Wollongong Coal Ltd v Gujarat NRE Properties Pty Ltd

Supreme Court of NSW|2019-06-07|Before: Ward CJ, Rein J

Judgment

HER HONOUR: Before me for hearing on 7 June 2019 were two notices of motion. First, a notice of motion filed 16 April 2019 by the plaintiff, Wollongong Coal Limited (to which I will refer as Wollongong Coal), seeking leave to amend its amended statement of claim in these proceedings and orders for access to documents produced under subpoenas issued by it to Wollongong City Council and a firm of accountants (Gokani & Associates) (those orders now being sought only in relation to the second of those subpoenas). Second, an earlier notice of motion dated 30 July 2018 (filed 1 August 2018) by the second and fourth defendants (they being Mr Jagatramka, a former director of Wollongong Coal, and Gujarat NRE India Pty Ltd (GNI), the recipient of a sum of money out of the proceeds of, or following, the sale of Wollongong Coal's shareholding in the first defendant (Gujarat NRE Properties Pty Ltd (to which I will refer as Gujarat NRE)), seeking to set aside the subpoenas in question (again, that issue now arising only in relation to the subpoena to Gokani & Associates (the Gokani Subpoena)).
Wollongong Coal maintains that the amendment application arises as a consequence of pleading objections taken by the second to fourth defendants at the commencement of an aborted hearing before Rein J on 27 August 2018 (to which I refer below) and is, in effect, to "tidy up" the pleading and to avoid later dispute as to what is within (or outside) the scope of its pleading. That said, it contends that the amendments are strictly not necessary in order to permit it to conduct the case as it was opened before Rein J. The second to fourth defendants do not accept any of those propositions but say that if, as Wollongong Coal contends, the amendments are not necessary, then the pleading issue should be left to be dealt with at the hearing now scheduled for November this year.

Background

The background to the present applications is in large part set out in my earlier interlocutory judgment in these proceedings (see Wollongong Coal Limited v Gujarat NRE Properties Pty Ltd [2019] NSWSC 187) in which I dealt with a security for costs application made by the second and fourth defendants against Wollongong Coal. However, I will here again briefly summarise the underlying dispute between the parties as it is of particular relevance when considering the amendment application now brought by Wollongong Coal.
The dispute relates to a residential property located in Wollongong (the Cliff Road Property), which was acquired in 2008 (and is still owned) by Gujarat NRE. Between June 2008 and June 2013, Gujarat NRE was a wholly-owned subsidiary of Wollongong Coal and was the special purpose vehicle established for the purpose of holding the Cliff Road Property.
Wollongong Coal contends that there was no justification for Mr and Mrs Jagatramka acting to commit the company to the acquisition and development of the Cliff Road Property; and says that the reasons they advanced at the time (namely, to accommodate executives who were expected to travel to Wollongong to attend the offices of Wollongong Coal) are "contrived and fanciful", pointing to the facts that Wollongong Coal already owned a penthouse apartment in a similar location and that, once the Cliff Road Property was built, visiting executives continued to stay at the local Medina and Novotel hotels. Wollongong Coal says its case is that Mr and Mrs Jagatramka were motivated by improper purposes in causing Wollongong Coal to fund and develop the land because they intended, at all relevant times, to live at the Cliff Road Property once it was built; and that, in so doing, they acted in breach of their fiduciary duties to Wollongong Coal. It is contended that the property held by Gujarat NRE represents the traceable proceeds of those breaches of duty.
In the context of the applications in relation to the Gokani Subpoena, it is relevant here to set out some further factual background.
On or about 9 July 2013, Wollongong Coal's shares in Gujarat NRE were transferred to Basant International Pty Ltd (Basant) (a transaction impugned by Wollongong Coal in the proceedings), although the Board resolution of 18 June 2013 which authorised this transfer had specified Happy Mining Pty Ltd (Happy Mining) as the transferee. On 18 June 2013, Mr Sanjay Sharma (the then company secretary) and Mr and Mrs Jagatramka (then two of the directors) stood down from the Board of Gujarat NRE and Mr Rajat Sharma, a director of Happy Mining, assumed the sole directorship of the company, on the day of transfer of the shares (9 July 2013), Mr Kunal Chandak, a director of Basant, became (and he remains) the sole director of the company. (The disconformity between the Board resolution and what actually occurred is one of the matters to which Wollongong Coal points in support of the relevance of the documents sought under the Gokani Subpoena.)
Wollongong Coal asserts (at [202] and [203] of the amended statement of claim) that Mr and Mrs Jagatramka did not obtain the fully informed consent of Wollongong Coal or its shareholders when they caused Wollongong Coal to dispose of its shares in Gujarat NRE to Happy Mining/Basant. It is alleged that the fully informed consent of Wollongong Coal was not obtained because Mr and Mrs Jagatramka failed to disclose to their fellow Board members that the directors of Happy Mining and Basant were close associates of theirs, which allegations are denied by the second to fourth defendants. (Wollongong Coal now contends that the association between these people rises to the level of a familial connection.)
Mr and Mrs Jagatramka have been in occupation of the Cliff Road Property since the new residence was built on the site. Wollongong Coal points to the fact that, notwithstanding the transfer of Wollongong Coal's shares in Gujarat NRE to Basant (a company which Wollongong Coal says was ostensibly outside of the Gujarat group), Basant took no steps to determine Mr and Mrs Jagatramka's continued occupation of the Cliff Road Property. Wollongong Coal further points to affidavit evidence that has been prepared by two of the other directors of Wollongong Coal at the relevant time (Dr Firek and Mr Anghie) to the effect that they were not aware, at the time they were deliberating upon the resolution approving the sale of Wollongong Coal's shares in Gujarat NRE to Happy Mining, of any association between Happy Mining and Mr Jagatramka (or his associated entities); and that, had they been made aware of such an association, they would have made further enquiries before approving the resolution.
Wollongong Coal argues that the effect of the sale of the shares in Gujarat NRE was to crystallise a loss of $6,403,050 on its investment in the Cliff Road Property.
Wollongong Coal commenced these proceedings on 12 June 2014, in which it seeks the imposition of a remedial constructive trust over the Cliff Road Property and also seeks equitable compensation. The proprietary relief sought by Wollongong Coal is premised on Gujarat NRE being a recipient of property with knowledge that the property was procured in breach of fiduciary duty. In essence, Wollongong Coal alleges that the second and third defendants, Mr and Mrs Jagatramka, in breach of their duties as directors of Wollongong Coal, procured the company to subscribe for equity in, and to advance loans to, Gujarat NRE in order to fund the purchase of the Cliff Road Property and the development of a lavish house on that land. Wollongong Coal says that Gujarat NRE obtained the land, and expended the funds on its development, with knowledge of those breaches of duty because Mr and Mrs Jagatramka comprised two thirds of Gujarat NRE's Board of directors at all relevant times.
Mr and Mrs Jagatramka have denied all of the alleged breaches. Mr Jagatramka has filed a cross claim against Dr Firek and Mr Anghie (the cross-defendants), each of whom remains a current director of the company, seeking contribution from them. If, which is denied, Mr Jagatramka is liable to Wollongong Coal for breach of duty as alleged, then he contends that his former co-directors who participated in those matters are also liable in respect of the same breaches of duty alleged against Mr Jagatramka. The second to fourth defendants say that the cross-claim is entirely defensive to, and predicated upon, the claims made by Wollongong Coal against Mr and Mrs Jagatramka (see the second to fourth defendants' submissions at [10]).
Gujarat NRE, has taken no step in the proceedings (including not having filed any notice of appearance).
On 30 January 2018, the proceedings were set down for hearing for seven days commencing on 27 August 2018 before Rein J. At the commencement of that hearing, an issue was raised (by the cross-defendants, not the second to fourth defendants) as to the authority of those instructing and appearing on behalf of Wollongong Coal to represent the company in the proceedings. That issue led to the vacation on 28 August 2018 of the remaining hearing dates (on Wollongong Coal's application and over the opposition of the second to fourth defendants).
Relevantly, as I will explain further in due course, Rein J made an order at that time to the effect that Wollongong Coal was not permitted to make any further amendment to its statement of claim (or to adduce any further evidence), in the absence of special circumstances. It is clear from the transcript of what occurred at the time (to which I will refer later in these reasons) that this order was made with the intent that Wollongong Coal should not obtain a forensic advantage as a result of the vacation of the hearing dates (that having been caused, as indicated above, by Wollongong Coal's desire to put beyond doubt any issue as to the authority of those representing it in the proceedings).
What transpired after the vacation of the August 2018 hearing dates includes that, in December 2018, the matter was again set down for hearing before Rein J (this time for five days in November 2019) and there was a subsequent application by the second to fourth defendants for security for their costs which I heard on 21 February 2019 and determined on 6 March 2019. It was only after the determination of the security for costs application that Wollongong Coal filed its notice of motion seeking leave further to amend its statement of claim (that being the main issue now for determination by me).
The remaining issue presently for determination is as to the Gokani Subpoena. This subpoena was issued on 20 July 2018 by Wollongong Coal to Gokani & Associates, the former accountants of the first defendant, seeking financial documents of Gujarat NRE and financial documents of Happy Mining, the asserted relevance of which I will explain in due course. Documents have already been produced by Gokani & Associates in answer to that subpoena. Wollongong Coal seeks access to those documents. The second to fourth defendants resist this and seek an order setting aside that subpoena.
Wollongong Coal submits that access orders to the documents produced in answer to the Gokani Subpoena ought be made, because the documents sought satisfy the test of adjectival relevance and because, it says, the second and fourth defendants have not hitherto prosecuted their notice of motion filed 1 August 2018 by which they sought to set the subpoena aside notwithstanding that there have been numerous opportunities since the adjourned hearing for those defendants to advance that application. The second and fourth defendants do not accept that there has been unconscionable delay in this regard (pointing to the fact that the notice of motion was initially stood over to be dealt with by the trial judge, Rein J, and saying that it was then 'overtaken by events' when the hearing was vacated).

Amendment Application

I will deal first with the amendment application. The proposed further amended statement of claim is annexed to Wollongong Coal's notice of motion filed 16 April 2019.

Existing pleading

As presently framed in the amended statement of claim filed 19 April 2016, Wollongong Coal alleges that Mr and Mrs Jagatramka (then two of the directors of the company) breached general law and statutory duties owed by them, as directors, to the company in relation to the acquisition and development of the Cliff Road Property and the ultimate sale by Wollongong Coal of its shareholding in Gujarat NRE. Wollongong Coal alleges that Mr and Mrs Jagatramka caused it to fund the acquisition and development of the Cliff Road Property in pursuit of their own interests, being a desire to construct a residence in which they intended to reside rent-free, which motivation it is said was not disclosed to Wollongong Coal or the other members of the Board (amended statement of claim at [42]).
Complaint is made by Wollongong Coal as to Mr and Mrs Jagatramka's conduct in: causing it to subscribe for 800,000 shares in Gujarat NRE in June and July 2008 at $1 per share (which money was applied to purchasing the Cliff Road Property) (amended statement of claim at [43]-[57]); causing it to advance to Gujarat NRE the sum of approximately $5m (amended to $4.5m in the proposed further amended statement of claim) in June 2008 to facilitate the purchase by Gujarat NRE of the Cliff Road Property (amended statement of claim at [58]-[106]); causing it, between 30 April 2010 and 17 June 2013, to advance to Gujarat NRE the sum of approximately $4.3m (amended to $4.8m in the proposed further amended statement of claim) to facilitate the demolition and construction of a new residence at the Cliff Road Property (amended statement of claim at [112]-[124]; [139]-[168]); permitting (but not actually causing) it on or about 18 June 2013 to convert into equity the advances it had made to Gujarat NRE ($9,353,050) and voting (in June 2013) in favour of the company thereafter selling its shareholding in Gujarat NRE (and therein the Cliff Road Property) for $3.75m (amended statement of claim at [169]-[181]; [189]-[218]); and causing it on 4 July 2013 to transfer the sum of $1,158,526 to GNI, following the sale of Wollongong Coal's shareholding in Gujarat NRE (amended statement of claim at [182]-[188]) (which sum it is said is now unrecoverable by Wollongong Coal, for reasons that it is not necessary here to recount but which are related to other proceedings recently before the Court of Appeal - see Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135).
It is further alleged that Mr and Mrs Jagatramka engaged in conduct that is misleading or deceptive or likely to mislead or deceive in relation to certain matters connected with the above complaints (amended statement of claim at [219]-[226]) (namely in relation to the information they gave to the Board of Wollongong Coal as to the purpose of acquiring the Cliff Road Property, as well as the information given to the Board at the time Wollongong Coal decided to sell its shareholding in Gujarat NRE in June 2013).
In the amended statement of claim there is a further complaint unrelated to the Cliff Road Property; namely, as to Mr Jagatramka's entry into an executive services agreement with it in September 2011, which Wollongong Coal asserts occurred in breach of s 208 of the Corporations Act 2001 (Cth) (Corporations Act) (see amended statement of claim at [125]-[138]).

