Temwood Holdings Pty Ltd v Oliver - [2000] WASC 69

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: TEMWOOD HOLDINGS PTY LTD -v- OLIVER & ORS [2000] WASC 69

CORAM: STEYTLER J

HEARD: 22 FEBRUARY 2000

DELIVERED : 21 MARCH 2000

FILE NO/S: CIV 2008 of 1997
CIV 2173 of 1997
CIV 2244 of 1997
(Consolidated by Order dated 13 March 1998)

BETWEEN: TEMWOOD HOLDINGS PTY LTD
Plaintiff
AND
OSCAR NEIL BLACKBURNE OLIVER
First Defendant
ASEAN AUSTRALIAN ASSETS PTY LTD
Second Defendant
SLY AND WEIGALL (A FIRM)
Third Defendant
(BY ORIGINAL ACTION)
ASEAN AUSTRALIAN ASSETS PTY LTD
Plaintiff
AND
TEMWOOD HOLDINGS PTY LTD
Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Pleading - Breach of fiduciary duty - Turns on own facts

Legislation:

Nil

Result:

Application acceded to

Representation:

Original Action

Counsel:

Plaintiff:     Mr D H Solomon
First Defendant             :     Mr C E Chenu
Second Defendant         :     Mr C E Chenu
Third Defendant           :     Mr A N Siopis

Solicitors:

Plaintiff:     Solomon Brothers
First Defendant             :     Durack & Zilko
Second Defendant         :     Durack & Zilko
Third Defendant           :     Blake Dawson Waldron

Counterclaim

Counsel:

Plaintiff: Mr C E Chenu
Defendant: Mr D H Solomon

Solicitors:

Plaintiff: Durack & Zilko
Defendant: Solomon Brothers

Case(s) referred to in judgment(s):

Dey v Victorian Railways Commissioners (1949) 78 CLR 62
General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125
Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378
Williams & Humbert Ltd v W & H Trademarks (Jersey) Ltd [1986] AC 368

Case(s) also cited:

Autodesk Inc v Dyason [No 2] (1993) 176 CLR 300
Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 33 ACSR 1
Cubillo v The Commonwealth (1999) 163 ALR 395
De L v Director-General Department of Community Services (NSW) (1997) 190 CLR 207
Espanol Holdings Pty Ltd v Banning [1999] WASC 49
Harrison v Harrison [1955] Ch 260
Hoad v Nationwide News Pty Ltd (1997) 37 1PR 407
London Loan & Savings Co v Brickenden [1934] 3 DLR 465
Maguire v Makaronis (1997) 188 CLR 449
Moody v Cox [1917] 2 Ch 71
Nationwide News Pty Ltd v Wiese (1990) 4 WAR 263
Niven v Grant (1903) 29 VLR 102
Norman v Norman (1992) 6 WAR 372
Northern Land Council v The Commonwealth [No 2] (1987) 61 ALJR 616
Spector v Ageda [1973] Ch 30
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 17 WAR 98
Wentworth v Wentworth; Wentworth, Estate of (1999) 46 NSWLR 300

