VISCARIELLO v Macks (No 2) - [2015] SASC 160

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
VISCARIELLO v MACKS (No 2)
[2015] SASC 160
Reasons for Ruling of The Honourable Chief Justice Kourakis
28 October 2015
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - GENERALLY
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - AMENDMENT
On 9 December 2014 reasons for the trial of this matter were delivered. During the course of trial the plaintiff filed and served a form of “Proposed Fourth Amended Statement of Claim”. A “Second Proposed Fourth Amended Statement of Claim” has since been filed.
Discovery made during the trial gave rise to further issues which the plaintiff could not reasonably have been aware.
Both the plaintiff and defendant were cross-examined on many of the issues raised by the Proposed Fourth Amended Statement of Claim, largely without objection. The parties had further tendered large volumes of documents recording conduct of issues raised by the Proposed Fourth Amended Statement of Claim.
The plaintiff seeks permission to amend the Statement of Claim.
Held:
1. Permission to amend the Statement of Claim is granted for paragraphs: [34.2.2] to [34.2.10], [34.5.15(B)] – [34.5.15(C)], [37A], [59.7], [71EA], [124A] – [124D], [138], [139A], [139C] (first appearing), [139D], [142.8B].
2. Permission to amend the Statement of Claim is refused for paragraphs: [71E], [71F.2], [71F(G)] – [71HA] for the purposes of pleading the Trade Practices Act 1974.
3. Permission is granted for all amendments to which no objection was pressed.

WORDS AND PHRASES CONSIDERED/DEFINED
"Amendment of Statement of Claim", "Amendment of Pleadings"

VISCARIELLO v MACKS (No 2)
[2015] SASC 160
Civil: Application to amend statement of claim

KOURAKIS CJ: I delivered reasons in the above matter on 9 December 2014. In the course of the hearing of the trial the plaintiff filed and served a form of Proposed Fourth Amended Statement of Claim on 5 March 2013. I heard argument but did not rule on the proposed amendment before the conclusion of the hearing and the delivery of reasons. I declined to do so for several reasons.
First, the Statement of Claim was cumbersomely drawn. I do not stay to consider the extent to which the awkwardness of the Statement of Claim reflected the nature of the case and difficulties in discovery on the one hand, or was the product of its drafting style on the other. Whatever the reason, the way in which it was drawn meant that the argument on the application to amend would have been unduly long and, depending on my findings of fact on some of the primary issues which were not affected by the amendments, unnecessary. Secondly, discovery made during the trial by the defendant substantially affected the conduct of the trial. That discovery was productive of further issues of which the plaintiff could not reasonably have been aware earlier and which the justice of the case required determination in these proceedings. Thirdly, both the plaintiff and defendant were cross-examined at length, largely without objection, on many of the issues raised by the proposed Fourth Amended Statement of Claim. Fourthly, the parties had tendered, and I had received, many volumes of documents which comprehensively recorded the conduct of the administration, and then liquidation, of the companies and the proceedings brought by Bernsteen and Ms George against Ms Hamilton-Smith. No question as to the admissibility of any material documents was dependent on the making of the amendments. For all of those reasons it appeared to me that the most efficient way forward was for me to consider whether or not the lateness of the proposed amendments prejudiced the defendant in the course of considering the salient factual issues which required determination in order to dispose of the proceedings.
When I delivered my reasons I indicated, consistently with the course I had adopted of only making findings of fact, favourable to the plaintiff on issues raised by the Fourth Amended Statement of Claim if I was satisfied that the defendant had not been prejudiced that:
… I would give permission to the plaintiff to make the amendments in his proposed fourth amended statement of claim which relate to the findings I have made. I am satisfied that the issues relating to those findings were fully joined in the course of the hearing and that the defendant has not suffered any prejudice by the evolving nature of the plaintiff’s case.
The defendant has appealed my judgment. The plaintiff has also lodged a cross-appeal.
For the purposes of the appeal, and perhaps for purposes related to possible collateral proceedings, it is necessary now to finally rule on the proposed Fourth Amended Statement of Claim.
The plaintiff has filed for the purpose of finalising the form of the statement of claim a document entitled “Second Proposed Fourth Amended Statement of Claim” (the proposed SOC). The paragraph numbers to which I refer are the paragraph numbers in the proposed (SOC).
The plaintiff does not seek permission to plead the following paragraphs of the proposed SOC: [34.5.1], [71A.5], [71HA-71HR], [142.8DA], [142.8DB], [120], [122], [128], [131], (second appearing) [139C] and [139D].
The defendant does not press objections which it had earlier indicated to paragraphs [6.5], [6.13], [6.21], [34.5.15(A) and (D)], [43], [57A.3], [66.6], [71.7], [71F(G)-71HA], [71HAC], [88], [118], [127.1.1], [141G-141J] and [142.9A] of the proposed SOC.
The defendant objects in part to paragraphs [34.2.2-34.2.10], [71EA], [71HAB] and [124A-124D] of the proposed SOC.
I accordingly deal below with the paragraphs which are objected to in part or in their entirety.
Paragraphs [34.2.2]-[34.2.10]
The defendant has not pressed his objections to paragraphs [34.2.3] to [34.2.10] of the proposed SOC. It objects to paragraph [34.2.2] which reads:
ARL informed the defendant that there was a difference in position between it and the defendant as to the amount of ARL’s entitlement in respect of retention of title in favour of ARL (ARL’s ROT Claim) such that ARL’s ROT entitlements were much greater than the defendant asserted they were. [Particulars] ARL so informed the defendant shortly prior to the meeting of the Committee of Creditors on 17 December 2001 and that is recorded in the minutes of that meeting being Ex P12 in the trial of the proceeding.
The factual contention pleaded by paragraph [34.2.2] is relevant to the issue joined on whether Mr Macks made proper disclosure to the Court on an application for a preponement of the second meeting of the creditors and, on the issue of whether Mr Macks discharged his duty in negotiating with Mr Bart over the Deed of Company Arrangement proposed by him.
The communications between ARL and Mr Macks, that refer to the conduct of Mr Macks in negotiating with ARL and Mr Bart, and the instructions Mr Macks gave his solicitors to bring the preponement application were comprehensively canvassed in the evidence and in submissions. I am satisfied that the issue was properly joined. I give the plaintiff permission to make the amendments in [34.2.2] to [34.2.10] of the proposed SOC as modified in the document “Plaintiff’s reply to the Defendant’s Submissions”.
Paragraph [34.5.15]
The defendant does not press his objections to 34.5.15(A) and 34.5.15(D). The plaintiff is given permission to make those amendments. The defendant presses his objection to 34.5.15(B) and (C). Clause 34.5.15 pleads:
[34.5.15]to fully disclose to the Court all of the matters relevant to the Court in exercising its discretion to grant the Orders sought by the Defendant in the Supreme Court Application including:
(A)the existence of and content of the Revised DOCA Proposal;
(B)the fact of ARL’s ROT Claim and/or that it represented a material impediment to the Defendant’s support for a DOCA because of the effect that it would have whether alone or combined with the obligations of the Defendant to remit moneys because of the sale of consignment stock;
(C)the fact that ARL had declined to sign the Revised DOCA Proposal and/or the reasons given;
(D)the effect and intention of the Defendant’s Terms.
I give the plaintiff permission to make the amendment in terms of [34.5.15(B)] and [34.5.15(C)]. The issue raised by these subparagraphs relates to Mr Macks’ conduct in negotiating the Deed of Company Arrangement proposed by Mr Bart and his disclosure of those negotiations to the Court. That issue was extensively canvassed in the evidence.
Paragraph [37A]
Paragraph [37A] reads:
[37A]The 439A Report did not inform the creditors of the existence of or the effect or intention of the Defendant’s Terms.
I give permission to make the proposed amendment. The documentary evidence and the cross-examination of Mr Macks dealt extensively with the degree of disclosure in the section 439A report of his involvement and motives in amending the terms of the Deed of Company Arrangement proposed by Mr Bart.
Paragraph [59.7]
Paragraph [59.7] reads:
[59.7]was under the general law in a fiduciary relationship with the Companies, the creditors of the Companies and the contributories of the Companies.
