Cohen v The State of Victoria

Supreme Court of NSW|2018-11-27|Before: Rees J

Solicitors: Squire Patton Boggs - Plaintiff Mills Oakley - First and Third Defendants File Number(s): 2017/3883652018/103221

Judgment

HER HONOUR: This is an argument about particulars, and whether a party should be allowed to amend a defence to include an inadequately particularised defence on the proviso that particulars are provided at a later stage in the proceedings.
The plaintiff (the Company) brings two proceedings against its former directors and auditors, the proceedings having been commenced in 2017 and 2018 respectively. The Company is subject to a Deed of Company Arrangement. The first defendant in each of these proceedings, former director Mr Elias, has filed a motion in each proceeding seeking leave to amend his defence. The Company does not oppose the filing of an amended defence by reason of case management considerations, but simply because the proposed amendments are so devoid of detail that it is said that the amendments should not be allowed at this stage. Mr Elias also seeks an order that the Company provide further particulars of its claim in the 2018 proceedings, whilst the Company defends the adequacy of its particulars.

Substantive proceedings

At the time of the events which are the subject of these proceedings, the Company was known as Chameleon Mining NL and was a publicly listed company engaged in mineral exploration and investment in mining tenements. Mr Elias was a director of the company. Anthony Karam was the managing director. Anthony Sage, Paul Kelly and James Arkoudis were also directors.
In the 2017 proceedings, the Company sues Mr Elias, Mr Karam and Mr Arkoudis in respect of inter alia alleged breaches of directors' duties by causing the Company to: 1. enter into employment agreements with Mr Elias, Mr Karam and another former director Mr Hassan in 2009 and with Mr Arkoudis in 2011; 2. pay bonuses under the employment agreements in December 2011 and February 2012 to Messrs Elias, Karam, Hassan and Arkoudis or companies associated with them; 3. amend the employment agreements with Mr Karam and Mr Arkoudis on 20 January 2012 to provide for termination payments; and 4. make termination payments on 28 February 2012 to Mr Karam and Mr Arkoudis.
In the 2018 proceedings, the Company sues Mr Elias and three other officeholders (Mr Sage, Mr Kelly and former secretary Ms Coppin) as well as the Company's auditors. The claim against the former directors concerns inter alia alleged breaches of directors' duties by causing the Company to: 1. acquire an interest in a joint venture in March 2012 to exploit manganese tenements in Kupang, West Timor, Indonesia, with the interest to be acquired by purchasing the share capital of NTT Manganese Pty Ltd; 2. enter into a Share Sale and Purchase Agreement in April 2012 to purchase the share capital of NTT Manganese Pty Ltd for some $10 million; and 3. pay $10 million under the Share Sale and Purchase Agreement, without undertaking due diligence in relation to the joint venture, or ensuring that the Company's interest in the joint venture was secured. If due diligence had been done, it is said that the Company would not have entered into the Share Sale and Purchase Agreement nor paid the monies under that agreement as well as further monies invested in the joint venture.
Further, in November 2012, the Company entered into a term sheet with PT Teguh Perkasa Utama (TPU) to acquire TPU's shares in PT Tanjung Mas and thus acquire a production licence to export the manganese from the joint venture. The price was $3 million plus 20 million shares in the Company. It is alleged in the 2018 proceedings that Mr Elias, Mr Sage and Mr Kelly breached their director's duties by causing the Company to enter into the term sheet without undertaking due diligence and, if due diligence had been done, it is said that the term sheet would not have been entered into and further monies would not have been invested in the joint venture.

