Federal Court of Australia

CEE t/as Electricity Wizard Pty Ltd (In Liq) (Receivers Appointed) v Electricity Wizard Pty Ltd [2022] FCA 1351

ORDERS

THE COURT ORDERS THAT:

1.    The respondents’ application for summary dismissal is dismissed.

2.    Save for paragraphs 77.5 and 89.1 the respondents’ application to strike out various paragraphs of Fifo Capital’s claims contained in the statement of claim is dismissed.

3.    Leave to the applicant to re-plead paragraphs 77.5 and 89.1 and plead paragraph 77.15 in the terms proposed in the Court Book p 43.

4.    Save for paragraphs 77.5 and 89.1, the third respondent’s application to strike out various paragraphs of the applicants’ claim against Marketlend Pty Ltd and/or Leo Anthony Tyndall be dismissed.

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

REASONS FOR JUDGMENT

O’SULLIVAN J:

overview

1    The first applicant (CEE) is a company incorporated in September 2014 for the purposes of purchasing the business known as “Electricity Wizard” from Alan Belkin Pty Ltd (Belkin P/L). CEE’s sole director at that time was Daniel Stephen Cobb (Mr Cobb).

2    In broad terms, Electricity Wizard provided a free service to members of the public to compare prices from different electricity and gas retailers on its website. It listed various electricity and gas retailers and assisted consumers to enter into energy plans with one of the listed retailers. In the event a consumer entered into an energy plan with one of the listed retailers, Electricity Wizard received a commission from that retailer. The amount of the commission was calculated in accordance with various agreements between Electricity Wizard and the energy retailers.

3    In February 2018, CEE entered into an agreement with the second applicant, Antra Group Pty Ltd trading as Fifo Capital (Fifo Capital), the sole director of which is Raymond Gordon Petty (Mr Petty), for the provision of factoring finance services. Funds were advanced by Fifo Capital against invoices that had been rendered by CEE to energy retailers but had not yet been paid.

4    Fifo Capital secured its advances to CEE by taking three security interests in its favour over all CEE’s present and after acquired property. Those security interests are registered on the Personal Property Securities Register (PPSR).

5    Solar Shop Group Pty Ltd (Solar Shop Group) is another company controlled by Mr Cobb. During 2018, Fifo Capital also advanced funds to CEE through Solar Shop Group with those funds being secured by three guarantees from CEE to Fifo Capital, two which were registered on the PPSR in March 2018 and one in April 2018.

6    In 2017, CEE was the subject of enforcement proceedings by the Australian Taxation Office and in late 2017, Mr Cobb started investigating the sale of the business conducted by CEE, or in the alternative, a merger of CEE’s business with another business. As part of that process, on 27 August 2018, Mr Cobb caused EW Holdings Australia Pty Ltd to be incorporated. EW Holdings changed its name to Electricity Wizard Pty Ltd (EW) on 7 January 2019.

7    Mr Cobb’s plan was for CEE’s assets to be transferred to EW, with CEE responsible for the debts. EW was to be sold or merged with another business and the proceeds of the sale/merger used to payout CEE’s creditors, including Fifo Capital and the Australian Taxation Office. Mr Cobb referred to this process as the “demerger” process.

8    The second respondent, (Marketlend) has as its’ sole director the third respondent Mr Leo Anthony Tyndall (Mr Tyndall). In late 2018/early 2019, Marketlend replaced Fifo Capital as the factoring financier to CEE.

9    At or about the time Marketlend replaced Fifo Capital, Fifo Capital’s outstanding loans to CEE were paid out, with the exception of one loan in the sum of $133,423. That amount continued to be owed to Fifo Capital by CEE, together with the guaranteed debts in relation to the funds advanced through the Solar Shop Group.

10    When Marketlend began providing factoring finance services to CEE, it was granted a second ranking PPSR security interest over CEE behind the security interest registered in favour of Fifo Capital.

11    The applicants have issued proceedings against the respondents, alleging that from in or about mid-2019, they engaged in an “asset strip” of CEE, thereby causing them loss.

12    The respondents apply for summary dismissal of Fifo Capital’s claims based on an agreement between Fifo Capital and Marketlend dated 12 July 2019 which, in broad terms, the respondents contend released Marketlend and EW from any claims by Fifo Capital.

13    Alternatively, the respondents seek an order striking out various paragraphs of the statement of claim.

The issues

14    The issues arising for determination are:

(a)    Whether Fifo Capital’s claims should be summarily dismissed;

(b)    Alternatively, whether claims made by Fifo Capital in various paragraphs of the statement of claim should be struck out; and

(c)    Whether claims made by CEE and/or Fifo Capital against Marketlend and/or Mr Tyndall in various paragraphs of the statement of claim should be struck out.

15    For the reasons which follow:

(1)    The respondents’ application for summary dismissal is dismissed;

(2)    Save for paragraphs 77.5 and 89.1 the respondents’ application to strike out various paragraphs of the statement of claim is dismissed;

(3)    The applicants will be given leave to re-plead, including a new paragraph 77.15; and

(4)    Save for paragraphs 77.5 and 89.1, the third respondent’s application to strike out various paragraphs of the applicants’ claim against Marketlend Pty Ltd and/or Leo Anthony Tyndall be dismissed.

Documents read and Evidence received

16    The respondents read, without objection, the affidavit of Mr Stefano Calabretta, who was the solicitor for Marketlend and Mr Tyndall, affirmed and filed on 28 January 2022, save for paragraphs 31 and 32 of that affidavit and the documents referred to in those paragraphs (Calabretta affidavit).

17    The respondents also tendered on the application, without objection, tabs 18 to 33 of the Court Book (pp 1235-1300). Those documents were received into evidence on the application.

18    The applicants read:

(a)    The affidavit of Daniel Stephen Cobb sworn and filed on 28 February 2022 (first Cobb affidavit), save for paragraphs 135 and 136;

(b)    The affidavit of Daniel Stephen Cobb sworn and filed 14 April 2022 (second Cobb affidavit);

(c)    The affidavit of Raymond Gordon Petty sworn 23 February 2022 and filed 28 February 2022, save for paragraph 20 (first Petty affidavit);

(d)    The affidavit of Raymond Gordon Petty sworn 13 April 2022 and filed 15 April 2022 (second Petty affidavit);

(e)    The affidavit of Patrick Hanrahan, the solicitor for Fifo Capital and Mr Petty, sworn and filed 28 February 2022, save for paragraphs 20 and 30 to 33 inclusive (first Hanrahan affidavit);

(f)    The affidavit of Patrick Hanrahan sworn 14 April 2022 and filed 15 April 2022 (second Hanrahan affidavit);

(g)    The affidavit of Nathan Sakellariou sworn 25 February 2022 and filed 28 February 2022 (Sakellariou affidavit);

(h)    The affidavit of Eddie Bastiani sworn and filed 28 February 2022 (first Bastiani affidavit); and

(i)    The affidavit of Eddie Bastiani sworn and filed 18 March 2022 (second Bastiani affidavit).

19    The respondents take a number of objections to the affidavits read by the applicants. It was agreed between the parties that the affidavits will be taken as read subject to those objections which, to the extent the objections become material, I will rule upon as part of this judgment.

20    The parties have also filed a multitude of written submissions.

(a)    Respondents’ outline of submissions: summary judgment/strike out, filed 18 March 2022;

(b)    Respondents’ outline of further submissions: revised strike out order 4, filed 21 March 2022;

(c)    Respondents’ outline of submissions: reply, filed 24 March 2022;

(d)    Respondents’ outline of further submissions: John Grant & Sons Equity, filed 22 April 2022.

(e)    Applicants’ submissions, filed 21 March 2022; and

(f)    Applicants’ supplementary submissions, filed 22 April 2022.

First issue

Should Fifo Capital’s claims be summarily dismissed?

Principles - summary judgment

21    The respondents apply under s 31A(2) of the Federal Court of Australia Act 1976 (Cth) (Act), alternatively, r 26.01(1)(c) of the Federal Court Rules 2011 (Cth) (FCR).

22    The principles relating to an application for summary dismissal of proceedings are well-settled.

23    In Spencer v Commonwealth of Australia [2010] HCA 28; 241 CLR 118, French CJ and Gummow J referred to the statement by Lord Hope at [21] in Three Rivers District Council v Governor and Company of the Bank of England (No 3), [2003] 2 AC 1 at 260 [94-95]:

The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, … that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.

24    Their Honours continued: at [25], [26]:

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. …

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.

(citations omitted)

25    The plurality (Hayne, Crennan, Kiefel (as her Honour then was) and Bell JJ) said: at [58]-[60]:

58.    How then should the expression "no reasonable prospect" be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is "no reasonable prospect". The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like "no reasonable prospect" is to be avoided. ...

59.    In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like "clearly", "manifestly" or "obviously") as "frivolous", "untenable", "groundless" or "faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word "reasonable", in the phrase "no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a "frivolous", "untenable", "groundless" or "faulty" claim.

60    Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. …

(citations omitted)

26    In Buurabalayji Thalanyji Aboriginal Corporation v Onslow Salt Pty Ltd (No 2) [2018] FCA 978 [3], McKerracher J summarised the principles which apply when the Court is considering whether to give summary judgment for a party defending a claim whether in whole or in part in accordance with s 31A of the Act in the following terms:

3    Without reference to all the well-known authorities, the parties agree that it is well established that the Court may give judgment for a defending party in relation to the whole or any part of a proceeding where the Court is satisfied that the prosecuting party has no reasonable prospects of successfully prosecuting the proceeding or a part of the proceeding. Further:

•    the claim need not be hopeless or bound to fail for it to have no reasonable prospects of success: s 31A of the Federal Court Act;

•    a reasonable prospect of success is one which is real, not fanciful or merely arguable: Rogers v Assets Loan Co Pty Ltd (2008) 250 ALR 82 per Logan J (at [41]);

•    there will be no prospect of success in circumstances where there is a defect in the pleadings which cannot be cured: Ship “Sam Hawk” v Reiter Petroleum Ltd (2016) 246 FCR 337 per Kenny and Besanko JJ (at [269]);

•    s 31A is amenable to resolving straightforward questions of law: Luck v University of Southern Queensland [2008] FCA 1582 per Logan J (at [16]). However, summary judgment may still be appropriate if a question raised is of some complexity: SK Foods LP v SK Foods Australia (in liq) (No 3) (2013) 214 FCR 543 per Flick J (at [115]);

•    if a prima facie case in support of summary judgment is established, the onus shifts to the opposing party to point to some factual or evidentiary issues making a trial necessary: Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 per Gordon J (at [127]);

•    it is clear that the legislature’s intention in enacting s 31A was to lower the bar for obtaining summary judgment, including summary dismissal, below that fixed by previous authorities: Spencer v Commonwealth of Australia (2010) 241 CLR 118 per Hayne, Crennan, Kiefel and Bell JJ; Jefferson Ford per Gordon J (at [127]);

