Re Annesley Plant Hire Pty Ltd (No 2)
[2014] VSC 350
•28 July 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
No 01633 of 2012
| IN THE MATTER OF ANNESLEY PLANT HIRE PTY LTD (ACN 006 702 601) | |
| BETWEEN: | |
| ANNESLEY PLANT HIRE PTY LTD (ACN 006 702 601) and PAUL ANNESLEY | First Plaintiff Second Plaintiff |
| v | |
| WILLIAM WILSON PETER WILSON WILSANDS PTY LTD (ACN 104 974 772) LINE IN THE SAND PTY LTD (ACN 133 913 587) and P J WILSON PROPERTIES PTY LTD | First Defendant Second Defendant Third Defendant Fourth Defendant Fifth Defendant |
| AND BETWEEN: | |
| WILLIAM WILSON PETER WILSON and BARRY MOSHEL | First Plaintiff by Counterclaim Second Plaintiff by Counterclaim Third Plaintiff by Counterclaim |
| v | |
| PAUL ANNESLEY | First Defendant by Counterclaim |
| PIONEER ROAD HOLDINGS PTY LTD (ACN 139 147 523)(IN LIQUIDATION) | Second Defendant by Counterclaim |
| FLEURIE PTY LTD (ACN 060 643 156) | Third Defendant by Counterclaim |
and | |
| REGISTRAR OF TITLES | Fifth Defendant by Counterclaim |
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JUDGE: | ROBSON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15 and 16 April 2014 |
DATE OF JUDGMENT: | 28 July 2014 |
CASE MAY BE CITED AS: | Re Annesley Plant Hire Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2014] VSC 350 |
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PRACTICE AND PROCEDURE – Application for leave to file a second amended counter claim – Whether pleading discloses a reasonable cause of action – Whether sufficient particulars provided of alleged knowledge of defendants – Application to add further defendants to counterclaim – Applications granted - Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 13.10(3)(b).
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APPEARANCES: | Counsel | Solicitors |
| For the second plaintiff and first defendant by counterclaim | Mr MS Osborne QC and Mr KR Hickie | Koroneos Lawyers |
| For the third and fourth defendants by counterclaim For first to fifth defendants | Mr A Schlicht Mr AP Rodbard-Bean | Simon Nixon & Associates MCP Commercial Lawyers |
Cases referred to:
Alexander v Perpetual Trustees WA Ltd (2003) 216 CLR 109
ASIC v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305
Broken Hill Proprietary Co Ltd v Bell Resources Ltd (1984) 8 ACLR 609
Freehouse Pty Ltd v Middletons, Moore & Bevins [2001] VSC 156
Hayim v Citibank [1987] 1 AC 730
HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633
McCracken v Phoenix Constructions (Qld) Pty Ltd [2013] 2 Qd R 27
Montclare v Metlife Insurance Limited (2009) 29 VR 20
Ramage v Waclaw (1988) 12 NSWLR 84
Re Annesley Plant Hire Pty Ltd [2014] VSC 56
Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 1613
Re Summit Resources (Aust) Pty Ltd (2012) 88 ACSR 60
Ristevski v Kyriacou & Zard Constructions Pty Ltd & Law Institute of Victoria (Unreported, Supreme Court of Victoria, Harper J, 5 August 1997)
Spelling Goldberg Productions Inc v BPC Publishing Ltd [1981] RPC 283
TABLE OF CONTENTS
Introduction............................................................................................................................... 1
The proposed further amended defence and counterclaim........................................................ 12
The alleged series of facts.......................................................................................................... 13
Summary of land transactions.................................................................................................. 23
Relevant principles on no reasonable cause of action disclosed................................................. 25
Annesley parties’ objections to the proposed counterclaim....................................................... 271.Claim for injunctive relief and damages under s 1324 of the Corporations Act........... 27
2.The conspiracy claim.................................................................................................... 32
3.Do W&P Wilson have standing to sue?....................................................................... 34
4.Alleged breaches of injunctions.................................................................................... 37
Objections of Fleurie, the third defendant by counterclaim....................................................... 38
Claims against Fleurie.............................................................................................................. 41
Particulars of knowledge about the sand mining joint venture................................................ 43
Conclusion............................................................................................................................... 48
Joinder of Constable and APFG............................................................................................... 48
Discussion................................................................................................................................ 51
Orders....................................................................................................................................... 52
HIS HONOUR:
Introduction
I have previously set out the history of this proceeding in Re Annesley Plant Hire Pty Ltd.[1] It is convenient to repeat the history to set the scene for consideration of the application before me by the plaintiffs by counterclaim to join Douglas Constable and Australian Property and Finance Group Pty Ltd (APFG) as the sixth and seventh defendants to the counterclaim. The plaintiffs by counterclaim also seek leave to file and serve a second amended counterclaim.
[1][2014] VSC 56.
Central to this case are four properties that lie along Westernport Road and its extension being Pioneer Road, at Lang Lang in Eastern Victoria. The road runs from west to east. Travelling east, the first relevant property is 325 Westernport Road, known as the Westhead land. Next, on the eastern boundary of the Westhead land is 345 Westernport Road, known as the Walker land. On the eastern boundary of the Walker land is the Jeffrey land. To the east of the Jeffrey land is 65 Pioneer Road, known as the Nerlane land. Thus the four properties in order are:
(1) 325 Westernport Road, (the Westhead land);
(2) 345 Westernport Road, (the Walker land);
(3) the Jeffrey land; and
(4) 65 Pioneer Road, (the Nerlane land).
The four properties are the subject of a permit or permits to extract sand issued by the Department of Primary Industries.
The plaintiffs are Annesley Plant Hire Pty Ltd (APH) and Paul Annesley (Annesley). I refer to APH and Annesley together as the Annesley parties. The defendants to the claim are William Wilson, his son Peter Wilson (together W & P Wilson), and three companies controlled by them; Wilsands Pty Ltd, Line in the Sand Pty Ltd and PJ Wilson Properties Pty Ltd. Together, the five defendants are referred to as the Wilson parties.
The plaintiffs by counterclaim are William and Peter Wilson and Barry Moshel (a solicitor) (the Wilson CC parties). The first defendant by counterclaim is Paul Annesley and the second defendant by counterclaim is Pioneer Road Holdings Pty Ltd (in liquidation) (PRH).
On 21 March 2012, the Annesley parties instituted proceedings against the Wilson parties claiming moneys allegedly advanced under an agreement initially made in August 2009 and, thereafter, varied from time to time.
The Annesley parties allege that there were implied terms of the agreement that interest would accrue on the loans and that the advances would be repaid within a reasonable time. The Annesley parties claim that the various advances amounted to $1,825,481.94. The Annesley parties also allege that William and Peter Wilson represented that they would personally guarantee the advances. The representations are alleged to have been made in the course of trade and commerce within the meaning of the Fair Trading Act1999 (Vic) (the Act). The Annesley parties allege that the representations were false and seek damages under the Act, interest and costs.
On 3 May 2012, the Wilson parties filed a defence that, inter alia, alleged that the Annesley parties and W&P Wilson entered into a number of agreements to purchase two properties: lots 1 and 2, 275 Nobles Road, Madewarre (Nobles Road) and 65 Pioneer Road, Lang Lang (the Nerlane land).
The Wilson parties alleged that the agreements broadly entailed the purchase of Nobles Road and the Nerlane land (using PRH as the purchasing entity).
The Wilson parties alleged that the purchases were to be funded by Annesley and that W&P Wilson would apply their expertise in matters of sand extraction such that Nobles Road and the Nerlane land were expected to yield a profit either from sand mining operations or by reason of their on-sale to a person or company interested in exploiting their sand resources. Nobles Road was ultimately on-sold.
The Wilson parties alleged that any profit from the purchase and subsequent exploitation or on-sale of Nobles Road or the Nerlane land would be divided evenly between Annesley and W & P Wilson.[2]
[2]Proposed Second Amended Counterclaim (Counterclaim), [4].
On 13 November 2012, leave was granted to W&P Wilson to add Barry Moshel as a third plaintiff by counterclaim and that a counterclaim in the form of exhibit PW 26 to the affidavit of Peter Wilson sworn 12 November 2012 be filed and served.
The counterclaim pleaded that Moshel held 200 shares in PRH as follows:
(a) 20 shares for himself;
(b) 90 shares on trust for the Wilsons; and
(c) 90 shares on trust for Paul Annesley.
The counterclaim also alleged that in August 2009 P&W Wilson and Annesley entered into an agreement to purchase the land in Lang Lang (the August agreement).[3] The joint venture involved improving the land’s value by obtaining requisite town planning approvals and licences for the extraction of sand and the ultimate sale of the land at a profit. It was alleged that PRH was incorporated for the purpose of acquiring the land.
[3]I took this to be a reference to land generally in the Lang Lang area. File, 33.
The counterclaim pleaded that on 31 August 2009, PRH entered into a contract of sale to purchase the Nerlane land for $7.2m with settlement to occur on 31 August 2012.
The counterclaim alleged that in or about December 2009, W&P Wilson and Paul Annesley identified land adjacent to the Nerlane land that contained sand deposits. W&P Wilson and Moshel alleged that the August agreement was varied to allow for further acquisitions by PRH on behalf of the joint venture (the December agreement).[4]
[4]Counterclaim, [7].
The counterclaim alleged that on 14 January 2010, PRH entered into a contract to purchase the Walker land for $1.45m, which was completed on 17 May 2010.
The counterclaim alleged that the purchase of the Walker land was partly funded by a loan from Central Victorian Investments Ltd to PRH for $500,000 secured by a second mortgage over the Walker land and by personal guarantees given by William Wilson, Paul Annesley and his wife, and Barry Moshel.
The counterclaim alleged that on 29 March 2010, PRH entered into an option agreement for the purchase of three blocks of land on Pioneer Road, Lang Lang including the Jeffrey land for $2.4m.
The counterclaim alleged that in May 2010, PRH agreed to purchase the Westhead land for $2,173,913 with settlement due on 7 September 2010.
The counterclaim alleged that on 17 November 2011, Annesley’s solicitors wrote to P&W Wilson advising them that an unidentified person from New South Wales had expressed a commitment to purchase PFH for $15 million and that a minimum of $200,000 would be returned to P&W Wilson but that the purchase did not proceed.[5]
[5]Ibid, [12], [13].
The counterclaim alleged that in breach of the August agreement and the December agreement, since on or about 21 November 2012, Paul Annesley has conducted the affairs of PRH and the joint venture without reference to the Wilson CC parties. Particulars were given. The counterclaim seeks damages, and transfer of 45 shares in PRH to each of W&P Wilson and 20 shares to Moshel. The counterclaim also seeks the taking of accounts and the making of inquiries.
On 13 November 2012, the Court ordered that Paul Annesley be restrained until 4.00 pm on 20 November 2012, from dealing with, disposing of, changing or in any way encumbering the shares in PRH being the subject of the defendants’ counterclaim.
On 20 November 2012, the Court ordered that the injunctive relief granted in this proceeding on 13 November 2012 be extended until the hearing and determination of this proceeding or further order.[6] The Court also restrained Paul Annesley from dealing with or disposing of the assets of PRH until 4.15 pm on 21 November 2012.
