SGB Jones Pty Ltd & Ors v Invion Limited [2013] QCA 306

[1]

[1] HOLMES JA: I agree with the reasons for judgment of Philippides J and with the order she proposes.

[2]

[2] MUIR JA: I agree that the appeal should be dismissed with costs for the reasons given by Philippides J.

[3]

[3] PHILIPPIDES J: Background The appeal concerns the decision at first instance striking out paragraphs of the appellants' amended defences (the paragraphs being relevantly identical in respect of each appellant).

[4]

[4] The proceeding concerns a claim by the respondent plaintiff, Invion Limited, formerly CBio Limited, brought against its former directors (the second appellant, Stephen Jones, third appellant, Jason Yeates and the fourth appellant, James Greig) a company associated with the second appellant, SGB Jones Pty Ltd (which has been deregistered) and the former secretary of the respondent, Benjamin Graham, who is no longer a party to the appeal.

[5]

[5] The respondent's claim concerns the conduct of the former directors and secretary in varying or purporting to vary their employment contracts, or in the case of the first appellant, consultancy contract.

[6]

[6] The former directors (other than the second appellant) and secretary had written contracts of employment with the respondent. The second appellant's services were provided pursuant to a consultancy contract between the first appellant and the respondent. The original terms of the consultancy and employment contracts provided that the respondent could terminate the contracts by giving six months' notice or paying the equivalent salary or fees in lieu and that the employee or contractor could terminate the contract by giving not less than six months' notice.

[7]

[7] On 25 March 2011, at a board meeting of the respondent, the board considered the "provisions of executive management employment contracts, and in particular termination due to uncertainty in the future" and resolved to extend the notice period to be given by the respondent in the executive management contracts to 12 months, other than in the circumstances of summary dismissal which remained unchanged, and subject to any ASX Listing rule requirements. The second, third and fourth appellants, who were present, abstained from voting on the issue.[1]

[8]

[8] The respondent pleaded that the fourth appellant sent an email to Reece Walker, a solicitor with McCullough Robertson, setting out the proposed amendments in accordance with the resolution. The draft amended employment agreements in accordance with the resolution were circulated to the other appellants. The second appellant stated that the first appellant's consultancy contract should provide that either party could terminate without cause and that the 12 months could be paid out or worked out depending on the decision of the first appellant.[2]

[9]

[9] It is alleged that the appellants thereafter between themselves purported to bind the respondent to revised employment and consultancy contracts that provided that if either the respondent or the employee gave notice, the employee would be paid the equivalent of 12 months' salary (or fees) and the employee would have the discretion as to whether any part of the 12 month period was worked.[3] The appellants allege that these terms were necessary to induce them to stay on with the respondent.[4]

[10]

[10] In October 2011, the appellants resigned their employment effective immediately and the second and third appellants caused the equivalent of 12 months' salary (or fees) to be paid to each of the former directors and secretary (excluding the second appellant, whose fees were paid to the first appellant).[5]

[11]

[11] The respondent seeks to impugn those payments. It claims that the contracts have no contractual effect, as they were made without authority and that the appellants knew that there was no proper basis for seeking or making the payments. Alternatively, it claims that, if the variations did have contractual effect, the appellants breached one or more of their fiduciary duties and duties under ss 180, 181 and 182 of the Corporations Act 2001 (the Act). The respondent seeks to recover the payments made upon a restitutionary basis, or alternatively on an account of profits, as equitable compensation or pursuant to s 1317H of the Act.

[12]

[12] The appellants dispute much of the case against them. They dispute the alleged lack of authority and plead that the directors had authority (either implied actual authority or a delegated authority) to vary the contracts. They also allege that the contracts were in the interests of the respondent. They dispute that the variation involved a breach of duty whether under statute or general law.

