Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 7] - [2015] WASC 280

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: TRAFALGAR WEST INVESTMENTS PTY LTD AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [No 7] [2015] WASC 280

CORAM: KENNETH MARTIN J

HEARD: 21 MAY 2015

DELIVERED : 5 AUGUST 2015

FILE NO/S: COR 59 of 2011

BETWEEN: TRAFALGAR WEST INVESTMENTS PTY LTD AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST
Plaintiff
AND
SUPERIOR LAWNS AUSTRALIA PTY LTD
First Defendant
KINGSLEY CRAIG FLUGGE
Second Defendant
MARGARET FLUGGE
Third Defendant
JEROME MATTHEW FLUGGE
Fourth Defendant
LINLEY FLUGGE
Fifth Defendant
DAMIEN CRAIG FLUGGE
Sixth Defendant

Catchwords:

Practice and procedure - Amendment to originating process - Corporations - Statutory oppression action - Limitation of actions - Time bar - Equitable claims - Leave to amend on basis of preservation of limitation right

Legislation:

Corporations Act 2001 (Cth)
Limitation Act 1935 (WA)
Limitation Act 2005 (WA

Result:

Plaintiff's application successful
Conditional leave granted to amend originating process
Defendants' limitation defence rights expressly preserved

Category: B

Representation:

Counsel:

Plaintiff:     Mr S Penglis
First Defendant             :     Mr M L Bennett & Mr D Banda
Second Defendant         :     Mr M L Bennett & Mr D Banda
Third Defendant           :     Mr M L Bennett & Mr D Banda
Fourth Defendant          :     Mr M L Bennett & Mr D Banda
Fifth Defendant            :     Mr M L Bennett & Mr D Banda
Sixth Defendant            :     Mr M L Bennett & Mr D Banda

Solicitors:

Plaintiff:     Corrs Chambers Westgarth
First Defendant             :     Bennett + Co
Second Defendant         :     Bennett + Co
Third Defendant           :     Bennett + Co
Fourth Defendant          :     Bennett + Co
Fifth Defendant            :     Bennett + Co
Sixth Defendant            :     Bennett + Co

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

Auzhair Supplies Pty Ltd v Gerace [2014] HCASL 231
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 19 ACLC 856
Foss v Harbottle (1843) 2 Hare 461; (1843) 67 ER 189
Gerace v Auzhair Supplies Pty Ltd [2014] NSWCA 181; (2014) 310 ALR 85
Hewitt v Henderson [2006] WASCA 233
Knox v Gye (1872) LR5HL 656; (1872) 42 LJ Ch 234
LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo [2013] QSC 225; (2013) 281 FLR 227
Morgan v Banning (1999) 20 WAR 474
Patterson v Humfrey [2014] WASC 446
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2011] WASC 92
Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 6] [2014] WASC 278
Wardley Australia Ltd v The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514
KENNETH MARTIN J:

Introduction

I am dealing with an application by the plaintiff (Trafalgar) seeking leave to re‑amend its originating process in this corporations action - which was originally begun in urgent circumstances towards the end of March 2011: see the reasons of EM Heenan J in Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2011] WASC 92.
Background to the unfolding litigation can be found across my subsequent interlocutory decisions: see Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 2] through [No 6] - culminating in the decision which was Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 6] [2014] WASC 278, delivered 1 August 2014.
Regrettably, I am still dealing with interlocutory skirmishes as between the parties, some four years after the commencement of Trafalgar's action.
By Trafalgar's minute of 30 March 2015, it seeks leave to file and serve the further amended originating process - which it attaches to that application as annexure A. Leave to amend is strongly opposed by the defendants.
There was an earlier amendment of 7 February 2014 to Trafalgar's originating process. This was uncontroversial at the time - at least in terms of a lack of any in principle objection to Trafalgar's ability to seek such relief. However, the present amendment proposed to the originating process is heavily opposed.
The proposed amendment for which leave is sought by Trafalgar needs to be viewed in overall context. For introductory purposes it is sufficient I identify that Trafalgar seeks to add to the current framework of its originating process a new subpar C(c). To provide necessary context, I must also set out subpars C(a) and C(b) - which were introduced by the amendments made to the originating process of 7 February 2014. Hence, par C, augmented by the proposed component subpar C(c) of Trafalgar's minute, in respect of which leave to amend is sought, provides:
CAn order that the defendants do purchase the plaintiff's shares in the Company at a value to be determined on the basis that:
(a)the shares issued pursuant to the Rights Issue are to be ignored (so that the plaintiff's shareholding in the Company is deemed to be 30% of the issued capital of the Company); and
(b)notionally reversing such of the conduct as is pleaded herein as this Honourable Court upholds as constituting the conduct of the affairs of the Company contrary to the interests of the members of the Company as a whole, alternatively oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff is notionally reversed;
(c)the trustees of the Flugge Property Trust are liable, alternatively the Company has, as an asset, a cause of action against the trustees of the Flugge Property Trust, to account to the Company for the Profit (as defined in paragraph 45 of the statement of claim).
References above to a 'Company' are references to the first defendant, Superior Lawns Australia Pty Ltd, which I refer to hereafter as 'Superior Lawns'.
Leave to amend is sought under O 21 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC) - although Trafalgar through its counsel, Mr Penglis, said that Trafalgar disavows any suggestion the proposed par C(c) amendment it is seeking to make introduces any new cause of action (let alone a new cause of action which could be validly challenged by the defendants as time barred by limitation).
As explained during oral arguments, Mr Penglis related that the motivation for the application for leave to amend the originating process was the concern by Trafalgar that an earlier 2014 excision amendment, under changes to the originating process of 7 February 2014 (then removing par 2(e) of Trafalgar's originating process) might possibly carry the (clearly unintended, as it was said) consequence of being viewed as an abandonment of a part of the case Trafalgar still wished to pursue, as a part of the overall statutory oppression action. Hence, it was put that the now proposed 2015 amendments to Trafalgar's originating process are really advanced on a basis of redressing or clarifying an unintended position (see ts 201).
Amendment under the newly proposed par C(c), if leave is granted, would see a direct and newly added reference to the word 'Profit'. 'Profit', in turn, is specifically defined by reference to par 45 in the most recent statement of claim of Trafalgar. That reference is to Trafalgar's Re-Amended Substituted Statement of Claim of 11 March 2015 (REASSOC).
To put the ramifications of this amendment application in a more understandable context, I must divert for a moment to assess Trafalgar's pleadings.
The underlying position is extremely complicated. In the end, I would allow Trafalgar's application to amend its originating process on a conditional basis and dismiss the cross-application of the defendants to strike out parts of Trafalgar's pleading. Inevitably it seems many of the matters raised will arise again for final determination at trial. Because of that prospect, I have canvassed at greater length than usual, given the present decision, some of the background to the presenting issues. I took that approach with a (somewhat reluctant) eye to the future.