[6]File, 35.
On 21 November 2012, the Court ordered that:[7] (a) Paul Annesley be restrained from disposing of, charging or in any way encumbering those shares in PRH being the subject of the defendants’ counterclaim; and, (b) Paul Annesley depose to a number of matters.
[7]File, 37.
Also on 21 November 2012, the Court made certain orders by consent. The Court made orders for the transfer of 20 shares in PRH to Moshel and 90 shares in PRH to Peter Wilson or his nominee, and for the doing of all things necessary to appoint Peter Wilson as a director of PRH.
The Court also ordered that until the transfer of shares had been completed Paul Annesley be restrained from dealing with or disposing of the shares in PRH other than in accordance with the order, and from dealing with or disposing of the assets of PRH.
In the proceeding, W&P Wilson allege that on 20 and 21 November 2012, Paul Annesley set out to defeat the orders that the Court made on 20 and 21 November 2012. W&P Wilson allege that Paul Annesley sold PRH’s major asset, the Walker land, to Fleurie Pty Ltd (Fleurie) for $860,000. As mentioned above, the Walker land was subject to a mortgage to Central Victorian Investments Ltd for $500,000.
On 22 November 2012, a caveat (no AK039192M) was lodged over the Walker land on behalf of W&P Wilson. The interest claimed was an interest in fee simple. The grounds were pursuant to a constructive and/or resulting trust of which the registered proprietor is trustee and the caveators are beneficiaries.[8] W&P Wilson contend that at the time the caveat was lodged, they were unaware that Paul Annesley had arranged for PRH to sell the Walker land the next day.
[8]Exhibit PW 34.
On 26 November 2012 a withdrawal of caveat was filed withdrawing the caveat (no AK039192M). It was purportedly signed by RD Taylor & Assoc, the then solicitors for the Wilsons.[9] Mr Taylor, the principal of RD Taylor & Assoc, deposed that the withdrawal of caveat was not drawn or lodged by him or his agent Ms Ryan, despite the name of his firm appearing next to the words ”signature of caveator.”
[9]Exhibit PW 35.
W&P Wilson contend that a Mr Collins who was acting for Fleurie produced the withdrawal of caveat to the solicitor for the mortgagee to enable Fleurie to complete the purchase of the Walker land from PRH.
Mr Merlo, a solicitor from Melbourne Legal Chambers, was acting for the proposed mortgagee of the Walker land. Mr Merlo informed the Court on 20 December 2012 that on 21 November 2012, he attempted to lodge the mortgage over the Walker land. He said that he understood settlement had taken place the previous day on 20 November 2012. Mr Merlo informed the Court that the mortgage was rejected by the titles office because of the relevant caveat. Mr Merlo says that he then contacted Mr Collins, who was the representative of Fleurie with whom he was dealing. Mr Merlo said that he advised Mr Collins that he should take action to have the caveat removed. He said that subsequently, Mr Collins attended at Mr Merlo’s office and delivered a withdrawal of caveat to Mr Merlo’s staff together with the transfer of land and the mortgage.[10]
[10]Transcript of 20 December 2012, 13-14.
On 27 November 2012, PRH was placed into voluntary liquidation by Paul Annesley.[11]
[11]Affidavit of Robert Taylor of 20 December 2012, [8] and Affidavit of Peter Wilson of 30 November 2012, file 39.
On the basis of the evidence before me, on 20 December 2012, the Court ordered ex parte that:
(a) Fleurie (the third named defendant by counterclaim) and Wayne Collins (the fourth named defendant by counterclaim) be added as parties to the proceeding;
(b) Fleurie be restrained from dealing with 345 Westernport Road, Lang Lang (the Walker land);
(c) That the Registrar of Titles remove Withdrawal of Caveat AK046105U in respect of the title to the Walker land; and
(d) The liquidation of PRH be stayed.
On 25 January 2013, Wayne Collins swore and filed an affidavit in the proceedings.[12] He deposed that he was a director of Fleurie. Mr Collins deposed that Fleurie is the registered proprietor of the Walker land at 345 Western Port Road and the property at 65 Pioneer Road, being the Nerlane land. Fleurie became registered proprietor of both properties on 26 November 2012.
[12]Affidavit of Wayne John Collins of 25 January 2013. File, 49.
Mr Collins deposed that both properties are part of a joint venture with another company, APFG, which is the purchaser of the property adjoining 345 Westernport Road, being 325 Westernport Road, the Westhead land. Mr Collins did not address his possession of the allegedly forged withdrawal of caveat. On 27 November 2013, Mr Schlicht, counsel for Mr Collins, informed the Court that he had been instructed that the withdrawal of caveat was provided to Mr Collins. Mr Schlicht said “It’s located in his post box, his letter box.”[13]
[13]Transcript of 27 November 2013, 36.
Subsequent to the joinder of Fleurie and Collins there were several attempts by W&P Wilson and Moshel to file and serve a statement of counterclaim against Fleurie and Collins. On 7 February 2013, the Court ordered that W&P Wilson and Moshel serve any proposed amended counterclaim by 26 February 2013.[14] The Court had previously ordered the joining of Fleurie and Collins as parties to the counterclaim without any pleading of a cause of action against them being filed at that time, based on the affidavit material filed.
[14]File, 52.
On 4 March 2013, W&P Wilson and Moshel sought leave to file a proposed amended counterclaim that purported to plead a claim against Fleurie and Collins.[15] On 7 March 2013, Fleurie and Collins opposed the Wilson CC parties’ application for leave to file the proposed amended counterclaim on the basis that it did not disclose a proper claim against Fleurie and Collins. After a contested hearing, the Court refused leave to W&P Wilson and Moshel to file the proposed amended counterclaim on the grounds that it did not disclose a good cause of action against Fleurie or Collins. The Court gave leave to W&P Wilson and Moshel to file a further proposed counterclaim by 21 March 2013.[16] W&P Wilson and Moshel failed to do so.
[15]File 53; filed pursuant to order of Robson J of 7 February 2013.
[16]File, 54A.
On 26 April 2013, the Court made orders by consent that the time for W&P Wilson and Moshel to serve a proposed counterclaim be extended to 17 May 2013.[17] The Court also directed that the proceedings be listed for directions and any subpoenas be returned on 31 May 2013. On 10 May 2013, W&P Wilson issued subpoenas returnable on 31 May 2013 for production of documents. The subpoenas were issued to:
[17]File, 56.
(a) the secretary of the Department of Environment and Primary Industries (DPI) to produce certain work authorities;[18]
[18]File, 57.
(b) Douglas Constable to produce documents relating to the sale by PRH to Fleurie of the Walker land;[19] and
(c) Onorato (Tino) Grossi to produce documents including documents relating to the originally intended sale by Nerlane (Land) Pty Ltd to PRH of the Nerlane land and the contract of sale of real estate between Grossi as mortgagee in possession as vendor and Fleurie Pty Ltd in respect of the Nerlane land including documents pertaining to discussions and negotiations between the parties, Paul Annesley and any other persons, leading to the execution of the contract.[20]
[19]File, 58.
[20]File, 59.
On 10 May 2013, notices to attend Court for cross examination on 31 May 2013 were issued to Paul Annesley and Wayne Collins.[21]
[21]File, 60, 61.
By 17 May 2013, W&P Wilson and Moshel had failed to file and serve the proposed amended counterclaim. On 31 May 2013, the matter returned to Court. Fleurie and Collins renewed their application to be removed as defendants to the counterclaim. Mr Taylor, solicitor for the Wilson CC parties, applied for a further extension of time to file and serve W&P Wilson CC parties’ further amended counterclaim. Mr Taylor informed the court that it was imperative for the drawing and drafting of the counterclaim that he have access to the DPI files and the full transcript of the hearing of 7 March 2013. At that stage, the DPI had produced to W&P Wilson and Moshel for inspection the relevant files. No application was made that day to cross examine Paul Annesley or Wayne Collins even though they had been subpoenaed to attend for cross examination.
The Court extended the time for W&P Wilson and Moshel to file and serve an amended counterclaim against Fleurie and Collins to 14 June 2013 and listed the matter for further hearing on 21 June 2013. Mr Taylor had informed the Court that 14 days would easily be sufficient to file and serve W&P Wilson CC parties’ amended counterclaim against Fleurie and Collins.
By 21 June 2013, W&P Wilson and Moshel had failed to file and serve a proposed amended counterclaim against Fleurie and Collins. On 21 June 2013, the matter came on for directions. The Court ordered that unless W&P Wilson and Moshel file and serve a counterclaim against Fleurie and Collins by 28 June 2013, Fleurie and Collins would be removed as parties to the proceeding. The Court further ordered that in the event that no counterclaim was filed W&P Wilson pay the costs of Fleurie and Collins of and incidental to the proceedings, including reserved costs.
The Court gave reasons for the ruling. In those reasons, the Court referred to the fact that Mr Taylor had informed the Court that he now had the material to support the Wilson CC parties’ allegation that Fleurie and Collins were involved in the alleged conspiracy to deprive W&P Wilson of the benefit of the joint venture.
The ruling stated that the key to the case against Fleurie and Collins was the allegation that they were aware of the existence of the previous joint venture between W&P Wilson and Paul Annesley. The Court also said that Mr Taylor had informed the Court that he now had material from which the inference could be drawn that Fleurie and Collins were aware of the interest of W&P Wilson in the joint venture assets. It was argued that the inference may be sufficient to articulate a case that Fleurie and Collins were privy to or party to a conspiracy to deprive W&P Wilson of their joint venture interest.
On 28 June 2013, W&P Wilson and Moshel filed an amended counterclaim.[22] On 25 October 2013, Fleurie and Collins issued a summons seeking orders that the proceedings as against Fleurie and Collins be dismissed and that W&P Wilson and Moshel pay their costs including reserved costs.[23] Fleurie and Collins contended that the amended counterclaim did not disclose a good cause of action against either of them. On 31 October 2013, Mr Taylor filed a notice of ceasing to act for W&P Wilson and the Wilson CC parties.
[22]File, 64; filed pursuant to order of Robson J of 7 March 2013.
[23]File, 67.
On 11 November 2013, Fleurie and Collins sought orders under their summons of 25 October 2013. W&P Wilson and Moshel were represented by new solicitors MCP Commercial Lawyers. Mr Tragardh, counsel for the Wilson CC parties, asked for an adjournment of 30 days to permit the new solicitors to familiarise themselves with the file. The Court reserved its decision on the adjournment application. On 18 November 2013, the Court granted the adjournment application but only to Wednesday 27 November 2013. On 27 November 2013, the Court heard the summons of 25 October 2013 and reserved its decision.
On 3 March 2014, the Court delivered its decision and ordered that the fourth defendant by counterclaim Wayne Collins be removed as a party to the proceeding. The counterclaim made no claim against Collins. The Court also ordered that W&P Wilson and Moshel file and serve an amended defence and counterclaim on or before 21 March 2014.[24]
[24]File, 79.
