McMillan v Coolah Home Base

Background

1. The underlying dispute between the parties and the events that have led to the current application have been canvassed in McMillan (No 1) and will not here be repeated. I adopt the same abbreviations as used in the earlier reasons. However, what is here relevant to note is the chronology of events since July 2020 and the ambit of the now proposed amendments to the pleading.
2. On 23 July 2020, as noted above, I struck out parts of the plaintiffs' then pleading. On 13 August 2020, a draft further amended statement of claim was sent to the solicitors for the Deed Administrators (see the affidavit affirmed on 3 September 2020 by the plaintiffs' solicitor, Mr Vogel, at [3]). On 20 August 2020, the solicitors for the Deed Administrators sent a letter refusing to consent to that further amended statement of claim and indicating their reasons for that position (see Mr Vogel's affidavit affirmed on 3 September 2020 at [4]).
3. On 2 September 2020, a revised draft of the further amended statement of claim (being the version referred to in the notice of motion filed on 3 September 2020) was sent to the solicitors for the Deed Administrators (see Mr Vogel's affidavit affirmed on 3 September 2020 at [5]); and then, on 3 September 2020, the plaintiffs filed a notice of motion seeking leave to file that amended pleading, supported by Mr Vogel's affidavit affirmed on 3 September 2020.
4. On 4 September 2020, the solicitors for the Deed Administrators sent a letter declining consent to the filing of that proposed further amended statement of claim and again indicating their reasons for that position (see affidavit of the Deed Administrators' solicitor, Mr Wilkinson, sworn on 9 September 2020 at [4]).
5. On 3 September 2020, the plaintiffs filed written submissions in support of their application to amend. The Deed Administrators filed their written submissions on 11 September 2020 and, on the same day, the plaintiffs filed supplementary submissions. Finally, on the morning that the notice of motion was to be heard, the plaintiffs filed submissions in reply, attaching to those submissions a further revised proposed further amended statement of claim (which is the version now the subject of the leave application) (the 14 September 2020 version).

Proposed pleading

1. Relevantly, the claim against the Deed Administrators as contained in the now proposed further amended statement of claim (commencing at [A11] of the proposed further amended statement of claim) is sought to be pleaded as follows.
2. From [A11]-[A20], under the heading "Relevant factual background", various allegations are made as to matters including: the identification of the defendants; the entry into "Allotment Contracts" by the plaintiffs with Coolah Home Base (the first defendant); the allegation that the Coolah Home Base "held each member's Allotments as equitable interests in the Land ('the Land Interests') in trust for each of the Plaintiffs"; the appointment of the Deed Administrators; and a telephone conference with a delegation of the plaintiffs on 11 September 2019 in which it is alleged that Mr Dean-Wilcox (one of the Deed Administrators) was informed "of the interests of the Plaintiffs in the land as particularised in paragraph 5".
3. Under the heading "Directors' Breaches of Fiduciary and Statutory Duties to CHB [Coolah Home Base] and the Plaintiffs", allegations are then made (as the heading suggests) of breach of duties by the directors (see from [A21]). Under that heading, there is an allegation (at [A33]) that the Deed Administrators, as voluntary administrators of Coolah Home Base, made a recommendation in the report to creditors of 18 November 2019 as to the Deed of Company Arrangement (the DOCA) that had been proposed; and then there are allegations as to the entry into the DOCA (at [A35]).
4. From [A43]-[A47], under the heading "The Administrators' sale at under value and gifting of undertaking", there are allegations that the Deed Administrators (again, when they were the joint and several administrators of Coolah Home Base) owed duties both to Coolah Home Base and to its members, as officers of the company, under ss 180 and 181 of the Corporations Act 2001 (Cth) (Corporations Act); and then there are also allegations of breaches of those duties, as a result of which it is alleged that the company and the plaintiffs have each suffered loss and damage.
5. Under the heading "The Administrators' Breaches of Officers' duties (ss180-181 CA [Corporations Act])", the plaintiffs allege further breaches of the statutory duties allegedly owed by the Deed Administrators (see at [A48]).
6. There is then an allegation of oppressive conduct on the part of the Deed Administrators (at [A49]), and of unconscionable conduct by them in breach of s 21 of sch 2 of the Competition and Consumer Law 2010 (Cth) (the Australian Consumer Law) and s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) (at [A50]); followed by allegations of breach of s 442C of the Corporations Act (at [A51]); and breach of a duty of care owed by the Deed Administrators to the plaintiffs (see at [A52]-[A54]).

Plaintiffs' application for leave to amend

1. The plaintiffs, in summary, say that their case against the Deed Administrators is as follows.
2. They say that what they acquired were two discrete property rights, allotments of land (being interests in land) as well as a share in the company (Coolah Home Base), and that Coolah Home Base held the members' allotments in the Coolah Home Base Retirement Village on trust for the shareholders.
3. They identify the misconduct of the directors as being that (after the plaintiffs bought and developed their sites, on land of which Coolah Home Base was the registered proprietor, and acquired shares in Coolah Home Base) the directors: sold themselves enough village sites and issued further shares in Coolah Home Base to themselves for a nominal consideration to attain majority shareholding and complete control of the company; then made the company insolvent by indebting the company to themselves; appointed voluntary administrators (who ultimately became the Deed Administrators); and entered into a deed of company arrangement to which was attached a contract for sale of Coolah Home Base's undertaking to Coolah Tourist Park, by which they transferred the company's assets and business undertaking to a new company they owned and controlled, thereby "stripping" the plaintiffs of their equitable interests in the land and "denuding" the plaintiffs' shares in Coolah Home Base of all value.
4. The plaintiffs contend that, by giving themselves advantages to the detriment of the company and its members, the directors breached their fiduciary duties to Coolah Home Base and to its members, and breached their statutory duties under ss 180-183 of the Corporations Act (citing Cook v Deeks [1916] 1 AC 554).
5. It is submitted that this conduct was also oppressive conduct by the office-bearers of Coolah Home Base (which, by then, included the Deed Administrators in their capacity as voluntary administrators) in breach of s 232 of the Corporations Act, and was unconscionable in equity and under s 21 of the Australian Consumer Law and under s 12CB of the ASIC Act because the office-bearers took unconscientious advantage of the disadvantaged position of the plaintiffs (they being aged pensioners in a retirement village who, they say, had no knowledge and gave no consent to the "perfidious scheme" to strip them of their assets so that the directors could then use their land and assets through the new corporate vehicle for a more profitable venture; namely, the redevelopment of the site for medium density housing using the plaintiffs' allotments and homes paid for, and built, by them).

Deed Administrators' submissions

1. The Deed Administrators emphasise that, since the order that was made on 23 July 2020 striking out the plaintiffs' amended statement of claim, the plaintiffs have had a number of attempts at repleading their case against the Deed Administrators. They say that the penultimate version of the proposed further amended statement of claim (which was annexed to Mr Vogel's affidavit sworn on 3 September 2020) suffered from the same or similar defects as the previous pleading that was struck out (see McMillan (No 1) at [112]-[153]), and that the causes of action contained in that (penultimate) version of the proposed further amended statement of claim were untenable and were pleaded in a way that was embarrassing and likely to cause irremediable prejudice if permitted to stand. The Deed Administrators argue that no opportunity should be granted to the plaintiffs to propound any further claim against the Deed Administrators and that the proceedings against them should be dismissed, with costs.
2. As to the ultimate version of the pleading that was propounded (and for which leave is now sought), the position of the Deed Administrators is as follows. For completeness, I will also summarise here, where relevant, the plaintiffs' response to the criticisms made by the Deed Administrators of the relevant parts of the pleading.

Background to the pleaded claims against the Deed Administrators - [A11]-[A42]

1. The Deed Administrators complain that [A16] contains a "somewhat muddled" allegation that the plaintiffs had an equitable interest in various allotments of the land owned by Coolah Home Base which were held on trust for them by Coolah Home Base. The proposed pleading (as referred to earlier) is as follows: A16. In the premises, CHB [Coolah Home Base] held each member's Allotments as equitable interests in the Land ("the Land Interests") in trust for each of the Plaintiffs
2. The Deed Administrators say that this pleading confuses the existence of an alleged equitable interest in the Coolah Land and the concept that the particular allotments were allegedly held on trust for the plaintiffs. Meanwhile, the plaintiffs say, in essence, that the allegation of an equitable interest in the land has now been ventilated more than once (both before Emmett AJA and before me), and is a matter for argument at trial.
3. As to the allegation at [A30] that the Deed Administrators (as voluntary administrators of the company) were officers of Coolah Home Base and owed statutory duties in that context, the Deed Administrators make no complaint. However, they maintain that the duties are owed to the company and not to the members generally, or any one or more of them. As to [A36]-[A39], in which it is alleged that the directors of Coolah Home Base breached certain fiduciary duties or statutory duties, it is similarly said that the directors owed their statutory duties to the company, not its members.
4. As to [A42], which contains an allegation that the sale of the Coolah Land (including the allotments said to be held on trust for the plaintiffs) constituted a breach of the directors' fiduciary duties "as trustee[s]", complaint is made that it is not clear how the directors are said to be trustees; nor is there any detail pleaded as to the content of the duty or duties breached.

