Solicitors:
Plaintiff: WMD Law
Defendant: Rigby Cooke
File Number(s): 2016/00357782
[2]
INTRODUCTION
In substance, and at a high level of abstraction, these proceedings concern conflict between the Page and Boros families encountered, following the death of Mr Greg Page, in disengagement of the respective interests of the three families (namely, those of the late Mr Page; the defendant, Mr Attila Boros; and Mr Stephen Thatcher) involved in the conduct of an events hire business, from premises at Punchbowl, through corporate and trust structures. Looking beyond corporate forms, the business was conducted as a "partnership" between the three families. The Page family had an effective interest of 50% in the business, and each of the Boros and Thatcher families had 25%.
The corporate structure of the "partnership" (loosely described as "the Page Group") is set out in a "tree diagram" marked for identification as "MFI P1". For present purposes, it is sufficient to note that the plaintiff is the registered proprietor of the Punchbowl property, presently subject to an unregistered, long term lease in favour of a related company (Pages Equipment Holdings Pty Ltd or "PEH") which the defendant caused to be executed on or about 15 June 2016 at a time when, following the death of Mr Page in 2003, he was: (a) the sole director and secretary of the plaintiff; and (b) a director and the secretary of the lessee. The plaintiff, under the control of Mr Page's widow as its sole shareholder, alleges that the defendant, in his own interests, caused the lease to be entered for a below-market rental.
The indebtedness of the Page Group of corporations the ANZ Bank is cross-collateralised. Under the defendant's management of the business, during 2016 the liability of the plaintiff to the Bank was increased by about $1.65 million, and changed from that of one of several sureties to that of a principal debtor. The plaintiff alleges that the defendant, in his own interests, changed the nature and amount of the plaintiff's liability to the Bank by using money of the plaintiff to discharge PEH's indebtedness to the Bank.
The Bank is pressing for the debt of the Page Group owed to it to be paid out. That is a sum in excess of $7 million.
With a view to meeting demands of the Bank, the plaintiff contracted to sell the Punchbowl property to a third party. The contract provides for a sale with vacant possession, with a right of rescission if vacant possession was not available by 16 June 2018. Anticipating an exercise of that right, the purchaser recently commenced separate proceedings against the plaintiff and PEH to restrain any purported exercise of the plaintiff's ostensible right of rescission; to compel PEH to vacate the Punchbowl property; and to enforce the contract for sale.
The defendant (and Mr Thatcher) have a competing aspiration to purchase the property.
For the plaintiff, if not all persons interested in the Page Group, importance attaches to whether (as the plaintiff alleges) the disputed lease can be displaced and whether (as it alleges) the defendant is accountable to the plaintiff, as a fiduciary or otherwise, for the decisions he made subjecting the plaintiff to a long-term lease at an undervalue rental and an increased bank liability.
The proceedings were commenced by a summons filed, on 29 November 2016, on an application by the plaintiff to the duty judge for orders that the defendant deliver up property of the plaintiff and provide information about the conduct of the business under his management. A recurrent theme in the plaintiff's conduct of the proceedings remains a complaint that the defendant has failed to produce books and records of the business necessary to permit his conduct of the business to be audited or sufficient to allow the plaintiff's forensic accountant to prepare an expert report. The state of the defendant's record keeping remains a live issue as he endeavours to contain the plaintiff's case at an interlocutory stage.
An order for pleadings having been made on 16 February 2017, the plaintiff filed a statement of claim on 4 April 2017, to which the defendant responded with a defence filed on 21 April 2017. Since that time progress towards a final hearing has stalled.
[3]
INTERLOCUTORY MOTIONS BEFORE THE COURT
Before the Court are three notices of motion. By a notice of motion filed on 1 November 2017, the plaintiff seeks leave to amend its statement of claim. By a notice of motion filed on 29 January 2018, the defendant applies for a cascade of alternative orders, ranging from an order for summary dismissal of the proceedings to an order for the statement of claim to be struck out. By a notice of motion filed on 16 April 2018, the defendant seeks an order that seven subpoenas for production which the plaintiff, on 4 April 2018, caused to be issued be set aside.
The first two motions were the subject of a joint hearing on 23 March 2018, during which I expressed the view that the plaintiff's then draft amended statement of claim was defective in form. Counsel for the plaintiff sought, and obtained, an adjournment to recast the proposed pleading.
After the proceedings had been adjourned for that purpose, the plaintiff caused its seven subpoenas to be issued, in each case directed to a corporation in the Page Group. The defendant responded by filing his motion for them to be set aside.
