Galati v Deans

Background

1. Some of the background to the present dispute is outlined in a judgment that I published not so long ago on an unsuccessful application by the tenth cross-defendant (EJC Pyrmont Pty Ltd) (which is not affected by the current application) for security for costs of the cross-claim to be provided by the second cross-claimant, Fishbank Development Corporation Pty Ltd (FDC), the second defendant in the proceedings (see Galati v Deans [2018] NSWSC 1600). However, it will be necessary to add something briefly by way of further background in order to explain the dispute between the plaintiffs and the existing defendants and the basis on which the plaintiffs now wish to join an array of other defendants to the proceedings. I make clear at the outset that I am not here making any findings of fact in relation to the substantive dispute. I am simply recording the background as asserted in the submissions and evidence put before me on the hearing of the present amendment application.

The relevant parties

1. The plaintiffs, as already noted, are Mr Dominic Galati and a company he controls, TA. In essence, Mr Galati claims that he and the first defendant, Mr Robert Deans are or were business partners or partners to a joint venture and that, through that partnership or joint venture, he (Mr Galati) and/or his company (TA) has an entitlement or interest in a parcel of shares said to be worth some $100 million, the control (and attempted sale) of which has wrongfully been assumed by Mr Deans (see the plaintiffs' submissions at [1]). Mr Doyle Gray of Counsel appeared with Mr Butt for the plaintiffs on the amendment application.
2. There are presently three defendants to the proceedings. The first defendant is Mr Deans. From about 2001, Mr Deans was involved in a project for the proposed redevelopment of the Sydney Fish Market at Blackwattle Bay. The second defendant, FDC, is a company controlled by Mr Deans which was also involved in the project for that proposed redevelopment. The third defendant, TRHS Pty Ltd (TRHS), is a company that is or was the registered owner of the shares in the proposed fourth defendant, Felan's Fisheries Pty Ltd (Felan's). The plaintiffs allege that TRHS held those shares (the Felan's shares) as nominee of and on trust for the plaintiffs (as to 50%) and the first and second defendants (as to 50%) (see [28]; [40] of the proposed amended statement of claim; T 11.8). The three existing defendants were represented at the hearing of the present application by Mr Barham of Counsel.
3. As to the proposed additional defendants, the first is the proposed fourth defendant (Felan's), to which I have already referred. As at 2015, Felan's owned a parcel of some 1.875 million shares in the proposed seventh defendant, SFM Tenants and Merchants Pty Ltd (a company referred to by the parties on this application, and in these reasons, as "Buyers"). This is the parcel of shares to which I have referred at [10] above. There is a dispute as to the value of that parcel of shares (which is a minority shareholding). I was taken in the course of argument to valuation evidence which puts the value of that shareholding at substantially less than $100 million (see the valuations by Acumen Accounting and Advisory, William Buck Corporate Advisory Services, and PricewaterhouseCoopers - at pp 111, 125, 288 of Exhibit RD-8 to the affidavit of Robert Paton Deans sworn 13 August 2018 (Exhibit 1 on the amendment application)) but Mr Doyle Gray points to correspondence by Mr Deans in which that higher value is attributed to the shares (see Annexure C to the affidavit of David Jonathan Glinatsis, the plaintiffs' solicitor, sworn 25 May 2018 - Mr Glinatsis' first affidavit). (Counsel for Mr Deans, Mr Barham, appeared to suggest this was in the context of Mr Deans "spruiking the shares" - see T 32.26; but in any event it suffices to note that there is more than one expert valuation that would not on its face support Mr Galati's assertion that his entitlement or interest in the shares is anywhere near $100 million.) Felan's was not represented, and did not seek leave to appear, at the hearing of the plaintiffs' amendment application.