[13]

[13] In April 2013, the appellants amended their defences to invoke ss 1317S and 1318 of the Act by way of a claim for statutory excusal in the event that an alleged breach was established and sought relief, in whole or in part, for liability of any such breach. This was done in respect of the amended defence of the first and second appellants by adding new paras 18A to 18D, 66A and 66B (that pleading may conveniently be referred to for present purposes as the other amended defences are in the same terms).[6] It was those paragraphs and the corresponding paragraphs of the other amended defences which the primary judge ordered to be struck out.

[14]

[14] The claim for excusal under ss 1317S and 1318 of the Act was made in para 66A and 66B of the amended defence. It was pleaded in para 66A that, if Mr Jones, Mr Yeates and Mr Greig breached their fiduciary or statutory duty, which was denied, they "acted honestly" and "in all the circumstances ought fairly be excused". The particulars to para 66A identified that the claim for excusal relied on "the Legal Advice" (an expression defined in para 18A) and "all of the facts, matters and circumstances pleaded herein".

[15]

[15] By para 18A of their respective amended defences, the appellants pleaded that in amending their respective consultancy and employment agreements, the appellants:

[16]

"... acted in reliance upon legal advice from reputable Queensland solicitors, McCullough Robertson, believing that:-

[17]

(a) provisions in their employment agreements with CBio providing for twelve months' termination payments were proper and lawful;

[18]

(b) a resolution of the Board of Directors of CBio was not necessary for the making or variation of the employment agreements between them and CBio.

[19]

The advice was given in the course of a meeting, on or about 25 March, 2010, held at the offices of McCullough Robertson and attended by Mr Jones, Mr Yeates and Mr Reece Walker ('Mr Walker') during which:-

[20]

(i) Mr Jones and Mr Yeates told Mr Walker that they wished to improve CBio's remuneration of the Defendants by the issue by CBio to the Defendants of Options and/or Performance Rights:

[21]

(ii) Mr Jones and Mr Yeates asked McCullough Robertson, by Mr Walker, to provide advice concerning the matters in subparagraph (i), above:

[22]

(iii) Mr Walker advised Mr Jones and Mr Yeates that:-

[23]

they should not proceed with such a proposal so soon after CBio's listing on the ASX;
any issue of equity to CBio's officers would need to be approved by its members;

[24]

generally, benefits fixed by reference to a period of time no greater than 12 months were in order and did not require member approval; and

[25]

the termination period in the defendants' employment agreements with CBio could be extended up to 12 months, without any difficulty, and without member approval."

[26]

[16] It is immediately obvious, as was accepted by the appellants' counsel, that what is in fact pleaded in para 18A as "the Legal Advice" is a misnomer. That paragraph clearly seeks to plead a belief (based on legal advice) that the provisions allowing for 12 months' termination payments were proper and lawful and a belief that they did not require a resolution of the board. However, legal advice is identified in para (iii) of the particulars.

[27]

[17] Continuing with the concept of "the Legal Advice", by para 18B, it was pleaded that "the Legal Advice" was given in the course of the following events:

[28]

In about July 2009, CBio retained McCullough Robertson to advise CBio in relation to its application for the listing of its shares on the ASX (the Listing Retainer): para 18B(a).
The Listing Retainer in substance was that McCullough Robertson "would undertake all due diligence enquiries, advise CBio in relation to its listing, and undertake all legal work in relation thereto": para 18B(b).
In the course of the Listing Retainer, McCullough Robertson reviewed all minutes of meetings of the directors of CBio and the employment agreements: para 18B(c).
In about October or November 2009, Mr Walker of McCullough Robertson advised Mr Greig that he had reviewed the employment agreements and that they were in order, save in one respect; that they contained a provision to the effect that CBio was entitled to terminate the employment of each of the appellants if there was a change in control of CBio. Mr Walker advised that the employment agreements would need to be amended to alter such provisions: para 18B(d).
Thereafter, Mr Greig prepared the necessary amendments, which were executed by Mr Jones, Mr Yeates, Mr Greig and Mr Graham, and Mr Jones and/or Mr Yeates for CBio, with Mr Greig providing copies of the amended agreements to McCullough Robertson: para 18B(e).
McCullough Robertson prepared a prospectus dated 10 November 2009 for the public listing of CBio's shares: para 18B(f).
In the prospectus material agreements were described in cl 8.1 as follows:

[29]

"The Board considers that certain agreements relating to the Company are significant to the Offer, the operations of the Company, or may be relevant to investors. A description of material agreements or arrangements, together with a summary of the more important details of each of these agreements is set out below.": para 18B(g)(i).

[30]

In the prospectus, the amended employment agreements were described in cl 8.6 as material agreements and in the following terms:

[31]

"CBio has entered into executive service agreements with key executives, which contain standard terms and conditions for agreements of this nature, including confidentiality, restraint on competition and assignment of intellectual property provisions. The agreements are expressed to cover periods specific to individual appointments, but may generally be terminated by notice by either party, or earlier in the event of certain breaches of the terms and conditions.": para 18B(g)(ii).

[32]

When the amended employment agreements were provided to Mr Walker, the directors of CBio had not resolved that CBio enter into those agreements, there was no minute of a meeting of the directors so resolving and Mr Walker knew or ought to have known this: para 18B(h).

[33]

[18] By para 18C it was pleaded that throughout the course of the dealings pleaded in para 18B:

[34]

(a) Mr Jones, Mr Yeates and Mr Greig were the only officers of CBio with whom McCullough Robertson dealt;

(b) Mr Jones, Mr Yeates and Mr Greig were senior executive officers of CBio;

(c) the first appellant was a party to a consultancy agreement with CBio the subject of advice from McCullough Robertson; and

(d) the appellants were not independently advised by solicitors in relation to their agreement with CBio.

[35]

[19] By para 18D, the appellants pleaded that McCullough Robertson did not advise them that they ought to be advised independently from CBio.

[36]

[20] The respondent's strike out application was treated by the primary judge as one brought pursuant to UCPR 171(1)(a), that is, as one contending that the matters alleged in the impugned paragraphs disclosed no reasonable defence and could not be properly relevant in the disposition of the litigation. No complaint is made as to any error in the statement or application of principle in respect of an application under UCPR 171(1)(a).

[37]

[21] In respect of what is pleaded in para 18A about the advice said to have been given at the March 2010 meeting, the learned judge said:

[38]

"It is sufficient to say this about what is there pleaded. Firstly, it is clear that this meeting and this advice, if given, was in an entirely different context from the variation to the defendant's employment contracts. The first thing about that is that it was given on March 2010, well before the variations to the contracts were made or purportedly made in the following year. The second thing is that it was given upon a different subject matter. In other words, not only was it not given in relation to a proposal to vary the defendant's contracts of employment which then became effected in 2011, but it was not given at all in relation to what might be described as the propriety of a defendant putting in place a variation to the contract by his own action on behalf of the company, which was to his advantage but not to the company's advantage."

[39]

[22] His Honour observed that for the purposes of the application before him the relevance of the legal advice relied upon had to be considered upon the premise of a finding of breach of duty by the appellants. But in that regard, his Honour stated:

[40]

"The advice said to have been given at the 25 March 2010 meeting was one which is directed to the circumstances in which the approval of the members of the company would be required to a change to the remuneration of the directors. As I have said, it would seem to have nothing to do with the propriety of causing the company to become bound by a variation to the employment contract, as was made in 2011."

[41]

[23] In determining that the paragraphs in question should be struck out, the learned primary judge reasoned as follows:

[42]

"The allegations raise then effectively two occasions on which advice was given. One was in March 2010 and the other was in 2009. The 2010 advice, as I have said, was concerned with the requirement or otherwise for the approval of shareholders to a change in the remuneration of the directors. The 2009 advice might be considered to be relevant to the question of whether a resolution of the Board was required for that change to each employment agreement.

