Valda Pty Ltd v Macarthur Coal Limited

STATEMENT OF CLAIM 3 The originating application and a statement of claim were filed on 28 March 2012. When argument on the issue of security for costs was heard on 20 June 2012, counsel for the applicants indicated that the applicants would seek to amend the statement of claim. 4 On 6 July 2012, the applicants filed, without leave, an amended statement of claim which made a number of changes to the original statement of claim, although these were not marked up. One of these changes was the insertion of an oppression claim in paragraphs [20]-[22] in a form similar to that currently proposed. 5 On 13 July 2012, the applicants filed, without leave, a marked up version of the pleading filed on 6 July, which, contrary to the applicants' solicitors' letter of 18 July 2012, highlighted the amendments by reference to the original statement of claim filed on 28 March 2012. 6 On 18 July 2012, the applicants filed, again without leave, another amended statement of claim featuring marked up changes. This document closely resembled the 13 July version, with some minor alterations. It purported to amend the statement of claim "pursuant to Rule 16.59 of the Federal Court Rules 2011". Aside from some inconsequential formatting changes, paragraphs [20]-[22] of this document were the same as paragraphs [20]-[22] of the 13 July document (and therefore the 6 July document). 7 On 19 September 2012, the applicants sought leave to file a further amended statement of claim, a copy of which was provided with their submissions on 1 October 2012. In what follows, the Court has noted the changes in paragraphs [20]-[22] of this document, which now read as follows: Oppression, Unfair Discrimination, Unfairly Prejudicial Conduct 20. At the time of sending the Rights Issue Documents to Eligible Shareholders, each Applicant was an Eligible Shareholder in Macarthur Coal. 21. Macarthur Coal engaged in conduct of its affairs which was "oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member of members", namely the Applicants, in contravention of Sub-section 232(e) of the Corporations Act by sending to each Eligible Shareholder, including each Applicant, the Rights Issue Documents referred to in paragraph 4 above and then: (a) sending to each Eligible Shareholder, including each Applicant, the Rights Issue Documents referred to in paragraph 4 above; (a) (b) rejecting each Applicant's acceptance of Macarthur Coal's offer; and (b) (c) refusing to issue New Shares to each of the Applicants; without providing a reasonable explanation when issuing New Shares to other Eligible Shareholders. (c) issuing New Shares to other Eligible Shareholders; whereby Macarthur Coal treated the Applicants in a manner substantially different from the manner in which it treated other Eligible Shareholders. Particulars The Applicants refer to and repeat the particulars to paragraph 12 above. Further, on or about 29 July 2009, Mr Faggianelli on behalf of some of the Applicants, wrote a letter to Macarthur Coal requesting a list of which shareholders were issued shares under the SPP and which were not. On or about 31 July 2009, McCullough Robertson, lawyers acting on behalf of Macarthur Coal, informed Mr Faggianelli in writing that the information he sought "will not be provided". Copies of both letters are in the possession of the Applicants' lawyers and can be viewed by prior appointment. The Applicants otherwise refer to and repeat the particulars to paragraph 12 above and say further that, notwithstanding the Respondent's stated reasons for refusing to issue the New Shares, on 24 July 2009, Macarthur Coal, following acceptance of an offer and payment of $15,000.00 under the SPP from Graeme Barnes in his own name and a company named Seaford Holdings Pty Ltd respectively (of which Mr Barnes was sole director), issued 2,500 shares to each shareholder. Mr Barnes is the director of a number of the Applicants. Further particulars of this allegation will be provided after discovery. 22. By reason of the matters referred to at paragraphs 20 and 21 above, the Applicants have suffered loss and damage and the Applicants seek an order under Section 233 of the Corporations Act by which Macarthur Coal must pay damages to each of the Applicants for the loss suffered by each of the Applicants as a result of Macarthur Coal's misconduct. 