4. Leaving aside, for the moment, the proposed fifth defendant and focussing on the relevant corporate relationships, the proposed sixth defendant is Sydney Fish Market Pty Ltd (SFM). SFM has two shareholders: NSW Fishermen's Holding Company Pty Ltd (referred to by the parties on this application as "Catchers" and not involved in the proceedings) and Buyers. Each of Catchers and Buyers owns one ordinary share in SFM (see SFM's submissions at [6]; proposed amended statement of claim at [12]). SFM is the entity which operates the seafood market known as the Sydney Fish Market on a site at Blackwattle Bay (this being the subject of the proposed redevelopment proposal). On the hearing of the plaintiffs' amendment application, Mr Hewitt of Counsel appeared, by leave, for SFM.
5. The proposed seventh defendant, as noted above, is the entity referred to as Buyers. On the hearing of the plaintiffs' amendment application, Mr Ng of Counsel appeared, by leave, for Buyers.
6. The proposed eighth to seventeenth defendants are persons identified in submissions as the "director defendants" (being directors of SFM). They, together with the first defendant and the proposed fourth, sixth, seventh and eighteenth defendants, are parties to a deed of settlement dated 9 November 2017 concerning the 2015 Proceedings (see [6A] of the proposed amended statement of claim) (the Deed of Settlement) (a copy of which is Annexure B to Mr Glinatsis' first affidavit at 26). It seems that there were allegations in the 2015 Proceedings of breaches of duty by SFM's directors. Although I was informed that the director defendants were not parties to the 2015 Proceedings (see T 31.25), review of the Court file indicates that the Statement of Claim filed in those proceedings on 17 February 2016 did name all of the director defendants as defendants to the 2015 Proceedings (a copy of that pleading appears in draft at Ex 1, 5-49). This also seems to be the case by reference to a judgment of Black J in the 2015 Proceedings: In the matter of Felan's Fisheries Pty Limited [2017] NSWSC 1502. There may be some explanation for this apparent disconformity in the position as it was explained in submissions on the present application. Nothing ultimately turns on this. On the hearing of the plaintiffs' amendment application, Mr Kidd of Senior Counsel appeared, by leave, for the eighth to seventeenth defendants.
7. The proposed eighteenth defendant (Mr Gregory Imisides) is also a party to the Deed of Settlement. He was not represented, and did not seek leave to appear, at the hearing of the plaintiffs' amendment application.
8. The proposed nineteenth defendant (Mr Thanh-Chi Pho) was (and the plaintiffs maintain still is) a director of Felan's, having been nominated as such by Mr Galati. The plaintiffs complain as to the removal (they say the "purported" removal) of Mr Pho as a director of Felan's. Mr Pho was not represented, and did not seek leave to appear, at the hearing of the plaintiffs' amendment application. The plaintiffs did, however, rely upon an affidavit from Mr Pho on the hearing of the application which suggests that he is prepared to give evidence in the proceedings. The plaintiffs maintain that Mr Pho is a necessary party to be joined as he is a person affected by the orders sought (T 16.38), though no relief is sought against him. It is said that he is affected because the plaintiffs are seeking declarations that he was continuously a director of Felan's and that, if those declarations are made, the ASIC register would need to be corrected by him (see T 17.33ff). Mr Pho has not, however, at this stage made any challenge himself in respect of his removal (or purported removal) as director.
9. Finally, going back to the proposed fifth defendant, he is Mr Sebastian Stevens, an accountant and partner of BDO Sydney who was appointed under an irrevocable power of attorney to effect the sale of the parcel of 1.875 million shares in Buyers in respect of which the plaintiffs claim an entitlement or interest. On the hearing of the plaintiffs' amendment application, Mr Bulley of Counsel appeared by leave for Mr Stevens. Mr Stevens, too, is simply sought to be joined as a necessary party. Although it is pleaded at [6A] of the proposed amended statement of claim that Mr Stevens was also party to the Deed of Settlement, the copy of the Deed of Settlement in evidence does not identify him as a party and his Counsel, Mr Bulley, argued that the pleading was factually incorrect in this regard, a position which Mr Doyle Gray for the plaintiffs appeared to accept (see T 64.12ff, 73.6). There is no relief sought against Mr Stevens as such (though I note that the application for injunctive relief does seek orders against him in his capacity as holder of the power of attorney - he being the person currently progressing the sale of the relevant shares).

