Temwood Holdings Pty Ltd v Oliver
[1999] WASC 213
TEMWOOD HOLDINGS PTY LTD -v- OLIVER & ORS [1999] WASC 213
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASC 213 | |
| Case No: | CIV:2008/1997 | 20 SEPTEMBER 1999 | |
| Coram: | STEYTLER J | 3/11/99 | |
| 23 | Judgment Part: | 1 of 1 | |
| Result: | Leave to reamend statement of claim refused | ||
| PDF Version |
| Parties: | TEMWOOD HOLDINGS PTY LTD OSCAR NEIL BLACKBURNE OLIVER ASEAN AUSTRALIAN ASSETS PTY LTD SLY AND WEIGALL (A FIRM) |
Catchwords: | Practice and Procedure Pleading Breach of fiduciary duty Accessory liability Turns on its own facts |
Legislation: | Nil |
Case References: | Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 Barnes v Addy (1874) LR 9 Ch App 244 Beach Petroleum NL v Johnson (1993) 115 ALR 411 Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] Ch 250 Chester v Buckingham Travel Ltd [1981] 1 WLR 96 Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285 Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 Cubillo v Commonwealth of Australia (1999) 163 ALR 395 Dawson, Re; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 Dempster v Mallina Holdings Ltd (1994) 13 WAR 12 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Director of Public Prosecutions v Gomez [1993] AC 442 Duke Group Ltd (In Liq) v Pilmer (1999) 31 ACSR 213 Farrow Finance Co Ltd (In Liq) v Farrow Properties Pty Ltd (In Liq) (1997) 26 ACSR 544 General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125 Giumelli v Giumelli (1999) 161 ALR 473 Humphries v Jenshol (1997) 25 ACSR 212 Hungerfords v Walker (1989) 171 CLR 125 International Alpaca Management Pty Ltd v Ensor (1995) 133 ALR 561 Ledger v Petagna Nominees Pty Ltd (1989) 1 WAR 300 Ninety Five Pty Ltd (In Liq) v Banque National de Paris [1988] WAR 132 Permanent Building Society (In Liq) v Wheeler (1994) 11 WAR 187 "President of India" v La Pintada Compania Navigacion SA [1985] AC 104 Southern Cross Commodities Pty Ltd (In Liq) v Ewing (1988) 91 FLR 271 Stowe v Stowe (1995) 15 WAR 363 Switzerland Insurance Australia Ltd v McCann, unreported; CA SCt of NSW; 27 August 1999 The Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124 Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 17 WAR 98 Wallersteiner v Moir [No 2] [1975] QB 373 Warwick Grove Pty Ltd v Wright (1976) 1 SR (WA) 69 Williams & Humbert Ltd v W & H Trade Marks (Jersey) Ltd [1986] AC 368 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
Consolidated with CIV 2173 of 1997 and CIV 2244 of 1997 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)
(Page 2)
Catchwords:
Practice and Procedure - Pleading - Breach of fiduciary duty - Accessory liability - Turns on its own facts
Legislation:
Nil
Result:
Leave to reamend statement of claim refused
Representation:
Original Action
Counsel:
Plaintiff : Mr D H Solomon
First Defendant : Mr N W McKerracher QC & Mr C E Chenu
Second Defendant : Mr N W McKerracher QC & 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
(Page 3)
Counterclaim
Counsel:
Plaintiff : Mr N W McKerracher QC & Mr C E Chenu
Defendant : Mr D H Solomon
Solicitors:
Plaintiff : Durack & Zilko
Defendant : Solomon Brothers
Case(s) referred to in judgment(s):
Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378
Case(s) also cited:
Barnes v Addy (1874) LR 9 Ch App 244
Beach Petroleum NL v Johnson (1993) 115 ALR 411
Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] Ch 250
Chester v Buckingham Travel Ltd [1981] 1 WLR 96
Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285
Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1
Cubillo v Commonwealth of Australia (1999) 163 ALR 395
Dawson, Re; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211
Dempster v Mallina Holdings Ltd (1994) 13 WAR 12
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Director of Public Prosecutions v Gomez [1993] AC 442
Duke Group Ltd (In Liq) v Pilmer (1999) 31 ACSR 213
Farrow Finance Co Ltd (In Liq) v Farrow Properties Pty Ltd (In Liq) (1997) 26 ACSR 544
General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125
Giumelli v Giumelli (1999) 161 ALR 473
Humphries v Jenshol (1997) 25 ACSR 212
Hungerfords v Walker (1989) 171 CLR 125
International Alpaca Management Pty Ltd v Ensor (1995) 133 ALR 561
(Page 4)
Ledger v Petagna Nominees Pty Ltd (1989) 1 WAR 300
Ninety Five Pty Ltd (In Liq) v Banque National de Paris [1988] WAR 132
Permanent Building Society (In Liq) v Wheeler (1994) 11 WAR 187
"President of India" v La Pintada Compania Navigacion SA [1985] AC 104
Southern Cross Commodities Pty Ltd (In Liq) v Ewing (1988) 91 FLR 271
Stowe v Stowe (1995) 15 WAR 363
Switzerland Insurance Australia Ltd v McCann, unreported; CA SCt of NSW; 27 August 1999
The Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 17 WAR 98
Wallersteiner v Moir [No 2] [1975] QB 373
Warwick Grove Pty Ltd v Wright (1976) 1 SR (WA) 69
Williams & Humbert Ltd v W & H Trade Marks (Jersey) Ltd [1986] AC 368
(Page 5)
1 STEYTLER J: This is an application by the plaintiff to reamend its statement of claim. That document has been the subject of a number of prior applications to amend. It has also been the subject of applications brought by the three defendants. Each of the defendants opposes this application.
