Stuart v Mordialloc Sporting Club Inc

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2018 01124

BETWEEN

RAYMOND JOHN STUART	Plaintiff
v
MORDIALLOC SPORTING CLUB INC. (ARN A0027737R) & Ors (according to the attached schedule)	Defendants

JUDICIAL REVIEW AND APPEALS LIST

S ECI 2018 01223

BETWEEN

JOHN BARR INVESTMENTS PTY LTD (ACN 005 225 274)	Appellant
v
MORDIALLOC SPORTING CLUB INCORPORATED (ARN A0027737R)	Respondent

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JUDGE:	Randall AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	24 February 2020, 13 March 2020, and 25 March 2020
DATE OF RULING:	11 May 2021
CASE MAY BE CITED AS:	Stuart v Mordialloc Sporting Club Inc; John Barr Investments Pty Ltd v Mordialloc Sporting Club Inc
MEDIUM NEUTRAL CITATION:	[2021] VSC 244

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PRACTICE AND PROCEDURE – Pleadings – Application to file a further amended statement of claim – Rule 36.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Rule 36.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Rule 13.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Rule 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Claims made pursuant to the Associations Incorporation Reform Act 2012 (Vic) (‘the Act’) – Oppressive conduct pursuant to s 68 of the Act – Claims to set aside agreements relating to the sale of the club’s property pursuant to s 36 of the Act – Compensation pursuant to s 36 of the Act – Enforcement of rules pursuant to s 67 of the Act – Whether or not the proposed further amended statement of claim is embarrassing.

PRACTICE AND PROCEDURE – Application to join the proceeding – Rule 9.06(b) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Application to intervene in the proceeding – Whether or not the rights or liabilities of the proposed party are directly affected – Giving effect to the overarching purpose of the Civil Procedure Act 2010 (Vic) – Imposing conditions on joinder.

PRACTICE AND PROCEDURE – Application for costs of complying with subpoenas – Rule 42.11 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Rule 63.20.1 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Whether or not a subpoenaed person is entitled to costs of complying with a subpoena in circumstances where the subpoenaed person seeks to join the proceeding – Whether or not the costs claimed are reasonable – Whether or not costs ought to be taxed immediately.

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APPEARANCES FOR S ECI 2018 01124:	Counsel	Solicitors
For the Plaintiff	Mr W Stark	Mahons with Yuncken & Yuncken Lawyers
For the First Defendant	Dr A Hanak QC, with Dr E Kelly	Fitzpatrick Legal Pty Ltd
For the Second to Fifth Defendants	Ms K E Foley	Lander & Rogers
For the Sixth Defendant	Mr N Frenkel	HWL Ebsworth Lawyers
For the Seventh Defendant	Mr M J Hoyne	Ralph Manno
For the proposed Fourteenth Defendant	Mr T North QC, with Mr D O’Brien	McDonald Slater & Lay

APPEARANCES FOR S ECI 2018 01223:	Counsel	Solicitors
For the Appellant	Mr T North QC, with Mr D O’Brien	McDonald Slater & Lay
For the Respondent	Dr A Hanak QC, with Dr E Kelly	Fitzpatrick Legal Pty Ltd
For 528 Main Street Mordialloc Pty Ltd and Aus Finance Group Pty Ltd	Mr S Horgan QC, with Mr N Frenkel	HWL Ebsworth Lawyers

TABLE OF CONTENTS

Relevant parties and proposed parties.......................................................................................... 2

Stuart v Mordialloc Sporting Club Inc............................................................................................ 4

Procedural background................................................................................................................ 4
The plaintiff’s application for leave to file the proposed third further amended statement of claim................................................................................................................................................ 6
Proposed further amended statement of claim............................................................... 6
Relevant statutory provisions............................................................................................ 7
Principles with respect to pleadings............................................................................... 12
The issues............................................................................................................................ 17
Standing with respect to claims....................................................................................... 18
Oppression............................................................................................................ 18
Director’s duties................................................................................................... 20
AFG duties............................................................................................................. 22

Standing with respect to damages.................................................................................. 23
Section 36 of the Act............................................................................................. 23
Section 67 of the Act............................................................................................. 26

Whether the pleadings are embarrassing...................................................................... 26
Use of schedules................................................................................................... 27
Whether there are incompatible allegations..................................................... 29
Validity of appointment of directors................................................................. 31
Seventh defendant’s conflict of interest as a solicitor..................................... 32
Paragraph 9(c) of the proposed FASOC............................................................ 33
Paragraph 18 of the proposed FASOC.............................................................. 33
Paragraphs 31 to 33 of the proposed FASOC................................................... 34
Paragraphs 35 to 38 of the proposed FASOC................................................... 34
Paragraph 41 of the proposed FASOC.............................................................. 35
Paragraph 43 of the proposed FASOC.............................................................. 36
Paragraph 45 of the proposed FASOC.............................................................. 36
Paragraph 52 of the proposed FASOC.............................................................. 37
Paragraphs 63 to 66 of the proposed FASOC................................................... 37
Paragraphs 72 to 78 of the proposed FASOC................................................... 39
Paragraphs 79 to 81 of the proposed FASOC................................................... 41
Paragraphs 82 and 83 of the proposed FASOC................................................ 41
Paragraph 84 of the proposed FASOC.............................................................. 42
Paragraph 85 of the proposed FASOC.............................................................. 43
Paragraphs 86 and 87 of the proposed FASOC................................................ 43
Paragraphs 88 to 92 of the proposed FASOC................................................... 44
Paragraph 93 of the proposed FASOC.............................................................. 47
Paragraphs 94 to 101 of the proposed FASOC................................................. 48
Paragraphs 102 and 103 of the proposed FASOC............................................ 49
Paragraphs 104 and 105 of the proposed FASOC............................................ 49
Paragraph 106 of the proposed FASOC............................................................ 50
Paragraphs 107 and 108 of the proposed FASOC............................................ 51
Paragraphs 112 and 113 of the proposed FASOC............................................ 52
Paragraph 114 of the proposed FASOC............................................................ 52
Paragraph 116 of the proposed FASOC............................................................ 56
Paragraphs 117 to 119 of the proposed FASOC............................................... 56
Paragraphs 120 to 133 of the proposed FASOC............................................... 57
Paragraph 134 of the proposed FASOC............................................................ 59
Paragraph 135 of the proposed FASOC............................................................ 60
Paragraphs 137 to 140 of the proposed FASOC............................................... 61
Paragraph 141 of the proposed FASOC............................................................ 62
Paragraph 143 of the proposed FASOC............................................................ 63
Paragraph 144 of the proposed FASOC............................................................ 64
General observations........................................................................................... 64
Summary............................................................................................................... 64

Conclusion.......................................................................................................................... 66

John Barr Investments Pty Ltd v Mordialloc Sporting Club Incorporated............................. 67

Joinder application...................................................................................................................... 68
Background........................................................................................................................ 68
528 Main’s points of claim................................................................................................ 69
JBI’s position....................................................................................................................... 71
The club’s position............................................................................................................. 75
528 Main’s position............................................................................................................ 81
Relevant rules..................................................................................................................... 84
Joinder under r 9.06(b)(i) of the Rules............................................................................ 86
528 Main’s right to purchase the property....................................................... 90
528 Main’s interest pursuant to the On-Sale Deed and Related Agreements 94

Joinder under r 9.06(b)(ii) of the Rules......................................................................... 101
Leave to intervene in this proceeding.......................................................................... 101
Conclusion........................................................................................................................ 103

Costs application....................................................................................................................... 104
Background...................................................................................................................... 104
Relevant rules................................................................................................................... 108
JBI’s position..................................................................................................................... 109
Costs as a whole.................................................................................................. 109
Objection costs.................................................................................................... 112
Compliance costs................................................................................................ 113

528 Main’s and AFG’s position...................................................................................... 115
The issues.......................................................................................................................... 119
Entitlement to costs of complying with subpoenas.................................................... 119
Whether 528 Main and AFG can claim costs of complying with the subpoenas 120
Costs that are allowed........................................................................................ 122

Reasonableness of costs claimed................................................................................... 129
Should the costs be taxed immediately?...................................................................... 129
Conclusion........................................................................................................................ 131

Orders............................................................................................................................................... 132

Stuart v Mordialloc Sporting Club Inc................................................................................... 132
Other matters.................................................................................................................... 132
Orders................................................................................................................................ 132

John Barr Investments Pty Ltd v Mordialloc Sporting Club Incorporated...................... 133
Joinder application.......................................................................................................... 133
Costs application.............................................................................................................. 133
General.............................................................................................................................. 133

HIS HONOUR:

This ruling relates to two court proceedings, Stuart v Mordialloc Sporting Club Inc (‘Stuart proceeding’) and John Barr Investments Pty Ltd v Mordialloc Sporting Club Incorporated (‘appeal proceeding’).

In the Stuart proceeding, there are presently five applications as follows:

(a) an application by the plaintiff, Mr Stuart, for leave to file a third further amended statement of claim;

(b) an application by the plaintiff to join 528 Main Street Mordialloc Pty Ltd (‘528 Main’) as trustee for the 528 Main Street Mordialloc Unit Trust (‘528 Main Trust’), Aus Finance Group Pty Ltd (‘AFG’), Frank Durso, Christopher Broad, David Mazzeo, Toby Pope and John Barr Investments Pty Ltd (‘JBI’) as the eighth, ninth, tenth, eleventh, twelfth, thirteenth and fourteenth defendants, respectively;

(c) an application by the second to fifth defendants filed on 14 August 2019 to strike out certain paragraphs of the plaintiff’s amended statement of claim dated 17 June 2019; and

(d) two applications, one by the sixth defendant and one by the seventh defendant, filed on 13 August 2019 and on 17 September 2019, respectively, to strike out the plaintiff’s amended statement of claim dated 17 June 2019.

In the appeal proceeding, there are two applications before me as follows:

(a) an application by 528 Main to be added as the second respondent, or alternatively, for leave to intervene; and

(b) an application by 528 Main and AFG for costs of and incidental to their compliance with the subpoenas served by the appellant.

Relevant parties and proposed parties

The plaintiff in the Stuart proceeding is Raymond Stuart. He is an ordinary member of Mordialloc Sporting Club Inc (‘the club’). He was also a director of the club from 24 November 2013 until 2 December 2016.

The club is an association incorporated pursuant to the Associations Incorporation Reform Act 2012 (Vic) (‘the Act’). The club is a tenant of the property in Mordialloc (‘the property’), which is the subject of the proceedings. The club is the first defendant in the Stuart proceeding and the respondent in the appeal proceeding.

The landlord of the property is John Barr Investments Pty Ltd (‘JBI’), who is the proposed fourteenth defendant in the Stuart proceeding and the appellant in the appeal proceeding.

Lance Draper is the second defendant in the Stuart proceeding and he was a director of the club from at least 29 July 2009. He was the chair of the club from 14 September 2015 and resigned as chairman on 31 August 2018.

Trevor Warren is the third defendant in the Stuart proceeding and was a director of the club from at least 29 July 2009. He was not re-elected as a director on 22 March 2019.

Andrew Wise is the fourth defendant in the Stuart proceeding and was a director of the club from 24 July 2013. He was not re-elected as a director on 22 March 2019.

Julian Knipe is the fifth defendant in the Stuart proceeding and was a director of the club from 29 November 2015. He was not re-elected as a director on 22 March 2019.

Kevin Said is the sixth defendant in the Stuart proceeding. He is a director and chief investment officer of Aus Finance Group (‘AFG’), who is the proposed ninth defendant in the Stuart proceeding. Mr Said gave financial and credit advice to the club through AFG. Mr Said is also a director of 528 Main Street Mordialloc Pty Ltd (‘528 Main’) as trustee for the 528 Main Street Mordialloc Unit Trust (‘528 Main Trust’). Mr Said is alleged to be a purported director of the club by casual vacancy from 6 December 2016 and is alleged to have resigned as a director of the club on 8 July 2019.

