Litigation Capital Partners LLP Pte Ltd (Registration No 200922518M) v ACN 117 641 004 Pty Ltd (in Liquidation) (formerly known as Vale Cash Management Fund Pty Ltd) [No 2]
[2024] WASC 20
•27 MARCH 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: LITIGATION CAPITAL PARTNERS LLP PTE LTD (REGISTRATION NO 200922518M) -v- ACN 117 641 004 PTY LTD (IN LIQUIDATION) (formerly known as VALE CASH MANAGEMENT FUND PTY LTD) [No 2] [2024] WASC 20
CORAM: HILL J
HEARD: 5 & 6 OCTOBER 2021 (FURTHER SUBMISSIONS FILED 8 APRIL 2022)
DELIVERED : 27 MARCH 2024
PUBLISHED : 27 MARCH 2024
FILE NO/S: CIV 1528 of 2020
BETWEEN: LITIGATION CAPITAL PARTNERS LLP PTE LTD (REGISTRATION NO 200922518M)
Plaintiff
AND
ACN 117 641 004 PTY LTD (IN LIQUIDATION) (formerly known as VALE CASH MANAGEMENT FUND PTY LTD)
First Defendant
MARTIN BRUCE JONES as liquidator of ACN 117 641 004 PTY LTD (IN LIQUIDATION) (formerly known as VALE CASH MANAGEMENT FUND PTY LTD)
Second Defendant
ANDREW SMITH as liquidator of ACN 117 641 004 PTY LTD (IN LIQUIDATION) (formerly known as VALE CASH MANAGEMENT FUND PTY LTD)
Third Defendant
HBF HEALTH LIMITED (ACN 126 884 786)
Fourth Defendant
Catchwords:
Practice and procedure - Application by plaintiff to strike out certain paragraphs of fourth defendant's further amended defence and counterclaim - Whether extension of time required - Proper construction of O 20 r 19(3)(a) of the Rules of the Supreme Court 1971 (WA) - Whether matters disclose reasonable cause of action - Whether matters pleaded may prejudice, embarrass or delay fair trial of action - Whether matters pleaded are scandalous, frivolous or vexatious - Whether inclusion of paragraphs in pleading after orders on first strike out application is an abuse of process - Turns on own facts
Practice and procedure - Second application by second and third defendants to strike out certain paragraphs of fourth defendant’s further amended defence and counterclaim - Whether matters disclose reasonable cause of action - Whether matters pleaded may prejudice, embarrass or delay fair trial of action - Whether matters pleaded are scandalous, frivolous or vexatious - Whether inclusion of paragraphs in pleading after orders on first strike out application is an abuse of process - Turns on own facts
Practice and procedure - Application by second and third defendants to strike out first defendant's counterclaim, alternatively certain paragraphs - Whether matters disclose reasonable cause of action - Whether matters pleaded may prejudice, embarrass or delay fair trial of action - Whether matters pleaded are scandalous, frivolous or vexatious - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA) O 20 r 19
Trustees Act 1962 (WA) s 65, s 92
Result:
Plaintiff's application to strike out fourth defendant's further amended defence and counterclaim allowed in part
Second and third defendants' application to strike out fourth defendant's further amended defence and counterclaim allowed
Second and third defendants' application to strike out first defendant's counterclaim allowed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr T Bannon SC & Mr S Hartford-Davis |
| First Defendant | : | Mr T Duggan QC |
| Second Defendant | : | Ms P Cahill SC & Mr P R Edgar |
| Third Defendant | : | Ms P Cahill SC & Mr P R Edgar |
| Fourth Defendant | : | Mr A D'Arcy |
Solicitors:
| Plaintiff | : | Cornwalls NSW |
| First Defendant | : | HWL Ebsworth Lawyers |
| Second Defendant | : | Norton Rose Fulbright Australia |
| Third Defendant | : | Norton Rose Fulbright Australia |
| Fourth Defendant | : | Lipman Karas |
Cases referred to in decision:
Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109
Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406
Australian Securities and Investments Commission v King [2020] HCA 4; (2020) 270 CLR 1
Barnes v Addy (1874) LR 9 Ch App 244
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2] [2011] WASC 136
Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) (2007) FLR 392
Fried v National Australia Bank Ltd [2001] FCA 907; (2001) 111 FCR 322
Gardiner v Ray [1999] WASC 140
Gunns Ltd & Ors v Marr [2005] VSC 251
Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5; (2022) 96 ALJR 234; 399 ALR 214
Kukulovski v Georges [2011] NSWSC 359
Lewis v Nortex Pty Ltd (in liq) [2005] NSWSC 482
Litigation Capital Partners LLP Pte Ltd (registration No 200922518M) v ACN 117 641 004 Pty Ltd (in liq) (formerly known as Vale Cash Management Fund Pty Ltd) [2021] WASC 161
Lois Nominees Pty Ltd v Hill [2011] WASC 53
Macks v Viscariello [2017] SASCFC 172; (2017) 130 SASR 1
McRobert Superannuation Pty Ltd v Cranston [2021] WASCA 126
Metaxas v Legal Profession Complaints Committee [2020] WASCA 27
Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) [1999] FCA 1820; (1999) 96 FCR 217
National Australia Bank Ltd v Rowe [2018] WASC 330
Nationwide News Pty Ltd v Moodie [2003] WASCA 273
Newcrest Mining Ltd v Santos WA Northwest Pty Ltd [2022] WASC 315
Pave Wealth Services Pty Ltd v Jones [2023] WASC 175
Plaintiff S10/2011 v Minister for Immigration and Citizenship [2012] HCA 31; (2012) 246 CLR 636
Ramage v Waclaw (1988) 12 NSWLR 84
Re Autolook Pty Ltd (1983) 8 ACLR 419
Re Condon; ex parte James (1874) 9 Ch App 609
Re JW Murphy & PC Allen; Re BPTC Ltd (in liq) (1996) 19 ACSR 569
Re One.Tel Ltd (2014) 99 ACSR 247
Sergeant v Glass [2017] NSWSC 1446
Shafron v Australian Securities and Investments Commission [2012] HCA 18; (2012) 247 CLR 465
Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80
Smilkovic v Westcourt General Insurance Brokers Pty Ltd [2006] WADC 201
Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236
Wheelahan v City of Casey & Ors (No 12) [2013] VSC 316
White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441; (2006) 200 FLR 125
HILL J:
On 26 May 2021, I delivered reasons for my decision to strike out part of the fourth defendant's defence and counterclaim in these proceedings[1] and made orders giving effect to those reasons.[2] At the time, I expressed the view that the amended defence and counterclaim was prolix, complex and lacked appropriate particularisation, particularly in relation to the serious allegations made against Mr Jones and Mr Smith.[3]
[1] Litigation Capital Partners LLP Pte Ltd (registration No 200922518M) v ACN 117 641 004 Pty Ltd (in liq) (formerly known as Vale Cash Management Fund Pty Ltd) [2021] WASC 161 (First Strike Out Reasons).
[2] Orders of Hill J dated 26 May 2021.
[3] First Strike Out Reasons [3].
On 24 June 2021, the fourth defendant (HBF) filed a further amended defence and further amended counterclaim. On 24 June 2021, I made orders requiring the plaintiff (LCP) and the second and third defendants (Mr Jones and Mr Smith) to file and serve any application to strike out HBF's further amended defence and counterclaim by 4.00 pm on 15 July 2021 or to file any reply and defence to the amended pleading by 22 July 2021.
On 15 July 2021, both LCP and Mr Jones and Mr Smith filed applications to strike out portions of HBF's further amended defence and counterclaim. On 28 July 2021, orders were made programming each of these applications through to a hearing on 5 and 6 October 2021. These parties, in essence, contend that the amendments by HBF do not comply with the orders made on 26 May 2021 or address the issues identified by the court in the First Strike Out Reasons and that the pleading remains prolix and unnecessarily complicated. HBF denies this is the case.
On 6 August 2021, the first defendant (Vale) filed a counterclaim against LCP, Mr Jones and Mr Smith. On 25 August 2021, Mr Jones and Mr Smith filed an application to strike out the whole, alternatively certain paragraphs, of this counterclaim. This application was also listed for hearing on 5 and 6 October 2021. Mr Jones and Mr Smith say that Vale's counterclaim has exacerbated the issues previously identified by incorporating significant portions of HBF's further amended defence and counterclaim as well as failing to properly identify the basis for the claim made against Mr Jones. Vale denies this is the case. Prior to the hearing, Vale filed, as an annexure to its submissions, an aide memoir which incorporated the relevant paragraphs of HBF's pleading into its counterclaim.
As was the case at the hearing of the First Strike Out application, further amendments were proposed to be made to both pleadings shortly prior to the hearing. This included notification by HBF that certain paragraphs of HBF's further amended defence and counterclaim were not pressed, although these paragraphs were not formally deleted from its pleading.
Many of the issues raised on this application were identical (or at least very similar) to those raised on the First Strike Out application. On this basis, in these reasons, I have referred to the relevant parts of the First Strike Out Reasons without repeating those matters. These reasons should be read with the First Strike Out Reasons.
For the reasons that follow, it is my view that:
(a)[21.5.1] - [21.5.4], [22.2.1A], [34.2.1] and [34.2.2] of HBF's further amended defence should be struck out;
(b)[27.2.4], [30] - [32], [35], [40], [41], [77A], [79], [82.1], and paragraph (a) of the particulars of [82.2.2] of HBF's further amended counterclaim should be struck out;
(c)[4], [8a], and [9b] of HBF's prayer for relief should be struck out; and
(d)Vale's counterclaim should be struck out in its entirety with leave to replead in accordance with these reasons.
Initial observations
Regrettably, it has not been possible to deliver my reasons for decision on these applications prior to now. This is due, at least in part, to the number of issues raised, the requirement to review the amendments carefully against the previous iteration of the pleading and the First Strike Out Reasons, and the lengthy submissions filed by all parties in support of the position they contended, including after the court had reserved its decision.
The complexity of the issues raised and the manner in which these matters have been argued have caused a further significant delay in the progress of these proceedings (and the related proceedings). To date, more than four days of court time have been spent hearing the applications to strike out the pleadings that have been filed. It is hard to see how this is consistent with the obligations of the parties in O 1 r 4A and 4B of the Rules of the Supreme Court 1971 (WA) (Rules).
Hopefully, with the delivery of these reasons, consideration will be given to filing pleadings that comply with both the orders of the court and the Rules. This will enable the disputes between the parties in respect of the pleadings to cease and for the parties to turn their attention to preparing this matter, and the related matters, for final hearing.
Does LCP require an extension of time to bring its application?
Before turning to address the substance of the applications, it is necessary to deal with a preliminary point.
