Repose Nominees Pty Ltd v Phillip Capital Limited
[2020] VCC 1453
•16 September 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-01025
| REPOSE NOMINEES PTY LTD | Plaintiff |
| v | |
| PHILLIP CAPITAL LIMITED | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 7 September 2020 | |
DATE OF JUDGMENT: | 16 September 2020 | |
CASE MAY BE CITED AS: | Repose Nominees Pty Ltd v Phillip Capital Limited | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1453 | |
REASONS FOR RULING
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Ribbands | Koya & Co |
| For the Defendant | Mr A. Kirby | Wotton & Kearney |
HIS HONOUR:
1 I heard the trial in this matter over five days during August 2020. Near the conclusion of the trial, I commented to counsel for the plaintiff that a particular document to which he attached considerable significance in his closing submissions, while included in the court book, was not referred to in the statement of claim. I suggested that he and counsel for the defendant give the matter some thought, but I indicated that I thought it was preferable for the pleadings to better reflect the case that was run in court.
2 At the conclusion of final submissions, I revisited the issue. The plaintiff’s counsel said that, apart from clarifying the issue of the fiduciary duty alleged and the document at court book 646, he would also remove parts of the pleading which were now extraneous. This issue of extraneity arose either due to the plaintiff abandoning the point (for example, exemplary and punitive damages) or a lack of relevance to how the trial was run (for example, reliance upon the CHESS material).
3 I gave directions which specified a time for the plaintiff to amend its claim and serve a copy of the proposed pleading on the defendant. Unless within a specified time the defendant objected to the pleading, it was to stand as the plaintiff’s further amended statement of claim. If there were an objection which could not be resolved between the parties, then the matter would return to court.
4 The plaintiff served its proposed pleading and the defendant objected to it. Thus, on 7 September 2020, the court reconvened for argument about the amendment.
5 As a result of the hearing before me, it became apparent that the areas of disagreement between the parties might become more confined. Hence, I gave the parties some additional time after court to narrow their differences. The arrangement was that the plaintiff would file the final version of the proposed pleading by close of business on 8 September 2020 and I would adjudicate upon that version of the claim. The plaintiff duly filed a proposed further amended statement of claim the following day.
6 The latest version of the pleading deletes references to:
· the plaintiff retaining the defendant as its financial advisor and relying upon a CHESS sponsorship agreement between the plaintiff and a predecessor of the defendant.
· the defendant providing investment advice to the plaintiff or being the CHESS authorised agent of the plaintiff.
· the defendant breaching its retainer with the plaintiff by failing to properly supervise its employees to prevent 2UP Gaming PLC (“2UP”) shares being removed from the plaintiff’s account without lawful instructions and failing to put proper systems in place to prevent 2UP shares being removed from the plaintiff’s account without lawful instructions.
· a damages claim of $5 million in relation to the plaintiff’s 2UP shares.
· a claim for exemplary damages.
· a claim for punitive damages.
· a claim for unconscionable conduct in disregard of the defendant’s duties.
7 The defendant had no objection to these deletions. The defendant displayed the same attitude to the removal from the penultimate version of the pleading of the claims for breach of trust and negligence.
8 The main changes sought to be made by the plaintiff’s proposed pleading are as follows:
· the claim that the plaintiff retained the defendant as the custodian of its shares in relation to share trading in 2UP. The plaintiff relied upon the appointment and authorisation documents dated 16 September 2011 (CB 646) and 8 May 2012 (CB 660). The plaintiff also referred to the defendant taking custody and control of the plaintiff’s shares in 2UP by putting them into an omnibus account in the defendant’s name while recognising that the plaintiff had beneficial ownership of such shares.
· pursuant to a retainer from the plaintiff, the defendant effected a transfer of beneficial ownership of 5 million shares from 2UP to the plaintiff. The defendant continued to be the legal owner of those shares while recognising the beneficial ownership of the plaintiff.
· pursuant to a retainer between the plaintiff and the defendant, the defendant held the plaintiff’s shares in 2UP as custodian for the benefit of the plaintiff.
· the defendant was in a position of trust and responsibility vis a vis the plaintiff because at all times, the defendant had control of the plaintiff’s shareholding in 2UP.
· by removing 2UP’s shares from the plaintiff’s account without the consent of the plaintiff, the defendant breached its retainer and fiduciary duty to the plaintiff.
· the plaintiff’s damages flowing from the defendant’s breach of duty was $1.7 million, representing 34 cents per share.
9 The defendant objected to the amendment at the initial hearing about the pleading because of the prejudice which it claimed it would suffer if the amendment were allowed. I accept that the claims for negligence and breach of trust were new and, had the plaintiff not withdrawn them from the final version of the pleading, I would have disallowed them in any event.
10 The plaintiff made clear that it did not seek to expand the case which was run at trial or adduce new evidence. The plaintiff noted that the defendant in its case referred to the concept of “custodian”. The plaintiff submitted that the critical point was that the defendant had the power to deal with the plaintiff’s 2UP shares because, although the plaintiff was the beneficial owner, the shares were not registered in the omnibus account in its own name but in the name of the English custodian. The plaintiff alleged that, regardless of the legal label attached, the defendant could not deal with these shares, which the plaintiff beneficially owned, without its knowledge or consent.