•    s 31A permits dismissal of a proceeding where an inquiry into the merits of the issues of law demonstrates the arguments are insufficiently strong to warrant the matter going to trial: McAleer v University of Western Australia (No 3) (2008) 171 FCR 499 per Siopis J (at [39] and the cases therein cited);

•    summary dismissal will not apply to ‘a real question of law that is serious, important or difficult, involves conflicting authority, or is apparently arguable yet novel’: Nichol v Discovery Africa Ltd (2016) 343 ALR 594 per Greenwood, McKerracher and Moshinsky JJ (at [134]);

•    the moving party bears the onus of persuading the Court the application has no reasonable prospects of success. The assessment of whether a proceeding has no reasonable prospects of success necessitates the making of a value judgement in the absence of a full and complete factual matrix and argument, with a result that the provision vests a discretion in the Court. That discretion includes whether to deal with the motion at once or at some later stage in the proceedings, when the legal and factual issues have been more clearly defined: Kimber v The Owners of Strata Plan No 48216 [2017] FCAFC 226 per Logan, Kerr and Farrell JJ (at [62]) quoting with approval Eliezer v University of Sydney (2015) 239 FCR 381 per Perry J (at [37]);

•    despite the threshold for summary dismissal having been lowered, it must still be exercised with caution. The power is not to be exercised lightly: Spencer v Commonwealth per Hayne, Crennan, Kiefel and Bell JJ (at [60]);

•    the Court does not, in such an application, conduct a ‘mini trial based upon incomplete evidence to decide whether the proceedings are likely to succeed or fail at trial’. Rather, it ‘requires a critical examination of the available materials to determine whether there is a real question of law or fact that should be decided at trial’: Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256 per Reeves J (at [46]); and

•    each application for summary judgment or summary dismissal has to be determined according to its particular circumstances. What is required is a practical judgment of the case at hand. The relevant facts and circumstances will partly depend upon the stage which the proceedings have reached. Among other things, this will affect materials available to the Court for considering the application, for example, where the pleadings have been exchanged, or discovery of documents has occurred: Cassimatis per Reeves J (at [46]).

12 July 2019 Agreement

27    The 12 July Agreement is central to the respondents’ summary dismissal application. It came about following a period of negotiation involving Mr Petty, Fifo Capital’s solicitor, Mr Hanrahan, Mr Cobb for CEE and Solar Shop Group, Mr Tyndall and Mr Calabretta.

28    I summarise below the background leading up to the 12 July Agreement. In so doing, I am not making findings of fact but recording what is to some extent common ground that exists between the parties.

29    Initially, there were six shareholders in EW, including CEE and John 1.1 Pty Ltd (John 1.1) as trustee for the Logos Trust. John 1.1 held one of two “Z class shares” (which were preference shares) in EW entitling the holder to the first $750,000 from a subsequent sale of CEE.

30    In late 2018, Mr Cobb spoke with Mr Petty about the demerger process and the transfer of CEE’s business to EW. The effect of that discussion was that Fifo Capital would only release its’ security over CEE’s business and assets if it was repaid in full for all loans and guarantees that CEE had, or alternatively if an acceptable payment plan was agreed with adequate securities being provided and entered into.

31    On or about 20 December 2018, Coles (the supermarket chain) made a conditional offer to acquire CEE’s business (proposed Coles deal). If it eventuated, it required all of CEE’s shareholders to agree, one of whom was Belkin Pty Ltd.

32    Alan Belkin (Mr Belkin) had established the business known as Electricity Wizard. Part of the proposed Coles deal required Mr Belkin to remain involved with CEE’s business for a period of 12 months.

33    Prior to Christmas 2018, Mr Cobb, CEE, EW, Belkin P/L and Mr Belkin entered into a Deed which, amongst other things, recorded that Mr Belkin would continue to work for CEE’s business and that Belkin P/L would be paid the sum of $200,000 in four equal instalments of $50,000, the first being payable on 20 December 2018. The Deed was not made contingent upon the proposed Coles deal proceeding.

34    Shortly after the Deed was signed, Mr Belkin went to the United States of America and did not return. Coles did not execute the final sale agreement and the proposed Coles deal did not proceed.

35    CEE did not pay the first instalment to Belkin P/L and consequently on 21 January 2019, Belkin P/L issued a statutory demand to CEE demanding the sum of $143,750. Subsequently it commenced winding up proceedings against both CEE and EW.

36    Consequently, in the first half of the calendar year 2019 CEE was faced with insufficient cash flow to pay Belkin P/L and Fifo Capital. It received further financial support at this time from Marketlend.

37    In late April/early May 2019, Mr Tyndall Mr Calabretta negotiated on behalf of CEE with the solicitors for Mr Belkin and Belkin P/L, as well as with a number of supporting creditors to the winding up applications including Fifo Capital in relation to CEE’s outstanding debt to it of $133,423.

38    On 16 May 2019, a conference call took place between Mr Tyndall, Mr Calabretta, Mr Petty, Mr Hanrahan, Mr Cobb and a Marketlend employee named Mr Ianns. Following the call, both Mr Petty and Mr Calabretta sent emails.

39    In Mr Petty’s email sent on 16 May 2019 to Mr Cobb, Mr Tyndall, Mr Calabretta, Mr Ianns and Mr Hanrahan: first Cobb affidavit [137], annexure DSC-1, p 445, he confirmed Fifo Capital was to be paid $100,000 in satisfaction of the outstanding loan of $133,324 to CEE. He also makes reference to John 1.1’s Z class preference share in EW and to Fifo Capital taking a share mortgage over that share.

40    The respondents object to part of [137] in the first Cobb affidavit which reads, “recording the agreement”, on the basis it is a submission and the email speaks for itself. I allow the objection and will ignore those words for the purposes of this application. There is also an objection to the last sentence of [138] of the first Cobb affidavit on the basis it is an assertion, conclusion and a submission. I do not accept that objection and I overrule it. Nonetheless, I give it no weight for the purposes of this application.

41    Mr Calabretta also sent an email on 16 May 2019 to Mr Petty and Mr Cobb which was copied to, amongst other people, Mr Hanrahan. The email attached a draft Deed Poll which set out what Marketlend was prepared to agree at that time but noted that the draft Deed Poll was subject to further revision based on the ongoing discussions of the parties. Mr Hanrahan responded to Mr Calabretta’s email sent on 16 May 2019 by email sent on 3 June 2019 with marked up amendments to the draft Deed Poll. The draft Deed Poll was never executed.

42    On 21 May 2019, EW entered into a Convertible Note Deed Poll which named RAI Ltd (RAI) as the Noteholder by which 5000 convertible notes of one dollar each were issued to RAI (EW Convertible Note Deed Poll). RAI is a company incorporated in Hong Kong on 21 September 2016 and has as its directors, amongst others, Mr Tyndall.

43    It was a term of the Convertible Note Deed Poll that RAI, as Noteholder, could convert its notes at any time following the execution of the Convertible Note Deed Poll by delivering to EW a Conversion Notice and the Note Certificates. Upon conversion, EW was required to allot one “X” Class Preference Share and issue a number of ordinary shares to RAI sufficient to result in RAI being issued 75% of the total ordinary shares in EW. A further consequence of such an allotment of shares is that RAI would become entitled to the first 75% of the dividends and/or 75% of the net proceeds following the sale of the business and/or assets of EW available to shareholders subject only to payment to the holders of the Z Class preference shares in EW.

44    The EW Convertible Note Deed Poll provides in Clause 8 that, amongst other things, immediately upon execution of the Deed, the Noteholder or any person nominated by it, has the entitlement and ability, at its sole and unfettered discretion, to exercise full and complete control over the business, financial and legal affairs of EW to the exclusion of the directors, if so required by the Noteholder.

45    It appears that a further Convertible Note Deed Poll may have been entered into, this time by CEE to RAI (CEE Convertible Note Deed Poll) because on 24 May 2019, Marketlend and a company named Tyndall Capital Pty Ltd (Tyndall Capital) sent a letter to CEE and EW, described by Mr Cobb as a “letter of comfort” in which reference was made to it. However, no party annexes a copy of it to any affidavit that was read.

46    On 6 July 2019, Fifo Capital took a share mortgage over the Z class preference share in EW held by John 1.1 to secure repayment of monies loaned by Fifo Capital to CEE through Solar Shop Group.

47    The respondents object to the last sentence of [142] in the first Cobb affidavit on the basis it is a submission. I do not consider it a submission and I overrule the objection, however I give the sentence no weight for the purposes of this application.

48    On 9 July 2019, a further without prejudice conference call occurred however, both parties have agreed that it should be placed before me as evidence on the interlocutory application: transcript 26 April 2022 T5 6-22. Mr Petty was not present on that call however, he was represented by Mr Hanrahan. Mr Tyndall, Mr Calabretta, Mr Cobb and one other were present.

49    In the time between the 16 May 2019 conference call and the 9 July 2019 conference call, Fifo Capital had become a supporting creditor to Belkin P/L’s winding up applications for both CEE and EW.

50    On 10 July 2019, Mr Tyndall made a “non negotiable request” for a representative of Marketlend to be given administrator rights “in the comm biz account of electricity wizard”. That appears to relate to CEE, not EW.

51    Mr Calabretta sent a letter to Mr Hanrahan dated 12 July 2019 from Marketlend and Tyndall Capital under cover of an email of the same date in which Marketlend put an offer to Fifo Capital in relation to it withdrawing its Notice of Appearance in the CEE winding up proceedings as a supporting creditor. In the letter, Marketlend and Tyndall Capital stated that subject to various matters to which I refer below, Marketlend and Tyndall Capital would ensure the winding up petitions by Belkin P/L against EW would be dismissed and to ensure funding is available to support the working capital expenses of EW. The email was marked without prejudice but once again, no objection was taken by either party to the email being placed before me as evidence on the interlocutory application.

52    The offer was accepted by Fifo Capital’s solicitors that same day, subject to one condition which is not relevant to this matter (12 July Agreement).

53    On 15 July 2019, Marketlend paid $100,000 to Fifo Capital which was in part payment of the amount of $133,423 owed by CEE to Fifo Capital.

54    On 19 July 2019, Mr Tyndall wrote to Mr Cobb, confirming Marketlend would pay out a supporting creditor to the winding up application for CEE. The letter is somewhat ambiguous but it seemed to confirm, amongst other things, that CEE would issue to RAI either a convertible note in the same terms as the EW Convertible Note Deed Poll or alternatively issue sufficient shares to give RAI a 75% holding in CEE, and that Mr Cobb was to take the position of a non-executive director in both CEE and EW with senior management of both companies to report to Mr Tyndall as CEO of Marketlend.

55    The winding up applications against CEE and EW were dismissed.

56    On 7 August 2019, Mr Cobb personally, CEE and EW entered into a Deed with Marketlend and RAI (7 August Deed). That Deed reflected Mr Tyndall’s email sent 19 July 2019. It also recorded in recital 7 that in July 2019, Marketlend paid $100,000 to Fifo Capital.

