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CFMG Land Limited v MacLaren[2020] QDC 335

CFMG Land Limited v MacLaren[2020] QDC 335

DISTRICT COURT OF QUEENSLAND

CITATION:

CFMG Land Limited v MacLaren [2020] QDC 335

PARTIES:

TAYLOR DAVID PTY LTD ACN 143 938 603

(applicant/plaintiff)

v

GRAEME JOHN MACLAREN

(defendant)

FILE NO/S:

BD 3572/17

DIVISION:

Civil

PROCEEDING:

Application

DELIVERED ON:

18 December 2020, ex tempore

DELIVERED AT:

Brisbane

HEARING DATE:

17 December 2020

JUDGE:

Barlow QC DCJ

ORDER:

  1. The plaintiff’s application filed 12 November 2020 be dismissed.
  2. The costs of and incidental to the application be reserved.
  3. Pursuant to s 28(2) of the Civil Proceedings Act 2011 (Qld), the proceeding be transferred to the Supreme Court of Queensland.
  4. The plaintiff pay the defendant’s costs thrown away by reason of that transfer.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SUMMARY JUDGMENT FOR PLAINTIFF OR APPLICANT – WHEN GRANTED OR REFUSED AND CONDITIONS – plaintiff sues defendant for alleged breach of fiduciary duties as director in acquiring land below market value – plaintiff seeks summary judgment on the basis that the defendant has no real prospect of successfully defending the claim – whether there is a real prospect that the defendant will be able to demonstrate that the plaintiff was fully informed in giving its consent to the defendant to acquire the lots – whether summary judgment should be granted

PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – JURISDICTION – plaintiff’s claim is based, in part, upon a claim for compensation for breach of statutory duties under the Corporations Act 2001 – compensation order for a contravention of a civil penalty provision can only be made a “Court” – whether the District Court is a “Court” for the purposes of the Corporations Act – whether District Court has jurisdiction to determine the proceeding

Civil Proceedings Act 2011, s 28(2)

Corporations Act 2001 (Cth), s 9, s 191, s 1337E

Uniform Civil Procedure Rules 1999, r 292

Agar v Hyde (2000) 201 CLR 552, cited

Angas Law Services Pty Ltd (in liquidation) v Carabelas (2005) 79 ALJR 993, cited

Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232, applied

Maguire v Makaronis (1997) 188 CLR 449, cited

Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2005] QSC 233, cited

Warman International Ltd v Dwyer [1994] QCA 012, cited

COUNSEL:

BWJ Kidston for the plaintiff

MJ May for the defendant

SOLICITORS:

Mahoneys for the plaintiff

Russells for the defendant

Introduction

  1. [1]
    This is an application by the plaintiff for summary judgement on its claim, on the basis that the defendant has no real prospect of successfully defending that claim.  I heard the application yesterday and reserved the matter for judgment today.
  2. [2]
    The plaintiff is, in essence, a property developer.  The defendant was, at relevant times, one of four directors of the plaintiff.  Relevantly, the plaintiff developed a property into a residential estate in New South Wales in what might be termed a joint venture with a company known as Vantage.  The joint venturers, which is how I shall refer to them, were the owners of a joint venture vehicle, to which I shall refer as Dalmatia, that was in fact the developer.  The venturers each owned a 50 per cent interest in Dalmatia and each appointed two directors to its board.  The two directors appointed by the plaintiff were two of its own directors.
  3. [3]
    When the development was completed, four lots had not been sold, as the developer was required to utilise them as a stormwater collection and dispersal system until such time as potential adjoining developments were completed and a stormwater system for the area was installed.  The joint venturers preferred to complete the sale of all lots in order to finalise the development and to distribute final profits.  To that end, Dalmatia’s board discussed offering the lots to each joint venturer to hold pending an ability to complete their development and to sell them then for residential purposes.
  4. [4]
    The plaintiff was not interested in acquiring the lots.  Over a period of time, to describe matters broadly, the directors of Dalmatia and, to a lesser extent, the plaintiff’s directors, discussed who might purchase them.  Ultimately, the defendant bought two lots that had been allocated for the plaintiff, each for $107,000.
  5. [5]
    In this proceeding, the plaintiff alleges that, in buying the lots and doing so for that price, the defendant obtained a benefit or profit by reason of his being a director of the plaintiff and, in doing so, he was in breach of his fiduciary duties as director because, in essence, he did not obtain the plaintiff’s fully informed consent to that purchase.
  6. [6]
    The plaintiff also makes claims under the Corporations Act for breach of the director’s duties and seeks compensation under that Act.  An issue has arisen whether this court has jurisdiction in respect of those claims, or whether only the Supreme Court has, but that’s not necessary for me to determine at this stage, because the plaintiff’s application for summary judgement is based solely on the equitable rights that it asserts as beneficiary of the fiduciary duties owed by its director.
  7. [7]
    The plaintiff alleges that it did not give fully informed consent to the defendant acquiring the two lots, because he failed to inform it of a number of relevant facts, particularly that the price at which he was to buy the lots was, or was likely to be, well below their true market value.  For the purpose of this application, the parties agree that, at that time, the fair market value of each lot was in fact $233,000, although in its statement of claim, the plaintiff claims that they were in fact worth considerably more than that sum.

Summary judgment application

  1. [8]
    The plaintiff seeks summary judgement on the basis that, even accepting the defendant’s case at its highest and accepting the defendant’s evidence in response to the summary judgement application, the defendant has no real prospect of successfully demonstrating at a trial that he obtained the plaintiff’s fully informed consent to him obtaining the benefit that he did.  That benefit, as claimed by the plaintiff, is the difference between the price he paid and the fair market value of the lots.
  2. [9]
    The first question under rule 292 is whether the defendant has no real prospects of successfully defending the claim.  That means real as opposed to fanciful prospects, as stated by Justice Williams in the Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 at paragraphs 11 to 13.  The test is really whether there is a high degree of certainty about the ultimate outcome of the proceeding if it were to go to trial in the ordinary way:  see Agar v Hyde (2000) 201 CLR 552 at pages 575 to 576.
  3. [10]
    The second question is whether there is no need for a trial of the relevant claim.  In certain cases, if there’s a triable issue of law, even if there are no real issues of fact, there is often still a need for a trial.  A summary judgment application should be refused if the court is satisfied that there are circumstances that ought to be investigated, notwithstanding that the defendant cannot identify a specific issue which ought to be tried.
  4. [11]
    The onus is on the plaintiff to satisfy the court of the two requirements set out in rule 292 and only when a prima facie entitlement to summary judgment has been established does the evidentiary burden shift to the defendant.  However, there is no particular requirement in rule 292 as to what a defendant needs to do in order to prevent a court from being satisfied of any, or all, of the matters set out in sub-rule 292(2).
  5. [12]
    Reverting back to this case, during the discussions about who would buy the lots and for what price, after the board of the plaintiff decided that it did not wish to buy them, there were various potential buyers.  At first, each of the defendant and Mr Watson, another director of the plaintiff, expressed an interest.  Then, Mr Matigian, another director of the plaintiff, said that his father had expressed an interest.  Finally, though, only the defendant was prepared to buy those lots.
  6. [13]
    In the course of those considerations, Dalmatia told the defendant, who told at least Mr Watson, that, if the lots were able to be sold as residential lots at the time, they would have each been marketed for a price of $565,000.  Dalmatia then obtained a draft valuation of the lots, as they were, from a person who appears to be an independent valuer, in which he expressed the opinion that they were each worth $210,000.  That draft valuation was also sent to Mr Watson.
  7. [14]
    Some criticisms of the draft valuation were made by various people, to the effect that it did not sufficiently take into account the risks associated with holding the lots.  In particular, the period for which they may have had to be held before being able to be completed and sold as residential lots and the costs of completing them, and holding them, were uncertain.  They may have been sellable as residential lots within two or three years, but the delay could have been much longer.  These, and other uncertainties, were not clearly taken into account by the valuer according to the people who criticised the draft valuation.
  8. [15]
    Mr Matigian is a real estate valuer and owns a valuation company.  Instead of Dalmatia reverting to the valuer with criticisms and questions, Mr Matigian arranged for one of his company’s valuers to value the lots, taking account of what were said to be all relevant factors and risks.  That valuer valued them each at $107,000, which is the price that the defendant paid for them.
  9. [16]
    The defendant says that, on the basis of a number of facts summarised in paragraph 55 of the submissions filed by counsel on his behalf,  he has a real prospect of demonstrating that the plaintiff was fully informed in giving its consent to the defendant acquiring the lots.  He says that the court, in deciding that question, will have to examine all the circumstances and the information that the plaintiff, by its directors, had, in order to determine whether or not it was fully informed.  He points out that there is no precise formula which will determine, in all cases, if fully informed consent has been given and, in that respect, defence counsel referred to Maguire v Makaronis (1997) 188 CLR 449 at page 466.
  10. [17]
    The plaintiff relies on several cases as showing what may constitute fully informed consent in the context of an alleged breach of fiduciary duties by a director of a company.  In particular, the plaintiff’s counsel relied upon statements to the effect that full disclosure of the relevant facts must be made in advance of a decision.  The consent must be made after full and frank disclosure of all material facts, with the fiduciary having offered the opportunity to the beneficiary, who declined it and the beneficiary ought to have the fullest information given to them and ought not be driven to inquiry.  In that respect, the plaintiff’s counsel referred to Angas Law Services Pty Ltd (in liquidation) v Carabelas (2005) 79 ALJR 993 at 1002, Warman International Ltd v Dwyer [1994] QCA 012 and Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2005] QSC 233.
  11. [18]
    The plaintiff submits that the matters relied on by the defendant, as summarised particularly in paragraph 55 of the defendant’s outline of submission, cannot constitute full information.  In particular, it points out that the defendant did not expressly and clearly disclose that the proposed purchase would give him a substantial benefit because the price was, or may well have been, well below the fair market value of the lots.
  12. [19]
    The plaintiff also says that, even if all relevant facts had been disclosed to it over the course of the discussions, which was over a period of some six months or so, that would not amount to its consent being fully informed as, to be fully informed, all relevant facts should really be disclosed together at the time the decision to consent is sought and made.  Mr Kidston in this respect, pointed to the requirements of “notice” in section 191 of the Corporations Act as a statutory expression of the equitable principle that is applicable.
  13. [20]
    I accept the principles on which the plaintiff relies.  On my relatively brief overview of the facts and the law, my preliminary view is that the plaintiff has a strong case and good prospects of success in its claim.  However, I do not consider that its prospects of success are so overwhelming that the defendant has no real prospect of success.  In order to consider that, and in order to determine the issues, it will be necessary for the court to read carefully and to hear the evidence to appreciate, and make findings about, the full circumstances in which the information was obtained and provided, to whom it was provided, as well as the nature and extent of the information provided.  I consider that a trial of the proceeding is necessary in order to consider and to make findings on these matters.
  14. [21]
    There is also a real issue about the true value of the properties at the time.  It is not in my view sufficient for the plaintiff to assert that, for the purposes of this application, it will accept that each lot was worth a particular figure when, in the proceeding, it maintains that they may well be worth considerably more.  The plaintiff has not abandoned that contention, generally.
  15. [22]
    In the circumstances, and particularly given the great care with which the court must consider the exercise of its discretion under rule 292, I do not consider this to be a case in which I should grant summary judgement for the plaintiff.  I therefore dismiss the plaintiff’s application.
  16. [23]
    Although, ordinarily, costs of such an application would follow the event, it does seem to be me that in this case it’s appropriate to reserve the costs of the application and that they be determined having regard to the outcome of the trial.  I hesitate only because there’s a possibility that the trial will not be heard in this court, because of the question of jurisdiction in respect of the Corporations Act matters.  But it seems to me that a trial judge could appropriately consider the appropriateness of this application having been brought, including at this stage of the proceeding, where the trial has been set down in the absence of realisation of the jurisdictional issues, to commence in February next year.  In those circumstances, I will reserve the costs of the plaintiff’s application.