2 I have, in prior reasons given in this matter on 17 August 1998, set out the nature of the claims made by the plaintiff against the defendants in the proceedings. I will not repeat what I then said. All that need be said, for present purposes, is that the amendments the subject of the present application relate primarily to a cause of action pleaded against the third defendant ("Sly and Weigall"), a firm of solicitors. That firm, by one of its partners, Mr Warwick Bradney, is alleged, in the amended pleading, to have either dishonestly assisted the first defendant ("Mr Oliver"), who was at all material times a director of the plaintiff, in a breach of his fiduciary duty in that capacity or to have been a knowing participant in a fraudulent and dishonest breach of fiduciary duty by Mr Oliver in that capacity.
3 The first and second defendants oppose the amendments upon a number of grounds insofar as those amendments, as they read them, touch upon matters which are pleaded also against Mr Oliver and the second defendant ("AAA") of which company Mr Oliver is and has been a director and shareholder. Sly and Weigall also opposes the amendments upon a number of grounds, the most important of which is to the effect that the amendments fail to identify, at least with the requisite degree of clarity, the various elements of the cause of action pleaded against it.
4 Rather than set out in full the various amendments to be made (which run to many pages) I will endeavour to set out the effect of those paragraphs which are proposed to be substantially amended and which set out the cause of action against Sly and Weigall to which I have referred (being par 7 to par 11E, par 29A to par 29E and par 30.2).
5 The plaintiff pleads that Sly and Weigall represented it and AAA with respect to the preparation of and their entering into an agreement made by deed dated 18 September 1991 and referred to as the First Management Agreement and also a Deed of Option made on 11 September 1991 (par 7). By the First Management Agreement AAA was appointed to act as the plaintiff's consultant with respect to the development of some land, the subject of the Deed of Option (par 6).
(Page 6)
6 It had originally been proposed that a company, Trandale Pty Ltd ("Trandale"), would acquire the option the subject of the Deed of Option but, at a date prior to 22 August 1991, the plaintiff was substituted for Trandale as the proposed grantee of the option and as the party to carry out the development of the land (par 7B).
7 At a meeting which had taken place on 30 July 1991 between Mr Bradney, Mr Ian Morison (one of his partners in Sly and Weigall), Mr Oliver and Mr Lim Yee Ching ("Mr Lim") Messrs Morison and Bradney advised Mr Lim that Mr Ling Tung Leh ("Mr Ling"), or Mr Ling and Mr Lim, should acquire a shelf company (presumably the plaintiff) to acquire the option and to carry out the development. Mr Lim is then said to have told the others present that Mr Ling was not the ultimate beneficial owner of the shares which he then held in Trandale and was to hold in the plaintiff but was holding (and, presumably, would hold) those shares as agent for an unidentified Malaysian investor (par 7BA).
8 The pleading next recites that on 20 August 1991 Mr Oliver told Mr Morison that he wanted to ensure that the First Management Agreement was entered into by the plaintiff at the time at which it executed the Deed of Option because Mr Lim would do "things on the cheap". At a meeting held on the same day Mr Morison is said to have been told by one or both of Mr Oliver and Mr Lim that the shareholders in the plaintiff were Mr Lim and Lim Sui Mui, who held the shares in that company as trustee for a foreign investor or investors. Mr Morison prepared memoranda in respect of events which took place in Mr Bradney's absence and these memoranda were read by Mr Bradney prior to 13 September 1991 (par 7BC, par 7BD and par 7BE).
9 A number of variations to the proposed terms of the First Management Agreement were made by Sly and Weigall on Mr Oliver's instructions. These are alleged to have been to the advantage of AAA and to the detriment of the plaintiff (par 7A, par 7C, par 7E and par 7G).
10 After instructions had been given to Sly and Weigall in respect of some, at least, of these variations Mr Morison, on 23 August 1991, directed a written memorandum to Mr Bradney recording, inter alia, that Mr Morison had discussed with Mr Oliver a possible conflict of interest which he and Mr Lim had between their duties as directors of the plaintiff and their personal interests as shareholders in AAA. He there said that the shareholders in the plaintiff held their shares on trust for a Malaysian investor and 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
(Page 7)
- negotiating the First Management Agreement and that the Malaysian investor should join the plaintiff's board before it decided to enter into the First Management Agreement. He said that Mr Oliver had said that this last option was not practicable. He also said (presumably as a consequence of what Mr Oliver had said) that the Malaysian investor should approve the First Management Agreement before it was entered into by the plaintiff and that the future 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 fact that Mr Oliver and Mr Lim had a personal interest in the First Management Agreement and that Sly and Weigall had acted for both parties in that transaction (par 7CA). The plaintiff goes on to plead (par 7CB) that at no material time was Mr Lim or any shareholder in the plaintiff told what had been said by Mr Morrison to Mr Oliver in respect of the conflict of interest and measures which should be taken in that regard.
