Aqwell Pty Ltd v BJC Drilling Services Pty Ltd [2007] QSC 140

[1] This is an application by the plaintiff for leave to amend its claim and statement of claim. The application is stated to be under rules 377 (Amendment of originating process) and 380 (Amendment after request for trial date) of the Uniform Civil Procedure Rules 1999, but since the plaintiff also seeks to add further parties to the proceeding rules 69 (Including, substituting or removing party) and 70 (Procedure for inclusion of party) are also relevant.

[2] The plaintiff's case, as it is framed at present, may be summarized as follows. In 2001 it sold three rotary drills used for drilling blasting-holes in open-cut mines to the defendant. The plaintiff has pleaded three agreements, the last being made on or about 30 April 2002 when the parties executed a joint venture agreement in writing. The defendant was to complete its purchase of the drills on a day nominated by it after 1 October 2004 but no later than 1 October 2007. The parties in the meantime were to operate the drills as joint venturers sharing the profits equally, the defendant having the day-to-day management of the drills. On 27 August 2002 the plaintiff elected to terminate the joint venture agreement with the defendant asserting that the defendant had breached it by failing to keep proper accounts, charging expenses not connected with the joint venture to it, and paying earnings from the drills to itself rather than to the joint venture account.

[3] These proceedings began on 16 August 2002 when the plaintiff applied to this court for an order for the appointment of receivers and managers of the joint venture. On 19 September 2002 an order was made appointing receivers. On 9 October 2003, by consent, an order was made that the receivership be terminated. On 3 March 2004 an order was made giving the plaintiff leave to file and serve a further amended statement of claim, the pleading the plaintiff now seeks to amend. (The further amended statement of claim was not filed until 22 September 2004.) On 27 May 2004 an order was made by Mullins J. that on or before 10 June 2004 the plaintiff provide security for costs in the sum of $60,000. It was not until 16 September 2005 that the security was provided by a payment into court. On 4 April 2006 a request for trial date was filed.

[4] The principal amendments proposed by the plaintiff are far-reaching. The plaintiff seeks to join four new parties: as a plaintiff Mr Peter Rogers (the 'controlling mind' of the plaintiff), and as defendants Messrs Colin Donegan, Jon Crosskill, and Brian Weber (directors of the defendant at various times who, the plaintiff alleges, controlled it at material times). Mr Donegan was a director of the defendant from 28 January 1999 to 7 November 2003, Mr Crosskill from 28 January 1999 to

21 November 2003, and Mr Weber from 28 January 1999 to 29 March 2000, from 25 October 2001 to 6 May 2004, and from 29 January 2005 to the present.

[5] The plaintiff seeks to add new claims: a claim for damages from Messrs Donegan, Crosskill, and Weber by the plaintiff and Mr Rogers for the torts of inducing breach of the agreements and interfering with the contractual relations between the plaintiff and the defendant arising from the agreements; a claim for damages from the defendant and Messrs Donegan, Crosskill, and Weber by the plaintiff and

Mr Rogers for 'breach of fiduciary obligation'; a claim for damages from the defendant and Messrs Donegan, Crosskill, and Weber by the plaintiff and

Mr Rogers for damages 'as accessories to breach of fiduciary obligations'.

[6] This application is not of course an application to strike out the proposed pleading, so I shall approach it in the way described by McGill D.C.J. in Cooper v. Dexter & Ors [2003] QDC 31. Referring to an application under rule 69(1)(b)(ii), his Honour said:

If the application were refused, the plaintiff could issue a separate proceeding against the third respondent, and therefore the practical issue becomes whether it is more convenient for this claim to be included as part of the present action or whether it should be a separate action. It is not necessary for the plaintiff to show at this stage either that he has a good cause of action against the additional defendant, or even that he has a prima facie case against the proposed party. He need only show what a plaintiff in filing a claim and statement of claim has to show, the pleading of a good cause of action against the defendant. In my opinion, where there is no issue arising about the limitation period, the plaintiff does not need to show more for the purposes of an application under r 69(1)(b)(ii), in terms of proving his case. He does need to show that the proposed defendant comes within the terms of that subrule, but the contrary was not argued by the third respondent. (para. 26)

