The Duke Group Limited (in Liq) v Alamain Investments Limited (in Liq)

[2005] SASC 411

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

THE DUKE GROUP LIMITED (IN LIQ) v ALAMAIN INVESTMENTS LIMITED (IN LIQ) & ORS

Judgment of The Honourable Justice White

2 November 2005

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PRACTICE UNDER RULES OF COURT - SERVICE AND AUTHORITY OF SOLICITORS

Ex parte application by fifth, sixth, seventh and eighth defendants for leave to serve third party proceedings outside Australia - whether leave to serve proceedings should be granted - application of principles for grant of leave - whether interests of justice warrant grant of leave - retrospective leave granted to defendants to serve third party proceedings.

Supreme Court Rules 1987 r 18.02, r 18.04, r 18.07, r 19, r 20, r 37.01, referred to.
Fenbury Ltd v Hong Kong and Shanghai Banking Corporation Ltd (1996) 189 LSJS 348; University of South Australia v GNB Battery Technologies Ltd (1997) 192 LSJS 1; McCheane v Gyles [1902] 1 Ch 287; Gilchrist v Dean [1960] VR 266; AMP Society v GEC Diesels Australia Ltd (1989) VR 407; Shantou Heshing Commercial Development Co v P & O Swire Containers Ltd (1999) 3 VR 478; K & S Corporation v Number 1 Betting Shop Ltd [2005] SASC 228; Southern Equities Corporation Ltd v Bond [1999] SASC 90; Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank (1991) 1 Qd R 101, applied.
Duke Group Ltd (In Liq) v Pilmer & Ors (1998) 27 ACSR 1; Duke Group Ltd (In Liq) v Alamain Investments Ltd [2003] SASC 415; (2003) 232 LSJS 58; Barker and Ors v The Duke Group Ltd (In Liq); Hambros Australia Ltd and Ors v The Duke Group Ltd (In Liq) [2005] SASC 81; (2005) 91 SASR 167, considered.

THE DUKE GROUP LIMITED (IN LIQ) v ALAMAIN INVESTMENTS LIMITED (IN LIQ) & ORS
[2005] SASC 411

Civil

1. WHITE J: The fifth to eighth defendants (“the Hambros defendants”) have applied for leave, pursuant to r 18.07, to serve a Third Party Notice, the Third Party Statement of Claim and the Notice prescribed by r 18.04(1)(a) (“the third party proceedings”) out of the State in respect of two third parties. They are the second third party, Lawrence Robert Schneider-Paas (as Executor of the estate of Alfred Carl Schneider-Paas) and the tenth third party, BQT Solutions Holdings Limited. The second third party (“the Executor”) resides in Germany and the registered office of the tenth third party (formerly known as International and Irish Securities PLC (“International and Irish Securities”) is in Surrey, England.

2. The application was heard ex parte.  Although the plaintiff and the other defendants were aware that the application was being heard, none of them wished to make submissions in relation to it.

3. The within proceedings were commenced on 13 November 2002. The proceedings arise out of a transaction in 1987 and 1988 in which the plaintiff (then known as Kia Ora Gold Corporation NL) acquired the shares in Western United Limited (“Western United”). The plaintiff, who was plaintiff in previous major litigation in this Court arising out of the same transaction (“the Nelson Wheeler proceedings”)[1] seeks to recover from the present defendants damages and/or equitable compensation over and above that which it recovered in the Nelson Wheeler proceedings.  The plaintiff seeks to recover a substantial sum; an entitlement to recovery in excess of $81m has been asserted.

   [1] Duke Group Ltd (In Liq) v Pilmer & Ors (1998) 27 ACSR 1.

4. It is not necessary for me to outline the nature of the present proceedings in any detail.  They have already been the subject of a decision on an interlocutory application by a single judge of this Court[2] and by the Full Court.[3]  It is sufficient to record that there are eight defendants to the proceedings.  The plaintiff asserts against them an entitlement to equitable compensation and, or in the alternative, damages on the grounds that the defendants knowingly assisted the plaintiff’s directors in breaches by them of fiduciary duties which they owed to the plaintiff or, alternatively, knowingly assisted the plaintiff’s directors in breaches of statutory duties which they owed to the plaintiff.

