a long think about the next version and how it is drafted. One view might be that it is beyond repair in its current form. The task at hand is not a complex one for a skilled equity junior.Conclusion I will dismiss KTC’s interlocutory application. I will reserve the costs at this point. I rejected many of G+T’s points but the very form of the pleading invited them. The issue of costs may be addressed if and when another version emerges. The orders I make are that:(1)The plaintiff’s interlocutory application of 26 April 2019 be dismissed.(2)Costs be reserved.(3)The plaintiff file and serve any final application for leave to amend by 5 November 2019.
Ratio Decidendi
Legal Principle Established
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