Procedural history

On 1 June 2018, a statement of claim was filed in both proceedings. On 13 July 2018, Mr Elias filed his defence in both proceedings. He was able to do so without the further and better particulars which he now seeks of the Company's claim in the 2018 proceedings.
On 23 July 2018, Mr Elias briefed senior counsel to review his defence. On 17 August 2018, Mr Elias proposed orders which envisaged him filing an amended defence, and the Company's solicitors were amenable to agreeing a timetable for filing such defences without the need for orders. On 20 August 2018, the court made orders for the Company to serve its lay evidence by 2 October 2018.
On 31 August 2018, Mr Elias' solicitors served a proposed amended defence in both proceedings. I note in passing that the statement of claim filed in the 2017 proceedings was 20 pages in length and, in the 2018 proceedings, 28 pages in length. Mr Elias' proposed amended defence is a remarkably short six pages in each proceeding. Whilst a "page count" is not a substantive answer to either parties' contentions as to the adequacy of particulars, it does indicate the paucity of detail contained in the proposed amended defences. Two elements of Mr Elias' proposed amended defences are in issue. 1. The first is an inclusion of a defence in both proceedings under the "business judgment rule" in section 180(2) of the Corporations Act 2001 (Cth). 2. The second is the inclusion of a proportionate liability defence under Part 4 of the Civil Liability Act 2002 (NSW) in the 2018 proceedings, at least insofar as it identifies concurrent wrongdoers who are not already parties to the 2018 proceedings.
On 13 September 2018, the Company's solicitors requested further particulars of the proposed defences so that it could provide its informed consent, or otherwise, to the proposed amendments. Further particulars of the "business judgment rule" defence were sought as to: 1. the steps Mr Elias took to inform himself of the subject matter of the judgements in issue; and 2. the basis on which Mr Elias believed that the judgments in issue were made in the best interests of the company. The Company also sought further information as to the basis of the proportionate liability defences.
On 21 September 2018, Mr Elias responded that the request for particulars of the "business judgment rule" defence was a request for evidence and that he was unable to provide particulars as the paragraphs of the statement of claim to which the defence was directed were not properly particularised as to precisely what Mr Elias did or did not do or ought to have done. In the absence of proper particularity, Mr Elias could not provide the details sought. In the 2018 proceedings, Mr Elias added: In the meantime, the best details that he can give are that insofar as it is established that he ought to have taken further steps in relation to the Impugned Transactions, he relied upon others who he understood to be better qualified and to be carrying out those steps.
In any event, Mr Elias said the proposed "business judgment rule" defence was generally consistent with his existing defences pleaded pursuant to sections 1317S and 1318 of the Corporations Act 2001 (Cth). Those provisions provide that the court may relieve a person who is otherwise liable for negligence, default or breach of trust or duty if the person has acted honestly and ought fairly to be excused for their breach or default. That is not entirely the same thing, it seems to me, as the proposed "business judgment rule" defence seeks to assert a positive case, presently devoid of any detail, that Mr Elias in fact discharged his duties as a director in some way. In respect of the proportionate liability defence, Mr Elias replied that, so long as Mr Karam, Mr Bontempo and Mr Arkoudis were directors, they each owed the same duties as Mr Elias and, if Mr Elias is found to have breached those duties, they breached in the same way during the period that they were directors. Further, Mr Elias explained that Mr Arkoudis and Mr Youds provided consultancy services to the Company (in Mr Arkoudis' case, through Advisor Business Services Group Pty Ltd) in relation to the transactions. Mr Elias said that he was not in possession of the relevant records but the Company should have them. Mr Elias proposed to provide further particulars following the service of evidence, discovery and subpoenas. The Company replied that there was no lack of particularity in respect of the statement of claim and, even if there was, it was no answer to the lack of particularity of the "business judgment rule" defence. The Company advised that it did not consent to leave to amend in the circumstances.
On 4 October 2018, the Company served its lay evidence. I was told that the Company's evidence was an affidavit from the deed administrator essentially exhibiting documentary material comprising some twelve or thirteen volumes of material. The Company is due to serve its expert evidence by 7 December 2018, which is expected to address the auditors' alleged negligence. There is no suggestion that the Company cannot put on this evidence notwithstanding a non-particularised defence, although this is not particularly surprising where the Company's case against Mr Elias is documentary.
On 8 October 2018, the Company provided further and better particulars of paragraphs 55, 58, 59, 60, 78, 79, 100.5 and 103 of the statement of claim in the 2018 proceedings. The Company's particulars amount to five pages which I note is almost as long as Mr Elias' entire defence. Mr Elias complains that the further and better particulars are inadequate and this inadequacy is said to explain the bald nature of the proposed "business judgment rule" defence. The Company submits that it has provided all particulars of its claim as it is able to give and these are sufficient for Mr Elias to understand the case he is required to meet.