On 21 March 2014, W&P Wilson and Moshel filed and served a proposed amended counterclaim. On 28 March 2014, the Court ordered that any summons to join further parties to the counterclaim and any affidavit in support be filed and served by 4 April 2014. The Court also ordered that the Annesley parties and Fleurie serve notice on W&P Wilson and Moshel of any objections each has to the proposed amended counterclaim dated 21 March 2014, on or before 4 April 2014.
The Court further ordered that W&P Wilson and Moshel serve any amended proposed counterclaim consequent upon those objections by 11 April 2014 and the matter be heard on 14 April 2014.
On 3 April 2014, W&P Wilson and Moshel issued a summons seeking to join Douglas Constable and APFG as the sixth and seventh defendants to the counterclaim.
When the matter came on for hearing on 15 April 2014, W&P Wilson and Moshel established that APFG had been served but that attempts to serve Douglas Constable had been unsuccessful and W&P Wilson and Moshel would be seeking an order for substituted service.
The Annesley parties provided a list of objections that they had to the proposed amended counterclaim and these were considered by the Wilson CC parties. As a consequence, a second proposed amended counterclaim was submitted to the Court; the proposed further amended defence and counterclaim. The objections by Fleurie were not received in sufficient time for W&P Wilson and Moshel to consider and make consequential amendments to their proposed pleading.
The proposed further amended defence and counterclaim
The pleading is structured in the following way:
(a) paragraphs 1 to 8B plead the names of the parties to the proposed counterclaim and the capacity in which they sue or are sued;
(b) paragraphs 9-64 plead a series of facts which are then relied upon in support of the various causes of action pleaded in paragraphs 65-92;
(c) the causes of action pleaded against Annesley comprise:
(i) in paragraphs 65-69, an entitlement to an injunction under s 1324(1) and damages under s 1324(10) of the Corporations Act 2001 (Cth) (Corporations Act) with respect to conduct on the part of Annesley said to be in contravention of sections 181 and 182 of the Corporations Act;
(ii) in paragraph 72, the civil tort of conspiracy, which in substance involves Annesley and others conspiring together to commit an unlawful act, namely the actionable conduct and breaches by Annesley of the August agreement;
(iii) in paragraphs 73-76, a breach by Annesley of trust and fiduciary duties owed by him to W&P Wilson and Moshel;
(iv) in paragraphs 85-87, a claim with respect to the alleged failure to comply with the share transfer orders of 21 November 2012; and
(v) a claim for damages for breach of the Sand Mining Joint Venture Agreement.
I propose to go through the alleged series of events in chronological order and then to go to the objections by the defendants to the counterclaim. What follows are, at this stage, only allegations.
The alleged series of facts
In or about August 2009, W & P Wilson, Moshel and Annesley agreed to enter into a joint venture: “Sand Mining Joint Venture Agreement” (JVA). On 28 August 2009, W & P Wilson, Moshel and Annesley incorporated PRH pursuant to the JVA. On 31 August 2009, the JVA was executed by W & P Wilson, Moshel and Annesley.[25]
[25]Counterclaim, particulars [9].
Also on 31 August 2009, PRH for and on behalf of the joint venture agreed with Nerlane (Land) Pty Ltd to purchase 65 Pioneer Road, Lang Lang and the rear of 7 Pioneer Road, Lang Lang and 46 Pioneer Road, Lang Lang (Nerlane land) for $7.2m, with settlement to occur on 31 August 2012.[26]
[26]Ibid, particulars [12].
On 17 December 2009, the joint venturers identified that land adjacent to the Nerlane land, the Walker land, also contained substantial mineral sand deposits and was suitable for sand mining in conjunction with the Nerlane land. The joint venturers agreed to vary the JVA to incorporate the Walker land in the joint venture and for PRH to purchase the Walker land on behalf of the joint venture. The joint venturers agreed that Annesley would fund the purchase of the Walker land on behalf of the joint venture.[27]
[27]Ibid, particulars [13].
On 14 January 2010, PRH, on behalf of the joint venture, agreed to purchase the Walker land for $1,450,000. The purchase of the Walker land was partly funded by a $500,000 loan from Central Victorian Investments Ltd, which loan was secured by second ranking mortgage.[28]
[28]Ibid, [14], particulars [14].
In or about March 2010, the joint venturers identified lands adjacent to the Nerlane and Walker land known as 7 Pioneer Road, Lang Lang, 9 Pioneer Road, Lang Lang and 25 Pioneer Road, Lang Lang (the Jeffrey land), and agreed to vary the JVA to incorporate the Jeffrey land in the joint venture. The joint venturers agreed that PRH would enter into an option agreement over the Jeffrey land for and on behalf of the joint venture.[29]
[29]Ibid, particulars [15].
On 29 March 2010, PRH on behalf of the joint venture entered into an option agreement with Donald Jeffrey to acquire an option to purchase the Jeffrey land for $2,400,000.[30]
[30]Ibid, particulars [16].
On 5 April 2010, Douglas Constable became the sole shareholder of Fleurie and was appointed the sole director and secretary of Fleurie.[31]
[31]Ibid, particulars [7], [7B], [8A].
In or about May 2010, the joint venturers identified that the Westhead land also contained substantial mineral sand deposits and agreed to further vary the JVA to incorporate the Westhead land. The joint venturers agreed that PRH would purchase the Westhead land for and on behalf of the joint venture and that Annesley would fund the purchase of the Westhead land for and on behalf of the joint venture.[32]
[32]Ibid, particulars [17].
On 27 May 2010, PRH, for and on behalf of the joint venture, entered into an agreement to purchase the Westhead land for $2,173,913.[33] The settlement date for the purchase of the Westhead land was 7 September 2010.
[33]Ibid.
On 28 May 2010, Central Victorian Investments Ltd approved a loan of $500,000 for the purchase of the Walker land, to be secured by mortgage over the Walker land. W & P Wilson, Annesley and Charlene Annesley provided personal guarantees for the loan.[34]
[34]Ibid, particulars [14].
On 6 June 2011, Xiu Lin was appointed a director of Fleurie.[35]
[35]Ibid, particulars [7D].
As at 23 June 2011, Nerlane (Land) Pty Ltd and Nerlane Pty Ltd trading as Premium Salads, held various loan and credit facilities with National Australia Bank (NAB) in the sum of $3,800,000. Onorato Grossi was the sole shareholder, director and secretary of Nerlane (Land) Pty Ltd and Nerlane Pty Ltd.[36]
[36]Ibid, particulars [28].
On 1 July 2011, Constable ceased to be a director of Fleurie.[37]
[37]Ibid, [7(b)].
On 23 August 2011, the DPI allocated Work Authority 1471 to PRH, which PRH received for and on behalf of the joint venture. The Work Authority covered the Nerlane, Walker, Jeffery and Westhead lands and allowed PRH to prepare work plans for the mining of sands there to the exclusion of all other parties.[38]
[38]Ibid, [21].
From or about November 2011 onwards, Annesley refused to communicate with W&P Wilson about the conduct of the business affairs of the joint venture.[39]
[39]Ibid, [22].
On 9 December 2011, Constable ceased to be the sole shareholder of Fleurie.[40]
[40]Ibid, particulars [7].
In or about early February 2012, Annesley sought and received business and financial advice from Constable and entities he controlled, Quick Fix Solutions Pty Ltd and APFG, about Annesley’s business affairs, including PRH and the sand mining joint venture.[41]
[41]Ibid, particulars [37].
On 14 February 2012, Annesley directed Moshel to transfer 200 shares Moshel held in PRH to Annesley and to allow Annesley to replace Moshel as the sole shareholder, director and secretary of PRH. Thereupon, Annesley became the sole shareholder, director and secretary of PRH.[42]
[42]Ibid, [23(a), (b)], [5(d)].
On or about 14 February 2012, PRH executed an agreement with Bryantcraft Pty Ltd (Bryantcraft) under which PRH charged all of its assets and lands, including the Walker land, to Bryantcraft.[43] Bryantcraft is a company controlled by Sandy Constantine, a member of the firm of chartered accountants, Bryant and Bryant.[44]
[43]Ibid, [25].
[44]Ibid, particulars [25].
On or about 20 February 2012, PRH, which was then under the control of Annesley, executed an agreement with APH, a company under the sole control of Annesley, under which PRH charged all of its assets and lands to APH.[45] On 20 February 2012, APH lodged a caveat over the Walker land claiming an interest over the whole of the land as chargee pursuant to the agreement.[46]
[45]Ibid, [26].
[46]Ibid, [27].
During the period from 27 April 2012 to 19 December 2012, Grossi and Nerlane (Land) Pty Ltd received financial advice from Sandy Constantine and the firm of chartered accountants, being Bryant and Bryant.[47]
[47]Ibid, particulars [28].
On or about 1 June 2012, Grossi, the sole shareholder, director and secretary of Nerlane (Land) Pty Ltd, advanced an unknown sum of money to Nerlane (Land) Pty Ltd and secured those advances by accepting a second mortgage from Nerlane (Land) Pty Ltd over the Nerlane land.[48] Settlement of the sale of the Nerlane land to PRH was scheduled to occur on 31 August 2012.
[48]Ibid.
On 20 June 2012, PRH lodged a caveat over the Nerlane land, claiming an interest in fee simple.[49]
[49]Ibid, [29].
On 13 July 2012, Grossi registered the second mortgage over the Nerlane land.[50]
[50]Ibid, particulars [28].
Prior to 31 August 2012, notwithstanding the obligations of PRH to settle the purchase of the Nerlane land, Annesley deliberately failed to take any real or substantial steps to arrange the funding of the balance of $6,500,000 due under the Nerlane land purchase agreement.[51]
[51]Ibid, [33].
In or about August 2012, PRH (under the control of Annesley) agreed with Fleurie to sell the Walker land to Fleurie for the sum of $860,000 which was below the market price of approximately $1,450,000.[52]
[52]Ibid, [32].
On or about 20 August 2012, Annesley signed a nomination form, under the agreement for the purchase of the Westhead land by PRH, by which APFG was substituted as the purchaser of the Westhead land in lieu of PRH.[53]
[53]Ibid, [30].
On 31 August 2012, the NAB facilities in respect of Nerlane (Land) Pty Ltd were due to expire. 31 August 2012 was also the settlement date of the Nerlane land purchase agreement with PRH, when $6,500,000 was due on the purchase.[54] PRH breached its obligations under the agreement with Nerlane (Land) Pty Ltd to pay the balance of the purchase price.[55]
[54]Ibid, particulars [28], [33].
[55]Ibid, [34].
Subsequent to 31 August 2012, Nerlane (Land) Pty Ltd rescinded the agreement with PRH for the purchase of the Nerlane land and re-entered into the possession and control of the Nerlane land.[56]
[56]Ibid, [35].
At some time prior to 24 September 2012, Annesley, Fleurie and APFG entered into a joint venture agreement (Fleurie/APFG joint venture agreement) by which Fleurie and APFG would carry on the business of sand mining on the Nerlane, Walker and Westhead lands, conditional upon (a) the Nerlane, Walker and Westhead lands being acquired by Fleurie and APFG in lieu of PRH, and (b) Fleurie and/or APFG obtaining a sand mining Work Authority from the DPI over the Nerlane, Walker and Westhead lands.[57]
[57]Ibid, [36].