11 Next, the plaintiff pleads that Mr Bradney made some changes to Sly and Weigall's filing arrangements in respect of the matters in which that firm was acting, one of which was a change in name of a file formerly titled "Oliver Re Your Affairs" to the name of the plaintiff (par 7CC). A new draft of the First Management Agreement was then prepared in accordance with Mr Oliver's instructions.
12 In par 7F the plaintiff pleads that on about 11 September 1991 Mr Oliver delivered a memorandum prepared by Mr Lim to Sly and Weigall regarding the proposed terms of the First Management Agreement but said, in a facsimile dated 12 September 1991, that Mr Lim's comments were "unrealistic" (par 7F and par 7G).
13 By par 8 of the statement of claim the plaintiff pleads that, by a letter dated 13 September 1991, Mr Oliver instructed Sly and Weigall 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" and that Mr Bradney would "no doubt consider this an unusual situation as Mr Ling holds both shares in … [the plaintiff] but will ultimately … hold the shares in trust for other parties".
14 There is then a plea that, by virtue of a number of the matters pleaded, Mr Bradney knew, as at 13 September 1991, that the First Management Agreement was an improvident transaction for the plaintiff to enter into, that Mr Oliver intended that AAA and Mr Ling would, at the expense of future beneficial shareholders of the plaintiff, benefit from the fees payable by the plaintiff under the First Management Agreement and
(Page 8)
- that Mr Oliver, as a director of the plaintiff, was in the process of carrying out a fraudulent and dishonest design by which the plaintiff would enter into this improvident transaction and Mr Oliver "and the plaintiff's present beneficial shareholder" would benefit from that transaction at the expense and to the detriment of the plaintiff and its future beneficial shareholders (par 10).
15 Amongst the various matters said to have been known by Mr Bradney were the following:
"9A.6 the shares in the plaintiff were, or were to be, held on trust for, as at that time, an unidentified Malaysian investor or investors who had not approved or even been informed of the terms of the First Management Agreement, despite Morison's recommendation to Oliver reported to Bradney in the memorandum referred to in paragraph 7CA;
9A.7 Morison had advised Oliver that:-
9A.7.1 the process of amending the draft First Management Agreement to the benefit of AAA and the detriment of the plaintiff instructed by Oliver in the letter of 22 August 1991 was likely to result in the directors of the plaintiff breaching their duty to the plaintiff if they caused the plaintiff to enter into an improvident transaction;
9A.7.2 accordingly, the beneficial shareholder of the plaintiff should become a director of the plaintiff and approve the First Management Agreement;
9A.8 Oliver had not implemented the advice pleaded in paragraph 9A.7.2 and was proceeding to implement the process pleaded in paragraph 9A.7.1; and
9A.9 By reason of the knowledge pleaded in paragraph 9A.8, Oliver was acting in breach of his duties to the plaintiff in proceeding to give instructions for preparation of the First Management Agreement with each successive draft becoming more favourable to AAA and more detrimental to the plaintiff."
(Page 9)
16 Then, in par 11, the plaintiff goes on to plead that, notwithstanding Mr Bradney's knowledge, inter alia, of the improvident nature of the First Management Agreement as far as the plaintiff was concerned and of the fact that Mr Oliver was in the process of carrying out the alleged fraudulent and dishonest design, Sly and Weigall continued to represent both the plaintiff and AAA.
17 The plaintiff next pleads that when it executed the First Management Agreement on 18 September 1991 that transaction was improvident for it and that Mr Bradney knew this to be so as did Mr Oliver and AAA (par 11A, par 11B and par 11C). In par 11D the plaintiff pleads, by way of an alternative claim, that when it executed the First Management Agreement on 18 September 1991 Mr Oliver and AAA had a reckless disregard as to whether or not that was an improvident transaction for the plaintiff to enter into.
18 In par 11E the plaintiff pleads that neither Mr Oliver nor Mr Bradney made any attempt to send a draft of the First Management Agreement to Mr Ling or to any other investor or shareholder in the plaintiff prior to the plaintiff entering into the First Management Agreement.
19 The plaintiff pleads in par 29A that, some two months after the First Management Agreement had been entered into, Mr Ling (as the sole beneficial shareholder of the plaintiff) told Sly and Weigall, by letter dated 15 November 1991, that he had received a copy of the First Management Agreement and was yet to make a decision whether or not to enter into that agreement. The plaintiff pleads (in par 29B) that Mr Bradney then knew (contrary to what he had earlier been told by Mr Oliver in the letter dated 13 September 1991) that Mr Ling had not seen or approved the First Management Agreement prior to its execution, that he was concerned about its terms and that the plaintiff was considering exercising some rights which had been given to it under an agreement to vary that agreement which had been made prior to the execution of the First Management Agreement and by the terms of which the plaintiff could vary the First Management Agreement if it had any objections to any of its provisions ("the Agreement to Vary").