Obligation to provide particulars under Uniform Civil Procedure Rules

The purpose of particulars is a practical one: to enable the parties to litigation to prepare for trial in an organised and cost effective way having regard to the factual and legal issues which will be the subject of that trial. Properly particularised pleadings enable the parties' legal representatives to prepare, sooner rather than later, to meet those factual and legal issues by obtaining instructions, undertaking investigations, using the processes of the court to obtain documents and witnesses, retain experts and advise clients on their legal position so that clients can resolve their disputes before the trial if appropriate. To this end, Rule 14.14 of the Uniform Civil Procedure Rules 2005 (UCPR) requires the parties to "plead specifically any matter that, if not pleaded specifically, may take the other parties by surprise". Rule 15.1(1) of UCPR provides: … a pleading must give such particulars of any claim, defence or other matter pleaded by the party as are necessary to enable the opposite party to identify the case that the pleading requires him or her to meet.
Rule 15.4(1) UCPR provides: A pleading that alleges any condition of mind must give particulars of the facts on which the party pleading relies where "condition of mind" does not include knowledge: rule 15.4(2), UCPR.
Whilst there are many cases on the subject of particulars, a useful summary of the function of particulars in litigation is provided by Crawford J of the Supreme Court of Tasmania in McCormick v Colonial Mutual General Insurance Co Ltd (1995) 8 ANZ Ins Cas 61-262 at 75,940: 1. Particulars fulfil an important function in the conduct of litigation. They define the issues to be tried and enable the parties to know what evidence it will be necessary to have available and to avoid taking up time with questions that are not in dispute. On the one hand they prevent the injustice that may occur when a party is taken by surprise; on the other hand they save expense by keeping the conduct of the case within due bounds. Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 at 219; Esso Petroleum Co Ltd v Southport Corporation [1956] AC 218 at 241; Spedding v Fitzpatrick (1888) 38 Ch D 410 at 413. 2. It is a fundamental principle that a party should always be fairly apprised of the nature of the case that party is called upon to meet, shall be placed in possession of its broad outlines and the constitutive facts which the other party will rely on to establish or defend the case. A party is entitled to receive sufficient information to ensure a fair trial and to guard against what the law terms "surprise" although there is no entitlement to be told the mode by which the case is to be proved by the other party. R v Associated Northern Collieries (1910) 11 CLR 738 at 740. … 7. It is a matter for the court in the exercise of its discretion to determine what degree of particularity is appropriate in each case.
The Court may refuse leave to amend where the proposed amendments are defective or raise an unparticularised case: Tamaya Resources Ltd (In Liq) v Campbell-Wilson (2016) 332 ALR 199; [2016] FCAFC 2 at [194]-[204].

Are the particulars of the statement of claim adequate?

