Federal Court of Australia

Sharif v Vitruvian Investments Pty Ltd [2023] FCA 426

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiff have leave to amend his statement of claim in the terms expressed in the proposed minute of the amended statement of claim filed with the interlocutory application dated 20 April 2023 and to delete the patent claim in those proceedings.

2.    The plaintiff file and serve an amended statement of claim on or before 8 May 2023.

3.    The plaintiff have leave to amend his reply in accordance with the minute of proposed amended reply filed with the interlocutory application dated 20 April 2023.

4.    The plaintiff has leave nunc pro tunc to file the supplementary witness statement of Ahmad Walid Obaid Sharif dated 14 April 2023. Subject to objections, that supplementary witness statement shall stand as part of the evidence in chief of that witness.

5.    On or before 11 May 2023, the plaintiff do provide particulars of the financial resources that he says would have been available to him (and when) in order to subscribe for shares in Vitruvian Investments Pty Ltd or participate in a capital raising by that company (Particulars).

6.    On or before 11 May 2023, the plaintiff do provide disclosure of the documents that it will rely upon to support the matters relied upon in the Particulars and any documents which are materially inconsistent with those Particulars.

7.    On or before 11 May 2023, the defendant do file an amended defence.

8.    On or before 16 May 2023, the plaintiff do file any further amended reply consequent upon the amended defence.

9.    The plaintiff pay the defendant's costs thrown away by reason of the amendments to the statement of claim.

10.    The plaintiff pay the defendant's costs of the interlocutory application dated 20 April 2023.

11.    There be liberty to the defendant to apply to vary the costs order to provide that the costs be paid forthwith.

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

REASONS FOR JUDGMENT

(Revised from the transcript)

COLVIN J:

1    Mr Ahmad Sharif and Mr Jonathan Gregory founded a company, Vitruvian Investments Pty Ltd (Vitruvian). Mr Sharif claims that they, together with a Mr Andrew Larson, entered into an oral agreement concerning their respective interests in Vitruvian and payments to be made to Mr Sharif for his involvement in the management of the company. Mr Sharif claims that contrary to the agreement, he was excluded from the management of Vitruvian. He also says that contrary to law, his shareholding in Vitruvian was cancelled and he maintains that he is still entitled to those shares. After those events, Vitruvian undertook capital-raisings and Mr Sharif objects to what he says was his inability to participate in those capital-raisings, or at least their consequences for the extent of his interest in the company.

2    Mr Sharif has commenced proceedings against Vitruvian and certain companies in which Mr Gregory has an interest. I will refer to them as the Vitruvian parties. Relevantly for present purposes, Mr Sharif seeks relief under s 233 of the Corporations Act 2001 (Cth) in relation to his shareholding in Vitruvian, as well as damages. By separate proceedings, Vitruvian seeks an order declaring that the share cancellation was not invalid and that subsequent transactions in respect of shares in the company are not invalid. It also seeks an order under s 1322(4)(c) of the Corporations Act that Vitruvian, its directors and officers are relieved from any civil liability arising out of any contravention or failure in relation to the share cancellation.

3    Since early February 2023, both proceedings have been listed for trial commencing on 29 May 2023 and the parties have been directed to undertake the interlocutory steps on a relatively urgent basis in order to enable that trial to occur. The trial is to be of all issues, save that the quantum of any order as to compensation or damages will be determined separately and after the trial of all other issues. On 4 April 2023, the solicitors for Mr Sharif sent proposed amended pleadings in both proceedings to the solicitors for the Vitruvian parties. The main amendment proposed was to add a claim that it was an implied term of the oral agreement that Mr Sharif and Mr Larsen would be afforded the opportunity of participating in any capital-raisings and other share issues to the extent necessary to obviate dilution of their respective shareholdings in Vitruvian.

4    The main amendment was opposed by the Vitruvian parties. One of the objections raised by the defendants to the main amendment concerned the alleged need for further evidence and discovery. On 14 April 2023, the solicitors for Mr Sharif provided a supplementary witness statement and further discovery on the basis that leave to amend would be obtained. Leave was still opposed and Mr Sharif has now brought a formal application for leave to amend.

5    The relevant principles concerning leave to amend are not in issue.

6    The Vitruvian parties say that there has been unexplained delay. In the context of the tight timetable, it is understandable that the Vitruvian parties would be seeking to have these matters raised at the earliest opportunity. However, an affidavit has been provided which sets out the circumstances and the history of the matter in relation to the conduct of the proceedings for Mr Sharif. Whilst there has been some delay, I would not describe it as 'substantial', in the context of a matter that is proceeding according to the timetable. In any event, the principles focus on the practical consequences for the future conduct of the proceedings, particularly whether there will be an unfairness for the other party, that is, the Vitruvian parties, or delay to a trial if the amendment was granted.

7    Next the defendants say that the amendments have no realistic prospects of success because of the requirements of the law as to the circumstances in which a term will be implied. For Mr Sharif it is said that the position of the defendants fails to have regard to the fact that the claims made in the proceedings concern an oral agreement. There are other issues relating to the oral agreement that will go to trial in any event. Much of the evidence relied upon to support the implied term will involve matters that are to be adduced by way of evidence to support other aspects of the claim that is also based upon the oral agreement. In short, this is a case where any contention as to whether the point has merit is appropriately resolved at the hearing.

8    Finally, the defendants say that the amendment will extend the evidence and documents and jeopardise the trial dates. They say that the amendment will give rise to an issue as to whether Mr Sharif had the financial capacity to participate in any share issue, and that in turn will require an investigation of his financial circumstances and the possible provision of expert evidence by a forensic accountant.

9    For Mr Sharif, it is said that in the chronology of events, the amount needed to maintain a substantial interest would have been of the order of $56,000, or at least that will be one aspect of the way in which the case is put if the amendment is allowed. The Vitruvian parties challenge whether Mr Sharif had access to even an amount of that order.

10    It was suggested for the Vitruvian parties that the amendment may require them to engage a forensic accountant because it would be necessary to deal with the evidence that has been provided by way of bank statements as to the financial circumstances of Mr Sharif.

11    It seems to me that the issue raised by the proposed amendment is a confined one. It concerns simply the extent of financial resources available to Mr Sharif that he could call upon and that issue is not so complex as indicates that it would be necessary for a forensic accountant to be engaged in order to examine the available evidence.

12    Rather, the real issue is whether Mr Sharif has nailed his colours to the mast, as it were, to identify precisely what resources he had available to him and has provided to the Vitruvian parties the materials by way of disclosure that bear upon that question. It seems to me that if the amendment that is sought is conditioned upon orders which ensure that those steps are taken, then the prospects of prejudice to the Vitruvian parties is substantially reduced and there is the ability to timetable those matters to happen without jeopardising the trial.

13    So for those reasons, I propose to allow the application to amend, but on terms that would require Mr Sharif to provide particulars of the financial resources to which he says he would have been able to resort and to provide disclosure of documents that would be relied upon to support those particulars, as well as any documents that are materially inconsistent with those particulars.

14    In reaching those conclusions, I have taken into account the fact that a significant part of the case, which relates to what has been described as the 'patent claim', is to be abandoned by Mr Sharif. Although he will continue to rely upon evidence that supported that claim, that aspect of the case will no longer have to be determined or have to be the subject of submissions to be advanced in the course of the hearing.

15    However, it is necessary again for Mr Sharif to make clear that position and to do so promptly. The orders that are to be made should also require the amended pleadings to reflect the position that Mr Sharif will abandon his patent claim. So for those reasons, the application will be allowed on the basis of the conditions that I have indicated.

Associate:

Dated:    9 May 2023