20 In par 29C the plaintiff pleads that, after receiving this letter dated 15 November 1991, Mr Bradney wrote to Mr Ling's lawyers saying that he was not clear in his own mind as to the meaning of that letter and that, once its meaning was clarified, he would discuss it with his "clients". By doing so he is alleged (par 29D) falsely to have represented to Mr Ling that he was unaware of the matters pleaded in par 29B and of the
(Page 10)
- Agreement to Vary. Then, in par 29E, the plaintiff pleads that in December 1991 Mr Bradney met with Mr Ling in Sabah but did not tell him of any of the matters pleaded in par 7A to par 13 or par 29B of the proposed amended statement of claim.
21 Finally, insofar as is material, the plaintiff pleads in par 30 that on or 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 did not tell him of the matters pleaded in par 7A to par 13 and par 29B.
22 These are the matters, in essence, upon which the plaintiff relies for its plea, in par 12, that Sly and Weigall, by Mr Bradney, either dishonestly assisted Mr Oliver in breach of his fiduciary duty as a director of the plaintiff or was a knowing participant in a fraudulent and dishonest breach of fiduciary duty by Mr Oliver in that capacity.
23 I will, against that background, deal as briefly as I can with the complaints made respectively by the first and second defendants and the third defendant.
The first and second defendants' complaints
Paragraph 7(i)(A)
24 The first complaint made by the first and second defendants is a minor one. It relates to par 7(i)(A) of the proposed amendment. This paragraph is merely a particular pleaded in support of the plea that Sly and Weigall represented the plaintiff for reward with respect to the preparation of the First Management Agreement. The particular is to the effect that by letter dated 6 September 1991 Sly and Weigall provided an estimate of $1,350 to the plaintiff in respect of the cost of preparing that agreement. Counsel for the first and second defendants contends that this particular lends no support to the principal plea.
25 The particular is intended to be read together with other particulars of par 7. It seems to me to be sufficiently arguable that that particular, taken together with the other particulars, is capable of supporting an inference, at least, that Sly and Weigall represented the plaintiff for reward in entering into the First Management Agreement. I should add, in any event, that nothing in that paragraph raises any plea against the first and second defendants. I am consequently not persuaded that I should disallow the amendment upon the ground contended for.
(Page 11)
Paragraph 7BA to par 7BE, par 7CA and par 7CC
26 The first and second defendants complain, next, that par 7BA to par 7BE, par 7CA and par 7CC plead evidence rather than material facts. They contend, in particular, that there is nowhere a plea "as a primary and independent material fact" that Mr Oliver and AAA were embarking upon a fraudulent and dishonest design.
27 The paragraphs to which they refer are, as will be apparent from what I have said, pleaded primarily against Sly and Weigall in order to show Mr Bradney's knowledge, and the circumstances in which he acquired it, as part of the two alternative bases for accessorial liability to which I have referred. That being so, they must be understood in this context.
28 However, some of the matters there pleaded (par 7BA.2, par 7BC, par 7BD and par 7CC.3 to .6) are also pleaded in support of the alleged breach of fiduciary duty by Mr Oliver. That breach is, as will also be apparent from what I have said, said to be essentially that, as a director of the plaintiff, he procured it to enter into the allegedly improvident First Management Agreement for the benefit of others, including himself in his capacity as a shareholder of AAA. It seems to me to be sufficiently arguable that the provisions of par 7BA.2 (which alleges, in effect, knowledge by Mr Oliver that Mr Ling was not the ultimate beneficial owner of the shares which he was to hold in the plaintiff), par 7BC (which alleges that Mr Oliver was anxious to have the First Management Agreement executed at the time at which the plaintiff executed the Deed of Option because Mr Lim would do "things on the cheap"), par 7BD (which alleges, in effect, that Mr Oliver knew that Mr Lim and Lim Sui Mui, the other shareholder in the plaintiff, held their shares in that company for a foreign investor or investors) and par 7CA.3 to par 7CA.6 (which essentially touch upon the advice received by Mr Oliver from his solicitors as to the existence of a conflict of interest and as to the best means of dealing with it) all plead matters which are arguably relevant to Mr Oliver's alleged breach of fiduciary duty and that they might be categorised as pleas of material fact rather than of evidence.
29 I am also not persuaded, subject to what I will say below, that the pleading is inadequate to raise a plea (and it should be remembered that the plea complained of is one against the third defendant) that the first and second defendants were embarking upon a fraudulent and dishonest design. However I shall return to these paragraphs when considering the objections raised on behalf of Sly and Weigall.
(Page 12)
Paragraph 9A.7 and par 9A.9
30 The first and second defendants next contend that the fact of the advice from Mr Morison to Mr Oliver, pleaded in par 9A.7 of the statement of claim, adds nothing to any pleaded cause of action. They also say that the mere fact that Mr Oliver allegedly chose not to follow that advice adds nothing to any plea of breach of duty on the part of Mr Oliver.
31 Each of the pleas in par 9A.7 and par 9A.9 is one of Mr Bradney's knowledge. These paragraphs are consequently pleaded as part of a cause of action against Sly and Weigall and, subject to what I have said below, not as part of any cause of action against the first or second defendants.
