KTC v David (Pleadings)

• Jurisdiction: Australia Federal only
• Judge: PERRAM J
• Judgment Date: 24 September 2019
• Neutral Citation: [2019] FCA 1566
• Date: 24 September 2019
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

KTC v David (Pleadings) [2019] FCA 1566

File number:	NSD 555 of 2019
Judge:	PERRAM J
Date of judgment:	24 September 2019
Catchwords:	PRACTICE AND PROCEDURE – application for leave to file and serve further amended statement of claim – where allegations made that fourth and fifth defendants liable under second limb of Barnes v Addy (1874) LR 9 Ch App 244 – whether pleadings sufficiently allege dishonest and fraudulent designs – whether pleadings sufficiently allege knowledge of fourth and fifth defendants – where fourth and fifth defendants challenge pleading of underlying fiduciary duties – where fourth and fifth defendants oppose granting leave to replead
Legislation:	Federal Court Rules 2011 (Cth) r 16.02
Cases cited:	Barnes v Addy(1874) LR 9 Ch App 244 Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; 87 NSWLR 609 KTC v David (No 1) [2019] NSWSC 281 KTC v David (No 2) [2019] NSWSC 330 Mercedes Holdings Pty Ltd v Waters (No 3) [2011] FCA 236 Theseus Exploration NL v Foyster [1972] HCA 41; 126 CLR 507
Date of hearing:	21 May 2019
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	53
Counsel for the Plaintiff:	Ms M Loughnan QC with Mr B Carew
Solicitor for the Plaintiff:	HWL Ebsworth Lawyers
Counsel for the First Defendant:	Mr J A Hogan-Doran
Solicitor for the First Defendant:	Aitken Lawyers
Counsel for the Second and Third Defendants:	Mr R A Jedrzejczyk
Solicitor for the Second and Third Defendants:	Ashurst Australia
Counsel for the Fourth and Fifth Defendants:	Mr M Darke SC with Mr G Ng
Solicitor for the Fourth and Fifth Defendants:	YPOL Lawyers

ORDERS

		NSD 555 of 2019
BETWEEN:	KTC Plaintiff
AND:	RODRIC DAVID First Defendant ; NAVEEN DAVID SINGH Second Defendant ; XALT PTY LTD ACN 147 571 033 (and others named in the Schedule) Third Defendant

JUDGE:	PERRAM J
DATE OF ORDER:	24 September 2019

THE COURT ORDERS THAT:

1. The plaintiff’s interlocutory application of 26 April 2019 be dismissed.

2. Costs be reserved.

3. The plaintiff file and serve any final application for leave to amend by 5 November 2019.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

Introduction

1. The plaintiff, KTC, seeks leave to file and serve a further amended statement of claim. This is opposed by the fourth defendant, the law firm comprising partners trading under the business name Gilbert + Tobin (‘G+T’) and the fifth defendant, Mr Bullock, who was at the times relevant to this litigation, but no longer is, a partner of that firm. Where I refer in these reasons to G+T, it should be taken to include Mr Bullock unless otherwise indicated.

2. The case pleaded against G+T is said to lie under the second limb of the so-called rule in Barnes v Addy(1874) LR 9 Ch App 244 (‘Barnes v Addy’). A previous attempt to plead such a case was struck out by Kunc J in the Supreme Court of New South Wales before that proceeding was transferred to this Court: KTC v David (No 1) [2019] NSWSC 281 (‘KTC (No 1)’). At that time leave to replead was granted. It is the adequacy of that repleading which now falls to be determined.

3. The proposed further amended statement claim was annexed to the interlocutory application filed by KTC on 26 April 2019. Before turning to the particular pleading problems, it is useful to explain the detailed allegations made in it.

Background to the dispute as pleaded

4. In around mid-2008, Charif and Tarek Kazal (‘the Kazals’) entered into a joint venture with the first defendant, Rodric David, in which they would each have respectively a 50% interest. The purpose of the joint venture was to invest in businesses with a particular focus either on businesses located in the United Arab Emirates and/or engaging in waste management and disposal. Mr David was to act as the manager of the joint venture. The joint venture vehicle was to be a Cayman Islands company, Emergent Capital Limited (‘Emergent’). The Kazals held their interest in the joint venture vehicle through their entity, the present plaintiff KTC, and Mr David held his through his entity RAAL Limited (‘RAAL’). KTC alleges that there was a joint venture agreement but this is not alleged to have been in writing. A number of terms are alleged in this agreement including that the Kazals and Mr David would be equally represented on the board of Emergent and that Mr David (and RAAL) would provide services to Emergent as necessary for its day to day operations.

5. It is then alleged that the joint venture vehicle Emergent invested in another joint venture with an Abu Dhabi developer. Ultimately, this investment was conducted through an entity called IPS (International Property Services) Limited. Emergent also invested in a waste management facility at Eastern Creek in Sydney (‘the Waste Facility’). It is alleged by KTC that it was Mr David who managed Emergent’s interests in these two businesses.

6. Originally, the directors of Emergent were Mr David on the one hand and the Kazals on the other. However, the Kazals between them had only one vote. Mr David acted as chairperson and also as chief executive officer. KTC and RAAL held the equity in Emergent in equal shares.

7. Returning then to the Waste Facility, it is alleged that in August 2008 the Kazals and Mr David identified it as a suitable investment. At that time, that business was being conducted by several entities all ultimately owned by Global Renewables Australia Pty Limited (‘GRA’). Its managing director was Mr Singh, the second defendant to this proceeding. The pleading does not spell this out but there appears to have been a business proposal between Mr Singh and Mr David for Emergent and Mr Singh to form an entity to acquire GRA. This entity was known as Global Renewables Limited (‘GRL’). GRL was owned as to 80% by Emergent and as to 20% by Mr Singh’s vehicle, Singh Investments Pty Limited (‘SIL’). GRL acquired all of the shares in GRA on or about 21 January 2009 for $1. Although the pleading does not appear to allege this, there is material which suggests that GRL also took over GRA’s debt to the...