The REASSOC

Paragraph 45 in Trafalgar's REASSOC has been amended, in part, under the most recent pleading amendments, made without leave by Trafalgar, under its REASSOC of 11 March 2015.
Other pleading amendments by Trafalgar at that time (which were highlighted in blue) included introducing new pars 38A, 38B, 44A, 44B, 44C and 45A.
The REASSOC partial amendment made to par 45 was, by the addition of some extra words, seen at the end of par 45, in the terms I have underlined below:
45.On or about 25 June 2013, Craig and Margaret, as trustees for the Flugge Property Trust, sold, and Gnangara purchased, Sydney Road for the Purchase Price and thereby made a profit (Profit).
New particulars to REASSOC par 45 were added at this time as well, in terms:
Particulars of Profit
The best particulars which the plaintiff is presently able to provide is $19,345,000 (being $18,600,000 plus $745,000) less the actual cost to the trustees of the Flugge Property Trust of acquiring and holding the Sydney Road Property. Full particulars will be provided after discovery and inspection of documents.
A new REASSOC par 45A, also introduced at this time, provided:
45AThe Profit was obtained by Craig and Margaret in their capacity as trustees of the Flugge Property Trust as a consequence of, and knowing of, the matters:
(a)pleaded in paragraphs 10(b), 11, 13, 14, 15, 21, 23, 24, 25, 26, 27, 28, 29, 30 and 31 above and, or alternatively;
(b)paragraphs 38, 38A, 38B above;
and thus, they would be liable, upon action being taken against them by the Company (or in its name) to account to the Company for the Profit by way of the declaration of a constructive trust and/or an account of profits.
Amendments by the REASSOC were made as well to Trafalgar's culminating statutory oppression plea, at par 104 - picking up and adding references to pars 38B, 39, 44A to 44C and pars 94 to 94B (but, interestingly, not mentioning either pars 45 or 45A).
There was also an amendment added to the prayer for relief in the REASSOC by new prayer C(c) - a plea highlighted in bold below that mirrors almost precisely the presently proposed amendment to the originating process in respect of which leave is now sought, in terms (again for context I show the surrounding prayers C(a) and C(b) as well, which are subsisting pleas):
CAn order that the defendants do purchase the plaintiff's shares in the Company at a value to be determined on the basis that:
(a)the shares issued pursuant to the Rights Issue are to be ignored (so that the plaintiff's shareholding in the Company is deemed to be 30% of the issued capital of the Company); and
(b)notionally reversing such of the conduct as is pleaded herein as this Honourable Court upholds as constituting the conduct of the affairs of the Company contrary to the interests of the members of the Company as a whole, alternatively oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff is notionally reversed;
(c)the trustees of the Flugge Property Trust are liable, alternatively the Company has, as an asset, a cause of action against the trustees of the Flugge Property Trust, to account to the Company for the Profit.
Prayer C(c) of the REASSOC and the proposed amendment to add par C(c) to the originating process of Trafalgar (for which leave is now sought and opposed) seek that a valuation for Trafalgar's minority shareholding of shares in Superior Lawns should proceed to be determined on a basis that the trustees of the Flugge Property Trust (who are, relevantly, the second and third defendants in this litigation, namely, Kingsley Craig Flugge and Margaret Flugge (Craig and Margaret Flugge)) are liable to Superior Lawns, or that Superior Lawns holds as against them as one of its assets, a cause of action that Craig and Margaret Flugge account to Superior Lawns for Profit (as defined under REASSOC par 45). The profit is defined as an amount in the order of $19.345 million, less an acquisition and holding adjustment in relation to a Sydney Road property which was once beneficially owned by Superior Lawns - but which property was gradually disposed of in portions over time by Superior Lawns between 2000 and 2006.
I need to say some more about the disposition of the Sydney Road property by Superior Lawns in due course. But for now I simply wish to highlight a close linkage as between the uncontroversial (at the time) REASSOC amendments of 2015 to Trafalgar's pleading and the opposed amendment sought to be made under par C(c) to Trafalgar's originating process by leave on this application.

The grounds of opposition to the originating process and the defendants' cross-application

As mentioned, the defendants oppose leave being granted to amend Trafalgar's originating process. This opposition is chiefly expressed on a basis they contend that the originating process amendment, if allowed, would see the introduction of a new cause of action - which the defendants contend is obviously time barred by limitation of actions legislation - including by the Limitation Act 2005 (WA).
The defendants also contend that granting leave to Trafalgar to make the amendment to the originating process would be contrary to orderly case flow management principles. The secondary plank of opposition can be dismissed immediately as an unhelpful distraction from deeper considerations of principle.
The opposition by the defendants to a grant of leave to amend the originating process has also spawned, in effect, a cross‑application by the defendants which seeks the striking out of some of the March 2015 amendments to the REASSOC, made without leave at the time. This pleading cross‑challenge was on a basis of the REASSOC amendments being challenged by the defendants, in effect, as failing to disclose any reasonably arguable cause(s) of action or, alternatively, by reason of them being 'embarrassing'.
There is, of course, no necessary obligation for Corporations Act2001 (Cth) proceedings to proceed upon the basis of exchanged pleadings. Indeed, most corporations actions these days would seem to eschew that process completely. However, here, as long ago as 2011, out of sheer case management necessity at the time, I did make orders requiring that this particular corporations action should proceed on the basis of pleadings. I took that decision given a magnitude of confusingly assembled grievances and issues sought to be raised by Trafalgar, and the resulting unacceptable levels of uncertainty as to what Trafalgar, as plaintiff, across rambling affidavits, was actually seeking or complaining about.
Under the defendants' proposed minute of orders of 22 May 2015 (which I required to be filed to formalise the cross-challenges of the defendants - which emerged only from their written outline of submissions of 5 May 2015 strenuously opposing a grant of leave to amend the originating process), it is clarified by par 2 that some amendments to Trafalgar's REASSOC, as introduced under pars 38A, 38B, 45 and 45A (and the collected subsequent references to pars 38A and 38B found in par 104) of the REASSOC, are now sought to be struck out. Striking out of those pleas is sought, along with the counterpart prayer C(c) of the prayer for relief in the REASSOC (in terms akin, as now seen, to the proposed par C(c) of the originating process).

Trafalgar's statutory oppression grievances against Superior Lawns and others

The pleaded statutory oppression grievances of Trafalgar still present as being of considerable dimensions and complexity, even under its current REASSOC. For present purposes, however, it is enough to relate that, very broadly speaking, in the context of Trafalgar's statutory oppression action, on foot since March 2011, there may be roughly identified two conceptually distinct 'baskets' of oppression grounded statutory grievances.
A first 'basket' of statutory oppression grievances concerns wrongs alleged to have been directly perpetrated by one or other of the defendants against Trafalgar, qua that corporation being a minority shareholder in Superior Lawns (initially a 20% shareholder from 16 June 2006, but later rising to become a 30% shareholder from 16 December 2008, before the contentious rights issue of 2011 saw Trafalgar's proportionate shareholding in Superior Lawns diminish to an infinitesimal level).
Trafalgar is a corporation closely associated with its sole director Mr Patrick Jebb. He was invited to become a director of Superior Lawns in a period around 8 September 2005 (alternatively 8 November 2005). Mr Flugge held a position as a director of Superior Lawns in what otherwise had been a Flugge family owned and run corporation, until about 19 April 2009. At that time Mr Jebb resigned as a director of Superior Lawns.
The second 'basket' of oppression grievances articulated by Trafalgar under the REASSOC seeks to complain of derivative, or quasi-derivative, wrongs which Trafalgar would seek to ventilate at a trial, in effect, as the causes of action of Superior Lawns which are directed against various defendants. This is done only in a context of Trafalgar seeking the end relief under s 232/s 233 of the Corporations Act of a court ordered compulsory acquisition order against the defendants for its minority shareholders in Superior Lawns at a 'buy-out' price fixed by the court. These derivative grievances are directed at having the assessed value of the assets of Superior Lawns increased - to take account of the value of such factors, thereby, it would be hoped, pushing up the value of Superior Lawns shares for the purposes of the compulsory 'buy out' relief sought under s 232/s 233, if Trafalgar wins and gets that far.
Unfolding arguments around this amendment application raise the history of a disposal of a Sydney Road property that was once owned by Superior Lawns. This by no means exclusive grievance falls into the second basket of derivative, or quasi-derivative, grievances advanced by Trafalgar. It is an argument that essentially seeks to raise 'out of the mouth' of Superior Lawns alleged wrongs done to Superior Lawns by various of the defendants; it is alleged chiefly by Craig and Margaret Flugge, in their capacities as trustees of different trusts, whilst at the same time also being Superior Lawns' board directors.

Conclusive limitation of actions defences foreshadowed by the defendants to the amendment of the originating process

The defendants' written submissions of 5 May 2015 (at par 1.1) assert that 'the cause of action or claim for relief sought to be introduced by paragraph A(c) of the Proposed Further Amended Originating Process is time barred and as a consequence is not capable of being maintained at trial' (my emphasis).
I take the reference to par A(c) to be intended towards proposed par C(c) - marked in blue upon the minute of Trafalgar's further amended originating process, filed on 31 March 2015.
The limitation of actions contention is raised against one of Trafalgar's derivative cause of action sub‑issues - concerning an argued cause of action held by Superior Lawns against Craig and Margaret Flugge as trustees of the Flugge Property Trust. It is not an argument, as I understood it, challenging Trafalgar's overarching statutory corporate oppression cause of action directed against the defendants, by invoking s 232 and s 233 of the Corporations Act, as was begun in March 2011.
It is of significance to my end conclusion rejecting the defendants' limitation of action objections to leave to amend being granted, that I am embarking upon this scrutiny in a context of a situation in which the defendants have pleaded out their defence and counterclaim on 26 August 2014. That was obviously before the REASSOC's most recent amendments of 11 March 2015. Consequently, the defendants have not yet pleaded out to expressly raise their limitation of action defences against Trafalgar's new REASSOC pleas, seen under pars 45 and 45A (and C(c)) that seek relief against Craig and Margaret as trustees of the Flugge Property Trust. Those pleas appear to be inseparably tied to the currently proposed amendment of the originating process: see REASSOC pars 38A, 38B, 44A, 44B, 44C, 45, 45A and 104. Instead the defendants raise their cross-application to strike out some of those pleas. The point is that the defendants have not yet by their pleading raised any limitation of action defences. I am asked, in effect, to pre-emptively evaluate the limitation of other defences as foreshadowed - before they are pleaded. This, in my view, is problematic for the defendants.