Duties owed to members

1. As to the denial by the Deed Administrators that administrators owe any duties to members, the plaintiffs say that, while it is generally true that the administrators' duty is to the company and its creditors, there are exceptions and the present situation is one such exception. It is noted that a liquidator has a duty to exercise reasonable care and diligence in the discharge of his or her functions (citing Gray v Bridgestone Aust Ltd (1986) 4 ACLC 330; Sydlow Pty Ltd (in Liquidation) v T G Kotselas Pty Ltd (1996) 65 FCR 234; [1996] FCA 233), and that this is a duty owed to the creditors and shareholders of the entity the subject of the winding up (citing Mills v Sheahan (2007) 99 SASR 357; [2007] SASC 365 (Mills) at [15], per Debelle J). The plaintiffs say that the same must apply to external administrators.
2. The plaintiffs say that they have suffered economic loss due to the sale of Coolah Home Base's assets at an under-value, because there was no surplus to be distributed to them (as explained in the administrators' Report to Creditors dated 18 November 2019). It is noted that, in relation to pure economic loss, McHugh J in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16 (at [80]) said that the vulnerability of the party alleged to have suffered pure economic loss is an important requirement.
3. The plaintiffs say that Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185; [2014] HCA 36 confirms the position that, in determining the existence or non-existence of a duty of care where pure economic loss is claimed, a general test is not open to be applied. Rather, it is said, the exercise involves a judicial evaluation of the various factors which may be relevant to each particular case to arrive at a principled decision. The plaintiffs say that the relevant factors which give rise to a duty of care in the present case are pleaded at [A52]. They say that damages claimed are not restricted to pure economic loss (noting that, at [A54], physical and psychological injury is also claimed). It is said that the stricter rules applicable to pure economic loss do not apply.

The claim of breach of fiduciary or statutory duty - [A43]-[A48]

1. The Deed Administrators say that the allegations at [A43] and [A44] of the proposed further amended statement of claim (that "the Administrators were under a duty to CHB and its members") then "springboard" into allegations that such duty was breached by the Deed Administrators' conduct in: obtaining a valuation of the Coolah Land on a vacant possession basis (see at [A45]); and recommending that the creditors approve Coolah Home Base's entry into the DOCA (see at [A33]-[A34]).
2. The Deed Administrators maintain that an allegation of such duties being owed in the terms pleaded in those paragraphs is untenable and not known to the law. They maintain that administrators do not owe duties to creditors or members but, rather, that administrators owe statutory and fiduciary duties to the company (referring to s 437B of the Corporations Act; and to Correa v Whittingham (2013) 278 FLR 310; [2013] NSWCA 263 at [148], per Gleeson JA, Barrett JA and Tobias AJA agreeing on that point; and Blundell v Macrocom Pty Ltd [2004] NSWSC 895; (2004) 50 ACSR 549 at [10], per Barrett J, as his Honour then was).
3. The Deed Administrators accept that a fiduciary relationship subsists between an administrator and the company in administration but they say that an administrator does not owe statutory or general law duties to individual creditors or members and, absent a statutory entitlement, a creditor has no personal right of action against an administrator for damages or compensation (citing Macks v Viscariello (2017) 130 SASR 1; [2017] SASCFC 172 (Macks) at [192], [210]-[213]; Hausmann v Smith [2006] NSWSC 682; (2006) 24 ACLC 688 (Hausmann) at [12]; and noting the conclusion expressed in McMillan (No 1) at [112]-[119], and in particular at [114]).
4. The Deed Administrators say that the imposition of a duty in favour of individual creditors or members may be seen as inconsistent with the statutory scheme created by Pt 5.3A of the Corporations Act (citing Viscariello v Macks [2014] SASC 189; (2014) 103 ACSR 542 at [94]-[95], approved on appeal in Macks at [202]-[203]). Reference is also made in this context to Seaman v Silvia [2018] FCA 97 (Seaman v Silvia) at [36], [39], per Derrington J, and to the conclusion there (at [35]-[42]) that administrators owe no statutory duties, fiduciary duties, or a common law duty of care to individual creditors or members.

The claim of breach of fiduciary or statutory duty - plaintiffs' response

1. Insofar as the Deed Administrators cite Macks as authority that the imposition of a duty in favour of individual creditors or members may be seen as inconsistent with the statutory scheme created by Pt 5.3A of the Corporations Act, the plaintiffs say that the present case is distinguishable from Macks because there is no conflict between the statutory duty to maximise the return to creditors and the duty of care to members (citing Mills at [112]-[117]). It is submitted that the selling of Coolah Home Base cheaply (as was the giving away of the profitable business) was detrimental to both creditors and members.
2. The plaintiffs say that the relevant question for consideration is not whether a duty of care would necessarily be established in the circumstances of the present case. Rather, they say that the relevant question is whether it can be said that the plaintiffs' claim discloses no reasonable cause of action such that a duty could be said, with certainty, not to exist.
3. Insofar as the Deed Administrators say that the plaintiffs have no standing to bring claims under ss 180 and 181 of the Corporations Act because those duties are owed only to the company and no application has been brought for leave to bring a derivative action, the plaintiffs say that this ignores the scheme of the Corporations Act, and in particular the statutory powers under items 90-15 and 90-20 of the Insolvency Practice Schedule (Corporations), and s 1324(10) of the Corporations Act to award compensation to the plaintiffs for contraventions of such provisions. The plaintiffs submit that a derivative suit is only required to commence proceedings in the name of the company, whereas they seek relief in their own favour for the Deed Administrators' breach of duties under ss 180 and 181 of the Corporations Act. It is submitted that such a contravention would amount to oppression, referring by way of example to Vadori v AAV Plumbing [2010] NSWSC 274 at [43] where I considered in obiter that a member of the company there in question would have had an entitlement to an order for leave to commence a derivative suit against directors of the company for breach of their duties as directors arising out of the circumstances in which the business of the company had been improperly diverted and the company denuded of any residual goodwill in the business. There, however, no question as to such a claim in relation to conduct of administrators of the company arose.

