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[2009] NSWSC 130
Supreme Court of NSW
2009-03-11
White J, Windeyer J
Original judgment source is linked above.
CITATION : Power v Ekstein & 5 Ors [2009] NSWSC 130
CATCHWORDS : Application to amend statement of claim - complex claims of breach of trust and oppression in management of companies - whether allegations disclose arguable causes of action - whether leave should be refused on ground that causes of action are barred by the Limitation Act - whether leave should be refused in order to separate issues - leave granted
Family Provision Act 1982 (NSW) LEGISLATION CITED : Corporations Act 2001 (Cth) Limitation Act 1969 (NSW) Civil Procedure Act 2005 (NSW)
Power v Ekstein [2000] NSWSC 905 Middleton v O'Neill (1943) 43 SR (NSW) 178 Barnes v Addy (1874) LR 9 Ch App 244 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 Oates v Consolidated Capital Services Ltd (2008) 66 ACSR 277 CASES CITED : Re Consolidated Nickel Mines Ltd [1914] 1 Ch 883 Club Flotilla (Pacific Palms) Ltd v Isherwood (1987) 12 ACLR 387 Gosford Christian School Ltd v Totonjian (2006) 201 FLR 424 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 Short v Crawley (No. 30) [2007] NSWSC 1322 Short v Crawley (No. 40) [2008] NSWSC 1302 Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 Dean-Willcocks v Air Transport International Pty Ltd [2002] NSWSC 525; (2002) 55 NSWLR 64
TEXTS CITED : R P Meagher, J D Heydon & M Leeming, Meagher Gummow & Lehane's Equity Doctrines & Remedies, 4th ed LexisNexis Australian Corporation Law Principles and Practice
Kaaren Jarmila Power PARTIES : v Paul George Ekstein & 5 Ors
Plaintiff: D A Smallbone COUNSEL : 1st-6th Defendants: T Rickard Mr Ward-Harvey - D Fagan SC
SOLICITORS : Plaintiff: Holman Webb 1st-6th Defendants: Horowitz & Bilinsky
IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION
6590/04 Kaaren Jarmila Power v Paul George Ekstein & 5 Ors JUDGMENT 1 HIS HONOUR: This is an application for leave to amend the statement of claim. The controversy has a long history. 2 The proceedings concern the estate of the late Otto Ekstein who died on 13 May 1992. He was the trustee of a trust known as the Otto Ekstein Family Trust. Certain questions concerning the trust deed and the will of Otto Ekstein were decided by Windeyer J on 14 September 2000 (Power v Ekstein [2000] NSWSC 905). His Honour recorded that the beneficiaries of the trust included Paul Ekstein and Helen Ekstein, being children of Otto Ekstein's first marriage; Misha Ekstein, a son of his second marriage; Kaaren Jarmila Jones (the plaintiff) his step-daughter, being the daughter of his second wife; and his third wife and widow, Sonja Ekstein. 3 The plaintiff is a major beneficiary under Otto Ekstein's will, being entitled to 50 per cent of the residuary estate subject to certain other bequests. Following Otto Ekstein's death, Mr Paul Ekstein became trustee of the trust. He is the first defendant. Clause 25 of the trust deed, as amended, provided: " Notwithstanding anything to the contrary in this deed expressed upon the death of the said OTTO EKSTEIN the Trustee shall as far as possible give effect to the wishes of the said OTTO EKSTEIN in regards to the affairs and management of the O Ekstein Family Trust as evidenced by his last Will and Testament. " 4 On 17 April 1991, probate of Otto Ekstein's will was granted to Mr Paul Ward-Harvey, solicitor. After certain bequests, the will provided as follows: " 9. I DIRECT that the following provisions shall apply in relation to the property known as 148 Milson Road Cremorne (hereinafter referred to as "the Cremorne property") owned by the O. EKSTEIN FAMILY TRUST (hereinafter referred to as "The Trust") (a) My said wife SONJA EKSTEIN shall have the right during her lifetime (i) to reside in Flat 2 free of rent and use all the contents therein (ii) to receive all rental income for Flat 1 subject to payment of Municipal Rates and Water Rates together with the costs of maintaining the property (except replacements of a capital nature or repairs of a structural nature which shall be paid for by the Trust) (b) My said daughter HELEN EKSTEIN shall have the right during her lifetime to reside in Flat 3 rent free (c) Upon the death of my said wife the rental income from Flat 1 shall be paid to the Trust AND my said daughter KAAREN JARMILLA EKSTEIN shall have the right during her lifetime to reside in Flat 2 free of rent or to receive the rental income therefrom on condition that she contribute two-fifths of the outgoings (d) Upon the death of my said daughter KAAREN JARMILA EKSTEIN the Cremorne property shall subject to any life interests created pursuant to clauses 9(a) and 9(b) be vested in my said son PAUL GEORGE EKSTEIN UPON TRUST for such of his children and children of my said daughter KAAREN JARMILLA EKSTEIN as survive my said daughter KAAREN JARMILA EKSTEIN and reach the age of twenty-eight (28) years and if more than one in equal shares as tenants in common 10. (a) I GIVE DEVISE AND BEQUEATH the rest and residue all the real and personal estate of whatsoever nature and kind regardless of the legal entity in which it is vested including property owned by the Trust and wheresoever situate to which I shall be entitled to or over or in relation to which I shall any power of disposition at the time of my death to divide into two shares as follows (i) as to one undivided one half share to my said daughter KAAREN JARMILA EKSTEIN PROVIDED THAT should she predecease me to such of her children as survive her and if more than one in equal shares as tenants in common PROVIDED FURTHER THAT if she predeceases me without leaving children as aforesaid then to the Trust (ii) as to the other one half share (I) as to two-thirds of the income thereof to my said son PAUL GEORGE EKSTEIN UPON TRUST for my said daughter HELEN EKSTEIN (II) as to one half of the capital thereof to my said son PAUL GEORGE EKSTEIN UPON TRUST for such of his children as survive my said daughter HELEN EKSTEIN and reach the age of twenty-eight (28) years and if more than one in equal shares as tenants in common and (III) as to the remainder thereof to my said son PAUL GEORGE EKSTEIN
... (c) I DIRECT my Trustee that in determining the values of my residuary estate the following principles be adopted (i) formal valuations be applied for by my Trustee (ii) the undivided one-half share bequeathed to my said daughter KAAREN JARMILA EKSTEIN shall as far as possible exclude the assets of the Trust and shall include the property known as 8 John Street Avalon and a balancing amount either be paid to her or be paid by her in order to ensure that my wishes are fulfilled
... E. Clause 13(c) and 13(e) are of no effect. Clause 13(e) cannot be given effect to. Clause 13(c) only refers to clause 11 which presumably is a mistake and means clause 10. In any event it appears to relate only to trust assets and assets of private companies and insofar as it so relates has no effect on the executor of the will. Insofar as it may relate to assets of the deceased it is likely to be ineffective, but I do not think it necessary to make any declaration about it unless some further argument is addressed to me on that aspect. "
37 The first sentence in para [32E] is a summary of the executor's claim. No declaration was made as to whether clause 13(c) or (e) could be given any effect. There is no res judicata. In some senses it is undoubtedly true that it is not possible for the executor to have treated assets owned by a company or by the trustee of the trust as assets of the estate. His Honour was not asked to address the contention the plaintiff now seeks to raise. Whether or not his Honour's observations give rise to an issue estoppel, or other form of estoppel, they do not preclude the proposed amendment if it is otherwise reasonably arguable. No argument was developed for the defendants that the plaintiff's contention is not reasonably arguable. 38 Mr Smallbone for the plaintiff submitted that by his will, Otto Ekstein purported to dispose both of property which he owned and property which was owned by the legatees. He submitted that this brought into play the equitable doctrine of election that where a testator bequeaths his own property to a legatee and also purports to bequeath to a third party property which is owned by the legatee, the legatee can only retain his or her property with which the testator purported to deal, and also obtain the legacy under the will, by paying compensation to the third party to whom the testator intended to bequeath the legatee's property of a sum which is the lesser of the value of the legacy or the value of the legatee's property with which the testator purported to deal (R P Meagher, J D Heydon & M Leeming, Meagher Gummow & Lehane's Equity Doctrines & Remedies, 4th ed at [39-005] ff). Mr Smallbone submitted that clause 13(c) purportedly required the executor to disregard the unequal formal shareholdings of Paul Ekstein, Helen Ekstein and the plaintiff in the private companies and clause 13(e) required him to disregard the formal ownership of assets including those of the estate, such that the shareholdings of Paul Ekstein, Helen Ekstein and the plaintiff and their interests as beneficiaries in the trust were to be treated as property to be distributed in accordance with clause 10(a) (the reference in clause 13(c) to clause 11 of the will appears to be a mistaken reference to clause 10). 39 The question is not whether the plaintiff's contention is right or wrong. In my view it is reasonably arguable. 40 This contention was not raised by the plaintiff prior to the service of the proposed amendments. It is possible that the lateness with which the contention is raised may give rise to a defence of laches. The defendants also foreshadowed a defence of acquiescence in relation to the complaints concerning the distribution of estate and trust assets. The defendants submitted that the plaintiff had not objected to the proposed distribution, but there was no evidence to that effect and it was not common ground. In any event, the existence of possible defences of laches or acquiescence is not a reason to refuse leave to amend the statement of claim. 41 Objection is taken by the defendants to proposed paragraphs 30.2, 30.4, 30.8 and 30.10. In those paragraphs the plaintiff alleges against Paul Ekstein that he was obliged by clause 25 of the trust deed and the wishes expressed in the will to co-operate with Mr Ward-Harvey in causing the shares in Boucher & Muir to be valued in accordance with the provisions of clause 2 of the partnership agreement to cause the shares in Elysee, Boucher & Muir Holdings, HP Holdings and Newton & Co to be valued on a net asset backing basis. Mr Rickard, who appears for the present defendants, submitted that the plaintiff fails to specify what it was the first defendant failed to do which he was required to do, and says that on the plaintiff's pleading it was the executor, not Paul Ekstein, who had the duty so to value the shares. 42 I consider that these paragraphs are sufficiently pleaded and disclose a reasonably arguable claim. The plaintiff's allegation is that Paul Ekstein did nothing by way of co-operation or assistance. It is apparent from paragraph 32D.15 that the plaintiff alleges that Paul Ekstein asserted that the value of the shares was nominal and suggested to Mr Ward-Harvey that they be distributed in specie. It is reasonably arguable that having regard to clause 25 of the trust deed and the orders of Windeyer J that the first defendant was required to co-operate with Mr Ward-Harvey in valuing the shares so as to prepare a scheme to give effect to the wishes of Otto Ekstein. 43 Objection is taken to additional allegations in paragraphs 32D.10, 32D.12, 32D.13 and 32D.15 that the distribution of assets made on or about 7 July 2003 was a breach of trust. Paragraph 32D.10 alleges that the property at 85 Bobbin Head Road, Turramurra owned by Elysee was undervalued because it was valued by capitalising rental income and that rental income paid by the first defendant was not disclosed to the valuer or taken into account and that the valuation ought to have been adjusted to a figure calculated as if Paul Ekstein had been in occupation under a "proper lease" at market rental. Mr Rickard submitted that this was an unstated allegation of fraud which needed to be specifically pleaded and was embarrassing as a mere particular breach of trust. Fraud is not pleaded in this paragraph, nor is it necessarily implied. The allegation is pleaded with sufficient particularity not to be embarrassing. 44 The objection to the amendment to the particulars in paragraph 32D.12 in substance is that the plaintiff is pleading evidence and not facts. She alleges that a liability to the estate was brought to account in calculating the assets of the trust, but has not been recognised by the executor as an asset of the estate. However, whether or not such an alleged liability of the trustee to the estate, and hence presumably asset of the estate, has been recognised by the executor is itself a material fact to the claim for an account and an order for general administration. 45 Amendments to particular 32D.13 are objected to. The existing particulars allege that in calculating the value of shares in Elysee, Paul Ekstein, inter alia, failed "to explain why directors' fees were justified". The amendment is to allege that he "failed to explain why directors' fees and management fees were justified. Those fees should have been added back to the assets of the company." The objection is that no basis is alleged for the obligation to add back such fees as assets of the company. However, later allegations in paragraphs 75.1 to 75.6 do propound that basis and allege the quantum of fees in question. It is alleged that the articles provide that the remuneration of directors is to be determined from time to time by the company in a general meeting and no general meetings have been held or resolutions passed for the payment of fees. It is alleged that the first defendant was at all material times in effective practical control of Elysee, although not validly appointed as a director from at least 31 August 1993. It is alleged that he breached his fiduciary duty owed to Elysee by paying to himself money of Elysee purportedly as management fees and director's fees. These allegations are sufficiently pleaded. 46 Paragraph 32D.15 has been amended to include an allegation that the in specie distribution of shares in the private companies made by the executor was done at the suggestion of the first defendant. It is alleged that: " The intention of the first defendant, which he communicated to the seventh defendant (Mr Ward-Harvey) prior to them executing the scheme (for distribution of assets of the estate and the trust) was that the effect of distribution in specie would be to deprive the plaintiff of any effective benefit or value in respect of the shares. " 47 Objection was also taken to an additional allegation that: " No adjustment was made as it should have been for the application since 1992 of income of and emoluments from Boucher & Muir Pty Ltd hereinafter alleged, which was not in accordance with the wishes expressed in the will and which ought to have been added back to the value of the company's assets for the purpose of valuation. " 48 The objection taken is that the amendment "asserts a fraudulent intention of the first defendant by reference to undisclosed evidence of an admission, which should be specifically pleaded and is embarrassing as and [sic] not properly the subject of a particular of breach of trust. Additionally it claims 'income and emoluments' of Boucher & Muir Pty Ltd since 1992 or to have been added back without specifying the amounts and how they arose." 49 The defendants know of the alleged admission on the basis of which the pleader alleges that it was the first defendant's intention to deprive the plaintiff of any effective benefit or value in respect of the shares. On this application the plaintiff adduced evidence that on 15 October 2002 Mr Ward-Harvey produced documents under subpoena which included a letter from Andrews Solicitors on behalf of Paul Ekstein to Mr Ward-Harvey dated 27 November 2002. The evidence of the plaintiff's solicitor is that until the document was produced on subpoena, he had not been provided with the correspondence. It appears from the letterhead of Andrews Solicitors that Mr Ekstein is a partner of that firm and it might be inferred that he was the author of the letter. He wrote: " I note we are to meet on Tuesday next, 3 December to prepare draft terms to be put before the court. These terms ... would merely combine the net assets of the trust and the estate, divide those in half and provide for Kaaren's payment from the combined assets. ... It would not contain any premium for the transfer of the private company shares but would include the transfer of half of those shares in specie to Kaaren. ... The result of such orders would be that Kaaren would ... have a small minority interest in various ongoing private companies without the power to control, influence or direct either the dividend policy of those companies or their winding-up. It appears that Kaaren and her advisors do not appreciate this.
... " 50 It would not be a proper pleading to plead the fact of the alleged admission. Nor does the pleader do so. He pleads facts about which, in due course, it will be said an admission has been made. The fact that the alleged admission is "undisclosed" in the pleading is immaterial. It would be improper for the admission to be pleaded. 51 The defendants' submission may be that the pleader ought to have expressly alleged fraud. However, whilst fraud must be pleaded specifically and with particularity, it does not appear that fraud is an element of the cause of action pleaded in para 32. In Middleton v O'Neill (1943) 43 SR (NSW) 178 Jordan CJ said (at 184): " It is well established that if a party intends to set up fraud, fraud must be clearly charged: Davy v Garrett (1877) 7 Ch. D. 473 at 489; but the use of the word 'fraud' is neither necessary nor sufficient for this purpose. Thus, a statement of claim is demurrable if it merely alleges fraud without pleading the facts alleged to constitute it: Wallingford v Mutual Society (1880) 5 App. Cas. 685 at 701; Lawrence v Norreys (1890) 15 App. Cas. 210 at 221; In re Rica Gold Washing Company (1879) 11 Ch. D. 36. On the other hand, if facts amounting to fraud are plainly alleged it is no defect in the pleading if the word 'fraud' is not used: M'Calmont v Rankin (1849) 8 Hare 1 at 15-16; Davy v Garrett; Reddaway v Banham [1896] A.C. 199 at 219; Angelides v James Stedman Hendersons Sweets Ltd (1927) 40 C.L.R. 43 at 82; 20 Austn Digest 847. It has been said, also, that if a plaintiff bases his case solely upon fraud it is not open to him, if he fails in establishing the fraud, to pick out from the allegations of the statement of claim facts which might, if not put forward as proofs of fraud, have yet warranted the plaintiff in asking for relief: Hickson v Lombard (1866) L.R 1 H.L. 324 at 336; Brindley v Scott (1902) 2 S.R. (Eq.) 49; 9 Austn Digest 290. But this does not follow from the mere fact that a charge of fraud is made; the statement is applicable if fraud is a necessary element of the type of wrong complained of. If, however, the facts alleged, together with the element of fraud which is included, would entitle the plaintiff to relief, and the same facts minus the fraud element would also entitle him to relief, although not necessarily the same relief, the latter form of relief may in a proper case be granted if everything but fraud is made out. I respectfully adopt the statement of Harvey J, in Adey v Fisher (1914) 14 S.R. 407 at 410; 9 Austn Digest 259: ' The real principle seems to me to be that the Court must be satisfied that the defendant had to address himself to those issues which are material to the relief sought, and that the parties have addressed their evidence to these issues' ..." 52 I do not consider the proposed additional allegations against Paul Ekstein are objectionable on the ground that the word "fraud" is not used. However, later in these reasons I address the cognate allegations in the proposed para 34.5(H) against Mr Ward-Harvey. I there say that the plaintiff needs to make clear whether the only claim against Mr Ward-Harvey is his acting as principal, or whether it is also to be alleged that he is liable as an accessary under the second limb of Barnes v Addy (1874) LR 9 Ch App 244. If it is to be alleged that Mr Ward-Harvey is liable as an accessary by providing knowing assistance to a dishonest and fraudulent design on the part of the trustee (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [160], [163]), then the allegation of a dishonest and fraudulent design should be specifically pleaded. 53 The facts on the basis of which the plaintiff alleges that the first defendant ought to have made an adjustment for the application since 1992 of income and emoluments from Boucher & Muir are specifically pleaded at paras 72.1-72.94. 54 Objection is taken to proposed paras 34.1-34.4. In the existing paragraph 34 the plaintiff pleads that the first defendant breached clause 25 by not acting in accordance with the wishes of Otto Ekstein expressed in his will by not distributing to the plaintiff 50 percent of the distributed income of the trust. The claim is made for the period from 1992 to 2003. The defendants say that the claims are statute-barred by s 48 of the Limitation Act. 55 In Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 533-534, the High Court warned against deciding limitation questions in interlocutory proceedings. The possibility of a successful defence to the claim or part of it under the Limitation Act is not a reason for refusing leave to amend. If the first defendant pleads the Limitation Act as an answer to the claims, or some of them, the plaintiff may have arguable answers which could be pleaded by way of reply to such a defence. In this connection it is relevant that the plaintiff alleges that she was deprived of information in relation to the affairs of the trust. 56 I do not consider that the amendments add a new cause of action to that contained in the original pleading. As noted above, the statement of claim includes the allegation that the first defendant acted in breach of trust by not distributing 50 percent of the distributed trust income to the plaintiff. The additional paragraphs provide particulars of that allegation. In any event, even if the amendments did add a new cause of action, they arise out of the same, or substantially the same, facts as those giving rise to the existing cause of action and claim for relief in the statement of claim. Where an amendment is made under s 65 of the Civil Procedure Act 2005 (NSW), it is taken to have effect as from the date on which the proceedings were commenced unless the Court otherwise orders. I decline to order otherwise. 57 Objection is taken to paras 44(e) and (f) on the ground that allegations of misappropriation from corporate defendants have not been specifically pleaded or properly particularised. Standing on their own, those paragraphs are certainly deficient. However, the pleading has to be read with the specific allegations concerning Boucher & Muir in paragraph 72.1 and following and in relation to Elysee in para 73 and following in which those matters are specifically pleaded. The effect of paras 44(e) and (f) is to charge the defendant with breach of his duty as trustee of the Otto Ekstein Family Trust in relation to those matters. Paras 44(e) and (f) should be clarified by the provision of particulars, which may be done by cross-reference to other paragraphs in the pleading. 58 Objection is taken to proposed para 44(g). The objection is in the same category as that taken to para 32D.15. The paragraph is sufficiently pleaded. 59 The defendants object to paragraph 50.1. In that paragraph the plaintiff pleads: " By a deed poll dated 21 January, 2004 the first defendant has purported to: (a) expropriate and convert to his own use as trustee for Tara Ekstein, Brendan Ekstein, Matthew Ekstein and Joseph Power the plaintiff's interest in the property at 148 Milson Road, Cremorne and; (b) make other provision inconsistent with the wishes expressed in the will of Otto Felix Ekstein." 60 I do not understand the pleader to be using the word "convert" in its technical sense as referring to the tort of conversion. It appears to add nothing to "expropriate". There is no reason that a person acting in capacity as trustee cannot convert or expropriate property. The deed appears to have been brought into existence to confirm the effect of the distribution of July 2003 about which the plaintiff complains elsewhere in the pleading. I do not think that the defendants will be taken by surprise by the allegation in para 50.1(b). However, I agree that the plaintiff ought to identify the respects in which she alleges that provisions in the deed are inconsistent with the wishes expressed in the will of Otto Felix Ekstein. In other words, particulars should be provided of para 50.1(b), even if that is by cross-reference to other paragraphs of the pleading. 61 Provisions to the same effect as the deed dated 21 January 2004 were made in a deed made 21 September 2004 to which Mr Ward-Harvey was also a party. The same allegations are made in para 50.2 in respect of that document and the same objections are taken. I will allow the amendment in para 50.2 but direct that particulars of para 50.2(b) be provided as with para 50.1(b). 62 The remaining proposed amendments so far as they affect the existing defendants expand the existing allegations of improprieties in the administration of the affairs of Boucher & Muir Holdings, Boucher & Muir, Newton & Co and HP Holdings. Boucher & Muir Holdings 63 In the existing statement of claim the plaintiff complains that on 29 March 2004, the directors of Boucher & Muir Holdings resolved that various shares in that company be compulsorily transferred to Paul Ekstein and to David Frish. Included in the shares the subject of the alleged resolution were eight "B" class shares held by the plaintiff. The plaintiff alleges that the resolution and purported subsequent transfer of her shares were invalid for various reasons. These include that notice provision under the articles of Boucher & Muir Holdings for such a resolution were not complied with. The plaintiff alleges that in passing the resolution the directors of Boucher & Muir Holdings breached their fiduciary duty owed to members of the company and committed a fraud on the minority. She alleges that no dividends have been paid by any of the companies to her or to the executor of the estate. She alleges that no fair or reasonable provision has been made for members of the companies to realise their investment by sale or other disposition of their shares at a fair value and that the plaintiff has not been provided with reasonable information in relation to the financial position and affairs of those companies. 64 The proposed amendments in relation to Boucher & Muir Holdings expand on these allegations. The plaintiff alleges that the article pursuant to which the transfer was purportedly made did not on its true construction authorise the compulsory acquisition of her shares. This is elaborated in various ways to which it is not necessary to refer. The plaintiff alleges that Messrs Paul Ekstein, Sydney Frish and David Frish, the latter two being proposed additional defendants, acted in fraud of the affected shareholders including the plaintiff. Allegations are made to support a claim for a winding-up on the just and equitable ground or for relief in respect of allegedly oppressive conduct. Further allegations are made in relation to whether the purported transfer of the plaintiff's shares was registered. The plaintiff alleges that she was refused access to the share register of Boucher & Muir Holdings. She alleges that Paul Ekstein set out to ensure that she would get no benefit from her shareholding in Boucher & Muir and to ensure that her shares would be a worthless minority interest. 65 In para 68.21 of the proposed amended statement of claim the plaintiff alleges that: " 68.21 In the premises, (a) it is probable that the third defendant will not, unless the plaintiff brings proceedings on its behalf, bring or properly take responsibility for proceedings against the said Paul George Ekstein and Sydney George Frish and David Victor Frish and Boucher & Muir Pty Limited and Newton & Co Pty Limited in respect of the conduct concerning the affairs of Boucher & Muir Pty Limited and Newton & Co Pty Limited affecting the third defendant as a shareholder in those companies; (b) the plaintiff in seeking leave to bring such proceedings on behalf of the third defendant is acting in good faith, (c) it is in the best interests of the third defendant that the plaintiff be granted leave to commence proceedings on its behalf against the said Paul George Ekstein and David Victor Frish in respect of the matters aforesaid, (d) at least 14 days prior to the filing of this amended statement of claim and the amended originating process the plaintiff gave notice to the third defendant of her intention to apply for leave to commence proceedings on its behalf and of the reasons for so applying, and (e) leave ought be give leave [sic] to the plaintiff to bring proceedings on behalf of the third defendant against the said Paul George Ekstein and Sydney George Frish and David Victor Frish and Boucher & Muir Pty Limited and Newton & Co Pty Limited in respect of the matters aforesaid. " 66 All the matters complained about in para 68 leading to the contentions in para 68.21 relate to alleged breaches of duty owed to the plaintiff, or to particular shareholders in the company, or misconduct in relation to the plaintiff. None of the allegations in para 68, if substantiated, would lead to claims which the company, as distinct from its shareholders, might have against the directors or persons acting as directors. The defendants submit that the plaintiff's claim for leave to bring proceedings on behalf of the company cannot properly be brought as a claim for final relief, but must be sought by way of interlocutory relief, presumably pursuant to ss 236 and 237 of the Corporations Act. I deal with the same submission later in these reasons in relation to claims the plaintiff contends the companies have against Paul Ekstein, Sydney Frish and David Frish. The allegations in paras 55-68 may support a claim for relief by the plaintiff in her personal capacity, but do not support a claim for relief by the company against the first defendant and the proposed additional defendants. The fact that the plaintiff complains that other shareholders were also mistreated, and this is arguably relevant to her claim for oppression, does not mean that the pleading discloses a cause of action by the company. No question arises of the plaintiff having leave to bring proceedings on behalf of Boucher & Muir Holdings against the persons acting as its directors in relation to the conduct of its affairs. As the plaintiff is a shareholder of Boucher & Muir and Newton & Co and seeks to bring claims on behalf of those companies against Paul Ekstein, Sydney Frish and David Frish there is no need for her to seek leave to bring an action on behalf of Boucher & Muir Holdings to enforce what she contends to be its entitlement as a shareholder of those companies to seek leave to bring an action by those companies against the persons acting as directors of those companies. Although no argument was addressed to this issue it would appear in any event that the decision in Oates v Consolidated Capital Services Ltd (2008) 66 ACSR 277 would preclude the plaintiff using ss 236 and 237 to make a derivative claim on behalf of Boucher & Muir Holdings, not to enforce any cause of action it has, but to seek to cause it to bring a derivative claim to enforce causes of action of companies of which it is a shareholder. Accordingly, I refuse leave to file the amended statement of claim including para 68.21. 67 Other objections are made to particular paragraphs, but it is unnecessary to deal with them in detail. Contrary to the defendants' submissions, the pleading discloses the legal foundations for its claims, is not frivolous or vexatious, and pleads specifically the facts giving rise to the claims for oppression or for a winding-up on just and equitable grounds. There is no substance to the allegation that if the matters pleaded are established, they would not arguably found the claims for relief. 68 The defendants contend that there is no utility in the plaintiff pleading claims in respect of the alleged passing of a resolution, presumably, the resolution of 29 March 2004 because "the defendants have already pleaded [that the resolution] was never passed and accepted and is not operative". Accordingly, the defendants say that the pleading has no utility. I do not understand this submission. It may be that some or all of the plaintiff's allegations are or will be admitted, but that is no reason for refusing leave to amend. The plaintiff may be entitled to say that the passing and acting on a resolution which the existing defendants admit to be invalid is a reason for granting relief under s 233 of the Corporations Act. This is part of the plaintiff's allegation that Paul Ekstein has endeavoured to ensure that she receive no value from her minority holding in the proprietary companies which she alleges is controlled by him and David Frish. Boucher & Muir 69 Paras 72.1-72.122 contain new allegations in relation to the conduct of the affairs of Boucher & Muir. In their written submissions the solicitors for the defendants assert that many of these paragraphs contain allegations that are embarrassing, irrelevant, frivolous, untenable, vague, lacking particularity, or which otherwise have no legal foundation. The written submissions did not seek to demonstrate the basis for these assertions. To a large extent no attempt was made in oral submissions to justify these assertions. I will confine myself to those submissions where the defendants sought to demonstrate the correctness of their assertions. 70 The defendants' primary case was that the allegations concerning the conduct of the companies should not be joined to the case concerning a breach of trust. I deal with that later in conjunction with the similar submission advanced for Mr Ward-Harvey. 71 One of the allegations addressed in oral submissions is that since at least 31 December 1993 Boucher & Muir has had no directors. Counsel for the defendants submitted that it was "frivolous, vexatious and entirely untenable to contend that a company can have no directors, without more." The allegation is not made "without more". The plaintiff alleges that the articles required directors within two months of their appointment to acquire at least ten "A" class shares. The plaintiff alleges that the persons who purported to act as directors were not validly so appointed because they did not have the requisite shareholdings at various times. The plaintiff also pleads that the effect of the articles is that a general meeting is required to be held every year and one-third of the directors for the time being must retire from office each year. The plaintiff alleges that no general meetings have been called since at least 28 October 1993 and that by the operation of certain specified articles, the company has had no directors. The plaintiff also alleges that by not later than 31 August 1992 there ceased to be, if there were then, a sufficient number of directors of Boucher & Muir to form a quorum and that the remaining directors had no powers other than to summon a general meeting of the company. Mr Rickard for the defendants did not explain why it was entirely untenable that a company could have no directors. He referred to no authorities. Authorities such as Re Consolidated Nickel Mines Ltd [1914] 1 Ch 883 at 888-889, Club Flotilla (Pacific Palms) Ltd v Isherwood (1987) 12 ACLR 387 and Gosford Christian School Ltd v Totonjian (2006) 201 FLR 424 at 436-437 show that it is plainly arguable that if the facts alleged by the plaintiff are established, the persons who purported to act as directors were not in fact appointed as such. 72 In oral submissions counsel for the defendants also submitted that paras 72.86-72.90 were "vague". It was submitted that the paragraphs effectively alleged fraud or improper behaviour without sufficient specificity of alleged breaches of duty. In those paragraphs the plaintiff alleges: " 72.86. In the financial statements for the year ended 30 June, 2002 the said Paul George Ekstein and Sydney George Frish and David Victor Frish have caused the 2001 comparable figure directors emoluments to be reported as consultancy fees and have not disclosed any directors' emoluments in the fourth defendant's 2002 financial statements.
72.87. In the year ended 30 June, 2002 the said Paul George Ekstein and Sydney George Frish and David Victor Frish caused $190,490 to be paid to associated persons relative to the fourth defendant.
72.88. The said Paul George Ekstein and Sydney George Frish and David Victor Frish have not disclosed to the plaintiff or in the fourth defendant's 2002 financial statements who were the associated persons to whom they caused $190,490 of the fourth defendant's money to be paid during the year ended 30 June, 2002 and they have failed otherwise to account to the members of the fourth defendant for the making of those payments. 72.89. The said Paul George Ekstein and Sydney George Frish and David Victor Frish have not disclosed to the plaintiff or in the fourth defendant's financial statements in the 2003 and subsequent financial years whether there were payments made by the fourth defendant or its controlled entity to the acting directors or to associated persons and if so to whom and in what amounts. 72.90. The defendants have not given discovery of any taxation return of the fourth defendant for any year subsequent to the year ended 30 June, 2002. " 73 The plaintiff alleges that by reason of these and other matters, the affairs of Boucher & Muir has been conducted contrary to the interests of the members as a whole or in a way which is oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiff. It is reasonably arguable that the allegations, if made out, would support such a claim. I do not see why as a matter of principle the plaintiff cannot contend that the manner in which the defendants are conducting the present litigation forms part of her claimed oppression. It is not self-evident that allegations that information has been withheld, or documents have not been discovered, are irrelevant to her claims for relief under s 233 of the Corporations Act. 74 In oral submissions Mr Rickard attacked para 72.116 as being embarrassing and of no legal effect and for which insufficient particulars of fraud were given. In that paragraph the plaintiff pleads: " 72.116 Further, or in the alternative, the plaintiff says that the creation and allotment to D F Holdings Pty Limited of D class shares and the creation and allotment of E class shares as aforesaid and the dividend policy that has been purportedly adopted as aforesaid and the unauthorised and discriminatory payments to acting directors as aforesaid and the failures to provide fair and transparent reporting of payments to acting directors and associated persons as aforesaid, and the failure to provide reasonable information as to the financial progress of the company and the failure to provide any financial return whatsoever on the plaintiff's investment and the failure to hold meetings, commission audits, and keep and make available proper records were: (a) Actions constituting a fraud by the acting directors upon the B class shareholders, including the plaintiff and including Boucher & Muir (Holdings) Pty Limited; (b) Actions constituting a fraud by the A class shareholders other than Boucher & Muir (Holdings) Pty Limited upon the B class shareholders, including the plaintiff and including Boucher & Muir (Holdings) Pty Limited; (c) Actions act by which the affairs of the company have been unfairly discriminatory and oppressively and unfairly carried on to the prejudice of the B class shareholders, including the plaintiff and including Boucher & Muir (Holdings) Pty Limited; and (d) Actions by which the acting directors have carried on the affairs of the company in their own interest rather than in the interest of members as a whole; and (e) Actions by which the acting directors have carried on the affairs of the company in a manner that is unfair and unjust to other members and the fourth defendant. (f) Actions which were not in accordance with the aforesaid reasonable expectations of the members of the company; and (g) Actions which were not in accordance with the aforesaid wishes expressed in the will of Otto Felix Ekstein. (h) Actions by which the property of the fourth defendant was wrongly distributed. (i) Actions by which property of the fourth defendant was converted to the use of the first, eighth, ninth and tenth defendants. " 75 The paragraph is not to be read in isolation. In earlier paragraphs the plaintiff has pleaded in detail her complaints in relation to what she contends to be the invalid creation and issue of D class and E class shares. She makes specific allegations in relation to the distribution of dividends. In that respect she alleges that she has been deprived of information as to what dividends have been declared and paid for the years ended 30 June 1992 to 30 June 1996, and for the year ended 30 June 2007. She alleges that none of the amounts paid after the death of Otto Ekstein, purportedly as dividends, have been paid with the authority of a board of directors because there were no directors. She alleges that dividends have been paid to other B class shareholders, but not to her. She alleges that the defendants and the proposed defendants have caused payments to be made to themselves and to their associates without the authority of a board of directors. When para 72.116 is read with the paragraphs which precede it, it is not embarrassing. It is not an objection that the plaintiff specifically alleges fraud where she has provided sufficient particulars of the conduct said to amount to fraud. 76 Mr Rickard also attacked paras 72.119 and 72.120 for which it was submitted there was "no legal foundation". This submission was not explained. Again, those paragraphs cannot be read in isolation. The plaintiff alleges that she was entitled to expect that in formulating and effectuating the scheme for distribution of trust and estate assets pursuant to the orders of the Court, the first defendant would ensure that she have an effective enjoyment of shares in Boucher & Muir transferred to her and that she should benefit therefrom on an equal basis such that the shares she received should be as valuable in her hands as the shares Paul Ekstein received were valuable in his. She alleges that Paul Ekstein has set out to ensure that her shares were a worthless minority interest in her hands whilst he, David Frish and Sydney Frish control Boucher & Muir and Boucher & Muir Holdings. Counsel for the defendant submitted that this could not found an arguable ground for complaint. I do not agree. In my view, it is reasonably arguable, that if the facts alleged are established, there would be grounds for the making of orders under s 233 of the Corporations Act by reason, amongst other things, that the plaintiff's expectations and the expectations of one of the founding shareholders, Otto Ekstein, as expressed in his will, were being frustrated. 77 In para 72.122 the plaintiff alleges matters apparently relevant to a claim under s 237 of the Corporations Act for her to have leave to bring proceedings on behalf of Boucher & Muir against Paul Ekstein, Sydney Frish, David Frish and DF Holdings. Unlike the similar claim made in para 68.21, in this case the plaintiff has alleged causes of action of Boucher & Muir against those persons. It is at least arguable that such claims can be maintained by the plaintiff in the oppression suit. One of the orders a Court can make under s 233 is an order authorising a member to institute and prosecute specified proceedings in the name and on behalf of the company (s 233(1)(g)). In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at 695-696 [137]-[144], 759-760 [506], 763 [527]-[528], 792-793), the Court of appeal upheld the decision of Young J (as his Honour then was) that in an oppression suit the Court can "short circuit" the making of an order authorising a person to institute and prosecute the proceedings where the liability of the defendant to the company is established in that suit. There is a question as to whether that right survived the introduction of Pt 2F.1 of the Corporations Act. It is at least seriously arguable that it does. In LexisNexis Australian Corporation Law Principles and Practice at [11.275], the learned authors conclude that: " It may be permissible to infer that the legislature adopted the opinion of the Companies and Securities Law Review Committee ... and did not intend s 233 to be affected by the introduction of Pt 2F.1A. "
In Short v Crawley (No. 30) [2007] NSWSC 1322 the point was conceded (at [177]). 78 Accordingly, the plaintiff may not need leave to pursue her present claim. However, if leave is to be sought pursuant to s 237 of the Corporations Act that application should be dealt with in advance of the hearing. One possible outcome of such an application is that the application under s 237 might be stood over to the hearing if all, or virtually all, of the issues that would be raised if the s 237 application were granted would in any event be raised in connection with the claim for oppression. That was a course taken by Hodgson CJ in Eq (as his Honour then was) in Short v Crawley (1/5/2001, unreported) (see Short v Crawley (No. 40) [2008] NSWSC 1302 at [77] and Short v Crawley (No. 30) at [177]). I express no view as to the likely outcome of that application. Whatever its merits, the plaintiff should have leave to file the statement of claim which includes para 72.122. If the plaintiff presses the claim under s 237 she should apply by interlocutory process or notice of motion for that relief. Given that the plaintiff is prima facie entitled to include in her oppression suit her allegations that the directors or persons acting as directors of the companies breached duties owed to the companies, there is no reason that the defendants should not be required to plead to the amended statement of claim prior to the plaintiff applying for orders under s 237. Elysee 79 In paras 75.1-75.6 the plaintiff alleges that the first defendant has from about 1992 paid to himself remuneration as management fees or director's fees of Elysee. The plaintiff alleges that the articles of Elysee stipulate that the remuneration of directors is to be determined by the company in general meeting and that no general meeting has determined that such fees be paid. The allegations concern payments made from the year ended 30 June 1993. The defendants submit that the plaintiff has no standing to maintain such a proceeding on behalf of the company and that the claim is substantially statute-barred. For the reasons I have given, it is arguable that the plaintiff can maintain such claims in proceedings under ss 232 and 233 of the Corporations Act. For the same reasons as in para [55], it is not appropriate to refuse leave because there is a possible defence under the Limitation Act. 80 In the proposed amended originating process the plaintiff seeks leave under s 237 as well as s 233(1)(g) to bring claims on behalf of Elysee against Paul Ekstein and the proposed additional defendants. The plaintiff does not plead the matters in s 237 in support of her application for leave to bring proceedings on behalf of Elysee under that section. If the claim under s 237 is pressed, it should be pleaded and the relief sought in advance of the hearing. Newton & Co 81 From paras 84-163 new allegations are made in relation to the conduct of the affairs of Newton & Co. Objection is taken to paras 121-124, 140-142, 143, 145, 156-157, 160, 161, and 163. Few of these objections were pressed in oral submissions because, it was said, they were similar to objections to earlier paragraphs. None was abandoned. In paras 121 and 122 it was alleged that "in the premises", that is, by reason of the matters earlier pleaded, Newton & Co has suspended its business for more than a year and ought to be wound up under s 461(1)(c) of the Corporations Act. It was earlier pleaded that the company's objects stated in its memorandum were the acquisition and carrying on of a real estate agency business and the investment in real estate. It was alleged that the company had not for many years carried on a real estate agency business and that it sold its last real estate in the year ended 30 June 2004. It was alleged that since the sale of land at Naremburn in that year, Newton & Co had not had any real estate investment and it has had no rental income. It is alleged that no general meeting of Newton & Co has been held since at least 28 October 1993 and that it has no directors. The plaintiff says that the disclosed assets of the company as at 30 June 2004 consisted of cash at bank, a term deposit, a loan to Boucher & Muir and receivables from sundry debtors of $120 and liabilities of $1,580. The plaintiff alleges that in the following financial year the company ceased to have any term deposit. She also alleges that the financial statements of Newton & Co for the year ended 30 June 2005 disclosed a loan of $500,000 to the estate of Otto Ekstein but says that no such loan was made. I do not understand the defendants' objection that the plaintiff has not pleaded the facts by reason of which she alleges that Newton & Co has suspended its business for more than a year or has finally and conclusively abandoned its business with no reasonable prospect that it would resume the prosecution of its main objects. 82 The defendants submit that para 140 of the proposed amended pleading is inconsistent with the rest of the pleading and involves the withdrawal of an admission without leave. The defendants did not identify what admission it is alleged the plaintiff had made which by this pleading she sought to withdraw. In paras 135-141 the plaintiff pleads that she received a transfer of shares in Newton & Co from Mr Ward-Harvey as the executor of the estate on 7 March 2003 and lodged the transfer for registration with the company secretary. She alleges that by notice dated 10 September 2007 lodged with ASIC, the company secretary notified that the transfer was registered on 10 September 2007. She complains that if the registration of the transfer was delayed until 10 September 2007 she was deprived of her rights as shareholder including rights to attend general meetings and to receive financial statements and auditor's reports. Alternatively, she says that the company and David Frish failed until 10 September 2007 to lodge correct particulars of the change of membership. I do not accept that these allegations are frivolous or vexatious, or that she has no standing to pursue them. They would be relevant to her claim for relief under s 233 of the Corporations Act. 83 Paragraph 142 is objected to as containing a vague, unparticularised allegation without a pleaded foundation, and which is said to give rise to no cause of action in the plaintiff. It is true that the cause of action alleged in para 142 would be one which could be maintained by the company. However in para 163 the plaintiff pleads matters which would be relevant to the application for leave to bring proceedings on behalf of the company pursuant to s 237 of the Corporations Act. For the reasons earlier given, it is at least seriously arguable that she is entitled, in any event, to pursue that claim in the oppression suit. 84 Paragraphs 97-99 plead amongst other things that Newton & Co disclosed that, as at 30 June 2004, it had assets which included cash at bank of $49,662 and term deposits of $1,489,364. It is alleged that in the following financial year it ceased to have any term deposit. It is alleged that in that year $1 million was "obtained by DF Holdings Pty Ltd from funds of the sixth defendant [Newton & Co]." In para 100 it is alleged that, according to the company's financial statements, it made a loan of $500,000 to the estate of Otto Ekstein, but it is alleged in para 101 that no such loan was made. In para 142 the plaintiff alleges that the appropriation of $1 million from the funds of Newton & Co to DF Holdings Pty Ltd was not within the permitted objects of the company, was not capable of being authorised by the directors or acting directors of the company, was not authorised by lawful directors of the company (it being alleged that the persons purporting to act as directors had ceased to hold office), was not paid bona fide for the benefit of Newton & Co but to provide a private benefit for David Frish and his company DF Holdings, and caused detriment to Newton & Co in that it was paid without security and without any proper and authorised purpose or return. It is then alleged in para 143 that the payment was a fraud on Newton & Co and its members, was a breach of fiduciary duty, was in breach of ss 180, 181, and 182 of the Corporations Act, and was improper in various other ways. I do not consider these allegations to be unparticularised. The allegation is that the money which belonged to the company was paid to Mr Frish's company without security, without interest, without authority and not for a permitted object. The defendants can be in no doubt as to the details of the claim the plaintiff makes. It is no objection to the pleading that fraud is alleged where sufficient particulars are provided. 85 The same comments apply to the objections to para 145. In this paragraph the plaintiff complains that the statement in the financial statements of Newton & Co that $500,000 had been lent to the estate of Otto Ekstein was false. It is not suggested that the plaintiff lacks a proper basis for making that allegation. She says that the executor has denied knowledge of the loan. The plaintiff then alleges that by not providing an explanation as to the true application and destination of the payment of $500,000, Paul Ekstein and David Frish committed a fraud on Newton & Co and its members and breached various duties. In my view, these matters are sufficiently pleaded. The defendants asserted that the elements of the claim were not pleaded and proper particulars are not given. No submission was made in elaboration of this assertion. Mr Rickard did not point to any reason the defendants would have difficulty in responding to the claim made. 86 In paras 155-157 the plaintiff pleads again the matters earlier raised in relation to the alleged breaches of trust, namely, that the transfer of shares to her in Newton & Co in purported implementation of a scheme to give effect to the orders of 4 October 2000 was an attempt to ensure that she receive no benefit from the shares and that it be a worthless minority interest in her hands. This is relied on as a ground for an order that the company be wound up on just and equitable grounds. If the facts alleged are established, they provide an arguable basis for the relief sought. No proper reason was advanced by the defendants for their objection that the pleading is "frivolous and vexatious ... having no legal effect or foundation". 87 In paras 159-162 the plaintiff pleads various causes of action of Newton & Co for the recovery of the sum of $1 million alleged to have been paid to DF Holdings. For the reasons previously given, the plaintiff arguably has standing to pursue such claims in the oppression suit. In any event, she pleads matters to give rise to a claim for leave under s 237. The earlier paragraphs sufficiently identify the facts of the claims she alleges Newton & Co has against DF Holdings. 88 Again, an application for leave under s 237 should be brought before the hearing. However, there is no reason that the defendants should not be required to plead to the allegations.
HP Holdings 89 In paras 164-237 the plaintiff makes allegations in relation to the conduct of the affairs of HP Holdings Pty Ltd which are similar to those she makes in relation to the conduct of the affairs of Newton & Co. After pleading the objects of the company as prescribed in its memorandum, the plaintiff alleges that by the year ended 30 June 2004 HP Holdings had sold all of its real estate and reduced its assets to cash or loans. She alleges that it has suspended its business for more than a year and this is relied upon as a ground for winding-up pursuant to s 461(1)(c) of the Corporations Act. The plaintiff also alleges that according to its financial statements the company made a loan of $151,234 in the year ended 30 June 2005 to the estate of Otto Ekstein. She pleads that no such loan was made. She pleads that she wrote to Paul Ekstein, informing him that the executor denied all knowledge of the alleged loan and that she asked for an explanation of it, but has received none. Objection is taken to a paragraph that alleges that "[HP Holdings] has not lent the said $151,234 to the estate of the late Otto Ekstein, and has not accounted therefore." The defendant says that no facts are pleaded as to give rise to any obligation to account. The allegation is to be understood in its context in which it is said that the financial statements of the company disclosed a purported loan of $151,234 to the estate. Clearly the allegation is that as (so it is said) no such loan was made, no accounting for that sum is provided by the company. The plaintiff also alleges that in the year ended 30 June 2005 HP Holdings lent Sydney Frish $1,051,234. She alleges that this loan was not authorised. She says there were no directors for essentially the same reasons as with the other companies. She says that the persons acting as directors, namely, Sydney Frish, David Frish and Paul Ekstein breached their fiduciary and statutory duties by causing the payment to be made. At para 214 she alleges in respect of this payment that, inter alia, it was not within the permitted objects of HP Holdings; it was not paid for the benefit of the company but to provide an improper and private benefit for Mr Frish; was lent without security and without provision for interest. In my view, sufficient facts are alleged to explain the causes of action alleged in relation to this payment. 90 An additional allegation in relation to the affairs of HP Holdings concerns the transfer of shares in that company from Mr Ward-Harvey to the plaintiff. The plaintiff alleges that on 7 July 2003 Paul Ekstein by his solicitor delivered to her a transfer in her favour dated 1 July 2003 executed by Mr Ward-Harvey as executor of the estate of Otto Ekstein of 28 of the A class shares in HP Holdings which had been held by Otto Ekstein. She alleges that by letter dated 12 November 2003 her solicitor lodged the transfer with HP Holdings for the purpose of having the transfer registered. She alleges that by notice dated 20 September 2007 David Frish acting as a director of HP Holdings lodged with ASIC notification of the registration effective 19 September 2007. As with the claims in relation to Newton & Co she complains of the apparent late registration of the transfer. She also alleges that the notice lodged by David Frish stated that a transfer of 14 of the shares to her had been registered and that the remaining 14 shares had been registered as a purported transfer to Paul Ekstein whereas, according to her, the executors had in fact attempted to transfer those shares to her. The defendants say that this was a serious allegation of the lodgment of false records without the pleading of the factual elements of that allegation or any particulars thereof. I do not understand the objection. The allegation is perfectly clear. 91 Similar allegations are made in relation to the alleged loan of $151,234 from HP Holdings to the estate of Otto Ekstein as are made in relation to the alleged loan of $500,000 from Newton & Co to the estate. Similar objections are taken to those allegations. But for the same reasons, those matters are sufficiently pleaded. 92 A separate allegation is made in relation to the affairs of HP Holdings concerning the payment of management fees. The plaintiff alleges that the company did not incur any, or any substantial management fees, prior to the year ended 30 June 2005, but in that year it is alleged Paul Ekstein, Sydney Frish and David Frish caused the companies' financial statements to disclose an expense for management fees of $52,000. The plaintiff alleges that during the financial year ended 30 June 2005 HP Holdings did not have any assets under management. She alleges that if any such fees were incurred at all they were not incurred for a proper purpose of the company. She alleges that the incurring of such fees, if they were incurred, was in breach of various duties of those persons' fiduciary and statutory duties. It appears that the plaintiff has pleaded all that she presently can plead in relation to this matter. I do not accept the defendants' objections to the adequacy of the pleading. 93 Similar allegations are made in relation to the affairs of HP Holdings to support a claim for a just and equitable winding-up or for orders under s 233 of the Corporations Act as are dealt with in para [86] above in respect of Newton & Co. 94 Objection is again taken to the plaintiff's standing to maintain claims which, if well-founded, belong to the company. Again, the plaintiff at least arguably has standing to pursue the claims in the oppression suit and in any event is seeking leave pursuant to s 237. Again, any such application for leave pursuant to s 237 should be brought before the final hearing, but, in the meantime, the defendants should be required to plead.
Joinder of Claims for Breach of Trust and Relief under the Corporations Act 95 The defendants also contend that the claims concerning the conduct of the affairs of the various companies are insufficiently connected with the allegations that Paul Ekstein breached his duties as trustee of the Otto Ekstein Family Trust to warrant all of the claims being brought in the same proceeding. They submitted that the resolution of the claims of breach of trust will be unduly prolonged if the plaintiff is allowed in the same proceeding to pursue what I will call her oppression claims in respect of the affairs of the companies. However, it seems to me that, at least so far as the defendants are concerned, there is very good reason for all of the claims to be heard in the same proceedings. There is obviously a clear overlap between some of the claims. For example, the allegation in para 32D.15 is that the first defendant acted in breach of trust in distributing the shares in the private companies in specie and did so for the purpose of depriving the plaintiff of any effective benefit or value in respect of the shares. Those same matters form part of the grounds upon which the plaintiff alleges that it is just and equitable that the companies be wound up. She alleges that Paul Ekstein intended she should derive no benefit from her shares, and in her oppression suit she alleges that the companies' affairs have been conducted so as to ensure that her minority shareholding is of no value. 96 Another example of the overlap of the claims concerns the business of Elysee. The plaintiff complains that in distributing the Trust's shares in Elysee to himself, Helen Ekstein and Paul Ekstein's children, Paul Ekstein undervalued the shares because, so it is said, the companies' assets were undervalued because premises occupied by Paul Ekstein were not valued according to a market rent but according to what is alleged to be a rent below market paid by him to Elysee. The same allegations concerning Paul Ekstein's occupancy of property owned by Elysee are included in the oppression claims the plaintiff makes in relation to Elysee. 97 Moreover, as Mr Smallbone for the plaintiff pointed out, the existing pleading, which was filed in 2004, joins the allegations of breach of trust with the claims of oppression in relation to the conduct of the affairs of the company. No application has yet been made for the trial of separate issues. The plaintiff's complaints of breach of trust and her complaints as a minority shareholder are parts of a single controversy. 98 No submissions were made by reference to r 6.19(1) of the Uniform Civil Procedure Rules. That rule provides: " 6.19 Proceedings involving common questions of law or fact
(1) Two or more persons may be joined as plaintiffs or defendants in any originating process if: (a) separate proceedings by or against each of them would give rise to a common question of law or fact, and (b) all rights of relief claimed in the originating process are in respect of, or arise out of, the same transaction or series of transactions, or if the court gives leave for them to be joined. "
The defendants did not submit that the plaintiff required leave under this rule. Clearly there are common questions of law and fact. I received no submissions on whether all rights of relief claimed in the proposed amended originating process are in respect of, or arise out of, the same series of transactions. If they do not, subject to considering the position of Mr Ward-Harvey, it would be an appropriate case for the grant of leave under the rule. Claims Against Mr Ward-Harvey 99 Another part of that controversy is the complaints the plaintiff now seeks to bring against Mr Ward-Harvey. Mr Fagan SC for Mr Ward-Harvey pointed out that by far the bulk of the plaintiff's allegations concern the administration of the trust by Paul Ekstein and alleged breaches of directors' duties or oppressive conduct by Paul Ekstein, Sydney Frish or David Frish in the conduct of the affairs of Elysee, Boucher & Muir Holdings, Boucher & Muir, Newton & Co and HP Holdings. In quantitative terms, the allegations in the amended statement of claim affecting Mr Ward-Harvey are less than a quarter of the total pleading. 100 Mr Fagan did not submit that leave to amend to include the claims against Mr Ward-Harvey should be refused on the ground that the claims were plainly untenable or that the pleading was deficient. He submitted that it would be unfair to Mr Ward-Harvey to be required to be embroiled in the much larger controversy involving the other defendants. He also submitted that the only basis upon which the plaintiff challenged Mr Ward-Harvey's distribution of assets from the estate in specie was that, according to the plaintiff, clauses 13(c) and 13(e) of the will required the plaintiff, Paul Ekstein and Helen Ekstein dispose of the shares in the private companies they beneficially owned in accordance with the directions and wishes expressed in clause 10 of the will if they were to elect to take under the will. He submitted that this raised a discrete issue which, if answered in favour of the executor, would dispose of the claims sought to be made against him in relation to the distribution of July 2003. 101 Mr Fagan submitted that that issue and the remaining issues concerning Mr Ward-Harvey in relation to the taking of accounts should be ventilated in separate proceedings. The reason it was submitted that this could be the only complaint the plaintiff has against Mr Ward-Harvey in relation to the distribution of July 2003 was that there was no doubt that the plaintiff received more than a 50 percent share of the assets of the estate. Therefore, leaving aside the argument about election, the plaintiff's complaint about the distribution of assets in July 2003 had to be a complaint that she received insufficient distribution from the Trust, not from the estate. 102 Mr Fagan also pointed out that all of the estate had been distributed except such assets as were required to pay an annuity to Mrs Sonja Ekstein. There were no assets in the estate to which Mr Ward-Harvey could have recourse to meet the costs of defending the claims against him except the assets which provided the income to pay that annuity. This was an additional reason why Mr Ward-Harvey should not be exposed to the large costs burden which would be entailed by the claims against him being joined to the other claims. 103 It is not correct that the only basis upon which the plaintiff claims that Mr Ward-Harvey is liable to account to her in respect of the distribution of estate assets is if the beneficiaries were required to surrender their existing shareholdings to the estate before they received a distribution under the will. One of the complaints against Mr Ward-Harvey is that he has not properly accounted for distributions which the estate received from the Trust (para 34.1-34.4). Another complaint is that he failed to obtain or seek any dividends or other return or income from the estate's shareholdings in the various private companies, save for an amount of $150,000 in respect of the 1994 year. It is alleged that he ought to have taken steps to ensure that the persons acting as directors of the companies paid proper dividends (paras 34.5(h) and (i) and 34.6). It is alleged in para 34.6 that Mr Ward-Harvey: " ... has permitted and acquiesced in the affairs of those companies being conducted by the first, eighth and ninth defendants [Paul Ekstein, Sydney Frish and David Frish] in their own interest and to the great damage and disadvantage of the estate and of its beneficiaries, whereby the income that ought to have accrued from those companies and the estate's interest in those companies has been wasted. " 104 Also, most significantly, it is alleged against Mr Ward-Harvey that: " 34.5 Notwithstanding the terms of the will as aforesaid, and in breach of his duty to administer the estate and execute the said will according to its terms, and notwithstanding the declaration of the Court as aforesaid and notwithstanding the direction of the Court as aforesaid, the seventh defendant has failed, neglected and refused to administer the estate of the late Otto Felix Ekstein in accordance with the terms of the will. Particulars
(a) The seventh defendant acted in conjunction with the proposals of the first defendant referred to in item C of the particulars to par. 32 and has co-operated with him or acquiesced in the conduct alleged in item B of the particulars to par. 32.
(b) [D.9] In calculating the value of estate property comprising shares in Elysee Pty Limited, the seventh defendant has failed to make adjustments or credits impartially and at full value in favour of Elysee Pty Limited for the first defendant's or his firm's occupation of portion of premises at 8 Burton Street, Kirribilli which are owned by Elysee Pty Limited.
(c) [D.10] In calculating the value of shares in Elysee Pty Limited the seventh defendant has failed to obtain formal valuations of the assets of that company (including land at 8 Burton Street, Kirribilli and 85 Bobbin Head Road, Turramurra) and calculate the value of those shares upon a notional winding up basis. 85 Bobbin Head Road Turramurra was attributed an undervalue. The seventh defendant attributed to 8 Burton Street, Kirribilli a value in accordance with a Herron Todd White valuation supplied by the plaintiff. That valuation was made on a capitalisation of rental income basis. Rental paid or which ought to have been paid by the first defendant in respect of the portion of the premises that he occupied was not disclosed to the valuer and not taken into account. The valuation ought to have been adjusted to a figure calculated as if the first defendant had been in occupation under proper lease at market rental.
(d) [D.11] In calculating the value of shares in Elysee Pty Limited, the seventh defendant has brought in a liability to Misha Weidman.
(e) [D.12] In calculating the value of shares in Elysee Pty Limited the seventh defendant has brought in a liability to Tara Matt Bren trust.
(f) [D.13] In calculating the value of shares in Elysee Pty Limited, the seventh defendant has supplied a value which he claims is a net asset backing value but which fails to take account of the company's transactions and fails to make adjustment for unjustified or unauthorised directors' fees and management fees paid to the first defendant. Those fees should have been added back to the assets of the company.
(g) [D.14] In calculating the value of the estate's one half share in the Partnership of Frisch & Ekstein, the seventh defendant has failed to obtain formal valuations of the assets of that partnership (including land at 5 Dargan Street, Naremburn and 19 Keswick Avenue, Castle Hill) and calculate the value of that share upon a notional winding up basis. 5 Dargan Street, Naremburn and 19 Keswick Avenue, Castle Hill were brought in to the scheme at substantially less than their true values.
(h) [D.15] Contrary to the wishes of the late Otto Ekstein as expressed in clause 10(c)(ii) of the will, the seventh defendant has failed and refused to calculate the value of the estate's shares in the companies Boucher and Muir (Holdings) Pty Limited, Boucher and Muir Pty Limited, H P Holdings Pty Limited and Newton & Co Pty Limited. At the suggestion of the first defendant a distribution in specie has been made by the said Paul Ward Harvey in respect of the shares in those companies which were held by the said Paul Ward Harvey as executor and trustee of the will. The seventh defendant has failed and refused to obtain formal valuations of the assets of those companies and has asserted that their value is nominal. The seventh defendant has joined or acquiesced in the intention of the first defendant, which he communicated to the seventh defendant prior to them executing the scheme, to the effect that the effect of this distribution in specie would be to deprive the plaintiff of any effective benefit or value in respect of the shares. Except for an amount of $150,000 received from Boucher & Muir Pty Ltd in respect of the 1994 year, the seventh defendant has failed to obtain or seek any dividends or other return or income on the investment or distribution on winding up or consideration on sale of shares or other realisation whatsoever of the investments of the estate and the trust in those companies ... The seventh defendant has failed to find out or if he found out has failed and refused to inform the plaintiff of the true financial position of those companies and to supply any financial statements in respect thereof. " 105 It is alleged in para 34.5(h) that Mr Ward-Harvey "joined or acquiesced in the intention of [Paul Ekstein], which he communicated to [Mr Ward-Harvey] prior to them executing the scheme, to the effect that the effect of this distribution in specie would be to deprive the plaintiff of any effective benefit or value in respect of the shares." Bearing in mind that the order of 4 October 2000 required Paul Ekstein to prepare the scheme to give effect so far as possible to the wishes of Otto Ekstein in regards to the affairs and management of the Trust as evidenced by his last will, this appears to be an allegation that Paul Ekstein acted dishonestly in preparing the scheme of distribution of assets and that Mr Ward-Harvey assisted him with knowledge in the furtherance of a dishonest design. 106 However, I think the plaintiff should make it quite clear, whether she alleges that Mr Ward-Harvey is liable only as a principal, or whether she also alleges that he is liable as an accessary under the second limb of Barnes v Addy, that is, that he knowingly assisted in a dishonest and fraudulent design on the part of the trustee (Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [160], [163]). 107 Even if the plaintiff does not intend to make a claim that Mr Ward-Harvey is liable as an accessary, her claim against him is still wider than Mr Fagan submitted. The effect of the paragraphs quoted at [104] is at least to allege that in the events which had happened, including the declarations and orders made on 4 October 2000, Mr Ward-Harvey was required, as part of his duty in administering the estate and executing the will, to ensure that the scheme of distribution gave effect to the terms of Otto Ekstein's will. 108 Nor is Mr Ward-Harvey wholly separated from the claims in relation to the administration of the companies' affairs. As noted above, part of the allegations against him include that he did not exercise rights which attached to shares held for the estate so as to obtain proper value for the estate from its shareholding. There is also an overlap in the claim for an account and in the claims in relation to the conduct of the affairs of Newton & Co and HP Holdings in relation to the payments of $500,000 and $150,000 which the plaintiff impugns. Having said that, I accept that most of the allegations in relation to the conduct of the companies' affairs do not affect Mr Ward-Harvey. 109 If the plaintiff succeeds in her submission in respect of election, then it would seem that having elected to take under the will, the plaintiff could not at the same time maintain her claim as a minority shareholder, unless, perhaps, she was able to say that if the other beneficiaries were to be taken to have elected against the will, that she was entitled to a transfer in specie of substantially all of the estate assets including the estate's shares. But even if she could not maintain a claim as a minority shareholder from the time the estate was distributed, it would still be open to her to maintain claims against the companies in her capacity as a minority shareholder for the period prior to the distribution. In other words, success by the plaintiff on her election submission would not mean that all of her complaints in relation to the affairs of the companies were doomed to fail. 110 Although no submissions were made by reference to r 6.19(1), it seems to me that prima facie not all of the claims for relief in the proposed amended originating process arise out of the same transactions, or same series of transactions, although many of them do. I will not decide that question as it was not argued. I will assume that the question is whether leave should be given pursuant to r 6.19(1) for the joinder of all the claims in the one action. 111 In essence, Mr Ward-Harvey is seeking a separate trial of the issues concerning him notwithstanding the overlap of his position with that of the other defendants. The High Court has warned that perceived advantages in terms of saving time and costs in ordering the trial of separate issues can prove chimerical (eg Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 at 55 [168]). In Dean-Willcocks v Air Transport International Pty Ltd [2002] NSWSC 525; (2002) 55 NSWLR 64, Austin J said (at 73-74 [34]) that in exercising its discretion to grant or refuse leave under the rules: " ... the Court's task is to identify disadvantages [to a defendant] of these kinds, and to weigh them up against identified advantages to the plaintiff, to the defendants as a whole, and in terms of the efficient use of the Court's resources, having regard to the commonality of the issues raised by each claim and the Court's ability to case manage so as to minimise the disadvantages. In some cases the disadvantages to a defendant will be so great as to outweigh the advantages of a single proceeding, and the Court should therefore decline to exercise its discretion under subpara(b) as to the joinder of that defendant. In other cases, the sensible and practical solution will be to grant leave to the plaintiff to join all defendants to the proceeding, subject perhaps to case management and review at a later stage." 112 Here the degree of overlap of issues and the fact that the claims against Mr Ward-Harvey are part of a larger single controversy, albeit a controversy involving many parties and extending over years, are factors which indicate that if leave is required under r 6.19(1) it should be given. When the position of all parties is taken into account the resolution of the real issues as justly, quickly and cheaply as possible would be enhanced by the claims being brought in one proceeding. If the plaintiff is compelled to bring more than one proceeding it is likely that applications would be made to consolidate the proceedings or for common issues to be heard together. The management of the further procedural steps will be less cumbersome if there is a single proceeding. I express no view as to whether or not it might later be appropriate to order the trial of separate issues. Even if no such orders are made, it is likely that in the management of the case for hearing, directions will be given in order so far as possible to minimise costs of parties who are not affected by particular issues. However, those are matters for later case management. Costs Thrown Away by Amendment and Costs of Application for Leave to Amend 113 The plaintiff and the defendants made submissions on questions of costs . The defendants submitted that leave to amend should not be given because the plaintiff had not offered to pay the defendants' costs thrown away by reason of the amendment. Such an order is often made. However, in the present case, there is reason to think that many of the allegations raised in the proposed amendments are based on documents which the plaintiff has only obtained as a result of the production of documents on discovery or subpoena. She complains that the defendants have been secretive and unco-operative. It is not possible on the present application properly to assess where the merits of these contentions lie. In my view, no special order ought be made in respect of costs thrown away by the amendments. If any particular application is to be made about those costs, it can be made to the trial judge at the determination of the proceedings when the merits of the plaintiff's complaints about the defendants' allegedly secretive and unco-operative conduct have been investigated. 114 So far as the costs of the application for leave to amend are concerned, the plaintiff has been substantially successful. The matters raised in opposition to her application by counsel for Mr Ward-Harvey were measured and essentially raised the issue of what orders would best ensure that the real issues between the parties were decided as quickly and cheaply as possible. Counsel for Mr Ward-Harvey did not contend that the plaintiff should not be able to bring the complaints she sought against him. Rather, the objection was to those complaints being brought forward in the current proceedings. As between Mr Ward-Harvey and the plaintiff, the costs of the application for leave to amend should be costs in the proceedings. 115 I regret to say that the defendants' position cannot be characterised in the same way. As is apparent from these reasons, there was no proper basis for most of the defendants' objections. In the circumstances the appropriate order is that the defendants pay the plaintiff's costs of the application for leave to amend the statement of claim so far as it concerns the claims against them. Those costs do not include the costs of preparing the proposed amendments. 116 For these reasons I make the following orders:
(b) by the deletion of para 68.21; (c) if it is to be alleged that the seventh defendant is liable as an accessary by providing knowing assistance to a dishonest and fraudulent design on the part of the first defendant, that the allegations of a dishonest and fraudulent design and of knowing assistance be specifically pleaded; (d) by the provision of particulars of paras 44(e), 44(f), 50.1(b), and 50.2(b), either by cross-reference to other paragraphs or otherwise; and (e) by the pleading of the claim for leave under s 237 of the Corporations Act to bring proceedings on behalf of the second defendant as sought in para 7 of the amended originating process.
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Power
Ekstein & 5 Ors
(2007) 230 CLR 89
(1992) 175 CLR 514
(2006) 201 FLR 424
(2001) 206 CLR 1
(2002) 55 NSWLR 64