32 Paragraph 11E of the proposed amended statement of claim does plead that, despite, inter alia, the matters pleaded in par 9A.7, neither Mr Oliver nor Mr Bradney made any attempt to send a draft of the First Management Agreement to Mr Ling or any other investor or shareholder in the plaintiff at any time prior to the plaintiff entering into the First Management Agreement. However that paragraph, in turn, is one of the matters pleaded in par 22 of the proposed amended statement of claim as giving rise to a breach of fiduciary and statutory duties on the part of Mr Oliver and to dishonest, alternatively knowing, participation in those breaches by AAA and I am prepared to accept that it is arguably relevant for that purpose.
33 I am consequently not persuaded that I should disallow the amendments complained of upon these grounds.
Paragraph 10.1C
34 The first and second defendants make three complaints about par 10.1C.
35 This paragraph is a particular of the allegation that Mr Bradney knew that the First Management Agreement was an improvident transaction for the plaintiff to enter into. It is to the effect 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 provisions of a kind therein set out.
36 The first complaint is that in the absence of particulars there is no pleaded assertion as to what "documents" were on the file of Sly and Weigall in relation to "another project management agreement". That
(Page 13)
- difficulty might, in my opinion, appropriate be resolved by way of a request for further and better particulars. It does not warrant the refusal of the amendment.
37 There is next a complaint that there is, in law or commerce, no such concept as a "usual project management agreement". However par 10.1C does not alleged that there is such a creature. Rather, it alleges that project management agreements usually contain terms of the kind specified. Whether this is or is not true seems to me to be a matter for evidence and, in particular, expert evidence. It is not a basis for disallowing the amendment.
38 The third complaint in respect of this paragraph is that it is irrelevant that one agreement might take a different form to another previously drafted by the same firm of solicitors. In the end, this seems to me to be a matter for argument at the trial. The particular is one from which an inference is sought to be drawn as to knowledge of the improvidence of the transaction in question. It seems to me to be arguable that what is pleaded in par 10.1C, taken together with the other particulars, is capable of giving rise to the inference contended for. That being so, I do not consider that the amendment should be disallowed on this ground.
Paragraph 11C
39 The first and second defendants make a number of complaints about par 11C. That is the paragraph which alleges that when the plaintiff executed the First Management Agreement Mr Oliver and AAA knew that it was an improvident transaction for the plaintiff to enter into.
40 The first complaint relates to particulars D to F inclusive of that paragraph. The contention is that these rely upon a mistaken premise that, if a client elects not to follow advice given by a solicitor, the client is necessarily involved in an improvident transaction.
41 However it seems to me to be arguable that knowledge of the kind pleaded in par 11C is capable of being inferred from the fact, together with the other matters pleaded, that Mr Oliver had been given legal advice of the kind pleaded in par 7CA.3 and .5 but had chosen not to follow that advice and instead had acted as set out in particulars E and F of par 11C.
42 The first and second defendants next complain that the very existence of the pleaded "Agreement to Vary" defeats any contention as regards an improvident transaction or fraudulent design.
(Page 14)
43 However, there are, in respect of the Agreement to Vary, pleas (in par 14.1 and par 14.2) of representations by Mr Oliver and advice by Mr Bradney to Mr Lim and other conduct which is said to have resulted in the plaintiff not having taken advantage of the Agreement to Vary. I am consequently not persuaded that the pleading is so untenable as to warrant the amendment being disallowed upon this ground.
Paragraph 19
44 Paragraph 19 of the statement of claim, as it presently stands, pleads that the First Management Agreement was not a "standard" project management agreement, contrary to representations to that effect by Mr Oliver and advice to that effect from Mr Bradney. The plaintiff proposes to amend that paragraph by adding to the existing plea that a "standard" management agreement would not have included specified provisions a further plea that such an agreement would have been consistent "with the usual provisions in project management agreements pleaded in particular C to paragraph 10.1".
45 The first and second defendants make the same complaint in respect of this proposed addition as they made in respect of the pleading of "usual" terms in par 10.1C. For the reasons set out in respect of that paragraph I am not satisfied that there is any substance to this complaint.
Paragraphs 29A to E
46 Finally, so far as the first and second defendants are concerned, they complain that nothing pleaded in par 29A to E inclusive adds any weight to any assertion of impropriety on their part. However these paragraphs do not form part of any case made against the first and second defendants. They relate solely to the claims against Sly and Weigall. There is consequently no basis for disallowing them on this ground.
Complaints by the third defendant
47 That brings me, next, to Sly and Weigall's objections to the proposed amendments which affect it.
Paragraph 12
48 Sly and Weigall first complains about the plea, in par 12, that it, by Mr Bradney, dishonestly assisted Mr Oliver in a breach of his fiduciary
(Page 15)
- duty or was a knowing participant in a fraudulent and dishonest breach of fiduciary duty by Mr Oliver. It contends that while par 12 identifies a range of matters in support of the two alternative propositions there pleaded it does not identify which allegations are relied upon for which alternative. It argues that the paragraph comprises a rolled-up plea leaving it to Sly and Weigall to determine what constitutes "assistance", "knowing participation", "dishonesty" and "fraud" and which paragraphs are raised in support of which of those concepts. Its counsel contends that the plaintiff should plead in such a way as to identify the facts, and not the evidence, which comprise each element of each of the two alternative causes of action.