HBF says that LCP requires an extension of time to bring at least part of its application because some of the paragraphs the subject of the strikeout application were included in earlier versions of HBF's defence and counterclaim and have not previously been the subject of challenge. HBF opposed any extension being granted to allow LCP to challenge these paragraphs. HBF says that LCP had sufficient time to consider these paragraphs of its original pleading filed in May 2020 and emphasises that no explanation has been given for the delay or the reason it did not participate in the hearing of the First Strike Out application, when it could have. In accordance with appropriate case management principles, HBF says the time has passed for LCP to raise any objection in respect of these paragraphs and that its application to strike out HBF's further amended defence and counterclaim is an abuse of process.
LCP denies that any extension of time is required to bring its application as its application was filed within 21 days of HBF's further amended defence and counterclaim being filed. In any event, LCP says that its submission that these paragraphs do not disclose any cause of action is correct and, accordingly, it cannot be an abuse of process for these paragraphs to be struck out.
Order 20 r 19(3)(a) of the Rules provides that any application must be made 'within 21 days of the service of any pleading, or amended pleading'. In Gardiner v Ray, Steytler J explained the rationale for this time limit as follows:[4]
Applications to strike out pleadings are, in my opinion, overused. They are always productive of delay and expense, sometimes substantially so, and often produce no sufficient countervailing benefit, particularly when they are brought at a late stage of the proceedings. It was because of considerations of this kind that the time limit fixed by O 20 r 19 was introduced. (See Seaman: Civil Procedure Western Australia par 20.19.2.) The purpose underlying that time limit is that of ensuring that, if an application of this kind is brought, it should be brought promptly so that it might at once be disposed of and the action continued without further interruption. The time limit is one to which more than lip service should be paid. Those who wish to bring an application of this kind, whether in defamation proceedings or otherwise, should consider, within the period fixed for that purpose, what benefit will be derived by bringing the application and then weigh against that the inevitable consequences of delay and expense. If the benefit is outweighed by the delay or expense, or both, the application should not be brought. If the converse is true, the application should be filed promptly.
[4] Gardiner v Ray [1999] WASC 140 [33]. These comments were reiterated by Steytler J in Nationwide News Pty Ltd v Moodie [2003] WASCA 273 [69], with which Anderson and McLure JJ agreed ([21], [84]).
In the First Strike Out Reasons, I expressed the view (at [5]), without reference to the specific text of O 20 r 19(3)(a), that the second and third defendants required an extension of time to bring that application because the majority of the paragraphs the subject of that application were included in an earlier version of the pleading. In Newcrest Mining Ltd v Santos WA Northwest Pty Ltd, Tottle J, by reference to the specific text of the sub-rule, expressed the view that an application brought within 21 days of the service of an amended pleading (even if the paragraphs were in the original pleading) was not out of time.[5]
[5] Newcrest Mining Ltd v Santos WA Northwest Pty Ltd [2022] WASC 315 [8].
I accept that the text of O 20 r 19(3)(a) does not restrict an application to the paragraphs of an amended pleading which are the subject of the specific amendment. This can be contrasted to the text of O 21 r 3(3) of the Rules (dealing with an application to strike out a pleading which has been amended without leave) which specifically limits the subject of the application to the striking out of any amendment to the pleading.
On this basis, I accept that the plaintiff does not require an extension of time to file its application. That said, it is my view that allowing a party to take advantage of the service of an amended pleading to apply to strike out paragraphs of the pleading which are long-standing is inconsistent with the purpose of the rule (as articulated by Steytler J) as well as the case management principles set out in O 1 r 4A and 4B of the Rules. Accordingly, even if an extension of time to bring an application to strike out a pleading is not required, I consider that a relevant factor in the exercise of the court's discretion to strike out a pleading under O 20 r 19(1) is the length of time the relevant paragraph has formed part of the pleading and the reason for the delay in raising the issues. Where the defects raised by a party do not, in any material way, impede the progress of the action, it is my view that any application concerning long-standing paragraphs should be refused.[6]
[6] Gardiner v Ray [34].
Amendments to pleadings
In the First Strike Out Reasons at [18] - [29], I summarised in some detail the statement of claim filed by LCP, as well as the defence of Mr Jones and Mr Smith in these proceedings. These pleadings have not been amended since that time and accordingly, I have not repeated this summary in these reasons.
HBF's further amended defence and counterclaim
Only relatively limited amendments have been made by HBF to its defence.
In relation to the 2016 agreement, HBF has maintained its complaints in relation to this agreement summarised at [31] of the First Strike Out Reasons. Relevantly, HBF has maintained the plea in [21.5] that had Mr Jones been appointed a director of Vale, he would have owed certain duties to Vale and that it would have been a breach of those duties to bind Vale to the 2016 agreement. The amendments that have been made are to the particulars of these claims. Lengthy additional particulars have been provided as to why HBF says this is the case. In essence, HBF says that Vale would have been better off as an unfunded group member as opposed to a funded group member.
HBF continues to challenge the voluntary winding up of Vale on the same grounds as summarised at [32] of the First Strike Out Reasons. Lengthy particulars have been provided in Annexure A of the contention that Mr Jones' substantial purpose in resolving to wind up Vale was to enable a significant financial benefit to be paid to Oakvale. HBF has also amended its pleading in relation to the meeting of members of Vale which resolved to wind up Vale. HBF now contends the meeting was invalid because notice was not given to all directors of Vale and was inquorate.[7]
[7] HBF's further amended defence filed 24 June 2021 [28.3].
In relation to the 2017 agreement, HBF has maintained its complaints about this agreement summarised at [33] of the First Strike Out Reasons. HBF has maintained its plea that Mr Jones breached their duties to Vale set out in [34.2.1] of the defence, despite orders being made for this paragraph to be struck out.
An additional ground of challenge to each of the 2016 and 2017 agreements has been inserted in the further amended defence, namely that approval has not been obtained for entry into either of these agreements as no application has been made to a Court, as defined in these agreements.[8]
[8] HBF's further amended defence filed 24 June 2021 [30], [34.2.1A].
HBF's further amended counterclaim maintains HBF's claims against each of LCP, Vale and Mr Jones and Mr Smith and continues to challenge the validity of each of the 2016 and 2017 agreements. More significant amendments have been made to HBF's counterclaim, particularly by the provision of significant additional particulars, as well as to the relief sought by HBF.
First, in addition to the declarations sought as to the non-binding nature of each of the 2016 and 2017 agreements,[9] HBF now seeks declarations that no court confirmation or approval has been given to entry into these agreements, as required.[10] HBF seeks a number of additional declarations in relation to what it says is the absence of any entitlement of LCP to be paid any amount from its share of the settlement of the Liverpool Proceedings and that any amount that has been paid is held by LCP as constructive trustee for Vale.[11] These declarations are sought in addition to the orders for an account of the differences between the amount paid by Vale to LCP under the agreements and the amount that would have been payable by Vale if the agreements had not been entered into.[12] In the alternative, HBF seeks declarations that Vale acted in breach of trust in entering into or ratifying these agreements and that Mr Jones (and where relevant, Mr Smith) knowingly induced or procured these breaches of trust or breached duties owed to Vale.[13]
[9] HBF's prayer for relief filed 24 June 2021 [1], [6].
[10] HBF's prayer for relief filed 24 June 2021 [1A], [7A], [8c].
[11] HBF's prayer for relief filed 24 June 2021 [1B] - [1E].
[12] HBF's prayer for relief filed 24 June 2021 [2], [3], [6], [7].
[13] HBF's prayer for relief filed 24 June 2021 [4], [8], [9].
Second, HBF seeks declarations that the solvency declarations are of no effect, the resolutions to wind up Vale and appoint Mr Jones and Mr Smith as liquidators are invalid, and that Mr Jones and Mr Smith have not been appointed as joint and several liquidators of Vale.[14]
[14] HBF's prayer for relief filed 24 June 2021 [10] - [15].
Finally, HBF seeks an order under s 65(2) of the Trustees Act 1962 (WA) (Trustees Act) that LCP pay Vale $12,862,861.57 or such other sum as determined by the court.[15]
[15] HBF's prayer for relief filed 24 June 2021 [17A].
The essential allegations made by HBF in respect of each of the 2016 and 2017 agreements summarised at [39] and [40] of the First Strike Out Reasons have been maintained in HBF's further amended counterclaim. Lengthy additional particulars have been provided as to the basis for the contention of Mr Jones' understanding and expectations as deed administrator of Oakvale, including that Oakvale would receive a substantial financial benefit from entry into the 2016 agreement, and his purpose in entering into this agreement.
HBF continues to plead it was a breach of trust for Vale to enter into the 2016 agreement. HBF's counterclaim has been further amended to specifically plead a number of clauses of the agreement on which reliance is placed. Despite orders having been made to strike out HBF's claim that Mr Jones and LCP knowingly induced or immediately procured this breach of trust (in [41] of HBF's amended counterclaim), this paragraph has been maintained with some amendment to the particulars.
As set out above at [25], a significant amendment to HBF's counterclaim is the inclusion of the claim that LCP had no entitlement to be paid any amount under the 2016 agreement because no approval for entry into the agreement has been given by a Court under the terms of the 2016 agreement. HBF says that it was a breach of trust for Vale to pay any amount to LCP and that LCP had actual or constructive knowledge of the breach of trust. HBF also says the distribution to LCP was a distribution of assets subject to a trust and that it is entitled under s 65(2) of the Trustees Act for an order for repayment of these funds.
HBF repeats the contentions in its defence in relation to the declarations of solvency and the validity of the meeting and pleads that, as a result, Mr Jones and Mr Smith were not appointed as liquidators of Vale. As a consequence, HBF contends the 2017 agreement is not binding on Vale.
HBF has specifically pleaded a number of terms of the 2017 agreement which it says are the basis for its contention that entry into the 2017 agreement was not in the best interests of Vale or its beneficiaries. These are similar to the terms raised in respect of the 2016 agreement. As set out above at [25], HBF's further amended counterclaim now includes a claim that LCP has no entitlement to be paid any amount under the 2017 agreement because no approval has been given by a Court under the terms of the agreement.
Despite orders having been made to strike out [79.1] and [79.2] of HBF's amended counterclaim, these paragraphs remain in HBF's further amended counterclaim. These plead that if Mr Jones was appointed as liquidator of Vale, Mr Jones breached his duties to Vale in causing it to enter into the 2017 agreement as it was not in the best interests of the beneficiaries of the trust and a trustee acting with due care, skill and diligence would not have entered into the agreement. These matters are also said to be a breach of trust by Vale.
HBF continues to plead that if the 2016 and 2017 agreements have been ratified, any acts of ratification are also a breach of the duties by Mr Jones and Mr Smith, as well as a breach of trust by Vale.
Finally, HBF says orders under s 1322 of the Corporations Act 2001 (Cth) (Act) should not be made as sought by LCP as any irregularity has caused or may cause HBF substantial injustice that cannot be remedied by any order of the court.
