Federal Court of Australia

KTC v David [2022] FCAFC 60

Appeal from:

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

File number:

NSD 838 of 2020

Judgment of:

WIGNEY, ANASTASSIOU AND JACKSON JJ

Date of judgment:

13 April 2022

Catchwords:

PRACTICE AND PROCEDURE – application for leave to appeal – whether decision of primary judge attended by sufficient doubt to warrant grant of leave – whether substantial injustice would result from a refusal of leave – where interlocutory orders have practical effect of finally determining the rights of a party to proceeding – whether claim involves speculation or conjecture, obviating any purported substantial injustice – leave to appeal granted

PRACTICE AND PROCEDURE – application for leave to file and serve proposed further amended statement of claim – where proceeding involves numerous corporate entities and multiple complex commercial transactions – where proceeding raises questions of fact and law in relation to pleading of a dishonest and fraudulent design under the second limb of so-called rule in Barnes v Addy – relevant principles concerning the amendment and striking out of pleadings and summary dismissal – whether primary judge erred in concluding that claim of knowing assistance in dishonest and fraudulent design was not maintainable – appeal dismissed

Legislation:

Corporations Act 2001 (Cth)

Federal Court of Australia Act 1976 (Cth) ss 24(1A), 31A, 31A(2), 37M, 37M(3)

Federal Court Rules 2011 (Cth) rr 16.02, 16.02(1), 16.02(1)(b), 16.02(1)(c), 16.02(1)(d), 16.02(2), 16.02(2)(c), 16.02(2)(d), 16.21, 16.21(1)(c), 16.21(1)(e), 16.42, 16.43, 16.51, 16.53, 26.01

Judiciary Act 1903 (Cth) s 39B

Cases cited:

Aardwolf Industries LLC v Tayeh [2020] NSWCA 301

Advanced Holdings Pty Ltd v Commissioner of Taxation (2020) 281 FCR 149; [2020] FCAFC 157

Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 (2021) 396 ALR 27; [2021] FCAFC 121

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1994) 217 ALR 226; [1994] FCA 636

Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27

Arab Monetary Fund v Hashim (No 2) [1990] 1 All ER 673

Archer Capital 4A Pty Ltd as trustee for Archer Capital Trust 4A v Sage Group plc (No 2) (2013) 306 ALR 384; [2013] FCA 1098

Attorney-General v Wentworth (1988) 14 NSWLR 481

Australian Competition and Consumer Commission v NQCranes Pty Ltd [2021] FCA 1270

Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1992] 4 All ER 161; [1993] 1 WLR 509

Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437

Barclay Mowlem Construction Ltd v Dampier Port Authority & Anor (2006) 33 WAR 82; [2006] WASC 281

Barnes v Addy (1874) LR 9 Ch App 244

Bartlett v Swan Television & Radio Broadcasters Pty Ltd [1995] ATPR 41-434

Spiteri v Nine Network Australia Pty Ltd [2008] FCA 905

Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256; [2006] HCA 27

Caason Investments Pty Ltd v Cao (2015) 236 FCR 322; [2015] FCAFC 94

Clough & Rogers v Frog (1974) 4 ALR 615

Construction, Forestry, Maritime, Mining and Energy Union v One Key Workforce Pty Ltd [2020] FCAFC 27

Coshott v Official Trustee in Bankruptcy, in the matter of the Bankrupt Estate of Michael Petrovic Lenin (deceased) [2019] FCA 913

Cropper v Smith (1884) 26 Ch D 700

Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325

Dare v Pulham (1982) 148 CLR 658

Davidson v Official Receiver [2021] FCAFC 73

Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397; [1991] FCA 844

Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366

Ex parte Bucknell (1936) 56 CLR 221; [1936] HCA 67

Fair Work Ombudsman v Eastern Colour Pty Ltd [2011] FCA 803

Farah Constructions Pty Limited v Say-Dee Pty Limited (2007) 230 CLR 89; [2007] HCA 22

Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39

Fuller v Toms (2012) 247 FCR 440; [2012] FCA 27

Gallo v Attorney-General (Full Court of the Supreme Court of Victoria, 4 September 1984)

Granite Transformations Pty Ltd v Apex Distributions Pty Ltd (2018) 359 ALR 62; [2018] FCA 725

Groom v Crocker [1939] 1 KB 194

Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266

Hastwell v Kott Gunning [2021] FCAFC 70

House v The King (1936) 55 CLR 499; [1936] HCA 40

J C Techforce Pty Ltd & Steinhardt v Pearce, Neville & Oke Industrial Pty Ltd (1996) 138 ALR 522

Johnson Tiles Pty v Esso Australia Pty Ltd (2000) 104 FCR 564; [2000] FCA 1572

KTC v David (No 1) [2019] NSWSC 281

KTC v David (Pleadings) [2019] FCA 1566

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

KTC v Singh & Ors [2018] NSWSC 1510

Mathews v State of Queensland [2015] FCA 1488

Medich v Bentley-Smythe Pty Ltd [2010] FCA 494

Nationwide News Pty Limited v Rush (2020) 380 ALR 432; [2020] FCAFC 115

Nicholson v Morgan (No 3) [2013] WASC 110

Oztech Pty Ltd v Public Trustee of Queensland (2019) 269 FCR 349; [2019] FCAFC 102

Polar Aviation Pty Ltd v Civil Aviation Safety Authority (2012) 203 FCR 325; [2012] FCAFC 97

Rawson Finances Pty Ltd v Commissioner of Taxation [2016] FCAFC 95

Re-Engine Pty Ltd (in liq) v Fergusson (2007) 209 FLR 1; [2007] VSC 57

Research in Motion Ltd v Samsung Electronics Australia Pty Limited (2009) 176 FCR 66; [2009] FCA 320

Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156

Seven Network Limited v News Limited [2005] FCA 142

Shelton v National Roads and Motorists Association Ltd (2004) 51 ACSR 278; [2004] FCA 1393

Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28

Tamaya Resources Ltd (In Liq) v Deloitte Touche Tohmatsu (A Firm) (2016) 332 ALR 199; [2016] FCAFC 2

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

Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15

Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 22 FCR 305

Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164

Von Reisner v Commonwealth (2009) 177 FCR 531; [2009] FCAFC 97

Webster (Trustee) v Murray Goulburn Co-operative Co. Ltd (No 2) [2017] FCA 1260

Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157

White Industries Aust Ltd v Commissioner of Taxation (2007) 160 FCR 298; [2007] HCA 511

X (Minors) v Bedfordshire County Council [1995] 2 AC 633

Young Investments Group Pty Ltd v Mann (2012) 293 ALR 537; [2012] FCAFC 107

Zibara v Ultra Management (Sports) Pty Ltd (2021) 283 FCR 18; [2021] FCAFC 4

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

446

Date of hearing:

25 February 2021

Counsel for the Appellant:

Mr P Collinson QC and Ms M Loughnan QC and Mr C Parkinson SC

Solicitor for the Appellant:

HWL Ebsworth

Counsel for the First Respondent

The First Respondent did not appear

Solicitor for the First Respondent

Russell Kennedy Aitken Lawyers

Counsel for the Second and Third Respondents:

Mr J Hutton with Mr R Jedrzejczyk

Solicitor for the Second and Third Respondents:

Ashurst

Counsel for the Fourth and Fifth Respondents:

Mr A Bannon SC with Ms C Ernst

Solicitor for the Fourth and Fifth Respondents:

YPOL Lawyers

ORDERS

NSD 838 of 2020

BETWEEN:

KTC

Appellant

AND:

RODRIC DAVID

First Respondent

NAVEEN DAVID SINGH

Second Respondent

XALT PTY LTD (ACN 147 571 033) (and others named in the Schedule)

Third Respondent

order made by:

WIGNEY, ANASTASSIOU AND JACKSON JJ

DATE OF ORDER:

13 April 2022

THE COURT ORDERS THAT:

1.    Leave to appeal be granted.

2.    The appeal be dismissed.

3.    The proceeding as against the first, second and third respondents be remitted to the primary judge.

4.    The appellant pay the respondents’ costs of the appeal.

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

REASONS FOR JUDGMENT

WIGNEY J:

1    In July 2018, the applicant in this matter, KTC, commenced a proceeding in the Supreme Court of New South Wales against Mr Rodric David, Mr Naveen Singh, XALT Pty Limited, a company of which Mr Singh is the sole director and shareholder, Mr Andrew Bullock and the law firm of which Mr Bullock was a partner, Gilbert + Tobin (G+T). KTC alleged, in short summary, that Mr David and a company associated with him had engaged in a dishonest and fraudulent design which had caused it economic loss and that Mr Singh, XALT, Mr Bullock and G+T had knowingly assisted in that fraudulent design. KTC’s statement of claim, however, was struck out by Kunc J in the Supreme Court of New South Wales and the proceeding was transferred to this Court. KTC did not fare any better in this Court. The primary judge twice refused KTC’s applications to file a further amended statement of claim. KTC applied for leave to appeal the second judgment of the primary judge that dismissed its application to file a further amended statement of claim and dismissed the proceeding as against Mr Bullock and G+T.

2    I have had the advantage of reading, in draft form, the reasons for judgment to be published by Anastassiou J. His Honour has concluded that the primary judge erred in refusing to grant leave to KTC to file a further amended statement of claim, that leave to appeal should be granted, the appeal be allowed and that KTC be granted leave to file a further amended statement of claim in the form tendered at the hearing before the primary judge. I gratefully adopt much of Anastassiou J’s detailed analysis of the factual background, the judgment of the primary judge and the submissions of the parties. I regret, however, that I do not share his Honour’s conclusion that the primary judge erred in refusing KTC’s application. While I have some misgivings about some aspects of the primary judge’s reasoning, I have concluded that the primary judge was ultimately right to refuse KTC’s application. That is because the proposed pleading would, if filed, be liable to be struck out on the basis that it is ambiguous, is likely to cause embarrassment and prejudice, and ultimately fails to disclose a reasonable cause of action against Mr Bullock and G+T.

3    I would grant leave to appeal but dismiss the appeal.

PROCEDURAL BACKGROUND

4    KTC has had many attempts at drafting a pleading which articulates its case against Mr Bullock and G+T in a way which is capable of withstanding a strike-out application.

5    The following short summary of the relevant procedural background is drawn from an affidavit sworn by a solicitor acting on behalf of G+T. While KTC objected, albeit faintly, to the affidavit on the grounds of relevance, the procedural background is to some extent relevant to the question of whether the primary judge’s exercise of the discretion to refuse leave to file the proposed amended pleading miscarried as KTC contended. The factual background would also appear to be relatively uncontentious.

In the Supreme Court

6    The first iteration of KTC’s pleading against Mr Bullock and G+T was filed in the Supreme Court on 25 July 2018. KTC applied for freezing orders against Mr Singh, XALT and others shortly after the filing of the pleading. That application was dismissed by White J in the Supreme Court: KTC v Singh & Ors [2018] NSWSC 1510.

7    On 24 October 2018, Mr Bullock and G+T applied to strike out the pleading against them. On 22 February 2019, KTC applied for and was granted leave to file an amended statement of claim. That second iteration of the pleading was then the subject of the strike-out application. On 18 March 2019, Kunc J in the Supreme Court struck out the amended statement of claim and transferred the proceeding to this Court: KTC v David (No 1) [2019] NSWSC 281.

8    In striking out the pleading, Kunc J noted (at [24]) that the “Court resolutely rejects an approach to pleading which entails the indiscriminate recitation of large numbers of facts and detailed but insignificant particulars combined with rolled up conclusions, and which is then defended on the basis that at the end of the hearing at least one of the causes of action can be expected to have been established”. His Honour also observed (at [48]) that KTC and its representatives bore a “serious onus” and that, as the case that KTC wished to plead involved allegations of fraud against Mr Bullock, it was required to be “properly pleaded and particularised”. In that context, Kunc J said (at [50]) that “the question of what Mr Bullock is alleged to have known (in the relevant sense) that would have indicated that the breach [by Mr David] was a dishonest and fraudulent design will require particular attention”. His Honour rejected a submission advanced on behalf of G+T that leave to re-plead should not be granted and stated (at [47]) that KTC should be given a “final opportunity” to plead its case.

In this Court

9    On 26 April 2019, KTC filed an interlocutory application in this Court seeking leave to file an amended statement of claim. The interlocutory application annexed what was, by that stage, the third iteration of KTC’s pleading. Prior to the hearing of the interlocutory application, however, KTC served a fourth iteration of its pleading. The leave application was heard and determined on the basis of that fourth iteration of the pleading.

10    On 24 September 2019, the primary judge dismissed KTC’s interlocutory application: KTC v David (Pleadings) [2019] FCA 1566 (the pleadings judgment). His Honour ordered KTC to file and serve any “final application for leave to amend” by 5 November 2019.

11    The pleadings judgment is not the judgment that is the subject of this application for leave to appeal. It concerned a different iteration of the pleading to the pleading that is the subject of this application. It is, in those circumstances, unnecessary to consider the pleadings judgment in detail. There are, however, three aspects of the judgment that should be noted.

12    First, the key difficulties with the pleading which led the primary judge to dismiss the application were that there was no clear or explicit pleading that the alleged breaches of fiduciary duty were part of a dishonest and fraudulent design (see in particular [17]-[19]) and no clear or explicit pleading that Mr Bullock and G+T had requisite knowledge of any dishonest and fraudulent design (see in particular [21]-[24]). His Honour did, however, appear to accept (at [34]) that there was a “trial to be had” in respect of the allegation that Mr Bullock and G+T had the requisite knowledge because “[t]here is something quite striking about these transactions and one’s interest can only be piqued by the fact that G+T is alleged to have advised that it was lawful”. More will be said about those observations later.

13    Second, the primary judge concluded (at [52]) that the proposed pleading – in its then current form – breached r 16.02(1)(b) and (c) and r 16.02(2)(d) and (c) of the Federal Court Rules 2011 (Cth). His Honour reasoned that the pleading breached r 16.02(1)(b), which provides that the pleading must “be as brief as the nature of the case permits”, because it was “at least three times as long as it needs to be”; it breached r 16.02(1)(c), which provides that the pleading must “identify the issues that the party wants the Court to resolve”, because it “obscures rather than identifies the issues”; it breached r 16.02(2)(d), which provides the pleading must not be “likely to cause prejudice, embarrassment or delay in the proceeding”, because “it is certain to cause prejudice and embarrassment”; and it breached r 16.02(2)(c), which provides a pleading must not “be evasive or ambiguous”, because “it is incomprehensible” . His Honour had earlier noted (at [48]), in that regard, that “the pleading is in many parts simply incomprehensible” and that it had taken him “an entire week to understand its arcane obscurities”.

14    Third, in the context of determining that KTC should be given one final chance to file a satisfactory pleading, his Honour (at [52]) implored those advising KTC to “have a long think about the next version and how it is drafted” and noted that “[o]ne view might be that it is beyond repair in its current form”. It would seem from what followed that his Honour’s pleas in that regard were not heeded.

15    On 5 November 2019, KTC filed an interlocutory application seeking leave to file a further amended statement of claim in the form annexed to that application. This was the fifth iteration of the pleading, or proposed pleading. KTC served a sixth iteration of the proposed pleading shortly prior to the hearing of the interlocutory application. A seventh iteration of the proposed pleading was provided to the primary judge at the hearing of the interlocutory application. It was that seventh iteration which was the subject of the judgment of the primary judge and the primary focus of attention on this application for leave to appeal.

16    On 17 July 2020, the primary judge dismissed KTC’s application, ordered KTC to pay the costs of Mr Bullock and G+T and dismissed the proceedings against Mr Bullock and G+T: KTC v David (Summary Dismissal) [2020] FCA 1012 (Judgment). The primary judge’s reasons for making those orders will be considered in detail later in these reasons.

LEAVE TO APPEAL

17    Mr Bullock and G+T opposed the grant of leave to appeal. I do not propose to dwell at length on the question of leave. Like Anastassiou J, I would grant leave to appeal.

18    It is well accepted that an applicant for leave to appeal must generally demonstrate: first, that the decision in question is “attended with sufficient doubt to warrant its being reconsidered by the Full Court”; and second, that “substantial injustice would result if leave were refused, supposing the decision to be wrong”: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397; [1991] FCA 844 at 398; Advanced Holdings Pty Ltd v Commissioner of Taxation (2020) 281 FCR 149; [2020] FCAFC 157 at [35]; Davidson v Official Receiver [2021] FCAFC 73 at [15]. While those two criteria may not represent a “hard and fast rule” (Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156 at [29]), they nevertheless provide “general guidance which the Court should normally accept”: Rawson Finances Pty Ltd v Commissioner of Taxation [2016] FCAFC 95 at [39].

19    As for the first of the two Décor criteria, it is clear that, to secure leave to appeal, the applicant does not have to demonstrate that its proposed grounds of appeal are likely to succeed, or even that it has strong grounds. It need only be demonstrated that there is sufficient doubt about the correctness of the judgment to warrant appellate reconsideration. KTC’s proposed grounds of appeal and its submissions in support of those grounds are substantial and not so obviously weak or untenable that it can be said that there are insufficient doubts about the judgment of the primary judge to warrant the grant of leave to appeal. The issues surrounding the proposed pleading and the primary judge’s reasons for refusing leave are complex and difficult and require close attention.

20    As for the second Décor criteria, it may generally be accepted that an applicant for leave to appeal an interlocutory decision is likely to suffer substantial injustice, supposing the decision to be wrong, if the decision has the practical effect of finally determining the rights of the parties, or determines “a substantive right”: Décor at 400. Those circumstances generally provide a prima facie case, or at least a strong ground, for the grant of leave to appeal: Ex parte Bucknell (1936) 56 CLR 221 at 225-226; Construction, Forestry, Maritime, Mining and Energy Union v One Key Workforce Pty Ltd [2020] FCAFC 27 at [44]; Hastwell v Kott Gunning [2021] FCAFC 70 at [26], citing Johnson Tiles Pty v Esso Australia Pty Ltd (2000) 104 FCR 564; [2000] FCA 1572 at [43]; Aardwolf Industries LLC v Tayeh [2020] NSWCA 301 at [1], [54] and [87]. The judgment of the primary judge plainly had the practical effect of finally determining the rights of the parties. It resulted in the dismissal of KTC’s claim against Mr Bullock and G+T.

21    Mr Bullock and G+T submitted that KTC would not suffer any substantial injustice if leave to appeal were refused, even supposing that the primary judge’s decision was wrong. That submission was put on two bases.

22    First, it was said that KTC had had ample opportunity to properly plead its case in the circumstances. Both Kunc J in the Supreme Court and the primary judge had given KTC further opportunities and yet, so it was submitted, the pleading remained deficient and incoherent.

23    Second, it was submitted that the claimed injustice to KTC arising from the effective summary dismissal of their application was no more than conjecture or speculation. That was said to be the case because KTC has already recovered a substantial portion of its claimed losses arising from the transactions impugned in this proceeding as a result of its success in proceedings commenced in the Grand Court of the Cayman Islands. It was also submitted, in effect, that KTC’s case against Mr Bullock and G+T was speculative and unlikely to succeed in any event. Mr Bullock and G+T relied on the reasoning of Steward J (with whom Allsop CJ and Bromwich J agreed) in Advanced Holdings at [35]-[70] in support of the proposition that the loss of a chance or opportunity which was no more than “conjecture or speculation” would not constitute a substantial injustice.

24    The contention that KTC would suffer no substantial injustice if leave to appeal was refused, even if the primary judge’s decision was incorrect, may be dealt with shortly.

25    First, it would appear to be common ground that KTC sought and obtained relief in the Grand Court which goes some considerable way towards righting the wrongs which KTC alleges were committed by Mr David. That relief included an order which effectively reversed an issue of shares which KTC seeks to impugn in this proceeding, as well as an order which had the effect of providing KTC with recompense in respect of another impugned transaction. The proceeding in the Grand Court did not, however, involve Mr Bullock or G+T. It is not possible to entirely rule out, at least on the basis of the material put before this Court, that KTC may be able to obtain some additional or incremental relief or recompense from Mr Bullock and G+T in respect of the impugned transactions, assuming that KTC is able to properly plead its case against them. The potential loss of the ability to seek and obtain any such additional or incremental relief can fairly be characterised as a substantial injustice.

26    Second, for the Court to be satisfied that KTC’s claim against Mr Bullock and G+T amounted to no more than conjecture or speculation, the Court would in effect have to determine the issues that arise on the appeal. KTC’s arguments in relation to the appeal are not so obviously unmeritorious that the Court could proceed at the leave stage on the basis that KTC’s claims against Mr Bullock and G+T are speculative or a matter of conjecture.

27    The grant of leave to appeal is appropriate in all the circumstances.

OVERVIEW of KTC’S CASE AGAINST MR BULLOCK AND G+T

28    The primary judge gave a helpful overview of KTC’s case against Mr Bullock and G+T in the pleadings judgment at [4]-[12]. That overview is extracted in full in the reasons of Anastassiou J. The Judgment also includes an overview of the dispute as pleaded at [4]-[12]. It is, however, nonetheless useful to briefly outline the key factual allegations made by KTC and the asserted legal basis of the claims against Mr Bullock and G+T.

29    The following overview derives primarily from the Proposed Further Amended Statement of Claim (PFASC or proposed pleading) which was the subject of the Judgment under appeal.

The key factual allegations

30    The central players in the saga which is the subject matter of the proposed pleading are Mr Charif Kazal, his brother Mr Tarek Kazal (together the Kazals), Mr David, Mr Singh and Mr Bullock.

31    The Kazals owned all of the shares in, and were directors of, KTC: PFASC [2]. KTC was a company registered in the Cayman Islands: PFASC [1].

32    Mr David was the sole director and shareholder in RAAL Limited, also a company registered in the Cayman Islands: PFASC [3]-[4].

33    Mr Singh was the sole director and shareholder of both Singh Investments Limited and XALT. Singh Investments was a Cayman Islands registered company, whereas XALT was a company registered pursuant to the Corporations Act 2001 (Cth): PFASC [5]-[7].

34    Mr Bullock was a partner of G+T: PFASC [8]-[9].

35    In September 2008, Emergent Capital Limited (Emergent or ECL) was registered as a company in the Cayman Islands: PFASC [10]-[11]. Emergent had authorised share capital of 50,000 shares with a par value of US$1.00, though only 100 shares were initially issued. Of those 100 shares, KTC held 50 shares and RAAL held 50 shares. Emergent’s directors were the Kazals (holding one vote jointly) and Mr David: PFASC [11].

36    KTC alleges that at about the time of the registration of Emergent, it and RAAL entered into an oral (and partly implied) joint venture agreement, the terms of which relevantly included that: Emergent would (as the joint venture vehicle) carry on the business of investments; KTC and RAAL would hold the equity in Emergent in equal shares and be equally represented on the board of Emergent; and RAAL and Mr David would act for, and on behalf of, KTC in the management of KTC’s interests in the joint venture: PFASC [11]-[13].

37    Global Renewables Australia Pty Ltd, a company registered in Australia, was the holding company of a group of companies which owned a waste facility at Eastern Creek, a suburb of Sydney: PFASC [14]. In about December 2008, Emergent and Singh Investments agreed that Emergent would invest in the waste facility, albeit indirectly through a company registered in the Cayman Islands: PFASC [17].

38    In December 2008, Global Renewables Limited was registered in the Cayman Islands. Emergent was the registered holder of 80 of the 100 issued shares in Global Renewables and Singh Investments was the registered holder of 20 issued shares: PFASC [17]. Mr David and Mr Singh were the directors of Global Renewables.

39    In January 2009, Global Renewables acquired all the shares in Global Renewables Australia: PFASC [17(d)].

40    Both KTC and RAAL advanced funds to Emergent by way of unsecured loans: see PFASC [21]. KTC alleges that by November 2009 it had loaned Emergent A$600,000: PFASC [21(a)]. RAAL claimed to have loaned Emergent approximately A$5.8 million, though KTC alleges that that claim was disputed: PFASC [21(b)] and [26(b)].

41    On 13 November 2009, Mr Nikolaos Mavromanolakis was appointed to the board of Emergent: PFASC [22]. There is no allegation that Mr Mavromanolakis’ appointment was contentious, or that KTC or the Kazals did not know about, or did not agree with, the appointment.

The issue of 49,900 Emergent shares to RAAL

42    KTC alleges that at some point between November 2009 and December 2009, Mr David and RAAL sought and obtained legal advice from Mr Bullock. That legal advice is alleged to have concerned “the reduction of part of [Emergent’s] indebtedness to RAAL for a share issue to RAAL to effectively eliminate KTC’s interest in [Emergent]”: PFASC [23(a)].

43    A critical allegation in KTC’s case is that, in November and December 2009, Mr Bullock gave Mr David, RAAL, Mr Mavromanolakis and Emergent advice to the effect that: Mr David had to do everything possible to protect Emergent so as to protect his and RAAL’s investment in Emergent; “the only available action was for RAAL to demand repayment of its loans to [Emergent] and when no payment was made to dilute KTC’s shareholding”; and “such action was the right and the legal thing to do”: PFASC [23(b)]. The advice was given orally and in an email dated 17 November 2009: particulars to PFASC [23]. It is defined in the pleadings as the “G+T Legal Advice”. KTC alleges that it and the Kazals were unaware of the G+T Legal Advice until 2018: PFASC [24].

44    I should perhaps interpolate at this point that the proposed pleading repeatedly employs the device of applying definitions or labels to various pleaded events or circumstances and then utilising those definitions throughout the pleadings. That type of pleading device can sometimes serve to shorten and simplify a pleading. When used excessively, however, as it is in the pleading the subject of this appeal, the effect may be to destroy the narrative and obscure and confuse critical factual and legal issues. In the pleading currently under consideration, the excessive and indiscriminate use of defined events and circumstances renders the pleading confusing, ambiguous and, in parts, almost impenetrable.

45    Returning to the narrative, on about 20 January 2010, Emergent and RAAL executed a loan agreement that recorded that RAAL had loaned Emergent A$5,837,009.04: PFASC [25]. KTC alleges that Mr David executed the loan agreement without informing it or the Kazals and in the knowledge that they disputed the loan: PFASC [26].

46    On 21 January 2010, Mr David signed a letter on behalf of RAAL which demanded that Emergent pay RAAL US$49,900 within seven days, failing which RAAL would accept US$49,900 worth of fully paid ordinary shares in Emergent in satisfaction of the debt: PFASC [27]. KTC alleges that it and the Kazals were not informed about, and remained unaware of, the letter of demand: PFASC [29].

47    The following day, Mr David called a meeting of the board of Emergent: PFASC [28]. The meeting was to take place on 28 January 2010 – that is, upon expiry of the seven-day period referred to in the letter of demand. KTC does not allege that the Kazals did not receive notice of the Emergent board meeting called by Mr David.

48    KTC alleges that it and the Kazals remained unaware that Mr David intended to move on a motion at the board meeting which would result in Emergent issuing 49,900 shares to RAAL in accordance with the letter of demand: PFASC [28], [35].

49    The meeting of the board of Emergent took place by telephone on 28 January 2010. It was attended by Mr David and Mr Mavromanolakis: PFASC [30]. It was not attended by either of the Kazals. It was resolved at the meeting that Emergent would issue 49,900 shares to RAAL in consideration of the satisfaction of Emergent’s indebtedness to RAAL in the sum of US$49,900: PFASC [31]. Those shares were subsequently issued: PFASC [34].

50    KTC alleges that at no time prior to the passing of the resolution at the board meeting did either Emergent, Mr David, Mr Mavromanolakis or RAAL obtain a valuation of Emergent shares: PFASC [32]. It also alleges that the resolution was “caused and procured” by Mr David and RAAL and that Mr David “procured” Mr Mavromanolakis’ support for the resolution: PFASC [38].

51    On about 18 March 2010, KTC and the Kazals were sent a copy of the minutes of the Emergent board meeting and thereby became aware of the resolution passed at that meeting: particulars to PFASC [35]. The Kazals and KTC subsequently disputed the validity of the resolution and the share issue: PFASC [36].

52    On 29 March 2010, the Kazals were removed as directors of Emergent: PFASC [37].

53    KTC alleges that the effect of the issue of 49,900 Emergent shares to RAAL was that KTC’s shareholding in Emergent was reduced from 50% to 0.1%, RAAL’s shareholding was increased from 50% to 99.9% and Emergent’s debt to RAAL pursuant to the loan agreement executed on 20 January 2010 was reduced by only 0.93%: PFASC [39].

The issue of 60 shares in Global Renewables to Singh Investments

54    On 22 April 2010, the directors of Global Renewables, Messrs David and Singh, resolved to issue 60 ordinary “fully paid” shares in Global Renewables to Singh Investments for an issue price of US$1.00 per share: PFASC [41]. Those shares were subsequently issued: PFASC [41].

55    KTC alleges that the resolution passed on 22 April 2010 and the subsequent share issue was “procured” by Mr David and RAAL: PFASC [42]. Perhaps more significantly, it alleges that shares in Global Renewables were a “valuable asset” and that there was no consideration for the issue of the shares to Singh Investments: PFASC [44]-[45].

56    The effect of the issue of 60 shares in Global Renewables to Singh Investments is alleged to have been that: Singh Investments’ total shareholding in Global Renewables was increased from 20 to 80, meaning that it held 50% of the issued shares; Emergent’s total holding remained at 80 shares, but its interest in Global Renewables was reduced from 80% to 50%; and Emergent had “divested 30% of its interest in [Global Renewables] … in circumstances where no benefit accrued to [Emergent] from the transaction”: PFASC [46].

Sale of Emergent’s shareholding in Global Renewables

57    In December 2010, Ironbridge Capital Pty Ltd acquired all of the shares in Global Renewables, including Emergent’s 80 shares (50% shareholding), for A$25 million: PFASC [60]. The pleading contains further factual allegations concerning this sale, though it is unnecessary for present purposes to address those facts in any detail. It suffices to note that in October 2010 KTC had made a non-binding indicative offer to acquire 100% of the Global Renewables shares for A$25.5 million and a non-binding indicative and conditional offer to purchase Emergent’s shares in Global Renewables for A$15 million. Those offers were rejected by Mr David and RAAL, on behalf of Emergent, in favour of the offer by Ironbridge Capital: PFASC [57].

The Cayman Islands proceedings

58    The pleading makes scattered references (including in the particulars) to proceedings commenced in the Cayman Islands. The Cayman Islands proceedings would appear to be relevant to at least some of the allegations against Mr Bullock and G+T. The relevant facts or allegations concerning the proceedings that may be gleaned from the pleading are as follows.

59    On 21 May 2010, KTC applied to the Grand Court for the winding up of Emergent and the appointment of provisional liquidators: PFASC [48]. On 2 June 2021, the Grand Court dismissed the application for the appointment of a provisional liquidator on the undertaking that RAAL would not exercise any voting rights, including in respect of its Emergent shares and Mr David would not exercise his powers as a director of Emergent without the prior written consent of KTC or the leave of the Grand Court: PFASC [49].

60    On 4 October 2010, the Grand Court, on the application of RAAL, ordered that Mr David be permitted to exercise his powers as a director of Global Renewables and Emergent in order to “consider and conclude” the sale of Emergent’s shares in Global Renewables to Ironbridge Capital: PFASC [54]-[55].

61    In about January 2011, KTC and RAAL filed a joint petition in the Grand Court applying for the liquidation of Emergent to be brought under the supervision of the Grand Court: particulars to PFASC [128]. In June 2011, the Grand Court ordered that the joint petition proceed as if it were a writ between KTC and RAAL in respect of the validity of the resolution of the Emergent board passed on 28 January 2010 and the subsequent issue of 49,900 Emergent shares to RAAL. On 23 November 2011, the Grand Court found that the resolution and share issue were made in breach of Mr David’s and Mr Mavromanolakisfiduciary duty and ordered that liquidators be directed to rectify Emergent’s register of members to reflect the fact that KTC and RAAL each owned 50 shares in Emergent: see particulars to PFASC [128(a)]. The register was subsequently rectified.

Key factual allegations against Mr Bullock and G+T

62    The legal basis of KTC’s claim will be addressed next. It would be useful, however, to briefly summarise the key factual allegations against Mr Bullock and G+T. It will be necessary to address the sufficiency of the particulars of these allegations in more detail later.

63    The key allegations against Mr Bullock and G+T would appear to be as follows.

64    First, it is alleged that G+T was retained by, and Mr Bullock provided legal services, to Global Renewables, Emergent, RAAL and Mr David “in respect of” certain things, including: the drafting of the loan agreement between Emergent and RAAL; “providing a strategy to deal with KTC’s refusal to contribute funding” to Emergent which was equal to the funding provided by RAAL; various draft Global Renewables shareholders agreements which were prepared between January 2009 and March 2010; the resolution of the Emergent board on 28 January 2009 and the subsequent issue of Emergent shares; and the issue of Global Renewables shares to Singh Investments in April 2010: PFASC [72]-[73].

65    It should perhaps be noted at this stage that the particulars of the provision of these legal services in the pleading are in most cases inadequate, unclear and ambiguous. The particulars extend little beyond indicating that G+T rendered invoices to Global Renewables for legal services between January 2009 and May 2010. Those particulars tend to suggest that G+T only provided legal services to Global Renewables, not Emergent, RAAL, Mr Mavromanolakis or Mr David as is otherwise alleged. The allegation that G+T, pursuant to its retainer with Global Renewables, provided legal services to anyone other than Global Renewables is at best ambiguous. More significantly, it is entirely unclear when the particular legal services were provided and what those legal services in fact entailed or involved. More will be said about this later.

66    Second, it is alleged that in or about November and December 2009, Mr Bullock gave the G+T Legal Advice to Mr David, Mr Mavromanolakis, RAAL and Emergent: PFASC [23] and [72(c)]. That advice allegedly included that it was the “right thing and the legal thing” for RAAL to demand repayment of the loan it had made to Emergent and, when no payment was made, to “dilute KTC’s shareholding”: PFASC [23(b)]. More will be said about the G+T Legal Advice later in these reasons. It suffices at this point to note that the advice was allegedly given many weeks before Mr David sent the letter of demand, called the meeting of the Emergent board and voted (along with Mr Mavromanolakis) in favour of the issue of shares to RAAL. Perhaps more significantly, it is not alleged that the advice included advice that it would be “right” or “legal” for RAAL and Mr David to call a meeting of the Emergent board without advising the Kazals of the resolution concerning the share issue which was to be moved at the meeting.

