FEDERAL COURT OF AUSTRALIA Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820 Citation: Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820 Parties: ADDENBROOKE PTY LIMITED ACN 055 973 576 v TRAVERS WILLIAM DUNCAN, PETER GRAY, SOUTHERN CROSS EQUITIES PTY LTD ACN 071 935 441, ARTHUR PHILLIP PTY LTD ACN 100 908 101, ARTHUR PHILLIP NOMINEES PTY LTD ACN 111 862 358, CASCADE COAL PTY LTD ACN 119 180 620, RICHARD JONATHAN POOLE, JOHN VERN MCGUIGAN, JOHN CHARLES ATKINSON, JOHN ALAN KINGHORN, COAL AND MINERALS GROUP PTY LTD ACN 144 641 092 and AMANDA POOLE File number: NSD 2243 of 2012 Judge: JACOBSON J Date of judgment: 14 August 2013 Catchwords: PRACTICE AND PROCEDURE – pleadings – application to strike out statement of claim for failure to properly plead basis of claim in accessorial liability – principle in Yorke v Lucas – actual knowledge of the essential elements of the contravention is required CORPORATIONS LAW – misleading and deceptive conduct – accessorial liability – claim of accessorial liability against director of respondent company – requirement to plead elements of accessorial liability – requirement to plead actual knowledge of representation and knowledge of falsity of representation Legislation: Australian Securities and Investments Commission Act 2001 (Cth) Corporations Act 2001 (Cth) Trade Practices Act 1974 (Cth) Cases cited: Australian Automotive Repairers' Association v NRMA Insurance Ltd [2002] FCA 1568 Beach Petroleum NL v Johnson (1991) 105 ALR 456 Caple v All Fasteners (WA) [2005] FCA 1558 Fernandez v Glev Pty Ltd [2000] FCA 1859 Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 Roumanus v Orchard Holdings (NSW) Pty Limited (in liq) (2012) 90 ACSR 677 SAS Financial Services Pty Ltd v Trew [2006] WASCA 252 Yorke v Lucas (1985) 158 CLR 661 Date of hearing: 13 August 2013 Date of last submissions: 13 August 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 23 Counsel for the Applicant: Mr FM Douglas QC with Mr G O'Mahoney Solicitor for the Applicant: Gye & Associates Counsel for the First Respondent: The First Respondent did not appear Counsel for the Second Respondent: The Second Respondent did not appear Counsel for the Fourth, Fifth, Seventh, Eleventh and Twelfth Respondents: The Fourth, Fifth, Seventh, Eleventh and Twelfth Respondents did not appear Counsel for the Sixth, Eighth, and Ninth Respondents: The Sixth, Eighth and Ninth Respondents did not appear Counsel for the Tenth Respondent: Mr DFC Thomas Solicitor for the Tenth Respondent: King & Wood Mallesons IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2243 of 2012 BETWEEN: ADDENBROOKE PTY LIMITED ACN 055 973 576 Applicant AND: TRAVERS WILLIAM DUNCAN First Respondent PETER GRAY Second Respondent SOUTHERN CROSS EQUITIES PTY LTD ACN 071 935 441 Third Respondent ARTHUR PHILLIP PTY LTD ACN 100 908 101 Fourth Respondent ARTHUR PHILLIP NOMINEES PTY LTD ACN 111 862 358 Fifth Respondent CASCADE COAL PTY LTD ACN 119 180 620 Sixth Respondent RICHARD JONATHAN POOLE Seventh Respondent JOHN VERN MCGUIGAN Eighth Respondent JOHN CHARLES ATKINSON Ninth Respondent JOHN ALAN KINGHORN Tenth Respondent COAL AND MINERALS GROUP PTY LTD ACN 144 641 092 Eleventh Respondent AMANDA POOLE Twelfth Respondent JUDGE: JACOBSON J DATE OF ORDER: 14 AUGUST 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Paragraphs 49, 50, 134, 135, 151, 157 and 158 of the Amended Statement of Claim be struck out as against the Tenth Respondent, John Alan Kinghorn. 2. The balance of the Amended Statement of Claim be struck out as against the Tenth Respondent. 3. The Applicant is to pay the Tenth Respondent's costs of the interlocutory application filed 12 July 2013. 4. The Applicant serve on the Tenth Respondent any draft proposed Further Amended Statement of Claim by Tuesday, 20 August 2013. 5. The Tenth Respondent inform the Applicant by Tuesday, 27 August 2013 whether he consents to the filing of the draft proposed Further Amended Statement of Claim. If such consent is given: (a) the Applicant to file the proposed Further Amended Statement of Claim by Wednesday, 28 August 2013; (b) the Tenth Respondent file his Defence to any Further Amended Statement of Claim, and any Cross-Claims, by 6 September 2013; (c) the Applicant to file any Reply to the Tenth Respondent's defence, and any further affidavit evidence in chief as against the Tenth Respondent, by 13 September 2013. 