The respondents’ summary judgment application

57    The respondents rely on FCR 26.01(1)(c), alternatively s 31A(2) of the Act in seeking an order that the claims made by Fifo Capital in [10], [13], [94], [95], [100 – 104], [106.12] and [106.14] of the statement of claim be summarily dismissed.

58    Section 31A(2) of the Act provides:

31A Summary judgment

(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.

59    FCR 26.01(1)(c) provides:

26.01 Summary judgment

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

…

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

…

Paragraphs 10, 13, 94, 95, 106.12

60    Paragraphs 10, 13, 94, 95, and 106.12 of the statement of claim make allegations in relation to Fifo Capital’s security in the following terms:

Fifo Capital’s Interest in the Company and its Assets

10.    By operation of sections 19 and 32(1) of the Personal Property Securities Act 2009 (Cth), the security interest of Fifo Capital in and under the Fifo Securities attached to all of the present and after-acquired personal property and over the accounts of the Company and continued in that collateral notwithstanding any dealing therewith by the Company.

…

13.    The Fifo Securities are and were at all material times the first ranking PPSR registration in respect of the Company.

Fifo Capital’s Interest Unaffected

94.    Further and in the alternative, the transfer of the Business and the Assets, and the conduct of Cobb, Marketlend and Tyndall in effectuating the plan to effect, and the happening of, the Asset Strip was done without the knowledge or consent of Fifo Capital.

95.    The security interest of Fifo Capital pursuant to the Fifo Securities existed over and continues in the collateral represented by the Business and Assets in the hands of Electricity Wizard, as a first priority security interest.

Particulars

95.1.    Sections 19 and 32(1) of the Personal Property Securities Act 2009 (Cth).

95.2.    Letter from JHK Legal to Emerson Lewis dated 2 October 2019.

Relief claimed by the Applicants

106.    The Applicants seek the following relief:

…

106.12    A declaration that the assets in Electricity Wizard’s name remain subject to the Fifo Securities.

Paragraph 100-104, 106.14

61    Paragraphs 100-104, and 106.14 of the statement of claim allege conspiracy by unlawful means, conspiracy to achieve unlawful end and the tort of causing loss by unlawful means in the following terms:

Conspiracy by unlawful means

100.    Further or in the alternative to the claims pleaded above, in the premises of the matters pleaded in paragraphs 42 to 57, 60 to 65 and 69 to 76 above, it is to be inferred:

100.1.    that two or more of Cobb, Tyndall, Electricity Wizard, and Marketlend conspired to procure that the Company breach its obligations to Fifo Capital under the Fifo Securities, namely to attempt to put the Company’s Business and Assets beyond the reach of the Company and therefore the Fifo Securities;

100.2.    that one or more of Cobb, Electricity Wizard, and Marketlend did so with the intention of causing loss to the Company and/or Fifo Capital.

101.    The agreement and conspiracy pleaded in the preceding paragraph was carried out.

Particulars

101.1.    The Asset Strip was carried out.

101.2.    Further particulars will be provided after full and complete discovery from the Respondents.

Conspiracy to achieve an unlawful end

102.    Further or in the alternative to the claims pleaded above, in the premises of the matters pleaded in paragraphs 42 to 57, 60 to 65 and 69 to 76 above, it is to be inferred:

102.1.    that two or more of Cobb, Tyndall, Electricity Wizard, and Marketlend combined to procure that:

102.1.1.    the Company lose the Business and its Assets; and

102.1.2.    Fifo Capital lose the benefit and value of the Fifo Securities;

through their conduct pleaded in the said paragraphs, including but not limited to the conduct comprising the Asset Strip.

102.2.    further that the conspirators did so conspire with the predominant intention of causing loss to the Company and/or to Fifo Capital.

103.    The agreement and conspiracy pleaded in the preceding paragraph was carried out.

Particulars

103.1.    The Asset Strip was carried out.

103.2.    Further particulars will be provided after full and complete discovery from the Respondents.

Tort of causing loss by unlawful means

104.    Further and in the alternative to the claims pleaded above, in the premises of the matters pleaded in paragraphs 42 to 57, 60 to 65 and 69 to 76 above, it is to be inferred:

104.1.    that one or more of Cobb, Tyndall, Electricity Wizard, and Marketlend wrongfully interfered with the Company to procure that it breach its obligations to Fifo Capital under the Fifo Securities, in respect of which Fifo Capital had an economic interest by procuring that the Company transfer its Business and Assets to Electricity Wizard thereby to put such business and assets beyond the reach of the Fifo Securities; and

104.2.    further, one or more of Cobb, Electricity Wizard, and Marketlend did so with the intention of causing loss to Fifo Capital.

Relief claimed by the Applicants

106.    The Applicants seek the following relief:

…

106.14.    Damages to compensate Fifo Capital’s loss.

The parties’ submissions and consideration – summary judgment - Fifo Capital’s Security

62    In summary, Fifo Capital pleads the continued existence of its security under the Fifo Securities attached to present and after-acquired personal property and over CEE’s accounts: [10], [13], [94], [95] and [106.12].

63    The respondents submit that the claim by Fifo Capital for the enforcement of securities should be summarily dismissed on two bases. First, because of the terms of the agreement made on 12 July 2019 between Fifo Capital and Marketlend, to which I have referred above at [52] and to which I refer below. Second, the sale and/or transfer by CEE of its business and assets to EW on about 25 January 2019, alternatively 31 January 2019, with Fifo Capital’s knowledge and consent: Defence [10].

12 July 2019 Agreement

64    The respondents submit there is no issue that the 12 July 2019 Agreement is binding, enforceable and has been performed at least to the extent that Marketlend paid $100,000 to Fifo Capital. I accept that submission, however the issue is the effect of that agreement on Fifo Capital’s right to bring its action.

65    The respondents refer to cl 5.3 of the 12 July 2019 Agreement which provides, along with cls 5.2 and 5.4:

5.2    your client undertakes not to commence or resume enforcement action against CEE (including any steps for the winding up of the company) for a period of three (3) months following the above payment to your client, during which the parties would attempt to negotiate in good faith with respect to entering into a payment plan relating to the balance of the CEE debt. The rights of your client against CEE would otherwise be unaffected;

5.3    your client acknowledges, agrees and undertakes that that (sic) it will make no claim against EW whether as a secured or unsecured creditor or over the assets or business of EW (noting, however, that your client has a security interest over the Z Class Preference Share in EW held by John 1.1 Pty Ltd) (Z Class Preference Share);

5.4    your client agrees and acknowledges that RAI Limited will be issued a preference share in EW which will give RAI Limited the right to the first 65% of the net sale proceeds of the business or assets of EW following the payment of creditors of EW in accordance with their priorities under law which will rank in priority to any rights that attach to the Z Class Preference Share.

66    The respondents refer to the marked up Deed Poll sent by Fifo Capital’s solicitors to Marketlend’s solicitors on 3 June 2019 which provided, in cl 3, that “Fifo Capital acknowledges, agrees and undertakes that it will make no claim against [EW] whether as a secured or unsecured creditor over the assets or business of [EW].”

67    The respondents also refer to an email from Mr Cobb to Mr Petty sent 16 May 2019 and an email from Mr Petty to the participants in the 16 May 2019 teleconference after that teleconference concluded. They submit Mr Petty’s email is inconsistent with the asserted evidence put forward by Fifo Capital of the conversation on that day and the outcome of that teleconference.

68    I have read the transcript of that teleconference and watched the video recording. Whether Mr Petty’s email is inconsistent with the evidence put forward by Fifo Capital is a matter that I am not prepared to decide based on a single piece of evidence tendered on an interlocutory application and forming part of a large and complex factual matrix.

69    The respondents submit that although not executed, the marked up Deed Poll by Mr Calabretta in his email sent 10 May 2019 provides context for the 12 July 2019 Agreement.

70    That may well be correct, but it is unnecessary to decide whether it provides context at this point. The marked up Deed Poll was a counter offer to that put by Marketlend, was never accepted and never executed. I do not consider that it carries any weight for the purposes of this application.

71    Next, the respondents submit that to determine the proper construction of the 12 July 2019 Agreement, the starting point is the words actually used. They submit there is no ambiguity in cl 5.3 of the 12 July 2019 Agreement and that there is no doubt what the words mean. They refer to the principle of objectivity by which the rights and liabilities of the parties to a contract are determined: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35, 218 CLR 451, [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, 219 CLR 165 [40] where the High Court said:

40    This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

(citations omitted)

72    On that basis, the respondents submit the 12 July 2019 Agreement is capable of clear expression and there is nothing in the surrounding context to disturb the ordinary meaning of, in particular, cl 5.3. The respondents urge a construction of the 12 July 2019 Agreement which comprises a complete release by Fifo Capital of its security for all time.

73    The respondents submit evidence relied upon by Fifo Capital of what transpired at the 16 May 2019 and 9 July 2019 telephone conferences is inadmissible or even if admissible, cannot be used to establish a meaning inconsistent with the unambiguous terms of the Agreement. They submit that the evidence upon which the applicants rely is directed at the witnesses’ subjective understanding and is inconsistent with the transcripts of the teleconferences on 16 May and 9 July 2019. They concentrate on what was in the contemplation of the parties and take a number of objections to the affidavit evidence.

74    The respondents point to cl 5.2 of the 12 July 2019 Agreement, and submit it does not qualify the release in cl 5.3.

75    I have read the transcript of the 9 July 2019 teleconference and watched the video. The respondents seek a finding at this stage as to the meaning and effect of an agreement sufficient to warrant an order for summary dismissal in circumstances where no evidence has been tested. To that extent there is a factual vacuum and I am not prepared to make such a finding without hearing all the evidence and hearing that evidence tested.

76    Fifo Capital relies on Grant v John Grant & Sons Pty Ltd [1954] HCA 23, 91 CLR 112, 131 (Dixon CJ, Fullager, Kitto and Taylor JJ) where the High Court said:

The question is whether upon a proper interpretation of the deed the general release clause should be restrained to matters in dispute within the meaning of these recitals. The question depends primarily on the application of the prima facie canon of construction qualifying the general words of a release by reference to particular matters which recitals show to be the occasion of the instrument. But it is also affected by the general tenor of the deed. …

77    Fifo Capital also refers to Sarina v Fairfax Media Publications Pty Ltd [2018] FCAFC 190; (2018) 365 ALR 15. That was a matter in which the applicant, Sarina sought leave to appeal against a decision of the primary judge dismissing summarily, pursuant to s 31A(2) of the Act, proceedings in defamation against the respondent. The applicant had commenced proceedings in the District Court of New South Wales alleging defamation. The parties participated in a mediation and entered into a deed in which Sarina gave releases to the respondent. In considering the terms of those releases, the Court (Rares, Markovic and Bromwich JJ) said: at [20]-[21].