[43]

But of course those occasions were well prior to 2011 when these agreements were varied. The advice given on those occasions did not anticipate a proposal to vary the contracts as was affected [sic] in 2011 and of which complaint is now made. Nor in my view could the advice given in 2009 or 2010 have provided any basis, upon an objective view, for the propriety of the conduct which is complained of and, in particular, a variation to the contracts of employment which would permit the director or secretary to effectively depart immediately and with a full year's remuneration.

[44]

Under each of sections 1317S and 1318, there is a question, where the provision is relied upon, of whether the person ought fairly to be excused. As the arguments accept, that requires an assessment on an objective basis, although having regard to the circumstances of the person concerned and of the contravention, of whether there should be fairly an excuse for the contravention.

[45]

The matters pleaded in my view would not or do not have a relevance to the propriety of the conduct which is alleged and nor could that advice, on an objective view, have provided any reasonable basis for the conduct. It arguably would provide some basis for proceeding without the approval of the Board, if the transaction was otherwise a proper one and in particular was not one in breach of the director or officer's duty. But it is another matter to say that it would be relevant to the propriety of that conduct.

[46]

Therefore the allegations within paragraphs which are in question, if made out at the trial, would not provide any defence or make any contribution, when considered with other facts and circumstances, to a defence under sections 1317S or 1318. The discretion under each of those provisions is, of course, a broad one. But in my view this is a case where it can be seen that the matters pleaded within these paragraphs could not matter to the exercise of that discretion."

[47]

[24] The appellants argue that the primary judge erred in striking out the amendments to the defences which sought to found a claim for excusal under ss 1317S and 1318 of the Act and in holding that UCPR 171(1)(a) was satisfied such that the matters alleged in the struck-out paragraphs could not be properly relevant to the disposition of the litigation. Although the notice of appeal stated the grounds of appeal in different terms, the appellants' submissions condensed those to a contention that his Honour made four errors being that his Honour:

[48]

(a) treated the case against the appellants as involving only an attack on the propriety of the transactions;[7]

(b) in any event, erred in holding that the matters could not arguably be relevant to a consideration of circumstances that may excuse an improper transaction;

(c) misconstrued the content of the legal advice that was pleaded as a reason to excuse any such breaches of duty or contraventions;[8]

(d) made what amounted to findings of fact, which ought not have been made on the strike out application:

[49]

(i) that the matters relied on by the appellants occurred too long before the impugned transactions;[9] and

[50]

(ii) that the legal advice relied on was given "upon a different subject matter" (which finding was in any event itself erroneous).[10]

[51]

[25] The appellants did not contend that there was any error by the primary judge in failing to appreciate the breadth of the discretionary power to excuse contraventions by directors of fiduciary or statutory duties. Rather the contention was that his Honour misapplied the law to the pleading.

[52]

[26] In respect of the applicable principles, the appellants submitted that, in considering ss 1317S and 1318 of the Act, the factors that are relevant to whether a person should be excused from liability thereunder include not only whether the person acted honestly, but also the degree to which the conduct fell short of the required standard of care and diligence, the seriousness of the contravention and its actual or potential consequences and any impropriety such as deception or personal gain: see McLellan, Re; The Stake Man Pty Ltd v Carroll (2009) 76 ACSR 67; [2009] FCA 1415 (where the court granted relief to a director who had acted honestly and with the benefit of professional advice and who had actively taken steps to improve the company's financial position).

[53]

[27] The appellants placed emphasis on the express statutory direction to have regard to "all the circumstances of the case" in determining whether the person ought fairly be excused and that that discretion is a wide one: see Morley v Australian Securities and Investments Commission (No 2) (2011) 83 ACSR 620; [2011] NSWCA 110 at [8]. Reference was also made to Australian Securities and Investments Commission v Healey (No 2) (2011) 196 FCR 430; [2011] FCA 1003 at [84] where it was observed that in considering an application under s 1318 of the Act, the court undertakes a three stage inquiry: firstly, as to whether the applicant for relief has acted honestly, secondly, whether having regard to all of the circumstances the applicant ought fairly to be excused, and thirdly, whether the applicant should be relieved from liability wholly or in part and, if in part, to what extent.