Nick Mazzeo (‘Mazzeo’) is the seventh defendant in the Stuart proceeding and is a legal practitioner. He is a partner of the law firm, Lennon Mazzeo Lawyers, who provided legal advice to the club. He is alleged to be a purported director of the club by casual vacancy from 6 December 2016 and is alleged to have resigned as a director of the club on 1 March 2019.

528 Main is the proposed eighth defendant in the Stuart proceeding and is a corporate trustee of the 528 Main Trust. Its directors are Mr Said and Mr Durso. 528 Main is alleged to have wished to purchase the property from the club by causing the club to exercise an option to purchase. 528 Main seeks to be joined as a second respondent to the appeal proceeding, or, alternatively, to be an intervener.

AFG is the proposed ninth defendant in the Stuart proceeding and is a corporation. Its directors are Mr Said and Mr Durso. AFG was engaged by the club to provide services, including financial services to develop a strategy for the possible purchase of the club of the property.

Both 528 Main and AFG were subpoenaed in the appeal proceeding and seek their costs of complying with the subpoenas from JBI.

Frank Durso is the proposed tenth defendant in the Stuart proceeding, and he is a director of AFG from 11 March 2014 and a director of 528 Main from 22 August 2016. He is alleged to have provided financial and credit advice to the club through AFG.

Chris Broad is the proposed eleventh defendant in the Stuart proceeding and is a director and member of Paudimar, which is a company that has shares in 528 Main. He is alleged to be an associate of Messrs Said, Durso, Mazzeo, Warren and David Mazzeo.

David Mazzeo is the proposed twelfth defendant in the Stuart proceeding, who is the brother of the seventh defendant in the Stuart proceeding. He is a lawyer who provided legal advice to AFG and 528 Main in a firm named Pointon Partners Lawyers, relating to the purported acquisition of the property by the club from JBI under the lease.

Tony Pope is the proposed thirteenth defendant in the Stuart proceeding, and he provided development advice to the club. He is a director and shareholder in Alpha 14, which provided development advice to the club.

Stuart v Mordialloc Sporting Club Inc

Procedural background

On 3 September 2018, the plaintiff commenced this proceeding against the first defendant, Mordialloc Sporting Club Inc (‘the club’), by writ and statement of claim (‘V1’).

The plaintiff is a member of the club which is an association incorporated pursuant to the Associations Incorporation Reform Act 2012 (Vic) (‘the Act’). The plaintiff is also a former director of the club.

On 5 June 2019, the plaintiff filed an application for leave to join Messrs Lance Draper, Trevor Warren, Andrew Wise, Julian Knipe, Kevin Said and Nick Mazzeo (‘Mazzeo’) as defendants, and for leave to amend his statement of claim as set out in exhibit RJA-8 (‘V2’) to the affidavit sworn by Mr Richard Ashley on 4 June 2019.

On the same day, Derham AsJ made orders by consent granting the plaintiff leave to join the individuals identified in paragraph 22 hereof as defendants to the proceeding, and for the plaintiff to file and serve V2.

On 7 June 2019, Derham AsJ made orders by consent that effectively granted leave for the plaintiff to file and serve an amended writ and statement of claim that may be different to V2.

On 17 June 2019, the plaintiff filed an amended writ and an amended statement of claim (‘ASOC’), which was different to V2 (‘V3’).

On 29 July 2019, the plaintiff applied by email to the Court and by an affidavit of Mr Ashley sworn on 29 July 2019 to add 528 Main, AFG, Frank Durso, Chris Broad, David Mazzeo and Toby Pope as defendants to the proceeding, and to file and serve a further amended statement of claim dated 30 July 2019, being exhibit RJA-2 (‘V4’) to the affidavit of Mr Ashley sworn on 29 July 2019.

On 13 August 2019, the sixth defendant filed an application to strike out the plaintiff’s ASOC.

On 14 August 2019, the second to fifth defendants filed an application to strike out certain paragraphs of the plaintiff’s ASOC.

On 17 September 2019, the seventh defendant filed an application to strike out the plaintiff’s ASOC.

On 20 September 2019, the plaintiff filed an application to join the parties referred to in paragraph 26 hereof as the eighth to thirteenth defendants, and to file a further amended statement of claim dated 19 September 2019, being exhibit RJA-16 (‘V5’) to the affidavit of Mr Ashley sworn on 20 September 2019. The plaintiff also sought to join JBI as the second plaintiff in this proceeding. JBI is the landlord of the property in Mordialloc (‘property’) that is a subject of this proceeding. JBI, as the proposed second plaintiff, contributed to V5.

On 18 November 2019, the plaintiff served a proposed second further amended statement of claim dated 18 November 2019 (‘V6’), which was sought to be relied upon at the hearing on 19 November 2019 in lieu of V5. V6 is exhibit RJA-1 to the affidavit of Mr Ashley sworn on 18 November 2019. JBI also contributed to V6 as the proposed second plaintiff.

At the hearing on 19 November 2019 before myself, I did not grant the plaintiff leave to file V6 of the statement of claim and I ordered the plaintiff to provide a proposed third further amended statement of claim. At that hearing, I indicated that JBI ought to be joined as a defendant rather than as a second plaintiff.

On 19 December 2019, the plaintiff provided to the defendants a proposed third further amended statement of claim (‘V7’).

On 24 February 2020, the plaintiff provided the final version of the proposed third further amended statement of claim dated 18 December 2019 (‘proposed FASOC’) (‘V8’), in which the plaintiff sought to join JBI as the fourteenth defendant. The plaintiff seeks to file the proposed FASOC.

The plaintiff’s application to file the proposed FASOC was heard primarily on 13 March 2020 and 25 March 2020.

Given the nature of the applications currently before me, I will only deal with the plaintiff’s application for leave to file the proposed FASOC in this ruling. The second to seventh defendants oppose this application. Given that the first defendant and the proposed fourteenth defendant do not oppose the plaintiff’s application, I will not include their submissions in detail other than when they add to the other parties’ submissions in a relevant way.

The plaintiff’s application for leave to file the proposed third further amended statement of claim
Proposed further amended statement of claim

The proposed FASOC is 128 pages long, inclusive of 10 schedules (Schedules A to J).

The proposed FASOC seeks to add seven parties as the eighth to fourteenth defendants: 528 Main, AFG, Frank Durso, Christopher Broad, David Mazzeo, Toby Pope and JBI.

In summary, the plaintiff seeks to set aside agreements referred to by the plaintiff as the ‘Impugned Agreements’ and to restrain the performance of the Impugned Agreements. The plaintiff seeks damages or statutory compensation on behalf of the club. Further, the plaintiff seeks orders as a consequence of oppressive conduct by the club. The orders sought by the plaintiff are pursuant to ss 35, 36, 67 and 68 of the Act.

Agreements referred to in the proposed FASOC include:

(a) the lease between the club and JBI (‘lease’), in which the club leased the property from JBI and which included an option to purchase the property;

(b) the ‘AFG Engagement’ between the club and AFG, whereby AFG would provide services to the club to conduct due diligence about the possibility of the club purchasing the property pursuant to the option to purchase;

(c) the ‘Said Confidentiality Agreement’, which is a confidentiality undertaking given by the sixth defendant, Mr Kevin Said, on behalf of himself and AFG to the club to keep documents of the club confidential;

(d) the ‘Confidential Acquisition Partnership’, which is an agreement between the club and the sixth and seventh defendants on behalf of themselves and/or AFG and the unitholders of the 528 Main Trust, whereby AFG, or its nominee, 528 Main, would purchase the property when the club exercised the option to purchase;

(e) the ‘Deed of Understanding’ between AFG or its nominee and the club, which was to contain the terms of the Confidential Acquisition Partnership, and which was executed by the club and 528 Main on 22 December 2016; and

(f) the ‘Impugned Agreements’, which include the Deed of Understanding and through which the club purported to on-sell the property to 528 Main.

Relevant statutory provisions

The relevant statutory provisions of the Associations Incorporation Reform Act 2012 (Vic) are set out as follows:

34 Restriction of exercise of powers
An incorporated association must not, otherwise than as provided by this Act-
(a)exercise any power that its rules prohibit the association from exercising; or
(b)exercise any power contrary to any restriction on the exercise of that power contained in its rules; or
(c)do any act that is outside the scope of the purposes of the association.

35 Prohibited transactions
(1)No act of an incorporated association (including the entering into of an agreement by the association) and no conveyance or transfer of property to or by an incorporated association is invalid by reason only of the fact that-
(a)the association was without the capacity or power to do the act or execute or take the conveyance or transfer; or
(b)doing the act, or executing or taking the conveyance or transfer, was prohibited under section 34.

(2)No act performed by a person for or on behalf of an incorporated association (including the entering into of an agreement on behalf of the association) is invalid by reason only of the fact that the act was prohibited under section 34.
(3)Any lack of capacity or power or any prohibition referred to in subsection (1) or (2) may be asserted or relied on only in-
(a)proceedings against an incorporated association by a member of the association or the Registrar to restrain the association from doing any act or executing or taking a conveyance or transfer of property; or
(b)proceedings by an incorporated association or by a member of the association against the present or former secretary or former public officer of the association; or
(c)an application by a member of an incorporated association or the Registrar to wind up the association; or
(d)an application by the Registrar to appoint a person as the statutory manager of an incorporated association.

36Unauthorised act, conveyance or transfer performed pursuant to contract
(1)This section applies if an unauthorised act, conveyance or transfer by an incorporated association-
(a)is sought to be restrained in proceedings referred to in section 35(3)(a); and
(b)is being, or is to be, performed or made pursuant to a contract to which the association is a party.

(2)The court in which the proceedings are brought may take action referred to in subsection (3) if-
(a)all parties to the contract are parties to the proceedings; and
(b)the court considers it just and equitable to take the action.

(3)If subsection (2) applies, the court may-
(a)set aside and restrain the performance of the contract; and
(b)allow to the association or to the other parties to the contract (as the case requires) compensation for the loss or damage sustained by either that may result from the setting aside and restraining of the contract.

(4)For the purposes of subsection (3)(b), any anticipated profits to be derived from the performance of the contract must not be awarded by the court as a loss or damage sustained.

67 Enforcement of rules
(1)An incorporated association, a member of an incorporated association or the Registrar may apply to the Magistrates’ Court for an order under subsection (2).
(2)The Magistrates’ Court may make an order-
(a)giving directions for the performance and observance of the rules of an incorporated association by a person who is under an obligation to perform or observe those rules; or
(b)restraining an incorporated association from doing an act that is outside the scope of its purposes; or
(c)declaring and enforcing the rights or obligations of-
(i)members of an incorporated association between themselves; or
(ii)an incorporated association and any of its members between themselves.

(3)An order may be made under subsection (2) whether or not a right of a proprietary nature is involved and whether or not the applicant has an interest in the property of the incorporated association.
(4)The Magistrates’ Court may refuse to make an order on the application or may make an order for costs against a party, whether successful or not, if it is of opinion that-
(a)the issue raised in the application is trivial; or
(b)it was unreasonable to make the application having regard to any one or more of the following-
(i)the importance of the issue;
(ii)the nature of the incorporated association;
(iii)the availability of any other method of resolving the issue;
(iv)the costs involved;
(v)the lapse of time;
(vi)acquiescence;
(vii)any other relevant circumstance; or

(c)the unreasonable or improper conduct of a party has been responsible for the making of the application, or has added to the cost of the proceedings.