STEYTLER J: This is an application by the plaintiff to reamend its consolidated statement of claim. The application is opposed by the third defendant.
There have been prior applications to amend the statement of claim. Those were also opposed. I have, in reasons given in this action on 17 August 1998 and again on 3 November 1999 set out the nature of the claims made by the plaintiff against the defendants in the proceedings. I will not repeat what I there said.
There is now opposition only from the third defendant ("Sly and Weigall"), a firm of solicitors. That opposition relates solely to two alternative causes of action pleaded against it. The first is to the effect that Sly and Weigall dishonestly assisted the first defendant ("Mr Oliver") in a breach of the fiduciary duties owed by him in his capacity as a director of the plaintiff. The second is that it was a knowing participant in a fraudulent and dishonest breach of fiduciary duty by Mr Oliver in that capacity.
Sly and Weigall contends, in a nutshell, that no sufficient basis for either cause of action has been, or can be, pleaded by the plaintiff. Consequently it contends that the amendment, insofar as it pleads these alternative causes of action, should not be allowed and that the plaintiff should not be afforded a further opportunity to amend so as to plead them.
Before moving to the causes of action to which I have referred I should say something of the background to the matter, insofar as it is material to those causes of action, as it appears from the statement of claim.
Mr Oliver was, between 8 August 1991 and 7 May 1992, a director of the plaintiff (par 4.1). He is, and has at all times since 20 November 1989 been, a director and shareholder of the second defendant ("AAA") (par 4.2).
On 11 September 1991 the plaintiff entered into a deed of option by which it was given an option ("the option") to acquire land at Singleton Beach in Western Australia for a price of $3,060,000 (par 5). By a deed dated 18 September 1991 ("the First Management Agreement") the plaintiff appointed AAA to act as its consultant with respect to the development of the land (par 6).
Sly and Weigall represented the plaintiff and AAA with respect to the preparation of, and their entering into, the First Management Agreement and the deed of option (par 7).
By a letter dated 22 August 1991, prior to the making of the First Management Agreement, Mr Oliver instructed Sly and Weigall that variations were to be made to a draft of what became, after amendments, that agreement. Those variations were to the disadvantage of the plaintiff and to the benefit of AAA (par 7C).
By a written memorandum dated 23 August 1991, Mr Ian Morison (a solicitor at Sly and Weigall) informed Mr Warwick Bradney (another solicitor at that firm), inter alia, that he had had a long discussion with Mr Oliver as regards a possible conflict which Mr Oliver and Mr Don Lim, a director of the plaintiff and shareholder in AAA, had between their duties as directors of the plaintiff and their interests as shareholders in AAA. Mr Morison also there recorded that he had told Mr Oliver that the plaintiff's directors would need to be satisfied that they had performed their duty to the plaintiff in negotiating the First Management Agreement and that the beneficial holder of the shares in the plaintiff (Mr Ricky Ling) should join the plaintiff's board before it decided to enter into the First Management Agreement. He also recorded that Mr Oliver had said that this was not practicable. Mr Morison recommended, too, that Mr Ling, as the beneficial owner of the shares in the plaintiff, should approve the First Management Agreement before it was entered into by the plaintiff. He said that a future board of directors of the plaintiff and its future solicitors might "closely scrutinise" the conduct of Mr Oliver, Mr Lim and Sly and Weigall in the light of the personal interest of Messrs Oliver and Lim in the First Management Agreement and the fact that Sly and Weigall had acted for both parties to it. Finally, Mr Morison told Mr Bradney, in the memorandum, that Mr Oliver had agreed with what he, Mr Morison, had said to him (par 7CA).
However neither Mr Ling nor any shareholder in the plaintiff was at any material time told of the matters appearing in this memorandum (par 7CB).