Mr Elias submits the particulars of the 2018 statement of claim were deficient in three respects. First, it is pleaded that Mr Elias (and others) caused the Company to enter into the Share Sale and Purchase Agreement and pay $10 million as a consequence; Mr Elias should first have undertaken sufficient due diligence to ascertain the risks and likely returns of the joint venture, and satisfied himself that the returns justified the risks; and Mr Elias failed to cause the Company to undertake any, or any sufficient, due diligence before entry into the Share Sale and Purchase Agreement. The following particulars of breach are given in the statement of claim: In breach of their Duty of care, each of Mr Elias, Mr Sage and Mr Kelly failed, prior to entry in the SSPA to cause the Company to undertake any, or any sufficient, due diligence in relation to the Kupang Joint Venture. PARTICULARS (i) No due diligence was undertaken with respect to the sovereign risk associated with the Kupang Joint Venture. (ii) No, or insufficient, due diligence was undertaken with respect to the potential for exploitation of manganese from the licence areas covered by the Kupang Joint Venture. (iii) No independent advice was obtained from an expert geologist or other suitable expert in relation to the manganese resources contained the licence areas covered by the Kupang Joint Venture. (iv) No financial projections were prepared or tested in relation to the expected revenue to be earned from Kupang Joint Venture. (v) It was not identified that NTT Manganese's true economic interest in the future revenues from the Kupang Joint Venture were only 27.5% rather than 55% for the reasons identified above. (vi) No assessment was made of whether the $10 million price justified the risks associated with the Kupang Joint Venture having regard to the potential returns. (vii) While a large portion of documentation was provided to the Company on or about 16 March 2012 in relation to the Kupang Joint Venture, no assessment was made of that documentation or any further use made of it. (viii) Further particulars may be provided following discovery and evidence.
Further particulars were provided on 8 October 2018 as follows: 1(a) The plaintiff contends that sufficient due diligence would have required, at a minimum: (i) identifying that NTT Manganese's economic interest in the future net revenue of the Kupang Joint Venture was only 27.5% rather than 55% for the reasons pleaded in paragraph 46 of the SOC; (ii) the engagement of a suitably qualified expert geologist to assess the quality and extent of the manganese resources from the licence areas covered by the Kupang Joint Venture; (iii) the engagement of a suitably qualified expert on Indonesian law relating to the exploitation of mineral resources and the licensing requirements relating thereto, to assess the ability of the Kupang joint Venture to produce, transport, export and sell manganese ore; and (iv) the engagement of a suitably qualified expert valuer or accountant to assess the value of NTT Manganese's interest in the Kupang Joint Venture, having regard to, inter alia, the matters referred to in sub-paragraphs (i) to (iii) above. (b) Each of Mr Elias, Mr Sage and Mr Kelly failed to cause the Company to undertake the steps referred to in sub-paragraph (a). (c) Further particulars may be provided following discovery and/or evidence.
Mr Elias notes that the further and better particulars set out what the Company contends sufficient due diligence would have required "at a minimum", being to do four things, with the possibility that the Company may provide further particulars following discovery and evidence. Mr Elias says the Company should be in a position, now, to particularise what it says constitutes sufficient due diligence, and the points in time at which it alleges various steps ought to have been taken by Mr Elias (and others). The Company says there is no substance to this objection.
The allegation that Mr Elias breached his duties by failing to do "any" due diligence is clear. The allegation that Mr Elias failed to do any "sufficient" due diligence is also articulated with some specificity as to what it is said Mr Elias did not do at all, or did not do enough, by reference to the subject matter it is said that he should have investigated as a director or the task which it is said he should have attended to. The statement of claim provides adequate particulars such that Mr Elias is apprised of the case he will be called to meet. The further and better particulars are the 'flip side' of the pleaded failings of Mr Elias, in that the particulars identify what it is said Mr Elias should have done to discharge his duties. The phrase "at a minimum" is a turn of phrase which does not otherwise detract from the import of the Company's particulars of breach. The Company submitted, and I agree, that a person under an obligation to take reasonable care may have open a range of possible courses of action. There will be a breach of the obligation only where that person's chosen course of action falls outside the range of possible choices which the director, acting reasonably, could have chosen at the relevant time: see Oztech Pty Ltd v Public Trustee of Queensland (No 15) [2018] FCA 819 at [346] per Yates J. The Company has particularised what it contends is the least that a reasonable director should have done. It seems to me that the Company has provided adequate particulars of how it says Mr Elias failed to discharge his duties to the Company. I do not think the Company should be required to finally state all aspects of the alleged breach of duty at this stage as long as the Company has provided the best particulars which it presently can.