Trafalgar's position

The stance of Trafalgar is that no new cause of action is being introduced under its proposed amendment to the originating process - for which leave is sought. Trafalgar then says that nor can it be fairly said that there has been introduced any obviously time barred cause of action - that ought not be permitted to proceed to an evaluation at a trial.
By written submissions of 18 May 2015, Trafalgar elaborates upon its resistance to the defendants' limitation of actions challenges, as follows:
4.What the amendments do is to introduce additional facts by which the plaintiff seeks to make out its extant cause of action under section 232 of the Corporations Act. Put simply, the additional matters pleaded constitute conduct which, either alone or considered with the other conduct complained of, the plaintiff will rely upon at trial to establish that the question identified by this Honourable court in Trafalgar West Investments Pty Ltd as Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 6] [2014] WASC 278 at [34] should be answered in the affirmative.
5.The additional facts pleaded do not enlarge the scope of the matter or the quantum of the claim. The additional facts amplify the matters which are/were already pleaded at paragraphs 38, 44, 45, 64 and 65 of the re-amended substituted statement of claim. [My note: Paragraphs 64 and 65 of the REASSOC are actually deleted, but the intent of the submission as to matters being raised earlier is understood. The submission no doubt reflects the plea under par 45A(a) of the REASSOC referring to existing pleas as regards the newly introduced 'Profit' concept added to par 45.]
6.Contrary to the submissions of the defendants, the amendments do not seek to introduce a derivative action. The fact that the conduct complained of is alleged to be in breach of various duties is not to found a separate cause of action, but to characterise the nature of the conduct complained of, and, further, with respect to the formulation of any relief, to identify an alternative basis for, and more clearly articulate the existence of (in effect) an asset of the company to which regard ought be had when valuing the plaintiff's shares in the event of an order that the plaintiff's shares be bought out is made after trial: see generally Patterson v Humfrey [2014] WASC 446 at [56] - [58] and the authorities referred to therein (including Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672). [My note: nomenclature arguments over the term derivative being appropriate or not can be put aside. I accept that Trafalgar has and continues to pursue s 232/s 233 end relief. But the underlying valuation and compulsory buy out relief which has been framed from an assets of Superior Lawns perspective, seeking to value alleged causes of action of Superior Lawns against Craig and Margaret, must be recognised. One question is whether Trafalgar can do that where, had it been attempted by Superior Lawns directly commencing such litigation, it would have been dismissed by a time bar. This all presents to me now as being somewhat unprecedented from a case law perspective.]
I pause to also note that Patterson v Humfrey [2014] WASC 446 was a 2014 decision by Le Miere J in this court. At [56] his Honour had observed:
The court has power under Corporations Act s 233 to order compensation in favour of the companies whose affairs are in question, notwithstanding the availability of a derivative action.
One decision referred to in Patterson was LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo [2013] QSC 225; (2013) 281 FLR 227 (McMurdo J) at [44]. There, at [43], McMurdo J (prior to passages referred to by Le Miere J) said:
I am unable to accept that the scope of the powers conferred by s 233 has become so limited by the introduction of s 236 and s 237 as the defendants suggest. But I do accept that those other provisions, and the means which they provide for the prosecution of proceedings in the company's name, could be relevant to the exercise of the court's discretion under s 233 in some cases. In particular, the court should be mindful of the potential for the misuse of proceedings which are purportedly brought under s 233 but for relief which, in the circumstances, could not be warranted in order to prevent or remedy the consequences of conduct of a kind described in s 232. And of course the availability of s 236 proceedings will be relevant in the discretionary consideration of whether there should be an order under s 233(1)(f).
McMurdo J's pointer in LPD Holdings (Aust) v Phillips, Hickey & Toigo was towards recognising the court's ultimate discretion under s 233.
In a context of valuation of asset arguments raised in statutory oppression proceedings which would otherwise require leave of the court, if attempted to be run as a pure derivative action by the carefully regulated regime of s 236 and s 237 of the Corporations Act, the existence of the court's ultimate discretion as regards granting a s 233(1)(f) order is an important consideration. It provides some mechanism of control against any extravagant invocations of s 233 by disgruntled minority shareholders crying oppression under s 232 and s 233, but in reality seeking to avoid the rigour of the controls upon derivative actions requiring leave under s 236 and s 237.
Returning to Trafalgar's written submissions, they assert at par 7:
7.It may be open to the defendants to plead, by way of defence, that no cause of action exists or is statute barred. That is the matter for [the] defence: not a strike out application: see Hewitt v Henderson [2006] WASCA 233, per Buss JA at [30]. In that regard, it cannot be said that the plaintiff's prospects of establishing the existence of such an asset at trial is 'hopeless'. [My note: In the end, as I explain, I accept this submission, albeit Hewitt v Henderson addressed the former Limitation Act 1935(WA). The same principles apply, however, in my view.]
I pause to observe that, in relation to the former Limitation Act 1935 (WA), Buss JA, with whom Steytler P and Pullin JA agreed, had said in Hewitt v Henderson [2006] WASCA 233 [30]:
In the present case, the respondents have pleaded, relevantly, causes of action for breach of fiduciary duty and an account. The appellant's allegation that a limitation period should be applied by analogy would, in the ordinary course, be specifically pleaded in his defence. See O 20 r 9(1) of the Rules of the Supreme Court1971 (WA). The respondents would then plead to that allegation in a reply. The plea in reply would include any facts which, on the respondents' contention, make it unconscionable for the appellant to invoke the limitation defence. The appellant has not (yet) sought to amend its defence to raise limitation issues. In my opinion, the application before the learned Judge was not a satisfactory process for determining, on a summary basis, whether the respondents' pleaded causes of action for breach of fiduciary duty and an account were hopelessly barred. That issue should be determined at trial on the pleadings and after all material facts have been found. (my emphasis in bold)
Buss JA continued at [34]:
In my opinion, it was unnecessary for the learned Judge to make an order that the amendments which he allowed, or any of them, should take effect from the date of amendment and not from the date on which the original writ of summons was issued. The granting of leave to make the amendments does not preclude the appellant from pleading any limitation defence which he alleges applies, either directly or by analogy, to any of the causes of action in the substituted statement of claim. If the appellant pleads that any of the causes of action is time barred, it will be necessary for the trial Judge to find the material facts and determine whether the limitation defence is made good.
With respect, Buss JA's observations from [30] seem to me to be apposite to present circumstances. A summary basis of determination for limitation arguments is not a satisfactory process. Little was put to me during arguments about the ramifications of the new Limitation Act 2005. As matters stand, I should proceed on the basis that, like the 1935 predecessor legislation it was replacing, the 2005 Act, in its intended operative effect, still bars the remedy but not the cause of action itself.
Returning to Trafalgar's written submissions, they assert:
8.As for the issue of any claim by the Company being statute barred, it is indeed a novel proposition to suggest that where a company director acts in breach of fiduciary duty, [presumably a reference to Craig and Margaret Flugge], and a third person [presumably Craig and Margaret Flugge as trustees of the Flugge Property Trust] knowingly received the benefit of that breach, any action subsequently taken by the Company [Superior Lawns] would be successfully met with a Limitation Act defence where, to the third parties' knowledge, the director's conduct cannot be and is not disclosed until after the expiration of the limitation period. [My note: This submission rather suggests a reliance upon multiple underlying causes of action of Superior Lawns, including (possibly) for persons knowingly assisting in a breach of trust, or by knowing receipt of trust property, contrary to both limbs of Barnes v Addy. It also suggests a basal need for some level of factual inquiry concerning the state of knowledge of the board of Superior Lawns as to alleged misconduct by some of its board members - as to underlying events to be complained of qua Superior Lawns and more factual issues as well about a director's misconduct not being uncovered until after what would otherwise be an expiration of a relevant limitation period. Trafalgar's submission appears to foreshadow, if necessary, an invocation of s 38 in Pt 3, Div 3 of the Limitation Act 2005. Section 38, however, read at face value, seems to require any extension of up to a further three years to sue to be obtained on the basis of an application to court for leave to commence under s 38(1), followed by a grant of an extension under s 38(2). None of that has happened yet.]
9.By specific reference to the Limitation Act 2005 (WA), the answer is provided by sections 27 and/or 38. In this regard the defendants' assertions that the plaintiff should have disclosed the matters now complained of earlier are without reasonable foundation in fact or logic. In any event, the prospect of such action not being statute barred cannot, at this point, be said to be 'hopeless'.
10.Finally, in the alternative, the defendants' Submissions completely overlook and ignore the fact that what is pleaded in paragraph 45A(b) is pleaded 'and, alternatively' to what is pleaded in (a), all of which forms part of the pleading before the amendments complained of.

