FEDERAL COURT OF AUSTRALIA

Seaman v Silvia [2018] FCA 97

ORDERS

THE COURT ORDERS THAT:

1.    The application dated 14 November 2017 for leave to file and serve a further amended Originating Application and a further amended Statement of Claim be dismissed.

2.    The parties are to be heard on the question of costs.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    By the application before the Court, Mr Joshua Seaman (Mr Seaman) is making a fifth attempt to plead his case against the respondents. The previous four attempts have been unsuccessful and, unfortunately for Mr Seaman, this recent attempt also fails. As these reasons demonstrate, it is unlikely that he has any valid cause of action but if he does his legal representatives are unable to articulate it in an appropriate manner and form.

2    The formal application is for leave to file and serve a further amended Originating Application and a further amended Statement of Claim (the “new Statement of Claim”). For the reasons set out herein the application must be dismissed.

The procedural background

3    Mr Seaman commenced these proceedings on 14 June 2017 with the issuing of an Originating Application together with a Statement of Claim. To date the respondents have not been required to file a Defence as Mr Seaman has encountered numerous impediments to successfully agitating his claim in a comprehensible pleading. The following steps have occurred:

(a)    On 14 June 2017, the initial Statement of Claim was filed along with the claim.

(b)    On 22 June 2017, leave was sought to file a further Statement of Claim although the document then proffered required some alterations.

(c)    On 4 August 2017, the applicant filed a second Statement of Claim. However it attracted an application in September 2017 to strike it out.

(d)    On 10 November 2017, Mr Seaman produced a new pleading by which he hoped to meet the complaints which underpinned the strike out application.

(e)    On 17 November 2017, the strike out application was heard. Ultimately it did not proceed to judgment because Mr Seaman applied to replead the Statement of Claim.

(f)    On 20 December 2017, a new pleading was produced for the purposes of the adjourned strike out application. However, it too was deficient and the application was again adjourned to allow the applicant a further attempt to replead.

(g)    This application, made on 9 February 2018, is for leave to replead. The iteration of the pleading which is advanced as the Second Further Amended Statement of Claim is the fifth iteration of the pleading.

The substance of the claim

4    Mr Seaman is a director of a company previously named “Private Health Clubs Pty Ltd” (the Company). The only other director of that company is a Ms Leanne Taratoris (Ms Taratoris). They were equal shareholders in the Company and the only shareholders. The Company conducted the business of a fitness studio or gymnasium from premises which it leased in Neutral Bay, NSW. In or around 30 March 2016, Mr Seaman was temporarily overseas. Ms Taratoris was conducting the Company’s business. It appears that the landlord of the leased premises required the Company to comply with the terms of its lease by replacing a bank guarantee which it had previously given to secure its lease obligations and which had then been called upon. It appears that Ms Taratoris was not prepared to contribute further money to the company as she was then its largest creditor. She has claimed that Mr Seaman would not respond to her attempts to contact him about that issue. She contacted Mr Geoffrey Granger, an insolvency professional, to assist her in relation to the Company’s financial problems. By a purported resolution on 30 March 2016, the Company appointed Mr Granger and Mr Silvia as its administrators. That resolution was invalid as the meeting at which it was passed required the attendance of both directors and Mr Seaman was absent. The appointment was subsequently validated by an order of this Court on 6 May 2016 (see Granger v A.C.N 165 098 617 Pty Ltd [2016] FCA 474). In previous iterations of his Statement of Claim in this matter Mr Seaman has sought to go behind that decision, albeit made with his consent, although he does not attempt to do so in the present version of the pleading.

5    During the course of the administration, Mr Seaman returned from overseas and had various discussions with the administrators. No Deed of Company Arrangement was offered by any party and at the second meeting of creditors on 6 May 2016, the creditors voted unanimously to put the Company into liquidation. It is noted that Mr Seaman was a major creditor of the Company as was Ms Taratoris. They each voted in favour of the Company’s liquidation.

6    The gravamen of Mr Seaman’s complaints as against the erstwhile administrators is to the effect that they conducted the administration inadequately in various respects. A significant part of this allegation is that the administrators discharged the claims of some of the Company’s creditors during the course of the administration. Although it is not entirely clear, it seems that the complaint is that those creditors’ debts were paid prior to the last day for their payment. Mr Seaman also claims that the administrators operated the Company in a way which caused it to suffer losses. These complaints include allegations of a failure to undertake an advertising campaign and a failure to increase the cost of membership subscriptions. Additional allegations concern the making of alleged misrepresentations in the 439A report provided by the administrators to the second meeting of creditors.

7    In essence Mr Seaman claims that if the administration was conducted “properly” the Company would have been found to be solvent, would have been handed back to the directors, and would have proceeded to become a profitable enterprise from which Mr Seaman would have substantially benefitted. He claims the loss of that benefit or the opportunity to obtain that benefit as damages.

8    Some important aspects of the circumstances of this matter must be kept in mind. First, that the Company was a trustee of a trust, being the PHC Business Trust, with the result that various trust duties and obligations overlay the Company’s right to the assets of the business. Second, the liquidators of the Company have not considered it appropriate to pursue the erstwhile administrators in relation to the matters alleged in the new Statement of Claim. Third, Mr Seaman claims that he is entitled to bring this action in his own capacity, as a shareholder of the Company, as a former director of the Company and as a creditor of the Company. He also claims to be a “person” within s 1324(10) of the Corporations Act 2001 (Cth) who has been affected in relation to the affairs of the Company and he also claims to bring the action as trustee of the PHC Business Trust.

9    In relation to the last mentioned matter it is alleged that Mr Seaman was recently appointed as the trustee of the PHC Business Trust in lieu of the Company. It seems that for this reason Mr Seaman has considered it necessary to set out large parts of the relevant trust deed in the new Statement of Claim although their relevance to the claims made is not explained. Also included in the pleading is an allegation at paragraph 15(a) that the Company did not have any beneficial interest in the trust assets save to the extent to which it was entitled to indemnity from out of the trust assets. Whilst such a proposition is not usually contentious, it is not immediately clear why that allegation is relevant to the presently pursued causes of action. It might be a vestige of some of the previous forms of the statement of claim wherein it was inaccurately asserted that the administrators had no right to deal with the Company’s business or assets of the business because they were held on trust.

10    It should be observed that the Company’s status as a trustee may have little relevance given the circumstances of this case. It only engaged in the business of being the trustee of the trust such that all assets and liabilities were trust related. In this respect, in the 439A report to creditors which is dated 28 April 2016, Mr Silvia and Mr Granger identified an estimated deficiency in assets over liabilities of $769,812. It follows that the trust liabilities exceed the assets held on trust by that amount. Necessarily it follows that the Company’s right of indemnity is, prima facie, far greater than the assets to which it might have recourse. That being so, there seems to be no beneficial interest in any of the assets held on the terms of the trust which might be claimed by the beneficiaries. I should add that the 439A report does not mention any causes of action which might exist against the administrators nor identify them as assets of the trust.

Principles for granting leave to amend the statement of claim

11    In the ordinary course, and subject to the application of case management principles, leave will be given to allow an amendment to be made to a pleading if it is shown that an arguable case has been raised by the proposed amendment. The converse of that is that leave will be refused if the proposed amendments are futile such that the causes of action sought to be added are unlikely to succeed or they are likely to be struck out (see Research in Motion Ltd & Anor v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at 69, 70, [21]–[22]; QS Holdings SARL & Ors v Paul’s Retail Pty Ltd (ACN 114 419 242) (2011) 92 IPR 460 at 493, [120]). In that way the Court commences with the prima facie proposition that all amendments ought to be allowed which will enable the real questions in controversy to be agitated at trial.

12    However, these general principles are also subject to the considerations arising from case management objectives which require the avoidance of wasted costs and delay as well as the promotion of the efficient and cost effective disposition of matters (see AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175).

13    In this matter it is apparent that Mr Seaman’s claims are without merit and leave should not be given for that reason alone. In that sense the discretionary stage of the determination of the application has not been reached. However, if that stage had been reached an important consideration would be that the manner in which the new Statement of Claim is pleaded is inadequate in the sense that insufficient material facts are alleged to enable the respondents to know the real case which they would have to meet. For that reason also it would be inappropriate to give leave to file the proposed pleading and that is especially so, given that the respondents have been required to confront four earlier iterations which were equally inadequate. It follows that even were Mr Seaman able to identify some semblance of an arguable case, given the serious infelicities in the pleading, I would not have exercised the discretion to allow it to be filed.

Standing

14    The respondents submit with some force that there is confusion in the pleading by the variety of capacities in which Mr Seaman purports to pursue the respondents. Despite the assertion of Mr Seaman that he pursues the actions in a variety of capacities, he does not attempt to identify which causes of action are pursued in which capacity. Where an applicant sues in differing and divergent capacities one would expect an indication in the pleading as to how the causes of action variously vest in them. Additionally, where it is alleged that duties of care and the like are owed to the applicant in the various capacities it is a necessary part of a valid pleading that facts are alleged to disclose how the duties are owed in each respect. That is an indispensable requirement where, as in this case, Mr Seaman asserts that the same duty is owed to him in all his capacities even though some of those capacities are divergent. Similar issues arise when allegations of causation of loss and damage are made. Here, the pleader has not been concerned with such obligations.

Standing as a trustee

15    The new Statement of Claim recognises that the PHC Business Trust, of which the Company was the trustee, had as its main asset the business of the gymnasium along with various items of plant and equipment. At paragraphs 13 and 14 of the new Statement of Claim it is alleged that by a deed the Company was removed as trustee and Mr Seaman was appointed as the new trustee. From that allegation it appears that Mr Seaman claims to be entitled to pursue the various actions against the administrators on the basis that the Company’s causes of action against them vested in him. Whilst that is not spelled out in any clear way in the pleading, it is how the matter was advanced during the course of oral argument. In other words, the assertion is that the Company’s causes of action against the administrators automatically vested in him on his appointment as trustee. That proposition is misconceived in the circumstances of the present case.

16    The deed establishing the PHC Business Trust identifies that it is established under the laws of Queensland with the result that it is subject to the Trusts Act 1973 (Qld). Section 15 of that Act has the effect that some trust property vests in a newly appointed trustee by reason of the instrument of appointment. However, it does not cause all trust property to vest in that manner. The section reads as follows:

15     Vesting of trust property in new and continuing trustees

(1)     Where a new trustee is appointed the instrument of appointment vests, subject to the provisions of any other Act, the trust property in the persons who become and are the trustees as joint tenants without any conveyance, transfer or assignment.

17    The expression “subject to the provisions of any other Act” has the effect that where there exists other statutory provisions controlling the conveyance, transfer or assignment of trust property, the requirements of those provisions must be satisfied for trust property to pass. In relation to the assignment of causes of action, those other provisions would include s 199 of the Property Law Act 1974 (Qld) (the PLA) which provides:

199    Statutory assignments of things in action

(1)    Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice –

    (a)    the legal right to such debt or thing in action; and

    (b)    all legal and other remedies for the same; and

(c)    the power to give a good discharge for the same without the concurrence of the assignor.

18    Each of the various causes of action which the applicant has attempted to articulate in the new Statement of Claim fall within the description of a “legal thing in action”. It cannot be suggested that the alleged assignment of the various choses in action to Mr Seaman is otherwise than an absolute assignment. It follows that compliance with s 199 is required for there to be an assignment of those causes of action and that necessitates the assignment in writing under the hand of the Company and the giving of express notice to the obligor.

19    The consequence is that, in order for Mr Seaman to pursue these causes of action in his capacity as trustee of the PHC Business Trust, he would have to plead, and ultimately establish, that there had been compliance with the requirements of s 199 of the PLA; namely that there was an assignment in writing and the giving of notice. These matters have not been alleged and nor have they been suggested in the course of argument. The result is that Mr Seaman cannot rely upon his appointment as the new trustee of the PHC Business Trust as affording him standing in relation to alleged causes of action which the Company may have had against the administrators.

20    In reaching the above conclusion I adopt the careful reasons and observations of McDonald J in the Supreme Court of Victoria in Innovateq Australia Pty Ltd (ATF The Innovateq Unit Trust) v Barnes [2017] VSC 16. In that case the plaintiff sought to pursue causes of action which had allegedly accrued to a corporate trustee in the course of its administration of a trust after which time the plaintiff was substituted as trustee of that trust. The defendants claimed that the plaintiff lacked standing to pursue the claims. The plaintiff asserted that the causes of action vested in him by reason of his appointment as the new trustee. The issue arose on an application for summary dismissal of the action. McDonald J (on appeal from Ierodiaconou AsJ) considered the operation and effect of the cognate provisions of s 15 of the Trusts Act and s 199 of the PLA. His Honour held that causes of action at law and in equity were within the description of “legal things in action”, that any absolute assignment of a thing in action can only occur in the manner prescribed by the equivalent of s 199 of the PLA and that the assignment of a cause of action which is held in trust is an absolute assignment. In the absence of any assignment in writing it followed that, in order for the new trustee to have standing, a vesting order relating to the various causes of action would have to have been made.

21    The reasoning of McDonald J in Innovateq Australia Pty Ltd v Barnes is applicable to the position in Queensland and should be followed. It is plainly correct. The various causes of action did not vest in Mr Seaman merely because he became the new trustee of the PHC business trust.

22    It might also be observed that whilst the pleading merely alleges that Mr Seaman succeeded the Company as trustee, there is no allegation that the effect of that was to vest causes of action in him. Equally there is no calling in aid of any provision of the Trusts Act or any other Act.

23    Although the above discussion proceeds upon the assumption that Mr Seaman is relying upon the vesting in him of various causes of action which had accrued to the Company, there are difficulties with the validity of that assumption. In particular, the allegations in the new Statement of Claim do not assert that the duties and obligations were owed by the administrators to the Company, were breached and that damage was sustained by the Company. They assert that the duties and obligations were owed to Mr Seaman and that as a result of their breach he has suffered loss and damage. That being so the allegations concerning the existence of the PHC Business Trust and Mr Seaman’s appointment as trustee are irrelevant and otiose.

24    If, as has been submitted in the course of this matter since the application was filed, the applicant is relying upon the vesting in him of causes of action which had previously accrued to the Company, the pleading is inadequate to sustain that proposition. However, it is not necessary to determine whether this failing justifies the refusal of leave as there are more serious and substantial matters which warrant the rejection of the new Statement of Claim.

Other capacities in which Mr Seaman pursues his claim

25    Otherwise Mr Seaman claims to pursue the various causes of action in his own capacity, as a shareholder, as a creditor, as a former director and as a person under s 1324(10) of the Corporations Act. Whilst these are discussed below, it is apparent that the pleading fails to identify any foundation on which Mr Seaman might successfully pursue these claims.

A difficulty with the pleading of causation

26    As mentioned above, Mr Seaman seeks to pursue certain actions against the administrators on the basis that, by their conduct, the Company which he claims was not insolvent became insolvent during the course of the administration and was wound up and that has caused him loss. The impugned conduct appears to fall into three major categories. They are:

(a)    Allegations that in the s 439A report, dated 28 April 2016, the administrators made misleading or deceptive comments to the effect that the Company was insolvent.

(b)    That between 30 March and 6 May 2016 (being the period of the administration) the administrators made payments of certain debts which were owed by the Company, but in respect of which the final date for payment had not expired. In other words, the claim appears to be that the debts were discharged before the expiration of the commercial terms on which they were payable.

(c)    That other alleged managerial negligence occurred in the relation to the management of the underlying gymnasium business. In particular allegations are made about the failure to pay wages, the failure to retain members, the failure to expend money on advertising and promotion, the failure to manage the business in a commercially viable manner and the failure to raise the subscription price of members.

27    I will return to the veracity of the pleading of these matters subsequently, however, for present purposes it is relevant to note paragraph 32 appears to be some form of allegation about the causal effect of the administrators’ conduct on the solvency of the Company. It reads:

As a result of the Misrepresentations, the Premature Payments and Managerial Negligence, and the first and second respondents’ conduct following their appointment, the first and second respondents caused the company to become insolvent.

28    As a pleading of causation that paragraph is woefully inadequate in any court, let alone a superior commercial court. It does not explain how the making of misrepresentations in the 439A report (made approximately a week before liquidators were appointed) caused the Company to be insolvent. The same can be said in relation to the allegations of managerial negligence and the premature payments. In the absence of any such pleaded facts the allegation in paragraph 32 is merely conclusory. In order to sustain it at trial a number of facts would need to be proved in order to establish the necessary causative link. In the absence of those facts being pleaded, the attempt to establish them at trial would necessarily take the respondents by surprise. That underscores the inadequacy of the pleading. It should be observed that in the course of his submissions Mr Henry for the applicant was not able to explain the causal nexus between the making of the alleged misrepresentations and the subsequent insolvency of the Company. That was disturbing as his name appears on the new Statement of Claim as being the person who settled it.

29    It should also be noted that the applicant’s inability to successfully plead facts sufficient to sustain an allegation of causation is not new in this case. A number of the earlier iterations of the pleading stumbled at the same hurdle, amongst others.

The negligence claim

30    The applicant’s negligence claim against the administrators is pleaded in the following manner:

NEGLIGENCE OF THE FIRST AND SECOND RESPONDENTS

33.    At all times material to this proceeding, the first respondent and the second respondents owed a duty of care to the applicant to act with reasonable care, skill and diligence in their provision of services in the administration of the company.

34.    It was reasonably foreseeable that if the first respondent and the second respondent failed in their duty of care towards the applicant that the applicant would suffer loss and damage.

35.    The first respondent and the second respondent breached their duty of care towards the applicant by engaging in the following conduct:

    a.    Making the Misrepresentations;

    b.    Managerial Negligence; and

    c.    Making the Premature Payments.

    (collectively hereinafter called “the Breaches”).

36.    As a result of the Breaches, the applicant has suffered loss and damage.

31    It is patent that the pleading of the duty of care in paragraph 33 is inadequate. As Brennan J (as his Honour then was) said in Sutherland Shire Council v Heyman & Anor (1985) 157 CLR 424 at 487:

[A] postulated duty of care must be stated in reference to the kind of damage that a plaintiff has suffered and in reference to the plaintiff or a class of which the plaintiff is a member.

32    A pleading which fails to plead the content of the duty of care owed is deficient (see Bankstown City Council v Zraika (2016) 94 NSWLR 159; Raging Thunder Pty Ltd v Bank of Western Australia Ltd [2012] QSC 329, [119]; Garzo v Liverpool/Campbell Christian School Ltd [2011] NSWSC 292; Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026). In this case, the content of the duty of care is not identified nor is the type of harm which might be suffered identified. Whilst it may be that in some cases the content of a duty of care will be apparent from the circumstances or allegations of breach, that is not the position here and the respondents are entitled to know the case they have to meet. Here, where Mr Seaman brings his action against the administrators of the Company in a number of disparate capacities, the identification of the content of the duty of care allegedly owed to him in each capacity is an essential requirement and an important part of any cause of action. It is beyond doubt that the existence and scope of any common law duty of care owed by an administrator to creditors, shareholders or directors would be a contentious part of any asserted cause of action. That is particularly so, given the existence of the comprehensive nature of the obligations binding administrators in the performance of their duties, which are only statutory. It follows that such a complex and crucial allegation cannot be glossed over by mere generalised assertions of the existence of the duty. In this case that issue is even more accentuated because Mr Seaman claims to pursue the administrators in a variety of capacities. As the interests of creditors being paid their debt and the interests of shareholders recovering the value of any residue in the Company or having it enter into a DOCA are divergent interests, if such duties of care existed they would be inconsistent vis-à-vis those different groups. An exception might arise in relation to the realisation of assets where a statutory duty exists to obtain their market value, however those circumstances do not exist in the present matter (see Mills v Sheahan (2007) 99 SASR 357). It sufficies to identify that the pleading of the alleged duty of care is deficient because it neither identifies the content of the duty, nor the type of loss which the administrators were to prevent.

33    As Mr Henry for the applicant acknowledged in the course of his submissions, the claim being made by Mr Seaman is one for pure economic loss. It is now well established that liability for unintentionally inflicted economic loss arises only in particular circumstances. In Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102, Allsop P (Beazley and McColl JJA agreeing) identified a number of the salient features which must necessarily exist for there to be a sufficiently close relationship that gives rise to a duty of care to prevent economic loss. Of those the most important feature is “vulnerability”. The proposed new Statement of Claim is devoid of any allegations which might give rise to the matters from which such a close relationship might be discerned. It is not a pleading which can sustain a claim for pure economic loss.

34    During the course of his submissions Mr Henry submitted that relatively minor amendments might be made to the new Statement of Claim so as to render it acceptable. He says that the relief sought in the application is that the applicant be permitted to file a pleading substantially in the form of the new Statement of Claim. He submitted that the document which would be filed if the application were successful would include several amendments arising out of the respondents submissions and the deficiencies now recognised. Two things might be said about that. First, given that this is the fifth occasion on which the applicant has attempted to plead its claim, it would exceed the bounds of reasonableness to accede to the filing of a further document which is presently unseen. It cannot be overlooked that the respondents have already expended substantial costs in having to deal with numerous and varied iterations of the Statement of Claim which have been advanced to date. Second, to complete the requirements necessary for the pleading of a proper cause of action in negligence and, in particular, for a claim for pure economic loss, substantial amendments would have to be made. Any such produced pleading would not be substantially in the form of the existing new Statement of Claim.

Duties were not owed to Mr Seaman by the administrators

35    Even if the applicant overcame the difficulties of pleading the content of a duty of care and a pure economic loss claim against the administrators, he would still face some insurmountable difficulties. The main one is that his claims are necessarily founded upon the assumption that the administrators might owe statutory duties or a duty of care to Mr Seaman in his capacity as a creditor, director or shareholder. That proposition is not sustainable. Whilst both parties before the Court referred to the decision of Kourakis CJ in Viscariello v Macks [2014] SASC 189; (2014) 103 ACSR 542, neither referred to the decision of the Full Court (Lovell J, Corboy and Slattery AJJ) on appeal from that decision: Macks v Viscariello [2017] SASCFC 172. The failure of the parties to address the Court on this important authority was somewhat startling. Notably that Full Court decision overturned a number of the conclusions of law reached by Kourakis CJ, although, it must be said, not necessarily in relation to matters which are relevant to the present application. In the course of the Full Court’s reasoning, it concluded that an administrator does not owe duties either under statute or at common law to individual creditors of a company. This was emphatically expressed in paragraphs [192]-[193]:

192.    It is to be noted that the passages cited above from the judgments of Gleeson JA in Correa v Whittingham and Barrett J in Blundell v Macrocom identified the fiduciary relationship as subsisting between an administrator and the company in administration. We do not think that their Honours were merely defining the relationship in a general sense. Rather, we consider that the Primary Judge was right to reject, albeit tentatively, the proposition that an administrator owes a duty to individual creditors. In our view, an administrator does not owe statutory or general law duties to individual creditors. Absent a statutory entitlement, a creditor has no personal right of action against an administrator for damages or compensation. The directors of a company, including a company that is nearly insolvent, do not owe duties to individual creditors and we are unable to discern any basis for reaching a different conclusion for administrators.

193.    There is no duty generally owed by an officer of a corporation to creditors (Spies v The Queen (2000) 201 CLR 603) and any action for remedies for breach of ss 180, 181 or the general law duties from which those provisions are derived is ordinarily to be commenced by the company.

36    The Full Court also identified that a liquidator’s duty of care in realizing a company’s assets could not be equated with the liquidator’s fiduciary duty when exercising their powers in the winding up of insolvent companies. It was observed (at [200]) that the scope and the nature of those duties were entirely different. Whilst the Full Court doubted the observations of Debelle J in Mills v Sheahan (2007) 99 SASR 357 and the observations of Vickery J in Perpetual Nominees Ltd v McGoldrick (No 3) (2017) 317 FLR 227 in relation to the alleged existence of a duty of care of a liquidator when realising an insolvent company’s assets, it held that no duty of care was owed by the administrator to creditors in the management of the company’s business affairs, including the sale of some or all of its assets, the compromising claims for and against it and the negotiations of a DOCA. Their Honours agreed with the observations of Kourakis CJ at first instance where the Chief Justice said (at [94]):

However, the imposition of a duty to individual creditors in making decisions as to the re-arrangement of the company’s finances, the proportionate payment of debt in accordance with a DOCA, or whether the company should go into liquidation, would compromise the statutory scheme to which I have referred. In my view, this factor alone decisively tells against the imposition of a duty to individual creditors with respect to that part of an administrator’s responsibilities.

37    The Full Court further agreed with the observations of the Chief Justice where he said (at [95]):

It is manifestly inconsistent with the statutory regime of the Corporations Act regulating the duties of voluntary administrators to superimpose upon it a common law duty of care owed by the administrator to individual creditors, directors or shareholders to protect them from financial loss by the exercise of reasonable care in discharging his or her statutory powers affecting the form in which the company will continue to operate or, alternatively, whether it will be wound up. That inconsistency is at its greatest when an administrator must form an opinion and frame a recommendation to the creditors, about whether to trade on, enter into a deed of company arrangement, sell the business and/or wind up the company.

38    It also agreed with the observations of Barrett J stated in Hausmann v Smith (2006) 24 ACLC 688 at [12] to the effect that duties owed by administrators (and liquidators) are not duties owed to shareholders or to creditors. The duties are owed to the company in administration even if, when performing those duties, attention must be paid to the interests of creditors.

39    As mentioned, neither counsel in the matter before the Court referred to this important decision even though it is somewhat determinative of many of central issues in the application. Given that the Full Court’s decision is one of an intermediate Court of Appeal on national scheme legislation it is binding upon me. Even if it were not, I agree with the substance of the decision and it is far from being “plainly wrong”. It is plainly right.

40    The above is sufficient to dispose of the allegations with respect to negligence although it could be added that the failure to adequately plead a causative connection between the negligence and the loss would also justify the rejection.

41    It should also be observed that no allegation is made in the new Statement of Claim that the administrators owed a duty of care to the Company. The only allegation is that such a duty was owed to Mr Seaman in his various capacities.

Corporations Act statutory duties

42    The decision in Macks v Viscariello also disposes of the claim that Mr Seaman might pursue claims against the administrators under the provision of the Corporations Act. As the Full Court identified, those statutory duties are owed to the company and not to a person who is a director, shareholder or creditor. Mr Seaman cannot succeed on these claims either.

Whether the conduct of the administrators was “in trade or commerce”

43    A number of claims agitated by Mr Seaman stem from the supposition that in performing the statutory duties of administration, the administrators were engaged “in trade or commerce”. From that foundation Mr Seaman asserts that the administrators are liable to him for alleged misleading or deceptive conduct under the the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the ACL), based upon certain statements in the 439A report. Further, it is alleged that because the conduct was “in trade or commerce” certain statutory duties of care could be imposed on the performance of the administrators’ obligations. Those statutory duties are said to be imposed by s 60 of the ACL

44    In Macks v Viscariello the Full Court considered whether the acts of an administrator in the performance of their statutory obligations amounted to conduct “in trade or commerce”. The Court concluded, in conformity with the observations of Kourakis CJ at first instance, that the relationship between a voluntary administrator, the company, the contributors and the creditors is a statutory construct. Therefore, in providing a 439A report and informing creditors of the position of the company at a second creditors meeting, an administrator is merely performing the statutory role. Whilst the conduct might be reviewed by a court pursuant to Part 5.3A and s 1321 of the Corporations Act, the s 439A report and statements made by the administrator at a meeting of creditors are merely part of the process by which the decision to terminate the administration and place the company in liquidation is made (see [233] of the Full Court’s decision in Macks v Viscariello). The Court concluded that it was not conduct “in trade or commerce”.

Misleading or deceptive conduct

45    In the present case, the allegations of misleading or deceptive conduct is said to arise from certain statements made in the 439A report. As was said by the Full Court, such conduct of an administrator is the performance of the statutory functions, powers and duties and as such, it does not constitute conduct “in trade or commerce”. It follows that the proposed new pleading in this regard could not succeed. I would add that the pleading of the alleged misleading or deceptive conduct claim was confusing and in parts inconsistent. In the course of submissions Mr Henry agreed that the pleading required further amendments and he ought to be allowed to do that. As indicated above, that is not an appropriate course in the circumstances of this case. Therefore, even if there were some substance in this cause of action, I would not have allowed the pleading in this respect to be filed because of its pleading inadequacies.

Obligations to exercise due care and skill in the performance of the administration

46    As mentioned, Mr Seaman also relies upon the allegation that the administrators engaged “in trade and commerce” to found an allegation that they were subject to s 60 of the ACL which requires the exercise of due care and skill in the provision of services. The observations of the Full Court in Macks v Viscariello cited above make it clear that the conduct complained of by Mr Seaman is conduct in the fulfilment of the administrators’ statutory functions, powers and duties relating to the creditors, contributories and directors of the Company and, as such, does not amount to conduct “in trade or commerce”. For this reason the claim founded upon s 60 of the ACL could not succeed. In addition, this claim is derivative upon other claims which, as has been indicated above, are not maintainable by Mr Seaman.

47    Again, even if there was some semblance of a cause of action which was maintainable by Mr Seaman pursuant to s 60 of the ACL, in the exercise of my discretion I would not have allowed the new Statement of Claim to be advanced due to the pleading deficiencies surrounding the relevant allegations. In the course of submissions Mr Henry also acknowledged that in relation to this plea there were deficiencies which required amendment. With respect to paragraph 43 (which is part of the allegations of due care and skill) he claimed that there were some typographical errors in the chapeau which required curing. Those typographical errors could be remedied, so he submitted, by completely rewriting and rephrasing that chapeau so as to completely change its meaning. The errors were patently not of a typographical nature. The pleading deficiencies in this respect were also so significant that I would not have allowed the new Statement of Claim to be advanced for that reason alone.

Claim for damages under s 1324(10) of the Corporations Act

48    Mr Seaman claims in his prayer for relief in the new Statement of Claim relief pursuant to s 1324(10) of the Corporations Act although there is very little in the new Statement of Claim which indicates why or how that relief might be granted. Section 1324 concerns the granting of injunctions by the court in respect of actual and prospective breaches of the Corporations Act. Section 1324(10) permits the court to award damages in lieu of the granting of an injunction. It appears that Mr Seaman relies upon this subsection in order to bolster his claim for compensation or damages and, although it is somewhat opaque, it seems that he bases that claim upon contraventions of s 180 or s 181 of the Corporations Act. As has been indicated above, those sections impose obligations owed to the Company and not to Mr Seaman in any of his various capacities.

49    Another difficulty is that there is no claim for an injunction in the Prayer for Relief of the new Statement of Claim or the proposed amended Originating Application. That is, perhaps, not surprising as it is unlikely that any injunction would be granted where the administrators have ceased exercising control of the company for some time now. However, s 1324 is primary concerned with the granting of injunctions and not the awarding of damages. It would follow that in the absence of any claimed injunction or likelihood that one might be granted, the section is not enlivened.

50    However a more substantive reason exists as to why Mr Seaman would not be able to recover compensation under s 1324(10) for a contravention of s 180 or s 181 of the Act. The awarding of damages for contravention of those provisions is specifically provided for in Part 9.4B of the Corporations Act. That Part is headed “Civil Consequences of Contravening Civil Penalty Provisions”. In particular, s 1317H makes provision for the court to order a person to compensate a corporation for damage suffered by reason of a contravention of a civil penalty provision. Sections 180 and 181 of the Corporations Act are civil penalty provisions. Therefore, the remedy for damage arising from contravention of either of those sections is specifically provided for in Part 9.4B. In McCracken v Phoenix Constructions (Qld) Pty Ltd [2013] 2 Qd R 27, 35 at [27] the Queensland Court of Appeal identified that the existence of Part 9.4B is inconsistent with a construction of s 1324(10) which would allow a person whose interests were adversely affected by the contravention of a civil penalty provision to be awarded damages. The Court there identified that such a construction would make a “dead letter of the provisions in Part 9.4B which create and regulate the power to award compensation”. The Court also noted that s 1324(10) would not seem to accommodate the diminution in value of a shareholder’s interest in a company which is derivative upon any loss suffered by that company.

51    That limited construction of the operation of s 1324(10) in McCracken was cited with approval by the Full Court in Macks v Viscariello at [710]. There the Full Court also noted the subsequent decision of the Queensland Court of Appeal in Day v Woolworths Limited [2016] QCA 337 where Jackson J (with whom McMurdo P and Philippides JA agreed) concluded that:

There is no statutory cause of action conferring a right to damages or compensation upon a third party in the plaintiff’s position for breach of an officer’s general duties under ss 180(1) or 181(1). There are two reasons. First, loss suffered by a third party such as the plaintiff is not loss ‘suffered by the corporation’ within the meaning of s 1317H(1). Second, only ASIC or the corporation may apply for a compensation order under s 1317J. Properly construed, ss 180(1) and 181(1) do not create a private

cause of action for damages for breach other than where an express provision of the [Corporations Act] provides for it. This view is consistent with McCracken v Phoenix Constructions (Qld) Pty Ltd.

52    It follows that both the Court of Appeal in Queensland and the Full Court in South Australia are of the opinion that s 1324(10) is not an avenue pursuant to which a person in the position of Mr Seaman might recover damages for breach of provisions of the Corporations Act. Those binding decisions appear to be palpably correct and ought to be followed.

53    The claim for relief sought under s 1324(10) cannot succeed.

Conclusion

54    It necessarily follows from the above that the application for leave to file the new Statement of Claim ought to be refused. The above discussion discloses that Mr Seaman, in his capacities as a natural person, a shareholder, a trustee, director or creditor or even a guarantor has no cause of action against the administrators on the facts of this case. He also has no cause of action based on his recently acquired status as a trustee of the PHC Business Trust. If Mr Seaman has any cause of action which he might agitate, it has been well hidden within the various versions of the Statement of Claim advanced by the applicant in this matter so far. Moreover, it is apparent that his legal representatives are not able to articulate it with any clarity. The application should be refused because the discernible claims advanced in the new Statement of Claim lack any substance.

55    Second, however, putting aside the substantive deficiencies in Mr Seaman’s claims, the manner in which they have been pleaded is most inadequate. This was recognised by Mr Henry during the course of his submissions. He acknowledged on many occasions that the document as proffered as the new Statement of Claim required deletions, insertions, clarifications, elaborations, amendments and the like. Whilst he submitted that the relief sought on the application was the filing of a Statement of Claim “substantially in the form of” the proffered document, his acknowledgement of the necessary amendments meant that any future document would be significantly different to that on which the application is founded. An order granting leave to file an amended pleading substantially in the form of that which had been debated might be appropriate on some occasions such as if it were the first attempt to amend and only minor alternations were required. That is not the position here. This is an application to file a fifth iteration of the pleading which is acknowledged to be insufficient in numerous respects. That being so, matters of case management and the overarching purpose set out in s 37M and s 37N of the Federal Court of Australia Act 1976 (Cth) come into play (see Gove Aluminium Limited v EF Maritime Navigation SA [2012] FCA 599). In the circumstances of this case where the respondents have been now required to confront and deal with five versions of the pleading and the applicant acknowledges the proposed pleading requires amendment, consideration must be given to the lack of speed and efficiency with which this matter is being progressed. As a result of the five failed attempts to plead their case, the applicant has imposed substantial delay and wasted costs on the respondents and that must now weigh heavily in any consideration of the matter. Moreover, the failures of the applicant to plead anything coming close to an adequate pleading necessarily results in the conclusion that there must be great doubt as to whether he will ever be able to put forward an appropriate pleading in the future. That being so, putting all other considerations aside, I would not make an order allowing the filing and serving of a pleading which has not undergone a process of close scrutiny by the respondents and the Court.

56    In the circumstances, the application to file the amended pleading must be refused.

57    I have not dealt with in these reasons many of the other complaints raised by the respondent. In particular, I have not entered into the realm of considering the substantive merits of allegations of fact which have been made in the pleading. The respondents have pointed to a number of pieces of what appears to be uncontentious evidence with which the pleading is inconsistent. In effect they say that the pleading is embarrassing because it is contrary to well established facts. Although there may be some merit in these submissions I have concluded that the substantive causes of action are not available so I do not find it necessary to consider those matters.

58    The application to amend the Originating Application is derivate upon the success of the application to amend the Statement of Claim. For the reasons referred to above the application must also fail in this respect.

Costs

59    I will hear the parties as to the appropriate order for costs.

Associate:

Dated:    16 February 2018