On 24 September 2012, Fleurie and APFG executed the Fleurie/APFG joint venture agreement. Annesley is not a party to that written agreement.[58]
[58]Ibid, particulars [36].
As at 24 September 2012, PRH was still the holder of the Work Authority and in order for Fleurie or APFG to obtain a Work Authority it was necessary for PRH to relinquish the existing Work Authority.[59]
[59]Ibid.
As at 24 September 2012, Annesley had a prior appointment to meet with officers of the DPI to discuss a revised Work Authority proposal by a new applicant, Fleurie and/or APFG over the Nerlane, Walker and Westhead lands.[60]
[60]Ibid, particulars [37].
As at 24 September 2012, PRH was still the registered proprietor of the Walker land, but had entered into a contract of sale with Fleurie in respect of that land. Further, PRH had nominated APFG as the purchaser of the Westhead land. PRH remained the purchaser of the Nerlane land, which had been due to settle on 31 August 2012.[61]
[61]Ibid.
On or about 25 September 2012, Annesley met with officers of the DPI and advised that he would be closing down PRH and that he would be providing to the DPI a revised Work Authority proposal.[62]
[62]Ibid, [38].
On or about 2 October 2012, Constable lodged the APH caveat dated 20 February 2012 over the Walker land on behalf of Annesley and APH.[63]
[63]Ibid, [39].
On or about 12 October 2012, Annesley wrote to the DPI requesting removal of Work Authority 1471 from the system due to the closing down of PRH.[64] On 16 October 2012, the DPI terminated Work Authority 1471.[65]
[64]Ibid, [40].
[65]Ibid, [41].
On 26 October 2012, Grossi transferred to Fleurie the Nerlane land for $3,500,000 pursuant to his powers as mortgagee under s 77 of the Transfer of LandAct 1958 (Vic).[66]
[66]Ibid, [42].
On 13 November 2012, the Court ordered that Annesley be restrained from dealing with, disposing of or charging or in any way encumbering the W&P Wilson shares in PRH.[67]
[67]Ibid, [43].
On 16 November 2012, Annesley resolved to wind up APH by way of a creditors’ voluntary winding up.[68]
[68]Ibid, [44].
On or about 19 November 2012, Focus Creative Development Solutions (Focus), an extractive industry consultant (formerly engaged by PRH in relation to the sand mining joint venture), wrote to the DPI and advised of being retained on behalf of Fleurie to project manage the process of obtaining a Work Authority and planning permit to facilitate the use and development of land at Lang Lang for sand extraction operations.[69]
[69]Ibid, [45].
On 21 November 2012, the Court ordered that Annesley be restrained from dealing with or disposing of assets of PRH until the transfer of 20 shares in PRH to Moshel and 90 shares in PRH to W & P Wilson.[70]
[70]Ibid, [47].
On 21 November 2012, Grossi through Melbourne Legal Chambers Pty Ltd advanced $600,000 to Fleurie and/or PRH so as to enable PRH to discharge its debts to Central Victorian Investments Ltd and Bryantcraft which were secured by mortgages over the Walker land provided by PRH.[71] Also on that day, the sale of the Walker land by PRH to Fleurie, which Annesley arranged, settled.[72]
[71]Ibid, [49].
[72]Ibid, [48].
On 22 November 2012, Annesley dealt with or disposed of the assets of PRH and took possession of books and records of PRH from the offices of Bryant and Bryant.[73]
[73]Ibid, [50].
Also on 22 November 2012, W&P Wilson lodged a caveat over the Walker land.[74]
[74]Ibid, [51].
Subsequent to the lodgement of the caveat, Melbourne Legal Chambers, solicitors for Grossi, attempted to lodge with Land Victoria a transfer of land for the Walker land from PRH to Fleurie.[75]
[75]Ibid, [52].
On 26 November 2012, Collins provided to Melbourne Legal Chambers, the solicitors for Grossi, a forged withdrawal of caveat for the W&P Wilson caveat.[76]
[76]Ibid, [54].
Subsequently on 26 November 2012, Melbourne Legal Chambers lodged with Land Victoria the forged withdrawal of caveat, a mortgage provided by Fleurie over the Walker land to secure the advance of $600,000 by Grossi to Fleurie and/or to PRH, and the transfer of land of the Walker land by PRH to Fleurie. This, in due course, enabled the registration of Fleurie as the registered proprietor of the Walker land.[77] The transfer was by Grossi as the transferor/mortgagee.[78]
[77]Ibid, [55], [56].
[78]Ibid, particulars [56].
On 5 December 2012, the Court ordered that Fleurie be restrained from dealing with or disposing of the Walker land and until further order the liquidation of PRH be stayed pursuant to s 482 of the Corporations Act.[79]
[79]Ibid, [58].
On 18 December 2012, Collins and Annesley attended a site meeting on the Nerlane and Walker lands with representatives of Focus and the DPI to discuss Fleurie’s sand quarry application.[80]
[80]Ibid, [59].
On or about 18 December 2012, Focus lodged a new Work Authority proposal for the Nerlane, Walker and Westhead lands for and on behalf of Annesley, Fleurie, Collins, Constable and APFG.[81]
[81]Ibid, [60].
On 19 December 2012, Grossi and Nerlane (Land) Pty Ltd ceased receiving financial advice from Constantine and Bryant and Bryant[82]
[82]Ibid, particulars [28].
On 20 December 2012, Constable, on his own behalf and on behalf of Quick Fix Solutions Pty Ltd and APFG, lodged three caveats over the Walker land.[83]
[83]Ibid, [61].
On or about 4 January 2013, DPI issued new Work Authority 1516 to Fleurie over the Nerlane, Walker and Westhead lands.[84]
[84]Ibid, [62].
On 25 January 2013, Collins swore an affidavit on behalf of Fleurie as its then director in relation to the purchase of the Walker land.[85]
[85]Ibid, particulars [32].
In or about January/February 2013, the owners of the Westhead land advised PRH and APFG that they did not accept and were not bound by the APFG nomination form and issued a notice of rescission to PRH in respect of the agreement to purchase the Westhead land. The purchase of the Westhead land was consequently rescinded.[86]
[86]Ibid, [63].
On 7 February 2013, the Court dissolved, by consent, the injunctions restraining Fleurie from dealing with or disposing of the Walker land and Fleurie is now the registered proprietor of the Walker land.[87]
[87]Ibid, [64].
On 1 May 2013, Xiu Lin was registered as the sole shareholder of Fleurie, with a legal but not a beneficial shareholding.[88] Xiu Lin had been appointed a director of Fleurie on 6 June 2011.[89] Constable was appointed a director for one day on 1 May 2013.[90]
[88]Ibid, particulars [7].
[89]Ibid.
[90]Ibid.
On 14 October 2013, Xiu Lin ceased to be a director of Fleurie.[91] Robbyn Strickland was listed as the sole shareholder of Fleurie with a legal but not beneficial shareholding.[92]
[91]Ibid, [7(d)].
[92]Ibid, [79(e)].
The allegations concerning the directors and shareholders of Fleurie presumably were pleaded to establish the odd history of Fleurie and the uncertainty concerning its management.
Summary of land transactions
In summary the relevant land transactions under the joint ventures are as follows. In 2009, W & P Wilson, Moshel and Annesley entered into a joint venture to acquire land and to carry out sand mining on four adjacent blocks of land; the Nerlane land, the Walker land, the Jeffrey land and the Westhead land.
Under the sand mining joint venture:
(a) PRH agreed to purchase the Nerlane land from Nerlane (Land) Pty Ltd for $7,200,000 with settlement on 31 August 2012;
(b) PRH agreed to purchase the Walker land for $1,450,000 with a secured loan of $500,000 from Central Victorian Investments Ltd;
(c) PRH acquired an option to purchase the Jeffrey land for $2,400,000; and
(d) PRH agreed to purchase the Westhead land for $2,179,313 with settlement on 7 September 2010.
In August 2011, Annesley ceased to communicate with W&P Wilson and thereafter treated the sand mining joint venture as at an end. Annesley took sole control of PRH. The four properties were then dealt with as follows:
(a) Nerlane land: On 31 August 2012, PRH, in breach of the contract of sale, did not complete the purchase of the Nerlane land and Nerlane (Land) Pty Ltd rescinded the contract and re-took possession of the land.[93] Thereafter, on 26 October 2012, Grossi transferred to Fleurie the Nerlane land for $3,500,000 pursuant to its powers as mortgagee under s 77 of the Transfer of Land Act 1958 (Vic). On or about 1 June 2012, Grossi had obtained a mortgage over the Nerlane land.[94] On 26 November 2012, the transfer to Fleurie was completed.
[93]Ibid, [35].
[94]Ibid, [28].
(b) Walker land: In August 2012, PRH agreed to sell the Walker land to Fleurie for $860,000. On 22 November 2012, W&P Wilson lodged a caveat over the Walker land. The caveat was removed on 26 November 2012 with a forged removal of caveat form and the sale to Fleurie settled. Previously, on 14 January 2010, PRH had agreed to purchase the Walker land for $1,450,000, and had obtained a secured loan of $500,000 from Central Victorian Investments Ltd.[95]
[95]Ibid, [14].
(c) Jeffrey land: PRH permitted the option to purchase the Jeffrey land to lapse. The option agreement had been obtained by PRH on 29 March 2010 to purchase the Jeffrey land for $2,400,000.[96]
(d) Westhead land: On 28 August 2012, PRH nominated APFG as the purchaser of the Westhead land under the contract of purchase.[97] On 27 May 2010, PRH, for and on behalf of the JVA, had agreed to buy the Westhead land for $2,173,913. Settlement was to be on 7 September 2012.[98]
[96]Ibid, [16].
[97]Ibid, [30].
[98]Ibid, [18].
W&P Wilson and Moshel allege that at some time prior to 24 September 2012, Annesley, Fleurie and APFG entered into a joint venture agreement under which Fleurie and APFG would carry on the business of sand mining on the Nerlane, Walker and Westhead lands.
Several causes of action are pleaded against the defendants to the counterclaim. W&P Wilson and Moshel allege that Annesley breached his duties under the JVA and breached his duties as a director of PRH. In substance, the causes of action alleged against the other defendants to the counterclaim rely on an allegation that they knew of the sand mining joint venture and participated in the transactions referred to above relating to the Nerlane land, the Walker land and the Westhead land and in obtaining a new Work Authority that deprived the sand mining joint venturers of the benefits of the joint venture to the advantage of the defendants by counterclaim.
Relevant principles on no reasonable cause of action disclosed
Before me is an application to file and serve a further amended counterclaim, and an application for leave to add two parties to the counterclaim. The defendants’ objections to the proposed amendments include the objection that insufficient particulars of knowledge have been alleged and the objection that in some respects no reasonable cause of action has been disclosed.
On the issue of whether a reasonable cause of action has been disclosed the relevant principles have the relevant principles have been conveniently summarised by Black J in Re Colorado Products Pty Ltd (in prov liq)[99] as follows:
[99][2013] NSWSC 1613 (Colorado).