20.    Where, in a deed (or agreement) a clause provided one party with a release in wide or general words, the common law principle of construction restricted 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 (or agreement) read as a whole referred: Grant 91 CLR at 123-124 per Dixon CJ, Fullagar, Kitto and Taylor JJ. Thus, where, as often occurs, a deed recited that the parties have had a particular dispute, but the clause creating the release did not expressly confine its operation to the dispute mentioned in the recitals, the principles of construction at common law read down the wide words of the release to apply only to the dispute in the recitals. Indeed, Dixon CJ, Fullagar, Kitto and Taylor JJ explained (Grant 91 CLR at 124 and 131) that the common law principle was that a written instrument expressed in general terms (be it a deed or statute) had to be construed having regard to the circumstances to which the instrument must have intended to apply. This in substance accords with the modern principles applicable to the construction of contracts and deeds. …

21    However, where one of the parties to a release sought to rely upon its wide and general words, equity considered whether it would be unconscientious for that party to enforce such a meaning by examining each party’s actual knowledge and intention at the time of entry into the release: Grant 91 CLR at 124-125. In other words, as Dixon CJ, Fullagar, Kitto and Taylor JJ held (at 129-130), equity will restrain a party seeking to enforce a wide or general release where it would be unconscientious for that party to do so in all of the circumstances. In such a case, the court will examine the knowledge and intention of both releasor and releasee as to the subject matter on which the release would operate.

78    Fifo Capital submits that on the basis of these authorities, the inquiry required in this case, involving as it does a contractual release stated in wide terms, concerns the following four matters:

(a)    What dispute the parties are addressing in the document;

(b)    What disputes are in their contemplation;

(c)    Whether one party had a duty of disclosure to the other; and

(d)    What was the subjective beliefs and intentions of the parties as to those matters.

79    On the John Grant & Sons equity point, the respondents submit that John Grant & Sons has never been authority for the propositions that the general words of a release can only ever apply to matters known to the parties: The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322, [22] (Pembroke J).

80    However, paragraph 22 of Pembroke J’s judgment in Multiplex, upon which the respondents rely, must be seen against the broader consideration by his Honour of the equitable principles derived from John Grant & Sons. His Honour said: at [22]-[25] and [27]-[29]:

22.    The principle for which Grant v John Grant & Sons (supra) stands is sometimes described more widely than is justified. It is not, and never has been, authority for the proposition that the general words of a release can only ever apply to matters then known to the parties. There have been many explications of the principle but none rises any higher than the reasoning in the joint judgment of Dixon CJ, Fullager, Kitto and Taylor JJ in that case. …

23.    There are two aspects to the reasoning in the joint judgment in Grant v John Grant & Sons (supra). First, the High Court held, as a matter of construction, that the general words of the release should be construed by reference to the subject matter of the particular disputes which the recitals said the parties had resolved to settle on the terms of the deed. In other words, in accordance with ancient principle and sound practice - "the general words of a release should be restrained by the particular occasion" … "the general words of a release are to be restrained by the particular recital" … and "If there be introductory matter, that will qualify the general words of the release".

24.    Thus the resolution of the first aspect of the decision in Grant v John Grant & Sons depended on the interpretation of the release according to settled rules of construction. It involved no new principle. The joint judgment endorsed the following statement of Lord Langdale: "It has been considered that the general words of release are to be restrained by the contract and intention of the parties, that contract and intention appearing by the deed itself or from any other proper evidence ...".

25.    In other words, the intention of the parties that appears from the terms of the contract and any other proper evidence will control and de-limit the operation of general words of a release. The general words should not be permitted to subvert what the parties should be taken to have intended when the release is properly construed in its context. Thus the joint judgment in Grant v John Grant & Sons (supra) described the application of the principle to the facts before them in the following conventional terms:

The question depends primarily on the application of the prima facie canon of construction qualifying the general words of a release by reference to particular matters which recitals show to be the occasion of the instrument ... prima facie the release should be read as confined to the matters forming the subject matter of the disputes which the deed recites ...

26.    …

Equitable Principle

27.    However, the second aspect of the decision in Grant v John Grant & Sons (supra) involves the application of equitable principle. The joint judgment explained that acceptance of the facts that were pleaded in that case made it inequitable for the releasee to set up the general words of the release in answer to the particular liability that the releasor now sought to enforce. That is because the liability had nothing to do with the subject matter of the deed of release. It was quite extraneous to it. And the releasee's attempt to defend the liability by resort to the general words of the release was unconscionable and opportunistic. This was an additional ground for arriving at the ultimate result. It was the context in which the pleaded facts relied upon included the propositions that the releasor did not know of the liability now sought to be enforced, did not intend to release it as part of the transaction and did not know of any intention on the part of the releasee that it should be released. …

28.    The court held that in the circumstances it would be unconscientious to allow the general words of the release to be relied upon. The equity was described as one "to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances". …

29.    This aspect of the reasoning was a particular illustration of one of the many ways in which equity restrains a party from any unconscientious reliance on legal rights. Naturally, the trigger for the application of the equitable principle must be some feature of the facts or conduct of one of the parties that is against conscience. That is why the joint judgment in Grant's case endorsed (at 125) Kerly's statement in his Historical Sketch of the Equitable Jurisdiction of the Court of Chancery that:

The peculiar construction of releases in equity, which restricts their operation to matters within the contemplation of the parties, rests also partly on mistake of expression and partly on mistake going to the substance of the transaction.

In other words, equity permits an investigation of the circumstances, including consideration of the actual intentions of the parties, in order to determine whether enforcement of the general words of a release would be against conscience.

(citations omitted)

81    I accept Fifo Capital’s submissions that an enquiry needs to occur in relation to at least some of the matters identified in [78] above. In particular, there is a question as to whether cl 5.3 is qualified by cl 5.2. It seems to be common ground that the objective of the 12 July 2019 Agreement was to clear the winding up petitions against both CEE and EW. Clause 5.2 provides that Fifo Capital is “… not to commence or resume enforcement action against CEE (including any steps for the winding up of the company) for a period of three (3) months …” following the payment made by Marketlend to Fifo Capital. It was during that period of three months that the parties would attempt to negotiate, in good faith, in respect of entering into a payment plan relating to the balance of CEE’s debt to Fifo Capital.

82    The 12 July 2019 Agreement is silent as to what happens after that three months and what might happen to the security Fifo Capital holds over the assets of CEE in circumstances where those assets are transferred either to EW or some other entity. Still further, there is an issue, significant in the context of these proceedings, as to when the assets of CEE were transferred to EW and the circumstances of any transfer of assets done.

83    Further, on one view, cl 5.4 may interfere with the priority of the Z class preference shares in EW by ranking RAI’s preference share ahead of that preference share over which Fifo Capital had a share mortgage. If that is correct, it raises a question as to the circumstances in which Fifo Capital was prepared to compromise its existing security, if at all.

84    There is, therefore, at the least, an issue about the ambit of any release contained within the 12 July 2019 Agreement. The factual circumstances leading up to the acceptance of the 12 July 2019 Agreement which provide context to the ambit of any release contained within it and the potential compromise by Fifo Capital’s security are complex and will require evidence and the testing of that evidence. It is a factual scenario that cannot be determined based on limited material and on an application such as this.

85    It is for those reasons that I do not accept the respondents’ submissions that the effect of the 12 July 2019 Agreement is such as to warrant an order for summary dismissal of part of Fifo Capital’s claim.

The sale and/or transfer of CEE’s business and assets to EW

86    The second point raised by the respondents may be disposed of quickly. There is an issue which, as I have noted, is significant in the context of these proceedings, as to whether the business and assets of CEE were sold and/or transferred to EW and in particular, whether prior to 12 July 2019 or at a later date or dates. There is also a question of the circumstances of the transfer of assets.

87    It is fair to say that there are some obtuse suggestions both ways on the material before the Court, but I am quite unable to reach a view one way or the other on that material as to whether, and if so, when such a transaction or transactions occurred. An added complication is the suggestion of knowledge and consent to any such sale or transfer on the part of Fifo Capital.

Conclusion on summary judgment application - Fifo Capital’s security

88    In view of the principles to which I have referred, there are real questions of law and fact that should be decided at trial and I am not satisfied that Fifo Capital has no reasonable prospect of successfully prosecuting this part of the proceedings in which it seeks to enforce its security. I dismiss this part of the application.

Summary judgment – conspiracy – the parties’ submissions

89    At [100]-[104] and [106.14] of the statement of claim, the applicants plead causes of actions in conspiracy by unlawful means ([100]-[101]); conspiracy to achieve an unlawful end ([102]-[103]); and the tort of causing loss by unlawful means ([104]).

90    The respondents submit that these claims are the subject of the release in cl 5.3 of the 12 July 2019 Agreement.

91    I do not accept that submission. By its nature, conspiracy is something done without the knowledge of the party or parties the subject of the conspiracy. The release should be read as confined to the matters forming the subject of the disputes to which the agreement relates: Grant at p 131. I repeat the matters I have set out above. The matters forming the subject of the 12 July 2019 Agreement and its’ extent is a matter for trial.

Conclusion on summary judgment application - conspiracy

92    I am not satisfied that Fifo Capital has no reasonable prospect of successfully prosecuting this part of the proceedings against the respondents. I dismiss this part of the application.

Issue 2 – Should claims made by Fifo Capital be struck out?

93    In paragraph 2 of the application, the respondents seek an order pursuant to FCR 16.21(1)(e) that [8], [9], [10], [13], [94], [95], [100]-[104], [106.12] and [106.14] of the statement of claim be struck out.

94    FCR 16.21(1)(e) provides:

16.21 Application to strike out pleadings

(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:

…

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

…

Principles – strike out

95    There are a number of grounds upon which a pleading or part of a pleading may be struck out.

96    In Polar Aviation Pty Ltd v Civil Aviation Safety Authority [2012] FCAFC 97, the Full Court (Perram, Dodds-Streeton and Griffiths JJ) at [43] referred with approval to a summary of general principles by Beaumont J in Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (Unreported, FCA, Beaumont J, 13 September 1994 at p 24) in the following terms:

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

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

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

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

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

97    The power to strike out pleadings or portions of pleadings is discretionary and should be employed sparingly and only in a clear case: Radisich v McDonald [2010] FCA 762 at [20] citing Australian Competition and Consumer Commission v Pauls Ltd [1999] FCA 1750 at [10] (O’Loughlin J).

Parties’ submissions

98    The primary ground advanced by the respondents is that the paragraphs about which complaint is made do not disclose a reasonable cause of action because of the 12 July 2019 Agreement.

99    In view of the conclusion I have reached on the summary judgment application, I do not accept that submission.

Respondent’s submissions - conspiracy - lack of particularity

100    The respondents also contend the conspiracy case pleaded at [100]-[104] of the statement of claim has a number of pleading deficiencies.

101    The first submission by the respondents is made by way of summary that the pleading of a conspiracy is “unclear, repetitive and lacking proper particulars of any actual agreement between the identified parties, nor any properly pleaded loss, so to be liable to be struck out”.

