Walker v Verus Global Pty Ltd

[2021] VCC 1027

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION

 Revised
Not Restricted
Suitable for Publication

General List

Case No. CI-21-00060

ANDREW DAVID WALKER	Plaintiff
v
VERUS GLOBAL PTY LTD (ACN 628 779 359)	First Defendant
VERUS GLOBAL HOLDINGS PTY LTD (ACN 628 770 377)	Second Defendant

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JUDICIAL OFFICER:	Judicial Registrar Muller
WHERE HELD:	Melbourne
DATE OF HEARING:	26 July 2021
DATE OF RULING:	29 July 2021
CASE MAY BE CITED AS:	Walker v Verus Global Pty Ltd & Anor
MEDIUM NEUTRAL CITATION:	[2021] VCC 1027

RULING
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Subject:PLEADINGS — LEAVE TO AMEND

Catchwords: Leave to file counterclaim — whether County Court can allow an amended pleading to be filed which falls outside of the jurisdiction of the Court — whether s 27 of Courts (Case Transfer) Act 1991 (Vic) is applicable

Legislation Cited:      Supreme Court Act 1958 (Vic); Corporations Act 2001 (Cth); Courts (Case Transfer) Act 1991 (Vic)

Cases Cited:Pascoe Ltd (in liq) v Lucas 27 ACSR 737; ADAZ Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201; ASIC v Cassimatis 336 ALR 209; Smith & Anor v J Z Lee Interiors Pty Ltd [2015] VSCA 203

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	R Moore	KCL Law
For the Defendants	J Tomlinson	SBA Law

JUDICIAL REGISTRAR:

1This proceeding concerns a number of loans made between the plaintiff and the first defendant. The plaintiff initiated the proceedings in January 2021 seeking repayment of the loans and interest under the loan agreements or pursuant to s 58 and/or s 60 of the Supreme Court Act 1958 (Vic).

2At the time the money was advanced to the defendants, the plaintiff was a director of the first and second defendants and a director of Walker Trusco Pty Ltd (ACN 059 540 420), the Trustee of the Walker Family Trust.

3The plaintiff alleges that it was an implied term of each of the loans that the loans were repayable by the first defendant on demand. Interest payments were also to be made monthly for each loan from the date of the advance. The plaintiff claims that despite demand the loans have not been repaid.

4The defendants filed their defence on 25 February 2021. No counterclaim was filed at this time.

5The defendants allege that a “Master Loan Agreement” was entered into between Verus Singapore, of which the plaintiff was a director, and Trident Capital Limited, of which the plaintiff is the sole director and shareholder. The Master Loan Agreement is said to establish the loan term as the period commencing on the Drawdown Date of each respective advance and ending 7 years later. Therefore, the defendants contend that the loans have not yet fallen due.

6The plaintiff was removed as a director of the defendants in December 2020.

7Upon filing the matter was entered into the Expedited Cases List of the Commercial Division and in accordance with the practice of that list, fixed for trial on 2 August 2021.

8In accordance with the practice of the Commercial Division this matter was listed for a pre-trial directions hearing before me on 19 July 2021.

9Prior to the pre-trial directions hearing, both parties had completed the required pre-trial information form. These forms disclosed that subject to minor matters to be resolved at the pre-trial directions hearing, the parties were of the joint view that the matter was ready for trial.

10However, shortly before the scheduled commencement of the pre-trial directions hearing, the defendants filed and served detailed submissions in support of an unmade, and (until that moment) unforeshadowed, application to adjourn the trial and to be given leave to file and serve an amended defence and counterclaim. The submissions were not supported by an affidavit, nor was a draft pleading provided.

11The effect of a counterclaim in the form foreshadowed was said to be to remove the proceeding from this Court for want of jurisdiction in respect of potential claims made under the Corporations Act 2001 which can only be heard by a “Capital C” Court. Both parties and the Court were aware of this jurisdictional issue and counsel for the defendants proposed that if leave was granted it would then trigger the requirement for a transfer of the matter to the Supreme Court pursuant to s 27 of the Courts (Case Transfer) Act.[1]

[1] 1991 (Vic).

12In these unsatisfactory circumstances, and in the understandable absence of consent from the plaintiff, I was not prepared to do more than confirm the trial date, modify the timing for orders to do with the Court Book, and order a time for the defendants to provide a proposed pleading to the plaintiff.

13I noted that if a proposed pleading was not provided, it was expected that the matter will proceed to trial on the scheduled date.

14I then adjourned the pre-trial directions hearing to Monday 26 July 2021 and ordered that the parties be ready to address the Court at that time on:

(a)   whether leave should be given to the defendants to file and serve any amended defence and counterclaim (including on any issues of prejudice); and

(b)   the further orders that would be necessary if leave is given.

15In due course the defendants prepared a proposed amended defence and a proposed counterclaim (in the form exhibited to an affidavit from a solicitor for the defendants.[2] They also filed detailed submissions in support of being granted leave to make the proposed amendments.

[2] Affidavit of Rachel Midtgaard affirmed 23 July 2021.

