Oates v Hawkins - [2010] NSWSC 491

No judgment structure available for this case.

CITATION: Oates v Hawkins [2010] NSWSC 491

HEARING DATE(S): 31 March 2010

JUDGMENT DATE :
25 May 2010

JUDGMENT OF: Bergin CJ in Eq

DECISION: Parts of the pleading struck out.

CATCHWORDS: PLEADINGS - Application to strike out claims alleged to be the subject of findings in previous proceedings - whether plaintiff entitled to bring a claim under s 1324 of the Corporations Act - various other claims

LEGISLATION CITED: Australian Securities and Investments Commission Act 2001 (Cth)
Conveyancing Act 1919
Corporations Act 2001 (Cth)
District Court Act 1973
Uniform Civil Procedure Rules 2005

CASES CITED: Agar v Hyde (2000) 201 CLR 552
Allen v Atalay (1993) 11 ACSR 753
Bazos v Doman [2001] NSWCA 347
Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 2 ACLC 157
Brookfield Multiplex Ltd v International Litigation Funding Partners Pty Ltd (2009) 180 FCR 11
Crawley v Short (2009) 262 ALR 654
Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853
D A Christie Pty Ltd v Baker [1996] 2 VR 582
Egglishaw v Australian Crime Commission (2007) 164 FCR 224
Goldrei, Foucard & Son v Sinclair and Russian Chamber of Commerce in London [1918] 1 KB 180
Kuligowski v Metrobus (2004) 220 CLR 363
Meriton Apartments Pty Limited v Industrial Court of New South Wales [2009] NSWCA 434
Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128
Natureland Parks Pty Ltd v My-Life Corporation Pty Ltd (1996) 67 FCR 237
Oates v Consolidated Capital Services Ltd [2008] NSWSC 464
Oates v Consolidated Capital Services Ltd [2009] NSWCA 183
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Re Luck (2003) 78 ALJR 177
Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313
Tagget v Sexton [2009] NSWCA 91
Webster v Lampard (1993) 177 CLR 598

TEXTS CITED: Spencer Bower and Handley, Res Judicata, 4th edn (2009)

PARTIES: Tom Michael Oates (Plaintiff/Respondent)
Garrick Michael Hawkins (First Defendant/Applicant)
Scott Francis Tyne (Second Defendant/Applicant)
Consolidated Capital Limited UK (Third Defendant)
Credit and Commercial Finance Pty Ltd (Fourth Defendant/Applicant)
Evelyn Hawkins (Fifth Defendant/Applicant)
Gillian Tyne (Sixth Defendant/Applicant)
Sea Power Holdings Limited (Seventh Defendant)
Pegela Pty Ltd (Eight Defendant/Applicant)
Consolidated Capital Services Pty Limited (Ninth Defendant/Applicant)

FILE NUMBER(S): SC 2009/00290344 (4392/09)

COUNSEL: M Leeming SC / J Hewitt (Plaintiff / Respondent)
J Gleeson SC / J Hogan-Doran (First, Second, Fourth, Fifth, Sixth, Eighth and Ninth Defendants / Applicants)

SOLICITORS: Thompson Eslick Solicitors (Plaintiff / Respondent)
Eakin McCaffery Cox (First, Second, Fourth, Fifth, Sixth, Eighth and Ninth Defendants / Applicants)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BERGIN CJ in Eq

25 MAY 2010

2009/290344 TOM MICHAEL OATES v GARRICK MICHAEL HAWKINS & ORS

JUDGMENT

1 This is an application to strike out the plaintiff’s Further Amended Statement of Claim (the SOC). The plaintiff, Tom Michael Oates, makes claims against the defendants in respect of alleged fraudulent conduct in relation to transactions involving Matrix Group Limited (Matrix) and FSA International Inc (FSA). Matrix is a New South Wales company incorporated on 1 September 1993. It carried on business under the name Matrix Finance Group arranging and managing structured finance transactions for a fee. It went into liquidation on 8 February 2008. FSA is a company incorporated in the Cayman Islands.

2 The first defendant is Garrick Michael Hawkins (Hawkins) and his wife, Evelyn Hawkins, is the fifth defendant. The second defendant is Scott Francis Tyne (Tyne) and his mother, Gillian Tyne, is the sixth defendant. The third defendant is Consolidated Capital Limited UK (CCL UK), a company incorporated on 28 February 2001 and registered in England. It was struck off the register on 24 January 2006 and restored to the register on or about 13 September 2006. It is alleged that it carried on business in Australia at all material times prior to 24 January 2006. The fourth defendant is Credit and Commercial Finance Pty Limited (CCF), a company incorporated in New South Wales and controlled by Hawkins. The seventh defendant is Sea Power Holdings Limited (Sea Power), a company controlled and owned by Tyne. The eighth defendant is Pegela Pty Limited (Pegela), the trustee of the Pegela Trust established for the benefit of Hawkins and his family. The ninth defendant is Consolidated Capital Services Pty Limited (CCL Aus), a New South Wales company, incorporated on 12 April 2001, deregistered on 7 August 2005 and re-instated on 25 July 2007.

3 The application to strike out the SOC is made by all defendants except CCL UK and Sea Power.

The present proceedings

4 The claims in the present proceedings need to be reviewed in the light of previous proceedings brought by the plaintiff in this Court because the defendants contend that the outcome of the previous proceedings before Barrett J: Oates v Consolidated Capital Services Ltd [2008] NSWSC 464; and the Court of Appeal: Oates v Consolidated Capital Services Ltd [2009] NSWCA 183; prevents the plaintiff from making the claims in the SOC.

5 It is alleged that the plaintiff, Hawkins and Tyne were in a fiduciary relationship by reason of what is described in the SOC as “the Matrix Joint Venture” and “the CCL Joint Venture” (SOC 20, 40 and 48).

The Matrix Joint Venture

6 It is alleged that the Matrix Joint Venture was a business operated through Matrix between 1998 and 2001 by the plaintiff, Hawkins, Tyne and Brian Graham (Graham) arranging and managing structured finance transactions for a fee (SOC 18-20).

7 Matrix was the original shareholder of CCL UK prior to the transfer of its shares to CCL Aus. It is alleged that the 110 issued shares in Matrix were held as to 50% by Hawkins (1 share in his own name and 54 shares by Pajiti Pty Ltd, a company controlled by Hawkins); as to 20% by Tyne (1 share in his own name and 21 shares held by Mosft Pty Ltd, a company controlled by Tyne); as to 28.2% by Graham (1 share in his own name and 30 shares by Viridian Investments Pty Limited); and as to 1.8% by an unnamed entity controlled by Peter Cinque (SOC 15).

8 It is alleged that in 1996, prior to the establishment of the Matrix Joint Venture, the Western Australian Department of Transport awarded a mandate to Matrix to arrange and manage a leasing transaction, defined in the SOC as “the WA Car Transaction” (SOC 17). The Matrix Joint Venture is alleged to have been founded upon the basis of a personal relationship of trust and confidence between the plaintiff, Hawkins, Tyne and Graham and involved five transactions: (1) The WA Bus Transaction (a mandate awarded to Matrix in 1999 by the Western Australian Government to pursue a private funding package for the acquisition of Transperth buses; (2) the Pipeline Transaction (involving Epic Energy using a Matrix licence structure in respect of the Dampier to Bunbury Pipeline in 1999 and 2000); (3) Tom’s Transactions (being transactions developed by the plaintiff for use in Australia); (4) the Non-Pipeline Licence Transactions; and (5) the UK Transactions (which became known as the CCL Licence Products) (SOC 20 and 24).

9 It is alleged that on 12 October 1998 each of the Matrix Partners (the plaintiff, Hawkins, Tyne and Graham) agreed on their respective profit shares in respect of the transactions, the manner in which expenses were to be paid and the manner in which equity funding was to be raised. It is alleged that there was “an agreement or understanding” between the Matrix Partners that each of them would be entitled to be represented on the board of Matrix; to be involved in the making of major or strategic decisions affecting Matrix or the Matrix Joint Venture; and to share in the profits of Matrix and the Matrix Joint Venture from transactions “developed by the Matrix Partners” (SOC 22).