67    Mr Bullock’s (and G+T’s) state of mind and knowledge at the time that the G+T Legal Advice was allegedly given is critical to KTC’s case against Mr Bullock and G+T. It should perhaps be noted at this point, however, that there is some suggestion in [72(c)] of the pleading that Mr Bullock and G+T may have provided additional legal advice to RAAL, Mr David and Mr Mavromanolakis to the effect that the “ECL Share issue was lawful”. The particulars to that allegation, however, simply refer back to [23] of the pleading and therefore indicate or imply that there was no separate advice about the lawfulness of the relevant transaction. If there was separate legal advice provided, the proposed pleading contains no particulars whatsoever in respect of that advice.

68    Third, it is alleged that Mr Bullock “assisted in preparing the documentation to effect” the resolution which was passed at the meeting of the Emergent board on 28 January 2010: PFASC [72(d)] and [73]. The particulars provided in relation to this allegation are again wholly inadequate. It is entirely unclear precisely what assistance was provided and when it was provided. More will be said about this later.

69    Fourth, it is alleged that Mr Bullock (and therefore G+T) advised Global Renewables, Emergent, RAAL and Mr David that it was “lawful to make” the issue of 60 shares in Global Renewables to Singh Investments: PFASC [72(e)]. That allegation, which is again a critical plank in KTC’s case against Mr Bullock and G+T, is discussed in more detail later in these reasons. It suffices at this point to note that the particulars provided in relation to the allegation are again wholly inadequate. KTC alleges, in summary, that the fact that Mr Bullock gave this advice is to be inferred from the fact that he was retained to advise in relation to various draft Global Renewables shareholders agreements, one of which fleetingly refers to the Global Renewables share issue.

70    Fifth, it is alleged that Mr Bullock “assisted in preparing the documentation to effect the making of” the Global Renewables share issue to Singh Investments: PFASC [72(f)]. Once again, the particulars provided in relation to this critical allegation are wholly inadequate and amount to little more than identifying invoices that G+T rendered to Global Renewables. It is entirely unclear what the assistance comprised of and when it was provided. It is not even entirely clear what documents were the subject of the alleged assistance.

71    Sixth, it is alleged that “at all material times” Mr Bullock knew about certain events or circumstances: PFASC [74]. The particular events or circumstances that Mr Bullock is alleged to have known about relevantly include that: the “G+T Legal Advice” was not disclosed to the Kazals; the Kazals did not know about and did not consent to the resolution to issue Emergent shares to RAAL at any time prior to 28 January 2010; Emergent, RAAL and Mr David did not inform the Kazals or KTC, at any time prior to 28 January 2010, of the G+T Legal Advice, or that the resolution to issue Emergent shares to RAAL was to be considered at the board meeting on 28 January 2010, or that Mr David had “procured [Mr Mavromanolakis’] support” for the vote in respect of that resolution; Emergent, RAAL and Mr David did not obtain any valuation of the shares in Emergent at any time before 28 January 2010; the issue to Singh Investments of 60 shares in Global Renewables was made without the consent or knowledge of KTC and the Kazals; and Singh Investments paid no consideration for the 60 shares issued to it, or if it did, that consideration was “colourable or illusory”.

72    Those allegations of knowledge on the part of Mr Bullock will be discussed in detail later. It suffices here to again note that the particulars provided in relation to what, in the circumstances, amount to very serious allegations against Mr Bullock are unsatisfactory in many respects. More significantly, there is a serious issue as to whether the particulars disclose a reasonable basis, or reasonable case, in respect of the allegations.

The asserted legal basis of the claims against Mr Bullock and G+T

73    It was and is essentially common ground that the primary legal basis of the claims against Mr Bullock and G+T is to be found in the so-called second limb of the rule in Barnes v Addy: see Barnes v Addy (1874) LR 9 Ch App 244.

74    The second limb of Barnes v Addy concerns the circumstances in which a third party (the defendant) may be liable in respect of a breach of fiduciary duty by another person in circumstances where the defendant does not receive any property arising from the breach. The principles relevant to such a claim are fairly well settled, at least in Australia, and may be summarised in a few short propositions. Those propositions were identified by Kunc J in KTC v David at [19] and, save in perhaps two minor respects, are not controversial or in issue in this proceeding. The propositions are as follows.

75    First, the defendant may be liable if they knowingly procured or induced the breach of fiduciary duty. It is unnecessary to consider this form of liability as KTC does not allege that Mr Bullock and G+T are liable on this basis. There is no allegation of inducement.

76    Second, the defendant may also be liable if the defendant assists in the breach of fiduciary duty with knowledge that the breach was a “dishonest and fraudulent design”: Farah Constructions Pty Limited v Say-Dee Pty Limited (2007) 230 CLR 89; [2007] HCA 22 at [160]-[163], [179]; Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [74]-[75], [78]-[79], [106]-[100], [122]-[125].

77    Third, the “assistance” or “participation” provided by the defendant must be “facilitative conduct or activity which is more than mere knowledge or notice of the breach of duty”: Re-Engine Pty Ltd (in liq) v Fergusson (2007) 209 FLR 1; [2007] VSC 57 at [117].

78    Fourth, the defendant’s “knowledge” must be one of five kinds: “actual knowledge”; “wilfully shutting one’s eyes to the obvious”; “wilfully and recklessly failing to make such inquiries as an honest and reasonable [person] would make”; “knowledge of circumstances which would indicate the facts to an honest and reasonable [person]”; or “knowledge of circumstances which would put an honest and reasonable [person] on inquiry”: Farah at [174]-[178], citing Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1992] 4 All ER 161 at 235, 242–3.

79    The two propositions that require some further consideration are the one that requires there to be a “dishonest and fraudulent design” and the one that concerns “assistance”.

80    As to the former, KTC submitted that the state of the law in Australia concerning the meaning of a “dishonest and fraudulent design” is unsettled, largely as a result of the judgment of Drummond AJA (with whom Carr AJA relevantly agreed) in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 at [2112]-[2125]. It is, however, unnecessary to give this issue any detailed consideration. It suffices to say that the preponderance of authority now is that the reasoning of Drummond AJA in Bell as to the meaning of “dishonest and fraudulent design” should not be followed and that “dishonesty” in this context means, in essence, “a transgression of ordinary standards of honest behaviour”: Hasler at [124] (Leeming JA with whom Gleeson JA agreed at [9]-[10]; Barrett JA not deciding at [4]); see also Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 at [71] (Gageler J); Zibara v Ultra Management (Sports) Pty Ltd (2021) 283 FCR 18; [2021] FCAFC 4 at [103], [107] (McKerracher and Anderson JJ) and [254] (Derrington J).

81    The proposition concerning assistance may also be dealt with shortly. KTC submitted that a solicitor can relevantly assist a dishonest and fraudulent design by drafting agreements which give effect to that design. KTC relied, in support of that submission, on the decision of the House of Lords in Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366. That case primarily concerned issues of vicarious liability and contribution. It may nevertheless be accepted that a solicitor can assist a dishonest and fraudulent design by drafting documents which facilitate or give effect to that design. As the reasoning of Lord Nicholls of Birkenhead in Dubai Aluminium (at 381) makes clear, however, that assistance will only “give rise to equitable liability” on the part of the solicitor when it is “coupled with dishonesty”; that is, where the solicitor knows (in the requisite sense) that the documents that he or she is drafting are in furtherance of a dishonest and fraudulent design. The solicitor in question in Dubai Aluminium was alleged to have been a party to a criminal conspiracy.

82    KTC alleges that Mr Bullock assisted in the breaches of fiduciary duties by Mr David with knowledge that the breaches were, or formed part of, a dishonest and fraudulent design. As will be seen, however, there is a considerable degree of ambiguity in the pleading as to whether there was a single dishonest and fraudulent design, or a number of separate and distinct dishonest and fraudulent designs that together made up an overarching dishonest and fraudulent design. Putting that issue to one side for the moment, the allegations against KTC and Mr Bullock mainly relate to two transactions, both involving share issues, which are said to involve dishonest breaches of fiduciary duties that Mr David owed to KTC.

83    The first transaction is the issue of 49,900 Emergent shares to RAAL which was the subject of the Emergent board meeting on 28 January 2010. The conduct engaged in by Mr David and the breaches of fiduciary duty resulting from it is defined in the pleading as the “David ECL Share Conduct”: PFASC [77]. The David ECL Share Conduct is alleged to have constituted a fraudulent and dishonest design: PFASC [77].

84    The second transaction is the issue of 60 Global Renewables shares to Singh Investments which was the subject of the Global Renewables board meeting on 22 April 2010. The conduct engaged in by Mr David and the breaches of fiduciary duty resulting from it is defined in the pleading as the “David GRL Share Conduct”: PFASC [78]. The David GRL Share Conduct is also alleged to have constituted a fraudulent and dishonest design: PFASC [78].

85    KTC alleges that Mr Bullock and G+T assisted Mr David “with the David ECL Share Conduct and the David GRL Share Conduct and the dishonest breaches of duties [that are alleged to have been committed by reason of that conduct] as part of a dishonest and fraudulent design”: PFASC [98]. It may be noted that the allegations as pleaded at [98] involve assisting a single dishonest and fraudulent design, though both the David ECL Share Conduct and the David GRL Share Conduct are also alleged to constitute dishonest and fraudulent designs. The conduct allegedly engaged in by Mr Bullock and G+T which is said to amount to assistance will be discussed in more detail later. It suffices at this point to note that it involves allegedly giving legal advice and assisting in preparing documents to effect those two share issues.

86    KTC also alleges that Mr Bullock and G+T “knew that they were engaged in conduct to further the David ECL Share Conduct, the David GRL Share Conduct and the dishonest breaches of his fiduciary duties … as part of a dishonest and fraudulent design”: PFASC [99]. It may again be noted that the allegations as pleaded at [99] involve knowledge in respect of a single dishonest and fraudulent design. The knowledge allegedly possessed by Mr Bullock and G+T which is said to constitute knowledge that Mr David’s breaches of duty were, or were part of, a dishonest and fraudulent is discussed in further detail later. It suffices at this point to note that the critical allegation is that Mr Bullock either “wilfully shut his eyes” to the obvious conclusion that, amongst other things, the legal advice that he gave in respect of the two relevant share issues was wrong (PFASC [75]), or alternatively that he had “knowledge of circumstances which would have indicated to an honest and reasonable person” that the legal advice he had given was wrong: PFASC [76]. As discussed later, KTC expressly disclaims any allegation that Mr Bullock actually knew that his legal advice was wrong.

87    There is also a third category of conduct relevant to the allegations against Mr Bullock and G+T. The third category of conduct appears to be pleaded in the alternative. KTC alleges that RAAL held all or half of the 49,900 shares issued to it on 28 January 2010 on constructive trust for KTC “as a knowing recipient of property obtained by breach of fiduciary duty”: PFASC [126]. In those circumstances, RAAL is alleged to have owed duties to KTC as constructive trustee. Those duties included a duty to transfer those shares to KTC or a duty to have Emergent rectify its register: PFASC [127]. KTC alleges that in failing to do either of those things, RAAL breached those duties: PFASC [128(a)]. It is also alleged that RAAL breached its duties by using its control of Emergent to the detriment of KTC by subsequently procuring the issue of Global Renewables shares to Singh Investments and later still causing Emergent to sell its Global Renewables shares to Ironbridge Capital rather than KTC. Those breaches of duties are alleged to have constituted a dishonest and fraudulent design on the part of RAAL. RAAL’s dishonest and fraudulent design is defined in the proposed pleading as the “Constructive Trust Fraudulent Scheme”: PFASC [129].

88    As for Mr Bullock and G+T, KTC alleges that they “assisted RAAL with the Constructive Trust Fraudulent Scheme and the dishonest breaches of trust … as part of a dishonest and fraudulent design”: PFASC [145]. The conduct allegedly engaged in by Mr Bullock and G+T which is said to amount to assistance in respect of this dishonest and fraudulent design is essentially the same as the conduct relied on in respect of the other alleged dishonest and fraudulent designs: giving legal advice and assisting in preparing documents in respect of the share issues to RAAL and Singh Investments: PFASC [144]-[149].

89    KTC also alleges that Mr Bullock and G+T “knew of the Constructive Trust Fraudulent Scheme” and that Mr Bullock knew that “he was engaged in conduct to further the Constructive Trust Fraudulent Scheme and the dishonest breaches of trust … as part of a dishonest and fraudulent design”: PFASC [146]. The particulars provided in support of those allegations are the same as those relied on in respect of Mr Bullock’s alleged knowledge of the other dishonest and fraudulent design or designs relating to the share issues themselves: PFASC [74]-[76].

JUDGMENT OF THE PRIMARY JUDGE

90    The reasons for judgment of Anastassiou J set out the primary judge’s decision and reasoning in considerable detail. It suffices, in those circumstances, to make the following brief points about the primary judge’s findings and reasons.

91    The essential reason given by the primary judge for refusing to grant KTC leave to file the proposed pleading was that it contained allegations against Mr Bullock and G+T which would be liable to be struck out: Judgment at [5]. His Honour made four critical findings which led to that conclusion.

92    First, his Honour found that the allegation that Mr Bullock and G+T advised Global Renewables and others that it was lawful to allot 60 Global Renewables shares to Singh Investments was “not adequately supported by the subscribed particulars to it”: Judgment at [19]. As noted earlier, KTC’s case that Mr Bullock gave that advice was based on an inference allegedly flowing from the fact that Mr Bullock had been retained to assist or advise in relation to other documents, one of which referred to the share issue. After carefully analysing each of the documents (see Judgment at [15]), the primary judge in effect concluded that the alleged inference was not open: Judgment at [16]-[17].

93    Second, the primary judge found that the allegation that Mr Bullock and G+T knew that the allotment of 60 Global Renewables shares to Singh Investments was for no consideration was not supported or supportable by the particulars provided in the pleading: Judgment at [20]-[24]. His Honour concluded that it was not possible to draw that inference simply from the fact that Mr Bullock had provided advice in relation to the funding of Global Renewables by RAAL and KTC, or from the fact that Mr Bullock had prepared and provided advice in respect of certain documents, including the resolution that was passed at the April 2010 Global Renewables board meeting: Judgment at [20]-[24].

94    Third, the primary judge noted that the parties had proceeded on the basis that the issues which arose in relation to the “ECL Share Conduct” were the same as those that arose in relation to the “GRL Share Conduct” and that he would “act on that assumption too”: Judgment at [24]. His Honour did not expand on that assumption or what flowed from it, though it would appear that it effectively amounted to a finding that the allegations concerning Mr Bullock’s knowledge of, and advice in relation to, the issue of 49,900 shares to RAAL on 28 January 2010 were not supported by the particulars. That appears from the next paragraph of his Honour’s reasons, where it is noted that “the consequence of the conclusions in the preceding section is that the allegation that G+T advised that the Emergent and [Global Renewables] share issues were lawful is not maintainable”: Judgment at [25].

95    Fourth, the primary judge concluded that the so-called Constructive Trust Fraudulent Scheme was “fundamentally incoherent”: Judgment at [40]. His Honour’s reasons for so concluding hinged essentially on the finding that the facts and circumstances surrounding the issue of 49,900 Emergent shares to RAAL on 28 January 2010 could not be said to demonstrate any dishonesty. His Honour reasoned that the decision to issue the shares could not be considered to involve any dishonesty given that it was not alleged that the other director who voted in favour of the resolution to issue the shares, Mr Mavromanolakis, had acted improperly, or had been duped or lied to by Mr David. His Honour concluded that in those circumstances, while what occurred might well have involved a breach of fiduciary duty which might be described as “aggressive”, “highhanded”, or even “brutal”, it could not be described as dishonest: Judgment at [38]-[39].

96    It should perhaps be noted that, while the primary judge’s finding that the pleadings did not adequately articulate or particularise a case of dishonesty in relation to the issue of 49,900 Emergent shares to RAAL occurred in the context of his Honour’s consideration of the Constructive Trust Fraudulent Scheme, the effect of the finding is that the allegations in the pleading concerning the dishonesty of the David ECL Share Conduct also cannot be sustained. Those allegations, which culminate in the allegations against Mr Bullock and G+T at [98] and [99] of the pleading, are premised on the allegation that Mr David’s breaches of fiduciary duty in respect of the Emergent share issue were dishonest. His Honour effectively found that that allegation could not be sustained.

97    The primary judge accordingly concluded, in effect, that the pleading did not disclose a reasonable case against Mr Bullock and G+T and that no further opportunity should be afforded to KTC to file a pleading that did. Indeed, his Honour concluded that “KTC’s continuing inability to plead the case is a potential marker that it does not have a case against G+T”: Judgment at [42]. His Honour accordingly dismissed the proceeding against Mr Bullock and G+T: Judgment at [43].

APPEAL grounds and notice of contention

98    KTC filed, as it was required to do under r 35.12(2)(d) of the Rules, a draft notice of appeal annexed to its application for leave to appeal. Mr Bullock and G+T filed a notice of contention. Given the grant of leave to appeal, the draft notice of appeal may be taken to have been filed as the notice of appeal.

KTC’s draft notice of appeal

99    KTC’s draft notice of appeal contains 16 grounds of appeal. Those grounds of appeal essentially challenge seven aspects of the primary judge’s findings or reasons.

100    Grounds 1 and 2 challenge the primary judge’s finding (Judgment at [24]) that the parties had proceeded on the basis that the issues which arose in relation to the “ECL Share Conduct” (that is, the conduct relating to the issue of the Emergent shares) were the same as those that arose in respect of the “GRL Share Conduct (that is, the conduct relating to the issue of the Global Renewables shares). KTC contended that the issues were not the same and that the primary judge therefore erroneously conflated the issues relating to the two share issues and should have separately considered them.

101    Grounds 3 to 5 challenge the primary judge’s finding to the effect that, while Mr David’s conduct in relation to the issue of 49,900 Emergent shares to RAAL may have involved breaches of his fiduciary duty, it did not involve any dishonesty. KTC contended that that finding was wrong, that the fact that Mr Mavromanolakis was not lied to or duped did not mean that the conduct could not be dishonest and that the primary judge should have found that the pleading disclosed a reasonable case that the conduct concerning the Emergent share issue constituted a dishonest and fraudulent scheme.

102    Grounds 6 and 7 challenge the primary judge’s findings in respect of the Constructive Trust Fraudulent Scheme. KTC contended that the pleading discloses that that conduct constituted a dishonest and fraudulent design even if, as the primary judge found, the conduct concerning the issue of Emergent shares could not be said to be a dishonest and fraudulent scheme.

103    Grounds 8 and 9 challenge the primary judge’s finding that the particulars in the pleading were inadequate to support an inference that Mr Bullock and G+T advised that it was lawful to issue 60 Global Renewables shares to Singh Investments. KTC contended that the primary judge should have found that the pleading disclosed a reasonable cause of action in that regard.

104    Grounds 10 and 11 would appear to involve the contention that the primary judge, having found that the pleading did not disclose a reasonable case that Mr Bullock and G+T advised that the issue of Global Renewables shares to Singh Investments was lawful, then failed to address an additional or alternative element of KTC’s case. That additional element was that Mr Bullock and G+T could be found to have assisted Mr David’s breaches of duty in respect of the Global Renewables share issue on the basis that they assisted in the preparation of documents in respect of that share issue.

105    Grounds 12 to 14 challenge the primary judge’s finding that the particulars in the pleading were incapable of supporting the pleaded inference that Mr Bullock and G+T knew that no consideration was paid in respect of the 60 Global Renewables shares that were issued to Singh Investments. KTC contended that the primary judge should have found that a reasonable case in respect of that allegation was disclosed in the pleading.

106    Grounds 15 and 16 contend that, even if the proposed pleading did not disclose a reasonable case against Mr Bullock and G+T, the primary judge should nevertheless have granted leave to file the pleading against the other respondents, Mr David, Mr Singh and XALT, none of whom opposed the grant of leave.

Mr Bullock and G+T’s notice of contention

107    The notice of contention filed by Mr Bullock and G+T contains three grounds. Those grounds, read together, appear to attack the allegation in the pleading that Mr Bullock wilfully shut his eyes to the obvious conclusion that the legal advice that he had given – to the effect it was lawful to issue 49,900 Emergent shares to RAAL and lawful to issue 60 Global Renewables shares to Singh Investment – was wrong. The main thrust of the challenge to this aspect of the pleading is that it is incoherent to, on the one hand, disclaim any allegation that Mr Bullock actually knew that his advice was wrong, and yet on the other hand assert that he wilfully shut his eyes to the correctness of his own advice. Mr Bullock and G+T contended that, in effect, the proposed pleading simply asserted that Mr Bullock was negligent.

RELEVANT PRINCIPLES – STRIKING OUT AND SUMMARY DISMISSAL

108    It is useful, before addressing the appeal grounds and the merits of the primary judge’s judgment generally, to address some of the relevant principles concerning the amendment and striking out of pleadings and summary dismissal. The parties gave limited attention to those principles.

109    The effect of rr 16.51 and 16.53 of the Rules is that, other than in circumstances not applicable to this case, a party must apply for the leave of the Court to amend a pleading.

110    The Court’s power to grant leave to amend is broad and has the remedial objective of ensuring that any defect in the pleadings is cured and that the real questions in the controversy are properly agitated: Caason Investments Pty Ltd v Cao (2015) 236 FCR 322; [2015] FCAFC 94 at [20] (Gilmour and Foster JJ); Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [14]. The power must be exercised in a “way that best promotes the Court’s overarching purpose to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible”: Caason at [19] and the cases cited therein; s 37M(3) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). The object of the Court is “not to punish parties for mistakes made in the conduct of their case, but to correct errors with the result that a decision can be made on the real matters in controversy”: Clough & Rogers v Frog (1974) 4 ALR 615 at 618, quoting Cropper v Smith (1884) 26 Ch D 700 at 710; Caason at [20].

111    Leave to amend should generally be granted unless the proposed amendment is futile, including, for example, because the issue sought to be raised by the amendment has no reasonable prospects of success, or would be liable to be struck out as not raising a reasonable cause of action, or where the amendment would cause substantial prejudice or injustice to the opposing party in a way that cannot be compensated by the award of costs: Research in Motion Ltd v Samsung Electronics Australia Pty Limited (2009) 176 FCR 66; [2009] FCA 320 at [21]-[22]; Medich v Bentley-Smythe Pty Ltd [2010] FCA 494 at [8]; Caason at [21].

112    The primary judge refused to grant KTC leave to amend the pleading essentially because the proposed amended pleading, if permitted to be filed, would be liable to be struck out. It is accordingly necessary to have regard to the rules and principles relating to the striking out of pleadings.

113    The starting point is r 16.02(1) and (2) of the Rules which specifies the general requirements for a pleading. It provides as follows:

(1)    A pleading must:

(a)    be divided into consecutively numbered paragraphs, each, as far as practicable, dealing with a separate matter; and

(b)    be as brief as the nature of the case permits; and

(c)    identify the issues that the party wants the Court to resolve; and

(d)    state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial, but not the evidence by which the material facts are to be proved; and

(e)    state the provisions of any statute relied on; and

(f)    state the specific relief sought or claimed.

(2)    A pleading must not:

(a)    contain any scandalous material; or

(b)    contain any frivolous or vexatious material; or

(c)    be evasive or ambiguous; or

(d)    be likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fail to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or

(f)    otherwise be an abuse of the process of the Court.

114    In relation to the requirement in r 16.02(1)(d) that the pleading state the “material facts” relied on, it has been said that material facts must be pleaded with a degree of specificity which is sufficient to convey to the opposite party the case that that party has to meet and that a “bare conclusion” is ordinarily not a proper allegation: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1994) 217 ALR 226; [1994] FCA 636 at 235. A pleading that “simply pleads a conclusion is embarrassing and should not be permitted to stand”: Young Investments Group Pty Ltd v Mann (2012) 293 ALR 537; [2012] FCAFC 107 at [7].

115    It is also relevant in this case to have regard to r 16.42 of the Rules, which provides that a party who pleads fraud, misrepresentation, unconscionable conduct, breach of trust, wilful default or undue influence, must state in the pleading particulars of the facts on which the party relies. There could be little doubt that an allegation that a person has assisted another person to breach a fiduciary duty with knowledge that the breach was a dishonest and fraudulent design falls within this rule.

116    Putting r 16.42 to one side, it is in any event “fundamental, and long established, that if a case of fraud is to be mounted, it should be pleaded specifically and with particularity”: Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [26].

117    Rule 16.21 of the Rules provides, in effect, that a pleading that fails to meet any of the requirements in r 16.02 may be struck out. It provides as follows:

(1)    A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:

(a)    contains scandalous material; or

(b)    contains frivolous or vexatious material; or

(c)    is evasive or ambiguous; or

(d)    is likely to cause prejudice, embarrassment or delay in the proceeding; or

(e)    fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or

(f)    is otherwise an abuse of the process of the Court.

118    Rules 16.02 and 16.21 must be interpreted and applied in light of s 37M of the FCA Act, which in summary provides that the overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.

119    The word “vexatious” in the context of rules such as r 16.21 is an “omnibus expression” that includes material which is scandalous, discloses no reasonable cause of action, is oppressive or embarrassing, or the inclusion of which is otherwise an abuse of the processes of the Court: Gallo v Attorney-General (Vic) (Full Court of the Supreme Court of Victoria, Starke J, with whom Crockett and Beach JJ agreed at [12], 4 September 1984), referred to with approval in Mathews v State of Queensland [2015] FCA 1488 at [87]. Material in a pleading would also be considered to be vexatious or frivolous if it was included in the pleading with the intention of annoying or embarrassing, or for a collateral purpose, or if it raises matters that are “obviously untenable or manifestly groundless”: Attorney-General v Wentworth (1988) 14 NSWLR 481 at 491; see also Von Reisner v Commonwealth (2009) 177 FCR 531; [2009] FCAFC 97 at [27].

120    A pleading is likely to cause prejudice or embarrassment, for the purposes of r 16.21(1)(d) of the Rules, if it is susceptible to various meanings, contains inconsistent allegations, includes various alternatives which are confusingly intermixed, contains irrelevant allegations or includes defects which result in it being unintelligible, ambiguous, vague or too general: Bartlett v Swan Television & Radio Broadcasters Pty Ltd [1995] ATPR 41-434; Spiteri v Nine Network Australia Pty Ltd [2008] FCA 905 at [22]; Fair Work Ombudsman v Eastern Colour Pty Ltd [2011] FCA 803 at [18]; Shelton v National Roads and Motorists Association Ltd (2004) 51 ACSR 278; [2004] FCA 1393 at [18]. Such a pleading could equally be characterised as evasive or ambiguous for the purposes of r 16.21(1)(c) of the Rules.

121    A pleading may be considered to be embarrassing if it suffers from narrative prolixity or irrelevancies to the point that it is not a pleading to which the other party can reasonably be expected to plead to: Fuller v Toms (2012) 247 FCR 440; [2012] FCA 27 at [80]-[84]. A party cannot be expected to respond to mere context, commentary, “history, narrative material or material of a general evidentiary nature”: Fuller v Toms at [83].

122    A pleading may also be struck out as embarrassing if it is plain that the pleading party cannot lawfully call any evidence at the hearing to substantiate the pleading: J C Techforce Pty Ltd & Steinhardt v Pearce, Neville & Oke Industrial Pty Ltd (1996) 138 ALR 522 at 531.

123    A “reasonable cause of action”, for the purposes of r 16.21(1)(e) of the Rules, is a cause of action that has some chance of success having regard to the allegations pleaded: Polar Aviation Pty Ltd v Civil Aviation Safety Authority (2012) 203 FCR 325; [2012] FCAFC 97 at [42]-[43]. A cause of action cannot be struck out merely on the basis that it appears to be weak: Allstate at 236.

124    If substantial parts of a pleading are struck out, the Court may strike out the entire pleading on the basis that the “residue would be confusing”: Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 22 FCR 305 at 323.

125    Normally the power to strike out should be exercised only in plain and obvious cases, where no reasonable amendment could cure the alleged defect or deficiency: Allstate at 236. The power is discretionary and should be employed sparingly and only in a clear case “lest one deprive a party of a case which in justice it ought to be able to bring”: Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164 at 175.

126    The application which was before the primary judge was an application to amend, not an application for summary dismissal. The effect of the orders made by his Honour was, however, effectively to summarily dismiss the proceedings commenced by KTC, at least insofar as Mr Bullock and G+T were concerned. It is, in those circumstances, useful to have regard to some of the principles that apply in relation to summary dismissal.

127    Subsection 31A(2) of the FCA Act relevantly provides that the Court may give judgment for a party if the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding. Rule 26.01 of the Rules, which also deals with summary judgment, provides that a party may apply to the Court for an order that judgment be given against another party on grounds that essentially mirror the grounds for striking out a pleading in r 16.21 of the Rules.

128    The relevant principles in relation to summary judgment or dismissal under s 31A of the FCA Act were considered by the High Court in Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28 and have been discussed in numerous judgments in this Court. They may be summarised as follows.

129    First, s 31A of the FCA Act authorises summary disposition of proceedings “on a variety of bases under its general rubric”, including, but not limited to: where the pleading discloses no reasonable cause of action and the deficiency in that regard is “incurable”; where “there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment”; and the “longstanding category of cases which are ‘frivolous or vexatious or an abuse of process’”: Spencer at [22] (French CJ and Gummow J).

130    Second, the power to summarily dismiss a proceeding is to be distinguished, in its application to deficient pleadings, from rules such as r 16.21 of the Rules: Spencer at [23] (French CJ and Gummow J). Where the evidence shows that a person may have a reasonable cause of action or reasonable prospects of success, but the person’s pleading does not disclose that to be the case, the Court may be empowered to strike out the pleading under r 16.21, but is not empowered to summarily dismiss the proceeding under s 31A of the FCA Act: see White Industries Aust Ltd v Commissioner of Taxation (2007) 160 FCR 298; [2007] HCA 511 at [47], referred to in Spencer at [23]. That said, a “failure after ample opportunity to plead a reasonable cause of action may suggest that none exists and therefore that the applicant has no reasonable prospects of success”: White Industries at [47].

131    Third, an applicant may have no reasonable prospect of successfully prosecuting the proceeding even if it cannot be concluded that the proceeding is hopeless or bound to fail: Spencer at [17] (French CJ and Gummow J). The inquiry required under s 31A is “not an enquiry directed to whether a certain and concluded determination could be made that the proceeding would necessarily fail”: Spencer at [52] (Hayne, Crennan, Kiefel and Bell JJ).

132    Fourth, the “exercise of powers to summarily terminate proceedings must always be attended with caution”, whatever may be the basis upon which that disposition is sought: Spencer at [24] (French CJ and Gummow J). It is not a power “to be exercised lightly”: Spencer at [60] (Hayne, Crennan, Kiefel and Bell JJ). There must be a “high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way”: Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256; [2006] HCA 27 at [46], referred to in Spencer at [24] (French CJ and Gummow J).

ANALYSIS OF THE PROPOSED PLEADING

133    I propose to address the merits of the grounds of appeal and notice of contention in the course of analysing the adequacy of the pleading generally.

134    Upon close analysis, the proposed pleading against Mr Bullock and G+T, which involves serious allegations of fraud and dishonesty, is manifestly defective and deficient on a number of fronts. It is, in critical parts, opaque, obscure and ambiguous. Critical allegations are frequently expressed in bare conclusionary terms, or are unsupported by meaningful particulars, or supported by prolix particulars that, upon analysis, provide no reasonable basis for the allegation they are said to support. The proposed pleading is, in short, a proverbial dog’s breakfast.

135    The proposed pleading calls to mind the observations of French CJ, Gummow, Hayne and Kiefel JJ in Forrest (at [27]) that the task of the pleader “does not extend to planting a forest of forensic contingencies and waiting until final address or perhaps even an appeal hearing to map a path through it”. The proposed pleading lays a minefield, rather than plants a forest, of forensic contingencies to the point that it would be unfair and oppressive to require Mr Bullock and G+T to plead to it. It is no easy task to map a path through that minefield. What follows is my best attempt.

The alleged dishonest and fraudulent designs

136    Given that the essence of the case against Mr Bullock and G+T is that they assisted in a breach of fiduciary duty with knowledge that the breach was, or was part of, a dishonest and fraudulent design, the obvious starting point is to endeavour to identify from the pleading exactly what is said to constitute the alleged dishonest and fraudulent design. That is no mean feat in the case of the proposed pleading. On my analysis, there are at least six possible dishonest and fraudulent designs alleged in the pleading and it is somewhat unclear precisely which of those designs were allegedly knowingly assisted by Mr Bullock and G+T.

137    The first dishonest and fraudulent design is the one defined as the David ECL Share Conduct: PFASC [77]. The conduct that is said to constitute the David ECL Share Conduct was discussed in some detail earlier. The point to note for present purposes is that that conduct, and the dishonest breaches of duty said to arise from that conduct, is itself said to constitute a dishonest and fraudulent design: PFASC [80].

138    The second dishonest and fraudulent design is the one defined as the David GRL Share Conduct: PFASC [78]. The conduct said to constitute the David GRL Share Conduct was also discussed in detail earlier. That conduct, and the dishonest breaches of duty said to arise from that conduct, is also itself said to constitute a dishonest and fraudulent design: PFASC [80].

139    The third dishonest and fraudulent design is defined as the David GRL Share Sale: PFASC [79]. The David GRL Share Sale conduct encompasses Mr David’s role in ultimately causing shares in Global Renewables to be sold to Ironbridge Capital in December 2010, rather than to KTC. That conduct is also said to constitute a separate dishonest and fraudulent design: PFASC [80].

140    The fourth dishonest and fraudulent design is defined as the David Fraudulent Scheme: PFASC [80]. It is constituted by the combined conduct involved in the David ECL Share Conduct, the David GRL Share Conduct and the David GRL Share Sale: PFASC [80].

141    The fifth dishonest and fraudulent design arises from the way in which the critical allegations of knowing assistance are worded in [98] and [99] of the proposed pleading. To make the point, it is necessary to set out those paragraphs of the proposed pleading in full.

By giving the G+T Legal Advice and advice that it was lawful to make the ECL Share Issue, and by giving legal advice that it was lawful to make the GRL Share Issue, and by assisting in preparing the documentation to effect those transactions, Bullock and G+T assisted David with the David ECL Share Conduct and the David GRL Share Conduct and the dishonest breaches of his fiduciary duties as set out in paragraph 82 above as part of a dishonest and fraudulent design.