[54]

[28] It should be noted that, in their submissions, the appellants summarised the pleas in paras 18A to 18D, consistently with the submissions made below, in the following manner:

[55]

(a) the solicitors, McCullough Robertson, were the regular solicitors for the company;

(b) they dealt with the appellants (as Invion's directors) when Invion was floated on the ASX;

(c) the solicitors examined all of the minutes of every board meeting of the company, and they examined the employment contracts (pleaded in paras 8 to 11 of the SOC);

(d) the solicitors said that only one thing needed to be remedied in the employment agreements - provisions giving the senior executives the right to terminate their contracts if there was a change of control;

(e) the solicitors reviewed the amendments that the appellants consequently made to the agreements before the float and before the prospectus - again, without any board meeting, as the solicitors knew;

(f) the solicitors then said in the prospectus that the company "has entered into [the employment contracts]" (as amended without any resolution) which they said were material contracts, and were properly on foot;

(g) the solicitors also later gave advice that the employment contracts could contain benefits for the directors, including termination notice periods of up to 12 months - this would be "in order" and could be done "without any difficulty" (and there would be no need for member approval, no doubt with Chapter 2E of the Act in mind).

[56]

[29] In that regard, the appellants submitted (again as they did below) that it would be contended at trial that:

[57]

in the light of those facts and circumstances, it was perfectly understandable that the Australian directors of the respondent, which became a listed public company with the guidance and advice of McCullough Robertson, believed that they did not need a formal resolution to authorise an amendment to their employment agreements; and that the 12 month termination period was, in Mr Walker's words, "in order" and could be agreed "without any difficulty".
the appellants had been through a float, and the issue of a prospectus, and had seen McCullough Robertson "certify to the public that the employment agreements were on foot, although the agreements had been entered into, and indeed amended pursuant to the advice of solicitors, without any board resolution" and they had "express advice from the solicitors that a 12 month termination period in their contracts was in order" and did not require member approval.

[58]

[30] Returning to the four areas of error alleged, as to the first error contended by the appellants, it was said that the primary judge treated the case against the appellants as involving only an attack on the propriety of the transactions. It was argued that that approach ignored the respondent's case that the relevant amendments were knowingly made without authority, and consequently, the receipt of the money was a breach of fiduciary and statutory duties. Although his Honour adverted to the relevance of the matters pleaded to the lack of authority case, his conclusion that the advice pleaded "did not anticipate a proposal to vary the contracts" as effected in 2011 was erroneous. The approach taken by the primary judge overlooked the possibility that any breach of duty or contravention involved in the receipt of the money may not involve dishonesty or impropriety. In that event, that the appellants acted honestly, believing on the basis of legal advice that the amendments were "in order" and did not require member approval, was at least arguably relevant under ss 1317S and 1318.

[59]

[31] As to the second error which concerned his Honour's conclusion that the legal advice could not, objectively, be seen as a factor relevant as to whether to excuse any contravention consisting of impropriety, the appellants made the following submissions as to the nature of the pleaded advice. The appellants consulted the solicitors for advice regarding the improvement of their remuneration by the issue of securities, but were advised against that, it being too soon after the float and because member approval would be required. However, they were also advised that the benefits fixed by reference to a period of time no greater than 12 months were in order, and that the termination period could be extended to 12 months without difficulty. Therefore, if the amendments were found to be improper (but within authority) that they were made by the appellants believing, because of the advice, that the provisions were "in order" and "presented no difficulty", was at least arguably relevant to the court's discretionary power under ss 1317S and 1318.

