Lenark Pty Limited v TheChairmen1 Pty Limited & Ors [2012] NSWSC 485

Supreme Court New South Wales

Medium Neutral Citation: Lenark Pty Limited v TheChairmen1 Pty Limited & Ors [2012] NSWSC 485 Hearing dates: 7 May 2012 Decision date: 10 May 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Any application to amend can be renewed after matters dealt with by judgment are addressed, if agreement in respect of amendment cannot be reached between the parties. Catchwords: PRACTICE AND PROCEDURE - Amendments - Application by Plaintiff for leave to file Second Further Amended Statement of Claim -Whether specific amendments would be permitted - Second Further Amended Statement of Claim not pressed in form currently before the Court. Legislation Cited: - Corporations Act 2001 (Cth) ss 180-182, 232, 233(1)(d) Category: Interlocutory applications Parties: Lenark Pty Limited (Plaintiff) TheChairmen1 Pty Limited & Ors (Defendants) Representation: Counsel: N.M. Bender (Plaintiff) M. Henry (Defendants) Solicitors: Minter Ellison (Plaintiff) Freehills (Defendants) File Number(s): 10/318240

Judgment 1By Notice of Motion filed on 1 May 2012, the Plaintiff, Lenark Pty Ltd ("Lenark") seeks leave to amend its Further Amended Statement of Claim in accordance with a Second Further Amended Statement of Claim which is exhibited to the affidavit of its solicitor, Mr Lin Chern Tan, dated 30 April 2012, and an order that costs thrown away by reason of the amendments be reserved to the trial judge. That application for leave is opposed by the First Defendant ("TheChairmen1"). 2The Second Further Amended Statement of Claim was served on 30 April 2012 and a revised version was served on 3 May 2012, although I was informed that the revisions then made were not material. By letter dated 4 May 2012, TheChairmen1's solicitors, Freehills, wrote to Lenark's solicitors, Minter Ellison, raising questions as to a number of aspects of the pleadings in the Second Further Amended Statement of Claim. A number of those questions were directed to matters which, in my view, are not sufficiently clearly pleaded in the Second Further Amended Statement of Claim. Many of those matters can readily be addressed by straightforward amendments to the Second Further Amended Statement of Claim and it may have been preferable if further efforts had been made to resolve those issues between the parties, before this motion proceeded. At the same time, I recognise that Lenark will have been rightly anxious to have the issue resolved promptly, where there have been significant delays in the progress of the proceedings by reason of disputes as to TheChairmen1's claim for confidentiality over discovered documents and Lenark's evidence is due to be filed by 18 June 2012. 3By its Statement of Claim previously filed in these proceedings, Lenark had advanced a case that a transaction by which certain assets of TheChairmen1 were sold to Guildford Coal Limited ("GUF"), in consideration for a share issue by GUF to TheChairmen1, was contrary to a legitimate expectation of Lenark that the shares in GUF would be issued to shareholders of TheChairmen1 rather than to TheChairmen1. Lenark also contended that that transaction occurred in circumstances where the principal of Lenark, Mr Chisholm, who was also a director of TheChairmen1, was excluded from deliberations concerning the transaction. Lenark also attacked a transaction by which TheChairmen1 acquired 85% of the shares in Springsure Mining Limited ("Springsure") in September 2010 for a consideration of $12.5 million. Lenark contended that TheChairmen1 paid in excess of the true value of the shares in Springsure, the only asset of which was a coal exploration tenement and that the proceeds of that transaction were used by Springsure to discharge a debt owed by Resco Services Pty Limited ("Resco Services"), another company associated with Mr Ransley (the chairman of TheChairmen1), to Westpac Banking Corporation. Lenark sought, inter alia, a declaration that TheChairmen1's capital raising by way of a rights issue and placement and its purchase of 85% of the shares in Springsure was contrary to the interests of members of TheChairmen1 as a whole and/or oppressive to, unfairly prejudicial to or unfairly discriminatory against Lenark or other members of TheChairmen1 within the meaning of s 232 of the Corporations Act 2001 (Cth) and declarations that certain persons contravened their statutory duties under ss 180-182 of the Corporations Act and their corresponding general law duties in respect of the transaction. 4Mr Bender, who appears for Lenark, points out that the intent of the Second Further Amended Statement of Claim is to narrow the case by no longer pressing the claim for oppression in respect of the structure of the GUF transaction; pleading Mr Chisholm's exclusion from board deliberations as a relevant fact, rather than as a separate ground of oppression; extending the pleading in respect of the Springsure transaction, based on new information obtained by Lenark and its legal representatives on discovery and by the issue of subpoenas; and adding a new claim for oppression in respect of TheChairmen1's funding of the costs of certain directors and shareholders who are separate defendants in the proceedings. 5Mr Henry, who appears for TheChairmen1, advances a number of criticisms of the proposed Second Further Amended Statement of Claim, which he contends does not put TheChairmen1 on notice of the case it has to meet. He also raises the possibility that several defendants need not remain as defendants having regard to the Second Further Amended Statement of Claim. 6The parties agreed that the preferable course was for me to deliver a judgment dealing with the matters which had been argued before me and, so far as further amendments were required to address those matters, Lenark would then produce a further pleading making any necessary amendments. Criticisms of the Second Further Amended Statement of Claim 7TheChairmen1 contends that the relevance of paragraphs 28-36 of the proposed Second Further Amended Statement of Claim, which relate to dealings between TheChairmen1 and GUF, is not readily apparent. TheChairmen1 also contends that paragraphs 37-39 of the proposed Second Further Amended Statement of Claim, which advance an allegation of breach of duties by the directors of TheChairmen1 in concluding and giving effect to the transaction between TheChairmen1 and GUF, are unclear, since the relevant conduct was not undertaken in that capacity, and that no loss is identified in respect of these matters. 