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Thorne Developments Pty Ltd v Laird[2021] QSC 90

Thorne Developments Pty Ltd v Laird[2021] QSC 90

SUPREME COURT OF QUEENSLAND

CITATION:

Thorne Developments Pty Ltd v Laird [2021] QSC 90

PARTIES:

THORNE DEVELOPMENTS PTY LTD

(plaintiff)

v

GRAHAM DAVID LAIRD AS TRUSTEE OF THE LAIRD FAMILY TRUST

(first defendant)

RICK WILLIAMSON INVESTMENTS PTY LTD

(second defendant)

GRAHAM DAVID LAIRD

(third defendant)

RICHARD JOHN WILLIAMSON

(fourth defendant)

FILE NO/S:

BS No 3570 of 2014

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

11 May 2021

DELIVERED AT:

Brisbane

HEARING DATE:

18 June 2020

JUDGE:

Davis J

ORDER:

  1. The plaintiff should have leave to amend to plead:

(a) a claim against the third defendant and the fourth defendant as principal debtors;

(b) a claim against the third defendant and fourth defendant as chargors;

(c) a claim against the fourth defendant for his removal as a director of Transparent Enterprises Pty Ltd;

(d) a claim against the fourth defendant for breach of the personal covenants contained in the mortgage.

  1. The plaintiff should not have leave to plead a case based on estoppel by convention.
  2. The plaintiff shall pay the defendants’ costs of the application and the costs incurred by the amendments, such costs only being payable upon final judgment in the proceedings or earlier order.
  3. The parties shall be heard on the question of further final orders.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – FORM OF PLEADING – OTHER MATTERS – AMENDING PLEADING – where the plaintiff company Thorne Developments Pty Ltd (Thorne Developments) seeks to amend its claim and its third further amended statement of claim – where Mr Bradley Thorne is the sole director of Thorne Developments – where the application is opposed – where Transparent Enterprises Pty Ltd (Transparent Enterprises) operated an adult entertainment club in Mackay and planned to expand to Brisbane and Townsville – where Thorne Developments owned one half of the issued share capital in Transparent Enterprises – where the third defendant, Mr Graham Laird, owned the balance of the issued shares in Transparent Enterprises – where Mr Laird and Mr Thorne were the sole directors of Transparent Enterprises – where in September 2011 the regulatory authorities notified Transparent Enterprises its liquor licenses would be discontinued if Mr Thorne held any interest in the company – where an agreement was reached between Mr Laird, Mr Thorne and Mr Williamson, the fourth defendant who controlled Rick Williamson Investments Pty Ltd, the second defendant, to relinquish Mr Thorne’s interest in Transparent Enterprises – where two contracts were then executed by the parties to effect the agreement; firstly, a Share Sale Agreement and secondly,  a Loan Agreement – where Mr Laird and Mr Williamson provided guarantees of performance under the Share Sale Agreement – where, at the time of these proceedings, the repayments due under the Loan Agreement had not been made – where Thorne Developments submit that the intention of the Share Sale Agreement has been effected – where Thorne Developments seeks to recover the monies owed under the terms of the Share Sale Agreement, the Loan Agreement and the guarantee – where the defendants counterclaim for the monies paid for the shares to date pursuant to the terms of the Share Sale Agreement, Loan Agreement and guarantee on the basis that Thorne Developments had no capacity to sell the shares in Transparent Enterprises – where the plaintiff seeks leave to amend its pleadings to abandon allegations and claims made in earlier versions – where, if given leave, Thorne Developments intends to plead causes of action for which the limitation period has expired – whether the plaintiff should be given leave to amend its pleadings

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – ILLEGAL AND VOID CONTRACTS – EFFECT OF ILLEGALITY OR INVALIDITY – IN GENERAL – where in December 2011, three months prior to the execution of the Share Sale Agreement and the Loan Agreement, Thorne Developments was deregistered pursuant to the relevant provisions of the Corporations Act 2001 – where in September 2013, Thorne Developments was reinstated pursuant to the relevant provisions of the Corporations Act 2001 – where Thorne Developments seeks that the court validate the contractual arrangements entered into during the period of deregistration – whether the court should validate the Share Sale Agreement and Loan Agreement

Corporations Act 2001 (Cth), s 601AB, s 601AH

Uniform Civil Procedure Rules 1999, r 375, r 376

Body Corporate for Sun City Resort CTS 24674 v Sunland Constructions Pty Ltd (No 2) [2011] QSC 42, cited

Borsato v Campbell [2006] QSC 191, cited

Browning v ACN 149 351 413 Pty Ltd (in liq) (formerly known as Enviren Constructions Pty Ltd) [2016] QCA 169, followed

Central Sawmilling No 1 Pty Ltd v State of Queensland [2003] QCA 311, cited

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226, followed

Mineralogy Pty Ltd v Sino Iron Pty Ltd & Ors (No 6) (2015) 329 ALR 1, cited

Re Piccoli Tesori Pty Ltd (deregistered); Ex parte Bertuol (2006) 151 FCR 109, cited

Zinc Corporation Pty Limited & Ors v Pasminco Australia Ltd & Ors [2005] VSC 62, followed

Rolleston Coal Holdings Pty Ltd v ICRA Rolleston Pty Ltd [2020] QSC 352, cited

COUNSEL:

P Land for the plaintiff/applicant

M De Waard for the defendants/respondents

SOLICITORS:

P Land appeared by direct brief for the plaintiff/applicant

Macrossan & Amiet for the defendants/respondents

  1. [1]
    The plaintiff, Thorne Developments Pty Ltd (Thorne Developments), applies to amend its claim and its third further amended statement of claim.  The application is opposed.