[60]

[32] Thirdly, the appellants submitted that his Honour misconstrued the content of the legal advice that was pleaded as a reason to excuse any such breaches of duty or contraventions. The trial judge described the advice as being "directed to the circumstances in which the approval of the members of the company would be required to a change to the remuneration of the directors". But the appellants submitted that the advice pleaded, and the circumstances in which it was given, were neither so limited nor primarily on that topic.

[61]

[33] Fourthly, the appellants submitted that the trial judge erred in making what amounted to findings of fact, which ought not have been made on an application to strike out a pleading. In finding that the matters relied on by the appellants occurred too long before the impugned transactions, his Honour reached a conclusion that was erroneous in principle and as a matter of analysis. The respondent's case involved the proposition that the appellants engaged in transactions in 2005 and 2006, that they knew the terms of these agreements, and that they knew in April 2011, that the amendments were unauthorised. In the appellants' submission, there was a logical connection between the legal advice provided in late 2009 and the impugned transactions which could arguably invoke the discretionary power under ss 1317S and 1318. Further, the appellants submitted that his Honour's finding that the legal advice was given "upon a different subject matter" was erroneous.

[62]

[34] The respondent submitted this was not a case in which expert advice was relevant to the exercise of the discretion under s 1317S or s 1318 as was the case in Re Claridge's Patent Asphalte Co Ltd [1921] 1 Ch 543 and McLellan, Re; The Stake Man Pty Ltd. The appellants introduced an intermediate step as to "what they believed" based on the alleged advice. That belief had two components. Firstly, that the provisions in the employment agreements providing for 12 months' termination payments were proper and lawful. But the relevant part of the alleged advice concerned the extension of the termination period, rather than the setting of a termination payment to be paid immediately upon resigning. The second component of the belief was that a board resolution was not necessary to vary the agreements. But since the alleged advice related only to member approval, there was no logical basis for believing that board approval was not necessary.

[63]

[35] The respondent further submitted that there was no connection between the pleaded belief, or the advice itself, and the appellants' conduct which was to confer a particular benefit of themselves (to terminate their own employment without notice and immediately receive 12 months' salary). The respondent submitted that the appellants did not have any advice about that matter, nor did they have advice on conferring a greater benefit on themselves than that which the board had approved after considering what changes should be made to the termination provisions.

[64]

[36] As to the first error argued by the appellants, the respondent submitted that the appellants misinterpreted his Honour's use of the word "propriety" as meaning "honesty", whereas his Honour used the word more broadly to mean "conformity to established standards of behaviour", "appropriateness to the purpose or circumstances" or "rightness or justness".[11] The appellants failed to explain why his Honour's conclusion that the advice did not anticipate the proposal to amend the contracts was erroneous. It was plainly correct, as there was no connection between the advice and the conduct.

[65]

[37] In response to the appellants' submission that his Honour ignored the part of the respondent's case to the effect that the amendments were made without authority, the respondent submitted that the basis of that allegation was that, once the board resolved as to the appropriate amendment to the employment contracts on 25 March 2011, no director had authority to do something different. For this reason, the advice received in 2010, and any belief arising therefrom, had no relevance to the question of authority. Further, the appellants alleged that they had made the amendments by exercising an authority conferred by the board 10 years earlier or by an implied authority, and therefore denied that they knew they lacked the authority to make the amendments. Again, the respondent submitted, the alleged legal advice was not concerned with either of these sources of authority relied upon by the appellants.

[66]

[38] As to the appellants' submission that the primary judge overlooked the possibility that a contravention may not involve dishonesty or impropriety, his Honour identified that one of the duties alleged to have been breached was s 180 of the Act. Further, his Honour did not use impropriety interchangeably with dishonesty. And even if dishonesty or impropriety was not an element of the contravention, it did not follow that conduct that satisfied the elements of the contravention did not also involve dishonesty or impropriety. The respondent submitted that the point made by his Honour was that, if the appellants engaged in contravening conduct, advice that was not about the appropriateness of that conduct could not even arguably mean that the appellants should fairly be excused from liability.