11 When faced with the initial amendment, the defendant suggested that the prejudice was extensive because it raised new issues. It said that if it knew that it had to meet the case now advanced, it would have pleaded a different defence, adduced further evidence (including from the expert), and framed its case differently. To what extent these complaints applied to the latest version of the proposed pleading was a little unclear.
12 The defendant also raised an objection regarding the quantification of the plaintiff’s claim. Although the amended statement of claim in the court book particularised the damages in respect of the 2UP shares at $5 million, which represented a value of approximately $1.14 per share, the plaintiff when opening its case abandoned that quantification and said that the value of each 2UP share was between about 30 cents and 68 cents. During the trial, the defendant raised no objection to the plaintiff claiming a reduced amount. The quantification in the proposed pleading, which seeks damages on a valuation of 34 cents per share, falls at the lower end of the range raised in the opening. That being so, I do not regard this as an appropriate basis for disallowing the proposed amendment.
13 In final address, the defendant criticised the plaintiff for allegedly changing the formulation of the damages claim again. Counsel for the defendant argued that the plaintiff no longer relied upon off market sales in Australia for the purpose of attributing a value to the shares but relied upon trading data produced by 2UP. The defendant said that this material was not verified and the defendant did not have the opportunity to obtain evidence from its expert about the matter.
14 While the defendant complained about the plaintiff’s conduct, it did not object or apply to exclude the material or apply for an order that the hearing be adjourned to enable it to confer with its expert and if necessary, adduce further evidence. In the absence of such applications, I find that the defendant effectively acquiesced to the plaintiff’s conduct at trial. To that extent, it cannot complain now when it allowed the prior opportunity to pass. The real genesis of the defendant’s dissatisfaction with the plaintiff’s damages claim is not the proposed pleading but the plaintiff’s conduct of the trial.
15 A specific concern of the defendant appeared to be that the evidence, from its perspective, did not support the case sought to be pleaded. For example, the defendant said that it was not managing the plaintiff’s shares because it was not acting as a broker in the usual sense (T8). The defendant claimed that it was responsible for maintaining the sub-register in relation to off-market transactions involving the sale and purchase of 2UP shares but said that it was not a party to those transactions. The defendant submitted that, in those circumstances, I should not allow the amendment.
16 In my view, that objection is misconceived. For present purposes, the crucial question is “Does the amended pleading reflect the case run by the plaintiff at trial?”. Whether that case succeeds or fails depends upon the evidence and applicable law. If the pleaded case were found ultimately not to be supported by the evidence, that could constitute good reason for the claim to fail. But it is not a good reason for disallowing the amendment.
17 Apart from the above, the defendant also raised issues about case management and the principles regarding the re-opening of trials. Case management is not a major concern in the present case. No one could doubt that the circumstances in Aon Risk Services Australia Limited v The Australian National University[1] are significantly different to those in this case. Because the factual context is so different, the factors relevant to the exercise of the discretion are not so pressing against the grant of the amendment. The reason for the amendment is clear. The plaintiff does not seek to produce more evidence or submissions – it is content for the court to determine the outcome of the trial on the existing material. There should not, in my opinion, be any diminution in public confidence in the judicial system if the amendment is allowed. I accept that there has been some wastage and inefficiency in the use of the judicial and administrative resources of the court. I expected that counsel could resolve the pleading issue between them. However, that did not occur and, as a result, I and my associates have become rather more involved in the issue than I expected. I do not regard re-opening as a substantial issue where it is limited to the filing of the pleading.
[1] (2009) 239 CLR 175.
18 In determining this application I have also taken account of the requirements of sections 7-9 inclusive of the Civil Procedure Act2010.
19 I consider that the thrust of the plaintiff’s case at trial was clear. The plaintiff said that it authorised the defendant to deposit or transfer its assets into the omnibus account. The defendant, having done this in relation to the shares which the plaintiff owned in 2UP, later cancelled those shares at the direction of 2UP without the knowledge or consent of the plaintiff and without compensating the plaintiff. It was this dealing with the plaintiff’s property, mainly the 2UP shares, which was said to constitute a breach of fiduciary duty.
20 As noted above, whether or not the plaintiff’s allegations are correct is not decisive. From the defendant’s position at trial, I expect it would contest, inter alia, the proposition that the defendant acted wrongfully in changing the sub-register to accord with the instructions given to it by 2UP in relation to the plaintiff’s shares in the company.
21 In my opinion, the proposed pleading fairly represents how the plaintiff ran its case.
22 I accept that, if the defendant were expected to deal with allegations such as negligence and breach of trust, then it would very likely have wanted to plead a different defence and adduce further evidence. However, where the proposed pleading reflects the case which the plaintiff advanced, and the defendant met, at trial then I do not agree that the defendant suffers any, or any sufficient, prejudice which would warrant the refusal of the amendment.
23 Subject to hearing from the parties, I propose to now address the trial judgment. I currently see no need for any further evidence or submissions and propose to decide the case on the basis of the existing material.
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