FEDERAL COURT OF AUSTRALIA

Batterham v Nauer, in the matter of Peter James Batterham [2019] FCA 485

ORDERS

THE COURT ORDERS THAT:

1.    In proceeding NSD982/2018, the application to set aside bankruptcy notice BN224341 be refused.

2.    In proceeding NSD982/2018, the proceeding be dismissed with costs.

3.    In proceeding NSD990/2018, the proceeding be summarily dismissed with costs.

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

REASONS FOR JUDGMENT

GLEESON J:

Introduction

1    This judgment concerns applications in two proceedings following the issue of bankruptcy notice BN224341 to the applicant, Mr Batterham, at the request of the respondent, Mr Nauer. The first is Mr Batterham’s application to set aside the bankruptcy notice in proceeding NSD982/2018. The second is Mr Nauer’s application for summary dismissal of proceeding NSD990/2018, a proceeding commenced by Mr Batterham against Mr Nauer and which provides the primary basis for Mr Batterham’s application to set aside the bankruptcy notice.

2    The bankruptcy notice requires Mr Batterham to pay Mr Nauer an amount of $168,595.52. That sum comprises an amount of $163,456.71 payable by Mr Batterham pursuant to a lump sum costs order made by a judge of the Supreme Court of New South Wales in proceeding 2016/00124822 (“2016 Supreme Court proceeding”) in December 2017, together with interest of $5,138.81.

Mr Batterham’s application to set aside the bankruptcy notice

3    Mr Batterham’s application is based on s 40(1)(g) of the Bankruptcy Act 1966 (Cth), and supported by an affidavit made by him on 8 June 2018.

4    A bankruptcy notice may be set aside on the ground that the debtor has such a counter-claim, set-off or cross-demand as is referred to in s 40(1)(g), that is:

[A] counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt or sum payable under the final order [specified in the bankruptcy notice], as the case may be, being a counter­claim, set-off or cross-demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.

5    In his affidavit, Mr Batterham states that he has a counter-claim, set-off and/or cross-demand against Mr Nauer in an amount exceeding the amount specified in the bankruptcy notice. Mr Batterham states that “the counter-claim proceeding [is] being brought in the Federal Court”. The relevant proceeding is proceeding NSD990/2018, commenced by Mr Batterham on 12 June 2018.

6    In his affidavit, Mr Batterham also contends that the service of the bankruptcy notice was an attempt to stultify any claims that he has against Mr Nauer without those claims proceeding to final hearing and determination. However, proceeding NSD990/2018 was only commenced after the issue of the bankruptcy notice and Mr Batterham did not point to evidence that Mr Nauer was on notice of his intention to make the claims in the proceeding. In those circumstances, I am not satisfied that the bankruptcy notice was issued for the purpose asserted by Mr Batterham.

7    Mr Nauer opposes Mr Batterham’s application on the grounds that Mr Batterham does not have a prima facie case against Mr Nauer, and he does not have a fair chance of success in any cross-claim or cross-demand against Mr Nauer. Mr Nauer relied on an affidavit of Stephen Rush, solicitor, sworn 19 June 2018.

Mr Nauer’s summary dismissal application

8    Mr Nauer seeks an order that proceeding NSD990/2018 be dismissed pursuant to r 26.01 of the Federal Court Rules 2011 or alternatively that the statement of claim be struck out pursuant to r 16.21 of the Rules or alternatively that the proceeding be stayed pursuant to r 1.31 of the Rules.

9    Mr Nauer’s application was supported by an affidavit of Stephen Rush sworn on 18 July 2018.

10    The application was opposed by Mr Batterham, who relied upon his own affidavits affirmed on 25 July 2018 and 31 October 2018.

11    Mr Nauer’s application was argued by reference to the amended statement of claim (“ASOC”) filed by Mr Batterham on 9 July 2018.

Summary of conclusions

12    Proceeding NSD990/2018 should be summarily dismissed because Mr Batterham’s claims for relief are either misconceived or doomed to fail.

13    In particular, Mr Batterham does not have a claim against Mr Nauer based on his status as the sole beneficiary of the Batterham Retirement Fund or otherwise on behalf of the Batterham Retirement Fund.

14    Further, any cause of action that Mr Batterham may have had against Mr Nauer is personal to him, accrued prior to his bankruptcy in November 2014, and did not re-vest in Mr Batterham upon the discharge of his bankruptcy.

15    Further, the ASOC does not disclose any reasonable cause of action and, on the available evidence, there is no reason to believe that Mr Batterham has a viable cause of action against Mr Nauer.

16    It follows that I am not satisfied that Mr Batterham has the requisite counter-claim, set-off or cross-demand for the purposes of s 40(1)(g) of the Bankruptcy Act.

17    As I am not satisfied that the bankruptcy notice is an abuse of process, Mr Batterham’s application to set aside the bankruptcy notice must fail.

Background

18    The history of this matter goes back to 2007.

19    In essence, Mr Batterham alleges that he and Mr Nauer were parties to a joint venture in the business of strata management. Mr Batterham alleges that Mr Nauer and others took control of the joint venture and marginalised Mr Batterham to his financial detriment.

20    The ASOC is lengthy and includes a recitation of complex factual allegations, many of which are not obviously relevant to any particular claim. A notable feature of the ASOC is the absence of facts that might be relied upon to support findings as to the creation of the alleged joint venture.

21    Many of the facts set out below are the facts as alleged in the ASOC. Those facts are assumed in Mr Batterham’s favour for the purpose of considering Mr Nauer’s application.

Relevant parties

22    Mr Batterham is the sole member and beneficiary of the Batterham Retirement Fund. Maylord Equity Management Pty Ltd (“Maylord”) is the trustee of the Batterham Retirement Fund, and Maylord holds any assets of the fund on trust for Mr Batterham as its sole member and beneficiary. Prior to and since his bankruptcy, between 13 November 2014 and 3 December 2017, Mr Batterham was and has been a director of Maylord.

23    At relevant times, Mr Nauer:

(1)    controlled or directed Vesture Limited, now known as Smarter Communities Limited (“Vesture”), as its principal shareholder and executive chairman;

(2)    was a director and officer or a de facto director or a shadow director of Vesture; and

(3)    was required to act as a director of Vesture.

24    Victorian Body Corporate Services Pty Ltd (“VBCS”) is a company identified by Mr Batterham in 2007 as a “foundation business entity” for the alleged joint venture. At around the time that it was identified by Mr Batterham, VBCS provided strata management services in Melbourne for 30,000 strata units and had EBITDA (earnings before interest, tax, depreciation and amortization) of about $3.5 million.

25    Ztrata Capital Limited (“ZCL”) is a company incorporated in the British Virgin Islands on 9 November 2009. Mr Nauer was a shareholder and director of ZCL from that date.

26    On or about 15 March 2010, Ztrata Limited (“ZL”) was incorporated in Hong Kong with ZCL as its controlling shareholder, and Mr Batterham and an entity called “Urunga” as minority shareholders.

4 July 2011 settlement deed

27    An important background fact is a deed dated 4 July 2011 between Maylord, Mr Batterham, Vesture and VBCS. On its face, the deed provides for the sale and purchase of 1,250 shares in ZL and 600 shares in ZCL by Maylord to Vesture for $450,000. The deed formed part of Mr Batterham’s evidence.

28    Paragraph 134 of the ASOC alleges that $450,000 was paid to Mr Batterham (not Maylord) for 1,250 shares in ZL. Paragraph 134 further alleges that Mr Batterham received “no compensation” for “the value of the ZCL shares”.

29    One of Mr Batterham’s complaints concerns Mr Nauer’s conduct in executing the settlement deed himself in 2015. The deed as executed by Mr Nauer is referred to in the ASOC as the “2015 Deed”.

30    The recitals to the deed record:

A.    Maylord and Mr Batterham have made various claims and allegations against Vesture and VBCS and others in respect of the various matters summarised in the First Schedule (“the Claims”).

B.    Vesture and VBCS have denied the Claims.

C.    Vesture, VBCS, Maylord and Mr Batterham have agreed to settle the Claims and any and all disputes between them and the Related Parties referred to in the Third Schedule by Vesture purchasing certain shares owned by Maylord on the terms and conditions contained in this Deed.

D.    Maylord is the owner of the shares in [ZL] and [ZCL], which shares are described in the Second Schedule (“the Shares”).

E.    Maylord has agreed to sell and Vesture has agreed to purchase the Shares on the terms and conditions contained in this Deed.

31    The “First Schedule” refers to several items of correspondence and a “document titled “Statement of Claim Vesture/[Parazelsus Body Corporate Services Pty Ltd (“PBCS”)]” issued by Maylord or Mr Batterham, a copy of which is said to be Annexure “B”, but which is not attached to the deed as it appears in Mr Batterham’s July 2018 affidavit.

32    The “Second Schedule” refers to 1,250 fully paid ordinary shares in ZL and 600 fully paid ordinary shares in ZCL.

33    The “Third Schedule” lists the “Related Parties” including, relevantly, all directors and officers of Vesture as at the date of the deed or prior to the date of the deed but excluding Peter Zuellig and Marcus Haefeli. Based on Mr Batterham’s allegation that at all relevant times Mr Nauer was a director and officer of Vesture, noted above, Mr Nauer is one of the “Related Parties” within the meaning of the deed.

34    Clause 3.7 of the deed provides:

The Related Parties may at any time make itself a party to this Deed for the purposes of enforcing Clause 3.1 by executing a copy of the Deed and delivering it to any of Maylord or Batterham.

35    On its face, cl 3.1 sets out a release by Maylord and Mr Batterham in favour of Vesture, VBCS and the “Related Parties”. It is reasonable to infer that Mr Nauer executed the deed for the purpose of invoking such rights as are available to him pursuant to cl 3.1 and cl 3.7.

36    By cl 5.1 of the deed, completion of the sale of the “Shares” was to take place on 12 July 2011, or any other date agreed in writing by the parties. By cl 5.2, on completion, Maylord was required to deliver to Vesture share transfers, copies of share certificates, a direction to ZL and ZCL to deliver the original share certificates for the shares to Vesture and any other document reasonably required by Vesture to obtain title to the shares and have the shares registered in the name of Vesture or its nominee.

37    The evidence did not identify the date of completion of the sale. Mr Rush’s uncontested evidence was that, by 12 August 2014, Vesture had paid Maylord and Mr Batterham a total of $450,000 in accordance with the settlement deed.

2014 and 2016 Supreme Court proceedings

38    In December 2014, Maylord commenced proceedings against Mr Nauer. On Maylord’s application, the Supreme Court granted leave to Maylord on 13 February 2015 to commence and carry on the proceeding by Mr Batterham who purported to be a director of Maylord, although he was then an undischarged bankrupt.

39    The 2014 proceeding was dismissed on 24 April 2015 for non-compliance with the Court’s directions.

40    Maylord commenced the 2016 Supreme Court proceeding on 22 April 2016. Mr Rush’s evidence was that the proceeding was commenced on the same factual matrix and contained similar allegations to those in the 2014 proceeding and in NSD990/2018. Mr Batterham stated that Maylord brought the 2016 Supreme Court proceeding on behalf of the Batterham Retirement Fund. He submitted that his only financial contribution to the proceeding was to pay “relatively small filing fees”.

41    According to Mr Batterham, the cause of action pleaded by Maylord in the 2016 Supreme Court proceeding was:

[A] breach of fiduciary duties by [Mr Nauer] as a partner in the joint venture when he purchased control of the joint venture without offering to acquire the shares owned by the [Batterham Retirement Fund] on the same terms as agreed with the two other partners in the joint venture to gain control of it. Damages sought were primarily to recover the current value of the loss to the [Batterham Retirement Fund] arising from this breach.

42    Mr Batterham disputed that the causes of action in NSD990/2018 are substantially similar to those in the 2016 Supreme Court proceeding. However, the stated basis for that dispute was that the current claim adds a claim of conspiracy to defraud a minority shareholder and breaches of the Corporations Act 2001 (Cth). Mr Batterham identified as the “critical added fact” that Mr Nauer was a director of ZCL when the alleged conspiracy to defraud was perpetrated on and around 17 February 2011.

43    On 24 October 2016, Bergin CJ in Eq ordered that the Commercial List Statement in the 2016 Supreme Court proceeding be struck out on the basis that it did not disclose a reasonable cause of action. Bergin CJ in Eq also refused leave to Maylord to file a proposed draft Amended Commercial List Statement and ordered Maylord to pay Mr Nauer’s costs forthwith in a fixed sum of $25,000 prior to filing any further proposed Amended Commercial List Statement.

44    The evidence before me included a transcript of the lengthy hearing before Bergin CJ in Eq, at which Mr Batterham was in attendance. Early on in the hearing, her Honour asked Maylord’s counsel, Mr Fernon: “What is [it] that Mr Batterham says Mr Nauer did? What is the alleged misconduct?” Following this question, there was extensive dialogue between her Honour and Mr Fernon in which her Honour sought to understand Maylord’s case against Mr Nauer. Bergin CJ in Eq asked numerous questions concerning the alleged joint venture, including its parties (said by Mr Fernon to be Maylord, Parazelsus Limited (“Parazelsus”), Mr Nauer, Urunga and Mr Patrick Bruhlmann) and the terms of the joint venture.

45    Eventually, her Honour noted that Maylord had not pleaded a case that it seemed to wish to bring, to the effect that the joint venturers agreed (expressly or impliedly) that any company that was to be a proposed investment opportunity would be restricted from any investment by any of the joint venturers. Her Honour concluded:

You need to identify with precision how it is that Mr Nauer ends up with a fiduciary obligation to you to ensure that Vesture makes an identical offer to you and to [PBCS] and to Urunga.

46    Amongst other pointed observations about the deficiencies in Maylord’s Commercial List Statement, her Honour also said: “You can’t just say because you’re a shareholder you’re a co joint venture with all these obligations.”

47    On 6 February 2017, Maylord filed a notice of motion seeking that the 24 October 2016 orders be set aside. The notice of motion was dismissed with costs, but leave was granted for Maylord to bring such an application again on further material within six months.

48    On 24 March 2017, Maylord applied to reinstate the 6 February 2017 notice of motion. This motion was dismissed with costs on 7 April 2017, apparently for non-appearance by Maylord.

49    On the same day, 7 April 2017, Maylord filed another motion seeking to set aside the 24 October 2016 orders.

50    On 28 April 2017, Mr Nauer filed a notice of motion seeking orders that the proceeding be stayed or dismissed as Maylord did not have authority to commence or continue the proceeding in its capacity as trustee for the Batterham Retirement Fund. This application was based on Maylord’s non-compliance with the Superannuation Industry (Supervision) Act 1993 (Cth) as a result of Mr Batterham’s bankruptcy and consequent disqualifications, including from being a director of a corporation and a director of a body corporate that is a trustee of a self-managed superannuation fund.

51    On 12 May 2017, Ward CJ in Eq dismissed Maylord’s application to set aside the 24 October 2016 orders: Maylord Equity Management Pty Ltd as trustee of the Batterham Retirement Fund v Nauer [2017] NSWSC 634. Her Honour determined that the Batterham Retirement Fund was a non-compliant, self-managed superannuation fund and that Maylord did not have authority to act as trustee of the fund. Her Honour stayed the proceeding pending payment of costs orders made to that time, on the basis that it was “not inconceivable that Maylord might be able to rectify the irregularities in its commencement of the proceedings as trustee of the [Batterham Retirement Fund] so as to enable it, or another trustee, to continue the proceedings” (at [3]).

52    In the course of her Honour’s reasons, Ward CJ in Eq made the following observations concerning the claims made in the 2016 Supreme Court proceeding:

(1)    Bergin CJ in Eq had “made clear that she was satisfied the pleading [that is, the Commercial List statement] was and remained deficient” (at [26]).

(2)    “The deficiencies identified in the existing pleading included the lack of material facts for the allegation that [Mr Nauer] owed fiduciary obligations” (at [42]).

(3)    “It is clear from the transcript of proceedings on 24 October 2016 that the decision to order costs followed from her Honour’s conclusion that the claim as then pleaded was seriously defective” (at [44]).

53    On 2 August 2017, Mr Nauer filed a notice of motion seeking dismissal of the 2016 Supreme Court proceeding for want of prosecution and an order that Mr Batterham personally pay part of the costs of the proceeding.

54    On 6 November 2017, Slattery J ordered that the 2016 Supreme Court proceeding be dismissed for want of due dispatch, that Maylord pay the costs of the proceeding and that Mr Batterham pay part of the costs on a joint and several basis: Maylord Equity Management Pty Ltd as trustee of the Batterham Retirement Fund v Nauer (No 2) [2017] NSWSC 1467. Mr Batterham pointed to the following statement at [53] of the judgment:

Mr Batterham should be made personally liable for the costs of the present application. Mr Batterham generally satisfies the requirements for a costs order against a third party. He has shown himself to be substantially in control of Maylord’s actions and has been initiating and directing the impecunious Maylord’s steps on this application. He alone stands to benefit from any success Maylord has as the sole beneficiary of the [Batterham Retirement Fund].

55    On 13 December 2017, Maylord filed a notice of motion seeking that the order dismissing the 2016 Supreme Court proceeding be set aside and that Mr Batterham be joined as a second plaintiff.

56    On 19 December 2017, Slattery J delivered further reasons and fixed a gross sum amount for the costs ordered against Maylord and Mr Batterham on 6 November 2017.

57    On 2 February 2018, Hammerschlag J dismissed Maylord’s notice of motion to set aside the orders of Slattery J.

58    On the same day, Maylord and Mr Batterham filed a summons seeking leave to appeal (case number 2018/35657). The orders sought included that the time for seeking leave to appeal be extended, leave to appeal from the whole of the discretionary and interlocutory decisions made by each of Bergin CJ in Eq on 24 October 2016, Ward CJ in Eq on 12 May 2017 and Slattery J on 6 November 2017 and 19 December 2017, and that such decisions be set aside in their entirety.

59    On 10 April 2018, Basten JA and Leeming JA refused the application to extend the time within which to file a notice of leave to appeal, refused leave to appeal and ordered that Maylord and Mr Batterham pay Mr Nauer’s costs of the Court of Appeal proceeding.

Legal framework

Summary dismissal/strike out of pleading

60    As noted above, Mr Nauer’s primary application is for summary dismissal of proceeding NSD990/2018. Alternatively, Mr Nauer seeks an order that the ASOC be struck out.

61    Rule 26.01 of the Rules permits an application for summary judgment, including summary dismissal, on the following terms:

(1)    A party may apply to the Court for an order that judgment be given against another party because:

(a)    the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or

…

(c)    no reasonable cause of action is disclosed; or

(d)    the proceeding is an abuse of the process of the Court; ...