Vale's counterclaim
The counterclaim filed by Vale seeks repayment from LCP, as well as Mr Jones and Mr Smith, of any amounts paid to LCP under the 2016 agreement over and above any amount Vale would have been liable to pay as an unfunded group member.
The factual basis for Vale's counterclaim against LCP is that Mr Strapp did not have authority to bind Vale to the 2016 agreement and this agreement was not executed in accordance with Vale's constitution. Vale seeks by way of restitution, repayment of any amounts paid to LCP over and above the amount it would otherwise have been liable to pay to LCP as an unfunded group member.
In relation to the claim against Mr Jones, Vale says that between the date of reinstatement of Vale until the purported appointment of Mr Jones and Mr Smith as liquidators, Mr Jones was an officer of Vale. Two alternative grounds are pleaded as to why they say this was the case.
First, it is contended that Mr Jones acted in the position of a director of Vale. The particulars of the actions relied upon by Vale are as follows:[16]
Vale relies on the actions pleaded in [26.3], [28.1] (except the words in paragraph [28.1] following the closed bracket) to [28.5], [33.1], [35.1], [36.0], [36.1] and [36.3] of the HBF CC, to the extent that the actions pleaded in those paragraphs were taken prior to the reinstatement of Vale (Prior Conduct) and to the extent that the actions pleaded paragraphs were taken after the reinstatement of Vale (Post Conduct). Mr Jones acted in the position of a director of Vale by engaging in the Post Conduct, in circumstances where Mr Jones had also engaged in the Prior Conduct.
[16] Vale's counterclaim filed 6 August 2021 [12].
In the alternative, it is pleaded that Mr Jones made or participated in making decisions affecting the whole or a substantial part of the business of Vale and, accordingly, is an officer of Vale within the meaning of s 9 of the Act. Particulars are provided of this allegation in the following terms:[17]
Vale relies on the Post Conduct, in circumstances where Mr Jones had also engaged in the Prior Conduct.
During the Initial Period the subject matter of Vale's participation in the 2016 Liverpool Proceeding constituted the whole of Vale's business.
[17] Vale's counterclaim filed 6 August 2021 [14].
Vale pleads that Mr Jones breached the duties he owed to Vale (both statutory duties and duties owed as a matter of law) by negotiating the 2016 agreement; encouraging and recommending to Mr Strapp of Vale to execute it; seeking and obtaining the orders in CIV 1181 of 2017; and ratifying the 2016 and 2017 agreements. Similar allegations are made against Mr Smith in respect of his conduct in seeking and obtaining the orders in CIV 1181 of 2017 and ratifying the 2016 and 2017 agreements. Vale seeks orders pursuant to s 1317H of the Act, alternatively at common law, for payment of any amounts paid to LCP over and above the amount it would otherwise have been liable to pay to LCP.
In relation to the 2017 agreement, Vale's counterclaim adopts various paragraphs of HBF's further amended defence and counterclaim and says that causing Vale to enter into this agreement was a breach by Mr Jones of his duties to Vale (both statutory and at common law). Vale contends that it suffered loss because of this breach, although no particulars are provided.
Prior to the hearing of the application, Vale also sought to include a plea that a reasonable person who was a director or officer of a corporation in the circumstances of Vale who occupied the office held by Mr Jones and Mr Smith, with the same responsibilities, would not have bound Vale to the 2017 agreement. The particulars refer to [34.2.1(b)] of HBF's defence 'on the basis that the reference to Mr Jones is a reference to Mr Jones and Mr Smith'.
Principles governing strike out applications
The principles which govern the applications were not in dispute and were summarised at [43] - [48] of my First Strike Out Reasons. I have adopted these principles in considering the applications.
Before addressing the substance of the applications, it is useful to reiterate the purpose of pleadings and particulars more generally.
A pleading is required to define the issues for trial and disclose an arguable claim or defence. It must also inform the other party of the case that has to be met at trial. The pleading provides the basis on which other case management processes will be determined, including what documents will be required to be discovered and what evidence is admissible at trial.
O 20 r 8(1) of the Rules relevantly provides that:
[E]very pleading must contain, and contain only, a statement in a summary form of the material facts on which the party pleading relies for his claim or defence, as the case may be, but not the evidence by which those facts are to be proved, and the statement must be as brief as the nature of the case admits.
In determining whether a pleading is adequate, it is necessary to keep these purposes in mind. While contemporary case management techniques have reduced the opportunity to ambush at trial, this does not mean that the requirements for proper pleadings can be ignored.
As Vaughan J observed in National Australia Bank Ltd v Rowe:[18]
[T]he goal in O 1 r 4A of the Rules of the Supreme Court 1971 (WA) and the objects of O 1 r 4B are best achieved through conscientious adherence to O 20 r 8(1). Prolixity obscures identification of the true issues in contention and adversely impacts on the proper and efficient preparation of a case and its presentation at trial. …
The requirements of O 20 r 8(1) should be observed in preparing a pleading. Practitioners may do so confident in the knowledge that a summary statement of the material facts — and only such a summary statement — is what is required by the rules. The true significance of the case management authorities in this area is that it is unnecessary to encumber a pleading with unnecessary particulars, and all the more so evidence, as it is inevitable that there will be subsequent pre-trial disclosure of the evidence to be adduced at trial.
A pleading must identify the issues, disclose an arguable claim or defence, and inform the parties of the case to be met. In doing so it should be clear and complete but concise. That standard is not met by over-complicating the pleading with unnecessary particulars and evidence.
[18] National Australia Bank Ltd v Rowe [2018] WASC 330 [4] - [6].
Evidence on the strike out application
As summarised in the First Strike Out Reasons at [53], on an application to strike out a pleading for failure to disclose a reasonable cause of action or defence, evidence is not admissible, save for documents which are specifically pleaded.[19] In relation to the remaining grounds of an application to strike out a pleading, evidence is admissible.[20]
[19] Rules of the Supreme Court, O 20 r 19(2); Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236 [3] (McLure JA).
[20] Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd [3] (McLure JA).
LCP filed two affidavits of Andrew Sutherland, a partner of LCP's solicitors, on 15 July 2021 and 30 August 2021 in support of its application to strike out certain paragraphs of HBF's amended defence and counterclaim. At the hearing, senior counsel for LCP limited the tender of these affidavits to the 2016 agreement,[21] the 2017 agreement,[22] the notice of originating motion for approval of the 2016 agreement, the orders made by Master Sanderson on 21 February 2017, the notice of originating motion for approval of the 2017 agreement, and the orders made by Master Sanderson on 14 November 2019.[23] Each of the agreements referred to in the pleadings is the subject of these applications. The originating motions are specifically pleaded in the statement of claim and admitted by HBF. As such, it is my view that each of these documents is also admissible on the application.
[21] Affidavit of Andrew Paul Tennent Sutherland filed 15 July 2021 'APTS-4', p 8 - 44.
[22] Affidavit of Andrew Paul Tennent Sutherland filed 15 July 2021 'APTS-4', p 45 - 84.
[23] Affidavit of Andrew Paul Tennent Sutherland filed 30 August 2021 'APTS-5', p 8 - 16.
At the hearing, senior counsel for Mr Jones and Mr Smith sought to rely on additional documents which are exhibited to Mr Sutherland's affidavit. These documents are specifically pleaded by HBF in Annexure A of HBF's further amended defence and counterclaim and, as a result, are admissible on the application.
In response to the application, counsel for HBF relied on two affidavits: an affidavit of Scott Foreman filed 13 September 2021 and an affidavit of Martin Jones filed 9 April 2020 in CIV 1484 of 2020. Counsel for HBF also sought to rely on annexure 'MBJ-13' of an affidavit of Martin Jones filed on 31 October 2019 in CIV 2903 of 2019. Senior counsel for LCP objected to the tender of this annexure on the basis of relevance. Ultimately, for the reasons set out below, it is not necessary for me to consider this letter in resolving these applications.
Applications to strike out HBF's further amended defence and counterclaim
A number of the issues raised by the applications by LCP and Mr Jones and Mr Smith were also the subject of argument at the hearing of the First Strike Out application and the First Strike Out Reasons. One of the complaints made by both LCP and Mr Jones and Mr Smith is that a number of the paragraphs which were ordered to be struck out on 26 May 2021 remain in HBF's further amended defence and counterclaim.
In respect of the remaining issues, there are two primary issues raised on the application. First, what is the impact (if any) of Vale filing its own counterclaim on the ability of HBF to bring the claims in the further amended counterclaim. Second, whether the amendments made by HBF adequately address the First Strike Out Reasons.
Before turning to these substantive matters, it is useful to address the first complaint.
Compliance with previous orders of court
The orders of the court on 26 May 2021 were that:[24]
The following paragraphs of the amended defence and counterclaim be struck out:
(a) [21.5.1] - [21.5.3], [22.2.1A], part of [22.2.4], and [34.2.1] of the defence;
(b) [27.2.4], [28.1], [29], [30] - [32], [35], [40.2] particular (f), [41], [78], [79.1], [79.2], and [83] - [86A] of the counterclaim; and
(c) [4b], [5], [8a], and [13] of the prayer for relief.
[24] Orders of Hill J dated 26 May 2021 [4].
Notwithstanding these orders, many of these paragraphs remain in HBF's further amended defence and counterclaim in an unamended form, although further particulars and, in some cases, very extensive further particulars have been provided.
In my view, it is not sufficient compliance with orders of a court that certain paragraphs be struck out for a party to simply amend or provide further particulars of these paragraphs. These paragraphs should be marked as being deleted (as required by the court's orders) with the new paragraphs and particulars that have been inserted also marked up. Not only is this the standard approach, but it also ensures that proper consideration is given in repleading the allegations to ensure they are sustainable and consistent with the First Strike Out Reasons.
Prior to the hearing, HBF advised LCP and Mr Jones and Mr Smith that a number of paragraphs in HBF's further amended defence and counterclaim were not being pressed by HBF. This included [30] - [32], [79.1] and [79.2] of HBF's further amended counterclaim and [8a] of HBF's prayer for relief, as well as the cross-references to these paragraphs in the further amended defence and counterclaim (in [40] of HBF's further amended defence and the particulars to [82] of HBF's further amended counterclaim). These paragraphs were ordered to be struck out and should not remain in HBF's further amended defence and counterclaim. Orders should be made to strike out these paragraphs, without leave to replead.
In relation to the following paragraphs, I consider that, consistent with the orders made on 26 May 2021, these paragraphs should be deleted from the next iteration of HBF's defence and counterclaim. With the exception of the paragraphs referred to at [60], these allegations (if maintained) should be redrafted to comply with the orders of 26 May 2021, the orders to be made following delivery of these reasons, and both sets of reasons. These paragraphs are:
(a) [21.5.1] - [21.5.3], [22.2.1A] and [34.2.1] of HBF's further amended defence;
(b) [27.2.4], [28.1], [29], [30] - [32], [35], [41], [79.1] and [79.2] of HBF's further amended counterclaim; and
(c) [4b] and [8a] of HBF's prayer for relief.
