Moage Limited v Jagelman

[2001] NSWSC 557

Reported Decision: (2001) 38 ACSR 679

New South Wales

Supreme Court

CITATION:	Moage Limited v Jagelman & Ors [2001] NSWSC 557
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50067 of 2001
HEARING DATE(S):	25 and 28 May 2001
JUDGMENT DATE:	6 July 2001
PARTIES :	Moage Limited (In Liquidation) (Plaintiff) Joseph Grant Jagelman (First Defendant) Baseform Pty Ltd (Second Defendant) Rhetford Pty Ltd (Third Defendant) Di Darke Pty Ltd (Fourth Defendant) County Natwest Securities Australia (Fifth Defendant) FAI Traders Insurance Company Ltd (Sixth Defendant) FAI General Insurance Company Ltd (Seventh Defendant) FAI Insurances Ltd (Eighth Defendant)
JUDGMENT OF:	Bergin J

COUNSEL :	JC Kelly SC (Plaintiff) AJ Meagher SC/TGR Parker (Fifth Defendant)
SOLICITORS:	Piper Alderman (Plaintiff) Allen Allen & Hemsley (Fifth Defendant)
CATCHWORDS:	[CONSPIRACY] - Application to strike out pleading alleging conspiracy to harm plaintiff by unlawful means - Whether conspiracy alleged is identical to agreement by which prohibited acquisition of shares is achieved. [LIABILITY TO ACCOUNT] - Whether pleading alleging conspirator's liability to account for co-conspirators' benefits should be struck out. [AIDING AND ABETTING BREACHES OF COMPANIES CODE] - Whether deeming provisions have the effect of making aider and abetter liable for loss.
LEGISLATION CITED:	Companies Code Companies (Acquisition of Shares) (Victoria) Code Companies and Securities (Interpretation and Miscellaneous Provisions) (Victoria) Code Federal Courts (State Jurisdiction) Act 1999 (NSW) Foreign Takeovers Act 1975 (Cth) Trade Practices Act 1974 (Cth)
CASES CITED:	Beach Petroleum NL v Johnson & Ors (1993) 115 ALR 411 Canada Safeway Ltd v Thompson [1951] 3 DLR 295 Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd & Ors (1998) 157 ALR 135 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Law Society of NSW v Bruce (1996) 40 NSWLR 77 New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 Pancontinental Mining Ltd v Posgold Investments Pty Ltd & Ors (1994) 121 ALR 405 PMT Partners Pty Ltd (In Liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 Re Moage Ltd (In Liq); Sheahan v Pittorino & Ors (1998) 26 ACSR 726 R v Chow (1987) 11 NSWLR 561 Trade Practices Commission v Allied Mills Industries Pty Ltd (1980) 32 ALR 570 United States Surgical Corporation v Hospital Products International Pty Ltd (1982) 2 NSWLR 766 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Williams v Hursey (1959) 103 CLR 30 Re Wakim; Ex parte McNally (1999) 198 CLR 511
DECISION:	Motion to strike out pleading dismissed. Application to amend pleading allowed.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

DATE: FRIDAY 6 JULY 2001

50067/2001 - MOAGE LIMITED (IN LIQUIDATION) v JAGELMAN & ORS

Introduction

1    The main application for decision is a Motion brought by the fifth defendant, County Natwest Securities (Australia) Ltd (County) to strike out the claims made against it by the plaintiff, Moage Limited (In Liquidation) (Moage). There is also a Motion brought by Moage to amend its Pleading.

2    These applications were heard on 25 and 28 May 2001. Mr JC Kelly SC appeared for Moage and Mr AJ Meagher SC leading Mr TGR Parker appeared for County.

3    Moage commenced proceedings in the Federal Court in 1995 and a Third Amended Statement of Claim was filed on 1 December 1998 (the Pleading). County, by Motion filed in the Federal Court, sought an order that the Pleading be struck out in whole or in part as it concerned County.

4 That Motion was heard by Burchett J in March or April 1999, however his Honour’s decision had not been delivered by June 1999 when the High Court delivered its judgment in Re Wakim; Ex parte McNally (1999) 198 CLR 511. On 8 February 2001 Simos J made an order pursuant to section 11(2) of the Federal Courts (State Jurisdiction) Act 1999 (NSW) that the proceedings in the Federal Court be treated as proceedings in this Court.

5    Pursuant to further orders of this Court on 6 April 2001 Moage sought leave to file an Amended Summons in this Court in the terms of the Third Amended Statement of Claim filed in the Federal Court. County subsequently filed the strike out Motion the subject of this application.

The Pleading

6    The claims made by Moage against County in the Federal Court Pleading are made in the Amended Summons. I shall deal with the Third Amended Statement of Claim in the Federal Court as the relevant Pleading because the parties have addressed their submissions to that Pleading.

7    Moage pleads that at all material times its principal asset was 28,341,880 shares in Claremont Petroleum NL (Claremont), which represented approximately 22.4% of the issued share capital in Claremont. In 1987 and 1988 the principal activities of Claremont were exploration, development and production of petroleum and oil pipeline ownership. Claremont through its wholly owned subsidiary Midland Exploration Pty Ltd (Midland) owned 72,210,146 shares in Beach representing 65.12% of the issued capital in Beach.

8    FAI Insurances Ltd (FAI) was the beneficial owner of 19,882,846 shares in Claremont representing approximately 16.2% of the issued capital in Claremont. Lawrence James Adler (Adler) was a director of FAI and controlled the FAI Group.

9    Jagelman was a director of Moage from 11 September 1980 to 20 October 1987. He was also a director of Claremont until 20 October 1987 and Beach until 9 October 1987. It is alleged that between July and October 1987 companies in the Jagelman Group included Baseform Pty Limited (Baseform), the second defendant, Rhetford Pty Limited (Rhetford), the third defendant and Di Darke Pty Limited (Di Darke), the fourth defendant.

10    It is alleged that Jagelman acted in conjunction with certain companies in the Jagelman Group in the sale of their shares and options in Moage and in the control of the board of directors of Moage.

11    The Pleading also makes allegations in relation to the Johnson Group and one Malcolm Keith Johnson (Johnson) who it is alleged controlled a trust known as the SKA Trust (SKA), the trustee of which was Hong Kong Fidei Commissaire Ltd (HKFC), and was, with members of his immediate family, the sole beneficiary of SKA.

12    SKA and Johnson were the beneficial owners of all of the issued capital in Cawston Overseas Corporation (Cawston), a company incorporated in Panama, Coninvest Establishment (Coninvest), a company incorporated in Liechtenstein, Sunstone Investments Limited (Sunstone), a company incorporated in the Island of Nevis and Norseman Limited (Norseman) a company incorporated in the Republic of Liberia. Cawston, Coninvest, Sunstone and Norseman are collectively referred to in the Pleading as the R & B Beneficiaries. It is alleged that those companies acted in concert with each other in relation to the acquisition of shares and options in Moage.

13    Another company, Coronet Investments Ltd (Coronet) which was controlled by Coronet Australia Ltd (CAL) which held 30% of Coronet’s issued share capital, is alleged in September 1987 to have been caused by its management to act in accordance with the directions of Johnson in relation to transactions involving purchases of shares in Moage.

14    At the time it is alleged Coronet was caused to act in accordance with Johnson’s directions, its controlling company, CAL, was in the process of being taken over by Independent Resources Ltd (IRL). The two largest shareholders in IRL were Hazap Pty Ltd (Hazap) and Gloucestershire Investments Pty Ltd (Gloucestershire).