102    The respondents provide further detail in their following submissions, but as an example, the respondents refer to [60]-[61] of the statement of claim. However, in so doing, the respondents conflate two different pleas.

103    In [60], the applicants plead that:

… after Marketlend and Tyndall had acquired control over [CEE] and [EW], Cobb (under the direction of Marketlend and Tyndall), and Marketlend and Tyndall themselves, caused [CEE] to effectuate the Cobb’s (sic) original plan to transfer the Business and Assets of [CEE] to [EW] for no, or insufficient, consideration, …

104    As an alternative plea, the applicants plead at [61] a case by inference that:

… Cobb, Tyndall and Marketlend caused [CEE’s] Business, Contracts and Assets to be transferred to [EW] at a time and by a method unknown to the Applicants but in or around 2019 or early 2020 for no monetary consideration.

105    The two pleas are quite different.

106    In any event, the respondents’ first submission was directed at particularity of the conspiracy. They commence by submitting that the inferred conspiracy case at [100] and [102] is based on the Asset Strip or at least the conduct pleaded in [42]-[57], [60]-[65] and [69]-[76] of the statement of claim.

107    The pleading at [42]-[57] covers the period 23 April 2019 - 19 August 2019 and includes what is referred to as the ‘2019 arrangements’ in [57] of the statement of claim.

108    Paragraphs [60]-[65] plead the Asset Strip and the two alternative pleas referred to above. The participation by Mr Cobb with Marketlend and Mr Tyndall in the Asset Strip is pleaded at [63] with the participation by all three to be inferred by reference to the particulars which follow. [64] and [65] plead that CEE had creditors at the time of the Asset Strip and the consequences of the Asset Strip, respectively.

109    Paragraphs [69]-[76] cover the period 27 December 2019 to 2 February 2020 and execution of what is referred to as the “2020 Deed”.

110    The respondents submit that where such serious allegations are made, the respondents must be fully on notice of the claims being made against them and that it is of fundamental importance that the pleading of serious allegations must be clear and particularised: Muriniti v Lawcover Insurance Pty Ltd [2022] NSWSC 90, [474]-[477] (Ward CJ in Eq).

111    The respondents refer to Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433, (2011) 83 ACSR 206 at [612]-[669]. Where Ward J (as her Honour then was) considered the tort of conspiracy to injure by unlawful means. The object of the conspiracy was One.Tel Ltd. The plaintiffs had pleaded an express agreement by the defendants to extract certain corporate defendants from a series of agreements thereby depriving One.Tel of the benefit of those agreements. The pleading of the alleged express agreement cross-referenced to other paragraphs in the statement of claim for particulars of the express agreement. Her Honour found that those cross-referenced paragraphs did not contain a pleading of the essential elements of an agreement.

Applicants’ submissions – conspiracy – lack of particularity

112    The applicants submit that the specific conduct of Mr Tyndall, Marketlend and EW and how they formed together to conspire is not known to them as there has been no discovery.

113    The applicants contend further that insofar as the conspiracy allegations are directed at Mr Cobb, Mr Tyndall, EW and Marketlend or any one or more of them, the applicants plead an inferential case that after Marketlend and Mr Tyndall had acquired control over CEE and EW, they and Mr Cobb under their direction, effected the transfer of the business and assets of CEE for no, or insufficient consideration, in order to obtain those assets free and clear of Fifo Capital’s securities and therefore caused loss to Fifo Capital and CEE. They submit there is an arguable inferential case that all three were engaged in a common plan to cause the asset stripping and the respondents know the case they have to meet which is set out in [60]-[65] of the statement of claim.

Consideration – conspiracy - lack of particularity

114    Historically, there are two types of civil conspiracy, each having distinct elements: see Bullen & Leake & Jacob’s Precedents of Pleadings (19th Ed, Sweet and Maxwell, 2019) [59-01].

115    The elements of the tort of conspiracy by unlawful means pleaded in [100] of the statement of claim comprise:

(a)    A combination or arrangement between two or more parties;

(b)    Whereby they agree that at least one of them shall use “unlawful means” against the claimant;

(c)    The claimant suffers loss and damage as a result; and

(d)    Damage to the claimant need not be the predominant intention of any of the parties.

see also Winfield and Jolowicz on Tort, Peel A and Goudkamp J (ed), (19th Ed, Sweet & Maxwell, 2014) [19-044].

116    That is to be compared with conspiracy to injure (or conspiracy to achieve an unlawful end) (also known as a Crofter conspiracy: Crofter Hand-Woven Harris Tweed Co Ltd v Veitch [1942] AC 435, 445 (Viscount Simon L.C)) pleaded in [102] of the statement of claim. The elements of that cause of action are:

(a)    A combination or arrangement between two or more parties;

(b)    Whose predominant purpose is to cause damage to the claimant;

(c)    That purpose may render acts which would otherwise be lawful, if committed by one person, even with the purpose of causing injury, unlawful.

See also Winfield and Jolowicz on Tort (supra) [19-036].

117    The applicants submit that specific conduct of Mr Tyndall, Marketlend and EW and how they formed together to conspire is not known to them as there has been no discovery.

118    The nature of conspiracy typically involves a clandestine element such that a party may not have available to them a suite of documents to enable it to plead with particularity. It is for that reason that a conspiracy may be inferred from conduct however, that does not detract from the requirement to plead the material facts as upon which inferences are to be drawn so that the respondents are aware of the case they are asked to meet: Australian Parking and Revenue Control Pty Ltd v Reino International Pty Ltd [2016] FCA 744, [73] (Perry J).

119    By way of an overview, and without doing a disservice to the pleadings of the applicants or the respondents, the real difference between the parties centres around the effect of various documents, whether the respondents had the right to deal with the business and assets of CEE, the transfer of the business and assets of CEE to EW, and the question of whether Fifo Capital’s security interests follow the assets or not.

120    It is the disputes between the parties over those issues that form the background to the inferential conspiracy case mounted against the respondents.

121    There are two matters which satisfy me that the pleaded inferential case of conspiracy is not so deficient that the respondents do not know the case they have to meet, even allowing for the serious nature of the allegations and cognisant of the observations by Ward CJ in Eq in Muriniti, and the authorities to which her Honour refers in the cited passages.

122    The first is that the overt acts pleaded whereby CEE’s assets were transferred are alleged to have been done for no consideration. Fifo Capital assert first, a security interest over CEE’s business and assets, and second, a share mortgage over the Z class preference shares in EW. The Z class preference shares in EW were later subordinated to the preference shares issued to RAI. On one view, it is inconsistent with those security interests for those assets to have been transferred for no consideration or consideration not reflective of the market value of the business and assets that were transferred, if that in fact be the case. Second, when the cross-referenced paragraphs of the statement of claim in both [100] and [102] are considered, the cross-referenced paragraphs provide the basis upon which the inferred conspiracy is founded such that the respondents are aware of the case they are required to meet.

123    Accordingly, I decline to strike out [100]-[104] and [106.14] of the statement of claim on the basis of a lack of particularity in relation to the conspiracy plea.

Other issues with the pleaded conspiracy case

124    The respondents raise a number of other issues with the pleaded conspiracy case.

125    The first is that the tort of conspiracy by unlawful means as well the tort of causing loss by unlawful means, are pleaded. The second is that there is insufficient pleading of the actual agreement required for a conspiracy. I have already dealt with the second point concerning the pleading of the actual agreement and I do not accept that submission.

126    As to the first point, which is the pleading of both the conspiracy to commit the tort and the tort itself, the respondents refer to Weston v Publishing and Broadcasting Ltd [2011] NSWSC 433; (2011) 83 ACSR 206 at [612]-[669].

127    In that manner, Ward J referred to the ongoing academic and judicial point as to whether both the conspiracy to commit the tort as well as the tort itself can both be pleaded. Her Honour determined that in view of the debate on the issue, it would not be appropriate to determine that question on the application before her Honour at [633]; see also the decision by Ward J (as her Honour then was) in Szanto v Bainton [2011] NSWSC 985 [185].

128    The respondents do not contend one way or the other, referring instead to the discussion in Weston.

129    In those circumstances, I do not consider it appropriate to determine the question on this application. Accordingly, both the conspiracy to commit the tort as well as a tort itself can be pleaded, although clearly the applicants, if successful, could not claim the same loss twice.

130    The second issue is that the respondents contend the loss and damage claimed in the conspiracy and tort claims by Fifo Capital is the same as that claimed by CEE such that the loss claimed by Fifo Capital is reflective of the loss claimed by CEE.

131    That may be so, but I do not accept it as a basis to strike out these paragraphs. Each of CEE and Fifo Capital have separate claims. The assessment of loss (if any) will need to take into account any loss sustained by one applicant that is reflective of the loss claimed by the other applicant.

Conclusion on the application to strike out paragraphs of Fifo Capital’s claim

132    I decline to strike out the claims made by Fifo Capital in [8], [9], [10], [13], [94], [85], [100]-[104], [106.12] and [106.14] of the statement of claim.

Third issue – The application by Marketlend and Mr Tyndall to strike out various paragraphs of the applicants’ statement of claim

133    Marketlend Pty Ltd and Mr Tyndall apply to strike out the claims made by the applicants against Marketlend and/or Mr Tyndall in [21], [22], [44], [47], [48], [50], [56], [57], [60], [61] [63], [74], [75.1], [75.3], [76] (in particular [76.2]), [77] (in particular, [77.4]–[77.12]), [78], [79], [80], [81], [82], [83], [84]–[93], [100]–[104], [105.3], [106.1], [106.2], [106.8], [106.9] and [106.10] of the statement of claim.

134    In support of this part of the application, the respondents filed further written submissions on 21 March 2022 directed at these paragraphs in which six topics are identified.

1. Marketlend and Mr Tyndall personally both as shadow/de facto directors

135    The first topic concerns the applicants’ claim that Marketlend and Mr Tyndall were shadow or de facto directors of CEE such that Mr Tyndall was personally a director of CEE at the same time and in addition to Marketlend.

136    The respondents submit that the pleadings make it clear that the applicants allege Marketlend and Mr Tyndall were shadow or de facto directors. I accept that submission.

137    As I understand the submission, the respondents contend the alleged conduct cannot have been separate and distinct conduct of Mr Tyndall personally but only by Marketlend. The underlying premise to that submission is the complaint that certain alleged conduct of Mr Tyndall could only have been that of Marketlend or Mr Tyndall in his capacity as a director of Marketlend. The respondents submit the offending paragraphs should be struck out, otherwise there is a conflation of the distinction between a company as a separate entity and its directors.

138    The fundamental problem with this submission, accepting the distinction between a company and its directors, at least for some purposes, is that a pleading that a company did or did not do something inevitably leads to the question of who, acting for the company, did or failed to do something. In some cases, it is necessary to identify the individual or individuals who acted for or on behalf of the company. That distinction becomes important when considering the issues of whether an individual was the controlling mind of a corporation or was a person involved for the purpose of s 79 of the Corporation Act: see for example Mawhinney v Australian Securities and Investments Commission [2022] FCAFC 159 [96(4)], (Jagot, O’Bryan and Cheeseman JJ).