Paragraph 78 of the statement of claim pleads that Mr Elias failed to cause the Company to undertake any, or sufficient, due diligence before entering into the term sheet. Similar particulars of breach of duty are given as for paragraph 55, both in the pleading and in the further and better particulars provided since. The Company repeats the particulars given to paragraph 55 which are said to be deficient. It follows from what I have said that I think the particulars to paragraph 78 are also adequate.
Secondly, the Company pleads in paragraph 59 that, had Mr Elias not breached his duty, the Company would not have entered into the Share Sale and Purchase Agreement and expended the associated funds. Further particulars have since been provided including the following: (a) Had Mr Elias, Mr Sage and/or Mr Kelly caused the Company to take the steps referred to in sub-paragraph 1(a) above, then acting reasonably, the directors of the Company would have identified: (i) the matter referred to in sub-paragraph 1(a)(i) above; (ii) that no in situ manganese outcrops could be identified in the concession area the subject of the tenements owned by the Kupang Joint Venture; (iii) that the only significant manganese occurrences in the concession area that could be identified were not located in outcrop but were found in creek areas as floats, indicating that they had been transported from areas outside the concession; (iv) that the Kupang Joint Venture was not presently able, under provincial and Indonesian law, to produce, transport, export and/or sell manganese ore and it was uncertain whether it would or could become able to do so; and (v) that, having regard to the matters referred to in sub-paragraphs (i) to (iv) above, the value of NTT Manganese's interest in the Kupang Joint Venture was negligible or in any event significantly lower than $10 million.
Mr Elias says that paragraph 59 is affected by the deficiencies in the particulars to paragraph 55. Nor does the Company explain with any specificity how the directors of the company would have identified the matters set out at paragraph 3(a)(i)-(v) of the letter. The Company says how those matters would have been identified is explained when the particulars are read with the cross-referenced particulars to paragraph 55, that is, the matters would have been identified by considering the joint venture agreement and commissioning the expert reports referred to in the particulars to paragraph 55. To the extent further detail is sought, that is a matter for evidence.
I do not think there are deficiencies in the particulars provided for paragraph 55. It follows that I do not consider paragraph 59 is affected by such deficiencies, but in any event, I consider that the pleading and particulars when read together provide sufficient detail to enable Mr Elias to prepare for trial. Obviously, the Company should supplement those particulars as soon as practicable if further breaches of duty are going to be put at trial.
Thirdly, paragraph 60 of the Statement of Claim alleges that Mr Elias breached his duty of care in that he failed to take any steps to ensure the Company's interest in the joint venture and licences "was secured". The further particulars of this paragraph include: The plaintiff repeats paragraph 42.7 of the statement of claim, which reflects the effect of clause 8.4(c) of the Heads of Agreement.
Clause 42.7 of the statement of claim is in the following terms: The Heads of Agreement provided inter alia that … the parties would enter into any documents reasonably required by the Company and/or its nominees to secure the Company's payment of the sums of $3.5 million and $6.5 million referred to above to ensure the Company's interest in the Kupang Joint Venture project and licences is secured.
Mr Elias submits that the Company has failed to provide any particulars of the nature of the security that ought to have been obtained, and has not explained how obtaining that particular security would have avoided the loss. The Company responds that the nature and efficacy of the security that could be obtained is a matter for expert evidence, having regard to the nature of the underlying assets of the joint venture. For that reason, the Company cannot give further particulars in relation to these matters at this time. The Company will seek to supplement the particulars following service of expert evidence.
It seems to me that the alleged breach of duty is sufficiently particularised at the present time to identify what it is that the Company says amounted to a breach of duty by Mr Elias. The Company says the particulars are the best it can presently provide, and there is no evidence before me to suggest otherwise.
Finally, the Company points out that Mr Elias seeks an order for further particulars of paragraphs 58, 79, 100.5 and 103 of the statement of claim, although no deficiency has been identified in the particulars already provided of those paragraphs. This point is well taken. In any event, I do not think the Company needs to provide further particulars of its claim, although obviously it should do so as and when it becomes aware of any further breaches of duty it intends to rely on at trial.