10 The plaintiff alleges that: (1) Hawkins and Tyne were in a position to have special knowledge about the conduct of the transactions; (2) he relied upon Hawkins and Tyne; (3) Hawkins and Tyne knew that he was relying upon them; and (4) his interests were vulnerable to actions taken by Hawkins and Tyne because: (a) Hawkins was the primary point of contact with the WA Government and its legal adviser in respect of the WA Bus Transaction; (b) Hawkins and Tyne had information about the profits earned by Matrix and the Matrix Joint Venture from the WA Bus Transaction that the plaintiff did not have; (c) Hawkins and Tyne did not provide that information to the plaintiff; and (d) Hawkins and Tyne controlled Matrix through their ownership (in their own names or through entities that they controlled) of 70% of the shares in Matrix (SOC 23).

11 Paragraph 25 of the SOC is in the following terms:

In the premises, the Matrix Joint Venture was in reality a partnership in corporate guise, that is, a “quasi-partnership”, such that Hawkins and Tyne owed to Oates the duties alleged in paragraph 48 below.

12 Paragraph 48 of the SOC alleges that at all material times from 1998 Hawkins and Tyne were in a fiduciary relationship with the plaintiff and owed the plaintiff duties in relation to the conduct of, inter alia, Matrix and the Matrix Joint Venture. Those duties are pleaded as follows:

(a) A duty to refrain from pursuing, obtaining or retaining for himself any collateral advantage in relation to the Joint Ventures without the fully-informed consent of Oates and the relevant corporate vehicle;

(b) A duty not to use their position or any information or entitlement acquired by them in the course of and for the purposes of the Joint Ventures to their own separate advantage or in a manner inconsistent with the interests of the Joint Ventures without the fully-informed consent of Oates and the relevant corporate vehicle;

(c) A duty to act with respect to the Joint Ventures in good faith and in its best interests;

(d) A duty to exercise his powers for proper purposes;

(e) A duty not to place himself into a position in which his personal interests did or might conflict with the interests of the Joint Ventures;

(f) A duty not to use for his personal benefit any business opportunity belonging to the Joint Ventures.

13 The plaintiff claims that Hawkins and Graham “purportedly” resigned as directors of Matrix on 19 June 2002, that “a fictitious person”, Scott Macleay (Macleay), was purportedly appointed as a director of Matrix, and that Hawkins and Tyne knew: (a) that Macleay was a fictitious person; and (b) that documents were to be lodged with ASIC holding out that there was a real person of that name acting as a director of Matrix (SOC 50).

14 It is alleged that there were four relevant payments by the Western Australian Government to Matrix. Two were made in respect of the WA Bus Transaction: $2,517,980 on 18 May 2001 and $6,500,000 on 4 December 2001. The other two were made in respect of the WA Car Transaction: $4,250,000 on 15 June 2001 and $4,286,248.93 on 24 August 2001 (SOC 51-54). It is alleged that Matrix therefore received income in the period May 2001 to December 2001 in the amount $17,554,113.93, referred to in the SOC as the “Matrix Receipts”. It is alleged that the cheques comprising the Matrix Receipts were endorsed in favour of FSA and that the $17,554,113.93 was deposited into an FSA ANZ account in Singapore at the direction of Hawkins and Tyne. It is alleged that the purpose of these payments was to conceal the existence of the Matrix Receipts from the plaintiff and the Australian regulatory authorities (SOC 58-64).

15 It is alleged that CCF, the fourth defendant, established a medium term note programme to raise funds to enable it to lend moneys to Pegela and on about 3 September 2002 issued notes in an aggregate principal amount of $15,000,000. It is alleged that CCF received $15,000,000 in exchange for the issue of the notes and transferred some or all of the funds to Pegela (SOC 65). It is alleged that the Matrix Receipts were the source of the funds for the notes and that in the period from July 2001 to September 2002 some of the Matrix Receipts were transferred from FSA to Mrs Hawkins in the amount of $969,670.05 on 6 July 2001 and to CCF and Pegela in the amount of $15,000,000 (via Sea Power) on 4 September 2002 (SOC 66-67). It is also alleged that from July 2001 to September 2002 some of the Matrix Receipts were transferred from FSA to Mrs Tyne in the amount of $200,000 on 10 September 2001 and to Sea Power in the amounts of $100,000 on 30 October 2001 and $15,732,988.65 on 3 September 2002, $15,000,000 of which was then transferred to CCF (SOC 68). It is also alleged that some of the Matrix Receipts were transferred from FSA to CCL UK; $2,755,738 in the period from 26 February 2002 to 31 July 2002; and $246,089 in the period 31 October 2002 and 8 April 2003 (SOC 69).

16 The plaintiff claims that Hawkins and Tyne fraudulently concealed the Matrix Receipts by making false declarations in financial reports for the years ending 30 June 2001 and 30 June 2002 and by failing to disclose the receipts in those financial reports (SOC 70-84).

17 It is alleged that Hawkins and Tyne transferred the Matrix Receipts to FSA with the intention of defrauding creditors of Matrix, including the plaintiff, and the Australian Taxation Office. It is claimed that each of the transfers to FSA are voidable pursuant to s 37A of the Conveyancing Act 1919 (NSW) (SOC 96-98). It is further alleged that Hawkins and Tyne breached their fiduciary obligations to the plaintiff by concealing the Matrix Receipts; failing to disclose to the plaintiff the profits earned by Matrix and the Matrix Joint Venture from the WA Bus Transaction; failing to account to the plaintiff for his share of the profits from that transaction; and by seeking the voluntary deregistration of Matrix without accounting to the plaintiff (SOC 99-101). There is an alternative claim that Hawkins and Tyne were in breach of their statutory obligations as directors to act in good faith, not to misappropriate company property for personal advantage and not to misuse their position for personal advantage (SOC 102). There is also a claim that Hawkins and Tyne acted dishonestly with the intention of appropriating Matrix and Matrix Joint Venture funds for their own benefit and/or the benefit of companies, entities or persons controlled by or associated with them thereby affecting the plaintiff’s interest as a creditor of Matrix (SOC 103). The plaintiff seeks an order pursuant to ss 1324(1) and (10) of the Corporations Act 2001 (Cth) to restore the Matrix Receipts and to pay damages to the plaintiff (SOC 104).

18 There is a further claim that in about January 2003 Hawkins and Tyne caused FSA to be struck off the register of companies in the Cayman Islands effective from 30 July 2003. It is also alleged that on or about 14 October 2005 Tyne filed a voluntary deregistration of Matrix in a form which stated that Matrix’s assets were worth less than $1,000. It is claimed that Tyne knew this to be false (SOC 85-90).

19 There is also a claim that on 29 June 1999 the plaintiff and Matrix entered into an agreement in relation to the plaintiff’s entitlements in relation to the WA Bus Transaction. It is alleged that it was an express term of the agreement that the plaintiff was entitled to 5% of the income received by Matrix from the WA Bus Transaction and that Matrix breached that contract by failing to pay the plaintiff that entitlement. The plaintiff obtained judgment against Matrix in the District Court of New South Wales on 1 November 2006 in the amount of $188,748.47 plus $12,000 costs in respect of that entitlement. It is alleged that the judgment debt was not paid and Matrix was placed into liquidation on 8 February 2008 on the plaintiff’s application. It is alleged that the plaintiff has still not received any payment in respect of that judgment (SOC 91-95C).

20 There is a claim of inducing a breach of contract together with a claim for exemplary damages (SOC 105-106), and claims of knowing receipt of the Matrix Receipts by CCF (SOC 107-109), Sea Power (SOC 110-112), CCL UK (SOC 113-115) and Pegela (SOC 116-118).

The Consolidated Capital Joint Venture

21 It is alleged that the Consolidated Capital Joint Venture was established after the plaintiff moved to London, at the request of Hawkins and Tyne, to explore structured finance opportunities in the United Kingdom for “a business to be conducted by the Matrix Partners and as part of the Matrix Joint Venture” (the UK business). The plaintiff alleges that as requested, he and his family moved to London on 1 November 2000 and that he carried on the UK business in London through Matrix between November 2000 and February 2001. It is further alleged that Graham decided not to be involved in the UK business and on 28 March 2001 Tony Mallin (Mallin) agreed to join the plaintiff, Hawkins and Tyne in carrying on the UK business (SOC 29-30). It is alleged that the plaintiff, Hawkins and Tyne decided to establish a new corporate vehicle to carry on the UK business and to that end CCL Aus, CCL UK and CCL Ireland were established as “the corporate vehicles to be used to arrange and participate in structured finance transactions for and with investment banks and their clients in the United Kingdom” (SOC 32).