[45] It is well-established that the power to dismiss a claim because it discloses no reasonable cause of action will not lightly be exercised: General Steel Industries Inc v Cmr for Railways [1964] HCA 69; (1964) 112 CLR 125 at 128-130; Webster v Lampard (1993) 177 CLR 598 at 602-603. In Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [57], Gaudron, McHugh, Gummow and Hayne JJ observed:
“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 of 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.” (footnote omitted)
[46] That formulation has been adopted in Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 at [46]; Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24] and Shaw v New South Wales [2012] NSWCA 102. In Spencer v Commonwealth above at [24], French CJ and Gummow J summarised the relevant principles as follows (omitting citations):
“The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this court in Fancourt v Mercantile Credits Ltd said:
The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.
More recently, in Batistatos v Roads and Traffic Authority (NSW) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following:
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 of 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.”
[47] In exercising the Court's power to strike out a Statement of Claim under UCPR r 14.28, the Court must also give effect to the overriding purpose stated in s 56(1) of the Civil Procedure Act 2005 (NSW), namely "to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings". Section 58(1) requires the Court to act in accordance with the dictates of justice, and s 58(2) requires that the overriding purpose specified in s 56(1) be taken into account: Shaw v New South Wales above at [128]ff.
In my opinion, the observations of Black J on the Civil Procedure Act 2005 (NSW) are equally apposite to the Civil Procedure Act 2010 (Vic) (Civil Procedure Act).
Annesley parties’ objections to the proposed counterclaim
1. Claim for injunctive relief and damages under s 1324 of the Corporations Act
W&P Wilson and Moshel claim an injunction restraining Annesley, Fleurie, Constable and APFG from contravening s 181 and 182 of the Corporations Act.[100] The entitlement to an injunction is pleaded in paragraphs [65]-[69].
[100]Ibid, Relief A.
Section 1324(1) of the Corporations Act provides:
Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:
(a)a contravention of this Act; or
(b)attempting to contravene this Act; or
(c)aiding, abetting, counselling or procuring a person to contravene this Act; or
(d)inducing or attempting to induce, whether by threats, promises or otherwise a person to contravene this Act; or
(e)being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act, or
(f)conspiring with others to contravene this Act;
the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.
Further and/or in the alternative, W&P Wilson and Moshel seek an order for damages under s 1324(10) of the Corporations Act against Annesley, Fleurie, Constable and APFG.[101]
[101]Ibid, Relief B.
Annesley submits that an injunction may only be obtained in respect of threatened or apprehended conduct. Annesley submits that there is no sufficient plea of threatened conduct to justify the claim for the injunction as the four disputed properties have all been dealt with.[102] Annesley says that the conduct complained of has already happened and that no anticipated conduct is alleged. In other words the breach of the Annesley/Wilson joint venture has finished. Thus there is no cause to obtain an injunction and therefore no basis for a damages order against Annesley.
[102]Re Summit Resources (Aust) Pty Ltd (2012) 88 ACSR 60, [67]-[78].
I do not accept this submission. W&P Wilson and Moshel allege that Annesley is engaging in or is proposing to engage in conduct that constitutes or would constitute a contravention of s 181 and s 182 of the Corporations Act in relation to duties allegedly owed to PRH.[103] The proposed conduct is alleged to be Annesley’s continuing attempts, together with Fleurie, Constable and APFG to take control of the business and assets of the sand mining joint venture to the exclusion of W&P Wilson and Moshel.[104]
[103]Counterclaim, [66].
[104]Ibid, particulars [66].
Annesley further says that the alleged conduct is merely a device to enable W&P Wilson and Moshel to seek damages under s 1324(10). Annesley submits that W&P Wilson and Moshel should not be given leave to file the counterclaim to claim damages against Annesley under s 1324(10) of the Corporations Act. Annesley says that under s 1324(10) damages may only be awarded in addition to or in substitution for the grant of an injunction. Section 1324(10) of the Corporations Act provides:
Where the Court has power under this section to grant an injunction restraining a person from engaging in particular conduct, or requiring a person to do a particular act or thine, the Court may, either in addition to or in substitution for the grant of the injunction, order that person to pay damages to any other person.
W&P Wilson and Moshel contend that they have standing under s 1324(1) given they are entitled to be registered as members of PRH pursuant to the orders of the Court made 21 November 2012, and are thus persons whose interests have been affected by the conduct of Annesley whilst a director of PRH. W&P Wilson and Moshel submit that their interests are greater than the mere interests of an ordinary member of the public.[105]
[105]Broken Hill Proprietary Co Ltd v Bell Resources Ltd (1984) 8 ACLR 609.
W&P Wilson and Moshel submit that they seek injunctions against Annesley, Fleurie Constable and APFG as are necessary to restrain the alleged conduct of the defendants to the counterclaim: their continuing attempts to take control of the business and assets of the sand mining joint venture to the exclusion of W&P Wilson and Moshel.[106] W&P Wilson and Moshel contend that ancillary to the prohibitory injunctions, they will seek such mandatory injunctions as are necessary to undo the contraventions of the Corporations Act committed by the defendants to the counterclaim.[107]
[106]Corporations Act s 1324(6).
[107]Corporations Act s 1324(7).
In my opinion, the alleged conduct, if established, may justify an injunction or injunctions. I reject this objection by Annesley to the proposed counterclaim.
Further, Annesley says that the conduct of Annesley alleged to breach the Corporations Act, is conduct that allegedly breached statutory duties owed by Annesley, as a director, to PRH. Annesley submits that such conduct does not give rise to a cause of action under s 1324 of the Corporations Act that W&P Wilson and Moshel may bring against Annesley as the sole director of PRH. Rather, the cause of action, if any, belongs to PRH.
Annesley relies on McCracken v Phoenix Constructions (Qld) Pty Ltd[108] where Fraser JA (with whom White JA and Applegarth J agreed) of the Queensland Court of Appeal, held that a breach by an officer of a company of his duties under s 182 to the company did not give rise to a claim for damages under s 1324 by a creditor who claimed to have suffered loss by reason of the breach. Fraser JA held that under s 1317H of the Corporations Act the right to claim damages and compensation were limited to the company.
[108][2013] 2 Qd R 27 (McCracken), [27]-[34].
In McCracken a creditor sued a company for breach of an agreement. During a mediation the sole director of the company threatened that if the creditor succeeded the creditor would not recover anything from the company as the director would divert the company’s assets to the director’s wife. Afterwards, the director did as he threatened. The creditor then added the director as a defendant to the proceeding claiming that the director had breached his duties under s 182 of the Corporations Act. The creditor claimed damages under s 1324(10) of the Corporations Act. The trial judge awarded damages against the director in favour of the creditor.
Fraser JA considered whether s 1324(10) of the Corporations Act permitted an award of damages where an entitlement did not otherwise exist at law. Fraser JA held that it was not necessary to decide that issue but held that at least where the Corporations Act provided ASIC and the corporation with a right to seek compensation, to the exclusion of other interested parties, for contravention of s 182(1) which protects the corporation’s interests, s 1324(10) did not empower the Court to award damages to a creditor for loss which was merely derivative of the corporation’s loss.[109] He said that s 1324(10) did not empower the Court to award damages of any nature in favour of every person who is entitled to apply for an injunction.[110]
[109]Ibid, [33].
[110]Ibid, [34].
W&P Wilson and Moshel rely on Colorado where Black J considered an application to strike out a s 1324(10) damages claim. After referring to McCracken, Black J said:
[40] The Plaintiffs also contend that the claim under s 1324(10) of the Corporations Act is not properly arguable, relying on the decision of the Court of Appeal of the Supreme Court of Queensland in McCracken v Phoenix Constructions (Qld) Pty Ltd. Mr Harper contended, consistent with the reasoning of the Court of Appeal of the Supreme Court of Queensland in Phoenix, s 1324(10) had no application in the absence of claim for an injunction against Mr Tan and Ms Helen Huang. I accept that the decision in Phoenix Constructions (Qld) Pty Ltd above would be binding upon me, as a Judge sitting at first instance, and is also likely to be followed by a Court of Appeal in this State by reason of the importance given to uniformity of decision-making in respect of the Corporations Act.
[41] However, I do not consider that the question of the availability of a claim under s 1324(10) of the Corporations Act can be said to be closed beyond argument. The scope of that section and its predecessors has been a matter of considerable controversy in the case law; a wider construction was given to predecessors of s 1324(10) in early case law, before the narrower construction came to prevail; and there is substantial body of academic commentary contending that the wider construction should be given to that section. It seems to me that, at least in the High Court of Australia, the wider construction of that section for which Ms Huang contends would be open to be adopted. If the Court now strikes out a claim which advances that wider construction, that would deny the First and Second Defendants the ability to contend for that wider construction at least at the appellate level, or at least run the risk that, if an appellate Court were to take a wider view of the scope of the section, the matter would then have to be remitted for a further hearing at first instance in the absence of factual findings as to the claim that had been struck out. (citations omitted)
As indicated in Colorado, the plaintiffs, relying on McCracken, argued that a claim for damages against a defendant under s 1324(10) of the Corporations Act was not open in the absence of a claim for an injunction against the defendant. Black J accepted that he would be bound by McCracken but said that as the scope of s 1324(10) was a matter of some controversy and its predecessor was given a wider construction, the High Court of Australia may give the section a wider construction. Black J said that if the claim were struck out then the plaintiffs would be denied the opportunity to test the matter at an appellate level.[111]
[111]Ibid, [41].
Annesley argued that it was wrong to suggest that merely because a construction had not been finally determined by the High Court, the claim should be permitted to proceed. Annesley argued that Colorado was a special case where the plaintiffs’ case was one for damages, the facts were going to be heard and the issue was whether the company could also be liable for damages as a concurrent wrong doer. I accept that Colorado was an unusual case.
I accept that if this were a trial of the relevant issues I would be bound by the decision in McCracken. Nevertheless, the words of s 1324(10) do not exclude the possibility of a claim for damages by a person other than ASIC or the company itself. The construction found by the Queensland Court of Appeal relied upon an examination of other provisions of the Corporations Act and the general law relating to the rights of creditors as against the debtor company. Colorado recognised that the law on s 1324(10) had not been settled. In those circumstances, I am not prepared to deny W&P Wilson and Moshel the opportunity to place their damages claim under s 1324(10) before the Court in the ordinary way.
Accordingly, I will not refuse leave for W&P Wilson and Moshel to pursue a claim for damages against Annesley under s 1324(10) of the Corporations Act.
2. The conspiracy claim
Annesley submits that the civil tort of conspiracy claim against him in paragraphs [70]-[72] should not be permitted to proceed. The claim alleges that each of Annesley, Fleurie, Collins, Constable and APFG and others presently unknown, have combined together by agreement to commit an unlawful act with the intention, actual or constructive, of harming the Wilsons’ and Moshel’s economic interests in the sand mining joint venture.[112]
[112]Counterclaim, particulars [70].