139    The respondents’ submissions start by addressing [77] of the statement of claim which alleges that each of Marketlend and Mr Tyndall were shadow or de facto directors of CEE. The respondents submit that the conduct alleged by the applicants to support the allegation that each of Marketlend and Mr Tyndall were directors of CEE is mostly based on conduct that can only have been that of Marketlend and not Mr Tyndall personally.

140    I do not accept that submission. The respondents’ submissions seek, in effect, factual findings that something can only have been done by Marketlend. That will require consideration of evidence to be tested at trial. The point is made clear by consideration of the conduct alleged in [77] where, for example, the conduct pleaded may also be that of Mr Tyndall. I do not consider the pleading in [77] fails to disclose a reasonable cause of action or otherwise comes within any of the criteria in FCR 16.21: See for example [77.5], [77.6], [77.10] of the statement of claim.

141    The respondents refer to other parts of the pleading which I set out below and deal with in order.

(a)    [84] (contraventions - s 79 Corporations Act 2011 (Cth)). The respondents contend that the pleading suffers from confusing circularity. I do not consider the pleading is either confusing or circular. A careful reading of the allegations makes the pleading perfectly clear. I do not consider this pleading comes within any of the criteria in FCR 16.21 and I decline to strike it out.

(b)    [63] alleges the Asset Strip was done under the “direction and control of Marketlend and/or Mr Tyndall”. The respondents contend that the inferred “direction and control” arises from certain matters, in the main various contractual documents, including the 2019 arrangement: [57], the 2019 Deed: [54], and the 2020 Deed: [73] to which, Mr Tyndall was not a party. On that basis, they contend the pleading should be struck out. I do not accept that submission. The allegations in that paragraph are not limited to the three documents to which reference is made and even if it was, Mr Tyndall is the sole director of Marketlend. These are issues that will need to be determined at trial. I do not consider the pleading to come within any of the criteria in FCR 16.21 and I decline to strike it out.

(c)    [84.1] (sic [89.1]) which alleges “… under the effective control of Tyndall, or Tyndall’s nominees”. There is force in the respondents’ complaint about this paragraph in the sense that the reference to “nominees” is vague. There will be an order striking out the words “or Tyndall’s nominees” in [89.1]. The applicants will be given leave to re-plead that part of [89.1] if so advised.

142    I have noted the respondents contend that the statement of claim impermissibly relies on the conduct of Marketlend to establish that Mr Tyndall personally was a director of CEE. They contend further that it has not been pleaded that Mr Tyndall (or Marketlend) undertook functions that could properly only be discharged by a director of CEE. On these bases, the respondents submit the allegations made against Mr Tyndall personally should be struck out.

143    The respondents’ last contention that it has not been pleaded that Mr Tyndall or Marketlend undertook functions that could properly only be discharged by a director of CEE, should not be accepted. The absence of a pleading that Mr Tyndall or Marketlend undertook functions that could only be discharged by a director of CEE does not mean that either or both of Mr Tyndall and Marketlend were not shadow or de facto directors of CEE.

144    In support of their primary submission that Mr Tyndall’s alleged conduct could only have been undertaken by Marketlend, the respondents refer to the use of the expression “Tyndall on behalf of Marketlend” in the paragraphs of the statement of claim set out below. Prior to dealing with these paragraphs, a number of the respondents’ complaints suffer from the same problem as I have raised earlier in these reasons. The respondents ask the Court to make, at this point in the proceedings and faced with a complex factual background, a factual finding that Mr Tyndall could not have been involved in various alleged conduct in circumstances where the pleading makes clear that is the allegation made. In the consideration which follows, where I decline to strike out any of the impugned paragraphs, it should be understood that I do so on the basis the respondents have not satisfied me that the criteria in FCR 16.21 have been established:

(a)    Paragraph [44] pleads “… Cobb and Tyndall (or others on behalf of Marketlend) entered into negotiations …”. Contrary to the respondents’ submissions, this pleading is not directed at Mr Tyndall in his position as a shadow or de facto director of CEE. The pleading in [44] refers to negotiations and correspondence in the period leading up to 21 May 2019. I decline to strike out this paragraph.

(b)    Paragraphs [48] and [77.5]: The respondents point to the pleading in [48] which refers to an email sent on 16 July 2019 from “… Tyndall (on behalf of Marketlend) to Cobb …” and contend that the same email is relied on, inconsistently, against both Marketlend and Mr Tyndall in [77.5]. The offending words in [77.5] are “Tyndall’s and Marketlend’s demand on behalf of Marketlend …”. I accept the pleading is confusing and requires clarification although one might have thought the respondents could have corresponded with the applicant about this issue. In any event, there will be an order striking out [77.5] and an opportunity provided to the applicants to re-plead.

(c)    Paragraph [50] pleads that Mr Tyndall sent an email on behalf of Marketlend to Mr Cobb on 19 July 2019 informing him Marketlend would be paying some of CEE’s creditors on various conditions. The allegations are clear and I decline to strike this paragraph.

(d)    [50.3.3] pleads that in an email sent by Mr Tyndall to Mr Cobb on 19 July 2019, Mr Cobb was informed that he was to report directly to Mr Tyndall on behalf of Marketlend as part of the conditions attaching to Marketlend paying some of CEE’s creditors. The pleading is paraphrasing one of the conditions in the email sent by Mr Tyndall to Mr Cobb on 19 July 2019: first Cobb affidavit [102], annexure DSC-1 p 424. The paraphrasing is not inconsistent with the text of the email and I decline to strike out this paragraph.

(e)    [74] (sic [72]): The pleading is that the effect of an email sent by Mr Tyndall to Mr Cobb on 1 January 2020 (pleaded in [71]) is that Mr Tyndall on behalf of Marketlend threatened to call in securities given by Mr Cobb and other members of Mr Cobb’s family. This is a clear example of the applicant pleading that Marketlend has done something by a human vector, in this case Mr Tyndall. I decline to strike out this paragraph.

(f)    [77.5]: I have dealt with this paragraph and the same complaint above at (b).

(g)    [89.3]: The respondents contend this paragraph seeks to impute Mr Tyndall’s knowledge to Marketlend. The contention by the respondents is that the applicants recognise that conduct of Mr Tyndall as a director of Marketlend was conduct of Marketlend itself and not Mr Tyndall personally. That may be so, depending on the context, but the issue being addressed is Marketlend and Mr Tyndall as shadow or de facto directors of CEE. Pointing to circumstances where it is pleaded Mr Tyndall acted on behalf of Marketlend does not mean that both were not or not capable of being a director of CEE. I decline to strike out this paragraph.

145    Next, the respondents submit the statement of claim is inconsistent in that it alleges certain conduct or communications by Mr Tyndall against both Mr Tyndall and Marketlend and not that it was done “on behalf of Marketlend” despite the fact that the conduct or communication was only capable of having been done by Marketlend or by Mr Tyndall on behalf of Marketlend but not both. The respondents refer to the following paragraphs of the statement of claim:

(a)    [21]: The respondents contend that the passage “… Tyndall and Marketlend (under the control of its director Tyndall) took control of [CEE] …” can only sensibly be a pleading of conduct by Marketlend and not Mr Tyndall personally. I do not accept that submission. There is no reason why both Marketlend and Mr Tyndall personally could not take control of CEE. I decline to strike out this paragraph.

(b)    [47]: The passage to which the respondents refer is “Cobb acceded to the request made in the preceding paragraph and gave administrator rights to [CEE’s] bank account to Ianns (an employee of Marketlend) and therefore to Marketlend, which access enabled Tyndall and Marketlend to make payments from [CEE’s] account directly”. (square brackets and brackets provided).

The “request” to which reference is made is in [46] which pleads the request contained in an email sent from Mr Tyndall to Mr Cobb on 10 July 2019. The respondents submit that the 10 July 2019 email cannot reasonably be construed as being a request by Mr Tyndall personally because the rights sought to be given to Marketlend’s employee, Mr Ianns, are pleaded as Marketlend’s. That is not correct. The pleading in [46] is as follows:

46.    Shortly after entry into the suite of documents pleaded in the preceding paragraph, and by email dated 10 July 2019 from Tyndall to Cobb, Tyndall instructed Cobb to arrange for Mr Frank Ianns (a Marketlend employee under Tyndall’s control) (“Ianns”) to have administrator rights in respect of the Company’s primary bank account, and Tyndall described this in the email as “a non negotiable request please comply so we can get matters dealt with quickly.”

Particulars

46.1.    Email from Tyndall to Cobb dated 10 July 2019.

The respondents seek to make good their submission by referring to [77.4] which pleads:

77.    In the premises of:

…

77.4    Tyndall’s and Marketlend’s demand for Marketlend to have administrator access to [CEE’s] bank account, and Cobb’s acquiescence to the same, as pleaded in paragraph 46;

The pleading in [47] is that the request, which was granted by Mr Cobb, had the consequence that both Mr Tyndall and Marketlend were granted access to CEE’s bank account and could make payments from it directly. To that extent, the pleading is directed to both Mr Tyndall personally and Marketlend.

I fail to see the difficulty with [47]. The paragraph cannot be understood without reference to [46] and the description of the email in that paragraph. It is clear that what is pleaded arises out of the email sent 10 July 2019 and that the effect of Mr Tyndall’s actions is that both Mr Tyndall and Marketlend could make payments from CEE’s account directly. I decline to strike out this paragraph.

(c)    [56]: The applicants plead that “Cobb acceded to Marketlend’s and Tyndall’s demands made in the preceding paragraph and [CEE’s] tax agent did not file the relevant ASIC forms”. The preceding paragraph pleads an exchange of emails dated 19 August 2019. It is evident from the text of the email string: first Cobb affidavit [148], annexure DSC-1 pp 468-470, that there is a conflict between Mr Cobb and an employee of Marketlend in which Mr Tyndall became involved.

The respondents submit that properly understood, the emails cannot arguably constitute conduct on behalf of both Marketlend and Mr Tyndall.

There is some force to that submission but that requires a finding of fact at this stage. There is no doubt Mr Tyndall became involved. Whether he did so personally is a matter for trial and not an event to be seen in isolation such as to warrant the pleading being struck out and I decline to do so.

(d)    [60]: The respondents complain about the chapeau to this pleading which reads in part:

At a precise time unknown to the Applicants and by exact means unknown, but after effectuation of the 2019 Arrangements and in or around 2019 and early 2020, after Marketlend and Tyndal (sic) had acquired control over [CEE] and [EW], Cobb (under the direction of Marketlend and Tyndall), and Marketlend and Tyndall themselves, caused the [CEE] to effectuate the (sic) Cobb’s original plan …

The respondents contend that this is a matter which can only have been undertaken by Marketlend or Mr Tyndall but not both.

I do not accept that submission. There is no reason why, if in fact Marketlend and Mr Tyndall each became shadow or de facto directors of CEE, they both cannot be involved in the alleged conduct. I decline to strike out this paragraph.