The oppression claim - [A49]

1. Turning next to the oppression claim, the Deed Administrators note that the oppression remedy (in ss 232 and 233 of the Corporations Act) is directed to where the affairs of the company are being conducted contrary to the interests of the members as a whole, or oppressive to, unfairly prejudicial to or unfairly discriminatory against, a member or members (whether in that capacity or in any other capacity). It is submitted that, notwithstanding the broad definition of "affairs" of a body corporate in s 53 of the Corporations Act, an oppression suit is not one that applies to the conduct of a company's affairs while the company is the subject of administration under Pt 5.3A of the Corporations Act.
2. It is said that the word "company" in ss 232 and 233 of the Corporations Act is to be read as being a company not in external administration, in an analogous manner to the decisions in Chahwan v Euphoric (where it was held that the reference to "company" in ss 236 and 237 of the Corporations Act did not apply where the company was in liquidation), and Mighty River International v Hughes (No 2) [2018] WASC 368 (Mighty River) at [57]-[70], per Le Miere J (where it was held that the reference to "company" in Pt 2E of the Corporations Act does not apply to a company under a deed of company arrangement).
3. The Deed Administrators say that the nature of the oppression cause of action presupposes that the directors are in control of the company (and are conducting the affairs of the company in an oppressive manner), noting that, upon the appointment of administrators, the powers of the directors are suspended (see s 198G(1) of the Corporations Act).
4. Reference is made to Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 (Campbell v Backoffice Investments) at [180] where Gummow, Hayne and Heydon JJ and Kiefel J (as her Honour then was) observed that, upon the appointment of a provisional liquidator, any conduct of the company's affairs that was "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" Backoffice Investments, whether in its capacity as a member or in some other capacity, was brought to an end; and that, at or soon after the appointment of the provisional liquidator, the only affairs of the company being conducted were those undertaken by the liquidator with a view to realising the company's assets.

The oppression claim - plaintiffs' response

1. The plaintiffs say that no authority has been cited by the Deed Administrators for the proposition that "an oppression suit is not one that applies to the conduct of a company's affairs while the company [is] the subject of administration under Pt 5.3A of the Act", and that the authorities that have been cited by the Deed Administrators do not conflict with the plaintiffs' position that a voluntary administrator, as an officer of the company, can conduct the affairs of the company in an oppressive manner.
2. It is noted that in Re Associated Tool Industries Ltd (1963) 5 FLR 55, the phrase "the affairs of the company are being conducted" was held to be wide enough to cover oppression by anyone who is taking part in the conduct of the affairs of the company whether de facto or de jure (see at 65, per Joske J). The plaintiffs argue that voluntary administrators or deed administrators take part in the conduct of the affairs of the company in the same way as directors, and therefore are included in the scope of the oppression provisions of the Corporations Act.

The unconscionable conduct claim - [A50]

1. As to [A50] of the proposed further amended statement of claim, which alleges that the administrators engaged in unconscionable conduct in contravention of the Australian Consumer Law or the ASIC Act, the Deed Administrators complain as to the absence of detailed allegations as to why the conduct is said to be unconscionable, but in any event they say that this cause of action is unsustainable, on the basis that the alleged conduct was not in trade or commerce and hence this cause of action is doomed to fail.
2. The Deed Administrators say that the relationship between a voluntary administrator, the company, its creditors and its members is a statutory construct; and that the conduct of an administrator performing a statutory role is not conduct in trade or commerce that attracts the operation of the Australian Consumer Law or the ASIC Act (citing Macks at [215]-[235]; Baxter v Hamilton (2005) 15 Tas R 59; [2005] TASSC 64; du Boulay v Worrell [2009] QCA 63 at [47], per Keane JA, as his Honour then was; Seaman v Silvia at [45], per Derrington J).