15    It is alleged that Hazap held 61.2% of IRL’s issued capital to 29 October 1987 and thereafter 39.1% and had granted a mortgage over its shares in IRL in favour of Uni-Invest Stiftung (Uni-Invest), a company owned and controlled by SKA and Johnson. It is alleged that Gloucestershire held 17.39% of IRL’s issued capital up to 29 October 1987 and thereafter 11.3% on trust for the Gloucestershire Trust.

16    It is alleged that 50% of the units in the Gloucestershire Trust and the shares in Gloucestershire were held by Pennant Pacific Resources (Pennant) which was controlled by SKA. It is alleged the other 50% of the units and shares were held by a discretionary family trust of IRL’s chairman, Michael John Fuller, on trust for SKA. Fuller was also a director of Claremont from 23 September 1987 and of Beach from 9 October 1987. It is alleged that at all material times SKA and Johnson, via Pennant and Gloucestershire effectively controlled 17.39% of IRL’s issued capital.

17    Two other relevant companies are the New South Wales incorporated Petrogulf Resources Limited (Petrogulf) and Energy Capital PLC (Energy Capital) incorporated in England. It is alleged that Petrogulf was at all material times controlled by SKA and accustomed to act in accordance with the directions and/or instructions of Johnson. It is alleged that Energy Capital was controlled by Johnson and/or SKA.

18    It is also alleged that Atlantic Capital Corporation (ACC) of which Sir Cecil Denniston Burney (Burney) was a senior executive officer, was a lender of money to the Johnson Group.

The Alleged Scheme

19    It is alleged that in July 1987 Jagelman decided to sell his interest in and control of Moage and retained John Austin (Austin) a consultant to and agent of County, to act on his behalf to sell that interest and control. It is alleged that County conducted a banking and share broking operation in Australia, London and Hong Kong and at all material times was the broker for and/or adviser to the Jagelman Group, the Johnson Group and the FAI Group.

20    It is alleged that in July 1987 Austin, on behalf of Jagelman, approached a number of people, including Johnson, to ascertain their interest in acquiring Jagelman’s interest in and control of Moage. It is alleged that in July 1987 Johnson (on his own behalf and on behalf of the Johnson Group), Austin (on County’s behalf, on behalf of the Jagelman Group, the Johnson Group and the FAI Group), Adler (on behalf of the FAI Group), Jagelman (on his own behalf and on that of the Jagelman Group), and Burney (on behalf of ACC) agreed with one or more of the others to implement a Scheme. Paragraph 97 of the Pleading claims that Scheme had the following components:

20.1. The Johnson Group would obtain control of Moage by acquiring approximately 40% of its issued share capital and approximately 42.5% of its then issued options from the Jagelman Group and its associates, the FAI Group and various institutional shareholders of Moage (par 97.1).
20.2. Jagelman would cause the shareholders or board of Moage to appoint nominees of the Johnson Group to Moage’s board and cause three of the existing members of the Moage board to resign upon the request of Johnson (par 97.2).
20.3. The FAI Group would sell its shares in Moage to the Johnson Group, and until such sale, vote in respect of those shares to support the Johnson Group (par 97.3).
20.4. By virtue of the matters pleaded in paragraphs 97.1 to 97.3 of the Pleading, the Johnson Group would obtain management, board and shareholder control of Moage (par 97.4).
20.5. The Johnson Group would obtain shareholder control of Claremont (and thereby Beach) by obtaining control of Moage’s 22.4% shareholding in Claremont and FAI’s 16.2% shareholding in Claremont (par 97.5).
20.6. Jagelman would cause the shareholders or board of Claremont to appoint nominees of the Johnson Group to Claremont’s board and Jagelman would resign as a director of Claremont upon the request of Johnson (par 97.6).
20.7. The FAI Group would sell its shares in Claremont to the Johnson Group and until such sale would vote in respect of those shares in support of the Johnson Group (par 97.7).
20.8. By virtue of the matters pleaded in paragraphs 97.5 to 97.7 of the Pleading, the Johnson Group would obtain management, board and shareholder control of Claremont and thereby Beach (par 97.8).
20.9. The fact that the Johnson Group would obtain shareholder control of Moage and Claremont by owning/controlling greater than 20% of the issued share capital of each company would be kept secret by all participants, thereby enabling the Johnson Group to circumvent the requirements of ss 11 and 12 of the Companies (Acquisition of Shares) (Victoria) Code (the CASC) to make a takeover offer for all of the issued share capital of Moage and Claremont (par 97.9).
20.10. The FAI Group would sell its interest in the Harriett Oil Field to the Johnson Group at a substantially greater price than its market value and would sell its shares in Claremont to the Johnson Group at a substantially greater price than their market value in return for the FAI Group’s participation in the Scheme (par 97.10).
20.11. The Jagelman Group would be paid a substantial premium over the market price for their shares and options in Moage in return for their participation in the Scheme (par 97.11).
20.12. County would receive substantial underwriting fees by underwriting rights issues by Moage, Claremont and Beach and in the meantime would earn brokerage and interest from the interim partial funding of the Scheme (par 97.12).
20.13. ACC would receive loan commitment fees and interest on the moneys advanced by it to fund the IRL acquisitions and acquisitions for the R & B beneficiaries (par 97.13).
20.14. Jagelman, as a director of Moage, would facilitate the implementation of the Scheme and would not disclose the Scheme to any person or persons not participating in the Scheme (par 97.14).

21    The proposed paragraph 97A is as follows:

97A When agreeing to participate in the Scheme, each of Johnson, Austin, Adler, Jagelman and Burney intended to cause harm to Moage by:
97A.1 depriving Moage of the benefits of ss 11
and 12 of CASC;
97A. 2 subjecting Moage to the control of the
Johnson Group;
97A. 3 assisting the Johnson Group to appropriate the assets of Moage, Claremont and Beach for its own use; or
97A. 4 any one or more of the above.

22    It is alleged that the Scheme comprised a conspiracy calculated to achieve control by the Johnson Group of Moage and Claremont by unlawful means (Par. 163). The conspirators are alleged to be Johnson, SKA (and its trustee HKFC), the R & B Beneficiaries, Energy Capital and Petrogulf, IRL, Jagelman, certain companies in the Jagelman Group, FAI and Adler, ACC, Burney and County (Par. 164).

23    Paragraph 165 of the Pleading alleges that the unlawful means comprised the following:

165.1. Breach of Section 11 of the CASC by virtue of the acquiring of a relevant interest by the Johnson Group of shares in Moage exceeding 20% of the issued shared capital of Moage without the Johnson Group making a takeover offer for all of the issued capital of Moage or complying with any other part of Section 12;
165.2. Breach of Section 11 of the CASC by virtue of the acquiring of a relevant interest by the Johnson Group of shares in Claremont exceeding 20% of the issued share capital of Claremont without the Johnson Group making a takeover offer for all of the issued share capital of Claremont or complying with any other part of Section 12;
165.3. Breach of the provisions of the Foreign Takeovers Act 1975 (Cth) ( the FTA Act) ;
165.4. A means to obtain an illegitimate benefit for the Scheme participants, namely, benefits procured by breaches of fiduciary and/or equitable duty by Jagelman, in which certain members of the Jagelman Group, County and the FAI Group participated,…., breaches of s 229 of the Companies (Victoria) Code ….and breaches of the Securities Industry (Victoria) Code as alleged.

24    It is alleged that in pursuance of the Scheme/conspiracy, prior to 3 August 1987 Austin negotiated with institutional shareholders of Moage, on behalf of IRL, for the purchase by IRL of their shares. It is also alleged that on 3 August 1987 County on behalf of IRL purchased for IRL 4,518,000 shares in Moage from institutional investors representing 19.99% of the issued share capital in Moage (pars. 99 and 100).