49 While it must, I think, be acknowledged that the pleading is, in a number of respects, difficult to follow, no doubt because of the piecemeal fashion in which it has been amended (necessitated, in part at least, by the discovery of new documents as the action progressed), it seems to me that each of the paragraphs referred to in the opening lines of par 12 is intended to be read as being pleaded in support of each of the alternative bases for accessorial liability there pleaded against Sly and Weigall. That is to say, the combination of all of the matters there referred to is said to give rise both to the conclusion that Sly and Weigall dishonestly assisted Mr Oliver in a breach of his fiduciary duty and that it was a knowing participant in Mr Oliver's fraudulent and dishonest breach of fiduciary duty. In either case its liability, if made out, is accessorial and the two alternative formulations have, it seems, been pleaded out of an abundance of caution. I will return below, after considering other complaints raised by Sly and Weigall in respect of the pleading, to the issues raised by the manner in which par 12 has been pleaded.
50 As to the complaint that the pleader has not identified the material facts, as opposed to evidence, comprising the cause of action relied upon it must, I think, be borne in mind the nature of the first, at least, of the alternative bases pleaded against Sly and Weigall in par 12 is such as to require the pleading of more extensive facts than might ordinarily be the case. That is because the Privy Council, in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 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". 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,
(Page 16)
- 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 other's 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."
51 When read in this light I am not persuaded that the manner of pleading gives rise to any real embarrassment or difficulty of the kind contended for and I would not be prepared to disallow the proposed amendments on this limited ground.
52 Counsel for Sly and Weigall, Mr Siopis, next contended that central to the pleading of the causes of action in par 8 to par 12 is the alleged "fraudulent and dishonest design" the pleading of which, he submits, is to the effect that Mr Oliver and Mr Ling would defraud the future shareholder or shareholders of the plaintiff by causing the plaintiff to enter into the improvident management agreement for their own benefit and that the pleading of this aspect of the case is deficient for a variety of reasons.
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53 The first of these, he submitted, is that the identity of the "victim" of this design is not disclosed or sufficiently disclosed. Nowhere, in his submission, is there any sufficient plea as to the identity of the victim of the design and nor, in his submission, does it even appear whether the victim is the person who was, at the material time, the beneficial holder of the shares or some person who was later to become the beneficial holder of those shares. Rather, he submitted, there are many conflicting pleas in this respect. He referred, in particular, to:
(a) par 7BA.2 in which it is said that at a meeting held on 30 July 1991 Mr Lim informed those present, including Mr Bradney, that Mr Ling was not the ultimate beneficial owner of the shares held by him in Trandale Pty Ltd and to be held by him in the plaintiff but was and would hold those shares as agent for an unidentified Malaysian investor;
(b) par 7BD in which it is pleaded that at a meeting on 20 August 1991 (in respect of which the material discussion was reduced to writing in the memorandum later read by Mr Bradney) Mr Morison of Sly and Weigall was told that the shareholders in the plaintiff were Mr Lim and Lim Sui Mui, who held the shares as trustees for a foreign investor or foreign investors;
(c) par 7CA.4 in which it is pleaded that by the written memorandum dated 23 August 1991 Mr Morison told Mr Bradney that the shareholders in the plaintiff held their shares on trust for a Malaysian investor;
(d) par 7CA.5 in which it is pleaded that Mr Morison told Mr Bradney, in the memorandum dated 23 August 1991, that he had told Mr Oliver that the Malaysian investor who was the beneficial owner of the shares in the plaintiff should join the board of the plaintiff prior to its decision to enter into the First Management Agreement or should approve that agreement before it was entered into by the plaintiff;
(e) par 7CB in which it is pleaded that at no material time was Mr Lim or any shareholder in the plaintiff advised of the matters pleaded in par 7CA;
(f) par 8.2 in which it is pleaded that by the letter dated 13 September 1991 Mr Oliver told Sly and Weigall that Mr Bradney would consider the fact that the proposed
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- terms of the First Management Agreement had been suggested and discussed with Mr Ling who would be allocated a share of the fees by AAA to be "an unusual situation as Mr Ling holds both shares in Temwood but will ultimately … hold the shares in trust for other parties";
- (g) par 9.3.2 which pleads that Mr Bradney was, on receipt of the 13 September letter, informed that Mr Ling would ultimately hold the shares in the plaintiff for parties other than himself;
(h) par 9A.5 in which it is pleaded that as at 13 September 1991 Mr Bradney knew that it would not be unusual for the sole beneficial shareholder of the plaintiff to have approved the proposed terms of the First Management Agreement unless those terms made that agreement an improvident transaction for the plaintiff to enter into;
(i) par 9A.6 which pleads that Mr Bradney knew that the shares in the plaintiff were, or were to be, held on trust for, as at that time, an unidentified Malaysian investor or investors who had not approved or even been informed of the terms of the First Management Agreement;
(j) par 10.3.2 which pleads that Mr Bradney knew, on receipt of the 13 September letter, that Mr Oliver and the plaintiff's present beneficial shareholder would benefit from the First Management Agreement at the expense and to the detriment of the plaintiff and its future beneficial shareholders;
(k) par 11E which pleads that neither Mr Oliver nor Mr Bradney sent, or attempted to send, a draft of the First Management Agreement to Mr Ling or any other investor or shareholder in the plaintiff at any time prior to the plaintiff entering into the First Management Agreement;
(l) par 28 which pleads that prior to the grant of the option to the plaintiff (which is pleaded in par 5 to have taken place on 11 September 1991), the shareholders in the plaintiff executed trust deeds over all of the shares in the plaintiff in favour of Mr Ling; and
(m) par 29A which pleads that by letter dated 15 November 1991 Mr Ling (as the sole beneficial shareholder of the plaintiff) told Sly and Weigall that he
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- had received a copy of the First Management Agreement and was yet to make a decision with respect to whether the plaintiff should enter into it.
