Revian v Dasford Holdings Pty Ltd [2002] FCA 1119 (10 September 2002)

Last Updated: 11 September 2002

FEDERAL COURT OF AUSTRALIA

Revian v Dasford Holdings Pty Ltd [2002] FCA 1119

PRACTICE AND PROCEDURE - representative action - applicant claiming as trustee of discretionary trust - applicant under Part X arrangement pursuant to Bankruptcy Act - disqualification from continuing to hold office of trustee pursuant to Deed of Trust - whether sufficient interest to continue proceeding on behalf of other group members - insufficient interest to commence proceedings - insufficient interest to continue proceedings - insufficient interest as beneficiary of discretionary trust - viability of statement of claim - allegations of accessorial involvement by directors of corporate respondents - substantial reliance upon bald assertions of actual knowledge coupled with inaction - constructive knowledge pleaded in the alternative - no reasonable cause of action for accessorial involvement disclosed - application dismissed as against corporate directors - applicant removed for want of sufficient interest - liberty to other group members to substitute new applicant.

Bankruptcy Act 1966 (Cth)

Federal Court of Australia Act 1976 (Cth) s 33C, s 33D, s 33T

Trade Practices Act 1974 (Cth)

Symington v Hoechst Schering Agrevo Pty Ltd (1997) 78 FCR 164 cited

Compaq Computer Australia Pty Ltd v Merry (unrep, Fed Court, 14 August 1998) cited

Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 cited

Cassidy v Medical Benefits Fund of Australia (No 2) [2002] FCA 1097 cited

KANDI LEE REVIAN (FOR AND ON BEHALF OF HERSELF AND AS JOINT TRUSTEE FOR THE GKDK TRUST AND AS A REPRESENTATIVE OF THE GROUP MEMBERS REFERRED TO IN THE APPLICATION) v DASFORD HOLDINGS PTY LTD and ORS

W 101 of 2001

FRENCH J

10 SEPTEMBER 2002

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W 101 of 2001

BETWEEN:	KANDI LEE REVIAN (FOR AND ON BEHALF OF HERSELF AND AS JOINT TRUSTEE FOR THE GKDK TRUST AND AS A REPRESENTATIVE OF THE GROUP MEMBERS REFERRED TO IN THE APPLICATION) APPLICANT
AND: AND:	KANDI LEE REVIAN AND GRANT WILLIAM THOMPSON AS TRUSTEES FOR THE GKDK TRUST CEASED TRADING AS LEADING EDGE VIDEO CLARKSON (SHOP 17) FIRST GROUP MEMBER RICHARD DAWSON FIELDS AND MARY ANNE FIELDS AND ELSIE NOMINEES PTY LTD TRADING AS CLARKSON MINI MART (SHOP 10) SECOND GROUP MEMBER FREDERICK FRANCIS TREBLE CEASED TRADING AS FRED'S HARDWARE (SHOP 1) THIRD GROUP MEMBER SHAUN NICHOLAS AND ANASTASHIA MARGARITA NICHOLAS AND DEBBIE PTY LTD CEASED TRADING AS CLARKSON INDIAN AND CHINESE CUISINE (SHOP 3C) FOURTH GROUP MEMBER PAREE BUCHANAN CEASED TRADING AS SPICY THAI (SHOP 3B) FIFTH GROUP MEMBER PATRICK HINKSMAN AND ROBYN JEANETTE HINKSMAN CEASED TRADING AS THE BEST DRESSED IN SECONDS (SHOP 2) SIXTH GROUP MEMBER HAYDEE MARTINEZ AND ROBERTO MARTINEZ CEASED TRADING AS NACHOS AND PASTA (SHOP 3A) SEVENTH GROUP MEMBER PAUL FREDERICK HOUSTON AND LINDA ANN HOUSTON TRADING AS CLARKSON FISH SUPPLY (SHOP 11) EIGHTH GROUP MEMBER DASFORD HOLDINGS PTY LTD (ACN 051 224 438) FIRST RESPONDENT PENMAN HOLDINGS PTY LTD (ACN 009 203 105) SECOND RESPONDENT THURSTON JOHN PETER SAULSMAN THIRD RESPONDENT KEVIN ARTHUR POWNALL FOURTH RESPONDENT BRIAN JOSEPH BOWLER FIFTH RESPONDENT
JUDGE:	FRENCH J
DATE OF ORDER:	10 SEPTEMBER 2002
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The applicant be removed as representative of the Group Members.

