General Steel Industries Inc v Commissioner for Railways [1997] FCA 1501 | Case summary

Factual Background This is the second application of this nature to be made in these proceedings. On 26 September 1997, I dismissed a motion brought by the respondent which sought to have either the whole or certain parts of the amended statement of claim struck out. On that occasion, I set out in some detail the background to the proceedings and the motion then under consideration. As I said at the time, that account was based on material contained in various pleadings which were before me. Since that time the respondent has filed a defence which puts in issue a number of the claims made in those pleadings. I do not intend, however, to revisit in these reasons the background matters which I have already addressed. On 14 October 1997 the applicants filed a further amended statement of claim. On 27 October 1997, the respondent filed a defence to the further amended statement of claim and a cross-claim. There followed an exchange of correspondence between the parties' solicitors. Messrs Stephen Blanks & Associates, solicitors for the applicants, by letter dated 6 November 1997 and addressed to the Sydney agents of the respondent's solicitors, sought the withdrawal of parts of the defence and the discontinuation of the cross-claim by 12 November 1997. Later that day the respondent's solicitors, Messrs Bennett & Co, refused that request. Accordingly, on 12 November 1997, the notice of motion which is presently before the Court was filed. THE PLEADINGS Before considering the relevant rules and the submissions that have been made on each side in relation to the defence and cross-claim, it is convenient to set out the relevant parts of the respondent's pleadings. The defence Of the paragraphs of the defence to which the applicants object, paragraph 25 is the most important. It sets out the substance of the alleged defence. It pleads to paragraph 24 of the applicants' further amended statement of claim, which reads:- "24. The Applicants wish to retain their shares in Elders so that they can enjoy the benefits which will flow to shareholders as a result of the operation of the undertaking of Elders." Paragraph 25 of the defence is as follows:- "25. The Respondent denies each and every allegation in paragraph 24 of the Further Amended Statement of Claim and says further that the Applicants acted in concert alternatively each of them acted to purchase shares in Elders for the purpose of seeking to obtain a financial benefit from the Respondent substantially exceeding the Offer made by the Respondent pursuant to the Part A statement and Offer by utilising the procedure afforded by section 701(6) of the Corporations Law to delay or prevent the Respondent from proceeding to compulsory acquisition pursuant to section 701 of the Corporations Law. Particulars of Intention (a) A company secretary of the First Applicant and a director of the Second Application, Robert John Catto has previously purchased in his name and in the name of companies associated with him or has caused to be purchased minority interests in companies the subject of a takeover offer or share cancellation and objected to the compulsory acquisition or cancellation of such shares including: (i) Australia Consolidated Investment Ltd's bid for Weeks Petroleum; (ii) Cyprus Minerals' bid for McIlwraith McEacharn; (iii) Aztec Mining's bid for Nicron Resources; (iv) Consolidated Press Resources' attempt to privatise and cancel shares in Muswellbrook Energy; (v) IEL's bid for Adelaide and Wallaroo; (vi) Veall Securities and Finance Ltd's planned capital reduction. Further particulars will be provided after discovery, interrogatories and return of subpoenas. (b) The intention of the Applicants is to be inferred from the following: (i) the Applicants, with the exception of the Fourth Applicant, were all parties to an application pursuant to section 701(6) of the Corporations Law in respect to a takeover by Marford Investments Pte Ltd of Allied Queensland Coalfields Ltd; (ii) in the proceedings referred to in paragraph (b)(i) hereof, Diana Hazard of the same address as the Fourth Applicant, was a party to the proceedings; (iii) in the proceedings referred to in paragraph (b)(i) hereof, the Applicants were represented by Stephen Blanks and Associates; (c) The Respondent will say further that the intention of the Applicants is to be inferred from the following: (i) the date of the Respondent's Offer was 31 July 1996; (ii) as at the date of the Offer, none of the Applicants were shareholders of Elders; (iii) the Applicants purchased shares in Elders on the dates specified in paragraph 20 hereof; (vi) the purchases of shares referred to in paragraphs 20.17 to 20.20 hereof were made after the date the Respondent had publicly announced it intended compulsorily to acquire the remaining shares in Elders; (v) the acquisition of shares referred to in paragraphs 20.17 to 20.20 hereof were at a price, full particulars of which will be given after discovery, but on dates when the market closing price for Elders' shares was: - on 22 January 1997 $2.20 - on 11 February 1997 $2.34 - on 6 March 1997 $2.17 - on 11 