22 CCL UK was originally a wholly owned subsidiary of Matrix but is now a wholly owned subsidiary of CCL Aus. CCL Aus is a wholly owned subsidiary of CCL Ireland (previously known as Eynbourne Limited and Consolidated Capital Resources Limited). CCL Ireland was incorporated on 7 December 1999 and was deregistered by the registrar in Ireland on 21 July 2006. Corporate Securities Limited (CSL), a share nominee service company incorporated in Ireland, held all of the 100 issued ordinary shares in CCL Ireland: as to 35 ordinary shares on trust for Hawkins’ Nominee, DHS (Hong Kong) Limited; as to 35 ordinary shares on trust for Tyne’s Nominee, Argot Limited; as to 20 ordinary shares on trust for the plaintiff; and as to 10 ordinary shares on trust for Mallin’s Nominee, his wife, Marie-Louise Mallin.

23 CCL Aust, CCL UK and CCL Ireland are referred to in the SOC as the “the Consolidated Capital Group” (SOC 2). It is alleged that during the period early 2001 to 18 August 2004 the plaintiff was responsible for the day-to-day running of the Consolidated Capital Group and developed structural finance transactions to market to investment banks and their clients. The CCL Joint Venture is defined in the SOC as the CCL Partners seeking “to derive fees from a joint involvement in transactions relating to the CCL Products and the CCL Business Opportunities” during the period from late 2000 to 18 August 2004 (SOC 40).

24 It is alleged that “the CCL Products” were developed by “officers of CCL Aus and/or CCL UK and/or CCL Ireland”, primarily by the plaintiff in his capacity as a director and employee of CCL Aus and/or CCL UK and/or the CCL Joint Venture and “with input from Hawkins and Tyne” (SOC 119-121). The CCL “Products” are defined as: (1) Licence Product – a structured leasing (licensing) product; (2) Repo Product – a repurchase agreement product; (3) Medium Term Annuity Product; and (4) Main Annuity Product (SOC 119-122).

25 The CCL “Business Opportunities” are defined as: (1) Acquiring Income Transactions; (2) Swap Novation Transactions; (3) Transactions involving the CCL Products; and (4) other substantially similar transactions. It is alleged that the plaintiff, Hawkins and Tyne developed the Business Opportunities in their capacities as officers and/or directors of CCL Aus and/or CCL UK and/or CCL Ireland and/or as partners in the CCL Joint Venture. It is also alleged that the CCL Business Opportunities were the business opportunities of CCL Aus and/or CCL UK and/or CCL Ireland and/or the partners in the CCL Joint Venture (SOC 123-129).

26 The plaintiff alleges that about the time he went to London, Hawkins and Tyne made representations to him that he “would share in the profits from transactions relating to the CCL Joint Venture” (SOC 41). It is alleged that the Consolidated Capital Group and the CCL Joint Venture were founded upon the basis of a personal relationship of trust and confidence among the plaintiff, Hawkins, Tyne and Mallin (SOC 42). It is also alleged that there was an agreement or understanding between the plaintiff, Hawkins, Tyne and Mallin that: (1) each of them would be entitled to be represented on the board of directors of the company and to be involved in the making of major or strategic decisions affecting the affairs of the Consolidated Capital Group and the CCL Joint Venture; (2) each would share in the profits of the Consolidated Capital Group and the CCL Joint Venture from transactions developed by the CCL Partners in proportion to the number of shares held on their behalf by CSL in CCL Ireland; and (3) none could sell his shares in the Consolidated Capital Group (SOC 43).

27 The plaintiff claims that: Hawkins and Tyne were in a position to have special knowledge about the conduct of the business transactions of the Consolidated Capital Group and the CCL Joint Venture; the plaintiff relied on Hawkins and Tyne (to their knowledge); and that his interests were vulnerable to their conduct because: (1) their net worth substantially exceeded that of the plaintiff; (2) without their assurances that he would share in the profits from the transactions of the CCL Joint Venture, the plaintiff would not have worked in the UK business or developed the CCL Products and the CCL Business Opportunities; (3) Hawkins was the primary point of contact with the parties that might be involved in transactions relating to the CCL Products and the CCL Business Opportunities and had information as to the value of the CCL Products and CCL Business Opportunities that the plaintiff did not have; and (4) Hawkins and Tyne controlled the Consolidated Capital Group through their 70% ownership of the shares in CCL Ireland and after 18 August 2004, when the plaintiff resigned as executive director of CCL Aus and CCL UK, he had no ability to influence the conduct of the affairs of the Consolidated Capital Group or the CCL Joint Venture (SOC 44).

28 Paragraph 45 of the SOC alleges:

In the premises, the Consolidated Capital Group and the CCL Joint Venture was in reality a partnership in corporate guise, that is, a “quasi-partnership”, such that Hawkins and Tyne owed to Oates the duties alleged in paragraph 48 below.

29 The duties alleged in paragraph 48 have been identified earlier in this judgment at [12]. There are allegations that the CCL Partners participated in meetings with Merrill Lynch UK, Deutsche Bank and HSBC, regarding the CCL Business Opportunities (SOC 130-134).

30 It is alleged that on 24 August 2004 Hawkins and Tyne executed a document, defined as the “CCL Reorganisation Deed” (the Deed), which effected various assignments. It is alleged that at the time of the execution of the Deed, Hawkins and Tyne intended to use the CCL Products and the CCL Business Opportunities in a new business to be conducted through a new corporate structure to be owned and controlled equally by Hawkins and Tyne or their respective nominees. It is alleged that Hawkins and Tyne breached their duties to the CCL Partners by the receipt of that property (SOC 142-147). It is also alleged that such conduct was in breach of s 320 of the Companies Act 1985 (UK) and in breach of duties to CCL Australia, CCL UK, CCL Ireland and the plaintiff (SOC 148-150).

31 There are a number of claims in respect of what is described as the “diversion of business opportunities of the Consolidated Capital Group”. It is alleged that CC Holdings, a wholly owned subsidiary of Sea Power (which was owned and controlled by Tyne) was incorporated on 11 October 2004 and Hawkins and Tyne were both appointed as directors. It is alleged that it received property of CCL Aus and/or CCL UK as a result of breaches of duty and breaches of trust by Hawkins and Tyne (SOC 151-156).

32 It is alleged that Hawkins and Tyne set up companies (including in the Cayman Islands and Jersey) (the other companies) for the purpose of deriving income from the CCL Business Opportunities (SOC 157-166). It is also alleged that a number of transactions occurred in December 2004 from which Hawkins and Tyne derived income through the other companies by using the CCL Business Opportunities. It is alleged that by this conduct Hawkins and Tyne have breached their duties to CCL Aus, CCL UK, CCL Ireland and the plaintiff (SOC 167-177).

33 There is a claim that in the period 18 August 2004 to 24 August 2004 Hawkins and Tyne conducted negotiations with the plaintiff to acquire his interest in the Consolidated Capital Group. It is alleged that at this time Hawkins and Tyne had knowledge of material facts and circumstances affecting the value of the plaintiff’s interest in the Consolidated Capital Group and entitlements under the CCL Joint Venture, including knowledge of the prospects that Hawkins and Tyne and their associated companies would derive income from pursuing the CCL Business Opportunities. It is alleged that by reason of those circumstances Hawkins and Tyne owed a fiduciary duty to the plaintiff to fully disclose all material facts and circumstances affecting the value of the plaintiff’s interests in the Consolidated Capital Group and that they failed to disclose those material facts in breach of their obligations to the plaintiff, CCL Australia, CCL UK and CCL Ireland (SOC 178-183).

