Moss v Cave - [2009] SASC 189

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
MOSS v CAVE
[2009] SASC 189
Judgment of The Honourable Justice Gray
2 July 2009
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - GENERALLY
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PARTIES - JOINDER OF PARTIES
Appeal from decision of Master dismissing application for leave to file and serve amended statement of claim and application for joinder of defendant - application from defendants and respondents to have statement of claim struck out for failing to disclose cause of action - whether statement of claim disclosed cause of action.
Held: appeal allowed - strike out application dismissed - order of Master set aside - statement of claim disclosed cause of action - plaintiff and appellant to have leave to file and serve amended statement of claim in form provided to Court - leave granted to join defendant.
Corporations Act 2001 (Cth) s 232, s 233, s 249T and s 1234, referred to.

MOSS v CAVE
[2009] SASC 189
Civil
GRAY J.

This is an appeal from the decision of a Master dismissing an application for leave to file and serve an amended statement of claim and an application for joinder of a defendant. The plaintiff and appellant, Dennis Wayne Moss, also appeals against the Master’s costs order.
Counsel for the plaintiff argued that the purposes of the proposed amendments to the statement of claim were twofold - to join as a defendant, a company, Frontier Holdings Pty Ltd and to address an earlier order requiring the plaintiff to provide further particulars.
On 9 June 2009 I ordered that the plaintiff was to have leave to add Frontier Holdings Pty Ltd as a defendant, and leave to file and serve an amended statement of claim in the form provided to the Court. I now publish my reasons for that decision.
The defendants and respondents, Peter Cave and Maxine Cave, raised objections to the statement of claim, and sought an order that the proceeding be struck out. Counsel for the defendants contended that the proceedings were frivolous, vexatious, repetitious or otherwise an abuse of process. Counsel further argued that the statement of claim of the plaintiff did not disclose a cause of action.
On the hearing of the appeal, counsel for the defendants conceded that if the statement of claim did disclose a cause of action, their application to strike out the proceedings would fail, and it would be appropriate for the company to be joined as a party. The strike out and joinder/amendment applications were heard concurrently.
Master’s Decision
According to the plaintiff, Frontier Holdings Pty Ltd was the trustee of a trust and carried on the business of a finance broker under the registered business names “Frontier Finance” and “Frontier Home Loans”. The plaintiff alleged that he reached an agreement with the first defendant relating to the acquisition of the business and Frontier Holdings Pty Ltd. The agreement included contributions of $100,00.00 by the plaintiff and $125,000.00 by the first defendant to provide the consideration for the purchase, an amount of $225,000.00. The plaintiff and the first defendant acquired the shares in Frontier Holdings Pty Ltd and the company continued to operate the finance broking business. The plaintiff and the first defendant were each a director of Frontier Holdings Pty Ltd.
The plaintiff alleges that the first defendant initially caused the two issued shares to be transferred into his own name, with none transferred into the name of the plaintiff. When the plaintiff became aware of the state of the shareholding, the position was remedied and further shares were issued so that the first defendant held 55% of the issued shares and the plaintiff held 45%. The parties were to have the benefit of the income stream in these proportions through Frontier Holdings Pty Ltd.
The plaintiff alleges that in October 2003, after the breakdown of the relationship between the first defendant and the plaintiff, the first defendant called a general meeting of the members of Frontier Holdings Pty Ltd. In the absence of the plaintiff, the first defendant purported to give a proxy to the second defendant in respect of a proportion of his shares, in order to achieve a quorum at the meeting as required by section 249T of the Corporations Act 2001 (Cth). The first and second defendants passed a resolution removing the plaintiff as a director and appointing the second defendant as a director. The plaintiff complains that as a consequence, he has been excluded from management and information pertaining to the affairs of the company. The plaintiff retains his 45% shareholding.
The plaintiff alleges that since October 2003, the first and second defendants have conducted the affairs of Frontier Holdings Pty Ltd so as to benefit the first and second defendants to the exclusion of the plaintiff. Several specific allegations are outlined in the proposed amended statement of claim. These include allegations that the first defendant failed to have an agreement prepared documenting the acquisition of the shares of Frontier Holdings Pty Ltd and the transfer of the business from Frontier Finance Trust to Frontier Holdings Pty Ltd beneficially and that the first defendant caused the two issued shares in Frontier Holdings Pty Ltd to be transferred to the first defendant and failed to keep adequate records of the transactions. Further specific allegations include that the first defendant has paid himself a car allowance and director’s fees without the plaintiff’s agreement and has managed the day to day affairs of Frontier Holdings Pty Ltd to the exclusion of the plaintiff. The original statement of claim contained similar factual allegations, although these were not as detailed as the allegations set out in the amended statement of claim.