March 1997 $2.20 when the comparative value of the Respondent's offer having regard to the market closing price for Futuris' shares on those same dates was: - on 22 January $2.296 - on 11 February 1997 $2.23 - on 6 March 1997 $2.185 - on 11 March 1997 $2.23 and further having regard to the additional costs of brokerage, duty and any applicable income or capital gains tax that the Applicants and each of them would have incurred or been likely to incur in purchasing shares in Elders, full particulars of which will be given after discovery and inspection. Particulars of Acting in Concert The Applicants and each of them acting in concert is to be inferred from: (a) the conduct of the Second and Fourth Applicant in sending letters pursuant to section 701(9) of the Corporations Law to the Respondent dated 25 March 1997 in identical terms and from the same facsimile number; (b) the conduct of the First Applicant in sending a letter in largely identical terms to the letter referred to in paragraph (a) above and from the same facsimile number as referred to in paragraph (a) above; (c) the conduct of the Fifth Applicant in sending an identical letter to those referred to in paragraph (a) above to the Respondent; (d) the Applicants are all represented in these proceedings by Stephen Blanks and Associates; (e) all purchases of shares referred to in paragraph 20 hereof, apart from the purchase referred to at paragraph 20.12 hereof, were made through the same broker, namely Cameron Securities, Sydney; (f) the Applicants, with the exception of the Fourth Applicant, were all parties to an application pursuant to section 701(6) of the Corporations Law in respect to the takeover by Marford Investments Pte Ltd of Allied Queensland Coalfields Ltd; (g) in the proceedings referred to in paragraph (f) hereof, Diana Hazard of the same address as the Fourth Applicant, was a party to the proceedings; (h) in the proceedings referred to in paragraph (f) hereof, the Applicants were represented by Stephen Blanks and Associates. Further particulars will be provided after discovery, interrogatories and return of subpoenas." Paragraph 26 denies that the applicants are entitled to the relief claimed. Paragraph 27 picks up the allegations contained in paragraph 25 of the defence, saying:- "27. Further, by reason of the matters referred to in paragraph 25 hereof, the Court should decline to exercise any discretion pursuant to section 701(6) of the Corporations Law." The cross-claim In their cross-claim the respondents plead two causes of action: the tort of abuse of process (paragraphs 1 to 7) and insider trading (paragraphs 8 to 17). Both of these causes of action, especially the former, refer back to the factual basis of paragraph 25 of the defence. It is convenient to examine each in turn. Abuse of process Paragraph 1 of the cross-claim repeats paragraphs 1, 3 and 20 of the defence. Paragraph 20 relates to the timing and size of purchases of shares in Elders made by the applicants, a factual matter upon which the parties have so far been unable to agree. These details are relied upon in subsequent paragraphs of the cross-claim. Paragraphs 2 and 3 of the cross-claim then recite facts relating to the progress of the Futuris takeover which it is alleged were within the knowledge of the applicants at various times when they purchased their shares in Elders. The first part of paragraph 4 reads as follows:- "4. At the time of purchasing the shares referred to in paragraph 20 of the Defence, the Applicants acted in concert further and alternatively each of them acted to purchase shares in Elders with the intention alternatively the predominant purpose of seeking to obtain a financial benefit from the Respondent substantially exceeding the Offer made by the Respondent pursuant to the Part A statement and Offer by utilising the procedure afforded by section 701(6) of the Corporations Law to delay or prevent the Respondent from proceeding to compulsory acquisition pursuant to section 701 of the Corporations Law." The cross-claim then provides "Particulars of Intention" and "Particulars of Acting in Concert" in exactly the same form as in the particulars to paragraph 25 of the defence. Paragraph 5 is similar to paragraph 4 but adverts specifically to the bringing and maintaining of these proceedings. It reads:- "5. Further and alternatively to paragraph 4 of the Cross-Claim, the Applicants acted in concert further and alternatively each of them commenced and maintained the within proceedings with the intention alternatively the predominant purpose of seeking to obtain a financial benefit from the Respondent substantially exceeding the Offer made by the Respondent pursuant to the Part A statement and Offer by utilising the procedure afforded by section 701(6) of the Corporations Law to delay or prevent the Respondent from proceeding to compulsory acquisition pursuant to section 701 of the Corporations Law." The cross-claim then recounts the "Particulars of Intention" and "Particulars of Acting in Concert" which are to be found in paragraph 25 of the defence and paragraph 4 of the cross-claim. Paragraph 6 draws together the preceding paragraphs of the cross-claim, saying:- "6. By