54 Mr Siopis next contended that a "design" for Mr Oliver and Mr Ling to take a benefit in respect of the First Management Agreement is insufficient to demonstrate any fraudulent intent to deceive the "future shareholder" unless it was pleaded, for example, that the design contemplated that Mr Ling would dispose of his beneficial interest in the shares to the future investor without disclosing to that person the disadvantageous terms of the First Management Agreement. He submitted that in the absence of a plea of that kind it might be assumed that any future investor would familiarise himself with such matters as the terms of the First Management Agreement before deciding to invest in the plaintiff.
55 Moreover, Mr Siopis contended, the plea in par 29, par 29A and par 29B that Mr Ling was concerned about some of the provisions of the First Management Agreement after being informed of the Agreement to Vary is inconsistent with the plea that he was a participant or likely participant in the "design". Mr Siopis also contended, in this respect, that no facts are pleaded to the effect that Mr Ling obtained an interest in the profits arising from the First Management Agreement, that he deceived future investors as to its terms, that he disposed of his shares to a future investor in any fraudulent way, that the investor paid more than he should have paid for the shares or, indeed, that the "fraudulent design" was ever implemented. That being so, Mr Siopis submitted, it was not apparent how Mr Bradney (and consequently Sly and Weigall) could be liable as an accessory in respect of an alleged fraudulent design which, on the pleading, was never implemented.
56 Finally, Mr Siopis submitted that if the fraudulent design had been implemented then the cause of action would have been one at the instance of the defrauded shareholder and not the plaintiff.
57 These defects, taken together, are such as in Sly and Weigall's submission to infect the whole of the pleading of par 8 to par 12 with the consequence that the amendments should be disallowed in their entirety.
58 It is true that the pleading is not easy to follow as regards what is said to have been the nature and content of the "design" or breach of fiduciary duty by Mr Oliver to which Mr Bradney is said to have lent his aid or in which he is said to have participated.
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59 Paragraph 22 of the statement of claim is to the effect that by reason of the matters pleaded in paragraphs 4, 8, 7BA.2, 7BC, 7BD, 7CA.3 - 7CA.6, 11A, 11C alternatively 11D, 11E, 14.1, 17, 18, 18A, 19, 19A, 20, 20A, 20B and 20C and by not preventing the plaintiff from entering into, and encouraging the plaintiff to enter into, the First Management Agreement Mr Oliver breached fiduciary duties owed by him to the plaintiff. Those paragraphs essentially plead a case to the effect that Mr Oliver, as a director of the plaintiff, procured it to enter into the improvident First Management Agreement to his own advantage and to that of AAA in circumstances in which he knew that Mr Ling was not to be the ultimate beneficial owner of the shares which he was to hold in the plaintiff (par 7BA.2), that the shareholders in the plaintiff were, on 20 August 1991, Mr Lim and Lim Sui Mui, who held them on trust for a foreign investor or foreign investors (par 7BD), that, while he told Sly and Weigall in the letter dated 13 September 1991 that the proposed terms of the First Management Agreement had been suggested and discussed with Mr Ling who then held both shares in the plaintiff (albeit he would ultimately hold them in trust for other parties) (par 8), he did not in fact send or attempt to send a copy of that Agreement in draft to Mr Ling or any other investor or shareholder in the plaintiff at any time prior to the plaintiff entering into that Agreement (par 11E) and that he made various misrepresentations (par 14.1, par 17, par 18, par 18A, par 19, par 19A, par 20 and par 20A) so as to cause the plaintiff to enter into the First Management Agreement.
60 There are pleas which appear to suggest that Sly and Weigall did, by Mr Bradney, assist or participate in this breach. Thus, par 9A.6 pleads as one alternative that as at 13 September 1991 Mr Bradney knew that the shares in the plaintiff were held on trust for an unidentified Malaysian investor or investors who had not approved or even been informed of the terms of the First Management Agreement and par 9A.9 pleads that he knew that Mr Oliver was acting in breach of his duties to the plaintiff in proceeding to give instructions for preparation of the First Management Agreement in terms detrimental to the plaintiff. Par 11 pleads that notwithstanding, inter alia, this knowledge Sly and Weigall continued to represent both the plaintiff and AAA with respect to the matters in question. All of these paragraphs are referred to in par 12 being that which, as I have said, pleads the conclusion that there was accessorial liability on the part of Sly and Weigall.