Background

  1. [2]
    Transparent Enterprises Pty Ltd (Transparent Enterprises) operated an adult entertainment club in Mackay.  It was planning also to operate similar businesses in Brisbane and Townsville.
  2. [3]
    Thorne Developments owned one half of the issued share capital in Transparent Enterprises. 
  3. [4]
    Graham David Laird (the third defendant) owned the other issued shares in Transparent Enterprises.  Although Mr Laird was the trustee of the Laird Family Trust, the share in Transparent Enterprises held by him before the transactions the subject of the current dispute, was held by him beneficially, and not on trust.
  4. [5]
    Bradley James Thorne was the sole director of Thorne Developments.  He and Mr Laird were the only directors of Transparent Enterprises.
  5. [6]
    Transparent Enterprises was the holding company of, and owned the shares in, various companies collectively known as “The Showbar Group”.  Mr Thorne and Mr Laird were directors of each of those companies.
  6. [7]
    In about September 2011, it became apparent that the regulatory authorities would not continue Transparent Enterprises’ liquor licences if Mr Thorne held any interest in the company.  Mr Thorne ultimately went bankrupt on 26 March 2012.
  7. [8]
    Richard John Williamson, who is the fourth defendant, controlled Rick Williamson Investments Pty Ltd (Rick Williamson Investments), who is the second defendant.
  8. [9]
    Negotiations proceeded from September 2011 between Mr Thorne, Mr Laird and Mr Williamson and by December an arrangement had been agreed upon, namely:
    1. (a)
      Thorne Developments would sell its shares in Transparent Enterprises to Mr Laird as Trustee of the Laird Family Trust (Mr Laird as Trustee) and Rick Williamson Investments;
    2. (b)
      Mr Thorne would resign his directorship in Transparent Enterprises and each of the companies in the Showbar Group;
    3. (c)
      the share price would be determined by Transparent Enterprises’ accountant who would prepare a valuation.
  9. [10]
    On 12 December 2011, $95,000 was paid by Rick Williamson Investments to the trust account of a solicitor acting for Thorne Developments in part payment of the proposed purchase price.
  10. [11]
    Once the purchase price was ascertained, two contracts were executed by the parties on 28 February 2012.  The first was a Share Sale Agreement.
  11. [12]
    By the terms of the share sale agreement:
    1. (a)
      Thorne Developments sold its shareholding in Transparent Enterprises to Mr Laird as Trustee and to Rick Williamson Investments;
    2. (b)
      Mr Laird as Trustee and Rick Williamson Investments agreed to pay a purchase price to Thorne Developments of $1,871,775;
    3. (c)
      Mr Laird and Mr Williamson guaranteed and indemnified to Thorne Developments the performance of the share sale agreement by Mr Laird as Trustee and Rick Williamson Investments;
    4. (d)
      Clause 5.1 of the share sale agreement provided as follows:

“5.1Payment on Completion

On Completion:

  1. (a)
    The Buyers[1] will procure that consideration in the amount of $1,871,775.00 apportioned as set out in Schedule 1 to be paid to the Seller,[2] to be paid as follows:
  1. (i)
    $95,000 paid into the Trust Account of Reardon & Associates on 12th December, 2011;
  1. (ii)
    $300,000.00 to be paid to Thorne Developments Pty Ltd upon the Completion Date;
  1. (iii)
    $1,476,775.00 to be paid in accordance with the Loan Agreement between the Seller and the Buyers
  1. (b)
    It is acknowledged that the proportion of consideration in clause 5.1(a)(i) has been paid into a bank account and is available to the Seller.”
  1. [13]
    The payments required by clauses 5.1(a)(i) and 5.1(a)(ii) have been paid.
  2. [14]
    Clause 5.1(a)(iii) refers to the second agreement entered into between the parties, namely the Loan Agreement.  The Loan Agreement effected what is colloquially known as “vendor finance”.  The right to the purchase price under the Share Sale Agreement is converted to a right to recover a debt.  The debt here was $1,476,775, being the unpaid balance under the Share Sale Agreement as identified in clause 5.1.
  3. [15]
    The Loan Agreement provided for repayment by instalments as follows:

“Repayment Instalments

REPAYMENT - the Borrower will pay the Loan in the sum of $1,476, 775.00 by way of the following instalments:-

  1. (a)
    $540,888.00 on or before 31st day of March 2012;
  1. (b)
    $935,887.00 on or before 31st day of August 2012;

EARLY REPAYMENT - the Borrower will have the right to make early repayment of the whole of the loan at any time.”

  1. [16]
    Although Mr Laird and Mr Williamson guaranteed the performance of Mr Laird as Trustee and Rick Williamson Investments under the Share Sale Agreement, no guarantees were given of the obligations of those entities under the Loan Agreement.[3]
  2. [17]
    To partly secure the loan, second mortgages were registered over properties owned by Mr Williamson.  They have been sold with no proceeds flowing to Thorne Developments.  The repayments due under the Loan Agreement have not been made.  Therefore, on Thorne Developments’ case, it is owed $1,476,775.
  3. [18]
    Complicating all this is the fact that on 4 December 2011, about three months before the Share Sale Agreement and Loan Agreement were executed, Thorne Developments was deregistered pursuant to s 601AB(1) of the Corporations Act 2001 (Cth).  On 4 September 2013, Thorne Developments was reinstated pursuant to s 601AH(1) of the Corporations Act.
  4. [19]
    By s 601AH(5), upon reinstatement of Thorne Developments, it continued in existence from the date of its deregistration.  Notwithstanding reinstatement, contractual arrangements entered into during the period of deregistration are invalid unless validated by the court under s 601AH(3)(d).  Those orders are sought in the current proceedings.
  5. [20]
    However, the shares in Transparent Enterprises were purportedly transferred by Thorne Developments to Mr Laird as Trustee and Rick Williamson Investments.  Thorne Developments say that the intended effect of the Share Sale Agreement, namely the transfer of control of Transparent Enterprises and the Showbar Group of companies to Mr Laird as Trustee and Rick Williamson Investments has been effected.
  6. [21]
    Proceedings were commenced in the Supreme Court of New South Wales on 8 November 2013 and were later transferred to this court.  The proceedings seek to recover the sum of $1,476,775 under the terms of the Share Sale Agreement, the guarantee and the Loan Agreement.
  7. [22]
    Various versions of the claim and statement of claim have been filed.  The defendants plead, in essence, that Thorne Developments had no capacity to sell the shares in Transparent Enterprises.  Due to its deregistration, Thorne Developments did not own them.  The defendants counterclaim for the return of the $395,000 already paid for the shares.
  8. [23]
    Patrick Norman Casey is now the sole director of Thorne Developments.  He has been a director since 18 February 2014, although since then there have been other directors.  He has been the only director since 8 November 2019.  He has sworn an affidavit which, in some respects, is unsatisfactory.  Some of it, at least, is sworn based on obvious hearsay without identification of the sources of his information and without him swearing as to his belief of its truth.  However, it is clear from his affidavit and from facts alleged which appear to be uncontentious, that the businesses seem to be under the control of Mr Laird and Mr Williamson.  Neither Thorne Developments nor Mr Thorne has control of the businesses, Transparent Enterprises or the Showbar Group and the businesses continue to operate.
  9. [24]
    On 14 August 2015, upon application by the defendants, Byrne SJA ordered that Thorne Developments provide security for costs in the following form:

“1. The Plaintiff provide security, within 14 days, for the defendants’ costs pursuant to rule 670 of the UCPR by the Plaintiff’s director, Patrick Norman Casey providing the defendants with a written guarantee and indemnity whereby he agrees to be personally liable for any costs order made against the Plaintiff in these proceedings except the Costs Orders dated 18 May 2015 and 9 June 2015.

  1. The Plaintiff’s director, Patrick Norman Casey, be restrained until further order, from disposing of or encumbering the property situated at 19 Dennis Street, South Mackay in the State of Queensland, more particularly described as Lot 34, on RP 727939, being that land contained in title reference 20940205.”

The new pleading

  1. [25]
    The proposed fourth further amended statement of claim is a substantial redraw of earlier versions of the statement of claim.  The proposed amendments to the claim mirror the claims now made in the proposed fourth further amended statement of claim.
  2. [26]
    By the proposed new pleading, various allegations and claims made in earlier versions are sought to be abandoned.  Mr de Waard of counsel, who appeared for the defendants, does not object to the abandonment of those allegations and claims.
  3. [27]
    Five new causes of action are sought to be added.  They can be described as:

“a. a claim against the Third Defendant and the Fourth Defendant as principal debtors;

b. a claim against the Third Defendant and the Fourth Defendant as chargors;

c. a claim against the Fourth Defendant for his removal as a director of TEPL;[4]

d. a claim against the Defendants that they are estopped by convention from denying that they are bound by the SSA[5] and the LA;[6] and

e. a claim against the Fourth Defendant for breach of the personal covenant of the second registered mortgage.”[7]

  1. [28]
    Mr de Waard submits that, irrespective of the usual discretionary considerations in allowing amendments, the pleading of them is deficient anyway.

Claim against the third defendant and the fourth defendant as principal debtors

  1. [29]
    Paragraph 47A of the proposed pleading alleges this:

“47A. The Plaintiff repeats and relies upon the facts alleged in paragraphs 22, 43A, 43B, 45, 46, 46A, 46B, 46C, 46D, 46E, 46F, 46G, 46H and 47 hereof and says that subject to validation of the Share Sale Agreement and the Loan Agreement:

  1. (a)
    the First Defendant and the Second Defendant are obliged to pay to the Plaintiff the unpaid price for the shares, in the amount of $1,476,775 jointly and each of them severally as provided by Clause 1.2(3) of the Loan Agreement; or
  1. (b)
    the Third Defendant is obliged to pay that amount of $1,476,775 as provided by Clauses 1.2(5) and (8) of the Loan Agreement.”
  1. [30]
    The first defendant is Mr Laird as Trustee.  The second defendant is Rick Williamson Investments, both parties to the Loan Agreement.  The third defendant is Mr Laird, who is not.
  2. [31]
    What is pleaded at paragraph 47A(b) is that Mr Laird, in his own capacity,[8] is principally liable.  Thorne Developments pleads clause 1.2(5) of the Loan Agreement.  The plea, which is at paragraph 34, is as follows:

“34. Clause 1.2(5) of the Loan Agreement is as follows:-

‘(5) A party which is a trustee is bound both personally and in its capacity as trustee in both cases.’”

  1. [32]
    Clause 8 of the Loan Agreement is pleaded at paragraph 40 of the proposed statement of claim.  Paragraph 40 provides:

“40. Clause 8 of the Loan Agreement is in the following terms:

Trust Powers

‘Where a Borrower has executed this agreement in his capacity as a trustee of a trust (‘Trust’) whether or not the fact that the Borrower is a trustee is disclosed to the Lender the Borrower acknowledges that this agreement is binding on the Borrower personally and in its capacity as trustee of the Trust and that the Lender’s right of recourse extends to both the assets of the Borrower personally and the assets of the Trust.’”

  1. [33]
    Paragraph 47A of the proposed pleading pleads the case against “the Third Defendant” which is “Graham David Laird as Trustee of the Laird Family Trust” and having done that, by sub-paragraph (b), relies upon clauses 1.2(5) and 8 to attribute liability to the “third defendant” which is Mr Laird.
  2. [34]
    The pleading against Mr Laird supports the claim against him.
  3. [35]
    There is, I think, a second basis for Mr Laird in his personal capacity and Mr Williamson to be liable as principal debtors.  That is, the guarantees given by them of performance by Mr Laird as Trustee and Rick Williamson Investments under the Share Sale Agreement.  Clauses 14.19 and 14.20 of the Share Sale Agreement are the clauses which provide the guarantees.  They are, relevantly, in these terms:

“14.19 Personal Guarantees for the Buyer

The Guarantor unconditionally and irrevocably:

  1. (a)
    Guarantees the obligations of the Buyers to pay any sums of money payable by the Buyers under this agreement or to perform any other obligations under this agreement;
  1. (b)
    Indemnifies the Seller against any loss or liability the Seller incurs arising from or connected with the failure of the Buyers to perform their obligations under this agreement; and
  1. (c)
    Charges the guarantor real and personal estates with payment of all sums that may become payable by the guarantor.