The defendants' cross-application to strike out - further aspects of Trafalgar's REASSOC of 11 March 2015

Examining the pleading amendments of Trafalgar by its REASSOC, which have now become controversial, under the defendants' cross-application to strike out, it is necessary to note that pars 38A and 38B have been introduced within a section of the pleading dealing with events relating to what is termed the 'fourth Sydney Road transfer'.
This section of the REASSOC focuses upon a 2007 property transaction, concerning the acquisition of 78 undivided one hundredth shares in Sydney Road by the Flugge Property Trust. This interest in land was then being acquired not from Superior Lawns but, rather, from the Jacaranda Trust, for $3,510,000, at October 2007.
What are the now impugned par 38A and par 38B amendments, which the REASSOC introduced concerning this 2007 (Flugge Property Trust/Jacaranda Trust) acquisition transaction by pars 38A and 38B, say:
38AThe fourth Sydney Road Transfer was facilitated by Craig and Margaret:
(a)in or about January 2007, causing the deposit of $500,000 to be paid to the Jacaranda Trust out of [Superior Lawns'] funds;
(b)in or about July 2007, subsequently procuring a loan from the National Australia Bank to Craig and Margaret as trustees of the Flugge Property Trust in the sum of $3,500,000 (Flugge Property Trust Commercial Bill);
(c)in order to obtain the Flugge Property Trust Commercial Bill, informing the National Australia Bank that the then existing borrowings of [Superior Lawns], Craig and Margaret would be restructured;
(d)in order to obtain the Flugge Property Trust Commercial Bill, informing the National Australia Bank that [Superior Lawns] would pay a rental for its future occupation of the Sydney Road Property sufficient to cover the interests costs of the Flugge Property Trust Commercial Bill.
38BThe conduct pleaded at 38A above was:
(a)made without notification being given to Mr Jebb or [Trafalgar] and, therefore, was made without their consent;
(b)for the benefit of Craig and Margaret, alternatively the beneficiaries of the Flugge Property Trust, and not for the benefit of [Superior Lawns];
(c)not for any proper purpose of [Superior Lawns], nor in its best interests;
(d)in the premises, breaches by Craig and Margaret of each of the Director's Duties and each of the Fiduciary Duties.
Here, I need to pause to point out that key terms used above, namely 'Director's Duties' and 'Fiduciary Duties', are found defined earlier in the REASSOC. At par 4(i) of the pleading concerning the second defendant, Craig Flugge, 'Director's Duties' is defined to refer to statutory obligations and general duties as a director of [Superior Lawns] to exercise powers and discharge duties in good faith, in the best interests of Superior Lawns for proper purposes and as well to not improperly use the position of director to gain an advantage for the director or someone else or cause detriment to Superior Lawns. This plea invokes reliance upon the statutory obligations made applicable to directors under s 181 and s 182 of the Corporations Act.
The term 'fiduciary duties' is also defined in the REASSOC plea at par 4(j), concerning Craig Flugge. This plea invokes an orthodox formulation of the fiduciary duties of a company director, concerning obligations to act in the best interests of Superior Lawns, for proper purposes, not to promote personal interest where there is a conflict or substantial possibility of conflict between personal interest and the interest of Superior Lawns and then not to profit by virtue of the role of director beyond agreed remuneration.
Under the heading 'Sale of Sydney Road', Trafalgar's statement of claim, prior to the REASSOC 2015 amendments, had identified, at par 44, that the Flugge Property Trust (which had become 100% holder of all of the Sydney Road land, at October 2007) had entered a written agreement of 10 December 2010 to grant an option to a third party, Gnangara Holdings Pty Ltd (Gnangara) to acquire Sydney Road under a call option at a purchase price of $18,600,000, with a non‑refundable option fee payment of $1,500,000 plus two further option fees payable on extensions of $500,000 each.
A further plea under par 45, prior to the 2015 amendments, identified a disposition by the Flugge Property Trust trustees, namely, Craig and Margaret, at 25 June 2013 of the Sydney Road land to Gnangara (by sale and purchase). But no more than that was said before the REASSOC 2015 amendments. Before then, a notion of this sale to Trafalgar producing a 2013 'Profit' for Craig and Margaret Flugge as trustees of the Flugge Property Trust, had not emerged.
As I have earlier mentioned, details addressing the (as defined) 'Profit' were only added under the 11 March 2015 amendments made to pars 45 and 45A by the REASSOC.
What was also added under the REASSOC 2015 amendments to the pleading is now part of the defendants' cross-application, applying to strike out the extra words added to par 45 and its new particulars about 'Profit', plus challenging a plea by a new par 45A (as was set out earlier in these reasons).
[Paragraphs 38A and 38B (and their later collected reference under par 104) have already been seen. They are challenged as well by the defendants. But some other REASSOC amendments, introduced by pars 44A, 44B and 44C, are not challenged on the cross-application.]

Two key observations

First, Trafalgar's pleas concerning the gradual disposition of the Sydney Road land over time in tranches, then an ensuing disposition of the 78 one‑hundredths undivided interest held by the Jacaranda Trust to the Flugge Property Trust, have all been the subject of pleaded complaint for some time.
Nevertheless, the par 45 and par 45A REASSOC amendments of 2015 would appear to evolve a development of Trafalgar's grievances to some new level, particularly by the contention under new par 45A(b), as regards an asserted liability of Craig and Margaret Flugge to account to Superior Lawns for 'Profit' - as trustees of the Flugge Property Trust - by their selling of the Sydney Road land to Gnangara, in 2013.
Second, the 2015 pars 45 and 45A amendment pleas fall under what I have broadly described as Trafalgar's 'second' basket of derivative or quasi‑derivative oppression grievances in the litigation. Such grievances, viewed alone, do not raise matters which would ordinarily be classed as the personal causes of action of Trafalgar. In other words, broadly speaking, Trafalgar does not as a minority shareholder in Superior Lawns complain of a direct injury to itself as a result of anyone's oppressive corporate misconduct. Rather, its position seeks to contend, in effect, putting itself in the 'shoes' of Superior Lawns, that this corporation (in which it wants its shares valued and compulsorily acquired) holds equitable causes of action against (its directors) Craig and Margaret Flugge, by reason of their alleged acts of misconduct in their capacities as subsisting directors of Superior Lawns but, as well, whilst acting as trustees of the Flugge Property Trust and thereby causing harm not to Trafalgar, but to Superior Lawns.
This derivative or quasi-derivative contention goes in the end under the present litigation exclusively towards Trafalgar's pursuit of elevated worth share valuation arguments, to the effect that if and when Trafalgar can make good a case of statutory oppression against Superior Lawns, or against any of the other natural person defendants for the purposes of s 232 and s 233 of the Corporations Act, Trafalgar's minority shareholding should be ordered compulsorily to be purchased. In effect, Trafalgar's minority shareholding is sought to be bought out. And in that 'buy out' process the compulsory acquisition of Trafalgar's minority shareholding is sought to be ordered by the court upon the basis of a valuation exercise which assumes increased values for Superior Lawns' assets - based on the assessed worth to Superior Lawns of (presumably) successful cause(s) of action held by that corporation against Craig and Margaret Flugge as the trustees of the Flugge Property Trust - to seek and obtain an account of the 'Profit', as defined.
On present case authority the legitimacy of an approach of allowing baskets of derivative or quasi‑derivative grievances to be run in an oppression context has a legitimate parentage: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 19 ACLC 856 [142] ‑ [144] (Spigelman CJ) (ratifying the approach of Young J at first instance, in that oppression action, concerning predecessor corporations legislation, via s 260(2) of the Corporations Law). That is notwithstanding that the Corporations Act undeniably seeks to regulate very carefully the limited situations where the common law rule from Foss v Harbottle (1843) 2 Hare 461; (1843) 67 ER 189 has been refashioned and controlled by Pt 2F.1A of the Corporations Act (s 236 and s 237) and there predicated upon the protection of a grant of leave by a court, before the beginning of derivative proceedings. I mention again the observations of McMurdo J in LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo about a permissible anomaly arising within the unique environment of a share valuation buy-out exercise within an oppression action.

Sydney Road

Some more background about the history of the Sydney Road property is called for. I mention the following aspects:
(a)The Sydney Road land was acquired by Superior Lawns at about 21 August 1989, at a time when Superior Lawns had also acquired the goodwill, plant and equipment of a turf farming business. There was 18 ha of land used by the acquired business as a turf farm at 59 Sydney Road, Gnangara in lands under certificate of title, volume 129, folio 18A (REASSOC par 3(d)).
(b)According to the REASSOC, the Sydney Road property was acquired by Superior Lawns in 1989 for $450,000 (par 10a).
(c)Next, it appears that 22 undivided one hundredth shares of the Sydney Road land was disposed of by Superior Lawns to the second, third, sixth and fourth defendants (Craig, Margaret, Damien and Jerome Flugge) - in their capacities as the then trustees of the Flugge Property Trust for a 'stated consideration of $127,500'. This was under a transfer of land instrument of 30 June 2000, stamped 2 August 2001 and registered on 13 April 2004 (REASSOC par 10(b)).
(d)Aspects of that 'first' disposition of 22 undivided shares to the Flugge Property Trust in 2004 have been identified and complained over for some time under existing paragraphs of Trafalgar's pleading claim: see REASSOC pars 10 ‑ 15. The pleaded (derivative) grievance includes a plea that the Flugge Property Trust had not provided any consideration (to Superior Lawns) for receiving those 22 individual shares: see par 11.
(e)The remaining 78 undivided one hundredth shares in Sydney Road, as held by Superior Lawns, are next contended to have been disposed of -under resolutions of Superior Lawns' board at meetings on 21 and 28 November 2005 (REASSOC par 22). This sale is said to have been for the asserted amount of $3,432,000 (REASSOC par 23). This disposition was to the trustees of the Jacaranda Trust (Craig and Margaret Flugge), under a transfer of 15 December 2005, stamped 1 March 2006 and lodged for registration on 2 March 2006 (REASSOC par 23).
(f)The 2006 Sydney Road sale events effectively saw, at that time, Superior Lawns dispose of its entire (ie, 22 shares plus 78 shares) interest in its Sydney Road land, at 2 March 2006. These events have been complained about under prior iterations of Trafalgar's statements of claim: see pars 22 ‑ 31. The (derivative) grievance of Trafalgar included a plea that no consideration was paid (ie, to Superior Lawns) by the recipient of the 78 shares in the Sydney Road land (ie, the Jacaranda Trust) (REASSOC par 29).
(g)Rounding Sydney Road matters out, par 38 of Trafalgar's pleading (prior to the most recent 2015 REASSOC pleading amendments) made a plea that in about October 2007, Craig and Margaret Flugge, acting not as board members of Superior Lawns, but as trustees of the Flugge Property Trust - had proceeded to purchase 78 undivided shares of the Sydney Road land from its then owners - the interest being held (since March 2006) by the Jacaranda Trust - for $3,510,000 excluding GST, under the transaction referred to as the 'fourth Sydney Road transfer'.
It is apparent then that aspects of Super Lawns' disposition (in tranches) of its Sydney Road land have been pleaded and complained about by Trafalgar for some time now - then responded to under the defendants' defence and counterclaim of 26 August 2014.
However, the 'Profit' complaint aspect of the par 45 and par 45A REASSOC pleas directed at the funds derived from the 2013 sale of the Sydney Road land to Gnangara by the Flugge Property Trust and the consequent 'Profit', emerged in 2015.
It is convenient to pause to recall that Trafalgar did not become a shareholder in Superior Lawns, on its case, until 16 June 2006. By then, of course, chronologically, as can be seen, all of the Sydney Road land had been disposed of by Superior Lawns. That happened no later than under the second Sydney Road transfer, of March 2006, to the Jacaranda Trust.

Affidavit of Patrick Jebb sworn 18 May 2015

By a short affidavit Mr Jebb seeks to support Trafalgar's application for leave to amend its originating process - and by reference to the asserted significance of one newly seen document, which he appends. The document is a credit memorandum Mr Jebb relates was recently obtained by his current solicitors - as a consequence of a subpoena issued on 22 September 2014 to the National Australia Bank Ltd (NAB).
It appears that some documents were produced by NAB on 6 October 2014, in response to a subpoena issued by Trafalgar's solicitors. Documents produced were uplifted by the plaintiff's solicitors about a week thereafter.
Mr Jebb relates that he was provided by email with a copy of documents as were produced by NAB, including the document which he appends as PGGJ‑1 - referred to as a 'credit memorandum'. The short form credit memorandum, attached by Mr Jebb, is dated 26 July 2007.
Mr Jebb concludes his affidavit at par 7 by relating that prior to 20 October 2014, he had not previously seen the credit memorandum. He adds:
I was not aware of the facts the subject of the allegations in subparagraphs 38A(a) and (d) of the Plaintiff's Re‑Amended Substituted Statement of Claim … and (c) I was only aware of the facts the subject of the allegations in subparagraphs 38(c) and (d) to the extent the facts were previously pleaded in paragraphs 38, 64 and 65 of the Plaintiff's Amended Substituted Statement of Claim filed 11 August 2014.
Mr Jebb proceeds upon a basis that the state of his knowledge as regards to facts emerging from his either seeing or not seeing the NAB credit memorandum document of 26 July 2007, are of some present relevance. Why that should be so is not clear to me, bearing in mind all this material seems to be raised in a context of the attempt to sustain derivative cause of action arguments that Trafalgar would seek to have Superior Lawns notionally advance against Craig and Margaret Flugge as a part of Trafalgar's compulsory buy out share valuation exercise.
Relevantly, in a limitation of actions context it is not what Mr Jebb for Trafalgar knew or did not know about these matters. Rather, what matters is what the board of Superior Lawns as a whole knew or did not know, as to the facts collected within this supposedly significant 2007 NAB document.
From my examination of its content I can see little to suggest that the board of Superior Lawns at the time (comprising, it appears, of Craig, Margaret and Linley Flugge and Mr Jebb) would not have been aware of this proposed 2007 borrowing transaction. It addressed the application by Craig and Margaret Flugge as trustees of the Flugge Property Trust to borrow funds from NAB, in order to fund the acquisition by that trust of the 78% interest in Sydney Road it did not then hold, but wished to acquire, from the Jacaranda Trust.
Part of the NAB credit memorandum of 2007 reads:
Clients are seeking a Commercial Bill facility for $3.5 M in the name of FPT. At settlement the funds will be distributed through the Jacaranda Trust to the beneficiaries, Craig & Margaret Flugge, however ultimately the funds will be utilised as follows -
1.Payout of the Flexiplus Mortgage facilities ino KC and Flugge $950,000;
2.Payout of existing Commercial Bill ino Superior Lawns Pty Ltd $2,050,000;
3.Stamp Duty & Settlement fees on transfer $190,000;
4.Transfer of funds back into working capital for Superior Lawns PL $310,000.
Total:$3.5 million.
Items 2 and 4 seem to indicate that end consequences of this lending proposal being evaluated by NAB (which was approved in due course) saw Superior Lawns being advantaged, to the extent of a discharge of its existing commercial bill (ie, debt) in the amount of $2,050,000, plus receiving an injection of funds for the working capital of Superior Lawns in the amount of $310,000 - an overall benefit approaching $2,360,000. It would seem remarkable if the board of Superior Lawns did not come to know of these positives for that corporation.
The credit memorandum then said:
The $310K to be paid back to the trading entity along with additional funds held in Flugge's Superannuation Fund of approximately $200K will replace the $500K deposit paid out of working capital. Both Craig and Margaret are officially retired and can access the super funds for this purpose.
New pleas in 2015 under par 38A(a) and (d) of Trafalgar's REASSOC address the fourth Sydney Road transfer as being facilitated by Craig and Margaret, and seek to raise a (derivative) grievance qua Superior Lawns, as to Craig and Margaret Flugge in January 2007, causing a deposit amount of $500,000 to be paid to the Jacaranda Trust - out of the funds of Superior Lawns (see par 38A(a)). There is also a grievance over the NAB being advised that Superior Lawns would pay rent for its future occupation of the Sydney Road property, sufficient to cover the interest costs of the Flugge Property Trust Commercial Bill.
From the terms of the NAB 2007 credit memorandum, I cannot yet infer anything sinister vis-à-vis Craig and Margaret Flugge, absent greater information. On the face of it, Superior Lawns appears, overall, to be a nett beneficiary dollarwise, upon an implementation of the steps as identified under items 1 to 4 as quoted above.
Moreover, I struggle to infer anything pejorative about Superior Lawns being party to arrangements to pay to the owner of land it leases, a proper level of commercial rent for the Sydney Road property - assuming the land was then still being occupied and being used by Superior Lawns in its business operations.
If Mr Jebb's affidavit is intended towards laying some sort of foundation for a possible future invocation of s 38(2) or s 44 in Pt 3 Div 3 of the Limitation Act 2005 - to assist in circumventing limitation of actions obstacles arising under, say, s 13(1) or s 27(1) of that new limitations legislation, it is difficult at present to see how that objective is met. His affidavit appears prima facie to fall a considerable distance short of meeting that objective, as regards a purely equitable cause of action (presumably of Superior Lawns, invoked derivatively) that may be argued to lack a common law analogue.
If Mr Jebb's affidavit were intended to be directed towards meeting or surmounting limitation of actions obstacles arising in respect of some underlying equitable cause of action of Superior Lawns (to which there is a common law analogue cause of action and so an applicable time bar), then, by virtue of what is said in the recent New South Wales Court of Appeal decision, Gerace v Auzhair Supplies Pty Ltd [2014] NSWCA 181; (2014) 310 ALR 85 as explained by Meagher JA (Beasley P and Emmett JA agreeing), his efforts would need to exceed those currently manifested. I do not need to presently resolve these matters. However, I note that an application for special leave to appeal from the New South Wales Court of Appeal's decision (see Auzhair Supplies Pty Ltd v Gerace [2014] HCASL 231) was refused by Hayne and Crennan JJ on 10 December 2014, on the basis (see [8]) that there was 'no reason to doubt the correctness of the decision of the Court of Appeal' and that an appeal to the High Court would 'enjoy insufficient prospects of success to warrant a grant of special leave to appeal'. The Gerace decision concerned, of course, the provisions of the New South Wales Limitation Act 1969 (NSW). In contrast, the West Australian Limitation Act 2005 looks to carry some unique considerations: see generally the article by Dr Natalie Skead entitled 'Limitation Act 2005 (WA) and Equitable Actions: A Fatal Blow to Judicial Discretion and Flexibility - How Other Australian Jurisdictions Might Learn From Western Australia's Mistakes' (2009) 11 UNDALR 1.