HBF's standing to bring claims
Standing to bring claims against Mr Jones and Mr Smith for breach of duties[25]
[25] HBF's further amended counterclaim filed 24 June 2021 [82]; HBF's prayer for relief filed 24 June 2021 [9b].
In the First Strike Out Reasons, I concluded that HBF did not have standing to bring the claims presently pleaded at [79.1] and [79.2] of HBF's counterclaim. Orders were made on 26 May 2021 striking out these paragraphs. Notwithstanding this, as noted at [58] and [60] above, [79.1] and [79.2] remain as part of HBF's further amended defence and counterclaim. In continuing to include these paragraphs, HBF has made no attempt to address the issues with this pleading identified at [133] of the First Strike Out Reasons. For this reason alone, these paragraphs should be struck out.
Vale has now filed a counterclaim against Mr Jones for breach of the duties owed to it. I accept that, given this development, HBF cannot plead or establish that in respect of the derivative claims, there is an 'unwilling trustee' who refuses to bring any claim in relation to these matters.[26] HBF accepts this is the case and has advised LCP and Mr Jones and Mr Smith that it does not press these paragraphs.[27] Given these matters, as set out above, it is my view that these paragraphs should be struck out without liberty to replead.
[26] Fried v National Australia Bank Ltd [2001] FCA 907; (2001) 111 FCR 322 [185]; Orders of Hill J dated 26 May 2021 [132].
[27] Affidavit of Andrew Paul Tennent Sutherland filed 30 August 2021 'APTS-5', p 106.
Mr Jones and Mr Smith contended that [82.1] of HBF's further amended counterclaim and [9b] of HBF's prayer for relief should also be struck out because Vale has now commenced proceedings against them in relation to the alleged breaches of duties in ratifying the 2016 and 2017 agreements. HBF denied these paragraphs should be struck out and relied on the conclusions at [231] of the First Strike Out Reasons that HBF has standing to raise these issues.
For the reasons set out at [225] - [230] of the First Strike Out Reasons, I accept that HBF has standing to raise these matters in answer to the claim by LCP and that this interest is separate to the interests of Vale. There is an issue between the parties as to whether the 2016 and 2017 agreements have or should have been ratified. The fact that Mr Jones and Mr Smith have been replaced as liquidators of Vale does not prevent HBF from contending that their actions, while they were liquidators of Vale, were a breach of duty and seeking declaratory relief to that effect. The questions as to whether the court will, in fact, be persuaded at the final hearing that this is an appropriate case to grant the relief sought and whether the declarations will have any legal consequence are separate issues which, in my view, should only be considered at the final hearing.
However, this does not answer the issue with [82] of HBF's further amended counterclaim set out at [234] of the First Strike Out Reasons, namely that the allegations against Mr Jones and Mr Smith were not properly particularised. The only amendments that have been made to the particulars are in respect of the pleading of breach of trust by Vale. The additional particulars provided in respect of the pleaded breach by Mr Jones and Mr Smith refer to paragraphs of HBF's further amended defence and counterclaim which are either being struck out or HBF has given notice it does not rely on.
As stated in the First Strike Out Reasons, the allegations that Mr Jones and Mr Smith have breached their duties are serious allegations which must be properly pleaded and particularised. On this basis, I consider that both [82.1] of HBF's further amended counterclaim and [9b] of HBF's prayer for relief should be struck out as they may prejudice, embarrass, or delay the fair trial of the action. However, given my view that HBF has (or at least may have) standing to advance a properly pleaded claim, I will give HBF leave to replead these allegations.
LCP's application challenging the standing of HBF to seek declaratory relief[28]
[28] HBF's prayer for relief filed 24 June 2021 [1], [1A] - [1E], [4a], [6] - [7], [7A], [8b] - [8c], [9a].
In its application, LCP contended the declarations sought by HBF in respect of both the 2016 and 2017 agreements should be struck out on the basis that Vale has filed a counterclaim against LCP in relation to these matters and is the proper plaintiff to bring these claims. HBF submitted that LCP's submissions failed to distinguish between those claims which it brought as a beneficiary of the trust; that is, derivative claims which should be brought by Vale as trustee, and the claims which it had standing to bring in its own name. HBF contended that, consistent with the First Strike Out Reasons, its commercial interests were impacted by the 2016 and 2017 agreements and, on this basis, maintained it had standing to seek the declaratory relief set out in HBF's further amended defence and counterclaim.
It is accepted by all parties that since delivery of the First Strike Out Reasons, Vale has filed a counterclaim against each of LCP, Mr Jones and Mr Smith. Given this development, LCP says HBF does not have standing to bring any counterclaim in relation to the affairs of the trust as these are matters properly agitated by Vale.
A further development is the delivery of the decision of the High Court in Hobart International Airport Pty Ltd v Clarence City Council.[29] After the delivery of this decision, the solicitors for HBF wrote to the court to ask whether the court would be assisted 'by short written submissions from each party, strictly addressing the significance and potential application (if any)' of this decision to the present matter. Having conveyed that the court would be so assisted, both HBF and LCP filed submissions. On receipt of the submissions from HBF, the solicitors for LCP objected to a number of the matters contained in HBF's submissions on the basis that they either repeated matters which had already been raised at the hearing or were a new case advanced without leave. I do not agree that the submissions filed by HBF went outside the leave granted. I accept that in addressing the significance and application of this decision to this matter, it was open for the parties to identify particular matters of this case that were held by the High Court to be relevant to the question of standing. For this reason, in considering this part of the application, I have had regard to the matters raised by HBF in their submissions filed 8 April 2022.
[29] Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5; (2022) 96 ALJR 234; 399 ALR 214.
I turn then to the question of HBF's standing to bring the claims set out in HBF's further amended counterclaim.
In Alexander v Perpetual Trustees WA Ltd,[30] Gleeson CJ, Gummow and Hayne JJ referred with approval to the decision of Powell J in Ramage v Waclaw[31] as supporting the proposition that:[32]
[W]here relief is sought in the equitable jurisdiction of the Supreme Court against a third party, a beneficiary may sue in his own name, joining as defendants the trustee and any other beneficiaries, but only where there are 'special circumstances'.
[30] Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109.
[31] Ramage v Waclaw (1988) 12 NSWLR 84, 91 - 93.
[32] Alexander v Perpetual Trustees WA Ltd [55].
As stated by their Honours in that case, one of the reasons for this proposition is to avoid the 'vexation' of multiple suits.[33]
[33] Alexander v Perpetual Trustees WA Ltd [55].
Their Honours also reinforced the general principle that:[34]
The interests of the beneficiaries of a trust are protected against a third person acting adversely to the trustee through proceedings brought against him by the trustee and not by the beneficiaries. As long as the trustee is ready and willing to take the proper proceedings against the third person, the beneficiaries cannot maintain a suit against him.
[34] Alexander v Perpetual Trustees WA Ltd [55], quoting Scott on Trusts, 4th ed (1989) vol 4 § 282.
The mere fact that a trustee is not 'ready and willing' to bring proceedings will not always amount to 'special circumstances' enabling a beneficiary to commence proceedings. This is because, in some cases, the refusal to bring proceedings, properly understood, will not amount to a failure by the trustee of its duty to protect trust assets.[35]
[35] McRobert Superannuation Pty Ltd v Cranston [2021] WASCA 126 [255] - [257].
LCP submits that these general principles should not be defeated by a beneficiary 'carefully seeking only declaratory relief, or trying artfully to avoid duplication of the trustee's claims'.[36]
[36] LCP's written submissions filed 30 August 2021 [9].
HBF says that it is entitled as a beneficiary of a trust to sue a third party as of right in two circumstances. First, where the claim is a Barnes v Addy[37] type claim.[38] Second, where the beneficiary has sufficient standing to seek declaratory relief. HBF says the relief it seeks in HBF's further amended counterclaim are the appropriate orders in the event it is successful in its direct claim for knowing inducement of breach of trust.
[37] Barnes v Addy (1874) LR 9 Ch App 244.
[38] Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) [1999] FCA 1820; (1999) 96 FCR 217 [54].
In respect of the first of these claims, as was noted by the Full Court of the Federal Court in Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq):[39]
An action by the trustee to recover the trust property is an action "for the benefit of the trust estate". His right to bring such an action is but an aspect of his duty to get in the trust estate. In contrast, the action by a beneficiary against a third party recipient in such a case as the present is not precisely the same as that of the trustee. It is a direct action in respect of a wrong to the beneficiary. It has the same character as an action against the trustee for breach of trust. As Bogert notes, "[t]he beneficiary is enforcing a cause of action belonging to him, and is not acting as a representative of the guilty trustee in realizing upon a claim held by the latter". In contrast to the usual situation concerning suits by trustees against third parties, the right of a trustee in such circumstances seems more appropriately to be described as a "derivative" one. (citations omitted)
[39] Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) [57].
Where a beneficiary has a direct cause of action under a Barnes v Addy claim and the court upholds the claim, there are a range of remedies that may be granted. In some circumstances, the appropriate relief is to order restitution of the trust fund and in others, an award of equitable compensation directly to the beneficiary.[40]
[40] Lewis v Nortex Pty Ltd (in liq) [2005] NSWSC 482 [30].
I accept that in HBF's further amended counterclaim, HBF seeks to advance a claim against LCP, Mr Jones and Mr Smith for knowing inducement of a breach of trust.[41] If these claims are properly pleaded (which at present, for the reasons set out below, I consider is not the case), I accept that it would be open for HBF to seek the relief set out in HBF's prayer for relief.
[41] HBF's prayer for relief filed 24 June 2021 [1D], [4a], [8b], [9a].
I turn then to consider whether HBF has sufficient standing to seek declaratory relief in relation to the 2016 and 2017 agreements.
In the First Strike Out Reasons, in reliance on the decision of the Full Court of South Australia in Macks v Viscariello,[42] I concluded that HBF's commercial interests were directly impacted by the question of whether any fees were payable to LCP under the 2016 and 2017 agreements, and considered this was sufficient to give HBF standing.[43] Since that time, the question as to whether a third party to a contract has standing to seek declaratory relief in respect of the proper construction of the contract has been considered by the High Court in Hobart International Airport Pty Ltd v Clarence City Council. This decision was delivered after the First Strike Out Reasons and after I reserved my decision on these applications. Leave was given to both LCP and HBF to file submissions in relation to the impact of this decision. Both submitted that this decision supported the position for which they contended.
[42] Macks v Viscariello [2017] SASCFC 172; (2017) 130 SASR 1.