14.20 Terms of Guarantee

  1. (a)
    The guarantee contained in clause 14.19:
  1. (i)
    is a principal obligation and will not be treated as ancillary or collateral to any other right or obligation however created or arising;
  1. (ii)
    may be enforced against the Guarantor without the Seller first being required to exhaust any remedy the may have against the Buyers;
  1. (iii)
    is a continuing guarantee and indemnity for the whole of the Buyer’s obligations under this agreement and will be irrevocable and will remain in full force and effect until discharged; and
  1. (iv)
    will not be considered as wholly or partially discharged by the performance at any time of any of the Buyer’s obligations under this agreement or by any settlement of account or by any other matter or thing whatever and will apply to the present and future scope of the Buyer’s obligations under this agreement;
  1. (b)
    The liability of a Guarantor is absolute and will not be affected by any act, omission, matter or thing which but for this clause might operate to release or otherwise exonerate the Guarantor from the Guarantor’s obligations in whole or in part including without limiting the generality of the foregoing:

[What follows is a list of factors which do not affect the liability under the guarantee.]”

  1. [36]
    It is then pleaded at paragraphs 49 and 49A:

“49. The Plaintiff repeats and relies upon the facts alleged in paragraphs 6, 8, 9, 10, 11, 15, 18, 19, 20, 21, 22, 25, 25A, 26, 26A, 27, 28, 29, 30, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 45, 47 and 48 hereof.

49A. On the proper construction of Clause 14.19 and Clause 14.20 of the Share Sale Agreement dated on 28 February 2012, each of the Third and Fourth Defendants unconditionally and irrevocably:

  1. (a)
    guarantee the obligations of the First and Second Defendants to pay any sums of money payable by the First Defendant and the Second Defendant under the Share Sale Agreement or to perform any other obligations under the Share Sale Agreement;
  1. (b)
    indemnified the Plaintiff against any loss or liability the Plaintiff incurs arising from or connected with the failures of the First Defendant and the Second Defendant to perform their obligations under the Share Sale Agreement that it may suffer if the borrower under the Loan Agreement does not pay the borrowed amount;
  1. (c)
    made themselves liable as principal debtors.”
  1. [37]
    It is then pleaded at paragraphs 49 and 49A that on a proper construction of the Share Sale Agreement, and in reliance upon the earlier allegations referred to in the paragraphs mentioned in paragraph 49, that a personal liability arises.
  2. [38]
    Thorne Developments’ case is:
    1. (a)
      Mr Laird is principally liable for the debt due under the Loan Agreement because of clauses 8 and 12.5;
    2. (b)
      Mr Williamson and Mr Laird are personally liable for money due under the Share Sale Agreement because of the guarantees.
  3. [39]
    However, the proposed pleading does not properly comprehend the transaction effected by both the Share Sale Agreement and the Loan Agreement.
  4. [40]
    In broad terms:
    1. (a)
      the Share Sale Agreement is meant to effect a sale of the shares for a consideration of $1,871,775;
    2. (b)
      by the Share Sale Agreement, the sum of $395,000 is to be paid by completion;
    3. (c)
      Thorne Developments then advances the balance of $1,476,775 to the purchasers of the shares, namely Mr Laird as Trustee and Rick Williamson Investments who notionally pay that sum to Thorne Developments;
    4. (d)
      then, the sum notionally advanced is to be repaid in two instalments, one on 31 March 2012 of $540,888 and one on 31 August 2012 of $935,887.
  5. [41]
    If Mr Laird and Mr Williamson guaranteed the obligations of Mr Laird as Trustee and Rick Williamson Investments under the terms of the Share Sale Agreement, but not under the Loan Agreement, then, prima facie, once the purchase price has been paid (as it seems notionally to have been), the obligations of Mr Laird as Trustee and Rick Williamson Investments under the Loan Agreement have been discharged and therefore any liability under the guarantees has been discharged.
  6. [42]
    I have previously set out Clause 5.1 of the Share Sale Agreement. It is convenient to do so again and emphasis some parts:

“5 Payment

5.1 Payment on Completion

On Completion:

  1. (a)
    the Buyers will procure that consideration in the amount of $1,871,775.00 apportioned as set out in Schedule 1 to be paid to the Seller, to be paid as follows:
  1. (i)
    $95,000.00 paid into the Trust Account of Reardon & Associates on the 12th December, 2011;
  1. (ii)
    $300,000.00 to be paid to Thorne Developments Pty Ltd upon the Completion Date;
  1. (iii)
    $1,476,775.00 to be paid in accordance with the Loan Agreement between the Seller and the Buyers.
  1. (b)
    It is acknowledged that the proportion of consideration in clause 5.1(a)(i) has been paid into a bank account and is available to the Seller.”
  1. [43]
    The “Buyers” are defined as Mr Laird as Trustee and Rick Williamson Investments.  It is at least arguable that on a proper construction of clause 5.1(iii) of the Share Sale Agreement, Mr Laird and Rick Williamson Investments covenant (by force of the Share Sale Agreement, not by force of the Loan Agreement) to procure the sum of $1,476,775 “to be paid in accordance with the Loan Agreement”.  In other words, a contractual obligation of Mr Laird and Rick Williamson Investments to repay the loan of $1,476,775 may come from clause 5.1(iii) of the Share Sale Agreement.  If that is the case, then Mr Laird and Mr Williamson, on a proper construction of the guarantees contained in the Share Sale Agreement, have guaranteed the obligations under clause 5.1(iii), and thereby guaranteed effectively the obligations of Mr Laird as Trustee and Rick Williamson Investments under the Loan Agreement.
  2. [44]
    With all due respect to the author of the proposed pleading, I find it quite confusing.  It largely consists of a reconstruction of a number of clauses of the Share Sale Agreement (including the guarantee) and then allegations are made as to the liability of the various defendants.  The proposed pleading may have intended to allege that clause 5.1(iii) of the Share Sale Agreement contains a covenant by Mr Laird as Trustee and Rick Williams Investments to pay $1,476,775 pursuant to the Loan Agreement and that Mr Laird and Mr Williamson have guaranteed that obligation and assumed (by the terms of the guarantee) a principal liability.[9]  That, though, is not clear from the pleading.
  3. [45]
    Thorne Developments accepts that it is attempting to plead a cause of action for which the limitation period has expired.  Rules 375 and 376 of the Uniform Civil Procedure Rules 1999 provides:

“375 Power to amend

  1. (1)
    At any stage of a proceeding, the court may allow or direct a party to amend a claim, anything written on a claim, a pleading, an application or any other document in a proceeding in the way and on the conditions the court considers appropriate.
  1. (2)
    The court may give leave to make an amendment even if the effect of the amendment would be to include a cause of action arising after the proceeding was started.
  1. (3)
    If there is misnomer of a party, the court must allow or direct the amendments necessary to correct the misnomer.
  1. (4)
    This rule is subject to rule 376.

376 Amendment after limitation period

  1. (1)
    This rule applies in relation to an application, in a proceeding, for leave to make an amendment mentioned in this rule if a relevant period of limitation, current at the date the proceeding was started, has ended.
  1. (2)
    The court may give leave to make an amendment correcting the name of a party, even if the effect of the amendment is to substitute a new party, only if—
  1. (a)
    the court considers it appropriate; and
  1. (b)
    the court is satisfied that the mistake sought to be corrected—
  1. (i)
    was a genuine mistake; and
  1. (ii)
    was not misleading or likely to cause any reasonable doubt as to the identity of the person intending to sue or intended to be sued.
  1. (3)
    The court may give leave to make an amendment changing the capacity in which a party sues, whether as plaintiff or counterclaiming defendant, only if—
  1. (a)
    the court considers it appropriate; and
  1. (b)
    the changed capacity in which the party would then sue is one in which, at the date the proceeding was started by the party, the party might have sued.
  1. (4)
    The court may give leave to make an amendment to include a new cause of action only if—
  1. (a)
    the court considers it appropriate; and
  1. (b)
    the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment.”
  1. [46]
    There are many cases where consideration has been given to the approach to the exercise of discretion to allow amendments generally, and specifically, to allow amendments out of time.[10]  It is unnecessary to descend into an analysis of those decisions.  Here, the pleading of new causes of action based on contracts which have been pleaded in the first statement of claim filed should be allowed.  All that is added to the case is argument as to the proper construction of the Share Sale Agreement (including the guarantee) and the Loan Agreement.  There are unlikely to be any further witnesses and the defendants do not point to any specific prejudice.

Claim against Mr Laird and Mr Williamson as chargors

  1. [47]
    Mr de Waard submits that there is nothing supporting the prayer for relief claiming declarations that Thorne Developments is entitled to an equitable charge over the property of Mr Laird and Mr Williamson.
  2. [48]
    The relevant prayer for relief is contained in paragraphs 49D(a) and (b) as follows:

“49D. In the alternative to the relief claimed in paragraph 49B hereof the Plaintiff pursuant to s. 601AH(3)(d) of the Corporations Act 2001 claims against the Third Defendant and the Fourth Defendant as chargors:-

  1. (a)
    a declaration that on the proper construction of Clause 14.19(c) of the Share Sale Agreement and in the events that have happened the Plaintiff is entitled to an equitable charge over all real estate and personal property including shares, cash, and consulting agreements owned by the Third Defendant, either wholly or partly and/or any Trust of which the Third Defendant is the sole trustee and a beneficiary thereof whether such real estate and personal property is situated in the State of Queensland or elsewhere in Australia as at 31 March 2012 in the sum of $1,476,775 plus interest calculated pursuant to Item 9 and/or Clause 3.1 of the Loan Agreement from 31 March 2012, or in the alternative pursuant to s 58(3) of the Civil Proceedings Act 2011 at a rate this Honourable Court considers appropriate from 31 August 2012 to date of judgment;
  1. (b)
    a declaration that on the proper construction of Clause 14.19(c) of the Share Sale Agreement and in the events that have happened the Plaintiff is entitled to an equitable charge over all real estate and personal property including shares, cash, and consulting agreements owned by the Fourth Defendant, either wholly or partly and/or any Trust of which the Fourth defendant is the sole trustee and a beneficiary thereof whether such real estate and personal property is situated in the State of Queensland or elsewhere in Australia, as at March 2012 in the sum of $1,476,775 plus interest calculated pursuant to Item 9 and/or Clause 3.1 of the Loan Agreement from 31 March 2012, or in the alternative pursuant to s 58(3) of the Civil Proceedings Act 2011 at a rate this Honourable Court considers appropriate from 31 August 2012 to date of judgment; …”
  1. [49]
    Clause 14.19 of the Share Sale Agreement provides:

“14.19 Personal Guarantees for the Buyer

The Guarantor unconditionally and irrevocably:

  1. (a)
    Guarantees the obligations of the Buyers to pay any sums of money payable by the buyers under this agreement or to perform any other obligations under this agreement;
  1. (b)
    Indemnifies the Seller against any loss or liability the Seller incurs arising from or connected with the failure of the Buyers to perform their obligations under this agreement; and
  1. (c)
    Charges the guarantor’s real and personal estates with payment of all sums that may become payable by the guarantor.”
  1. [50]
    Paragraphs 49C and 49D have to be looked at in light of paragraph 49.  In the paragraphs referred to in paragraph 49, Thorne Developments pleads:
  1. the Share Sale Agreement;[11]
  2. the provisions in the Share Sale Agreement where Mr Laird and Mr Williamson give their guarantees and charged their property;[12]
  3. various facts pleading an entitlement to the purchase price.[13]
  1. [51]
    However, the plea suffers from the same defect as the plea made that Mr Laird and Mr Williamson are personally and principally liable.  That liability must come through the Loan Agreement (probably clause 5.1) and the guarantee.
  2. [52]
    It seems to me that the plea could be properly made upon the construction of contracts pleaded long ago.  No prejudice to be suffered by the defendants has been identified.  Such a plea should be allowed.