The existing statement of claim

1. The dispute between the plaintiffs and the existing defendants (i.e, Mr Deans, FDC and TRHS), as already noted, arises out of proposals that were being considered and progressed for some time in relation to the redevelopment of the Sydney Fish Market. As presently pleaded, there is an allegation in the statement of claim that, between 2013 and 2015, Mr Galati and TA on the one hand and Mr Deans and FDC on the other hand "worked together, and separately, on the formulation of potential plans for the redevelopment" (see [8]) and that this work included identifying and introducing potential investors or purchasers for various aspects of the redevelopment proposal ([9]).
2. The existing pleading then proceeds to allege various matters as to: Felan's and its shareholding in Buyers ([10]-[11]); Buyers' 50% shareholding in SFM and SFM's position as the manager and operator of the Sydney Fish Market ([12]-[13]); the entry by FDC and TA (as the designated buyer) into, and terms of, a call option and share sale agreement in respect of all of the shares in Felan's ([14]- [18]) (the Share Option Agreement) and a corresponding option agreement in relation to a parcel of land in the vicinity of the Sydney Fish Market ([19]-[20]); and the ultimate exercise of the respective options pursuant to which, inter alia, TRHS was the entity nominated to exercise the Share Option Agreement and to purchase and hold all the shares in Felan's on trust as to 50% for TA and as to the remaining 50% for FDC (see [21]-[33]).
3. It is alleged (at [28]) that there was an agreement between the plaintiffs, on the one hand, and Mr Deans and FDC, on the other, which included agreement that a nominee of the plaintiffs and of Mr Deans and FDC would purchase and hold the shares in Felan's on trust as to 50% for each of TA and FDC.
4. Paragraphs [34]-[39] of the existing pleading then allege various events subsequent to the date of exercise of the said options, including (at [35]) the appointment by Mr Galati and Mr Deans, respectively, of nominated "appointee" directors to Felan's. Mr Pho (the proposed nineteenth defendant) is said to have been Mr Galati's appointee director. Mr David Turner, who is not a party to the proceedings, is said to have been Mr Deans' appointee director.
5. At [38], it is alleged that TRHS was the registered but not beneficial owner of all the shares in Felan's; and, at [40], that TRHS held all of the shares in Felan's of which it became or was the registered owner at all material times on and after 20 November 2015, on trust as to 50% for TA and as to 50% for FDC.

The 2015 Proceedings

1. Before turning to the proposed amendments to the existing pleading, it is relevant to refer here to the 2015 Proceedings, the background to which is set out in the submissions filed for SFM on the present application (see [10]-[15]) and does not relevantly appear to be in dispute.
2. The 2015 Proceedings concerned a month to month lease and licence that had been granted to Felan's by SFM over parts of the Sydney Fish Market site. On 21 April 2015, the board of SFM resolved to issue notices to quit to Felan's. On 22 April 2015 SFM served the notices to quit on Felan's in respect of the Felan's lease and licence.
3. Under the articles of association of Buyers, the termination of Felan's lease at the Sydney Fish Market site triggered a mechanism for the sale of Felan's shares in Buyers (see the affidavit of Timothy John Webster, SFM's solicitor, sworn 26 October 2018 in opposition to the amendment application, at [13]).
4. On 16 December 2015, Felan's commenced the 2015 Proceedings against SFM (and, it seems, its directors), among other things challenging the validity of the notices to quit issued by SFM as well as various actions taken by the directors of SFM in relation to the Felan's premises which were alleged to have been breaches of their duties as directors of SFM. The solicitor on the record for Felan's throughout the 2015 Proceedings was Mark Fraser of Fraser Clancy Lawyers (see Mr Webster's affidavit at [6]). There is evidence to show that Mr Galati and his then legal advisers were aware of the 2015 Proceedings (see in this regard the correspondence contained in Ex 1, referred to in oral submissions by Mr Barham from T 28ff; and Ex 6D-1, being a letter dated 8 December 2015 from Mr Pho to Mr Fraser). Mr Galati's own evidence is that, from 2015 to about 19 January 2017, he was aware of the 2015 Proceedings and, along with Mr Deans, was giving instructions to Mr Fraser (see his affidavit affirmed 28 June 2018 at [1]-[2]).
5. The trial of the 2015 Proceedings was listed for hearing for three weeks to commence before Black J on 3 November 2017 (see In the matter of Felan's Fisheries Pty Limited at [1]). Shortly before the commencement of that hearing, and following a mediation at which Felan's was represented by Mr Fraser, a settlement of the dispute was reached and the hearing dates were vacated.