6. If the consent referred to in Order 4 above is not given: (a) the Applicant to file any application for leave to file a Further Amended Statement of Claim, and any evidence in support of such an application, by 3 September 2013; (b) the Tenth Respondent to file any evidence in relation to such an application by 10 September 2013; (c) the Applicant to file and serve a written outline of submissions in relation to such an application by 17 September 2013; (d) the Tenth Respondent to file and serve a written outline of submissions in relation to such an application by 24 September 2013; (e) the application be listed for hearing on 30 September 2013. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2243 of 2012 BETWEEN: ADDENBROOKE PTY LIMITED ACN 055 973 576 Applicant AND: TRAVERS WILLIAM DUNCAN First Respondent PETER GRAY Second Respondent SOUTHERN CROSS EQUITIES PTY LTD ACN 071 935 441 Third Respondent ARTHUR PHILLIP PTY LTD ACN 100 908 101 Fourth Respondent ARTHUR PHILLIP NOMINEES PTY LTD ACN 111 862 358 Fifth Respondent CASCADE COAL PTY LTD ACN 119 180 620 Sixth Respondent RICHARD JONATHAN POOLE Seventh Respondent JOHN VERN MCGUIGAN Eighth Respondent JOHN CHARLES ATKINSON Ninth Respondent JOHN ALAN KINGHORN Tenth Respondent COAL AND MINERALS GROUP PTY LTD ACN 144 641 092 Eleventh Respondent AMANDA POOLE Twelfth Respondent JUDGE: JACOBSON J DATE: 14 AUGUST 2013 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By its Amended Statement of Claim filed 16 May 2013 Addenbrooke Pty Limited (Addenbrooke) makes four claims for compensation against Mr John Alan Kinghorn for accessorial liability under s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). Addenbrooke no longer presses one of the claims, which is pleaded in paragraph 151, against Mr Kinghorn. 2 Mr Kinghorn applies by an interlocutory application to strike out the three remaining claims. The essential ground of the application is that the Statement of Claim fails to plead the matters required to give rise to a claim of accessorial liability identified by the High Court in Yorke v Lucas (1985) 158 CLR 661. 3 It is well established that the expression "any person involved in the contravention" in s 12GF of the ASIC Act, as defined in s 79 of the Corporations Act 2001 (Cth) (Corporations Act) is relevantly identical to s 75B(1) of the former Trade Practices Act 1974 (Cth) and that jurisprudence that has been developed in relation to that section is applicable to the meaning of the phrase: see Roumanus v Orchard Holdings (NSW) Pty Ltd (in liq) (2012) 90 ACSR 677 at [178]. 4 Thus, what is required to give rise to accessorial liability in the present case is actual knowledge of the falsity of the representation comprising the primary contravention and intentional participation in the contravention. These are essential matters which must be alleged and pleaded: Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 at [10]-[15]; SAS Financial Services Pty Ltd v Trew [2006] WASCA 252 at [12]. 5 Where, as in the present case, the primary contravention is alleged to involve a misrepresentation as to a future matter it is necessary for a plaintiff or applicant to allege that the accessory had actual knowledge that the person alleged to have made the representation had no reasonable grounds for making it: Quinlivan at [15]. 6 It is important to bear in mind that the concept of accessorial liability under s 79 of the Corporations Act and its analogues imports quasi criminal standards in imposing civil liability: Yorke v Lucas at 667-669. 7 Thus, while I accept that pleadings are a means to an end and that technical objections to pleadings are now received with less enthusiasm than in the past, the authorities to which I have referred make it clear that the essential elements of the claim must be properly pleaded. 8 Observations made by judges as to the blurring of the distinction between a pleading of material facts and a statement of particulars have little or no application to claims of the type made against Mr Kinghorn in the present proceeding: cf Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466; Australian Automotive Repairers' Association v NRMA Insurance Ltd [2002] FCA 1568 at [13]-[17]. The first accessorial liability claim 9 The first claim of accessorial liability is pleaded in paragraph 49 of the Statement of Claim. It pleads that Mr Kinghorn and others were "persons involved in the contraventions" of s 12DA of the ASIC Act by Cascade Coal Pty Ltd (Cascade) and Southern Cross Equities Pty Ltd (Southern Cross). 10 The only primary contraventions by Cascade and Southern Cross which are relied upon are written representations made in a representational document and a subscription agreement described as the Addenbrooke Subscription Agreement. 