62    Rule 16.21 permits a strike out application, 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:

…

(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; …

63    The power to order summary dismissal of a proceeding is contained in s 31A of the Federal Court of Australia Act 1976 (Cth), which provides relevantly:

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

(4)    This section does not limit any powers that the Court has apart from this section.

  (5)    This section does not apply to criminal proceedings.

64    The distinction between summary judgment and an order striking out a pleading (here, the ASOC) was discussed in Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920; (2008) 252 ALR 41 at [3] to [8]; Oliver v Commonwealth Bank of Australia (No 1) [2011] FCA 1440 at [23] and J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Limited [2014] FCA 581 at [8]. Both involve the summary resolution of claims: Imobilari at [3]. The fundamental distinction is that a strike-out is based solely on the inadequacy of the relevant pleading while a summary dismissal may be based on a consideration of facts or evidence outside the pleadings. In Vaughan Super, Pagone J noted that a strike-out leaves a proceeding on foot and a party may be given leave to re-plead unless leave would be futile because the cause of action is unarguable.

65    In Imobilari at [7], Finkelstein J stated:

[I]t is easier to obtain summary judgment than strike-out because the moving party on a summary judgment application need only show that there is no real dispute of material fact, not that the allegations are implausible or admit of no reasonable argument. Indeed, the summary judgment inquiry does not turn on the pleadings at all because the truth of the pleaded allegations is no longer assumed. Instead, the court must look at the evidence to see if it discloses a cause of action or defence, or whether there is any ambiguity, contradiction, or other divergence with respect to a material fact such as to require a full trial.

66    In Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 at [24]-[26], French CJ and Gummow J said:

[24]    The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd [(1983) 154 CLR 87 at 99] said:

“The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried”.

More recently, in Batistatos v Roads and Traffic Authority (NSW) [[2006] HCA 27; (2000) 226 CLR 256 at 275 [46]] Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde [[2000] HCA 41; (2000) 201 CLR 552 at 575-576 [57]] which included the following:

“Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.”

There would seem to be little distinction between those approaches and the requirement of a “real” as distinct from “fanciful” prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.

[25]    Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.

[26]    Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant. The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact.

67    An instance in which the moving party might obtain summary judgment on this basis is where a party “completely fails to identify any valid claim or cause of action, to the court or fails to provide any factual material that could amount to a valid claim, in the materials he or she places before the court, having been given a reasonable opportunity to do so”: Dowling v Commonwealth Bank of Australia [2008] FCA 59 at [30]. In Dowling, Reeves J continued at [30]:

The complete absence of an identified and valid claim and, more importantly, the factual materials to found either that valid claim, or some other form of valid claim, along with the likelihood that the applicant has no reasonable prospects of ever being able to produce that material, justifies a conclusion that there is not, and never will be, a valid claim before the court. This obviously cannot be remedied by orders to amend or strike out the pleadings because no amount of pleadings will remedy the fundamental absence of a valid claim. Moreover, the complete absence of a valid claim in this sense i.e. no identification of a claim, no factual foundation for a claim and no prospect of providing either, must lead inexorably to the conclusion that the applicant has no prospects of prosecuting his or her proceedings to a successful conclusion.

68    It must be apparent on the face of the statement of claim that the facts pleaded, if proved, would establish the cause of action relied upon by the relevant plaintiff or plaintiffs. In Wride v Schulze [2004] FCAFC 216 at [25], the Full Court said:

[T]he pleadings must disclose a reasonable cause of action against the party against whom the cause of action is brought and must state all material facts necessary to establish that cause of action and the relief sought. A “reasonable cause of action” for this purpose means one which has some chance of success if regard is had only to the allegations and the pleadings relied on by the applicant.

69    A pleading (in this case, the ASOC) may be struck out as embarrassing if it is unintelligible, ambiguous or so vague that it fails to identify the material factual allegations to the extent that the other party is not given notice of the real substance of the claim: Priest v State of New South Wales [2006] NSWSC 12 at [34].

70    However, as the Full Court noted at [24], citing Kirby P in Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 435, that where the pleading under consideration has been prepared by a litigant in person without the benefit of legal assistance (or apparently without that benefit):

[C]are must be taken to ensure that this significant disadvantage does not deprive her of the opportunity to have her claim, if any, determined according to law. Persons unfamiliar with the rules of pleading and the technicalities which surround the drafting of a statement of claim in adequate and permissible legal form are inevitably, if unrepresented, at a disadvantage. Courts should approach the peremptory termination of the litigation with special care to ensure that, within the possibly ill expressed and unstructured statement of the legal claim sought to be ventilated, there is no viable cause of action which, with appropriate amendment of the pleading and a little assistance from the court, could be put into proper form.

Setting aside a bankruptcy notice

71    To satisfy the Court that a debtor has the requisite counter-claim, set-off or cross-demand, “the debtor must show that he has a prima facie case, even if then and there he does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues”: Ebert v The Union Trustee Co of Australia Limited [1960] HCA 50; (1960) 104 CLR 346 at 350.

72    In Guss v Johnstone [2000] HCA 26; (2000) 171 ALR 598 at [40], Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ held that “the state of satisfaction referred to in s 40(1)(g), and s 41(7), involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim”.

73    In Blair v Owners - Strata Plan No. 71656 [2016] FCA 1522 at [23], Markovic J referred to the judgment of Lindgren J in Glew v Harrowell [2003] FCA 373; (2003) 198 ALR 331 at [9], as follows:

… Lindgren J identified three interrelated and sometimes overlapping matters that an applicant must establish for the Court to be satisfied that he or she has a counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g) of the Bankruptcy Act namely:

•    that they have a “prima facie case”, even if they do not adduce evidence which would be admissible on a final hearing making out that case: Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 (“Ebert”) at 350; Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 44 FLR 135 (“Brink”) at 141; Gomez v State Bank of New South Wales Ltd [2002] FCAFC 101 at [17], [18];

•    that they have “a fair chance of success” or are “fairly entitled to litigate” the claim: Brink at ALR 438-9; FLR 141; Gould v Day [1999] FCA 1650 at [27], [28]; Re Capsanis; Capsanis v The Owners – Strata Plan 11727 [2000] FCA 1262 at [11]; and

•    that they are advancing a “genuine” or “bona fide” claim: Re Capsanis; Capsanis v The Owners – Strata Plan 11727 [2000] FCA 1262 at [11].

74    A bankruptcy notice may also be set aside as an abuse of process: Re Sterling; Ex parte Esanda Ltd (1980) 30 ALR 77 at 82-83.

75    It would be an abuse of process to procure the issue of a bankruptcy notice if a creditor did not genuinely intend to pursue the matter in the event of default in complying with the notice because the creditor sought to achieve a collateral purpose: Maxwell-Smith v S & E Hall Pty Ltd, Re Maxwell-Smith [2006] FCA 825 at [43] and [44]. The relevant time to judge abuse of process is the time at which a bankruptcy notice is issued: Killoran v Duncan [1999] FCA 1574 at [13].

76    The onus of proving the existence of a collateral purpose lies on the debtor: Cavoli v Etl [2007] FCA 1191 at [17] per Heerey J, and more than mere assertion is required: Watts v Adelaide Bank Limited [2009] FCA 420 at [19].

Summary dismissal

77    Mr Batterham alleges that he is the only party able to benefit from proceeding NSD990/2018 and, as such, is a proper party to instigate the proceeding. This contention confuses Mr Batterham’s position as the person standing behind Maylord (which led to the imposition of a costs order against Mr Batterham in the 2016 Supreme Court proceeding) and his position as a person who may or may not have a legal claim for relief. The confusion may have arisen from, or been exacerbated by, a submission made on behalf of Mr Nauer in the 2016 Supreme Court proceeding, which stated “[i]t is plain that Mr Batterham is the true plaintiff”. Contrary to Mr Batterham’s submission, Slattery J did not find that Mr Batterham was the “true plaintiff” in proceedings brought by the trustee of the Batterham Retirement Fund.

78    In any event, the fact that Mr Batterham may be the only ultimate beneficiary of proceeding NSD990/2018, if he were to succeed, does not preclude the Court from summarily dismissing the proceeding if Mr Nauer is able to demonstrate that Mr Batterham (in whatever capacity) has no reasonable prospect of successfully prosecuting the proceeding or no reasonable cause of action is disclosed.

79    Nor is it material that Mr Batterham was made a party to the 2016 Supreme Court proceeding (a fact that Mr Nauer disputed but which I will assume in Mr Batterham’s favour) and had costs awarded against him personally in that proceeding.

Relief sought by Mr Batterham in NSD990/2018

80    The originating process, filed on 12 June 2018, identifies the relief sought as follows:

1.    Damages for breaches of Sections 180, 181 and 182, 232 and 233 of the Corporations Act 2001.

2.    Damages pursuant to Section 236 of the Australian Consumer Law for contravention of Sections 18 and 20 of the Australian Consumer Law.

 3.    Damages for breach of fiduciary duty.

 4.    Damages for fraud.

81    As Mr Batterham put it in his affidavit affirmed on 25 July 2018:

18.    My Statement of Claim relies on three causes of action, namely:

a)    Breach of fiduciary duties as a partner in a joint venture

b)    Conspiracy to Defraud and

c)    Breach of the Corporations Act 2001.

82    For the reasons set out below, I have concluded that Mr Batterham’s claims for relief are either misconceived or doomed to fail. Mr Batterham has no reasonable prospect of successfully prosecuting any of the claims.

83    In order to explain that conclusion, it is first necessary to identify the loss and damage that Mr Batterham claims to have suffered.