The unconscionable conduct claim - plaintiffs' response

1. The plaintiffs say that the Deed Administrators' contention as to the unconscionable conduct claim (that such conduct is not in trade or commerce that attracts the operation of the relevant legislation) overlooks references in the pleaded allegations which contend relevantly that the Deed Administrators were involved in the directors' unconscionable conduct (i.e., the conduct pleaded inter alia at [A41]). The plaintiffs say that the directors' conduct was without doubt in trade or commerce engaging either the Australian Consumer Law or Div 2 of Pt 2 of the ASIC Act, "relating as it does to financial misconduct" by the Deed Administrators.
2. It is noted that s 236(1) of the Australian Consumer Law provides that damages for unconscionable conduct under s 21 of the Australian Consumer Law can be recovered "against any person involved in the contravention"; and reference is also made to comparable provisions of the ASIC Act.
3. That said, the plaintiffs revised the proposed further amended statement of claim in which [A63(b)] is amended to refer also to [A41], and [A50] also is revised to limit the case in this respect to involvement of the Deed Administrators in the conduct of the directors at [A41].

The s 442C claim - [A51]

1. The complaint about the claim that the Deed Administrators contravened s 442C(1)(b) of the Corporations Act is that it is pleaded in the broadest and most generalised terms (the allegation being simply that the Deed Administrators sold property which Coolah Home Base did not own, in breach of s 442C of the Corporations Act). The Deed Administrators say that, even if the allegation is that Coolah Home Base did not own the caravan park (or the parts of the land corresponding to the exclusive use permitted by the applicable shareholders of the various allotments), there is no pleading as to how the Deed Administrators are liable therefor.
2. The Deed Administrators point to what was said in relation to this kind of allegation in McMillan (No 1) at [126]-[127]: 126. The second direct allegation pleaded against the Deed Administrators is that of a breach of s 442C(1)(b) of the Corporations Act (at [12] of the amended statement of claim). Again, the broad allegation that there has been a breach "[b]y their involvement with the sale of property held in trust by [CHB]" is an inadequate pleading. The concept of "involvement" with the sale of the property is no more than a broad generalisation, without specifying the conduct of which complaint is made. The particulars to this allegation refer to a letter sent by the plaintiffs' solicitors (after the entry into the contract for sale and, indeed, after completion of the sale of the Coolah Land - although the plaintiffs say that it was before the transfer was registered), raising some form of constructive notice argument (as noted above). 127. As I have said, it is not an answer to point to particulars provided in the pleading. As I have had cause to say elsewhere (regrettably, more than once), particulars do not serve the same function as pleadings. The material facts on which the plaintiffs rely for the allegation that the Deed Administrators were trustees and/or owed fiduciary duties, what those duties were and how it is alleged they were breached need to be clearly pleaded, as do the material facts on which it is alleged that there was a breach of s 442C(1)(b) of the Corporations Act.
3. The Deed Administrators say that the above criticisms are not addressed in the proposed further amended statement of claim. They complain, in particular: that there is no allegation as to the alleged "non-ownership" by Coolah Home Base (it being accepted that Coolah Home Base was, in fact, the registered proprietor of the land); that, even if it be accepted that the pleading implicitly seeks to raise the alleged equitable interest in the land held by the shareholders of Coolah Home Base (referring to the allegation made in [A16]), that is insufficient to give rise to a claim under s 442C(1)(b) of the Corporations Act; and they say that nowhere in the pleading is there any allegation as to the Deed Administrators' knowledge of the members' alleged equitable interest.

The s 442C claim - plaintiffs' response

1. The plaintiffs say that their claim is simply that, although Coolah Home Base was the legal owner of the land sold, the plaintiffs owned their allotments in equity (see at [A51(a)]), and the Deed Administrators sold the whole of the land including those allotments (see [A51(b)]), and that this was contrary to s 442C(1)(b) of the Corporations Act which provides that: 442C When administrator may dispose of encumbered property (1) The administrator of a company under administration or of a deed of company arrangement must not dispose of: (a) property of the company that is subject to a security interest; or (b) property (other than PPSA retention of title property) that is used or occupied by, or is in the possession of, the company but of which someone else is the owner or lessor.
2. The plaintiffs respond to the Deed Administrators' complaints as to this pleading as follows. First, as to the complaint that there is no allegation as to the alleged "non-ownership" by Coolah Home Base, the plaintiffs say that the plaintiffs owned their allotments in equity (see at A51]) and that these allotments, or the plaintiffs' equitable interest in them, were in the possession of the company when it sold the land. Second, as to the contention that an equitable interest is not sufficient to give rise to a claim under s 442C(1)(b) of the Corporations Act, the plaintiffs dispute this and refer to the definition of "property" in s 9 of the Corporations Act; third, as to the complaint that there is no allegation of the Deed Administrators' knowledge of the alleged interest, the plaintiffs say that knowledge of the alleged interest is clearly pleaded at [A58].