Purpose of proposed further amendments

Broadly speaking, as adverted to above, Wollongong Coal maintains that the purpose of the amendments now sought to be made is to "tidy up" the pleading, having regard to the evidence already filed in the proceedings, in accordance with the overarching obligation of litigants in this Court for the just, quick and cheap resolution of the real issues in dispute. Wollongong Coal contends that the issues raised by the proposed amendments are already encompassed in the pleadings as filed (and, perhaps somewhat inconsistently with the proposition that the occasion for the amendment application was the taking by the second to fourth defendants of pleading objections in their opening submissions at the hearing last year) argues that the amendments do not go to the matters that the second to fourth defendants have contended were outside the scope of the pleadings, and that even without leave further to amend its pleading these matters will be in issue in the substantive proceeding.
Wollongong Coal submits that the amendments in the proposed further amended statement of claim go no further than articulating, with greater clarity and precision, the contentions in the existing pleading; that permitting the amendments will avoid unnecessary disputation at the final hearing (as to whether particular contentions that will be advanced by Wollongong Coal arise on the existing pleading); and that the second to fourth defendants will not suffer any real prejudice. Alternatively, it says the amendments concerning allegations against Gujarat NRE should be permitted because it does not oppose the notice of motion.
The second to fourth defendants dispute Wollongong Coal's characterisation of much of the proposed amendments (describing the proposed amendments as "a fundamental and significant redrafting, recrafting, recasting of the central allegations" - T 26.6). They oppose the grant of leave for Wollongong Coal further to amend its pleading, principally on the basis that they say Wollongong Coal has not identified any special circumstances for the amendments. It is contended that Wollongong Coal is seeking to obtain a forensic advantage by addressing the pleading points that were raised in the opening before Rein J; that some of the amendments will require further evidence or discovery; that there has been unconscionable delay on the part of Wollongong Coal in bringing this amendment application; and that further security for costs may be necessary. (As to the last of those contentions, Counsel for Wollongong Coal made clear that Wollongong Coal will consent to the provision of further security for costs occasioned by the proposed amendments (see its reply submissions and oral submissions at T 7.36); though the second to fourth defendants do not accept that as a complete answer to the security for costs issue particularly in light of the stance taken by Wollongong Coal in relation to security for costs earlier this year - see T 42.5.)

Opening submissions before Rein J last year

Before turning to the proposed amendments themselves, it is relevant to note the context in which this amendment application is to be considered, in particular, the circumstances in which Rein J imposed the "special circumstances" condition of the grant of leave for any further amendment to the pleadings.
At the time the hearing before Rein J was vacated, written submissions had been served on behalf of the second to fourth defendants, identifying various allegations that it was said were not made in the amended statement of claim, including: that the Cliff Road Property was purchased at an overvalue (it being noted that Wollongong Coal did not seek as damages the difference between the amount paid for the Cliff Road Property and its asserted actual value at the time); that the Cliff Road Property was over-capitalised (it being noted that Wollongong Coal did not seek as damages the difference between the moneys advanced by it towards the re-development of the Cliff Road Property and the purported sum that should have been expended on re-developing it or the value of improvements actually obtained from the moneys advanced); and that Wollongong Coal had sold, in June 2013, its shareholding in Gujarat NRE at an undervalue (those shares representing the value of the Cliff Road Property, given the special purpose vehicle status of Gujarat NRE) (it being noted that Wollongong Coal did not seek as damages the difference between the sale price and the price it asserts at which the shares ought to have been sold).
On the first day of hearing, both written and oral submissions were made on behalf of the second to fourth defendants as to aspects of Wollongong Coal's opening submissions that it was said went beyond its pleaded case. A written schedule was handed up to Rein J on that occasion (a copy of which was tendered in the applications before me - Exhibit C, Tab 36), including the submissions that: • There is no allegation in the pleadings that Mr and Mrs Jagatramka were motivated, in voting in favour of the resolution for [Wollongong Coal] to sell its shareholding in [Gujarat NRE] in June 2013, by the fact that Mr Jagatramka's control over [Wollongong Coal] was coming under threat due to a takeover bid by the Jindal Group. • In respect of the allegation regarding [Wollongong Coal]'s subscription for 800,000 shares in [Gujarat NRE] in June/July 2008 (being Transaction 1 in the Plaintiff's Notes on Impugned Transactions) it is not alleged that the First and Second Allotments of shares (500,000 and 300,000 respectively) were the result of an alleged improper motive held by Mr and Mrs Jagatramka to use that money to acquire a house in which they intended to reside … . Nor is it pleaded that Mr Jagatramka procured these subscriptions by exercising his control and influence over the board of [Wollongong Coal]. Instead, the allegations revolve around the fact that the subscription did not give any benefit to [Wollongong Coal] in light of the fact that [Wollongong Coal] already held all the share capital in [Gujarat NRE]: … . • It is not pleaded that, but for Mr and Mrs Jagatramka's alleged breaches of duty in June 2008, which caused [Wollongong Coal] (in part) to acquire the Cliff Road Property, [Wollongong Coal] would not have purchased the Cliff Road Property and, therein, would not have suffered a loss of $6.413m (being the difference between the monies advanced by [Wollongong Coal] to [Gujarat NRE] - $10.153m - and the proceeds received from selling [Wollongong Coal]'s shareholding in [Gujarat NRE] - $3.75m) … . No counterfactual is pleaded by [Wollongong Coal] in its [amended statement of claim]. Merely, that un-particularised loss, damage or detriment was suffered or sustained by [Wollongong Coal] by reason of certain breaches of duty … .
Wollongong Coal has summarised the contentions that were said by the second to fourth defendants not to arise on the existing pleading at the time the matter was before Rein J as relating to: the contention that Mr Jagatramka was the controlling mind of Wollongong Coal; the contention that Mr and Mrs Jagatramka were motivated, in voting in favour of the resolution for Wollongong Coal to sell its shareholding in Gujarat NRE in June 2013, by the fact that Mr Jagatramka's control over Wollongong Coal was coming under threat due to a takeover bid by the Jindal Group; the contention that Mr Jagatramka was acting as the executive chairman of Wollongong Coal prior to 11 September 2011; the contentions that Wollongong Coal's subscription for 800,000 shares in Gujarat NRE in June/July 2008 were the result of an alleged improper motive held by Mr and Mrs Jagatramka to use that money to acquire a house in which they intended to reside, and that if it were not for these alleged breaches of duty, Wollongong Coal would not have acquired the property and thereby would have avoided suffering loss; the contention that in failing to carry out due diligence prior to the acquisition of the Cliff Road Property, Mr and Mrs Jagatramka breached their duty of care and diligence under s 180 of the Corporations Act; and the contention that the present value of the Cliff Road Property is still only $3.75m, notwithstanding that the valuation was performed in 2013 (also noting the further submission made in opening by Wollongong Coal, at T 17.26 of the hearing before Rein J that the acquisition of the Cliff Road Property placed Wollongong Coal in the position that, if there was a downturn in the market, or if Wollongong Coal overcapitalised on its improvement, it would suffer a loss if it were ultimately forced to sell the property to meet its cashflow requirements).
Wollongong Coal disputes those contentions but says that "in an effort to avoid that debate detracting from the valuable hearing time assigned to this matter" it has formulated the proposed further amended statement of claim so as to raise these matters "in the clearest of terms". It maintains that the proposed further amended statement of claim does not venture beyond the case that Wollongong Coal put in opening before Rein J on 27 August 2018 (which rather begs the question as to whether the case was, thus, pleaded at that time); and says that the case is supported by the existing evidence and the documentary tender which the second to fourth defendants have had since August 2018. Wollongong Coal says the amendments will not cause it to rely on any further evidence to make good those contentions.
Further, as adverted to above, Wollongong Coal says that, if not given leave to amend, it will continue to advance these contentions at the final hearing on the basis that they do arise on the existing pleading. It says that, in such an event, it seems inevitable that further disputation on these issues will occur at that hearing; and that such an outcome would not be in the interests of the parties (or that of the general public), and would be avoided by a grant of leave to amend.

Imposition of requirement that special circumstances be shown

Wollongong Coal accepts that, by virtue of the orders made by Rein J when the hearing of this matter was vacated last year, it is necessary that it now establish more than would be required on the ordinary application of the principles in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 (Aon) for further leave to amend now to be granted; namely that it needs to show "special circumstances".
It is relevant, therefore, to have regard to the context in which the requirement for special circumstances was imposed. The transcript of proceedings before his Honour on that occasion makes evident (and the second to fourth defendants here accept) that the "special circumstances" requirement was not intended to apply to "housekeeping" or "fixing up" type amendments (i.e., correcting typographical errors or addressing evidentiary objections) but, rather, was intended to ensure that Wollongong Coal not obtain a forensic advantage out of the vacation of the hearing (that was caused through no fault of the second to fourth defendants) (see T 80.1-13; T 81.44 - 49). Counsel for the cross-defendants embraced the notion that there should be no further claim for expansion for claims brought by the plaintiffs but took no issue with withdrawal of pleadings or allegations or the tidying up of affidavits (see T 81.19-40) but said there should be no ability for Wollongong Coal to expand the allegations which are made.
His Honour accepted those submissions and made the limiting order the application of which is now in issue.
With that in mind, it is necessary to consider in some detail the proposed amendments.

Proposed amendments to the amended statement of claim

There are a number of minor proposed amendments to which, as I understand it, no real objection is taken (such as [20A] and [27] of the proposed further amended statement of claim). There are also a number of proposed deletions, to which (again) no objection is taken.
The principal amendments, to which objection is taken by the second to fourth defendants, are characterised by the second to fourth defendants as falling within a number of groups (some but not all of which are listed as core objections in the list of the second to fourth defendants' core objections to the proposed amendments handed up in the course of the hearing before me).

"Ordinary course of business allegation"

First, the introduction of an allegation that Wollongong Coal was, at all material times, in the business of mining hard coking coal and that the acquisition and construction (and the advance of moneys by Wollongong Coal to Gujarat NRE for the purposes of acquiring and developing) the Cliff Road Property was not in the ordinary course of Wollongong Coal's business (see 1; [35A]; [61A]; 78; [116A]; 145 of the proposed further amended statement of claim) (to which I will refer as the ordinary course of business allegation).
The second to fourth defendants complain about this allegation in connection with their complaint about the "outside core business allegations" - see [55] below.

"Family/indefinite residence allegation"

Second, the allegation that, at the time Wollongong Coal resolved to approve the purchase of the Cliff Road Property, "unbeknown to the other directors of [Wollongong Coal]", Mr and Mrs Jagatramka intended that they and their children would reside at the property on an "exclusive, indefinite and continuous basis" (see [36] and [42] of the proposed further amended statement of claim) (to which I will refer as the family/indefinite residence allegation). In this regard, the second to fourth defendants point to the broadening of the alleged intention of Mr and Mrs Jagatramka (at numerous paces in the proposed further amended statement of claim) from an intention for the couple to reside at the Cliff Road Property themselves to an alleged intention that they "and/or their children" reside at the property and that this be "on an exclusive, indefinite and continuous basis" (referring to [42]; [69]; [72]; [75]; [94]; [119]; [142]-[143]; and [194]-[195] of the proposed further amended statement of claim).