…

68 Oppressive conduct
(1)A member or former member of an incorporated association may apply to the Magistrates’ Court for an order under this section on the ground that the association has engaged, or proposes to engage, in oppressive conduct.
(2)Unless the Magistrates’ Court grants leave to apply at a later date, an application under subsection (1) by a former member must be made within 6 months after the person ceases to be a member of the association.
(3)The Magistrates’ Court may only grant leave under subsection (2) if the Magistrates’ Court is satisfied that there is sufficient public interest to do so.
(4)On hearing the application, the Magistrates’ Court may, if satisfied that the incorporated association has engaged, or proposes to engage, in oppressive conduct, make one or more of the following orders-
(a)an order for regulating the conduct of the association’s affairs in the future;
(b)an order directing the association to institute, prosecute, defend or discontinue specified proceedings, or authorising a member of the association to do so on behalf of the association;
(c)an order restraining a person from engaging in specified conduct or from doing a specified act or thing;
(d)an order requiring a person to do a specified act or thing;
(e)an order for the alteration of the rules of the association;
(f)an order that a former member be reinstated as a member of the association;
(g)an order terminating a person’s membership of the association;
(h)subject to subsection (5), any other order that is, in the opinion of the Court, necessary to remedy any default or resolve any dispute.

(5)The Magistrates’ Court must not make an order that an incorporated association be wound up.
(6)For the purposes of this section-
(a)oppressive conduct, in relation to an incorporated association, includes conduct that is-
(i)unfairly prejudicial to, or unfairly discriminatory against, a member of the incorporated association (including in the member’s capacity as a member of the committee); or
(ii)contrary to the interests of the members of the incorporated association as a whole; and

(b)a reference to engaging in conduct includes a reference to refusing or failing to take action.

83 Improper use of information or position
(1)An office holder or former office holder of an incorporated association must not make improper use of information acquired by virtue of holding that office-
(a)to gain an advantage for himself or herself or any other person; or
(b)to cause detriment to the association.

…
(2)An office holder of an incorporated association must not make improper use of that office-
(a)to gain an advantage for himself or herself or any other person; or
(b)to cause detriment to the association.

…

84 Duty of care and diligence
(1)An office holder of an incorporated association must exercise his or her powers and discharge his or her duties with the degree of care and diligence that a reasonable person would if that person—
(a)were an office holder of the association in the circumstances applying at the time of the exercise of the power or the discharge of the duty; and
(b)occupied the office held by, and had the same responsibilities within the association as, the office holder.

…

85 Duty of good faith and proper purpose
(1)An office holder of an incorporated association must exercise his or her powers and discharge his or her duties-
(a)in good faith in the best interests of the association; and
(b)for a proper purpose.

…

Principles with respect to pleadings

The Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) sets out rules with respect to pleadings. With respect to the content of pleadings, r 13.02(1) states:

(1) Every pleading shall-
(a)contain in a summary form a statement of all the material facts on which the party relies, but not the evidence by which those facts are to be proved;
(b)where any claim, defence or answer of the party arises by or under any Act, identify the specific provision relied on; and
(c)state specifically any relief or remedy claimed.

It is essential that a pleading contains all the material facts relied upon by the party. In Environinvest Ltd (recs and mgrs apptd) (in liq) v Pescott (No 2) (‘Environinvest v Pescott’),[1] Ferguson J (as her Honour then was) said:

There are two reasons why material facts must be pleaded. First, such a pleading enables a party’s opponent and the Court to know what the case is that is to be met. Secondly, it discloses whether the party has a claim or defence (whichever may be the case) which is known to law.[2]

[1][2012] VSC 151 (‘Environinvest v Pescott’).

[2]Ibid [4], citing Australian Wool Innovation v Newkirk [2005] FCA 290, [20]–[26].

Further, a pleading must ‘contain the necessary particulars of any fact or matter pleaded’.[3]
[3]Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 13.10(1) (‘Supreme Court Rules’).

The Court can grant leave for a party to amend their pleadings pursuant to s 36.04(1)(b) of the Rules. Rule 36.04 sets out:

(1) A party may amend any pleading served by that party-
(a) once before the close of pleadings; or
(b)at any time by leave of the Court or with the consent of all other parties.

…

Rule 36.01(1) of the Rules sets out the purpose for which the Court may grant leave for a party to amend any document as follows:

(1) For the purpose of-
(a)determining the real question in controversy between the parties to any proceeding; or
(b)correcting any defect or error in any proceeding; or
(c)avoiding multiplicity of proceedings-

the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.

An application for leave to file a further amended statement of claim is subject to the Court’s discretion. In Environinvest v Pescott,[4] Ferguson J observed that:

The Court has a discretion as to whether to allow a pleading to be amended. Where there is no prejudice, amendments are generally allowed. The discretion to allow a proposed amendment is unlikely to be exercised if the proposed amended pleading would be liable to be struck out. A pleading will be struck out if it has no reasonable prospect of success.
On a strike out application or where leave to amend is opposed, it is usually assumed that the matters pleaded can be proven. If the case pleaded is arguable, commonly that is all that is required to permit the amended pleading to be filed. Its ultimate success or failure is a matter for determination at trial. However, as noted above, in these proceedings, Judd J was of the opinion that leave to replead should only be granted if the Court is satisfied that there is a sound basis to support the claims. Having regard to the history of the matter (there having been unsuccessful attempts at pleading claims previously) that seems to me to be the appropriate basis upon which the Court ought to proceed. Having said that, sight ought not be lost of the fact that this is a pleading application. Bearing that in mind, in my view it is sufficient if the plaintiffs have adequate documentary and other material to show that there is a proper basis for an arguable claim. They ought not to be required to produce evidence of the type that would be necessary to establish the claims at trial.[5]

[4]Environinvest v Pescott (n 1).

[5]Ibid [5]–[6] (citations omitted).

In Mandie v Memart Nominees Pty Ltd (‘Mandie v Memart’),[6] the Court of Appeal held that the proper test in determining whether or not to grant leave to amend a pleading is whether or not the claims have a real prospect of success, which is derived from s 63(1) of the Civil Procedure Act 2010 (Vic).[7] The Court of Appeal noted that this ‘no real prospect of success’ test has been explained in different ways by various authorities, including that the pleading is not fanciful or futile and that it is arguable.[8]
[6][2016] VSCA 4.
[7]Ibid [41]–[44].
[8]Ibid [44]–[46].

Accordingly, I do not find that there is any real difference between the language used by Ferguson J in Environinvest v Prescott with respect to ‘no reasonable prospect of success’ and the language used by the Court of Appeal in Mandie v Memart with respect to ‘no real prospect of success’. In either test, a pleading is sufficient if it is arguable.

Further, the whole or any part of a pleading may be struck out where the pleading or any part of the pleading:

(a)       does not disclose a cause of action or defence;
(b)       is scandalous, frivolous or vexatious;
(c)       may prejudice, embarrass or delay the fair trial of the proceeding; or
(d)      is otherwise an abuse of the process of the Court …[9]

[9]Supreme Court Rules (n 3) r 23.02.

In Hoh v Frosthollow Pty Ltd,[10] Derham AsJ discussed the meaning of ‘scandalous’, ‘frivolous or vexatious’ and ‘prejudice, embarrass or delay’ as follows:

(a) Scandalous: Allegations made in a pleading for the purpose only of abusing or injuring the opposite party and allegations which are indecent or offensive are scandalous within the meaning of the rule, and liable to be struck out …
(b) Frivolous or vexatious: These words in combination have traditionally been used to describe a wide variety of circumstances in which a claim is found to be groundless, or lacking a legal basis or merit
(c) Prejudice, embarrass or delay: In general, a pleading or indorsement is embarrassing when it places the opposite party in the position that he or she does not know what is alleged against him or her … Thus, a pleading which is unintelligible … or is vague or ambiguous … or is too general … is embarrassing.[11]

[10][2014] VSC 77.

[11]Ibid [12] (emphasis in original) (citations omitted).

The relevant principles of a pleading was summarised by Dixon J in Wheelahan v City of Casey (No 12):[12]
[12][2013] VSC 316, [25] (‘Wheelahan’), quoted in ibid [13] (Derham AsJ).

Casey contended that three recent decisions of this court, SMEC Australia Pty Ltd & Anor v McConnell Dowell Constructors (Aust) Pty Ltd & Ors (No 2),[13] Environinvest Ltd v Pescott & Ors; Environinvest Ltd v Blackburne Pty Ltd & Ors,[14] and Clarke & Ors v Great Southern Finance Pty Ltd & Ors[15] identify the relevant principles that govern its application. Frankston took no issue in written or oral submissions with Casey’s contention as to the applicable principles. Relevantly:
[13][2011] VSC 492 (30 September 2011).
[14][2011] VSC 325 (19 July 2011).
[15][2010] VSC 473 (20 October 2010).
(a)Order 13 of the Rules set out the relevant requirements of a sufficient pleading, while r 23.02 provides the grounds on which the sufficiency of a pleading may be impugned;
(b)the function of a pleading in civil proceedings is to alert the other party to the case they need to meet (and hence satisfy basic requirements of procedural fairness) and further, to define the precise issues for determination so that the court may conduct a fair trial;[16]
[16]The function of defining issues for trial is required from an early stage. Otherwise, discovery and other interlocutory process are likely to be misdirected: Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd & Ors (1996) ATPR 41-522 per Burchett J at 42,679.
(c)the cardinal rule is that a pleading must state all the material facts to establish a reasonable cause of action (or defence).[17] The expression ‘material facts’ is not synonymous with providing all the circumstances. Material facts are only those relied on to establish the essential elements of the cause of action;[18]
[17]A reasonable cause of action or defence is one with a real chance of success, assuming the correctness of the allegations of fact in the challenged pleading.
[18]Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Ltd [2002] FCA 1568 [13], citing Bruce v Oldhams Press Ltd [1936] 1 KB 697, 712–713.
(d)as a corollary, the pleading must be presented in an intelligible form - it must not be vague or ambiguous or inconsistent.[19] Thus a pleading is ‘embarrassing’ within the meaning of r 23.02 when it places the opposite party in the position of not knowing what is alleged;
[19]In Environinvest, the pleading was struck out because it was confusing, often circular, sometimes inconsistent and contained no coherent narrative.
(e)the fact that a proceeding arises from a complex factual matrix does not detract from the pleading requirements. To the contrary, the requirements become more poignant;[20]
[20]SMEC at [8].
(f)pleadings, when well-drawn, serve the overarching purpose of the Civil Procedure Act 2010 (Vic);[21]
[21]SMEC at [9].
(g)a pleading which contains unnecessary or irrelevant allegations may be embarrassing — for example, if it contains a body of material by way of background factual matrix which does not lead to the making out of any defined cause of action (or defence), particularly if the offending paragraphs tend to obfuscate the issues to be determined;[22]
[22]SMEC at [28]–[31]. In SMEC, Vickery J remarked (at [5]) that good pleading calls for ‘judgment and courage to shed what is unnecessary’.
(h)it is not sufficient to simply plead a conclusion from unstated facts.[23] In this instance, the pleading is embarrassing;
(i)every pleading must contain in a summary form a statement of all material facts upon which the party relies, but not the evidence by which the facts are to be proved (r 13.02(1)(a));
(j)the effect of any document or purport of any conversation, if material, must be pleaded as briefly as possible, and the precise words of the document or the conversation must not be pleaded unless the words are themselves material (r 13.03);[24]
(k)particulars are not intended to fill gaps in a deficient pleading. Rather, they are intended to meet a separate requirement - namely, to fill in the picture of the plaintiff’s cause of action (or defendant’s defence) with information sufficiently detailed to put the other party on guard as to the case that must be met.[25] An object and function of particulars is to limit the generality of a pleading and thereby limit and define the issues to be tried;[26]
(l)a pleading should not be so prolix that the opposite party is unable to ascertain with precision the causes of action and the material facts that are alleged against it;[27]
(m)extensive cross-referencing of facts in a pleading may render parts of the pleading unintelligible;[28]
(n)in an application under r 23.02, the court will only look at the pleading itself and the documents referred to in the pleading;[29]
(o)the power to strike out a pleading is discretionary. As a rule, the power will be exercised only when there is some substantial objection to the pleading complained of or some real embarrassment is shown;[30] and
(p)if the objectionable part of the pleading is so intertwined with the rest of the pleading so as to make separation difficult, the appropriate course is to strike out the whole of the pleading.[31]

[23]Trade Practices Commission v David Jones (Australia) Pty Ltd & Ors (1985) 7 FCR 109, 114.