On about 30 August 1991 Sly and Weigall produced a draft of the First Management Agreement (par 7D). On about 11 September 1991 Mr Oliver delivered a memorandum prepared by Mr Lim to Sly and Weigall regarding the proposed terms of that agreement (par 7F). However, by a facsimile dated 12 September 1991 Mr Oliver told Sly and Weigall that Mr Lim's comments were "unrealistic". He referred Sly and Weigall to his letter dated 22 August 1991. He also instructed Sly and Weigall that AAA needed additional remuneration in one respect and that it needed the protection of a termination fee in case the plaintiff should not proceed with the development (par 7G). By a communication or communications made on 12 or 13 September 1991 Sly and Weigall sought from Mr Oliver or AAA instructions concerning the drafting of the agreement and as regards specific aspects of remuneration to be included therein (par 7H).
Then, by letter dated 13 September 1991, Mr Oliver (in his capacity as a director of the plaintiff and a director of AAA) instructed Sly and Weigall (falsely) that the proposed terms of the First Management Agreement had been "suggested and discussed with Mr Ling who will be allocated a share of the fees by AAA" (par 8.1, par 8A and par 9AA). He told Sly and Weigall that Mr Bradney would no doubt consider that to be "an unusual situation as Mr Ling holds both shares in ... [the plaintiff] but will ultimately … hold the shares in trust for other parties" (par 8.2). He also specified the payment terms to be included in the First Management Agreement with respect to the aspects of remuneration mentioned in the communication or communications on 12 or 13 September 1991.
Next, the plaintiff pleads that as at 13 September 1991 Mr Bradney knew, as a consequence of the communications to which I have referred and by reason of his experience as a commercial solicitor, in effect that the First Management Agreement was an improvident transaction for the plaintiff to enter into (par 9A and par 10.1). He also knew that Mr Lim's comments or instructions in his memorandum had been countermanded by Mr Oliver in terms that would benefit AAA at the expense of the plaintiff (par 9A.4). Moreover, he knew that the beneficial ownership of the shares in the plaintiff was to be transferred to a then unidentified Malaysian investor or investors who had not approved or been informed of the terms of the First Management Agreement, notwithstanding the recommendation made by Mr Morison to Mr Oliver as recorded in his memorandum to Mr Bradney (par 9A.6). Finally, he knew, according to the pleading, that Mr Oliver had not implemented the advice given to him by Mr Morison and was nevertheless proceeding to amend the draft First Management Agreement to the benefit of AAA and to the detriment of the plaintiff (pars 9A.7 and 9A.8). The plaintiff alleges that, because Mr Bradney knew all of these facts, he also knew that Mr Oliver was acting in breach of the duties which he owed to the plaintiff (par 9A.9).
The plaintiff also alleges (par 10.1C) that Mr Bradney knew, from copies on file of documents prepared by Sly and Weigall in relation to another project management agreement, that project management agreements usually make different and more favourable provisions (viewed from the plaintiff's point of view).
The plaintiff then pleads, in par 10.2 (and par 10A), that Mr Bradney had, by that stage, been informed and that he then believed that Mr Oliver intended that AAA and Mr Ling would, at the expense of the plaintiff (which would then have different beneficial shareholders), benefit from the fees payable by the plaintiff under the First Management Agreement (although this was true, in fact, only as regards AAA and not as regards Mr Ling). It also pleads that Mr Bradney then knew that, alternatively had a reckless disregard whether or not, Mr Oliver, as a director of the plaintiff, was in the process of carrying out a fraudulent and dishonest design in which the plaintiff would enter into an improvident transaction to the benefit of Mr Oliver and/or AAA (par 10.3).
The plaintiff goes on to plead that notwithstanding all of this Sly and Weigall continued to represent both the plaintiff and AAA with respect to the preparation and execution of the deed of option and the First Management Agreement.