Proposed amended pleading

1. The proposed amended statement of claim, for which leave is now sought, makes wholesale deletions of much of the existing pleading and recasts the relief that is sought.

Existing Claim Amendments

1. In the proposed amended statement of claim, [8] and [9] of the existing pleading are to be wholly deleted and the time at which it is alleged (at [7]) that Mr Galati met Mr Deans is to be amended to a later date (namely in or about April 2014 as opposed to 2013). What is now sought to be alleged is that, in and from May 2014, the plaintiffs and Mr Deans and FDC became partners in a partnership ([8C]) or alternatively in a joint venture ([8D]) and commenced carrying on a business in common with a view of profit (namely, as set out at [8A], "to acquire an interest in the Sydney Fish Market, initiate, participate in, and profit from the Sydney Fish Market's redevelopment based upon a proposal known as Destination Blackwattle Bay").
2. What is then alleged, in summary, is that in and from May 2014, in carrying on the common business, Mr Deans and FDC owed fiduciary duties to Mr Galati and TA ([8E]) and that Mr Deans breached those duties ([40B]).
3. The agreement allegedly giving rise to the partnership (or joint venture) is pleaded at [8A] of the proposed amended statement of claim as follows: In and subsequent to May 2014 following a series of conversations, the 1st plaintiff and the 1st defendant orally agreed to carry on a business in common with a view of profit, namely to acquire an interest in the Sydney Fish Market, initiate, participate in, and profit from the Sydney Fish Market's redevelopment based upon a proposal known as Destination Blackwattle Bay.
4. At [8B] of the proposed amended statement of claim it is alleged that it was a term of the May 2014 agreement that the parties to that business in common would be both plaintiffs and Mr Deans and FDC.
5. It is then alleged that the terms of the alleged partnership or joint venture were varied, first in or around April 2015 and then on 20 November 2015 - see [8F]-[8H] as follows: 8F In or around April 2015, the 1st and 2nd plaintiffs and the 1st and 2nd defendants varied the terms of their partnership, or alternatively varied the terms of their joint venture, in writing. Particulars Document titled "Agreement Principles between Robert Deans, Dominic Galati & Bhavani Ma." 8G On 20 November 2015, the 1st and 2nd plaintiffs and the 1st and 2nd defendants varied the terms of their partnership, or alternatively varied the terms of their joint venture, by using the 3rd defendant TRHS Pty Ltd as a vehicle for conducting at least part of their common business (20 November 2015 Variation). 8H The 20 November 2015 Variation included terms to the effect: (a) when the 3rd defendant acquired property, such property would be a partnership asset or, in the alternative, an asset of the joint venture (b) the 1st and 2nd plaintiffs and the 1st and 2nd defendants would at all times exercise control over the 3rd defendant, in a manner the precise terms of which were to be decided at a later date, and (c) the 1st and 2nd plaintiffs and the 1st and 2nd defendants would at all times exercise control over the 3rd defendant's assets, in a manner the precise terms of which were to be decided at a later date.