"Augmentation of First and Second Allotments allegation"

Third, the deletion of [49]-[57] of the amended statement of claim (comprising the allegation that Wollongong Coal derived no benefit from the $800,000 equity injected by Wollongong Coal into Gujarat NRE and that this conduct constituted a breach of directors' duties).
In this regard, the second to fourth defendants' complaint is not so much the deletion of [49]-[57] (because they made clear that they do not object to deletions from the existing pleading) but that the allegation relating to that equity subscription has been "shifted and incorporated into" Wollongong Coal's complaint as to Mr and Mrs Jagatramka's conduct in causing Wollongong Coal to advance to Gujarat NRE the sum of about $5 million in June 2008 to facilitate the purchase of the Cliff Road Property (see [58]-[106] of the amended statement of claim). (I will refer to this complaint as the "augmentation of the First and Second Allotments allegation", i.e., expansion of the case concerning the injection of equity by Wollongong Coal into Gujarat NRE as the First and Second Allotments issue.)
The second to fourth defendants argue that in the proposed further amended statement of claim there has been a significant expansion of the case concerning the First and Second Allotments (i.e., the $800,000 of equity injected into Gujarat NRE by Wollongong Coal in June 2008): from the existing allegation (at [43]-[57] of the existing pleading) that the allotments were in breach of duty because they gave no benefit to Wollongong Coal to an expanded allegation that they were caused by Mr and Mrs Jagatramka pursuant to an intention to cause Wollongong Coal to construct for them a residential dwelling in which they intended to live (with their children) on an exclusive, indefinite and continuous basis) (referring, inter alia, in their submissions to [65]; [69]; [72]; and [75] of the proposed further amended statement of claim but the full list appears to be [61], [61A], [65], [67], [68], [68A]-[68C], [69]-[70], [72], [74], [75], [77], [77A]-[77B], [79], [81], [83], [89], [89A]-[89C], [95], [97], [104] of the proposed further amended statement of claim).
The second to fourth defendants refer to the Schedule of Non-Pleaded Claims handed up to Rein J in the course of opening submissions (see Exhibit C, Tab 36) in which this issue was noted and respondents maintain that this proposed amendment arises in response to the Schedule of Non-Pleaded Claims at [4]).
In submissions filed by leave after the hearing of the present applications, Wollongong Coal's response to this third objection (the first "core objection" listed in the list of core objections handed up to me by the second to fourth defendants to the proposed amendments) is as follows.
First, Wollongong Coal says that the allegation of fact that the moneys paid on account of the First and Second Allotments were applied towards payment of the deposit and stamp duty in connection with the purchase of the Cliff Road Property ought not to be controversial, pointing out that it is addressed in the second to fourth defendants' own evidence.
Second, insofar as the allegation that Mr and Mrs Jagatramka were motivated by an improper purpose (i.e., their intention to live at the property once it was built) is concerned, and the legal consequences which are said to flow from this allegation, Wollongong Coal says this has always been its case and that it arises on the existing pleading (pointing to [2.11] and [2.12] of Wollongong Coal's reply submissions dated 17 May 2019 on the present application (Exhibit C, Tab 3 on the application).
Wollongong Coal argues that the amendments contained in the proposed further amended statement of claim merely formulate this claim with greater precision, by combining factual allegations as to mechanical matters with the relevant propositions of law that Wollongong Coal advances, and says that this is done consistently with Wollongong Coal's obligations pursuant to the overriding purpose of litigation conducted in this Court. It is said that the amendments reflect the case run by Wollongong Coal on the evidence and in its written opening submissions at trial (referring to [14.11]-[14.14] of Wollongong Coal's written opening submissions dated 21 August 2018 (Exhibit C, Tab 33 on the application).

"Gujarat NRE knowing receipt/liability to account allegations"

Fourth, the allegation that Gujarat NRE knowingly received the First and Second Allotments (totalling $800,000) and the Initial Loan ($4,500,000) in breach of its fiduciary duty and, therefore, holds those funds (and its traceable proceeds, i.e., the Cliff Road Property) on constructive trust for Wollongong Coal ([68A]-[68C]; [77A]-[77B]; and [89A]-[89B] of the proposed further amended statement of claim). The second to fourth defendants note that the same allegation is made in respect of the moneys advanced to construct the new residential dwelling, with the allegation that the entirety of the Cliff Road Property is held on constructive trust for Wollongong Coal (see [152A]-[152B] of the proposed further amended statement of claim).
It is submitted by Wollongong Coal that the second to fourth defendants have no standing to challenge amendments that concern the first defendant alone. This submission, although in the Schedule addressed to the First and Second Allotments allegations seems to be directed not to those allegations but to the Gujarat NRE knowing receipt allegations, since Wollongong Coal goes on to submit that these amendments clarify the knowing receipt claim, which it says arises on the existing pleading at [76]. As to the proposition, dismissed in Wollongong Coal's submissions as a "faint contention", that the second to fourth defendants may be exposed to a cross-claim in this regard - and hence can properly challenge amendments going to the causes of action against Gujarat NRE, Wollongong Coal says that this has not been given "meaningful expression and ought to be disregarded".
Fifth, the new allegation that Gujarat NRE is liable to account, in addition to the First and Second Allotments and the Initial Loan, for the benefit that it has obtained from the possession of the Cliff Road Property since its acquisition ([89C] of the proposed further amended statement of claim).
In relation to [89C] of the proposed further amended statement of claim, Wollongong Coal repeats its earlier response that the second to fourth defendants have no standing to object to this proposed amendment, on the basis that it affects the first defendant (Gujarat NRE) alone. It is submitted that since the first defendant was served with the motion, the supporting evidence and the directions made by the Court in advance of this notice of motion, and consistently with its decision not to appear in the proceeding, it must be taken as not objecting to the amendment.

"Outside core business allegations"

Sixth, the second to fourth defendants point to the allegation that, as part of an alleged breach of s 180(1) of the Corporations Act arising in connection with the acquisition of the Cliff Road Property (and its financing by Wollongong Coal), Mr and Mrs Jagatramka failed to inform the Board of Wollongong Coal of, or properly account for, the particular risks that attended the acquisition of the Cliff Road Property (see at 78 of the proposed further amended statement of claim).
In the list of core objections, the second to fourth defendants list the allegation that Mr and Mrs Jagatramka caused Wollongong Coal to engage in activity outside its ordinary course of business and failed to advise the Board of Wollongong Coal as to the risks of that investment (see 78 of the proposed further amended statement of claim; together with the pleadings at 1, [35A], [61A], [116A] and 145).
The second to fourth defendants consider that the proposed pleading in this regard arises in response to the Schedule of Non-Pleaded Claims at [6] (Exhibit C, Tab 36) regarding an allegation concerning a failure to carry out due diligence.
In response to this, Wollongong Coal says that, as a proposition of fact, the Directors' Report and Chairman's Letter to Shareholders, contained in Wollongong Coal's 2007 Annual Report, both signed by Mr Jagatramka, make it clear that the principal activity of Wollongong Coal at the time was that of coal mining (referring to Exhibit B on the present application); and notes that Senior Counsel for the second to fourth defendants withdrew the challenge to 1 of the proposed further amended statement of claim during oral submissions.
Wollongong Coal says that there is no basis for the second to fourth defendants to press the objections to the balance of the paragraphs referred to in [2] of the Core Objections if the amendment to 1 is to be permitted because these paragraphs simply allege the "flipside" of 1, namely, that a different activity, that of acquiring residential property, was not in the ordinary course of Wollongong Coal's business.
Wollongong Coal notes that it had one other property (Bank Street) and accepts that it is open to the second to fourth defendants to argue that the acquisition of property was in the ordinary course of its business but says that this would not entail some large factual investigation.

"Purpose to which a reasonable director would have regard"

Seventh, that the express purpose said to justify the acquisition of the Cliff Road Property and the advance of the "Construction Loan" (of accommodating visiting executives and entertaining foreign dignitaries and other people important to the development of the mines of Wollongong Coal) were not purposes to which a reasonable company director in the position of Mr and Mrs Jagatramka would have had regard (145).
Pausing here, the second to fourth defendants submit that this is a "curious new allegation" given that the other directors of Wollongong Coal (Dr Firek and Mr Anghie), who are not sued by Wollongong Coal, give evidence as to the appropriateness and legitimacy of this objective (a point they say was made in the opening submissions of the second and fourth defendants before Rein J).
Wollongong Coal understands the opposition to 145 of the proposed further amended statement of claim, as it was put at the hearing of the application before me, to be that the second to fourth defendants contend that they will be prejudiced because they will not have sufficient time to obtain expert evidence from coal mining companies which make similar arrangements to accommodate travelling executives to the impugned arrangement the subject of this proceeding. Wollongong Coal says that Mr Jagatramka has always advanced this reason as the purpose of the acquisition of the Cliff Road Property (pointing to Mr Jagatramka's amended defence at [9] and his affidavit affirmed 26 August 2015 at [19]). Wollongong Coal says that it was always open to Mr Jagatramka to adduce expert evidence on this topic to demonstrate that the acquisition was for proper purposes and that the introduction of this allegation does not give rise to some evidentiary burden that did not exist before. In any event, it is submitted that expert evidence on this matter would not be of any assistance, and that the Court is well placed to determine for itself whether such a purpose was a reasonable one.
In any event, Wollongong Coal says that the breadth of [145] of the existing pleading is such that the proposed amendments serve to particularise, rather than expand, Wollongong Coal's contentions.

Causation

Eighth, the second to fourth defendants point to the allegation that the various breaches of Mr and Mrs Jagatramka's duties caused Wollongong Coal to pay for the construction of the residential dwelling on the Cliff Road Property "to personal and idiosyncratic design and specifications" of Mr and Mrs Jagatramka ([168A] of the proposed further amended statement of claim). It is said that this is but one of several new allegations regarding causation that were previously absent from the pleading. The second to fourth defendants note that the issue of causation was raised in the Schedule of Non-Pleaded Claims at [5] - Exhibit C, Tab 36.
In response to this, Wollongong Coal says that the allegation at [168A] of the proposed further amended statement of claim is the culmination of all of the material facts pleaded in support of the breaches of duty arising from the construction of the Cliff Road Property. It says that this is, and has always been, a core part of its case and that it was addressed in [1.2], [1.3], [1.5], [1.7], [14.4], [16.3], [16.4], [21.1] and [21.2] of the opening submissions before Rein J.
Wollongong Coal says that, by oversight, this causation plea had been omitted from the existing pleading but that its introduction at [168A] does not give rise to any forensic advantage, as it could not seriously be doubted that it has been part of Wollongong Coal's case from the beginning (referring to see [2.13] of the reply submissions).

"Jindal takeover allegation"

Ninth, the second to fourth defendants point to the allegation that, as at 17 June 2013, being immediately prior to when Wollongong Coal resolved to sell its shareholding in Gujarat NRE, Mr Jagatramka knew (see [169B] of the proposed further amended statement of claim) that: there was a real likelihood that Jindal Steel & Power (Mauritius) Ltd (JSPML) would soon obtain more than 50% of the shares of Wollongong Coal as a consequence of the finance Wollongong Coal was seeking to obtain from JSPML; upon JSPML taking control of Wollongong Coal, Mr Jagatramka would be removed from his position as executive chairman of Wollongong Coal, as well as from the Board of Gujarat NRE; further, upon JSPML taking control of Wollongong Coal, there was a real likelihood that Wollongong Coal would determine the tenancy of Mr and Mrs Jagatramka (and their children) at the Cliff Road Property; and, upon JSPML taking control of Wollongong Coal, there was a real likelihood that JSPML would cause Wollongong Coal to repay its urgent and pressing creditors in priority to intercompany loans purportedly owing to entities associated with Mr Jagatramka, including GNI.
The second to fourth defendants say this arises in response to the Schedule of Non-Pleaded Claims at [2] (Exhibit C, Tab 36)
Wollongong Coal's response is that the allegations contained in [169B] of the proposed further amended statement of claim are not material facts and have been introduced so as to avoid the potential for surprise. (Wollongong Coal otherwise relies on the submissions contained in [2.8] of its reply submissions, to which I refer in due course.)