Then it pleads that, when it executed the First Management Agreement on 18 September 1991, that agreement was an improvident transaction for it to enter into (par 11A) and Mr Bradney knew it to be so (par 11B) as did Mr Oliver and AAA (par 11C). This last allegation carries with it a particular (particular F) to the effect that Mr Oliver instructed Mr Bradney, by a facsimile dated 17 September 1991, that even though a proposal was yet to be discussed by Mr Oliver with Mr Lim and Mr Ling had not seen a draft of the First Management Agreement, it was appropriate that it be executed because none of Mr Lim, Mr Ling or Mr Oliver "could operate without the protection of the terms [therein] set out".
In par 11D the plaintiff alleges, by way of an alternative plea, that when it executed the First Management Agreement Mr Oliver and AAA had a reckless disregard as to whether or not it was an improvident transaction for the plaintiff to enter into.
In par 11E the plaintiff pleads that, notwithstanding his knowledge of what Mr Morison had told Mr Oliver and that the First Management Agreement was improvident for the plaintiff, Mr Bradney did not send or attempt to send a copy of that agreement in draft to Mr Ling at any time before the plaintiff entered into it. It also pleads that Mr Oliver likewise made no such attempt (par 11E.2).
Then, in par 11F, the plaintiff alleges that as at 18 September 1991 Mr Ling was the sole beneficial shareholder in the plaintiff and that he then intended to transfer his interest in the plaintiff to an investor or group of investors prior to the exercise of the option.
In par 12 of the statement of claim the plaintiff alleges that on receipt of the 17 September facsimile and at all times thereafter Mr Bradney knew, or had a reckless disregard to the fact, that one of the two directors of the plaintiff, Mr Lim, and its sole beneficial shareholder, Mr Ling, had not approved the First Management Agreement and that Mr Ling intended to transfer his beneficial interest in the shares in the plaintiff to an unidentified third person or persons who could not at that time have approved the First Management Agreement.
In par 13 the plaintiff pleads that before the execution of the First Management Agreement the plaintiff and AAA agreed ("the agreement to vary") that the plaintiff would thereafter be entitled to have that agreement varied if it had any objections to any of its provisions.
In par 14 the plaintiff pleads that, prior to the making of the agreement to vary, Mr Oliver and AAA represented to Mr Lim, in his capacity as a director of the plaintiff, inter alia, that it was urgent that the First Management Agreement be executed and that that agreement was a standard form of project management agreement. Mr Bradney is said also to have advised Mr Lim, prior to the making of the agreement to vary, that the First Management Agreement was a standard project management agreement and that there was no reason why Sly and Weigall should not represent both the plaintiff and AAA with respect to the preparation of and their entering into that agreement (par 14.2).
In par 15 the plaintiff pleads that it entered into the First Management Agreement in consideration of AAA having made the agreement to vary and in reliance on Mr Oliver's representations and Mr Bradney's advice and also by reason of Sly and Weigall's conduct.
The plaintiff next pleads that there was in fact no urgency as represented by Mr Oliver and that, contrary to what had been said by Mr Oliver and Mr Bradney, the First Management Agreement was not a standard project management agreement (pars 18, 19 and 20) and that on 18 September 1991 (when that agreement was executed) Mr Bradney, Mr Oliver and AAA knew that it was not a standard project management agreement (par 19A).
In par 20A, the plaintiff pleads that Mr Oliver and AAA knew that there was no urgency of the kind represented. In par 20B it pleads (once again) that the entry into the First Management Agreement by the plaintiff was detrimental to it but beneficial to AAA and Mr Oliver.
Then, in pars 20C, 21 and 22, the plaintiff alleges that Mr Oliver engaged in the conduct pleaded against him for the sole or predominant purpose of causing the plaintiff to enter into the First Management Agreement and that, by doing so and by not preventing the plaintiff from entering into and by encouraging the plaintiff to enter into the First Management Agreement, he breached his fiduciary and statutory duties.
There are also pleas against Sly and Weigall alleging breach of fiduciary duties and breach of duties of care and in contract owed by it to the plaintiff.