As to rule 380, I respectfully agree with the following words of Mackenzie J. in Hassall & Ors v. Johnden Engineering Pty Ltd & Anor [2001] QSC 211; Hassall & Ors v. Speedy Gantry Hire Pty Ltd & Anor [2001] QSC 212:

Rule 380 UCPR provides that an amendment after filing of a request for trial date may only be made with leave of the court. Its terms provide for a wide discretion, the exercise of which no doubt will be influenced by the individual circumstances of the particular case without the need for closed categories of relevant factors to be identified. (para. 10)

It does not follow from the observations of either judge that an application of this kind made so late should not be examined carefully. In Kestrel Coal Pty Ltd

v. Longwall Roof Supports Ltd & Ors [2003] QSC 187 Muir J. observed:

As the joinder application requires the exercise of a discretion, the merits of the case proposed to be advanced after joinder is a relevant consideration, at least where there are significant doubts concerning its prospects of success. Here I am satisfied that the case against the fifth defendant is not so deficient that the plaintiff should not be permitted to advance it. Subject to my later observations, if when pleaded it discloses no cause of action or there is no evidence to support it, application can be brought for its summary dismissal. (para. 16)

Rule 5(3) must always be borne in mind. It provides that, in a proceeding in a court, a party impliedly undertakes to the court and to the other parties to proceed in an expeditious way. It would be contrary to the spirit of that rule for the court to permit the late introduction of issues without clearly demonstrable validity.

[7] This application was filed on 2 March 2007, and on 13 March 2007 an affidavit of Mr Rogers was filed in support of it in compliance with an order made by McMurdo J. on a supervised case list review that the plaintiff file affidavits verifying the proposed amendments and the facts that support the allegations contained in the proposed amendments. I shall refer later to parts of the affidavit.

[8] In resisting the application the defendant referred to the fact that it was made late and so long after the request for trial date had been filed. In addition, the defendant advanced a number of arguments in support of a contention that the amendments lack proper legal bases. I should mention here that I propose dealing only with the broad questions whether the new causes of action, the joinder of new parties, and other amendments should be the subject of leave. I do not think it necessary or desirable that I deal with questions properly dealt with on a striking out application or on an application for particulars. Those matters should be left for consideration, if necessary, after any reconstruction of the plaintiff's case.

[9] Messrs Donegan, Crosskill, and Weber did not appear on the hearing of the application, but an affidavit of Ms Jill Prosser, solicitor in the employ of the solicitors for the plaintiff, filed on 2 March 2007 shows that under cover of letters dated that day she forwarded copies of the application, her affidavit, and the exhibits to it to the three at addresses provided on the Australian Securities and Investments Commission database recording the details of the defendant. In doing so she was complying with an order as to notice of the proposed amendments made on 25 January 2007 by McMurdo J.

[10] The first new claim proposed by the plaintiff, the claim for damages for the torts of inducing breach of the agreements and interfering with contractual relations between the plaintiff and the defendant, cannot be sustained under the law of this country. A recent detailed analysis of that subject by Finkelstein J. may be found in Root Quality v. Root Control [2000] FCA 980; (2000) 177 A.L.R. 231. His Honour referred to the important decision of McCardie J. in Said v. Butt [1920] 3 K.B. 497 and to subsequent authority including O'Brien v. Dawson [1942] HCA 8; (1942) 66 C.L.R. 18, in which McTiernan J. summarized the law as follows:

A commits an actionable wrong against B if he procures C to break his contract with B ... But an action by the plaintiff would not lie against the company for procuring a breach of its own contract with him nor against the individual defendants on that cause of action if in terminating the agreement they were acting in pursuance of their authority as directors (Said v Butt). There is no evidence that they were not acting in pursuance of that authority. (p. 34)

In the face of these authorities it would be quite wrong for me not to apply Said v Butt. Presently, that case represents the law in this country and I will follow it. I should say that even if Said v Butt were not the authority in Australia I would still be inclined to apply this case because it appears to me to be good law. Said v Butt has been adopted in Canada (see Imperial Oil Ltd v C & G Holdings Ltd (1989) 62 DLR (4th) 261; ADGA Systems International Ltd v Valcom Ltd (1999) 39 CCEL (2d) 163 (Ont CA)); in the United States, see, for example, Golden v Anderson (1967) 64 Cal Rptr 404 at 408. (p. 263)

The principle in Said v Butt follows from the nature of corporate personality and the liability of a corporation for the acts of its agents, as his Honour explained at

p. 260. In this case the plaintiff seeks to pursue Messrs Donegan, Crosskill, and Weber as directors of the defendant. It follows that the claim is misconceived and therefore I shall not give leave for that proposed amendment.