11 Mr Douglas QC who appears for Addenbrooke submits that the necessary elements for accessorial liability on the part of Mr Kinghorn are contained in the particulars to paragraph 49 which include reference to the matters pleaded in paragraphs 51 to 126 as well as to an email sent by Mr Kinghorn to the ABC 4 Corners program dated 25 February 2013. 12 However, quite apart from the fact that the allegations are made in particulars, in my opinion they do not contain the critical elements identified in Yorke v Lucas and the later authorities. 13 The approach which I have taken is supported by the observations made in SAS v Trew at [7] and [9] and Fernandez v Glev Pty Ltd [2000] FCA 1859 at [18]. 14 I therefore propose to strike out the allegations in paragraph 49 and the related allegations in paragraph 50. 15 Nevertheless, I will give leave to Mr Douglas to re-plead the allegations contained in those paragraphs. The second accessorial liability claim 16 The second accessorial liability claim is pleaded in paragraph 134. The primary contravention in which Mr Kinghorn is said to be involved is a failure by Cascade and Arthur Phillip Pty Ltd to disclose to Addenbrooke the facts pleaded in paragraphs 51 to 126 (subject to certain exceptions stated in paragraphs 133 and 134). 17 The allegation in paragraph 134 suffers from the same deficiencies as identified in relation to the first accessorial liability claim. 18 The second accessorial liability claim has more deficiencies than the first. This is because the primary contravention is one of misrepresentation by silence. Thus it seems to me to follow that Addenbrooke must plead actual knowledge of what was disclosed as well as actual knowledge of the matters that were not disclosed. It also seems to me that Addenbrooke must plead that Mr Kinghorn knew that the non-disclosure was intentional with intent to mislead: see Caple v All Fasteners (WA) [2005] FCA 1558 at [70]. 19 Nevertheless, I will give leave to Addenbrooke to re-plead the claim. The third accessorial liability claim 20 The third accessorial claim is pleaded in paragraph 157. It is a claim that Mr Kinghorn was involved in Cascade's contravention of s 12CB by reason of its engaging in unconscionable conduct. This pleading is deficient because it fails to allege that Mr Kinghorn had actual knowledge of the essential elements of the conduct of Cascade which is said to be unconscionable. 21 Moreover, the primary contravention alleged in paragraph 156 is deficient because it does not identify the material facts sufficient to give rise to a claim of unconscionability. Such a claim is not made out by an allegation of matters sufficient to amount to misleading conduct. 22 Nevertheless, I will once again give leave to Addenbrooke to re-plead the claim. Orders 23 For the reasons set out above I will make orders set out in the draft orders submitted by Mr Thomas as follows: 1. Paragraphs 49, 50, 134, 135, 151, 157 and 158 of the Amended Statement of Claim be struck out as against the Tenth Respondent, John Alan Kinghorn. 2. The balance of the Amended Statement of Claim be struck out as against the Tenth Respondent. 3. The Applicant is to pay the Tenth Respondent's costs of the interlocutory application filed 12 July 2013. 4. The Applicant serve on the Tenth Respondent any draft proposed Further Amended Statement of Claim by Tuesday, 20 August 2013. 5. The Tenth Respondent inform the Applicant by Tuesday, 27 August 2013 whether he consents to the filing of the draft proposed Further Amended Statement of Claim. If such consent is given: (a) the Applicant to file the proposed Further Amended Statement of Claim by Wednesday, 28 August 2013; (b) the Tenth Respondent file his Defence to any Further Amended Statement of Claim, and any Cross-Claims, by 6 September 2013; (c) the Applicant to file any Reply to the Tenth Respondent's defence, and any further affidavit evidence in chief as against the Tenth Respondent, by 13 September 2013. 6. If the consent referred to in Order 4 above is not given: (a) the Applicant to file any application for leave to file a Further Amended Statement of Claim, and any evidence in support of such an application, by 3 September 2013; (b) the Tenth Respondent to file any evidence in relation to such an application by 10 September 2013; (c) the Applicant to file and serve a written outline of submissions in relation to such an application by 17 September 2013; (d) the Tenth Respondent to file and serve a written outline of submissions in relation to such an application by 24 September 2013; (e) the application be listed for hearing on 30 September 2013. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. Associate: Dated: 14 August 2013