25    It is also alleged that County charged $67,770 in brokerage for that purchase and that the shares were initially registered in County’s wholly owned subsidiary’s name, Bowyang Nominees Pty Ltd (par 101).

26    It is also alleged that on 4 August 1987 County on behalf of IRL, acquired 1,235,000 options in Moage from institutional investors for which County received $18,525 brokerage. Both the acquisitions of the shares and the options were initially funded by a loan from County which was partially repaid by IRL on 25 September 1987 with loan moneys from ACC. Further repayment was made in December 1987 by Moage. This payment to County is alleged to have been recorded in Moage’s books as a loan to CAL. The final payment discharging the loan was made by IRL with funds loaned to it by CAL (pars 102 - 109).

27    Moage claims that Jagelman breached his fiduciary and/or equitable duty to Moage by his participation in the Scheme. It is also alleged that Jagelman had a duty to disclose the Scheme and the transactions implementing the Scheme to Moage and the other directors and shareholders of Moage, the NCSC and the Treasurer (par. 170).

28    Moage also alleges that Jagelman had a duty to act in Moage’s interests and to confirm that IRL and the R & B Beneficiaries were related to each other and under the control of Johnson and to attempt to prevent the acquisition of the shares in Moage by the R & B Beneficiaries (par. 171).

29    It is alleged that Jagelman failed to eschew the conflict between his personal interest and his duties to Moage. It is also alleged that Jagelman failed to act honestly and in good faith or in the interests of Moage and made use of his personal position as a director of Moage to gain advantage for himself and the Jagelman Group or to cause a detriment to Moage (par. 168). It is alleged that Jagelman and the Jagelman Group’s involvement in the Scheme/conspiracy comprised a dishonest and fraudulent design in breach of Jagelman’s fiduciary and equitable duties (par. 173A).

30    Moage alleges that by reason of his participation in the Scheme Jagelman has failed to act honestly in the discharge of his duty as a director and officer of Moage and thereby acted in breach of s 229(1) of the Companies Code and has used his position to gain directly or indirectly advantages for himself and his associates in breach of s 229(2) of the Companies Code (par. 192).

31    It is claimed that one of the purposes of the Scheme was to deliver control of the shares in Claremont held by Moage and control of Claremont to the Johnson Group without compliance with s 11 and s 12 of the CASC. It is alleged this purpose was achieved by the implementation of the Scheme without compliance of ss 11 and 12 (pars. 159 and 160).

32    It is also alleged that prior to the implementation of the Scheme Moage had the capacity to sell its Claremont shares at a price in excess of the prevailing market price of Claremont shares and that the implementation of the Scheme caused Moage to lose that capacity (pars. 161 and 162).

33    It is also alleged that by its participation in the Scheme County obtained a benefit and knowingly or alternatively dishonestly assisted Jagelman in his dishonest and fraudulent design in breach of his fiduciary duty and/or equitable duties to Moage (par. 180 and 181).

34    Moage claims that County is liable to account to it for the benefits obtained by all the Scheme participants or for the benefits County received by reason of its participation in the Scheme (par. 182). It is alleged that County aided, abetted, counselled, procured and was directly or indirectly knowingly concerned in and party to the breaches of the Companies Code by Jagelman and is deemed thereby to be correspondingly in breach of the Code (par. 199). It is further alleged that pursuant to s 229(7)(a) of the Companies Code County is liable to pay to Moage the benefits received by all the Scheme participants, or alternatively the benefits it received (par. 200). Alternatively Moage claims County is liable to pay compensation to Moage for the loss and damage it has suffered as a result of the implementation of the Scheme (par. 201).

The Particulars

35 Mansfield J’s summary of the case disclosed on the Pleading in Re Moage Ltd (In Liq); Sheahan v Pittorino & Ors (1998) 26 ACSR 726 at 729 has been adopted by Moage in its document entitled “Particulars of Intention to Harm and the evidence upon which the applicant relies” (Ex. A). That summary is as follows:

In about July 1987, Joseph Grant Jagelman through his associated entities held a substantial shareholding in Moage, sufficient to control it. It was proposed that a group of entities associated with Malcolm Keith Johnson (the Johnson Group) would acquire that shareholding so as to get control of Moage. That shareholding control carried with it a significant parcel of shares in Claremont Petroleum NL (Claremont) held by Moage, which together with another substantial shareholder in Claremont (FAI), enabled Moage and that other shareholder to control Claremont, and through Claremont’s shareholding in Beach Petroleum NL (Beach) also enable Moage and that other shareholder to control Beach. It was part of the plan that that other shareholder in Claremont would also sell its shares in Claremont to the Johnson Group, so that control of Claremont would be exercisable by the Johnson Group directly. It was then proposed that assets of Moage, Claremont and Beach would each be appropriated to Moage to recover amounts paid in the share acquisition referred to and for the purpose of the Johnson Group. The Jagelman Group would receive greater than market value for its Moage shares (and options). The other large shareholder in Claremont would recover greater than market value for its Claremont shares. The Johnson Group would get control of Moage and Claremont without complying with the Companies (Acquisition of Shares) (Vic) Code (CASC) in particular without making an offer to all Moage shareholders in the same terms as it acquired the Moage shares from Jagelman Group and without making an offer to all Claremont shareholders (including Moage) in the same terms as it acquired the Claremont shares from that other shareholder (FAI). The transaction whereby the Johnson Group got such control of Moage and Claremont, and the fact of its control, was to be kept secret.
That proposal was implemented through, and involving a number of other persons and entities, including Sir Cecil Burney on behalf of ACC. It involved ACC making various loans to facilitate share acquisitions, including the entities which operated as intermediaries ultimately of the Johnson Group, but which themselves had nominal assets only, and in the knowledge that those share acquisitions by those intermediaries were ultimately held for the Johnson Group and in the knowledge that the implementation of the proposal would breach the CASC. ACC is alleged to have made a number of loans totalling more than $28 m to support the overall proposal, and have received substantial commitment fees as well as interest on the loans.

36    Moage particularised some of the evidence upon which it intends to rely in support of the claim of intention to harm Moage. In particular paragraphs 7 and 8 (Ex A) deal with the contents of an affidavit of Burney in which conversations between Burney and Johnson in London at the relevant time are recorded. Johnson is alleged to have said:

There is an opportunity for IRL to get control of an Australian oil group, Moage, Claremont and Beach. John Austin at County Securities has put together a proposal and has told me that the Chairman of Moage, Grant Jagelman, wants to sell his shares and options. With his shares and others available from some institutions, we could get control. Would Atlantic be prepared to provide the finance to enable me to purchase the Moage shares and options?
I want to buy Moage shares and options so that the IRL Group can take control of Moage, Claremont and Beach. John (referring to Austin) has put the proposal together.
There are a large number of Moage shares available which John (referring to Austin) can arrange the purchase of. Under the Australian Code you can only buy 19.9% without needing to make a takeover bid. IRL will buy 19.9% which are coming from institutions. I will buy the balance, about 14.5%, which are being sold by Jagelman. Both IRL and I will also be buying options from the institutions and Jagelman. I will borrow the funds for the acquisition from Atlantic.
Obtaining control of Moage is beneficial to the IRL Group as a whole as Moage has a substantial interest in Claremont of 23% and Claremont has a controlling interest in Beach of 65%.
Larry Adler at FAI also has a substantial interest in Claremont of 16% and if I get control of the Moage Holding in Claremont, Adler has told me he will be friendly and I can then control Claremont. To get Adler’s cooperation, however, I have to purchase FAI’s interest in the Harriett Oil Field. In exchange, Adler won’t sell his Claremont shares to anyone else, will be on-side and will eventually let us take him out of Claremont down the track by selling the shares to the IRL Group. If I don’t buy the Harriett interests we won’t get control of Claremont.
Once control is obtained, rights issues to be underwritten by County Natwest will be made in each of Moage, Claremont and Beach to raise large sums of money and substantially more than the premium paid for the shares and options.
I will buy the Moage shares over and above the 19.99% through my private companies who will take the loans. The money will go through R & B who will buy the shares and options on behalf of the company.
Immediately after the purchase County Securities has agreed to underwrite a rights issue of $16.5m to $30 m in Moage, $62m to $74m in Claremont and $50m in Beach.