[67]

[39] As to the appellants' submission that the appellants' belief (based on the alleged advice that the amendments were "in order" and could be made "without difficulty") was at least arguably relevant to ss 1317S and 1318, the submission conflated various parts of the defence to misstate the nature of the struck-out allegations. McCullough Robertson did not advise that the amendments were "in order" and could be made "without difficulty". The appellants did not allege that the lawyers were told about or asked to advise on the impugned amendments, nor did they allege in the struck-out paragraphs that they believed that the impugned amendments were in order and could be made without difficulty. The alleged advice was the only specific factor referred to in the struck-out paragraphs to excuse liability, rather than one of a number of relevant factors.

[68]

[40] The respondent submitted that the second to fourth errors identified by the appellants were simply different ways of formulating the first error. The appellants misrepresented the judge's reasons; his Honour did not find that the advice had been given too long before the impugned conduct. Rather, his Honour pointed out that the advice did not anticipate the conduct of the appellants. And the appellants did not provide any explanation as to why the finding that the legal advice was "upon a different subject matter" was erroneous.

[69]

[41] It may be accepted, as the appellants contended, that it is not correct to say that unless the appellants can allege that their state of mind was based on legal advice concerning the very conduct that is impugned, the statutory power of excusal cannot be engaged.

[70]

[42] The first, second and third errors contended for by the appellants in effect are that the primary judge considered the struck-out pleadings in too narrow a context. But the pleading before the primary judge was one which alleged in para 18A that the appellants acted in reliance on legal advice in having the belief pleaded (that the transactions were proper, lawful and did not require a board resolution). In those circumstances, the primary judge, unsurprisingly, focussed on the two identified occasions on which legal advice was provided and the nature of that advice.

[71]

[43] Nevertheless, it is apparent that the appellants seek to recast the nature of the case put forward in the pleading from one which alleges in para 18A a belief, which is based on legal advice, to one that asserts that the relevant belief stemmed from a range of facts and circumstances, including the nature of past legal advice. The appellants thus sought to argue that relevant to the issue of the statutory excusal was, for example, the appellants' contention that from their past experience as directors they believed no resolution was required, that such belief was informed by their understanding that the impugned conduct was authorised and that the appellants were acting in the respondent's best interests. In advancing that argument, the appellants submitted that the plea in para 66A(c), that "in all the circumstances" the appellants "ought fairly to be excused" for any alleged contravention or breach, acted as a "catch all" incorporating all the matters sought to be relied upon. This was because para 66A(c) particularised the matters relied on as not only "the Legal Advice" but also "all of the other facts, matters and circumstances pleaded herein".

[72]

[44] However, there are obvious difficulties in relying on the present pleading in terms of the case which the appellants presently contend they intend to pursue at trial. As the respondent submitted, there is no allegation that the facts and circumstances pleaded in paras 18B to 18D led to the belief pleaded in para 18A. Nor does para 66A(c) identify any of those matters as particulars of the "circumstances of the case" relevant to the issue of the s 1317S or s 1318 excuse. At best, para 66A(c) seeks to achieve this in an oblique and circuitous manner by incorporating all the paragraphs of the defence without discrimination and without regard to their relevance. Clearly, the amended defence as it stands is inadequate to the task of pleading the case which the appellants contend they intend to take to trial.

[73]

[45] Dealing with the particular errors alleged, I do not accept that the primary judge erred in treating the case against the appellants as involving only an attack on the propriety of the impugned transactions. As the appellants conceded in their written submissions, the express terms of the advice pleaded were relevant more to the allegations of impropriety and breach of statutory duty, rather than to the issue of authority. And although they did not sustain the relevance of the advice on such a narrow basis, insofar as the appellants submitted that the context and events pleaded in paras 18B to 18D went directly to the issue of how and why the appellants believed that a board resolution was not necessary, there is (as already mentioned) an insurmountable obstacle in that the pleading did not connect in any meaningful way the matters pleaded in paras 18B to 18D with the belief asserted in para 18A.