Jurisdiction of the District Court to hear the proceeding as a whole

  1. [24]
    As I said in my reasons for refusing the application for summary judgement, the plaintiff’s claim is based, in part, upon a claim for compensation for breach of statutory duties under the Corporations Act.  That Act, of course, is an Act of the Commonwealth.  The claim is made under section 1317H of that Act, which provides that a “Court” may order a person to compensate a corporation for a contravention of a civil penalty provision.  “Court” is defined in the Act as meaning any of the following courts:  the Federal Court, the Supreme Court of a state or territory, the Family Court of Australia or a court to which section 41 of the Family Law Act applies.  This Court, of course, is none of those.
  2. [25]
    Section 1337E provides certain jurisdiction to lower courts, but that jurisdiction does not apply to superior court matters as defined in section 9 of the Act, which is “a civil matter that this act clearly intends (for example, by use of the expression “the Court”) to be dealt with only by a superior court.”  A superior court also means the Federal Court of Australia, the Supreme Court of a state or territory, the Family Court, or a state Family Court.
  3. [26]
    The plaintiff today indicates that it continues to wish to press its claims under the Corporations Act.  I’m therefore satisfied that this court does not have jurisdiction to hear and determine the proceeding as a whole, because those parts of the claims made in the proceeding are beyond its jurisdiction.
  4. [27]
    It’s clear to me that the Supreme Court of Queensland has jurisdiction for the proceeding and therefore, that it’s appropriate to transfer the proceeding to that court by an order pursuant to subsection 28(2) of the Civil Proceedings Act.
  5. [28]
    The defendant seeks an order that the plaintiff pay the defendant’s costs thrown away by reason of the transfer to the Supreme Court, on the basis that the plaintiff chose this jurisdiction as the one in which it would commence its proceeding, notwithstanding that it was beyond the jurisdiction of this court and, although neither the plaintiff nor the defendant was, at the time, nor until very recently, conscious of the jurisdictional issue, nevertheless, it was the plaintiff who chose to bring it in this court and it has been necessary to transfer it, which will clearly lead to costs being incurred by both parties that would not have been incurred had the plaintiff commenced in the correct jurisdiction.
  6. [29]
    The plaintiff submits that neither party appreciated the jurisdictional issue, it was not raised by the defendant and, in the circumstances, the costs thrown away should simply be costs in the proceeding, to fall as they do after the trial.
  7. [30]
    In my view, notwithstanding that neither party appreciated the jurisdictional issue, the claim is brought in this court as a result of the plaintiff having commenced in this court and claiming, and continuing to claim, as is its right, relief under the Corporations Act.  In the circumstances, properly advised, it would not have brought the proceeding in this court and it’s appropriate that it pay any costs thrown away.  I therefore order that this proceeding be transferred to the Supreme Court of Queensland and I order that the plaintiff pay the defendant’s costs thrown away by reason of that transfer.
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Editorial Notes

  • Published Case Name:

    CFMG Land Limited v MacLaren

  • Shortened Case Name:

    CFMG Land Limited v MacLaren

  • MNC:

    [2020] QDC 335

  • Court:

    QDC

  • Judge(s):

    Barlow QC DCJ

  • Date:

    18 Dec 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Agar v Hyde (2000) 201 CLR 552
2 citations
Angas Law Services Pty Ltd (in liq) v Carabelas (2005) 79 ALJR 993
2 citations
Deputy Commissioner of Taxation v Salcedo[2005] 2 Qd R 232; [2005] QCA 227
2 citations
Maguire and Tansey v Makaronis (1997) 188 CLR 449
2 citations
Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2005] QSC 233
2 citations
Warman International Ltd v Dwyer [1994] QCA 12
2 citations

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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