The unlawful acts particularised are the actionable conduct of Annesley, Fleurie, Constable and APFG in breach of s 181 and s 182 of the Corporations Act, the breach of the JVA by Annesley, and Fleurie, Constable and APFG’s inducement of Annesley’s breach of contract.[113]
[113]Ibid.
I am prepared to allow the claim against Annesley based on s 181 and s 182 to proceed. Annesley’s first objection in respect of the conspiracy claim is simply that the claim must fall away once the s 181 and s 182 claims have been disallowed. As the s 181 and s 182 claims are allowed to proceed, there is no basis for the objection to the conspiracy claim. Accordingly, I am also prepared to allow the conspiracy claim to proceed.
Second, Annesley submits that the pleading as to ancillary liability on the part of Fleurie, Constable and APFG is wholly deficient. Annesley submits that s 79 of the Corporations Act defines the circumstances in which a person is “involved” in a contravention. Those circumstances include where a person is “in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention.”
Annesley says that this is language which is employed in a variety of other statutory contexts including s 75B of the Trade Practices Act 1974 (Cth), the authorities on which have been said to be applicable to cases arising under the Corporations Act.[114] Annesley refers to ASIC v Australian Investors Forum Pty Ltd (No 2)[115] where Palmer J noted that “aiding, abetting counselling or procuring” have the same meaning in s 79 of the Corporations Act as they have at common law.
[114]HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633, [15].
[115](2005) 53 ACSR 305.
In my opinion, for reasons I give below the pleaded facts, if established, do permit the necessary degree of knowledge on the part of Fleurie, Constable and APFG to be inferred. Further particulars can be sought if required. Suffice to say that I do not accept that the arguments of Annesley on this ground are sufficient to deny W&P Wilson and Moshel the right to pursue their claim against Annesley.
Annesley submits that Fleurie is also alleged to be a party to the conspiracy and there are certain elements that have to be established against all the conspirators for the claim to be sustainable and if there is a deficiency of particularisation of knowledge in relation to Fleurie, then the pleading must fail also against Annesley. Annesley relies on Fleurie’s submissions that insufficient particulars of knowledge have been provided in respect of Fleurie. As it is, for the reasons addressed below, I have found that sufficient particulars have been provided to sustain an allegation of conspiracy against Fleurie. I therefore reject this ground of objection by Annesley.
Thirdly, Annesley says that certain allegations are made against him for which particulars of the conspiracy are not provided. He takes as an example the allegation in paragraph 70(aa) that on or about 27 November 2012, and in breach of the injunctions granted on 20 and 21 November 2012, Annesley, then the sole shareholder of PRH resolved to voluntarily wind up PRH under s 497 of the Corporations Act by way of creditors’ voluntary winding up. There are no particulars that this action was part of the conspiracy.
I accept that objection. As I am allowing the pleading to go forward, I consider that the proper way to deal with the objection is to direct that W&P Wilson and Moshel provide further and better particulars of this allegation and how it constitutes the civil tort of conspiracy.
3. Do W&P Wilson have standing to sue?
Thirdly, Annesley submits that W&P Wilson and Moshel do not have standing to complain about the actions of Annesley as the proper plaintiff is PRH. In Hayim v Citibank,[116] Lord Templeton said that “a beneficiary has no cause of action against a third party save in special circumstances which embrace a failure, excusable or inexcusable by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate.”
[116][1987] 1 AC 730, 748.
Annesley contends that it is PRH that has lost the right to mine the land and it is the proper plaintiff.
W&P Wilson and Moshel allege that they were each a member of the sand mining joint venture and that PRH conducted the sand mining joint venture on trust for its members. W&P Wilson and Moshel also contend that Annesley was a member of the sand mining joint venture. Clearly, W&P Wilson and Moshel have standing to sue in respect of actions by Annesley that breach Annesley’s duties as a member of the sand mining joint venture.
As to the claims that W&P Wilson and Moshel make as beneficiaries of the trust under which PRH held the joint venture assets, in Alexander v Perpetual Trustees WA Ltd[117] Gleeson CJ, Gummow and Hayne JJ considered the circumstances where a beneficiary might bring proceedings where the wrong complained of was rightly the cause of action of the trustee. They recognised a right to bring proceedings in “special circumstances” which included where the trustee was not ready and willing to take the proper proceedings against a third party. Their Honours said:
In Ramage v Waclaw, Powell J reviewed many of the authorities, including the judgment of James LJ in Sharpe v San Paulo Railway Co, which support the proposition that, where relief is sought in the equitable jurisdiction of the Supreme Court against a third party, a beneficiary may sue in his own name, joining as defendants the trustee and any other beneficiaries, but only where there are “special circumstances”. One reason for this restriction, given by James LJ in Sharpe, is the avoidance of the vexation of the third party by multiple suits. Powell J held that the "special circumstances" were not confined to collusion between the trustee and the third party, or the insolvency of the trustee. But the general principle is that stated by Scott:
“The interests of the beneficiaries of a trust are protected against a third person acting adversely to the trustee through proceedings brought against him by the trustee and not by the beneficiaries. As long as the trustee is ready and willing to take the proper proceedings against the third person, the beneficiaries cannot maintain a suit against him.”
Minters referred to statements of principle by the Privy Council in Hayim v Citibank NA. Their Lordships referred to some of the authorities discussed by Powell J in Ramage, including Sharpe, and concluded that “special circumstances” included a failure by the trustees to perform their duty to the beneficiaries to protect the trust estate or the interests of the beneficiary therein. Nothing there said assists the arguments by Minters that the plaintiffs had the necessary entitlement for Pt IV of the Act. [118]
[117](2003) 216 CLR 109.
[118]Ibid, [55] – [56] (citations omitted).
In Ramage v Waclaw[119] Powell J of the Equity Division of the Supreme Court of New South Wales dealt with a proceeding by a beneficiary under a will to compel the trustee to protect his interest in the estate. His Honour said that the true position with regard to the beneficiaries’ right to bring an action in their own name was accurately stated in the fourth edition of Jacobs’ Law of Trusts in Australia.[120] In the current edition of Jacobs’ Law of Trusts in Australia,[121] the learned authors state:
To Compel the Performance of the Trust
The beneficiaries, or any one of them, may institute proceedings to compel the performance of the trustee’s duty or to protect their beneficial interest in the trust property even though that interest is only contingent. A failure by the trustee to carry out any particular duty will, of course, be a breach of trust, giving rise to a right of action by a beneficiary and, if sufficiently serious, will afford grounds for the removal of the trustee and the appointment of a new trustee.
Normally this remedy will provide adequate protection to a beneficiary. The general rule is, ‘As long as the trustee is ready and willing to take the proper proceedings against the third person, the beneficiaries cannot maintain a suit against him’. But where a trustee refuses to institute proceedings against a debtor or to recover trust property, the beneficiary may wish to institute proceedings either in the beneficiary’s own name or in the name of the trustee. The rule here is that where relief is sought in the equitable jurisdiction of the Supreme Court against a third party, a beneficiary may sue in his or her own name, joining as defendants the trustee and any other beneficiaries, but only where there are ‘special circumstances’. Finn J has persuasively reasoned that, provided the ‘exceptional’ or ‘special’ circumstances requirement is met, the same holds for claims at common law, in a judicature system designed to avoid multiplicity of suits. If the circumstances are not exceptional or special, the beneficiary’s remedy is to sue the trustee for the execution of the trust and then apply for the appointment of a receiver, and for leave to sue in the name of the trustee or of the receiver. [122]
[119](1988) 12 NSWLR 84.
[120]Ibid, 91.
[121]JD Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 7th ed, 2006).
[122]Ibid, [2303] (citations omitted).
W&P Wilson and Moshel contend that it is obvious that PRH will not take proceedings against its sole director Annesley or seek to take proceedings against the other defendants by counterclaim who are alleged to be colluding with Annesley to damage W&P Wilson and Moshel’s equitable interests in the sand mining joint venture. I accept that proposition so far as it goes at this stage. It will be a matter that can be resolved at the trial of the proceeding.
4. Alleged breaches of injunctions
In paragraphs 43, 46, 47, 48, 50 and 57 of the proposed further amended counterclaim W&P Wilson and Moshel allege that Annesley breached various injunctions relating to PRH.[123] Annesley says that whether Annesley breached the injunctions (as distinct from the alleged underlying conduct) is irrelevant to any of the causes of action alleged. Further, Annesley contends that it would probably have to plead a non-responsive defence.
[123]Transcript, 56.
Annesley submits that the allegations of breach do not form part of the actionable conduct in paragraph 66, the breach of fiduciary duty in paragraph 73, the breach of the JVA in paragraph 88 or the conspiracy claim. Annesley says that the particulars are the substance of what has to be made out to succeed on the conspiracy claim, being the involvement of all of the defendants by counterclaim. Annesley says that the particulars do not refer to the alleged breaches of the injunctions.
Annesley says that paragraph 70(aa) illustrates the point he wishes to make. That paragraph includes Annesley’s breach of injunctions as part of the alleged civil tort of conspiracy. On the other hand, that action (breach of injunction) is not one of the actions that is particularised under paragraph 70 as being part of the combining together by agreement, part of the unlawful actions, part of the intention to injure, or otherwise. Annesley submits that the plea of the breach of the injunctions should not be permitted to remain part of the alleged conspiracy.
Annesley submits that the alleged breaches of the injunctions are not part of the alleged breach of fiduciary duty, the actionable conduct, or the alleged breach of the sand mining joint venture. Accordingly, Annesley submits that paragraphs 43, 46, 47, 48, 50 and 57 and the correlative sub-paragraphs should not be allowed to be pleaded.
Paragraph 70 lists 32 examples of Annesley, Fleurie, Collins, Constable, APFG and others presently unknown engaging in the tort of conspiracy (subparagraphs (a)-(ff)). The structure of paragraph 70 is that each subparagraph is an example of the alleged conspirators combining by agreement to commit unlawful acts with the intention to injure.
Subparagraph 70(aa) is such an example. The particulars flesh out the pleaded examples.
As the pleading stands, 70(aa) is not particularised. It is therefore not clear how Fleurie, Collins, Constable and APFG conspired in Annesley’s winding up of PRH. It is not clear, therefore, how the winding up of PRH is an unlawful act for the purposes of the tort claim. This can be cured by asking for further and better particulars.
If the plaintiffs by counterclaim provide particulars of Fleurie, Collins, Constable and APFG conspiring with Annesley to wind up PRH despite the injunctions, then that action becomes a separate unlawful act for the purposes of the tort of conspiracy. Then the unlawful acts for the purposes of the tort claim would be breach of fiduciary duty, breach of the JVA, and breach of the injunction.
Objections of Fleurie, the third defendant by counterclaim[124]
[124]Transcript, 58.
Fleurie submits that a central allegation against it is of knowledge of alleged activities which are said to contravene the sand mining joint venture.[125] Fleurie claims that insufficient particulars of knowledge are pleaded.
[125]Transcript, 63.
It is convenient to consider relevant authorities on particulars and the relevant Rules.