[43] First Strike Out Reasons [225] - [230].
In their joint judgment, Kiefel CJ, Keane and Gordon JJ held that what was required to establish standing varied depending on the relief sought. Where the relief sought is declaratory relief, it is necessary for the applicant to have a 'sufficient' or 'real interest in obtaining the relief'. There is no requirement that the applicant have an independent cause of action against the respondent.[44]
[44] Hobart International Airport Pty Ltd v Clarence City Council [32]; Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406, 414; Plaintiff S10/2011 v Minister for Immigration and Citizenship [2012] HCA 31; (2012) 246 CLR 636 [68].
In considering what was a 'sufficient' or 'real' interest, their Honours stated that:[45]
The requirement that an applicant for declaratory relief have a "sufficient" or "real" interest in obtaining the relief has work to do in both public and private law contexts. "However, the requirement applies differently to different sorts of controversies".
In respect of private rights, the general principle is clear: an applicant for declaratory relief will have a "sufficient" or "real" interest in obtaining relief where it pertains to declaring the existence of legally enforceable rights or liabilities of the applicant, including statutory rights. Here, the Councils did not assert that they had any legally enforceable contractual rights under the Leases or any statutory right which they could enforce and, at least in the proceedings below, they disavowed that they enjoyed the benefit of a contractual promise held on trust.
Although lack of privity is a factor relevant to standing and a reason for a court approaching the question of the standing of an outsider with considerable caution, an outsider to a contract may, "for other reasons" — what might be described as "exceptional circumstances" — have a "sufficient" or "real" interest to seek declaratory relief as to the meaning and effect of a contract between contracting parties. As the Full Court put it below, "there is reason to be concerned as to the potential for what might be described as unfounded intermeddling by a third party to a contract. But, in the context of declaratory relief, the solution to that concern is not the doctrine of privity of contract". (citations omitted)
[45] Hobart International Airport Pty Ltd v Clarence City Council [33] - [35].
Their Honours concluded that a mere commercial interest on the meaning and effect of a contract would not give rise to a 'sufficient' or 'real' interest and referred to a combination of circumstances as giving rise in that case to a sufficient or real interest. Three matters were referred to by their Honours. First, the proper construction of the contract had a 'real practical importance' to the applicants, given their role under the agreements. Second, the applicants had a 'real commercial interest' in the relief. Third, the success in obtaining declaratory relief would advance the applicants' interests in their commercial negotiations.[46]
[46] Hobart International Airport Pty Ltd v Clarence City Council [38] - [40].
Gageler and Gleeson JJ in their joint judgement expressed the view that:[47]
Depending on the totality of the circumstances, the material interest that the person has in seeking the order may be sufficient to justify a court entertaining the proceeding in which the order is sought.
[47] Hobart International Airport Pty Ltd v Clarence City Council [65].
In this case, I accept that a number of the declarations sought by HBF concern the 2016 and 2017 agreements and that HBF is not a party to either agreement. The parties to these agreements are LCP, Vale and (in the case of the 2016 agreement) Mr Strapp. HBF's lack of privity is a factor that is relevant, although not determinative, to whether it has standing and requires the court to approach this question with 'considerable caution'.[48]
[48] Hobart International Airport Pty Ltd v Clarence City Council [35].
LCP says that HBF has not identified or established any exceptional circumstances.[49] In contrast, HBF relies on a number of matters which it says give it standing, or at least mean it arguably has standing.
[49] LCP's submissions filed 30 August 2021 [12] - [13].
HBF says that the relief it seeks will have a real, practical importance, in that if it obtains the declaration sought, it will not need to pursue its applications to set aside the orders made by the court in CIV 1181 of 2017 and CIV 2903 of 2019. In addition, HBF contends the declarations (if it is successful) will assist it in any future negotiations with LCP as to the funding agreements of any future class action. For these reasons, HBF contends it has a sufficient and real interest to seek the relief set out in HBF's further amended counterclaim. In any event, HBF submits that this issue should not be resolved on a strike out application but should only be resolved at a final hearing.[50]
[50] HBF's submissions filed 8 April 2022 [21] - [24].
I consider it is arguable that the matters referred to by HBF give it a sufficient or real interest in seeking the relief set out in HBF's further amended counterclaim. I also accept HBF's submission that the declarations it seeks as to the validity of the 2016 and 2017 agreements are simply the contrary position to the relief claimed by LCP in its statement of claim.
For these reasons, I do not accept that HBF's further amended defence and counterclaim, in so far as it seeks declaratory relief in relation to the 2016 and 2017 agreements, should be struck out. In my view, the question as to whether the interest of HBF is sufficient to give it standing to seek the relief set out in HBF's further amended defence and counterclaim should not be resolved at an interlocutory hearing, but be resolved at the final hearing.
Knowing inducement or procurement of a breach of trust in relation to 2016 agreement[51] and breach of trust in relation to 2017 agreement[52]
[51] HBF's further amended counterclaim filed 24 June 2021 [40] - [41], [35]; HBF's prayer for relief filed 24 June 2021 [4b]. See also HBF's further amended defence filed 24 June 2021 [21.5.1] - [21.5.4].
[52] HBF's further amended counterclaim filed 24 June 2021 [77A]; HBF's prayer for relief filed 24 June 2021 [8b]. See also HBF's further amended defence filed 24 June 2021 [34.2.1] - [34.2.2].
Once again, the dispute between the parties in relation to these paragraphs of HBF's further amended counterclaim essentially concerns whether the amendments that have been made to the counterclaim address the First Strike Out Reasons. Both LCP and Mr Jones and Mr Smith contend that the amendments made by HBF do not address the previous findings of the court. Specifically, at [83] - [88] of the First Strike Out Reasons, I concluded that entry into the 2016 agreement could not constitute a breach of trust and, as a result, Mr Jones could not have knowingly induced or procured the pleaded breach of trust. At [130] of the First Strike Out Reasons, I concluded that entry into the 2017 agreement could not constitute a breach of trust or breach of duty by Mr Jones.
Significant amendments have been made to [40] of HBF's further amended counterclaim. HBF has pleaded a number of matters which it says mean that Vale was worse off by entering into the 2016 agreement as compared to the position it would otherwise have been in. HBF has also introduced a plea, at [45D - 45E] of HBF's further amended counterclaim, that Vale was not obliged to pay any amount to LCP because no approval has been given by a Court to the entry into the 2016 agreement, which it says was required.
LCP, as well as Mr Jones and Mr Smith, submit the amendments are superficial and do not address the First Strike Out Reasons for three primary reasons. First, the matters identified by HBF are all matters which arise under the 2016 or 2017 agreements. They contend that the requirement to seek approval of the court is in respect of the entirety of each agreement and not just the payment obligations. Second, the matters relied upon by HBF cannot constitute a relevant detriment or breach of trust. Third, the effect of the directions or approval obtained from the court is that the trustee is deemed to have discharged their duty in the subject matter of the direction. Consistent with the First Strike Out Reasons, it is contended that entry into the 2016 and 2017 agreements cannot constitute a breach of trust.
HBF raises a number of matters in response. First, HBF submits its claim is 'an orthodox breach of trust case', which has been pleaded consistent with authority.[53] It says that the previous findings were limited to the then-pleaded detriment of the payment obligation, which is no longer pleaded. Second, it says that under the terms of the 2016 and 2017 agreements, Court approval is not a condition precedent and that the remaining obligations of Vale continue under each agreement (apart from payment to LCP) even if court approval is not obtained. These obligations, in its view, give rise to at least an arguable claim for breach of trust. Third, it says the order obtained by Mr Jones and Mr Smith in relation to the 2016 agreement does not protect Vale because it was not obtained prior to entry into the 2016 agreement and Vale did not act under the direction (as the 2016 agreement had already been entered into). Fourth, in relation to the order obtained by Mr Jones and Mr Smith in relation to the 2017 agreement, HBF says that this order does not protect Vale because Mr Jones and Mr Smith did not seek the orders as trustee but as liquidators and there was no power to make the order under s 92 of the Trustees Act.[54] Fifth, s 92 of the Trustees Act is concerned with future and not past conduct.[55] In this case, the order was obtained after entry into the 2017 agreement. As a result, HBF says that Vale did not act under the direction.
[53] Submissions of HBF in opposition to Mr Jones' application filed 13 September 2021 [9].
[54] Kukulovski v Georges [2011] NSWSC 359; Sergeant v Glass [2017] NSWSC 1446.
[55] Re JW Murphy & PC Allen; Re BPTC Ltd (in liq) (1996) 19 ACSR 569, 571; Re One.Tel Ltd (2014) 99 ACSR 247 [55].
The 2016 agreement imposes an obligation on the Claimant to obtain 'confirmation of the Court' to its entry into this agreement (cl 1.4). However, under the terms of the 2016 agreement, the only consequence for the failure to obtain confirmation of the Court is that LCP is not entitled to remuneration under cl 7 (cl 7.4).
My preliminary view is that the failure to obtain confirmation of the court does not, of itself, terminate the 2016 agreement or Vale's obligations under it. This question depends on whether the failure to obtain approval for entry into the 2016 agreement is a Revision Event or whether the liquidator would exercise the right to terminate the agreement. Ultimately, for the reasons set out below, it is not necessary for me to decide this question of construction on this application. It is sufficient to express the view that I consider this is a factual matter that should be resolved at trial.
Similarly, the question as to whether the matters identified by HBF could amount to a breach of trust is, in my view, a matter that should be resolved at trial. It is sufficient for the purposes of this application to express the view that I consider this is arguable.
The 2017 agreement is in materially identical terms to the 2016 agreement. For that reason, my preliminary view in relation to that agreement is the same.
I accept that HBF's further amended counterclaim now pleads that confirmation of the Court has not been obtained under the 2016 agreement (in contrast to the previous pleading). However, this failure is pleaded only in relation to the entitlement of LCP to be paid under the 2016 agreement. Similarly, in relation to the 2017 agreement, HBF's further amended counterclaim simply contends that no amount is payable to LCP unless the Court confirms or approves entry into the agreement. However, at present, the pleading does not address the separate question as to the effect (if any) of the approvals obtained by Mr Jones and Mr Smith from this court.
At present, Mr Jones and Mr Smith as liquidators of Vale have obtained judicial advice from this court, pursuant to s 92 of the Trustees Act, that they are 'justified and acting properly and reasonably in entering into the 2016 agreement'.[56] Separate judicial advice has been obtained in respect of the 2017 agreement.[57]
[56] First Strike Out Reasons [24].
[57] First Strike Out Reasons [27].