37    The particulars also refer (par 21 Ex. A) to a document which Moage intends to rely upon in which Burney records the “Moage deal” and what Austin had “offered” as follows:

Under the Australian Code a purchaser is only allowed to acquire 19.9% of a company without making a bid. The intention is for IRL to announce the acquisition of 19.9% of the shares … The remaining shares would have to be put elsewhere.
Companies (Acquisition of Shares) (Victoria) Code

38    Part II of the Companies (Acquisition of Shares) (Victoria) Code (the CASC) is entitled Control of Acquisition of Shares. Section 11 provides as follows:

SECTION 11 RESTRICTION ON ACQUISITION OF SHARES
11(1) [Acquisition of 20% shareholding] Except as provided by this Code, a person shall not, either alone or together with another person or other persons, acquire shares in a company if any person who is not entitled to any voting shares in the company or is entitled to less than the prescribed percentage of the voting shares in the company would, immediately after the acquisition, be entitled to more than the prescribed percentage of the voting shares in the company.
…….
11(7) [Prescribed percentage is 20%] A reference in this section to the prescribed percentage is a reference to 20% or, where a lesser percentage is prescribed by regulations in force for the time being for the purposes of this section, a reference to that lesser percentage.

39    Section 7(1)(a) provides:

SECTION 7 PROVISIONS RELATING TO ACQUISITION AND DISPOSAL OF, AND ENTITLEMENT TO, SHARES, AND ASSOCIATED PERSONS

7(1) [Acquisition of Shares] For the purposes of this Code, a person shall be taken to acquire shares in a company (in this sub-section referred to as the “shares concerned”) if, and only if -
(a) he acquires a relevant interest in the shares concerned as a direct or indirect result of a transaction entered into by him or on his behalf in relation to those shares…;

40    Section 8(7) provides:

SECTION 8 OTHER INTERPRETATIVE AND EVIDENTIARY PROVISIONS
8(7) [Entering into a transaction] In this Code, a reference to entering into a transaction in relation to shares includes -
(a) a reference to entering into or becoming a party to an agreement, arrangement, understanding or undertaking, whether formal or informal and whether express or implied, in relation to shares; and
(b) a reference to exercising an option to have shares allotted.

41    Section 7(3) provides:

7(3) [Entitlement to shares] For the purposes of this Code, the shares in a company (in this sub-section and sub-section (4) referred to as the “relevant company”) to which a person (in this sub-section and sub-section (4) referred to as the “person concerned”), being the relevant company or any other person, is entitled include -
(a) shares in which the person concerned has a relevant interest; and
(b) except where the person concerned is a nominee corporation in respect of which a certificate by the Commission is in force under sub-section (8) or under the provision of a law of a participating State or of a participating Territory that corresponds with that sub-section - shares in which a person who is an associate of the person concerned has a relevant interest.

42    The reference to associate in s 7(3) is further defined in s 7(4) as follows:

7(4) [Associates for purposes of sec. 7(3)(b)] A reference in paragraph (3)(b) to a person who is an associate of the person concerned shall be construed as a reference to -
(a) if the person concerned is a corporation -
(i) a director or secretary of the corporation;
(ii) a corporation (including the relevant company) that is related to the person concerned; or
(iii) a director or secretary of such a related corporation;
(b) a person (including the relevant company) with whom the person concerned has, or proposes to enter into, an agreement, arrangement, understanding or undertaking, whether formal or informal and whether express or implied -
(i) by reason of which the first-mentioned person, or the person concerned, may exercise, may directly or indirectly control the exercise of, or may substantially influence the exercise of, any voting power attached to shares in the relevant company;
(ii) with a view to controlling or influencing the composition of the board of directors, or the conduct of affairs, of the relevant company;
(iii) under which the first-mentioned person may acquire from the person concerned, or the person concerned may acquire from the first-mentioned person, shares in the relevant company; or
(iv) under which the first-mentioned person, or the person concerned, may be required to dispose of shares in the relevant company in accordance with the directions of the person concerned, or of the first-mentioned person, as the case may be;
(c) a person (including the relevant company) in concert with whom the person concerned is acting, or proposes to act, in relation to the acquisition or proposed acquisition of shares in the relevant company;
(d) a person (including the relevant company) with whom the person concerned is, or proposes to become, associated, whether formally or informally with a view to controlling or influencing the composition of the board of directors, or the conduct of affairs of the relevant company;
(e) a person (including the relevant company) with whom the person concerned is, by virtue of the regulations, to be regarded as associated in relation to the acquisition or proposed acquisition of shares in the relevant company;
(f) a person (including the relevant company) with whom the person concerned is, or proposes to become, associated, whether formally or informally, in any other way in relation to shares in the relevant company; or
(g) if the person concerned has entered into, or proposes to enter into, a transaction, or has done, or proposes to do, any other act or thing, with a view to becoming person associated with another person (including the relevant company) as mentioned in paragraph (b), (c), (d), (e) or (f) - that other person.