8 The particulars to paragraph 12, which have not been changed since they were inserted by the 6 July amended statement of claim, read: Particulars (a) Macarthur Coal, through its agent Computershare, sent a letter to each of the Applicants dated 28 July 2009 stating, inter alia, as follows: "Unfortunately your application exceeded the Maximum Application Amount of A$15,000, as defined in the Share Purchase Plan Rules. Please find attached cheque representing the refunded portion of your Share Purchase Plan application money." (b) On or about 28 July 2009, Yiori Yi, Project Coordinator, Investor Services, Computershare, sent an email to Mark Menzies, the broker acting on behalf of some of the Applicants, confirming the rejection on the grounds that all acceptances by those Applicants were to be treated as if sent or made by one shareholder only and stating, inter alia, as follows: "[Macarthur Coal] has taken the view that various shareholders on the register may be the same person …" (c) In the same email referred to in the preceding sub-paragraph, it was stated that Macarthur Coal also had the right under clauses 3.3 & 3.6 of the Plan Rules "to reject any application" and that Macarthur Coal did so on the basis that: "…the company is not satisfied that the total application price you have applied for is $15,000 or less." (d) In a letter dated 29 July 2009 from Macarthur Coal to Joe Faggianelli, the director of some of the Applicants, Macarthur Coal stated, inter alia, as follows: "… in accordance with the SPP rules, Macarthur Coal Limited decided not to accept Grapevine Nominee Limited's application." (e) In a further letter from McCullough Robertson, lawyers for Macarthur Coal to Mr Faggianelli dated 31 July 2009, it was further stated, inter alia, as follows: "The rejection of the application by Grapevine Nominees Limited was made in accordance with the rules of the Share Purchase Plan." Copies of all correspondence referred to above are in the possession of the Applicants' lawyers and my [sic] be viewed by prior appointment. 9 Under r 16.51(1) of the Federal Court Rules 2011 ("the Rules"), a party may amend a pleading once, at any time before the pleadings close, without the leave of the Court. Under r 16.51(3), a party may further amend a pleading at any time before the pleadings close if each other party consents to the amendment. It suffices to note that, while an amended statement of claim filed pursuant to r 16.51 must comply with r 16.59's formal requirements, the latter rule does not of itself provide a basis for filing an amended pleading; and it remains unclear why quite so many different documents were lodged. In any event, it is not in dispute that the applicants require the leave of the Court to further amend the statement of claim as they propose to do. 10 The parties filed submissions on the question of whether the applicants should have leave to further amend their pleading. The parties agreed on the bulk of the proposed amendments and, bearing this in mind, I would grant leave with respect to so much of the further amended statement of claim as is agreed between the parties. 11 The real issue between the parties, as their submissions show, is whether the proposed oppression claim as a whole fails to disclose a reasonable cause of action or is likely to cause embarrassment in the proceeding. If the respondent's submissions are accepted, then the Court would refuse the leave sought by the applicants. Whilst in the circumstances, it is unnecessary to decide which (if any) of the previous amended statements of claim that have been filed were filed in accordance with the Rules, if the Court accepts the respondent's submissions, any form of the proposed oppression claim that has previously been included in the applicants' pleading should be struck out under r 16.21 of the Rules - as the applicants' submissions apparently concede: see applicants' outline of submissions filed on 1 October 2012. 12 In their written submissions, the applicants submitted that an oppression claim "imports general notions of unfairness where that unfairness arises from abuse of majority power or control". The applicants submitted that their particulars disclosed discrimination against them since their particulars disclosed that the applicants were refused shares while at least one other person "in circumstances similar to those of the applicants" was issued shares. The applicants maintained that this was enough to make an inference of unfairness reasonably open and that the onus was now on the respondent to show that its conduct was not oppressive. The applicants affirmed that only the respondent possessed documents capable of showing the full extent of the discrimination against them and argued that they should be permitted "to fully particularise the oppression claim once discovery has taken place". The applicants submitted that, as the cause of action was statutory, the pleadings sufficiently informed the respondent of the nature of the claim it was required to meet because "[t]he elements underlying the cause of action [were] stated in [the legislation]". 13 For its part, the respondent submitted that paragraphs [20]-[22] failed to disclose a cause of action. The respondent argued that the pleading "simply recite[d] the 'oppression' formula in s.232(e) of the Corporations Act" and asserted oppression from the fact of the refusal to issue shares to the applicants, without explaining how the differential treatment was said to constitute oppression. The respondent maintained that differential treatment alone was insufficient to establish unfairness as "there may have been material differences between other Eligible Shareholders and the Applicants". The respondent submitted that allowing the proposed oppression claim would allow the applicants "to go on a fishing expedition to investigate whether or not they in fact have a cause of action" and "would inevitably lead to a far-reaching and costly inquiry across the many thousands of applications made by other Eligible Applicants under the Share Purchase Plan and the manner in which they were assessed by the Respondent". The respondent submitted that the proposed oppression claim "would be likely to embarrass the efficient conduct of the proceeding and any hearing" and "ought not be allowed". 