[11] The proposed second and third new claims are on stronger ground. A joint venture arrangement that is analogous to a partnership can create fiduciary obligations: United Dominions Corporation Ltd v. Brian Pty Ltd [1985] HCA 49; (1985) 157 C.L.R. 1. The existence of a contractual relationship does not prevent the relationship imposing fiduciary obligations: Meagher, Gummow and Lehane's Equity Doctrines and Remedies (4th ed., 2002) at pp. 157-165. So far as the plaintiff seeks to add a cause of action based on a breach of fiduciary duty by the defendant as a party to the joint venture agreement I see no difficulty in principle. It is nevertheless hard to understand why the plaintiff has elected to wait as long as this to renew that claim. On 16 January 2004 Muir J. dealt with allegations of breaches of fiduciary duty in a previous version of the statement of claim and concluded that they could not be sustained. His Honour referred to Breen v. Williams (1996) 186 C.L.R. 71 as authority for the rule that under our law only proscriptive fiduciary duties are recognized. Following that ruling the plaintiff abandoned its claim based on breach of fiduciary duty but now seeks to resurrect it. Since it would appear that if that claim is to proceed it will be based on evidence of facts that would be relevant in any event on the trial of the issues as they are at present defined, I see no impediment to the plaintiff's pursuing it again, subject to its pleading the claim properly. On behalf of the defendant submissions were made concerning the pleading of the claim in the proposed amendments. I shall not deal with those contentions as this is not an application to strike out a pleading and shall confine myself to the broader question whether that claim can be resurrected. In my view, as I have indicated, it can be.

[12] What I have been discussing to this point is a claim on behalf of the plaintiff based on breach of fiduciary duty. It is also evident from the proposed amended statement of claim that the plaintiff and Mr Rogers seek to widen the issues to allege that there was a second joint venture between Mr Rogers and Messrs Donegan, Crosskill, and Weber. There is no proper basis for that allegation in my view when one examines Mr Rogers's account of his dealings with the three in his affidavit. Referring to the beginning of their association, he swears this in para. 8 of his affidavit:

I did not want to sell Drill 4 but I was attracted to the idea of having the drill rebuilt and working and earning some profits rather than the drill sitting in Aqwell's yard earning nothing, as I recognised an upturn in the coal mining industry. BJC had four permanent staff and only two drills but Aqwell had four drills but only me to manage them. Because of their experience I thought (at the time) that the staff of BJC were capable of managing and operating the drills successfully and would make reliable joint venture partners. I refused BJC's offer to purchase Drill 4 and instead proposed that BJC and Aqwell each have a half share of the ownership of the drill, operate the drill as joint venture partners, and share the expenses and profits 50-50. Messrs Donegan, Crosskill and Weber all agreed with me that we should operate Drill 4 as joint venture partners.

As I read that paragraph, which relates to the first drill, the commercial relationship was from the beginning to be by way of joint venture between plaintiff and defendant. There is nothing in the latter part of the affidavit that contradicts that analysis of the events. It therefore follows that there is no proper basis for the joinder of Mr Rogers as a plaintiff and the defendant should not be troubled with dealing with a false issue.

[13] The question then arises whether there any proper basis for the joinder of

Messrs Donegan, Crosskill, and Weber as defendants in a claim against them as accessories to a breach of fiduciary duty by the defendant. On behalf of the plaintiff it was argued that they could be liable as accessories on the principles described as the second limb of the rule in Barnes v. Addy [1874] UKLawRpCh 20; (1874) L.R. 9 Ch. App. 244. I see no difficulty in principle in the plaintiff's pursuing that claim despite the arguments advanced on behalf of the defendant, which concerned chiefly the way in which that liability had been pleaded. Once again, I am not concerned with the details of pleading but rather with the broader question whether such a claim can be made. I should add that it was not argued for the defendant that the principles that apply in relation to the first claim apply to the accessorial liability of directors based on the second limb in Barnes v. Addy and so I shall not consider that question.