By reason of the matters in paragraphs 74, 75 and 76 Bullock and G+T knew that they were engaged in conduct to further the David ECL Share Conduct, the David GRL Share Conduct and the dishonest breaches of his fiduciary duties as set out in paragraph 82 above as part of a dishonest and fraudulent design.

(Underlining, denoting proposed amendment, in original)

142    The point is that the critical allegations against Mr Bullock and G+T in these paragraphs is that they assisted Mr David with the David ECL Share Conduct, the David GRL Share Conduct and the breaches of fiduciary duties pleaded in [82] of the pleading as part of a single dishonest and fraudulent design. It is somewhat unclear whether that single dishonest and fraudulent design was one simply constituted by the David ECL Share Conduct and the David GRL Share Conduct, or whether it involved something more. If one goes to [82] of the pleading, the breaches of fiduciary duty outlined in that paragraph include breaches flowing from the David GRL Share Sale. That may mean that the dishonest and fraudulent design that Mr Bullock and G+T are alleged to have knowingly assisted is the one defined as the David Fraudulent Scheme, though that is far from clear.

143    The ambiguity of this central aspect of the proposed pleading was highlighted during the hearing of the appeal. When pressed to precisely identify the dishonest and fraudulent designs or schemes that Mr Bullock and G+T were alleged to have knowingly assisted, Senior Counsel for KTC initially embraced [80] of the proposed pleading and said that there were individual dishonest and fraudulent designs – the David ECL Share Conduct and the David GRL Share Conduct – and that together they also constituted a dishonest and fraudulent design. The suggestion appeared to be that Mr Bullock and G+T knowingly assisted each of those dishonest and fraudulent designs.

144    Senior Counsel for KTC later conceded, however, that KTC had not pleaded any “connective conduct between the three schemes” identified in [80] of the pleading and suggested that the words “and together constituted a dishonest and fraudulent scheme” could be deleted from [80]. He then submitted that the allegation in [98] and [99] of the pleading was that Mr Bullock and G+T knowingly assisted only the conduct defined as the David ECL Share Conduct and the David GRL Share Conduct. There are at least two problems with that submission. The first problem is that it ignores the fact that [98] and [99] also refer to the “dishonest breaches of duties as set out in paragraph 82”, which includes breaches relating to the David GRL Share Sale conduct described in [79]. The second problem is that it is inconsistent with another submission made by Senior Counsel for KTC, which was that the case could go forward “simply based upon the ECL share conduct”. That ignores the fact that [98] and [99] do not allege knowing assistance in the two schemes in the alternative, but allege knowing assistance in a single dishonest and fraudulent design.

145    This manifest ambiguity is not a mere drafting technicality. It goes to the very heart of the pleaded case against Mr Bullock and G+T. It cannot be remedied by minor surgery to the proposed pleading. More fundamentally, it remains entirely unclear exactly what KTC’s case is in respect of the alleged fraudulent design or designs. In my view, this ambiguity in the proposed pleading would itself provide a sound basis for refusing to grant KTC leave to file the proposed pleading.

146    There is also a sixth alleged dishonest and fraudulent design. It is the one defined as the Constructive Trust Fraudulent Scheme: PFASC [129]. It is comprised of the dishonest breaches of fiduciary duty by RAAL pleaded in [128]. As discussed earlier, those breaches involve: RAAL’s alleged refusal to transfer 49,900 Emergent shares to KTC; RAAL’s failure to take steps to have Emergent rectify its register; RAAL’s conduct in defending KTC’s petition in the Grand Court; and RAAL’s conduct in using its control of Emergent to procure the issue of Global Renewable shares to Singh Investments and cause Emergent to sell its Global Renewables shares to Ironbridge Capital instead of to KTC.

The “David ECL Share Conduct”

147    The conduct said to constitute the David ECL Share Conduct was described in some detail earlier in these reasons. That conduct is said by KTC to itself constitute a dishonest and fraudulent design and to form part of the conduct that constituted a broader dishonest and fraudulent design. KTC alleges that Mr Bullock and G+T assisted in the breaches of fiduciary duty arising from the conduct knowing that the breaches were, or were part of, an alleged dishonest and fraudulent design.

148    The primary judge found that the proposed pleading did not properly plead or disclose a reasonable case that the David ECL Share Conduct was dishonest. His Honour also appears to have concluded, albeit in brief terms, that the proposed pleading did not disclose a reasonable case that Mr Bullock and G+T possessed the requisite knowledge of the design or its dishonesty. Those findings are broadly the subject of grounds 1 to 5 in the draft notice of appeal. The knowledge elements of KTC’s case against Mr Bullock and G+T in respect of the David ECL Share Conduct are also the subject of the notice of contention.

149    The issues that arise for consideration are broadly as follows: first, whether the proposed pleading discloses a reasonable case that the David ECL Share Conduct was, or was part of, a dishonest and fraudulent design; second, whether the proposed pleadings discloses a reasonable case that Mr Bullock and G+T assisted that dishonest and fraudulent design in circumstances where they possessed the requisite knowledge of its dishonest and fraudulent nature; and third, whether the proposed pleading of these elements of the cause of action against Mr Bullock and G+T are otherwise embarrassing or likely to cause prejudice in the sense discussed earlier.

Dishonest and fraudulent?

150    As was made abundantly clear in both Farah (at [184]) and Hasler (at [57]), not all breaches of fiduciary duty involve dishonesty or fraud and only those that involve a dishonest and fraudulent design can engage Barnes v Addy liability. Accepting, for present purposes, that the proposed pleading is capable of supporting a case that the David ECL Share Conduct involved a breach or breaches of fiduciary duty owed by Mr David, on what basis is it alleged that the conduct was relevantly dishonest and fraudulent?

151    The proposed pleading does not make that very clear. It simply alleges or asserts that the David ECL Share Conduct was dishonest and was part of a dishonest and fraudulent design. The premise seems to be that the issue of Emergent shares to RAAL was unlawful, though it is not made clear why that is so. The suggestion seems to be that it was unlawful because Emergent’s interest in Global Renewables was valuable but that no valuation of the Emergent shares was obtained (see for example PFASC [74(i) and (l)]). Otherwise, the complaints concerning the share issue would seem to be that the Kazals were not told about the G+T Legal Advice and were not told that the resolution relating to the issue of shares to RAAL was to be considered and voted on at the board meeting that they were invited to attend.

152    The primary judge found that the proposed pleading did not disclose a reasonably arguable case that the David ECL Share Conduct was dishonest and fraudulent essentially because the pleading did not grapple with the involvement of the independent director, Mr Mavromanolakis. In particular, it is not alleged in the proposed pleading that Mr Mavromanolakis was a party to the dishonest and fraudulent design, or was lied to or deceived. That led the primary judge to conclude that the dishonest scheme alleged by KTC was “fundamentally incoherent”: Judgment at [40].

153    I have some misgivings concerning the primary judge’s reasoning based on the involvement of Mr Mavromanolakis. I have some difficulty accepting that the involvement of Mr Mavromanolakis and the fact that it is not alleged that he was either involved in the dishonesty, or that he was misled or deceived by Mr David, means that the allegation of dishonesty in respect of the David ECL Share Conduct is fundamentally incoherent. I am nevertheless not persuaded that the primary judge erred in principle in concluding that the proposed pleading did not disclose a reasonably arguable case that the breaches of duty arising from the issue of Emergent shares to RAAL constituted or formed part of a dishonest and fraudulent design.

154    KTC contended that the failure to allege that Mr Mavromanolakis was a party to any dishonest and fraudulent design, or had been lied to or deceived by Mr David, does not mean that Mr David’s breach cannot be dishonest in the relevant sense. Like the primary judge, however, I find it difficult to see how the putting and passing of the resolution of the Emergent board on 28 January 2010 could be seen to be dishonest and fraudulent in circumstances where an independent director, apparently possessed of all the relevant information, also voted in favour of the resolution. Given the absence of any allegation that Mr Mavromanolakis had acted dishonestly, or had been misled or deceived by Mr David, it must be presumed that Mr Mavromanolakis acted honestly when he voted in favour of the resolution. It is difficult to see how it could be concluded that Mr David’s breaches of duties could be said to be dishonest in those circumstances.

155    Putting the involvement of Mr Mavromanolakis to one side, there are other reasons to doubt that the facts pleaded in respect of the David ECL Share Conduct disclose a reasonably arguable case of dishonesty or fraud on the part of Mr David. I do not see how the fact that the G+T Legal Advice was not shown to the Kazals could necessarily be seen to be dishonest in circumstances where that advice was sought and obtained by Mr David and RAAL a month or more before the board meeting. That advice concerned how Mr David and RAAL could protect their investment in Emergent. It is not entirely clear how it could be said to be dishonest not to disclose that advice to KTC and the Kazals in those circumstances.

156    Much the same can be said about the alleged non-disclosure of the loan agreement, the letter of demand and the fact that a resolution concerning the share issue would be put to the board at the board meeting on 28 January 2010. As for the loan agreement and the letter of demand, they were matters involving the management of Emergent which, under the terms of the alleged joint venture, KTC had entrusted to Mr David. As for the notice of the board meeting, the fact remains that the Kazals were invited to the board meeting and, for reasons unknown, did not attend it.

157    The non-disclosure by Mr David of the loan agreement, letter of demand and the proposed resolution could, in the absence of any reasonable explanation by Mr David, most likely be characterised as sharp practice. More significantly, it is reasonably arguable that that conduct undermined the validity of the resolution and was capable of establishing a breach of fiduciary duty by Mr David. That appears to have been accepted in the proceedings in the Cayman Islands. I do not, however, see how that conduct could necessarily be said to be dishonest or to constitute a dishonest and fraudulent design. That is particularly so given that the board meeting and resolution were documented and the Kazals and KTC were subsequently provided with copies of those documents.

158    I am not, in all the circumstances, persuaded that the primary judge erred in principle in finding that the proposed pleading failed to disclose a reasonable and coherent case that the conduct surrounding the issue of Emergent shares to RAAL was dishonest and fraudulent. I should emphasise, however, that even if the primary judge did err in arriving at this particular conclusion, it does not follow that his Honour erred in refusing to grant leave to KTC to file the proposed proceeding. That is because his Honour found a number of other significant faults or deficiencies in the proposed pleading. In my opinion, those other deficiencies provided a much sounder basis for the refusal of leave. They go to the heart of the question whether the pleading discloses a reasonable cause of action against Mr Bullock and G+T.

159    It should also be added that KTC submitted, in the context of the primary judge’s findings concerning the Emergent share issue, that the primary judge should in any event have granted leave to amend “given the factual complexity and uncertainty in the law” in relation to what might constitute a dishonest and fraudulent design. There is no merit in that submission. The facts are not overly complex, or at least not so complex that they cannot be properly pleaded. Even if they were, that alone would not provide a proper basis for leave to amend given the many other difficulties with the pleaded case. It is also doubtful that it could be said, following Hasler, that there is any real uncertainty in the law. Even if there was, it would not, in the particular circumstances of this case, justify the grant of leave to file the proposed amended pleadings, particularly given the other fundamental problems with the pleading.

Mr Bullock’s alleged assistance

160    What is it that Mr Bullock and G+T are alleged to have done to assist the David ECL Share Conduct? Two things: first, giving the G+T Legal Advice; and second, “assisting in preparing the documentation to effect” the share issue to RAAL. Upon close analysis, the pleading of both those elements of assistance is inadequate and embarrassing in the requisite sense.

161    The following points should be made concerning the G+T Legal Advice.

162    First, the advice was allegedly given orally by Mr Bullock to Mr David and Mr Mavromanolakis in November and early December 2009, and in an email Mr Bullock sent to Mr David and Mr Mavromanolakis on 17 November 2009. It follows that the advice was given almost two months before the resolution was put to and passed at the meeting of the Emergent board on 28 January 2010.

163    Second, and flowing in part from the first point, the effect of the advice was allegedly that it would be legal for RAAL to demand repayment of its loans from Emergent and, when no payment was made, to “dilute KTC’s shareholding”. The reference to diluting KTC’s shareholding may be taken to mean to issue further shares to RAAL. Importantly, there is no suggestion that the advice included the mechanics of how Mr David would go about causing Emergent to issue shares to RAAL should a demand be made and not met. There is, for example, no suggestion that Mr Bullock advised Mr David that he could or should refrain from telling KTC or the Kazals about the loan agreement, or the demand for repayment of the loans, or the resolution to issue the shares.

164    Third, as adverted to earlier in these reasons, there are suggestions in the proposed pleading that Mr Bullock both gave the G+T Legal Advice and also separately advised Mr David, RAAL and Mr Mavromanolakis that the share issue by Emergent was lawful: see [72(c)] and [98]-[99] of the PFASC. The particulars to [72(c)], however, simply refer back to the particulars to the allegation that Mr Bullock gave the G+T Legal Advice. It would seem, therefore, that there was no separate advice that the share issue was lawful. There are certainly no particulars of any other separate advice.

165    As for the allegation that Mr Bullock and G+T assisted in preparing the documentation to effect the Emergent share issue, that allegation is almost entirely devoid of any meaningful particulars. Such particulars that are given simply point to the fact that G+T rendered invoices to Global Renewables on various occasions between January 2009 and May 2010. That leaves the following important questions unanswered: first, what documents in respect of the Emergent share issue did G+T assist in preparing; second, exactly what assistance was provided; and third, when was that assistance provided?

166    There is also a faint suggestion elsewhere in the particulars that Mr Bullock “obtained instructions from [Mr] David in relation to the drafting of [amongst other things] the RAAL Loan Agreement”: particular (iv) to PFASC [74(e)]. It is, however, left entirely unclear as to when those instructions were obtained, whether Mr Bullock acted on those instructions and, if so, when. Likewise, there is a suggestion elsewhere in the proposed pleading that on 11 January 2010, Mr David sent an email to Mr Bullock requesting him to review a draft letter of demand: particular (iv) to PFASC [74(g) and (h)]. It is, however, unclear whether Mr Bullock received the email or acted on the instructions. It is entirely unsatisfactory for Mr Bullock and G+T to have to piece together the case supposedly made against them from fragments of particulars scattered seemingly randomly throughout the pleading.

167    Given the seriousness of the allegations against Mr Bullock and G+T, the pleading of the assistance allegedly provided is deficient in material respects. The more serious deficiencies, however, are in respect of the allegations of knowledge on the part of Mr Bullock in respect of the allegedly dishonest and fraudulent nature of the Emergent share issue.

Mr Bullock’s alleged knowledge

168    The proposed pleading contains a detailed list of what Mr Bullock is alleged to have known: PFASC [74]. The knowledge relevant to the alleged dishonesty of the Emergent share issue is: first, that the G+T Legal Advice was not disclosed to the Kazals; second, the Kazals did not know about the Emergent share issue at any time prior to 28 January 2010 and did not consent to it; third, Mr David did not inform the Kazals that the resolution to issue Emergent shares to RAAL was to be considered at the board meeting on 28 January 2010; fourth, the Kazals were not told that Mr David had “procured [Mr Mavromanolakis’] support” for the resolution; and fifth, no valuation of Emergent shares had been obtained: PFASC [74(g), (h) and (i)].

169    These critical allegations concerning knowledge are, however, almost entirely bereft of meaningful particulars.

170    As for the allegation to the effect that Mr Bullock and G+T knew that Mr David had not disclosed certain things to the Kazals prior to the 28 January 2010 meeting, that is said to be a conclusion that can be inferred from the following facts: first, that G+T was retained to advise Global Renewables on its funding by RAAL and KTC and Mr Bullock was the partner responsible for that advice; second, Mr Bullock received instructions from Mr David and not the Kazals in relation to that retainer; third, Mr David and Mr Mavromanolakis attended the meetings with Mr Bullock [on, it may be interpolated, November 2009 and 1 December 2009] when legal advice was given; and fourth, Mr David sent an email to Mr Bullock on 11 January 2010 in which he asked Mr Bullock to review a draft letter of demand: particulars (i) – (iv) to PFASC [74(g) and (h)].

171    I am unable to see how any of those facts, alone or in combination, could reasonably support an inference that Mr Bullock was aware that Mr David had failed to disclose to the Kazals any of the important aspects of the Emergent share issue. Mr Bullock’s involvement in the particularised matters, on close analysis, provides no basis for inferring that he knew that Mr David was going to conceal things from KTC and the Kazals. The alleged inference is, in truth, little more than speculation. The allegation that Mr Bullock possessed that knowledge is in my view vexatious and embarrassing in the relevant sense.

172    The allegation that Mr Bullock knew that no valuation had been obtained is no better. It is said to be an inference to be drawn from the fact that no valuation was obtained and that “a lawyer as experienced as [Mr] Bullock would have sought instructions in respect of any valuation of the Waste Facility in the provision of the legal services requested”: particulars to [74(i)] of the PFASC. The availability of the inference of knowledge from those facts would depend entirely on the nature of the “legal services requested”. If Mr Bullock had been requested to be intimately involved in all aspects of the proposed share issue, the inference may arguably follow. The difficulty, however, is that all that is alleged against Mr Bullock is that in late November and early December 2009 he gave some very general advice about the lawfulness of a possible share issue and that he obtained instructions, or was asked to review, two documents: a draft letter of demand and a loan agreement.

173    The alleged inference that Mr Bullock and G+T knew that no valuation had been obtained is again, upon analysis of the facts said to support that inference, no more than speculation. It is not an inference that is reasonably supported by the particularised facts.

174    The conclusion that the factual allegations that Mr Bullock knew both that Mr David had failed to disclose to the Kazals certain things about the Emergent share issue and that no valuation had been obtained is fatal to the two further critical allegations about Mr Bullock’s knowledge or state of mind relating to the Global Renewables share issue. Those allegations, which are in [75] and [76] of the proposed pleading, are: first, that Mr Bullock wilfully shut his eyes to the obvious conclusions that his legal advice that it was lawful for Emergent to issue shares to RAAL was wrong and that the share issue, if made, would constitute a dishonest breach of fiduciary duty by Mr David as part of a fraudulent design (PFASC [75(a) and (b)]; and second, in the alternative, that Mr Bullock had knowledge of circumstances which would have indicated those conclusions to an honest and reasonable person: PFASC [76(a) and (b)]. Both of those allegations rely on the allegations of knowledge in respect of the Emergent share issue in [74] of the proposed pleading which, for the reasons which have been given, are deficient and not supported by the particulars.

175    It should perhaps be added that there is also considerable force in the submission advanced by Mr Bullock and G+T to the effect that KTC’s allegation that Mr Bullock was wilfully blind about the correctness of his advice is incoherent and illogical. It may readily be accepted that a solicitor who knowingly gives false legal advice relating to a dishonest design could be said to have knowingly assisted that dishonest and fraudulent design. As has already been noted, however, KTC does not allege that Mr Bullock had actual knowledge that his legal advice was wrong. It is only alleged that he wilfully shut his eyes to the obvious conclusion that his advice was wrong. That is tantamount to an allegation of actual knowledge: Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 at 454, referred to in Farah at [174]. It is conceptually very difficult to see how a solicitor who does not have actual knowledge that legal advice given by him or her was wrong could nevertheless be said to have wilfully shut his or her eyes to the obvious conclusion that his or her advice was wrong. It is, however, unnecessary to reach a concluded position in respect of this argument.

176    I should also add that I see no merit in the submission by Mr Bullock and G+T to the effect that the pleading alleged no more than negligence by Mr Bullock. The proposed pleading alleges, in effect, that Mr Bullock shut his eyes to the obvious conclusion that if Mr David caused Emergent to issue shares to RAAL, that would constitute a dishonest breach of his fiduciary duties as part of a dishonest and fraudulent design: PFASC [75(b)]. That is not just an allegation of negligence. The problem for KTC, however, is that that allegation is based on allegations that Mr Bullock knew certain things which, upon analysis, are allegations that are not reasonably supported by the particulars.

177    In my view the particulars provided in respect of Mr Bullock’s relevant knowledge of the Emergent share issue are deficient and do not support the pleaded facts. More significantly, I do not accept that the pleaded facts disclose a reasonable or sustainable basis for alleging that Mr Bullock knew (in the relevant sense) that Mr David was engaged in a dishonest and fraudulent design in relation to the Emergent share issue and that he was assisting in that design. The proposed pleading does not disclose a reasonable or sustainable basis to allege that Mr Bullock either shut his eyes to the obvious conclusion that, in causing Emergent to issue shares to RAAL, Mr David dishonestly breached his fiduciary duties as part of a dishonest and fraudulent scheme, or was aware of facts that would have indicated that conclusion to an honest and reasonable person.

A reasonable cause of action?

178    For all the reasons just given, the proposed pleading does not disclose a reasonable cause of action against Mr Bullock and G+T that they knowingly assisted Mr David in respect of a dishonest and fraudulent design involving the Emergent share issue. The proposed pleading does not disclose a reasonable or sustainable factual basis for alleging that the Emergent share issue was a dishonest and fraudulent design, that that design was assisted by Mr Bullock and G+T, or that Mr Bullock and G+T knew the facts that allegedly made the design dishonest and fraudulent.

Other issues

179    The proposed pleading of a cause of action based on Mr Bullock knowingly assisting a dishonest and fraudulent design surrounding the Emergent share issue is also vexatious and embarrassing in the requisite sense. An allegation that a partner of a major and well-respected law firm assisted a client to engage in dishonest breaches of duty, or a dishonest and fraudulent design is an extremely serious allegation. For the reasons already given, the proposed pleading is anything but pellucid. The allegations against Mr Bullock concerning his knowledge of and assistance in the Emergent share issue are obscured by the repeated use of defined events or circumstances and particulars, scattered through the pleading, which are not only vague, general and ambiguous, but which upon even the most cursory analysis, disappear in a puff of smoke.

Conclusions in respect of appeal grounds 1-5

180    For the reasons already given, the primary judge was correct to hold that the proposed pleading did not disclose a reasonable case that the breaches of duty by Mr David in relation to the issue of the Emergent shares on 28 January 2010 were dishonest and fraudulent, or constituted a dishonest and fraudulent scheme. The primary judge did not err in the way asserted in appeal grounds 3 and 4 and KTC has not demonstrated that the primary judge should have made the finding in appeal ground 5.

181    As for appeal grounds 1 and 2, it is not correct to say that the primary judge conflated the issues which arose in connection with the ECL Share Conduct and the GRL Share Conduct. Rather, the primary judge acted on the assumption that the parties had proceeded on the basis that the issues which arose in relation to the ECL Share Conduct were the same as those which arose in relation to the GRL Share Conduct. It was on that basis that his Honour did not give detailed consideration to the question of whether the proposed pleading disclosed a reasonable basis for alleging that Mr Bullock and G+T possessed knowledge of the facts and circumstances which were alleged to make the breaches of duty in respect of the Emergent share issue a dishonest and fraudulent design. KTC did not contend, or at least did not contend in clear and unambiguous terms, that the parties did not proceed before the primary judge on the basis that the issues were the same. As will be seen, the issues raised by the pleading of the ECL Share Conduct were essentially the same as those raised by the GRL Share Conduct.

182    KTC relied on the fact that in the earlier pleadings judgment, the primary judge appeared to find that KTC had sufficiently alleged that Mr Bullock and G+T knew that Mr David and RAAL were engaged in a dishonest and fraudulent design in relation to the Emergent share issue: see pleadings judgment at [25]-[29]. That is not entirely correct. The passages in the pleading judgment relied on by KTC deal with a particular submission that had been made on behalf of Mr Bullock and G+T in respect of an earlier iteration of the proposed pleading. In that context, the primary judge stated that, subject to certain matters that he had dealt with earlier in the judgment, “it is sufficient that it [the pleading] alleges (in the various ways it has or will) that G+T knew that Mr David and RAAL were acting in breach of fiduciary duty as part of a dishonest and fraudulent design”: pleadings judgment at [28]. That says nothing about whether the different iteration of the proposed pleading which was the subject of the judgment under appeal contained sufficient facts and particulars to disclose a reasonably arguable case that Mr Bullock and G+T possessed the requisite knowledge.

183    Likewise, KTC is not relevantly assisted by the primary judge’s observations in the pleadings judgment at [34] that there was “something quite striking about these transactions and one’s interest can only be piqued by the fact that G+T is alleged to have advised that it was lawful” and that there was “a trial to be had here”. Those observations were subject to the stated condition that KTC satisfactorily deal with issues about the pleading earlier identified by his Honour. In any event, the pleadings judgment is not the subject of the appeal and, even if it was, I would not feel constrained by the fact that the primary judge’s interest was apparently piqued by the transactions. The fact that the transactions may be seen as “quite striking” says nothing about whether the serious allegations involving dishonesty levelled against Mr Bullock and G+T are reasonably capable of being sustained by the particulars.

The “David GRL Share Conduct”

184    The conduct said to constitute the David GRL Share Conduct was described in considerable detail earlier in these reasons. That conduct is again said by KTC to itself constitute a dishonest and fraudulent design and to form part of the conduct that constituted a broader dishonest and fraudulent design.

185    The primary judge found that the proposed pleading did not properly plead or disclose a reasonable case that Mr Bullock and G+T had advised that it was lawful for Global Renewables to issue 60 shares to Singh Investments in April 2010. His Honour also found that the proposed pleading did not disclose a reasonable case that Mr Bullock and G+T knew that the allotment was unsupported by consideration. It followed that the proposed pleading did not disclose a reasonable cause of action that Mr Bullock and G+T knowingly assisted any dishonest breaches of duty, or any dishonest and fraudulent design, relating to the issue of Global Renewables shares. Those findings by the primary judge in respect of the David GRL Share Conduct are the subject of appeal grounds 8 to 14.

186    The issues that arise for consideration in respect of the David GRL Share Conduct are similar to those just considered in respect of the David ECL Share Conduct: first, whether the proposed pleading discloses a reasonable case that the David GRL Share Conduct was, or was part of, a dishonest and fraudulent design; second, whether the proposed pleading discloses a reasonable case that Mr Bullock and G+T assisted that alleged design in circumstances where they possessed the requisite knowledge of its dishonest and fraudulent nature; and third, whether the proposed pleading of these elements of the cause of action against Mr Bullock and G+T are otherwise embarrassing or likely to cause prejudice in the sense discussed earlier.

Dishonest and fraudulent?

187    The primary judge did not make any finding about whether the pleading disclosed a reasonable basis for the allegation that Mr David’s conduct in causing or procuring Global Renewables to issue 60 shares to Singh Investments was dishonest and fraudulent, or part of a dishonest and fraudulent scheme. It is nevertheless useful to briefly consider the basis upon which it is alleged that Mr David’s conduct not only involved breaches of fiduciary duties, but constituted or was part of a dishonest and fraudulent scheme. That allegation would appear to be based almost entirely on the allegation that Global Renewables received no benefit or consideration for the shares it issued, or that any consideration it did receive was colourable or illusory: PFASC [78].

Mr Bullock’s alleged assistance

188    Mr Bullock and G+T are alleged to have done two things to assist Mr David in respect of the relevant share issue by Global Renewables. First, it is alleged that Mr Bullock and G+T advised Global Renewables, Emergent, Mr David and RAAL that it was lawful to make the share issue: PFASC [72(e)] and [98]. Second, it is alleged that Mr Bullock and G+T assisted in preparing the documentation to effect the share issue: PFASC [72(f)] and [98].

189    Does the proposed pleading disclose a reasonable case, or a reasonable basis for, those allegations? The short answer to that question is “no”.

190    The first problem is with the particulars provided in respect of the allegation that Mr Bullock and G+T advised that the share issue by Global Renewables was lawful. The particulars, in short, are hopeless. They simply assert that Mr Bullock was retained to draft and provide advice in relation to seven documents. One of those documents, identified by the defined term “GRL Share Issue”, would appear not to be a document at all. In any event, only one of the documents is said to refer to the share issue, though what it says about it is entirely unclear. The fact that Mr Bullock may at some later stage have drafted or provided advice about a document that simply refers to the share issue provides no reasonable basis for the allegation that he and G+T advised that the share issue was lawful.

191    It follows that in my view the primary judge was correct to conclude that the allegation that Mr Bullock and G+T provided that advice is not adequately supported by the particulars: Judgment at [19]. Appeal grounds 8 and 9 challenge that finding.

192    KTC submitted that it was open to infer that Mr Bullock gave the alleged advice from two facts or circumstances: first, Mr Bullock was a senior and highly qualified lawyer and it is an implied term of the lawyer-client retainer that the lawyer will protect the client’s interests in matters to which the retainer relates and; and second, G+T drafted various iterations of a shareholders agreement, one of which made a fleeting reference to the share issue. In KTC’s submission, the “changing terms” of the various shareholders agreements suggested that G+T provided advice about the proposed share issue. There is no merit in that submission. The factual basis of the alleged inference is so tenuous that the particulars amount to little more than speculation. In any event, the substance of that submission is not reflected in the pleading itself.

193    The second problem is that the particulars which are said to support the allegation that Mr Bullock assisted in preparing the documentation to effect the issue of the Global Renewables shares are equally hopeless. The particulars simply assert that G+T rendered invoices for legal services to Global Renewables during the period 22 January 2009 and 5 May 2010. They provide no hint whatsoever as to the identity of the documents which gave effect to the Global Renewables share issue which Mr Bullock allegedly “assisted in preparing”: PFASC [72(d)]. Even if it is assumed that those documents are the seven documents that are particularised in aid of the allegation that Mr Bullock advised that the share issue was valid, none of those documents appear to be documents that could be said to have effected the share issue.

194    As the primary judge pointed out, there is a reference in the particulars to an entirely separate allegation (the allegation that the share issue was unsupported by consideration) which suggests that Mr Bullock “prepared and advised on” the resolution relating to the share issue which was passed at the Global Renewables board meeting: see particulars to [74](m)] of the PFASC. This is another example why the proposed pleading is vexatious and embarrassing. Mr Bullock and G+T should not be required to sift through the pleading and piece together scattered particulars so they can endeavour to understand the case that is supposedly put against them. Putting that issue to one side, the question arises whether the allegation that Mr Bullock prepared and advised on the resolution could provide a reasonable basis for the allegation that he and G+T assisted Mr David in respect of the alleged dishonest and fraudulent design.

195    The primary judge did not make any express or direct finding in respect of that issue. That is the subject matter of appeal grounds 10 and 11. It may be accepted that, at least in some circumstances, a solicitor who prepares documents which put into effect a dishonest and fraudulent scheme may be found to have knowingly assisted in that scheme: see Dubai Aluminium at [36]. This case is, however, far removed from the facts of Dubai Aluminium. In my view it is very difficult to accept that the mere drafting of the resolution in respect of the share issue could alone support a finding that Mr Bullock and G+T assisted the alleged dishonest and fraudulent design. The resolution alone reveals little, if anything, about the alleged dishonesty of the share issue. In any event, this was not alleged to be an independent or alternative basis upon which it could be found that Mr Bullock and G+T assisted the design in question. More significantly, the deficiencies in the proposed pleading in respect of the allegation that Mr Bullock and G+T knew that the design was dishonest and fraudulent mean that this point goes nowhere.

Mr Bullock’s alleged knowledge

196    The critical allegations which appear to found KTC’s allegation that Mr Bullock and G+T knew, in the relevant sense, that Mr David’s conduct in respect of the Global Renewables share issue was dishonest and fraudulent are: first, that the share issue was made without the knowledge or consent of the Kazals; second, that Singh Investments paid no consideration, or consideration which was illusory or colourable, for the Global Renewable shares; and third, a 30% interest in Global Renewables was “very valuable”: PFASC [74(k) and (l)].

197    The primary judge found that the allegation that Mr Bullock and G+T knew that Singh Investments paid no consideration was not supported by the particulars and was therefore not maintainable: Judgment at [20]-[24]. I agree.

198    The allegation that Mr Bullock and G+T knew that the share issue was unsupported by consideration was supported by two particulars: first, that Mr Bullock and G+T were retained by Global Renewables to advise in respect of RAAL and KTC’s funding of Global Renewables; and second, that Mr Bullock “prepared and advised on” certain documents: particulars (i) – (ii) to [72(m)] of the PFASC.

199    As for the first particular, the primary judge was correct in finding that the first particular provided no support for the allegation. Putting aside the fact that the proposed pleading gives no hint as to exactly what advice was sought by Global Renewables, or what advice was given, or when or in what circumstances it was given, the mere fact that at some point Mr Bullock provided some advice about “funding” says nothing about whether he knew that a later share issue was unsupported by any consideration.

200    As for the second particular, the documents that Mr Bullock allegedly “prepared and advised on” that are said to support the inference that he knew that there was no consideration are essentially the same seven documents relied on in support of the allegation that Mr Bullock advised that the share issue was lawful. As was noted earlier, one of those documents makes a fleeting reference to the share issue. None of them say anything about consideration. It is impossible to see how they could support an inference that Mr Bullock knew that no consideration had been paid for the shares.

201    The particulars also include the allegation that Mr Bullock allegedly prepared and advised on the resolution which gave effect to the share issue. It is again impossible to see how the mere fact that Mr Bullock may have had some involvement in relation to the documentation of the resolution is capable, without more, of supporting an inference that Mr Bullock knew that no consideration had been paid. Finally, the particulars include a cross-reference to another set of particulars in respect of an allegation concerning Mr Singh’s knowledge, though those particulars essentially just repeat the particulars provided in respect of Mr Bullock’s knowledge.

202    The conclusion that the allegation that Mr Bullock and G+T knew that Singh Investments paid no consideration in respect of the Global Renewables shares issued to it is not reasonably open or supported by the particulars is fatal to the two further critical allegations about Mr Bullock’s knowledge or state of mind in [75] and [76] of the proposed pleading. Those allegations are: first, that Mr Bullock wilfully shut his eyes to the obvious conclusion that his legal advice, being his advice to the effect that it was lawful for Global Renewables to issue shares to Singh Investments, was wrong and that the share issue, if made, would constitute a dishonest breach of fiduciary duty by Mr David as part of a fraudulent design (PFASC [75(c) and (d)]); and second, in the alternative, that Mr Bullock had knowledge of circumstances which would have indicated those conclusions to an honest and reasonable person: PFASC [76(c) and (d)].

203    Both of those allegations essentially rely on the allegations that Mr Bullock and G+T knew that the share issue was unsupported by consideration. For the reasons already given, that allegation is not reasonably supported by the particulars provided in respect of it.

204    As for the other knowledge allegedly possessed by Mr Bullock, it is impossible to see how the critical allegations of wilful blindness or constructive knowledge could be supported simply on the basis of the allegations that Mr Bullock and G+T knew that the share issue was made without the knowledge or consent of the Kazals and that the shares were valuable. Mere knowledge that the Kazals were not given notice of and did not consent to the Global Renewables share issue would not have made it obvious to Mr Bullock, or an honest and reasonable person, that Mr Bullock’s advice concerning the issue was wrong, or that the share issue was dishonest. The Kazals were not directors of Global Renewables. There was in those circumstances no obligation to tell them about the share issue. On what basis, then, could it be said that the share issue was unlawful because the Kazals did not know about it? The fact that the shares were valuable is also immaterial in the absence of knowledge that the share issue was unsupported by consideration.

205    The observations made earlier, in the context of the allegations concerning the Emergent share issue, concerning the coherency of the allegation that Mr Bullock wilfully shut his eyes to the obvious conclusion that his advice was wrong, apply equally to the same allegation made in respect of the Global Renewables share issue.

206    For all the reasons just given, the particulars provided in respect of Mr Bullock’s (and G+T’s) relevant knowledge of the Global Renewables share issue are deficient and do not support the pleaded facts. I do not accept that the pleaded facts disclose a reasonable or sustainable basis for alleging that Mr Bullock knew (in the relevant sense) that Mr David was engaged in a dishonest and fraudulent design in relation to the Global Renewables share issue and that he was assisting in that design. The proposed pleading does not disclose a reasonable or sustainable basis to allege that Mr Bullock either shut his eyes to the obvious conclusion that, in causing Global Renewables to issue shares to Singh Investments, Mr David dishonestly breached his fiduciary duty as part of a dishonest and fraudulent scheme, or was aware of facts that would have indicated that conclusion to an honest and reasonable person.

207    Appeal grounds 12, 13 and 14 essentially challenge the primary judge’s finding that the pleading disclosed no reasonable case that Mr Bullock and G+T knew that Mr Singh provided no consideration for the Global Renewable shares. KTC submitted that the primary judge erred in two ways. First, KTC simply asserted that the inference was open on the basis of the particulars. I do not agree. For the reasons already given, which essentially mirror those given by the primary judge, the inference is not reasonably open from the particularised facts.

208    Second, KTC submitted that the relevant particulars of knowledge were sufficient because it is generally permissible in a case involving accessorial liability to “plead the requisite knowledge [of the accessory] in general terms and defer particularisation until after discovery”. That may perhaps be so where the pleadings are at an early stage and sufficient particulars are given to show that the plea of knowledge is not “wholly speculative”: see Webster (Trustee) v Murray Goulburn Co-operative Co. Ltd (No 2) [2017] FCA 1260 at [6]. The pleadings in this case, however, are not at an early stage. More importantly, for the reasons already given, the plea of knowledge, upon analysis, is wholly speculative. As Charlesworth J put it in Teakle Property Australia v Business Initiatives Pty Ltd [2021] FCA 13 at [21], what is “not permitted is the pleading of speculative claims so as to erect a purported foundation for the giving of discovery to ascertain whether the speculative case exists”. This would appear to be such a case.

209    For all the reasons just given, the particulars provided in respect of Mr Bullock’s alleged knowledge of the dishonesty of the breaches of duty in relation to the Global Renewables share issue are deficient and do not support the pleaded facts. I do not accept that the pleaded facts disclose a reasonable or sustainable basis for alleging that Mr Bullock knew that Mr David’s breaches of duty were dishonest, or were part of a dishonest and fraudulent design in relation to the Global Renewables share issue. The proposed pleading does not disclose a reasonable or sustainable basis to allege that Mr Bullock either shut his eyes to the obvious conclusion that, in causing Global Renewables to issue shares to Singh Investments, Mr David dishonestly breached his fiduciary duties as part of a dishonest and fraudulent scheme, or was aware of facts that would have indicated that conclusion to an honest and reasonable person.

A reasonable cause of action?

210    For the reasons just given, the proposed pleading does not disclose a reasonable cause of action against Mr Bullock and G+T that they knowingly assisted Mr David’s dishonest breaches, or that those breaches constituted or were part of a dishonest and fraudulent design involving the Global Renewables share issue. The proposed pleading does not disclose a reasonable or sustainable factual basis for alleging that Mr Bullock and G+T not only assisted Mr David’s breaches of duty, but also knew the breaches of duty were dishonest, or constituted or were part of a dishonest and fraudulent design.

Conclusion in relation to appeal grounds 8 to 14

211    For the reasons already given, the primary judge was correct to hold that the proposed pleading did not disclose a reasonable case that Mr Bullock and G+T knowingly assisted Mr David in respect of a dishonest and fraudulent design relating to the issue of the Global Renewables shares to Singh Investments on 22 April 2010. The allegation that Mr Bullock and G+T possessed knowledge which meant that they wilfully shut their eyes to the dishonesty of the breaches of duty, or knowledge which would have revealed that dishonesty to an honest and reasonable person, are not reasonably supported by the particulars and not reasonably sustainable. The primary judge did not err in any of the ways asserted in appeal grounds 8 to 14.

The “Constructive Trust Fraudulent Scheme”

212    The Constructive Trust Fraudulent Scheme may be dealt with fairly briefly. It would appear to be pleaded as an alternative to the case based on the David ECL Share Conduct and the David GRL Share Conduct. The pleading based on the Constructive Trust Fraudulent Scheme essentially repeats the factual allegations concerning Mr David’s conduct relating to the issue of Emergent shares to RAAL and alleges that those shares, or half of them, were held by RAAL on constructive trust for KTC: PFASC [125] and [126]. It is then alleged that RAAL breached its duties as constructive trustee when it refused to transfer the relevant Emergent shares, or half of them, to KTC, took no steps to have Emergent rectify its register and actively defended proceedings commenced in the Grand Court: PFASC [128(a)]. It is further alleged that RAAL breached its duties as constructive trustee when it used its control of Emergent to cause Global Renewables to issue shares to Singh Investments and to later cause Emergent to sell its Global Renewable Shares to Ironbridge Capital rather than KTC. Those breaches of trust are said to constitute a dishonest and fraudulent design.

Dishonest and fraudulent?

213    The primary judge concluded, in effect, that the Constructive Trust Fraudulent Scheme was incoherent and the factual allegations and particulars in the proposed pleading did not support the central allegation that the scheme was dishonest: Judgment at [39]-[40]. That was essentially because the conduct which resulted in the issue of Emergent shares to RAAL could not be seen as dishonest given the role of Mr Mavromanolakis. The primary judge’s findings to that effect, and KTC’s challenge to those findings, were dealt with at length earlier in the context of the David ECL Share Conduct. It is unnecessary to add anything in this context. In my view, KTC has failed to demonstrate any error by the trial judge in respect of those findings.

Mr Bullock’s alleged assistance

214    Mr Bullock and G+T are alleged to have assisted the Constructive Trust Fraudulent Scheme by: first, giving the G+T Legal Advice; second, giving advice that it was lawful to make the issue of Global Renewables shares to Singh Investments; and third, by assisting in preparing documentation in respect of those share issues.

215    Each of those allegations relating to assistance has been considered in detail earlier in the context of the David ECL Share Conduct and the David GRL Share Conduct. For the reasons already given, the proposed pleading fails to provide a reasonable or sustainable case in respect of those allegations.

216    It might also be added that there is no allegation in the proposed pleading to the effect that Mr Bullock and G+T had any direct involvement in the alleged breaches of duty by RAAL pleaded in [128(a)] of the proposed pleading: that is, the breaches constituted by RAAL’s refusal to transfer the Emergent shares to KTC, or its failure to cause Emergent to rectify its register, or its defence of the proceedings in the Cayman Islands.

Mr Bullock’s alleged knowledge

217    Mr Bullock and G+T are alleged to have known of the Constructive Trust Fraudulent Scheme and to have known that they were engaged in conduct to assist that scheme and the dishonest breaches of duty by RAAL: PFASC [146].

218    Those unhelpfully broad and general allegations are said to flow from the matters pleaded in [74], [75] and [76] of the proposed pleading. Those paragraphs of the proposed pleading, which relate to the knowledge and state of mind of Mr Bullock and G+T in respect of the conduct relating to the issue of Emergent Shares to RAAL and the issue of Global Renewables shares to Singh Investments, have been considered at length earlier in these reasons in the context of the alleged David ECL Share Conduct and the David GRL Share Conduct. For the reasons already given, most, if not all, of the allegations of knowledge on the part of Mr Bullock and G+T are unsupported by adequate particulars or, upon analysis, are unsustainable based on the particulars.

219    It might again be added that there is no allegation in the proposed pleading to the effect that Mr Bullock and G+T knew anything about RAAL’s alleged refusal to transfer the relevant Emergent shares to KTC, or RAAL’s alleged failure to have Emergent rectify its register, or RAAL’s active defence of the proceeding in the Grand Court.

A reasonable cause of action?

220    The cause of action against Mr Bullock and G+T arising from the Constructive Trust Fraudulent Scheme essentially lumps together all of the factual allegations made in respect of the David ECL Share Conduct and the David GRL Share Conduct, yet characterises the breaches of duty arising from that conduct as dishonest breaches of duty owed by RAAL to KTC as constructive trustee of the shares issued to it in January 2010. Mr Bullock and G+T are alleged to have assisted those dishonest breaches knowing that they were part of a dishonest and fraudulent design.

221    For the reasons given at length in the context of the David ECL Share Conduct and the David GRL Share Conduct, the proposed pleading does not disclose a reasonable cause of action against Mr Bullock and G+T in respect of the Constructive Trust Fraudulent Scheme. The critical allegations of fact made against Mr Bullock and G+T in respect of their assistance and knowledge of the alleged dishonest and fraudulent design or designs are not reasonably supported or sustained by the particulars. They are, for the most part, entirely speculative.

THE CLAIMS AGAINST MR DAVID, MR SINGH AND XALT

222    Mr David, Mr Singh and XALT did not oppose the grant of leave to KTC to file the proposed pleading. Nor does it appear that they made any submissions before the primary judge as to the adequacy of the proposed pleading insofar as it involved claims against them. It is no doubt for that reason that the primary judge did not dismiss the proceeding as against them.

223    Appeal grounds 15 and 16 contend that the primary judge erred in not granting leave to file the proposed pleading insofar as it addressed claims against Mr David, Mr Singh and XALT. KTC contended that the primary judge should have granted leave to file the proposed pleading insofar as it concerned those three respondents.

224    The difficulty with that course, however, is that the reasons of the primary judge expose some significant issues in relation to KTC’s case against Mr David, Mr Singh and XALT. The clearest example is the primary judge’s finding that the proposed pleading did not disclose a reasonable case that the Constructive Trust Fraudulent Scheme involved dishonesty. That finding, which KTC has not demonstrated was wrong or involved error, would likely have significant implications at least in relation to the cause of action against Mr Singh based on the second limb of Barnes v Addy. In addition, given the dismissal of the proceeding as against Mr Bullock and G+T, if the case is to proceed against Mr David, Mr Singh and XALT, it would plainly be preferable for a further pleading to be prepared which excises the claims against Mr Bullock and G+T.

225    The appropriate course, in all the circumstances, would be to remit the proceeding as against Mr David, Mr Singh and XALT to the primary judge. It would then be a matter for the primary judge to determine the appropriate way forward in relation to that proceeding, including whether KTC should be given a further opportunity to re-plead as against Mr David, Mr Singh and XALT.

CONCLUSIONS IN RELATION TO THE PROPOSED PLEADING

226    The primary judge was correct to refuse to grant leave to KTC to file the proposed pleading and also correct to dismiss the proceeding as against Mr Bullock and G+T. KTC has failed to demonstrate that the primary judge erred in principle, or in any material way, in concluding that if the proposed pleading was filed, the allegations and claims made against Mr Bullock and G+T in the pleading would be liable to be struck out. Upon close analysis, most of the critical allegations against Mr Bullock and G+T in the proposed pleading are not supported by particulars that are reasonably comprehendible and reasonably capable of sustaining the allegations. The critical allegations against Mr Bullock and G+T, in particular those that relate to their knowledge of the alleged dishonest and fraudulent designs, are for the most part speculative.

227    Parts of the proposed pleading are also vexatious and embarrassing, in the relevant sense, and likely to cause prejudice, embarrassment or delay in the proceeding. The pleading itself is prolix. The excessive employment of the pleading device which involves applying defined terms to complex events and circumstances and then employing those defined terms throughout the pleading serves only to obscure and confuse. The overall effect is that the proposed pleading is difficult to comprehend, if not borderline unintelligible. Like the primary judge, it took me some considerable time to unravel, decipher and attempt to make sense of the allegations and pleaded causes of action against Mr Bullock and G+T. To make matters worse, many of the critical allegations or particulars in relation to the case against Mr Bullock and G+T are expressed in vague and ambiguous terms and amount to little more than bare conclusions. That is particularly unacceptable given the seriousness of the allegations, involving as they do allegations that Mr Bullock and G+T were aware of and knowingly assisted the alleged dishonest and fraudulent designs.

228    I am, of course, all too mindful of the principle that the power to refuse an amendment on the basis that it would, if allowed, be liable to be struck out, is discretionary and should be exercised sparingly and only in a clear case. That is particularly so where, as here, the effect of refusing the amendment would be the dismissal of the applicant’s case. The discretion plainly should not be exercised simply on the basis that the applicant’s case appears to be weak, or on the basis of minor, stylistic or technical deficiencies that could be readily cured. Nor should an unduly technical or restrictive approach be taken to pleadings. Where, however, an applicant fails to plead a reasonable cause of action or proffer an acceptable pleading after having been given ample opportunity to do so, it may usually be inferred that the applicant is unable to plead a reasonable cause of action and has no reasonable prospects of success. This is such a case.

DISPOSITION

229    Leave to appeal should be granted to KTC and the appeal should be dismissed with costs.

230    The proceeding insofar as it concerns Mr David, Mr Singh and XALT should be remitted to the primary judge to determine whether KTC should be given a further opportunity to re-plead as against Mr David, Mr Singh and XALT.

I certify that the preceding two hundred and thirty (230) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney.

Associate:

Dated:    13 April 2022

REASONS FOR JUDGMENT

ANASTASSIOU J:

Introduction

231    By orders dated 17 July 2020, the learned primary judge dismissed an interlocutory application by the Applicant for leave to file a proposed Further Amended Statement of Claim (FASOC) and summarily dismissed the proceeding against the Fourth and Fifth Respondents: see KTC v David (Summary Dismissal) [2020] FCA 1012. This is an application for leave to appeal from those orders.

232    The Applicant, KTC, submitted that the learned primary judge should not have dismissed the FASOC in circumstances where the subject matter of the dispute raises complex factual and legal issues and, in any event, a reasonable cause of action is disclosed on the pleadings. KTC also submitted that there are material facts relevant to the claim which are exclusively within the Respondents’ knowledge. Accordingly, KTC contended that its claim should not be dismissed at this preliminary stage of the proceeding, as the evidence relevant to the question of whether the Respondents were knowingly involved in a dishonest and fraudulent design might only be obtained after the close of pleadings.

233    The Fourth and Fifth Respondents are Gilbert + Tobin, a law firm, and Mr Andrew Bullock, respectively. Mr Bullock was, at the relevant time, a partner of Gilbert + Tobin, specialising in the area of mergers and acquisitions, as well as the head of the firm’s corporate advisory team. For convenience, I will refer to the Fourth and Fifth Respondents as G+T, collectively.

234    G+T submitted that there is no appellable error in the reasoning of the primary judge. To the contrary, G+T’s position is that KTC’s pleading of a dishonest and fraudulent design against G+T, under the second limb of the so-called rule in Barnes v Addy (1874) LR 9 CH App 244, suffered from fundamental deficiencies.

235    G+T submitted that KTC has had multiple opportunities to plead its case, including before the Supreme Court of New South Wales (see KTC v David (No 1) [2019] NSWSC 281) and this Court (see KTC v David (Summary Dismissal) [2020] FCA 1012 and KTC v David (Pleadings) [2019] FCA 1566). G+T submitted that having regard to the identified deficiencies in KTC’s pleadings, and the repeated failures to address those issues, it fell well within the primary judge’s discretion to refuse leave to amend and to dismiss the proceeding. Ultimately, G+T’s principal contentions were:

(1)    that leave to appeal should not be granted;

(2)    if leave to appeal were to be granted, the appeal should nevertheless be dismissed; and

(3)    even if the substantive appeal were allowed, KTC should not be afforded yet another opportunity to recast or amend its pleading.

236    The Second Respondent (Mr Naveen Singh) and Third Respondent (XALT, a company of which Mr Singh is the sole director and shareholder) have a comparatively limited involvement in the appeal. In summary, the Second and Third Respondents only made submissions relevant to the question of whether, assuming the appeal is unsuccessful, the proceeding should be dismissed in its entirety (including as against the First, Second and Third Respondents) and not simply against G+T.

237    For the reasons that follow, I have concluded that leave to appeal should be granted and the appeal allowed.

Background

238    In the primary judge’s reasons, his Honour explained at [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…

239    I respectfully adopt the summary of the factual matters from the primary judge’s First Reasons (KTC v David (Pleadings) [2019] FCA 1566) at [4]-[12].

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 Commonwealth Bank of Australia.

8    There are then a number of allegations which are not necessary to recite in any detail but whose bottom line may be summarised in this way: the operation of the Waste Facility required funding which was provided by Mr David and RAAL through Emergent. It was Mr David who injected his funds into Emergent in a variety of ways over time. By 13 November 2009, RAAL claimed that Emergent owed it $5.8 million as a result of these advances. At this point there appears to have been some friction between the Kazals and Mr David about the desirability of them putting in some of KTC’s money or, if not, of increasing RAAL’s interest in Emergent to reflect the fact that Mr David was putting his hand in his pocket whereas the Kazals were not. In June 2009, Mr David had caused to be drafted a proposed memorandum of understanding between RAAL and KTC under which some of the money advanced by RAAL to Emergent was to be acknowledged by KTC. More importantly, under the proposed memorandum of understanding KTC would agree to cause Emergent to transfer 80% of its shareholding in GRL to RAAL for consideration of $1, which would then be transferred to KTC if it injected $2 million into Emergent before 1 September 2009. Mr David signed the memorandum on or around 17 June 2009 but the Kazals refused to execute it, eventually making this clear on or around 13 November 2009. Interpolating, at this point, the scene was set for a shareholder dispute between the Kazals and Mr David.

9    The draft memorandum itself had been prepared by G+T who had been retained by GRL. Subsequently, in November 2009, G+T advised RAAL and Emergent (inter alia) on how the proposed memorandum of understanding might otherwise be given effect to since the Kazals would not execute it. It is alleged that this involved the appointment of a Mr Mavromanalakis to the board and the idea of swapping some of RAAL’s debt for equity in Emergent. Mr Mavromanalakis was appointed to the board on 13 November 2009 which was, it might be noted, the same day that the Kazals said they would not execute the proposed memorandum of understanding. On 20 January 2010, RAAL and Emergent executed a loan agreement which recorded advances by RAAL to Emergent of $5,837,009.04. The following day, 21 January 2010, RAAL demanded payment of US$49,000 from Emergent (a much smaller amount) and informed Emergent that if this sum was not paid within seven days then it would accept payment instead in the form of 49,900 shares in Emergent.

10    The Kazals deny being aware of this demand. There was a meeting of the directors of Emergent on 28 January 2010, that is to say, at the exact time the seven-day period in RAAL’s demand expired. The Kazals say that they were not aware that at this meeting there would be under consideration the proposal that Emergent issue 49,900 shares to RAAL in consideration of the satisfaction of Emergent’s indebtedness to RAAL. The only persons at the meeting were, in fact, Mr David and Mr Mavromanalakis and the meeting itself was conducted by telephone. Both voted in favour of the resolution. Consequently, KTC’s interest in Emergent was reduced from 50% to 0.1% and RAAL’s correspondingly increased from 50% to 99.9%. However, because the debt to RAAL was $5,837,009.04, this debt for equity swap—whilst transforming the share register of Emergent—only reduced Emergent’s debt to RAAL by 0.93%. If true, RAAL kept almost all of its debt and obtained almost complete control of the company. It is a transaction which might well cause eyebrows to be raised but, if the allegations be correct, as will be seen, it has done more than that.

11    KTC says that the Kazals became aware of this transaction on 18 March 2010 and that Mr David and Mr Mavromanalakis voted to remove them as directors on 29 March 2010.

12    A large number of transactions are then alleged to have occurred but their detail can be omitted. Their terminus is that the Waste Facility passed through several hands and that Mr Singh made a very large profit. In subsequent proceedings between KTC and RAAL in the Grand Court of the Cayman Islands, it was held that the debt for equity swap brought about by Mr David and RAAL was done in breach of fiduciary duty.

240    Self-evidently, the background relevant to this appeal is complex and detailed. That is due to both the multiplicity of actors and the corporate structures involved, and the number and nature of the impugned transactions. In what follows, it becomes apparent that a detailed understanding of the factual matrix is integral to properly evaluating the adequacy of the FASOC.

Primary Judge’s Reasons

241    At [3], the primary judge said that there were three broad issues to consider in relation to the FASOC:

(1)    Whether, as against G+T, the David GRL Share Conduct and the RAAL GRL Share Conduct have been adequately pleaded [the GRL Share Conduct issue];

(2)    Whether, as against G+T, the David ECL Share Conduct and the RAAL ECL Share Conduct have been adequately pleaded [the ECL Share Conduct issue]; and

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

242    The primary judge considered the GRL Share Conduct and ECL Share Conduct issues (items (1) and (2) above) concurrently at [6]-[24].

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 of the pleadings under attack, §74(m), is therefore concerned with that part of the case in which it is sought to demonstrate that Mr Bullock knew of certain matters.

11    Particular (ii) to §74(m) alleges that Mr Bullock advised upon two shareholders’ agreements between Emergent and SIL. The first of these was dated 24 November 2009 (‘the First Purported GRL Shareholders’ Agreement’). Its existence is not pleaded as a material fact but its contents are described in the particulars to §62(n). §62(n) alleges that Mr Singh knew that SIL paid no consideration for the issue of the shares or alternatively only paid colourable or illusory consideration. The particulars to §62(n) are a complex pleading in themselves and really have no place in particulars. Their bottom line is this: the First Purported GRL Shareholders’ Agreement between Emergent and SIL of 24 November 2019 provided for the issue to SIL of redeemable preference shares but this was unlawful because it had not been authorised by Emergent’s board. On or around 23 April 2010 that agreement was then replaced by the second shareholders’ agreement (‘the Second Purported GRL Shareholders’ Agreement’) which made no reference to the redeemable preference shares. It is not alleged that the issue of the 60 ordinary shares occurred pursuant to the second shareholders’ agreement only that the agreement ‘refers’ to the issue. The actual dispositional event in relation to the 60 ordinary shares is the GRL Share Resolution of 22 April 2010 with the allotment envisaged by the resolution occurring on 30 July 2010 (‘the GRL Share Issue’).

12    It is alleged by KTC that the allotment of shares was for no consideration or a consideration which was illusory or colourable. It is alleged that Mr David and Mr Singh breached fiduciary duties in resolving to allot the 60 shares and that this was part of a dishonest design. Part of the design involved the alleged fact that the allotment of the shares to Mr Singh’s company, SIL, was for no consideration or for a consideration which was illusory or colourable. For the balance of these reasons I will only refer to this allegation as an allegation that the allotment was for no consideration since for present purposes there is no difference between no consideration or consideration which is colourable or illusory. The dishonest design culminated in the allotment whose effect was to increase Mr Singh’s interest in GRL (through his entity SIL) from 20% to 50% and to decrease Emergent’s interest from 80% to 50%.

13    G+T is alleged to have acted for GRL, Emergent (the joint venture vehicle between Mr David and the Kazals), Mr David and his entity RAAL. G+T is alleged to have participated in Mr Singh and Mr David’s dishonest design with the requisite degree of knowledge to be liable as an accessory. Two particular allegations which are made against G+T are that:

(1)    it advised that the allotment of the 60 shares to SIL was lawful (§72(e)); and

(2)    it knew that the allotment had been for no consideration (§74(m)).

14    G+T submits that the manner in which these two allegations have been particularised are not adequate. KTC alleges that the fact that G+T advised that the allotment would be lawful can be inferred from two facts (found in the particulars to (§72(e)):

(1)    G+T had been retained to advise in relation to and draft a series of transaction-related documents which preceded the allotment; and

(2)    One of those documents, ‘the Second Purported GRL Shareholders’ Agreement’ referred to the issue of the GRL shares.

15    G+T submits that such an inference cannot be drawn from these two facts. It is necessary to deal with the transactional documents laid out in the particulars of §72(e) individually before assessing the validity of the submission. There were seven of the documents as follows, including the two shareholders’ agreements I referred to above:

(1)    The 6 January 2009 Draft Terms Sheet. KTC alleges that this document embodied the actual way in which Emergent and SIL had been conducting the business of GRL since January 2009 (§62(n) particular (v)). The pleading does not allege what the arrangement embodied in this document was;

(2)    The later Draft GRL Shareholders’ Agreements. These too are alleged to be the documents which embodied the actual way in which Emergent and SIL had been conducting the business of GRL since January 2009 (§62(n) particular (v)). As in the case of (1) the pleading makes no allegation about the content of these agreements nor does it indicate how they differed from the document in (1). From a pleading perspective (1) and (2) appear to be identical and I will treat them as such;

(3)     The April 2009 Draft GRL Shareholders’ Agreement. The only allegation that the pleading makes about this document is that it was put before the board of Emergent on 13 November 2009 who resolved to fast track and finalise the review and signing of it (§62(n) particular (ii)). In particular, the pleading makes no allegation about the contents of this document;

(4)     The First Purported GRL Shareholders’ Agreement. KTC alleges that this document was purportedly executed by Mr David, on behalf of Emergent and GRL on 24 November 2009 and that it differed from the document in (3) (§62(n) particular (iii)). This document is alleged to have contained a cl 9 which conferred upon SIL an entitlement to redeemable preference shares in GRL. It is alleged (§62(n) particular (iii)) that this agreement was not authorised by the board of Emergent and that no independent advice was given to the board;

(5)    The March 2010 Draft GRL Shareholders’ Agreement. KTC alleges that in or around March 2010 a further draft shareholders’ agreement was prepared. It is alleged that it contained a recital 1A (§62(n) particular (iv)). It is alleged recital 1A of this document had referred to the document in (4) as a prior agreement between the parties but that this had been expressly deleted and replaced instead with an assertion that Emergent and SIL had been conducting the business under ‘an existing shareholders’ agreement’ since the completion of the purchase of GRL in January 2009. However, §62(n) particular (v) asserts that there was no such existing shareholders’ agreement, only documents (1) and (2) above;

(6)    The Second Purported GRL Shareholders’ Agreement. The pleading alleges that on 23 April 2010 Emergent and SIL purported to execute a further shareholders’ agreement (§62(n) particular (vi)). It is alleged that this agreement did not confer any entitlement on SIL to redeemable preference shares and made no reference to the first shareholders’ agreement in (4). It is also alleged that like the document in (5) it incorrectly referred to the fact that the business was being conducted under an ‘existing shareholders’ agreement’ since January 2009. At §72(e) particular (ii) it is also alleged that this document ‘refers’ to the fact of the allotment of the 60 shares although the pleader goes no further than saying it is referred to. It does not allege, for example, that the allotment was required under the agreement; and

(7)    The GRL Share Issue. This is alleged to be the issue of the 60 ordinary shares on 30 July 2010 (§41). As such it is not a document but rather an event recorded, presumably, in the records of GRL.

16    On the assumption that G+T was retained in relation to each of the above documents and advised upon them, G+T submits that it is not possible to infer that G+T gave advice that the allotment was lawful as the pleading alleges at §72(e). The only documents which the pleading alleges actually involve the allotment of the 60 ordinary shares are documents (6) and (7), that is to say, the Second Purported GRL Shareholders’ Agreement executed on 23 April 2010 and the GRL Share Issue itself. As I have noted, an additional fact alleged about the Second Purported GRL Shareholders’ Agreement is that it ‘refers’ to the allotment of the 60 ordinary shares. I do not see conceptually how documents (1)-(5) can throw light on the question of whether G+T gave advice about an allotment of shares to which none refers or any envisions. Without knowing what the document in (6) actually says about the allotment of the 60 shares (beyond the fact it ‘refers’ to it), I do not see how advice about that document or the preparation of it could support an inference that advice would have been proffered by G+T that such an allotment would be lawful.

17    Making the assumption that G+T were asked to advise on and draft documents (1) to (7), I do not see how it can be inferred from them that G+T would have advised that the allotment was lawful. I do not think that the situation becomes any better considering (6) and (7) cumulatively or even, most beneficially, as somehow informed by the back history which was (1) to (5). If (1)-(7) were the facts found at trial I would commit appellable error if I inferred from them that G+T advised that the allotment was lawful.

18     KTC submitted that its argument about what could be inferred from the drafting of the documents by G+T could be aided by the fact that Mr Bullock was an expert in the area of mergers and acquisitions and the head of G+T’s corporate advisory team and had been responsible for drafting the documents. But the drafting of the documents goes nowhere and the fact that Mr Bullock is a subject-matter expert does not really improve the situation.

19     I accept G+T’s submission that §72(e) is not adequately supported by the subscribed particulars to it. I should add for completeness that as I note below the pleader appears to have overlooked including the allegation that G+T advised on and drafted the GRL Share Resolution (that is the directors’ resolution to allot the shares on 22 April 2010). I say overlooked because that allegation is included as one of the particulars to §74(m). Assuming for the sake of argument that the GRL Share Resolution was taken also to be a particular to §72(e), it does not alter the analysis. The fact that G+T was retained to prepare and advise on the GRL Share Resolution does not permit one to infer what aspect they were asked to advise upon or what their advice was.

20     Dealing then with KTC’s allegation that G+T knew that the allotment had been for no consideration, this appears at §74(m) of the pleading. It is supported by two particulars. The first of these is that G+T had been retained by GRL and advised GRL and Emergent on GRL’s funding by RAAL and KTC. The pleading does not specify what was involved in ‘GRL’s funding by RAAL and KTC’ but it is clear from several places that it assumes that KTC and RAAL did provide funding to GRL. For example, at §38(d) it is said in some particulars that GRL was at risk in November 2009 of being wound up unless KTC and RAAL provided funding. At many places it is alleged that Mr Bullock was advising GRL in relation to these funding activities: §62(g) particular (iii), §62(h) particular (iii), §62(i) particular (iii), §74 (the particulars of many sub-paragraphs including (m)). I do not see how the fact that Mr Bullock was providing advice to GRL on the continuation of funding from KTC and RAAL can rationally advance a case that G+T knew that a subsequent allotment of the 60 ordinary shares by GRL to SIL was for no consideration and I therefore do not accept that particular (i) to §74(m) can sustain the allegation in support of which it is proffered.

21    Turning then to the second particular for the allegation that G+T knew the allotment had been for no consideration, the pleader essentially repeats the same matters as was said to support the contention that G+T had advised that the allotment was lawful. There is a qualification to that. The particulars to that allegation did not allege that G+T had been retained to draft and advise upon the GRL Share Resolution of 22 April 2010 which had authorised the allotment although it had alleged that G+T had been retained to draft and advise upon the allotment itself (although what that drafting involved was unclear). It will be recalled that my analysis of §72(e) above proceeded on the assumption that this was an oversight. In this section of the pleading the polarity is reversed and it is now alleged that G+T advised upon and drafted the GRL Share Resolution but not the allotment, that is, the GRL Share Issue. I am going to treat this as an example of the pleader being caught by his or her own defined terms and proceed on the basis that it was intended to refer to both the resolution and the allotment for both sets of allegations.

22    I am prepared to do this as it makes no difference. Just as I cannot see how an inference can be drawn from these matters that G+T advised that the transaction was lawful, I cannot see how an inference could be drawn that G+T knew that the allotment was for no consideration. My reasons for this in the case of §74(m) are the same as those I have given in relation to §72(e).

23    KTC submitted that the situation was helped by the fact that §74(m) cross-referenced the particulars to §62(n) but this is merely the allegation that Mr Singh knew there was no consideration for the share allotment. It is true that there are subscribed to §62(n) an elaborate series of ‘particulars’ which explore the theory that the consideration for the 60 ordinary shares was Mr Singh’s forbearance on the entitlement of SIL to the redeemable preference shares. The particulars to §62(n) in fact just recite the very same documents set out above so even if it were permissible to have recourse to these particulars, they are in fact the same as the particulars to §74(m). In any event, the pleading of §62(n) wholly fails to observe the distinction between allegations of material fact and particulars which is not a question of taste but a legal requirement this pleading repeatedly flouts: Federal Court Rules 2011 (Cth) r 16.02(1)(d). For completeness, KTC’s written submissions advanced an argument at [19]-[20] that the first and second shareholders’ agreements were not valid because entry into the first shareholders’ agreement had not been authorised by Emergent’s board. KTC contended that Mr Bullock must have known that the Emergent board had not authorised entry into the first agreement and therefore that SIL acquired no rights under it or the second shareholders’ agreement that replaced it. I am not prepared to read a cross-reference at the end of one set of particulars to another set of particulars as including central allegations of material fact.

24    I therefore accept G+T’s submission that the allegation that G+T knew that there was no consideration for the allotment is not maintainable. The parties both proceeded on the basis that the issues which arose in relation to the ECL Share Conduct were the same. I will act on that assumption too.

243    The primary judge then addressed the adequacy of the pleading in relation to the Constructive Trust Fraudulent Scheme at [25]-[41].

WHETHER THE PLEADING OF THE CONSTRUCTIVE TRUST FRAUDULENT SCHEME IS ADEQUATE

25    At §145 is it alleged against G+T that by giving the ‘G+T Legal Advice’, by giving the advice that it was lawful to make the Emergent and GRL share issues and by assisting in preparing the documentation to effect those transactions, G+T assisted RAAL with ‘the Constructive Trust Fraudulent Scheme’. The consequence of the conclusions in the preceding section is that the allegation that G+T advised that the Emergent and GRL share issues were lawful is not maintainable. Consequently, an assessment of §145 must proceed on the basis that those two allegations are not present.

26    The allegation is therefore reduced to one where it is said that G+T assisted RAAL with the Constructive Trust Fraudulent Scheme only because it gave the G+T Legal Advice and prepared the documentation to effect the Emergent and GRL share issues.