Proposed amendments to Mr Elias' defence: business judgment rule

Section 180(2) of the Corporations Act 2001 (Cth) provides: A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b) do not have a material personal interest in the subject matter of the judgment; and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d) rationally believe that the judgment is in the best interests of the corporation. The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.
As Spigelman CJ noted in Macdonald v Australian Securities and Investments Commission (2007) 73 NSWLR 612 at [14], the reference to "rationality" in section 180(2)(d) "constitutes a requirement going beyond mere grounds for a belief and could require identification of the facts and matters upon which any such belief was based". At [15]: In both these respects, namely, the process of the officer informing himself or herself about the relevant subject matter [in s180(2)(c)] and having a rational basis for his or her belief [in s180(2)(d)], a pleading could require reference to facts and matters associated with the relevant decision making process …. The identification of matters of this character may very well be matters that "may take the (opponent) by surprise" or that raise matters of fact not arising out of the Statement of Claim, within the meaning of r 14.14(2), par (a) or par (c)). Furthermore, particulars of the matters so identified may well be "necessary to enable the opposite party to identify the case that the pleading requires him or her to meet" within r 15.1(1).
The proposed amendment in respect of the "business judgment rule" is, in each proposed amended defence, as follows: In further answer to the whole of the statement of claim, if and insofar as the plaintiff may establish that the first defendant failed as alleged in paragraphs [of the relevant] statement of claim, they were business judgments and the first defendant: (a) made the judgments in good faith for a proper purpose; (b) did not have a material personal interest in the subject matter of the judgment; (c) informed himself about the subject matter of the judgments to the extent he reasonably believed to be appropriate; (d) rationally believed that the judgments were in the best interest of the Company. The Company is right to complain that Mr Elias has done no more than recite the relevant provision of the Corporations Act 2001 (Cth).
Mr Elias submits that he cannot provide particulars because of the defective statement of claim and should not be required to provide particulars until after the Company has put on its evidence and provided disclosure. The Company complains that the proposed amended defences offer no particulars as to what steps Mr Elias is alleged to have taken to inform himself about the subject matter of the judgments, nor the basis for his pleaded state of mind, contrary to the rules in respect of particulars. The Company submits that if Mr Elias is genuinely not in a position to provide any particulars about either of these matters, it is difficult to see how he has a proper basis to plead a "business judgment rule" defence at all.
The proposed "business judgment rule" defence in the 2017 proceedings effectively asserts as a positive fact that the decision to enter into the employment agreements, pay bonuses under the employment agreements, amend the agreements to pay for termination payments and make termination payments shortly afterwards were judgments formed based on something, in respect of which Mr Elias informed himself. Likewise, in the 2018 proceedings, Mr Elias gives no details whatsoever as to the business judgment that he made in relation to entering into the joint venture or the term sheet. Mr Elias has not sought particulars of the 2017 statement of claim, and I do not consider that the 2018 statement is inadequately pleaded or particularised. Ordinarily, the proposed amended defence should not be allowed absent further particularisation.