34 There is then a section of the SOC entitled “Failure to Pursue and Attempts to Frustrate Pursuit of Causes of Action” that refers to the deregistration of CCL Aus on 7 August 2005, CCL UK on 24 January 2006 and CCL Ireland on 21 July 2006. There are claims that: the plaintiff is not “legally able to seek the reinstatement of CCL Ireland”; CCL UK was reinstated on 13 September 2006 on the plaintiff’s application; and that Hawkins and Tyne caused the other companies to be placed into voluntary liquidation (SOC 184-193). The following claims are then made:

(a) orders that ASIC reinstate the registration of CCL Australia;

(b) leave to bring proceedings under s236 of the Corporations Act on behalf of CCL Australia against Hawkins and Tyne and companies associated with them; and

(c) leave to bring an application under s236 of the Corporations Act on behalf of CCL Australia for an order granting leave to CCL Australia to bring substantive derivative proceedings on behalf of CCL UK against Hawkins and Tyne.

195. Hawkins and Tyne opposed the applications brought by Oates referred to at paragraphs 194(b) and 194(c) above.

196. On 29 June 2007, the Supreme Court of New South Wales (Justice White) made orders that ASIC reinstate the registration of CCL Australia.

197. On 15 May 2008 the Supreme Court of New South Wales (Justice Barrett) dismissed the applications brought by Oates pursuant to s236 of the Corporations Act.

198. On 11 June 2008 Oates appealed from Justice Barrett’s decision to the New South Wales Court of Appeal.

199. On 3 July 2009, the New South Wales Court of Appeal dismissed Oates’ appeal against the decision of Justice Barrett.

200. At all material times since 24 August 2004, CCL Ireland, CCL Australia and CCL UK have had a good cause of action against Hawkins and Tyne for breach of the duties referred to in paragraphs 135 to 140 above.

(a) taking steps to frustrate and prevent CCL Ireland, CCL Australia and CCL UK and Mr Oates from pursuing the causes of action referred to at paragraph 200 above;

(b) taking the steps referred to above to have CCL Ireland, CCL Australia and CCL UK deregistered;

(c) taking the steps referred to above to have each of Clova, Finglas, Arklet, Prosen and SwapCo liquidated;

(d) taking the steps referred to above to have CC Holdings and Bluejay dissolved;

(e) failing in their capacity as directors of CCL Ireland, CCL Australia and CCL UK to bring proceedings against Hawkins and Tyne in relation to the causes of action referred to a paragraph 200 above;

(f) opposing the application by Mr Oates to bring proceedings against Hawkins and Tyne in relation to the causes of action referred to at paragraph 200 above on behalf of CCL Australia and CCL UK.

Particulars

Mr Oates has suffered losses in relation to the value of his beneficial interest in shares in CCL Ireland and his interest in the Joint Ventures.

35 Finally, the plaintiff alleges that Hawkins and Tyne have breached the Corporations Act and the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) (SOC 204-208).

36 There are a number of complaints made by the defendant about the SOC including that the proceedings determined by Barrett J in 2008, and by the Court of Appeal in 2009, prevent the plaintiff from maintaining these proceedings.

Proceedings before Barrett J

37 In the proceedings before Barrett J, the plaintiff sought leave pursuant to s 237 of the Corporations Act to bring proceedings on behalf of CCL Aus against six defendants, four of whom are defendants in the present proceedings, being CCL Aus, CCL UK, Hawkins and Tyne. In the previous proceedings there were two defendants, Consolidated Capital (Holdings) Limited and Bluejay Services Limited, that are not defendants in the present proceedings. The fourth to eighth defendants in the present proceedings, CCF, Mrs Hawkins, Mrs Tyne, Sea Power and Pegela were not defendants in the previous proceedings.

38 The complaint made in the proceedings before Barrett J was that Hawkins and Tyne appropriated to themselves (or to companies they controlled) commercial advantages properly belonging to CCL Aus (referred to by Barrett J as “CCAust”) or CCL UK (referred to by Barrett J as “CCEng”). Barrett J defined the “commercial advantages” as “intellectual property” and “business opportunities” and said at [5]:

The essential allegation is that Mr Tyne and Mr Hawkins were instrumental in causing interests associated exclusively with them to occupy the advantageous commercial position that had previously been occupied by either CCAust or CCEng, thereby ousting the relevant company without any attention to its own separate interests.

39 The plaintiff’s proposed claim against Hawkins and Tyne was for breaches of directors’ duties owed to CCL Aus or CCL UK: at [10]. Barrett J said:

35 A grant of leave to Mr Oates under s 237 could do no more than put him into a position to assert for the benefit of CCAust a cause of action belonging to CCAust itself. That company does not have any cause of action arising out of any wrongful appropriation of assets or advantages belonging to CCEng. The most that CCAust conceivably has is a right to bring a derivative action for the benefit of CCEng, with CCAust as nominal plaintiff but with CCEng as a nominal defendant for which the claims for remedies are advanced. The pursuit of any such right of CCAust would not involve the bringing of proceedings “on behalf of” CCAust – rather, the proceedings would be brought “on behalf of” CCEng. This is because, if the claims made in the proceedings were upheld, nothing would accrue to CCAust and everything would accrue to CCEng.

40 Barrett J referred to the fact that he had reviewed a “quantity of contemporary documentation” and concluded that it strongly suggested that CCL UK “was acting solely for itself and in its own interests – a conclusion that could, however, be displaced by proof that it was in truth acting as agent for CCAust as its undisclosed principal”: at [57]. His Honour said:

65 The problem Mr Oates faces is that there is no evidence from which any plausible inference of the existence of the agency can be drawn. The various accounts of what it was proposed do not really form a basis for determining what was actually done. …

…

Court of Appeal proceedings

41 In the Court of Appeal, Campbell JA, with whom Spigelman CJ and Allsop P agreed, outlined the claims that were before Barrett J and referred to one “theme” in the Statement of Claim that in the period 2001 to 2004 certain “CCL Products” and “CCL Business Opportunities” were “developed by officers of CCL Australia and/or CCL UK” and that they were primarily developed by the plaintiff “in his capacity as an executive director” of those companies: [30]-[39]. It is common ground that the “Products” and “Business Opportunities” as pleaded in the Statement of Claim before Barrett J are the same Products and Business Opportunities as pleaded in the SOC.

42 Campbell JA said:

38 The Statement of Claim also contains an allegation of breach of duty owed to Mr Oates personally, that need not be further considered for present purposes.

43 The reason that the personal cause of action was not considered further was because the appeal related to the rejection of the plaintiff’s claim to bring a derivative action under s 237 of the Corporations Act, which Campbell JA noted was rejected because Barrett J was not satisfied that the plaintiff had made out a serious question to be tried: at [44]. Campbell JA held that there was no error in Barrett J’s conclusion that leave granted under s 237 could not bring about the practical result that the plaintiff could initiate, in the name of CCL Aus, a general law derivative action to assert causes of action alleged to be owed to CCL UK: [136] and [140].

44 The plaintiff, as appellant in the Court of Appeal, contended that Barrett J erred in holding that there was no foundation for a finding that it was CCL Aus that “owned” the relevant Products and Business Opportunities: [141]. Campbell JA considered “ownership” in the context of a submission that the Products and Business Opportunities were developed by the plaintiff, Hawkins and Tyne in their capacities as employees and directors of CCL Aus: [142]. Campbell JA observed that Barrett J accepted that CCL Aus would remain the employer of the three individuals and noted that there was no challenge to that finding: [153]. Campbell JA also said:

155 I note that the judge was not asked to decide that it was in their capacity as employees of CCL Australia that the three men brought the relevant products and business opportunities into existence. However, there is no need to base any decision on that. When there is no evidence about the terms on which the services of the men were provided to CCL UK, it is speculation whether those terms would have entitled CCL Australia, or CCL UK, to their work product. To the extent that inferences could be drawn from the circumstances, there is some implausibility in the arrangement having been one that would have resulted in valuable intangible rights coming to be held in the highest taxing jurisdiction (Australia). The judge was not in error in failing to conclude that there was a serious question to be tried that CCL Australia had “ ownership ” of the products and business opportunities by virtue of their having been developed by the three men in their capacity as employees of CCL Australia.