Next, insofar as is relevant, the plaintiff pleads (par 29A) that by letter dated 15 November 1991 Mr Ling, by a firm of solicitors (Johnson T S Tan & Co), informed Sly and Weigall that he had received a copy of the First Management Agreement and that he had yet to make a decision with respect to the question whether or not to enter into it. That being so, the plaintiff alleges (par 29B), Mr Bradney consequently knew that Mr Ling had not seen or approved the First Management Agreement prior to 18 September 1991, that what he had been told in the 13 September letter was false, that Mr Ling was concerned about the terms of the First Management Agreement and that the plaintiff was considering exercising its rights under the agreement to vary.
The plaintiff alleges (par 29C) that, on receipt of the 15 November 1991 letter, Mr Bradney sent to Johnson T S Tan & Co a facsimile dated 9 December 1991 saying that he was "not clear in [his] own mind" as to the meaning of that letter and that once the letter was clarified he would discuss it with his clients. He also sent to Mr Lim a handwritten facsimile enclosing a copy of the 15 November 1991 letter and of his reply to it and seeking advice from Mr Lim and, through him, Mr Oliver as to whether or not he should contact Mr Ling on his (Mr Bradney's) forthcoming visit to Sabah.
The plaintiff alleges that the effect of Mr Bradney's facsimile dated 9 December 1991 was that he falsely represented to Mr Ling that he was unaware of the fact that Mr Ling had not seen or approved the First Management Agreement prior to 18 September 1991, of the fact that the 13 September letter was false, of the fact that Mr Ling was concerned about the terms of the First Management Agreement and of the fact that the plaintiff was considering exercising its rights under the agreement to vary and that he was also unaware of the agreement to vary itself.
In par 29E the plaintiff alleges that, between 13 and 16 December 1991, Mr Bradney met with Mr Ling in Sabah but did not tell him of any of the material matters by then known to him.
Thereafter, the plaintiff says (par 30), on about 24 February 1992 Mr Bradney told Mr Ling on behalf of the plaintiff that the First Management Agreement was a standard project management agreement and once again did not tell him of the other material matters known to him.
In par 30A the plaintiff pleads that prior to 8 May 1992, to Sly and Weigall's knowledge, Mr Ling transferred his beneficial interest in all of the shares in the plaintiff to Goldcore Investments Pty Ltd and Ing Chuang Ngui.
In par 31 the plaintiff alleges that, induced by and in reliance on Mr Bradney's advice to Mr Ling, the plaintiff engaged Sly and Weigall for reward to prepare a notice exercising the option and exercised the option on about 8 May 1992. It pleads, in the alternative (par 31A), that but for Mr Bradney's failure to tell Mr Ling of the matters known to him and but for the advice which he gave to Mr Ling to the effect that the First Management Agreement was a standard project management agreement, the plaintiff would not have engaged Sly and Weigall to prepare the notice exercising the option and would not have exercised the option while bound by the First Management Agreement.
Then, in par 32.2, the plaintiff alleges that in giving or prior to giving the advice pleaded in par 30 (that the First Management Agreement was a standard project management agreement), and until the option was exercised, Sly and Weigall did not advise the plaintiff of the material matters known by Mr Bradney.
Finally, so far as is relevant, the plaintiff pleads, in par 34A, that:
"34A.By reason of the matters pleaded in paragraphs 8 ‑ 11B, 11E, 12, 14.2.1, 19, 19A, 29B ‑ 30A and 32.3 Sly and Weigall, by Bradney:
34A.1dishonestly assisted Oliver in a breach of his fiduciary duty as a director of the plaintiff;
34A.2alternatively, was a knowing participant in a fraudulent and dishonest breach of fiduciary duty by Oliver in his capacity as a director of the plaintiff.
PARTICULARS
A.Oliver's fraudulent and dishonest design was to cause the plaintiff, while he was a director of the plaintiff, to enter into the First Management Agreement in the circumstances pleaded in paragraphs 11A, 11C alternatively 11D, 19A, 20B and 20C and thereafter to exercise the Option whilst bound by the First Management Agreement without any director or shareholder being informed of Oliver's knowledge as pleaded in paragraphs 11C alternatively 11D, 17, 19A, 20A or any of them or of his purpose pleaded in paragraph 20C.
B.Oliver's breach of fiduciary duty comprises the breaches pleaded in paragraphs 22.1 and 34C."