   [2] Duke Group Ltd (In Liq) v Alamain Investments Ltd [2003] SASC 415; (2003) 232 LSJS 58.

   [3] Barker and Ors v The Duke Group Ltd (In Liq); Hambros Australia Ltd and Ors v The Duke Group Ltd (In Liq) [2005] SASC 81; (2005) 91 SASR 167.

5. On 30 August 2005, as part of the general directions in the matter, I ordered that any third party proceedings or contribution proceedings to be instituted by the defendants should be filed and served on or before Friday 30 September 2005.  Subsequently, on the application of the Hambros defendants, I made an order by consent and in the absence of the parties extending the time in which any third party proceedings or contribution proceedings were to be filed to Monday 10 October 2005 and further, extended to Monday 24 October 2005 the time in which any such proceedings were to be served.  At the time of seeking those orders, the Hambros defendants did not seek any leave to serve the third party proceedings out of the State.

6. Since 10 October each of the Executor and of International and Irish Securities have been served with the third party proceedings in the sense that each has been provided personally with a copy of those proceedings. However, the Hambros defendants are concerned that leave to effect that service was not obtained and further, that the method of service adopted may not have been in accordance with the requirements of rr 19 and 20.

7. Rule 18.02 permits a summons to be served out of Australia without the leave of the Court whenever the subject matter of the claim “is or relates to” one or more of 15 specified kinds.  SCR 18.07(1) provides:

   An originating process which does not come within Rule 18.02, or other process of the Court, may be served out of the State with the leave of the Court.

   It has been held that r 18.07(1) refers to an originating process or summons which does not make a claim the subject matter of which is of the type specified in r 18.02.[4]  SCR 37.01 provides for the issue of third party proceedings.  SCR 37.01(7) provides that:

   The rules relating to the service of summonses are to apply to the service of a third party notice as if it was a summons.

   In University of South Australia v GNB Battery Technologies Ltd[5] Duggan J accepted that r 18 was applicable to the service of third party proceedings. I propose to proceed on the same basis. The Hambros defendants accepted that the application of r 18.02 in the present circumstances was to be determined by a consideration of whether the third party claims pleaded by them came within any one or more of the categories specified in r 18.02 and not by considering whether the claims made by the plaintiff in the principal action fell within one or more of those categories. In this respect, the Hambros defendants accepted the applicability of the decisions in McCheane v Gyles[6]; Gilchrist v Dean[7]; University of South Australia v GNB Battery Technologies Ltd[8]. It is arguable that at least some of the claims made in the Third Party Statement of Claim filed by the Hambros defendants do come within r 18.02. However, the Hambros defendants accepted that even if that were so, not all of their claims could be so categorised. That being so, the Hambros defendants accepted that leave to serve the third party proceedings was required. It was accepted that a party could not, without leave, serve out of the jurisdiction a process containing a claim in respect of which leave was required even though that claim was coupled with another claim or claims in respect of which leave to serve was not required.[9]

   [4] Fenbury Ltd v Hong Kong and Shanghai Banking Corporation Ltd (1996) 189 LSJS 348.

   [5] (1997) 192 LSJS 1.

   [6] [1902] 1 Ch 287 at 298-99.

   [7] [1960] VR 266 at 268-9.

   [8] (1997) 192 LSJS 1 at 9.

   [9] AMP Society v GEC Diesels Australia Ltd [1989] VR 407 at 411; Shantou Hesheng Commercial Development Co v P & O Swire Containers Ltd [1999] 3 VR 478 at 480.