Further non-disclosures at 18 June 2013 meeting

Tenth, the second to fourth defendants point to the allegation that, at the meeting of 18 June 2013 (at which the relevant resolution was recorded as being passed), there were further matters of which Mr and Mrs Jagatramka failed to inform the Board ([172]-[173] of the proposed further amended statement of claim) including: that the proposed sale to Happy Mining was not "at arm's length"; that Mr Jagatramka had a familial relationship with the controller of Happy Mining; that the sale to Basant was not "at arm's length"; that there was a real likelihood, upon JSPML taking control of Wollongong Coal, that it would determine the tenancy of Mr and Mrs Jagatramka (and their children) at the Cliff Road Property; and that the sale of Wollongong Coal's shareholding in Gujarat NRE would permit Mr and Mrs Jagatramka (and their children) to continue living at the Cliff Road Property.
The second to fourth defendants note that the allegation of the transaction not being at "arm's length" raises notions that the shareholding in Gujarat NRE was not sold for market value, something that they had noted as not being part of Wollongong Coal's case in their opening submissions before Rein J (referring to Exhibit C, Tab 34, p 331 6).
Wollongong Coal says that the amendments to [172] and [173] of the proposed further amended statement of claim rely on the Board minute, a copy of which appears at Annexure J to the affidavit of Mr Jagatramka affirmed 26 August 2015 (Exhibit A on the present application - that affidavit not yet having been read in the substantive proceedings), as representing a complete account of the disclosures that were made at the Board meeting in question; and that the meeting itself is the subject of affidavit evidence given by each director and the company secretary of Wollongong Coal at the time.
Further, Wollongong Coal says that all of the evidence upon which it relies in support of the additional factual contentions is contained in the existing court book and the supplementary bundle of documents that Wollongong Coal served on the parties following the adjournment in accordance with O6 of the orders made by Rein J on 28 August 2018, namely: (i) the "familial relationship" between Mr Jagatramka and the controller of Happy Mining (noting that at [202] of the existing pleading a close association is pleaded); and (ii) the fact that Mr and Mrs Jagatramka continued to reside at the Cliff Road Property notwithstanding the sale of its shares in Gujarat NRE to a non-group entity (which was the subject of answers to interrogatories - see Exhibit C, Tab 25).

Sale of shares at a loss

Finally, the second to fourth defendants point to the allegation that the fiduciary duty allegedly breached by Mr and Mrs Jagatramka in participating and voting in favour of the resolution for Wollongong Coal to sell its shareholding in Gujarat NRE caused Wollongong Coal to sell its shares in Gujarat Properties "at a loss" ([210A]; and referring also to [218A] of the proposed further amended statement of claim in respect of the other pleaded breaches of directors' duties). The second to fourth defendants note that the relevant loss is not particularised but say that it appears to be the difference between the monies injected into Gujarat NRE ($10,153,050) and the sale proceeds received ($3,750,000).
The second to fourth defendants say that this appears to be another issue regarding causation, something which was raised in the Schedule of Non-Pleaded Claims at [5] (see Exhibit C, Tab 36). They say that it also potentially raises a claim about whether the Cliff Road Property was over-capitalised or the shareholding in Gujarat NRE was sold at a loss, something noted as not being part of Wollongong Coal's case in the second to fourth defendants' opening submissions (see Exhibit C, Tab 34, pp 330-331 at 6-6).
As to this complaint, Wollongong Coal says that the amendments contained in [210A] and [218A] of the proposed further amended statement of claim arise on the existing pleading (at [209] and [218], respectively) and note that it gave particulars of its loss at [21.7] of its opening submissions before Rein J.

Grounds on which the amendment is opposed by the second to fourth defendants

The second to fourth defendants oppose the grant of leave to amend on a number of grounds.
First, and principally, as noted above, they contend that Wollongong Coal has not established any "special circumstances" that would warrant a grant of leave to amend the pleading. They argue that the only justification proffered for the amendments in the supporting affidavit read on the present application of Wollongong Coal's solicitor, Mr Garland, sworn 16 April 2019 is (at [19]): After the plaintiff's opening at the trial on 27 August 2018, which followed the service of the plaintiff's opening submissions, the second and fourth defendants' counsel (now also counsel for the third defendant) suggested that certain submissions made by the plaintiff were beyond its pleaded case. The plaintiff does not accept that proposition, but has now made some amendments to the pleading that clarify the scope and limitations of the plaintiff's case so that each of the defendants know precisely the case they have to meet and to avoid any confusion at trial about the parameters of the plaintiff's case.
It is submitted by the second to fourth defendants that that justification is precisely the reason behind the condition imposed by Rein J when acceding to Wollongong Coal's vacation application (which the second to fourth defendants opposed), namely, that Wollongong Coal was not, with the benefit and aid of the second and fourth defendants' opening submissions, to be able to use the intervening period to address the identified deficiencies in its case.
Second, it is said that many of the amendments arise directly out of deficiencies identified by the second and fourth defendants. In this regard, the second to fourth defendants point to the following matters.
In respect of the submission made in opening on 27 August 2018 regarding non-pleaded claims, it is said that [169B] is directly in response to the submission that there was no allegation that Mr and Mrs Jagatramka were motivated by the threat of a takeover bid by Jindal, insofar as the proposed further amended statement of claim raises a new matter for consideration, namely, the likelihood as to JSPML taking control of Wollongong Coal and the purported effect it would have on Mr and Mrs Jagatramka and any right to stay at the Cliff Road Property. Similarly, in respect of the submission as to the lack of a pleaded allegation relating to the subscription, it is said that the deletion of [49]-[57] and incorporation of those allegations into the allegations at [65], [69], [72] and [75] seek to address that matter. In respect of the submission as to lack of an allegation of causation, it is said that Wollongong Coal has inserted a number of new paragraphs addressing the question of causation.
Third, the second to fourth defendants submit that some of the amendments will potentially require further evidence and/or discovery, and say that this is particularly so in relation to: what is pleaded at 145 of the proposed further amended statement of claim (namely that the express purposes said to justify the acquisition of the Cliff Road Property and the advance of the "Construction Loan" were not purposes to which a reasonable company director in the position of Mr and Mrs Jagatramka would have had regard); as to which it is said that this potentially calls for expert evidence; and what is pleaded at [169B] of the proposed further amended statement of claim in relation to the probable takeover of Wollongong Coal by JSPML and the likely effects of that takeover. It is contended that this pleading raises a number of new matters, including: the likelihood, as at 17 June 2013, of JSPML obtaining control of Wollongong Coal; and the effect that would have, not only on the tenancy at the Cliff Road Property, but also on the repayment of inter-company debt. (The second to fourth defendants say, in relation to this latter point, that it is not clear precisely the relevance of what is pleaded at 169B of the proposed further amended statement of claim.)
Fourth, complaint is made that there has been unconscionable delay by Wollongong Coal in bringing the present application, on the basis of the following timeline of events: that the original hearing was vacated on 28 August 2018 on the application of Wollongong Coal; that on 29 November 2018, Wollongong Coal circulated proposed orders for a directions hearing scheduled for 4 December 2018, which orders contemplated Wollongong Coal serving any proposed further amended statement of claim by 15 February 2019 (see O 3); that those orders were, ultimately, not made by the Court on 4 December 2018 (but in any event Wollongong Coal did not serve any proposed further amended statement of claim by 15 February 2019, as had been foreshadowed in the orders it circulated); that on 3 December 2018, the second to fourth defendants filed a motion seeking further security for costs arising from the vacation of the original hearing, which was heard on 21 February 2019, during the course of which no mention was made of any intention by Wollongong Coal to amend its existing pleading (and, in that regard it is noted that the hearing of the motion before me proceeded expressly on the basis that no further pre-trial steps were required, other than the final preparation (by counsel) for, and the conduct of, the final hearing); that on 6 March 2019, reasons for judgment in respect of the security for costs application were handed down; that on 18 March 2019, Wollongong Coal again circulated proposed orders in respect of a directions hearing scheduled for 20 March 2019, this time contemplating the service of any proposed further amended statement of claim by 22 March 2019 (O 1), and, again, notwithstanding that those proposed orders were, ultimately, not made by the Court, Wollongong Coal did not serve any proposed further amended statement of claim by 22 March 2019 as it had foreshadowed was its intention in the orders it circulated; and that it was not until the filing of Wollongong Coal's motion of 16 April 2019 that Wollongong Coal first served the proposed further amended statement of claim.
Fifth, it is said that the amendments may also require additional security for costs, noting again the failure of Wollongong Coal to raise this matter at the security for costs hearing on 21 February 2019.
For the above reasons, in the exercise of the court's discretion in the management of these proceedings, and consistent with the principles in ss 56 to 58 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act), it is submitted by the second to fourth defendants that leave should not be granted for Wollongong Coal to file the proposed further amended statement of claim. In summary, they say that it is simply too late in the proceedings, that it introduces new factual allegations and legal arguments, and that it seeks to avail itself of a vacation that was expressly not intended to inure to the benefit of Wollongong Coal (hence, the requirement to demonstrate the existence of "special circumstances" in order to obtain any leave to amend the existing pleading).

Wollongong Coal's response

As to the grounds on which the second to fourth defendants oppose the grant of leave to amend, Wollongong Coal responds as follows.

Absence of special circumstances

Wollongong Coal notes that applications to amend pleadings pursuant to s 64 of the Civil Procedure Act are to be determined at the discretion of the Court, which is constrained only by the wording of the provision itself and the contents of Div 1 of Pt 6 of the Civil Procedure Act; and that, by its terms, the power under s 64(1) of the Civil Procedure Act is subject to the requirement that any amendment be necessary to determine the real questions raised in the proceeding; and subject to s 58 of the Civil Procedure Act, which requires the Court to follow the dictates of justice. It is noted that, any consideration of the dictates of justice must include the matters set out in ss 56 and 57 of the Civil Procedure Act and may include considerations such as: the degree of expedition with which the parties have approached the litigation; the difficulty or complexity of the issues in dispute; and the degree of injustice that would be suffered by either party if the amendment application were to be determined in one way or the other.
Against that background Wollongong Coal says that it is not clear what the "special circumstances" requirement adds to the ordinary principles that govern amendment applications, noting that it is not a blanket prohibition on any amendments being made. Wollongong Coal submits that it requires, first and foremost, an analysis of whether the second to fourth defendants are prejudiced by the amendments. It says that Gujarat NRE, having been served with the notice of motion and having taken no step in the proceedings, should be taken, in effect, not to oppose.
Wollongong Coal accepts that, to the extent that prejudice can be demonstrated, it will be more difficult for it to obtain leave for to allow the amendments, having regard to the special circumstances requirement, but says that prejudice has not been demonstrated.
In particular, Wollongong Coal says that, to the extent that the "special circumstances" requirement adds to the general principles relevant to the exercise of the discretion to grant leave to amend, the second to fourth defendants have not demonstrated that this requirement is not met where: their ability to prepare for the trial in November this year will not be seriously impacted because all of the factual issues raised in the pleading are already "in the arena" on the existing pleadings and on the evidence; that, subject to reviewing documents obtained under the outstanding subpoenas, Wollongong Coal will not be filing any further evidence in support of the allegations and the second to fourth defendants have had all of Wollongong Coal's evidence since August 2018; the amendments are made in pursuit of the overarching purpose to conduct the case in a just, quick and cheap manner and to avoid uncertainty and unnecessary debate at trial about the meaning of Wollongong Coal's pleading and to ensure that the trial of these proceedings focusses upon the real issues in dispute.
It is submitted by Wollongong Coal that the obligation to conduct the case consistently with those principles is one that lies upon all litigants and that Wollongong Coal's efforts to adhere to those principles by pursuing the amendments can hardly be a basis for the Court refusing to allow them.

