Copland v Gallia Worldwide Pty Ltd & Anor [2023] QSC 124 [2023] 24 QLR

SUPREME COURT OF QUEENSLAND CITATION: Copland v Gallia Worldwide Pty Ltd & another [2023] QSC 124 PARTIES: DAVID ALLEN COPLAND (plaintiff) v GALLIA WORLDWIDE PTY LTD ACN 099 223 935 (first defendant) and GALLIA WORLDWIDE PTY LTD ACN 099 172 693 (second defendant) FILE NO/S: 650 of 2020 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: Ex tempore reasons delivered on 16 February 2023 DELIVERED AT: Cairns HEARING DATE: 10 February 2023 and 16 February 2023 JUDGE: Henry J ORDERS: 1. a. The oral application of the second defendant for leave to add a counterclaim is granted. b. Pursuant to rules 375 and 377 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), the defendants are granted leave to amend their Counterclaim, substantially in the form exhibited at page 85 of exhibit “KAW” to the affidavit of Katherine Mary Whalan sworn on 1 February 2023 and the new causes of action therein are taken to have been started when the application for leave was filed, ie, 3 February 2023. 2. By 26 February 2023, the defendants file and serve their Defence to the Second Amended Statement of Claim and Counter Claim. 3. By 12 March 2023, the plaintiff file and serve and Amended Reply and Answer. 4. By 20 March 2023: a. the plaintiff give any further disclosure pursuant to rule 211 of the UCPR; and -- 1 of 9 -- 2 b. the defendant give any further disclosure pursuant to rule 211 of the UCPR. 5. By 6 April 2023, either party file and serve any application pursuant to rule 223 of the UCPR. 6. By 27 April 2023, the plaintiff serve a signed witness statement for each lay witness they intend to call to give evidence at the trial of the proceeding, setting out a detailed summary of that witness’ proposed evidence- in-chief. 7. By 18 May 2023, the defendant serve a signed witness statement for each lay witness he intends to call to give evidence at the trial of the proceeding, setting out a detailed summary of that witness’ proposed evidence- in-chief. 8. If either party intends to call a witness but cannot obtain a signed written statement from that person, the party may serve, by the same date, summary of evidence that the witness is expected to give. 9. The parties are directed to attend, participate in, and act reasonably and genuinely in a mediation to be conducted by 27 July 2023. 10. The mediator is to be selected by the plaintiff from a panel of three mediators proposed by the defendant. 11. Copies of the following documents are to be provided to the mediator: a. the pleadings; b. the witness statements and summaries served by the parties; and c. any other document agreed by the parties to be given to the mediator. 12. The period of the mediation is fixed at a maximum of 1 day and may extend beyond with the authorisation of the parties. 13. The parties are to negotiate a fee with the mediator. 14. The parties are to pay the following percentages of the cost of mediation: a. Plaintiff: 50%; and b. Defendant: 50%. 15. The parties must pay their respective percentages of the cost of the mediation to the mediator by the date requested by the mediator. -- 2 of 9 -- 3 16. The mediator is to be informed of the appointment by the plaintiff. 17. Subject to paragraphs 1 to 8 of these Orders above, the proceedings be stayed until 6 business days after the mediator’s certificate is filed in the registry or until further earlier order. 18. Costs reserved. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COURT SUPERVISION – DIRECTIONS – where the plaintiff applies for various directions including a staged further filing and service process for pleadings, a mediation and a disclosure order – whether the defendants should disclose documents relevant to the holding and transaction costs incurred by the defendants buying, holding and selling the business and its land PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COURT SUPERVISION – AMENDMENT – ORIGINATING PROCESS, PLEADINGS ETC – where the defendant companies apply for leave to amend their counterclaim pursuant to r 375 Uniform Civil Procedure Rules 1999 (UCPR) with the effect of introducing new cause of action – whether allowing leave pursuant to r 375 would of itself create detriment to the plaintiff –whether it is appropriate to take the exceptional course of ordering the exchange of witness statements Corporations Act 2001 s 1317H Limitation of Actions Act 1974 s 10(1)(a) Uniform Civil Procedure Rules 1999 rr 5, 149, 375, 376, 387 Montgomery v Pickard & Ors [2006] QSC 373 Twigg v Twigg [2022] NSWCA 68 COUNSEL: C Ryall for the plaintiff M Jonsson KC for the defendants SOLICITORS: Kahler Lawyers for the plaintiff McInnes Wilson Lawyers for the defendants [1] HIS HONOUR: The plaintiff, Mr Copland, applies for various directions in his proceeding against the defendant companies. The defendant companies apply for leave to amend their counterclaim in that proceeding. The latter application involves a limitation period issue. It is convenient to deal with it first after reviewing the nature of the proceeding. -- 3 of 9 -- 4 [2] The plaintiff, a former director of the defendant companies, alleges that in a so-called joint venture agreement, he, Timothy Horewood, Bruce Hore and Edward Hore, agreed in around late 2021 to work together to purchase the business known as King Reef Resort Hotel and Caravan Park, and the land at 75 Jacobs Road, Kurrimine Beach, on which the business was conducted, with Horewood and Edward Hore to provide the finance for the venture, and Mr Copland and Bruce Hore to conduct the business with a view to building it up and selling it at a profit to be divided equally between the venturers. [3] The first defendant acquired the business on about 10 May 2002, and the second defendant acquired the land at 75 Jacobs Road on about 11 September 2002. In an alleged reliance upon the joint venture agreement, Mr Copland and Bruce Hore worked in the business. Mr Copland pleads he did so at a remuneration far below the market rate for his services, and accepted appointment as a director of the first defendant in reliance upon the joint venture agreement. He alleges that in about May 2006, the venturers agreed Mr Copland would receive, as part of his share of any profit, the residential property at 14-16 Rebecca Jane Parade, Kurrimine Beach, owned by the first defendant. The same agreement was to result in Bruce Hore receiving another residential property. [4] In alleged reliance on that further agreement, Mr Copland pleads he accepted appointment as director of the second defendant, continued working for below market rate remuneration, and undertook maintenance and improvement works at his expense on the residential property at 14-16 Rebecca Jane parade. A further agreement to continue the joint venture agreement was allegedly made in 2012. [5] In February 2017, Bruce Hore’s employment by the business was terminated and he ceased as a director of the first defendant. Mr Copland pleads he was excluded from the joint venture from about June 2017 by being directed to take leave, being deprived of keys to the business, being refused access to the first defendant’s financial information as a director prior to his removal as director on 4 April 2019 and being issued a notice to leave the residential property on 28 July 2020. [6] Mr Copland claims a declaration the first defendant holds the residential property on trust for him, or alternatively, on trust for him and the first defendant, in proportion to their respective contributions to the acquisition, maintenance and improvement of the property, as well as a declaration the first and second defendants hold their respective interests in business and land on trust as to 75 per cent for the defendant companies and 25 per cent for the plaintiff. The defendants deny there was a joint venture agreement and that property is held on trust for Mr Copland. [7] The first defendant counterclaims, seeking a declaration it is entitled to possession of the residential property, and an injunction restraining Mr Copland from entering or remaining on the property. The defence and counterclaim was filed on 11 February 2021. The proposed amended counterclaim, in respect of which leave is sought, is made by both defendants and introduces newly pleaded allegations. They include the first defendant’s loss of prospective rental occasioned by Mr Copland’s failure to vacate the residential property, unauthorised withdrawals and unauthorised payments of moneys of the second defendant and detinue of the first defendant’s boat. [8] The additional relief sought by the proposed amended counterclaim by the defendant is damages of $94,050 or, alternatively, $40,050 for rent foregone, and a declaration -- 4 of 9 -- 5 and an order for delivery of possession of the boat. The relief sought for the second defendant is the amount of $106,432.53 as damages; alternatively, equitable compensation; alternatively, compensation under s 1317H Corporations Act 2001; alternatively, money had and received. [9] There exists a technical threshold point that the existing counterclaim is by the first defendant only, so that, strictly speaking, the second defendant should seek leave to add a counterclaim, rather than applying with the first defendant for leave to amend the counterclaim. The determinative issues remain the same if I approach the application as accompanied by an oral application of the second defendant for leave to add a counterclaim. I do so. [10] As to those issues, none of them relate to the first defendant, the plaintiff accepting it does not require leave to make the amendments regarding its rent foregone or its boat. The plaintiff relies upon a supposed lapse of a six-year limitation period in opposing the amendments alleging the unauthorised withdrawals and unauthorised payment of moneys of the second defendant, set out at paras 16 to 29 of the proposed counterclaim. [11] The unauthorised withdrawals basically consist of 10 withdrawals from 25 March 2004 to 30 January 2014, and one of $10,000 on 14 August 2016. The unauthorised personal payments all allegedly occurred from 31 January 2014 to 22 March 2014: well over six years ago. The proceeding started on 19 November 2020: over six years after all of the above withdrawals and payments, except for the withdrawal of $10,000 on 14 August 2016. To the extent a six-year limitation period may apply to it, that period lapsed between the commencement of the applications and the filing of the application for leave. [12] The plaintiff contends that the unauthorised withdrawals and payments are statute barred by lapse of a limitation period of six years, and that the Court should not take the extraordinary step of giving leave to a party to pursue a case which is bound to fail. However, the limitation period issue is not as clear as that submission assumes. It may be accepted that, in as much as the proposed counterclaim characterises the unauthorised withdrawals and payments as moneys had and received, it is founded in contract so that the six-year limitation period applicable pursuant to s 10(1)(a) Limitation of Actions Act 1974 has expired. However, it will be recalled the withdrawals and payments are alleged to have been unauthorised. [13] If the plaintiff pleads the statutory limitation period, the defendant has foreshadowed it will in turn plead the period has not expired because the effectively fraudulent conduct was not discovered until recently, so that pursuant to s 38(1) Limitation of Actions Act 1974, the period of limitation only began to run then. Whether the alleged misconduct could, with reasonable diligence, have been discovered much earlier is arguable rather than clear on the present materials and is typically a matter for trial. [14] Furthermore, the unauthorised withdrawals and payments are also characterised as breaches of fiduciary duty, recoverable as equitable compensation for which there is no statutory time limit. Whether they ought be barred by analogy, as the plaintiff argues, citing Twigg v Twigg [2022] NSWCA 68 [185]–[187], is a matter for the potential exercise of the equitable remedial discretion at trial. Again, it is a matter the plaintiff can raise in its pleading and argue at trial. -- 5 of 9 -- 6 [15] It is important to appreciate the present concern is whether leave should be granted. Accepting for the reasons just given that the proposed course of action cannot be characterised as bound to fail, and that it will be open to the plaintiff to plead its limitations, it cannot be accepted, subject to one exception, that allowing leave pursuant to r 375 Uniform Civil Procedure Rules 1999 (UCPR) would of itself create detriment to the plaintiff. Conversely, the desirability of uniting disputes related to the same overlapping facts and circumstances, and avoiding the expense, inconvenience and risk of inconsistent findings inherent in separate proceedings about such disputes, is a consideration here weighing strongly in favour of granting leave. [16] The only exception regarding putative detriment relates to the alleged unauthorised withdrawal of $10,000 on 14 August 2016. Before getting to that putative detriment, it is appropriate to touch upon r 376 UCPR. It will be recalled the alleged six-year limitation period for this $10,000 transaction was still current at the date the proceeding was started but has since ended. Such a scenario attracts the operation of r 376, with the consequence, pursuant to r 376(4), the leave may only be given to make the amendment to include a new cause of action, at least as it relates to that transaction, if: (a) the Court considers it appropriate; and (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. [17] Of course, if the defendants’ foreshadowed arguments regarding fraud are right, the relevant limitation period still has not ended, and r 376 does not apply. [18] The nature of that debate, and that it is pertinent for resolution at trial, supports the appropriateness of granting leave. Further, I am readily satisfied the new cause of action arises out of substantially the same facts as the cause of action for which relief has already been claimed by at least one of the parties applying for leave to make the amendment. The whole of the proposed monetary counterclaim is inextricably linked to the facts giving rise to the first defendant’s existing counterclaim for possession of the residential property. [19] That entitlement necessarily turns upon, inter alia, the determination of what moneys contributed by the defendants are deductible from any ultimate monetary entitlement to the plaintiff. The $10,000 withdrawal, indeed, all of the allegedly unauthorised withdrawals and payments, appear relevant in that determination. There remains a technical point that the cause of action for which relief is being claimed is that of the first defendant; not the second defendant. But bearing in mind r 5 UCPR, I would not apply r 376 here to preclude leave because of that technicality. [20] Turning now to putative detriment, a grant of leave would have the consequence, pursuant to r 387(3) UCPR, that the new causes of action are taken to