Dense Medium Separation Powders Pty Limited v Gondwana Chemicals Pty Limited

Judgment 1CAMPBELL JA: I will ask Young JA to deliver the first judgment. 2YOUNG JA: This is a concurrent application for leave to appeal and, if leave to appeal is granted, the hearing of the appeal. The appeal is from a decision of Einstein J sitting in the Commercial List of the Equity Division in a suit which was brought by a South African company against an Australian company now in liquidation, as well as what is termed the "alter ego" of that Australian company in the plaintiff's pleadings. 3The claim is a little hard to discern from the allegations in the pleadings but appears to be a rather confused concatenation of breach of contract, breach of fiduciary duties and breach of an equity to observe confidential information. 4The proceedings were commenced in 2010 and they moved very slowly through the Commercial List with at least three or four pieces of satellite litigation along the way. The present problems came to a head when the second defendant (the second respondent here) explicitly raised in a defence that, if there had otherwise been a breach of contract or breach of fiduciary duty, it had been waived, in the case of a common law matter, or consented to, in the case of an equitable matter, by the plaintiff and that the person who was responsible for binding the plaintiff to that position was a Mr Blair. 5Although this only surfaced in pleadings towards the end of 2010, it had been mooted much earlier in that year. The plaintiff then sought to amend its claim by adding three further parties, Mr Blair and two companies that were alleged to be controlled by him. That application was opposed. 6Einstein J then had to deal with three matters: A. The application to amend the claim to add three additional parties; B. An application by the second respondent to increase security for costs; C. An oral application that was made during the course of the hearing to strike out parts of the amended defence. 7I should note that the first respondent in liquidation has taken no part in the proceedings. We were told that orders had been made allowing the action to proceed against the company in liquidation, but the liquidator has deliberately taken no part in the proceedings so that today the only defence has been put forward by the second respondent, and that person who is, as I have said, being sued as the "alter ego" of the first defendant/respondent. 8I would digress for a minute to say that the words "alter ego of a company" smack more of American jurisprudence than Australian and may run contrary to the doctrine in Salomon's case ( Salomon v A Salomon & Co Ltd [1897] AC 22), but that is for another day. 9Einstein J heard the matter on 16 February 2011 and gave judgment the following day. The judgment is a fairly short judgment. Mr J B Simpkins SC, who appeared with Ms McWilliam for the applicant, stringently criticised the judgment as being completely inadequate. 10The principal complaints were that it did not refer to a number of submissions that were made, it did not refer to the relevant rules of Court, it stated propositions from one side without balancing those with propositions on the other side and, in particular with respect to the security for costs application, the reasons were simply inadequate. There was discussion before us as to just how adequate reasons must be when one is hearing an interlocutory application. 11The brief authorities that were read to us were decided before the Civil Procedure Act 2005 and one must bear in mind that there was quite a sea change with ss 56-60 of that Act. In particular s 57 deals with case management and makes the focus the efficient disposal of the business of the Court and s 58 tells courts that, when dealing with amendments, they have got to keep with the dictates of justice, and more technical matters as to crossing every "t" and dotting every "i" in interlocutory judgments are now of far less significance than they may have been in an earlier era. Even putting that thought aside, the authorities show that it is not a requirement in an interlocutory judgment, a fortiori an interlocutory judgment in a busy Commercial list or Equity duty list, that the Judge give full reasons for each and every step along the way such as can be criticised in the Court of Appeal. 12Perhaps it gets close to the situation that one gets in the Wu case in Administrative Law ( Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; 185 CLR 259). That is, so long as the parties have a fair idea of what were the reasons for the Judge's decision, that would suffice. However, I am a little disturbed I must confess about the paucity of reasons for the matter of increasing the security for costs, a matter to which I will come later. 13So far as the oral application to strike part of the statement of defence is concerned, his Honour just did not deal with that at all. We have said before that when that sort of scenario presents itself, the obligation of the parties is to go back to the primary judge and respectfully suggest that he or she ought to give reasons on that point. It is not to come up to the Court of Appeal and ventilate the matter here. 14Mr Simpkins says that he recognises that as a general principle, but as there were other matters being dealt with in the Court of Appeal it was expedient or convenient or both to have the Court of Appeal deal with the matter. With great respect, I do not think that is a sufficient reason for doing it. 15It is quite obvious from looking at the pleadings in their present form that before this case does go to trial there will have to be considerable giving of particulars or amending of pleadings to make sure that the trial judge actually sees what the causes of action are. 16As to point C, there is authority for the proposition that if a plaintiff amends its statement of claim, but does not amend para x, the defendant has general liberty to amend with respect to those paragraphs of the claim which are amended, but not para x or others which remain the same. 17I concede that there is some support for that proposition but I do not consider that it is some general rule of practice and indeed when one looks at cases such as the Squire v Squire [1972] Ch 391, 397, one can see that the rationale put forward is that when some slight amendment is made in a statement of claim it should not permit a defendant to raise an entirely new case. 18That is not the situation here. The amended statement of defence to the paragraphs which are not altered, now merely pleads specifically in lieu of a non-admission. However, despite what I have just said, we should not deal with the matter and let it be dealt with, together with other pleading points that will arise, in the Commercial List in due course. 19I will pass to what I have called section A, the application to amend to add parties. I have already given the background facts and the criticism of his Honour's reasons. 20The points in favour of granting the amendment can be briefly summarised as follows, there is a connection between Mr Blair and his company and the matters which will have to be resolved in the litigation, that is, whether Mr Blair did give consent for what he did believe operated as a waiver. However, what is now sought to be put is that Mr Blair, as a director of the plaintiff at the relevant time, has generally breached his contractual duty as an employee, or his fiduciary duty as a director, in allowing to happen what the second defendant says happened if that be established at the trial. 21There is some correspondence on these issues and there is a possibility that there could be conflicting decisions if the issue between the plaintiff and second defendant was tried in Court A and the issue between the plaintiff and its solicitors was tried in Court B. 22Furthermore, there could be, as Mr Simpkins explained, forensic problems involved and these include who, if anyone, might have to call Mr Blair and such matters. 23However, on the other side, one has to realise that the trial, if it involves all these matters, that is, the present issues between plaintiff and defendant and the additional issues that are said to be raised against the Blair interests, would be very much extended. Mr Simpkins says part of that can be dealt with by having separate hearings, but that is just a possibility and it may or may not decrease the costs so far as the second defendant is concerned. 24However, it is more likely than not that if these additional matters are put into the arena, the second defendant will have to be represented in Court while other issues that do not concern him are ventilated. 25Whatever the result of the proceedings between the plaintiff and Blair it would not directly affect the second defendant or any actions by the plaintiff against the second defendant. 26UCPR Rule 6.24 deals with the joinder of parties. It deals with two situations: