Supreme Court New South Wales

• Medium Neutral Citation: In the matter of Joe & Joe Developments Pty Limited [2013] NSWSC 1984
• Hearing dates: 4 November 2013
• Decision date: 04 November 2013
• Jurisdiction: Equity Division - Corporations List
• Before: Brereton J

Decision

Grant leave to amend Points of Claim. Direct service of Defence. Costs of interlocutory process to be costs in the proceedings.

• Catchwords: CORPORATIONS - Application for declaratory relief under (Cth) Corporations Act 2001 s 447E - Interlocutory application to amend points of claim - Application granted in part.
• Legislation Cited: (Cth) Corporations Act 2001 s 447E
• Category: Interlocutory applications
• Parties: Tony Elias (first plaintiff); Kelly Elias (second plaintiff); George Elias (third plaintiff); Emily Elias (fourth plaintiff); Blair Pleash (first defendant); Richard Albarran (second defendant); Joe & Joe Development Pty Ltd (third defendant)
• Representation: Counsel: R D Marshall (plaintiffs); A W Smith (defendants); Solicitors: Marsdens Law Group (plaintiffs); Hicksons (defendants)
• File Number(s): 2012/322387

Judgment - EX TEMPORE

1 HIS HONOUR: By interlocutory process filed by leave of the Court on 28 October 2013, the plaintiffs Emily Elias, Kelly Elias, Tony Elias and George Elias seek leave to amend their points of claim filed in the proceedings in accordance with draft amended points of claim attached to the interlocutory process, and consequential directions that the defendants Richard Albarran and Blair Pleash, Administrators of a Deed of Company Arrangement of the third defendant Joe & Joe Developments Pty Ltd, file and serve points of defence. The dispute about the proposed amendment is limited, and largely reflects issues taken by the defendants' solicitors in a letter of 24 October 2013.

2 The first paragraphs in issue are 51A and 51B of the proposed amended points of claim, which are as follows:

51A The first and second defendants permitted the Kossaifi family to retain $122,000.00 from the $372,000.00 advanced by the ANZ Bank to the Kossaifi family which advance was secured by the first registered mortgage granted to the ANZ Bank by the Kossaifi family over the title to Lot 4 SP78565.

51B The transactions pleaded in paragraphs 49 to 51A were:

a) carried out without the consent or knowledge of the plaintiffs.

b) Not disclosed by the first and second defendants to the plaintiffs.

3 On the one hand, those paragraphs must be seen in the context of what preceded them. Paragraphs 45 through 48 have the effect of pleading that in order to procure the transfer for their benefit of lot 6, the Elias family was required to pay into the Deed Fund the total proceeds of its sale being $640,000, whereas practically contemporaneously in order to procure the transfer for their benefit of lot 4, the Kossaifi family was required to pay into the Deed Fund only $250,000.

4 It is difficult to see that paragraph 51A actually adds anything to that allegation. In so far as it alleges that the first and second defendants "permitted" the Kossaifi family to retain $122,000 from the advance, it assumes knowledge on the part of the first and second defendants to the mortgage and the advance. An allegation that they were aware of the mortgage is implicit in paragraph 50 subparagraph (c) and on that basis it seems to me that the complaint that there was no sufficient allegation of knowledge on the part of the first defendant is not sustained. Although I retain reservations as to the utility of paragraph 51A, which is not otherwise objected to, I propose to allow it.

5 So far as paragraph 51B is concerned, I do not read into the complaint that the transactions were "without the consent" of the plaintiffs an allegation that there was necessarily any obligation to obtain that consent. It amounts simply to an allegation that consent was not given. I will allow paragraph 51B.

6 I turn then to paragraph 74I, subparagraph (e) of which complains that:

Etienne Lawyers rendered tax invoices on the third defendant that: ...

(e) made itemised charges that are apparently excessive [emphasis added]

and then goes on to specify some instances of that alleged apparent excess. This appears in the context of paragraph 74E, which complains that the defendants did not check the tax invoices, 74G, which complains that the defendants did not challenge or object to them; and 74H, which complains that the defendants paid them.

7 Although counsel for the defendants objected that an allegation that itemised charges were apparently excessive did not found any cause of action and that only an allegation that they were in fact excessive would do so, this misconceives the role of this aspect of the pleading. The complaint is, in a nutshell, that in the face of charges that were apparently or manifestly or self-evidently or overtly excessive, the defendants none the less paid them without checking or querying them. The importance of the word "apparently" is to charge the defendants with paying invoices which called for scrutiny before they were approved for payment. On that basis the pleading is perfectly permissible in that respect.