Mr Jebb's first affidavit of March 2011

The defendants point out that in the first affidavit Mr Jebb swore in 2011 at the commencement of these proceedings, seeking urgent interlocutory relief as far back as 24 March 2011, he addressed at pars 289 to 304 the issue of the Flugge Property Trust's purchase of the remaining 78 one‑hundredths interest (from the Jacaranda Trust) in 2007. I will mention the following paragraphs from that affidavit, commencing at par 289:
At a meeting held on about 24 May 2007 at the offices of Athans and Taylor [in other words two months prior to the credit memorandum], I became aware from conversations between [Craig Flugge] and John Athans that the Flugge Super Fund was proposing to buy out the second and third defendants' 78% interest in Sydney Rd.
Mr Jebb also swore (par 300):
At no stage during these conversations was I made aware of any suggestion that [Superior Lawns] would provide funding for the sale.
See also pars 301 ‑ 304.
It is apparent from numerous other places in Mr Jebb's first affidavit that a profitable sale by Superior Lawns of its (then surplus to working requirements) Sydney Road land had been a pending issue for a considerable time. That was well before Mr Jebb was invited to become a director of Superior Lawns in late 2005, and well before Trafalgar received an allocation of Superior Lawns shares, initially at 20% in 2006, going up to 30% in 2007: see pars 35, 48, 52, 53, 54, 55, 67, 68 and 70 of that first affidavit of Mr Jebb.
An extract from a conversation as was related by Mr Jebb under his 2011 affidavit at par 93, that occurred around Monday 24 October 2005 with Craig and Margaret Flugge at Mill Point Road, proceeds:
Craig: Patrick, the family is now considering developing Sydney Road itself rather than selling to a developer.
Patrick: Craig, we have already agreed that the Business has to relocate and I have no problem with the Company selling the land as we simply don't need it, but if you keep the property in the Company while it is developed it will greatly complicate matters once you have a buyer.
Craig: I know that. We have discussed this with Michael and we believe the best option may be to have the company sell Sydney Road to a specific development company, maybe in joint venture with Marg and I and Michael McDermott's people, as they have a lot of experience in these developments. Michael is very confident Sydney Road will be rezoned.
Patrick: That's up to you Craig. I know I would be happier if we separated the Company from the land development business from the start.
You know my views on property developers and Judy and I are not comfortable risking our equity on the success or otherwise of lobbying the Wanneroo Council.
Ideally, you should leave enough equity in the Company for us to develop the new farm leaving the balance for use by the family to redevelop Sydney Road.
As long as the Company gets a fair value for the land on its current zoning, so that the debts are covered and the shares are worth something, we will be able to develop the farm separately to the property development business.
But without Sydney Road and no other farm to move to ‑ the Company has got a negative value and Judy and my shares, however much we get, will have no value.
You and Marg decide whatever is fair. The sooner that happens the sooner we can focus on growing the Business and you and Marg and the rest of the family can develop Sydney Road separately.
Craig: Okay I'll need to speak with Michael McDermott and get back to you.
At par 125 a further conversation is related by Mr Jebb at around Monday 14 November 2005:
Patrick: Craig, has the family agreed on how many shares will be issued to Judy and I, and what do you want to do with Sydney Road?
Craig: As for Sydney Road we are going to develop it separately, but we're still working through that process. Michael will help us.
In relation to the shares, Marg and I believe you should set the percentage that we end up with. We talked about it and we are very worried that we don't want to offend you so we decided it was best that you choose.
Patrick: I can't do that. It's up to the family and it depends on what you do with Sydney Road. This decision is something you have to make. Is everyone okay with us coming on board?
Craig: Yes absolutely. Marg and I are very anxious for you to be a part owner of the business. We also want Jerome and Linley to be brought in. They are equally convinced it is the best move.
Patrick: I'm happy for Jerome and Linley to be involved … Okay then but we need to settle on the shares we are to receive before I finalise the deal with GRM tomorrow.
We already agreed that Judy and I have no issue with you dealing with Sydney Road as you wish as long as the Company gets a reasonable value for its interest in the property.
So what you do with it after that is none of our business.
In the circumstances as are described by Mr Jebb in 2011, the subject matter of a NAB 2007 credit memorandum concerning NAB funding of a loan of $3.5 million to the Flugge Property Trust, in order for that trust to acquire the remaining 78% interest in that property - then held by the Jacaranda Trust since 2006, would hardly present as startling information. Nor does Mr Jebb's 2011 narration of events concerning Sydney Road present a scenario by which some valuable land asset of Superior Lawns was being removed by stealth from Superior Lawns' balance sheet by the misconduct of that company's then board.
Fundamentally, however, the residual concern I hold about Mr Jebb's affidavit dealing with his 20 October 2014 insights towards the NAB credit memorandum of 2007, is that his related recent knowledge of those events all presents as being conceptually irrelevant, in a context of what seems to be a derivative claim, not a direct claim of Trafalgar. The real consideration then is when the board of Superior Lawns learned of the matters the subject of the NAB credit memorandum of July 2007. There is no evidence to suggest that the board of Superior Lawns was not or did not become fully aware of those matters.
But all that must stand over to be a matter for the trial - if limitation of action defences are properly pleaded to be raised by the defendants and then need to be evaluated in that more reliable context.
I next move to mention some further limitation arguments arising out of the parties' respective submissions.

Par 45 and par 45A REASSOC

The eventual pleas as seen under pars 45 and 45A of the REASSOC address the concept of 'Profit', as defined, and derived upon the ultimate sale of the Sydney Road land by the Flugge Property Trust to the corporation Gnangara, in June 2013. They still seem rather obliquely framed, at present. The plea under subpar 45A(a) looks to formulate some sort of claim by accretion - invoking pleas that have been raised for some considerable period before 2015 and have been responded to under the defendants' defence and counterclaim pleading of 26 August 2014.
A further and alternative plea, under par 45A(b), invoking par 38 and new pars 38A and 38B, does look distinctly focussed at events in or around October 2007, at first blush. By that time, of course, all of Superior Lawns' interest in Sydney Road had been sold off - upon completion of the second Sydney Road transfer in March 2006 - which disposed of Superior Lawns' remaining 78 undivided one‑hundredth shares in Sydney Road to the Jacaranda Trust (par 23) for $3,432,000.
On this application, the defendants must accept the conceptual availability of a derivative or quasi‑derivative claim by Trafalgar in its oppression action. But they argue, nevertheless, that the proposed amendment to Trafalgar's originating process (viewed in the light of what must be viewed as counterpart amendments to the REASSOC) should not be allowed - since they are said to be plainly time barred vis-à-vis even Superior Lawns itself at this time raising and pursuing such causes of action.
Trafalgar falls back to contend that if, contrary to its favoured position, its proposed amendments to the originating process might arguably introduce new causes of action, which then might be assessed as being potentially time barred under the provisions of the Limitation Act 2005 amendments (that Act taking effect as from 15 November 2005, concerning causes of action vesting from then) that, nevertheless, there is more than ample scope for this court, as a matter of discretion, to grant it conditional leave to amend - upon the basis of a preservation to the defendants of all viable limitation of action defences as they might currently hold (if any).

For their part the defendants contend that to proceed on that basis would amount to an approach something akin to a 'coward's way out' - pointing to an alleged (negative) pragmatic consequence that the 2015 REASSOC amendments carry of pushing the parties even further apart from a possible settlement perspective - in terms of their perceived financial dimensions of this litigation (from $7 million outwards to a level of some $19 million). Notwithstanding that submission of the defendants, I have reached the position, at the end, that 'discretion is the better part of valour'!