43    Section 9 provides:

SECTION 9 RELEVANT INTEREST IN SHARES
9(1) [Relevant interest] Subject to this section, a person has a relevant interest in a share in a corporation for the purposes of this Code if that person has power -
(a) where the share is a voting share - to exercise, or to control the exercise of, the right to vote attached to that share; or
(b) to dispose of, or to exercise control over the disposal of, that share whether or not it is a voting share.
9(2) [Extent of power immaterial] It is immaterial for the purposes of this section whether the power of a person -
(a) to exercise, or to control the exercise of, the right to vote attached to a voting share; or
(b) to dispose of, or to exercise control over the disposal of, a share,
is expressed or implied or formal or informal, is exercisable alone or jointly with another person or other persons, cannot be related to a particular share, or is, or is capable of being made, subject to restraint or restriction, and any such power exercisable by a person jointly with another person or other persons shall, for those purposes, be deemed to be exercisable by either or any of those persons.
9(3) [Power or control] A reference in this section to power or control includes a reference to power or control that is direct or indirect or is, or is capable of being, exercised as a result of, or by means of, or in breach of, or by revocation of, trusts, agreements, arrangements, understandings and practices, or any of them, whether or not they are enforceable, and a reference in this section to a controlling interest includes a reference to such an interest as gives control.
9(4) [Equal power with body corporate over a share] Without limiting the generality of sub-sections (1), (2) and (3), where a body corporate has, or is by virtue of this section to be deemed to have, power -
(a) to exercise, or to control the exercise of, the right to vote attached to a voting share; or
(b) to dispose of, or to exercise control over the disposal of, a share, and -
(c) the body corporate is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of a person in relation to the exercise of the power; or
(d) a person has a controlling interest in the body corporate,
that person shall, for the purpose of this section, be deemed to have the same power in relation to that share as the body corporate has or is to be deemed to have.
9(5) [Deemed equal power] Where a body corporate has, or is by virtue of this section (other than this sub-section) to be deemed to have, power -
(a) to exercise, or to control the exercise of, the right to vote attached to a voting share; or
(b) to dispose of, or to exercise control over the disposal of, a share,
a person (in this sub-section referred to as the “relevant person”) shall, for the purposes of this section, be deemed to have the same power in relation to that share as the body corporate has, or is to be deemed to have, if -
(c) the relevant person has;
(d) a person associated with the relevant person has;
(e) persons associated with the relevant person together have; or
(f) the relevant person and a person or persons associated with the relevant person together have;
the power to exercise, or to control the exercise of, the voting power attached to not less than the prescribed percentage of the voting shares in the body corporate.
9(6) [Deemed relevant interest] Where a person -
(a) has entered into an agreement with respect to an issued share;
(b) has a right relating to an issued share, whether the right is enforceable presently or in the future and whether on the fulfilment of a conditions or not; or
(c) has an option with respect to an issued share,
and, on performance of the agreement, enforcement of the right or exercise of the option, as the case may be, that person would have a relevant interest in the share, he shall, for the purposes of this section, be deemed to have that relevant interest in the share.
9(7) [Person deemed to have relevant interest where body corporate is deemed by sub-section (6) to have interest] For the purposes of this section, where a body corporate is to be deemed, by virtue of sub-section (6), to have a relevant interest in a share in a corporation and -
(a) the body corporate is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of a person in relation to the exercise of, or the control of the exercise of, the right to vote attached to shares in the corporation, or in relation to the disposal of, or the exercise of control over the disposal of, shares in the corporation;
(b) a person has a controlling interest in the body corporate; or
(c) a person has power to exercise, or to control the exercise of, the voting power attached to not less than the prescribed percentage of the voting shares in the body corporate,
that person shall be deemed to have a relevant interest in that share.
…
9(11) [Prescribed percentage] A reference in this section to the prescribed percentage is a reference to 20% or, where a lesser percentage is prescribed by regulations in force for the time being for the purposes of section 11, a reference to that lesser percentage.

44 Section 45 provides:

45(1) [Contravention of sec. 11] Where a person has acquired shares in a company in contravention of section 11, the Court may, on the application of the Commission, the company, a member of the company or the person from whom the shares were acquired, make such order or orders as it thinks fit, including, but without limiting the generality of the foregoing, one or more of the following orders:
(a) an order restraining the person who acquired the shares from disposing of, or of any interest in, the shares or such of the shares as are specified in the order;
(b) an order restraining the exercise of any voting or other rights attached to the shares or such of the shares as are specified in the order;
(c) an order directing the company not to make payment, or to defer making payment, of any sum or sums due from the company in respect of the shares or such of the shares as are specified in the order;
(d) an order directing the disposal of, or of any interest in, the shares or such of the shares as are specified in the order;
(da) an order vesting in the Commission -
(i) the shares, or such of the shares as are specified in the order; or
(ii) any interest in the shares, or in such of the shares as are specified in the order;
(e) an order directing the company not to register the transfer or transmission of the shares or such of the shares as are specified in the order;
(f) an order that any exercise of the voting or other rights attached to the shares, or such of the shares as are specified in the order, be disregarded;
(fa) an order cancelling a contract, arrangement or offer for or in connection with the acquisition of the shares, or of such of the shares as are specified in the order;
(fb) an order declaring a contract, arrangement or offer for or in connection with the acquisition of the shares, or of such of the shares as are specified in the order, to be voidable;
(g) for the purpose of securing compliance with any order referred to in any of the preceding paragraphs, an order directing the company or any other person to do or refrain from doing a specified act.
45(2) [Prima facie evidence of association] Where, at the hearing of an application under sub-section (1), it is proved to the satisfaction of the Court that -
(a) a person is entitled to shares in a company by reason that another person who is, by virtue of sub-section 7(4), an associate of the first-mentioned person has a relevant interest in those shares; and

(b) that other person became entitled to that relevant interest by reason of an acquisition of shares (whether in that company or in another corporation) that took place within 6 months immediately preceding the filing of the application with the Court,
then, in determining for the purposes of the application whether the acquisition referred to in paragraph (b) of this sub-section was made in contravention of section 11, the proof to the satisfaction of the Court of the matters mentioned in paragraphs (a) and (b) of this sub-section constitutes prima facie evidence that the other person was, for the purposes of sub-section 7(3), an associate of the first-mentioned person immediately after the acquisition took place.

45    The CASC prohibits the acquisition of more than 20% of the voting shares in a company (s 11). Acquisition occurs if and only if a relevant interest is acquired in shares as a direct or indirect result of a transaction entered into “in relation to those shares” (ss. 7 & 9). Entry into a transaction by which such shares are acquired includes entering into or becoming a party to a formal or informal, express or implied, agreement, arrangement, understanding or undertaking, “in relation to shares” (s 8(7)). A person who contravenes or fails to comply with the provisions of the CASC is guilty of an offence (s. 53(1)).

46 The term “in relation to shares” is not defined in the CASC or in the Companies and Securities (Interpretation and Miscellaneous Provisions) (Victoria) Code (the Interpretation Code). The term “in relation to” is prima facie a broad one and is designed to include things which have a sufficient nexus to each other. The sufficiency of the nexus is determined by the statutory context of the term. It is a question of degree, however there must be an association between the agreement and the shares that is relevant or appropriate. It is not a remote or merely incidental or coincidental association: PMT Partners Pty Ltd (in Liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301; Law Society of NSW v Bruce (1996) 40 NSWLR 77 at 84.

47    I am of the view that an agreement “in relation to shares” in the context of the CASC must have an integral or fundamental connection to shares. The fact that there may also be matters other than shares which are the subject of the agreement may not mean that the classification of the agreement falls outside the term “in relation to shares”. It will require an analysis of the agreement and the degree to which the connection with shares is present.

48    The Interpretation Code provides that a person who aids, abets, counsels or procures or is knowingly concerned in the commission of an offence against any relevant Code is deemed to have committed that offence which is punishable accordingly (s. 38(1)).

Foreign Takeovers Act 1975 (Cth)

49    The Foreign Takeovers Act 1975 (Cth) (the FTA) prohibits a person or corporation not resident in Australia from acquiring a greater than 15% interest in an Australian company without the approval of the Commonwealth Treasurer following a review by the Foreign Investment Review Board (FIRB).

50    Part II of the FTA is entitled Control of Takeover and Like Transactions. Section 18 of the FTA empowers the Treasurer to make an order prohibiting a proposed acquisition if the Treasurer is satisfied, in the case of a corporation not controlled for foreign persons, that the corporation would be controlled by foreign persons. Section 18(4) empowers the Treasurer to make an order directing a person who acquired the shares to dispose of the shares within a specified time to any person approved in writing by the Treasurer.

51    Section 26 deals with compulsory notification of transactions and s 26(2) provides:

(2) Where a person to whom this section applies -
(a) Enters into a agreement by virtue of which he acquires a substantial shareholding in an Australian corporation (other than an non-trading company) and did not, before entering into the agreement, furnish to the Treasurer a notice stating his intention to enter into that agreement;
…
the person is guilty of an offence and is punishable on conviction by a fine not exceeding $50,000.

52    Section 26(6) provides:

(6) In this section, a reference to an agreement by virtue of which a person acquires a substantial shareholding in a corporation is a reference to an agreement by virtue of which the person acquires any interests in any shares in the corporation where -
(a) he already holds a substantial interest in the corporation; or
(b) upon the acquisition by him of those interests, or of those interests and of any interests in other shares in the corporation, being interests that he has offered to acquire, he would hold a substantial interest in the corporation.