27    What was the Constructive Trust Fraudulent Scheme? §129 tells one that the scheme was the one described in §128. Here one must return to the Emergent share issue to understand what the pleader is driving at. That share issue is at the heart of the shareholder dispute between the Kazals and Mr David in the affairs of their joint venture vehicle, Emergent. As I explained in my earlier reasons, Mr David was putting money into Emergent but the Kazals allegedly were not and, in due course, this generated some tension between them. On or around 20 January 2010 Emergent and Mr David’s company RAAL executed a loan agreement that recorded that RAAL had leant Emergent $5,837,009.04 (§25). KTC alleges that this was done without the Kazals being informed that this was to occur and in circumstances where they disputed that those funds had been advanced by RAAL (§26). On 21 January 2010 RAAL demanded payment of $54,016 (USD49,900) from Emergent (as part of the amount owed) and indicated that if that sum were not paid within seven days it would accept USD49,900 worth of fully paid ordinary shares in Emergent in satisfaction of that sum (§27).

28    On 22 January 2010 Mr David called a meeting of the directors of Emergent. KTC alleges that they were not told about the loan agreement or the letter of demand (§29) although it does not say that they were not told about the meeting. The meeting occurred on 28 January 2010 but the Kazals did not attend (§§30-31). At the meeting, the two directors present – Mr David and a Mr Mavromanolakis – voted in favour of issuing the 49,900 ordinary shares to RAAL (§31). The effect of this was to turn what had been a 50:50 joint venture vehicle into one where Mr David controlled (through RAAL) 99.9% of the shares in Emergent with the Kazals controlling 0.1% (§39). It is this transaction which the pleader refers to as the Emergent share issue.

29    KTC’s primary case is that this has caused it loss. However, at §125 it pursues a case in the alternative which is premised upon a contention that the shares in Emergent that RAAL obtained as a result of the Emergent share issue were held by it as a constructive trustee for KTC. At §127 it is then said that RAAL, as a constructive trustee, was obliged to transfer the 49,900 shares to KTC and not to use its ownership of those shares to the detriment of KTC. In various ways, including by not transferring the shares and by allowing the GRL share issue to proceed, RAAL is said to have breached these duties (§128).

30    Although the allegations of breach are not alleged to be dishonest in §128 the pleader doubles back at §129 and alleges that they constituted a dishonest and fraudulent design. In the same paragraph the pleader then christens these events the Constructive Trust Fraudulent Scheme. At §§131-133 Mr David is said knowingly to have assisted in the scheme. Mr Singh suffers the same fate at §§134-136 and one of his companies (XALT Pty Ltd) is alleged to have been in knowing receipt of trust property at §§137-143.

31    Which brings one back to G+T and Mr Bullock who at §§144-147 are said knowingly to have assisted in the scheme. On the present application G+T continued to rely upon the apparent inconsistency between alleging that G+T had advised the Emergent share issue was lawful whilst simultaneously alleging that it was part of a dishonest design in which the solicitors were complicit. However, as I have already indicated, having been persuaded that the allegation that G+T advised that the Emergent share issue was lawful cannot be maintained, that argument drops away.

32    It is an interesting question whether the claim of knowing assistance which is left – based only on the G+T Legal Advice and the preparation of the transactional documents – can succeed. However, G+T made no submission about this.

33    The G+T Legal Advice is set out at §23. In essence it is that Mr Bullock and G+T advised RAAL and Emergent and their directors (aside from the Kazals) that Mr David had to do everything possible to protect Emergent so as to protect RAAL’s investment in Emergent, that RAAL had to demand repayment of its loans to Emergent and if Emergent did not meet the demand then it had to dilute KTC’s shareholding in Emergent; also, that this was the right and legal thing to do. This is the assistance alleged to have been given together with the drafting of the documentation.

34     At §146 it is then alleged that Mr Bullock and G+T knew of the Constructive Trust Fraudulent Scheme and knew they were involved in dishonest breaches of trust as part of the scheme. Why? Because of the matters in §§74-76.

35    G+T complain about two aspects of this. First, they submit that some attention has to be given to the role of Mr Mavromanolakis. He was the director who with Mr David voted at the directors’ meeting of Emergent in favour of the Emergent share issue. He was appointed to the board of Emergent on 13 November 2009 (§22). At §38(d) it is said that Mr David procured Mr Mavromanolakis’ support for the Emergent share issue. It is alleged that Mr Mavromanolakis was told that Emergent faced an urgent funding crisis and was at risk of being wound up if RAAL ceased to provide financial support.

36     G+T points out that it is not alleged that this information provided to Mr Mavromanolakis was false or that Mr Mavromanolakis had acted improperly in voting in favour of the Emergent share issue in reliance upon it. G+T asks rhetorically how can the scheme have been fraudulent when it is neither alleged that Mr Mavromanolakis was lied to nor that he was involved in the fraudulent scheme?

37    Although this seems like a small point when cast against the maelstrom of allegations made in Exhibit 1, I am inclined to accept that it is a sound one and that much of the maelstrom serves only to distract attention from the central allegation which inevitably involves Mr Mavromanolakis. The short of the allegations is this: there were three directors of Emergent, one of the Kazals, Mr David and Mr Mavromanolakis. Mr David and one of the Kazals were each representing their 50% interest in the joint venture embodied in Emergent and Mr Mavromanolakis was an independent director. As at November 2009 Mr David was complaining that Emergent owed him money and that the Kazals were not putting in their fair share. Although it is alleged that the debt Mr David claimed was disputed, it is not disputed that he was complaining about it. A board meeting was held. The Kazals did not attend. It is not suggested that they were prevented from attending. Mr David had previously told Mr Mavromanolakis that he was no longer willing to fund Emergent and if he withdrew his funding Emergent might be wound up. KTC says it was not told that this proposal was on the table. Again, however, that does not prove dishonesty. It was raised at a board meeting to which they were invited. Perhaps in retrospect the Kazals regret the decision not to attend that board meeting but that sense of regret cannot impermissibly be conflated with the proposition that Mr David had acted dishonestly in not telling them he was going to raise it. And even if it could, it is rendered irrelevant by the events at the meeting.

38    Mr David suggested to Mr Mavromanolakis that he should agree to meet the RAAL demand for payment by issuing the shares in Emergent. The decision to issue the shares may well have involved a breach of fiduciary duty (as the Grand Court of the Caymann Islands concluded in related proceedings) but it is hard to describe what happened as dishonest. Highhanded perhaps, aggressive certainly, but dishonest it does not appear to me to be. If it were alleged that Mr David had duped Mr Mavromanolakis then a case of dishonesty might come into view. But that is not alleged. If Mr David in fact had had no intention of winding up Emergent similar considerations might have arisen. But all Mr David is alleged to have done, when all is said and done, is to use his status as a substantial (although on the pleadings, disputed) creditor to strongarm Mr Mavromanolakis into a provocative debt for equity swap. Although I would not describe that as nice, I am unable to see how it was dishonest.

39    Once that conclusion is reached, the fabric frays from the edge as the thread comes undone. The board meeting is the centre piece of the Emergent share issue; it is not peripheral. If there was a dishonest scheme (as opposed to a brutal one) then its critical element was the board meeting for everything else flows from it. Once control of Emergent was delivered to RAAL by the events of the directors’ meeting, what occurred with GRL follows trivially. Maybe Mr David used his control to effect the transaction with Mr Singh which delivered an increased share of GRL to SIL. Maybe this was a further outrage on KTC. But on the hypothesis that Mr David had obtained control of Emergent by brutal rather than dishonest means (and accepting for the sake of argument that it most likely involved a breach of fiduciary duty) it is impossible coherently to imagine what was dishonest in using that power in relation to GRL. Granted that the Emergent share issue is a transaction which is apt to raise eyebrows, the problem is that I cannot understand how it can be said to be a dishonest scheme unless Mr Mavromanolakis is said to have been lied to or, alternatively, himself to have been in on it. But neither allegation is made.

40    It follows that I accept G+T’s submission that the dishonest scheme alleged by KTC is fundamentally incoherent. I do not accept KTC’s submission that the dishonesty of Mr David (and implicitly of G+T) is to be assessed against what is alleged against them rather than by reference to Mr Mavromanolakis. That submission seeks to reduce the role of Mr Mavromanolakis in the dishonest scheme and to make him a non-essential or at least peripheral participant. In fact, the entire scheme hinged on him. If the scheme was not dishonest in relation to Mr Mavromanolakis then the rest of KTC’s case makes no sense. Nor is it to the point that it is alleged that G+T knew that Mr David had procured Mr Mavromanolakis’s support. Again this brings into focus the critical issue which is not whether Mr David procured Mr Mavromanolakis’ support but how he did so: did he do it with deceit or blunt force? There is no allegation of deceit and every appearance of blunt force.

41    In that circumstance, I do not need to deal with G+T’s submission that it is not alleged that G+T knew that the value of the Emergent shares was far in excess of the US$49,900 that Mr David appears to have paid for it.

244    Having regard to the foregoing, and the many opportunities which KTC has had to plead its claim, the primary judge concluded as follows:

42    I am not satisfied that I should grant leave to KTC to rely upon Exhibit 1 and I refuse it leave to do so. Insofar as G+T and Mr Bullock are concerned, KTC has had three attempts at pleading this case. After the first attempt, Kunc J gave them one more opportunity; I declined that opportunity but afforded them one final chance. KTC’s continuing inability to plead the case is a potential marker that it does not have a case against G+T. Accordingly, I dismiss the proceeding against them. KTC is to pay G+T’s costs as taxed, assessed or agreed.

Grounds of appeal

245    By a draft Notice of Appeal dated 31 July 2020, KTC raises 16 grounds of appeal.

Conflation of issues in connection with the “ECL Share Conduct” and the “GRL Share Conduct”

1. The primary Judge erred in holding that both parties had proceeded on the basis that the issues which arose in relation to the “ECL Share Conduct” were the same as those which arose in relation to the “GRL Share Conduct”.

2. The primary Judge should have proceeded on the basis that the issues which arose in relation to the “ECL Share Conduct” were not the same as those which arose in relation to the “GRL Share Conduct” and considered each of the issues which arose in relation to the “ECL Share Conduct” separately.

Dishonesty of ECL Share Issue

3. The primary judge erred in holding that the proposed further amended statement of claim (ASOC) did not disclose a reasonable cause of action that the conduct concerning the ECL Share Issue constituted a dishonest and fraudulent scheme unless it was alleged that Mavro was lied to or “duped” or, alternatively, was himself alleged to be liable in respect of the scheme.

4. The primary judge erred in holding that, although the conduct concerning the ECL Share Issue pleaded in ASOC may well have been a breach of fiduciary duty and merited such descriptions as “high-handed perhaps”, “aggressive certainly” and “brutal”, it was not dishonest.

5. The primary judge ought to have held that ASOC disclosed a reasonable cause of action that the conduct concerning the ECL Share Issue constituted a dishonest and fraudulent scheme.

Constructive Trust Fraudulent Scheme

6. The primary judge erred in failing to hold that, irrespective of whether or not the conduct concerning the ECL Share Issue constituted a dishonest and fraudulent scheme, ASOC, [128] disclosed a reasonable cause of action that the conduct alleged therein constituted a dishonest and fraudulent design or scheme.

7. The primary judge ought to have held that ASOC, [128] disclosed a reasonable cause of action that the conduct alleged therein constituted a dishonest and fraudulent design or scheme

Advice that it was lawful to make the GRL Share Issue

8. The primary judge erred in holding that the particulars to ASOC, [72](e) were inadequate to support an inference that G+T advised that it was lawful to make the GRL Share Issue.

9. The primary judge ought to have held that ASOC, [72](e) including the particulars disclosed a reasonable cause of action that G+T advised that it was lawful to make the GRL Share Issue.

Assistance in preparing the documentation to effect the GRL Share Issue

10. Irrespective of whether any advice was given by G+T as alleged in ASOC, [72](e), the primary judge erred in failing to hold that ASOC, [72](f) pleaded a reasonable cause of action that G+T assisted in preparing the documentation to effect the making of the GRL Share Issue so as to found liability for knowing assistance on the part of G+T on that basis.

11. The primary judge ought to have held that the allegation in ASOC, [72](f) that G+T assisted in preparing the documentation to effect the making of the GRL Share Issue disclosed a reasonable cause of action against G+T so as to found liability for knowing assistance on the part of G+T on that basis.

G+T’s knowledge that the GRL Share Issue was for no consideration

12. The primary judge erred in holding that the particulars to ASOC, [74](m) were inadequate to support an inference that the fifth respondent (Bullock) knew that the GRL Share Issue was for no consideration.

13. The primary judge ought to have held that ASOC, [74](m) including the particulars disclosed a reasonable cause of action that Bullock knew that no consideration was paid for the GRL Share Issue.

14. The primary judge erred in holding that the particulars to ASOC, [62](n) ought to have been pleaded as allegations of material fact.

Dismissal of application to amend the claims against the first to third respondents

15. The primary judge erred in not granting leave to file ASOC in so far as it addressed KTC’s claims against the parties to the proceeding who did not oppose the granting of leave being the first, second and third respondents.

16. The primary judge ought to have granted leave to file ASOC in so far as it addressed KTC’s claims against the first, second and third respondents.

[Footnotes omitted]

246    At the outset, there are three relevant matters to note in relation to the draft Notice of Appeal. First, in most instances, defined terms in the draft Notice of Appeal have the meaning assigned to them in the FASOC. Importantly, however, the ECL Share Conduct and GRL Share Conduct are definitions used by the primary judge and are not defined terms in the FASOC. Second, it will be apparent that many of the grounds of appeal are interrelated. Accordingly, where it was appropriate to do so, I have avoided unnecessary duplication and expressed my reasons by reference to views expressed in relation to other grounds of appeal. Third, there was a miscorrelation between the numbering of the grounds of appeal in the draft Notice of Appeal and the numbering used in the parties’ respective written submissions. More specifically, the submissions in relation to grounds 10 and 11 were mistakenly grouped under grounds 12 to 14 and vice versa. For convenience, I have adopted the numbering from the draft Notice of appeal in these reasons.

Leave to appeal

247    The decision of the primary judge was an interlocutory judgment. Accordingly, leave to appeal is required pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth).

248    At the commencement of the hearing, the learned presiding judge indicated that the Court would hear submissions from the parties in relation to the substantive appeal and address the question of leave in the course of delivering written reasons.

249    It is well established that there are two considerations governing the Court’s discretion to grant leave to appeal in circumstances such as the present. These considerations were summarised by Stewart J in Coshott v Official Trustee in Bankruptcy, in the matter of the Bankrupt Estate of Michael Petrovic Lenin (deceased) [2019] FCA 913 at [28]-[30]:

The principles to be applied in determining an application for leave to appeal are stated in Bienstein v Bienstein [2003] HCA 7; 195 ALR 225 per McHugh, Kirby and Callinan JJ at [29] as follows:

An applicant for leave must establish that the decision in question is attended with sufficient doubt to warrant the grant of leave. The applicant must also show that substantial injustice will result from a refusal of leave to appeal.

Therefore, there are two considerations. First, whether in all the circumstances of the case, the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court; and second, whether substantial injustice would result if leave were refused supposing the decision to be wrong.

These two criteria, however, do not represent a “hard and fast rule” (Samsung Electronics Company Ltd v Apple Inc [2011] FCAFC 156; 217 FCR 238 at [29] per Dowsett, Foster and Yates JJ), but they nevertheless provide “general guidance which the Court should normally accept” (Rawson Finances Pty Ltd v Federal Commissioner of Taxation [2016] FCAFC 95; 103 ATR 630 at [39] per Robertson, Moshinsky and Bromwich JJ).

[Emphasis added]

250    These principles are derived from Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; 33 FCR 397 at 398 (Sheppard, Burchett and Heerey JJ) and have been cited with approval by the Full Court of this Court on many occasions: see, eg, Davidson v Official Receiver [2021] FCAFC 73 at [15] (Allsop CJ, Markovic and Anastassiou JJ); Advanced Holdings Pty Ltd v Commissioner of Taxation [2020] FCAFC 157; 281 FCR 149 at [35] (Steward J, with whom Allsop CJ and Bromwich J agreed).

251    KTC contended that the draft Notice of Appeal enumerates 16 reasonably arguable grounds of appeal, which itself demonstrates the orders of the primary judge are, at a minimum, attended by sufficient doubt to warrant being reconsidered by the Full Court. In this regard, KTC submitted that the pleading concerns novel questions of law that are incapable of being resolved on hypothetical facts, those facts themselves involving considerable complexity.

252    KTC further submitted that because the orders of the primary judge have the practical effect of finally determining their claims against G+T, there is a prima facie basis for granting leave to appeal. In particular, KTC referred to the observations of the High Court in Ex parte Bucknell [1936] HCA 67; 56 CLR 221, in which Latham CJ, Rich, Dixon, Evatt and McTiernan JJ said at 225-226:

It is apparent that many different considerations may be raised by cases in which leave only is needed and that all the grounds upon which applications may succeed cannot be stated in advance. It is possible, however, to say how certain types of cases should be dealt with. But any statement of the matters which would justify granting leave to appeal must be subject to one important qualification which applies to all cases. It is this. The court will examine each case and, unless the circumstances are exceptional, it will not grant leave if it forms a clear opinion adverse to the success of the proposed appeal.

There is one class of case which raises little difficulty. If the interlocutory order…has the practical effect of finally determining the rights of the parties, though it is interlocutory in form, a prima facie case exists for granting leave to appeal. For example, a judgment for either party on a demurrer might, in effect, be decisive of the whole litigation. Although such a judgment would often be interlocutory, it might be final in determining the issue between the parties, and, in such a case, leave would be granted almost as of course.

[Emphasis added]

253    KTC also referred to the following observations of the Full Court in Décor at 400:

… When the court comes to exercise its discretion on a particular application, an important distinction to be observed is that between the common interlocutory decision on a point of practice – concerning which the High Court has given (see Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 171) a strong warning that "a tight rein" should be kept on appeals - and an interlocutory decision determining a substantive right - where leave will more readily be granted…

[Emphasis added]

254    KTC also referred to a decision of the New South Wales Court of Appeal in which Bucknell had been cited with approval, being Aardwolf Industries LLC v Tayeh [2020] NSWCA 301 at [54] (Macfarlan JA), Bell P agreeing at [1], Leeming JA agreeing at [87]:

Although I have, for the reasons set out below, concluded that the primary judge did not err in refusing to grant the applicants leave to sue the liquidators, I consider that leave to appeal should be granted because whilst her Honour’s judgment is interlocutory (as at least in theory a further application could be brought) it “has the practical effect of finally determining the rights of the parties” and this is a strong factor favouring a grant of leave to appeal (see Ex parte Bucknell (1936) 56 CLR 221 at 225-6; [1936] HCA 67)

255    KTC relied on these authorities in support of the proposition that there would be a substantial injustice if leave were to be refused, supposing the decision to be wrong, because it would be dispositive of their claim (at least as between KTC and G+T).

256    In response, G+T characterised KTC’s position as being, in effect, that if a claim is summarily dismissed as a result of an interlocutory decision, there is a prima facie basis for granting leave to appeal. G+T submitted that this submission is unsupported by recent authority and ought to be rejected to the extent it involves a departure or modification from the established principles in Décor.

257    I do not accept G+T’s submission, as it is inconsistent with authorities in this Court and other intermediate appellate courts.

258    In Construction, Forestry, Maritime, Mining and Energy Union v One Key Workforce Pty Ltd [2020] FCAFC 27, the Full Court (McKerracher, Farrell and Markovic JJ) noted at [44]:

The principles governing an application for leave to appeal were not in dispute. An applicant for leave must demonstrate that the decision of the primary judge is attended by sufficient doubt to warrant its reconsideration by a Full Court and that substantial injustice would result if leave were refused, supposing the decision to be wrong: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (Décor Corporation) at 398-399. Leave will more readily be granted in the case of an interlocutory decision that determines a substantive right: Décor Corporation at 400. In Ashby v Slipper (2014) 219 FCR 322 at [46] Mansfield and Gilmour JJ said:

In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564 at [43], citing Ex parte Bucknell (1936) 56 CLR 221 at 225, French J, with whom the other members of the Court agreed, said that a “prima facie case exists for granting leave to appeal” if the judgment, although interlocutory, has the practical operation of finally determining the rights of the parties.

259    Similarly, in a decision handed down after the hearing, but of direct relevance, the Full Court said in Hastwell v Kott Gunning [2021] FCAFC 70 at [26] (McKerracher, Kerr and Charlesworth JJ):

We also accept the concession made by [the respondent] that consideration of whether the decision was attended by sufficient doubt so as to justify the grant of leave to appeal must be assessed in the context that the order effectively brought the proceeding to an end: Tyne v UBS AG [2016] FCA 241 per Edelman J (at [31]-[34]). In this regard, the observations of French J (with whom Beaumont and Finkelstein JJ agreed) in Johnson Tiles Pty v Esso Australia Pty Ltd [2000] FCA 1572; (2000) 104 FCR 564 (at [43]) are instructive:

… Interlocutory orders cover a spectrum from those concerned solely with the mechanics of case management and pre-trial preparation to those which may, for one reason or another, have a significant impact upon the scope and outcome of the proceedings. If the order, the subject of the application for leave to appeal, is concerned with the mechanics of the pre-trial process then the scales are likely to be weighted against the grant of leave. However if while interlocutory in legal effect it has the practical operation of finally determining the rights of the parties “a prima facie case exists for granting leave to appeal” – Ex parte Bucknell (1936) 56 CLR 221 at 225; Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 400; Minogue v Williams [2000] FCA 125 at [18]. If a proceeding is dismissed because it is frivolous or vexatious or because no reasonable cause of action is disclosed the decision is treated as interlocutory. However leave will usually be granted in such a case if there is any doubt about the decision at first instance – Little v Victoria [1998] 4 VR 596 at 598-600 and 601 (Callaway JA, Buchanan JA agreeing).

(see also Samsung Electronics at [31] and Re CSR Ltd [2002] FCAFC 34; (2010) 183 FCR 358 at [5])

260    G+T made two further submissions in relation to the grant of leave to appeal. First, G+T submitted that KTC has not demonstrated that the primary judge’s reasons are attended by sufficient doubt to warrant being reconsidered by the Full Court. Notwithstanding KTC’s generalised references to “novel questions” of law and “factual complexity and uncertainty”, G+T contended that the primary judge’s reasons turned on established principles concerning the test for accessorial liability and the requirement that allegations of fraud be adequately pleaded.

261    In this regard, G+T submitted that the core deficiencies with the pleading may be summarised as follows.

262    First, G+T submitted that KTC’s pleading does not disclose a basis upon which it could be said that G+T had the requisite knowledge, in a legal sense, of the allegedly dishonest and fraudulent design of Mr David and/or RAAL. The allegation of knowledge rests on the proposition that G+T: (i) advised that the impugned transactions – being two share issues referred to below – were lawful; and (ii) knew the impugned transactions were for no consideration. However, G+T said there are no pleaded facts from which either of those matters could be inferred.

263    Second, G+T submitted that KTC’s pleading does not disclose a basis upon which it could be said that there was a design which was dishonest and fraudulent. The central transaction impugned in the pleading is a resolution by the board of Emergent, of which there were three directors: Mr David; Charif and Tarek Kazal (the directors of KTC, who between them had one vote); and Mr Nikolaos Mavromanolakis. The resolution was passed by Mr David and Mr Mavromanolakis at a board meeting the Kazals had been notified of but did not attend. Crucially, the pleadings do not identify how the passing of the resolution – or the conduct of the parties in connection with it – was dishonest or fraudulent.

264    Third, G+T submitted that it was logically incoherent for KTC to plead that G+T acted with the requisite ‘knowledge’ of the fraud, for the reasons detailed in the Notice of Contention dated 25 November 2020. In particular, G+T submitted that the knowledge of Mr Bullock is derived only from the correctness or otherwise of his legal advice. At its highest, that pleading amounts to an allegation of negligence. It does not, without more, affix Mr Bullock with knowledge of a dishonest and fraudulent design.

265    In addition, G+T submitted that there would not be substantial injustice to KTC if leave to appeal were refused, even supposing the decision to be wrong, as KTC has already been offered successive opportunities to amend its pleadings. For example, in KTC v David (No 1) [2019] NSWSC 281 at [47], Kunc J indicated that KTC should “be given a final opportunity to plead [its] case if it comes to the view that it is able to do so.” Similarly, in KTC v David (Pleadings) [2019] FCA 1566 at [52], the learned primary judge put KTC on notice that it would only be given “one more chance” to amend its pleading, adding “[t]his is the end of the line; there are no more stops after this one”. It followed, according to G+T, that KTC would not suffer an injustice in circumstances where it has had many opportunities to re-plead its claim and has not availed itself of those opportunities.

266    During the course of the hearing, G+T made detailed submissions concerning the second limb of the test for leave to appeal, including by reference to a decision of the Full Court in Advanced Holdings. In Advanced Holdings, Steward J, then a member of this Court, wrote the principal judgment of the Court, with which Allsop CJ and Bromwich J agreed.

267    Expressed briefly, Advanced Holdings involved an application for leave to appeal from a summary dismissal of the applicant’s challenge, made pursuant to s 39B of the Judiciary Act 1903 (Cth), to the validity of amended assessments and penalty assessments issued to it by the Commissioner of Taxation across various income tax years. The basis for the challenge was that the Commissioner had relied on documents which were allegedly seized illegally. This occurred in circumstances where a search warrant had been served and executed on the taxpayer’s accountants but the disputed documents purportedly fell outside the scope of what the search warrant authorised.

268    After setting out some additional background matters that are not presently relevant, Steward J proceeded to consider whether substantial injustice would result if leave were refused, supposing the decision to be wrong. In that case, the applicant submitted that there would be a substantial injustice because if the Court determined that the assessments were invalid based on the illegally seized materials, the Commissioner would be unlikely to re-issue the assessments. The predicate of the applicant’s submission was that the Commissioner might subsequently be persuaded to form the opinion that there had never been a fraud or tax evasion and, in any event, the Commissioner would then be out of time to issue amended assessments to the applicant for the years of income in dispute.

269    At [66], Steward J dealt with this submission, and the question of whether leave to appeal should be granted, as follows:

It is convenient to begin with the second test for leave. In my view, the possible opportunity to re-agitate the correctness of the Commissioner’s opinion about the presence of fraud or evasion, and thus avoid the issue of the assessments, is optimistic conjecture and no more. Even if it be a species of possible injustice, due to its slim prospects, the identified injustice is not substantial. It is speculative.

270    His Honour went on to observe at [70]:

It follows from the foregoing that, in my view, the supposed substantial injustice was no more than conjecture or speculation. The Court was given no material upon which it could judge the prospects of the applicant persuading the Commissioner that there had been no fraud or evasion, assuming it would ever need to do so.

[Emphasis added]

271    By reference to Advanced Holdings, G+T submitted that KTC has been unable to demonstrate that the striking out of its pleading against G+T would result in any substantial injustice. This contention was particularised in the following ways.

272    First, G+T submitted that KTC had already exercised legal rights in respect of the same underlying conduct and thereby recovered a substantial part of its claim. G+T further submitted that the notion that there was any “incremental value” in pursuing the claim so alleged against G+T is merely a matter of conjecture, both due to the speculative nature of the claims sought to be advanced against G+T and because there was no evidence that KTC would be unable to recover damages from ancillary litigation.

273    G+T referred in particular to earlier proceedings before the Grand Court of the Cayman Islands, including a court-supervised process through which KTC received a significant distribution of money following the sale of GRL. In relation to this issue, I defer to the reasons of the learned White J of the New South Wales Supreme Court in KTC v Singh & Ors [2018] NSWSC 1510. His Honour described the circumstances relevant to this distribution at [15]-[17]:

…On 14 May 2010 KTC presented a winding-up petition of ECL in the Cayman Islands. On 4 October 2010 a judge of the Grand Court of the Cayman Islands, Mr Justice Jones, made an order to the effect that ECL’s shareholding in GRL could be sold on terms that the net proceeds of sale be paid into court pending the outcome of KTC’s winding-up petition.

KTC alleges that in or about December 2010 all of the shares in GRL were sold to Ironbridge Capital Pty Ltd (“IBC”) for $25 million. By the time of the sale ECL held only 50 per cent of the shares in GRL. This was the result of an issue of shares in GRL to SIL made on or about 23 April 2010. KTC alleges that the share issue was for no consideration. For the reasons below, that contention is without substance.

Half of the proceeds of the sale of shares in GRL, representing ECL’s share of the proceeds, were paid into court in the Cayman Islands. In his judgment of 23 November 2011 Jones J records that the net proceeds of sale paid into Court were about A$12 million. Jones J concluded that the issue of shares in ECL that diluted KTC’s equity from 50 per cent to 0.01 per cent was invalid and the result of the directors of ECL breaching their fiduciary duty by issuing shares for the only purpose of eliminating KTC’s interests and passing ownership of ECL to RAAL. His Honour directed the liquidators of ECL to rectify the register of members to reflect that KTC and RAAL each owned 50 per cent of the shares in KTC. I was told that KTC’s 50 per cent share of the moneys paid into court in the Cayman Islands was remitted to it.

274    G+T’s reliance on the decision of White J in KTC v Singh & Ors [2018] NSWSC 1510 was two-fold. First, to demonstrate that KTC had already recovered all, or at least a substantial part, of the loss allegedly flowing from the impugned transactions; and, second, that there was no risk that assets would be dissipated, leaving KTC unable to recover funds to which it claims an entitlement. In relation to the second of these matters, it is again relevant to refer to the reasons of White J in KTC v Singh & Ors [2018] NSWSC 1510. The application before his Honour was summarised at [1]-[2]:

This is a contested application for freezing orders brought by the applicant, KTC (a company incorporated in the Cayman Islands) against four respondents. KTC is the plaintiff in proceedings in this Court brought by way of statement of claim filed 25 July 2018 against five defendants. Two of these defendants are respondents to this application. The other respondents are the wife and an associated company of the second defendant, Mr David Singh.

KTC does not contend that there is an imminent risk of the respondents’ dissipating assets with the intention of frustrating a judgment. No ex parte application was made for a freezing order. KTC submits that it should be inferred from the conduct of two of the respondents that, unless restrained, the respondents will dissipate assets so as to put them outside the reach of KTC should they become the judgment creditor.

275    His Honour went on to observe at [8]-[10]:

In many cases the risk of dissipation of assets to avoid a judgment will be evident from the plaintiff’s strong prima facie case of the defendant’s having fraudulently misappropriated assets or of serious dishonesty. As the Court held in Patterson v BTR Engineering (Aust) Ltd such evidence may establish that it can reasonably be inferred that the defendant is the sort of person who would, unless restrained, not preserve his or her assets intact so that they might be available to a judgment creditor (at 325-326).

KTC seeks to bring its case within that principle. But it does not say that it has a prima facie case that the respondents themselves engaged in fraudulent activity. Rather, it says that two of the respondents, who are defendants to its claim, participated with knowledge in a fraudulent design and breach of fiduciary duties allegedly owed by another defendant, a Mr David, to KTC.

The facts in relation to this claim are complex. For the reasons which follow I do not accept that KTC has shown that it has a prima facie case that the relevant defendants (that is, relevant to its present application for freezing orders) knowingly assisted in a fraudulent design of Mr David’s or in a breach by him of fiduciary duties owed to KTC. The evidence does not establish a risk that assets will be dissipated. Accordingly, the claim for the grant of a freezing order fails in limine. In any event the freezing order would be refused on the grounds of KTC’s delay in bringing the proceedings and the inadequacy of the proffered undertaking as to damages.

[Emphasis added]

276    Accordingly, G+T submitted that KTC has been unable to demonstrate, in any meaningful way, that there would be a substantial injustice to it if deprived of the opportunity to pursue its claim. G+T contended that as a result of other ancillary proceedings in the Grand Court of the Cayman Islands, KTC has been, or will be, fully compensated for any loss it has suffered. Put differently, G+T submitted that this proceeding involved an attempt at ‘double-dipping’ and it therefore follows that if leave to appeal were refused, no substantial injustice would result because KTC has already been compensated for its loss.

277    G+T also submitted that there can be no substantial injustice in a dispute of the present nature because KTC’s central allegation against G+T involves an “existential impossibility”. G+T expanded upon this contention as follows. Assuming the allegation is that G+T gave legal advice that the relevant transactions were lawful, that advice can only be so described if it based on an opinion which is honestly held. This is because if the advice was presented as ‘legal advice’, but constituted a view which was not in fact held, it would not in fact be legal advice at all. Rather, it would be an artifice, or a fraud.

278    In this respect, G+T continued to rely upon the apparent inconsistency between alleging that G+T had advised that the ELC Share Conduct was lawful, while simultaneously alleging that it was part of a dishonest and fraudulent scheme. For this reason also, G+T submitted that the claim was conjecture and merely speculative in the sense described in Advanced Holdings.

279    G+T emphasised that the onus is on KTC to demonstrate – and positively persuade the Court – that a substantial injustice would result if leave were refused, supposing the decision to be wrong. G+T added that leave to appeal is not available as of right, and that position is not altered simply because the effect of the summary dismissal was to determine KTC’s rights as against (at least) G+T.

280    In reply, KTC submitted that there was no basis for the Court to reach a view that KTC had already been fully compensated for the loss suffered in connection with the ECL Share Conduct and GRL Share Conduct. By way of example, KTC directed attention to [70] of the FASOC, in which it is alleged that on or about 28 November 2013, Global Renewables Holdings Pty Ltd acquired all the shares in GRL, and thus the whole of the Waste Facility, for $120 million. It was KTC’s submission that, but for the contravening conduct, it would have retained an interest in the waste facility and therefore that it has suffered loss which has not been compensated to date.

281    As to whether the claim against G+T involved an “existential impossibility”, KTC submitted that there was no logical inconsistency in the pleaded knowledge of G+T at [75]-[76] of the FASOC. For ease of reference, I extract those paragraphs of the pleading in full:

75.    By reason of Bullock’s knowledge as set out in the preceding paragraph Bullock wilfully shut his eyes to the obvious conclusions that:

(a)    the legal advice that it was lawful to make the ECL Share Issue was wrong;

(b)    if the ECL Share Issue was made then it would constitute a dishonest breach of the fiduciary duties owed by each of David and RAAL to KTC as part of a dishonest and fraudulent design;

(c)    the advice that it was lawful to make the GRL Share Issue was wrong;

(d)    if the GRL Share Issue was made then it would constitute a dishonest breach of the fiduciary duties owed by David and RAAL to KTC as part of a dishonest and fraudulent design;

(e)    further, if the GRL Share Issue was made then it would constitute a dishonest breach of the trust owed by RAAL to KTC as part of a dishonest and fraudulent design.

