Mio Art Pty Ltd v Macequest Pty Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:  Mio Art Pty Ltd v Macequest Pty Ltd & Ors [2013] QSC 211
PARTIES:  MIO ART PTY LTD
ACN 101 121 875
(plaintiff)
v
MACEQUEST PTY LTD
CAN 101 563 649
(first defendant)
BMD HOLDINGS PTY LTD

ACN 010 093 348 (second defendant)

MANGO BOULEVARD PTY LTD
ACN 101 544 601
(third defendant)
URBEX PTY LTD

ACN 102 865 823 (fourth defendant)

BMD PROPERTIES PTY LTD
ACN 091 902 475
(fifth defendant)
MANGO HILL (PRIME) PTY LTD
ACN 110 696 565
(sixth defendant)
MANGO HILL (MEZZANINE) PTY LTD
ACN110697 400
(seventh defendant)
TASOVAC PTY LTD as Trustee of the Security Trust
ACN 108 013 467
(ninth defendant)
KENNETH ROWLAND BIRD
(tenth defendant)
GARY WILLIAM INGRAM
(eleventh defendant)
JAMES VARITIMOS
(twelfth defendant)
WAYNE ROBERT REX
(thirteenth defendant)
RUSSELL JOHN THOMSON
(fourteenth defendant)
DAVID JOHN DUNCAN
(fifteenth defendant)
ANDREW MARCOS
(sixteenth defendant)
SCOTT WILLIAM POWER
(seventeenth defendant)
MICHAEL CHRISTOPHER POWER
(eighteenth defendant)
KINSELLA HEIGHTS DEVELOPMENTS PTY LTD
ACN 100 484 299
(twentieth defendant)
FILE NO/S:  BS 4352 of 2012
DIVISION:  Trial
PROCEEDING:  Application
DELIVERED ON:  19 August 2013
DELIVERED AT:  Brisbane
HEARING DATE:  30, 31 January, and 16 & 17 April 2013
JUDGE:  Jackson J
ORDER:  The order of the court is that:

On the plaintiff‟s application to amend the claim in

4352 of 2012:

1.          the application is dismissed.

2.          the applicant pay the respondents‟ costs of the

application.

On the plaintiff‟s application for leave to bring the

proceeding on behalf of KHD under s 237 of the Corporations Act 2001 (Cth) in 11109 of 2012 and 4352 of 2012:

3.          the application is dismissed in both 11109 of 2012 and 4352 of 2012.

4.          the applicant pay the respondents‟ costs of the

application.

5.          proceeding 11109 of 2012 is stayed.

On the first to seventh, tenth, eleventh and fourteenth

to eighteenth defendants‟ application to strike out the

statement of claim and to dismiss the proceeding in
4352 of 2012:

6.          the statement of claim is struck out.

7.          the respondent pay the applicants‟ costs of the

application on the indemnity basis.

On the ninth defendant‟s application to strike out the

statement of claim and to dismiss the proceeding in
4352 of 2012:

8.          the statement of claim is struck out.

9.          the respondent pay the applicant‟s costs of the

application on the indemnity basis.

On the twelfth defendant‟s application to strike out the

statement of claim and to dismiss the proceeding in
4352 of 2012:

10.        the statement of claim is struck out.

11.        the respondent pay the applicant‟s costs of the

application on the indemnity basis.

On the thirteenth defendant‟s application to strike out

the statement of claim and to dismiss the proceeding in
4352 of 2012:

12.        the statement of claim is struck out.

13.        the respondent pay the applicant‟s costs of the

application on the indemnity basis.

In 4352 of 2012:

14.        the plaintiff file and serve a further statement of claim on or before 30 September 2013.

And the court direct…

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Details
Case
[2013] QSC 211
Decision Date

CaseChat Overview and Summary

Mio Art Pty Ltd brought proceedings against Macequest Pty Ltd and others in the Supreme Court of Queensland, seeking various reliefs related to a land development project at Mango Hill. The plaintiff's Statement of Claim (3FASOC) adopted a narrative style and included claims under the Corporations Act 2001 (Cth), alleging a fraudulent scheme by the defendants involving the project. Mio also sought leave to bring the proceedings on behalf of the company under s 237 of the Corporations Act and applied to amend its claim. The defendants cross-applied to strike out Mio's statement of claim and dismiss the proceeding.

The central legal issues in the case were whether Mio's statement of claim sufficiently pleaded material facts for the separate causes of action, and whether it sufficiently alleged a fraudulent scheme. The court had to determine if the narrative style of the statement of claim adequately set out the necessary facts for the claims and if it properly pleaded the fraudulent scheme. Additionally, the court considered whether Mio was entitled to bring the proceeding on behalf of the company and if the amendment to the claim was appropriate.

The court found that while the narrative style of the statement of claim was conventional, it did not adequately plead the material facts required for the separate causes of action. The court held that the statement of claim did not sufficiently allege a fraudulent scheme, and therefore, Mio's claims failed. The court also dismissed Mio's application for leave to bring the proceeding on behalf of the company and its application to amend the claim. Consequently, the court struck out the statement of claim and dismissed the proceeding. However, the court granted Mio leave to file and serve a further statement of claim by a specified date.

The final orders of the court were that Mio's application to amend the claim was dismissed, and Mio was ordered to pay the respondents' costs. Mio's application for leave to bring the proceeding on behalf of the company was also dismissed in both proceedings, and one of the proceedings was stayed. The defendants' applications to strike out the statement of claim and dismiss the proceeding were granted, with the statement of claim being struck out, and the respondents ordered to pay the applicants' costs on an indemnity basis. Mio was directed to file and serve a further statement of claim by a specified date, and the parties were directed to provide submissions regarding costs by a certain time.

Orders

Orders of the court

The order of the court is that:

On the plaintiff‟s application to amend the claim in

4352 of 2012:

1. the application is dismissed.

2. the applicant pay the respondents‟ costs of the

application.

On the plaintiff‟s application for leave to bring the

proceeding on behalf of KHD under s 237 of the Corporations Act 2001 (Cth) in 11109 of 2012 and 4352 of 2012:

3. the application is dismissed in both 11109 of 2012 and 4352 of 2012.

4. the applicant pay the respondents‟ costs of the

application.

5. proceeding 11109 of 2012 is stayed.

On the first to seventh, tenth, eleventh and fourteenth

to eighteenth defendants‟ application to strike out the

statement of claim and to dismiss the proceeding in

4352 of 2012:

6. the statement of claim is struck out.

7. the respondent pay the applicants‟ costs of the

application on the indemnity basis.

On the ninth defendant‟s application to strike out the

statement of claim and to dismiss the proceeding in

4352 of 2012:

8. the statement of claim is struck out.

9. the respondent pay the applicant‟s costs of the

application on the indemnity basis.

On the twelfth defendant‟s application to strike out the

statement of claim and to dismiss the proceeding in

4352 of 2012:

10. the statement of claim is struck out.

11. the respondent pay the applicant‟s costs of the

application on the indemnity basis.

On the thirteenth defendant‟s application to strike out

the statement of claim and to dismiss the proceeding in

4352 of 2012:

12. the statement of claim is struck out.

13. the respondent pay the applicant‟s costs of the

application on the indemnity basis.

In 4352 of 2012:

14. the plaintiff file and serve a further statement of claim on or before 30 September 2013.

And the court direct that:

15. Parties provide submissions as to cost by 4pm, 21 August 2013.

Background

Background to the litigation

Before diving into the substance, it will help if some background is set out. Background The subject matter of the main proceeding is a land development project at Mango Hill, north of Brisbane on land owned by KHD. There are two shareholding factions in KHD. Mio is in one camp and claims to be entitled to be registered as a At the highest level, the project was for the development of the land by subdivision and sale. The original shareholders of KHD were two individuals, Richard Spencer and Silvana Perovich. Mango became a shareholder as part of a complex corporate joint venture restructuring involving companies associated with Michael Power, Scott Power and Denise Power (“the Powers”). KHD and Mango became joint venturers to carry out the project. The corporate BMD defendants are companies 2 There are other companies associated with the Powers among the BMD defendants which were not referred to in the original suite of project documents. Their involvement in 4352 of 2012 stems from the financing facilities that were subsequently entered into by KHD and Mango, ostensibly to further the project. Using loose language for brevity, the Powers may be seen to be the principals of the corporate BMD defendants. The other individual defendants were at different times officers of the relevant corporate identities, appointed by or representing the BMD interests. They include two current directors of KHD, the twelfth defendant (“Mr Varitimos”) and the thirteenth defendant (“Mr Rex”), who are separately represented It is convenient to extract a more detailed description of the initial project arrangements from the 3FASOC in paragraphs [17] to [49]: “Share Sale Agreement (“SSA”) 17. As at 4 July 2003 the Former Trustee (Spencer) was the registered owner of 50 ordinary shares in KHD. 18. As at 4 July 2003 Perovich was the registered owner of 50 ordinary shares in KHD. 19. On or about 4 July 2003, the Former Trustee (Spencer), Perovich, and Mango and KHD entered into an agreement known as the “Share Sale Agreement” (“SSA”) pursuant to which: From these allegations, the 3FASOC proceeds to the detail of the acquisition of the land by KHD and arrangements made for financing in August and September 2004. It is convenient to leave off the detail at this point. Various details will be raised later. These reasons will be lengthy. To limit the excess, in some places I have used abbreviations from the 3FASOC without full explanation. Hopefully, that will not detract too much from the reader‟s comprehension. Up to this point in the narrative, it is not alleged that any of the defendants has breached a legal obligation owed to the original shareholders or KHD. Yet, already the paragraphs extracted above show enough to identify one of the principal difficulties confronting the parties in the hearing of the applications. A narrative pleading The style of the 3FASOC is described by Mio as “narrative” and “wholly conventional”. Thus (with a few exceptions, including paragraph [254]) paragraphs [1] to [260] allege factual matters, mostly in a chronological order, beginning with the constitution of relevant parties and ending with an allegation of a notice given by Mango to the directors of KHD on 4 February 2013.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In my view, Mio should have the opportunity in 4325 of 2012 to file a statement of claim that complies with the requirements of the UCPR. Because the subject of 11109 of 2012 is now taken up in 4352 of 2012, there is no justification for Mio to vex the defendants in that proceeding with duplication of the same allegations or subject matter. Proceeding 11109 of 2012 should be stayed, for the present, as an abuse of process. Conclusion For those reasons, I propose to order that: On Mio‟s application to amend the claim in 4352 of 2012:

Ratio Decidendi

Legal Principle Established

As particulars of the involvement of Mango and the other defendants in the contraventions by the directors, Mio relies upon paragraphs [1] to [258]. These causes of action suffer from the narrative defect. Registration of Mio as a member Although Mio alleges that it is a shareholder and member of KHD in paragraphs [1(b)] and [289] of the 3FASOC, Mio does not allege (or appear to contend) that its name is entered in the register of members of KHD. As previously discussed, the evidence is that it is not. Paragraph 1 of the claims for relief is for an order under s 82 of the Trusts Act vesting the Spencer Family Trust Shares in Mio. Paragraph [290] alleges an entitlement to such an order, if Mio is not a person to whom a share in KHD has been transmitted by operation of law. As to s 82 of the Trusts Act, a change or retirement of a trustee is a basis for a court 34 A vesting order is an order that is usually sought against the retiring trustee and any beneficiaries concerned. KHD is only interested in who is entitled to be registered as a member. An order against it may not be appropriate. That may be illustrated by the fact that Mr Vicca is a director of KHD. Any order that Mio‟s name be The BMD defendants submit that relief could not be granted for the same reasons that they contend that Mio does not have standing for a grant of leave under s 237 of the Corporations Act. I do not agree. They are different questions. If Mio has been appointed trustee of the Spencer Family Trust, it may be entitled to relief by way of vesting order, irrespective of whether it is presently entitled to be registered as a member under s 236(1)(a)(i) of the Corporations Act. Andco Nominees Pty Ltd v 35 Lestato Pty Ltd illustrates the width of the Court‟s power under s 82. It is not appropriate to make a final determination of whether the discretion should be exercised in the course of the application by the BMD defendants to strike out the 3FASOC. Paragraph 2 of the claims for relief in the 3FASOC is for an order under s 1071F of the Corporations Act requiring the twelfth and thirteenth defendants to register the transmission of the Spencer Family Trust Shares in the books and records of KHD. The claim appears to be brought against Mr Varitimos and Mr Rex as directors of 36 Although the order claimed in paragraph 2 of the claims refers to “books and records” that is imprecise. As previously noted, a company must keep a register of 37 The power in s 1071F is intended to enable the court to correct the register of members or to enforce a person‟s right to become a member. In this case, the correction or enforcement which may be required would be that Mio be entered as a member as transferee of the Spencer Family Trust‟s shares held by Richard Spencer. The proper defendants to such an application may include the directors as the “relevant authority” but an order is made against the company.[40] [40] It may be possible to obtain an order to rectify the register of members of a company under s 233 of the Corporations Act. Paragraph [290] appears in a section of the 3FASOC which is headed “Oppression”, but s 233 is not the apparent basis on which order 2 is sought.