Forensic advantage

It is submitted by Wollongong Coal that there is no substance to this complaint. In particular, it is said that, if leave to amend were to be granted, Wollongong Coal would not derive the forensic advantage alleged by the second to fourth defendants, arguing that the three matters relied upon in the second to fourth defendants' submissions at [21] are all capable of being run on the existing pleadings.
As to the first of those matters, the contention at [169B] of the proposed further amended statement of claim (that Mr Jagatramka's knowledge that Jindal would soon obtain a controlling shareholding in Wollongong Coal motivated his conduct in June 2013 (the Jindal Issue)) is said to arise in the context of allegations that Mr and Mrs Jagatramka breached their fiduciary duties to Wollongong Coal when they caused Wollongong Coal to resolve to convert its debt into equity in Gujarat NRE and sell the resulting shares to Happy Mining or Basant ([169]-[181] and [189]-[218A] of the proposed further amended statement of claim). It is said that the nub of that allegation is that the transaction put the Cliff Road Property beyond the reach of Wollongong Coal, but not Mr and Mrs Jagatramka, as they continued to reside there notwithstanding that it was now controlled by a third party.
Wollongong Coal says that the Jindal Issue, at its highest, goes to state of mind and in particular to explaining the motive behind Mr and Mrs Jagatramka's actions at that time; and that the matters contained in [169B] of the proposed further amended statement of claim are not material facts on which the claim for breach of fiduciary duty depends (and, strictly speaking, those facts are not necessary to plead). Wollongong Coal says it seeks to plead those matters in order to avoid allegations of "ambush and surprise". It says that this factual issue as to what the Board of Wollongong Coal knew about the likelihood of Jindal taking control of Wollongong Coal has already been the subject of litigation involving the parties (referring to Gujarat NRE India Pty Ltd v Wollongong Coal Ltd [2018] NSWSC 1459 at [329]-[337], where Robb J found that it must have been apparent to the Wollongong Coal Board as at June that the Gujarat group's desire to retain control of Wollongong Coal was hopeless and that Jindal was its only viable source of salvation). Thus, Wollongong Coal says that it cannot be said that the second to fourth defendants are not familiar with the evidence and factual basis for the allegation at [169B].
As to the second of those matters, the contentions at [43]-[57] of the proposed further amended statement of claim that Wollongong Coal's subscription for 800,000 shares was the result of an improper motive held by Mr and Mrs Jagatramka to use that money to buy the Cliff Road Property with the intention that they (and/or their children) would live there (the Subscription Issue), it is noted that Wollongong Coal did not open before Rein J on the contentions which appear at [49]-[57] of the existing pleading and that those contentions have been deleted in the proposed further amended statement of claim. Thus, it is said that if leave to amend were granted in this regard, Wollongong Coal will not achieve any forensic advantage by subtracting from its claim.

Further evidence and discovery

Insofar as the second to fourth defendants assert the potential need to rely on expert evidence to address the allegation at 145 of the proposed further amended statement of claim (as to whether accommodating visiting executives and entertaining foreign dignitaries were purposes to which a reasonable director in the position of Mr and Mrs Jagatramka would have had regard when they committed Wollongong Coal to advancing the Construction Loan), Wollongong Coal notes that this allegation is made in support of the claim that Mr and Mrs Jagatramka did not act in good faith in the interests of Wollongong Coal or for a proper purpose.
Wollongong Coal says that the relevant considerations that arise in respect of the assessment of these duties are summarised by Black J in In the matter of Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 at [418]-[421]; and that expert evidence is not necessary to determine whether the stated purpose for which the director acted was objectively reasonable. It is noted that, in the context of a claim under s 180 of the Corporations Act for breach of the duty of care and diligence (where, it is said, expert evidence is more common), McDougall J recognised the ability of the court to make its own assessment of reasonableness, and in doing so, rejected a submission that the breach could not be made out without the benefit of expert evidence in Resource Equities v Carr; Resource Equities v Garrett [2009] NSWSC 1385 (at [188]).
Wollongong Coal argues that it is difficult to imagine the utility in this case of any expert evidence on this issue and disavows in advance the making of any submission at trial that the second to fourth defendants could have but did not call expert evidence as to how a reasonable director would have acted in the circumstances.
In relation to the second to fourth defendants' submissions regarding the Jindal Issue, Wollongong Coal notes that it is not stated whether further evidence or further discovery (or both) is considered to be necessary but that in either case the evidence upon which Wollongong Coal will rely is documentary and that the Court will be asked to infer that in the context of Jindal wresting Wollongong Coal from the control of the Gujarat group, it is probable that Jindal would have terminated Mr and Mrs Jagatramka's rent-free occupation of the Cliff Road Property. Wollongong Coal says that it is not proposed that it will rely on any further affidavit evidence from an officer of Jindal (or any other affidavit evidence for that matter). Accordingly, Wollongong Coal says that it is difficult to understand the stated need on the part of the second to fourth defendants to obtain further evidence or discovery on this issue.

Delay

As to delay, Wollongong Coal argues that the issue of delay only assumes significance if it gives rise to prejudice and points out that there is no contention that it does. Wollongong Coal submits that there is no need for the second to fourth defendants to obtain any further evidence or discovery on any of the issues raised in the amendments; but that, even if there were, the fact that the final hearing is some six months away means that there is ample time for the second to fourth defendants to take all such steps in advance of the hearing that the Court finds may be necessary to meet any such prejudice.

Security for costs

As adverted to above, Wollongong Coal says that if the amendments are allowed and this requires further security to be provided, it will be provided.
The second to fourth defendants argue in response to this that the fact that there may be a dispute at any final hearing as to whether an issue has been raised on the pleadings is not a reason to accede to Wollongong Coal's present application. It is said that such disputes are not uncommon and it is not accepted that the proposed further amended statement of claim resolves all of the challenges made by the second to fourth defendants to the impermissible breadth of Wollongong Coal's opening submissions (or the deficiencies identified with its existing pleading). Further, it is submitted that the second to fourth defendants should not be deprived of any forensic advantage they presently enjoy in holding Wollongong Coal to its pleaded case in the circumstances of this case (in light of the orders of 28 August 2018 which it is said were intended to preserve such an advantage).
As to the position of the amendments relating to the claim against Gujarat NRE, the second to fourth defendants say that it would be unworkable for the Court to allow amendments only as against Gujarat NRE but not as against the second to fourth defendants. Further, it is said that Wollongong Coal's position that any property recovered from Gujarat NRE reduces the liability of the second and third defendants is not necessarily the case, in that "the legal nexus between the parties may not produce such a mathematically simple result". It is said that any recovery of the Cliff Road Property by Wollongong Coal may expose Mr and Mrs Jagatramka to liability to Basant (which purchased Wollongong Coal's shareholding in Gujarat NRE for $3.75m in June 2013) by reason of the fact that the company it purchased (Gujarat NRE) did not have indefeasible title to the Cliff Road Property (being that company's sole asset). Wollongong Coal maintains that this is, in effect, speculation (noting that Mr and Mrs Jagatramka were not the vendors of the property and that there is no evidence as to the making of any representations in connection with the sale by them - see T 46.12ff).