[74]

[46] As to the second error alleged, while it may be that the facts, matters and circumstances alleged in paras 18B to 18D, other than the actual legal advice referred to therein, were arguably capable of inducing the alleged state of mind or belief in para 18A, they were not pleaded as having induced that belief. Likewise, while statements made by the respondent's solicitors, in the context of the other matters pleaded, might arguably provide a basis for lay directors of a company to believe that the provisions were proper and lawful, they were not pleaded as founding the basis for the appellants' belief that the variations were proper or that a board resolution was not required and that any lack of authority could thus arguably be excused.

[75]

[47] As to the third and fourth errors, I am not persuaded that the primary judge misconstrued the legal advice pleaded or made findings of fact that were impermissible on a strike out application. The primary judge did not find that the "matters relied on" by the appellants "occurred too long before the impugned transactions", nor even that the pleaded legal advices were given too long before those transactions. Rather, in referring to the fact that the 2009 and 2010 advices were given "well prior" to the variations to the agreements, his Honour was making the point expressed in his reasons that the advice given on those occasions "did not anticipate a proposal" to vary the agreements that were effected in 2011. As to the finding that the legal advice relied on "was given upon a different subject matter", his Honour elaborated on that remark by explaining that the March 2010 advice was "not given in relation to a proposal to vary the defendant's contracts of employment which then became effected in 2011." That cannot be controverted; it was not the appellants' case as argued before this Court that there was express advice given in relation to the variations that were effected.

[76]

[48] The judge also explained that the advice "was not given at all in relation to what might be described as the propriety of a defendant putting in place a variation to the contract by his own action on behalf of the company, which was to his advantage but not to the company's advantage". The pleaded advice in its terms was not given on the impugned conduct. And his Honour's statement that the pleaded 2009 and 2010 advices could not have provided any reasonable basis upon an objective view for the propriety of the impugned conduct, is perhaps to be understood in the context of a submission contained in the appellants' written outline below that it was relevant that the appellants were "in receipt of legal advice as to the propriety of the contract extensions". If what his Honour was intending by his statement was to convey that the advices referred to could never be relevant to the issue of a statutory excuse, that may be stating the matter too broadly. On the basis of the case which it is said the appellants wish to take to trial, it is not inconceivable that the advices may arguably be relevant to the issue of the application of the statutory excusal.

[77]

[49] It is to be noted that in making the strike out orders, the primary judge also ordered that the appellants' signatures on a request for trial date be dispensed with unless they had filed and served an amended defence by a specified date. Subsequent amended defences in similar terms to the present pleadings were also struck out. The matter, which is on the supervised case list, has now been set down for trial for next year. By order dated 30 July 2013, the supervised case list judge ordered that the parties are only permitted to amend their pleadings with the leave of the court. Should the appellants seek leave to further amend their pleadings to reflect the case they have indicated they wish to take to trial, the matter will need to be raised on a further supervised case review, and no doubt with a draft of the proposed amendment being provided in advance.

[78]

[50] The appellants have failed to establish error by the primary judge. The appeal should be dismissed with costs.

[79]

[1] See allegations in para 20 of the second further amended statement of claim (SFASOC) which are admitted by the appellants.

[80]

[4] See para 24J first and second defendant's amended defence; para 23J third defendant's amended defence, para 21J fourth defendant's amended defence.

[81]

[6] See also paras 65A, 65B third defendant's amended defence; paras 59A, 59B fourth defendant's amended defence.

[82]

[11] Macquarie Dictionary (Revised 3rd Ed.), p 1522.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (82 paragraphs)

Parties

Cases Cited (1)