reason of the matters referred to in paragraphs 1 to 5 of the Cross-Claim, the commencement and maintenance of these proceedings by the Applicants and each of them is an abuse of the Court's process. Particulars (a) The proper purpose of an application pursuant to Section 701 of the Corporations Law is to afford a bona fide minority shareholders [sic] the opportunity to prevent an offeror from compulsorily acquiring their shares on terms which are not fair and reasonable. (b) It is not a proper purpose of an application pursuant to Section 701 of the Corporations Law to commence and maintain proceedings to obtain a financial benefit from the respondent substantially exceeding the Offer made by the Respondent pursuant to the Part A statement and Offer by utilising the procedure afforded by section 701(6) of the Corporations Law to delay or prevent the Respondent from proceeding to compulsory acquisition pursuant to section 701 of the Corporations Law." Finally, paragraph 7 of the cross-claim particularises the loss and damage which the respondent claims to have suffered as a result of the applicants' alleged abuse of process. Insider Trading Paragraph 8 of the cross-claim simply notes that at all material times trading in the ordinary shares of Elders was permitted on the stock market of a securities exchange. Paragraph 9 repeats paragraph 20 of the defence which, as has been noted, relates to the timing and size of purchases of shares in Elders made by the applicants. Paragraphs 10 and 11 relate to the applicants' knowledge of each other's intentions. Paragraph 10 reads:- "10. Each Applicant knew of or concerning each other Applicant that the Applicants or some of them intended to purchase shares in Elders to obtain a financial benefit from the Respondent substantially exceeding the Offer made by the Respondent pursuant to the Part A statement and Offer by utilising the procedure afforded by section 701(6) of the Corporations Law to delay or prevent the Respondent from proceeding to compulsory acquisition pursuant to section 701 of the Corporations Law. Particulars The knowledge of the Applicants and each of them is to be inferred from the following: (a) the conduct of the Second and Fourth Applicant in sending letters pursuant to section 701(9) of the Corporations Law to the Respondent dated 25 March 1997 in identical terms and from the same facsimile number; (b) the conduct of the First Applicant in sending a letter in largely identical terms to the letter referred to in paragraph (a) above and from the same facsimile number as referred to in paragraph (a) above; (c) the conduct of the Fifth Applicant in sending an identical letter to those referred to in paragraph (a) above to the Respondent; (d) the Applicants are all represented in these proceedings by Stephen Blanks and Associates; (e) all purchases of shares referred to in paragraph 20 hereof, apart from the purchase referred to at paragraph 20.12 hereof, were made through the same broker, namely Cameron Securities, Sydney; (f) the Applicants, with the exception of the Fourth Applicant, were all parties to an application pursuant to section 701(6) of the Corporations Law in respect to the takeover by Marford Investments Pte Ltd of Allied Queensland Coalfields Ltd; (g) in the proceedings referred to in paragraph (f) hereof, Diana Hazard of the same address as the Fourth Applicant, was a party to the proceedings; (h) in the proceedings referred to in paragraph (f) hereof, the Applicants were represented by Stephen Blanks and Associates. Further particulars will be provided after discovery, interrogatories and return of subpoenas." Paragraph 11, which is pleaded in the alternative, is identical to paragraph 10 save that it refers to the primary knowledge of the first and second applicants rather than the knowledge of all the applicants. Paragraphs 12, 13 and 14 relate to the information referred to in paragraph 10 or, alternatively, paragraph 11. Paragraph 12 alleges that the applicants knew or ought to have known that that information was "not generally available" while paragraph 13 alleges that the applicants knew or ought to have known that the information "would have a possible material effect on the price or value of shares of Elders alternatively a decision of a person to purchase or sell shares of Elders". Paragraph 14, pleaded as an alternative to paragraph 13, alleges that "a reasonable person in the position of the Applicants or each of them would expect that" the information referred to "would influence persons who commonly invest in securities in deciding whether or not to buy or sell shares of Elders". Each of paragraphs 12, 13 and 14 is particularised. I shall not set out the particulars here. Paragraphs 15 to 17 then draw together the preceding paragraphs as follows:- "15. By reason of the matters referred to in paragraphs 10 to 13 hereof, alternatively paragraphs 10 to 12 and 14 hereof, immediately prior to and at the time at which the Applicants and each of them purchased shares in Elders as referred to in paragraph 20 of the Defence, the Applicants and each of them were and was an 'insider' within the meaning of that term in section 1002G(1) of the Corporations Law. 16. By reason of the matters referred to in paragraphs 8 to 15 hereof, the Applicants and each of them contravened section 1002G(2) and section 1002G(3) of the Corporations Law. 17. By reason of the conduct of the Applicants and each of them, the Respondent has suffered loss and damage and is entitled to claim such damages pursuant to section 1005 of the Corporations Law." THE NOTICE OF MOTION By their notice of motion the applicants seek the following orders:- "1. That paragraph [sic] 25 to 27 inclusive of the Defence be struck out pursuant to Order 11 Rule 16 of the Federal Court Rules. 