16Counsel for the plaintiff did not oppose the proposed amendments save for those pertaining to allegations brought under the Corporations Act in excess of the jurisdiction of this Court. The objection to those parts of the pleading was that because the plaintiff was, at the relevant time, the ultimate shareholder of the defendants, the proposed amendments were futile and ought not be allowed on that basis. Counsel conceded that pleading was not otherwise offensive.

17It was submitted that the evidence of a number of company searches exhibited to the affidavit of David Stuart Brown established this fact. I note that while that would appear to be true at the relevant time, the plaintiff is no longer said to be the ultimate shareholder.

18Counsel for the plaintiff submitted that the decision of Debelle J in Pascoe Ltd (in liq) v Lucas[3] (Pascoe) stands for the proposition that where a company is solvent and the directors act at the behest and direction of the shareholders who are unanimous in their wishes and act intra vires and in good faith, the directors are not liable to the company.[4]

[3] 27 ACSR 737

[4] Pascoe at 768. See also ADAZ Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201 at [153] for a recent conclusion of the Victorian Court of Appeal along the same lines.

19That proposition is not an unqualified one. It may not apply where the effect of the transaction is detrimental to creditors. Further, as was submitted by counsel for the defendants, acquiescence by the shareholders does not eliminate or relieve the duty where there are other relevant interests of the corporation apart from the interests of the shareholders.[5] Nor would it automatically apply to allegations of breach of statutory duty in s 180(1) of the Corporations Act.[6]  The proposed counterclaim alleges a breach of s 180 and that is most likely a sufficient basis to doubt that the proposed amendments are futile.

[5]         ASIC v Cassimatis 336 ALR 209 at [523]-[525]

[6] Ibid at [507]-[508], [522]

20Accordingly, in the presence of such doubt, I would not find that the proposed amendments would be futile and subject to what is set out below, I would have allowed the proposed amendments. However, there are three factors which preclude me from so doing.

21First, counsel for the plaintiff raised the decision of the Victorian Court of Appeal in Smith & Anor v J Z Lee Interiors Pty Ltd,[7] in which the Court of Appeal held that it is inappropriate for this court to grant leave to amend a statement of claim to include a number of causes of action that the County Court is not competent to hear.[8] In the final sentence of that paragraph, the Court of Appeal expressly incorporated pleadings beyond a statement of claim, saying that “a pleading that includes allegations that cannot be entertained should not be permitted to go forward”.

[7] [2015] VSCA 203

[8] Ibid at [40]

22Second, the Court of Appeal held that in matters of case management, and the resolution of interlocutory disputes, should, as a matter of basic principle, be dealt with within the Court which is to hear the proceeding.[9]

[9] Ibid at [39]

23Following the Court of Appeal, as I am bound to do, means that I should not permit the amendments in respect of the Corporations Act allegations as to do so would be to allow a pleading that includes allegations that the County Court is not competent to hear. If the proceeding is ultimately transferred to the Supreme Court then the question of whether that claim is futile should be determine by the Supreme Court.

24Thirdly, to decide whether or not the proposed amendments are futile would be to stray outside the jurisdiction of this Court because it requires me to examine the merits of the defendants’ case which requires examination and determination (albeit on a summary basis) of matters which this Court does not have jurisdiction. It may well be different if the objection to the pleadings was on grounds that could be determined solely by looking at the pleadings without regard to other factors, but that is not the case here. In any event, following Pascoe, I should leave that question to be determined by the Supreme Court.

25Finally, for completeness, I will very briefly address two other points.

26First, I accept the defendants’ submissions that, even allowing for the proximity to trial, it is appropriate to grant leave to file and serve an amended defence and counterclaim (other than in respect of the Corporations Act allegations). The plaintiff did not submit that it would be inappropriate to allow leave on that basis.

27Second, while it is not necessary for me to decide, I doubt that s 27 of the Courts (Case Transfer) Act is applicable in this situation as it contemplates a process where a counterclaim is filed which exceeds the jurisdiction of the County Court and that the plaintiff does not consent to the County Court having jurisdiction.

28Section 27 has remained unamended since the introduction of the Act in 1991. At that time, the County Court did not have unlimited monetary jurisdiction, but the parties could consent to the Court hearing and determining a matter irrespective of the value of the relief sought. However, there is no provision which would permit the County Court to hear a “Capital C” matter, and thus no basis upon which the plaintiff could give or withhold consent. It would seem now that there will be very few circumstances where s 27 is applicable to proceedings initiated in the County Court.[10]

[10] It remains applicable to proceedings issued in the Magistrates’ Court.

29Accordingly, I will grant the defendants leave to file and serve an amended defence and counterclaim in the form contained in exhibit RHM-4 to the affidavit of Rachel Hanna Midtgaard dated 23 July 2021, save for paragraphs 47(a), 50(a), 51 and 52 and paragraphs A, B and C of the prayer for relief.

30I will direct counsel for the parties to confer and provide by 12 noon tomorrow, if possible by consent, proposed orders for the further conduct of the matter, including what should now be done with the trial scheduled to commence next Monday and as to costs.

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Certificate

I certify that these 6 pages are a true copy of the reasons for ruling of Judicial Registrar Muller, delivered on 29 July 2021.

Dated: 29 July 2021

Julia Despard

Associate to Judicial Registrar Muller