[14] I should record that no argument was advanced on behalf of the defendant that the proposed new claims are statute-barred, although on behalf of the defendant its counsel made it clear that it reserved the right to plead the expiration of a limitation period: see the discussion I initiated recorded at pp. 59-61 of the transcript.

[15] I can summarize my conclusions to this point as follows. I shall not grant leave for the joinder of Mr Rogers. I shall not grant leave to the plaintiff to amend its statement of claim by adding a claim for damages for inducing breach of the agreements and interfering with the contractual relations between it and the defendant arising from the agreements. I shall allow the statement of claim to be amended to add a claim in respect of breach by the defendant of fiduciary obligations and a claim against Messrs Donegan, Crosskill, and Weber as accessories to breach of fiduciary obligations by the defendant. The three must then be joined as defendants.

[16] The plaintiff seeks to add a new para. 56 which pleads a reduction of its joint venture profits arising from the appointment of the receivers of the joint venture with the defendant which in turn, the plaintiff alleges, was '[a]s a result of' breaches of the agreements by the defendant. On behalf of the plaintiff it was submitted that even if the plaintiff has no case for an award of damages in its common law claim under this head it has a case for it as part of an award of equitable compensation. While there may be inadequacies in the plaintiff's pleading of this aspect of its case - as on behalf of the defendant it was submitted there were - I am persuaded that the plaintiff should be permitted to proceed with it.

[17] The plaintiff seeks to amend an allegation in para. 48 of its statement of claim that had the defendant performed its contractual obligations to the plaintiff it would have exercised its rights to purchase the plaintiff's residual interests in the drills 'on approximately 1 October 2004' to an allegation that that event would have happened 'between 1 October 2004 and 1 October 2007'. There is a consequential amendment sought to para. 49. The defendant, in para. 24(a)(i) of its second further amended defence and counter-claim filed on 31 October 2005 admitted that it would have exercised its rights as pleaded, an admission adopted in the plaintiff's reply and answer. In Mr Rogers's affidavit he gives as an explanation for the proposed amendment that the current version of the statement of claim was prepared in early 2004 in expectation of a trial's taking place in 2004. Although the further amended statement of claim is dated 2 March 2004 it was not filed until 22 September 2005, when it appears the plaintiff was content to leave paras 48 and 49 unamended.

Mr Rogers says that the amendments 'need to take into account the fact that the agreement entered into in April 2002 allowed for the fact that BJC might not exercise its option to purchase Aqwell's remaining 50% interest until

1 October 2007' (para. 31). There was no issue until this year as to the likely date of the defendant's completion of the purchases, but since the pleaded agreement provided for the defendant's right to purchase the plaintiff's residual interests in the drills after 1 October 2004 but no later than 1 October 2007 the plaintiff should be permitted to introduce the issue raised by the proposed amendment. Mr Rogers swore in para. 14 of his affidavit to a conversation with an unnamed officer of the defendant at an unspecified time to the effect that the defendant might not be in a position to complete the purchases by 1 October 2004. That evidence was objected to on grounds that I must uphold, but in my view the plaintiff can fall back upon the pleaded agreement itself on this issue. It was pointed out on behalf of the defendant that it was conceded on behalf of the plaintiff by its counsel at the hearing before Mullins J. on 27 May 2004 that it was common ground that the property in the drills had passed to the defendant by then, but, as was pointed out to her Honour, the plaintiff's claim is for damages constituted in part by loss of income. The plaintiff will therefore have leave to make the proposed amendments to paras 48 and 49.

[18] The plaintiff seeks amendments to para. 53 of the statement of claim, which amendments are not correctly indicated in the proposed amended version of the statement of claim. It is not clear what the purpose of those amendments is, and there is nothing in Mr Rogers's affidavit that throws any light upon them. I am not persuaded that they should be permitted.

[19] There are certain incidental amendments to para. 3 of the proposed statement of claim concerning Mr Rogers's status. It would appear to me they are now unnecessary in view of my decision concerning the joinder of Mr Rogers.

[20] I shall invite further submissions on the form of the order to be made and costs.