2. So much of the substituted statement of claim as relates to the causes of action asserted by the First Group Members be struck out.

3. So much of the substituted statement of claim as alleges the accessorial involvement of the third, fourth and fifth respondents be struck out.

4. The proceedings be dismissed as against the third, fourth and fifth respondents.

5. The applicant pay the third, fourth and fifth respondents' costs of the application.

6. There be liberty to apply to substitute another Group Member or Group Members for the applicant.

7. The action as a whole will stand dismissed unless on or before 24 September 2002 a motion be filed which seeks to substitute another person or persons as applicant and proposes further directions for the progress of the action.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W 101 of 2001

BETWEEN:

KANDI LEE REVIAN (FOR AND ON BEHALF OF HERSELF AND AS JOINT TRUSTEE FOR THE GKDK TRUST AND AS A REPRESENTATIVE OF THE GROUP MEMBERS REFERRED TO IN THE APPLICATION) APPLICANT

AND: AND:

KANDI LEE REVIAN AND GRANT WILLIAM THOMPSON AS TRUSTEES FOR THE GKDK TRUST CEASED TRADING AS LEADING EDGE VIDEO CLARKSON (SHOP 17) FIRST GROUP MEMBER RICHARD DAWSON FIELDS AND MARY ANNE FIELDS AND ELSIE NOMINEES PTY LTD TRADING AS CLARKSON MINI MART (SHOP 10) SECOND GROUP MEMBER FREDERICK FRANCIS TREBLE CEASED TRADING AS FRED'S HARDWARE (SHOP 1) THIRD GROUP MEMBER SHAUN NICHOLAS AND ANASTASHIA MARGARITA NICHOLAS AND DEBBIE PTY LTD CEASED TRADING AS CLARKSON INDIAN AND CHINESE CUISINE (SHOP 3C) FOURTH GROUP MEMBER PAREE BUCHANAN CEASED TRADING AS SPICY THAI (SHOP 3B) FIFTH GROUP MEMBER PATRICK HINKSMAN AND ROBYN JEANETTE HINKSMAN CEASED TRADING AS THE BEST DRESSED IN SECONDS (SHOP 2) SIXTH GROUP MEMBER HAYDEE MARTINEZ AND ROBERTO MARTINEZ CEASED TRADING AS NACHOS AND PASTA (SHOP 3A) SEVENTH GROUP MEMBER PAUL FREDERICK HOUSTON AND LINDA ANN HOUSTON TRADING AS CLARKSON FISH SUPPLY (SHOP 11) EIGHTH GROUP MEMBER DASFORD HOLDINGS PTY LTD (ACN 051 224 438) FIRST RESPONDENT PENMAN HOLDINGS PTY LTD (ACN 009 203 105) SECOND RESPONDENT THURSTON JOHN PETER SAULSMAN THIRD RESPONDENT KEVIN ARTHUR POWNALL FOURTH RESPONDENT BRIAN JOSEPH BOWLER FIFTH RESPONDENT

JUDGE:	FRENCH J
DATE:	10 SEPTEMBER 2002
PLACE:	PERTH

REASONS FOR JUDGMENT ON MOTION TO STRIKE OUT ACTION

BY FOURTH RESPONDENT

Introduction

1 On 6 April 2001, Kandy Lee Revian commenced representative proceedings in this Court on behalf of herself and a number of other tenants of the Clarkson Neighbourhood Shopping Centre at the corner of Renshaw Boulevard and Ainsbury Parade, Clarkson. Between February 1998 and December 1998, she and her father, Grant William Thompson, operated a video business there known as Leading Edge Video Clarkson. They operated their business as trustees of the GKDK Trust. Their action was brought against Dasford Holdings Pty Ltd ("Dasford"), owner of the shopping centre and against Penman Holdings Pty Ltd ("Penman") which carried on a real estate agency under the name Perth Residential Investments. According to the statement of claim, Penman was employed at all material times as Dasford's leasing agent for the shopping centre. Thurston Saulsman, a director of Dasford and Penman, Kevin Pownall, who was a director of Dasford from 11 March 1991 to 28 January 2000 and Brian Bowler, who was a director of Dasford from 11 March 1991 until 28 April 1999 and its secretary from 11 March 1991 to 16 March 2001, were also joined. The statement of claim complains of misleading or deceptive conduct, negligent mis-statement and deceit on the part of or attributable to Dasford and Penman inducing the tenants to enter into leases for shops at the shopping centre. The directors are said to have been accessorially involved.

2 On 28 May 2002, I made orders striking out a statement of claim which had been filed on 9 April 2001 and gave leave to the applicant to file a substituted application and statement of claim. On 16 July 2002, a substituted application and a substituted statement of claim were filed. On 31 July, the fourth respondent, Mr Pownall, filed a motion seeking the following orders:

"1. That the Court strike out the entire action as the applicant Kandi Lee Revian and the group member Thompson sueing (sic) as Trustees of the GKDK Trust are not the possessors of any cause of action in this matter.

2. That the Court strike out the applicants substituted statement of claim as it contains the same fatal flaws as the original statement of claim struck out by the court on 28th May 2002.

3. That the court strike out the applicants actions against Kevin Arthur Pownall the Fourth Respondent as the substituted statement of claim contains no evidence to accessorise him to the allegations. (sic)

4. That the date for filing of defense [set as 16/08/02 at the last directions hearing] be changed to another date after the motions above are considered by the court." (sic)

Part X - The Deed of Arrangement

3 The first limb of Mr Pownall's motion relies upon the fact that Ms Revian and Mr Thompson are subject to arrangements under Part X of the Bankruptcy Act 1966 (Cth) which commenced on 10 August 2000 and are current. That fact is not in dispute.

4 A copy of the deed of arrangement entered into by Ms Revian was exhibited to her affidavit of 23 April 2002 filed in opposition to an application for security for costs. A deed in substantially the same form was executed by Mr Thompson. According to the deed entered into by Ms Revian she conveyed and assigned to her trustee, Graeme Trevor Lean, all of her indivisible property including specified interests in land on trust to be dealt with in accordance with the deed (cl 2). During the term of the deed any property as defined in s 5(1) of the Bankruptcy Act and any choses in action and any other rights or claims acquired by the debtor were to vest in the trustee upon trust to deal with in accordance with the deed (cl 3).

5 Clause 8 of the deed provides:

"The Debtor shall pay to the Trustee the proceeds of the damages claim (if any) against Dasford Holdings Pty Ltd, PRI Investments Pty Ltd or any other parties from whom damages and/or compensation are recovered in relation to the leasing of the Clarkson shop, or an amount of twenty-five thousand dollars ($25,000), whichever is the lesser, jointly with Grant William Thompson. The Debtor(s) may satisfy this obligation by payment of twenty-five thousand dollars ($25,000)."

Clause 9 provides:

"Upon payment by the Debtor of the amounts detailed in clauses 5 and 6 and either the payment of the amount detailed in clause 8 or notification of the failure or non-continuance of the damages claim by solicitors for the Debtor(s) this Deed shall terminate."

The resolution passed at the meeting of creditors of Ms Revian and Mr Thompson on 10 August 2000 included a resolution in the following terms:

"5. The proceeds of the damages claim against Dasford Holdings Pty Ltd, PRI Investments Pty (sic) or any other parties from whom damages are recovered in relation to the leasing of the Clarkson shop or an amount of $25,000 whichever is the lesser shall be paid to the trustee. The Debtors may satisfy this obligation by payment of $25,000."

It was contended for Mr Pownall that Ms Revian and Mr Thompson can only proceed with the current action with the consent of the trustee and that there was no evidence to show that such consent was given. If the trustee were to agree with the action, then it was said he should be liable for costs.

6 The entry by a debtor into a deed of arrangement under Part X of the Bankruptcy Act does not attract the application of s 60(2) of that Act. Under that provision legal proceedings commenced by a person who later becomes a bankrupt are stayed until the trustee makes an election in writing to prosecute or discontinue the action. The non-application of that provision to deeds of arrangement under Part X is apparent from s 237(2) which applies to deeds of arrangement certain other general provisions of the Act which are applicable to bankruptcies. It does not so apply s 60.

7 As counsel for the applicant has pointed out, there is no provision in the deed of arrangement which requires the consent of the trustee under the Part X arrangement to the continuance of legal proceedings by Ms Revian and Mr Thompson. Indeed the deed of arrangement in each case contemplates the continuance of those proceedings and the payment of certain of their proceeds to the trustee of the deed or a cash payment in lieu. The termination of the deed is conditioned upon the payment of the amount payable under clause 8 or notification of the failure or non-continuance of the damages claim. There is therefore nothing in the deed of arrangement itself or in the provisions of the Bankruptcy Act which prevents the continuance of the proceedings. There is however a question whether Ms Revian and Mr Thompson had authority to pledge the proceeds of the action which would in truth be assets of the GKDK Trust. This difficulty becomes particularly acute if they have, by the fact of entering into the deeds of arrangement, vacated their office as trustees.

The GKDK Trust

8 Mr Pownall also placed reliance upon the fact that Ms Revian and Mr Thompson were suing in their capacity as trustees of the GKDK Trust. It was in that capacity that they traded as Leading Edge Video Clarkson. In particular, reference was made to cl 14 of the GKDK Deed of Trust which provides:

"14. INCAPACITY OF TRUSTEE GUARDIAN OR APPOINTOR

A Trustee, Guardian or Appointor shall ipso facto vacate that office if that person:-

(a) Being an individual, is found to be a lunatic or of unsound mind or becomes subject to any bankruptcy law; or

(b) Being a company, enters into liquidation whether compulsory or voluntary (not being merely a voluntary liquidation for the purpose of amalgamation or reconstruction)."

A copy of the GKDK Deed of Trust was exhibited to the affidavit of Ms Revian sworn 23 April 2002 in opposition to a motion for security for costs. It was Mr Pownall's contention that by entering into the Part X arrangement, Ms Revian and Mr Thompson became subject to a bankruptcy law within the meaning of cl 14(a) and thereby vacated the office of trustee.

9 No submission was presented on behalf of the applicant adverse to the contention advanced by Mr Pownall that she and Mr Thompson had vacated the office of trustees upon entering into their deeds of arrangement under Part X. That contention, in my opinion, is correct. The application itself was commenced on 6 April 2001 at which time both Ms Revian and Mr Thompson were already subject to the provisions of Part X and were therefore incapable of acting in the office of trustees. On that basis, the submission that they lacked capacity to institute these proceedings is made out.

10 Counsel for the applicant argued that notwithstanding her lack of capacity to sue as trustee of the GKDK Trust, she retained sufficient interest to conduct the action on behalf of the Group Members. In this respect reliance was placed upon s 33D(2) of the Federal Court of Australia Act 1976 (Cth). That provision must be seen in the context of other relevant provisions of Part IVA of the Act.

11 Section 33C provides, inter alia:

"33C(1) Subject to this Part, where:

(a) 7 or more persons have claims against the same person; and

(b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and

(c) the claims of all those persons give rise to a substantial common issue of law or facts;

a proceeding may be commenced by one or more of those persons as representing some or all of them."

12 Section 33D which deals with standing to commence and continue proceedings is in the following terms:

"33D(1) A person referred to in paragraph 33C(1)(a) who has a sufficient interest to commence a proceeding on his or her own behalf against another person has a sufficient interest to commence a representative proceeding against that other person on behalf of other persons referred to in that paragraph.

(2) Where a person has commenced a representative proceeding, the person retains a sufficient interest:

(a) to continue that proceeding; and

(b) to bring an appeal from a judgment in that proceeding;

even though the person ceases to have a claim against the respondent."

13 The operation of s 33D was considered by Wilcox J in Symington v Hoechst Schering Agrevo Pty Ltd (1997) 78 FCR 164. Commenting on s 33D, his Honour said, at 167:

"The evident purpose of subs (1) is to overcome the common law standing rule that says A may not bring a damages action on behalf of B against C. Normally a person can only bring an action for damages on his or her own behalf. If that rule was applied in representative proceedings it would defeat their purpose. Section 33D(1) is designed to abrogate the common law rule but, of course, it does so only to the extent of the provision made by the subsection itself."

Subsection (2), consistently with the purpose of subs (1) identified in the Symington case, allows the person commencing the representative proceeding to continue it even though that person ceases to have a claim against the relevant respondent. The assumption implicit in subs (2) is that at the commencement of the proceeding the person did have a sufficient interest to initiate it. The subsequent cessation of the claim contemplated by that subsection does not, as a matter of construction, extend to a case in which the applicant had no claim in her own right. Were the contrary construction open, then any intermeddler could commence a representative proceeding and have authority to continue it notwithstanding the lack of any sufficient interest at the outset. In my opinion s 33D(2) does not overcome the difficulty arising from the fact that the applicant was not at any relevant time a trustee of the GKDK Trust.

14 The question which then arises is what can be done now. It is apparent that the action cannot continue with the present applicant. She lacks the very capacity upon which she relies to prosecute the proceeding. Moreover, she and Mr Thompson lack the capacity to continue as Group Members. The Trust itself, as disclosed by the Trust Deed, is discretionary with a range of beneficiaries comprising Ms Revian and her father and members of their extended family, including their siblings, aunts, uncles, nephews, nieces, cousins, second cousins, parents and grandparents. There is no apparent entitlement in the beneficiaries or in Ms Revian or Mr Thompson that could constitute an interest sufficient to bring the action in their capacities as beneficiaries. It was not suggested by way of submission that there is any such interest. In my opinion therefore, there is no alternative to removing Ms Revian as applicant and dismissing the claim bought by Ms Revian and Mr Thompson in their capacity as First Group Members.

15 Section 33T of the Federal Court Act provides:

"If, on an application by a group member, it appears to the Court that a representative party is not able adequately to represent the interests of the group members, the Court may substitute another group member as representative party and may make such other orders as it thinks fit."

Of course, any group member who is substituted as an applicant will become liable to pay the costs of the proceeding thereafter if unsuccessful.

The Viability of the Statement of Claim - Accessorial Liability

16 The second and third limbs of Mr Pownall's motion attack the viability of the substituted statement of claim. The submissions as to viability were not particularly detailed. The new pleading appears to place substantial reliance upon s 51A of the Trade Practices Act 1974 (Cth) and implied representations as to reasonable grounds for making various predictive statements. I am not prepared on the submissions made thus far to strike out the substituted statement of claim generally. However, given my conclusions on the claim against the directors this may be academic.

17 Mr Pownall focussed on the claimed basis for his accessorial involvement in the alleged contraventions by Dasford and Penman. The pleading in that respect makes common allegations against the third, fourth and fifth respondents. The relevant parts of the pleadings are to be found at pars 68, 141, 183, 214, 253, 285, 316, 342 and 380 for the first to ninth group members respectively.