The breach of duty of care claim - [A52]-[A54]

1. Again, it is said that the Deed Administrators do not owe a duty of care to individual creditors or members in connection with the management of the company's business affairs, including the sale of its assets and the negotiating of a deed of company arrangement. It is noted that in Seaman v Silvia, Derrington J refused leave to re-plead a claim against an administrator alleging that a duty of care was owed to particular creditors or members.
2. In any event, the Deed Administrators say that the pleading of the breach of duty claim is defective. It is noted that [A52] does not plead the content of the duty, nor does it identify the risk of harm, both of which are deficient (referring to Raging Thunder Pty Ltd v Bank of Western Australia Ltd [2012] QSC 329 at [119], per Applegarth J; Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026 at [58]; Garzo v Liverpool/Campbelltown Christian School Limited [2011] NSWSC 292 (Garzo) at [59]-[61] and [63]-[64], per Garling J), particularly in a case concerning pure economic loss. Further, the pleading is said to be deficient in that there is no identification of what each individual plaintiff would have done but for the alleged wrongful conduct, and how that would have led to some different result so as to establish the causal connection between the alleged breach of duty and any loss (citing Hastie Group Ltd (in liq) v Bourne [2017] NSWSC 709 at [217]).

The breach of duty of care claim - plaintiffs' response

1. The plaintiffs say that, contrary to the Deed Administrators' submissions, the decision in Seaman v Silvia is distinguishable in important respects.
2. Reference is made to the relevant factors summarised by Brennan J, as his Honour then was, in The Council of the Shire of Sutherland v Heyman (1985) 157 CLR 424 at 487; [1985] HCA 41, namely that a postulated duty of care must be stated by reference to the kind of damage that the plaintiff has suffered, and by reference to the plaintiff or a class of which the plaintiff is a member.
3. The plaintiffs say that [A52] of the proposed further amended statement of claim clearly sets out the kind of damage the plaintiffs have suffered (particularly the loss of their homes) and the class of which the plaintiffs are members (namely, elderly pensioners with significant health issues). Moreover, they note that, as Derrington J said in Seaman v Silvia, in some cases the content of a duty of care will be apparent from the circumstances or allegations of breach. The plaintiffs maintain that the present case is surely one where the duty of care is apparent from the circumstances.
4. Insofar as the Deed Administrators say that a claim for pure economic loss raises the bar for duty of care, the plaintiffs reiterate that their claim is not limited to pure economic loss. It is said that the Deed Administrators' breach of their duty has resulted in extreme distress and consequent injuries.
5. The plaintiffs say that there is no need for identification of what each individual plaintiff would have done but for the alleged wrongful conduct and how that would have led to some different result so as to establish the causal connection between the alleged breach of duty and any loss", noting that the wrongful conduct included (at [A46]) that the Deed Administrators procured the sale of the land on which the plaintiffs lived, including their allotments. It is said that, in a similar case of sale of assets not owned by the company in administration (THC Holding Pty Ltd v CMA Recycling Pty Ltd [2014] NSWSC 1136 (THC Holding) at [196]), Stevenson J found it "most unlikely" that the company would have disposed of the property it held on trust "had the administrators not been appointed". It is submitted that, had the Deed Administrators not sold the land, the plaintiffs would not have lived the past nine months under threat of loss of their homes and eviction.

The knowing assistance claim - [A55]-[A60]

1. As to the allegation of knowing assistance in a breach of duty by the directors (the second limb of Barnes v Addy), the Deed Administrators say that there are a number of fatal difficulties with respect to this cause of action.
2. First, that directors do not owe their duties to individual members but rather to the company, and that no derivative claim is sought to be brought in the name of, or on behalf of, Coolah Home Base. Thus, it is said that the plaintiffs have no standing to bring a claim against the Deed Administrators that is "parasitic" on a claim that the directors breached their duties to Coolah Home Base since such a claim belongs only to the company itself.
3. Second, that this part of the pleading picks up the "confusing allegations" in [A16] and [A42] about the alleged imposition of a trust with respect to the Coolah Land. It is noted that [A42] contains an allegation that the sale of the land (including the allotments said to be held on trust for the plaintiffs) constituted a breach of the directors' fiduciary duty "as trustee". The Deed Administrators say that, even if the plaintiffs held an equitable interest in parts of the Coolah Land, it is not clear how the directors are said to be trustees; nor is there any pleading of the content of the duty or duties breached. It is said that the plaintiffs have elided the different concepts of an equitable interest in the Coolah Land and the existence of an alleged trust, which infects the pleaded allegations at [A57]-[A59].
4. It is noted that in McMillan (No 1) (at [143]-[144]) there was criticism of the pleading for conflating the rights of members and the rights as beneficiaries of an alleged trust, as well as the inadequacy of the pleading with respect to the facts said to give rise to the trust claim. It is said that the same applies to the allegations in these paragraphs of the proposed further amended statement of claim.
5. Third, that a knowing assistance claim requires dishonest and improper design of the wrongdoers (in this case, the directors) (citing Farah Constructions Pty Limited v Say-Dee Pty Limited (2007) 230 CLR 89; [2007] HCA 22 at [179], per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ; Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [78], [106], per Leeming JA, Barrett and Gleeson JJA agreeing); and that, where the third party merely participates in the breach of duty, it is necessary for the breach to amount to a "dishonest and fraudulent design" before equity will intervene to impose liability on the third party.