[24]In Gunns Ltd & Ors v Marr [2005] VSC 251, Bongiorno J remarked (at [52]) that the paragraphs in the pleading ‘contain quotations from newspapers, websites and correspondence which are inappropriate in form’.

[25]Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 per Mason CJ and Gaudron J at 286.

[26]Clarke at [9].

[27]Knorr v CSIRO & Ors(No 2) [2012] VSC 268.

[28]In Gunns, Bongiorno J noted (at [20]) that the particulars to the amended statement of claim under attack incorporated allegations of approximately 40 other paragraphs, requiring the defendants to navigate through a labyrinth of allegations. His Honour refused leave to file the amended statement of claim in the proposed form.

[29]Rule 23.04 and Day v William Hill (Park Lane) Ltd [1949] 1 KB 632.

[30]Clarke at [11].

[31]Davy v Garrett (1878) 7 Ch D 473.

Further, it is permissible to plead conclusions of law provided that the material facts are properly set out.[32]
[32]See Supreme Court Rules (n 3) r 13.02(2)(b); Agtrack (NT) Pty Ltd v Hatfield (2003) 7 VR 63, 83 [33].

The issues

From the submissions of the parties, I take it that there are three main issues that need to be addressed, which are:

(a) whether the plaintiff has standing to make the claims set out in the proposed FASOC;

(b) whether the plaintiff has standing to claim for loss or damage suffered by the club; and

(c) whether the pleadings in the proposed FASOC are otherwise embarrassing.

Standing with respect to claims

The plaintiff contends that he has standing to bring this proceeding under ss 35, 36, 67 and 68 of the Act. The plaintiff contends that he seeks to set aside and restrain performance of relevant contracts under ss 35 and 36 of the Act. The plaintiff also seeks orders pursuant to s 67 of the Act, and seeks to claim oppressive conduct by the club under s 68 of the Act.

There is no dispute that the plaintiff, as a member of the club, has standing to bring an action to set aside and restrain the performance of the Impugned Agreements where the claim relates to the club’s lack of power pursuant to ss 34 to 36 of the Act.[33] The plaintiff must show that it is just and equitable to set aside and restrain performance of the Impugned Agreements.[34]
[33]See, eg, Associations Incorporation Reform Act 2012 (Vic) ss 35(3)(a), 36(3)(a) (‘AIR Act’).
[34]Ibid s 36(2)(b).

There is also no dispute that the plaintiff, as a member of the club, has standing to claim that the club has engaged in oppressive conduct pursuant to s 68 of the Act and has standing to seek orders under s 67 of the Act.[35]

Oppression

[35]See, eg, ibid ss 67(1), (2), 68(1), (4).

Before dealing with the objections to the proposed FASOC, it is convenient to set out what is oppressive conduct. Section 68(6)(a) of the Act defines oppressive conduct as follows:

oppressive conduct, in relation to an incorporated association, includes conduct that is-
(i)unfairly prejudicial to, or unfairly discriminatory against, a member of the incorporated association (including in the member’s capacity as a member of the committee); or
(ii)contrary to the interests of the members of the incorporated association as a whole …

In Moala v Free Wesleyan Church of Tonga in Australia (Victoria) Inc (No 4),[36] Ginnane J referred to oppressive conduct in corporations law with respect to oppressive conduct under s 68 of the Act in obiter.[37] In light of the lack of authority with respect to oppressive conduct under s 68 of the Act, I find that reference can be made to oppressive conduct in corporations law.
[36][2020] VSC 50.
[37]Ibid [33].

In s 232 of the Corporations Act 2001 (Cth) (‘Corporations Act’), oppressive conduct is referred to as where:

(a) the conduct of a company’s affairs; or
(b)an actual or proposed act or omission by or on behalf of a company; or
(c)a resolution, or a proposed resolution, of members or a class of members of a company;

is either
(d) contrary to the interests of the members as a whole; or
(e)oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

…

In Exton v Extons Pty Ltd,[38] Sifris J discussed what constitutes conduct that is ‘contrary to the interests of members as a whole’ and conduct that is oppressive to, unfairly prejudicial to or unfairly discriminatory against a member in the context of the Corporations Act.
[38](2017) 53 VR 520 (‘Exton v Extons’).

With respect to conduct that is ‘contrary to the interest of members as a whole’, after a review of relevant authorities, Sifris J said:

From a review of the authorities the better view is that s 232(d) is separate and distinct from s 232(e) and that a breach may not necessarily involve commercial unfairness. The Court is required to examine all of the relevant facts and circumstances in order to determine whether the conduct under scrutiny is in the best interests of the company as a whole, apart from its members. In this context breaches of duty (whether statutory or fiduciary) by directors and officers may well be conduct that is not in the best interests of the company as a whole. Whether breaches of duty in a small family type company, where there is an overwhelming identity of interest between shareholders and directors, fall within the sections is a related matter. There is authority, as referred to above, to the effect that where there is consent or ratification of such conduct, it may, in context and in the circumstances, not be contrary to the interests of members as a whole or indeed unfair.[39]

[39]Ibid 531–2 [39].

After reviewing authorities with respect to conduct that is oppressive to, unfairly prejudicial to or unfairly discriminatory against a member, Sifris J said:

From a review of the more relevant authorities, the critical issue is commercial unfairness, judged objectively. It usually results in some harm or prejudice by such conduct that is not reasonably or commercially justifiable. Of course all of the facts and circumstances and context needs to be examined in order to determine whether such conduct alleged is oppressive. Further, upon such examination conduct that may appear unfair may be fully justified. It goes without saying that the authorities referred to below deal with a range of different factual considerations and relationships. Each case must depend on its own facts and circumstances.[40]

Director’s duties

[40]Ibid 535 [48].

The second to fifth defendants contend that the plaintiff does not have standing under the Act to allege breach of director’s duties owed to the club and its members. The second to fifth defendants contend that the allegations of director’s duties have no bearing on the matters under s 36 of the Act because ss 34 to 36 are concerned with acts prohibited by the club’s rules. Accordingly, they contend that leave should not be granted to file the proposed FASOC in respect of the following paragraphs that contain allegations of breaches of directors’ duties: paragraphs 52, 61, 63, 83, 84, 92, 107, 108, 111, 112, 116, 139 and 144(d) of the proposed FASOC.

Similarly, the seventh defendant contends that, with respect to paragraph 83 of the proposed FASOC, the plaintiff has no standing to pursue breaches of ss 83 to 85 of the Act on behalf of the club,[41] and that the plaintiff ought to plead a Foss v Harbottle principle claim for claims other than those under s 36. Sections 83 to 85 of the Act relate to duties of an office holder of an incorporated association. In my view, given the change in office holders of the club, it is unlikely that the club, if so advised, would not institute a proceeding for breaches of director’s duties.
[41]Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233, 356–60 [390]–[403].

The plaintiff contends that the Foss v Harbottle principle is not relevant and that he only seeks to make claims under ss 35, 36, 67 and 68 of the Act. The plaintiff contends that he is not seeking to pursue breaches of ss 83 to 85, and counsel for the plaintiff concedes that the plaintiff has no capacity to separately sue for breach of director’s duties. However, the plaintiff contends that those paragraphs relating to director’s duties are necessary prerequisites for the relief sought under ss 35 and 36 of the Act and are relevant to the oppressive conduct and relief sought under ss 67 and 68. The plaintiff contends that they provide necessary background to the oppression claim and to how the relevant directors ran the club not for the benefit of members but for the benefit of the commercial interests of at least the sixth and seventh defendants. Therefore, the plaintiff contends that the paragraphs are relevant and ought to stay.

As it is arguable that the conduct of directors can be relevant to the conduct of the club, I am satisfied that the allegations with respect to director’s duties can be part of the plaintiff’s claim for oppression claim and for setting aside the Impugned Agreements.[42] The paragraphs of the proposed FASOC stated in paragraph 64 hereof can be maintained in respect of claims of director’s duties. However, the plaintiff must replead the references to director’s duties and the alleged breaches so that it is clear that the allegations are part of the claim for oppressive conduct by the club or part of the claim for setting aside the Impugned Agreements. The plaintiff must also plead out the specific duties and breach relied upon in each paragraph. The plaintiff cannot claim against the directors themselves for breach of duties to the club.
[42]Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; Exton v Extons (n 38).

I emphasise that all allegations made by the plaintiff in the proposed FASOC must relate back to the claim for setting aside the Impugned Agreements or to the claim for oppression.

AFG duties

The sixth defendant contends that the plaintiff does not have standing to complain about the AFG Engagement in paragraph 29 of the proposed FASOC, which relates to duties owed to the club by AFG and its servants and agents, being Messrs Said, Durso, Pope and Mazzeo. The seventh defendant also contends that paragraph 29 makes an allegation against the seventh defendant with respect to oppression; however, the seventh defendant was not part of the club at the time. Further, the seventh defendant contends that this paragraph is about persons entering into a fiduciary relationship with the club rather than about oppression. However, I find that the main issue with paragraph 29 is its relevance when the plaintiff’s claims are with respect to oppression and setting aside the Impugned Agreements. Given that the oppression claim is against the club and must be in relation to conduct engaged in by the club,[43] I cannot see how duties alleged to be owed to the club by parties external to the club can be part of the oppression claim. The plaintiff does not allege that the club acted oppressively as a result of a breach of duties by AFG. Further, paragraph 29 of the proposed FASOC is not referred to directly or explicitly as part of the plaintiff’s claim to set aside the Impugned Agreements in paragraphs 88 to 89A of the proposed FASOC. Accordingly, the allegations of duties owed by AFG and its servants and agents in paragraph 29 are irrelevant to the plaintiff’s claims and must not be pleaded. Any reference to paragraph 29 in other paragraphs of the proposed FASOC must also be removed.
[43]AIR Act (n 33) s 68; Imam Ali Islamic Centre v Iman Ali Islamic Centre Inc [2018] VSC 413, [675] (‘Imam v Iman’).

I note that with respect to paragraph 29 of the proposed FASOC, the sixth defendant also contends that the allegations in the sub-paragraphs are wide‑ranging and that the defendants would have to try to connect them to wide‑ranging particulars. Given that it is unclear which statutory provisions in the particulars refer to which duties in the sub-paragraphs, I find that paragraph 29 would also need to be repleaded for this reason.

Standing with respect to damages
Section 36 of the Act

The plaintiff sought statutory compensation on behalf of the club for loss and damage pursuant to s 36 of the Act in paragraph 145 of the proposed FASOC. Paragraph 144 of the proposed FASOC alleged the loss and damage suffered by the club.

However, the second to fifth defendants contend that the plaintiff, as a member, does not have standing to claim damages on behalf of the club under the Act. They contend that there are no express provisions conferring standing, and that standing cannot be implied because there is a contrary intention in the Act founded on s 36(2)(a). They contend that because s 36(2)(a) requires all parties to the contract to be parties to the proceeding, the Act intends that the association or other parties to the contract have a say on the application, including any relief to be granted and any damages to be awarded pursuant to s 36(3)(b). Therefore, the association will be before the Court and ought to be the one to make the claim for damages, not a member.