The primary submission of the plaintiff was that his exclusion from Frontier Holdings Pty Ltd and the management of the company in the manner alleged, constituted oppression of a minority shareholder contrary to sections 232 and 233 of the Corporations Act. The plaintiff alleges that both defendants engaged in the oppression. It was also said that they breached statutory duties owed to the plaintiff. The plaintiff alleges that the agreement between the plaintiff and first defendant gave rise to a quasi-partnership, and as a consequence, the first defendant owed the plaintiff a fiduciary duty in their business activities. The plaintiff contended that the actions of the first defendant, in addition to breaching the statutory duties arising pursuant to section 1234 of the Corporations Act, breached the fiduciary duty owed.
The factual background in relation to Frontier Holdings Pty Ltd is set out in the plaintiff’s amended statement of claim. The Master noted that of particular importance to both the plaintiff’s application for joinder and the defendants’ opposition to the proposed amendment, were the pleas in paragraph 4. It is convenient to set out this paragraph in full, along with several other consequential paragraphs:
4. In December 2000, the plaintiff and the first defendant orally agreed that (“the December 2000 agreement”):
4.1     They would acquire the said businesses.
4.2     The said businesses would be owned by them in the proportions of 55% owned by the first defendant, or interest associated with him, and 45% owned by the plaintiff, or interests associated with him.
4.3     They would acquire the company to conduct the businesses.
4.4     The plaintiff would contribute $100,000 in respect of the acquisition.
4.5     The first defendant would contribute $125,000 in respect of the acquisition.
4.6     The first defendant would make all the necessary arrangements to effect the acquisition.
4.7     The plaintiff and the first defendant would each be directors of the company.
4.8     The shares in the company would be owned by them in the proportions of 55% owned by the first defendant, or interest associated with him, and 45% owned by the plaintiff, or interests associated with him.
4.9     The plaintiff and the defendant would receive in the same proportion as their shareholding the benefit of the company’s commissions income stream after payment of ordinary business expenses.
5.The December 2000 agreement gave rise to a quasi-partnership between the plaintiff and the first defendant.
6.At all material times to this claim the first defendant owed the plaintiff a duty as fiduciary to act with the utmost good faith in relation to his dealings with the plaintiff (“the fiduciary duty”).
7.the first defendant breached the fiduciary duty by reason of the facts alleged in paragraphs 8,12 and 15 to 23 below.
8.At the time of the acquisition of the company in January 2001 [the first defendant]:
8.1     Failed to cause to be prepared an agreement documenting:
8.1.1The acquisition of shares in the company by the plaintiff and defendant form the vendor [of] those shares.
8.1.2The transfer of the business from the Frontier Finance Trust to the company beneficially.
8.2     Caused the two issued shares in the company to be transferred to the first defendant.
8.3     Failed to cause the provision of $100,000 by the plaintiff and $125,000 by the defendant, or interests associated with the defendant, pursuant to the December 2000 agreement to be recorded in the books and records of the company as loans to the company or at all.
On appeal, it was submitted that the Master misapprehended the thrust of the proposed statement of claim, and as a consequence, did not address the primary cause of action - oppression of a minority shareholder – and did not address the causes of action of breach of statutory duty and breach of fiduciary duty. The Master focused his attention on paragraph 4 as set out above and addressed what appeared to him to be a claim in contract for breach of the agreement referred to in paragraph 4. On appeal it was pointed out that paragraph 4, although referring to an agreement between the parties, was only setting up the background of factual assertions relevant to the causes of action sought to be advanced. The plaintiff, as may be observed from the prayers for relief, was not seeking to pursue a claim for a breach of the agreement.
Counsel for the defendants accepted that the Master had not addressed the causes of action sought to be advanced. However, it was argued that further particularity was required with respect to the oral agreement referred to in paragraph 4. It was also complained that other aspects of the proposed claim were inadequate. In the course of the appeal, counsel for the plaintiff attended to the provision of further particulars.
In these circumstances, it is unnecessary to discuss further the reasons of the Master. The appeal is by way of rehearing, and it is evident, as observed above, that the Master misunderstood the purpose of paragraph 4 and the thrust of the plaintiff’s claim. The statement of claim, as now particularised, advances well recognised causes of action.
In these circumstances, the appeal is allowed and the order of the Master is set aside. The plaintiff is to have leave to file and serve an amended statement of claim in the form provided to the Court and as signed and dated by me as approved.