14 In submissions in reply, citing Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539 ("Jenkins"), the applicants submitted that it was "at least arguable that once the applicants have raised a prime facie case [sic] the onus of proving that the relevant conduct was not oppressive falls on the [respondent]"; and the question of the propriety of the discrimination was "a matter that can be raised by way of defence". 15 The Rules are clear with respect to the sufficiency of pleadings. Pursuant to r 16.02(1)(d), "[a] pleading must … state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial, but not the evidence by which the material facts are to be proved". Under r 16.41, "[a] party must state in a pleading … the necessary particulars of each claim, defence, or other matter pleaded by the party". A pleading may be struck out under r 16.21(1)(d) and (e) on the grounds that it is likely to cause prejudice, embarrassment or delay in the proceeding or fails to disclose a reasonable cause of action. 16 The proposed oppression claim and any previous form of the claim relies on s 232(e) of the Corporations Act. Section 232(e) "requires proof of oppression or proof of unfairness: proof of mere prejudice to or discrimination against a member is insufficient to attract the court's jurisdiction to intervene": Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 at 472 per Brennan J. An allegation of unfairness is thus an essential element of an oppression claim and it must amount to more than a mere allegation of discrimination. 17 The applicants referred to Jenkins to support their submission that "it is at least arguable that once the applicants have raised a prime facie case [sic] the onus of proving that the relevant conduct was not oppressive falls on the company". In Jenkins, the appellant did indeed make such an argument (at 550), but it was rejected by the Full Court of the Supreme Court of Western Australia (at 551) and accordingly Jenkins does not assist the applicants. 18 In Shelton v National Roads and Motorists' Association Ltd (2004) 51 ACSR 278 ("Shelton"), Tamberlin J held that in s 232(e) matters, "[t]he onus of establishing unfairness rests on the applicant asserting the conduct": at 285 [24]. Citing Weatherall v Satellite Receiving Systems (Australia) Pty Ltd (1999) 92 FCR 101, his Honour noted that "[i]t is necessary for each single allegation in an oppression case to be pleaded clearly in order to assess whether the totality may amount to oppression" (at 285 [24]) and that the pleadings should "precisely delineate the basis on which s 232(e) is relied on": at 285 [25]. Tamberlin J held that an amended statement of claim was deficient because "the precise oppression, discrimination or unfairness is not articulated … [and] [t]he nature of the disadvantage is not alleged": at 291 [49]. 19 In light of these authorities, I would reject the applicants' submission that an allegation of discrimination suffices for a good oppression pleading. As noted already, r 16.02(1)(d) of the Rules made it necessary for them to plead the material facts on which they relied. The material facts had to establish more than discrimination: they needed to spell out the respects in which the alleged discrimination was said to be unfair. It is no answer to say that the elements of the action are to be found in the statute, because the statute does not state the material facts on which the applicants would rely, and those are what the applicants must plead. 20 The proposed further amended statement of claim pleads that the applicants were refused shares and that this amounted to being treated "in a manner substantially different" from other shareholders. This claim of mere discrimination is, without more, insufficient. 21 The particulars set out by the applicants could not cure this insufficiency. In the particulars to paragraph [21], the applicants state that Mr Barnes and Seaford Holdings Pty Ltd were issued shares, but nothing is said that would justify the proposition that there were no relevant differences between either of those persons and the applicants, or that the different treatment of the applicants was otherwise unfair. Nor is anything said in the particulars to paragraph [12] or elsewhere in the proposed further amended statement of claim that would justify the proposition that there were no material differences between the applicants and any Eligible Shareholders issued shares under the Share Purchase Plan. If, as their submissions imply, the applicants considered that no such material differences existed, then the material facts for this proposition, with particulars, should have appeared in the pleading. It is unlikely that the applicants need access to the respondent's documents for this purpose and the applicants' assertion that allegations of unfairness could be fully particularised after discovery is not therefore to the point. 