Rosegum Corporation Pty Ltd v Young, in the matter of Rosegum Corporation Pty Ltd

1. The interlocutory application dated 5 May 2016 be dismissed.
2. The plaintiffs have 21 days from the date of these orders to file a further application for leave to amend the statement of claim.
3. Costs of this application be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCKERRACHER J: 1 The plaintiffs seek leave to amend their statement of claim. They also seek a trial of the issues against the third defendant to be conducted before the trial of the issues against the first and second defendants. 2 Broadly speaking, the liquidator (on behalf of creditors in the liquidation) is pursuing the two former husband and wife directors, and their daughter for relief arising from alleged breaches of directors' and trustees' duties resulting in losses to the company and its creditors. The company was a trustee of a family trust and the daughter (the third defendant) a beneficiary. The defendants maintain that, in truth, the relevant conduct, primarily the making of certain failed real estate investments and attempts to extract themselves from the consequential difficulties was simply, with the benefit of hindsight, no more than unfortunate misjudgement. Whether or not this is so, or whether the liquidator's view is to be preferred, will depend in part on the clear identification of precisely what conduct by which director breached precisely which duty. This is in substance a family company, albeit a very active one, in which the family wealth was also exposed. But that is to say nothing about the merits. If the liquidator's arguments prevail then the creditors may, as the liquidator contends, be entitled to relief. But the debate does expose the importance in some further precision as to the precise allegations. 3 There are (curable) difficulties with the amendments proposed. Paragraph 7 of the proposed re-amended statement of claim lists numerous directors' and trustees' duties under statute and otherwise. The duties pleaded range from reasonable care and transaction duties to good faith and honesty duties. There are then pleaded numerous complex commercial activities in many paragraphs of the proposed re-amended statement of claim, culminating in a pleading to the effect that the directors, by virtue of the conduct pleaded in those paragraphs, breached the duties pleaded in para 7. Further issues arise as the defendant holding office as a director changed from time to time and back again. 4 I am reluctant to entertain or encourage unnecessary pleadings debates. However, given that these assertions lie at the heart of the plaintiffs' primary contentions in this matter, the pleader must stipulate which particular conduct breached which duty pleaded in para 7. This may be important given potential differences in the seriousness of such alleged breaches, as is evident from the range of duties to which I have pointed. This is so despite the plaintiffs' assertion that the breaches are said to arise from the entire course of conduct (that is, all the investments together), rather than individual transactions. That does not clarify the position. The defendants are entitled to have this information clearly presented to them. It is not a matter that can be cured by providing particulars, as counsel for the plaintiffs offered. 5 There is no reason why the pleading should not be amended relatively promptly to cure this deficiency. I propose to give the plaintiffs 21 days to rectify this current primary problem together with, if they see fit, other matters raised for the defendants in written submissions, although I do not accept all the complaints as I made clear in the course of exchanges during the interlocutory hearing. 6 In relation to the separate trial issue, as the plaintiffs clearly wish to amend the current (not the proposed) statement of claim substantially, it is premature, before any further amended draft statement of claim is allowed and the pleadings have closed to rule on the question of whether or not the trial should be split. I should however indicate at this stage that I prefer the arguments of the defendants in relation to the merit of separate trials as the pleading presently stands. It certainly appears that there is an overlap and connection in the pleaded matters as between each of the defendants, which is not surprising given that the defendants are parents and daughter. Even where all parties agree to split issues in a trial, problems still frequently arise by doing so. If the plaintiffs still wish to press for that course, the question can be revisited on the application of the plaintiffs when pleadings have closed. 7 As to costs, I propose to reserve costs of the plaintiffs' application for determination at any further application by the plaintiffs for leave to amend the statement of claim, or until further order of the Court if the parties consent to the plaintiffs having leave to rely upon any re-re-amended statement of claim. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.