Westerman v Njamal Mining Pty Ltd

[2018] WASC 403

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   WESTERMAN -v- NJAMAL MINING PTY LTD [2018] WASC 403

CORAM:   MASTER SANDERSON

HEARD:   4 DECEMBER 2018

DELIVERED          :   20 DECEMBER 2018

PUBLISHED           :   14 JANUARY 2019

FILE NO/S:   CIV 1675 of 2018

BETWEEN:   SHARON WESTERMAN

Plaintiff

AND

NJAMAL MINING PTY LTD

First Defendant

NJAMAL SERVICES PTY LTD

Second Defendant

INDIGENOUS SERVICES PTY LTD

Third Defendant

RODNEY CHARLES CARTER

Fourth Defendant

GREGORY BRIAN PARKER

Fifth Defendant

Catchwords:

Practice and procedure - Application by the defendants for summary judgment and for security for costs - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)

Result:

Part of re-amended statement of claim struck out
Summary judgment application adjourned sine die
Security for costs adjourned sine die

Category:    B

Representation:

Counsel:

Plaintiff	:	Mr C Stokes
First Defendant	:	Mr K L Christensen
Second Defendant	:	Mr K L Christensen
Third Defendant	:	Mr K L Christensen
Fourth Defendant	:	Mr K L Christensen
Fifth Defendant	:	Mr K L Christensen

Solicitors:

Plaintiff	:	Chris Stokes & Associates
First Defendant	:	CX Law
Second Defendant	:	CX Law
Third Defendant	:	CX Law
Fourth Defendant	:	CX Law
Fifth Defendant	:	CX Law

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

Nil

MASTER SANDERSON:

1. This was the defendants' application for summary judgment or, in the alternative, an application to strike out certain paragraphs of the re‑amended statement of claim and for security for costs.  The defendants required leave to bring the application and although the point was not conceded by the plaintiff, no detailed submissions in opposition to that aspect of the application were made.  In the circumstances I am satisfied the extension of time ought be granted.  I note that the re‑amended statement of claim was filed on 5 July 2018 and the application for summary judgment was filed on 26 July 2018.  The limited extent of the delay, given amendments were made to the statement of claim, is a significant factor in granting the application for an extension of time.

2. In an application for summary judgment by a defendant, the plaintiff is confined to claims actually raised in a statement of claim.  Of course, any dispute of fact must be assumed to fall in favour of the plaintiff.  But unlike an application made under O 14 a plaintiff cannot in an application made under O 16 go beyond the pleaded case.  If affidavit material is lodged which goes beyond the pleaded case and indicates the plaintiff may have a cause of action then it may be appropriate to strike out the offending paragraphs and give the plaintiff leave to re‑plead.  The defendants' chamber summons reflects that approach.

3. Turning then to the re‑amended statement of claim, it is pleaded the first defendant carried on a business of mining labour and equipment hire, mining site operations management and other mining site services.  The third defendant is the sole shareholder of the first defendant.  Between 31 August 2015 and 1 June 2016, Simon Coad was the sole director.  As of 1 June 2016 the fifth defendant and Mark Walker were the sole directors.  The second defendant is in the same business.  It too had as its sole shareholder the third defendant.  The directors of the second defendant are the fifth defendant, Travis Wayne McPhee and Andrew Lloyd White.[1]

   [1] Re‑amended statement of claim filed 5 July 2018 [2], [3].

4. The third defendant carried on the same business.  In addition it was the corporate trustee of the Njamal People's Trust (the Trust) as of 12 May 2016.  It is pleaded the third defendant held its share in the first defendant in its capacity as trustee of the Trust.  The directors of the third defendant were the fourth defendant and Wesley John Aird.  It follows from above the fourth defendant was as of 23 February 2016 the sole shareholder of the third defendant and was as of 24 June 2016 a director of the third defendant.  The fifth defendant was, as of 1 June 2016, a director of the first defendant and, as of 9 September 2016, a director of the second defendant.[2]

   [2] Re‑amended statement of claim filed 5 July 2018 [3] ‑ [6].

5. By par 7 of the re‑amended statement of claim it is pleaded that on or about 25 September 2013 the plaintiff entered into a written Executive Services Agreement (the employment contract).  The plaintiff was employed in the position of managing director of the first defendant.  Certain terms and conditions of that appointment are pleaded in par 8.  Importantly for present purposes, it is pleaded that employment contract included an 'Incentive Payment' equal to 10% of the first defendant's gross profits derived from any joint venture project which the plaintiff was directly responsible for securing.

6. Paragraphs 9 through to 19 deal with allegations the plaintiff's employment contract was terminated or, perhaps more accurately, that the contract was repudiated.  The plaintiff says as a consequence she has suffered loss and damage and those losses are quantified in par 19.  No complaint is made as to those paragraphs and that aspect of the claim will need to be determined by trial of the action.  That is also the case with incentive payments which the plaintiff says accrued during the course of her employment with the first defendant.

7. By par 23 the plaintiff pleads the second, third, fourth and fifth defendants have diverted business opportunities away from the first defendant in favour of the second defendant with the intent to avoid making incentive payments to the plaintiff.  This, it is said, amounts to a conspiracy and the plea of conspiracy is found in pars 24 through to 31 of the re‑amended statement of claim.  These paragraphs which were in the main added by the amendment made on 5 July 2018 require careful consideration.

8. By par 24 it is pleaded that at all material times the first defendant was the trading entity of the Trust and all profits received from any trading operation were to be paid to the Trust.  Clearly that is correct.  By par 25 it is pleaded the fourth defendant as the sole shareholder of the third defendant and a director of the third defendant 'owed the first defendant in equity as a fiduciary' the duties then set out in par 26. 