53    Section 5 of the Interpretation includes the following:

(1) In this Act, unless the contrary intention appears -
“acquisition” includes an agreement to acquire…
“agreement” means any agreement, whether formal or informal and whether express or implied, other than a money lending agreement.

54    For the purposes of the Act a person is taken to hold a substantial interest in the corporation if the person “alone or together with any associate or any associates of the person, is in a position to control not less than 15% of the voting power in the corporation or holds interest in not less than 15% of the issued shares in the corporation” (s 9(1)(a)). Section 11 provides relevantly as follows:

11(1) Subject to this section, a person holds an interest in a share if he has any legal or equitable interest in that share.
(2) Without limiting the generality of sub-section (1), where a person -
…
(b) has a right, otherwise than by reason of having an interest under a trust, to have a share transferred to himself or to his order, whether the right is exercisable presently or in the future and whether on the fulfilment of a condition or not;
(c) has the right to acquire a share, or an interest in a share, under an option, whether the right is exercisable presently or in the future and whether on the fulfilment of a condition or not;
…
that person shall be deemed to hold an interest in that share.
…
(4) It is immaterial, for the purposes of determining whether a person holds an interest in a share, that the interest cannot be related to a particular share.

55    Proceedings for an offence against the Act are unable to be instituted without the consent in writing of the Treasurer (s 33). The Court has powers to enforce the Treasurer’s orders made under Part II of the Act (s. 35).

County’s Application to Strike Out Pleading

56    County seeks an order striking out the Pleading of the Scheme/conspiracy so far as it concerns County or alternatively an order striking out specific paragraphs of the Pleading. The first group of paragraphs (pars 180, 182, 227, 228, 236, 243, 244 & 245) relate to County’s alleged knowing participation in the alleged breaches of fiduciary duty and the extent of its liability to account to Moage (knowing participation). The second group of paragraphs (pars 199 to 201, 238, 239, 240, 251 & 252) relate to the allegations that County aided and abetted breaches of s 229 of the Companies Code (aiding & abetting).

Conspiracy

57    County claims that the tort of conspiracy relied upon by Moage is an agreement or combination to commit an unlawful act. Although in his original outline of submissions Mr Meagher SC submitted that Moage had failed to plead the essential element of the intention to injure Moage, the amendment sought in paragraph 97A above, responds to such a claim. The Motion has been argued on the basis that the amendment is included in the Pleading. It is submitted that the Pleading of that intention in 97A is in any event defective, and should not be permitted.

58 County submitted, and Moage agreed, that the unlawful act must be itself and independently of any element of combination a criminal or civil wrong: Williams v Hursey (1959) 103 CLR 30. It was submitted that where the alleged conspiratorial agreement is itself unlawful and the relevant statute provides specific civil remedies for harm caused by that conduct, a tortious claim cannot be made that there was a conspiracy to commit that unlawful act: Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd & Ors (1998) 157 ALR 135 at 149 - 153; Pancontinental Mining Ltd v Posgold Investments Pty Ltd & Ors (1994) 121 ALR 405 at 410 - 411.

59 In Pancontinental Mining Ltd v Posgold Investments Pty Ltd the applicant had pleaded that the “arrangement or understanding” entered into by the respondents to buy certain shares was unlawful by virtue of the provisions of ss 34, 51 and 615 of the Corporations Law.

60 Section 615 prohibited a person from acquiring the prescribed percentage of shares in a company in certain circumstances. Section 51(1)(a) provided that a person was to be regarded as acquiring shares if and only if the person acquired “a relevant interest” in the shares. Section 31 provided that a person had a “relevant interest” if the person had the power to vote or dispose of a share.

61    The pleading in that case alleged that the respondents conspired to do the unlawful act which was the “arrangement or understanding” entered into by the respondents to buy the shares. An alternative allegation was made that the respondents conspired to do the unlawful act with the intention of injuring the applicant. A further alternative allegation was pleaded that the respondents conspired to do a lawful act by unlawful means with the intention of injuring the applicant.

62    The attack in Pancontinental, as in this case, was that the pleading was bad because it was impermissible to allege a conspiracy to do an unlawful act when the only agreement relied on was itself alleged to be the unlawful act.

63 Beaumont J relied upon the reasoning of Sheppard J in Trade Practices Commission v Allied Mills Industries Pty Ltd (1980) 32 ALR 570. In that case Sheppard J struck out parts of a pleading in which allegations were made firstly of arrangements or understandings for parallel pricing contrary to s 45 of the Trade Practices Act 1974 (Cth) and secondly conspiracies to breach the Act. Beaumont J cited Sheppard J’s judgment at p 410-411 including the following:

Thus the conspiracies relied upon are also the arrangements or understandings in the other paragraphs of the statement of claim…I am satisfied that it is not appropriate to charge, as an alternative to charging arrangements or understandings made unlawful by s 45, conspiracies which are themselves such arrangements or understandings...When that is done (reading the pleadings subject to the particulars) it becomes clear that the conspiracies on the one hand and the arrangements and understandings on the other are identical.

64 Beaumont J also cited the decision of the Court of Criminal Appeal (Slattery CJ at CL, Lee and Brownie JJ) in R v Chow (1987) 11 NSWLR 561. That was an appeal from a prosecution for a drug offence. The Court held that since the definition of “supply” in the Poisons legislation included the substantive offence of agreeing to supply it was not permissible to charge a conspiracy to supply arising out of an agreement to sell. The Court said at 570:

This is the substantive offence created by the definition of “supply” in the Poisons Act, and the agreement to sell or supply, being a substantive offence cannot also be the agreement which brings into existence the conspiracy. It would be absurd to say that the charge means that there was an agreement between the appellant and Lee that the appellant would agree to sell or supply the heroin to Lee.

65    Beaumont J struck out the paragraphs pleading that the respondents had conspired to do the unlawful act and the alternative pleading that the respondents had conspired to do the unlawful act with the intention of injuring the applicant. His Honour expressed the view that such pleading did “no more than plead an agreement to do an unlawful act in the form of a contravention of the law” (at 416).

66    Beaumont J refused to strike out the pleading that the respondent had conspired to do a lawful act by unlawful means with the intention of injuring the applicant. His Honour said that in his view such a pleading was in a different position as it did not allege that the act in question was itself unlawful.

67 Beazley J in New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 at 382 referred to Sheppard J’s approach in Allied Mills as “expounding a rule of practice” and not a “substantial rule”. Beaumont J, said in Pancontinental at 413:

In my opinion, the general statements of principle made in Allied Mills are well established by authority and should be followed. It is true, however that in Allied Mills itself, as well as in Korp (Korp v The Egg and Egg Pulp Marketing Boards (1964) VR 563) and in Chow , the application of the general rule depended, in the end, upon an analysis of the pleadings in the light of the proper interpretation of the applicable legislation.

68    In Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd & Ors Drummond J referred at 149 to the “two forms” of the tort of conspiracy as referred to in The Laws of Australia as:

1. An agreement or combination between two or more persons to commit a lawful act with the predominant purpose of injuring or damaging the plaintiff, and the act is carried out and the purpose achieved; or
2. An agreement or combination between two or more persons to commit an unlawful act with the intention to injure the plaintiff and the act is carried out and the intention achieved.