2. That the Cross Claim be struck out pursuant to Order 11 Rule 16 of the Federal Court Rules or, in the alternative, dismissed pursuant to Order 20 Rule 2 of the Federal Court Rules." Order 11 r 16 of the Federal Court Rules provides:- "Where a pleading - (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; (b) has a tendency to cause prejudice, embarrassment or delay in the proceeding; or (c) is otherwise an abuse of the process of the Court, the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out." Order 20 r 2 relevantly provides:- "(1) Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding - (a) no reasonable cause of action is disclosed; (b) the proceeding is frivolous or vexatious; or (c) the proceeding is an abuse of the process of the Court, the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding." Before coming to the specific bases upon which the applicants seek relief in this notice of motion, it is necessary that I refer briefly to the general principles which I must apply in considering this matter. Indeed, I have already referred to them in the previous notice of motion in these proceedings. In the well known case of General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Barwick CJ stated that the exercise by a Court of the power to strike out or dismiss a claim was appropriate only where it was made to appear that the claim was "so clearly untenable that it cannot possibly succeed". Whilst it is true that opinions have been expressed that some revision of this principle may be necessary in light of the ever increasing complexity of modern commercial litigation (see e.g. per Rogers CJ Comm D, AWA Limited v Daniels (Supreme Court of New South Wales, 8 October 1992, unreported)) there has been no revision of the rule by the High Court. Indeed, it has been reaffirmed by the High Court in Webster v Lampard (1993) 177 CLR 598. In this Court Northrop J has said in National Mutual Holdings Pty Limited & Ors v The Sentry Corporation & Anor (unreported, 27 September 1989):- "A respondent should not be deprived, on an interlocutory proceeding, from relying upon a defence except in the clearest of cases. Of necessity, the interlocutory proceedings can be determined only on the basis of an imperfect understanding of the facts and the law. The Court must be careful not to prevent unjustly a respondent raising a defence which, on further examination, constitutes a defence." Quite clearly, then, the applicants, in order to succeed in this notice of motion, must comply with the requirements of these principles. It may be noted, also, at this stage, that evidence is admissible under O 20 r 2(2). Dawson J has made reference to the introduction of evidence in interlocutory proceedings of this kind in Munnings v Australian Government Solicitor and Ors (1994) 118 ALR 385 at 389 where his Honour said:- "Although the jurisdiction to strike out ... is practically concluded by what appears in the pleadings, it is legitimate to look beyond the pleadings to affidavit or other proper material in exercising the jurisdiction of the court to stay or dismiss proceedings as frivolous or vexatious or an abuse of process (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 109)." The applicant has filed certain affidavit evidence which it contends show that the impugned portions of the defence and cross-claim are frivolous, vexatious, or an abuse of process. I shall make reference to this evidence later in these reasons. I should state now, however, that the adduction of such evidence, although permissible in proceedings such as these, is rarely of any significant help. Of necessity it cannot be properly tested, nor can it claim to be complete. As a result, it is usually left untested on the basis that it can only be properly evaluated as a result of a full hearing of the evidence to be given by all sides. In my view, no inference adverse to the party against whom the evidence is tendered can rationally be drawn, at least in most cases, from a failure to cross-examine or lead controverting evidence. I have had the benefit of both written and oral submissions on behalf of the applicants and the respondent. It is clear that the applicants mount the same attack on both the defence and the cross-claim against the respondent's assertion that their utilisation of s 701(6) is an abuse of the Court's process. It is convenient, therefore, to consider this aspect of the notice of motion separately. Abuse of process The applicants make two contentions. In the first place it is asserted that the claims made by the respondents in paragraph 25 of the defence cannot establish, in law, that any relevant abuse of process has taken place. Secondly, it is asserted that, particularly in light of the material supplied in the applicants' affidavits, the particulars supplied in paragraph 25 and in the corresponding parts of the cross-claim are not capable of supporting the abuse of process claim and are merely embarrassing or vexatious. In the applicants' written submissions these arguments are put in the following way:- "(a) the general allegation that the applicants had a purpose either individually or by 'acting in concert' of seeking to obtain a financial benefit from the respondent substantially exceeding the offer by utilising the procedure afforded by section 701(6) to delay or prevent the respondent from proceeding to compulsory acquisition, in the applicants' submission, cannot at law be relied on as a defence to an action under section 701(6) ...; and (b) the particulars pleaded, in the applicants' submission, are not capable of supporting the general allegation that the applicants had the alleged purpose, and it is clear from uncontroversial facts that the respondents will be unable to plead any particulars capable of supporting such an allegation ... ." In relation to (a), it is necessary to have regard to the authorities dealing with the tort of abuse of process. I am satisfied that the same considerations apply and the same elements must be established, whether "abuse of process" is relied upon as a defence or whether it is made the basis of a claim for damages in tort. A very full history of the development of the tort has been supplied by Clarke JA in Hanrahan v Ainsworth (1990) 22 NSWLR 73 at 107 ff. There is no need for me to repeat in these reasons the very full discussion provided by his Honour. In my view, it is sufficient, for present purposes, to make reference to the exposition of the tort in Williams v Spautz (1992) 174 CLR 509. In the majority judgment a detailed consideration of authority was undertaken which I shall not repeat here. Reference was made to the case of Grainger v Hill (1838) 132 ER 769, a decision of great antiquity, in which the existence of an action on the case for abuse of process was first recognised. Their Honours (Mason CJ, Dawson, Toohey and McHugh JJ) said of this case (at 523):- "The Court rejected the notion that the action was in essence an action for malicious prosecution or malicious arrest and held that it was a distinct and independent action for abuse of process. Tindal C.J. said [132 E.R., at p. 773]: 'If the course pursued by the Defendants is such that there is no precedent of a similar transaction, the Plaintiff's remedy is by an action on the case, applicable to such new and special circumstances; and his complaint being that the process of the law has been abused, to effect an object not within the scope of the process, it is immaterial whether the suit which that process commenced has been determined or not, or whether or not it was founded on reasonable and probable cause.' (Emphasis added)" Their Honours continued (at 524):- "In conformity with the approach adopted in Grainger v. Hill, this Court has regarded the purpose of the party instituting the proceedings as of crucial importance. In Varawa, the plaintiff alleged that the defendant company had instituted proceedings for breach of contract and procured the issue of a writ of capias ad respondendum pursuant to which the plaintiff was arrested with the intention of coercing him into paying the defendant moneys to which it was not entitled. The allegations were found unproved, but Griffith C.J., O'Connor and Isaacs JJ. recognized the existence of the tort of abuse of process. Griffith C.J. referred to the abuse in Grainger v. Hill as being 'a use of original process for purposes foreign to the scope of the process itself, that scope being merely to obtain security for enforcing the payment of an alleged debt'. O'Connor J. expressed himself in similar terms. And Isaacs J. observed: 'In the sense requisite to sustain an action, the term "abuse of process" connotes that the process is employed for some purpose other than the attainment of the claim in the action. If the proceedings are merely a stalking-horse to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the Court is asked to adjudicate they are regarded as an abuse of process for this purpose.'" (References omitted) Their Honours, after further consideration of authority then said (at 528):- "In his dissenting judgment in Goldsmith v. Sperrings Ltd., Lord Denning M.R. was of the view that to issue a writ for an improper purpose constitutes without more an abuse of process. His Lordship appears to have regarded the cases on the tort of collateral abuse of process, including Grainger v. Hill, as supporting this proposition. In this respect, Lord Denning may well have been incorrect. However, his Lordship was right in treating the comments of Lord Evershed M.R., when he delivered the judgment of the Court of Appeal in In re Majory, as supporting the proposition. There, Lord Evershed referred to a general rule 'that court proceedings may not be used or threatened for the purpose of obtaining for the person so using or threatening them some collateral advantage to himself, and not for the purpose for which such proceedings are properly designed and exist; and a party so using or threatening proceedings will be liable to be held guilty of abusing the process of the court and therefore disqualified from invoking the powers of the court by proceedings he has abused'. In our view, that is a correct statement of the principle." (References omitted) If one applies these principles to proceedings brought under s 701(6), it is apparent, in my view, that it cannot be said that the utilisation of that section can never, in law, amount to an abuse of process. In these interlocutory proceedings it would not be appropriate for me to enter upon any definitive consideration of the ways in which the section could be so utilised. It is sufficient to say that, in my view, it is clearly arguable that the purpose of the section is to provide protection to minority shareholders in a takeover situation where to require that their shares be compulsorily acquired would, in the circumstances, be unfair or unjust. The object of the section is to provide a means of preventing, for example, the compulsory acquisition of minority shareholders' shares at an unfair price. Arguably it would be an abuse of the section if it were used not for that purpose but to produce the result that the offeror was forced to pay an unfairly high price for the minority shares. Clearly enough, in my view, it would be an abuse of process to utilise this section, designed to protect minority shareholders from oppression, as a means of oppression of the offeror, by extorting from him an unconscionably high price for minority shares so that he might complete a one-hundred per cent acquisition of the company and obtain the benefits flowing from such an acquisition. It is clear from arguments presented to me that what the respondent asserts, both by way of defence and cross-action, is that the applicants have abused the Court's process in the present case by using s 701(6) as a means of oppression rather than legitimate protection. It is alleged that their use of the section is unconscionable insofar as what they are seeking to achieve is an unfairly high price for their shares. I have some doubt whether the formulation used in the opening paragraph of paragraph 25 of the defence and in the corresponding paragraphs of the cross-claim is really adequate, in its expression, to make this claim. It may be that a price "substantially exceeding the offer made by the Respondent pursuant to the Part A statement and Offer" is not necessarily an unfair or extortionate price within the meaning of the principles cited above. If the offer itself were significantly lower than reasonable, then a price "substantially" higher than the offer price might not itself be objectively unfair or unreasonable. I am not prepared to strike out these paragraphs on this ground, however, as they may, arguably, be sufficient in the whole context of the statement of claim, defence and cross-claim to convey the meaning sought. The matter was not argued before me. However, the respondent might wish to give consideration to amending these paragraphs so that they more certainly conform with the principles stated in Spautz. It follows from what I have said that I am not prepared to accede to the proposition that utilising the section cannot amount to an abuse of process. I therefore reject the applicants' first submission. I should say also that, in my view, the questions of law that may well be involved in this topic are not susceptible of disposal in a strikeout application. I have considered the complaints which have been made in respect of the extensive particulars supplied in support of the main contention of paragraph 25 and the corresponding parts of the cross-claim. I am concerned that the allegations of prior activities undertaken by Mr Catto and his associated companies, made in support of an inference of improper purpose or intention, could well lead to an unwarranted proliferation of issues and an undesirable lengthening of this case. However, in view of the general thrust of the case sought to be made for abuse of process, it cannot be said that consideration of these prior activities is irrelevant. It may well be that they should be restricted to the area of cross-examination rather than evidence-in-chief. It may well be that interrogation and discovery in relation to them should be restricted or excluded. In my opinion, these are matters which are best determined during the case management of these proceedings. The problems which undoubtedly exist are not sufficient to warrant the striking out of those portions of the defence and cross-claim but the Court will keep a wary eye on them as the matter proceeds. The other matters raised in complaints about the particulars may be similarly dealt with. Those portions of the cross-action and defence which allege that the applicants acted "in concert" in the buying of shares and in the utilisation of s 701(6) cannot, in my view, be held to be irrelevant allegations or merely vexatious or embarrassing. What does appear, however, from the affidavit material