The sixth defendant supports the second to fifth defendants’ submission. The sixth defendant further contends in the alternative that if the plaintiff can bring a claim for damages on behalf of the club, pursuant to ss 35(3)(a) and 36(1)(a), a claim for damages can only be with respect to a lack of power.

The seventh defendant contends that the plaintiff does not have standing to claim for damages pursuant to s 36 of the Act because such compensation is only available for loss or damage that were sustained as a result of the setting aside or restraining of the contract. However, in paragraphs 144 and 145 of the proposed FASOC, loss or damage claimed is not a result of the agreements being set aside, and there is no such pleading. Further, in the prayer for relief against all defendants except the club, the plaintiff claims damages for loss suffered by entering into the impugned agreements, which is not provided for by s 36.

On the other hand, the first defendant contends that it is a matter for the Court to consider compensation after the contract is set aside. The first defendant contends that s 35(3)(a) of the Act provides that a member can bring an action to set aside agreements, and contends that this cause of action is only available to a member, and is not available to the club. Therefore, the member can seek compensation under the Act as a result of the setting aside of a contract as a consequence. JBI adopts the first defendant’s submissions, having regard to ss 35 and 36 of the Act.

The plaintiff contends that ss 35 and 36 of the Act contain express words with respect to damages and that they make clear that he has standing to claim damages on behalf of the club. The plaintiff contends that s 36 makes it clear that a member must make the application to set aside the relevant contracts even though the compensation is for the association. However, counsel for the plaintiff accepts that the loss or damage must be as a result of the setting side or restraining of the performance of the contract. The plaintiff also contends that the loss or damage, as claimed in paragraph 144 of the proposed FASOC, includes the costs of the club in defending this proceeding because the club has had to incur costs to be involved in these proceedings and to disentangle itself from the impugned agreements if the agreements are set aside. Therefore, the plaintiff contends that those costs fall within ss 35 and 36 and that those costs ought to be reimbursed once the Impugned Agreements are set aside.

Further, the plaintiff contends that working out the heads of damages is a matter for trial and not a pleadings summons and that the plaintiff’s application to file the proposed FASOC ought not to be refused on the basis of damages that are sought. The plaintiff contends that if further particulars are sought, they can be requested.

Section 36(3) of the Act states that:

If subsection (2) applies, the court may-
(a) set aside and restrain the performance of the contract; and
(b)allow to the association or to the other parties to the contract (as the case requires) compensation for the loss or damage sustained by either that may result from the setting aside and restraining of the contract.

I agree with the plaintiff’s submission that the plaintiff has standing to claim compensation on behalf of the club for loss or damage sustained as a result of the setting aside and restraining of the Impugned Agreements pursuant to s 36 of the Act. While the club is required to be a party to the proceeding for the Impugned Agreements to be set aside pursuant to s 36(2)(a), s 36 of the Act applies to unauthorised acts, conveyances or transfers by an incorporated association that are ‘sought to be restrained in proceedings referred to in section 35(3)(a)’.[44] Section 35(3)(a) of the Act refers to ‘proceedings against an incorporated association by a member of the association or the Registrar’, and not to proceedings by the incorporated association. Accordingly, I am satisfied that it is reasonably arguable that the plaintiff can claim compensation on behalf of the club for loss or damage sustained as a result of the setting aside and restraining of the Impugned Agreements pursuant to s 36(3)(b) of the Act. However, the claim must relate to the loss or damage as a result of the setting aside and restraining of the Impugned Agreements, and cannot include loss or damage that results from entering into the Impugned Agreements.
[44]AIR Act (n 33) s 36(1)(a).

Given that the plaintiff has not clearly set out the loss or damage as a result of the setting aside and restraining of the contracts in paragraphs 144 and 145 of the proposed FASOC, those paragraphs must be repleaded.

Further, the prayer for relief claimed against all defendants except for the club must be reframed as the plaintiff cannot claim for damages or statutory compensation on behalf of the club pursuant to s 36 of the Act for loss suffered as a result of entering into the Impugned Agreements. The plaintiff can only claim for compensation as a result of loss or damage sustained as a result of the setting aside and restraining of the Impugned Agreements pursuant to s 36 of the Act. For the same reason, paragraph B of the prayer for relief sought against Mr Said in the proposed FASOC must also be reframed to only specify loss suffered as a result of the setting aside and restraining of the Impugned Agreements.

I note that in paragraph A of the prayer for relief sought against Mr Said in the proposed FASOC, the plaintiff claims damages for loss suffered by Mr Said’s breach of the Said Confidentiality Agreement. Given that it is not clear whether Mr Said’s breach of the Said Confidentiality Agreement is part of either the oppression claim or claim to set aside the Impugned Agreements, as discussed in paragraph 109 hereof, paragraph A of this prayer for relief must be excised.

Section 67 of the Act

Further, I took it that the plaintiff contends that s 67 of the Act entitles the plaintiff to claim damages on behalf of the club as s 67(2)(c) allows the plaintiff to make an order against anyone, including the sixth and seventh defendants, if oppression is established. However, s 67(2)(c) only refers to an order ‘declaring and enforcing the rights or obligations’ of members between themselves or of an association and any of its members between themselves in the context of enforcing rules of the association. Section 67(2)(c) does not refer to an order for damages. Therefore, s 67(2)(c) would not give standing to the plaintiff to claim damages on behalf of the club with respect to oppression. Regardless, the plaintiff has not relied upon s 67(2)(c) to claim damages on behalf of the club in the proposed FASOC.

Whether the pleadings are embarrassing

For reasons that I will set out below, I find that the proposed FASOC is embarrassing and that it must be repleaded.

I note that the plaintiff often responded to objections by the second to seventh defendants’ submissions to the proposed FASOC by contending that the defendants can request further particulars if they are not satisfied with the particulars or that the defendants’ submissions are more appropriate as defences rather than objections to a pleadings summons. Given the history of this proceeding, I determine that the plaintiff is required to properly formulate the proposed FASOC before leave will be given to permit the claim to go forward.

The sixth defendant, Mr Said, contends that the proposed FASOC employs a scattergun approach and is a ‘snowstorm’.[45] The sixth defendant contends that the pleading ought to be concise and ought to articulate the plaintiff’s two claims of lack of power and oppression. Further, both the sixth defendant and seventh defendant contend that many paragraphs of the proposed FASOC lack detail and contain irrelevant claims.

Use of schedules

[45]Pentridge Village Pty Ltd (in liq) v Construction, Forestry, Maritime, Mining and Energy Union [2020] VSC 47, [59], [125], quoting John Holland Construction & Engineering Pty Ltd v Kvaener RJ Brown Pty Ltd (1996) 8 VR 681, 693 [22] (‘John Holland v Kvaener’).

The sixth defendant contends that the use of schedules at paragraphs 16, 17, 28, 47, 111, 113 and 114 is impermissible. The sixth defendant contends that it is unclear whether the defendants will be required to attach schedules to their defences responding to allegations in the schedules. I took it that the sixth defendant contends that the schedules either contain material facts that are more appropriately placed in the pleading itself to enable the defendants to plead in response, or contain allegations that ought to be placed in a witness statement or affidavit.

With respect to the use of schedules, the plaintiff contends that I had ruled on this issue on 19 November 2018 in which I held that the plaintiff is entitled to plead as he chooses. Further, the plaintiff contends that each schedule is tied to a specific paragraph of the proposed FASOC and supporting documents have been provided to all parties, and therefore it is disingenuous of the defendants to contend that they do not understand the claim based upon documents the defendants had prepared.

References to schedules in the proposed FASOC are as follows:

(a) Schedule A provides the schedule of the parties in the proposed FASOC, and this schedule is not in dispute;

(b) paragraph 16 refers to Schedule B, which summarises principal terms of the lease;

(c) paragraph 17 refers to Schedule C, which summarises relevant rules of the club;

(d) paragraph 22 refers to Schedule D, which provides further particulars of the negotiations for a new lease; however, I note that the sixth defendant does not raise an issue with respect to this schedule in both written and oral submissions;

(e) paragraph 28 refers to Schedule E, which sets out the terms and conditions of the AFG Engagement;

(f) paragraph 47 refers to Schedule F, which sets out details of facts of the performance under the Confidential Acquisition Partnership;

(g) paragraph 96 refers to Schedule G, which sets out further particulars with respect to actions relating to the building notice;

(h) paragraph 111 refers to Schedule H, which sets out further particulars of allegations against Mr Said;

(i) paragraph 113 refers to Schedule I, which sets out further particulars of allegations against Mr Mazzeo; and

(j) paragraph 114 refers to Schedule J, which sets out further particulars of the non-disclosure of the on-sale agreement and other breaches of the lease in the VCAT proceedings; however, I note that Schedule J refers to paragraph 121 instead of paragraph 114 of the proposed FASOC.

The use of schedules in a statement of claim is not of itself impermissible. In Vanmarc Holdings Pty Ltd v P W Jess & Associates Pty Ltd,[46] a schedule was used to provide particulars, and this was not disputed. I find that the use of Schedules C to D and F to J to set out particulars is permissible but not desirable.
[46](2000) 34 ACSR 222.

In the proposed FASOC, Schedules B and E plead material facts. In Isabet Ltd v Worldgroup Consulting Pty Ltd (No 2),[47] there was no issue as to whether the material facts appeared in the pleading or in a schedule in circumstances in which the material facts consisted of complex technical information.[48] As Schedules B and E of the proposed FASOC plead many terms of the lease and AFG Engagement, respectively, I find that there is no issue with the plaintiff’s use of schedules in these respects. In my view, there is no real utility in requiring the plaintiff to copy and paste the schedules into the pleading, and the defendants can choose how they wish to respond in their respective defences. However, I do not encourage the use of schedules by the plaintiff given that there has been a propensity to mix facts and particulars.
[47][2003] VSC 233 (Habersberger J). See also John Holland v Kvaener (n 45) 686–7 [8].
[48]Ibid [40], [57].

However, the issue with Schedule E is that plaintiff does not specify which terms are written or oral. While reference was made to paragraph 27 of the proposed FASOC, it is too vague and requires the defendants to work out which terms are written and which are oral. Accordingly, Schedule E must be reformulated.

I note that the sixth defendant contends that there are particulars in the schedules that are not particularised. The sixth defendant refers to sub-paragraphs (h) and (j) of Schedule F. I find that sub-paragraph (h) does not provide appropriate particulars as to how Mr Draper is alleged to have determined to proceed with the Confidential Acquisition Partnership. Further, sub-paragraph (j) does not provide detail as to when the discussions occurred. I emphasise that adequate particulars with sufficient details must be provided to ‘put the other party on guard as to the case that must be met’.[49]

Whether there are incompatible allegations

[49]Wheelahan (n 12) [25] (Dixon J).

The sixth defendant contends that the plaintiff had allegations which are not compatible with each other. The sixth defendant contends that in paragraphs 52(e) and (f), 82 to 84, 111, 112, 135, 137 and 138 of the proposed FASOC, the plaintiff alleges that the sixth and seventh defendants were de facto directors. However, in paragraphs 7(c), 8(f), 67 and 68 of the proposed FASOC, the plaintiff alleges that the sixth and seventh defendants were not directors of the club as they were not validly appointed.