Concurrent wrongdoers

In the 2018 proceedings, Mr Elias proposes to identify concurrent wrongdoers who are not presently defendants. After introductory pleading matters, the proposed amended defence is as follows: (d) Anthony Karam is a concurrent wrongdoer. Particulars The first defendant relies upon the maters pleaded by the plaintiff in the SOC in respect of Mr Karam; and the matters pleaded by the plaintiff in paragraphs 18, 19, 54, 55, 59, 60, 78, 79 and 104 as if they were pleaded as against Mr Karam. Further particulars may be given following the service of evidence, discovery and subpoenas. (e) Anthony Karam and Advisor Business Services Group Pty Ltd are concurrent wrongdoers. Particulars The first defendant relies upon the fact that Mr Karam was engaged through Advisor Business Services Group Pty Ltd to provide consultancy services to the Company and they thereby owed a duty to do so with reasonable care; and upon the matters pleaded by the plaintiff in paragraphs 54, 55, 59, 60, 78, 79 and 104 of the SOC as if they were pleaded as against Mr Karam and Advisor Business Services Group Pty Ltd in respect of their duty of care. Further particulars may be given following the service of evidence, discovery and subpoenas. (f) Jason Bontempo is a concurrent wrongdoes: Particulars The first defendant relies upon the matters pleaded by the plaintiff in the SOC in respect of Mr Bontempo; and the matters pleaded by the plaintiff in paragraphs 18, 19, 54, 55, 59, 60, 78, 79 and 104 as if they were pleaded as against Mr Bontempo. Further particulars may be given following the service of evidence, discovery and subpoenas. (g) James Arkoudis is a concurrent wrongdoer: Particulars The first defendant relies upon the matters pleaded by the plaintiff in the SOC in respect of Mr Arkoudis; and the matters pleaded by the plaintiff in paragraphs 18, 19, 54, 55, 59, 60, 78, 79 and 104 as if they were pleaded as against Mr Arkoudis. Further particulars may be given following the service of evidence, discovery and subpoenas. (h) Simon Youds is a concurrent wrongdoer: Particulars The first defendant relies upon the fact that Mr Youds was engaged to provide engineering and consultancy services to the Company and thereby owed a duty to do so with reasonable care; and upon the matters pleaded by the plaintiff in paragraphs 78, 79 and 104 as if they were pleaded as against Mr Youds in respect of his duty of care. Further particulars may be given following the service of evidence, discovery and subpoenas.
The additional concurrent wrongdoers in the 2018 proceedings are: Mr Karam; the company through which Mr Karam's consultancy services were provided to the Company, Advisor Business Services Group Pty Ltd; Jason Bontempo (a former director of the company); Mr Arkoudis; and, Simon Youds, who was engaged to provide engineering and consultancy services to the Company. The proposed pleading simply identifies the alleged concurrent wrongdoers, cross-references the portions of the statement of claim which plead directors' duties, breach of those duties, and what it is said happened as a result.
Insofar as concurrent wrongdoers are persons other than existing defendants, the Company complains that Mr Elias asserts these persons are concurrent wrongdoers without properly pleading the basis on which it is said that those persons are to be considered to have caused the loss or damage occasioned to the Company. In each case, the allegation of concurrent wrongdoing is contained in a single line. How the person is said to be a concurrent wrongdoer is then contained in a rolled up paragraph styled "particulars", but in fact containing the factual allegations on which the contention of concurrent wrongdoing is based. The pleading does not explain how the cited paragraphs of the statement of claim can apply against each alleged concurrent wrongdoer, in circumstances where none of them were directors of the Company at the relevant time, nor is it alleged that any of them caused the Company to enter into the transactions. The claim should be properly particularised as the Company may wish to add the concurrent wrongdoers as defendants and, given that the events occurred in 2012, Limitations Act problems are critical.
Mr Elias says that the fact that the other directors ceased to be directors shortly before entry into the joint ventures does not exclude them as concurrent wrongdoers. They owed duties as directors until they ceased to be such. Mr Elias clarified that the nomination of these directors as concurrent wrongdoers is put simply on the basis that they owed directors' duties, and nothing more.
A defendant seeking to invoke the proportionate liability provisions in Part 4 Civil Liability Act 2002 (NSW) "should plead with the same degree of precision and particularity as it would have done before the Act if it were bringing a cross-claim against an alleged concurrent wrongdoer": Ucak v Avanti [2007] NSWSC 367 at [41] per Hammerschlag J. The pleading should specify the duty which it is said was owed by the concurrent wrongdoer such as to enable the plaintiff to determine for itself whether each identified person owes such a duty: HSD Co Pty Ltd v Masu Financial Management Pty Ltd [2008] NSWSC 1279 at [21] per Rothman J. It is not sufficient for the defendant when pleading such matters to assert a conclusion without the material facts upon which that conclusion depends: Ucak v Avanti at [36]; Sanderson Motors Pty Ltd v Lindsay Bennelong Developments Pty Ltd [2014] NSWSC 846 at [33] per Ball J.
The proposed amendment falls far short of these requirements. However, insofar as Mr Elias has explained the identification of Mr Karam, Mr Bontempo and Mr Arkoudis as concurrent wrongdoers, it appears that no more can usefully be added at this stage and the allegation that each were concurrent wrongdoers presently rises no higher than that they were directors shortly before the relevant transactions. The position is different, however, with respect of the alleged concurrent wrongdoers Advisor Business Services Group Pty Ltd and Mr Youds. The basis on which these entities are concurrent wrongdoers is entirely unclear. Ordinarily, such amendments would not be permitted.