I made declarations that Mr Macks breached the duties imposed by ss 180‑182 of the Corporations Act. The plaintiff sought to rely, in addition, on duties allegedly owed in equity. I found it unnecessary to make those declarations. The issue raised is a question of law. The evidentiary material and considerations relevant to the exercise of the discretion in making declarations under the Corporations Act substantially overlap with the questions of equitable defences to the claim for declaration of breach of fiduciary duty in which the defendant may wish to rely. The plaintiff is given permission to make this amendment.
Paragraphs [66.6]-[66.7]
The defendant does not press his objection to paragraph [66.6]. The plaintiff is given permission to make that amendment.
Paragraph [66.7] provides:
[66.7]The Defendant applied to the Supreme Court to abridge time for the second creditors meeting on a misleading basis as above pleaded, and in particular on the basis that the abridgement was required to consider a proposal to sell the business ~~when~~ in circumstances where:
66.7.1he did not have a concluded and binding proposal capable of acceptance by the creditors;
66.7.2he did not apprise the Court of the matters alleged in paragraphs 34..5.15 though he was aware of them at the time the Orders were obtained and that they were material matters to the exercise of the discretion.
The issues pleaded in [66.7] arise out of the same factual matrix as the issue pleaded in [34.5.15]. For the same reasons I give the plaintiff permission to amend the proposed SOC in the terms of [66.7].
Paragraph [71E], [71EA], [71F2], [71F(G)-71HA], [71HAC]
These paragraphs read:
[71E]Because of the matters alleged in paragraphs 71B and 71D, alternatively 71B and 71C and D in making the November 2001 Representations, the Defendant engaged in misleading or deceptive conduct within the meaning of s 56 of the Fair Trading Act (FTA) alternatively s 52 of the Trade Practices Act 1974 (TPA).
[71EA]The Defendant did not inform either Bart or the Plaintiff prior to the second meeting of creditors that ARL had declined to accede to the Revised DOCA Proposal or the reasons or all of the reasons why ARL had declined to accede to the Revised DOCA Proposal.
…
[71F.2]constituted misleading or deceptive conduct within the meaning of s 56 of the FTA alternatively s 52 of the TPA:
…
71F(G) the conduct alleged in paragraphs 34.5.15, 37A, 46A, 57A.3 and 71EA in circumstances where as administrator the Defendant was under a duty to inform to the effect alleged. (collectively DOCA Representations)
[71G]But for the Defendant’s November 2001 Representations, the Plaintiff would not have consented to the appointment of the Defendant as voluntary administrator of the Companies; and:
71G.1the Companies would not have been placed into liquidation but placed under deeds of company arrangement based on the Heads of Agreement; and
71G.2.the Plaintiff would not have suffered the Plaintiffs Loss and Damage.
[71H]Further or alternatively, but for each of or a combination of two or more of the DOCA Representations, the second meeting of creditors in respect of each of Bernsteen and Newmore, would not have voted to place the Companies into liquidation, but rather would have voted
(a) to place the Companies under Deeds of Company Arrangement based on the Revised DOCA Proposal excluding the Defendant’s Terms alternatively some variation of the Revised DOCA Proposal.
(b)alternatively would have voted to adjourn the meeting with the result that subsequently the Revised DOCA Proposal excluding the Defendant’s Terms alternatively some variation of the Revised DOCA Proposal could have been put to the adjourned meeting and passed.
[71HA]Alternatively, because of each of the DOCA Representations or a combination of 2 or more them, the Plaintiff lost his chance to avoid the Plaintiff’s Loss and Damage by the Companies being placed under a deed of arrangement based on the Revised DOCA Proposal excluding the Defendant’s Terms alternatively some variation of the Revised DOCA Proposal and the Plaintiff is entitled to damages in proportion with his loss of chance.
[71HAC]The Plaintiff suffered the Plaintiff’s Loss and Damage because of the Defendant’s conduct alleged in the preceding paragraph, alternatively, the Plaintiff lost his chance to avoid the Plaintiff’s Loss and Damage because of the Defendant’s conduct as alleged in the preceding paragraph and the Plaintiff is entitled to damages in proportion to his loss of chance.