Heads of damage

84    Paragraph 134 of the ASOC alleges that Mr Batterham has suffered the following loss that is potentially relevant to the damages claims:

(1)    $98,038, allegedly being the difference paid to “Urunga” for its shares in ZL of $548,038 in March 2011 and $450,000 paid to Mr Batterham;

(2)    $1,653,758, allegedly for the value of the ZCL shares for which Mr Batterham received no compensation, based on the price paid by Vesture in September 2013 for ZCL shares issued to Mr Nauer in November 2009;

(3)    $325,000 for consulting fees not paid; and

(4)    $350,000 for an introduction fee for the “Ernst acquisition”.

85    Mr Batterham also claims other unspecified damages “for the fraudulent action” of Mr Nauer, and for breach of his joint venture duties to Mr Batterham including increase in the value of “the Defendant’s company” since September 2013.

ZL and ZCL shares

86    As to the first two alleged losses, it appears from the ASOC that the shares in ZL and ZCL (which Mr Batterham pleads are his shares) are the shares that are identified in the 4 July 2011 settlement deed as shares owned by Maylord. Paragraph 90 of the ASOC alleges that Mr Batterham “held a beneficial interest in 1250 ZL shares … in March 2011”. Paragraph 113 of the ASOC refers to Mr Batterham’s “600 shares in ZCL also issued to him also on 9 November 2009”.

87    Mr Nauer’s submissions, dated 23 August 2018, squarely asserted that the owner of the relevant shares was Maylord in its capacity as trustee of the Batterham Retirement Fund and not Mr Batterham. Mr Nauer noted that, in a document entitled “Amended Commercial List Statement”, apparently prepared for the 2016 Supreme Court proceeding, Maylord alleged ownership of 600 shares in ZCL and 1,250 shares in ZL.

88    There was no documentary evidence that Mr Batterham was ever the owner of shares in either ZL or ZCL. Mr Batterham’s evidence included an extract from ZL’s register of members which records that ZCL, Maylord and Urunga Trading Corp were the shareholders of ZL from March 2010.

89    At the hearing on 25 October 2018, Mr Batterham referred to himself as the beneficiary of the trust that owned the shares. Subsequently, he referred to ZL as a company that “I held shares in – or Maylord held shares in, the trust held shares in, and the British Virgin Island company held shares in” and said “I had shares in the Hong Kong company, and shares in the British Virgin Islands company”.

90    In his 10 September 2018 submissions, Mr Batterham refers to the current claim as being “in relation to shares owned by the [Batterham Retirement Fund] and [Mr Nauer’s] actions to deprive the [Batterham Retirement Fund] of fair value when interests controlled by [Mr Nauer] purchased these shares. Shares owned by the [Batterham Retirement Fund] plus any action relating thereto were exempt from vesting in the trustee in bankruptcy”. Those submissions also state:

24.    The shares in ZCL and ZL never vested in the trustee in bankruptcy as they were owned by the [Batterham Retirement Fund]. Accordingly, any causes of action relating thereto also did not vest with the trustee in bankruptcy.

25.    The shares in ZCL and ZL were never the property of Batterham and as such did not vest in the trustee in bankruptcy. They were owned by the [Batterham Retirement Fund] and as such were exempt from vesting.

91    In his 3 December 2018 submissions, Mr Batterham said:

[T]he current Statement of Claim in the Federal Court primarily relates to damages associated with shares owned by the [Batterham Retirement Fund] that did not vest with the Applicant’s trustee in bankruptcy as they were excluded assets being owned by a [Self-Managed Superannuation Fund] and not the Applicant.

92    At the hearing on 5 December 2018, Mr Batterham explained that, when he said “I had shares”, “I’m talking of the beneficiary of the Batterham Family Trust”. When asked about his receipt of shares in ZCL, Mr Batterham said:

MR BATTERHAM:    I – they were allocated to me, according to the share registry, on 9 November 2009. … It was about February 2010 that I received a copy of the share register and given a copy of the application form that I filled out on behalf of Maylord.

 HER HONOUR:    All right.

 MR BATTERHAM:    As trustee of the Batterham Retirement Fund.

93    In summary, despite the allegations in the ASOC that Mr Batterham was the owner of 1,250 shares in ZL and 600 shares in ZCL, there was no evidence to support those allegations and there was ample evidence that, to the contrary, the owner of the shares was Maylord. Further, although Mr Batterham’s case was not entirely clear, it was most clearly put on the basis that the beneficial ownership of the shares was held by the Batterham Retirement Fund, of which Mr Batterham is the sole beneficiary.

94    As to the sale of the shares in ZL, there is no basis to think other than that Maylord sold the shares to Vesture. Mr Batterham’s underlying complaint is that the value of his interest in the Batterham Retirement Fund was diminished by Maylord’s sale of the fund’s ZL shares for $450,000 when the shares were worth a higher sum.

95    As to the shares in ZCL, although Mr Batterham alleges that he received no “compensation” for their value, the 2011 settlement deed provided for their sale by Maylord to Vesture. Mr Batterham did not suggest that he retains ownership of the ZCL shares. Again, Mr Batterham’s underlying complaint appears to be that the value of his interest in the Batterham Retirement Fund was diminished by Maylord’s transfer of the fund’s ZCL shares to Vesture for no value (because he attributes the whole of the $450,000 paid under the settlement deed to the ZL shares) when the shares were worth $1,653,758.

96    Any diminution in the value of the Batterham Retirement Fund evidently occurred when Maylord agreed to transfer the ZL and ZCL shares to Vesture on the terms of the settlement deed.

97    As explained below, Mr Batterham has not identified any cause of action against Mr Nauer for losses sustained by the Batterham Retirement Fund in connection with the value of the ZL and ZCL shares.

Unpaid consulting fees

98    The ASOC alleges relevantly that:

(1)    on 2 July 2009, Parazelsus confirmed its interest to proceed with the strata management opportunity with Mr Batterham as the promoter of the joint venture, with Mr Batterham having a 10% shareholding in the joint venture and to have an ongoing role as a consultant to the joint venture (para 23 of ASOC);

(2)    in an email dated 12 August 2009, it was again confirmed that Mr Batterham would have a 10% shareholding and an ongoing consulting role (para 24 of ASOC);

(3)    from April 2010 to January 2011, Mr Batterham received the agreed consulting fee of $12,500 per month from VBCS. From January 2011, Mr Batterham ceased to receive the agreed consulting fee of $12,500 per month (para 79 of ASOC);

(4)    Mr Batterham’s consulting fees were terminated after January 2011 (para 92 of ASOC);

(5)    Mr Nauer caused PBCS to have its subsidiary VBCS to cease paying Mr Batterham’s consulting fees after January 2011 (para 117(i) of ASOC);

(6)    in February 2011, Mr Batterham was told that a consulting agreement “was to be put in place with VBSC whereby Maylord would receive an annual consulting fee of $150,000 paid monthly” (para 66 of ASOC);

(7)    however, the letter by which Mr Batterham was given this information made no mention of “what was to become of the consulting agreement, assuming that [Mr Batterham] was intended to retain [his] ‘interest’ in ZCL and therefore would remain a consultant to the joint venture” (para 68 of ASOC); and

(8)    at the time of entering into the “17 February 2011 agreements”, Vesture and Mr Nauer knew that Mr Batterham had a consulting agreement with the joint venture (para 76 of ASOC).

99    These allegations do not identify any party with a legal obligation to pay Mr Batterham consulting fees. The first two allegations refer to the prospect of a consulting agreement with “the joint venture”. Although there is a subsequent allegation that Mr Batterham was “a consultant to the joint venture”, the only fact that might support that allegation is the fact of the payments by VBCS which, it is alleged, was purchased by the joint venture.

100    Based on para 117 of the ASOC, these losses were allegedly sustained by reason of Mr Nauer’s breaches of fiduciary duties as a joint venturer.

Introduction fee for Ernst acquisition

101    The ASOC alleges relevantly that:

(1)    pursuant to the joint venture, Mr Batterham became entitled to be paid an introduction fee of $350,000 (para 30(g) of ASOC); and

(2)    in breach of his joint venture fiduciary duties, by funding the transaction to acquire Ernst Body Corporate Services Pty Ltd (“Ernst”) that was introduced by Mr Batterham to the joint venture, Mr Nauer caused Vesture to fail to pay the agreed introduction fee to Mr Batterham of 3.5% of the acquisition price of some $10 million (para 117(e) of ASOC).

102    Thus, as for the unpaid consulting fees, this claim is referrable only to the allegation of breach of fiduciary duties.

Sections 180, 181 and 182 Corporations Act 2001 (Cth)

103    Sections 180, 181 and 182 of the Corporations Act relevantly specify duties owed by a director or other officer of a corporation. The ASOC alleges that Mr Nauer held relevant positions in three corporations: Vesture; ZCL and PBCS. Mr Batterham does not allege that he is or was a shareholder of either Vesture or PBCS. It is arguably implicit in the allegations concerning the introduction fee that Mr Batterham claims to be a creditor of Vesture.