HBF does not plead the matters which were raised in its submissions as to whether these orders provide any protection under the Trustees Act (and if so, to whom) and whether Mr Jones or Vale has acted in accordance with it. At present, the counterclaim, read in its entirety, pleads that the applications were not applications to the Court as defined in the 2016 or 2017 agreements. If these additional matters are to be raised, they must be pleaded so that LCP, Mr Jones and Mr Smith are aware of the case they are required to meet at trial. In my view, these matters are not anticipatory of the defences that may be filed, as submitted by counsel for HBF at the hearing.[58]
[58] ts 298.
For these reasons, I consider that these paragraphs in their current form may prejudice, embarrass, or delay the fair trial of the action and that they, together with [4] of HBF's prayer for relief, should be struck out pursuant to O 20 r 19(1)(c) of the Rules, and that HBF should have leave to replead these matters. Given this conclusion, I also consider, consistent with the First Strike Out Reasons, that [35] of HBF's further amended counterclaim should also be struck out.
There are two further matters on this issue that require comment. First, in the First Strike Out Reasons at [245], I indicated that I would hear from the parties as to whether [21.5.4] of HBF's defence, given those reasons, should also be struck out. No order was made striking out this paragraph on the basis of the assurance by counsel for HBF at the hearing at which the First Strike Out Reasons were published that the paragraph would be removed consistent with those reasons.[59] This did not occur and should now occur. On this occasion, however, I consider it should be the subject of a specific order.
[59] ts 167.
Second, in the First Strike Out Reasons, I did not make a similar observation in relation to [34.2.2] of HBF's defence or [79.3] of HBF's counterclaim. I accept that these paragraphs have not previously been challenged by any party and have formed part of HBF's defence since the original defence was filed on 7 May 2020. However, consistent with both the First Strike Out Reasons and these further reasons, I consider these paragraphs should also be struck out. This is reinforced by the fact that both paragraphs rely on the particulars of [34.2.1] of HBF's defence which I have ordered to be struck out.
Financial benefit to Oakvale by entry into 2016 agreement[60]
[60] HBF's further amended counterclaim filed 24 June 2021 [27.2.4], [28.1], [29].
The dispute between HBF and Mr Jones and Mr Smith, in relation to these paragraphs of HBF's further amended counterclaim, also concern whether the amendments made by HBF sufficiently address the First Strike Out Reasons. Specifically, at [96] - [101] of the First Strike Out Reasons, I concluded that it was not clear from the pleadings as they then stood as to the basis on which HBF advanced its claim and that it was necessary for HBF to properly particularise its claim.
HBF has made significant amendments to the relevant paragraphs of HBF's further amended counterclaim, including by the addition of Annexure A. These amendments set out in some detail the specific emails relied upon by HBF in support of this allegation. In this regard, I accept that HBF has sought to address the issue with this plea identified at [100] of the First Strike Out Reasons.
However, HBF has not addressed the issue identified at [97] of the First Strike Out Reasons. That is, it remains unclear from HBF's further amended counterclaim (and the extensive particulars that have been provided) as to the basis on which it is contended that Mr Jones' substantial purpose at the time of resolving to wind up Vale was to enable Oakvale to receive a substantial financial benefit of payment of all or some of the residual remaining after payment to LCP.
In my view, the particulars that have now been provided do not support the allegation pleaded and are, on their face, contradictory. The pleading contends that Mr Jones, as deed administrator of Oakvale, understood or expected that if Vale was reinstated, entered into the funding agreement and if the Liverpool Proceedings were successful resulting in a payment to Vale, then Oakvale would receive a substantial benefit being payment of 'all or some' of the residual amount after payment of LCP.[61] The language of this pleading can be contrasted with the particulars which are said to support this plea. The particulars initially contend that Oakvale wanted to achieve a position whereby Vale would pay to it 'some or all' of the residual of any money paid to Vale from the Liverpool Proceedings.[62] Subsequently, the particulars state that Mr Jones wanted to preserve the ability of Vale to approach the court to seek an order that some or all of the proceeds be paid to Oakvale[63] and accept that no payment could be made to Oakvale without directions from the court authorising any payment.[64] That is, HBF accepts that it was not possible for a significant financial benefit of 'all or some' of the residual to be paid to Oakvale as of right if the Liverpool Proceedings were successful. However, it is not clear as to the basis on which it is contended that Mr Jones understood or expected that Oakvale would receive a substantial benefit, as compared to preserving this position.
[61] HBF's further amended counterclaim filed 24 June 2021 [27.2.4].
[62] HBF's further amended defence and further amended counterclaim, Annexure A filed 24 June 2021 [5].
[63] HBF's further amended defence and further amended counterclaim, Annexure A filed 24 June 2021 [27].
[64] HBF's further amended defence and further amended counterclaim, Annexure A filed 24 June 2021 [39].
While I accept that Mr Jones' purpose in resolving to wind up Vale is a matter within his knowledge and not HBF, this does not mean that HBF is excused from any obligation to identify and properly plead its case. The cases relied upon by HBF do not support an alternate conclusion.
At the hearing, there was disagreement between the parties as to whether the rule in Re Condon; ex parte James[65] (which is referred to by HBF in the particulars) applies to voluntary liquidators or only court-appointed liquidators. It is not necessary on this application for me to resolve this issue. As Needham J commented in Re Autolook Pty Ltd,[66] if a liquidator has money which in equity belongs to someone else, they can apply to the court for directions and should have the directions which require them to perform their duties honestly.[67]
[65] Re Condon; ex parte James (1874) 9 Ch App 609.
[66] Re Autolook Pty Ltd (1983) 8 ACLR 419.
[67] Re Autolook Pty Ltd (1983) 8 ACLR 419, 421.
What is not clear from HBF's pleading is how it is contended that the principles in ex parte James could be used to distribute 'all or some' of the residual funds to Oakvale. If this allegation is to be maintained, this must be made plain. There is also a contradiction between the particulars in Annexure A (which contend Oakvale had no legal or equitable entitlement to trust property)[68] and the particulars of HBF's further amended counterclaim which say that Mr Jones intended to contend Oakvale was entitled to some or all of the proceeds.[69] In oral submissions, counsel for HBF clarified that the use of 'entitlement' in HBF's further amended counterclaim was a reference to moral entitlement (as opposed to legal or equitable entitlement) and that this could be cured by a simple amendment.[70] In my view, if this is what is intended to be conveyed, it should be pleaded.
[68] HBF's further amended defence and further amended counterclaim, Annexure A filed 24 June 2021 [39].
[69] HBF's further amended counterclaim filed 24 June 2021 [41(a)(x)].
[70] ts 352.
In my view, it remains unclear as to what is said to be the factual basis for the substantial purpose that has been pleaded and whether it is alleged that Mr Jones wanted to preserve the right or intended to pay 'all or some' of the residual to Oakvale (in contrast to the 'some or all' which is particularised).
As was stated by Quinlan CJ and Pritchard JA (Mitchell JA agreeing on this point) in Metaxas v Legal Profession Complaints Committee:[71]
The requirement for a 'proper' factual foundation for a pleading or submission is, therefore, simply an acknowledgement that a practitioner is required to critically evaluate the contention that he or she proposes to advance to the court to see that there is a reasonable basis for doing so. It requires the practitioner to take steps to ensure that the court is not misled, while acknowledging that the practitioner's obligation is not a counsel of perfection and a practitioner often is not in a position to warrant the reliability of information supplied by other persons.
What steps are necessary for there to be a proper factual foundation for a pleading or submission will, of course, vary with the circumstances of the case. Relevant considerations may include the resources of the practitioner, the ability of the client to pay for legal work, whether it is reasonable to proceed on the basis of a client's instructions as to matters not personally known to the practitioner and the knowledge of the practitioner. The nature of the pleading or submission will also be important. In the case of an allegation of fraud or serious misconduct, for example, the steps necessary to ensure that there is a proper factual basis are likely to be greater than in the case of a pleading or submission relating to more quotidian matters. Nevertheless, the principle remains one of general application.
…
The word 'proper' in this context is equivalent to 'reasonable', and is intended to capture the qualitative aspect of a practitioner's duty not to mislead the court.
[71] Metaxas v Legal Profession Complaints Committee [2020] WASCA 27 [68] - [71].
On this basis, I consider that these paragraphs are still not properly particularised and may prejudice, embarrass or delay the trial of this action. These paragraphs should be struck out pursuant to O 20 r 19(1)(c) of the Rules.
Was an application made to a 'Court' under the 2016 agreement and 2017 agreement?[72]
[72] HBF's further amended defence filed 24 June 2021 [30], [34.2.1A], [36]; HBF's further amended counterclaim filed 24 June 2021 [45C] - [45E], [78A] - [78B]; HBF's prayer for Relief filed 24 June 2021 [1A] - [1E], [2] - [3], [7A], [8c].
LCP seeks to strike out a number of paragraphs of HBF's further amended defence and counterclaim which contend that LCP was not entitled to be paid under cl 7 of the 2016 agreement because no application has been made to a Court, as required under the terms of the agreement. This depends on the proper construction of the agreement. Similar issues are raised in respect of the 2017 agreement.
Clause 1.4 of the 2016 agreement required Vale to 'make an application to the Court seeking the confirmation of the Court to its entry into this Agreement'. Schedule 1 of the 2016 agreement defines 'Court' to mean 'any court, tribunal or arbitral forum seized with the Proceedings'. Proceedings is relevantly defined to mean:
[A]ny Class Action, Group Action, Test Case or other legal proceedings to prosecute the Claims, or claims including or representing the Claims and includes without limitation:
(a)any application, motion, summons or proceeding brought in contemplation of Proceedings, including without limitation proceedings for preliminary discovery; and
(b)where the context admits – any appeal in or arising out of Proceedings.
Each of the terms 'Class Action, 'Group Action', 'Test Case' and 'Claims' are separately defined in sch 1.
HBF says that on a proper construction of the 2016 agreement, this required an application to be made to the Federal Court (and not the Supreme Court) for confirmation to entry into the 2016 agreement, which has not occurred.
On this application, LCP submitted this is an untenable construction of the 2016 agreement.[73] For the following reasons, I do not agree.
[73] Counsel for HBF noted that this was in contrast with LCP's submissions on an application to cross-vest proceedings CIV 1181 of 2017 and CIV 2903 of 2019 to New South Wales: ts 296.
It is not in dispute that the proper construction of a commercial contract is to be determined objectively by reference to the text, context and purpose of the contract. In Electricity Generation Corporation v Woodside Energy Ltd, the plurality of the High Court stated:[74]
[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.
[74] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ).
The starting point is to consider the possible meanings of the words chosen by the parties.[75]
[75] Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80 [296].