…

ownership

45 The plaintiff also submitted in the Court of Appeal that Barrett J had erred in failing to deal with the contention that even if the Products and the Business Opportunities were “owned” by CCL UK, and even if there were no agency relationship between CCL Aus and CCL UK, the assignment effected by clause 15 of the Deed of all the property of CCL Aus included, at the least, an assignment of all the shares in CCL UK. There is no question that the trial judge did not deal with that point: [183]-[184]. Campbell JA held that the issue should have been dealt with and expressed the view that one way the plaintiff could establish a serious question to be tried would be to show that the shares in CCL UK had value in CCL Aus’ hands before they were transferred: [201]-[203]. Campbell JA held that the only company that would have the benefit of the exploitation of the Products and the Business Opportunities was CCL UK and concluded that the evidence before the trial judge showed that there was a serious question to be tried that the shares in CCL UK had a value before they were transferred, and that they were transferred for less than value [204]-[206]. His Honour concluded that if the only remedy that CCL Aus could obtain was a remedy of no substantial value, it followed that it was not in the best interests of CCL Aus that the plaintiff be granted leave to pursue such an action on its behalf. His Honour said he would decline to grant leave to the plaintiff to bring proceedings on behalf of CCL Aus concerning the transfer of its shares in CCL UK.

Consideration

46 The defendants move to strike out various claims in the SOC pursuant to Rule 14.28 of the Uniform Civil Procedure Rules 2005, on the basis that parts of the pleading do not disclose any reasonable cause of action, or have a tendency to cause prejudice or embarrassment or are otherwise an abuse of process.

47 As with the power to order summary judgment the power to strike out pleadings should be approached with caution: Webster v Lampard (1993) 177 CLR 598. In Agar v Hyde (2000) 201 CLR 552 at [575]-[576], Gaudron, McHugh, Gummow and Hayne JJ said:

It is, of course, well accepted that a court whose jurisdiction is regularly invoked in respect of a local defendant (most often by service of process on that defendant within the geographic limitations of the court’s jurisdiction) should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.

48 The parties argued the application by addressing a number of “issues” identified by the defendants.

The Matrix Claims

49 The first four issues relate to the Matrix Claims.

Issue 1

50 The first issue raised by the defendants is a contention that the plaintiff should not now be permitted to bring the claims relating to the Matrix Joint Venture because the plaintiff sued Matrix to judgment in the District Court without joining Hawkins or Tyne in those proceedings.

51 The plaintiff relied upon the following passage in Spencer Bower and Handley, Res Judicata, 4th edn (2009) at [21.10], as follows:

Goldrei

52 The plaintiff submitted that the facts in Goldrei, Foucard & Son v Sinclair and Russian Chamber of Commercein London [1918] 1 KB 180 resemble the present circumstances. In that case the plaintiffs sued the defendant, Sinclair, and the company to recover damages for fraudulent representations made to them by Sinclair with the knowledge and authority of the company. The plaintiffs alleged that they were induced by the representations to subscribe funds in order to become one of the founders of the company. There was also a claim against the company for rescission of the agreement to become a founder and a return of the money paid with interest. The company failed to file a defence and default judgment was entered against the company. That judgment was not satisfied. The jury found against Sinclair in the action against him on the ground of fraudulent misrepresentation. Sinclair had pleaded that the judgment against the company estopped the plaintiff from bringing the action against him.

53 The English Court of Appeal held that the plaintiffs were entitled to recover against Sinclair because there were two causes of action, one against the company for rescission of the agreement and the repayment of the funds in respect of which fraud was not a necessary element and the other against both defendants to recover damages for fraud. The Court held that the judgment against the company on the claim for rescission was no bar to the claim against Sinclair for damages for fraud. Pickford LJ said at 186-187:

Read v Brown

Cooke v Gill

54 The plaintiff submitted that the cause of action he pursued against Matrix in the District Court is different from the cause of action he now seeks to pursue against Hawkins and Tyne. In support of this submission the plaintiff points to the following matters: (1) the parties are different; in the District Court it was the plaintiff against Matrix whereas the current action is brought against Hawkins and Tyne and others; (2) the legal basis for the claim and the factual elements necessary to prove the claim are different; in the District Court it was a claim in contract whereas the current action is an equitable claim for breach of fiduciary duty; (3) the remedies sought are different; in the District Court it was a claim for damages whereas the current action is a claim for account of profits and equitable compensation; (4) there are additional and different aspects of the matter pleaded in the present proceedings including (a) the concealing of the Matrix Receipts and causing them to be transferred to persons associated with Hawkins and Tyne leaving Matrix without a source of funds available to satisfy the plaintiffs judgment against it: (b) the failure to disclose to the plaintiff the profits earned by Matrix from the WA Bus Transaction; (c) the failure to account to the plaintiff for his share of the WA Bus Transaction; and (d) the attempts to deregister Matrix.

55 The defendants relied upon the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 to submit that the plaintiff is now precluded from proceeding against Hawkins and Tyne. In this regard the defendants have to show that the claims in the present proceedings were so relevant to the subject matter of the District Court proceedings that it would have been unreasonable not to have included those claims in the District Court proceedings: Anshun at 602; Meriton Apartments Pty Limited v Industrial Court of New South Wales [2009] NSWCA 434 at [60]; Egglishaw v Australian Crime Commission (2007) 164 FCR 224 at [24].

56 The plaintiff submitted it was not unreasonable for him to have deferred raising his personal claims against Hawkins and Tyne if the causes of action that he now brings could not have been raised in the District Court proceedings: Bazos v Doman [2001] NSWCA 347 at [38]. The plaintiff contends that the claims in relation to Matrix and the Matrix Joint Venture against Hawkins and Tyne in the present proceedings could not have been raised in the District Court because: (1) the equitable jurisdiction of the District Court is limited pursuant to s 134 of the District Court Act 1973 so that there was no jurisdiction to advance all of the equitable causes of action in the present proceedings in the District Court proceedings; (2) the amount claimed by the plaintiff exceeds the jurisdictional limit of the District Court; (3) an action under s 1324 of the Corporations Act cannot be brought in the District Court; and (4) an action under s 37A of the Conveyancing Act 1919 cannot be brought in the District Court; Tagget v Sexton [2009] NSWCA 91 at [58], [139] and [143]. Each of matters (1), (3) and (4) are good reasons why it was not unreasonable for the plaintiff not to have brought the present claims in the District Court proceedings. If the only factor had been exceeding the jurisdictional limit, the plaintiff could have sought consent to an increase in that limit from Hawkins and Tyne. However the other factors persuade me that it was not unreasonable for the plaintiff not to have brought his personal claims against Hawkins and Tyne at the time that he sued Matrix in the District Court.

57 I am not satisfied that the plaintiff is precluded from bringing his claim against Hawkins and Tyne, because he did not seek to pursue them in the District Court proceedings against Matrix.

58 The defendants also contend that the plaintiff’s claim in paragraph 25 of the SOC that the Matrix Joint Venture was “in reality a partnership in corporate guise, that is, a ‘quasi-partnership’, such that Hawkins and Tyne” owed to the plaintiff the fiduciary duties as pleaded, is bad in law and cannot be made out. There is an identical claim in respect of the CCL Joint Venture and I should deal with this aspect of both claims at the same time. Mr Leeming indicated that the wording of this part of the pleading is taken from the following passage of Young JA’s judgment in Crawley v Short (2009) 262 ALR 654 as follows:

121 There will be a variety of situations where a shareholder or director/shareholder holds a special position where he or she may owe duties to another shareholder.

59 Paragraph 25 of the pleading claims that the “Matrix Joint Venture” was a partnership in corporate guise and thus a “quasi-partnership”. One of the difficulties with this pleading is that the Matrix Joint Venture was defined as the Matrix Partners, being Hawkins, Tyne, the plaintiff and Graham, seeking to derive fees in the period 1998 to 2001 from a joint involvement in the various transactions as pleaded (SOC 20). Paragraph 19 of the SOC alleges that Matrix was the corporate vehicle used to carry on “the businesses” referred to in paragraphs 16 and 18 of the SOC. There is no clear allegation that Matrix was the corporate vehicle used to carry out the Matrix Joint Venture. If that is what is intended then the pleading needs amendment. At the moment it appears that the plaintiff is alleging that the Matrix Joint Venture was a joint venture between the Matrix Partners and Matrix and it is therefore inappropriate to plead that the partnership was in a “corporate guise”. If this is what is intended one of the partners in the Joint Venture, Matrix, was a corporation, and it may be intended to claim that Matrix was a quasi-partnership, but at the moment the pleading is embarrassing and it will be struck out with leave to replead.