New Claim Amendments

1. The New Claim Amendments introduce a whole new set of claims involving the proposed joinder of the various prospective additional defendants.
2. It is proposed that [41]-[52] of the existing pleading be wholly deleted (thus the existing allegations as to the wrongful changes to the directors and the failure to acknowledge TA's beneficial interest in the Felan's shares are to be deleted). In their place there is a series of allegations to the effect that: Mr Pho was not validly removed as a director of Felan's and remains a director of that company ([40A.1]-[40A.7]); Mr Hoban and Mr Turner were not validly removed as directors of Felan's and remain as directors of that company and Mr Deans was not appointed as a director ([40B.1]-[40B.2]); and that Mr Deans' conduct in relation to those matters was a breach of his fiduciary duty.
3. Then, at [40C.1]-[40C.4], what is alleged is that: Mr Deans purported to cause Felan's to settle the 2015 Proceedings; Mr Pho did not consent to the settlement; Mr Deans had neither actual nor ostensible authority to bind Felan's to any agreement; and there was no legally enforceable agreement to settle the 2015 Proceedings, either on the terms as proposed for by the Deed of Settlement or at all.
4. As already noted, what is now sought to be claimed by way of relief includes an order setting aside the orders in the 2015 Proceedings "insofar as they were made consequent upon the deed of settlement". Declarations are to be sought as to Mr Deans' breach of fiduciary duty in purporting to remove Mr Pho as director of Felan's and in purporting to settle the 2015 Proceedings; that Mr Pho was appointed a director of the company "and has continuously remained a director since"; that Mr Deans lacked authority to cause Felan's to settle the 2015 Proceedings; and that the Deed of Settlement is void and of nil effect insofar as it binds Felan's and the parties to the 2015 Proceedings inter se.
5. Mr Doyle Gray says that what follows from the alleged breach of fiduciary duty by Mr Deans is the relief to set aside the Deed of Settlement and Consent Order in the 2015 Proceedings, because they were "a perpetuation of a breach intended to deprive Mr Galati of his interest in the partnership" (T 12.40). If orders to undo the transactions and restore the property (i.e., the Buyers Shares) to Felan's were not to be able to be obtained, Mr Doyle Gray says the plaintiffs' alternative claim would be for equitable compensation (for breach of fiduciary duty) (see T 13.30) (though no such claim has presently been pleaded).

Relevant principles

1. As noted earlier, the plaintiffs' amendment application is made pursuant to s 64 of the Civil Procedure Act, which provides, relevantly, that: (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. …
2. There was no dispute as to the relevant principles in relation to such an application. Leave to amend will generally be granted if the application is made in a timely manner and for a proper purpose (see Clough and Rogers v Frog (1974) 4 ALR 615 at 618; 48 ALJR 481; Horton v Jones (No 2) (1939) 39 SR (NSW) 305 at 309-310; Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 at 446-447; 50 ALJR 666; Commissioner for Railways v Bielewicz (1962) 63 SR (NSW) 466 at 468; Abela v Giew (1964) 81 WN (Pt 1) (NSW) 344 at 345; TCN Channel 9 Pty Ltd v Antoniadis (1998) 44 NSWLR 682 at 690-695; Commonwealth v McLean (1996) 41 NSWLR 389 at 396-397; see also Middleton v O'Neill (1943) 43 SR (NSW) 178 at 185).
3. Section 58 of the Civil Procedure Act, to which s 64(2) is expressly made subject, requires that the Court follow the dictates of justice in deciding whether to make any order or direction for the management of proceedings including any order for the amendment of a document. For the purposes of determining what the dictates of justice are in a particular case, the Court must have regard to ss 56 and 57. It is important to recognise that regard to both ss 56 and 57 of the Civil Procedure Act is "statutorily compulsory" (see Hans Pet Constructions Pty Limited v Cassar [2009] NSWCA 230 at [38] per Allsop ACJ (as his Honour then was), with whom Campbell and Young JJA agreed).
4. In Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 ("Aon"), French CJ (at [14]) noted the distinction between the discretion of a court to allow a party to amend its pleading on that party's motion and the requirement to make all such amendments as may be necessary to determine the real questions in controversy (the latter engaging with the authority conferred on the court to make amendments of its own motion).