104    The ASOC does not allege with precision any breach of s 180 or s 181. There is a single allegation of breach of s 182 (at para 125 of the ASOC). Although the ASOC is not clear, the allegations of breach appear principally to concern Mr Nauer’s conduct as a director or officer of Vesture. The relevant allegations are:

(1)    Mr Nauer’s actions amounted to a deliberate breach of his duties under the Corporations Act (para 94 of ASOC);

(2)    Mr Nauer, in collaboration with Mr Bruhlmann (allegedly the chief executive officer of Vesture), caused Mr Batterham to be marginalised from “the joint venture” and deprived Mr Batterham of any operational or financial information concerning “the joint venture” in breach of their duties under Chapter 2D of the Corporations Act (para 117(c) of ASOC);

(3)    Mr Nauer failed to finalise the merger contracted between VBCS and Vesture to the detriment of Mr Batterham by depriving him of liquidity for his shares in the joint venture that was contrary to the strategy proposed by Mr Batterham for the joint venture to acquire VBCS and merge with Vesture in breach of his duties under Chapter 2D of the Corporations Act (para 117(d) of ASOC);

(4)    Mr Nauer conspired as a shadow director of Vesture and a director of ZCL with Mr Zuellig as a shareholder and director of ZCL for Vesture to transfer the proceeds from Vesture purchasing shares in ZL owned by ZCL to Parazelsus with the result to intentionally deprive Mr Batterham of his rightful beneficial interest of $412,121 from this transaction in contravention of his duties as a director and/or officer pursuant to Chapter 2D of the Corporations Act (para 117(h) of ASOC);

(5)    In relation to the “2015 Deed”, Mr Nauer acted in breach of his duties of good faith pursuant to s 182 of the Corporations Act (para 125 of ASOC).

105    At para 120 of the ASOC, Mr Batterham alleges relevantly that, by reason of the breaches of his duties imposed by Chapter 2D of the Corporations Act, Mr Nauer deliberately and purposely, and with the requisite intent, prevented Mr Batterham from obtaining any further value for his ZL and ZCL shares other than an offer made on 8 June 2011.

106    The fundamental problem with these claims is that Mr Batterham has no right to claim damages from Mr Nauer for any breach of ss 180, 181 or 182, either under the statute or at general law: cf. s 1317H to s 1317HE of the Corporations Act, which set out rights to claim compensation in particular circumstances. Further, it has generally been accepted that the duties imposed by ss 180, 181 and 182 are duties owed to the relevant company: Australian Securities and Investments Commission (ASIC) v Cassimatis (No 8) [2016] FCA 1023; (2016) 336 ALR 209 at [469]-[478].

107    To the extent that Mr Batterham seeks to vindicate the rights of ZCL for Mr Nauer’s alleged breaches of statutory obligations as a director of ZCL, Mr Batterham has not been granted leave to do so: cf. Pt 2F.1A of the Corporations Act.

108    Accordingly, the claims for damages for breach of ss 180, 181 and 181 are misconceived and should be summarily dismissed.

Sections 232 and 233 Corporations Act

109    Sections 232 and 233 may be invoked to obtain relief for oppressive conduct of a company’s affairs. Section 232 sets out the grounds on which the Court may make an order under s 233. As appears from s 232, the relief provided for in s 233 is directed towards conduct that is either contrary to the interests of the members of a company as a whole, or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. It is not concerned with oppressive conduct towards a non-member. Section 234 identifies who may apply for an order under s 233 including, relevantly, a member of the company.

110    Paragraph 126 of the ASOC alleges that Mr Nauer “as a director and or as a majority shareholder has used his control and direction to oppress” Mr Batterham in contravention of s 232 and s 233.

111    The ASOC does not specify the company in respect of which the oppressive conduct occurred. However, para 117(f) pleads that Mr Nauer:

As a 53% shareholder in Vesture and as such a shadow director of Vesture, negotiated with Zuellig, his co director of ZCL, for Vesture to acquire control of the joint venture by purchasing shares in ZL from ZCL and Urunga without the knowledge or agreement of the Applicant and to oppress the Applicant in contravention of Chapter 2F of the Corporations Act 2001.

112    If the claim is based upon the conduct of the affairs of Vesture, it is misconceived because Mr Batterham does not claim to be a member of Vesture and therefore, by s 234, has no standing to apply for an order under s 233.

113    An alternative is that the claim concerns the conduct of the affairs of ZCL. However, as explained above, Mr Batterham has no prospect of demonstrating that he was a member of ZCL.

114    Accordingly, Mr Batterham has no basis to claim relief under Part 2F.1. His claims for damages for breach of s 232 and s 233 are, accordingly, misconceived and should also be summarily dismissed.

Damages for contravention of Australian Consumer Law

115    The claim for damages pursuant to s 236 of the Australian Consumer Law (“ACL”), being Schedule 2 to the Competition and Consumer Act 2010 (Cth), is expressed to be based upon:

(1)    “the matters pleaded … in relation to the 5 February 2015 Deed … as well as the representations made by the Koffels letter dated 16 February 2011 … [Mr Nauer] has engaged in misleading and deceptive conduct (ASOC para 127); and

(2)    “the matters pleaded … in relation to the 2015 Deed [Mr Nauer] has engaged in unconscionable conduct (ASOC para 129).

116    There is a single allegation made in relation to the “5 February 2015 Deed”, as follows:

On 5 February 2015 the Respondent as a matter of material fact entered into a Deed to add himself to the settlement deed dated 4 July 2011 without the prior knowledge of the Applicant.

117    This allegation does not identify any conduct that could be characterised as misleading or deceptive on the part of Mr Nauer. Nor does it identify any facts by reason of which it could be found that Mr Nauer engaged in unconscionable conduct in relation to the “2015 Deed”.

118    As to the “Koffels letter dated 16 February 2011”, this appears to refer to a letter from Koffels Solicitors dated 4 February 2011 to Laurence & Laurence Lawyers. The letter states that Koffels was acting for Vesture concerning “issues raised in your letter of 21 January 2011 in relation to Maylord”.

119    Although the ASOC sets out certain facts concerning the contents of the 4 February 2011 letter and some matters about which no mention was made (paras 66 to 68 of the ASOC), there is no identification of facts that could support a finding that:

(1)    Mr Nauer engaged in any conduct by the act of Koffels in sending a letter, expressed to be written on behalf of Vesture; or

(2)    the letter made any statement that was misleading or deceptive or likely to mislead or deceive, or

(3)    the act of sending the letter involved misleading or deceptive conduct or conduct that was likely to mislead or deceive.

120    Only two other paragraphs in the ASOC are of potential relevance. They are as follows:

104.    Further the 19 May 2011 letter also stated that Vesture has no interest in acquiring the Applicant’s 6% beneficial interest in ZCL (a BVI company) and in fact was not able to do so. Further no offer was made to acquire the Applicant’s beneficial interest in ZL that on 4 February 2011 the Respondent stated that a contract to purchase the Applicant’s shares in ZL would be issued shortly.

105.    On 31 May 2011 Esplins on behalf of the Respondent, sent a letter to the Applicant’s solicitors containing an offer for Vesture to acquire the Applicant’s beneficial interest in ZL for $300,000, to be paid as to 50% on settlement and the balance paid over 36 months. This compared to the “offer” made on 4 February 2011 for a value of $463,939 paid mostly in cash for the Applicant’s shares in ZL and the comparable price paid to Urunga of $548,038 on 11 March 2011. No mention was made in this letter to the Applicant’s shares in ZCL.

121    Although these paragraphs contain allegations that refer to the 4 February 2011 letter, they do not contain facts that could support a conclusion that Mr Nauer engaged in misleading or deceptive conduct in connection with the letter.

122    It follows that the pleading of the alleged claims is hopelessly deficient. In addition, there is no allegation that Mr Batterham relied on any statement in the 4 February 2011 letter to do or refrain from doing anything that resulted in him suffering loss or damage. Similarly, there is no allegation of any causal relationship between Mr Nauer’s execution of the 2015 deed and any loss or damage.

123    To the extent that Mr Batterham might seek to allege that he suffered loss in connection with the value of the ZL and ZCL shares, there could not be any connection between Mr Nauer’s execution of the 2015 deed and Mr Batterham’s losses (if any) because any such losses were sustained when the shares were sold in 2011.

124    To the extent that Mr Batterham might seek to allege that the 4 February 2011 letter contained representations that he would or might receive a better price for the ZL and ZCL shares than the price paid under the settlement deed, there is no hint of an allegation that Mr Batterham might have relied on any such representations to his detriment.

125    On the available evidence, there is no basis for an allegation that Mr Nauer engaged in conduct that contravened either s 18 or s 20 of the ACL in connection with either the 4 February 2011 letter or the 2015 Deed.

126    Accordingly, the claim for damages pursuant to the ACL is hopeless and should be summarily dismissed.

Damages for breach of fiduciary duty

127    In United Dominions Corporation v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 at 10, Mason, Brennan and Deane JJ said:

The term “joint venture” is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, “adventure”) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a “joint venture” and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other. One would need a more confined and precise notion of what constitutes a “joint venture” than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint venturers is necessarily a fiduciary one but cf. per Cardozo C.J., Meinhard v. Salmon [(1928) 164 NY 458, at p 462; 164 NE 545, at p 546]. The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken. If the joint venture takes the form of a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers from being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship: see, generally, Birtchnell v. Equity Trustees, Executors and Agency Co. Ltd. [(1929) 42 CLR 384, at pp 407-409].

128    As appears from [81] above, Mr Batterham’s claim is that he and Mr Nauer (and probably others) were partners in a joint venture. The relationship between partners is a well-established, status-based, fiduciary relationship. In Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384 at 407-408, Dixon J explained:

The relation between partners is, of course, fiduciary. Indeed, it has been said that a stronger case of fiduciary relationship cannot be conceived than that which exists between partners. “Their mutual confidence is the life-blood of the concern. It is because they trust one another that they are partners in the first instance; it is because they continue to trust one another that the business goes on” (per Bacon V.C. in Helmore v. Smith [(1886) 35 Ch D 436, at p 444]). The relation is based, in some degree, upon a mutual confidence that the partners will engage in some particular kind of activity or transaction for the joint advantage only. In some degree it arises from the very fact that they are associated for such a common end and are agents for one another in its accomplishment. Lord Blackburn found in this consideration alone sufficient reason for the fiduciary character of the partnership relation (Cassels v. Stewart [(1881 6 App Cas, at p 97]). The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm.