The knowing assistance claim - the plaintiffs' response

1. It is said that, in addition to their primary wrongdoings, the Deed Administrators knowingly assisted with the directors' breaches of fiduciary duty to the company and to its members (most obviously by diverting the company's assets and business to their "alter ego" - [A55]), the directors' breach of trust (by selling land held in trust for the members by Coolah Home Base - [A57]-[A58]), and breaches of statutory duties. It is said that the Deed Administrators were thus "involved in a contravention" of the Corporations Act for the purposes of s 79 of the Corporations Act or for the purposes of 236(1)(b) of the Australian Consumer Law.
2. The plaintiffs say that the possibility that the directors could have carried out their fraud without the Deed Administrators' assistance is of no consequence. They say that the Deed Administrators' involvement need not have a "but for" connection to the wrongdoing and, rather, that "facts connecting the accused with the commission of the relevant offence" is enough.
3. While the plaintiffs accept that a knowing assistance claim requires a dishonest and improper design of the wrongdoers, they say that knowledge of the dishonest and fraudulent design is not required to establish "involvement in a contravention" of the Corporations Act or the Australian Consumer Law. Rather, they say that all that is required is that "it can reasonably be said that the act or omission shown to be done or neglected to be done by the defendant does in truth implicate or involve him in the offence, whether it does show a practical connection between him and the offence" (citing Ashbury v Reid [1961] WAR 49 at 51).
4. The plaintiffs say that the facts show that the Deed Administrators had sufficient knowledge of the dishonest and improper design of the directors to engage the second limb of Barnes and Addy (referring to the allegations at [A55(e)-(m)] and [A58(a)-(c)]). They say that the facts pleaded at [A55]-[A59] establish knowing assistance based on the second limb of Barnes v Addy as summarised by Drummond AJA in Westpac Banking Corporation v Bell Group (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 at [2104]. They say that conscious wrongdoing is not necessary to establish the "dishonest and fraudulent design" element in cases of "knowing assistance" and therefore is of no consequence if the directors did not think what they did was wrong. The plaintiffs say that it is not necessary to prove any dishonesty on the part of the Deed Administrators either; all that is required is that they knew of the directors' dishonesty (within the first four categories of knowledge described in Baden).

Deed Administrators' opposition to any further opportunity to re-plead the claim against them

1. The Deed Administrators, as noted above, point to the fact that the plaintiffs have now had a number of opportunities to plead a case against the Deed Administrators (and that, in McMillan (No 1), I referred to a "final opportunity" for the plaintiffs properly to plead their claim - see at [154]).
2. It is submitted that there are two further discretionary reasons not to permit any further iteration of a pleading against the Deed Administrators. First (as noted in McMillan (No 1) at [63]), that this would continue to cause prejudice to creditors by reason of the depletion of the amount available in the deed fund if continuing costs are incurred by the Deed Administrators in the proceedings. Second, that the plaintiffs' claim will not be struck out in its entirety and their claim will proceed to hearing against the other defendants, including Coolah Home Base, its directors and Coolah Tourist Park (hence, as I understand this submission, the plaintiffs will not be left without a remedy).

Plaintiffs' reply submissions

1. In their reply submissions, the plaintiffs emphasise the overriding statutory purpose of the just, quick and cheap disposal of the real issues in dispute (see s 56 of the Civil Procedure Act). It is said that the Deed Administrators erroneously conflate procedural pleading objections with issues appropriate for trial, and that they overlook that they substantially lost on the r 13.4 of the UCPR summary dismissal action brought by the Deed Administrators' notice of motion filed on 11 June 2020. It is submitted that the Deed Administrators' submissions raise questions of fact and law appropriate to be decided at final hearing on the whole of the evidence alongside the plaintiffs' case against the directors' interests (such that the amendment sought should be granted under s 64 of the Civil Procedure Act and be heard with the case against the directors as already determined by Emmett AJA in their case in this matter).
2. The plaintiffs emphasise that the Deed Administrators have been served with the primary evidence of the plaintiffs' case many weeks ago and the plaintiffs say that the Deed Administrators have had full notice of the evidentiary case against them. It is submitted that this is another reason for adopting the overriding purpose as a critical consideration in relation to the power to grant leave to amend and to order the Deed Administrators to put on their evidence.
3. The plaintiffs contend that the pleading defects identified in McMillan (No 1) have all been remedied in their proposed further amended statement of claim. In that regard, they say as follows.
4. As to the criticisms made at [117]-[122] of McMillan (No 1), the plaintiffs say that the proposed further amended statement of claim no longer pleads that the Deed Administrators owed members fiduciary duties, nor that the Deed Administrators were trustees; instead, it pleads that the Deed Administrators knowingly assisted Coolah Home Base and the directors in breaches of statutory duties, fiduciary duties and trust (referring to [A55]-[A59]). It is said that Emmett AJA has already found during the directors' arguments about the pleadings that this case must go to trial, and that the directors have not appealed that decision.
5. As to the observation made at [124] of McMillan (No 1) that allegations of awareness or knowledge must be properly pleaded, the plaintiffs say that the alleged knowledge is now particularised at [A55] and [A58] of the proposed further amended statement of claim.