8. The manner in which the Court should approach an application for the grant of leave pursuant to r 18.07 was recently considered by Debelle J in K & S Corporation Ltd v Number 1 Betting Shop Ltd & Others.[10]  From that decision, the following principles relevant to an application of this kind can be identified:

   1.An applicant must show that it has a good arguable case.  Satisfaction by the Court that the applicant has “a good arguable case” does not involve any prediction or assessment as to the prospects of the success of the claim.[11]

   2.An applicant must show that there is a real and substantial connection between the defendant or the subject matter of the litigation and South Australia.[12]

   3.The amount claimed by the defendant or the value of the property in dispute is not insubstantial.[13]

   4.Given the potential for the Court to cause offence if it was to arrogate jurisdiction to itself improperly, considerations of comity and restraint are important.[14]

   5.The existence or otherwise of the above matters can be determined by reference to the pleadings in the third party proceeding or by reference to a supporting affidavit or both.[15]

   It is to be noted that the above is not an exhaustive list of the matters to be considered.  Further, the extent to which each needs to be established in a given case will vary according to the circumstances of that case.

   [10] [2005] SASC 228.

   [11] K & S Corporation Ltd v Number 1 Betting Shop Ltd at [92].

   [12] K & S Corporation Ltd v Number 1  Betting Shop Ltd at [94].

   [13] K & S Corporation Ltd v Number 1 Betting Shop Ltd at [93].

   [14] K & S Corporation Ltd v Number 1 Betting Shop Ltd at [91].

   [15] K & S Corporation Ltd v Number 1 Betting Shop Ltd at [43]-[45].

   The Grant of Leave in the Present Case

9. In the present case, I will proceed on the basis that the Hambros defendants have an arguable case against each of the Executor and International and Irish Securities.  As the existence and nature of the causes of action asserted against each and the strength of those causes of action may well be the subject of some controversy in the proceedings, I prefer at this stage to say no more than that.  In particular, I prefer not to express any view as to whether the causes of action asserted are “good” or “reasonably arguable”.

10. I also accept that there is a substantial connection between the subject matter of the third party claim and the State of South Australia.  I have reached that conclusion by reference principally to the allegations contained in the Third Party Statement of Claim.  The first and most obvious fact bearing on this consideration is that the Hambros defendants have been sued and (if they are liable at all) will be found liable to the plaintiff in South Australia.  Further, the late Alfred Schneider-Paas, whose estate the Executor is administering, was a director of the plaintiff, a company incorporated in South Australia, and is alleged to have breached fiduciary and statutory duties which he owed to the plaintiff under the law of South Australia.  In relation to International and Irish Securities, it is alleged that that entity assisted in and profited from breaches of duty by the directors of the plaintiff, a South Australian company.

11. On any view, the amount or value of the present claim is substantial.  The amount sought to be recovered by the plaintiff from the defendants, and the amount which the Hambros defendants, if found liable to the plaintiff, will seek to recover from third parties is sufficient evidence of that.

12. I have also considered whether the interests of justice generally warrant the grant of leave.  I am satisfied that those interests do incline in favour of the grant of leave.  If the claims of the Hambros defendants against the Executor and International and Irish Securities are to be pursued, it is desirable that they be heard and determined at the same time when the dispute between the plaintiff and the Hambros defendants and the disputes between the plaintiff and the other third parties are heard and determined.  I accept that the claims against the Executor and International and Irish Securities will involve issues of fact and law which are substantially similar to those which arise in the plaintiff’s claim and the other third party and contribution claims.

13. Finally, I accept the submission of the Hambros defendants that it is appropriate that the leave sought should be granted retrospectively so as to apply to the “service” which was effected on the Executor on 20 October 2005 and International and Irish Securities on 17 October 2005.  I accept that the Court does have power to cure the defect retrospectively.[16]

    [16] Southern Equities Corporation Ltd v Bond [1999] SASC 90 at [4]; Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank Ltd (1990) 1 Qd R 101 at 109-10.

14. Accordingly the order of the Court pursuant to r 18.07(1) is that the fifth, sixth, seventh and eighth defendants have leave nunc pro tunc as at 20 October 2005 to serve the Third Party Notice, the Third Party Statement of Claim and the Notice prescribed by r 18.04(1)(a) on:

    1.Lawrence Robert Schneider-Paas (as Executor of the estate of Alfred Carl Scheider-Paas) of Dorfstrasse 101A, 44534 Lünen, Germany;

    and on

    2.BQT Solutions Holdings Limited (of Heath Road Business Centre, 65 High Street, Egham, Surrey TW20 9EY, England.