69    Drummond J analysed Beaumont J’s judgment in Pancontinental and the cases therein referred to and said at 152:

It is, in my opinion, wrong to think that these authorities govern when it is permissible to plead a civil conspiracy case. As Korp recognises, as a general rule a conspiracy to commit an offence can be charged as a separate offence. But where a statute makes conduct not previously in breach of the criminal law an offence, and that same conduct is, without more, capable of supporting a criminal conspiracy charge, the statute creating the new offence will be read as making the prosecution provided for by it the sole remedy for the new offence. A prosecution for conspiracy to commit such an offence is not, I think, open because the antecedent lawfulness of the conduct provides a reason for reading the statute, which now makes that same conduct unlawful, as providing the only action that can be taken in respect of that conduct. This approach to how the statute should be read would, I think, have to give way to a contrary intent. But I think that the principle, as one of statutory construction, is not confined to criminal statutes. The principle is equally applicable to statutes which proscribe certain conduct not previously unlawful and provides specific civil remedies for harm caused by such conduct.

His Honour concluded at 152:
The applicant cannot therefore sue on a common law conspiratorial agreement of the second kind in respect of an agreement only unlawful because it is an arrangement that contravenes s 45(2).

70    In this case County alleges Moage cannot sue on the pleaded conspiracy, which it claims is of the second kind, because it is an agreement only unlawful because it is an agreement or arrangement that contravenes s 11 of the CASC.

71    Mr Kelly SC submitted that this is not a case in which there is alleged a tort which involves an unlawful agreement, arrangement or understanding and a conspiracy to harm the plaintiff by the same means. He was making submissions upon the apprehension that the term “transaction” was not defined in the CASC. He submitted:

“ Transaction ” is not defined but it is not to be read as though it was synonymous with the meeting of minds that is required to constitute a conspiracy...Indeed the fallacy in the reasoning of County is exposed once it is appreciated that the element of agreement necessary to found the tort of conspiracy was complete when the elements of the Scheme were agreed. It does not require a “ transaction ” to have taken place, let alone the transaction which took the Johnson Group over the 20% without an offer having been made to the general body of shareholders.
(pars 3(j) and (m) 28.5.2001 subs)

72    Mr Kelly submitted that the agreement or conspiracy to effect an unlawful takeover and the share transactions which effect that result are separate acts. It was submitted that as separate acts they do not fall foul of the analysis made by Sheppard J in Allied Mills as they are not identical.

73    Section 11 of the CASC is contravened if a person acquires more than 20% of the issued shares in a company if and only if such acquisition is a direct or indirect result of a transaction entered into by or on behalf of that person. What is prohibited is the acquisition. The manner of the acquisition may differ. The prohibition is on the acquisition achieved alone or in concert with others.

74    Section 8(7) of the Code deals with a “reference to entering into a transaction”. Section 7(1)(a) refers to a “transaction entered into” by a person. Although there is no definition of the latter term I am of the view that the meaning attributed to the former term “entering into a transaction” is applicable to the latter term in s 7(1)(a) “transaction entered into”.

75    If that is right then a transaction entered into by a person includes entering into or becoming a party to an agreement in relation to shares as defined in s 8(7). One question that arises is whether the Scheme pleaded is identical to an agreement “in relation to shares”, the transaction, by which shares are acquired in breach of s 11 of the Code.

76    The conspiracy pleaded in paragraphs 97, 97A and 163 to 167A of the Pleading refers specifically to the acquisition of 40% of the shares in Moage by the Johnson group. It also refers specifically to the sale of the Moage shares to the Johnson group by the FAI group and thereby the control of Claremont and Beach.

77    The pleaded conspiracy also includes arrangements in relation to actions to be taken by Jagelman to cause shareholders or the Board of Moage to appoint nominees of the Johnson Group to Moage’s Board. It also details steps by Jagelman to cause three of the existing members of the Moage Board to resign upon the request of Johnson.

78    Other elements to the conspiracy include steps that the FAI Group would take including voting to support the Johnson Group. Other features to the agreement were that Jagelman would take steps to cause the shareholders or Board of Claremont to appoint nominees of the Johnson Group to Claremont’s Board. Additionally that Jagelman would resign as a director upon the request of Johnson.

79    A further important feature of the conspiracy is the element of secrecy. It is alleged that all alleged co-conspirators agreed to keep the Johnson Group’s acquisition secret “thereby” enabling it to avoid making a takeover offer.

80    It may be that the breadth of the conspiracy pleaded, read with the particulars supplied, might be viewed as taking it beyond an agreement “in relation to shares” although prima facie that would seem to me to be improbable.

81    If it can be said that the conspiracy as pleaded is, as Sheppard J said, “identical” to the transaction, that is, the agreement, arrangements and understandings “in relation to shares”, by which acquisition of more than 20% of shares is achieved as prohibited by the CASC then the conspiracy count against County might fail. However it must be kept in mind that the “unlawful means” include the matters alleged in par 165.4 of the Pleading.

82 There may also be some force in the distinction that Mr Kelly has made between the acquisition per se being the breach and the manner in which the acquisition is achieved i.e. as a direct or indirect result of an agreement/ transaction. This is to be viewed in the light of the fact that the Court only has powers under s 45 when acquisition of shares in contravention of s 11 has occurred.

83    The main focus of County’s attack on this part of the pleading was upon s 11 of the CASC. However it was also submitted that the making of the agreement constituted a relevant breach of the provisions of the FTA because there was a breach of s 26(2) by a foreign person or entity. It is submitted that such breach occurred by the entry into an agreement by which that person or entity acquired an interest in more than 15% of the shares in Moage.

84    However the offence under s 26(2) of the FTA is committed when there is a failure to furnish to the Treasurer a notice stating an intention to enter into the agreement rather than the entry into the agreement.

85 The fact that the matter is intricate, on its own, does not prevent the intervention of the Court at this interlocutory stage: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 per Dixon J at 91. However in this instance, to reach the conclusion that the conspiracy is co-extensive with the conduct constituting a breach of s 11 of the CASC or s 26(2) of the FTA involves mixed questions of fact and law which in my opinion should be decided at trial after detailed findings of fact are able to be made: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.

86    I am not satisfied that it is a matter that should be decided on an application of this kind, particularly having regard to the respectable differing views as to whether the “rule” is one of “practice” or a “substantial rule”. A discretionary matter which weighs in Moage’s favour in reaching this conclusion is the fact that the application was not made until the pleadings were closed, discovery had taken place and Moage’s evidence was filed.

87 County also submitted that the proposed par 97A was bad in that the alleged deprivation of the benefits of the CASC is illusory. It was submitted that the CASC did not confer any benefits on Moage, as distinct from its shareholders. Mr Kelly submitted that any analysis of s 45(1), extracted above, establishes that the CASC does confer benefits on a target company. Under that section a company has an opportunity to make application to restrain the implementation of an unlawful takeover, or reverse such a takeover, thereby protecting itself and its assets against control which has been unlawfully obtained, or which is in the process of being unlawfully pursued. I agree with these submissions.

88    County submitted that as the CASC provides remedies for the unlawful act, the breach of s 11, no other remedies may be pursued: Council for the City of the Gold Coast v Pioneer Concrete (Qld) Pty Ltd at 151 -152. Mr Kelly submitted that unlike the legislation before the Federal Court, the legislative schemes contained in CASC and the FTA do not purport to deal with the circumstances in which a party who has suffered loss and damage by reason of a contravention of the CASC or the FTA may obtain compensation for that loss. They empower the Court to make a wide range of orders to restrain or reverse the happening of an unlawful takeover or to enforce the Treasurer’s orders and it is submitted they do not purport to provide an injured party with a civil remedy for loss and damage.