8In my view, the pleadings in paragraphs 28-39 of the proposed Second Further Amended Statement of Claim are properly advanced as pleadings of material facts, on the basis that TheChairmen1 will rely on the alleged facts to contend that the GUF transaction was an initial attempt to confer a benefit on Resco Services and that the subsequent transaction in respect of Springsure was implemented when that transaction did not proceed to completion. The facts of the earlier GUF transaction are also relevant, as Lenark contends, because, if a pattern of oppressive conduct were established, that may be relevant to whether the Court should grant the relief sought so as to require that Lenark be, for example, bought out of its shares in TheChairmen1. I do not consider that there is any lack of clarity with these paragraphs which cannot be addressed by a request for and the provision of proper particulars of them. 9TheChairmen1 also contended that paragraph 39 of the proposed Second Further Amended Statement of Claim did not identify the "steps to carry out that part of the agreement" to which reference was made in that paragraph. Mr Bender indicates that the reference to the steps taken in paragraph 39 of the Statement of Claim is to the steps pleaded in paragraphs 31 and 32 of the proposed Second Further Amended Statement of Claim and an amendment to make that clear will address that criticism. 10TheChairmen1 points out that, although breach of statutory and fiduciary duty is pleaded in respect of TheChairmen1's directors in relation to the transaction between TheChairmen1 and Springsure, no allegation of oppression is pleaded in respect of that matter. TheChairmen1 correctly notes that this gives rise to a disconnect with the relief sought in the Second Further Amended Statement of Claim, which includes a declaration that the subscription by TheChairmen1 for 85% of the shares in Springsure was oppressive conduct for the purposes of s 232 of the Corporations Act. In my view, that criticism is well-founded; but it may readily be addressed, as Lenark proposes, by adding a pleading to make clear that Lenark contends that the breaches of directors duties pleaded in paragraph 54 and TheChairmen1's alleged failure to take action against the relevant directors amounted to oppressive conduct. 11TheChairmen1 criticises the formulation of paragraph 65 of the Further Amended Statement of Claim, which pleads that an alleged failure by TheChairmen1 and its board to provide information in the Offer Document in relation to the Springsure transaction and in response to requests by Mr Chisholm were also oppressive conduct for the purposes of s 232 of the Corporations Act. TheChairmen1 contends that the nature of the information that should have been provided is not identified. In my view, that could properly have been addressed by a request for particulars but, in any event, Lenark has identified the information referred to in submissions and the Second Further Amended Statement of Claim can be amended to make that clear. This would address that criticism. Criticisms of the relief claimed 12TheChairmen1 complains as to the formulation of paragraph 6(a) of the relief sought in the Second Further Amended Statement of Claim, to the effect that "Lenark be issued with sufficient shares in TheChairmen1 to increase its total shareholding to 18.73% of the shares on issue in TheChairmen1". Although that paragraph may be intended to have effect that TheChairmen1 should be ordered to issue the relevant shares and its directors ordered to take such steps as are necessary to bring that about, that paragraph does not presently identify the persons against whom that relief is sought or the acts which they should undertake. This matter could readily be addressed by amendment. 13TheChairmen1 also notes that the Second Further Amended Statement of Claim seeks relief under s 233(1)(d) of the Corporations Act requiring the 12th Defendant (Mrs Ransley), the 10th Defendant (Micjud), the 11th Defendant (Pooles Australia) and the 3rd Defendant, (Nooava) to purchase Lenark's shares at a value to be determined by the Court. Paragraph 6(b) of the relief sought in the Second Further Amended Statement of Claim seeks orders that Mrs Ransley, Pooles Australia and/or Nooava pay a sum of money to compensate Lenark for its claimed loss and paragraph 7 seeks orders against, inter alia, Mrs Ransley, Micjud, Pooles Australia and Nooava. Paragraph 7 of the claims for relief has the further difficulty, which Freehills had noted in the letter to which I referred above, that Mr Poole is not party to the proceedings. 14The Second Further Amended Statement of Claim does not presently plead any material facts to support these claims for relief. For example, it appears that Mrs Ransley is Mr Ransley's wife, and breaches of duty are pleaded against Mr Ransley, but no facts or basis is pleaded as to why that justifies an order that Mrs Ransley purchase Lenark's shares in TheChairmen1. I would not permit these claims for relief to proceed, in the absence of material facts pleaded to support them. Lenark has foreshadowed that it will seek to further amend the Second Further Amended Statement of Claim to address these matters, and the claims against one of those parties will not be pressed. Proper parties to the proceedings 15So far as complaint is made as to the identify of the parties joined to the Second Further Amended Statement of Claim, I consider it preferable, as Lenark contends, to deal with that question if any such party brings an action challenging their joinder in the proceedings. It is at least arguable that those persons are persons whose interests are affected by the making of the relevant orders, and particularly the order that Lenark be bought out of TheChairmen1, so that they are properly joined as party to the proceedings. Next steps 16I note that Lenark does not press the application for leave to file the Second Further Amended Statement of Claim in its present form and intends to prepare a further version of the Second Further Amended Statement of Claim. If agreement cannot be reached between the parties for that amendment to be permitted by consent, and as to any consequential orders, I will hear the parties further as to that amendment, the question of costs thrown away and the costs of this application.