60 Paragraph 45 of the SOC alleges that “the Consolidated Capital Group and the CCL Joint Venture was in reality a partnership in corporate guise, that is, a “quasi-partnership”, such that Hawkins and Tyne owed” the plaintiff the fiduciary duties as pleaded. In oral submissions Mr Leeming conceded that there was a problem with this paragraph and sought leave to amend it by removing the words “and the CCL Joint Venture”. With that amendment it is contended that the “Consolidated Capital Group (being CCL Aus, CCL UK and CCL Ireland) was in reality a partnership in corporate guise, that is a “quasi-partnership”, such that Hawkins and Tyne owed” the plaintiff the fiduciary duties as pleaded.

61 It seems to me that such an amendment, on its own, fails to acknowledge the pleading that the “CCL Partners” (being the plaintiff, Hawkins and Tyne) are alleged to have been in the CCL Joint Venture, that is, that during the period late 2000 to 18 August 2004, they “sought to derive fees from a joint involvement in transactions relating to” the CCL Products and CCL Business Opportunities as pleaded. I think that rather than simply removing the reference to the “CCL Joint Venture” in paragraph 45, the plaintiff needs to reflect on what it is that is actually being alleged in this instance.

62 Paragraphs 40 to 45 of the SOC include allegations that the Consolidated Capital Group (that is CCL Aus, CCL UK and CCL Ireland) operated in partnership with the CCL Partners (that is the plaintiff, Hawkins and Tyne) to derive the various fees. If that is the case then further amendment will need to be made because it may not be a partnership in “corporate guise” but rather a partnership between the corporate group (which may itself be a partnership in corporate guise) and the CCL Partners. If however the plaintiff now wishes to claim that it is only the Consolidated Capital Group that was a quasi-partnership, the pleading needs to be reviewed to make that claim clear. The present pleading of this claim is embarrassing and it will be struck out with leave to replead.

Issue 2

63 The next complaint made by the defendants in respect of the Matrix/Matrix Joint Venture pleadings is that the plaintiff has no standing to pursue causes of action on behalf of Matrix. The allegations upon which the defendants focus in this regard are the allegations against Hawkins and Tyne of breach of fiduciary duties owed to Matrix (SOC 100-102) and the allegations against third parties of knowing receipt of funds transferred from Matrix in breach of a fiduciary duty owed by Hawkins or Tyne to Matrix. These include claims against Hawkins and Tyne (SOC 101-102); CCF (SOC 107-109); Sea Power (SOC 110-112); CCL UK (SOC 113-115) and Pegela (SOC 116-118).

64 The defendants submitted that the liquidator of Matrix has chosen not to pursue Hawkins or Tyne or the third parties in respect of these claims and the plaintiff has not challenged that decision. It was also submitted that the plaintiff seeks to escape this reality by invoking s 1324 of the Corporations Act. That section provides that the Court may grant an injunction on the application of ASIC or on the application of “a person whose interests have been, are or would be affected by the conduct” the subject of the application for the injunction. The prerequisite to the granting of that injunction is the conduct of the person the subject of the application amounting to, inter alia, a contravention of the Act or aiding and abetting a contravention of the Act.

65 The defendants relied upon the decision in Mesenberg v Cord Industrial RecruitersPty Ltd (1996) 39 NSWLR 128 in which Young J, as his Honour then was, said at 137:

Although the Corporations Law is riddled with provisions that certain enactments are not to prevent other parts of the Law or the general principles of law and equity operating, Pt 9.4B is singularly silent on the matter as to whether s 1324 continues to operate.

66 The plaintiff submitted that the weight of authority is against the view expressed by Young J and relied in particular on the decision of the Full Court of the Federal Court of Australia in Brookfield Multiplex Ltd v International Litigation Funding Partners Pty Ltd (2009) 180 FCR 11 in which Sundberg and Dowsett JJ at [110] endorsed the following test articulated by Hampel J in Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 2 ACLC 157 at 162:

In my view the interests referred to in this subsection are interests of any person (which includes a corporation) which go beyond the mere interests of a member of the public. It is not necessary that personal rights of a proprietary nature or rights analogous thereto are or may be affected nor need it be shown that any special injury arising from a breach of the Act has occurred.

67 The plaintiff also relied upon the decision in Allen v Atalay (1993) 11 ACSR 753 in which Hayne J, after discussing the rule in Foss v Harbottle (1843) 2 Hare 461, said at 757:

Thus it may be accepted that the general rule is that it is for ZZZ Pty Ltd to bring action at the instigation of its liquidator, to complain of wrongs that are alleged to have been done to the company by its officers. But the question is whether that general rule is now subject to an exception created by s 1324 of the Corporations Law. I do not consider that that question can be answered by assuming, as the defendant’s submissions came perilously close to doing, that the rule is one of absolute generality admitting of no exception.

68 Hayne J continued:

The Broken Hill Proprietary Co Ltd v Bell Resources Ltd

Biala Pty Ltd v Mallina Holdings Ltd

69 I am not satisfied that the plaintiff is seeking to bring an action on behalf of Matrix. Rather the plaintiff is pursuing his personal claims and makes these allegations to establish the lengths to which Hawkins and Tyne went to conceal the Matrix Receipts from him, with the consequence that he was denied his share of the profits of the joint venture as allegedly agreed. I am not satisfied that the claim for relief under s 1324 of the Act should be struck out. It is true that the plaintiff seeks an order that the Matrix Receipts be “restored” to Matrix (SOC 104) and in those circumstances, the plaintiff is to review the matter and decide whether Matrix should be joined as a party and if so to discuss the matter with the liquidator and/or seek leave to proceed.

Issue 3

70 The defendants framed this issue as “whether there is available evidence” to support the plaintiff’s allegations in relation to certain aspects of the SOC. The first matter was the alleged second payment in respect of the WA Bus Transaction of $6.5 million. The second was the claim that Scott Macleay was a fictitious person and the third was the claim that the defendants’ conduct was to, inter alia, avoid detection by the Australian Taxation Office.

71 The first and second matters are matters for trial and should not be decided at this pleading stage. I regard the third matter as quite otiose, having no relationship or relevance to the claims made against the defendants. It will be struck out.

Issue 4

72 The plaintiff seeks relief pursuant to s 37A of the Conveyancing Act. It will be necessary for the plaintiff to join the alleged alienor Matrix, and to seek leave to proceed against it because it is in liquidation. The plaintiff will also need to give consideration to the joinder of FSA in this regard. Subject to that the claims will not be struck out.

73 The were a number of issues raised in respect of the CCL claims including the claim in relation to paragraph 45 with which I have already dealt under the Matrix claims.

Issue 5

74 The main complaint made by the defendants in respect of this aspect of the plaintiff’s claims relates to paragraphs 119 to 129 of the SOC in which it is claimed that the Products and the Business Opportunities were respectively the “confidential property” and the business opportunities of CCL Aus and/or CCL UK and/or CCL Ireland and/or the partners in the CCL Joint Venture. The CCL Partners are defined as the plaintiff, Hawkins and Tyne (SOC 32 and 40).

75 The defendants’ claim is characterised as an issue estoppel or an abuse of process. The plaintiff submitted that for the doctrine of issue estoppel to apply to the present proceedings the following requirements must be satisfied: (1) that the same question has been decided: (2) that the earlier decision was final; and (3) that the parties to both proceedings are the same: Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 at 935; Kuligowski v Metrobus (2004) 220 CLR 363 at [21].