Plaintiffs' submissions

1. At the outset, I note that there seems little doubt that there are strong feelings between the protagonists in the present dispute (Mr Galati on the one hand and Mr Deans on the other). Mr Doyle Gray made numerous references in oral submissions to Mr Deans as the perpetrator of wrongdoings against Mr Galati. He accuses Mr Deans of having caused Felan's (as plaintiff) to settle the 2015 Proceedings "on terms amounting to a total capitulation in favour of the defendants", including an agreement for the sale of the $100 million parcel of shares in Buyers "to a closed group of potential purchasers who each already had interests in the Sydney fish markets" for a "knockdown price" (plaintiffs' submissions at [6]). Mr Deans, in turn, has made serious allegations as to the receipt of a substantial secret commission by Mr Galati and/or TA (see the cross-claim filed by Mr Deans and FDC in the proceedings). However, emotive submissions as to the perpetuation of wrongdoing or fraud do not assist in, and are apt to distract from, the present task. Relevantly, what must here be taken into account are the factors relevant to the decision whether to grant leave to amend (as adverted to above).
2. In support of their amendment application the plaintiffs rely on affidavits by their current solicitor, Mr David Glinatsis, made on 25 May 2018, 28 June 2018, 26 October 2018, and 28 June 2018 as outlining the nature and scope of the issues, explaining the delay in bringing the application for leave to amend, and summarising the present evidence. Mr Glinatsis was first contacted by Mr Galati in late April 2018, some 16 months after the originating process had been filed (on 1 December 2016).
3. As to the question of delay, it is submitted (at [4]-[5]) that: In 2016, Mr Galati and his related corporation commenced these proceedings with the benefit of different solicitors in an effort to secure Mr Galati's entitlement as a business partner. Before Mr Galati terminated their instructions, his previous solicitors had managed to draft a statement of claim which failed to articulate the real issues. The previous solicitors marshalled a single affidavit to support the claim, from Mr Galati himself, comprising a mere 4 pages of text with no annexures or exhibits despite the text referring to documents which were relevant. In late April 2018, Mr Galati first contacted David Glinatsis, solicitor, who is the present solicitor for the plaintiffs. By April 2018, Mr Glinatsis agreed to take over conduct of the proceedings, and by May 2018 he recognised the need for significant amendments to be made to the pleadings articulating the determination of the real questions raised. He set about marshalling proper evidence.

Submissions by the existing and proposed additional defendants

1. The various defendants and proposed additional defendants all oppose the grant of leave. The first defendant relied on an affidavit sworn by him on 13 August 2018, which I read subject to relevance together with the exhibit thereto. SFM and the director defendants each read affidavits from their respective solicitors (an affidavit sworn 26 October 2018 of Timothy John Webster and an affidavit affirmed the same date of Matthew Carter Hending). As the submissions of the respective defendants and proposed additional defendants to some extent overlap, I will summarise them by reference to the two broad categories of amendments.
2. However, before turning to those two categories of amendments, I note that the first to third defendants take an overall position that, on case management grounds, the amendments should not be permitted at this stage of the proceedings. It is submitted (though I have my doubts about this having regard to the recent interlocutory stoush between the cross-claimant and the tenth cross-defendant and the consequent directions made in relation to the proposed re-pleading of the cross-claim) that the matter is on the cusp of being allocated a hearing date.
3. The first to third defendants emphasise that these proceedings were commenced on 1 December 2016; have now been on foot for close to two years; and that there have been numerous directions hearings in 2017 and 2018 where orders were made for the service of affidavits (including orders that the plaintiffs serve their evidence in chief by 4 December 2017, with their evidence to have been complete by early 2018) and where the plaintiffs pressed for the defendants' evidence to be filed within a relatively short compass. They say that they have now prepared their (voluminous) evidence in reply to that which had been served and complain that it is only now that the plaintiffs seek to raise issues which they maintain are not new issues but are issues which should have been raised before the completion of the evidence or in separate proceedings. It is submitted that the amendment of the pleadings at this stage (with a whole range of new parties and potential further interlocutory disputes over security for costs or the like) will take the proceedings in an entirely new direction and that this is a course which would be antithetical to the just, quick and cheap resolution of proceedings.