that has been put before me, is that there may be little if any factual contest as to how the various applicants came to purchase the shares and as to their relationship with each other and the first and second applicants. This is spelt out in the affidavits and may well, ultimately, be the subject of agreement. Conversely, it has been made clear to me in argument that the respondent does not accept that the applicants, either personally or by dint of agency, entered upon the purchasing of the shares at the time when they did without the intention of subsequently utilising s 701(6) for an improper purpose. As to this there is clearly a major factual issue which cannot be resolved in these interlocutory proceedings. Similarly, it has been made to appear that a number of the allegations in the defence and cross-claim relating to the time of acquisition by the applicants of their shares are, probably, incorrect. The hope was expressed that the parties would ultimately be able to agree on these matters by reference to incontestable records. I trust that this will be so. However, the present conflict cannot result in my striking out those portions of the defence and cross-claim which deal with these matters. They are clearly the subject of factual dispute. What was put to me on behalf of the applicants in relation to these areas was that material in the affidavits tendered, together with the documentary annexures, in effect put paid to the assertion that the applicants bought their shares with the intention of utilising the section thereafter for an improper purpose. It was said, as I apprehended, that in light of that material any such assertion would be quite untenable. I do not accept this submission. Whilst it is quite conceivable that the effect of the material is greatly to weaken the inferences available from the purchase of the shares at the times alleged and from the apparent agreement of the applicants underlying the purchases, it cannot be said to destroy them, especially in circumstances where the facts themselves are not fully conceded. For these reasons I am not prepared to strike out those portions of the defence and cross-claim dealing with the allegations of abuse of process. Insider trading In their written submissions in relation to this portion of the cross-claim, the applicants set out a passage from the decision of Young J in Exicom Pty Limited v Futuris Corporation Limited & Anor (1995) 18 ACSR 404 at 406-409. His Honour said this in relation to the difficulties posed by this branch of the law:- "The question is to how one approaches the construction of Div 2A. There are very real problems in construing the division sensibly if one adopts strict traditional methods of construction, construing each word in its ordinary grammatical sense. Accordingly, one should approach the construction in a purposive way. However, that again leads into trouble. The division is one which can be dealt with criminally by extremely harsh penalties (see s 1311). There is also significant civil liability (see s 1013). Where a harsh criminal penalty is imposed on conduct consideration of the liberty of the subject require [sic] one to construe provisions strictly. On the other hand, the division shows an intention to protect members of the public who are in the securities market, who are not 'insiders'. ... ... ... One aspect is that the purpose and direction of the section is to effect a transaction between an insider and somebody else, in which transaction information may affect the price of what is being traded. It is a section which is to protect the marketplace. ... 'the section is directed to people who are trading in the marketplace'. ... ... These guidelines make me think that while one has to approach Div 2A purposively and not over-technically, one must remember that it is a division designed to allow fair play in the marketplace, and that one must not be too free in its construction because otherwise people who may have taken proper advice and have intended to act legally may, through some technicality, find themselves in prison." This passage shows, in my view, the impossibility of determining complex questions of law involved in allegations of insider trading in an interlocutory strikeout application. I am not prepared on the basis of the submissions put to me to hold that the insider trading provisions of the Corporations Law could not apply to the alleged activities of the applicants in the present case. Similarly, I am not prepared to hold, as a result of material placed before me, that the facts alleged in this part of the cross-claim are incapable of being established. What really emerges, in my view, is that there are serious contested issues of fact in this case which can only be resolved at a hearing conducted in the ordinary way. CONCLUSION In the result, I have been quite unpersuaded that I should make the orders sought in the notice of motion. Accordingly, the motion is dismissed with costs. I certify that this and the preceding seventeen (17) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.

General Steel Industries Inc v Commissioner for Railways

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