PARTICULARS

Bullock wilfully shut his eyes to the conclusions in sub-paragraphs (a) to (e) by reason that:

(i)    at the relevant time Bullock was a highly experienced practitioner and the head of the G+T corporate advisory team and specialised in mergers and acquisitions, fundraisings and complex joint ventures;

(ii)     RAAL and KTC were joint venturers in their investment in ECL, to the knowledge of Bullock;

(iii)     Bullock was on notice by reason of the email received from Fionnuala O’Brien on 17 November 2009 that the G+T Legal Advice ought be given careful consideration as to whether it was lawful;

(iv)     ECL’s interest in GRL, and GRL itself, was very valuable, to the knowledge of Bullock, yet he neither obtained nor requested a valuation of GRL;

(v)     the result of the ECL Share Issue and the GRL Share Issue, to the knowledge of Bullock, was to increase RAAL’s interest in GRL from 40% to 50%, to increase SIL’s interest in GRL from 20% to 50%, reduce KTC’s interest in GRL from 40% to effectively nil, and reduce ECL’s debts by less than 1%;

(vi)     neither the advice that it was lawful to make the ECL Share Issue nor the advice to make the GRL Share Issue was advice that an experienced practitioner could reasonably have given;

(vi)     the advice to make the ECL Share Issue did not include any qualification in respect of rights arising in KTC’s favour in respect of oppression remedies;

76.    Alternatively, Bullock had knowledge of circumstances which would have indicated to an honest and reasonable person that:

(a)    the G+T Legal advice that it was lawful to make the ECL Share Issue was wrong;

(b)    if the ECL Share Issue was made then it would constitute a dishonest breach of the fiduciary duties owed by each of David and RAAL to KTC as part of a dishonest and fraudulent design;

(c)    the advice that it was lawful to make the GRL Share Issue was wrong;

(d)    if the GRL Share Issue was made then it would constitute a dishonest breach of the fiduciary duties owed by David and RAAL to KTC as part of a dishonest and fraudulent design;

(e)    further, if the GRL Share Issue was made then it would constitute a breach of the trust owed by RAAL to KTC as part of a dishonest and fraudulent design.

PARTICULARS

KTC refers to and repeats particulars under paragraph 75 above.

282    Senior counsel for KTC explained that, as pleaded, the act of knowing assistance is the provision of advice and drafting of legal documents, by which G+T facilitated the impugned transactions. KTC submitted that such conduct occurred in circumstances where G+T wilfully shut its eyes to the dishonest and fraudulent design that was thereby implemented or, alternatively, had knowledge of circumstances which would have indicated to an honest and reasonable person that the advice was wrong. According to KTC, that is a conventional pleading of knowing assistance and does not entail any logical non sequitur.

283    For reasons I will explain below, I am satisfied that the decision is attended by sufficient doubt to warrant being reconsidered and also that there would be substantial prejudice to KTC’s interests if leave were refused, supposing the decision to be wrong. I reject G+T’s submission that the interlocutory application turned on established principles or did not otherwise involve complex questions of fact incapable of being resolved at a pleading stage. I also reject G+T’s submission that the supposed substantial injustice was no more than conjecture or speculation. I am not persuaded that the proceeding is merely an attempt by KTC to recover loss for which it has already been compensated nor I am satisfied that KTC’s claim is premised on a “logical impossibility”.

284    I segue slightly to note that the principal protagonists in this appeal – KTC and G+T – each made submissions generally in relation to the principles to be applied in determining whether to grant leave to file an amended pleading. Having regard to those principles, I am fortified in my view that leave to appeal should be granted.

285    KTC submitted that leave to file an amended pleading should only be refused in plain and obvious cases. In its written submissions, KTC referred in particular to the summary of principles in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1994] FCA 636; 217 ALR 226 at 236 (Beaumont J):

… Under the modern system of pleading, on an application to strike out a statement of claim as disclosing no cause of action, the question is whether “it would be open to the (applicants) upon the pleadings to prove facts at the trial which would constitute a cause of action”: see Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631; [1971] ALR 235 at 237. The main general principles in strike out applications have been summarised as follows:

(1)    A “reasonable cause of action” means one with some chance of success if regard be had only to the allegations in the pleadings relied upon by the claimant; in such a case, the claim cannot be struck out (Davey v Bentinck ([1893] 1 QB 185)).

(2)    The mere fact that the case appears to be a weak one is not of itself sufficient to justify the striking out of the action (cf Wenlock v Moloney ([1965] 1 WLR 1238; [1965] 2 All ER 871)).

(3)    Normally, the power to strike out should be exercised only in plain and obvious cases, where no reasonable amendment could cure the alleged defect (cf Hodson v Pare ([1899] 1 QB 455)).

(4)    It goes without saying that if a substantial case is involved in the claim, the power to strike out cannot be exercised.

(5)    Where a point of law has to be decided, and the judge is satisfied that this can be done by him appropriately, thereby avoiding the necessity of, and expense in going to trial, he is entitled to determine the point (cf Williams and Humbert Ltd v W & H Trade Marks ([1986] AC 368; [1986] 1 All ER 129)).

This decision has been cited with approval by the Full Court in Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572; 104 FCR 564 at [50] (French J), Beaumont J agreeing at [1], Finkelstein J agreeing at [99].

286    KTC further submitted that contemporary case management principles are such that the Court should only refuse to grant leave to file an amended pleading if it would significantly impact upon the proper preparation of the case: see, eg, Barclay Mowlem Construction Ltd v Dampier Port Authority & Anor [2006] WASC 281; 33 WAR 82 at [6]-[8], cited with approval in Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15 at [13] (Greenwood, McKerracher and Reeves JJ). KTC contended that the importance of not taking “an unduly technical or restrictive approach to pleadings” (Thomson at [13]) was particularly important in the present circumstances because:

(1)    the relevant area of law is not settled, making it inappropriate to decide novel questions on hypothetical facts: see, eg, X (Minors) v Bedfordshire County Council [1995] 2 AC 633 at 740-741, cited with approval in Johnson Tiles at [50]; and

(2)    relevant facts are peculiarly within the knowledge of the Respondents. Accordingly, KTC’s cause of action should not be dismissed because of gaps in its case which might be resolved as a result of discovery, by requesting interrogatories or by adducing evidence from reluctant witnesses: see, eg, Granite Transformations Pty Ltd v Apex Distributions Pty Ltd [2018] FCA 725; 359 ALR 62 at [6] (O’Callaghan J).

287    In response, G+T submitted that the power to grant leave to amend a pleading is discretionary: see r 16.53 of the Federal Court Rules 2011 (Cth), discussed in Tamaya Resources Ltd (In Liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2; 332 ALR 199 at [122] (Gilmour, Perram and Beach JJ). Nonetheless, G+T acknowledged that the discretion is not at large. That is to say, it must be exercised having regard to the overarching purpose in 37M of the Federal Court Act, including the recognised interest in resolving a dispute expeditiously and promoting the efficient use of the Court’s resources: Tamaya Resources at [123].

288    Further, G+T accepted that in exercising this discretion modern courts do not take an unduly technical or restrictive approach. However, that does not detract from the requirement that pleadings must serve their essential function. As the Full Court said in Thomson at [13]:

It is well-established that the main purposes of pleadings are to give notice to the other party of the case it has to meet, to avoid surprise to that party, to define the issues at trial, to thereby allow only relevant evidence to be admitted at trial and for the trial to be conducted efficiently within permissible bounds: see, eg Dare v Pulham (1982) 148 CLR 658 (at 664–665). However, it is also well-established that pleadings are not an end in themselves, instead they are a means to the ultimate attainment of justice between the parties to litigation: see Banque Commerciale S.A. (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279 (at 293) per Dawson J who cites Isaacs and Rich JJ in Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 (at 517)...

[Emphasis added]

289    Consistent with these propositions, G+T submitted that the discretion to grant leave to amend a statement of claim should be exercised having regard to the need for the party opposing leave to properly understand the case put against it. G+T submitted that the necessity for proper notice is brought into sharp focus in a case such as the present given the central allegation is of knowing assistance in relation to a dishonest and fraudulent design.

290    In addition to the principles identified by the parties, I add the observations of the Full Court in Oztech Pty Ltd v Public Trustee of Queensland [2019] FCAFC 102; 269 FCR 349 at [28]-[32] (Middleton, Perram and Anastassiou JJ):

The question of whether a pleading adequately raises a claim or defence is not concerned with the expression of the pleading as a matter of style, or of phrasing, or the structure of the pleading. Neither is it concerned with the formality of the process by which the issues in the proceeding are identified; be it a statement of claim, statement of contentions, concise statement, points of claim or points of defence. The verbal formulation of the allegations of fact, or the contentions of law, need not conform to a particular style guide or to any pro forma template.

The sole objective of a pleading is to clearly identify matters in dispute and difference by and between the parties to the dispute. This objective necessarily involves expressing the factual basis of each claim or defence. It is necessary that the legal elements of each cause of action or defence are expressed by reference to allegations of fact required to establish each element. It is not necessary to plead the legal conclusions that follow from the facts, but it is often convenient to do so. These are trite propositions but nevertheless vital to ensuring that the pleading serves its purpose.

There should be no doubt about whether any particular cause of action is relied upon. At a minimum, the pleading should be pellucidly clear about the causes of action, or claims, relied upon by the applicant, including any claims made upon an alternative hypothesis. The explicit clarity with which a claim is expressed should ensure that there be no need for the opposite party to closely scrutinise the pleading in a process of textual construction to determine whether a particular fact is relied upon, or the purpose for which it is alleged, much less to decide whether a particular cause of action is raised. The same basic requirement applies to any defence raised in answer to a claim.

Clarity in pleading is by no means an unattainable objective, even in the most complex litigation. Often the elements of a cause of action require careful and precise identification to ensure that the relevant integer is properly characterised having regard to the context in which the claim arose. The pleading should always be a bespoke articulation of the dispute between the parties, even though the warp and the weft of its fabric may be the same as other claims based upon the same, or a similar, cause of action.

There are occasions when such definition can be difficult and may require reference to technical or scientific material, including cases where the material requires specialist explanation by reference to expert evidence to be given at trial. In some instances, the contended facts may be asserted based upon inferences to be distilled from a web of other facts. In other instances it may be necessary to define an implicit representation drawn from the contextual background against which express statements were made or from the failure to make an express statement contrary to the apparent common assumption of the parties. While the limits of text may in some cases impose linguistic limitations beyond a certain level, such linguistic limitations would not generally present any obstacle to expressing the substantive causes of action with sufficient clarity to ensure that the parties are able to reach a shared understanding of the issues in the dispute.

The above passages have been cited with approval by the Full Court of this Court in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2021] FCAFC 121; 396 ALR 27 at [153] (McKerracher and Colvin JJ) and, in my view, remain apposite in resolving a dispute regarding the adequacy of pleadings.

291    In my view, the quality of a pleading must surely be judged by its clarity. If it is clearly expressed, the analytical foundations of the claim, or defence, may be scrutinised. If upon scrutiny, the claim, or defence, is revealed to be founded upon a factual assumption for which there is no arguable basis, or a path of reasoning which is founded upon a misunderstanding of legal principles, the pleading will have served its proper purpose. A clear pleading shall also have served the interests of justice by stating clearly the nature and legal characterisation of the controversy between the parties, thereby allowing for the efficient disposition of the controversy.

292    A deficient pleading, on the other hand, is one which is, in critical respects, loose or opaque; often expressed in the passive voice. Such pleadings may elide inconvenient facts, or make generalised allegations or denials about critical elements such as knowledge, subjective or imputed, and may also lack a demonstrable and precise articulation of the necessary elements of the cause, or causes, of action relied upon. Those pleadings are ‘embarrassing’ in the legal sense (see r 16.02(2)(d) of the Rules) and should not be tolerated, not for their inelegance but for their potential to impede the efficient administration of justice for reasons that have been stated many times. As Abraham J explained in Australian Competition and Consumer Commission v NQCranes Pty Ltd [2021] FCA 1270 at [9]:

A pleading is embarrassing where it is unintelligible, ambiguous, vague or too general, such that the opposite party does not know what is alleged against him or her: Fair Work Ombudsman v Eastern Colour Pty Ltd [2011] FCA 803; (2019) 209 IR 263 (Eastern Colour) at [18], citing Meckiff v Simpson [1968] VR 62 at 70. A pleading may be considered to be embarrassing if it suffers from narrative, prolixity or irrelevancies to the extent it is not a pleading to which the other party can reasonably be expected to plead to: Fuller v Toms [2012] FCA 27; (2012) 247 FCR 440 at [80], [83]. It has been said that a pleading is embarrassing if it “is susceptible to various meanings, or contains inconsistent allegations or in which alternatives are confusingly intermixed or in which irrelevant allegations are made tending to increase expense”: Bartlett v Swan Television and Radio Broadcasters Pty Ltd [1995] ATPR 41-434 at [25]; Faruqi v Latham [2018] FCA 1328 at [94]. Although facts or characterisations of facts can be pleaded in the alternative, a pleading should not “[plant] a forest of forensic contingencies” which are only pulled together in final submissions: Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 at 503.

293    In my view, the pleaders for KTC have aspired to clarity, and to a degree, achieved it. They are subject to the limitations of text; that is to say, the limits to which inferences of fact, legal principle and/or wrongdoing may be expressed in writing, where those conclusions are distilled from a multiplicity of concurrent objective facts and, often, disputed events.

294    In cases such as the present, whether there has been wrongdoing sufficient to found a cause of action depends upon an assessment of conduct considered within its full context, which may extend back many years. Indeed, in such cases, however skilful the pleader, and however comprehensive and candid the pleading may be, there may remain legitimate disagreement about whether the pleading expresses an adequate factual foundation for the legal characterisation of the relevant conduct. Such disagreement concerning the pleaded characterisation of the conduct in question is more likely when the legal characterisation involves an element of moral turpitude such as fraud or dishonesty, and where that element may only be established by inferences drawn from multiple events and circumstances, particularly where the relevant inference concerns the subjective state of mind of the putative wrongdoer.

295    There are limits to the ability to express the combination or combinations of facts, conduct and relevant contextual circumstances which found the legal characterisation of the conduct, for example, the knowing assistance of a wrongdoer in a ‘dishonest and fraudulent design’. The complexity of the relationship between the relevant actors, the scope, and time frame over which the relevant context extends, add to the difficulty of encapsulation and characterisation, especially when the conduct in question is to be assessed having regard to the actual, or imputed, knowledge of the putative wrongdoer.

296    In my view, such disagreement should be resolved by the trier of fact at the trial of the proceeding. At a trial, the motivations of the relevant actors may be ‘teased out’ through the adversarial contest. This process includes the important opportunity to test by cross examination the knowledge and motivations of the relevant actors. In that context, it is conceivable that evidence given at the trial may vindicate the putative wrongdoer, or vice versa.

297    Needless to say, a party to a proceeding should not be subject to a trial on allegations that are untenable or are founded upon an identifiable misconception. As I have said above, the measure of a good pleading is clarity, for that allows such misconceptions to be identified. A trial is not an opportunity for one party to search for a claim, or defence, in running. But there must be a balance between the interests of a respondent not to be vexed by a misconceived or speculative claim, and the opportunity afforded by the adversarial mode of trial to explore and test evidence at trial.

298    In my view, keeping that balance in mind, and having regard to the fact that the interlocutory application has the effect of finally determining KTC’s rights as against G+T, I would grant leave to appeal. I therefore turn to consider the substantive grounds raised by the Notice of Appeal.

Substantive issues on appeal

299    KTC submitted that the 16 grounds of appeal raise four broad issues for the Court’s consideration:

(1)    whether the allegation that the ECL Share Conduct was dishonest is maintainable (grounds 3, 4 and 5);

(2)    whether the allegation of G+T’s assistance at [72](e) of the FASOC is maintainable (grounds 8 and 9), and sufficient assistance is otherwise alleged against G+T (grounds 10 and 11);

(3)    whether the allegation of G+T’s knowledge at [74](m) of the FASOC is maintainable (grounds 12 to 14); and

(4)    whether the Primary Judge considered the adequacy of the pleaded ECL Share Conduct (grounds 1 and 2) and Constructive Trust Fraudulent Scheme (grounds 6 and 7).

300    There is also a fifth issue which arises in relation to the orders of the primary judge. It is whether the allegations against the First to Third Respondents ought to be permitted to stand (grounds 15 and 16). This issue only arises if the appeal is not allowed in relation to the other grounds of appeal.

301    G+T submitted that those grounds are, in substance, an attempt to re-agitate issues that were traversed below and, in many instances, in the earlier interlocutory applications referred to in paragraph [235] above. G+T further submitted that in circumstances where the primary judge’s decision to refuse leave to amend is discretionary, the principles in House v The King [1936] HCA 40; 55 CLR 499 at 504-5 apply (see also Nationwide News Pty Limited v Rush [2020] FCAFC 115; 380 ALR 432 at [346] (White, Gleeson and Wheelahan JJ)) and, having regard to those principles, there was no error in the exercise of the primary judge’s discretion.

302    By its Notice of Contention, G+T identifies a further ground upon which it contends that the orders of the primary judge should be upheld. The Notice of Contention is in the following terms:

1.    Having regard to:

(a)     the definition of "G+ T Legal Advice" in paragraph 23(b) of the Proposed Further Amended Statement of Claim ("Proposed FASOC");

(b)    the allegation at paragraph 23(b) of the Proposed FASOC that the Fifth Respondent ("Bullock") gave the G+ T Legal Advice to the First Respondent (“David”), RAAL Limited ("RAAL") and Emergent Capital Limited ("ECL");

(c)     the additional allegations at paragraphs 98 and 145 of the Proposed FASOC that Bullock and the Fourth Respondent ("G+ T") gave David and RAAL legal advice that:

(i)     it was lawful to make the ECL Share Issue, as defined in paragraph 34 of the Proposed FASOC; and

(ii)     it was lawful to make the GRL Share Issue, as defined in paragraph 41 of the Proposed FASOC; and

(d)     the omission of the Appellant to plead that the advice referred to above did not represent the genuine views or opinions of Bullock, a matter they could not, in the circumstances, plead.

2.    The primary judge should have found that there was no proper basis for the Appellant to plead, or alternatively that it was embarrassing for the Appellant to plead:

(a)    that Bullock had wilfully shut his eyes to the conclusions pleaded at paragraph 75(a) to (e) of the Proposed FASOC;

(b)     that Bullock had knowledge of circumstances which would have indicated to an honest and reasonable person the matters pleaded at paragraph 76(a) to (e) of the Proposed FASOC; and

(c)     that either G+ Tor Bullock assisted RAAL or David in any breaches of fiduciary duty with knowledge:

(i)    of any such breaches; or

(ii)    that such breaches were part of a dishonest and fraudulent design.

3.    In the premises, the primary judge should have also struck out and dismissed the application to file the Proposed FASOC on the above basis as well.

303    The matters raised in the Notice of Contention only arise if, contrary to the primary judge’s finding, this Court concludes that the pleadings are capable of sustaining an inference that G+T advised that the ECL Share Conduct was lawful. In those circumstances, G+T submitted that the allegation that Mr Bullock wilfully shut his eyes to the incorrectness of his own legal advice (at [75] of the FASOC) is “simply impossible” as a matter of logic. In this respect, G+T contended that absent any plea that Mr Bullock had knowledge (constructive or otherwise) of the alleged fraud, and knowingly gave incorrect legal advice, the allegation can rise no higher than negligence in giving legal advice. As G+T noted, correctly, that is insufficient to found a knowing assistance claim under the second limb of the rule in Barnes v Addy.

Grounds 3 to 5

304    Grounds 3 to 5 relate to the claim that G+T knowingly assisted in a dishonest and fraudulent design given effect to by the First to Third Respondents through the ECL Share Issue. These issues were considered by the primary judge at [27]-[41] of his Honour’s reasons. The primary judge variously described the ECL Share Conduct as “highhanded perhaps”, “aggressive certainly”, “provocative”, “not … nice” (at [38]), and “apt to raise eyebrows” (at [39]), but found that the conduct was not such as to be capable of comprising a dishonest and fraudulent design. The primary judge concluded (at [39]) that the ECL Share Conduct could not be a fraudulent and dishonest scheme “unless Mr Mavromanolakis is said to have been lied to or, alternatively, himself to have been in on it. But neither allegation is made.” His Honour added (at [40]):

It follows that I accept G+T’s submission that the dishonest scheme alleged by KTC is fundamentally incoherent. I do not accept KTC’s submission that the dishonesty of Mr David (and implicitly of G+T) is to be assessed against what is alleged against them rather than by reference to Mr Mavromanolakis. That submission seeks to reduce the role of Mr Mavromanolakis in the dishonest scheme and to make him a non-essential or at least peripheral participant. In fact, the entire scheme hinged on him. If the scheme was not dishonest in relation to Mr Mavromanolakis then the rest of KTC’s case makes no sense. Nor is it to the point that it is alleged that G+T knew that Mr David had procured Mr Mavromanolakis’s support. Again this brings into focus the critical issue which is not whether Mr David procured Mr Mavromanolakis’ support but how he did so: did he do it with deceit or blunt force? There is no allegation of deceit and every appearance of blunt force.

305    KTC submitted that, in so finding, the primary judge erred for two reasons. First, as the ECL Share Conduct disclosed a dishonest and fraudulent design; and second, as the primary judge should in any case have granted leave to file the FASOC, given the factual complexity and uncertainty in the law. I outline the particulars of each submission in turn.

306    As to the first reason, KTC submitted that the elements of accessorial liability for knowing assistance under the second limb of Barnes v Addy, as conventionally understood in Australia, are that: (1) there has been a breach of fiduciary duty; (2) the breach was dishonest and fraudulent – referred to as a “dishonest and fraudulent design”; (3) the alleged accessory assisted in the breach; and (4) the alleged accessory had the requisite knowledge of the essential elements of the dishonest and fraudulent design: Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89 at [160], [174]-[179] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

307    Unsurprisingly, there are differing expressions of what is meant by, or constitutes, a dishonest and fraudulent design: see Zibara v Ultra Management (Sports) Pty Ltd [2021] FCAFC 4; 283 FCR 18 at [97] (McKerracher and Anderson JJ); cf. Westpac Banking Corporation v Bell Group Ltd (In Liq) (No 3) [2012] WASCA 157; 44 WAR 1 at [2112]-[2125] (Drummond AJA) and Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; 87 NSWLR 609 at [4] (Barrett JA), [9] (Gleeson JA) and [91]-[120] (Leeming JA). Abstract legal encapsulations such as this will inevitably be analytically deconstructed, and in that process expanded upon and, possibly, re-phrased. Whether there be substantive differences of opinion is often difficult to discern and distinguish from differences of phrasing. It is therefore necessary to explore whether there are in substance different interpretations of what is meant by the encapsulated expression that is ‘a dishonest and fraudulent design’.

308    In the Bell Group litigation, Drummond AJA opined that whether a trustee or fiduciary has engaged in a dishonest and fraudulent design requires an inquiry into whether the conduct in question would be excusable by analogy to statutory provisions applicable to excusing trustees or fiduciaries. His Honour explained that such inquiry requires consideration of at least the following matters identified at [2112]:

(a)    a finding of a breach of duty by the fiduciary will not, without some additional feature, be sufficient to show a dishonest and fraudulent design on the fiduciary’s part;

(b)    it is not necessary, in order to establish the existence of the additional feature, to show that the breach of duty occurred in circumstances in which the fiduciary acted with a conscious awareness that what he was doing was wrong: the breach of duty can be characterised as dishonest or fraudulent according to equitable principles and that will suffice for liability;

(c)     the additional feature will be found if the breach of duty is more than a trivial breach and is also too serious to be excusable because the fiduciary has acted honestly, reasonably and ought fairly to be excused…

His Honour added at [2119] (see also Lee AJA agreeing on this point at [1099]): “I do not think the court in Farah is to be understood as having accepted that conduct by trustees or fiduciaries must involve an element of moral reprehensibility before it will satisfy the requirement of the second limb that it is ‘dishonest and fraudulent’.” Senior counsel for KTC submitted that this has been understood as establishing a relatively low threshold for the concept of a dishonest and fraudulent design.

309    In Hasler, Leeming JA indicated that he regarded the test expounded by Drummond AJA as setting the bar too low (at [89]) and added that the reasoning at [2104]–[2126] in Bell should not be followed (at [91]). His Honour proceeded to explain that a dishonest and fraudulent design is one that meets the description at [124]:

Dishonesty amounts to a transgression of ordinary standards of honest behaviour. It is not necessary to say anything else by way of elaboration, save to confirm that it is not necessary to demonstrate that the person thought about what those standards were. (I have paraphrased Lord Hoffmann's account in Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2006] 1 All ER 333 at [16].)

[Emphasis added]

That proposition has been cited with approval by Gageler J in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; 265 CLR 1 at [71]. However, it is notable that other members of the High Court did not express a view about what constitutes a ‘dishonest and fraudulent design’ in Foresters.

310    In Zibara, McKerracher and Anderson JJ explained at [103] that there seemed to be a clear trend in the authorities favouring the approach articulated by Leeming JA in Hasler. Their Honours added at [107]:

It is “plain (in Australia) that it is the quality of the fiduciary’s breach which must answer the description of “dishonest or fraudulent”: Hasler, [110]. This Court must assess the quality of the conduct of the fiduciary and determine whether that conduct answers the description of a dishonest and fraudulent design, being conduct that amounts to a “transgression of ordinary standards of honest behaviour”: Hasler, [124]; Foresters, [72].

311    Writing separately in Zibara, Derrington J relevantly added (at [254]):

It is essential to attach liability to a third party, who has not procured or induced a breach of the fiduciary duty, that the breach in question is of a particular quality. That is, it is part of a dishonest and fraudulent design of which the third party has knowledge. This was reiterated in Farah and the point was comprehensively assayed by Leeming JA in Hasler v Singtel. In that analysis, his Honour identified the error in the reasoning in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1, which had concluded at [2112] that a breach of fiduciary duty could cause liability to attach to third parties where the breach could be characterised as dishonest or fraudulent according to equitable principles, and there was no need to show the conduct to be “morally reprehensible”. Leeming JA accepted (at 632 [106]) that in order to attach liability to a third party for the breach of fiduciary duty, outside of those cases of procuring or inducing the breach, it was necessary for the breach to amount to a dishonest and fraudulent design. His Honour also acknowledged (at 635 – 636 [122] – [125]) that the concept of “dishonest and fraudulent” design was conceptually different to that of equitable fraud and it requires a transgression of ordinary standards of honest behaviour. His Honour’s conclusions were subsequently endorsed in the reasons of Gageler J in Ancient Order of Foresters v Lifeplan at 31 [71], where his Honour said:

Knowing participation by a non-fiduciary in a dishonest and fraudulent breach of fiduciary duty is conduct which is regarded in equity as itself unconscionable and as attracting equitable remedies against the knowing participant of the same kind as those available against the errant fiduciary. Knowing participation in a dishonest and fraudulent breach of fiduciary duty includes knowingly assisting the fiduciary in the execution of a “dishonest and fraudulent design” on the part of the fiduciary to engage in the conduct that is in breach of fiduciary duty. The requisite element of dishonesty and fraud on the part of the fiduciary is met where the conduct which constitutes the breach transgresses ordinary standards of honest behaviour. Correspondingly, the requisite element of knowledge on the part of the participant is met where the participant has knowledge of circumstances which would indicate the fact of the dishonesty on the part of the fiduciary to an honest and reasonable person.

(Footnotes omitted)

[Emphasis added]

312    The final decision specifically referred to by KTC was Nicholson v Morgan (No 3) [2013] WASC 110, a first instance decision in which one of the defendants brought an application to strike out the plaintiffs’ amended statement of claim. In Nicholson, Edelman J, then a Judge of the Supreme Court of Western Australia, noted that caution should be exercised at the level of a strike out application before determining that the level of knowledge pleaded does not reach the threshold of showing knowledge of a dishonest and fraudulent design. In particular, his Honour referred to the decision of Drummond AJA in Bell and noted the uncertainty arising from this decision as to the meaning of a dishonest and fraudulent design: see in particular at [56]. Relevantly, however, Nicholson pre-dates both Hasler and Foresters.

313    I turn now to the FASOC itself. At [19], KTC pleaded that the fiduciary duty alleged to be owed by Mr David and RAAL to KTC included that they:

(1)    act in the interests of and not cause detriment to KTC;

(2)    not prefer their own interests to KTC’s interests, and not use their position to improperly gain an advantage for Mr David, RAAL or another party; and

(3)    to account to KTC for any improper benefit that they received.

Assuming such a duty, KTC submitted that Mr David’s and RAAL’s intentional or overt acts were, at a minimum, capable of comprising a dishonest and fraudulent design. Those acts, most relevantly, included converting a disputed debt into equity (without paying any heed to the value of the equity), practically eliminating KTC’s interest in the joint venture and thereby wrestling control of ECL.

314    In addition, KTC pleaded that it would be open for the Court to find a dishonest and fraudulent design from the following aspects of Mr David’s / RAAL’s conduct:

(1)    procuring the G+T Legal Advice for Mr David, Mr Mavromanolakis, RAAL and ECL and withholding it from KTC (FASOC at [23]-[24]);

(2)    executing the RAAL Loan Agreement when the loan amount was disputed by KTC (FASOC at [25]-[26]);

(3)    convening a board meeting on 28 January 2010 ECL without informing KTC of the RAAL Loan Agreement, RAAL’s demand, or that Mr David intended to move the ECL Share Resolution (FASOC at [28], [29]); and

(4)    failing to obtain a valuation of ECL or its shares prior to the making of the ECL Share Resolution, when shares in ECL were a valuable asset (FASOC at [32], [33]).

315    KTC emphasised that it is the quality of the fiduciary’s breach – in this instance, Mr David and RAAL – that is relevant. It follows that enquiring as to whether Mr Mavromanolakis acted properly in voting in favour of the share issue, or did so for extraneous reasons, is irrelevant. KTC contended that it was Mr David’s / RAAL’s breach that must constitute a “transgression of ordinary standards of honest behaviour” and the primary judge erred by undertaking that enquiry in relation to the ECL Share Conduct as a whole, including by reference to the role of Mr Mavromanolakis, rather than exclusively in relation to the conduct of Mr David / RAAL.

316    KTC further submitted that the failure to allege that Mr Mavromanolakis’ conduct was dishonest in relation to the relevant breach of fiduciary duty does not mean that Mr David / RAAL’s breach cannot be dishonest in the relevant sense. To hold otherwise would require dishonesty at every step, by every actor, of an otherwise dishonest and fraudulent design. In KTC’s submission, a design does not cease to be dishonest just because a critical step lies outside the errant fiduciary’s control.

317    KTC submitted that references to conduct which was “highhanded”, “brutal” and “aggressive” are almost indistinguishable, if not synonymous, from the concept of conduct which transgresses ordinary standards of behaviour. To the extent that those concepts are capable of being distinguished, it is not at the preliminary stage of pleadings but only after having received and considered the evidence. In those circumstances, KTC submitted that the primary judge erred in expressing a view that the conduct does not appear dishonest (at [38]) and striking out the FASOC. In KTC’s submission, that is a conclusion that could only be reached at trial and to strike out the pleading on that basis was a miscarriage of the primary judge’s discretion.

318    In any event, KTC submitted that the second reason the primary ought to have granted leave to file the FASOC is that the true extent of Mr David’s / RAAL’s dishonesty will involve matters uniquely within the knowledge of those actors, and the law in Australia as to what is meant by a “dishonest and fraudulent design” remains unsettled.

319    Relevant to the disposition of the appeal, KTC submitted that if the submissions in relation to grounds 3 to 5 were accepted, the appeal should be allowed. KTC made this submission on the premise that the primary judge did not impugn the knowing assistance component of the claim as it pertained to G+T (subject to considering the issue raised in the Notice of Contention).

320    Senior counsel for KTC advanced the following propositions in support of the submission that grounds 3 to 5 were dispositive of the appeal:

(1)    the relevant conduct is pleaded at [23](b) of the FASOC, in which it is alleged that G+T gave legal advice to Mr David, Mr Mavromanolakis, RAAL and ECL in relation to the ECL Share Conduct;

(2)    the retainer by which G+T provided legal services to GRL, ECL, RAAL and Mr David is pleaded at [72](a);

(3)    the G+T legal advice regarding the ECL Share Conduct is pleaded at [72](c) and (d);

(4)    there are then allegations that G+T had relevant knowledge of the dishonest and fraudulent design pleaded at [74](a)-(j); and

(5)    if satisfied that a reasonable cause of action is disclosed that the ECL Share Conduct involves a dishonest and fraudulent design, by reason of those pleadings, that alone would be sufficient for the appeal to be allowed.

321    G+T properly characterised KTC’s submissions in relation to grounds 3 to 5 as pertaining to either one of the following issues:

(1)    that the primary judge erred by concluding that the pleadings did not disclose a dishonest and fraudulent design; and/or

(2)    that owing to the factual complexity and uncertainty in the law, leave to amend should have been granted.

322    As to KTC’s first contention, G+T submitted that the FASOC does not identify any specific aspect of the ECL Share Conduct that is capable of constituting a dishonest and fraudulent design. G+T endorsed the primary judge’s differentiation of conduct which was, in legal terms, dishonest and fraudulent and, conduct that could be described as “aggressive” or “highhanded perhaps”.

323    In particular, G+T submitted that KTC had misunderstood the crucial point that the dishonest and fraudulent design inhered, at least for the purposes of grounds 3 to 5, in the ECL Share Conduct. It followed that, irrespective of the allegations of dishonestly against Mr David or RAAL in relation to other matters, KTC was required to plead that the decision to issue shares was dishonest or fraudulent and that G+T knowingly assisted in that process.

324    Taken to its logical conclusion, G+T’s contention was, in effect, that because the ECL Share Conduct was the consequence of a decision taken by ECL’s Board, with votes being cast separately by Mr David and Mr Mavromanolakis, there could be no dishonest and fraudulent design without an allegation that Mr Mavromanolakis was either misled or otherwise acted improperly in voting in favour of the share issue. Accordingly, G+T submitted that the primary judge did not err in finding that the pleading, at least in relation to the ECL Share Conduct, was not viable.