8 Paragraph 74I(f) alleges that the tax invoices rendered on the third defendant:

Claimed a total of over $730,000.00, which was invoiced by Etienne Lawyers to the third defendant for work claimed to have been done from March 2009 to [2012?] which, at the rate claimed of $450.00 to $550.00 per hour for solicitors' work, represents a claim made for over 1600 hours' worth of solicitors' work (or over 47 weeks working five days a week, seven hours a day).

9 Again, the purpose of that pleading is to demonstrate that the tax invoices called for scrutiny on their face because of the total amount that they claimed in the context. On that basis, that paragraph is I think permissible.

10 The first paragraph 74J is as follows:

A fair and reasonable amount to charge the third defendant for the legal work claimed to have been done by Etienne Lawyers and invoiced to the third plaintiff is about $127,000.00 plus GST.

11 The objection is that this does not contain a statement of the material facts on which the conclusion is based but merely states a conclusion and is vague, embarrassing and liable to be struck out. It is true that the paragraph states a conclusion. That is what pleadings normally do. That is no objection to it. It is true that it can be criticised for not stating the whole of the underlying material facts that explains how the $127,000 is reached, but it is clear in context that it is based on the expert report served by the plaintiffs of John Woodward of 1 August 2013 who concludes in paragraph 9.1:

The legal fees which I have estimated to have accrued properly and reasonably in relation to the work I have described in this report amount to $127,000.

12 Examination of Mr Woodward's report reveals how that sum of $127,000 was calculated. It is beside the point that Mr Woodward then goes on to allow that more could have been charged having regard to disbursements for counsel's fees and experts' reports and inefficiencies of the kind sometimes injected into this kind of matter. How the $127,000 is comprised can reasonably be ascertained from Mr Turnbull's report. There is no sustainable objection to that paragraph. If, ultimately, the expert report does not make good the allegation, that means it will not be proved if it has to be proved, but the content of the allegation is sufficiently particularised having regard to the expert report as not to render it amenable to being struck out.

13 So far as the second paragraph 74J is concerned, the central complaint there is that in subparagraph (b) it is alleged that the defendants paid the invoices without caring whether the lawyers had performed the relevant work, charged excessively or charged a fair and reasonable amount, which in subparagraph (c) they had done so without "controlling" their expenditure on legal fees.

14 So far as without "caring" is concerned, the defendants' complaint is that the allegation that this was done without caring is vague, embarrassing and liable to be struck out in that particulars of the alleged condition of the minds of the defendants including knowledge and notice is not pleaded. To the contrary, it seems to me that the knowledge or notice is pleaded in paragraph 74I, and in that setting there is no basis for the complaint about the allegation concerning without "caring".

15 The allegation about without "controlling" in paragraph 74J(c) is rather different. Normally, an allegation of uncontrolled legal expenditure would involve instructing or authorising work to be done without putting any control on the work to be done, rather than on monitoring the payment of invoices rendered. If the invoices have not been checked with care or were not due and payable, it does not seem to me that an allegation that expenditure was not controlled adds anything in that context. The concept of without "controlling" is, it seems to me, vague, and I do not propose to allow 74J(c).

16 Paragraph 74P is in similar terms in respect of expenditure on another consultant. For the same reasons, I will not allow 74P(c), which is relevantly in identical terms 74J(c).

17 Paragraph 74Q pleads the conclusion that the defendants have managed the third defendant's affairs in a manner prejudicial to the interests of its creditors and members or committed acts or omissions prejudicial to the interests of the creditors and members. That is a pleading in terms of the statute intended to represent a conclusion from the preceding pleaded facts. The chapeau to the paragraph expressly refers to the facts and matters pleaded in paragraphs 74(a) and 74Q. In those circumstances it plainly pleads the material facts that are said to support the conclusion and there is no tenable objection to 74Q.

18 I grant leave to the plaintiff to amend its points of claim by filing amended points of claim in the form attached to the interlocutory process and marked A, subject to the omission there from of paragraph 74J(c) and 74P(c).

19 I direct that the defendants serve their defence to the amended points of claim within 21 days.

20 On the one hand the plaintiff has had to seek leave to amend, which normally requires that the plaintiff pay the defendant's costs. On the other, most of the objections to the amendments have been close to untenable. Costs of the interlocutory process will be costs in the proceedings.

21 I adjourn the proceedings to 2 December 2013 at 10am in the Corporation Judge directions list.

22 I grant liberty to apply by arrangement with my Associate on three days notice.

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Decision last updated: 16 April 2014