Rule 13.10(1) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (the Rules) provides that every pleading shall contain the necessary particulars of any fact or matter pleaded. Particulars must be given if necessary to enable the opposite party to plead, or to define the questions for trial or to avoid surprise at trial: r 13.10(2). Every pleading shall contain particulars of any condition of the mind including knowledge or notice: r 13.10(3)(b).
In Ristevski v Kyriacou & Zard Constructions Pty Ltd & Law Institute of Victoria [126] the defendant, a solicitor, had been sued in negligence. She joined her insurer as a third party. The insurer denied liability on the ground that the solicitor had been acting dishonestly or fraudulently. The solicitor alleged that the insurer had not given sufficient particulars of the fraud or dishonesty and the defence should be struck out.
[126](Unreported, Supreme Court of Victoria, Harper J, 5 August 1997) (Ristevski).
Harper J said:
It may also very well be that a person who suspects fraud, and wishes to allege it, is unable to point to any more than mere speculation as a means of supporting the allegation. Hard as it may be for such a person to appreciate the fact, it is nevertheless inappropriate to allow such an allegation to go forward to trial if the person making the allegation does not have sufficient evidence to support it, then sooner the allegation is removed from the list of issues between the parties, the better. The Court should not be concerned with hunches, no matter how reluctant litigants might be to put their hunches aside. In such cases, the Court should act to save the subject of an allegation of fraud which cannot be substantiated “from the vexation of the continuance of useless and futile proceedings”: General Steel Industries Inc v Commissioner for Railways (NSW).[127]
Having acknowledged the force of that point, however, one must also bear in mind the nature of the allegation of fraud. Such an allegation will almost invariably only be made out if the appropriate inference can be drawn. An inference is a deduction from known facts. An allegation of fraud must therefore state the facts upon which the inference is sought to be drawn. Once that is done, then it is for the tribunal of fact to determine whether or not the inference is the only inference reasonably open (as it must be if it is to form an essential link in a chain of reasoning leading to a conviction on a criminal charge) or whether (in a civil case) the inference is more probable than not. But the process of reasoning itself cannot be the subject of pleading; all the pleading can do is to set out the facts upon which the inference might be drawn.
….
The first defendant says that all the material allegations of fact pleaded in the amended defence support an inference that the first defendant was, at worst, negligent. Alternatively, she argues that, put at their highest, those allegations are at least as consistent with negligence as they are with fraud. This being so, the ultimate tribunal of fact could not, after trial, find fraud because the requirement to prove fraud on the balance of probabilities would not be met.
I am not convinced by this argument. To the contrary, it seems to me that the material facts pleaded in the amended defence would if proved form an ample basis upon which an inference of fraud or other dishonesty might be proved.[128] The amended defence includes allegations which, if made out at the trial, would establish a motive: a desire to retain as clients members of a group of companies, including the second defendant, which might put considerable work [her way]…
…
The third party might or might not be able to prove these allegations at the trial. The trial judge might or might not be prepared to find in them an inference that the first defendant acted fraudulently, or otherwise dishonestly. But the point is that, once proved, the pleaded facts would be capable of supporting the inference upon which the third party relies; and the proper inference to be drawn from the pleaded facts is one which ought not to be determined as a pre-trial pleading exercise, but rather should only be determined at the trial itself. The inference properly to be drawn must be seen against the whole of the evidence as given viva voce with the benefit of testing under cross-examination. Indeed the drawing of inferences is pre-eminently a matter for the ultimate tribunal of fact after hearing and seeing the witnesses who are called to give oral evidence. In a case such as this, it is the evidence given at trial which would almost certainly tip the scales one way or the other. Such evidence, in the main, cannot form part of the pleadings... [129]
[127](1964) 112 CLR 125, 130 (Barwick CJ).
[128]My emphasis.
[129]Ristevski, 9-10.
From this case certain propositions can be established in respect of pleading knowledge. The allegation of knowledge will normally be established by inference drawn from established facts. The claim must plead facts from which the inference of knowledge might be drawn. If such facts are particularised it is up to the tribunal of fact to determine whether in the light of all the evidence the inference of knowledge should be drawn. If the facts particularised might not give rise to an inference of knowledge then the claim is merely speculation and should not be permitted to proceed. The process of reasoning from the facts to the inferences cannot be the subject of the pleading. All the pleading can do is set out the facts upon which the inference might be drawn. In my opinion, these principles should be applied in this case.
In Montclare v Metlife Insurance Limited,[130] Harper J again addressed whether sufficient particulars of a mental state were provided. He referred to his earlier decision in Ristevski. Previously, Beach J in Freehouse Pty Ltd v Middletons, Moore & Bevins[131] had held that particulars of knowledge were not required if they involved the insertion of evidence into the pleading. Harper J respectfully disagreed and confirmed the view he had expressed in Ristevski on the adequacy of particulars.
[130](2009) 29 VR 20.
[131][2001] VSC 156.
In the case before him he considered that the impugned particulars signified that the defendant was relying on not much more than a hunch. He permitted the matter to go forward if the particulars were amended.
Claims against Fleurie
The first claim for relief against Fleurie is that Fleurie has been involved in the contraventions by Annesley of s 181 and s 182 of the Corporations Act within the meaning of s 79 of the Corporations Act.[132] In substance, the alleged contraventions by Annesley are that he breached his duties as a director of PRH by his actions in repudiating the JVA and taking control of the business and assets of the sand mining joint venture, together with Fleurie, Constable and APFG, to the exclusion of W&P Wilson and Moshel.[133]
[132]Counterclaim, [67].
[133]Ibid, [66].
The second claim for relief against Fleurie is based on the civil tort of conspiracy. It is alleged that during the period of 14 February 2012 to date, each of Annesley, Fleurie, Collins, Constable and APFG (and others presently unknown) have combined together by agreement to commit an unlawful act with the intention, actual or constructive, of harming W&P Wilson and Moshel’s economic interest in the sand mining joint venture.[134] The unlawful acts alleged are: (i) the actionable conduct of Annesley, Fleurie, Constable and APFG in breach of ss 181 and s 182 of the Corporations Act as alleged; (ii) the breach of the JVA by Annesley; and (iii) Fleurie, Constable and APFG’s inducement of Annesley’s breach of contract. The particulars of intention to injure and the defendants’ state of mind are alleged to be the intention, actual or constructive, of Annesley, Fleurie, Constable and APFG to harm W&P Wilson and Moshel’s economic interest in the JVA. It is alleged that such intention may be inferred from the conduct of Annesley, Fleurie, Constable and APFG. That conduct, it is claimed, was aimed or directed at the assets and business of the sand mining joint venture, and thus W&P Wilson and Moshel’s economic interest in the sand mining joint venture. It is then claimed that it was reasonably foreseeable that the conduct would injure W&P Wilson and Moshel’s economic interests in the venture, which it did in fact do.[135]
[134]Ibid, [70].
[135]Ibid, particulars [70].
The third claim for relief against Fleurie is that of knowing receipt of trust property by Fleurie.[136] The allegation is that Fleurie, with actual or constructive knowledge of the dishonest and fraudulent design of Annesley, received some part of the trust property of PRH. The property included the Walker land, Nerlane land and other assets of the sand mining joint venture held by PRH.
[136]Ibid, [77].
The fourth claim for relief against Fleurie is that of knowing assistance in the breach of fiduciary duty by Annesley.[137] It is alleged that Fleurie had knowledge of Annesley’s dishonest and fraudulent breaches of the fiduciary duties in that Fleurie:
[137]Ibid, [78].
(a) had actual knowledge; or
(b) wilfully shut its eyes to the obvious; or
(c) wilfully and recklessly failed to make such inquiries as an honest and reasonable person would make; or
(d) had knowledge of circumstances which would indicate the facts to an honest and reasonable person; or
(e) had knowledge of circumstances which would have put an honest and reasonable man on inquiry.
Particulars of knowledge about the sand mining joint venture
What particulars do W&P Wilson and Moshel give that Fleurie knew of the JVA when PRH agreed to sell the Walker land to Fleurie in August 2012 and when PRH engaged in the other pleaded actions relating to the Nerlane land, the Jeffrey land and the Westhead land?
The allegations are contained in the particulars to paragraph 70 and in various other parts of the pleading. They appear to be as follows:
(a) In or about early February 2012, Annesley sought and received financial advice from Constable and his controlled entities, Quick Fix Solutions Pty Ltd and APFG, about Annesley’s business affairs including PRH and the sand mining joint venture. Based on this, the Court is asked to infer that Constable and APFG knew of the sand mining joint venture in early February 2012 and Annesley’s intention to terminate the JVA.
(b) Constable was a director and secretary of Fleurie from 5 April 2010 to 1 July 2011 and a director again for one day on 1 May 2013; and was the sole shareholder of Fleurie from 5 April 2010 to 9 December 2011. The particulars refer to the ASIC current and historical records for Fleurie. Those records disclose that none of the shareholders beneficially owned the shares they held. The records also disclose that other directors were appointed for merely one day. The records do not disclose who the beneficial shareholders are or were at the relevant times.
(c) On or about 14 February 2012, Annesley gave directions to Moshel that resulted in Annesley becoming the sole shareholder, director and secretary of PRH.[138]
[138]Ibid, [70(a)].
(d) Constable advised Annesley:
(i) to approach Constantine and Bryantcraft for finance and to cause PRH to execute an agreement with Bryantcraft under which PRH charged all of its assets and lands, including the Walker land, to Bryantcraft, which PRH did in February 2012; [139]
[139]Ibid, [70(c)].
(ii) to cause PRH to execute an agreement with APH, then under the sole control of Annesley, charging all its assets and lands to APH, which PRH did in February 2012;[140]
[140]Ibid, [70(d)].
(iii) to cause APH to execute a caveat over the Walker land claiming an interest as mortgagee, which it did in February 2012;[141]
[141]Ibid, [70(e)].
(iv) to cause PRH to lodge a caveat over the Nerlane land on behalf of Annesley and PRH, which it did on or about 20 June 2012;[142]
[142]Ibid, [70(g)].
(v) to cause APH to lodge the APH caveat over the Walker land and on behalf of Annesley and APH, which APH did on 2 October 2012.[143]
[143]Ibid, [70(o)]
(e) Constantine is a known business associate of Constable.
(f) During the period from 27 April 2012 to 19 December 2012, Grossi and Nerlane (Land) Pty Ltd received financial advice from Sandy Constantine and the firm of chartered accountants Bryant and Bryant.[144] The advice included advice about Grossi’s business affairs including the sale of the Nerlane land to PRH which was to settle on 31 August 2012 and the plans of PRH and the sand mining joint venture. Based on this plea the Court is asked to infer that Constantine and Grossi knew of the JVA.[145]
[144]Ibid, [28].
[145]Ibid, particulars [70].
(g) Constantine advised Grossi to, inter alia, enter into the Second Grossi Mortgage with Nerlane (Land) Pty Ltd.[146] The Second Grossi Mortgage was entered into on or about 1 June 2012.[147]
[146]Ibid, particulars [70].
[147]Ibid, [28].
(h) Constable was a former shareholder, director and secretary of Fleurie and APFG. Given the relationship of each company with Constable, it is alleged that APFG and Fleurie were related entities and/or connected entities and/or related body corporates to each other within the relevant meanings of ss 9, 50AAA and 54B of the Corporations Act.[148] It will be recalled that it is alleged that APFG was controlled by Constable.[149]
[148]Ibid, [70].