325    In relation to KTC’s second contention, G+T submitted that the primary judge was aware of, and alive to, the debate within the authorities as to what constitutes a dishonest and fraudulent design in Australian law (to the extent that there is any residual controversy). G+T referred in particular to [13] of the primary judge’s reasons in KTC v David (Pleadings) [2019] FCA 1566, in which the primary judge adopted the summary of principles by Kunc J in KTC v David (No 1) [2019] NSWSC 281 at [19]. Those principles included the following:

(5)     Avoiding argument over what is fraud, the fiduciary’s breach of duty must also be dishonest in the sense that it is a transgression of ordinary standards of honest behaviour

326    G+T contended that the primary judge followed an orthodox approach to the relevant question of law. That approach, G+T submitted, is consistent with Leeming JA’s reasons in Hasler, as adopted by Gageler J in Foresters and the Full Court in Zibara. Further, G+T submitted that the onus is on KTC to demonstrate that the primary judge erred in finding that the ECL Share Conduct may well have been a breach of fiduciary duty which merited descriptions such as “high-handed perhaps”, “aggressive certainly” and “brutal”, but that it was not dishonest. G+T added that KTC has not specifically identified any difference between the approaches taken by intermediate appellate courts, which might bear upon the claim, particularly in circumstances where KTC has failed to directly plead dishonesty in the relevant legal sense.

327    G+T also submitted that it was beside the point to focus on the asymmetry of information, or on matters that might uniquely be within the knowledge of Mr David or RAAL. In G+T’s submission, that only serves to detract from the actual deficiencies identified by the primary judge, namely, that absent an allegation of fraud concerning the issue of shares by ECL, KTC’s allegation of a dishonest and fraudulent design cannot be sustained.

328    As appears from the above, the respective submissions diverge in relation to a critical point. On the one hand, KTC submitted that it is the quality of the fiduciary’s breach that is relevant – being Mr David and RAAL’s breach of duty to KTC. On the other hand, the primary judge held, and G+T in turn submitted, that it is necessary to identify dishonesty attached to the ECL Share Conduct generally. In my view, it is the nature of Mr David’s and RAAL’s breach of fiduciary duty that must amount to a transgression of ordinary standards of honest behaviour and [21]-[40] of the FASOC, considered in its totality, plead that claim in sufficiently clear terms.

329    Having had the benefit of reading, in draft form, the reasons for judgment to be published of Wigney J, I agree with and adopt his Honour’s detailed recitation of the relevant principles concerning an application to strike out pleadings and summarily dismiss a claim at [108]-[132]. I also accept that a pleading of knowing assistance in this context is tantamount to an allegation of fraud, which is plainly a very serious allegation to make, whomsoever it is made against. That said, I respectfully disagree with Wigney J’s conclusions concerning the application of those principles in this case. In particular, I respectfully disagree with Wigney J, with whom Jackson J agrees in relation to this issue, that the pleading does not disclose a reasonable cause of action against G+T (including Mr Bullock) for knowing assistance in respect of the dishonest and fraudulent design that inhered in the ECL Share Conduct.

330    The expression used in Barnes v Addy of a ‘dishonest and fraudulent design’ is an apt encapsulation of a quality of breach of fiduciary duty. It encapsulates a breach where the conduct of the fiduciary, and those who assist the fiduciary, is comingled with knowledge. The proper appreciation of critical elements such as the knowledge of a third party may not always be possible, or even desirable, to derive from an analytical critique of the pleading. Accordingly, a case such as the present is, in my view, unsuitable for disposition on a pleading basis given the complexity of the relationship between the various actors, the complexity of the transaction in dispute and the extensive contextual antecedence to the joint venture. I am fortified in that conclusion by the information imbalance, or knowledge asymmetry, which favours G+T and presents obstacles for KTC at the pleading stage.

331    In my opinion, the FASOC discloses that KTC may have a cause of action against G+T for knowing assistance in a dishonest and fraudulent design. It may turn out following a trial that the pleading was unduly complex in parts, or that the case thesis underlying certain parts of the claim fails, or that the claim fails in its entirety. However, in a case of such comingled complexity, it is only at trial, where the evidence may be tested, that a conclusion may be reached concerning whether there has been a dishonest and fraudulent design and whether relevant actors had, or did not have, the requisite levels of knowledge described in Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509.

332    Indeed, it may reasonably be expected that the evidence given at trial will illuminate and reveal nuances which enable a better understanding of facts relevant to conclusions about critical elements of the claim. That may include illuminating matters such as the proper characterisation of the behaviour of the actors involved and/or their knowledge of relevant matters. Accordingly, I would allow the appeal on grounds 3 to 5. For the reasons explained by KTC, that itself is sufficient to dispose of the appeal.

Notice of Contention

333    By its Notice of Contention, referred to above at [302]-[303], G+T contended that KTC’s pleading is deficient because KTC accepts that Mr Bullock gave advice to the effect that the ECL Share Issue and GRL Share Issue were both lawful, but fails to plead that the advice did not represent the genuinely held views or opinions of Mr Bullock. G+T says that is a logical impossibility, a non sequitur, and that the primary judge should have found there was no proper basis for the pleading that Mr Bullock wilfully shut his eyes or had knowledge of circumstances which would have put an honest and reasonable person on notice, as pleaded at [75] and [76] of the FASOC, set out above at [281].

334    I do not accept the submission advanced in the Notice of Contention. Having regard to the principles in Farah Constructions, KTC’s pleading is, in this respect, a conventional pleading of accessorial liability. More specifically KTC pleads that:

(1)    Mr Bullock wilfully shut his eyes to obvious conclusions that the ECL Share Issue and GRL Share Issue would give rise to dishonest breaches, having regard to the objective features of those schemes; or, alternatively

(2)    Mr Bullock had knowledge of circumstances that would have put an honest and reasonable man on inquiry that his advice was wrong, again having regard to the objective features of the ECL Share Issue and GRL Share Issue.

335    In effect, G+T contended that KTC’s pleading against Mr Bullock is incapable of supporting a finding of knowing assistance because the relevant knowledge pleaded amounts to, in effect, no more than an assertion of negligence. However, as KTC rightly pointed out, that is a mischaracterisation of the plea. Indeed, it is a contention that was earlier rejected by the primary judge in KTC v David (Pleadings) [2019] FCA 1566. In this regard, the primary judge said at [25]-[26]:

G+T submits that KTC now wishes to run a case against it for performing the very services they were retained to perform. In particular, G+T submits that KTC now seeks to say that the legal advice which G+T gave was wrong because the share issue allegedly involved a breach of fiduciary duty owed by Mr David (and RAAL) to KTC.

This is not quite what the proposed pleading says…

336    After setting out relevant aspects of the pleading, as it then was, his Honour concluded at [31]-[35]:

To an extent, I would accept what I think is the substance of G+T’s point about this which is that none of these matters really go directly to actual knowledge of G+T. For example, the reference to the ‘G+T Advice’ in ¶137(a) is a cross-reference to ¶134 which contains a collection of either anodyne allegations (such as that G+T prepared an action plan to give effect to the memorandum of understanding) or, even less helpfully from KTC’s perspective, to allegations such as that at ¶134(h)(iii) that G+T advised that the transaction was the ‘right thing and the legal thing to do’. It is difficult to see how these allegations can advance a case that G+T knew that Mr David and RAAL were acting in breach of fiduciary duty as is alleged at ¶139(c). A similar point may be made about ¶138: how does the fact that G+T did not advise on obtaining a share valuation directly advance a case that G+T knew about a fraudulent design?

But the matter is perhaps not so straightforward as G+T’s submission would suggest. The allegation at ¶138 that G+T did not advise that a valuation of the shares be obtained may be consistent with it emerging at trial that G+T did not obtain a share valuation because it knew what would become clear if it did and this, in turn, may be seen as a species of wilful blindness. Another aspect of it may be that proof of the facts of the transaction reveal a transaction so inappropriate that it should be inferred that Mr Bullock was part of it since no reasonable solicitor could have advised as he did. Another form of this may be this syllogism: only someone who had no idea what they were doing would advise this transaction was lawful; Mr Bullock is not such a person; ergo Mr Bullock must have been fully aware of the inappropriate nature of the transaction.

I do not for a moment mean to suggest that this is in fact the case—to be clear I have no view—it is merely to observe that ¶¶137-139 may play out in various ways at trial. I think it is therefore possible that these allegations could sustain the allegations at ¶¶140-141:

140.     Alternatively, by reason of the G+T Advice and the matters referred to in paragraphs 28A to 28E inclusive, 137 and 138 G+T and Bullock knew of circumstances that an honest and reasonable person would have taken to have indicated facts constituting the matters set out in paragraph 139.

141    Alternatively, G+T and Bullock wilfully shut their eyes to the matters referred to in paragraphs 139.

Consequently, I do not accept G+T’s submission that these paragraphs are not sufficient to make the allegation. Subject to the earlier matters to which I have referred being attended to I do not think that these allegations against G+T should be dismissed summarily before trial. There is something quite striking about these transactions and one’s interest can only be piqued by the fact that G+T is alleged to have advised that it was lawful. There is a trial to be had here.

This part of the case as pleaded is not without difficulty but, when all is said and done, the transaction which Mr David and RAAL effected is striking in its obvious impact on the Kazals. One can readily imagine all kinds of possible answers—for example, that it was not fair for Mr David to be funding the whole enterprise without the Kazals contributing some form of capital—but this strikes me as a trial question and not a pleading question.

337    I respectfully agree with the primary judge’s reasoning in relation to this issue. KTC relevantly pleaded conduct in the sense of G+T giving legal advice. The requisite knowledge is not pleaded as Mr Bullock knowing the advice was wrong. Rather, it is an orthodox pleading of knowledge, based on Mr Bullock wilfully shutting his eyes or, alternatively, having knowledge of circumstances that would put a reasonable and honest man on inquiry. Those are matters to be determined at trial, not at the preliminary pleading stage. To adopt the language of the primary judge, “there is a trial to be had here”.

338    I would add a further reason as to why the Notice of Contention should be rejected. The allegations of wilful blindness and knowledge of circumstances that would have put an honest and reasonable man on inquiry that his advice was wrong are not merely allegations about the subjective state of mind of Mr Bullock. The Notice of Contention therefore sets up, and knocks over, a ‘straw man’. In the absence of an admission, or perhaps information from an informant, it is often practically impossible in this context to plead the subjective state of mind of another party with any particularity. The pleader is often confined to identifying and pleading the objective circumstantial factors upon which the thesis of knowing assistance in a dishonest and fraudulent design is founded. Hence the orthodox pleading of wilful blindness and knowledge of circumstances that would put a reasonable and honest man on inquiry. The claim may fail, or it may emerge at trial that the putative wrongdoer had the requisite knowledge of the dishonest intent of the design.

Grounds 8 and 9

339    It is convenient to note at this juncture that all of the remaining grounds of appeal concern the GRL Share Conduct, save for grounds 15 and 16 which relate to a discrete and entirely separate question concerning the Second and Third Respondents.

340    It will be recalled that the GRL Share Conduct principally consists of the following pleaded events.

(1)    On 22 April 2010, the directors of GRL (Mr David and Mr Singh) passed a resolution that GRL issue 60 ordinary shares in GRL to SIL for an issue price of $1.00 per share described as “fully paid” (the GRL Share Issue) (at [41]) of the FASOC.

(2)    G+T assisted in preparing the documentation to effect the making of the GRL Share Issue and allegedly advised GRL, ECL, RAAL and Mr David that it was lawful (at [72](a)(v) and [72](e) of the FASOC).

(3)    As at 22 April 2010, shares in GRL were a valuable asset, but there was no consideration paid for the GRL Share Issue (at [44]-[45] of the FASOC).

(4)    On 23 April 2010, a GRL Shareholders’ Agreement was purportedly executed by Mr David on behalf of ECL and GRL. That document is said to have been prepared by G+T (at [72](a)(iii)-[72](b) of the FASOC).

(5)    On 30 July 2010, the GRL Share Issue was effected without any involvement or approval by KTC (or the Kazals) (at [41] of the FASOC). The consequences of the GRL Share Issue were that:

(a)    SIL’s shareholding in GRL increased from 20 ordinary shares to 80 ordinary shares, giving SIL 50% of the issued shares in GRL; and

(b)    ECL’s shareholding in GRL remained at 80 ordinary shares, thereby reducing its interest in GRL from 80% to 50% and causing it to lose effective control of GRL (at [46] of the FASOC).

341    Having regard to these matters, grounds 8 and 9 concern the allegations at [72](e) of the FASOC, namely, that G+T “advised GRL, ECL, RAAL and [Mr] David that it was lawful to make the GRL Share Issue”. This allegation is one aspect of G+T’s alleged knowing assistance in the GRL Share Conduct.

342    Before proceeding any further, for ease of reference I shall extract the pleading at [72] of the FASOC in its entirety. The allegations in that paragraph are of central importance to not only grounds 8 and 9, but also to grounds 10 and 11.

Involvement of Bullock in David’s and RAAL’s conduct

72.    G+T:

(a)    was retained by GRL to provide legal services for GRL, ECL, RAAL and David in relation to:

(i)    drafting the RAAL Loan Agreement;

(ii)    providing a strategy to deal with KTC’s refusal to contribute funding to equal that of RAAL in ECL;

(iii)    the 6 January 2009 Draft Terms Sheet, later draft GRL Shareholders’ Agreements, the April 2009 Draft GRL Shareholders’ Agreement, the First Purported GRL Shareholders’ Agreement, the March 2010 Draft GRL Shareholders’ Agreement and the Second Purported GRL Shareholders’ Agreement;

(iv)    the ECL Share Resolution and ECL Share Issue; and

(v)     the GRL Share Issue;

(b)     in the period from 27 November 2008 11 November 2009 until 28 April 2010 provided legal services in respect of the work referred to in sub-paragraph (a) above;

         (c)    provided the G+T Legal Advice and advised RAAL, David and Mavro that the ECL Share Issue was lawful;

         (d)     assisted in preparing the documentation to effect the ECL Share Resolution and the ECL Share Issue;

         (e)    advised GRL, ECL, RAAL and David that it was lawful to make the GRL Share Issue; and

         (f)     assisted in preparing the documentation to effect the making of the GRL Share Issue.

PARTICULARS

As to sub-paragraphs (a), (b), (d) and (f) G+T rendered invoices to GRL for the legal services referred to in paragraph (a) dated 22 January 2009, 27 February 2009, 25 March 2009, 29 April 2009, 30 June 2009, 28 August 2009, 30 November 2009, 29 January 2010, 26 February 2010, 31 March 2010 and 5 May 2010.

Further as to sub-paragraph (a)(iii) by an email from David to Bullock sent at 18.40 on 27 Nov 2008, David instructed Bullock to prepare a shareholders’ agreement for GRL.

As to sub-paragraph (c) KTC repeats the particulars to paragraph 23 above.

As to sub-paragraph (e), Bullock giving advice that it was lawful to make the GRL Share Issue is to be inferred from the facts that:

(i) Bullock was retained to advise in relation to, and draft, the 6 January 2009 Draft Terms Sheet, later draft GRL Shareholders’ Agreements, the April 2009 Draft GRL Shareholders’ Agreement, the First Purported GRL Shareholders’ Agreement, the GRL Share Issue, the March 2010 Draft GRL Shareholders’ Agreement and the Second Purported GRL Shareholders’ Agreement; and

(ii) the Second Purported GRL Shareholders’ Agreement purported to identify the basis for refers to the GRL Share Issue.

343    KTC alleges that the inference that G+T knowingly assisted in the GRL Share Conduct can be derived from the fact that G+T was retained to advise on and draft a number of shareholders’ agreements and other related documents in relation to GRL (the G+T Documents, at [62](n) of the FASOC). However, the primary judge held at [16]-[19] that the pleading could not support an inference that G+T provided the advice alleged from the fact that Mr Bullock was retained to draft, and advise on, the G+T Documents.

344    KTC submitted that the primary judge erred for two reasons. First, because it is open to infer that G+T gave advice to the effect alleged from the matters particularised; and, second, the primary judge should in any event have granted to leave to file the FASOC, given the nature of the allegations and the asymmetry of information between the parties.

345    As to the first reason, KTC independently alleged that G+T both: (i) provided legal services in relation to the GRL Share Issue and G+T Documents (at [72](b) of the FASOC) and (ii) prepared documents to effect the GRL Share Issue (at [72](f) of the FASOC).

346    KTC submitted that both allegations are maintainable for the following reasons. It is an implied term of the lawyer-client retainer that a lawyer will use his or her best endeavours to protect the client’s interests in the matters to which the retainer relates: citing Groom v Crocker [1939] 1 KB 194, 222 (Scott LJ). In relation to a lay client, that duty will require the solicitor to give advice reasonably necessary to protect the client’s interests in the transaction: see, eg, Dalleagles Pty ltd v Australian Securities Commission (1991) 4 WAR 325, 332-333 (Anderson J), albeit in the context of his Honour discussing the common law doctrine of legal professional privilege. KTC submitted that because G+T is subject to those duties, it is open to infer that G+T would have provided advice in relation to the GRL Share Issue, including as to its lawfulness.

347    KTC further submitted that it is relevant to note that Mr Bullock was the head of G+T’s corporate advisory team and an experienced specialist in mergers and acquisitions, fundraisings and joint ventures (see [73] of the FASOC). It is reasonable to infer that such a solicitor would be diligent and thorough and, in this context, a diligent and thorough solicitor would be prudent to ensure his or her client’s interests are not jeopardised by entering into an unlawful transaction.

348    Separately, KTC submitted that it is open to infer that G+T gave advice about the lawfulness of the GRL Share Issue from the changing terms of the shareholders agreements drafted by G+T. Indeed, the April 2009 Draft GRL Shareholders’ Agreement, First Purported GRL Shareholders’ Agreement and Second Purported GRL Shareholders’ Agreement each contained changing terms as to the issue of shares to SIL. Further, the Second Purported GRL Shareholders’ Agreement is signed on 23 April 2010, the day after the GRL Share Issue, and it is alleged that document was prepared personally by Mr Bullock. KTC submitted it is open to the Court to infer that in negotiating and drafting those documents, G+T provided advice as to the lawfulness of the impugned transactions.

349    As to the second reason, KTC’s position, briefly stated, was that the nature of the allegation and the cause of action is such that the primary judge ought to have granted leave for the FASOC to be filed. This is principally because the content and effect of G+T’s advice is a matter uniquely within the Respondents’ knowledge.

350    In response, G+T contended that there was no error in the primary judge’s conclusion. G+T submitted that there was nothing in the pleading from which it could be inferred that Mr Bullock advised GRL, ECL, RAAL and Mr David that it was lawful to undertake the GRL Share Issue.

351    In particular, G+T submitted that of the seven documents particularised at [62](n) of the FASOC, only two of those documents actually concerned the allotment of shares from GRL to SIL. Those two ‘documents’ are: (i) a GRL Shareholders’ Agreement dated 23 April 2010, which allegedly “refers to” the allotment of 60 ordinary shares but goes no further; and (ii) the GRL Share Issue itself, which is not a document but rather an event recorded, presumably, in GRL’s business records.

352    It followed, according to G+T, that a mere reference in a document to the fact of the share issue, and a document recording that the share issue had taken place, is incapable of founding the inference that G+T advised that the share issue was lawful. G+T submitted that KTC’s contention amounted to a generalised “attempt to fix a solicitor with liability for the misconduct of his client” (see KTC v David (No 1) [2019] NSWSC 281 at [25] (Kunc J)), that being the very issue that the articulation of the principles in Barnes v Addy was directed at addressing. G+T referred specifically to the observations of Lord Selborne LC in Barnes v Addy (at 253-254), in relation to a solicitor who advised a client in relation to a transaction absent knowledge of the client’s dishonest purpose:

It would be an alarming doctrine if we were to lay down, assuming honesty of purpose and the absence of fraud, that the solicitor is in such a case made a constructive trustee; and we are not going to be the first Judges to lay down that doctrine, it certainly not having been laid down by any of our predecessors.

353    For that reason, G+T submitted that the bare allegation that it provided legal services “in relation to” the GRL Share Issue (at [72](b) of the FASOC) was not capable of sustaining an inference that it also advised that the share issue was lawful. G+T did not doubt the existence of an obligation that a lawyer will use his or her best endeavours to protect the client’s interests in the matters to which the retainer relates, but relevantly added that submission does not speak to the scope of the solicitor’s retainer. G+T submitted that in circumstances where KTC did not plead that the scope of G+T’s retainer extended to advising on the GRL Share Issue, the pleading, as particularised, is not capable of sustaining the inference that G+T advised the share issue was lawful. Indeed, G+T contended that KTC had not even met the anterior threshold of establishing that the advice was given at all.

354    In reply, KTC submitted that the inference that G+T gave legal advice in relation to lawfulness of the GRL Share Issue is plainly open to the Court, at least for the purposes of a pleadings contest. To this end, KTC emphasised that the context of the advice must be kept in mind, namely, a complex series of commercial transactions, for which G+T was retained to provide legal services including the drafting of transaction documents. KTC further submitted that a lawyer’s retainer in relation to such transactions usually extends beyond mere documentation, and includes a duty to warn the client of anything unusual or which may prevent the client from obtaining the intended benefit of the transaction: Vella v Permanent Mortgagees [2008] NSWSC 505 at [496], [500] (Young CJ).

355    KTC also submitted that the primary judge fell into error by looking only at the draft agreements referred to in [62](n) of the FASOC, rather than examining the whole of the alleged conduct and evidence of the relationship between G+T and Mr David / RAAL. Further, and in any event, KTC submitted that even accepting the primary judge’s approach, his Honour erred by failing to have regard to the various drafts of the shareholder agreements prepared by G+T, which itself reveals an understanding of the transaction and changes made pursuant to that understanding.

356    In my view, based on the level of involvement of Mr Bullock in the GRL Share Conduct, including in the preparation of transaction documentation and share resolutions, I am satisfied that the inference which KTC urges the Court to draw – namely, that G+T advised GRL, ECL, RAAL and Mr David that it was lawful to make the GRL Share Issue – is reasonably open on the pleading. Further, I respectfully disagree with Wigney J that the particulars provided to support that allegation are “hopeless”. I shall explain the reason for this difference by pausing to make some observations about the modern relationship between lawyers and their commercial clients.

357    It is apparent that the advisory services offered by commercial law firms today are far broader than they were in the era in which Lord Selbourne delivered his seminal remarks in Barnes v Addy. If necessary, I would take judicial notice of that fact. That is not to say that the often difficult to precisely define boundary between legal advice and other advice is less clear now than it was in the nineteenth century. Rather, it is to emphasise that the ‘business model’, so to speak, of commercial law firms is broader than the services that were typically offered by law firms at that time.

358    An example of this point is the tendency for so-called ‘in-house’ corporate counsel to act in both a commercial as well as legal capacity. In such circumstances, it has been observed that it is “often practically impossible to segregate commercial activities from purely ‘legal’ functions”: Seven Network Limited v News Limited [2005] FCA 142 at [38] (Tamberlin J); Archer Capital 4A Pty Ltd as trustee for Archer Capital Trust 4A v Sage Group plc (No 2) [2013] FCA 1098; 306 ALR 384 at [88] (Wigney J).

359    The multiple capacities in which lawyers may act for their corporate clients is not confined to ‘in-house’ counsel. Indeed, it is not uncommon to find that law firms offer corporate clients junior legal staff as ‘secondees’, to work effectively ‘in-house’ for their client. I make no criticism of this practice. I assume rather that in such cases the synergies of the relationship between the corporate client and the law firm allow for and encourage such arrangements. The point is that it is not uncommon for the relationship between a law firm and corporate client to become to a degree entangled in a commercial sense.

360    The relevance of that context is that in the present case, it would appear from the FASOC that Mr Bullock had a key role in the relationship between G+T and Mr David / RAAL. It would also appear that Mr Bullock had an extensive role personally, at the least, in drafting the relevant transaction documents. However, what is not capable of being determined with certainty at the stage of pleadings is the extent to which Mr Bullock was retained to advise in relation to the impugned transactions or whether that involvement might amount to knowing assistance.

361    In the circumstances described in the FASOC, in my view there is a serious triable issue concerning whether, and if so to what extent and effect, Mr Bullock gave legal advice regarding the GRL Share Issue. Plainly, it would seem that Mr Bullock was involved in the transactions at a practical level. The question for trial is whether his involvement was purely for the purpose of preparing transaction documentation or whether he was relevantly involved in a broader way, including whether he gave express legal advice to the effect that the transaction in question was lawful. There is also a question of whether in the circumstances, assuming no such express advice was given, the absence of express advice exculpates G+T.

362    For these reasons, I respectfully disagree with the conclusions reached by the primary judge and would also allow grounds 8 and 9. In any event, even if there be doubt about whether G+T advised that the relevant transactions were lawful (expressly or impliedly), for the reasons I express in relation to grounds 10 and 11, I am satisfied for the purposes of this appeal that the conduct of G+T in negotiating and drafting the relevant transaction documents, together with such other involvement they may be found to have had in the impugned transactions, may be sufficient to establish a claim for knowing assistance.

Grounds 10 and 11

363    Grounds 10 and 11 concern KTC’s allegation that G+T was an accessory to a dishonest and fraudulent scheme because it knowingly assisted in preparing the documentation to effect the GRL Share Issue. KTC submitted that the primary judge did not consider this issue, which is pleaded in [72](f) of the FASOC, having already concluded that the pleading at [72](e) of the FASOC could not be maintained (see grounds 8 and 9 above).

364    KTC contended that the primary judge should have treated each sub-paragraph of the pleading as an independent, alternative basis for the knowing assistance claim. That is, regardless of whether G+T advised that the GRL Share Issue was lawful, KTC said that G+T assisted in preparing the documentation necessary to effect the impugned transaction and, crucially, it contended that merely preparing the documentation comprises knowing assistance, such that the pleading disclosed a reasonable case.

365    In support of this contention, KTC submitted that it follows, as a matter of common sense, that if a solicitor drafts transaction documents with the requisite level of knowledge, that solicitor has provided sufficient assistance for the purpose of the second limb in Barnes v Addy. In the event that there was any doubt about that proposition, KTC submitted that the issue is put beyond controversy by the following observation of Lord Nicholls in Dubai Aluminium Co. Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366 at 381:

In the present case, drafting the consultancy agreement and other agreements were acts of assistance by Mr Amhurst [a solicitor] and, coupled with dishonesty, they were sufficient in themselves to give rise to equitable liability on his part.

366    In response, G+T contended that the primary judge had in fact dealt with KTC’s pleading that knowing assistance can be inferred from the fact that G+T drafted the transaction documents relevant to the GRL Share Issue. In particular, G+T submitted that:

(1)    at [14], the primary judge relevantly noted KTC’s allegation that knowing assistance be inferred from G+T having been retained to advise in relation to a series of transaction-related documents which preceded the allotment of shares from GRL to SIL;

(2)    at [15], the primary judge proceeded to specifically consider each of those transaction documents and their relevance to the pleading; and

(3)    at [16]-[18], the primary judge concluded that, even on the assumption G+T was retained to draft each of the specified documents and advised upon them, that does not found an inference of knowing assistance.

367    G+T further submitted that KTC’s submission fails to grapple with the fundamental requirement that there must be knowing assistance in a dishonest and fraudulent design. In this respect, G+T contended that the relevant assistance must be “facultative conduct or activity which is more than mere knowledge or notice of breach of duty”: Re-Engine Pty Ltd (in liq) v Fergusson [2007] VSC 57; 209 FLR 1 (cited by Kunc J in KTC v David (No 1) [2019] NSWSC 281 at [19]). G+T submitted that, read against that background, the primary judge’s conclusion that “the drafting of the documents goes nowhere” (at [18]) must be read as a rejection of KTC’s submission that the mere drafting of the transaction documents is sufficient to establish accessorial liability in this context.

368    The difficulty with G+T’s submission is that in each of the paragraphs of the primary judge’s reasons referred to above, his Honour appears to be specifically considering the pleading at [72](e) rather than the pleading at [72](f). His Honour, with respect, may have misunderstood that there was an alternative, independent claim for knowing assistance based on: (i) G+T advising that it was lawful to make the GRL Share Issue and (ii), separately, G+T having prepared the transaction documents relevant to the GRL Share issue. That confusion may be ameliorated by the insertion of an expression such as ‘and/or’, or a consequential amendment to [98] of the FASOC (the knowing assistance pleading in respect of G+T), though such amendments are, in my view, sufficiently inconsequential as to allow KTC to file the FASOC, with or without such grammatical correction.

369    More importantly, as a matter of principle, and as I have alluded to above, the present case may put into focus the question of whether the involvement of Mr Bullock in the preparation of the transaction documents constitutes participation in a dishonest and fraudulent design, even assuming no explicit advice was given as to the legality of the impugned transactions. I must therefore respectfully disagree with the primary judge that “the drafting of documents goes nowhere”. While I agree that as a general proposition, without more, a solicitor asked to prepare transaction documents is unlikely to be found to be a knowing participant, I am not sufficiently confident, based on the pleaded circumstantial facts, to rule out a finding that Mr Bullock was wilfully blind to the alleged fraudulent and dishonest design, understood in its proper and full context, or aware of matters that would put an honest and reasonable man on inquiry, when he assisted by drafting the transaction documents.

Grounds 12 to 14

370    Grounds 12 to 14 concern the allegation at [74](m) of the FASOC, namely, that G+T knew that “SIL paid no consideration for the GRL Share Issue or, alternatively, any consideration was colourable or illusory.”

371    The allegation is one aspect of G+T’s alleged knowledge of the GRL Share Conduct. The particulars to [74](m) state that the knowledge is to be inferred from facts that:

(1)    G+T advised GRL and ECL on GRL’s funding by RAAL and KTC; and

(2)    Mr Bullock prepared and advised on the G+T Documents (referring to and repeating the particulars to [62](n) of the FASOC).

372    The primary judge did not accept that the relevant knowledge could be inferred from the fact that Mr Bullock was providing advice to GRL on the continuation of funding from KTC and RAAL (at [20]), or from the fact that Mr Bullock was retained to advise on and draft the G+T Documents (at [22]). In addition, his Honour observed (at [23]) in relation to the particulars in [62](n): “I am not prepared to read a cross-reference at the end of one set of particulars to another set of particulars as including central allegations of material fact.

373    KTC submitted that in finding that the particulars to [74](m) did not adequately support the alleged knowledge, the primary judge erred for two reasons. First, KTC submitted that it is open to infer that G+T had the alleged knowledge from the matters particularised in [62](n) and his Honour erred by refusing to have regard to those matters. Second, KTC submitted that the primary judge should have, in any event, granted leave to file the FASOC, given the nature of the allegations and the pleaded cause of action.

374    As to the first reason, KTC submitted that it is open to infer that in providing advice to GRL and ECL in relation to GRL’s funding, and in drafting and advising on the shareholders’ agreements with evolving terms for the issue of shares to SIL, G+T knew about the consideration ascribable to the proposed share issue. KTC further submitted that, given the circumstances, it is also likely that G+T was aware that the ECL Share Issue (and events following) would be contentious. In those circumstances, an experienced practitioner specialising in mergers and acquisitions, fundraisings and joint ventures would be acutely aware of the relevance of the consideration to be ascribed to the GRL Share Issue.

375    Central to KTC’s submissions in relation to grounds 12 to 14 is that the primary judge erred by refusing to read-in the cross-reference to [62](n) of the FASOC. KTC submitted that cross-referencing in this manner is a commonly employed drafting technique, and assists in keeping a pleading brief, consistent with r 16.02(1)(b) of the Rules.

376    Further, KTC submitted that even if the matters set out in [62](n) of the FASOC were complex, they were particulars properly pleaded and not material facts. The relevant material facts were the matters that G+T was alleged to have knowledge of and those matters were particularised at [74](m) of the FASOC. Irrespective, KTC contended that the pleading disclosed a reasonable cause of action and G+T had fair notice of KTC’s case, those being the essential matters informing a strike out application according to modern authority.

377    In addition, KTC submitted that the particulars to [62](e) of the FASOC demonstrate that G+T had actual knowledge that SIL paid no consideration for the 60 shares issued to it by GRL because of the various changes to the shareholders agreements drafted by G+T (detailed at [72](a)(iii) and [72](b) of the FASOC).

378    In response, G+T said that payment “in kind” for the GRL Share Issue was made by SIL giving up an entitlement to redeemable preference shares contained at cl 9 of the First Purported Shareholders’ Agreement (particular (i) to [62](n) of the FASOC). However, KTC submitted that the First Purported Shareholders’ Agreement was not validly executed, as it did not have ECL board approval (particulars (ii), (iii) and (vii) to [62](n) of the FASOC). Further, KTC submitted that G+T knew that the document was invalid because following execution of the First Purported Shareholders’ Agreement, G+T prepared the March 2010 Draft GRL Shareholders’ Agreement (particular (iv) to [62(n)] of the FASOC), recital 1A of which reads:

The parties entered into the The Shareholders of Global Renewables Limited have been operating the business under the existing Shareholders Agreement (Existing SHA) since completion of the purchase of Global Renewables Australia Pty Ltd in on 1 Febr January 2009.on 24 November 2009

379    As Senior Counsel for KTC explained in detail during the hearing, there was not in fact any pre-existing shareholders agreement pursuant to which the shareholders had been operating the business since January 2009 (particular (vi) to [62(n)] of the FASOC). Marked-up recital 1A therefore indicated that G+T was of the view that the First Purported Shareholders’ Agreement was of no force or effect and that there was no consideration given for the GRL Share Issue.

380    As to the second reason, KTC reiterated its submission that the primary judge should have granted leave to file the FASOC given the nature of the allegations against the Respondents and the cause of action of pleaded. In particular, KTC submitted that where a plaintiff alleges accessorial liability, he or she is entitled to plead the requisite knowledge in general terms and defer particularisation until after discovery, provided there is some evidence on which the plaintiff can plead a dishonest and fraudulent design: see, eg, Arab Monetary Fund v Hashim (No 2) [1990] 1 All ER 673 at 679 (Hoffman J).

381    The primary judge held (at [22]) that the pleading did not support an inference that G+T knew the GRL Share Issue was for no consideration. Further, his Honour added (at [23]) that, even assuming that regard could be had to the particulars in [62](n) of the FASOC, that lent no further assistance to KTC’s claim. G+T endorsed the primary judge’s reasoning and submitted that there was no error in this approach.