129    In Breen v Williams [1996] HCA 57; (1996) 186 CLR 71 at 82, Brennan J stated:

Fiduciary duties arise from either of two sources, which may be distinguished one from the other but which frequently overlap. One source is agency; the other is a relationship of ascendancy or influence by one party over another, or dependence or trust on the part of that other. Whichever be the source of the duty, it is necessary to identify “the subject matter over which the fiduciary obligations extend”. It is erroneous to regard the duty owed by a fiduciary to his beneficiary as attaching to every aspect of the fiduciary’s conduct, however irrelevant that conduct may be to the agency or relationship that is the source of fiduciary duty. As Fletcher Moulton LJ pointed out in In re Coomber [[1911] 1 Ch 723 at 728-729], fiduciary relations are of many different types and where there is a fiduciary relation the court may interfere and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. His Lordship then added:

“Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation must be such that it justifies the interference. There is no class of case in which one ought more carefully to bear in mind the facts of the case, when one reads the judgment of the Court on those facts, than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them.”

As Mason J said in Hospital Products Ltd v United States Surgical Corporation [[1984] HCA 64; (1984) 156 CLR 41 at 102; see also at 73, per Gibbs CJ]:

“it is now acknowledged generally that the scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case.

130    “The essence of a fiduciary relationship … is that one party exercises power on behalf of another and pledges himself or herself to act in the best interests of the other”: Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at 197 (McHugh, Gummow, Hayne and Callinan JJ) quoting McLachlin J in Norberg v Wynrib [1992] 2 SCR 226 at 272.

131    The scope of a fiduciary relationship will be defined by the terms of the venture, which must be ascertained by having regard to the express terms of the contract between the parties to the relationship (although an informal arrangement may also give rise to a fiduciary relationship) and the parties’ course of dealing.

132    The most common remedies awarded for breach of fiduciary duty are an account of profits, equitable compensation or the imposition of a constructive trust. Damages are not available for a breach of fiduciary duty but equitable compensation aims to restore a party who has suffered loss as nearly as possible to the position they would have been in, but for the breach: O’Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 273.

133    The fundamental deficiency in the ASOC, insofar as its seeks to allege a fiduciary relationship, is that Mr Batterham has not pleaded facts from which it could be found that there was a partnership between Mr Batterham and Mr Nauer. Paragraph 30 of the ASOC pleads certain matters said to have occurred “[p]ursuant to the Joint Venture”. However, no facts are pleaded that identify the creation of the joint venture, the parties to the joint venture or any contractual terms of the joint venture.

134    In his submissions, Mr Batterham asserts that the parties to the joint venture “are pleaded with precision” and are the parties identified in the 4 September 2009 presentation made by Parazelsus to Mr Nauer “to encourage him to invest $2 million in the joint venture”.

135    Contrary to Mr Batterham’s submission, the ASOC does not plead the parties to the alleged joint venture at any time. Paragraph 26(a) of the ASOC states that the 4 September 2009 presentation contained the following information:

(a)    A legal structure depicting that Ztrata Capital Limited (ZCL) would be incorporated having the Respondent as a 34% shareholder, Parazelsus as a 60% shareholder and Promoter (the Applicant) as a 6% shareholder. Another company called Ztrata Limited (ZL) would be incorporated having Tan Sri Razali (Urunga) as a 39% shareholder, ZCL as a 58.5% shareholder and the Applicant as a 2.5% shareholder.

(b)    The Applicant to serve as a Senior Advisor to the Board of Directors and the Company.

(c)    Financial information provided by the Applicant in the Due Diligence Package provided to Parazelsus in February 2009 under the Parazelsus Confidentiality Deed.

(d)    Proposed equity contributions by Parazelsus, the Respondent and Urunga to the joint venture.

136    The first reference to Mr Nauer in the chronological facts set out in the ASOC is at para 25, which refers to a presentation made to him on 4 September 2009.

137    Paragraphs 25, 26 and 27 do not allege the existence of the partnership at this point. Rather, what appears to be suggested is that a joint venture was proposed to Mr Nauer. This suggestion is reinforced by para 29 of the ASOC, which commences: “[o]n 29 December 2009 Parazelsus advised the Applicant of the envisaged structure for the joint venture that was in accordance with the 4 September Presentation”.

138    The particulars to para 29 refer to an email from Parazelsus to Mr Batterham dated 29 December 2009, which sets out what is described as “the proposed structure for your shareholding in the Strata business”. The email refers to shareholdings in ZCL by Parazelsus: 60%; a “Swiss Investor”: 34%; and Maylord: 6%. The email also states:

Peter Batterham

It is proposed that you serve as a Senior Advisor to the Board of Directors and the Company. The annual remuneration is proposed at AUD 150,000. I assume this arrangement could be structured with you or with Maylord.

…

4)    This arrangement starts 18 months after the acquisition of VBCS.

139    In that context, the following statement, at para 28 of the ASOC, must be read as a statement about the structure proposed as at 9 November 2009, but not yet agreed:

On 9 November 2009 … [t]he joint venture structure inter alia provided that ZCL would have control of the joint venture by its majority shareholding in the joint venture.

140    The first alleged breach of fiduciary duty by Mr Nauer, at para 117(a) of the ASOC, is that he:

(a)    Purposely and deliberately failed to engage with the Applicant at any time after 4 September 2009, notwithstanding that he knew the Applicant was the promoter of the joint venture, a shareholder in it and an ongoing consultant to the joint venture.

141    On the earlier pleaded facts, this allegation predates the existence of any possible fiduciary relationship between Mr Batterham and Mr Nauer.

142    The allegation at para 117(a) implies the existence of a joint venture prior to 4 September 2009. But, if so, there is no fact alleged to support a conclusion that Mr Nauer was a party to that joint venture.

143    The allegation at para 117(a) also implies that Mr Batterham was a “shareholder” in the joint venture, but there is no allegation of shares held by Mr Batterham in any entity prior to 4 September 2009. This could not be a reference to the alleged shareholdings in ZCL and ZL. As noted earlier, Mr Batterham pleads that the 600 shares in ZCL were issued to him on 9 November 2009. Paragraph 36 of the ASOC pleads that ZL was incorporated on 15 March 2010.

144    Further, the ASOC does not plead facts that could support a conclusion that Mr Batterham was “an ongoing consultant to the joint venture” as at 4 September 2009. As set out above, the only facts pleaded concerning a consultancy prior to that time concern the prospect of a consultancy identified by Parazelsus (at para 23 and para 24 of the ASOC).

145    The allegation at para 117(a) is also, at least on its face, inconsistent with the creation of a fiduciary relationship between the two men after 4 September 2009. A fiduciary relationship is consensual and is a relationship of trust and confidence: it is objectively unlikely that it could arise between a party who purposely and deliberately fails to engage with another.

146    At para 30(c) of the ASOC, Mr Batterham pleads that, by electing to become a shareholder “in companies established to consummate the joint venture”, Mr Nauer became a partner in the joint venture. The relevant companies are not specified but I take them to be ZL and ZCL. Mr Batterham pleads that Mr Nauer became a shareholder in ZCL in November 2009 (para 28 of ASOC) and, subsequently, a controlling shareholder in Vesture.

147    Assuming, in Mr Batterham’s favour, that his case is that Mr Nauer acquired shares in ZCL in November 2009 and thereby (or with other facts) became a partner in the joint venture, there remains an absence of any pleading of the terms of the partnership or joint venture. In this regard, it is of some relevance to note that, at the 26 October 2016 hearing before Bergin CJ in Eq, her Honour sought to explain to Maylord’s counsel that it was not sufficient to allege a joint venture on the sole basis that Mr Nauer had acquired shares in what is identified as a joint venture. As her Honour put it, “[y]ou have to actually give him the knowledge that he’s actually taking on a commercial operation with partners or co-venturer”.

148    In the light of her Honour’s comments, it is not surprising that Mr Batterham specifically submitted that “[i]t is not alleged that [Mr Nauer] became a party to the joint venture solely by reason of him becoming a shareholder in ZCL” (although Mr Batterham submitted that this would be sufficient, citing UDC v Brien). Mr Batterham submitted that he also sought to rely on the following matters:

[Mr Nauer] was not merely a shareholder of ZCL, the entity that controlled the joint venture. [Mr Nauer] was a director of ZCL from its incorporation, took action with his brother in law to take control of Vesture Limited, a public company, that was a target of the joint venture identified by [Mr Batterham] for a merger to provide value to it. Additionally [Mr Nauer] installed this brother in law as the manager of the joint venture entity formed in Australia to manage the joint venture. [Mr Nauer] later became a director of this entity when his brother in law became the manager of Vesture and ceased to be the manager of the joint venture entity in Australia. He also funded the acquisition of another target of the joint venture (Ernst) introduced by [Mr Batterham] and subsequently purchased the shares owned by two other partners to take control of the joint venture without the knowledge of [Mr Batterham] and completed the merger with Vesture. The structure of the planned joint venture and the involvement of [the Batterham Retirement Fund] as its promoter was contained in a presentation dated 4 September 2009 provided to [Mr Nauer] by [Parazelsus] to encourage him to become a partner. The existence of this document only became available to [Mr Batterham] in August 2016 and as such was not pleaded in April 2016.