Mr Oliver's breach of fiduciary duty, as pleaded in par 34C, is said to arise by reason of his conduct, during the period of his directorship of the plaintiff, in not notifying or otherwise informing the other directors of the plaintiff of his knowledge, inter alia, of the fact that the First Management Agreement was improvident for the plaintiff or of his purpose in procuring it to enter into the First Management Agreement. This is said to have amounted to the engagement by him in a continuing breach of his fiduciary and statutory duties pleaded in par 21.
Counsel for Sly and Weigall contends that this pleading, and the documents which are said to support it (which were produced at the hearing without objection), do not disclose an arguable cause of action against Sly and Weigall.
I have previously mentioned (in the course of prior proceedings between these parties) that the Privy Council, in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (upon which case both parties relied) has said, at 389, that "in the context of the accessory liability principle, acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances" and that their Lordships went on to say (ibid):
"This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.
In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others' property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless."
Counsel for Sly and Weigall contends that the proposed amendment contemplates three stages of "dishonest assistance", being the entry into the First Management Agreement, the meeting with Mr Ling in Sabah and the exercise of the option by the plaintiff, and says that these, whether taken singularly or together, disclose no arguable cause of action.
He submits, firstly, that there is no arguable cause of action to the effect that, at the time that Mr Lim signed the First Management Agreement on behalf of the plaintiff, Mr Bradney dishonestly intended to assist Mr Oliver to keep Mr Ling in the dark as to the terms of that agreement so as to assist in the implementation of Mr Oliver's scheme. This, he contends, is so for four reasons. The first is that, shortly before the execution of the First Management Agreement, Mr Bradney had been told by Mr Oliver that its proposed terms had been suggested and discussed with Mr Ling and that Mr Ling would take a share in the fees payable to AAA. The second is that Mr Bradney was asked by Mr Oliver to send a copy of the executed agreement to Mr Ling who was then out of the country. That request, he contends, is inconsistent with any intention to keep Mr Ling in the dark as to the terms of the First Management Agreement and to deprive him of independent assistance in relation thereto prior to the exercise of the option. The third is that there is nothing in the 13 September 1991 letter which should have led Mr Bradney to conclude that the First Management Agreement was in fact improvident. The fourth is that, even if Mr Bradney should have concluded that the First Management Agreement favoured AAA, that did not mean that it was an improvident agreement. Moreover, counsel for Sly and Weigall submits, so far as Mr Bradney was aware, the sole beneficial shareholder in the plaintiff had suggested and discussed those terms and was to get a share of the fees paid by AAA. There is, counsel for Sly and Weigall points out, no plea that Mr Bradney was told or knew that, when Mr Ling transferred his shares, he would not, if in fact he ultimately did not, permit the transferee to scrutinise the First Management Agreement and to take such independent advice as might be thought fit.
As to the second stage, the visit to Mr Ling in Sabah, counsel for Sly and Weigall contends that the pleading does not make clear what it is that Mr Bradney is said to have failed to disclose. However, he said, even if it be assumed that the pleading alleges that Mr Bradney failed to disclose to Mr Ling that Mr Oliver had previously told him that Mr Ling had approved the terms of the First Management Agreement and was to be allocated a share of the fees to be received by AAA, and that he did not tell Mr Ling of the unfavourable nature of the First Management Agreement so far as the plaintiff was concerned, those failures could only amount to dishonest assistance if they were deliberate and effected with the intention of procuring the coming to fruition of the allegedly fraudulent scheme. This, he submitted, has not been pleaded.
Moreover, counsel for Sly and Weigall submitted, by the time of the meeting in Sabah Mr Ling had received the First Management Agreement and had engaged Johnson T S Tan & Co to act on the plaintiff's behalf in relation to it. That being so, he submitted, the plaintiff was no longer Mr Bradney's client in relation to the First Management Agreement. In those circumstances, he contended, any failure to advise Mr Ling of the matters referred to could not be categorised as dishonest assistance in a scheme to keep him in the dark, more particularly when Mr Ling was aware of the terms of that agreement and had engaged an independent solicitor to advise him about it.
As to the third stage counsel for Sly and Weigall contends that no arguable cause of action for dishonest assistance arises out of the failure, by Mr Bradney, to make the allegedly necessary disclosure or out of his advice to Mr Ling that the First Management Agreement was a standard project management agreement.
The exercise of the option, which, counsel for Sly and Weigall submitted, was the final step in the implementation of the allegedly fraudulent design, took place after Mr Ling had transferred the beneficial interest in his shares to Goldcore Investments Pty Ltd and Ing Chuang Ngui. Consequently, he submitted, if Mr Bradney's conduct was to be causally relevant there should at the very least be a plea that Mr Ling passed on to those transferees the advice which he had allegedly received from Mr Bradney.
In any event, he submitted, the decision to exercise the option was taken by "a new body of persons" who were free to exercise their own judgment as regards the terms of the First Management Agreement and who were able to engage their own lawyers to advise them in respect thereof. That being so, he submitted, if Mr Bradney's conduct was arguably to constitute dishonest assistance the plaintiff should have pleaded, but cannot plead, that Mr Bradney knew of and intended to implement the so‑called fraudulent scheme, that he knew and intended that Mr Ling would pass his advice on to the new shareholders and that he intended, by giving that advice to Mr Ling, to stop the new shareholders from examining the First Management Agreement and from obtaining their own advice in respect thereof. He submitted that it was also necessary, if any arguable cause of action was to be disclosed, for the plaintiff to plead that, because of Mr Bradney's conduct, the new shareholders had in fact not examined the First Management Agreement and not taken their own advice in respect of it before exercising the option.