Determination as to amendment application

It is clear from a review of the transcript at the time that the relevant orders were made that the requirement for "special circumstances" to be shown, for leave to be granted for any further amendment to the pleading (or for any further evidence to be filed) by Wollongong Coal, was clearly not intended to extend to the making of amendments for the purpose of "fixing up" or "tidying up" the existing pleading (that being the amended statement of claim) or to address evidentiary objections to the affidavit evidence (indeed, Senior Counsel for the second to fourth defendants accepted as much - see T 28.27). Nor was it suggested at the time that the defendants or cross-defendants would have any objection to the deletion or withdrawal of allegations made in the amended statement of claim.
The first step is, therefore, to ascertain which of the proposed amendments (if any) go beyond the notion of "fixing up" or "tidying up" the existing pleading and which would require special circumstances to be shown; and then to determine whether, for those proposed amendments that do go beyond that notion, special circumstances have been shown for the grant of leave. It is not appropriate in my opinion for there to be a wholesale refusal of leave further to amend the pleading without such an exercise, since there is nothing to suggest that Rein J considered the requirement for special circumstances to extend that far.
As to what is meant by "special circumstances" in this context, I accept the submission by Counsel for Wollongong Coal that this does not mean circumstances that are "extraordinary"; rather, that in the present context what is contemplated is that there be circumstances that are "out of the ordinary" (i.e., special) in some identifiable way. That said, I have some difficulty accepting that the (albeit wholly admirable) desire to comply with the overarching obligations imposed by ss 56ff of the Civil Procedure Act constitutes "special circumstances". To the contrary, that is the ordinary requirement of litigants in this Court.
Further, I consider that there is a distinction between a concern that Wollongong Coal not obtain a forensic advantage vis a vis the second to fourth defendants (and/or the cross-defendants) from a pleading perspective as a result of the vacation of the hearing dates and the position where the second to fourth defendants (and/or cross-defendants) might be able to point to a potential forensic disadvantage arising to them from an amendment to the pleading vis a vis (not Wollongong Coal but Gujarat NRE) (which is relevant when I come to consider the proposed amendment to the claim pleaded against Gujarat NRE).
Finally, by way of introduction to this section of the reasons, insofar as Wollongong Coal has sought to justify various of the proposed amendments (or, more precisely, to argue that no prejudice will be occasioned thereby) by reference to the fact that the amendments are to bring the pleading into line with the affidavit and documentary evidence that is already within the possession of the second to fourth defendants (and cross-defendants), that seems to me to be problematic. True it is that amendments are commonly permitted in order to bring the pleaded case into line with the evidence, but at this stage the parties have not yet formally gone into evidence; and, while parties may consensually depart from the pleadings (and be bound by such a departure) in the conduct of a case, that is hardly the position here, where the second to fourth defendants appear consistently to have resisted a widening of the pleaded case (having regard to the pleading objections raised in opening submissions before Rein J and their application for an order requiring special circumstances to be established for there to be any further amendment to the pleaded case).
In Ingot Capital Investments Pty Limited v Macquarie Equity Capital Markets Limited (No 6) [2007] NSWSC 124, at first instance, McDougall J implicitly recognised that in some circumstances the parties might, by their conduct of the case, acquiesce in the widening of the pleaded case. There, however, various of the counsel for the various defendants had repeatedly stated that they were responding to the plaintiff's pleaded case from which the plaintiff ought not be allowed to depart. McDougall J there said (at [285]) that "[i]n the present case, there can be no suggestion that the Macquarie parties, or for that matter any of the defendants who appeared during the hearing, acquiesced either expressly or by inference in any widening of the pleaded case against them. This was made clear on a number of occasions."
On appeal, Ipp JA in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206 considered the authorities and principles relevant to whether a party would be allowed at trial to depart from its pleaded case, noting (at [422]ff) that: At trial, there may be a departure from the pleadings where adherence to them would be unjust or unfair. In Banque Commerciale SA (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 Mason CJ and Gaudron J said at 286-287: The function of pleadings is to state with sufficient clarity the case that must be met: In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference. Dawson J (at 293) quoted the following statement by Isaacs and Rich JJ in Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq) [1916] HCA 81; (1916) 22 CLR 490 at 517: But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. and observed: (at CLR 296-297): But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings.
Ipp JA went on later to consider the factors which would have weighed on the making of a discretionary decision whether to allow the plaintiffs to depart from their case as pleaded. Included amongst those factors were: that the appellants, in opening their case, had asserted that they proposed to establish a case based on the "smoothing over" argument; that several parties had adduced evidence directly relevant to that argument; that there was much cross-examination on this evidence; the appellants in closing had presented lengthy submissions based on the smoothing over argument; and that the respondents, generally, had responded in their closing submissions to the merits of that argument.
His Honour then said (at [457]) that the principal factors contrary to such a decision included that the appellants had not, as required, pleaded the elements of the particular argument either expressly or impliedly. The respondents did not know that that evidence was being adduced in connection with the argument, that there was no agreement to amend and, relevantly for the present case, the respondents did not agree to or acquiesce in the appellants advancing that argument. His Honour considered that had the "smoothing cover" argument been pleaded, the case for the respondents might have been conducted in a different way.
The authorities to which Ipp JA referred suggest that the defendant's consent or acquiescence (whether express or implied) is necessary before a plaintiff can be allowed to depart from its pleaded case. In Vines v Australian Securities and Investment Commission (2007) NSWLR 451; [2007] NSWCA 75 at [57], Spigelman CJ stated the test as being whether the parties "had deliberately chosen to fight the case on a different basis" (applying what had been said by Mason CJ and Gaudron J in Banque Commerciale SA En Liquidation v Akhil Holdings Limited (1990) 169 CLR 279 at 286; [1990] HCA 11 (citing Dane v Pulhaim (1982) 148 CLR 658 at 664; [1982] HCA 70).
I do not accept that it can be said that the second to fourth defendants in the present case have chosen to fight the case on a different basis than has been pleaded. Nothing could be further from the stance that appears consistently to have been taken by them in that regard. The submissions made by Wollongong Coal on the basis of the evidence that has been filed (to the effect that this would warrant a departure from the pleaded case) suffer from the difficulty that, because of the early vacation of the balance of the hearing dates (on day two of the original hearing), the affidavit evidence was not formally read. Whether this will ultimately be the evidence at trial cannot be determined at this stage. Admittedly, we know what the deponents have been prepared to attest to in the affidavits that have been filed by the parties to date, but that will not necessarily tell the whole of the picture that will emerge at the trial.
Turning then to the particular amendments to the existing pleading, I note as follows.
As to 1 of the proposed further amended statement of claim, which contains the allegation that Wollongong Coal "was, at all material times, in the business of mining hard coking coal from coal mines located in the Illawarra region of New South Wales" (something the company itself asserts in its annual reports - see Exhibit B), there was ultimately no objection taken by the second to fourth defendants (see T 32.31) (their real objection being to its linkage with other allegations to which I will refer below). I will allow this amendment.
As to [20A] of the proposed further amended statement of claim, which contains the allegation that Ayush Jagatramka is the son of Mr and Mrs Jagatramka, again there was ultimately no objection taken by the second to fourth defendants to this allegation. It is not, as I understand it, in dispute (or, if it is, will surely not be difficult to disprove). I will allow this amendment.
As to 27 of the proposed further amended statement of claim, the proposed amendment is to include the words "in a position where there is" (in place of "of") before the words "a real and sensible possibility of conflict of duty and interest or duty and duty", with the deletion of obvious surplusage ("of interest"). It clearly falls within the rubric of "tidying up" in my opinion. No objection was taken to this amendment. I will allow this amendment.
At [32]-[34] of the proposed further amended statement of claim, there are amendments which add to the pleading statements as to the net deficiency of current assets of Wollongong Coal at particular times. No objection is taken to those amendments. I will allow those amendments.
Objection is taken to the insertion of [35A] of the proposed further amended statement of claim, which alleges that the investment and acquisition of residential property "was not in the ordinary course of the business of Wollongong Coal, which was that of mining, producing, selling and exporting hard coking coal". Objection was not taken to this paragraph on the basis of any expansion of or discrepancy with the new allegation at 1. Rather, the objection is that this raises a question as to the purposes of the acquisition of other properties owned by Wollongong Coal (noting that Wollongong Coal is the owner of another property at Bank Street) (see T 33.10). I accept that this might conceivably require evidence to be adduced as to matters such as the property portfolio from time to time of Wollongong Coal but I would have thought that it would largely be determined objectively on a consideration of the documentary evidence, not from the subjective views of one or other of the directors of the company from time to time; and that it is little more than an expansion of the pleading as to the ordinary business of the company. I regard this as within the rubric of "tidying up" the pleading and I will allow this amendment.
As to [36] of the proposed further amended statement of claim, this introduces a number of additional concepts beyond the existing allegation that, at the time of the resolution for the acquisition of the Cliff Road Property (referred to by reference to the "previous paragraph" but obviously this will need to change in light of the amendment to introduce [35A]), both Mr and Mrs Jagatramka intended to reside at the property and to cause Wollongong Coal to allow them to reside at the property. First, there is the allegation that this was "unbeknown to the other directors of Wollongong Coal". Second, the intention is extended to an intention not only that they but they "and/or their children" would reside at the property. Third, the intention is also extended to add the words "on an exclusive, indefinite and continuous basis". Fourth, that the intention was to cause Wollongong Coal "or" Gujarat NRE to allow them to reside at the property.
Objection was taken to this proposed amendment, on the basis that it explores the knowledge of the other directors (the first of the amendments) (see T 33.35) and also, for reasons not clear to me, that it encompasses residence by the children and residence on an indefinite basis (the second and third of the amendments). It is not clear that there is a separate objection to the fourth of the amendments encompassed by the proposed alterations to the pleading in this paragraph (i.e., the intention).
In this regard, it is noted that there has been no affidavit filed by Mrs Jagatramka, which I am informed (and which it would be in any event open for me to infer) was a forensic decision on the part of (at the very least one would assume) Mrs Jagatramka; and that it may be that the amendment would require that decision to be re-considered.
The complaint as to the raising of allegations as to matters not being known to the other directors of Wollongong Coal (or as to additional matters alleged to be the intention of Mr and Mrs Jagatramka) is one of the principal objections to the proposed amendments (the other being as to the allegations of knowing receipt in relation to Gujarat NRE).
In my opinion the allegation that matters were not known to the other directors of Wollongong Coal goes beyond a "tidying up" amendment. It calls for the exploration of the knowledge of the other directors of Wollongong Coal. It may be that at the trial such an amendment is warranted to bring the pleading into line with the evidence but I do not accept that special circumstances have been shown to permit it to be made at this time. The allegation as to matters not being notified to the Board or explained by Mr and Mrs Jagatramka is a different issue. Insofar as the allegation is based on there being nothing disclosed in the Board resolution that would be a matter that could be the subject of submission at the end of the hearing. However, I consider that there is force to the submission that it is implicit in an allegation that, say, Mr and Mrs Jagatramka did not explain to the Board or inform the Board of particular matters that they had knowledge of those matters and, in the absence of a pleading of knowledge (properly particularised), I consider that the pleading is at risk of being considered to be embarrassing. It certainly does not appear to me that this can be considered to be a mere "tidying up" of the pleading and again I do not consider that special circumstances have been shown to permit the amendment at this stage. I will not allow this amendment.
As to the complaint made of the allegations of family/indefinite residence intention, I consider that those are permissible. They do little more than expand on the existing allegation (and it is not at all clear that they do so in any substantive way - since it is just as much a personal use or benefit, one would think, for a couple to reside in the property as it would be for the couple to reside there with their family); similarly, it is not clear what is gained by the addition of the reference to the residence being indefinite as opposed to the existing allegation that they would reside in the building constructed on the property (without any limit there being pleaded). In any event, I will allow those family/indefinite residence amendments where appearing in the proposed further amended statement of claim, as they seem to me on balance to fall within the rubric of "tidying up".
The next proposed amendment is to [42] of the existing pleading. As it presently stands, the allegation is that at the 16 June 2008 Board meeting of Wollongong Coal, neither Mr nor Mrs Jagatramka explained to the Board that they intended to live at the Cliff Road Property and that they had not obtained an independent valuation of the Cliff Road Property. In the proposed further amended statement of claim, it is proposed to add to the intention there pleaded: first, that they "and/or their children" intended to live at the property, and "on an exclusive, indefinite and ongoing basis"; and, second, that they intended to have Wollongong Coal pay for the construction of a house on the property for that purpose "which would be built to their personal specifications".
The first of those proposed amendments again raises the "family/indefinite" aspects of the intention to live at the property. The second raises another issue (about which the second to fourth defendants complain) namely reference to the personal specifications for the construction of the house on the property. As to the first, I draw the same conclusion as in relation to [36]. I note that the problem identified by the second to fourth defendants (at T 34.5ff), which is that insofar as the allegation is that something was not done (or not explained, to use the words here) but there is no previous allegation as to the positive fact (i.e., that the defendants held the knowledge or had the intention that it is alleged was not disclosed or explained) then the pleader is guilty of "bootstrapping"; i.e., there is, implicit in this paragraph, an allegation (not expressly pleaded elsewhere) that Mr and Mrs Jagatramka had that knowledge or intention.
As to the second, complaint is made that this (and other proposed amendments which go to the lavish or opulent style of the house on the property) is an implicit criticism of Indian culture (see T 39.30ff). I do not see it as raising such an issue but, more to the point, Counsel for Wollongong Coal expressly disavows it (see T 40.1). I find it difficult to see what it adds, to the allegation that Mr and Mrs Jagatramka acted in breach of their duties in relation to the purchase and development of the Cliff Road Property (in that they intended to build a house for their personal residence), that they did so intending the house to be built to their personal specifications. In circumstances where Wollongong Coal disavowed any cultural criticism, and where it seems that the second to fourth defendants might otherwise perceive a need to adduce evidence of Indian culture to address this, I propose not to allow the words "which would be built to their personal specifications". However, that would certainly be a matter that could be the subject of submission in due course if that is what the evidence establishes.
The next set of amendments relates to the First and Second Allotments (the section of the existing pleading dealing with the initial share purchases in Gujarat NRE ([43]-[57]). Broadly, this involves the deletion of a large swathe of paragraphs ([44], [47], [49]-57]) and the addition of a couple of additional definitions (in [45] and [48]). There is no objection to deletions and the addition of definitions clearly falls within the rubric of "tidying up". I will allow these amendments.