149    These matters do not substantially advance the case because they presuppose the existence of a joint venture, rather than identifying the facts upon which it is alleged that a joint venture was created being a joint venture or association between Mr Batterham and Mr Nauer and which, among other things, was “controlled” by ZCL. In particular, the mere fact that Mr Nauer was a director of ZCL does not, without more, provide a basis to conclude that Mr Nauer and Mr Batterham had formed, or were part of, a partnership by virtue of which Mr Nauer owed fiduciary duties to Mr Batterham (or to the Batterham Retirement Fund). It is not enough to assert that ZCL was the joint venture vehicle. It is necessary to plead facts to support a finding that ZCL was “the joint venture vehicle”, including facts concerning the scope of the relevant joint venture.

150    In the absence of any other relevant pleaded facts, the ASOC does not plead a case that could support a claim for relief for breach of a fiduciary duty owed by Mr Nauer to Mr Batterham on the basis of the existence of a partnership between them, or them and others.

151    I have also considered whether Mr Batterham has pleaded facts that might support or even suggest the existence of a fiduciary relationship arising out of a relationship between Mr Batterham and Mr Nauer as prospective joint venturers: cf. UDC v Brien; Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1; Gibson Motorsport Merchandise Pty Ltd v Forbes [2003] FCA 583. However, no facts are pleaded of any relationship between Mr Batterham and Mr Nauer prior to 4 September 2009 and, as noted above, on Mr Batterham’s own case, Mr Nauer deliberately avoided a relationship thereafter.

Damages for fraud

152    The relevant pleaded facts are:

(1)    Mr Nauer fraudulently conspired with Mr Zuellig so that the proceeds from Vesture acquiring assets owned by ZCL was deliberately transferred to Mr Zuellig without the knowledge or agreement of Mr Batterham (para 103 of ASOC);

(2)    on or before 17 February 2011, Mr Nauer conspired with Mr Zuellig with the intent to defraud Mr Batterham by entering into specified agreements between each other (para 116 of ASOC);

(3)    by Vesture’s offer which led to the 2011 settlement deed, Mr Nauer “deprived [Mr Batterham] of fair value for his promotion of the joint venture by deceit and fraud to gain a financial advantage for himself at the expense of” Mr Batterham (para 119 of ASOC); and

(4)    Mr Nauer prevented Mr Batterham from obtaining any further value for his ZL and ZCL shares other than the offer made on 8 June 2011, which conduct was deceitful and fraudulent to the detriment and loss of Mr Batterham (paras 120 and 121 of ASOC).

153    Item (1) above concerns an alleged payment of the proceeds of sale of ZCL’s shares in ZL to Mr Zuellig, when the proceeds should have been paid to ZCL, being a company in which Mr Batterham was allegedly a shareholder.

154    Item (2) concerns the entry into several agreements and other conduct, identified in para 116 of the ASOC as follows:

(a)    an alleged agreement that Mr Nauer would fund Vesture to acquire the controlling interest in the joint venture from ZCL and cause Mr Batterham, as a minority shareholder, to be subject to the whims of Mr Nauer regarding any rights that Mr Batterham had in respect of his minority shareholder rights in ZCL;

(b)    an alleged agreement to acquire shares in ZL owned by Urunga, to cause Mr Batterham as a minority shareholder in ZL to be beholden to Mr Nauer’s whim regarding any rights that Mr Batterham had in respect of his minority shareholding in ZL;

(c)    Mr Nauer allegedly caused Vesture to enter into agreements with Mr Zuellig and ZCL, without the knowledge of Mr Batterham, to transfer the proceeds from the purchase by Vesture of the controlling interest in the joint venture owned by ZCL, in which Mr Batterham held a beneficial interest, to Mr Zuellig with the intent to deprive Mr Batterham of his rights to be paid his equitable beneficial interest in ZCL and thereby cause economic harm to Mr Batterham (this allegation appears to substantially replicate item (1) above);

(d)    Mr Nauer allegedly caused Vesture to conspire with ZCL, as a director of the latter and a shadow director of the former, to enter into a shareholder agreement with ZCL without the knowledge of Mr Batterham to exclude Mr Batterham as a minority shareholder with the intent to deprive Mr Batterham of any minority shareholder rights;

(e)    by the conduct in (d), Mr Nauer allegedly ensured that Mr Batterham had no rights to receive dividends from the joint venture activities or to cause Mr Nauer to acquire his shares in ZCL and ZL at a fair value;

(f)    Mr Nauer allegedly appointed Mr Zuellig to the board of Vesture on settlement of the “February 2011 transactions” on 11 March 2011, thereby ensuring that Vesture had knowledge of the financial circumstances of Mr Batterham of which Mr Zuellig was aware;

(g)    subsequent to 11 March 2011, Mr Nauer allegedly claimed that Mr Batterham’s shares in ZCL “were virtually unsaleable”, when on 11 March they had a value of $829,121 and in September 2013 had a value of $1,653,758; and

(h)    Mr Nauer benefited financially from the conspiracy with Mr Zuellig.

155    Young PW, Croft CE, Smith M, On Equity, (Thomson Reuters, 2009), quoting from Kerr on Fraud and Mistake (McDonnell and Monroe, 1952) sets out the following definition of fraud:

Fraud … may be said to include properly all acts, omissions, and concealments which may involve a breach of legal or equitable duty, trust or confidence, justly reposed, and are injurious to another, or by which an undue or unconscientious advantage is taken of another.

156    Based on this definition, an integral element of fraud is a breach of a relevant duty or obligation.

157    However, it appears from para 116(h) of the ASOC that Mr Batterham is basing his claim on the proposition that “an agreement by two or more by dishonesty to deprive a person of something which is his or to which he would be or might be entitled and an agreement by two or more by dishonesty to injure some proprietary right of his suffices to constitute the offence of conspiracy to defraud”.

158    This is a quotation from the speech of Viscount Dilhorne in the House of Lords decision of R v Scott [1974] UKHL 4; [1975] AC 819 at 840. The statement refers to a criminal offence, not a cause of action giving a right to monetary relief.

159    So far as fraud is concerned, Mr Batterham’s allegations are flawed because they do not identify facts by reason of which Mr Nauer was obliged to refrain from doing the allegedly fraudulent acts.

160    To the extent that Mr Batterham may wish to rely on an alleged tort of deceit, no relevant misrepresentation is alleged.

161    A further possibility is that Mr Batterham may wish to rely on the tort of conspiracy. That tort is committed where two or more defendants combine to do an unlawful act or to do a lawful act by unlawful means, thereby effecting some economic loss on the plaintiff: see, for example, Trade Practices Commission v Allied Mills Industries Pty Ltd (1980) 32 ALR 570. In this case, the pleading is defective because there are no facts pleaded to support an allegation that anything done by Mr Nauer (with Mr Zuellig) was an unlawful act or an act done by unlawful means. Based on para 116, the basis for the allegations of conspiracy is the existence of a joint venture. However, as explained, on the facts pleaded there was no relevant joint venture between Mr Batterham and Mr Nauer.

162    Further, Mr Batterham did not identify any materials from which I could identify the possibility of a valid claim based on fraud.

163    Accordingly, this claim for relief is also doomed to fail.

Conclusion

164    Mr Batterham has completely failed to identify any valid claim or cause of action or to provide any factual material that could amount to a valid claim, having been given a reasonable opportunity to do so.

165    With the possible exception of the claim for relief for breach of fiduciary duty, it is clear that there is no reasonable question to be tried and accordingly, the proceeding should be summarily dismissed to that extent.

166    As to the claim that Mr Nauer has breached fiduciary duties owed to Mr Batterham, it is currently hopelessly defective and liable to be struck out. The fact that Mr Batterham has not pleaded a reasonable cause of action following the detailed interaction between Bergin CJ in Eq and Mr Fernon of counsel strongly suggests that Mr Batterham is unable to do so. On the other hand, that current failure might be explained by Mr Batterham’s position as a litigant in person. But for the question of Mr Batterham’s bankruptcy, discussed below, I would have struck out this aspect of the pleading. Having regard to the lengthy history of the dispute between Maylord and Mr Nauer, and the costs order made against Mr Batterham in the 2016 Supreme Court proceeding, I would have granted leave to re-plead only on a condition that would require Mr Batterham first to pay Mr Nauer’s costs of the proceeding to date.

Additional bases for summary dismissal

167    Mr Nauer argued that the proceeding should be summarily dismissed for the following additional reasons:

(1)    If Mr Batterham had any personal cause of action against Mr Nauer (which is denied), that cause of action vested with the trustee in bankruptcy when Mr Batterham was declared bankrupt on 13 November 2014, and did not re-vest in Mr Batterham on his discharge from bankruptcy.

(2)    The pleaded causes of action are statute-barred.

(3)    Mr Batterham is barred from commencing or continuing the proceeding because of the releases given in the 2011 settlement deed.

Causes of action are statute-barred

168    Proceeding NSD990/2018 was commenced on 8 June 2018. Mr Nauer contends that, if Mr Batterham had any cause of action against him, it is now statute-barred.

169    As explained above, the alleged causes of action for breaches of the Corporations Act are misconceived so that it is not possible to identify a relevant limitation period.

