KTC v David (Summary Dismissal)

• Jurisdiction: Australia Federal only
• Judge: PERRAM J
• Judgment Date: 17 July 2020
• Neutral Citation: [2020] FCA 1012
• Date: 17 July 2020
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

KTC v David (Summary Dismissal) [2020] FCA 1012

File number:	NSD 555 of 2019
Judge:	PERRAM J
Date of judgment:	17 July 2020
Catchwords:	PRACTICE AND PROCEDURE – application for leave to file and serve further amended statement of claim – where proposed pleading is third attempt against Fourth and Fifth Defendants – 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(1)(d)
Cases cited:	KTC v David (Pleadings)[2019] FCA 1566 KTC v Singh [2018] NSWSC 1510
Date of hearing:	20 December 2019
Date of last submissions:	12 February 2020 (Plaintiff)
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	43
Counsel for the Plaintiff:	Mr P Collinson QC with Ms M Loughnan QC
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 Second and Third Defendants:	Ashurst Australia
Counsel for the Fourth and Fifth Defendants:	Mr A J L Bannon SC with Mr G E S Ng
Solicitor for 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:	17 July 2020

THE COURT ORDERS THAT:

1. The Plaintiff’s interlocutory application of 5 November 2019 be dismissed.

2. The Plaintiff pay the Fourth and Fifth Defendants’ costs as taxed, agreed or assessed.

3. The proceeding against the Fourth and Fifth Defendants be dismissed.

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

REASONS FOR JUDGMENT

PERRAM J:

1. The Plaintiff applies for leave to file a further amended statement of claim. The proposed further amended statement of claim was Exhibit 1 on the application. On 24 September 2019 I dismissed an earlier application by the Plaintiff to file a further amended statement of claim on the basis that the proposed pleading was not adequate. Since there appeared to me that there might be a case secreted somewhere inside the earlier pleading I granted the Plaintiff a further opportunity to put the pleading in order. The present application is the result of that attempt.

2. The background to the case appears in the earlier judgment and need not be repeated here: KTC v David (Pleadings)[2019] FCA 1566 (‘First Reasons’). These reasons assume a working familiarity with the First Reasons. A description of the transactions leading to the present litigation appears in the First Reasons at [4]-[12] and the broad structure of the predecessor pleading at [13]-[16].

3. The most recent application to amend was opposed substantively, as it was on the last occasion, by Gilbert + Tobin (‘G+T’). Throughout these reasons references to G+T should be taken to include Mr Bullock. There are three broad topics:

1. Whether, as against G+T, the David GRL Share Conduct and the RAAL GRL Share Conduct have been adequately pleaded;

2. Whether, as against G+T, the David ECL Share Conduct and the RAAL ECL Share Conduct have been adequately pleaded; and

3. Whether, as against G+T, the RAAL and David Constructive Trust Fraudulent Scheme have been adequately pleaded.

4. These dense expressions are defined terms in the pleading now under consideration. Some light is thrown on them in what follows.

5. In relation to each of the topics G+T submits that if Exhibit 1 were a filed pleading then the allegations it contains against G+T would be struck out so that leave should not be granted to amend. For the reasons which follow, I agree.

Issues Relating to GRL AND ECL SHARE CONDUCT

6. According to Exhibit 1, GRL is a company registered pursuant to the law of the Cayman Islands (§17(a)). Initially it had two shareholders, the joint venture vehicle Emergent (80 shares) and Mr Singh’s company, SIL (20 shares) (§17(b)). On or about 21 January 2009 GRL acquired all of the share capital in GRA (§17(e)). GRA was the holding company of a group of companies which owned and operated the Eastern Creek waste management facility in Sydney (§14). As at 21 January 2009 the joint venture vehicle Emergent was equally held by the Kazals (through their vehicle KTC) and Mr David (through his vehicle RAAL) (§13(b)).

7. On 22 April 2010 the directors of GRL (being Mr Singh and Mr David) resolved to issue 60 ordinary shares in GRL to SIL (§41) (‘the GRL Share Resolution’). The shares were issued on 30 July 2010. On 23 April 2010 Emergent and SIL entered into a shareholders’ agreement. The basic allegation KTC makes against Mr David and Mr Singh is that these GRL shares were allotted for no consideration (§44). It is then said that the transaction diluted Emergent’s interest in GRL (and consequently Emergent’s interest in the waste management facility) from 80% to 50% thereby divesting Emergent of a 30% interest (§46). In effect the 80:20 joint venture between the Kazals and Mr David, on the one hand, and Mr Singh, on the other, became a 50:50 joint venture.

8. Because Mr David is the owner of RAAL the pleading makes parallel allegations against the entity which are structurally identical. Except where the context otherwise demands, I will dispense with any further reference to RAAL as the analysis for present purposes is the same as that which obtains in the case of Mr David.

9. The pleading alleges that Mr David’s role in procuring the issue of the 60 ordinary shares in GRL to Mr Singh’s company SIL was a breach of fiduciary duty which constituted a fraudulent and dishonest scheme (§§78, 82). That fiduciary duty is alleged to have been owed to KTC (§18). Relief is sought against Mr Singh (and a company associated with him XALT Pty Ltd), Mr David and G+T. In the case of Mr Singh relief is sought on the basis that he knowingly assisted in Mr David’s fraudulent and dishonest scheme (§§65, 87, 88). His company XALT Pty Ltd is said to be liable as a knowing recipient in relation to certain funds (§§90-96).

10. In relation to G+T the case is that it knew that it was engaged in conduct to further Mr David’s dishonest breach of fiduciary duty in causing GRL to issue the 60 shares to SIL (§99). That allegation is linked back to §§74, 75 and 76. §74 concerns allegations of the knowledge of Mr Bullock and §75 and §76 allege that this knowledge had certain qualities. One...