Teakle Property Australia v Business Initiatives Pty Ltd

• Jurisdiction: Australia Federal only
• Judgment Date: 22 January 2021
• Neutral Citation: [2021] FCA 13
• Court: Federal Court
• Date: 22 January 2021

Federal Court of Australia

Teakle Property Australia v Business Initiatives Pty Ltd [2021] FCA 13

File number:	SAD 101 of 2020
Judgment of:	CHARLESWORTH J
Date of judgment:	22 January 2021
Catchwords:	PRACTICE AND PROCEDURE – pleadings – application for leave to amend statement of claim – alleged accessorial liability of respondents under the second limb recognised in Barnes v Addy (1874) LR 9 Ch App 244 – requirements of pleadings in cases alleging fraud or other serious misconduct – whether proposed pleading speculative in relation to the respondents’ alleged states of mind – whether proposed pleading alleges states of mind recognised under Australian law as sufficient to found liability for knowing assistance in a dishonest design – proposed amendments disallowed in part
Legislation:	Corporations Act 2001 (Cth) s 1041H Federal Court of Australia Act 1976 (Cth) s 37M Federal Court Rules 2011 (Cth) rr 7.23, 16.02, 16.42, 16.43
Cases cited:	Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd [2020] SASC 161 Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (No 2) [2017] FCA 393 Australian Securities and Investments Commission v Cassimatis (No 2)[2013] FCA 1008; 96 ACSR 272 Baden v Société Générale pour Faouriser le Developpment du Commerce et de L’Indsutrie en France SA[1993] 1 WLR 509 Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82 Barnes v Addy(1874) LR 9 Ch App 244 BCI Media Group Pty Ltd v Corelogic Australia Pty Ltd[2020] FCA 1556 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Dare v Pulham(1982) 148 CLR 658 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 ; Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486 Grimaldi v Chameleon Mining NL (No 2)(2012) 200 FCR 296 Objectivision Pty Ltd v Visionsearch Pty Ltd [2014] FCA 1087; 108 IPR 244 Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (2017) 257 FCR 62 The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; 225 FLR 1 Webster (Trustee) v Murray Goulburn Co-operative Co. Ltd (No 2) [2017] FCA 1260 Young Investments Group Pty Ltd v Mann (2012) 293 ALR 537
Division:	General Division
Registry:	South Australia
National Practice Area:	Commercial and Corporations
Sub-area:	Regulator and Consumer Protection
Number of paragraphs:	60
Date of hearing:	23 December 2020
Counsel for the Applicants:	Mr B Roberts QC
Solicitor for the Applicants:	Charlton Rowley
Counsel for the Respondents:	Mr P Bullock
Solicitor for the Respondents:	CPC Lawyers

ORDERS

		SAD 101 of 2020
BETWEEN:	TEAKLE PROPERTY AUSTRALIA ACN 609 456 840 First Applicant ; RG TEAKLE PTY LTD ACN 007 649 701 Second Applicant
AND:	BUSINESS INITIATIVES PTY LTD ACN 007 938 650 First Respondent ; MATTHEW WHITE Second Respondent

order made by:	CHARLESWORTH J
DATE OF ORDER:	22 JANUARY 2021

THE COURT ORDERS THAT:

1. The name of the first applicant be amended to include “Pty Ltd” following “Teakle Property Australia”.

2. The applicants have leave to file and serve an amended statement of claim in the form of the proposed pleading comprising annexure LJCR-2 to the affidavit of Luke John Charlton Rowley sworn on 23 December 2020, provided that:

   1. in proposed [23.1], the cross-references to [10C] and [10D] are to be deleted;

   2. the allegation of knowledge in proposed [24] is to be confined to the categories of knowledge alleged at [24.2.4]; and

   3. there be strictly consequential amendments to the numbering and wording of proposed [24.2.4] to reflect the deletion of the remainder of [24].

3. The amended statement of claim be filed and served on or before 25 January 2021.

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

REASONS FOR JUDGMENT

CHARLESWORTH J:

1. In this proceeding, the two applicant companies (together, the Teakle companies) claim that they each invested $500,000.00 in what they expected would culminate in a shopping centre development in the northern suburbs of Adelaide (the project). For their investment, the Teakle companies each received 500 units in a Trust. The corporate Trustee of the Trust is one of a number of companies in what is referred to as the Vidale Group.

2. Among other things, the applicants allege that their investments have been lost by virtue of what they say was a fraudulent design devised and conducted by the Trustee and its director, Mr Michael Vidale. The Trustee is not joined as a respondent. Nor is Mr Vidale. In these reasons they will be referred to together as the non-parties.

3. The first respondent, Business Initiatives Pty Ltd provided accounting services to companies in the Vidale Group in relation to the project, including the Trustee. Its sole director is the second respondent, Mr Matthew White.

4. The applicants apply for leave to file and serve an amended statement of claim in the form annexed to an affidavit of their instructing solicitor sworn on 23 December 2020 (the proposed pleading). Paragraph 22 of the proposed pleading alleges a dishonest design by the non-parties to procure money from investors to fund one or more members of the Vidale Group for purposes that were not related to the project, and in circumstances where the Trustee was not (at the time of the investments) “intending, or alternatively not in a position, to proceed with” the development of the project.

5. Paragraph 23 of the proposed pleading alleges that the respondents knowingly participated in that fraudulent and dishonest design and so is an attempt to allege a form of accessorial liability in equity commonly referred to as the second limb in Barnes v Addy(1874) LR 9 Ch App 244.

6. The respondents oppose the grant of leave to file the proposed pleading to the extent that it contains the plea at [23] and a related plea at [24] concerning their alleged states of mind.

7. For the reasons given below, I have concluded that those paragraphs are defective in part. The Teakle companies should be granted leave to file the proposed pleading, excluding the affected parts.

Liability under Barnes v Addy

8. In Barnes v Addy, Lord Selbourne explained the bases upon which the agent of a trustee may be liable for the trustee’s defaults (at 251 – 252) as follows:

Those who create a trust clothe the trustee with the legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some...