170    In the absence of more facts, it is not possible to identify when any cause of action based on the ACL might have arisen. However, I do note that by s 236(2) of the ACL, an action under s 236(1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued. To the extent that the claim related to the diminution in the value of the Batterham Retirement Fund, the cause of action accrued when the loss was suffered. The loss was suffered when the ZL and ZCL shares were transferred to Vesture. The evidence does not identify the date of the transfer. If it occurred prior to 8 June 2012, then an action to recover losses which crystallised on the sale of the ZL and ZCL shares to Vesture under s 236(1) of the ACL would be statute-barred.

171    In relation to the claims of breach of fiduciary duty and fraud, any cause of action would potentially be affected by a defence of laches. To the extent that there is a cause of action in respect of fraud, that claim would not have been statute-barred by s 47 of the Limitation Act 1969 (NSW), which provides for a 12 year limitation period.

172    Accordingly, I do not accept that any limitation period provides a basis for summary dismissal of the proceeding.

Mr Batterham’s bankruptcy

173    Mr Batterham was declared bankrupt on 13 November 2014. The bankruptcy was discharged on 3 December 2017.

174    Section 58(1) of the Bankruptcy Act provides that “where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee …”.

175    The word “property” is broadly defined in s 5 of the Bankruptcy Act. For the purposes of s 58 of the Act, “property” which vests in the trustee in bankruptcy includes choses in action and claims to enforce equitable rights: Moss v Eaglestone [2011] NSWCA 404; (2011) NSWLR 476 at [28]; Pridmore v Magenta Nominees Pty Ltd [1999] FCA 152; (1999) 161 ALR 458 at [58] and [63]. A bare right to sue in respect of alleged property and economic losses is property of the bankrupt which will vest in the trustee pursuant to s 58: Kovarfi v BMT & Associates Pty Ltd (No 2) [2014] NSWSC 100 at [27].

176    Thus, upon his bankruptcy, any chose in action which Mr Batterham then had vested with his trustee in bankruptcy.

177    On the basis of the facts pleaded in the ASOC, any claim that Mr Batterham had against Mr Nauer in respect of any breach of the joint venture agreement or breach of fiduciary duty, or claim to set aside the settlement deed, existed well prior to Mr Batterham’s bankruptcy. By 12 August 2014, Vesture had paid Maylord and Mr Batterham a total of $450,000 in accordance with the settlement deed. Mr Nauer contended, and Mr Batterham did not dispute, that property of a bankrupt that vests in the trustee in bankruptcy, including a chose in action, does not re-vest in the bankrupt when they are discharged from bankruptcy: Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178 at 185; Samootin v Shea [2010] NSWCA 371 at [90]-[91] and [94]-[99]; Blakeley v National Australia Bank [2017] FCA 835 at [39].

178    On Mr Batterham’s argument, these matters are beside the point because the causes of action which he now seeks to pursue were “excluded assets” in the bankruptcy for the reason that they are owned by the Batterham Retirement Fund and not Mr Batterham.

179    However, Mr Batterham is the applicant in the proceeding. The proceeding is relied upon by Mr Batterham in answer to a bankruptcy notice issued against him. Mr Batterham is not bringing the proceeding on behalf of the Batterham Retirement Fund and has no standing to do so.

180    Accordingly, a further reason why the proceeding should be dismissed is that, to the extent that the claims in the proceeding are the property of Mr Batterham (as they must be), they vested in his trustee in bankruptcy in November 2014 and did not re-vest in him on his discharge from bankruptcy.

181    It follows that the whole of the proceeding should be summarily dismissed.

Releases in 2011 settlement deed

182    As noted above, Mr Nauer is one of the “Related Parties” within the meaning of the deed.

183    Clause 3.1 provides as follows:

In consideration of the purchase of the Shares under this Deed and in consideration of the release in Clause 3.2, Maylord and Mr Batterham hereby release and discharge Vesture, VBCS and the Related Parties from all liabilities, debts, costs, expenses, damages, causes of action, actions, suits, arbitrations and all claims, demands and legal proceedings whatsoever and howsoever arising which but for this Deed, Maylord or Mr Batterham could claim from or bring against Vesture, VBCS or the Related Parties on any account whatsoever including without limitation those arising out of, in relation to or in any way connected with any of the Claims.

184    Clause 3.2 is a release given by Vesture and VBCS in favour of Maylord and Mr Batterham.

185    On the evidence, Mr Nauer has executed a copy of the settlement deed and delivered it to Maylord or Mr Batterham, so that he may enforce cl 3.1.

186    Mr Nauer contended that it is plain from the terms of cl 3.1 that the parties intended to put an end to all the disputes which could possibly be litigated between them (and, presumably, the “Related Parties”).

187    Where, in a deed a clause provides one party with a release in wide or general words, the common law principle of construction restricts the otherwise wide or general operation of those words by construing the release clause as operating upon only the subject or occasion to which the deed read as a whole refers: Grant v John Grant & Sons Proprietary Limited [1954] HCA 23; (1954) 91 CLR 112 at 123-124.

188    Mr Batterham did not suggest that the claims in this proceeding fell outside the true purpose of the release.

189    Accordingly, I accept that by cl 3.1, Mr Batterham released Mr Nauer from the claims made in this proceeding.

190    It follows that I accept that the release provides an additional ground for the summary dismissal of the proceeding.

Alternative relief sought by Mr Nauer

Strike out of pleading

191    For the reasons given above, even if I am wrong in concluding that the proceeding should be summarily dismissed, the ASOC is liable to be struck out in its entirety because it does not plead facts which, if proved, would establish any cause of action in Mr Batterham’s favour against Mr Nauer.

Mr Nauer’s contention that fraud proceeding should be stayed

192    In the alternative, Mr Nauer seeks an order pursuant to r 1.32 of the Rules, giving the Court power to “make any order the Court considers appropriate in the interests of justice”, that the proceeding be stayed pending payment by Mr Batterham of Mr Nauer’s costs of the 2016 Supreme Court proceeding.

193    Part of Mr Nauer’s case was that the allegations and claims made in NSD990/2018 are substantially similar to those made in the 2016 Supreme Court proceeding, except that Mr Batterham is the claimant for relief, instead of Maylord. Mr Nauer noted that, in his 8 June 2018 affidavit, Mr Batterham states:

[T]he facts, matters and circumstances pleaded in relation to the claim in relation to breach of joint venturer fiduciary duties and fraud had been raised in the proceedings in the NSW Supreme Court. However, at an interlocutory stage (which is the subject of the lump sum costs order the subject of the Bankruptcy Notice) the Respondent moved for the Commercial List Statement to be struck out and then the whole of proceedings subsequently dismissed when I did not have standing to advance the claim as a named Plaintiff.

194    As I will dismiss the proceeding, it is not necessary to consider whether the Court has power to make the proposed order or whether it is appropriate in all the circumstances of the case.

Bankruptcy proceeding

Counter-claim, set-off or cross-demand

195    In this case, for the reasons given above, Mr Batterham does not have a prima facie counter-claim based on the claims made in NSD990/2018. On the basis of the facts pleaded in the ASOC and the available material, they do not have “a fair chance of success”.

Mr Nauer’s motive

196    Mr Batterham contends that, at the time of seeking the lump sum costs order the subject of the bankruptcy notice, Mr Nauer had a “positive motive … to again place me into Bankruptcy post 3 December 2017 so as to prevent further legal proceedings being taken against him by myself, or if they were commenced, that they could not be dealt with to final determination”.

197    I take Mr Batterham to be arguing that the bankruptcy notice should be set aside as an abuse of process. I am not satisfied that Mr Nauer had an improper purpose in procuring the issue of the notice. There is no reason to think that, at the time when the notice was issued, Mr Nauer was seeking to do anything more than secure payment of the debt the subject of the notice with a view to proceeding to bankrupt Mr Batterham in default of compliance with the notice.

198    Further, there is no reason to think that when Mr Nauer sought a lump sum costs order against Mr Batterham, he was doing anything other than legitimately seeking to recover some of the costs of the litigation that had been brought against him by Maylord.

199    Accordingly, I am not satisfied that the issue of the bankruptcy notice is an abuse of process.

200    It follows that the application to set aside the bankruptcy notice must fail.

Other matter: proposed joinder of Finsec Pty ltd

201    Mr Batterham submitted that if the Court agreed with Mr Nauer that any cause of action needed to have the trustee of the Batterham Retirement Fund as a party, Finsec Pty Ltd (“Finsec”) as the current trustee of the fund had agreed to be joined to proceeding NSD990/2018.

202    The proposed joinder of Finsec is, at best, only a partial answer to the points raised by Mr Nauer. On the ASOC, it is far from clear that the trustee of the Batterham Retirement Fund has a reasonable cause of action against Mr Nauer. The ASOC does not identify facts upon which a finding could be made that Mr Nauer owed any relevant fiduciary obligation or that he engaged in a conspiracy to defraud the trustee of the Batterham Retirement Fund. Even if Maylord as the previous legal owner of shares in ZCL and ZL has a cause of action against Mr Nauer, it is not obvious that this cause of action has been transferred to Finsec: cf Tydeman v Tibra Capital Pty Ltd (No 2) [2018] NSWSC 884 at [42]. Then, there would be a further question as to whether the joinder of Finsec would be an abuse of process in the light of the 2016 Supreme Court proceeding: cf Tydeman at [62] to [65]. In the absence of a properly articulated case, there is no good reason to permit the joinder of Finsec at this stage.

Conclusion

203    Proceeding NSD990/2018 should be summarily dismissed. Costs should follow the event.

204    The application to set aside the bankruptcy notice should be dismissed and the proceeding otherwise be dismissed. Costs should also follow the event.

Associate:

Dated:    11 April 2019