Allowing particulars at a later stage

Mr Elias says he was previously examined in connection with the matters the subject of the 2017 and 2018 proceedings and, as part of those examinations, produced the documents in his possession. Mr Elias believes there are further documents that he does not have access to which may inform the matters the subject of the proposed amended defence. He wants to put forward the amended defences in their present form but re-particularise his defences once the Company has completed filing its lay and expert evidence as to liability and causation, and he has obtained discovery from the Company, but not before. Mr Elias submitted that it was potentially unfair to provide particulars now, in the absence of all documents.
The Court may order particulars to be provided at a later stage in proceedings, for example, where the pleading party has limited knowledge or documentation. As Moore J noted in King v AG Australia Holdings Ltd [2003] FCA 543 at [17]: … it is sometimes said that it is no answer for an applicant resisting a request for particulars to say the particulars are sought in relation to matters known to the respondent: Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 at 219 … , though the limited knowledge of an applicant might result in particulars being provided after discovery: see Millar v Harper (1888) 38 Ch D 110, Egg & Egg Pulp Marketing Board v K H Korp Tocumal Trading Co Pty Ltd [1963] VR 378, L Grollo & Co Pty Ltd v Nu-Statt Decorating Pty Ltd (1978) 34 FLR 81 and Trade Practices Commission v CC (NSW) Pty Ltd (No 4) (1995) 58 FCR 426 at 439, 440.
Likewise, in L.Grollo & Co v Nu-Statt Decorating Pty Ltd (1978) 34 FLR 81, Smithers J noted at 91: …the principles applied by Adam J in Egg and Egg Pulp Marketing Board v K H Korp Tocumal Trading Co Pty Ltd (1963) VR 378 are in point. His Honour there adopted the view expressed in Millar v Harper by Bowen LJ to the effect that: "It is good practice and good sense that where the defendant knows the facts and the plaintiffs do not, the defendant should give discovery before the plaintiffs deliver particulars" (1888) 38 Ch D, at 112. He went on to add: "In every case where this issue arises the appropriate order is in the discretion of the court: see Ross v Blakes Motors Ltd (1951) WN (Eng) 478. Where, as in the present case, it is not shown that any prejudice would arise to the defendants from following the dictates of good sense, I consider that the discretion of the Court should be exercised accordingly" (1963) VR, at p 382. cf also the discussion in Castlemaine Perkins Ltd v Queen St Hotels Pty Ltd (1968) Qd R 501.
In that case, the contracts, arrangements and undertakings pleaded by the plaintiff, of which particulars were sought, were particularly within the knowledge of the defendant. The same cannot be said here. The administrator under the Company's Deed of Company Arrangement is in possession of the Company's documents but not the former directors to 'speak' to those documents. The defendant directors can 'speak' to the documents but do not themselves have many documents, nor wish to 'speak' to anything until the Company has put on its lay and expert evidence in respect of liability and causation and provided discovery. Whilst the documents are largely in the possession of the Company, the knowledge is largely within the possession of Mr Elias.
In Cohen v The State of Victoria [2010] VSC 371, the plaintiff began proceedings in nuisance, negligence and breach of statutory duties against the State of Victoria, Parks Victoria and the Department of Natural Resources and Environment, alleging failings in the measures taken to prevent or restrict the spread of bushfires. The defendants disputed the adequacy of the fourth version of the statement of claim, including the particulars of negligence. His Honour Forrest J noted at [34] - [36] (emphasis added): [34] The particulars of negligence of each of the defendants are set out under para 22. Those particulars allege a variety of acts or omissions on the part of the defendants such as: (a) Inadequate risk assessment. (b) Inadequate prescribed burning. (c) An inadequate system within the parks to control or suppress the fires. (d) Too large an amount of combustible material within the parks. (e) A variety of failures in relationship to development and implementation of a Code of Practice. (f) Inadequate fire management and suppression activities. [35] Those particulars are sufficient, at the present time, to provide the defendants with enough information to understand which aspects of their operations will be the subject of complaint at trial. However, given the size of the fires and the areas consumed by fire, it will, ultimately, be necessary for Mr Cohen to identify, with some precision, what is the real gist of the complaint. For instance, the allegation of "permitting a build up of fuel in the park" needs to be refined so as to specify the particular areas where it is said such a build up occurred so that the defendants are in a position to meet this allegation. I have similar reservations about several of the other particulars. For my part, I would not permit the matter to proceed to trial until there was sufficient clarity in the particulars to enable the defendants to identify, with reasonable precision, their alleged failings and omissions. [36] However, it would be inappropriate to make orders in relation to provision of particulars in greater detail at this time. One of the problems, as I see it, is that notwithstanding contents of the two reports, until discovery is completed, Mr Cohen is not in a position to provide adequate particulars. If he was compelled to do so now, it would simply involve further obfuscation and delay. Accordingly, I propose to give the defendants leave to seek further and better particulars (subject to my approval) once discovery is completed.
The situation was different, however, to the one before me. Mr Cohen was there identifying aspects of the conduct of the State of Victoria and two government entities which he considered were negligent in the management of bushfires, whilst here Mr Elias is being asked to identify matters of his own thought processes and steps which he took to form the business judgments referred to in his defence. Only Mr Elias can know these things. True it is that the Company may have further documents to provide the detail of what Mr Elias did, but that does not absolve him from his present obligation to particularise his defence with the knowledge and documents which he already has.
Senior Counsel for Mr Elias submitted that the Company's approach would result in a provision of particulars and evidence on a "piecemeal" basis, whilst Mr Elias' proposal presented a coherent structure. Mr Elias submitted that what is proposed by the Company may lead to two rounds of evidence. The Company submitted that the other defendants may object to the Company having to meet Mr Elias' particularised defence, if provided at the same time as his evidence, by a large amount of evidence in reply.
From a case management perspective, provision of particulars sooner rather than later is more likely to result in the prompt and efficient preparation of the matter for trial by the Company and all defendants, rather than awaiting Mr Elias obtaining discovery from the Company and putting on his evidence. If Mr Elias wants to rely on the "business judgment rule" defence, he needs to properly particularise that defence based on the documents which he presently has, being the documents which he produced in the examination and the twelve or thirteen volumes of documents accompanying the Company's lay evidence.

ORDERS:

In In the matter of Kupang Resources Ltd (subject to Deed of Company Arrangement) proceedings No. 388365 of 2017, I make the following Orders: 1. Grant leave to the first defendant to file an amended defence in the form served on the plaintiff on 31 August 2018 save for proposed paragraph 48. 2. The first defendant to pay the plaintiff's costs of the amendment (if any) thrown away. 3. The first defendant to pay the plaintiff's costs in respect of prayers 1 and 2 of the motion filed on 5 November 2018. 4. Stand the matter over for directions in the Corporations List on 10 December 2018.
In In the matter of Kupang Resources Ltd (subject to Deed of Company Arrangement proceedings No. 130221 of 2018, I make the following Orders: 1. Grant leave to the first defendant to file an amended defence in the form served on the plaintiff on 31 August 2018 save for proposed paragraph 48 and paragraph 49(e) and (h). 2. The first defendant to pay the plaintiff's costs of the amendment (if any) thrown away. 3. The first defendant to pay the plaintiff's costs in respect of prayers 1, 2 and 3 of the motion filed on 5 November 2018. 4. Stand the matter over for directions in the Corporations List on 10 December 2018.

Amendments 10 December 2018 - Para 12 - amendment to second sentence Para 22 - Line 10 - is amended to it Para 33 - deleted and between "Australian / Securities" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 December 2018

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