At a directions hearing held on 10 May 2018, orders were made for the third notice of motion to be heard together with the first two. As it happened, a consensus emerged at the adjourned hearing (on 22 June 2018) that a determination of the third motion should await a determination of the first two.
[4]
THE DEFENDANT'S ALLEGATION OF ABUSE OF PROCESS
During the first phase of the hearing of the motions (on 23 March 2018) the defendant strongly advanced a contention that the plaintiff's then claims for relief (limited to claims for compensation) were an abuse of the processes of the Court because, he alleged, they were advanced for the ulterior (improper) purpose of putting pressure on the defendant to procure from PEH, for the benefit of the plaintiff, a surrender of the disputed lease. The defendant's response to that contention in submissions exposed to view a case which the plaintiff now seeks, in its re-drafted statement of claim, to advance specifically.
The plaintiff alleges that it only exchanged contracts for the sale of the Punchbowl property, and agreed to a new ANZ Bank facility, after it had secured from the defendant, on behalf of PEH, an agreement that PEH would surrender its lease and vacate the property, giving rise to a claim in estoppel, if not contract, when PEH (under the control of the defendant) refused to do so. The defendant denies that he ever gave to the plaintiff, or the Bank, an unqualified assurance that PEH would surrender its lease. He contends that he agreed that PEH would vacate the property if only if it could re-locate to an alternative property near Moorebank, a contingency which failed to occur.
The defendant's characterisation of the plaintiff's claim for a surrender of the lease as futile is misdirected. There is no deficiency in the plaintiff's proposed pleading of its claim in estoppel. There is a triable issue of fact about the content and timing of the defendant's assurances about surrender of the lease.
I am not satisfied that there is anything sinister in delays attending the pleading of the plaintiff's claim for the lease to be surrendered. Whatever their variant forms, the plaintiff's claims for relief have been, and remain, directed towards obtaining a proper accounting between the different interests of the Page Group. This is a practical necessity in order, both, to satisfy the ANZ Bank's demands for repayment of moneys owed to it, and to disengage the several interests of the families in the Group. The plaintiff's claims cannot be summarily dismissed, or stayed, as an abuse of process consequent upon a finding of improper purpose not made. The plaintiff's claim for surrender of the lease is now explicit, and pleaded in detail.
Inclusion in the plaintiff's proposed pleading of a claim for surrender of the disputed lease by PEH (and other relief against PEH) has prompted the plaintiff to seek the joinder of PEH as a second defendant. No objection has been taken to this.
[5]
THE PLAINTIFF'S ALLEGATIONS OF BREACH OF DUTY
The plaintiff's application for leave to amend its statement of claim, and the defendant's application for an order that the statement of claim be struck out have been argued, ultimately, by reference to the plaintiff's most recent form of pleading: a document styled "amended statement of claim" filed on 9 April 2018. That document was filed subject to a determination of the competing motions in due course. Absent a grant of leave to amend, it cannot stand as a pleading. It has been treated by the Court, and the parties, as a draft pleading.
Some amendment of the document is, in any event, required because it includes (in paragraphs 66-74) an allegation of unpaid rent superseded by events. The plaintiff concedes that, in recent times, the defendant has attended to payment of rent earlier alleged to have been unpaid. Omission of paragraphs 66-74 of the document may be accompanied by consequential amendments to those paragraphs of the draft pleading (32-42) which plead lease provisions relating to rental and ancillary obligations which now appear to be otiose.
The principal complaint of the defendant is that the plaintiff's draft pleading (in paragraphs 47-52 and 116-128) pleads breaches of fiduciary duties, and breaches of comparable statutory duties under the Corporations Act 2001 Cth, which do not (as he contends they should) allow for the fact that the plaintiff was but one corporation in a group of corporations and, as a director of both the plaintiff and PEM, he was obliged to take into account the interests of the Page Group as a whole.
At a final hearing of the proceedings the observations of Mason J in Walker v Wimborne (1976) 137 CLR 1 at 6-7, about reconciliation of the separate interests of companies in a corporate group, are likely to play a prominent role.
However, there is no necessity for prolonged debate about them at this interlocutory stage of the proceedings. The plaintiff's draft statement of claim sufficiently alleges breaches of duty (focusing, essentially, upon an allegation of entry into the disputed lease at an undervalue rent and an allegation of payment of the plaintiff's money out for the benefit of PEM), to which the defendant can plead the broader context upon which he relies.
[6]
SUNDRY OBJECTIONS TO THE PLAINTIFF'S CASE AND PLEADING
The defendant has advanced sundry complaints about the form of the plaintiff's draft amended statement of claim beyond his complaints about the proceedings being maintained for an improper purpose and imprecision in the pleading of breaches of duty alleged against him.
His complaint about imprecision in the plaintiff's allegation that the disputed lease was entered for a rent at less than market value has been addressed in the plaintiff's current draft pleading. There is now (in paragraphs 43-44) an allegation quantifying market value, as an aid to the allegation of rent set at less than market value.
The defendant's underlying complaint that the plaintiff has not, at this stage of the proceedings, substantiated its allegation by the production of evidence is misdirected. The plaintiff's pleading is not defective. It is not incumbent upon the plaintiff, at this stage, to support the allegation with evidence merely because the defendant calls upon it to do so on the hearing of a summary dismissal application. Nevertheless, in the course of the hearing, the plaintiff has pointed to evidentiary foundations for its allegation, sufficient to dispel any apprehension that the allegation has been made without a factual foundation. Whether the rent set by the disputed lease was, or was not, less than market value is a question of fact for determination at a final hearing.
Contrary to submissions of the defendant, the plaintiff's draft pleading sufficiently pleads (in paragraphs 83-115) its allegation that PEH (through the defendant and its solicitors) agreed to surrender the disputed lease, although it does not (as it should, if a claim in contract, as well as estoppel, is to be asserted) plead an element of consideration. The plaintiff's allegation (in paragraph 97) of a "binding agreement" is insufficient to support a claim in contract without the question of consideration being addressed. To the extent that the plaintiff seeks to maintain a claim in contract, it should plead the element of consideration. Absent an allegation of consideration, the current pleading cannot rise higher than a claim in estoppel.
Contrary to the defendant's submissions, the plaintiff's draft pleading articulates the basis upon which the plaintiff asserts a claim for moneys had and received referable to the defendant's application of the plaintiff's funds to pay out the PEH's indebtedness to the ANZ Bank. The allegation of "moneys had and received" (in paragraph 121) relates back to the allegation of a payment of the plaintiff's funds for the benefit of PEH (paragraph 118) and forward to an implicit allegation (in paragraphs 122-123) that PEH has retained those funds for its own benefit without cause. The plaintiff's reliance upon a cause of action of "moneys had and received" is consistent with characterisation of the moneys (in paragraph 121) as "repayable on demand". Even allowing for the possibility of debate about the significance of the nature of the payment out of funds of the plaintiff for the benefit of PEH, the factual matrix of the plaintiff's restitutionary claim is sufficiently pleaded for the defendants to know the nature of the case for which the plaintiff contends.
[7]
CONCLUSION
In my opinion, the plaintiff's current draft pleading is sufficient for the proceedings to move towards a final hearing, subject to two qualifications:
1. as the plaintiff has proposed, the draft should be amended to omit the plaintiff's otiose allegation of non-payment of rent.
2. if the plaintiff seeks to maintain a claim in contract (in addition to a claim in estoppel) referable to the alleged agreement for surrender of the disputed lease, the pleading should include an allegation that the agreement was supported by consideration.
The plaintiff should be allowed an opportunity to amend its statement of claim substantially in accordance with the document filed on 9 April 2018. However, in order to maintain the regularity of court process, that document should be formally ordered to be struck out.
Accordingly, in disposition of the notices of motion respectively filed on 1 November 2017 and 29 January 2018, I to make the following orders:
1. ORDER that Pages Equipment Holdings Pty Ltd, ACN 085 072 297, be joined as a defendant in these proceedings.
2. ORDER that the defendants be designated as follows:
1. Attila Boros is designated the first defendant.
2. Pages Equipment Holdings Pty Ltd is designated the second defendant.
1. ORDER that the document styled "amended statement of claim" filed on 9 April 2018 be struck out.
2. ORDER that the plaintiff be granted leave to amend its statement of claim, substantially in the form of the "amended statement of claim" filed on 9 April 2018, omitting the plaintiff's allegation of unpaid rent and (if the plaintiff be so advised) including an allegation that the alleged agreement for surrender of lease was supported by consideration.
3. ORDER that the plaintiff file and serve no later than 9 July 2018 any amended statement of claim filed pursuant to that grant of leave.
4. ORDER that the defendants file and serve no later than 30 July 2018 any defence they propose to file in answer to that amended statement of claim.
5. ORDER that the defendant's notice of motion filed on 29 January 2018 be dismissed.
I will hear the parties as to the costs of the notices of motion filed on 1 November 2017 and 29 January 2018; arrangements for hearing of the notice of motion filed 16 April 2018; and directions generally.
[8]
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: 29 June 2018