(e)    [61]: The respondents refer to the passage in this paragraph “… it is to be inferred that Cobb, Tyndall and Marketlend caused [CEE’s] Business, Contracts and Assets to be transferred to [EW] …” and submit that none of the particulars in [61] refer to Mr Tyndall, nor support the pleaded allegations against him personally.

Whereas the respondents are correct that Mr Tyndall is not named in any of the particulars, the allegations are based on an inference from the particulars, which include [60.1]. That paragraph includes allegations against Mr Tyndall.

I decline to strike out [61].

(f)    [63]: The respondents submit the pleading that “Together with Marketlend and Tyndall, Cobb participated in, and effectuated, the Asset Strip of [CEE] under the direction and control of Marketlend and/or Tyndall” is supported by particulars which, amongst other things, include the 2019 Arrangements, 2019 Deed and 2020 Deed to which Mr Tyndall was not personally a party.

The respondents also refer to the particulars of [63.1.2], which refers to Mr Cobb acceding to “the demands of Marketlend and Tyndall” pleaded at [46]-[49] and [55]-[56]. They submit that it is not arguable that the “demands” referred to in these paragraphs were made by Mr Tyndall personally.

I do not consider that the pleading, viewed as a whole and as against the cross-referenced paragraphs are such that it is not arguable Mr Tyndall was not involved personally. Once again, the respondents are asking the Court at this stage of the proceedings to make factual findings about Mr Tyndall’s personal involvement. That is not something I am prepared to do at this stage and it is a matter that will need to await trial. I do not accept the respondents’ submissions and I decline to strike out this paragraph.

(g)    [77.4]: I dealt with this paragraph as part of dealing with [47] at [145(b)] above. The respondents refer to the pleading “Tyndall’s and Marketlend’s demand for Marketlend to have administrator access to [CEE’s] bank account, and Cobb’s acquiescence to the same, as pleaded in paragraph 46”.

I refer to the same reasons I have set out above in relation [47] and [63]. I decline to strike out this paragraph

(h)    [77.5]: The respondents contend the pleading “Tyndall’s and Marketlend’s demand on behalf of Marketlend that Cobb not to cause (sic) [CEE] or [EW] to make any payment to a third party without Marketlend’s authorisation, as pleaded in paragraph 48” is both confusing and embarrassing. Further, they submit an allegation concerning a requirement of Marketlend’s authorisation cannot be conduct of Mr Tyndall personally. As to this last point, I repeat what I have said in relation to [63] above.

The respondents do not identify specifically why it is said this pleading is embarrassing, however in the context of the respondents’ submissions I understand the reference to the pleading being “embarrassing” is a reference to the confusion arising from the use of the words “Tyndall’s and Marketlend’s demand on behalf of Marketlend”.

There are number of reasons why a pleading may be “embarrassing” including if it “… is susceptible to various meanings or if it contains allegations which are inconsistent or where alternatives are intermixed or in which irrelevant allegations are made such that there is an increase in costs: Spiteri v Nine Network Australia Pty Ltd [2008] FCA 905, [22] (Edmonds J) referring to Bartlett v Swan Television and Radio Broadcasters Pty Ltd [1995] FCA 638; (1995) ATPR 41-434.

I accept [77.5] is confusing and the paragraph should be struck out with leave to re-plead.

(i)    [77.6]: This paragraph pleads:

Tyndall’s and Marketlend’s instruction, and Cobb’s acquiescence that, Cobb as the sole appointed director of the Company would limit his role to that of a non-executive director, would report directly to Tyndall on behalf of Marketlend, and would otherwise leave the management of the Company to Marketlend, as pleaded in paragraphs 54.4 to 54.6 above;

The respondents submit the pleading is internally inconsistent because it alleges Mr Tyndall personally gave an instruction to Mr Cobb that he was to report to him on behalf of Marketlend and otherwise leave control of CEE to Marketlend. They submit the instruction cannot have been given by Mr Tyndall personally and also by Marketlend. They submit further that the references to [54.4]-[54.6] contain references to the 2019 Deed to which Mr Tyndall was not a party. Further, they submit the “instructions” referred to in [77.6] were not instructions at all but contractual rights contained in the 2019 Deed.

The respondents first point is that Mr Tyndall and Marketlend could not both give the instruction. The respondents omit from their analysis, the cross-reference in [77.6] to [54] and the reference to [50] which pleads the 19 July 2019 email from Mr Tyndall to Mr Cobb. I have dealt with [50] and [50.3.3] above and I do not accept the pleading is internally inconsistent. Further, not only is the allegation open on the email sent 19 July 2019, once again, the respondents ask the Court to make factual findings at this stage in order to make their case that [77.6] should be struck out. That is a course I am not prepared to take at this stage of the proceedings.

The next point the respondents make is that Mr Tyndall is not a party to the 2019 Deed personally. That is so but it is pleaded that the Deed put into place the matters contained in the 19 July 2019 email sent by Mr Tyndall to Mr Cobb. The fact Mr Tyndall is not a party to the Deed does not mean that as the director of Marketlend, he was not personally involved in the instruction given on 19 July 2019 and subsequently recorded in the 2019 Deed.

The third point made by the respondents is that the alleged “instructions” were not instructions at all but contractual rights under the 2019 deed. Again, the respondents fail to take into account [50] to which I have referred above.

I decline to strike out [77.6].

(j)    [77.8]: The passage to which the respondents object is “Tyndall and Marketlend asserting that the monies held by [CEE] were in fact owned and controlled by Marketlend …”

The pleading cross-references [70.2.2] which refers to exchange of emails dated 30 December 2019 between amongst others, Mr Cobb and Mr Tyndall: first Cobb affidavit [187], in annexure DSC-1 pp 502-503.

The respondents submit these communications cannot be considered as a personal act by Mr Tyndall but instead can only be considered an act on behalf of Marketlend.

In context, the pleadings allege both Marketlend and Mr Tyndall asserted the money belongs to Marketlend. Mr Tyndall may have been communicating on behalf of Marketlend but again, that is a factual finding I am being asked to make and which I decline to do so at this stage of the proceedings. Further, the conclusion to this part of the pleading is at [77.13] which pleads that as a consequence of the matters at [77.1]-[77.12]:

each of Marketlend and Tyndall was:

77.13    a person who acted in the position of a director of the [CEE];

…

That is a further finding of fact and law that will need to be made based on an assessment of the evidence adduced at any trial. I decline to strike out [77.8].

(k)    [77.9]-[77.11]: The respondents repeat their submissions in relation to the use of the words “Tyndall and Marketlend”. I repeat my reasons above in relation to the use of this phrase and decline to strike out these paragraphs.

2. Exercise of Marketlend’s contractual rights – statement of claim [57], [75.1], [75.3], [76.2]

146    As to the second topic, the respondents submit that the most striking example of the pleading of Mr Tyndall acting personally is [57] of the statement of claim which reads:

Pursuant to the terms of the Marketlend Facilities, the Securities, the Convertible Note Documents and the 2019 Deed (the “2019 Arrangements”), Marketlend and Tyndall each, and together, acquired legal and actual control over the business, affairs and assets of each of the [CEE] and [EW], and further were put in a position to direct Cobb in relation to the affairs of both companies, and moreover obtained a 75% ordinary share ownership interest in them through their related party RAI.

147    The respondents contend this pleading cannot be sustained because Mr Tyndall was not a party to any of the documents comprising the 2019 Arrangements i.e. the Marketlend Facilities ([45.1]), the Securities ([45.2]), the Convertible Note Documents ([45.3]) and the 2019 Deed ([54]).

148    I have dealt with this submission above. The respondents emphasis that Mr Tyndall is not a party to various agreements whereas the pleading is that the effect of these documents is that “Pursuant to the terms …”, Mr Tyndall and Marketlend each and together, “… acquired legal and actual control …”. Ultimately, that may or may not be correct, however once it is recognised that the pleading refers to the effect of the terms of the 2019 Arrangements, the balance of the respondents’ submissions fall away. That question will need to be resolved at trial. I decline to strike out [57], [75.1], [75.3] and [76.2].

3. Secured lender and shadow/de facto director – statement of claim [77.14.1]

149    The third topic concerns s 9 of the Corporations Act which defines “Director” in the following terms:

Director of a company or other body means:

(a)    a person who:

(i)    is appointed to the position of a director; or

(ii)    is appointed to the position of an alternate director and is acting in that capacity;

regardless of the name that is given to their position; and

(b)    unless the contrary intention appears, a person who is not validly appointed as a director if:

(i)    they act in the position of a director; or

(ii)    the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes.

Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body.

Shadow/de facto Director

150    In Buzzle Operations Pty Ltd (In liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109; (2011) 81 NSWLR 47 (CA), Young JA considered the terms “shadow director” and “de facto director”. A person who fits within s 9(b)(i) of the Corporations Act may be termed a “de facto director” and a person who fits within s 9(b)(ii) may be termed a “shadow director”: Buzzle at [180].

151    At [190]-[197] of Buzzle, his Honour considered the primary judge’s analysis of Millett J in Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180, 183 as to what was required to establish whether a person was a shadow director, holding that Millett J’s analysis was consistent with the mainstream line of authority. Young JA observed that “… one must approach the subject with an eye to the ultimate question and not rely overmuch on one line statements such as those which say that the shadow director need not overawe the whole board nor need he or she seek to control all the company’s activities …”: at [205].

152    At [222], [228]-[232] his Honour identified the various principles that emerged from the leading authorities, noting at [226] that circumstances were infinitely variable:

228    First, not every person whose advice is in fact heeded as a general rule by the board is to be classed as a de facto or shadow director.

229    Secondly, if a person has a genuine interest of his or her or its own in giving advice to the board, such as a bank or mortgagee, the mere fact that the board will tend to take that advice to preserve it from the mortgagee’s wrath will not make the mortgagee, etc a shadow director.

230    Thirdly, the vital factor is that the shadow director has the potentiality to control. The fact that he or she does not seek to control every facet of the company or the fact that from time to time the board disregards advice is of little moment.

231    Fourthly, Millett J’s proposition that the evidence must show “something more” than just being in a position of control must be shown. The whole of the facts of the case must be shown to see whether that power to control was put into practice. The emphasis that one must judge on the whole of facts and circumstances is made many times over in the leading cases, see for example, Secretary of State for Trade and Industry v Tjolle [1998] 1 BCLC 333 at 343–344 and Re Kaytech International plc [1999] 2 BCLC 351 at 423–424.

232    Fifthly, although there are problems with cases where the board of the company splits into a majority and minority faction, so long as the influence controls the real decision makers, the person providing the influence may be a shadow director.