Claim against Mr Williamson that he be removed as a director of Transparent Enterprises

  1. [53]
    Relevant paragraphs in the proposed pleading are paragraphs 43C, 43D, 43E and 49H and 49I.  What is alleged is that because of a failure to comply with requirements in the constitution of Transparent Enterprises, Mr Williamson was not validly appointed a director.  In the alternative, it said that he ought to be removed in exercise of a power conferred on the court by the Corporations Act.  All that is clearly pleaded.
  2. [54]
    Seeking Mr Williamson’s removal seems inconsistent with Thorne Developments’ primary case, namely that it has disposed of the shares and has not been paid.  If that is the case, it has no interest in who might or might not be the directors of Transparent Enterprises.  Thorne Developments might have an interest in having Mr Williamson removed in the event that the transactions are not validated.  If the transactions are not validated, then it would seem (without finally deciding the issue) that Thorne Developments would be entitled to declarations that title in the shares of Transparent Enterprises did not pass and orders restoring the shares to it.
  3. [55]
    There is no limitation issue with this proposed claim.  No prejudice is identified by the defendants.  The amendment should be allowed.

Claim against the defendants in estoppel by convention

  1. [56]
    The proposed estoppel by convention plea is made at paragraphs 56 to 69.  It is unnecessary to analyse the proposed plea in any great detail.  In essence, it is that:
  1. The parties entered into the Share Sale Agreement and Loan Agreement.
  2. They have conducted themselves consistently with those contracts.
  3. The defendants are now estopped from denying the factual and legal bases underpinning the contracts and the legal relationships they establish.
  1. [57]
    In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd,[14] the High Court described estoppel by convention in these terms:

“Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying.”[15]

  1. [58]
    The principles were recently reviewed by the Court of Appeal in Browning v ACN 149 351 413 Pty Ltd (in liq) (formerly known as Enviren Constructions Pty Ltd)[16] and described as follows:

“Such a form of estoppel is not founded on a representation. It is based on the conduct of relations between parties. To establish a common law estoppel or estoppel by convention, a plaintiff must establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) the departure from the assumption will occasion detriment to the plaintiff.”[17]

  1. [59]
    Often, estoppel by convention usually arises in the context of a valid binding contract.  In other words, notwithstanding the existence of contractual terms, the parties have conducted themselves in a particular way such that it is unconscionable to then rely upon the strict terms of the contract.  Browning v ACN 149 351 413 Pty Ltd (in liq) (formerly known as Enviren Constructions Pty Ltd)[18] is such a case, as is Rolleston Coal Holdings Pty Ltd v ICRA Rolleston Pty Ltd[19] and Mineralogy Pty Ltd v Sino Iron Pty Ltd & Ors (No 6).[20] 
  2. [60]
    Here, the submission is that notwithstanding the deregistration of the company and the legal consequence that the contracts are obviously void until validated, the legal relationship between the parties is still governed by the terms of the contracts because the defendants are estopped from denying that the contracts are binding upon them.  No authority for such a proposition was referred to.
  3. [61]
    In Zinc Corporation Pty Limited & Ors v Pasminco Australia Ltd & Ors,[21] Dodds-Streeton J assumed, perhaps obviously, that an estoppel by convention could not arise inconsistently with applicable statutory provisions.[22]
  4. [62]
    Section 601AH of the Corporations Act 2001 provides as follows:

“Reinstatement

Reinstatement by ASIC

  1. (1)
    ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered.
  1. (1A)
    ASIC may reinstate the registration of a company deregistered under subsection 601AB(1B) if:
  1. (a)
    ASIC receives an application in relation to the reinstatement of the company's registration; and
  1. (b)
    the levy imposed on the company by the ASIC Supervisory Cost Recovery Levy Act 2017 is paid in full; and
  1. (c)
    the amount of any late payment penalty payable in relation to the levy is paid in full; and
  1. (d)
    the amount of any shortfall penalty payable in relation to the levy is paid in full.

Reinstatement by Court

  1. (2)
    The Court may make an order that ASIC reinstate the registration of a company if:
  1. (a)
    an application for reinstatement is made to the Court by:
  1. (i)
    a person aggrieved by the deregistration; or
  1. (ii)
    a former liquidator of the company; and
  1. (b)
    the Court is satisfied that it is just that the company's registration be reinstated.
  1. (3)
    If:
  1. (a)
    ASIC reinstates the registration of a company under subsection (1) or (1A); or
  1. (b)
    the Court makes an order under subsection (2);

the Court may:

  1. (c)
    validate anything done during the period:
  1. (i)
    beginning when the company was deregistered; and
  1. (ii)
    ending when the company's registration was reinstated; and
  1. (d)
    make any other order it considers appropriate.

Note:  For example, the Court may direct ASIC to transfer to another person property vested in ASIC under subsection 601AD(2).

ASIC to give notice of reinstatement

  1. (4)
    ASIC must give notice of a reinstatement in the Gazette .
  1. (4A)
    If an application was made to ASIC for the reinstatement of a company's registration, ASIC must give notice of the reinstatement to the applicant.