Next, are the amendments to the section of the existing pleading headed "Loan to purchase property" and now proposed to be headed "Initial Loan". This is the augmentation complaint made by the second to fourth defendants.
There is a proposed amendment to the amount of the advance pleaded at [58] (and a typographical amendment to the particulars thereto). Both fall within the rubric of "tidying up" in my opinion. I will allow that amendment.
At [61], there is the insertion of reference to the First Allotment Amount and the Second Allotment Amount, adopting the definitions introduced in [45] and [48], respectively; and the insertion of particulars of the existing (though proposed to be expanded to include the allotment amounts) allegation that the Initial Loan was for the purposes of Gujarat NRE purchasing the property and that the money was used for that purpose. The real objection in this regard is as to the proposed [61A], which introduces the allegation that the subscriptions for the respective Allotments and the making of the Initial Loan "each for the purpose of [Gujarat NRE] purchasing the Property" was not in the ordinary course of business of Wollongong Coal (as alleged earlier and here repeated). That new allegation is particularised by reference to the 30 June 2008 directors' report.
For the reasons summarised above, the second to fourth defendants object to those paragraphs. On balance, I will allow the amendments to [61] and the introduction of [61A]. There is already the allegation that the initial loan was used for the purposes of the acquisition of the property. It is clear that what is being alleged is that the property was acquired through the use of funds sourced from Wollongong Coal. I do not consider that the more precise articulation of the source of those funds amounts to a significant expansion of the pleading or gives rise to a forensic advantage such as to require special circumstances to be shown for the amendment.
The next set of amendments (to which the second to fourth defendants object) relates to the section of the existing pleading headed "Duties breached in the purchase" (now to be headed "Breach of the conflict rule in relation to the purchase"). These amendments (to [65] and [67], including the particulars thereto) incorporate reference to the subscription to the respective allotments (permissible in my view having regard to the ruling as to [61A] above) and to the family/indefinite residence intention (which I consider also to be permissible having regard to my rulings above in relation to those aspects of the pleading). The amendments to the heading of the section (not that headings are pleaded allegations in any event) and to the particulars (also strictly not part of the pleaded claim as such) make clear the particular interest said to be in conflict with the alleged fiduciary duties and fall within the rubric of "tidying up". I will allow those amendments.
Paragraphs [67A]-[68C] of the proposed further amended statement of claim relate to the Barnes v Addy (Barnes v Addy (1874) LR 9 Ch App 244) knowing receipt claim made against Gujarat NRE. The existing pleading is limited to the allegation at [68] that, by reason of the facts set out at [59]-[60] (the fact that Wollongong Coal did not seek or obtain: any security for the Initial Loan or an agreement to be paid or receive any interest on the Initial Loan), Gujarat NRE received the benefit of the property with actual or constructive knowledge of the fiduciary breaches alleged at [67]. That paragraph is proposed to be amended by the deletion of reference to [59]-[60] and the inclusion of reference to the respective allotment amounts. The amendment to the particulars to [68] is clearly an example of "tidying up" in my opinion.
Paragraph 67A of the proposed further amended statement of claim introduces the new allegation that Gujarat NRE knew or ought to have known of the facts set out in [58]-[67] (particularised by reference to the allegation that Mr and Mrs Jagatramka knew of the facts upon which Wollongong Coal relies in support of the allegations at [58]-[67] and that their knowledge was the knowledge of Gujarat NRE). The second to fourth defendants say that [67A] is a claim that is different in nature from the relief that is sought in the existing pleading (see T 36). Similarly, complaint is made as to [68A]-[68C], which contain the allegations against Gujarat NRE of: knowing receipt of a benefit in breach of fiduciary duty; that the Cliff Road Property constitutes traceable property; and that at all times Gujarat NRE has held the Cliff Road Property on constructive trust for Wollongong Coal and is liable to account for the benefits it has obtained by reason of its possession of the property since its acquisition.
The second to fourth defendants complain that the introduction of such allegations raises the potential for a cross-claim against them by Gujarat NRE. They argue that the test is not whether they would have no standing to object (were such allegations to have been made by Wollongong Coal against Gujarat NRE in the first place and then to have been sought to be withdrawn) but whether they would be bound by any finding in relation to those allegations (so as to give rise to a potential issue estoppel if a cross-claim were later to be made against them by Gujarat NRE) (see T 37).
Part of the difficulty in the complaint here raised is that the allegations of knowing receipt are allegations directed solely to Gujarat NRE. The second to fourth defendants are strictly not obliged to plead to them and in my opinion the amendment of the pleading to accommodate those allegations does not give rise to a forensic advantage to Wollongong Coal vis a vis the second to fourth defendants. I consider that the risk of a cross-claim (in circumstances where Gujarat NRE has to date taken no step whatsoever in the proceedings) is by no means evident but in any event it would be a risk to which Wollongong Coal would already have been exposed by the existing allegation that Gujarat NRE had received the benefit of the property with knowledge of the alleged breach of fiduciary duty. (In the interests of time, I do not here explore the interesting questions of issue estoppel or Anshun estoppel that might arise were a claim to be brought by Gujarat NRE against Mr or Mrs Jagatramka after the conclusion of these proceedings, having taken no part in these proceedings.) The second to fourth defendants point to an expansion by reference to the removal of the word "property" but the substance of the claim against Gujarat NRE has always been a claim based on knowledge of receipt of benefits in breach of fiduciary duty.
As I understand it, the failure to plead the knowing receipt claim in full was unintentional. It seems to me that, though obviously more substantive an amendment, this is broadly within the rubric of "tidying up" and should be allowed.
The next series of amendments relates to alleged breaches by each of Mr and Mrs Jagatramka of the "no profit" rule in relation to the purchase (see [69]-[75]). In summary, the amendments insert reference to the advance, allotments and initial loan in relation to the purchase; and particulars as to the family/indefinite residence intention. Consistent with the above rulings, I will allow those amendments (and the deletion of [73]).
There follows a section dealing with the alleged Barnes v Addy liability on the part of Gujarat NRE in relation to the alleged breach of the no profit rule relating to the purchase (amendments to [76]-[77] and the introduction of [77A] and [77B]). For the reasons given above in relation to the knowing receipt allegations against Gujarat NRE, I will allow those amendments.
Amendments to the alleged contraventions by Mr and Mrs Jagatramka of directors' duties and fiduciary duties (at [78]-[87]) are largely the introduction of references to the respective allotments; to the family/indefinite residence intention; and (at 78) to having: e. caused Wollongong Coal to engage in transactions directed to the purpose of acquiring residential property which was outside the ordinary course of Wollongong Coal's business, which was that of mining, producing, selling and exporting hard coking coal, and in doing so, failed to inform the board of Wollongong Coal of, or properly account for, the particular risks that attended the property acquisition.
For the reasons given earlier in relation to those kinds of allegations I will give leave for those amendments, subject to the following qualification. The allegation of failure to "inform the board of Wollongong Coal of, or properly account for, the particular risks that attended the property acquisition" suffers in my view from a number of deficiencies. First, and foremost, it is unclear what are the particular risks that it is alleged attended the property acquisition and of which Mr and Mrs Jagatramka should have informed the Board. Second, it is similarly unclear where is the allegation that Mr and Mrs Jagatramka knew of those risks (with proper particularisation of the matters required for an allegation of knowledge). Third, it is unclear what is meant for "properly account for". I will not give leave for the pleading of 78 in its present form. It will need to be repleaded in order to address the problems adverted to above.
As to the new allegation at [85A] of the proposed further amended statement of claim, to the effect that neither Mr nor Mrs Jagatramka had the fully informed consent of Wollongong Coal or its shareholders to engage in the conduct that comprised the breach of duty alleged in [85] (that alleged breach of duty being referable to the facts alleged at [78]-[84]), this seems to me to fall outside the concept of "tidying up" and would require special circumstances to be shown. This is so in my opinion because it calls for an exploration of the dealings between Mr and Mrs Jagatramka and the remaining directors of Wollongong Coal at the relevant time, and its shareholders. I would not allow [85A] as the requirement of special circumstances has not in my opinion been satisfied.
From [88]-[93] there are amendments to the existing allegations as to accessorial liability on the part of Gujarat NRE in respect of the alleged breaches of duty by Mr and Mrs Jagatramka in relation to the purchase of the property. I will allow these amendments for the same reasons as given above in relation to the other claims against Gujarat NRE. (Consistent with the stance taken in relation to other deletions, I understand the second to fourth defendants to have no objection to the deletion of [90] and [92] of the existing pleading.)
As to the amendments proposed to the sections on alleged contraventions by Mr and Mrs Jagatramka of s 182 of the Corporations Act (at [94]-[95], [97] of the proposed further amended statement of claim) and the alleged involvement of Gujarat NRE in the alleged contraventions (at [104] of the proposed further amended statement of claim), I will allow these amendments for the same reasons as earlier stated.
Next comes the section now headed "Causation in respect to breaches relating to the purchase" (see at the commencement of [106] of the proposed further amended statement of claim). I did not understand there to be any separate complaint as to the paragraphs of the pleading dealing with construction of the dwelling (including the deletion of [112]) other than as to the allegation at [116A] that the making of the construction loan was not in the ordinary course of business (and perhaps also the allegation at [118] as to the fact that Mr and Mrs Jagatramka "and/or their children" have from time to time used the property as their place of residence in Australia). I will allow those amendments.
The amendments to the section dealing with breaches in relation to the construction of the dwelling up to [143] will also be allowed (consistent with the above rulings).
As to 145 of the proposed further amended statement of claim, there are proposed amendments by way of the insertion of particulars to the allegation at 145, including an allegation in item 2 of the particulars as to the market value of the property at June 2013. This is not properly a particular in my opinion - it is an allegation of fact (as is item 3 of the particulars). They should be pleaded as facts not as particulars.
The allegation at 145 of the proposed further amended statement of claim is as to the investment into the construction being outside the ordinary course of business of Wollongong Coal. I will allow this amendment for the reasons given earlier.
The allegation at 145 of the proposed further amended statement of claim seems to me more problematic. It introduces the concept of purposes to which a reasonable company director in the position of Mr and Mrs Jagatramka would have had regard. I consider that this goes beyond tidying up and that special circumstances have not been established to permit that amendment. Otherwise I will allow the amendments to [145].
The proposed amendments at [147]-[149] and the particulars to [150]; as well as to [157], [160], the particulars to [162] of the proposed further amended statement of claim clearly fall within the rubric of "tidying up" and will be allowed.
There is then a series of amendments headed "Barnes v Addy liability of [Gujarat NRE] for breaches of fiduciary duty in relation to the construction of the dwelling" ([150A]-[151], [152A]-[152B]) and the introduction of a heading before [166]. They will be allowed for the reasons given earlier in relation to the claims against Gujarat NRE.
As to [168A] of the proposed further amended statement of claim, which contains the allegation that alleged breaches of Mr and Mrs Jagatramka caused Wollongong Coal to pay for the construction of the Residential Dwelling "which was built to the personal and idiosyncratic design and specifications of" Mr and Mrs Jagatramka, this is another allegation about which the complaint is that this raises cultural issues (T 39-40). I will allow [168A] but with the deletion of the words "and idiosyncratic".
As to [169B] of the proposed further amended statement of claim, this contains an allegation as to Mr Jagatramka's knowledge of a real likelihood of the Jindal Takeover (as defined) occurring and as to what would or was likely to occur on that takeover occurring. The complaint made in oral submissions, as I understand it, was that the pleading does not plead those matters as fact. I do not see a difficulty with the pleading being that Mr Jagatramka knew of an imminent takeover and knew that there was a real likelihood that certain things would then happen (though where such knowledge would lead in terms of the pleading is another issue). Where I have a difficulty is that this appears to be an entirely new allegation and one that cannot be characterised as a "tidying up" of the pleading. Special circumstances have not in my opinion been shown to warrant leave being granted at this stage to include this allegation and I will not allow it.
At 170 of the proposed further amended statement of claim there is a knew allegation that Mr Jagatramka represented at the 18 June 2013 meeting of the Board of Wollongong Coal that the shares in Gujarat NRE were to be sold to Happy Mining pursuant to the terms of a draft Share Sale Deed. Insofar as this is based on the Board minute, I will allow this amendment as falling, on balance, within the rubric of "tidying up".
More problematic are the new allegations at 172-(cG) of the proposed further amended statement of claim that Mr Jagatramka did not tell the Board of Wollongong Coal at the 18 June 2013 meeting certain matters (and the similar allegations at 173-(bE) of the proposed further amended statement of claim in respect of Mrs Jagatramka. Implicit in those allegations are that each of Mr and Mrs Jagatramka knew the respective matters of which it is alleged they did not tell the Board of Wollongong Coal without there being an allegation of knowledge of those matters, as such. I will not allow those amendments in circumstances where that will necessarily open up the issue of the knowledge of Mr and Mrs Jagatramka of those matters (which goes beyond mere "tidying up").
As there is no objection to deletions, the amendments to delete [176] and [184] will be allowed. The amendment to [183] is simply to include a sub-paragraph number and will be allowed.
The amendment at [189] of the proposed further amended statement of claim is only as to the particulars and I will allow it on the basis that particulars do not strictly form part of the pleading and it prevents any surprise at the trial as to the basis of the allegation at [189]. For similar reasons I will allow the amendments to the particulars at [193]-[195] (which raise the family/indefinite residence issue again).
The proposed amendments to [191], [202]-[203] of the proposed further amended statement of claim clearly fall within the rubric of "tidying up" in my opinion (and the amendments to the particulars to 202(i) and 203(i) fall within my ruling above; as does the amendment to the particulars at [210]). Those amendments will be allowed.
As to [210A] and [218A] of the proposed further amended statement of claim, those paragraphs respectively plead that the fiduciary breach alleged at [210] and the breaches alleged at [213]-[217] caused Wollongong Coal to sell its shares in Gujarat NRE at a loss. Objection is taken to those paragraphs. However, there is already a broader allegation as to loss. I will allow those amendments as making clearer the case sought to be run on the issue of loss.
The deletions at [219]-[226] of the proposed further amended statement of claim will be allowed.
Finally, I should note that amendment has been made to the articulation in the proposed further amended statement of claim of the relief claimed. Various prayers for relief have been deleted; others have been inserted (including declaratory relief in relation to the knowing receipt claims against Gujarat NRE). Leave will be granted to amend those prayers for relief, which follow as a consequence from the amendments that I will allow to the pleading.
I should make clear that nothing in these reasons precludes the making of submissions at the final hearing by Wollongong Coal to the effect foreshadowed by it on the present application that the allegations contained in the proposed amendments to the pleading that I have not permitted arise on the existing form of the pleading. Nor is there anything to preclude Wollongong Coal making a further application at the final hearing to amend to include those rejected amendments (whether on the basis that special circumstances can then be shown to the satisfaction of the trial judge or on the basis that it is necessary to bring the pleading into line with the evidence, or otherwise). The second to fourth defendants have contended that this would be an available (indeed, the appropriate) course and should not be heard later to say otherwise.