have started when the original proceeding started, back on 19 November 2020, unless the Court orders otherwise. That would have the consequence of bringing the $10,000 withdrawal within less than six years, and deprive the plaintiff from being able to plead its limitation period point as regards that transaction. That putative detriment -- 6 of 9 -- 7 rather pales in comparison to the reasons already given in favour of granting leave. In any event, it can be avoided by use of an order otherwise allowed by r 387(3). [21] Such an order was made by Cullinane J in Montgomery v Pickard & Ors [2006] QSC 373 where, in granting leave, his Honour ordered the new action was taken to have started when the amended statement of claim was filed. Here, the plaintiff’s counsel identified the date of filing of the leave application as an apt point in time. I agree. For all of these reasons, the defendants’ application for leave should be granted on terms consistent with that reasoning. [22] Turning to the application for directions, some of the proposed directions, particularly as to a staged further filing and service process for pleadings and a mediation, are uncontroversial. The only real controversies relate to the plaintiff’s relatively proscriptive proposed disclosure order, and the defendants’ proposed order regarding the exchange of witness statements. [23] Firstly, as to disclosure, the parties have been at odds in their correspondence regarding whether the defendants should disclose documents relevant to the holding and transaction costs incurred by the defendants buying, holding and selling the business and its land, and the income or other benefits received by the defendants as a result of them buying, holding and selling the business and its land. [24] As a general proposition, it appears unavoidable that such information is relevant, because the alternative relief sought at para 29(c) of the Second Amended Statement of Claim is: “Alternatively, an interest in the proceeds of the sale of the land and the business and the residential property in proportion to his contributions to the acquisition, maintenance and improvement of those assets of the defendants as compared to the contributions of the defendants and others in the course of the joint venture.” [25] The proportion therein mentioned cannot be identified without ascertaining the respective contributions of the defendants, and for that matter, other alleged venturers. This aspect of the matter, which featured in the defendants’ favour in its leave application, trends against the position it has taken in correspondence about the disclosure issue. It is no answer that the proposed amended defence and counterclaim pleads of the aforementioned content at para 29, in the course of denying it, that the proportionate interest should be calculated on a series of asserted factual premises before consideration of the defendants’ holding and transaction costs. [26] Quite apart from those factual premises necessarily qualifying this proposed pleading, it in any event, appears ambiguous in whether it means the defendants do not want the benefit of the holding and transaction costs to feature in the calculation of the ultimate valuation of the plaintiff’s 25 per cent interest, which seems an unusually and improbably generous position in a case where the defendants are trying to claw back all they can in their counterclaim, or whether it means the monetary amount quantified in their pleading is then to be subject to consideration of the defendants’ holding and transaction costs. [27] Having dispensed with that diversion, and accepted the relevance of the aforementioned information, the only issue is not whether further disclosure should -- 7 of 9 -- 8 occur, but whether the Court’s order should be proscriptive of its content. I am conscious disclosure can involve matters of degree with a point of diminishing returns arising and progressively descending into burdensome hunts for source or foundational financial documents when periodic financial returns and the like may meet the reasonable needs of an opponent. Given that very dynamic is likely to be in play here, it appears prudent at this point, having alerted the parties to these reasons, to avoid a proscriptive disclosure order for the moment, and wait and see whether a more general order regarding a timeframe for disclosure proves adequate. [28] The only other controversial proposed directions are those proposed by the defendants and resisted by the plaintiff, requiring the parties to provide each other with the copies of the witness statements of each lay witness intended to be called to give evidence. It is not proposed such statements should be exhibited in substitution of evidence-in- chief. Their purpose is merely to better inform the parties of the evidence likely to be led. Such a direction should be exceptional in that the pleadings should ordinarily be sufficient, as r 149 UCPR requires, to identify the material facts and avoid surprise at trial. [29] However, many of the material events here