76 The plaintiff submits that the issues in the present proceedings are quite different from the previous proceedings. The plaintiff tendered evidence before Barrett J to satisfy the Court that “there was a serious question to be tried”. That serious question as litigated before Barrett J was whether CCL Aus had “ownership” of the CCL Products and the CCL Business Opportunities through CCL UK acting as an agent for CCL Aus as undisclosed principal. After reviewing the evidence contained in the “quantity of contemporary documentation”, Barrett J held that the plaintiff had failed to show any arguable basis that CCL UK operated as an agent for CCL Aus and had failed to provide any foundation for a finding that it was CCL Aus, rather than CCL UK, “which ‘owned’ the commercial advantages said by him to have been wrongfully diverted by Mr Hawkins and Mr Tyne to themselves or their associated interests”: [69]. Campbell JA said that Barrett J held “that there was no serious question to be tried concerning the existence of that agency”: at [162]. The plaintiff submitted that in the previous proceedings the plaintiff sought leave to advance a case that CCL UK operated as agent for CCL Aus and there is no such claim in the present proceedings. The findings in the previous proceedings do not include or amount to a finding that CCL UK was the exclusive owner of the Products and Business Opportunities. There was no claim that there was a serious issue to be tried that the ownership was shared with CCL Ireland and/or the partners in the CCL Joint Venture (the plaintiff, Hawkins and Tyne).

77 It was submitted that even if there is an issue estoppel relevant to the CCL Business Opportunities belonging to CCL UK, it does not affect the plaintiff’s claim relevant to the breach of fiduciary duty that he alleges against Hawkins and Tyne. The plaintiff’s claim is that amongst other fiduciary duties, Hawkins and Tyne owed him a duty not to cause the CCL Business Opportunities to be moved out of the CCL Group so as to deny him the ability to participate in rewards from the Business Opportunities. It was submitted that any issue estoppel that arises from the previous proceedings cannot preclude that claim being maintained. I agree with the plaintiff’s submissions in this regard.

78 The plaintiff submitted that the leave application in the previous proceedings required Barrett J to decide, “not on a final basis”, whether CCL UK owned the Products and Business Opportunities, but whether the Court was satisfied that there was a serious question to be tried in respect of this matter pursuant to s 237(2)(d) of the Corporations Act. In support of this submission the plaintiff relied upon the following passage of what Hayne JA, as his Honour then was, said in D A Christie Pty Ltd v Baker [1996] 2 VR 582, at 599-600:

If all that the dismissal of the first application means is that the Court has concluded that on the material then advanced no order for extension should be made, it is apparent that an order dismissing the application determines no issue between the parties that is raised on the second application for on that second application the issue would be different – whether any extension of time should be made on the new and different material then before the court. If, however, the true characterisation of the order dismissing the first application is that it is a determination of whether an extension of time should be granted to the applicant within which that applicant might bring an action complaining of a cause action otherwise statute barred, it might perhaps be said that the dismissal of the application finally determined an issue which would arise in the course of the second application. Just as the classification of an order dismissing the application as final or interlocutory proceeds from the premise that a fresh application can be made, so too may the application of principles of issue estoppel be determined by the logically prior step of deciding what it is that the first court has determined – the narrow question whether an extension of time should be granted on the material then put forward, or the broader question whether any extension of time should be granted.

79 The defendants contend that the plaintiff’s submissions in this regard are erroneous and in support of that submission relied upon the following passage of Palmer J’s judgment in Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 at 318-319:

[24] It is clearly the intent of Pt 2F.1A that leave to bring a derivative action must not be given lightly. An application under s 237(2) is not interlocutory in character; the relief sought is final and the applicant bears the onus of establishing the requirements of the subsection to the court’s satisfaction.

[25] In order to ascertain whether there is a serious question to be tried for the purposes of s 237(2)(d), the court will not normally enter into the merits of the proposed derivative action to any great degree. The applicant has the same relatively low threshold to surmount as in the case of an application for an interlocutory injunction: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622; [1968] ALR 469 at 472. Thus, cross-examination on the merits of the proposed derivative action will usually be permitted only with leave of the Court and to a limited extent.

80 The plaintiff submitted that the terms “final” and “interlocutory” mean different things in different contexts. A judicial decision may be final for one purpose but not another: Res Judicata at [5.02]. At [5.13] of Res Judicata the authors state that decisions “which are temporary, provisional, or preliminary such as an interlocutory injunction” lack the necessary quality of finality for the purposes of issue estoppel. The plaintiff submitted that applications under s 236 and s 237 of the Corporations Act are “provisional” or “preliminary” in that sense. It was also submitted that Swansson was not a case dealing with issue estoppel and in answer to the defendants’ reliance on paragraph [25] of Swansson, the plaintiff relied upon the Explanatory Memorandum for the Corporate Law Economic Reform Program Bill 1998 in particular at page 23 at [6.47] as follows:

It is important in this regard that the application for leave to take proceedings is not turned into a trial of the substantive issues, without the applicant having the usual plaintiff’s right to pre trial discovery and interrogatories. The applicant is simply required to show that proceedings should be commenced. On the other hand, this criterion would prevent the proceedings being abused by further frivolous or vexatious claims.

81 It was submitted that the determination of issues without a full consideration of the merits strongly suggests that a finding in an application for leave under s 236 and s 237 is not final for the purposes of issue estoppel. The plaintiff also relied upon the following passage of Re Luck (2003) 78 ALJR 177 at [4] where McHugh ACJ, Gummow and Heydon JJ said (footnoted omitted):

Bienstein v Bienstein

82 The plaintiff also relied upon the following passage of that same judgment at [9]:

An order is an interlocutory order, therefore, when it stays or dismisses an action or refuses leave to commence or proceed with an action because the action is frivolous, vexatious, an abuse of process of the court or does not disclose a reasonable cause of action.

83 The plaintiff submitted that these passages from Re Luck provide strong support for the proposition that an order refusing leave to commence proceedings under s 236 and s 237 of the Corporations Act is interlocutory for the purposes of issue estoppel principles.

84 The plaintiff submitted that it is clear that the parties to the previous proceedings are different from the parties to the present proceedings, albeit that four of the parties to the previous proceedings are parties to the present proceedings. The plaintiff also submitted that the requirement that the issues arise between the same parties “in the same respective interests or capacities” is not met: Kuligowski v Metrobus at [40]. It was submitted that the plaintiff and CCL Aus were acting in a different capacity in the leave application compared to the present proceedings. The plaintiff was previously seeking leave to bring proceedings on behalf of CCL Aus. In the present proceedings he seeks to make claims personally against Hawkins and Tyne and certain others. It was submitted that the only possible issue estoppel relates to the finding in the proceedings that CCL UK did not operate as an agent of CCL Australia and that the plaintiff does not put his case on that basis in the present proceedings.

85 It was submitted that once it is shown that there is no issue estoppel as to the issue of the ownership of the Products and the Business Opportunities, there is no basis for striking out these paragraphs of the SOC.

86 The issues in these proceedings are different and there are different parties to the proceedings. It is not necessary to decide as a general rule whether a ruling in an application for leave under s 237 of the Corporations Act is final, other than to observe that much will depend upon the particular application. In the present case the plaintiff tendered for decision, and I am of the view for final decision, the issue whether the Products and Business Opportunities were owned by CCL Aus as undisclosed principal of its agent, CCL UK. The final decision was that CCL UK was not CCL Aus’ agent in relation to the ownership of the Products and Business Opportunities and the plaintiff cannot claim that CCL Aus owned the Products and Business Opportunities on the basis of such agency.

87 It is not clear, at this stage, on what evidentiary basis the plaintiff will claim that ownership of the Products and the Business Opportunities may be joint ownership with CCL UK or otherwise. There can be no claim inconsistently with the finding that in dealing with the Products and the Business Opportunities CCL UK was not acting as agent for CCL Aus, nor can there be any claim that CCL Aus is the owner of the Product and Business Opportunities by reason of CCL UK’s agency for it. However a claim of joint ownership may be made. There may also be a claim of ownership on the basis of CCL UK acting as agent for CCL Ireland and/or the partners to the CCL Joint Venture. That means that the plaintiff will have to give careful thought to the actual ownership claims he makes and at the very least there will need to be an amendment to remove the word “or” from some of the expressions “and/or” in paragraphs 122 and 129 of the SOC to ensure that there is no claim that is inconsistent with the findings in the previous proceedings.