The defendant does not press objections to [71E], [71F2], [71F(G)]-[71HA] other than to maintain his objection to pleading a cause of action under the Trade Practices Act. In the Third Statement of Claim the plaintiff relied only on the Fair Trading Act. I refuse the plaintiff permission to plead the Trade Practices Act. Section 52 of the Trade Practices Act applies to the conduct of a corporation. There is no merit in the proposed amendment.
Paragraph [71EA] is related to the amendment in paragraph [34.5.15(C)]. I allow the amendment for the same reasons.
The defendant does not press his objection to paragraph [71H] first appearing or to paragraph [71HAC] first appearing because they are related to factual findings made by me. However, I record here that I concluded that the issues raised in those paragraphs were fully canvassed and the issue was properly joined on them at trial.
Nor does the defendant object to paragraph [71HAB]. I again record that the issue was properly joined on Mr Macks’ motives in making recommendations to the creditors and on the question of whether he preferred his interests to the creditors of the companies. The evidence led on that question was comprehensive and exhaustive.
Paragraph [124A] – [124D]
The defendant complains that in pleading causation of loss the amendments made by these paragraphs go beyond the permission given in the course of the hearing. Permission was given to insert these paragraphs limited to the relief sought by the plaintiff that Mr Macks be removed as liquidator and for a section 536 enquiry. It was granted on condition that the plaintiff accept for the purposes of those pleas, that Minter Ellison performed work to the value of the fees paid. The plaintiff’s inclusion in those paragraphs of an allegation that the engagement of Minter Ellison, pursuant to a “recovery sharing agreement” caused a loss to the companies is not inconsistent with the permission granted. The plaintiff has not, by those particular paragraphs alone, sought to recover the money paid to Minter Ellison. The plaintiff’s claim is only that by engaging Minter Ellison on that basis Mr Macks breached his statutory duties in a way which was productive of loss. The companies suffered a loss simply because Mr Macks incurred that liability in breach of his duty as liquidator whether or not Minter Ellison was properly entitled to legal fees for the work that, on the plaintiff’s allegation, Minter Ellison were improperly engaged to perform.
Paragraph [138]
Paragraph [138] reads:
[138]The PPB Payments and the payments by the Companies in relation to the Defendant’s Remuneration resulted from breaches of the duties by the Defendant referred to in paragraphs 59.3 to 59.7:
~~138.1the duty at common law and/or pursuant to section 180 of the Act to exercise his powers and to discharge his duties as a liquidator of the Companies with reasonable care and diligence; and/or~~
138.2the duty at common law and/or pursuant to section 181 of the Act to exercise his powers and discharge his duties as a liquidator of the Companies in good faith in the best interests of the Companies and for a proper purpose; and/or
~~138.3the duty at common law and/or pursuant to section 182 of the Act to not improperly use his position as a liquidator of the Companies to cause detriment to the Companies; and/or~~
because:
138.4the payments should not have been made if the Defendant properly discharged each of the duties referred to above;
138.5the Defendant knew, or alternatively should have known, that the payments were unauthorised and/or unlawful for the reasons stated above;
138.6it was improper for the Defendant to cause, authorise and/or permit the payments to be made without proper lawful authorisation;
138.7the payments have caused detriment to the Companies because they diminished the assets of the Companies
138.8of the matters referred to in paragraphs 123-125
138.9of the matters referred to in paragraphs 139A to 139D.
The defendant objects to the reference to paragraph [59.7] on the grounds of its separate objection to that paragraph. I have ruled against the defendant on that objection and have allowed the amendment to paragraph [59.7].
The defendant also objects to the reference to paragraphs [124(A)] and [124D] in paragraph [138.8]. However, the basis of the claim in paragraph [138] is not the illegality or impropriety in engaging Minter Ellison on “recovery sharing agreement”. It relates to other conduct alleged to be in breach of Mr Macks’ duties. I give the Plaintiff permission to make the amendment sought.