happened a long time ago; most obviously, the initial alleged joint venture agreement, which was over 20 years ago. [30] Its creation, and other aged material events, will be evidenced inter alia by memories of conversations, the detail of which looms as of great importance in the case, but also looms as potentially very variable in its telling. I am therefore persuaded it is appropriate to take the exceptional course of ordering the proposed exchange of witness statements. I am fortified in reaching that conclusion by a further two considerations. [31] One is that the provision of the statements will plainly assist both sides in their proposed mediation. The other is that legal representatives acting competently in the normal course will take proofs of evidence, whether they call them affidavits, statements, or some other name, in order that they have committed their relevant witnesses as best they can to writing prior to them giving evidence. It appears to follow that the imposition of the proposed direction is not likely to impose a materially greater cost than otherwise is likely to be incurred by professional lawyers in any event. [32] I am not persuaded, though, that I ought make two of the associated orders proposed. One was that if a witness whose statement had been served gives evidence, that the leave of the Court should be required for evidence to be adduced from that witness in evidence-in-chief if it is not already described in the statement. I will not make such an order. If a witness in evidence-in-chief remembers new facts, or states facts which are inconsistent with the witness’s previous statements, the process by which that unfolds in Court should not be interrupted with objections and leave applications. Such occurrences are quite regular incidents in trials. They are a product of the involvement of human beings in the equation. [33] Such additions or variations or inconsistencies may be inconsequential, and at the other end of the spectrum, may be major variations bespeaking unreliability. But they are all matters a cross-examiner can explore. They are not apt to be seized on in regulation of a process intended to assist proper trial preparation by better informing each side of what will likely unfold at Court, with professional lawyers of course -- 8 of 9 -- 9 being well aware that no witness statement ever entirely replicates the encounter with the process of oral testimony once the witness is in the witness box. [34] The other proposed order I do not favour is one which would require the plaintiff to serve any signed witness statements in reply to any witness statements provided by the defendants. I reject making such an order, because it may unintentionally be seen as sanctioning an unethical process. In the normal course, it is not proper for legal representatives to tell prospective witnesses what other witnesses will say, lest it have the improper effect of influencing their prospective testimony. Lawyers can readily take statements by asking questions. It is unnecessary and improper to do so by telling the witness what another witness says. [35] There are exceptions in that sometimes, a witness will also be a party, and in conferring with such a person as a party, it may be necessary to reveal evidence from some other source in order to aid legal decision-making in conjunction with the party in the case. Here, the prospective witnesses are not just the parties. So the caution just discussed remains apt, and I accordingly will not make the proposed order. Of course, at any stage prior to trial, if a witness in conference materially digresses from or adds to information previously put in their statement, an addendum statement can readily be taken and disclosed. It requires no order by me. [36] I have amended one of the party’s draft orders by hand to reflect the various conclusions reached in these reasons. A copy is before the parties. [37] Costs of the application for directions would, were I to make an order now, simply be costs in the cause. I am content, in light of the order I intend to make for the other application, to simply make a global order reserving costs. [38] As to the other application, that for leave to amend the counterclaim introducing new cause of action, in the normal course it is unremarkable that costs would follow the event – see r 386 UCPR. However, as my reasons explained, there exists an allegation, though I intend to say nothing of its merits, that the second defendant only recently discovered the allegedly unlawful withdrawals and payments. If it transpires at trial that they are found to have been unauthorised, then coming within the fraudulent exception I have discussed on the topic of the limitation point, that would provide good reasons why costs ought not follow the event in respect of the application. It being impossible to forecast what will occur in that regard, the prudent course is accordingly, to reserve costs. I will do so. [39] I order as per the amended draft order, signed by me and placed with the papers. -- 9 of 9 --