382    In reply, KTC submitted that G+T’s position was unsupported by the primary judge’s reasoning. According to KTC, the primary judge failed to consider the critical document in this aspect of the reasoning, being the March 2010 Draft GRL Shareholders’ Agreement (which G+T had prepared). KTC reiterated its earlier submission, namely, that the March 2010 Draft GRL Shareholders’ Agreement included a marked-up recital deleting reference to an earlier shareholder agreement, indicating that G+T held the view that that earlier shareholder agreement was of no force or effect (and hence payment for the GRL Share Issue was not made by SIL giving up an entitlement to redeemable preference shares pursuant to it). According to KTC, it followed that G+ T knew the GRL Share Issue was for no consideration.

383    In relation to this issue, G+T further submitted that KTC was placing undue emphasis on minor, inconsequential amendments to the recitals of the March 2010 Draft GRL Shareholders’ Agreement. In particular, G+T submitted that, as a matter of grammatical expression, the deletion of the words ‘The parties entered into’ does not change the meaning of the words in the recital in the manner which KTC contends. Accordingly, G+T submitted that even if some alternative construction could be given to the recital prior to and after the amendment, those minor changes to a non-operative part of a contract do not provide a sufficient foundation from which serious allegations of knowledge of fraud are to be inferred.

384    KTC also addressed this matter in reply. In particular, KTC maintained that G+T’s submission ignores both the significance of the deletion, and the discrete knowledge to which the pleading is directed, namely, that Mr Bullock knew at all material times prior to the GRL Share Issue that SIL paid no consideration for the GRL Share Issue (see [74](m) of the FASOC)).

385    Finally, in relation to grounds 12 to 14, G+T submitted that KTC’s reliance on generalised assertions about the “nature of the allegations and cause of action” were misconceived. G+T added that notwithstanding KTC’s adoption of the nomenclature of a ‘dishonest and fraudulent design, it has failed in substance to allege accessorial liability of the kind necessary to engage the second limb of Barnes v Addy.

386    The above, somewhat laborious, recitation of the contending positions in relation to grounds 12 to 14 (albeit in summary only) speaks for itself as to why the FASOC should be allowed and the issues tested at trial. This conclusion should not be taken as endorsing any laxness in pleading the issues for determination and the facts upon which they are founded. I refer to what was said by a Full Court in Oztech at [28]-[32], of which the learned primary judge and I were both members. However, the conjecture between the parties about the proper characterisation of the facts concerning the involvement of G+T, and how that should be legally characterised, should in my view be determined following a trial of the proceeding.

387    I refer to and repeat what I have said above at [293]-[297] and [330]-[332] concerning the unique utility of a trial when it comes to gaining a full understanding of the proper contextual characterisation of conduct. In cases such as the present, where there is a cluster, or clusters, of comingled complexity, there is room for rational differences of analysis in relation to the meaning and effect of the conduct of the actors involved. These are matters which should be resolved at trial rather than on the basis of an inadequacy in the verbal formulation adopted by the pleader. Accordingly, I would allow grounds 12 to 14.

Grounds 1 and 2

388    Having found that [72](e) and [74](m) of the FASOC were not adequately pleaded as against G+T (see primary judge’s reasons at [16]-[19], [20], [22]), the primary judge proceeded on the basis that those matters were also fatal to KTC’s pleaded ECL Share Conduct (at [24]-[25], [31]).

389    KTC submitted that the primary judge erred in this respect as [72](e) and [74](m) only concerned G+T’s participation in, and knowledge of, the GRL Share Conduct and did not relate to G+T’s participation in, and knowledge of, the ECL Share Conduct. Accordingly, by grounds 1 and 2, KTC contended that the primary judge conflated the issues which arose in relation to the ECL Share Conduct and GRL Share Conduct, when his Honour should have considered each of the issues which arose in relation to the ECL Share Conduct separately.

390    KTC submitted that it was particularly important for the primary judge to have separately considered the GRL Share Conduct and ECL Share Conduct in circumstances where his Honour had earlier held that KTC had sufficiently alleged that G+T knew that Mr David and RAAL were engaged in a dishonest and fraudulent design in relation to the ECL Share Conduct: see KTC v David (Pleadings) [2019] FCA 1566 at [25]-[29].

391    During the hearing, Senior Counsel for KTC was asked whether, as pleaded, there were two dishonest and fraudulent designs – one relating to the ECL Share Conduct and one relating to the GRL Share Conduct, in which the latter was contingent on the former – or essentially a single dishonest and fraudulent design. Senior Counsel submitted that each of the ECL Share Conduct and GRL Share Conduct are said to constitute a dishonest and fraudulent design and together also constituted a dishonest and fraudulent design. However, Senior Counsel conceded that KTC had not pleaded ‘connective conduct’ between the different schemes and this deficiency, if it be one at all, might be overcome by minor amendments to the pleading.

392    In response, G+T submitted that the primary judge had not conflated the ECL Share Conduct and GRL Share Conduct and plainly recognised the distinction between the two aspects of the pleading. Indeed, the primary judge observed at [24] that: “[t]he parties both proceeded on the basis that the issues which arose in relation to the ECL Share Conduct were the same [as those in relation to the GRL Share Conduct]. I will act on that assumption too.”

393    G+T further submitted that KTC cannot now contend that the parties did not proceed on that assumption before his Honour. In addition, KTC conceded that the primary judge separately considered the ECL Share Conduct in the context of the pleaded Constructive Trust Fraudulent Scheme. G+T relied on this as supportive of its contention that the primary judge had not conflated the ECL Share Conduct and GRL Share Conduct in his Honour’s reasoning.

394    In my view, a careful reading of the primary judge’s reasons does not indicate his Honour “conflated” the ECL Share Conduct and GRL Share Conduct or in any way misunderstood that the ECL Share Conduct involved separate, anterior conduct to the GRL Share Conduct. In fact, it appears that to the extent there was any overlap in his Honour’s consideration of those issues, it was because both parties proceeded on that basis at first instance.

395    His Honour’s approach is particularly justifiable having regard to the particular phrasing at [97]-[100] of the FASOC:

Bullock’s & G+T’s knowing assistance in the David ECL Share Conduct and the David GRL Share Conduct

97.    The knowledge of Bullock of the matters referred to in paragraphs 74, 75 and 76 was knowledge of G+T.

PARTICULARS

KTC refers to and repeats paragraphs 8, 148 and 149 herein and says that the knowledge of Bullock was the knowledge of G+T, comprising Bullock’s partners.

98.    By giving the G+T Legal Advice and advice that it was lawful to make the ECL Share Issue, and by giving legal advice that it was lawful to make the GRL Share Issue, and by assisting in preparing the documentation to effect those transactions, Bullock and G+T assisted David with the David ECL Share Conduct and the David GRL Share Conduct and the dishonest breaches of his fiduciary duties as set out in paragraph 82 above as part of a dishonest and fraudulent design.

99.    By reason of the matters in paragraphs 74, 75 and 76 Bullock and G+T knew that they were engaged in conduct to further the David ECL Share Conduct, the David GRL Share Conduct and the dishonest breaches of his fiduciary duties as set out in paragraph 82 above as part of a dishonest and fraudulent design.

100.    KTC has suffered loss and damage, alternatively Singh and SIL have improperly profited, as a consequence of the David Fraudulent Scheme, and Bullock and G+T knowingly assisted in the David ECL Share Conduct, the David GRL Share Conduct and the dishonest breaches of his fiduciary duties as set out in paragraph 82 above as part of a dishonest and fraudulent design.

PARTICULARS

KTC refers to and repeats the particulars to paragraph 83

Further particulars of KTC’s loss and Singh’s and SIL’s improper profits will be provided upon the filing of expert evidence.

396    Properly read in context, that pleading is apt to suggest that KTC alleged a single dishonest and fraudulent design. In any event, the ECL Share Conduct and GRL Share Conduct are inextricably linked and at least the latter is contingent on the former. Notwithstanding the views I have expressed in relation to the other grounds of appeal, I do not accept that the primary judge erred by grounds 1 and 2, especially having regard to the manner in which the matter was argued before his Honour.

397    However, in the interests of avoiding further arid pleadings arguments, I would allow such further amendment as may be desirable for the clearer articulation by KTC of the dishonest and fraudulent design, or designs, it relies upon, and if more than one, their connection, if any, to each other.

Grounds 6 and 7

398    Grounds 6 and 7 relate to whether KTC pleaded a reasonable cause of action against G+T in relation to the Constructive Trust Fraudulent Scheme. The relevant paragraphs of the FASOC are [128]-[129]:

128.    In breach of the duties set out in paragraph 127 RAAL:

(a)    at all times prior to 23 November 2011:

(i)    refused to transfer 49,900, alternatively 24,950, shares in ECL to KTC;

(ii)    took no steps to have ECL rectify its register of members such that KTC and RAAL each owned 50 shares of USD1 each; and

(iii)    actively defended KTC’s claim in the Grand Court of the Cayman Islands to have the Liquidators of ECL rectify its register of members such that KTC and RAAL each owned 50 shares of USD1 each.

PARTICULARS

In or about January 2011 KTC and RAAL filed a joint petition in the Grand Court, Cayman Islands, and thereby applied for the liquidation of ECL to be brought under the supervision of the Court.

On 2 June 2011, the Grand Court, Cayman Islands, ordered that the joint petition proceed as if it were commenced by writ between KTC as applicant and RAAL as respondent, on the issue of the validity of the Resolution and Share Issue (ECL Share Issue Proceeding).

On the 23 November 2011, the Grand Court, Cayman Islands, made findings in the ECL Share Issue Proceeding that the RAAL Resolution and ECL Share Issue were made in breach of David’s and Mavros’ fiduciary duties to ECL and ordered that the Liquidators be directed to rectify ECL’s register of members to reflect that KTC and RAAL each own 50 shares of US$1 each.

On a date after 23 November 2011, the Liquidators of ECL rectified ECL’s register of members to record that KTC and RAAL each held 50 shares of US$1 each.

A copy of the Judgment of the Honourable Justice Andrew J Jones QC on 23 November 2011 in Cause No FSD 29 of 2011 (AJJ) filed in the Grand Court of the Cayman Islands between KTC (Applicant) and RAAL (Respondent) is in the possession of KTC’s solicitors and may be inspected by appointment.

(b)    between 28 January 2010 and 23 November 2011, used its control of ECL to the detriment of KTC, and to the benefit of Singh, SIL and XALT by:

(i)    procuring the GRL Share Issue and thereby:

(A)    acted contrary the interests of KTC, by reducing ECL’s interest in GRL from 80% to 50% without benefit to ECL;

(B)    used its position to improperly advantage SIL, by increasing its interest in GRL from 20% to 50% for no consideration, alternatively consideration that was colourable or illusory, and

(ii)    causing ECL to proceed with the IBC Sale instead of the First KTC Offer, alternatively the Second KTC Offer, and thereby:

(A)    acted contrary to the interests of KTC, by causing ECL to sell its shareholding in GRL for AUD2.5 million less than the value attributed to those shares by the Second KTC Offer;

(B)    used its position to improperly advantage Singh, by selling GRL at less than market value to a buyer on terms that Singh could maintain a 50% interest in the Waste Facility.

129.    The dishonest breaches of trust set out in paragraph 128 constituted a dishonest and fraudulent design on the part of RAAL (Constructive Trust Fraudulent Scheme).

399    Having regard to the primary judge’s earlier findings in relation to the ECL Share Conduct and GRL Share conduct, his Honour held that the allegations against G+T in relation to the Constructive Trust Fraudulent Scheme were not maintainable (at [37]-[40]). KTC submitted, and G+T accepted, that grounds 6 and 7 were thus consequential on the other grounds of appeal.

400    Having already concluded that KTC should succeed in relation to grounds 3-5, 8-9, 10-11 and 12-14 (but not grounds 1-2), it also follows that KTC has pleaded a reasonable cause of action against G+T in relation to the Constructive Trust Fraudulent Scheme.

Grounds 15 and 16

401    Grounds 15 and 16 are only relevant on the assumption that KTC’s appeal is unsuccessful on the grounds discussed above.

402    By grounds 15 and 16, KTC submitted that the primary judge erred in not granting leave to file the FASOC in relation to the First, Second and Third Respondents, subject to deletion of the claims against G+T. The predicate of KTC’s submission is that the application to file the FASOC was not opposed by the First, Second and Third Respondents and it was inappropriate, in those circumstances, to dismiss the application in its entirety.

403    The Second and Third Respondents maintained that while they did not oppose the granting of leave to file the FASOC, and did not make substantive submissions before the primary judge, it does not follow that the primary judge erred in dismissing the claim in its entirety. In this regard, the Second and Third Respondents submitted that the claims pleaded against them are not independent of those aspects of the FASOC that were successfully challenged before the primary judge. Accordingly, the Second and Third Respondents submitted that the pleading cannot have an independent operation against them once those aspects of the FASOC are severed.

404    By way of example, the Second and Third Respondents submitted that if the primary judge’s finding that there was no dishonest or fraudulent design capable of being substantiated on the pleading, the claim for knowing assistance against the Second Respondent at [134]-[136] of the FASOC is also demurrable.

405    In short, it was the Second and Third Respondents’ contention that the proper approach was for the primary judge to dismiss KTC’s application in its entirety, allowing each party to then consider their respective positions and make such further applications as they may be advised. The Second and Third Respondents submitted that such an approach is consistent with the conclusions reached by the primary judge in relation to the fundamental deficiencies in the pleading as well as the overarching purpose in s 37M of the Federal Court Act. The Second and Third Respondents acknowledged that it may be necessary for the matter to be remitted to the primary judge, including in relation to the filing of a new pleading reflecting the reasons of this Court.

406    In reply, KTC submitted that the claims against the Second and Third Respondents fundamentally differ from those against G+T. According to KTC, neither the Second and Third Respondents, nor the primary judge, identified why leave should not be granted to file the FASOC against at least those respondents and, accordingly, the proceeding ought not be dismissed in its entirety.

407    G+T did not make any submissions in relation to this issue as it is not a matter which concerns its interests.

408    As I have said, this issue does not arise given the conclusions I have expressed above. However, given the conclusions reached by Wigney J and Jackson J, I consider it necessary to add that I agree with KTC’s contention in relation to grounds 15 and 16.

409    The Second and Third Respondents did not seek to strike out any aspects of the FASOC before the primary judge. Further, the primary judge made no express finding that the allegations against the Second and Third Respondents were not maintainable once the claims against G+T fall away. Thus, to the extent it is relevant, in my view the matter should be remitted to the primary judge to make such directions as might be thought appropriate in relation to any extant claims, including, if necessary, the filing of a substantially revised statement of claim against the First, Second and Third Respondents.

Disposition

410    During the course of the hearing, KTC submitted that if the appeal were allowed in full, it would not seek leave to amend its FASOC, other than in relation to relatively inconsequential or insignificant matters. KTC submitted, however, that if the appeal were only allowed in part, then the matter would need to be remitted to the primary judge and it ought to be afforded an opportunity to further amend its pleading.

411    For the reasons I have expressed, I consider that leave to appeal should be granted, appeal grounds 3 to 14 allowed and the orders made by the primary judge on 17 July 2020 set aside. I would also make orders that KTC be afforded a further opportunity to amend its pleading in accordance with these reasons, but only in relation to matters that are directed to clarification and not otherwise of substance.

I certify that the preceding one hundred and eighty-one (181) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou.

Associate:

Dated:    13 April 2022

REASONS FOR JUDGMENT

JACKSON J:

412    I have had the considerable benefit of reading, in draft, the judgments of both Wigney J and Anastassiou J.

413    I agree with each of their Honours that leave to appeal should be granted for the reasons their Honours give. I also agree with Wigney J that the affidavit to which his Honour refers at [5] is relevant and should be admitted into evidence.

414    I have, however, come to the conclusion that the appeal should be dismissed. Unfortunately, and with respect to both of my colleagues on this bench, that is not because I agree entirely with the judgment of Wigney J, and nor is it because I disagree entirely with the judgment of Anastassiou J. That is especially unfortunate because it requires yet another judgment to navigate the tortuous terrain of the PFASC (I will use the defined terms in Wigney Js judgment). I will try to do so as briefly as possible, and to the extent possible by reference to Wigney Js and Anastassiou Js reasons, with which I will assume familiarity.

415    G+T are alleged to be liable to KTC because they are said to have knowingly assisted in dishonest and fraudulent schemes involving breaches of fiduciary duties perpetrated and committed by Mr David and RAAL (where I refer to G+T that includes a reference to Mr Bullock). I agree with Wigney J for the reasons his Honour gives that the way in which the pleading identifies at least six dishonest and fraudulent schemes is itself embarrassing. But that cannot dispose of the appeal, as it was not raised before the primary judge and was not the subject of a notice of contention in this appeal.

416    For present purposes, and in so far as G+T are concerned, the dishonest and fraudulent schemes centred around two transactions: the issue of shares in Emergent to RAAL in January 2010 and the issue of shares in Global Renewables to Singh Investments in April 2010.

Issue of shares in Global Renewables: pleading of G+Ts knowledge

417    For reasons that will become apparent, I will start with the transaction that is later in time. I respectfully agree with Wigney J and the primary judge that, for the reasons their Honours each give, the plea that G+T knew that Singh Investments paid no or colourable consideration for the issue of shares in Global Renewables in April 2010 lacks particulars that are capable of supporting it.

418    I also agree with their Honours that it follows that this plea of knowledge is not maintainable. I agree with Wigney J’s summary of the relevant principles, but on the plea of knowledge would emphasise the following propositions:

(1)    Two important functions of pleadings and particulars are to furnish a statement of the case that is sufficiently clear to allow the other party a fair opportunity to meet it and to define the issues for decision in the litigation: Dare v Pulham (1982) 148 CLR 658 at 664.

(2)    In general, and in the context of modern case management principles, the courts do not take a technical or restrictive approach to pleadings: Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15 at [13], citing Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 at [4]-[8].

(3)    But where fraud is pleaded, or something analogous to it such as knowing participation in a dishonest and fraudulent design, a rigorous approach will still be taken: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [170]; Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 at [26]; Young Investments Group Pty Ltd v Mann [2012] FCAFC 107 at [9].

(4)    Rule 16.43 of the Federal Court Rules 2011 (Cth) provides that a party who pleads a condition of mind, which includes knowledge, must state in the pleading particulars of the facts on which the party relies.

(5)    Even in the absence of a rule of that kind, there are sound reasons for requiring knowledge to be particularised, at least in relation to allegations such as fraud or intentional participation in the breach of another: see Young Investments at [11].

(6)    That requires particulars of the facts and circumstances from which it is said that the party knew (or ought to have known) the relevant matter. Those facts may include an admission or communication from which it must follow that the relevant party had the relevant knowledge. Or they may include facts and circumstances from which it can be inferred that the party had the knowledge: see Young Investments at [10]; Webster (Trustee) v Murray Goulburn Co-Operative Co Ltd (No 2) [2017] FCA 1260 at [6].

419    In the present case, and fundamentally then, G+T are entitled to a pleading that puts them on notice of alleged communications (whether to or from G+T) that indicate that G+T knew of Mr Davids and RAALs alleged dishonest and fraudulent schemes, or of facts or circumstances from which it can be inferred that they knew of them. For the reasons given by Wigney J and the primary judge, the PFASC fails to put G+T on notice of either of those things in relation to the key allegation that they knew the issue of shares in Global Renewables was for no or colourable consideration, so as to give G+T a fair opportunity to prepare their case.

420    In the absence of particulars of that kind, the bare plea of knowledge cannot stand. I agree with Anastassiou Js observations (made in the course of deciding whether to grant leave to appeal) that there are inevitably limits to the ability of any pleading to capture in writing inferences of fact and wrongdoing, where those conclusions are distilled from a multiplicity of objective facts and disputed events. But in my view, the way in which KTC has pleaded that G+T knew relevant matters is fundamentally deficient. I agree with Wigney J that this applies not just to KTCs allegations as to G+T’s actual knowledge of the specific matters alleged at PFASC para 74, but also to its allegations as to the knowledge of dishonest and fraudulent schemes, at two of the four levels of knowledge described in Baden v Société Générale pour Favoriser le Développement du Commerce et de lIndustrie en France SA [1993] 1 WLR 509; [1992] 4 All ER 161, namely wilful blindness and knowledge of circumstances that would have indicated the truth to an honest and reasonable person.

421    As such, the PFASC does not disclose a reasonable case against G+T in relation to knowing assistance with respect to the issue of shares in Global Renewables that took place in April 2010. I will return below to the consequences of that for the purposes of this appeal. But first it is necessary to deal with the preceding transaction that is impugned, namely the issue of shares in Emergent in January 2010.

Issue of shares in Emergent: pleading of dishonest and fraudulent scheme

422    For the reasons given by Anastassiou J, and with respect, I consider that the primary judge erred in concluding that the PFASC does not disclose a case to the effect that the issue of shares in Emergent involved a dishonest and fraudulent scheme. The primary judge focussed on the role of the third director of Emergent, Mr Mavromanolakis, who voted in favour of the issue of shares in January 2010. His Honour also focussed on the absence of any allegation that Mr Mavromanolakis was dishonest or was duped. But it is still possible, on the facts pleaded, that there was a dishonest or fraudulent design. KTC pleads that Mr David concealed from the Kazals and KTC the fact that the board of Emergent was going to vote on the resolution to issue the shares: PFASC para 38(c). Such concealment, in all the other circumstances pleaded, if established, might be found to be dishonest and might be found to have led to the issue of the shares. The proper characterisation of Mr Davids conduct in that regard (and that of RAAL) can only be reached after a trial that allows full consideration of the evidence.

Issue of shares in Emergent: pleading of G+Ts knowledge

423    I respectfully disagree with Anastassiou J, however, that this disposes of KTC’s appeal. Even if the PFASC does plead a reasonable case that Mr David and RAAL engaged in a dishonest and fraudulent design in respect of the January 2010 issue of shares in Emergent, as against G+T, it is still necessary to plead a reasonable case that the firm knowingly participated in that design.

424    Contrary to KTCs submissions on appeal, I do not consider that the primary judge had no difficulty with the pleading of the knowing assistance component of the case concerned with the January 2010 issue of shares in Emergent. It is true that this aspect of the pleading was not the subject of any detailed reasoning on the part of the primary judge, and is not the subject of any ground of appeal. But the primary judge did reach a conclusion on it. His Honour did so, in very brief terms, by saying (at [24]) that the parties both proceeded on the basis that the issues that arose in relation to the allegations about Mr Davids and RAALs conduct concerning the issue of shares in Emergent in January 2010 were the same as those that arose in relation to the allotment of shares in Global Renewables, and that his Honour would also proceed on that basis. I agree with Wigney J that this amounted to a finding that the allegations concerning G+Ts knowledge of and advice in relation to the January 2010 issue of shares in Emergent were not supported by the particulars. That is why it has been convenient to deal with the allegations of G+Ts knowledge of the April 2010 issue of shares in Global Renewables before dealing with the earlier issue of shares in Emergent.

425    I agree with Wigney J and with Anastassiou J, for the reasons their Honours give, that grounds of appeal 1 and 2, which attack the primary judges approach at [24], must fail. That being so, his Honour must be taken to have determined that G+Ts knowledge of the dishonest and fraudulent scheme or schemes involving the issue of shares in Emergent in January 2010 has not been adequately particularised, for reasons similar to his Honours reasons in relation to knowledge of the April 2010 issue of shares in Global Renewables.

426    Presumably because KTC took the view that the primary judge had not reached a conclusion, it did not advance any case on appeal going to the substance of the point, that is, to whether G+Ts knowledge of the facts that made the issue of shares in Emergent part of a dishonest or fraudulent scheme was adequately pleaded and particularised. But Wigney J has addressed the substance of the point, and has concluded that the pleaded facts do not disclose a reasonable or sustainable basis for alleging that G+T knew that Mr David was engaged in a dishonest and fraudulent design in relation to the Emergent share issue and that G+T were assisting in that design. For the reasons Wigney J gives, I agree that the case as to G+Ts knowledge has not been adequately pleaded.

427    For reasons similar to those I will briefly state below in relation to grounds 8 to 11 concerning the April 2010 issue of shares in Global Renewables, however, I do not find the plea as to G+Ts assistance, as distinct from its knowledge, to be so fundamentally defective that it should not be permitted to proceed.

Conclusions as to the grounds of appeal

428    Before considering where these conclusions leave the appeal, I should record the views I have reached on the grounds of appeal. I have already indicated that, like Wigney J and Anastassiou J, I would not uphold grounds 1 and 2, which assert error because the primary judge proceeded on the basis that the issues that arose in relation to the January 2010 issue of shares in Emergent were the same as the issues that arose in relation to the April 2010 issue of shares in Global Renewables.

429    I have also indicated that, like Anastassiou J, I would uphold grounds 3, 4 and 5 in relation to whether the pleading discloses a reasonable case that the January 2010 share issue in Emergent was part of a dishonest and fraudulent scheme.

430    Grounds 6 and 7 concern what is called the Constructive Trust Fraudulent Scheme. They attack the primary judges conclusion that no reasonable and sustainable case relying on that scheme was pleaded. As Anastassiou J has said, the parties proceeded on the basis that success in the appeal for KTC in relation to those grounds is dependent on success in relation to the other grounds concerning the two share issues. For the same reasons as I would uphold grounds 3, 4 and 5, I would uphold grounds 6 and 7 as originally framed, that is, to the extent that they assert only that KTC has adequately pleaded a case that the Constructive Trust Fraudulent Scheme was a dishonest and fraudulent scheme. But I agree with Wigney J that the pleas that G+T had the requisite knowledge in relation to that scheme are deficient, and in any case the pleading of knowledge is not addressed in grounds 6 and 7.

431    Grounds 8 and 9 concern the allegation that G+T assisted in the dishonest and fraudulent schemes involving the April 2010 issue of shares in Global Renewables by advising Global Renewables, Mr David and others that it was lawful to make the share issue. The grounds allege error in the primary judge’s holding that assistance was not adequately particularised. For the reasons given by Anastassiou J, these grounds should be upheld. The particulars to the allegation (which is at para 72(e) of the PFASC) include an allegation that G+T were retained to advise in relation to and draft the GRL Share Issue. It is true that this is defined at para 41 to mean a share issue, as distinct from the document that effected it (defined as the GRL Share Resolution), but in my view that is simply the result of the pleaders being led astray by their overuse of defined terms, and so is an oversight that can be easily fixed.

432    It is also alleged at para 72(a)(v) that G+T were retained to provide legal services in relation to the GRL Share Issue. Particulars given of that allegation are specified invoices. I do not consider those particulars to be inadequate. Although they could be characterised as evidence, rather than proper particulars, G+T do not make that complaint. In the end, the pleading and particulars put G+T fairly on notice that it is alleged that they gave advice in relation to the GRL Share Issue and that this is itemised, presumably, in the accounts that they rendered. It is open to infer from those facts and the usual scope of a lawyers retainer that the advice included advice to the effect that the share issue was lawful. Of course, whether that inference should be made is a matter for trial.

433    Grounds 10 and 11 concern the claim that G+T assisted Mr David and RAAL in relation to the alleged dishonest and fraudulent schemes involving the April 2010 issue of shares in Global Renewables by assisting in preparing the documentation to effect the share issue. The grounds similarly allege that the primary judge erred in finding that the particulars given in the PFASC are inadequate. I agree with Anastassiou J that these grounds should be upheld. The grounds focus on para 72(f) in the PFASC, which alleges that G+T assisted in preparing the documentation to effect the making of the GRL Share Issue. Once again, it is reasonable to read that as a reference to the documentation itself, namely the GRL Share Resolution. For the reasons given above in relation to grounds 8 and 9, I do not consider the particulars given of that allegation are inadequate. If G+T did draft the document that effected the share issue, on its face that is capable of being assistance with the issue. The particulars put G+T on fair notice of the case to be made against them in this regard.

434    However these acts of assistance - advising and preparing documents - if they were performed, cannot found liability in G+T in respect of the April 2010 issue of shares in Global Renewables unless G+T knew that the issue was part of a dishonest and fraudulent scheme (knew, that is, in any of the first four senses set out in Baden as endorsed in Farah Constructions). That is the subject of grounds 12 to 14 of the appeal. For reasons I have already given, I agree with Wigney J that grounds 12 and 13 should not be upheld. Ground 14 asserts that the primary judge erred in holding that the particulars to para 62(n) of the PFASC ought to have been pleaded as allegations of material fact. In the circumstances, that formal point adds nothing to the resolution of the determinative issues between the parties and for that reason I do not uphold it.

435    Grounds of appeal 15 and 16 assert that the primary judge erred in not granting leave to file the PFASC in so far as it addressed KTCs claims against Mr David, Mr Singh and XALT. I will return to that after I have addressed the final disposition of the appeal as against G+T.

Summary of conclusions on appeal

436    The result of the views I have reached, when combined with the respective views of Wigney J and Anastassiou J, is that, with respect, KTC has succeeded in establishing that, contrary to the conclusions of the primary judge:

(1)    KTC has pleaded a reasonable and sustainable case that the January 2010 issue of shares in Emergent was part of a dishonest and fraudulent scheme;

(2)    KTC has pleaded a reasonable and sustainable case that G+T assisted in the alleged dishonest and fraudulent schemes involving the April 2010 issue of shares in Global Renewables, by advising Global Renewables, Mr David and others that it was lawful to make the share issue; and

(3)    KTC has pleaded a reasonable and sustainable case that G+T assisted in relation to the alleged dishonest and fraudulent schemes involving the April 2010 issue of shares in Global Renewables, by assisting in preparing the documentation to effect the share issue.

437    KTC has not, however, established any error in the following conclusions reached by the primary judge:

(1)    KTC has not pleaded a reasonable and sustainable case that G+T had the requisite knowledge that the January 2010 issue of shares in Emergent was part of one or more alleged dishonest and fraudulent schemes; and

(2)    KTC has not pleaded a reasonable and sustainable case that G+T had the requisite knowledge that the April 2010 issue of shares in Global Renewables was part of one or more alleged dishonest and fraudulent schemes.

438    In the event it has not been necessary, however, for this Court to express a view as to whether KTC has pleaded a reasonable and sustainable case that G+T assisted in relation to the alleged dishonest and fraudulent schemes involving the January 2010 issue of shares in Emergent. It is unnecessary because of the manner in which the appeal will be disposed of, to which I will now turn.

Re-exercise of discretion

439    In the end, the primary judge exercised two discretions adversely to KTC: the discretion to permit amendment in the terms of the PFASC and the discretion to permit further repleading so that KTCs case against G+T could proceed to trial. The errors in his Honours judgment that have been established require this Court to re-exercise the discretions.

440    In my view, the appropriate way to exercise the discretions is to refuse leave to rely on the PFASC and to dismiss the claim as against G+T (including Mr Bullock). The deficiencies in the pleading as to knowledge which I, like Wigney J and the primary judge, consider to be present are fundamental to the case against G+T. If there is no reasonable and maintainable case that they knew (in any of the requisite senses) about the alleged dishonest and fraudulent schemes, then the case against them must fail. While the primary judge reached no express conclusion about the plea as to G+Ts knowledge of the Constructive Trust Fraudulent Scheme, as KTCs submissions implicitly acknowledge, that must stand or fall with the pleas as to G+Ts knowledge in relation to the two share issues.

441    The history of KTCs several attempts to plead the case properly, as described by Wigney J and the primary judge, compel the conclusion that leave to replead should not be given, meaning the case against G+T must be dismissed. KTC’s appeal was based on the contention that the primary judge erred in finding that the pleading was deficient, not on any contention that the discretion his Honour exercised as a consequence miscarried. In the result, then, the appeal must be dismissed.

442    Given the conclusion I have reached about the appeal, it is not necessary for me to express a view on the notice of contention.

The case against the first three respondents

443    To return, then, to where that leaves the case against Mr David, Mr Singh and XALT, I agree with Wigney J and Anastassiou J that the proceeding in so far as it concerns them should be remitted to the primary judge. As each of their Honours has indicated, the primary judge may make such directions as he thinks appropriate in relation to KTCs claims against Mr David, Mr Singh and XALT, including, if necessary, the filing of a substantially revised statement of claim. In deciding whether to give leave to replead and on what terms, his Honour will have regard to the fact that my reasons, combined with those of Anastassiou J, mean that the pleading that the 2010 issue of shares in Emergent was part of a dishonest and fraudulent scheme is not so fundamentally deficient that leave to make it should be denied. Also, it followed from the primary judges different view that, as his Honour said at [39] of his summary judgment decision, it was impossible coherently to imagine what was dishonest in using the control of Emergent thus delivered to effect the issue of shares in Global Renewables. The opinion held by Anastassiou J and myself that there could still be a dishonest and fraudulent scheme in relation to the Emergent share issue means that that conclusion of the primary judge also, with respect, cannot stand and will need to be reconsidered. The primary judge will also need to take into account that my reasons, combined with those of Anastassiou J, mean that KTC has pleaded a reasonable and sustainable case that the Constructive Trust Fraudulent Scheme was a dishonest and fraudulent scheme.

444    However, depending on how the issue comes back before the primary judge, he may also need to take into account that, as Wigney J has said and I have agreed, there are difficulties with the way that the PFASC seeks to extract at least six dishonest and fraudulent schemes from the underlying circumstances. It may be, as Wigney J says, that this problem cannot be remedied by minor surgery to the pleading, but in any event the success of G+Ts appeal plainly calls for major surgery before KTC can proceed with its claim against the remaining respondents. That is why I say it depends on how the matter comes back before the primary judge; whether that will be in the course of considering yet another amended (or substituted) statement of claim is a matter for his Honour.

445    It is therefore appropriate not to set aside the primary judges order dismissing KTCs application for leave to file the PFASC (or his Honours other orders), and I would not uphold grounds 15 and 16.

446    On that basis, I agree with the orders proposed by Wigney J.

I certify that the preceding thirty five (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.

Associate:

Dated:    13 April 2022

SCHEDULE OF PARTIES

NSD 838 of 2020

Respondents

Fourth Respondent:

D.T GILBERT & W.R SPAIN & C.G CONDOLEON & ORS TRADING AS GILBERT + TOBIN (ABN 88 775 098 848)

Fifth Respondent:

ANDREW BULLOCK