61 However the position is complicated by the references in par 8.1, par 8.2, par 9.3.2 and par 10.3 to the fact that Mr Bradney was told, by the letter dated 13 September 1991, that Mr Ling then held both shares in the
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- plaintiff (par 8.2), that the "proposed terms of the First Management Agreement had been 'suggested and discussed' with" Mr Ling (par 8.1) and that Mr Ling would "ultimately" hold the shares in the plaintiff "in trust for other parties" (par 8.2 and par 9.3.2) and that Mr Bradney then knew that Mr Oliver was in the process of carrying out a fraudulent and dishonest design by which Mr Oliver "and the plaintiff's present beneficial shareholders" would benefit from the improvident First Management Agreement at the expense and to the detriment "of the plaintiff and its future beneficial shareholders" (par 10.3). There are also references in par 28 and par 29A to the fact that Mr Ling was in fact the beneficial owner of the shares in the plaintiff. If these things were so then it could plainly not be said that Mr Bradney had dishonestly lent assistance to a breach of fiduciary duty or been a knowing participant in a fraudulent and dishonest breach of fiduciary duty by way of the procuring of the plaintiff to enter into the allegedly improvident First Management Agreement in circumstances in which the then beneficial owner of its shares was in ignorance of what was being done. Rather, so far as Mr Bradney was aware, the then beneficial owner of the shares was, in those circumstances, fully aware of and had consented to or even suggested the terms of the First Management Agreement.
62 If it was intended to plead, by way of an alternative claim against Sly and Weigall, that Mr Bradney knew, as at 13 September 1991, that the shares in the plaintiff were to be, but were not as yet, held by Mr Ling on trust for others who were to be defrauded then the pleading would have to demonstrate, as it does not, that there was in fact a transfer of the beneficial ownership to those others in circumstances in which they were in fact defrauded. There might then also be an issue as to who was the proper plaintiff in respect of that claim.
63 Furthermore, the plea in par 29A to par 29E and par 30.2 appears to be intended to give rise to a cause of action for accessorial liability against Sly and Weigall (these paragraphs are referred to in par 12) in relation to its conduct after 15 November 1991. That conduct is essentially pleaded to be that of misrepresenting material matters to Mr Ling and concealing others from him (and in neither case does the pleading expressly allege that this conduct was deliberately engaged in) after learning, apparently for the first time, as a consequence of receipt of the letter dated 15 November 1991 that, contrary to what Sly and Weigall had earlier been told in the letter dated 13 September 1991, Mr Ling (who is pleaded in par 29A to have been the beneficial shareholder in the plaintiff as, according to par 8 and par 9, the letter of 13 September 1991 had told Sly and Weigall that he then was) had not seen or approved the First
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- Management Agreement prior to the date of its execution by the plaintiff. However that plea is, as will be apparent, factually inconsistent with, but not pleaded as an alternative to, what seems to be the different basis for accessorial liability invoked by the reference, in par 12, to such paragraphs as par 9A.9 and that part of par 9A.6 which, as I have said, pleads that Mr Bradney knew, as at 13 September 1991, that the shares in the plaintiff were then held on trust for an unidentified Malaysian investor or investors who had not approved or even been informed of the proposed terms of the First Management Agreement.
64 These illustrations are, I think, enough to demonstrate the problems which have been created by the style of pleading adopted in par 12 of the statement of claim.
65 It goes without saying that a plea of dishonest assistance in a breach of fiduciary duty or participation in a fraudulent and dishonest breach of fiduciary duty is a very serious one. A defendant against whom an allegation of that kind is made is entitled to know precisely what is said to be the breach of fiduciary duty to which dishonest assistance has been lent or what is the fraudulent and dishonest breach of fiduciary duty in which he has knowingly participated and also precisely what acts are alleged to have amounted to that dishonest assistance or to that knowing participation.
66 While I acknowledge the difficulties under which the plaintiff has laboured in formulating its claim in a necessarily piecemeal fashion it seems to me that the pleading, as it is proposed to be amended, falls short of what is required. The plaintiff is, in my opinion, required to spell out unambiguously what was or were the breach or breaches of fiduciary duty to which dishonest assistance is said to have been lent or what was the fraudulent and dishonest breach of fiduciary duty in which there is said to have been knowing participation by Sly and Weigall and, in particular, whether it was the causing of the plaintiff to enter into an improvident transaction for the benefit of others in circumstances in which the then beneficial shareholder or shareholders did not know and therefore did not consent to what was being done, or whether it was the concealment of the fact of entry into an improvident agreement by the plaintiff thereby preventing the then beneficial owner of the shares in the plaintiff from causing the plaintiff to exercise its rights under the Agreement to Vary, or whether it was both of these, or whether the fraudulent design is said to have arisen by way of a scheme to defraud a person or persons who was or were to acquire the beneficial interest in the shares in the plaintiff (and, if so, whether that scheme was ever implemented).
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67 The consequence of the aforegoing is that it seems to me that I should refuse leave to make the proposed amendments forming part of the claim against Sly and Weigall until such time as the pleading has been further clarified in the respects to which I have referred.
68 I will hear from the parties as to the orders which might be made in order to give effect to these reasons.
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