Limitation of actions and observations upon derivative causes of action attempted to be run by Trafalgar in the context of the valuation exercise in an oppression action as regards the worth of its shares in Superior Lawns

As regards causes of action of Superior Lawns which are gathered by Trafalgar as causes of action it can effectively manipulate to be raised derivatively or quasi‑derivatively under its oppression relief action - in a context of a share valuation exercise of Trafalgar's shares in Superior Lawns - potential causes of action of Superior Lawns are seen raised via the proposed originating process plea under par C(c) (and its equivalent prayer for relief seen at the end of the REASSOC), as a cause of action put against the trustees of the Flugge Property Trust seeking that they account to Superior Lawns for 'Profit'.
That plea would appear to pursue an equitable remedy. In that respect, s 26 of the Limitation Act 2005 provides:
An action for an account cannot be commenced if the limitation period for the cause of action that is the basis of the duty to account has expired.
But what is the underlying cause or causes of action providing the basis for the equitable remedy of account to Superior Lawns ‑ and which may arguably be time barred? There appear to be a number to choose between. They could include:
(a)breach of the 'director's duties' as owed to Superior Lawns by Craig and Margaret Flugge as its directors - being statutory misconduct contrary to s 181 and 182 of the Corporations Act: see par 4(i) of the REASSOC;
(b)breach of 'fiduciary duties' as defined under par 4(j) of the REASSOC - by Craig and Margaret Flugge as directors of Superior Lawns; and [My note: conduct under par 38A is, by par 38B, concerning the fourth Sydney Road transfer, to be, per par 38B(d), 'in the premises, breaches by Craig and Margaret Flugge of each of the Director's Duties and each of the Fiduciary Duties'. (Paragraph 38A renders it clear that this was conduct said to have been facilitated by Craig and Margaret Flugge in a period between January to July 2007.) As regards breach of statutory director's duties (as defined) the applicable limitation of action period under s 1317K of the Corporations Act is six years, which on the face of it would appear to have run out by July 2013.]
(c)a cause of action raised via par 45, as regards alleged conduct of Craig and Margaret Flugge in their capacity as trustees of the Flugge Property Trust, with respect to the declaration of a constructive trust and/or the remedy of an account of profits. This rather presents as a wholly equitable cause of action. It would appear to be a contention as to a breach of one or another of the limbs of the rule in Barnes v Addy ‑ as Trafalgar's written submissions seemed to assume.
The defendants' submissions rather confidently contend that a Barnes v Addy cause of action for knowing assistance is analogous to an action under s 79 of the Corporations Act - as regards knowing involvement in contravention of a director's statutory duties. No authority is provided for that proposition. At this stage, I am not prepared to summarily draw that conclusion as being so clear cut, especially on this interlocutory application before any plea of a limitation defence by the defendants.
It seems arguable to me, absent any arguments specifically addressing this point, that a Barnes v Addy cause of action against a director for knowing assistance in a breach of trust, or the knowing receipt of trust property, may be assessed as a uniquely equitable cause of action, without any common law analogue.
That being so, the possibly applicable limitation of actions provision presents, prima facie, as arising under s 13(1) or s 27(1) of the Limitation Act 2005 - as regards a purely equitable cause of action - on or after 15 November 2005, when the new Limitation Act2005 took effect.
Section 27(1) of the Limitation Act 2005 says:
(1)An equitable action cannot be commenced after the only or later of such of the following events as are applicable ‑
(a)the elapse of 6 years since the cause of action accrued; or
(b)the elapse of 3 years since time started running, on equitable principles, for the commencement of the action.
See also the definition of 'equitable action' under s 27(2) of the Limitation Act 2005.
By s 27(1)(b) a potentially difficult further question arises here, in terms of when and whether or not, as a matter of fact, time has begun to run, applying equitable principles, within a three year period for the purposes of making a required assessment under s 27(1)(b).
Moreover, by s 38(2) of the Limitation Act 2005 an extension of a further three years might be obtained upon an application made to a court, beyond the point at which an ' … action ought reasonably to have been commenced if the court is satisfied that the failure to commence the action was attributable to fraudulent or other improper conduct of the defendant or a person for whom the defendant is vicariously liable'.
Trafalgar has indicated the intention to rely upon s 38, if or when necessary, within the context of derivative action arguments. As I have said, I am not comfortable about attempting to resolve that issue in an interlocutory context. The problem is more properly and safely resolved in the context of a final determination - where it is factually clearer if there ever was any 'fraudulent or other improper conduct' of any defendant relied upon and, if so, what that conduct is.
At present, it is simply not appropriate, in my view, to undertake what would be a pre‑emptive interlocutory assessment.

Resolution

Since these arguments may arise to be evaluated in the future, it is convenient if I render some directly responsive comments upon what is submitted under the defendants' written submissions. This may assist preparation to deal with such issues in due course, if necessary.
The defendants' limitation challenge is asserted to be based upon what is said to be a demonstrably applicable limitation time bar, articulated as follows (as I have said, I do not regard the emerging limitation of action issues as being at all so demonstrably clear as to presently enable a summary determination to be made as to their merits or demerits were that course open to me):
4.The cause of action or claim for relief sought to be introduced by paragraph A(c) [sic, C(c)] of the proposed further amended originating process is time barred pursuant to section 1317K of the Corporations Act, alternatively section 13(1) of the Limitation Act 2005. [My note: In each case specifying limitation periods of six years from the accrual of the cause of action.]
5.The gravamen of the Application and the amendments introduced by paragraphs 38A, 38B, 44A, 44B, 44C, 45, 45A and 104 of the Re‑Amended Statement of Claim is that Craig and Margaret Flugge as Trustees for the Flugge Property Trust are liable to Superior Lawns, alternatively Superior Lawns has an asset in the form of a cause of action against Craig and Margaret Flugge as trustees of the Flugge Property Trust to account to Superior Lawns for profit of $19,345,000 (minus costs) which was allegedly obtained by Craig and Margaret Flugge:
5.1causing Superior Lawns to pay $500,000 to the Jacaranda Trust in about January 2007 as the deposit for the transaction;
5.2procuring a loan from National Australia Bank in their capacity as trustees for the Flugge Property Trust in the sum of $3,500,000 (Flugge Property Trust Commercial Bill) in about July 2007;
5.3prior to obtaining the Flugge Property Trust Commercial Bill, informing National Australia Bank that:
5.3.1existing borrowings of Superior Lawns would be restructured;
5.3.2Superior Lawns would pay rent to the Flugge Property Trust for its occupation of Sydney Road sufficient to cover the interest costs of the Flugge Property Trust.
6.The crucial impugned conduct is alleged to have occurred between January 2007 and July 2007. [My note: This bland assertion I find difficult to accept. Perhaps viewed alone it can be said that the par 38A and 38B pleas concern only events in 2007 as regards the fourth Sydney Road transfer. But viewed more widely, the 2007 conduct might be viewed as part of an overall course of conduct relating to the disposition of parts of Sydney Road over time and culminating in the 2013 'Profit' by the Flugge Property Trust - which is sought to hold Craig and Margaret Flugge accountable as trustees of that trust.]
…
11.The rule in Weldon v Neal (1887) 19 QBD 394, that it is improper and unjust to allow an amendment setting up a cause of action which, if the writ were issued at the date of the amendment, would be barred by a statute of limitations, continues to apply in Western Australia, qualified only to the extent that O 21 r 5(5) of the RSC permits. (footnote 7 of the submission refers to Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431 at 439).
…
16.The relief claimed in the Amended Originating Process dated 7 February 2014 exists quite separately from the claim for relief under paragraph [C(c)] of the Proposed Further Amended Originating Process and introduced by paragraphs 38A, 38B, 44A, 44B, 44C, 45, 45A and 104 of the Re‑Amended Statement of Claim and therefore constitutes a new cause of action (that is, a new basket of facts or factual situation or combination of facts) arising from the facts or substantially some [sic] facts not previously pleaded (referring to Morgan v Banning (1999) 20 WAR 474 at 476 and Dye v Griffin at 434). [My note: From an arguability perspective at this time the 2007 events (see REASSOC par 38, 38A and 38B) could be seen as the penultimate steps towards the attaining of the par 45 'Profit'.]
…
19.While it is not entirely clear the basis upon which a cause of action is alleged to accrue against Craig and Margaret Flugge as trustees of the Flugge Property Trust to Superior Lawns, it appears from the pleaded facts the only basis upon which Craig and Margaret Flugge as trustees of the Flugge Property Trust could be liable to account for profits to Superior Lawns is if:
19.1there was an accounting relationship between Superior Lawns and Craig and Margaret as trustees of the Flugge Property Trust;
19.2there was a fiduciary duty owed by Craig and Margaret as trustees for the Flugge Property Trust to Superior Lawns and that those duties were breached;
19.3Craig and Margaret Flugge as trustees for the Flugge Property Trust were knowingly involved in contraventions [of] statutory director's duties to Superior Lawns;
19.4Craig and Margaret Flugge as trustees of the Flugge Property Trust knowingly received property in breach of fiduciary duties or money and/or knowingly assisted Superior Lawns to breach fiduciary duties (Barnes v Addy).
20.The only statutory contraventions pleaded by Trafalgar in their Re‑Amended Statement of Claim concern conduct alleged to contravene sections 181 and 182 of the Corporations Act. [My note: That assessment is questionable - particularly in light of the observation earlier in preceding par 19 about the lack of clarity regarding the cause(s) of action raised against Craig and Margaret Flugge.]
21.As sections 181 and 182 of the Corporations Act are civil penalty provisions, (the defendants' footnote 12 referring to section 1317E of the Corporations Act) the limitation period in relation to contraventions of sections 181 and 182 of the Corporations Act is six years (footnote 13 of the defendants' submissions refers to section 1317K of the Corporations Act).
22.Any cause of action that Superior Lawns may have had against Craig and Margaret Flugge in respect of their conduct as directors of Superior Lawns in relation to January to July of 2007 expired in July 2013 at the latest. [My note: That confidently put submission is at least open to question, as regards equitable causes of action, given s 13(2), s 27(1)(b), s 38 and s 44 of the Limitation Act 2005.]
23.Properly construed sections 13(1) and (2) of the Limitation Act 2005 provide that any action on any cause of action must be commenced within six years unless a particular provision in Part 2 Division 3 of the Limitation Act2005 applies.
24.Properly construed section 3(1) of the Limitation Act 2005 provides that an action means any civil proceeding in a court, whether the claim that is the subject of the proceeding or relief sought is under a written law, at common law, in equity or otherwise.
25.As the basis of the cause of action alleged against Craig and Margaret Flugge as trustee of the Flugge Property Trust is an account, section 26 of the Limitation Act 2005 is relevant and provides that an action for an account cannot be commenced if the limitation period for the cause of action that is the basis of the duty to account has expired.
26.Accordingly, any causes of action arising at common law or equity in respect of against [sic] Craig and Margaret (as trustees of the Flugge Property Trust or as directors of Superior Lawns) should have been commenced within six years. [My note: That submission may be superficially made if focussed only at pars 38A, 38B and 45A(b). But those pleas about events in 2007 need to be viewed in the longer standing context of grievances about the 2013 sale of Sydney Road to Gnangara. Whilst the 'Profit' arising out of that is explicitly challenged by pars 45 and 45A, the plea under par 45A provides some basis to assert that this has been a longer standing grievance. I am not prepared to dismiss it summarily.]