The plaintiff contends that the allegations of director’s duties and the position of de facto directors are sustainable together and are not inconsistent. The plaintiff contends that even though a person is not named a director and not properly appointed, he could still be liable as though he were a director. The plaintiff contends that no claim is made against the sixth defendant personally in this proceeding other than as a party to the agreements that are sought to be impugned. The plaintiff submits that the actions of the defendants undertaken as directors or de facto directors of the club with respect to breaches of duties are background for the oppression claim. The plaintiff contends that the conduct needs to be set out as it is relevant to the issues in dispute.

I am not satisfied that it is conflicting to allege that the sixth and seventh defendants are not validly appointed directors but are de facto directors. The plaintiff’s allegation that the sixth and seventh defendants are de facto directors follow from his allegation that they are not validly appointed as directors. Therefore, while they may owe director’s duties as de facto directors, they are not validly appointed directors for quorum purposes.

In Australian Securities and Investments Commission v King,[50] in the context of the definition of an ‘officer of a corporation’ set out in the Corporations Act 2001 (Cth), the High Court held that the definition includes an individual who does not formally hold that position but who acts in that capacity. Kiefel CJ, Gageler and Keane JJ referred to Grimaldi v Chameleon Mining NL (No 2)[51] and Corporate Affairs Commission v Drysdale,[52] in which the latter case concerned the definition of a ‘director’. Their Honours observed that:

In Grimaldi, the Full Court of the Federal Court discussed para (b) of the definition of ‘officer’ in s 9 of the Act in the light of the High Court’s decision in Corporate Affairs Commission v Drysdale. The High Court had concluded that de facto directors were directors for the purposes of s 5 of the Companies Act 1961 (NSW). In this regard, the Full Court in Grimaldi observed:
In reaching this conclusion, it is apparent that the concept of an office was integral to the judges reasoning. A de facto director was a person who did not have, or no longer had, lawful authority so to do, but who nonetheless occupied the office of director and discharged the duties attaching to that office.

As the Full Court in Grimaldi observed, the High Court in Drysdale rejected an argument that an individual who did not hold office as a lawfully appointed director could not be prosecuted for breach of duties imposed by the Companies Act upon a ‘director’. The High Court held that a person who acted as a director of a company was subject to the duties so imposed. In Drysdale, Mason J drew a distinction between holding an office and occupying an office; the latter refers to an individual who conducts himself or herself in the affairs of a corporation by exercising powers proper to an office even though he or she is not the lawful holder of that office. In Drysdale, the powers actually exercised were proper to a director of the corporation. Hence, the conclusion that the respondent was a ‘director’.[53]

[50](2020) 376 ALR 1 (‘ASIC v King’).

[51](2012) 200 FCR 296.

[52](1978) 141 CLR 236.

[53]ASIC v King (n 50) 15 [48]–[49] (emphasis in original) (citations omitted).

Accordingly, a de facto director would be liable for a breach of duties notwithstanding that they were not validly appointed. I therefore find that the allegation that the sixth and seventh defendants were de facto directors is not incompatible with the allegation that the sixth and seventh defendants were not validly appointed.

Validity of appointment of directors

The seventh defendant contends that the pleading is ambiguous as to whether the directors other than the sixth and seventh defendants were validly appointed. The seventh defendant contends that paragraphs 48 and 52 of the proposed FASOC allege that they were validly appointed, but paragraph 70 of the proposed FASOC alleges that they were not. The plaintiff contends that this matter was not raised by the second to fifth defendants so it is inappropriate for the seventh defendant to raise it on a pleadings application. Given that a statement of claim needs to be clear not only for the defendants but also for the Court,[54] I cannot accept the plaintiff’s submission.
[54]Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77, [4] (Harper J).

Paragraph 48 of the proposed FASOC alleges that the board of directors of the club included Messrs Draper, Warren, Wise and Knipe for the year ended 30 June 2016 and part of the year ended 30 June 2017, and paragraph 52 alleges that they were elected directors from 30 November 2016. However, paragraphs 70 and 71 allege that they were not registered with the Victorian Commission for Gambling and Liquor Regulation (‘VCGLR’) until 23 December 2016 or approved by the VCGLR until 15 February 2017 and accordingly were not eligible to be directors until 15 February 2017 under the club’s rules. I am satisfied that it is arguable that registration with, or approval by, the VCGLR is not required for a person to be validly appointed as a director. Under r 3.11.4.5 of the club’s rules, as summarised in Schedule C of the proposed FASOC, if nominees do not exceed the number of vacancies, the nominated candidates are declared as elected at the Annual General Meeting. There is no mention of the requirement to gain prior approval from the VCGLR. While it will be a contravention of s 10.4A.7(1) of the Gambling Regulation Act 2003 (Vic) if no prior approval of the VCGLR is obtained, it may not render the appointment of the director invalid. I am therefore not satisfied that there is ambiguity in these allegations of the plaintiff. However, I note that in paragraph 71, the plaintiff alleges that the second to seventh defendants could not be directors until 15 February 2017 under the rules of the club, but no specific rule was particularised. The plaintiff must do so. Further, the plaintiff has not tied the allegations with respect to the approval of the VCGLR into his claims for setting aside the Impugned Agreements or of oppression.

Seventh defendant’s conflict of interest as a solicitor

With respect to the entitlement to the costs of complying with subpoenas, 528 Main and AFG referred to ASADA v 34 Players and One Support Person (No 2) (‘ASADA’),[145] in which Croft J held:

where a person seeks to invoke the coercive powers of the court with respect to subpoenas, a person who seeks to resist that process or to comply with the process is entitled to have costs and expenses reimbursed so that they are not out of pocket as a result. As the authorities indicate, this is particularly so in circumstances where they have no interest in the relevant proceedings and, in any event, seek to assist the court with respect to the issue of or compliance with the subpoena.[146]

[145]ASADA (n 140).

[146]Ibid [19].

528 Main and AFG contend that the reference to persons with no interest in the proceedings by Croft J is not traversed by 528 Main now seeking to be joined to this proceeding. 528 Main and AFG contends that the costs were incurred when 528 Main was not a party, and therefore they are not costs in the cause, but are costs incurred as a non-party.

528 Main and AFG contend that ASADA was followed in Charan v Nationwide News Pty Ltd (No 6) (‘Charan’).[147] In that case, J Forrest J held that:
[147][2017] VSC 331 (‘Charan’).

In my view, the submissions of Mr Charan miss the point. The determination of whether an award of costs should be made under r 42.11 does not turn upon the result of the claim for privilege and the events preceding it. Rather, as the observations of Croft J regarding the purpose of the rule make clear, it is intended to provide a means for properly compensating a party which has gone to the trouble and expense of complying with a subpoena — and where it would not adequately be covered by the provision of conduct money or witness expenses.
The application of this principle, particularly in the case of a claim for privilege, is made clear by Byrne J in Pyramid:
Where the recipient incurs costs in collating documents, copying them and seeking advice as to privilege or as to claim for restricted access or use, it is well established that such costs are recoverable.

…
Even if DET had lost the PII claim but had sufficiently arguable grounds to maintain it, then it may well have been entitled to an award of costs in its favour as the rule envisages. I repeat that, as Croft J pointed out in ASADA, the purpose of the rule is to endeavour to ensure that a party who acts reasonably in complying with a subpoena is not out of pocket.[148]

[148]Ibid [20]–[21], [23] (citations omitted).

528 Main and AFG contend that these are the words of indemnity costs such as only those costs which are unreasonably incurred would not be allowed.

Further, 528 Main and AFG contend that Hera[149] set out examples of reasonable expenses as follows:
[149]Hera (n 141).

For an expense to be recoverable under r 42.11 it is necessary that it be incurred in complying with the subpoena and is reasonable. Expenses incurred in complying with a subpoena have been held to include expenses incurred in the following:
(a)Advice as to the validity of the subpoena and whether the addressee should comply with it at all or in part.
(b)Correspondence and attendances on the issuing party regarding its terms particularly with a view to narrowing or clarifying the scope of documents to be produced.
(c)Advice as to whether documents are subject to claims for privilege.
(d)Advice as to whether inspection of documents may be restricted on the basis of confidentiality including correspondence, attendances and negotiations with the issuing party as to the terms for inspection.
(e)Attendances in court on the return of the subpoena including attendances to assert that the subpoenaed documents should be protected from unrestricted access due to their confidential character and ensuring confidentiality undertakings have been properly given.[150]

[150]Ibid [45] (Riordan J) (citations omitted).

528 Main and AFG contend that Derham AsJ made orders on 30 April 2019 that limited the scope of the subpoenas to any documents relating to any transaction or agreement related to the on-sale. 528 Main and AFG contend that it was not an order for every document relating to the on-sale, and that the fact that their objections to the subpoenas were not wholly successful does not necessarily relieve JBI from its obligation to pay their costs.

With respect to r 63.20.1 of the Rules, 528 Main and AFG contend that it does not apply to a non-party such as a subpoenaed party. 528 Main and AFG contend that they are not parties for the purpose of costs with respect to subpoenas. They referred to De Simone[151] and Charan.[152] 528 Main and AFG contend that the costs of attending persons who are not a party to the dispute and are not subject to the compulsory powers of the Court in relation to discovery must be paid, which are the reasonable costs incurred pursuant to r 42.11.
[151]De Simone (n 143) [30]–[33].
[152]Charan (n 147) [30]–[33].

Further, 528 Main and AFG contend that the Robertson report contains multiple errors, including that:

(a) Ms Robertson purported to act under the wrong rule of the Court as she referred to r 42.04 rather than r 42.11;

(b) Ms Robertson miscites the case of Hera[153] as relating to the redaction of evidence on a costs application when the case was in relation to redaction of documents returned on a subpoena;
[153]Hera (n 141).

(c) Ms Robertson also misstates the test in Hera[154] about what is reasonable and necessary and that the relevant paragraph in Hera is paragraph 53;
[154]Ibid.

(d) Ms Robertson suggests that counsel should not have been involved in claiming privilege and that there should have been no affidavits regarding privilege, but that privilege ought to have been claimed by providing the documents to the Court in a sealed envelope for the Court to make a decision;

(e) Ms Robertson did not consider the fact that the solicitors for JBI had demanded that 528 Main and AFG justify their claim for privilege by affidavit; and

(f) Ms Robertson stated that some documents that have been claimed as privileged have been produced as referred to in the appellant’s costs submissions; however, 528 Main and AFG contend that the cost submissions do not say that but say that two documents were already in the possession of JBI.

528 Main and AFG contend that the Young report is properly reasoned and properly follows the course of events with respect to the subpoenas. 528 Main and AFG rely upon the whole of the Young report.

Given the reasons set out in this ruling, I do not need to consider the efficacy of each of the Young and Robertson reports.

The issues

To determine this costs application, there are three main issues in this proceeding as follows:

(a) firstly, whether 528 Main and AFG are entitled to the costs of complying with the subpoenas served on each of them;

(b) secondly, if 528 Main and AFG are so entitled, whether the costs claimed are reasonable; and

(c) thirdly, if costs are to be taxed, whether costs ought to be taxed immediately.

Entitlement to costs of complying with subpoenas

The issue of whether 528 Main and AFG is entitled to the costs of complying with the subpoenas involve the following questions:

(a) whether 528 Main and AFG can claim costs of complying with the subpoenas when 528 Main seeks to be a party to the proceeding (and has now been granted leave to join the proceeding as a second respondent); and

(b) if 528 Main and AFG can claim costs, what costs are allowed.

Whether 528 Main and AFG can claim costs of complying with the subpoenas

I took it that JBI contends that it ought not to pay for the costs of 528 Main and AFG in complying with the subpoenas in circumstances where 528 Main seeks to become a party to this proceeding. JBI contends that 528 Main is a party who is interested in this proceeding given that 528 Main relies upon the On-Sale Agreement, which is the subject of this proceeding. I find that this submission is not consistent with JBI’s opposition to 528 Main’s joinder application; however, I do not consider that this affects the joinder application when I have found that 528 Main ought to be joined as a party in this proceeding.