89 Mr Kelly SC further submitted that it would be odd to attribute to the legislature an intention to deny an injured party a remedy for conspiracy where all that needed to be done to frustrate and avoid an effective exercise of the power of the Court under s 45 of the CASC is to add a veil of secrecy for a sufficient time for the contravening parties to take advantage of the unlawful takeover. It was submitted that the express omission in the legislative scheme of any provision for damages indicates a legislative intention to leave such matters to general common law remedies. I agree with these submissions.

Knowing participation in breach of fiduciary duty - liability to account

90    County seeks an order striking out Moage’s claims that County is liable to account for benefits obtained by all Scheme participants. County submitted that on no basis could County be held so liable and the relevant portions of the Statement of Claim should therefore be struck out.

91 Mr Kelly submitted that this is one of several issues of principle which are alive and unresolved in the arena of accessory liability. He also submitted that there is authority to support the proposition that accessory liability does include an obligation to account for the profits made not only by an accessory but also by co-conspirators. In support of this submission he relied upon McLelland J’s judgment in United States Surgical Corporation v Hospital Products International Pty Ltd (1982) 2 NSWLR 766 in which his Honour said at 817C:

In my opinion the principle to be derived from those authorities is that a person who knowingly participates in a breach of fiduciary duty by another may be both (i) liable to account to the beneficiary for any benefit he has received as a result of such participation and (ii) jointly liable with the fiduciary in respect of any pecuniary liability of the fiduciary to the beneficiary as a result of the breach.

92 Additionally Mr Kelly relied upon the statement made by Manson J in Canada Safeway Ltd v Thompson [1951] 3 DLR 295 in which his Honour held that a director, Raley, was liable for breach of fiduciary duty to a company, and that the three defendants were liable for actively participating in Raley’s breach. At 323 Manson J said:

The defendants must account to the plaintiff not only for the profits which they made, that is, for the difference between that which they received for their Empress shares in 1939 and that which they paid for them in 1936, but additionally, for the profits made by their co-conspirator Raley.

93    Mr Meagher SC submitted that the case is distinguishable from the facts in this case. Mr Raley was a director of a company, a position quite different from that in which the case against County is pleaded. In those circumstances he submitted that the reference to Mr Raley as a co-conspirator is not controversial at all.

94 Mr Kelly SC submitted that the question squarely arises and that the evidence at trial will either give rise to the threshold question for the Court to determine or not. I intend to exercise the exceptional caution referred to by the High Court in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 in respect of this matter. I am of the view that I should not prevent Moage from raising such issue and that it should be decided at trial.

95    An additional complaint was raised in relation to the introductory words to par 181 “Further or in the alternative” and par 183 “By reason of County’s participation in the Scheme”. It is submitted that the words are superfluous in relation to the allegations against County of knowing participation in the alleged breaches of fiduciary duty.

96    During argument Moage advised it did not intend to press the words in par 181 the subject of complaint. In response to the complaint in relation to par 183 it was submitted that the alleged breaches by Jagelman of his fiduciary and equitable duties by his participation in the Scheme are pleaded in par 172. The steps taken by County in furtherance of the Scheme are pleaded in par 104 and 105. The benefit it is alleged to have received are pleaded in par 156.

97    It is submitted that the use of the words “by reason of County’s participation in the Scheme” is a convenient and unambiguous way to plead the alleged accessory liability against County. It is also submitted that no embarrassment is caused by such pleading which is evidenced by County’s defence having been filed in response to the pleading.

98    Although it is not a compendious term it seems to me that the intention of the pleader is consistent with the submissions put by Mr Kelly SC and the matters pleaded in pars. 172, 104, 105 and 156 are to be understood as the basis for the term “by reason of County’s participation in the Scheme”. In those circumstances I do not intend to strike these words out of the pleading.

Aiding and abetting breaches of s 229 of the Companies Code

99    Section 229(7) of the Companies Code provides that where “a person contravenes or fails to comply with a provision of this section in relation to a corporation” the corporation may, whether or not the person has been convicted of an offence in relation to that contravention or failure to comply, recover from the person either any profit made as a result of the contravention or failure or any loss or damage suffered by the corporation as a result of the contravention or failure.

100    Subsections 229(1) to (4) impose obligations upon officers or employees of a corporation. “Officer” is defined in sub s 229(5). It is submitted that absent any other provision, the only persons who can contravene or fail to comply with any of the provisions of sub ss 229(1) to 229(4) are either officers or employees of the corporation. County does not answer that description and is not alleged to answer that description.

101    Section 570(1) provides that a person who contravenes or fails to comply with a provision of the Code is guilty of an offence by virtue of that subsection. The relevant penalty applicable to that offence is set out at the foot of each of subsections 229(1) to 229(4). Section 38(1) of the Interpretation Code deems a person who has aided, abetted, counselled or procured the commission of an offence against the Code to have committed that offence and is liable to be punished accordingly.

102    It is submitted that s 38(1) does not state the effect which the provisions of the Code would have apart from that section. It is submitted that it creates a “statutory fiction” in the sense that the offence is deemed to have been committed by a person who aids and abets notwithstanding that that person is not a person to whom any of the subsections 229(1) to 229(4) apply.

103    It is submitted that critically for the present purposes s 38(1) does not deem a person who has aided and abetted to have contravened or failed to comply with any relevant provision of the Code, either generally or specifically for the purposes of s 229(7).

104    It is submitted that as County has not contravened or failed to comply with any of the provisions of subsections 229(1) to (4) and is not deemed for the purposes of s 229(7) to have done so, the condition precedent to the entitlement to recover profits or damages under s 229(7) is not satisfied.

105    It is therefore submitted that the pleading should be struck out because s 38 does not deem County to be in breach of any of the provisions of s 229. Additionally it is submitted that the Pleading 199 is bad in form as it does not comply with Part 15 rule 7 of the Rules. It is submitted that it pleads a rolled up conclusion and does not indicate what underlying material facts are relied upon to support the allegation that County aided or abetted or counselled or procured or was directly or indirectly knowingly concerned in or party to any of the alleged breaches of duty by Jagelman.

106    As to this last matter of non-compliance with Part 15 Rule 7 it is submitted that the underlying material facts upon which Moage relies have been pleaded in paragraph 93 to 98 inclusive, 104 and 105 and 156. On the understanding that such paragraphs are understood to be the basis of the claim made in par 199 I do not intend to strike it out.

107 As to the first mentioned complaint Mr Kelly submitted that what s 38(1) does is to create a statutory fiction in the sense that an offence is deemed to have been committed. The question that arises is whether that deemed effect then has the consequence of triggering a civil liability under s 229(7). In this regard Mr Kelly relied upon von Doussa J’s judgment in Beach Petroleum NL v Johnson & Ors (1993) 115 ALR 411. In that case his Honour said at 591:

I consider that s 38 of the...Code, by providing that a person who is knowingly concerned in the commission of an offence against any relevant Code shall be deemed to have committed that offence, has the effect that under s 229(7) of the former Code the parties who were knowingly concerned in the contravention become persons who contravene or fail to comply with the provisions of the sections, and become liable to pay the corporation compensation equal to the loss or damage suffered.

108    In the light of that authority it seems to me that the application to strike out this portion of the Statement of Claim must fail.

109    County’s Notice of Motion is dismissed. Having regard to the matters to which I have already referred in relation to par 97A which was the only paragraph challenged in the amendments sought by Moage, Moage’s Motion to amend its pleading is allowed. An amended Summons should be filed within 14 days and I will hear the parties on costs should they not be able to agree on a costs order.

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Last Modified: 07/09/2001