Existing Claim Amendments

1. I turn, first, to the Existing Claim Amendments, which relevantly affect only the existing defendants. Apart from the general complaint as to delay, the first to third defendants' complaint as to this category of amendment as to the adequacy of the proposed amended pleading.
2. So, for example, complaint is made that the allegation of an oral agreement in May 2014 (see [8A]) is pleaded in conclusory terms; the proposed amended statement of claim does not particularise the "series of conversations" to which reference is there made; and, other than [8B], the proposed amended pleading does not plead the terms of the alleged agreement. Similarly, complaint is made that the alleged November 2015 variation to the alleged partnership agreement (pleaded at [8G] and [8H]) does not plead whether the alleged variation(s) was or were oral or in writing, or who allegedly agreed to the variation(s) or how they did so (and it is further submitted that this appears to allege an agreement to agree which cannot be an agreement at law, citing Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72).
3. As to the allegation at [8E], to the effect that in carrying on the common business Mr Deans and FDC owed fiduciary duties to Mr Galati and TA, the complaint is that the proposed pleading does not plead why fiduciary duties were allegedly owed, what those fiduciary duties were, or how the alleged breach of fiduciary duty caused any loss "to Felans". (Pausing there, the plaintiffs' claim is for breach of fiduciary duties owed to them, not Felan's, so the question of loss to Felan's does not, on the plaintiffs' case arise.) The first to third defendants argue that the nature and scope of the fiduciary duty must be pleaded (citing Canberra Residential Developments Pty Ltd v Brendas (2010) 273 ALR 601; [2010] FCAFC 125 at [36] per Finkelstein, Siopis and Katzmann JJ ("Canberra Residential Developments")).
4. Mr Doyle Gray maintained that the proposed pleading is sufficient both as to the alleged agreement and as to the alleged fiduciary duties. Somewhat ironically, when one considers the pleading defect sought now to be rectified (i.e., that of pleading conclusions rather than the antecedent facts that might lead to such conclusions), what was submitted was that what is pleaded in the proposed amended statement of claim is "a material fact by way of conclusion" (see T 78.25). Mr Doyle Gray drew the analogy of a pleading based on a lease agreement and said (at T 77.39ff): … in a case between, for example, a landlord and tenant, one does not normally plead every single term of the lease. What one pleads is that there was a lease and then pleads the specific terms of that lease which are relevant to the dispute. That is what we have done here. We have pleaded, at a level of generality, that there was from a certain period of time, as we can believe, a partnership and that partnership gave rise to a fiduciary duty. Then, later, we plead a series of refinements, amendments and variations until we get down to paragraph 27, which is the implementation of part of the agreement. That is then executed. Then, for example, paragraph 31. The entity is nominated in accordance with the agreement. Then the directors are nominated at paragraph 35 in accordance with the agreement. Then these forms are lodged, which is the commencement of the breach, immediately after we have pleaded the details of THRS [sic], Mr Pho and the other representative director on behalf of Mr Deans. They are the only terms which are relevant.