While 528 Main and AFG are seeking costs jointly and are represented by the same solicitors and counsel, only 528 Main sought to be a party.

Pursuant to r 42.11(1) of the Rules, the Court may order JBI to ‘pay the amount of any reasonable loss or expense incurred in complying with the subpoena’.

As referenced by 528 Main and AFG, in ASADA,[155] Croft J said the following with respect to the application of r 42.11:

Rather, the proper question is, how are the provisions of r 42.11 to be applied having regard to the authorities to which reference has been made; authorities which indicate that where a person seeks to invoke the coercive powers of the court with respect to subpoenas, a person who seeks to resist that process or to comply with the process is entitled to have costs and expenses reimbursed so that they are not out of pocket as a result. As the authorities indicate, this is particularly so in circumstances where they have no interest in the relevant proceedings and, in any event, seek to assist the court with respect to the issue of or compliance with the subpoena.[156]

[155]ASADA (n 140).

[156]Ibid [19].

This passage was approved by J Forrest J in Charan.[157]
[157]Charan (n 147) [19].

I agree with Croft J in ASADA that an entitlement to the costs of complying with a subpoena is open to a person who seeks to resist the subpoena or who complies with it, particularly when they have no interest in the proceeding and seek to assist the Court with respect to the subpoena.

JBI referred to Byrne J’s discussion in Pyramid[158] of the role of the rule for costs of complying with a subpoena. Byrne J said that ‘[t]he role of the rule is to mitigate in the appropriate case the hardship of compliance which may be imposed on a person who is not concerned in the proceeding as a party’.[159] In Pyramid, the relevant rule was r 42.08(1) of the then Supreme Court Rules, which was a precursor to the current r 42.11 of the Rules, and it was in the following terms:

R 42.08 (1) Where a person named not being a party reasonably incurs in complying with a subpoena expense or loss substantially exceeding the amount of any conduct money given, the Court may order that the party who filed the subpoena pay to that person an amount in respect of that expense or loss.[160]

[158]Pyramid (n 140).

[159]Ibid 468.

[160]Ibid 465.

Although r 42.08(1) expressly required that the relevant person was not a party to the proceeding, in the current r 42.11, no such requirement is present. However, Croft J considered that r 42.11 did not apply to ‘inter partes’.[161]
[161]ASADA (n 140) [19].

The Supreme Court Act states that a ‘party’ includes ‘every person served with notice of or attending any proceeding, whether named on the record or not’.[162] However, in Pyramid, Byrne J said that this definition does not apply to the then r 42.08 because if the subpoenaed person is a party, ‘[s]uch an interpretation would deprive the rule of any utility’[163] as it would disentitle that person from claiming any loss or expense under that rule.[164] This was endorsed by Chernov JA in Victoria Legal Aid v County Court of Victoria.[165]
[162]Supreme Court Act (n 144) s 3(1).
[163]Pyramid (n 140) 467.
[164]Ibid 466–7.
[165](2004) 9 VR 686, 696–7 [22].

528 Main was not a party at the time the subpoena was issued, at the time the objections were heard or at the time the costs application was made. Although 528 Main could have applied to become a party at any of those times, it did not. Nor did JBI seek to join 528 Main at those times. Therefore, in my view, 528 Main is not precluded from claiming costs for complying with the subpoena.

Costs that are allowed

The question, then, is whether an order ought to be made for the costs of complying with the subpoenas. First, I will need to address the discrepancy in what is considered objection costs and compliance costs in this application. In the Young report and in JBI’s submissions, the costs of complying with the subpoenas were divided into either objection costs or compliance costs.

The Young report appears to rely upon the affidavit of Evan Stents sworn on 17 October 2019 with respect to the division of the costs. In the affidavit of Evan Stents, the objection costs relate to the preparation for and appearances at the hearings on 19 February 2019, 30 April 2019, 30 July 2019 and 26 September 2019, and the compliance costs relate to all other costs with respect to complying with the subpoenas and orders. In her calculations of the reasonable costs, Ms Young differentiated between the objection costs or compliance costs by bolding the font for objection costs. However, the bolded or unbolded items do not correspond exactly with the categories of the items set out in the exhibit to the affidavit of Evan Stents, and subsequently set out in the exhibit to the affidavit of Anthony Peterson affirmed on 6 December 2019.

On the other hand, JBI refers to the objection costs as the costs up to and including those on 30 April 2019, when the objections were heard and when Derham AsJ made orders with respect to the documents to be produced under the subpoenas. JBI refers to the costs thereafter as the compliance costs.

Given that 528 Main and AFG first sought to object to the subpoenas after they were served and orders were made by Derham AsJ with respect to the production of documents on 30 April 2019, I am inclined to adopt JBI’s interpretation of the terms ‘objection costs’ and ‘compliance costs’.

I will therefore look at each of the objection costs and compliance costs in turn.

With respect to the objection costs, JBI contends that those costs ought to stay reserved as ordered by Derham AsJ on 30 April 2019. However, Derham AsJ had made orders on 26 September 2019 for 528 Main and AFG to file an application for costs of their compliance with the subpoenas. Therefore, I will determine whether costs ought to be made in this application rather than simply leaving costs as reserved.

JBI contends that it is not the appropriate time to decide on reserved costs when 528 Main has an interest in the proceeding and seeks to be joined as a party or as an intervener. However, given that the joinder application has now been determined, I do not find that this is an obstacle in making an order with respect to the objection costs.

JBI also contends that 528 Main and AFG were largely unsuccessful in the objections claims and that less than 20 per cent of their objections were successful at the objections hearing.

In Charan,[166] a subpoena was issued at the request of the plaintiff to the Secretary to the Department of Education and Training (‘DET’). DET made a public interest immunity (‘PII’) objection to the production of a particular document, which was heard at a hearing. DET sought to redact parts of that document. The PII claims were sustained over certain parts of the document, but not over all the parts sought. In response to the question of costs of complying with the subpoena, the plaintiff contended that each party ought to bear its own costs for DET’s PII objection because both parties had some success in relation to the objection, the document was found to be a relevant document, and the plaintiff’s conduct in requiring DET to establish its PII claim was reasonable. J Forrest J held that:
[166]Charan (n 147).

In my view, the submissions of Mr Charan miss the point. The determination of whether an award of costs should be made under r 42.11 does not turn upon the result of the claim for privilege and the events preceding it. Rather, as the observations of Croft J regarding the purpose of the rule make clear, it is intended to provide a means for properly compensating a party which has gone to the trouble and expense of complying with a subpoena — and where it would not adequately be covered by the provision of conduct money or witness expenses.
The application of this principle, particularly in the case of a claim for privilege, is made clear by Byrne J in Pyramid:
Where the recipient incurs costs in collating documents, copying them and seeking advice as to privilege or as to claim for restricted access or use, it is well established that such costs are recoverable.

…
Even if DET had lost the PII claim but had sufficiently arguable grounds to maintain it, then it may well have been entitled to an award of costs in its favour as the rule envisages. I repeat that, as Croft J pointed out in ASADA, the purpose of the rule is to endeavour to ensure that a party who acts reasonably in complying with a subpoena is not out of pocket.
…
I accept that in a proceeding where a PII claim was demonstrated to be untenable, then a Court may, on a discretionary basis, refuse to make a costs order under the rule. However, in this case where the PII submission has been upheld and the ambit of compliance with the subpoena determined, then there is no good reason why DET is not entitled to its costs of the subpoena including those on the PII claim.
To make it clear, I think such costs of ‘compliance’ include not only the taking of advice in relation to questions of privilege but also putting submissions and articulating the PII claim at the subpoena hearing. Those costs were reasonably incurred in compliance with the subpoena and fall within the ambit of the rule.
If I am wrong in my analysis of the scope of the rule, I think that there is no good reason not to exercise the costs discretion in favour of DET given that it had substantiated its claim, in the main, for PII. That in itself is sufficient to give rise to a prima facie entitlement to costs.
The end result is that DET should have the costs of complying with the subpoena, including those of making and prosecuting the PII objection, on a standard basis.[167]

[167]Ibid [20]–[21], [23], [26]–[29] (citations omitted).

In VICT v CFMMEU (No 2),[168] Ierodiaconou AsJ approved the principles set out by J Forrest J in Charan.[169]
[168][2018] VSC 467.
[169]Ibid [33], [38].

Accordingly, it is not the result of the objection claims that is relevant in determining costs, but whether the objections were based on sufficiently arguable grounds.

At the objections hearing on 30 April 2019, 528 Main and AFG raised three main grounds of objections:

(a) firstly, that JBI had no case;

(b) secondly, that there was no legitimate forensic purpose for which the documents were sought pursuant to the subpoenas; and

(c) thirdly, that the issue of the subpoenas was an abuse of process or oppressive because it was too wide or fishing.

The first ground of objection was not a matter that could be determined at a hearing for an objection to a subpoena, as Derham AsJ said at the hearing. Accordingly, it cannot be said that this ground was sufficiently arguable.

With respect to the second ground of objection, although Derham AsJ found that there were two legitimate forensic purposes for which the documents were sought, the ground was ventilated at the hearing and was arguable in circumstances where Derham AsJ indicated that the purpose was not immediately clear from the then further amended notice of appeal or submissions of JBI. Further, JBI had referred to other documents that demonstrate the legitimate forensic purposes of the documents sought in the subpoenas.

With respect to the third ground of objection, Derham AsJ found that the scope of the subpoenas was too wide at the time of the objections hearing even with the date limitations to which parties consented, and his Honour ordered a more narrow criteria of the documents to be produced with liberty to apply for the balance of the documents originally sought in the subpoena. I am satisfied that 528 Main and AFG was successful with this ground of objection. While JBI had liberty to apply for the balance of the documents sought, the criteria for the documents to be produced according to the orders made at the hearing were nevertheless more narrow compared to the subpoenas.

Therefore, I find that it was reasonable to object to the subpoenas based on the second and third ground, but not the first ground. Hence, 528 Main and AFG ought to be entitled to part of the objection costs incurred on or prior to 30 April 2019. I will order that 528 Main and AFG are entitled to 75 per cent of the reasonable amount of the objection costs and not more because although the first ground was not ventilated in any great detail at the objections hearing, it was nevertheless raised.

In my view, the objection costs that can be expenses incurred in complying with the subpoenas pursuant to r 42.11 include:

(a) advice as to the validity of the subpoenas;[170]
[170]Hera (n 141) [45].

(b) preparation for the hearing with respect to objections against the subpoenas, including correspondence with JBI and making outlines of submissions;[171]

(c) attending the objections hearing on 30 April 2019 and making submissions at the hearing;[172] and

(d) attending the hearing on 19 February 2019, because even though the hearing of the objections was adjourned, it was listed on that date for the first return.

[171]See Levey v Bird [2020] VSC 615, [34], [39] (Clayton JR).

[172]See, eg, Charan (n 147) [27].

With respect to the compliance costs, JBI contends that those costs ought to be determined at the end of the proceeding because 528 Main and AFG have not complied with the subpoenas and the extent of their non-compliance will only be known at the end of the proceeding. JBI contends that non-compliance with the subpoena is important for the reasonableness of costs because r 42.12 of the Rules states as follows:

42.12 Failure to comply with subpoena—contempt of court
(1) Failure to comply with a subpoena without lawful excuse is a contempt of court and the addressee may be dealt with accordingly.
...

JBI had referred to 528 Main’s and AFG’s non-compliance at VCAT; however, their non-compliance at VCAT is irrelevant for this costs application. It is the compliance with the subpoenas issued by this Court at the request of JBI that is relevant.