Effect of reinstatement

  1. (5)
    If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim.
  1. (6)
    Subsection 601AH(5) does not affect the cancellation of an Australian financial services licence held by the company if the cancellation occurs because the company was deregistered.”
  1. [63]
    The effect of earlier sections such as 601AD and 601AE is that transactions purportedly effected by the company whilst it was deregistered do not affect legal rights.  They are nullities.  Consequently, not only are the Share Sale Agreement and the Loan Agreement nullities but so too are the transfer of shares and any actions taken in consequence of the agreements.
  2. [64]
    The clear intention of s 601AH is that while the deregistered company, when reinstated, is reinstated “nunc pro tunc”[23] and property which was vested in the company before deregistration re-vests in the company, acts performed by the company remain nullities unless validated by the court.[24]  There are good policy reasons why this should be so.  The rights of third parties who have purportedly dealt with the deregistered company may be affected.  The interests of creditors of the reregistered company may also be relevant.
  3. [65]
    The raising of an estoppel by convention which, for all intents and purposes, imposes upon the parties the rights and obligations under the contracts, notwithstanding that there has been no validation order made under s 601AH(3), is inconsistent with the scheme established under the Corporations Act.
  4. [66]
    The real issue here is whether the court validates the contracts.  That is part of the relief sought by Thorne Developments.  If that relief is granted, then an estoppel by convention has no utility.  If it is not granted, then the refusal to exercise the power should not be circumvented by an estoppel by convention.  To do so would be contrary to the Corporations Act.
  5. [67]
    To the extent that leave is sought to amend the claim and statement of claim to allege estoppel by convention, that leave ought to be refused.

Claim against the fourth defendant for breach of the second mortgage

  1. [68]
    The relevant plea in the proposed statement of claim pleads that the property was sold and the net proceeds were not paid to Thorne Developments or, before its reinstatement, to ASIC.  That was, it was said, a breach of the terms of the mortgage.[25]  However, here the covenant was to secure the sum owing under the Share Sale Agreement.  Therefore, Mr Williamson had an obligation pursuant to his guarantee and an obligation pursuant to the mortgage to pay the debt.
  2. [69]
    The guarantee in the Share Sale Agreement and the mortgage are both void unless validated.
  3. [70]
    The existence of the security interest is completely academic.  The property was sold and presumably is now registered in the name of the new owner.  In the absence of fraud, the new owner takes free from the mortgage once the release of mortgage is registered.
  4. [71]
    Pleading against Mr Williamson the separate obligation under the mortgage may have some utility if liability through clause 5.1(iii) and 14.19 and 14.20 (the guarantee provisions) of the Share Sale Agreement cannot establish liability for the money owing under the Loan Agreement.
  5. [72]
    Whether Mr Williamson is liable under the mortgage is just a matter of construction of the various contractual documents, including the mortgage.  No specific prejudice is identified and leave should be given to raise this plea.

Other objections by Mr De Waard

The prayer for relief

  1. [73]
    Section B of the prayer for relief is entitled:

“Section B:  In the alternative to the validation and consequential orders sought in Section A the plaintiff claims the following relief.”

  1. [74]
    The claims to relief under section B are said to be alternative to the orders sought in Section A.  Section A seeks orders for validation and various consequential orders.
  2. [75]
    The relief claimed under Section B consists of two parts.  By paragraphs 49A-49E, orders are sought against Mr Laird and Mr Williamson based on the principal obligation said to arise from the guarantees contained in the Share Sale Agreement.
  3. [76]
    It cannot possibly be that on a proper construction of the various contracts, a principal obligation has arisen in Mr Laird and Mr Williamson to pay the balance of the purchase price under the Share Sale Agreement (or the loan moneys outstanding under the Loan Agreement) if there has been no transfers of shares to Mr Laird as Trustee and Rick Williamson Investments.  Without validation, property in the shares has not passed to those entities.
  4. [77]
    Therefore, paragraphs 49A-49E should not be allowed to stand. 
  5. [78]
    Paragraph 49F is the second category of claims for relief in Section B.  This paragraph seeks declaratory relief in the event the validation order is not made.  This seeks to effectively unwind the steps purportedly taken by Thorne Developments before it was realised that Thorne Developments was deregistered.  In my view, seeking these orders appears appropriate. 
  6. [79]
    Mr De Waard takes objection to Section A in the prayer for relief on the basis that it is “difficult to follow”.[26]  I have no difficulty following paragraphs 48C and 48D.  Validation is sought in 48C of the making of the agreements and the steps taken thereunder.  Paragraph 48D seeks relief consequent upon that primary relief.

The caveat

  1. [80]
    An order was made by the court in relation to security for costs on the application of the defendants.  As a result of that, Mr Casey gave a guarantee, charged his property and a caveat was registered over it.  The claims at paragraphs 48D and 49B seek the removal of the caveat.  That is not relief sought in the action as such.  Questions of costs and orders ancillary thereto ought to be dealt with on submissions after the trial.

References to “purportedly”

  1. [81]
    Mr De Waard rightly submits that throughout the proposed pleading there is reference to actions having been “purportedly” taken by the plaintiff.  Mr De Waard submits that this is confusing.
  2. [82]
    It is clear to me why the plaintiff has alleged that things were “purportedly” done.  The parties did various things on the assumption that Thorne Developments was a company that could contract and dispose of its assets, etc.  As a matter of law, it could not as it was deregistered.  In that sense, the various steps were “purportedly” taken.

The objection to paragraph 4A

  1. [83]
    Paragraph 4A pleads that Transparent Enterprises Pty Ltd was a company according to law and held shares in the companies collectively known as the Showbar Group.  At paragraph 4A(b), it is alleged that Transparent Enterprises “held and continues to hold shares and/or reciprocal agreements with a group of companies commonly called the Showbar Group …”. 
  2. [84]
    It is not clear what “reciprocal agreements” are or how they could be relevant and Mr De Waard’s objection is made out.