88 I am satisfied that I should not accede to the defendants’ claim to strike out this aspect of the plaintiff’s SOC. However I will grant leave to amend these paragraphs to ensure that they comply with these findings.

Issue 6

89 The claims made in paragraphs 194 to 200 extracted earlier in this judgment are in my view an abuse of process. Hawkins and Tyne were successful in defending the action at first instance and on appeal. To now suggest that those defences and the conduct in maintaining those defences was a breach of Hawkins’ and Tyne’s duties to CCL Ireland, CCL Aus and CCL UK, in the light of the judgments of this Court, cannot be sustained. Those paragraphs of the pleading will be struck out.

Issue 7

90 The defendants raised the issue whether the SOC stated a proper basis on which the Corporations Act extended to Hawkins’ and Tyne’s conduct in their capacity as directors of companies incorporated in Ireland (CCL Ireland) and the United Kingdom (CCL UK).

91 There was evidence on the application that CCL UK carried on business in both London and Australia. The plaintiff contends that Hawkins’ and Tyne’s conduct in transferring the CCL assets to themselves, occurred in Australia and as those two defendants are resident in Australia there is a sufficient connection with Australia. I am not satisfied that this aspect of the plaintiff’s claim should be struck out.

Issue 8

92 I have dealt with the question of the availability of s 1324 of the Corporations Act to the plaintiff in respect of the Matrix Claims. A similar ruling applies to the CCL Claims. The fact that the company has chosen not to pursue a cause of action and the fact that leave to bring an action on behalf of CCL Aus was refused, does not mean that the section is unavailable to the plaintiff in his personal claims. The plaintiff is not seeking to bring an action on behalf of any of the corporate defendants. Rather the claim relates to the way in which the assets of the corporations were allegedly moved so as to deprive the plaintiff of his alleged agreed share of the profits of the CCL Joint Venture. However the claim is dependent on the plaintiff making the amendments in relation to the characterisation of the partnership in, inter alia, paragraph 45 of the SOC and is also subject to review as to joinder of parties and a possible application for leave to proceed.

Issue 9

93 Mr Gleeson raised an issue as to whether there can be any breach of fiduciary duty owed by Hawkins and Tyne to the plaintiff for conduct occurring after his resignation. The plaintiff claims that there was a continuing obligation to him by reason of the events prior to his resignation and the promises made to him in respect of his share of the profits of the joint venture. This claim is arguable and will not be struck out.

Issue 10

94 Mr Gleeson submitted that the claim of a “failure to disclose” certain matters to the plaintiff in connection with the proposed Deed should be struck out because there was no transaction. It was submitted that the plaintiff refused to sign the Deed and there was therefore no element of loss. The plaintiff submitted that it is inappropriate to decide these facts on a strike out application. It was submitted that there is an arguable case and a case known to law and therefore this aspect of the plaintiff’s claim should not be struck out. I agree with that submission.

Issue 11

95 The defendants submitted that in respect of the claim under the ASIC Act the plaintiff needed to obtain Ministerial consent prior to the commencement of the action. The plaintiff submitted that consistently with what was said in Natureland Parks Pty Ltd v My-Life CorporationPty Ltd (1996) 67 FCR 237, the pleading should be allowed to stand and the plaintiff should obtain Ministerial consent. It seems to me that the better course is to strike out the paragraphs dealing with the claim under the ASIC Act in respect of conduct outside Australia and if the plaintiff obtains Ministerial consent, an application to amend can be made. That claim will be struck out.

Issue 12

96 The defendants contend that the SOC does not adequately state a case in relation to financial services under s 12CA of the ASIC Act. The pleading in this regard is less than clear and Mr Leeming candidly conceded that the lack of particulars in the pleading made the claim less understandable, having regard to the very technical nature of the claim. He submitted however that this was not a basis for striking out the claim and emphasised the fact that the plaintiff had never been asked for particulars. The plaintiff is granted leave to replead paragraphs 204 to 206 to particularise the claim so it can be properly understood.

Orders

97 Paragraphs 25 and 45 of the SOC will be struck out. The plaintiff is granted leave to replead. Paragraphs 96(a) and (b) of the SOC will be struck out. Leave is granted to amend paragraphs 122 and 129 of the SOC. Paragraphs 194 to 200, 201(a), (e) and (f), the first paragraph of the particulars to paragraph 202 and the reference to paragraphs 194 and 195 in paragraph 203, will be struck out. Paragraphs 204 to 206 will be struck out. Leave is granted to replead the claims in paragraphs 204 to 206 in relation to conduct within Australia and to make an application in relation to conduct outside Australia if Ministerial consent is obtained.

98 The plaintiff is to serve an amended pleading on the defendants by no later than 10 June 2010. The matter is listed for directions on 18 June 2010 at 9.30 am. The parties are to attempt to reach agreement on a costs order. If they are unable to do so I will hear argument in due course after the plaintiff has served the amended pleading.

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Citations

Oates v Hawkins [2010] NSWSC 491

Most Recent Citation

Prencipe v Nisselle [1998] VSC 137

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CITATION:	Oates v Hawkins [2010] NSWSC 491
HEARING DATE(S):	31 March 2010
JUDGMENT DATE :	25 May 2010
JUDGMENT OF:	Bergin CJ in Eq
DECISION:	Parts of the pleading struck out.
CATCHWORDS:	PLEADINGS - Application to strike out claims alleged to be the subject of findings in previous proceedings - whether plaintiff entitled to bring a claim under s 1324 of the Corporations Act - various other claims
LEGISLATION CITED:	Australian Securities and Investments Commission Act 2001 (Cth) Conveyancing Act 1919 Corporations Act 2001 (Cth) District Court Act 1973 Uniform Civil Procedure Rules 2005
CASES CITED:	Agar v Hyde (2000) 201 CLR 552 Allen v Atalay (1993) 11 ACSR 753 Bazos v Doman [2001] NSWCA 347 Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 2 ACLC 157 Brookfield Multiplex Ltd v International Litigation Funding Partners Pty Ltd (2009) 180 FCR 11 Crawley v Short (2009) 262 ALR 654 Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 D A Christie Pty Ltd v Baker [1996] 2 VR 582 Egglishaw v Australian Crime Commission (2007) 164 FCR 224 Goldrei, Foucard & Son v Sinclair and Russian Chamber of Commerce in London [1918] 1 KB 180 Kuligowski v Metrobus (2004) 220 CLR 363 Meriton Apartments Pty Limited v Industrial Court of New South Wales [2009] NSWCA 434 Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128 Natureland Parks Pty Ltd v My-Life Corporation Pty Ltd (1996) 67 FCR 237 Oates v Consolidated Capital Services Ltd [2008] NSWSC 464 Oates v Consolidated Capital Services Ltd [2009] NSWCA 183 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Re Luck (2003) 78 ALJR 177 Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 Tagget v Sexton [2009] NSWCA 91 Webster v Lampard (1993) 177 CLR 598
TEXTS CITED:	Spencer Bower and Handley, Res Judicata, 4th edn (2009)
PARTIES:	Tom Michael Oates (Plaintiff/Respondent) Garrick Michael Hawkins (First Defendant/Applicant) Scott Francis Tyne (Second Defendant/Applicant) Consolidated Capital Limited UK (Third Defendant) Credit and Commercial Finance Pty Ltd (Fourth Defendant/Applicant) Evelyn Hawkins (Fifth Defendant/Applicant) Gillian Tyne (Sixth Defendant/Applicant) Sea Power Holdings Limited (Seventh Defendant) Pegela Pty Ltd (Eight Defendant/Applicant) Consolidated Capital Services Pty Limited (Ninth Defendant/Applicant)
FILE NUMBER(S):	SC 2009/00290344 (4392/09)
COUNSEL:	M Leeming SC / J Hewitt (Plaintiff / Respondent) J Gleeson SC / J Hogan-Doran (First, Second, Fourth, Fifth, Sixth, Eighth and Ninth Defendants / Applicants)
SOLICITORS:	Thompson Eslick Solicitors (Plaintiff / Respondent) Eakin McCaffery Cox (First, Second, Fourth, Fifth, Sixth, Eighth and Ninth Defendants / Applicants)