JBI contends that 528 Main and AFG have not complied with the subpoenas notwithstanding that documents were produced by other subpoenaed persons. However, 528 Main and AFG have produced four tranches of documents. Further, the solicitors for JBI had stated in correspondence to the solicitors for 528 Main and AFG that JBI would not be seeking further documents in relation to the subpoenas and court orders and that the dispute with respect to non-compliance with the subpoenas has come to an end.[173] Although I note that JBI maintains its objections with respect to 528 Main’s and AFG’s alleged non-compliance and that the solicitors for JBI considered that the issues are more appropriately ventilated in the Stuart proceeding, this does not negate the statement that further documents would not be sought from 528 Main and AFG with respect to the subpoenas and the statement that the dispute of non-compliance with the subpoenas has come to an end. Therefore, I do not find that non-compliance is an issue in the costs application in these circumstances. Nor do I need to determine the question of lawful excuse under r 42.12 of the Rules.
[173]See paragraph 370 hereof.

JBI contends that 528 Main and AFG are seeking to be compensated for costs incurred in determining their interest in this proceeding. However, this relates to the quantum of the costs claimed and therefore the reasonableness of the claim, rather than 528 Main’s and AFG’s entitlement to costs.

Accordingly, I am satisfied that 528 Main and AFG is entitled to a reasonable amount of the costs incurred in complying with the subpoena after 30 April 2019.

Such costs may include:

(a) advice about whether documents are subject to privilege claims;[174] and

(b) collating documents and copying them.[175]

[174]Hera (n 141) [45]; Pyramid (n 140) 468.

[175]Pyramid (n 140) 468.

528 Main and AFG also claimed costs in relation to two hearings on 30 July 2019 and 26 September 2019.

JBI contends that 528 Main and AFG claimed costs for appearing for half a day on 30 July 2019 even though matters relating to the subpoena were not considered and that the issue at the hearing was that the club was not represented. However, at the hearing, counsel for 528 Main and AFG appeared on 30 July 2019 to maintain 528 Main’s and AFG’s claims for privilege, to which JBI had not responded. Although JBI did not seek to dispute the claims for privilege at the hearing and the question of privilege was not ultimately dealt with, I do not find that it was inappropriate for 528 Main and AFG to appear on 30 July 2019 when there had been no response from JBI. Therefore, 528 Main and AFG can claim reasonable costs with respect to the hearing on 30 July 2019.

At the hearing on 26 September 2019, although counsel for 528 Main and AFG stated that 528 Main and AFG maintained that they had complied with the subpoenas, counsel for 528 Main and AFG did not seek to ventilate the issues of compliance with the subpoenas on that day. Instead, counsel for 528 Main and AFG sought orders to list the hearing of disputes with respect to the subpoenas on another day. However, such orders were not sought by counsel for JBI. On 26 September 2019, the main focus of the hearing was on the issue of the club’s legal representation. Given that 528 Main and AFG did not seek to make submissions as to compliance with the subpoenas, in my view, the expenses incurred with respect to the hearing on 26 September 2019 is not reasonably incurred in complying with the subpoenas.

In summary, I find that 528 Main and AFG are entitled to 75 per cent of the reasonable objection costs incurred, and to the full amount of the reasonable compliance costs incurred after 30 April 2019.

Reasonableness of costs claimed

As the reports prepared by Ms Young and Ms Robertson provide varying opinions as to the reasonableness of the costs claimed and as to the estimate of reasonable costs, in my view, the costs ought to be taxed.

Should the costs be taxed immediately?

Rule 63.20.1 of the Rules states:

If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.

JBI contends that the definition of a ‘party’ includes ‘every person served with notice of or attending any proceeding, whether named on the record or not’.[176] JBI contends that as 528 Main and AFG have been served with notice or have attended upon the proceeding whether named on the record or not, they are parties to the proceeding.
[176]Supreme Court Act (n 144) s 3(1).

In De Simone,[177] Derham AsJ held that r 63.20.1 does not apply to a non-party.[178] This was followed by J Forrest J in Charan.[179] In Charan, a non-party includes a subpoenaed person.[180] In Charan, J Forrest J did not refer to the definition of ‘party’ in s 3(1) of the Supreme Court Act even though subpoenaed parties have notice of the proceeding or have attended upon the proceeding for objections to the subpoenas. Therefore, according to the rules of precedent, I am bound by the decision of J Forrest J in Charan because an appeal from my decision would be heard by a single judge pursuant to s 17(3) of the Supreme Court Act.
[177]De Simone (n 143).
[178] Ibid [31].
[179]Charan (n 147) [31].
[180]Charan (n 147).

Although I have found that 528 Main ought to be joined as a party to this proceeding, 528 Main is not a party until it has been formally joined. Even though r 63.20.1 does not apply to non-parties, I find it appropriate to determine whether costs ought to be taxed immediately in this application given my finding that 528 Main ought to be joined to this proceeding.

In De Simone, Derham AsJ referred to Setka v Abbott (No 2)[181] in setting out circumstances in which the Court may order immediate taxation of costs. His Honour said:

In Setka v Abbott (No 2), the Court of Appeal summarised the factors that may warrant an order for immediate taxation of costs as one or more of the following:
(a)There is a prospect of considerable delay in completion of the proceedings;
(b)The issue the subject of the interlocutory order is discrete from what will finally require determination; and/or
(c)The party against whom the order was made has been guilty of unsatisfactory conduct, that is conduct that was unreasonable, reprehensible or involving a want of competence and diligence.[182]

[181][2013] VSCA 376, [27].

[182]De Simone (n 143) [32] (citations omitted).

In De Simone, Derham AsJ held that the costs of objecting to the inspection of documents produced pursuant to a subpoena ought to be taxed immediately in favour of the Commissioner, who was a non-party, because the issue was discrete and separate from the appeal and because it was likely that it would be some time before the appeal was finalised.[183]
[183]Ibid [33].

In Charan, J Forrest J held that the costs of complying with the subpoena ought to be taxed immediately because the relevant party had no further interest in the proceeding and therefore it would not serve any useful purpose for that party to await the final determination of the proceeding.[184]
[184]Charan (n 147) [32].

In this costs application, similar to the situation in De Simone, I find that the costs incurred in objecting to the subpoenas and in complying with the subpoenas are an issue that is discrete and separate to the substantive issues in this appeal proceeding and that it is likely that this proceeding will not be determined for some time. This is emphasised by the general understanding that this proceeding is to be heard at the same time as or after the determination of the Stuart proceeding in circumstances where the pleadings have not been finalised in the Stuart proceeding.

However, in this proceeding, as distinct from Charan and De Simone, 528 Main is and continues to be interested in this proceeding. In light of my finding that 528 Main is to be joined as a party, in my view, it is not appropriate for costs to be taxed immediately. Once 528 Main is joined as a party, 528 Main will be part of the proceeding until the end of the proceeding unless the conditions are no longer satisfied, and 528 Main may subsequently be subject to further orders as to costs. Ordinarily, the costs of a party complying with a subpoena would ultimately be borne by the unsuccessful party in the proceeding.[185] Hence, if 528 Main is unsuccessful in the proceeding, it may be required to pay JBI’s costs, which would ordinarily include the costs of having the subpoenas answered.[186] This will remove the utility of immediate taxation.
[185]Deposit & Investment Co Ltd (recs apptd) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267, 290 (‘Deposit v Peat’), cited in Diab Pty Ltd v Yum! Restaurants Australia Pty Ltd (No 2) [2017] FCA 54, [14]. See also Levey v Bird (n 171) [33].
[186]Deposit v Peat (n 185) 290.

Accordingly, I will not order that the costs of 528 Main and AFG in complying with the subpoenas are to be taxed immediately. As 528 Main and AFG jointly seek their costs in complying with the subpoenas in this application, I will not make separate orders for 528 Main and AFG.

Conclusion

528 Main and AFG are entitled to 75 per cent of their reasonable costs of complying with the subpoenas on and prior to 30 April 2019, and are entitled to their reasonable costs of complying with the subpoenas after 30 April 2019. However, such costs are to be taxed at the end of the proceeding. In the event that the conditions of joinder are no longer satisfied, I will order that there is liberty to apply.

Further, given that 528 Main and AFG were successful in their costs application save as to the date of taxation, they are entitled to 80 per cent of the costs of this application on a standard basis.

Orders
Stuart v Mordialloc Sporting Club Inc
Other matters
A.By order 2(B) of the orders made by Kennedy J on 12 November 2020, the proceeding ought to be stayed in the event that the plaintiff did not provide security as ordered.

B. The Court has been informed that security has not been provided.
C.Accordingly, it is not appropriate to make orders scheduling this proceeding for further hearing or for the provision of a proposed fourth further amended statement of claim.

D. In the event that the stay is lifted, the parties will have liberty to apply.
Orders

The plaintiff pay the costs of the application seeking leave to file the proposed third further amended statement of claim, including costs of the hearing on 19 November 2019 insofar as the hearing relates to seeking leave to file the proposed further amended statement of claim, on a standard basis. Otherwise the costs of the summonses, including the costs referred to in paragraph 5 of the Orders made on 19 November 2019, are reserved.
In the event that the stay is lifted, there be liberty to apply on reasonable notice in writing.
John Barr Investments Pty Ltd v Mordialloc Sporting Club Incorporated
Joinder application
528 Main Street Mordialloc Pty Ltd (‘528 Main’) as trustee for the 528 Main Street Mordialloc Unit Trust be joined to this proceeding pursuant to r 9.06(b)(i) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) subject to the following conditions:
(a)528 Main can only make submissions that differ to the submissions ultimately advanced by Mordialloc Sporting Club Incorporated (‘the club’); and
(b)the following agreements are not set aside in the proceeding S ECI 2018 01124:
(i)the On-Sale Deed dated 22 December 2016 and entered into by the club and 528 Main; and
(ii)the Related Agreements entered into by the club and 528 Main between about 13 January 2017 and about 19 December 2018, as referred to in 528 Main’s points of claim filed on 3 February 2020 in this proceeding.
Costs of the summons filed on 28 November 2019 are reserved.
Costs application
528 Main and Aus Finance Group Pty Ltd (‘AFG’) are entitled to 75 per cent of their reasonable costs of complying with the subpoenas on and prior to 30 April 2019, and are entitled to their reasonable costs of complying with the subpoenas after 30 April 2019. The costs are to be taxed at the end of the proceeding. The ultimate responsibility for payment of such costs be costs in the proceeding.
The appellant pay 80 per cent of 528 Main’s and AFG’s costs of the summons filed on 17 October 2019 on a standard basis.
If the conditions of joinder are no longer satisfied, there is liberty to apply.
General
A directions hearing is listed on a date to be fixed.

S C H E D U L E O F P A R T I E S

S ECI 2018 01124

B E T W E E N :

RAYMOND JOHN STUART Plaintiff

- v -

MORDIALLOC SPORTING CLUB INC.

(ARN A0027737R)
First Defendant

LANCE DRAPER Second Defendant

TREVOR WARREN Third Defendant

ANDREW WISE Fourth Defendant

JULIAN KNIPE Fifth Defendant

KEVIN SAID Sixth Defendant

NICK MAZZEO Seventh Defendant

RAYMOND JOHN STUART	Plaintiff
- v -
MORDIALLOC SPORTING CLUB INC. (ARN A0027737R)	First Defendant
LANCE DRAPER	Second Defendant
TREVOR WARREN	Third Defendant
ANDREW WISE	Fourth Defendant
JULIAN KNIPE	Fifth Defendant
KEVIN SAID	Sixth Defendant
NICK MAZZEO	Seventh Defendant

[2021] VSC 244

11 May 2021