The plea in paragraph 4C.A

  1. [85]
    That pleads the negotiations antecedent to the entering into of the Share Sale Agreement and the Loan Agreement.  Mr De Waard submits “paragraph 4C.A is also problematic in that it clearly does not relate to any material fact relevant to any of the pleaded causes of action”.  Normally, any antecedent negotiations would be irrelevant.  However, they explain the plea in paragraphs 4E and 5 that Mr Thorne was removed as a director of the various companies before the contracts were entered into.  Mr De Waard’s objection is not made out.

Disposition

  1. [86]
    It may be that Thorne Developments wishes to consider further amendments given these reasons.  Consequently, I will rule on the contentious amendments and give the parties an opportunity to make submissions on formal orders and directions.
  2. [87]
    A complication in the case is the claim to validate the various transactions.  That apart, the case is a conventional contract case.  The parties should consider whether it is appropriate to deal with the validation question as a separate issue.
  3. [88]
    In the ordinary course, a party seeking leave to amend its pleading would pay the costs of the application.  Even though the defendants unsuccessfully challenged most of the amendments sought, Thorne Developments should pay the costs.
  4. [89]
    However, there is a suggestion here that the first and second defendants have taken the benefit of the transactions requiring validation without paying the purchase price (now the money due under the Loan Agreement).  If that is the case, then the defendants have contributed to the financial stress which Thorne Developments is currently suffering.  In those circumstances, the payment of costs should be delayed until finalisation of the proceeding.

Orders

  1. The plaintiff should have leave to amend to plead:
  1. (a)
    a claim against the third defendant and the fourth defendant as principal debtors;
  1. (b)
    a claim against the third defendant and fourth defendant as chargors;
  1. (c)
    a claim against the fourth defendant for his removal as a director of Transparent Enterprises Pty Ltd;
  1. (d)
    a claim against the fourth defendant for breach of the personal covenants contained in the mortgage.
  1. The plaintiff should not have leave to plead a case based on estoppel by convention.
  2. The plaintiff shall pay the defendants’ costs of the application and the costs incurred by the amendments, such costs only being payable upon final judgment in the proceedings or earlier order.
  3. The parties shall be heard on the question of further final orders.

Footnotes

[1]  Rick Williamson Investments Pty Ltd and Mr Laird as Trustee of the Laird family Trust.

[2]  Thorne Developments Pty Ltd.

[3] Subject to what I later observe about the construction of Clause 1.5 of the Share Sale Agreement.

[4]  A reference to Transparent Enterprises Pty Ltd.

[5]  A reference to the Share Sale Agreement.

[6]  A reference to the Loan Agreement.

[7]  Plaintiff’s outline of submissions, paragraph G5.

[8]  ie, as described as the fourth defendant.

[9]  Share Sale Agreement; clause 14.20(a).

[10]Central Sawmilling No 1 Pty Ltd v State of Queensland [2003] QCA 311, Borsato v Campbell [2006] QSC 191, Body Corporate for Sun City Resort CTS 24674 v Sunland Constructions Pty Ltd (No 2) [2011] QSC 42.

[11]  Clause 6.

[12]  Clauses 19 and 20.

[13]  Clauses 11, 46H.

[14]  (1986) 160 CLR 226.

[15]  At 244.

[16]  [2016] QCA 169.

[17]  At [42].

[18]  [2016] QCA 169.

[19]  [2020] QSC 352.

[20]  (2015) 329 ALR 1.  See generally [758]-[779].

[21]  [2005] VSC 62.

[22]  At [150].

[23]Re Piccoli Tesori Pty Ltd (deregistered); Ex parte Bertuol (2006) 151 FCR 109.

[24]  Section 601AH(3)(c).

[25]  Paragraphs 44A and 47.

[26]  His written submissions, paragraph 58.

Close

Editorial Notes

  • Published Case Name:

    Thorne Developments Pty Ltd v Laird

  • Shortened Case Name:

    Thorne Developments Pty Ltd v Laird

  • MNC:

    [2021] QSC 90

  • Court:

    QSC

  • Judge(s):

    Davis J

  • Date:

    11 May 2021

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
Body Corporate for Sun City Resort v Sunland Constructions Pty Ltd (No 2) [2011] QSC 42
2 citations
Jump To
Cite 1 - [2011] QSC 42
Cite 2 - [2011] QSC 42
Borsato v Campbell [2006] QSC 191
2 citations
Jump To
Cite 1 - [2006] QSC 191
Cite 2 - [2006] QSC 191
Browning v ACN 149 351 413 Pty Ltd (in liq) [2016] QCA 169
3 citations
Jump To
Cite 1 - [2016] QCA 169
Cite 2 - [2016] QCA 169
Cite 3 - [2016] QCA 169
Central Sawmilling No 1 Pty Ltd v State of Queensland [2003] QCA 311
2 citations
Jump To
Cite 1 - [2003] QCA 311
Cite 2 - [2003] QCA 311
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
3 citations
Jump To
Cite 1 - (1986) 160 CLR 226
Cite 2 - (1986) 160 CLR 226
Cite 3 - (1986) 160 CLR 226
Mineralogy Pty Ltd v Sino Iron Pty Ltd (No. 6) [2015] 329 ALR 1
2 citations
Jump To
Cite 1 - [2015] 329 ALR 1
Cite 2 - [2015] 329 ALR 1
Re Piccoli Tesori Pty Ltd (deregistered); Ex parte Bertuol (2006) 151 FCR 109
2 citations
Jump To
Cite 1 - (2006) 151 FCR 109
Cite 2 - (2006) 151 FCR 109
Rolleston Coal Holdings Pty Ltd v ICRA Rolleston Pty Ltd [2020] QSC 352
2 citations
Jump To
Cite 1 - [2020] QSC 352
Cite 2 - [2020] QSC 352
Zinc Corporation Pty Limited & Ors v Pasminco Australia Ltd & Ors [2005] VSC 62
2 citations
Jump To
Cite 1 - [2005] VSC 62
Cite 2 - [2005] VSC 62

Cases Citing

Case NameFull CitationFrequency
Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd(2021) 9 QR 114; [2021] QCA 2121 citation
1

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