Determination

1. As I indicated at the outset, to the extent that the dispute as to whether leave should be granted for the filing of the proposed further amended statement of claim raises (yet again) pleading points or pleading defects the same or similar to those that have previously been aired between these very same parties, it is to be deplored as a waste of the Court's time and as involving unnecessary expense to the parties. In that category, I place the complaints now made as to the allegation at [A16] and [A42] and the complaints as to the pleading of knowledge and breach of s 442C of the Corporations Act. Imperfect as the draftsmanship involved in the present iteration of the proposed pleading may or may not be, it seems to me to be sufficiently clear what is here intended.
2. In that context, I repeat (as I have elsewhere) the observations of Lander J in Arthur Young v Tieco International [1995] SASC 5173; (1995) 182 LSJS 367 at [20]-[21] (approved by McDougall J in Ingot v Macquarie [2004] NSWSC 1136 at [46]): 20. Whether the material facts and whether sufficient particulars have been pleaded must depend upon the cause of action, the complexities of the case and the whole of the circumstances of the case. None of those matters can be considered in isolation any more than each of the paragraphs of the pleading can be considered in isolation. 21. When the Court considers a pleading it will not consider the pleading with the same degree of scrutiny which the courts are required to give to an Act of Parliament. With the complexities of modern litigation, a pleader can usually point to some deficiency in the opponent's pleadings. One can usually, if one approaches the matter with a critical eye, identify some failing in a pleading. But that is not the approach that in this age ought to be adopted. A court would not sit down in the manner of a nineteenth century pleader seeking to find an error capable of sending a party away to re-plead his claim or defence. Such a technical approach is inconsistent with modern litigation and inconsistent with the court's function which is to try to arrive at a just result. A successful result, if arrived at, after too great an expense may not be considered by even the successful party to be a just result. A court ought to approach a consideration of the adequacy of a pleading seeking to answer the ultimate question; does the pleading give fair notice of the case to be made against the other party at trial, thereby minimising the risk of injustice resulting from surprise. [Emphasis added]

Costs

1. The plaintiffs point out that the present notice of motion arose as a result of the application by the Deed Administrators in which they sought: that the proceedings against them be summarily dismissed under r 13.4 of the UCPR as not founded upon any reasonably arguable cause of action; or, alternatively, that the amended statement of claim be struck out as a matter of form as against them, with no leave to re-plead. It is noted that the Deed Administrators did not achieve either of these orders, although they were partly successful on their strike-out application. It is submitted that the plaintiffs were substantially successful and, therefore, that it is appropriate that the costs of that application should be the plaintiffs' costs in the cause.
2. As to costs, I consider that costs should be costs in the cause on both the earlier motion and the motion here being determined. Both sides have had a measure of success and neither should be encouraged in persisting in interlocutory pleading stoushes. I consider that the plaintiffs bear a share of the responsibility for costs, having regard to the inadequacy of the previous iterations of the pleadings; and the Deed Administrators a share of responsibility for the costs having regard to the stance they have adopted (albeit with partial success) in continuing to press for an outright summary dismissal of the claim brought against them, even in light of the elucidation that has been proffered as to the nature of the claims sought to be made against them (such as the continuing complaint about the allegation as to the plaintiffs' equitable interest in the land), though I accept that it would be likely in the interests of creditors of the company as a whole not to have to bear the costs of a contested final hearing (which would have been the result of a wholly successful summary dismissal application or of the present opposition to the grant of leave for the filing of the proposed further amended statement of claim).

Orders

1. For these reasons, I make the following orders: 1. Give leave to the plaintiffs to file the proposed further amended statement of claim against the fifth and sixth defendants (with the exception of the paragraphs [A43] - [A48] and references thereto elsewhere in the pleading, but including those paragraphs referred to at [104] of these reasons) subject to the further re-pleading of the allegation at [A52] to address the deficiencies identified in these reasons. 2. Direct that the revised further amended statement of claim be filed and served within 7 days. 3. Costs of both the strike out motion determined on 23 July 2020 and the plaintiffs' notice of motion of 3 September 2020 be costs in the cause. 4. List the matter for directions on 13 October 2020 at 8.30am.

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