Conclusions

In the end, as I have foreshadowed along the way, I am left persuaded here that the required course is to afford Trafalgar conditional leave to amend its originating process. This will be on the basis that the defendants' position is expressly stated to be protected, as regards the defendants fully retaining without any impediment all such limitation of action rights that they currently hold - as against the introduction of new or further causes of action via this 2015 amendment to the originating process. In other words, to the extent that it might otherwise be in play, any possibility that a present grant of leave to amend the originating process, as requested, might have the capacity, in some circumstances, to retrospectively validate (this itself looks doubtful, post Morgan v Banning (1999) 20 WAR 474, 483) (second proposition) the amendment to the originating process to see it take effect retrospectively from the time of the original filing of Trafalgar's originating process, will be expressly excluded from possible application here - as a condition that is tied to my grant of leave to amend the originating process of Trafalgar.
As I understood Trafalgar's position, it is untroubled by a grant of leave to amend in those expressly so qualified conditional terms - its principal stance being that the latest amendments do not seek to and do not introduce any new or further causes of action - derivative qua Superior Lawns, or otherwise.
For like reasons, I am also not prepared to accede to the defendants' cross-application.
But I will take the opportunity to render the following observations with an eye to the basket of derivative claims as are sought to be advanced by Trafalgar, in effect, via Superior Lawns against Mr and Mrs Flugge:
(a)the derivative character of the claims sought to be run, in effect, as part of a Trafalgar minority share buy out valuation exercise, as attempts to establish notional assets by reference to valuable causes of action by Superior Lawns, argued chiefly against Craig and Margaret Flugge in their capacity as trustees of the Flugge Property Trust, presents as unique, in the context of s 232 and s 233.
(b)I take the view that such limitation of action rights as are currently held by the defendants against Superior Lawns would be fully open to be pleaded and raised in a defence - within the framework of a pleaded amended defence against a derivative cause of action, to the extent otherwise available to Superior Lawns to be raised - and so would be measured in availability to the same extent as if direct proceedings had been attempted to be commenced against a defendant by Superior Lawns. Again, I did not understand that proposition to be cavilled with by Trafalgar upon this application.
Thus, I have reached a position as regards leave to amend the originating process being conditionally granted, essentially as:
(a)there is still the need under the Limitation Act 2005, as I would see it, for the defendants by a pleaded defence to explicitly raise a limitation of action plea before it becomes a live consideration: see RSC O 20 r 9(1)(a) and see Knox v Gye (1872) LR5HL 656; (1872) 42 LJ Ch 234 674 (Lord Westbury) and cited by Meagher JA in Gerace v Auzhair Supplies [20];
(b)a party ought not be deprived of a cause of action upon the basis of a limitation point raised at interlocutory level - unless the limitation of action obstacle is abundantly clear. Here the position is not at all clear, given some level of antecedent Sydney Road grievances pleaded out for some time previous: see Wardley Australia Ltd v The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, 533 (Mason CJ, Dawson, Gaudron and McHugh JJ).
(c)I perceive there to be difficult, and largely unexplored by case authority, limitation questions arising as to the applicability or otherwise of limitation defences within a framework of a derivative or quasi‑derivative action, qua the position of Superior Lawns. That is particularly so by reference to the presently somewhat underexplored position as regards purely equitable causes of action without a common law analogue via s 27 of the Limitation Act 2005 - that Act replacing the Limitation Act 1935, and made applicable to causes of action held by parties from 15 November 2005; and
(d)Trafalgar's pleading prior to the REASSOC of 11 March 2015 raised extensive complaints over the transfer by Superior Lawns of portions of its once entirely owned Sydney Road land. Accordingly, some expansion in the pleas of Trafalgar under amendments as regards the fourth Sydney Road transfer being facilitated by Craig and Margaret Flugge, seen under pars 38A, 38B and as regards a 'Profit' as identified by amendments to pars 45 and 45A, might be viewed as simply clarifying the dimensions of a Sydney Road disposition grievance canvas - already laid down some time ago. In other words, I do not assess the par 45A(a) plea as so new or distinct in its dimensions as to clearly be seen to add wholly new allegations. The plea under par 45A(b) linking back to newly introduced par 38A and par 38B presents as more vulnerable - but I am not prepared to conclude that it is defective by reason of limitation at this time.
Although I have mentioned the observations from [34] of Hewitt v Henderson concerning it not being strictly necessary to order that the amendments be allowed take effect from the date of the amendments, and not from a date of the original originating process, in this particular case - in light of the underlying and somewhat unprecedented complexities posed by a derivative or quasi‑derivative action - I see no harm in making it crystal clear now to all that leave to amend the originating process is only granted on that limited basis. Whilst that might be strictly unnecessary, an order in those terms will serve as a 'flag' by way of an express reminder for the future, concerning areas of dispute which look inevitably to re‑emerge for a deeper evaluation at some stage. Moreover, it renders it clear that I am not deploying sub silentio any power via RSC O 21 r 5(2) and (5) to allow a retrospective grant of leave to amend, under RSC O 21 r 6.

Derivative orders

The costs of this application for leave to amend the plaintiff's originating process should be borne by the defendants, in circumstances where, as I have pointed out in the reasons above, it is not appropriate to deprive a party of a cause of action on the basis of a limitation of action impediment at an interlocutory level, unless positively crystal clear - and it is not clear in the presenting case. Though, as expressly noted, the defendants will retain any rights presently held to raise any limitation defences at a later stage (presumably at trial), the plaintiff as the successful party upon this application should receive its costs of the opposed application for leave, to be taxed if not agreed.
The parties should now confer towards Trafalgar filing a memorandum of agreed orders or, in the absence of agreement, by filing respective minutes of proposed orders, to give effect to these reasons, to be filed within 21 days of the publication of these reasons.
I will resolve any residual disputation arising from the preparation of any proposed minutes on the papers.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: TRAFALGAR WEST INVESTMENTS PTY LTD AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [No 7] [2015] WASC 280 (S)

CORAM: KENNETH MARTIN J

HEARD: ON THE PAPERS

DELIVERED : 2 OCTOBER 2015