I accept that the pleading as regards the first "stage" referred to by counsel for Sly and Weigall discloses no arguable case of dishonesty on Mr Bradney's part. He could hardly have intended to keep Mr Ling in the dark as to the terms of the First Management Agreement if he had been told (as the pleading alleges) and presumably believed that its terms had been "suggested and discussed with" Mr Ling. Moreover, if he appreciated that the First Management Agreement was unfavourable to the plaintiff he would have understood this to be so in circumstances in which the sole beneficial shareholder (who had "suggested and discussed" its terms) might be presumed to know this and in which that shareholder was himself to get a share of the fees provided for by it.
However this "stage" is pleaded, as I understand the pleading, not as an independent act of dishonesty on Sly and Weigall's part. Rather, it is intended, at least in part, to explain the background knowledge which Mr Bradney, and therefore Sly and Weigall, had by the time of the events which took place in the course of what were referred to by counsel for Sly and Weigall as the second and third stages. That is to say, the pleading alleges that by the time at which Mr Bradney received the letter from Johnson T S Tan & Co (and there is nothing, at this stage, to say what, if any, role that firm thereafter played) he knew that Mr Ling had (apparently only recently) received a copy of the First Management Agreement and had "yet to make a decision with respect to … [it]" (par 29A), that Mr Ling had not seen or approved it before its execution (par 29B.1), that what he had been told in the 13 September letter was consequently false (par 29B.2), that Mr Ling was now considering his position in respect of the First Management Agreement in circumstances in which the plaintiff was able to exercise its rights under the agreement to vary (pars 29B.3 and 29B.4), that the First Management Agreement had been executed in circumstances of a conflict of interest and duty on the part of Messrs Oliver and Lim (par 7CA) and that the First Management Agreement, while beneficial to AAA and therefore to Mr Oliver, was an improvident transaction for the plaintiff to enter into (pars 9A, 10.1 and 11B), this last knowledge having been acquired through, inter alia, his knowledge of the terms thereof and his own commercial experience.
However, the pleading alleges, Mr Bradney, notwithstanding this knowledge, expressed himself merely to be unclear as to the meaning of the Johnson T S Tan & Co letter (par 29C) and, (par 29E) when he met with Mr Ling (in the course of the so‑called "second stage"), did not tell him what he then knew (and the pleading is, I think, clear enough in this respect). Instead he is alleged later (during the so‑called "third stage") to have told Mr Ling on behalf of the plaintiff, on about 24 February 1992, only that the First Management Agreement was a standard project management agreement (par 30) notwithstanding that, according to pars 10.1C and 19A, he knew that it was not such.
It seems to me that this is enough (albeit the pleading is somewhat repetitive and bears the scars of its many amendments) to make out an arguable case of dishonest assistance (in the sense described in the Royal Brunei Airlines case) on the part of Sly and Weigall, through Mr Bradney, in Mr Oliver's alleged breach of fiduciary duty or of knowing participation by it in his alleged fraudulent and dishonest breach of fiduciary duty.
It is true that there is still no express plea of intention on the part of Mr Bradney as regards the matters to which I have referred, or that he deliberately engaged in the conduct referred to. However it is, I think, necessarily implicit in the pleading that his alleged conduct was deliberately engaged in. Also it seems to me that a reasonable inference can now arguably be drawn from the pleaded facts, as, in effect, is alleged in par 34A, that Mr Bradney's purpose in engaging in that alleged conduct was that of assisting Mr Oliver (in the conduct ascribed to him of, in effect, causing the plaintiff to enter into the improvident (for it) First Management Agreement to his own advantage and to that of AAA) in a knowing and dishonest manner.
Neither am I persuaded that there is a gap in the chain of causation which is such as to result in the plaintiff failing to make out any arguable cause of action against Sly and Weigall merely by virtue of the fact that the option was only exercised after Mr Ling had transferred the beneficial interest in his shares to others. The point remains, at least arguably, that on the pleaded facts Mr Bradney misled Mr Ling, on behalf of the plaintiff, as to the nature of the First Management Agreement and did not disclose to him facts which would have caused him concern as regards the nature of that agreement at a time when he, or others who might take control of the plaintiff from him, was or were soon to cause the plaintiff to exercise the option and in circumstances in which, indeed, Sly and Weigall was later (on 8 May 1992) instructed to prepare the necessary documentation to enable it to take that step. Moreover, it must be borne in mind, in this respect, that the statement of claim alleges that the plaintiff exercised the option in reliance upon Mr Bradney's advice to Mr Ling and that it was induced to do so by that advice (par 31) and, in the alternative, that, but for Mr Bradney's failure to tell Mr Ling of the matters known to him and but for the advice which he gave to Mr Ling to the effect that the First Management Agreement was a standard project management agreement, the plaintiff would not have engaged Sly and Weigall to prepare the notice exercising the option and would not have exercised the option while bound by the First Management Agreement (par 31A).
Also, while the effect of some of the documents which were, as I have said, shown to me without objection during the course of the hearing of the application might be debatable, I am not persuaded that there is anything in them which should lead me to any different conclusion than that at which I have arrived.
I should add, for what this may be worth in the context of a plea as serious as this, that a disallowance of the amendment will not, in the light of other pleas of breach of fiduciary duty on the part of Sly and Weigall which rest upon much the same factual basis, substantially reduce the burden of preparing for trial and the trial itself (cfWilliams & Humbert Ltd v W & H Trademarks (Jersey) Ltd [1986] AC 368 at 435 ‑ 436).
I am consequently satisfied that the point has now been reached at which the plaintiff should be given the opportunity of a trial of its case before the appointed tribunal (see General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125 at 129 ‑ 130 and Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91). That being so, and while the pleading is still not entirely free from difficulty, the amendment should be allowed.