In considering the proper construction of the word 'Court', it is necessary, in accordance with the usual principles of construction, to insert the defined terms into the text of the clause. Adopting this approach and inserting the definition of Proceedings into this definition where it first appears, the text of the definition of Court is:
[A]ny court, tribunal or arbitral forum seized with the any (sic) Class Action, Group Action, Test Case or other legal proceedings to prosecute the claims, demands or causes of action asserted by Vale in respect of or arising from the transactions, events or circumstances described in Schedule 2, and where the context admits includes the same, similar or related claims of persons making Claims in or represented in the Proceedings other than Vale, or claims including or representing the Claims and includes without limitation:
(a)any application, motion, summons or proceeding brought in contemplation of Proceedings, including without limitation proceedings for preliminary discovery; and
(b)where the context admits – any appeal in or arising out of Proceedings.
In my view, there is a constructional choice as to whether Court means any court or whether it is limited to the Federal Court of Australia, who had the carriage of the class action proceedings concerning the transactions set out in sch 2; namely, the acquisition of Claim synthetic collateralised debt obligations. While the parties made lengthy submissions on this issue at the hearing, it is my view that this constructional choice should not be resolved on a strike out application but should await a final hearing. At this stage, there are insufficient facts before the court as to the context and purpose of the 2016 agreement and what was in the objective contemplation of the parties at that stage. In the absence of this evidence, I do not consider this is an appropriate case to consider the proper construction of the agreement on a final basis. It is sufficient for the purposes of this application that I consider the construction advanced by HBF is open.
In submissions (both written and oral), HBF advanced a number of reasons as to why it says that no Court has confirmed or approved Vale entering into the 2016 or 2017 agreements.[76] I accept the submission of LCP that it is not clear from HBF's further amended defence and counterclaim that these additional matters are sought to be raised by HBF. If HBF intends to advance these additional matters, they should, in my view, be pleaded. However, I do not consider this is a basis on which I would strikeout these paragraphs.
[76] ts 233.
For these reasons, I consider that LCP's application to strikeout these paragraphs should be dismissed.
Can HBF seek relief under s 65 of the Trustees Act?[77]
[77] HBF's further amended counterclaim filed 24 June 2021 [45N] - [45R]; HBF's prayer for relief filed 24 June 2021 [17A].
HBF's claim under s 65 of the Trustees Act is, essentially, that as Vale distributed assets subject to a trust to LCP and HBF is a person beneficially entitled under the trust, they are entitled to seek recovery of those assets.
In LCP's written submissions, LCP did not object to the standing of HBF to bring a claim under s 65(2) of the Trustees Act,[78] but said this claim should be struck out on the same basis as set out in relation to whether approval of a court had been obtained.[79] A different position was advanced in LCP's reply submissions,[80] as well as in oral submissions by senior counsel.[81]
[78] LCP's submissions filed 30 August 2021 [17(b)].
[79] LCP's submissions filed 30 August 2021 [32] - [38].
[80] LCP's submissions in reply filed 20 September 2021 [13] - [14].
[81] ts 229 - 232.
The additional reason advanced by LCP as to why these paragraphs should be struck out is that the payment to LCP does not fall within s 65 of the Trustees Act. This was advanced on three separate grounds: first, the section only applies to deceased estates; second, it only applies to distributions made by a trustee as opposed to payments; and third, even if the court were to accept that the section was not limited to deceased estates, it was not directed to subvert the established law on claims based on Barnes v Addy and knowing receipt of property.[82]
[82] ts 388 - 389.
Section 65 of the Trustees Act relevantly provides that:
65.Deceased estate, claims made after distribution of, tracing, following assets
(1)This section applies where a trustee has distributed any assets forming part of the estate of a deceased person or subject to a trust, and there is nothing in any Act to prevent the distribution from being disturbed.
(2)Where this section applies, the Court may make an order on a claim, being —
(a)an application under the Inheritance (Family and Dependants) Provision Act 1972; or
(b)a claim to which section 63 applies; or
(c)a claim by a person to be a beneficiary under the will, or to be entitled on the intestacy, of the deceased person, or to be beneficially interested under the trust;
any of which application or claims are, hereinafter in this section, called the claim.
I accept that it is possible for an adviser to fall within the definition of a director in sub-paragraph (b)(i) of the Act and that this subsection is not, on its face, limited to employees of a corporation. However, in order to fall within the terms of the subsection, it is necessary for a party to expressly plead the basis on which it says that a person is managing the corporation and is engaged in the decision-making of the corporation in that capacity. This includes the requirement to plead the specific acts of the person relied upon in support of the contention that the person is 'acting as a director'. The present pleading does not do this.
I also accept that it is arguable that, as a matter of law, Mr Jones, as an adviser to Vale, could fall within the definition of an officer in (b)(i) of the Act. However, it is not clear on the present pleading what role Mr Jones is said to have played in the decision and the basis for this, and whether Vale contends that Mr Jones made the decision or participated in the making of the decision. As noted by the High Court in Shafron v Australian Securities and Investments Commission, these are the elements that need to be proved in order to establish a person is an officer of the company.
In my view, it is necessary for Vale to plead precisely the role it contends Mr Jones had and the conduct it relies on as the basis for any contention Mr Jones made the decision. Vale also needs to separately plead the basis of any alternate contention that Mr Jones participated in the decision-making, including the material facts on which this is based. The present pleading does not do this nor does the copy annexed to Vale's submissions. These matters need to be addressed in any amended pleading.
In respect of the other matters raised by Mr Jones and Mr Smith, I do not accept that actions taken by Mr Jones prior to the registration of the company are, as a matter of law, irrelevant to the consideration of whether he acted as a director of Vale or was an officer of Vale after its reinstatement nor that Vale did not have a 'business'.
In my view, the power under s 601AH(3) of the Act to validate anything done between the period beginning on deregistration and ending on reinstatement supports a contention that actions purported to be taken on behalf of company can be considered by the court and may place into context conduct that has occurred after reinstatement. As noted by Campbell J in White v Baycorp Advantage Business Information Services Ltd, reinstatement does not validate the actions of a person who has purported to act on behalf of a deregistered company during the period it was deregistered.[102] However, it may be relevant to consider the actions on a person and whether they purported to act on behalf of a deregistered company. I also accept that reinstatement does not mean that any person (including Mr Jones) had authority to act on behalf of Vale during its period of deregistration.[103] However, the question is not whether, as a matter of fact, Mr Jones had authority to act on behalf of Vale during this period, but whether he purported to do so.
[102] White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441; (2006) 200 FLR 125 [115].
[103] Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) (2007) FLR 392 [42].
On this basis, I consider it is open for Vale to plead actions of Mr Jones prior to the reinstatement of the company. However, in doing so, it is necessary for Vale to precisely identify the acts as well as the basis on which it is said that these matters are material to the contentions pleaded. That is, Vale needs to identify whether the actions are said to be actions as a purported director or actions as an officer, and if so, why. That said, I accept liability for any actions can only arise after the reinstatement of the company and that it is this period which must be the primary focus of any claim.
Finally, the question as to what was, at the relevant time, the 'business' of Vale is a matter of fact. Section 21(3)(a) of the Act does not assist Mr Jones and Mr Smith. This section simply provides that a body corporate is not carrying on business in Australia merely because it is a party to proceedings. It does not assist in determining whether, at any particular point in time, the 'business' of a body corporate was its role as a party to legal proceedings.
Other complaints about counterclaim
In addition to the primary complaint which I have addressed above, Mr Jones and Mr Smith raise a number of additional complaints in relation to Vale's counterclaim. I address these briefly.
I accept that at present, [8] of Vale's counterclaim is a bare allegation which is not appropriately particularised. In addition, it is not clear as to why this allegation is relevant to the causes of action pleaded by Vale. This should be addressed in any amended pleading that is filed.
At [18] of Vale's counterclaim, Vale pleads that it was reasonably foreseeable that if Mr Jones failed to act with care and diligence in engaging in the Post Conduct, Vale would suffer loss. It is not clear from this pleading as to what conduct is relied on (that is, what conduct is said to constitute the Post Conduct), nor whether Vale is contending the duty of care arises as a consequence of its contention that Mr Jones was an officer of the company, or in a different capacity. In relation to [19] of Vale's counterclaim, while it is plain that Vale is alleging that Mr Jones' pleaded duties arose in three different capacities, no particulars are given as to the basis on which it says these duties arose in his capacity as adviser.
In relation to the allegations at [26.1] and [26.2] of Vale's counterclaim, I do not accept that these paragraphs are reliant on the plea that Mr Jones acted as a director of Vale, or alternatively was an officer of Vale. As senior counsel for Vale submitted, which I accept, these paragraphs also rely on Mr Jones' duty which is said to be owed as an adviser (pleaded at [19] of Vale's counterclaim). It is, however, necessary for Vale to differentiate between the allegations which are said to arise as an officer of Vale, from those said to arise as an adviser or liquidator and to properly particularise each of these. These matters should also be addressed in any amended pleading that is filed.
For these reasons, I consider that the entirety of Vale's counterclaim should be struck out with leave to replead. In doing so, Vale's counterclaim must be a standalone document and addresses the issues that I have identified above in respect of the claim that is advanced against Mr Jones.
Conclusion
For these reasons, I consider that:
(a)[21.5.1] - [21.5.4], [22.2.1A], [34.2.1] and [34.2.2] of HBF's further amended defence should be struck out;
(b)[27.2.4], [30] - [32], [35], [40], [41], [77A], [79], [82.1], and paragraph (a) of the particulars of [82.2.2] of HBF's further amended counterclaim should be struck out;
(c)[4], [8a], and [9b] of HBF's prayer for relief should be struck out; and
(d)Vale's counterclaim should be struck out in its entirety with leave to replead in accordance with these reasons.
My preliminary view is that Mr Jones and Mr Smith have been entirely successful on their application and should have their costs of both applications. In relation to the application by LCP, LCP has only been partially successful on its application, primarily in relation to matters that were also raised by Mr Jones and Mr Smith.
I will hear from the parties as to the orders that should be made to give effect to these reasons and as to the costs of the application.
Addendum
On 1 February 2024, the parties' solicitors were provided with an advanced copy of my reasons for decision ahead of judgment delivery, which was listed for 2 February 2024.
At the hearing on 2 February 2024, prior to publication of my reasons, counsel for the HBF raised two matters, namely:
(a)the accuracy of the references in footnotes 51 and 52 to various paragraphs of HBF's further amended defence and counterclaim; and
(b)a denial of procedural fairness in respect of the question whether LCP required leave to strike out certain paragraphs of the further amended defence and counterclaim. Specifically, HBF referred to the acceptance of the reasons of Tottle J in Newcrest Mining Ltd v Santos WA Northwest Pty Ltd, which was delivered after I had reserved my decision on this matter, without seeking submissions from the parties on this issue.
Given these matters had not been raised with the other parties prior to the hearing, I made orders for the parties to file submissions in relation to these issues and adjourned the date for judgment delivery until 23 February 2024. Orders were made administratively on 23 February 2024 for the filing of further submissions to substantively address the second matter and to adjourn the date for judgment delivery until today.