[149]Ibid.
(i) At a time presently unknown but well prior to August 2012, Constable introduced Annesley to Fleurie and thereafter Annesley, Fleurie, Collins, Constable and APFG and others presently unknown, resolved to take control of the business and assets of the sand mining joint venture, to the exclusion of W&P Wilson and Moshel, through the means of the Fleurie/APFG joint venture agreement and the related acts referred to.[150]
[150]Ibid.
(j) It is presently not known when Annesley, Fleurie, Collins, Constable and APFG and others acting in concert with them first commenced to plan the Fleurie/APFG joint venture agreement. But it can be inferred from the purported date of the APFG nomination form, being 20 August 2012, and the fact that substantial moneys were to be invested under the Fleurie/APFG joint venture agreement, that planning commenced well prior to August 2012.[151]
[151]Ibid, particulars [70].
(k) On 24 September 2012, Fleurie and APFG executed the Fleurie/APFG joint venture agreement by which Fleurie and APFG would carry on the business of sand mining on the Nerlane, Walker and Westhead lands, conditional upon (a) the Nerlane, Walker and Westhead lands being acquired by Fleurie and APFG, and (b) Fleurie and/or APFG obtaining a sand mining Work Authority from the DPI over the Nerlane, Walker and Westhead lands.[152] Annesley was not a party to that written agreement.[153]
[152]Ibid, [36].
[153]Ibid, particulars [36].
(l) In or about August 2012 and prior to the date of the Fleurie/APFG joint venture agreement, PRH, then under the control of Annesley, had already agreed to sell the Walker land to Fleurie for the sum of $860,000, which sum was substantially below the then market value of the Walker land of approximately $1,450,000.[154]
(m) It can be inferred, by reason of the precondition under the Fleurie/APFG joint venture agreement that Fleurie was to be the registered proprietor of the Nerlane land, that when Annesley, Fleurie, Collins, Constable and APFG first commenced to plan the Fleurie/APFG joint venture agreement, Annesley, Fleurie, Collins, Constable and APFG (and others acting in concert with them) were aware that PRH would not complete the Nerlane land purchase agreement and Fleurie would be free to purchase the Nerlane land.[155]
[154]Ibid, particulars [70], [32].
[155]Ibid, particulars [70].
If these allegations are made out, in my opinion, a Court may infer that Fleurie knew of the JVA well prior to the formal signing of the Fleurie/APFG joint venture agreement and knew of and was a party to an agreement with Annesley, Constable and APFG to take control of the business and assets of the sand mining joint venture to the exclusion of W&P Wilson and Moshel.[156] It is also my opinion that if the facts alleged are made out a Court may infer the alleged knowledge of Fleurie relied on by W&P Wilson and Moshel to make out the four causes of action alleged against Fleurie as set out above.
[156]Ibid, particulars [66].
There are several reasons for this conclusion. First, in my opinion, the nomination of APFG as purchaser of the Westhead land implies that APFG had previously requested that PRH do so. APFG subsequently executed a written joint venture agreement with Fleurie that was conditional on APFG acquiring the Westhead land. It is a reasonable inference that such a term was agreed on as there were grounds for Fleurie to believe that Fleurie and APFG were able to buy the Westhead land.
Secondly, in my opinion, a tribunal of fact might infer after hearing all the evidence that Constable was an agent of Fleurie in 2012 despite not being registered as a shareholder or a director in 2012. The Court may do so on the basis of Constable’s association with Fleurie in 2011 and in 2013. The Court may infer that Fleurie possessed Constable’s knowledge. This inference might be supported by the uncertainty surrounding the beneficial ownership of Fleurie and the odd practice of appointing directors for one day. (Of course, uncertainty may support an inference going the other way. That, however, is a matter for the trial).
Thirdly, if W&P Wilson and Moshel establish the allegation that Constable introduced Annesley to Fleurie, that tends to confirm the association of Constable with Fleurie. It carries with it the inference that Constable, who on the allegations was the architect of the scheme to deprive the sand mining joint venture of its assets and business, told Fleurie of the advice that he had given to Annesley and the role that Fleurie would play in carrying out that advice.
In my opinion, the particulars provided establish that the allegations of knowledge on the part of Fleurie go beyond being a mere hunch and if established may lead a Court to infer the relevant knowledge of Fleurie as alleged. As discussed above, knowledge may be established by inference. It is not necessary for the pleading to plead the process of reasoning from the particulars to the finding of knowledge. Further, it is only necessary to plead facts from which knowledge might be inferred. It is not necessary to plead facts from which knowledge must be inferred. Whether knowledge is to be inferred is a matter for trial, and is to be determined after considering all the evidence.
In my opinion, insofar as Fleurie is concerned, the pleading has pleaded sufficient particulars of knowledge on the part of Fleurie for leave to be granted to W&P Wilson and Moshel to file and serve the amended counterclaim. That is not to find that further particulars may not be sought by Fleurie.
Conclusion
For the reasons given, I propose to grant W&P Wilson and Moshel leave to file the second proposed amended counterclaim. I reserve the right of the defendants to the counterclaim to seek further and better particulars.
Joinder of Constable and APFG
By summons dated 3 April 2014, the plaintiffs by counterclaim seek leave to join Douglas Constable and APFG as the sixth and seventh defendants to the counterclaim relying on r 9.06(b)(i) and (ii) of the Rules.
At any stage of a proceeding the Court may, under r 9.06(b)(i), order a person be added as a party if the person’s presence is necessary to ensure that all questions in the proceeding are effectively and completely determined and adjudicated upon. Rule 9.06(b)(ii) provides that the Court may order that a person be added as a party, namely a person between whom and any party to the proceeding there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding.
Under this Rule the question to be determined between the party seeking the addition of a person as party and that person should exist already: Spelling Goldberg Productions Inc v BPC Publishing Ltd.[157]
[157][1981] RPC 283.
The application is supported by the affidavit of John Leonard Whelan the solicitor for the plaintiffs by counterclaim. Under r 9.07, the affidavit is required to show the interest of the person to added in the questions in the proceeding or the question to be determined as between that person and any party to the proceeding. Mr Whelan identifies allegations against Douglas Constable and APFG raised in the proposed counterclaim that the plaintiffs by counterclaim wish to serve upon Douglas Constable and APFG as follows.
Constable and APGF have, within the meaning of s 79 of the Corporations Act, been involved in the contraventions by Annesley of ss 181 and s 182 of the Corporations Act. Unless restrained, Constable and APFG will continue to engage in the actionable conduct. In the circumstances, the plaintiffs by counterclaim are entitled to an injunction restraining Constable and APFG from the carrying out of the actionable conduct, and additionally, or in substitution for the grant of the injunction, an order that Constable and APFG pay damages to the plaintiffs by counterclaim.
Under the heading of “civil tort of conspiracy”, Mr Whelan deposes that during the period of 14 February 2012 to date, each of Annesley, Fleurie, Collins, Constable, APFG and others presently unknown, have combined together to commit an unlawful act with the intention, actual or constructive, of harming the Wilsons’ economic interests in the sand mining joint venture. Alternatively, each of Annesley, Fleurie, Collins, Constable, APFG and/or others presently unknown, have combined together to assume control of the sand mining joint venture, through acts not themselves unlawful, but which were done with the sole or predominate purpose of injuring the Wilsons’ economic interest in the sand mining joint venture. By reason of these matters, the plaintiffs by counterclaim have suffered loss and damage.
Under the heading of receipt of trust property by Constable and APFG (the first limb of Barnes v Addy), Mr Whelan deposes that the proposed counterclaim alleges that Constable and APFG have, with actual or constructive knowledge of the dishonest and fraudulent designs of Annesley, received some part of the trust property of PRH.
Under the heading of knowing assistance in breach of trust or fiduciary duty (the second limb of Barnes v Addy), Mr Whelan deposes that the proposed counterclaim alleges that Constable and APFG have knowingly assisted Annesley in Annesley’s dishonest and fraudulent breaches of trust and/or Annesley’s breaches of fiduciary duties. Alternatively, the counterclaim alleges that Fleurie, Constable and APFG acted dishonestly in assisting Annesley in Annesley’s breaches of trust and/or Annesley’s breaches of fiduciary duties.
Under the heading of entitlement to a constructive trust, equitable compensation and/or alternatively an account of profits, Mr Whelan deposes that the proposed counterclaim alleges that in all the circumstances referred to above, Constable and APFG are liable to account to the plaintiffs by counterclaim for any benefit they have received, or to make good the resulting losses suffered by the plaintiffs by counterclaim. Further, the plaintiffs by counterclaim seek orders for equitable compensation, and further and/or alternatively at their election, an account of profits as against Constable and APFG.
Mr Whelan deposes that he is instructed by Peter Wilson that there is a proper basis for each and every allegation of fact raised in the proposed counterclaim as required by s 42 of the Civil Procedure Act.
Mr Whelan deposes that on the factual material available to him, Douglas and APFG are persons who ought to be joined as defendants to the counterclaim or whose presence before the Court is necessary so as to ensure all questions in this proceeding are effectually and completely determined and adjudicated upon. Further and alternatively, Mr Whelan deposes that Douglas Constable and APFG are persons between whom (and other parties to this proceeding, including the plaintiffs by counterclaim), there may exist a question arising out of, or relating to or connected with, any claim in the proceeding which it is just and convenient to determine as between Douglas Constable and APFG and other parties to this proceeding.
Discussion
In a nut shell the issues in the proposed counterclaim revolve around whether Annesley, Constable, APFG and Fleurie knew of the sand mining joint venture but, nevertheless, improperly took control of the assets and undertaking of the sand mining joint venture. The allegations are that this was done pursuant to the advice of Constable and that it was effected, substantially, by a new joint venture between Fleurie and APFG. In my opinion, the issues raised by the plaintiffs by counterclaim in relation to Annesley and Fleurie rely on the same or similar allegations as those sought to be made against Constable and APFG. In my view, it is convenient to determine those issues as between the plaintiffs by counterclaim and Constable and APFG as well as between the plaintiffs by counterclaim and Annesley and Fleurie. I also consider that the presence of Constable and APFG is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon. Accordingly, the Court’s discretion to add Constable and APFG as parties has been enlivened.
At this stage pleadings have not closed. In fact, a defence to the proposed counterclaim has not yet been delivered, as I have not as yet given leave to the plaintiffs by counterclaim to file and serve the proposed counterclaim (although at this stage I propose to do so). I do not consider that any prejudice will be suffered by joining Constable and APFG at this stage of the proceeding.
Accordingly, I propose to order that Douglas Constable and APFG be added as parties to the proceeding by being joined as defendants to the plaintiffs’ counterclaim.
Orders
For the above reasons, I propose to order that:
1 Leave be granted to the plaintiffs by counterclaim to file and serve the second proposed amended counterclaim;
2 Douglas Constable and APFG be added as parties to the proceeding as the sixth and seventh defendants to the counterclaim.
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