Paragraph [139A]
Paragraph [139A] reads:
[139A] Further, the Defendant’s primary purpose in:
(a) initiating the Bernsteen proceeding; and/or
(b)maintaining the Bernsteen proceeding after having advice that the pursuit of it was uncommercial; and/or
(c)using the funds of the Companies to pay the legal costs of the George Legal Proceedings
was for a purpose or dominantly for a purpose of a personal nature, namely the pursuit of the alleged debt of Hamilton-Smith as a “matter of principle” and therefore:
(d)not a proper purpose or an authorised purpose within the meaning of s 477 of the Corporations Act;
(e)was in breach of his duties under paragraphs 56.2 to 56.7.
The defendant’s purpose in initiating and maintaining the proceedings against Ms Hamilton-Smith and defending her counter-actions was extensively canvassed in the hearing. Those issues were properly joined and exhaustively dealt with. Permission is given to the plaintiff to make the amendment sought in paragraph [139A] subject to the corrections made in the document “Plaintiff’s Reply to the Defendant’s Criticism”.
Paragraph [139B]

Paragraph [139B] reads:
[139B]Further, in his dealings with the Committees of Inspection he breached his fiduciary duties to the Company, the creditors and the contributories in that he failed to act honestly in that:
(a)He failed to inform at all or properly inform the Committees of the:
a.the terms of the Heidi George Agreement or the Amended Heidi George Agreement;
b.the exposure to the funds of Bernsteen from time to time as a result of the Heidi George Agreement or the Amended Heidi George agreement in particular at the time of the meeting of 29 May 2006.
c.The exposure to the funds of Bernsteen from time to time as a result of Bernsteen action 10039 of 2002;
(b)he called meetings of the Committees not for the purpose of conduct of the liquidations of the Companies but to satisfy some need associated with this proceeding.
Particulars
The meetings of September 2011 were called for the dominant purpose of obtaining retrospective approval of the Heidi George Agreement or the Amended Heidi George Agreement or some variant of it.
The meeting of January 2012 was called to obtain approval for the fees of the Special Purpose Liquidators in circumstances where the only or dominant purpose of seeking that approval was to attempt foil the Plaintiff in this proceeding by exhausting any potential for recoupment of fees paid to Minter Ellison for the George Legal Proceedings and/or the Bernsteen Proceeding or fees paid to PPB in respect of same to be available to unsecured creditors of Bernsteen and Newmore including the Plaintiff.
(c)he misled the Committees as to his true purpose in funding the Bernsteen Proceeding and Heidi George Legal Proceedings by not revealing that they were being pursued as a “matter of principle” rather than in pursuit of the efficient and effective winding up of the companies.
(d)he failed to inform the Committees that there was an express connection between him seeking the approval of the Committees for the appointment of Special Purpose Liquidators to bring an insolvent trading proceeding against the Plaintiff and tactical manoeuvres in his defence to this proceeding. (e) At the meetings of the Committees in September 2011 he failed to inform the Committees that he had on numerous times from about late 2004 been told by his legal advisers that the Bernsteen proceeding was uncommercial to pursue.
Issue was joined on the breaches of duty alleged in this paragraph. The extent of Mr Macks’ disclosure to the Committees of Inspection was fully canvassed in the course of the hearing. The plaintiff is given permission to make the amendment sought.
Paragraph [139C] (first appearing)
I allow this amendment for the reasons given with respect to paragraph [139B].
Paragraph [139D]
[139D]In committing the conduct alleged in paragraph 139C, the Defendant was acting in a conflict of duty and interest in breach of his duties in paragraphs 56.2 to 56.7.
I grant permission to make this amendment for the same reasons that I allow permission with respect to paragraph [139B].
Paragraph [142.8B]
[142.8B]A declaration that the Defendant breached his duties under s 180(1), 181 and 182 of the Corporations Act by reason of the application of the ~~funds of Bernsteen and/or Newmore~~ moneys recovered in the course of the voluntary administrations or in the course of the liquidations of the Companies to the proceedings referred to:
142.8B.1in paragraph 118 of the Statement of Claim;
142.8B.2in paragraph 141 of the Statement of Claim,
(collectively Proceedings).
and that by reason of same, the Defendant has caused damage to the Companies within the meaning of s 1317H of the Corporations Act.
The conduct of the defendant in litigating the defined “Proceedings” was exhaustively canvassed at trial. His motives for doing so were always a major issue in the trial. I allow the plaintiff permission to make the amendment sought.