153    The respondents submit that:

(a)    As a general proposition, insistence on terms, including by a lender as a basis for continued support of a company and with which the company complies does not make that lender a shadow director: Buzzle at [191]-[192];

(b)    If a lender has a genuine interest of its own in giving advice to a company, the mere fact that the board would tend to take that advice to preserve it from the lenders “wrath” would not make the lender a shadow director: Buzzle at [229]; and

(c)    It is not enough the third party imposes conditions on the ongoing support, and it has left the directors to discharge their own duties to the company to decide whether or not to comply, even if they may feel they have “no choice”: Buzzle at [242].

154    Each of these propositions may be accepted.

155    The point of the respondents’ submissions is that the applicants rely on the exercise by Marketlend of its contractual rights as against CEE and EW prior to the Asset Strip having occurred which include rights in Marketlend to give directions to CEE as to its affairs they refer to [77.14.1].

156    The respondents ask the Court to conclude that by virtue of the fact Marketlend had contractual rights to give directions to CEE as to its affairs must mean that the pleadings fail to disclose a reasonable cause of action that Marketlend and Mr Tyndall were, in fact, shadow and/or de facto directors. That submission should be rejected. The fact that Marketlend may have had contractual rights to give directions to CEE as to its affairs does not mean that as a matter of fact Marketlend and/or Mr Tyndall did not act as shadow directors or de facto directors of CEE. As the authorities to which Young JA referred in Buzzle and the principles extracted by his Honour in that decision reveal, whether or not Marketlend and/or Mr Tyndall were, in fact, shadow directors or de facto directors of CEE is a matter that will only be determined after hearing evidence as to the extent of their control, if any, over CEE and the characterisation of that control.

157    I decline to strike out the pleadings alleging that Mr Tyndall and Marketlend were shadow and/or de facto directors of CEE.

4. Mr Tyndall as a director of Marketlend – statement of claim [63.1.4], [77.12]

158    The fourth contention submitted by the respondents is that it is not arguable that the conduct of Marketlend can support a claim that Mr Tyndall was personally a director of CEE at the same time and in addition to Marketlend, in circumstances where his conduct was taken in his capacity as a director of Marketlend and therefore “on behalf” of Marketlend.

159    The respondents refer to Buzzle at [224] for the proposition that the mere fact Mr Tyndall was a director of Marketlend cannot establish him as a shadow or de facto director of CEE. The passage in Buzzle to which the respondents refer is a reference by Young JA to the judgment of Lord Hope in Revenue and Customs Commissioners v Holland; In re-Paycheck Services 3 Ltd [2010] 1 WLR 2793; [2011] 1 All ER 430 at [26] where the Lordship was considering the term “de facto director”. That proposition may be accepted insofar as it goes.

160    The respondents submit further that:

(a)    If, which is not accepted, Mr Tyndall gave instructions to CEE in his role as a director of Marketlend, that does not make him a shadow or de facto director of CEE: Buzzle at [224]; and

(b)    The mere fact Mr Tyndall was discharging his functions as a director of Marketlend does not make him a shadow director or de facto director of CEE: Paycheck at [36]-[37]. Something more is required which, the respondents submit, has not and cannot be pleaded in the statement of claim.

161    The respondents submit that since [77.12] and [63.1.4] rely on the mere fact that Mr Tyndall was the “… director and directing mind of Marketlend”, and “… the controlling mind of Marketlend and RAI” respectively the paragraphs alleging that Mr Tyndall was personally, a director of CEE at the same time in addition to Marketlend where that conduct was undertaken in his capacity as director of Marketlend and therefore “on behalf of” Marketlend should be struck out.

162    The applicants submit insofar as the respondents’ submissions identify general principles, those principles may be accepted. However, they submit that the Court is not able to make findings about these matters at this stage of the proceedings. They refer to Young JA’s statements in Buzzle: at [226] and [231], to which I have referred above where his Honour observed that in considering whether a person is a de facto or shadow director, circumstances are infinitely variable and the whole of the facts of the case must be shown to see whether the power to control was put into practice.

163    I accept the applicants’ submissions. Once again, the respondents ask the Court to make a factual finding arising out of a complex factual situation in support of their submission that the pleadings disclose no reasonable cause of action that Mr Tyndall was acting as a de facto or a shadow director. I am not prepared to make those factual findings at this stage and on an application such as this.

164    I decline to strike out [77.12] and [63.1.4].

5. Knowing involvement claims - [84]

165    The fifth topic raised by the respondents concerns particulars in support of the allegation in [84] which deals with knowing involvement in the breaches of statutory duties of Mr Cobb and/or Marketlend and/or Mr Tyndall within the meaning of s 79 of the Corporations Act. The respondents submit the particulars are wholly inadequate.

166    Section 79 of the Corporations Act provides:

A person is involved in a contravention if, and only if, the person:

(a)    has aided, abetted, counselled or procured the contravention; or

(b)    has induced, whether by threats or promises or otherwise, the contravention; or

(c)    has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d)    has conspired with others to effect the contravention.

167    The terms of [84] reflect the terms of s 79 in the sense that each of the subparagraphs of [84] addresses each of the subparagraphs in s 79(a)-(d).

168    In Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342, (2015) 235 FCR 181, [397]-[411] White J examined the general principles of being knowingly concerned in a statutory contravention. His Honour observed that in order for a person to be knowingly concerned in the statutory contravention, the person must have been an intentional participant with knowledge of the essential elements constituting the contravention although it is not necessary for that person to also know that those essential elements in fact amount to a contravention: ActiveSuper at [398] citing Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661, 670. Further, although actual knowledge of the essential elements constituting the contravention is required, an imputed or constructive knowledge is insufficient: ActiveSuper [399] citing Young Investment Group Pty Ltd v Mann [2012] FCAFC 107; (2012) 293 ALR 537 at [11].

169    White J continued: at [400]:

Proof that a person had actual knowledge of each of the essential elements making up the contravention may be derived from direct evidence but more commonly will be a matter of inference from all the circumstances found to be proved. In some cases, actual knowledge can be inferred from the combination of a defendant’s knowledge of suspicious circumstances and the decision by the defendant not to make inquiries to remove those suspicions. The High Court referred to knowledge in these circumstances in Pereira v Director of Public Prosecutions (1988) 82 ALR 217 at 220.

170    The consequence is that only actual knowledge of the essential matters will be sufficient although that knowledge may be able to be inferred by combination of knowledge of matters raising suspicion together with a deliberate failure to make the inquiries which may have confirmed those suspicions: ActiveSuper at [402]. Whether actual knowledge exists will be a matter of proof and evidence: Lifeplan Australia Friendly Society Limited v Ancient Order of Foresters in Victoria Friendly Society Ltd [2017] FCAFC 74 [106] (Allsop CJ, Middleton and Davies JJ).

171    A further general principle is that the actual knowledge must come about a time contemporaneous with the contraventions: Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 2) [2005] NSWSC 267; (2005) 53 ACSR 305, [114]-[115].

172    The respondents submit that the pleading of knowing involvement in [84]-[85] is manifestly inadequate on the following grounds:

(a)    The particulars in [84] relate to contracts to which Mr Tyndall was not personally a party;

(b)    The particulars do not establish an arguable claim for intention and actual knowledge, in circumstances where contractual rights are being exercised pursuant to contractual arrangements;

(c)    In [84.1.5] neither of the references to Marketlend’s and Mr Tyndall’s demands in the email string involving Mr Tyndall dated 19 August 2019 in [55] and 30 December 2019 in [70] can be said reasonably to support the pleaded allegation of intention by Mr Tyndall; and

(d)    The balance of the particulars do not disclose a reasonably arguable case for the asserted claim such that [84]-[85] should be struck out as not disclosing an arguable claim under s 79 of the Corporations Act.

173    The applicants submit that the full details of how the respondent orchestrated the Asset Strip is not known to them and will not be known until after discovery. Further, the existing state of the particulars properly informs the respondents of the case they have to meet a trial.

174    I do not accept the pleading of knowing involvement at [84]-[85] is manifestly inadequate. As I have observed on a number of occasions, parts of the applicants’ case is one of inference and I am satisfied the pleaded case is sufficient to support the inferences alleged. Insofar as Mr Tyndall is concerned, the pleading of knowing involvement is sought to be inferred from the matters identified in [84]. As against all respondents, the applicants have put forward particulars, cross-referenced to other parts of the pleadings which are sufficient to disclose a reasonable cause of action of knowing involvement on the part of the respondents such that the respondents know the case they have to meet.

175    I decline to strike out [84] and [85].

176    Specifically with reference to Mr Tyndall, the applicants seek to supplement the matters they have pleaded by adding to [77] a proposed [77.15] contained in the Court Book at p 43. Leave will be granted to the application to amend the statement of claim by the addition of the matters in the proposed [77.15].

6. Knowing receipt and assistance claims – respondents’ 4th submissions [39]-[41]; statement of claim [85]-[93]

177    The sixth and final topic raised by the respondents concerns the pleading at [86] of knowing receipt and assistance. The respondents submit this paragraph suffers from the same defects that have previously been submitted, in particular the circularity of “each of Marketlend, Tyndall and [EW]” are alleged to have assisted Mr Cobb, Marketlend and Mr Tyndall in the fraudulent and dishonest design pleaded in [76]. The respondents submit that the particulars cross-referencing to [84.1] are inadequate. I do not accept that submission for the reasons I have set out above when dealing with [84].

178    Next, the respondent submits that [88] and [89] are circular. I do not accept that submission. [88] refers to the pleadings that follow for knowledge of Mr Cobb’s, Marketlend’s and Mr Tyndall’s fraudulent and dishonest design. In [89], the applicants plead the basis upon which Marketlend, EW and Mr Tyndall had actual knowledge of the plan to effect and the happening of the Asset Strip. The pleadings are a combination of direct allegations and allegations from which an inference is sought to be drawn. The respondents know the case they have to meet and I do not consider that the pleadings in [88]-[89] are such that they fail to disclose a reasonable cause of action although as I have noted, [89.1] will be struck out with leave to re-plead.

179    The next submission by the respondents is that the assertions in [91] and [92] contain no particulars, instead there being a statement that “further particulars to be provided after discovery”. The respondents fail to make reference to the cross-reference in [91] and [92] to [89]. The statement that further particulars are to be provided is in addition to that which is already provided in [89].

180    It is for the reasons I have previously given under this heading the respondents know the case they have to meet and this part of the pleading does not fail to disclose a reasonable cause of action.

181    I decline to strike out [85]-[93] of the statement of claim.

Conclusion

182    There will be orders as follows:

(1)    The respondents’ application for summary dismissal is dismissed.

(2)    Save for paragraphs 77.5 and 89.1 the respondents’ application to strike out various paragraphs of Fifo Capital’s claims contained in the statement of claim is dismissed.

(3)    Leave to the applicant to re-plead paragraphs 77.5 and 89.1 and plead paragraph 77.15 in the terms proposed in the Court Book p 43.

(4)    Save for paragraphs 77.5 and 89.1, the third respondent’s application to strike out various paragraphs of the applicants’ claim against Marketlend Pty Ltd and/or Leo Anthony Tyndall be dismissed.

Associate:

Dated:    15 November 2022