Subpoena to Gokani & Associates

Turning then to the respective applications in relation to the Gokani Subpoena, this subpoena broadly compels the production of financial documents relating to each of Gujarat NRE, Happy Mining and Basant. The business address of Gokani & Associates, an accounting practice, is the registered office of each of those companies.
The schedule to the subpoena to Gokani & Associates required production of: 1. All documents brought into existence in the period 31 December 2008 to 1 January 2015 relating to or evidencing Transactions, which relate to the acquisition, transfer or divestment of the Property or shares in the Property, between Basant and/or [Gujarat NRE] and/or Happy Mining, including but not limited to agreements, contracts, deeds correspondence, Financial Documents, minutes of meetings, board or shareholders' resolutions, reports or statements of account. 2. For the period 31 December 2008 to 30 June 2015, all Financial Documents of [Gujarat NRE] and Happy Mining. 3. For the period 1 July 2013 to 30 June 2015, all Financial Documents of Basant.
The term "[f]inancial documents" was defined in the schedule broadly as encompassing: (i) balance sheets or statements of financial position; (ii) general ledgers; (iii) loan accounts; (iv) profit and loss statements or statements of financial performance; (v) statements of current and non-current assets and liabilities. The term "[t]ransactions" was defined as including "payments, loans, sales, purchases, leases and advances".
By way of background, the second to fourth defendants note that before the Gokani Subpoena was issued Wollongong Coal filed, on 13 July 2017, a notice of motion seeking an order for discovery against the defendants. Relevantly, the categories of discovery sought by Wollongong Coal included: 4. For the period 1 June 2008 to date, all communications between any of the Defendants or any of their agents, employees or representatives and any, or any combination of [amongst others]: (i) Happy Mining Pty Ltd…; (ii) Basant International Pty Ltd…; … (viii) Gujarat Properties [i.e., Gujarat NRE] … . 5. Any financial statements or minutes of meeting of Gujarat Properties.
(The date of 2008, I was informed, is the date of incorporation of Happy Mining - T 48.22.)
Emmett AJA heard the discovery motion on 10 October 2017 and limited the discovery ordered in respect of categories 4 and 5.
In respect of category 4, by consent, the time period was limited to 1 January 2013 to 31 December 2013 that being six months before and after the sale by Wollongong Coal of its shareholding in Gujarat NRE. In respect of category 5, that category was limited to annual and half-annual financial reports for the period June 2008 to March 2009 and the 2011 and 2013 calendar years. The same time period was used in relation to minutes of Board meetings required to be produced by Gujarat NRE.
Pausing here, I note that it has been said that it will be an abuse of process to issue a subpoena to seek the production of documents that a court has refused to order be produced under discovery (i.e. to circumvent those orders) (Suzhou Haishun Investment Management Co Ltd v Yue'e Zhao (Ruling No 2) [2018] VSC 144 at [55] per Ierodiaconou AsJ).
It was against that background that, on 20 July 2018, some six weeks before the start date of the original trial (which commenced on 27 August 2018), Wollongong Coal issued the Gokani Subpoena. The second to fourth defendants, by notice of motion dated 30 July 2018, sought to have the subpoenas set aside. That motion was reserved to the trial judge. The second to fourth defendants say that what happened then was that the vacation of the hearing dates on 28 August 2018 overtook the matter (and hence that the complaint by Wollongong Coal as to delay in prosecution of the motion is misconceived).
Wollongong Coal notes that documents have already been produced to the Court in answer to the Gokani Subpoena. While it does not suggest that this removes the discretion to refuse access to inspect documents produced in answer to that subpoena if it is considered that the subpoena ought to have been set aside (see Rinehart v Rinehart [2018] NSWSC 1102 at [150] (Rinehart); Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 410 (Broadway Plaza) at [50]), it points to the fact of production (without complaint by Gokani & Associates that the subpoena was oppressive or gave rise to any undue burden) as giving rise to scepticism as to the complaint by the second to fourth defendants as to the scope of the Gokani Subpoena. It is submitted that this is particularly so in circumstances where "on a fair reading of the subpoena categories, the documents sought to be produced ought not to concern any one" of the second to fourth defendants.
The second to fourth defendants seek to set aside the Gokani Subpoena on two grounds: first, the breadth of its scope (in respect of each of the three categories of documents sought by the subpoena); and, second, in respect of the documents sought in categories two and three, as to relevance, both in terms of the time period and the type of document sought.
Wollongong Coal submits that relevance of the Gokani Subpoena is to interrogate the connection between Happy Mining, Basant and Gujarat NRE in respect of the acquisition of the Cliff Road Property and subsequent transactions between them. It argues that the second to fourth defendants have failed to prosecute their notice of motion for access to the documents with due diligence (accusing them of unconscionable delay).
In response to the complaint as to unconscionable delay, the second and fourth defendants submit that they have, to date, not pressed for the hearing of the motion by reason of considerations of judicial efficiency (i.e., given the time involved in determining the issues in dispute in the proceedings arising, primarily, from the length of the existing pleading). It is submitted that it was thought best to "reserve the dispute to the trial judge", noting the lack of urgency surrounding the determination of the subpoena matter, but that given Wollongong Coal has raised the issue for consideration prior to the hearing, and in light of the present pleading contest, the second to fourth defendants were content for the subpoena matter to be determined presently. It is submitted that the subpoena lacks a legitimate forensic purpose and that such a purpose is not supplied merely because the second and fourth defendants have thought it prudent to defer the hearing of the subpoena dispute to the trial judge.

Relevant legal principles

The relevant legal principles to an application to set aside a subpoena are well known and I have had occasion to consider them relatively recently: the test to determine whether documents sought on subpoena are relevant (and serve a legitimate forensic purpose) will be satisfied if the documents have a sufficient apparent connection to justify their production or inspection and/or could possibly throw light on the issues in the main case (see Broadway Plaza at [49]); it is not sufficient merely to show that such documents are or may be relevant to an issue for decision; instead, attention to the issues in the proceedings is required (Broadway Plaza at [52]). Further, a subpoena must identify with "reasonable particularity" the documents sought (which distinguishes the power to compel production of documents by such a process from a party's discovery obligation) (see In the matter of One.Tel Ltd (in liq) - SingTel Optus Pty Ltd v Weston [2010] NSWSC 1491 (One.Tel Ltd) at [39]-[41]; Broadway Plaza at [51]); and a subpoena cannot be used as part of a "fishing expedition" or as a "substitute for discovery" (One.Tel Ltd at [32])
What constitutes a "fishing expedition" was explained by Owen J in Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 at 254 (i.e., where a party has no evidence that "fish of a particular kind are in a pool [but] desires to be at liberty to drag it for the purpose of finding out whether there are any there or not").

Second to fourth defendants' submissions

The second to fourth defendants submit that the Gokani Subpoena should be set aside (and access to any documents refused) for the following reasons.
First, that the breadth of the categories is manifestly unreasonable. It is noted that the sale by Wollongong Coal of its shareholding in Gujarat NRE occurred in June and July 2013. Accordingly, it is submitted that there is no justification for six years of documents (spanning 31 December 2008 to 1 January 2015) in relation to this transaction (see category 1 of the subpoena schedule).
Second, it is said that there is no relevance to the request for the production of all "Financial Documents" of Gujarat Properties and Happy Mining for the same six-year period (see category 2 of the subpoena schedule), not only because of the time period specified, but also because of the breadth of the term "Financial Documents".
Third, it is said that the same relevance objection applies in respect of category 3 of the subpoena schedule; in that it is unclear to what issue the "Financial Documents" of Basant from 1 July 2013 to 30 June 2015 go (i.e. after the sale of the Cliff Road Property).

Wollongong Coal's submissions

As noted, Wollongong Coal submits that there is a legitimate forensic purpose to the Gokani Subpoena in that there is a reasonable basis to assume that the financial documents sought will shed light on the beneficial ownership of and relationship between the respective entities (Gujarat NRE, Happy Mining and Basant).

Determination as to subpoena applications

The length of the period over which all financial documents are sought in respect of each of Gujarat NRE and Happy Mining (31 December 2008 to 30 June 2015) is redolent of a fishing expedition in my opinion. There has already been an order for discovery of financial statements of Gujarat NRE for the period June 2008 to March 2009 and for the 2011 and 2013 calendar years. It is not clear what documents Wollongong Coal considers are likely to be available in the records of Gujarat NRE beyond those dates and this would appear to conflict with the decision made by Emmett AJA to limit the discovery to those dates.
As for Happy Mining, it is not clear why such a broad period of time for all financial documents is required if all that is sought is to ascertain whether there is evidence in the financial records as to the beneficial owner of the shares in Happy Mining.
As to Basant, the subpoena calls for production of documents for a much more limited period but again it is difficult to see why it is for a legitimate forensic purpose that all financial documents be sought when what is the ambit of Wollongong Coal's enquiry is as to the ultimate beneficial shareholding of the company.
If categories 2 and 3 of the Gokani Subpoena were read down to be limited to particular financial documents likely to record information as to the ultimate beneficial owner of the shares in the respective companies (assuming that the shares are not beneficially held by the registered shareholder) and for a more limited period I would consider the subpoena to be permissible, but the difficulty is that documents have already been produced and it is not clear whether those would readily be able to be separated into the relevant more limited category of documents. Therefore, I consider the better course to be to set aside the subpoena insofar as it requires production of documents in categories 2 and 3 and give leave for the issue of a more limited subpoena if that can readily be achieved (and if Wollongong Coal wishes to press a subpoena for those documents).
As to category 1 of the Gokani Subpoena I consider that a legitimate forensic purpose has been established. Had there been a complaint by Gokani & Associates as to oppression in regard to the call for documents "evidencing" the Transactions to which reference is there made, I would have been inclined to uphold that complaint. However, the documents have been produced and it would, thus, appear that Gokani & Associates have had no difficulty forming a judgment as to whether or not documents 'evidenced' the Transactions. Although the subpoena is for a broad period both before and after the relevant transactions, I would not set it aside on that basis.
Accordingly, I propose to permit access to documents produced in answer to category 1 of the Gokani Subpoena and otherwise to set aside the subpoena and order the return of documents produced in answer to categories 2 and 3.
Whether such a course is feasible will depend on whether the documents have been separately produced by reference to categories. I will hear from the parties as to how best to determine and address any difficulty in that regard.

Costs

Ordinarily, costs would follow the event. As there has been mixed success on the respective applications I will make directions for submissions as to costs with a view to determining this issue on the papers. I will also make directions as to submissions in relation to any application for security for costs in respect of the further amendment of the statement of claim, again with a view to determining that issue on the papers if possible.

Orders

Accordingly, I make the following orders: 1. Grant leave to the plaintiff to file a further amended statement of claim in the form annexed to the notice of motion filed 16 April 2019 but not including the following proposed amendments (without prejudice to the making of a further application to amend the pleading to include those amendments before the trial judge at the hearing): 1. the proposed amendment to [36] being the insertion of the words "unbeknown to the other directors of Wollongong Coal"; 2. the proposed amendment to [42] being the insertion of the words "which would be built to their personal specifications"; 3. the proposed insertion of 78 in its current form; 4. the proposed insertion of [85A]; 5. the proposed insertion of particulars to the allegation at 145; 6. the proposed insertion of 145; 7. the proposed amendment to [168A] being the insertion of the words "and idiosyncratic"; 8. the proposed insertion of [169B]; 9. the proposed insertion of 172-(cG); and 10. the proposed insertion of 173-(bE). 1. Direct the plaintiff to file the further amended statement of claim within seven days. 2. Order the plaintiff to pay the second to fourth defendants' costs thrown away by the further amendment of the statement of claim. 3. Reserve the question of costs of the notice of motion filed 16 April 2019 in relation to the application further to amend the statement of claim, with a view to it being dealt with on the papers following the provision of short written submissions by the parties within seven days from the making of these orders. 4. Set aside the subpoena issued 20 July 2018 to Gokani & Associates insofar as it compels the production of documents in categories 2 and 3 of the schedule to the subpoena but otherwise dismiss the application by the second to fourth defendants to set aside the said subpoena. 5. Subject to hearing submissions as to the ability to determine the documents produced by Gokani & Associates in answer to category 1 of the schedule to the subpoena from those produced in answer to categories 2 and 3 of the schedule to the subpoena (as to which the parties are to forward brief written submissions within seven days), order that the plaintiff have access to documents produced in answer to category 1 of the schedule to the subpoena and that the balance of the documents produced by Gokani & Associates be returned to Gokani & Associates not earlier than fourteen days after the making of these orders. 6. Reserve the question of costs of the respective applications in relation to the subpoena referred to in order 6 above, with a view to it being dealt with on the papers following the provision of short written submissions by the parties within seven days from the making of these orders.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 June 2019

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