A third matter was raised by HBF in its original submissions in respect of [82.1] of HBF's further amended counterclaim and [9b] of HBF's prayer for relief.
Ultimately, for the further reasons set out below, I do not consider that any of the matters raised by HBF alter the conclusions I have reached in respect of the applications.
Knowing inducement or procurement of trust?
In my reasons for decision, in addressing this aspect of the applications, I referred in the footnotes to the specific paragraphs of HBF's pleading that were the subject of the complaint.
Counsel for HBF drew attention to the reference in footnotes 51 and 52 of this decision to parts of HBF's amended defence, namely [21.5.1] ‑ [21.5.3] and [34.2.1]. HBF said that these paragraphs concerned HBF's claim for breach of directors' duties and not breach of trust. On this basis, HBF said the references to these paragraphs in the footnotes should be removed.
LCP accepted there was an apparent error in the footnotes but maintained, consistent with these reasons and the First Strike Out Reasons, that these paragraphs should be struck out. Mr Jones and Mr Smith similarly contended that these paragraphs should be struck out.
In its submissions in reply, HBF clarified its position. HBF accepts these paragraphs should be struck out consistent with these reasons; its contention was that the reference to these paragraphs in these footnotes should be removed.
Before addressing whether the footnotes should be amended, it is relevant to explain why these paragraphs are included in these footnotes. The reference to these paragraphs reflects both HBF's submissions on the substantive application,[104] as well as LCP's submissions.[105] I also note that these paragraphs were the subject of the strike out applications by both Mr Jones and Mr Smith, as well as LCP.[106]
[104] HBF's outline of submissions in opposition to Mr Jones' application dated 13 September 2021; HBF's outline of submissions in opposition to LCP's application dated 13 September 2021.
[105] LCP's submissions dated 30 August 2021, fns 16 and 17.
[106] Mr Jones and Mr Smith's strike out application, Schedule 1 [1] and [3]; LCP's strike out application, Schedule 1 [1] and [7].
In the application, these paragraphs of the defence were sought to be struck out on the basis that the amendments made to these paragraphs did not comply with the orders made on 26 May 2021 following the publication of the First Strike Out Reasons. I have accepted this argument.[107]
[107] See [61].
In respect of the matter raised by HBF, I accept that these paragraphs of HBF's amended defence do not concern a pleading of breach of trust or knowing inducement of a breach of trust. However, in my view, these paragraphs suffer from the same defects, set out at [100] ‑ [103] of these reasons. This is consistent with my conclusion at [243] ‑ [244] of the First Strike Out Reasons.
However, in order to more accurately reflect this conclusion, I have amended the reference in footnotes 51 and 52.
The impact of the conclusion that these paragraphs ought to be struck out flows through to [82.1] of HBF's further amended counterclaim and [9b] of HBF's prayer for relief. These paragraphs address the alleged breaches of duty by Mr Jones and Mr Smith in respect of the ratification and confirmation of the 2016 and 2017 Agreements. HBF says that further particulars have been provided for the breaches of duty and trust, contrary to the position that was originally expressed at [66] of these reasons, and that accordingly, these paragraphs should not be struck out.
These paragraphs were the subject of the application to strike out filed by Mr Jones and Mr Smith.[108] I accept that HBF amended [82.1] of its further amended counterclaim to incorporate reference to other paragraphs of its pleading. However, each of the paragraphs on which it relies in support of its allegation has either been struck out or the subject of a notice from HBF to the parties that these paragraphs are not pressed. Given this, it is my view that this paragraph continues to suffer from the defect identified in the First Strike Out Reasons and should be struck out for the reasons advanced at [234] of those reasons.
[108] Mr Jones and Mr Smith's strike out application, Schedule 1 [8] ‑ [11].
To address the matters raised by HBF, I have amended [66] of the reasons for decision to more accurately reflect this position.
Does LCP require an extension of time to bring its application?
Counsel for HBF submitted, correctly in my view, that the conclusion reached as to whether LCP required an extension of time to bring its application was inconsistent with the views I expressed at the hearing of the application. On this basis, I gave the parties leave to address this substantive question in further submissions filed on 26 February 2024 (HBF) and 4 March 2024 (LCP).
HBF advanced four separate contentions as to why it says the conclusion expressed at [12] ‑ [17] of these reasons is wrong. First, it says the words in O 20 r 19(3)(a) 'to which the application refers' is a reference to the requirement in O 20 r 19(3)(b) that the application specify those parts of the pleading under challenge that should be struck out. That is, any application to strike out amended paragraphs, must be made within 21 days of service of the amended pleading.
Second, HBF contended that their construction of O 20 r 19(3) was consistent with both the views expressed at the hearing on 6 October 2021 and the decisions of Allanson J in Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2][109] and Gething PR in Smilkovic v Westcourt General Insurance Brokers Pty Ltd,[110] and inconsistent with the conclusion at [12] ‑ [17] of these reasons. HBF contended that I should follow these decisions as a matter of judicial comity unless I considered they were plainly wrong.
[109] Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2] [2011] WASC 136.
[110] Smilkovic v Westcourt General Insurance Brokers Pty Ltd [2006] WADC 201 [11]
Third, HBF submitted this construction was inconsistent with the underlying purpose of O 20 r 19(3) and should, on this basis, be rejected.
Finally, HBF contented that no weight should be placed on the decision of Newcrest Mining Ltd v Santos WA Northwest Pty Ltd as Tottle J did not consider the previous decisions (referred to at [0]) in relation to O 20 r 19(3).
LCP disputes each of these contentions and maintains that it did not require an extension of time to bring its application.
Given the matters raised by HBF, I provide the following further reasons in support of the conclusion I have reached that LCP did not require an extension of time to bring its application.
Order 20 r 19(3) of the Rules of the Supreme Court 1971 (WA) (Rules) is in the following terms:
(3)An application for an order under subrule (1) must —
(a)be made within 21 days of the service of any pleading, or amended pleading, or writ to which the application refers; and
(b)where the application is to strike out certain pleadings, specify —
(i)the paragraph of subrule (1) under which the application is made; and
(ii)those parts of the pleadings which the applicant seeks to have struck out;
and
(c)where the application is to strike out the entire pleading, clearly indicate that intention in the application.
The text of this rule requires an application to be made within 21 days of service of the relevant pleading, whether that is the original pleading or the amended pleading to which the application refers. The rule does not refer to the parts of the pleading that are the subject of the amendment but refers to the pleading in its entirety. The requirement under O 20 r 19(3)(b) that the application refer to the parts of the pleading which are sought to be struck out is to make two matters plain. First, whether the application is to strike out the entire pleading or only parts of it and, if so, which parts. Second, whether the same grounds are relied upon to strike out each paragraph of the pleading. On this basis, I do not consider the words relied upon by HBF support the construction contended for.
I turn then to consider the previous decisions referred to by counsel for HBF in support of its construction. The first decision in time is a decision of Gething PR in Smilkovic v Westcourt General Insurance Brokers Pty Ltd which was delivered ex tempore. In that decision, Gething PR stated that:[111]
[111] Smilkovic v Westcourt General Insurance Brokers Pty Ltd [11].
As I read order 20 of the Rules of the Supreme Court 1971, r 19 subrule (3), the 21-day period referred to in that rule relates to the pleading, or those parts of the pleading, under challenge. In the present case, the parts of the pleading under challenge are substantially, or in their entirety, issues relating to the original pleading and not the amended pleading. So, on that basis, the application is technically out of time.
No explanation is provided, by reference to the text, context or purpose of the Rules, as to the basis upon which this view was reached.
The second decision is a decision of Allanson J in Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2]. In that case, his Honour noted the statement of claim was filed on 5 May 2010 and the application by the third defendant to strike out the statement of claim was not filed until 17 February 2011. After the application to strike out the statement of claim was filed, the plaintiff filed an amended statement of claim. The third defendant then filed an amended chamber summons which sought leave to file the application to strike out the statement of claim dated 5 May 2020, and to strike out paragraphs of the amended statement of claim which were the subject of the amendments.[112]
[112] Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2] [1], [4] ‑ [6].
In relation to these applications, Allanson J stated that:[113]
[113] Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2] [40].
Under O 20 r 19(3) an application for an order to strike out a pleading must be made within 21 days of the service of the pleading to which the application refers. The third defendant's application to strike out the whole of the statement of claim dated 5 May 2010, and served at about that time, was not made until 17 February 2011. The plaintiff amended the statement of claim on 25 February 2011. I have held that, in its current form, the statement of claim is sufficient in its plea against the third defendant. I refuse to extend time to the third defendant to bring the application to strike out.
In that case, the third defendant did not contend that it was entitled to strike out the relevant paragraphs of the pleading on the basis that an amended pleading had been filed. It relied on its original application, which was not filed within 21 days.
On this basis, I do not consider that this decision is of assistance in resolving the issue of construction.
In my view, by reference to the text of O 20 r 19(3), the construction of the rule by Gething PR (without reference to the text, context or purpose) is plainly wrong. I prefer the construction given by Tottle J in Newcrest Mining Ltd v Santos WA Northwest Pty Ltd and conclude that LCP did not require an extension of time to file its application. In my view, this construction is consistent with the text of the O 20 r 19(3).
The reference by HBF to O 1 r 4B(2) does not, in my view, advance the position. As was stated by Beech J in Lois Nominees Pty Ltd v Hill:[114]
[114] Lois Nominees Pty Ltd v Hill [2011] WASC 53 [36].
By O 1 r 4B(2), the [R]ules are to be construed so as best to ensure the attainment of the objects in O 1 r 4B(1). I do not think that that provision means that whenever an alternative construction can be identified, however tenuous, it must be chosen if it better advances the O 1 r 4B(1) objects, regardless of what is indicated by textual, contextual and historical considerations, or by other provisions in the [R]ules. It does not amount to a licence to rewrite the [R]ules under the guise of interpretation, so as to better advance the case management objects of O 1 r 4B(1). Order 1 r 4B(2) prescribes something about how the [R]ules are to be construed. The process of construction involves all the considerations I have identified. If, taking into account all those considerations, there are two reasonably available constructions, O 1 r 4B(2) requires the choice of the construction that better ensures (ie advances) the attainment of the goals of O 1 r 4B(2). It does not require or justify the adoption of a construction that, having regard to all the considerations relevant to the process of construction, is not reasonably available.
In my view, the construction contended for by HBF, on examining the text of the Rules, is not reasonably open. Consistent with the views expressed by Beech J, I do not consider that O 1 r 4B(2) enables the court to rewrite the Rules to reflect the position contended for. As set out at [17] of these reasons, I consider that the purpose of the Rules as set out in O 1 r 4A and r 4B can be addressed in the exercise of the court's discretion in whether to allow an application to strike out paragraphs of a pleading that are long-standing.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
27 MARCH 2024
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