New Claim Amendments

1. As to the New Claim Amendments, there is complaint by the first to third defendants as to what is meant by the expression "in the premises" at various places in the proposed amended pleading (see, for example at [40A.7]; [40BC.3], [40C.3], [40C.4]). It is submitted that it is unclear what causes of action are alleged at [40B] and [40C] (the allegations as to the removal of Mr Hoban and Turner and as to the settlement of the 2015 Proceedings) and that there is no pleading of any loss or damage consequent upon non-compliance with the articles of association of Felan's or by reason of the alleged irregularities.
2. Apart from the criticism of the proposed amended pleading in this regard (with which it is unnecessary in the event to deal), the nub of the complaints made by the existing defendants, and those of the proposed additional defendants who were represented at the hearing of the amendment application, is that the claims to set aside the Deed of Settlement and Consent Order are untenable and that leave to amend in this respect would be futile. This was the subject of submissions by each of Mr Barham, Mr Hewitt and Mr Kidd, and adopted by Mr Bulley and Mr Ng.
3. For the first to third defendants, it is submitted that the New Claim Amendments ignore the effect of s 129 of the Corporations Act and the "indoor management" rule (the first to third defendants largely adopting the submissions of SFM in this regard). In summary, it is said: that this is not a case of ultra vires since it could not be said that Felan's did not have the power to instruct solicitors in respect of the litigation, or to settle litigation, or to enter into a deed of settlement; that there is no allegation that SFM or any of the other parties to the settlement was on notice of any alleged irregularity within Felan's; and that, on the basis of s 129 of the Corporations Act and/or the indoor management rule, there can be no basis for "undoing" orders already made by the Court or transactions already entered into under the Deed of Settlement.
4. It is submitted that, even if it be assumed that Mr Pho was wrongfully removed as a director, Mr Galati and TA had authorised the carrying on of the proceedings and had left the prosecution of the proceedings up to instructions given by Mr Deans. It is submitted that in circumstances where Mr Galati and TA were content for Mr Deans to provide the instructions, and where Mr Deans was, effectively, their agent for that purpose, it is no answer, particularly as against a third party, to claim that Mr Deans had no authority.

Position of the proposed fourth defendant

1. It was submitted that Mr Pho was a necessary party to be joined in circumstances where declaratory relief was being sought as to his status as a director. If the plaintiffs persist with that claimed relief I would give leave for Mr Pho to be added as the fourth defendant in the proceedings (and I assume from the fact that he did not seek to be represented on the present application and has provided an affidavit in support of the plaintiffs' case that he would not oppose such a course). However, any order to that effect should await the preparation of any further proposed statement of claim.

Costs

1. I see no reason why costs should not follow the event. The plaintiffs should certainly pay the proposed additional defendants' costs of the applications for leave to amend. As to the first to third defendants, the plaintiffs have failed in their application for leave to amend in terms of the proposed amended statement of claim. They will be given an opportunity to prepare a further proposed amended pleading but in my view they should pay the first to third defendants' costs of the application that was heard and on which they were in substance unsuccessful. In due course, if leave is given for any further proposed amended statement of claim, the plaintiffs will be required to pay the costs thrown away by the proposed further amendment of the statement of claim but I do not understand there to be any opposition to this.

Orders

1. The orders I make are as follows: 1. Dismiss the plaintiffs' application for leave to file the proposed amended statement of claim annexed to the notice of motion dated 28 June 2018. 2. Direct the plaintiffs to serve any further proposed amended statement of claim limited to causes of action against the existing first to third defendants and not including the claims for relief at prayers 4D or 4F (or 4C to the extent that this would affect the rights or interests of the proposed additional defendants) by no later than 12 December 2018 and, if there is objection by the existing defendants to leave being granted for the filing of that amended pleading, the existing defendants file and serve brief written submissions on or before 16 January 2019 and the plaintiffs file and serve any submissions in reply by 23 January 2019 with a view to the issue being determined on the papers. 3. The plaintiffs to pay the costs of the first to third defendants and of the proposed fifth to eighteenth defendants of the application for leave to amend. 4. Liberty to the parties to apply on 3 business days' notice.
2. I will stand the matter over to directions at a convenient time in the new law term and will stand the motion for injunctive relief over to that date as well.

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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: 28 November 2018