22 Contrary to the applicants' submissions, there is no pleading that any person issued shares was "in circumstances similar to those of the applicants". The pleading provides nothing beyond the discrimination claim to explain how the respondent's conduct is said to be unfair. It is therefore an insufficient pleading of oppression. 23 It follows that the proposed oppression claim is insufficiently pleaded: proposed paragraphs [20]-[22] of the proposed further amended statement of claim fail to disclose a reasonable cause of action. Further, they would be likely to cause embarrassment and delay in the proceeding if they were permitted to remain. Accordingly, I would not grant leave to amend in respect of the proposed oppression claim and, to the extent necessary, I would strike out any forms of the claim that have previously been included in the applicants' pleading. 24 It is unnecessary here to consider the extent to which there were further deficiencies with the applicant's proposed oppression claim that were not mentioned by the parties, although I note, for instance, that the proposed pleading may not go far enough to setting out those facts that would establish standing in accordance with s 234 of the Corporations Act to apply for an order under s 233. A pleading that the applicants were members of the respondent at the time of the conduct would not be enough, since to obtain relief the applicants would need to be current members of the respondent under s 234(a), or would need to establish standing on some other basis under s 234. Further, the pleading of the proposed oppression claim needed to "specify how the … relief sought … [would] have the effect of remedying the conduct complained of or the consequences of that conduct": Shelton at 285 [26]. It may be doubted whether this requirement has been fulfilled in this instance.

ORIGINATING APPLICATION 25 The applicants sought leave to amend the originating application on 19 September 2012 and provided a copy of the proposed amended originating application on 1 October 2012. 26 Under r 8.21 of the Rules, an applicant may apply to the Court for leave to amend an originating application for any reason. It was not in dispute that the applicants required the leave of the Court to amend their originating application. 27 The respondent consents to some of the proposed amendments and I would grant leave to amend so much of the originating application as the parties agree upon. The only point in contention between the parties is the insertion of paragraphs [3(A)] and [3(B)]. 28 Paragraph [3] of the proposed amended originating application relevantly reads: 3. Alternatively to paragraph 1. and 2. above, on the grounds stated in the accompanying Statement of Claim, the Applicants claim: A. a declaration that the conduct of the Respondent in: (a) rejecting each Applicant's acceptance of Macarthur Coal's offer; (b) refusing to issue New Shares to each of the Applicants; (c) issuing New Shares to other Eligible Shareholders; whereby Macarthur Coal treated the Applicants in a manner substantially different from the manner in which it treated other Eligible Shareholders - was conduct of its affairs which was "oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members", namely the Applicants, in contravention of Sub-section 232(e) of the Corporations Act. B. Further and in the alternative to 1A, B, C & D and 2A, B & C above an order for damages in lieu of specific performance of each Contract, under Section 233 of the Corporations Act. … 29 Given that the proposed oppression claim does not attract a grant of leave and any previous versions are to be struck out from the earlier pleading, I would refuse leave to amend the originating application so as to include paragraphs [3(A)] and [3(B)]. 30 For the reasons stated above, I would order that the applicants be granted leave to file a further amended statement of claim in the form provided to Chambers on 1 October 2012, save that there is no leave granted with respect to proposed paragraphs [20]-[22] of that document. I would order that all previous forms of proposed paragraphs [20]-[22] of that document be struck out in their entirety. I would further order that the applicants be granted leave to file an amended originating application in the form provided to Chambers on 1 October 2012, save that there is no leave granted with respect to paragraphs [3(A)] and [3(B)]. In addition, I would order that the applicants pay the respondent's costs of and incidental to its opposition to the grant of leave to add the proposed oppression claim. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

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