9. Paragraph 26 has two subparagraphs.  In fact it is only par 26(a) which sets out an alleged duty.  Subparagraph (b) deals with a breach of this alleged duty.  By par 26(a) it is said the fourth defendant:

   Had the duty to exercise his powers and discharge his duties as the sole shareholder of the third defendant (which was in turn the sole shareholder of the first defendant) in the best interests of the first defendant.

10. As a matter of law that cannot be right.  Shareholders of a corporation do not owe duties fiduciary or otherwise to other corporations.  Furthermore a shareholder does not actually have any 'duties'.  A shareholder has certain rights including the right to appoint or participate in the appointment of directors.  But there is no fiduciary obligation and indeed no common law duty to exercise rights as a shareholder in a particular way.  Given that no duty exists the alleged breach of that duty in par 26(b) cannot stand.

11. In par 27 the allegation is made that the fifth defendant as a director of the first defendant owed the first defendant certain fiduciary duties. Reference is made to s 181 and 182 of the Corporations Act 2001 (Cth). That is a proper plea. So is the plea found in par 28(a) to the effect the fifth defendant had a duty to exercise his powers and discharge his duties as a director the first defendant in good faith and in the best interest of the first defendant. In par 28(b) it is alleged the fifth defendant, by causing the incorporation of the second defendant with the intent the second defendant would take up commercial opportunities which would otherwise be taken up by the first defendant, acted in breach of his fiduciary duties. On the face of it at least, that plea is arguable.

12. Paragraph 29 appears to repeat and expand upon par 28.  Although it is in its form inelegant and probably adds nothing to the claim overall it is not in its terms objectionable.

13. It is difficult to know what to make of par 30.  It alleges that actions pleaded in pars 26(b), 28(b) and 29(b) 'were done by the fourth defendant and/or the fifth defendant with the sole or predominant purpose of causing injury to the plaintiff'.  Particulars are then provided.  At the very least these particulars look like material facts or perhaps a mixture of evidence and material facts.  They are material facts to the extent that if proved they might go some way to establish the plaintiff's claim for conspiracy.  But at present the elements of the tort of conspiracy are not present in the pleading.

14. Taking a step back from the pleading and looking at the evidence relied on by the parties the position adopted by the plaintiff can be summarised in this way.  The plaintiff says the fourth defendant breached the duties he owed to the first defendant and the fifth defendant breached duties to the first defendant in his capacity as a director of the first defendant.  The fourth and fifth defendants caused the second defendant to be incorporated.  It is alleged this was done in order to direct opportunities from the first defendant to the second defendant.  The plaintiff says the predominant purpose  of the incorporation of the second defendant were to cause injury to the plaintiff.  As a result, the plaintiff has suffered loss and damage for which all of the defendants are jointly liable.  Really the incorporation of the second defendant was designed to ensure when business was diverted from the first defendant to the second defendant the plaintiff would not receive incentive payments.

15. In his written submissions counsel for the defendants points out the plaintiff fails to plead the first defendant does not otherwise have the financial means to pay her any amount which may be owing to her or that the first defendant would not have made any profit.[3]  With respect, even if there is such an omission, it is implicit in the pleading.  If necessary a further amendment can cure the defect.

    [3] Defendants submissions filed 6 September 2018 [8].

16. The defendants do not dispute the second defendant was incorporated and used for the operating activities on behalf of the Trust.  They say however the incorporation of Njamal Services took place after the termination of the plaintiff's employment.  Accordingly the plaintiff was not entitled to any incentive payments which would have accrued by any new or renewed opportunities which occurred after her termination.  Furthermore, it is said the incorporation of the second defendant was undertaken for good and proper business purposes and had nothing to do with an attempt to defeat any rights to incentive payments the plaintiff may have had.

17. As presently framed, I am not satisfied the plaintiff's pleading discloses a cause of action.  The basic elements of a conspiracy are missing.  In fact after introducing the conspiracy claim it is difficult to see what material facts are pleaded to advance that cause of action.  Furthermore, it is difficult to see how the plaintiff can allege she was a victim of a conspiracy when the incorporation of the second defendant took place after the termination of her employment with the first defendant.  Properly viewed, it may be the case the first defendant's claim is encompassed by the contract claim.  If the plaintiff is able to establish her employment was wrongfully terminated then damages will flow.  If, in claiming damages, the plaintiff is able to establish the first defendant would have received the benefit of certain contracts which were diverted to the second defendant, and if she was able to establish this was done with the intent to avoid a damages payment, then she may have a cause of action.  But the way the matter is pleaded at the moment does not really link any allegations of misconduct on the part of the second to fifth defendants with the damage suffered by the plaintiff.

18. In my view the proper course here is to strike out pars 24 to 33 of the re‑amended statement of claim and allow the plaintiff to re‑plead.  At present I would not dismiss the defendants' summary judgment application.  It may be when the matter is re‑pleaded the application for summary judgment can be reviewed.  But at present I am not satisfied the pleading is sufficiently clear to allow identification of the plaintiff's claimed cause of action and a determination that claim is not arguable.

Security for costs application

1. The security for costs application will also be adjourned pending delivery of a further re‑amended statement of claim.

2. On publication of these reasons I will give the parties the opportunity to make submissions as to the timeframe for the delivery of a further re‑amended statement of claim and on the question of costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

DG
Associate to Master Sanderson

14 JANUARY 2019