18 It is sufficient for present purposes to set out the plea of accessorial involvement in respect of representations to the first group members at par 68:

"At all material times, the Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent (as well as the First and Second Respondents) were directly or indirectly, knowingly concerned in, or party to, the contraventions of the Trade Practices Act by the First and Second Respondents pursuant to section 75B of the Trade Practices Act, in that:-

PARTICULARS OF INVOLVEMENT

(a) The First Group Members repeat the matters pleaded in paragraphs 4 to 8 above.

(b) At all material times, all of the Respondents had access to the plans, management policies and information in relation to the existing and proposed tenancies in the Shopping Centre, including the brochure and the facsimile.

(c) The First Respondent, by the Third and/or Fourth and/or Fifth Respondents, engaged the Second respondent as its agent and supplied it with information, from time to time, which the Second Respondent, by Wright, used in making the (1GM) Representations pleaded.

(d) Wright was reporting to the Respondents his representations to, and negotiations with prospective tenants, including the First Group Members.

(e) The Respondents knew the representations were made to the First Group Members or ought reasonably to have so known.

(f) The Respondents took no steps, or insufficient step, to correct, or prevent the misrepresentations made by Wright to the First Group Members or to ensure that the representations made were accurate.

(g) Further the First Group Members rely upon the provisions of section 84 of the Trade Practices Act and section 82 of the Fair Trading Act (WA).

(h) It was within the knowledge of the Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent who were well aware, alternatively who elected to remain purposely ignorant of the fact by not making any inquiries or any sufficient inquiries, that it would not be possible to have a newsagency tenancy in the Shopping Centre, in light of the policy of the Newsagency Council of Western Australia not to permit the establishment of another newsagency in competition with the newsagency at the nearby Quinns Rock Shopping Centre.

(i) It was within the knowledge of the Third Respondent and/or the Fourth respondent and/or the Fifth Respondent who were well aware, alternatively who elected to remain purposely ignorant of the fact by not making any inquiries or any sufficient inquiries, that it would not be possible to have a pharmacy within the Shopping Centre by reason of the existence of the pharmacy located at Quinns Rock Shopping Centre and the restriction placed by the Federal Government upon the establishment of another pharmacy within a radius of 5 km which ruled out the establishment of the pharmacy at the Shopping Centre.

(j) It was within the knowledge of the Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent who were well aware, alternatively who elected to remain purposely ignorant of the fact by not making any enquiries or any sufficient enquiries (sic), that no adequate demand existed for the establishment for a retail shopping facility on the site that the First Respondent had purchased from Landcorp, and that there were no reasonable grounds for the representations made to both mortgagees and prospective tenants regarding the strong demand for the establishment of a retail Shopping Centre facility on the undeveloped land, when in truth and in fact no such demand ever existed.

(k) The Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent were well aware, or ought reasonably to have been aware, that the development of the retail shopping facility on the undeveloped land which had been zoned for use as a Medical Centre by Landcorp was unlikely to succeed, but the Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent nonetheless elected to insist upon the rezoning of the undeveloped land by the City of Wanneroo to permit the erection of seventeen retail tenancies on the undeveloped land, so as to enable the First Respondent to obtain an increased valuation of the undeveloped land for mortgage finance purposes and thereby obtain an increased mortgage facility from Blackburne and Dixon Pty Ltd and thereby defraud Blackburne and Dixon Pty Ltd, and/or the individual investors who provided the mortgagee funds to Blackburne and Dixon Pty Ltd, into providing mortgagee finance in circumstances where had Blackburne and Dixon Pty Ltd and/or the individual investors who provided that mortgage funds known of the true situation a far lesser amount would have been lent against the Shopping Centre or no mortgage funds would have been advanced at all.

(l) Further and better particulars will be supplied after discovery and/or the administration of interrogatories."

Particular (a) refers to pars 4 to 8 of the substituted statement of claim which in essence assert the function of Penman as an agent for Dasford, the fact that Charles Wright was its employee and the directorships of the third, fourth and fifth respondents.

19 The particulars of accessorial involvement baldly assert that Wright reported his representations and negotiations with the group members to the respondents who, it was said, "knew the representations were made...or ought reasonably to have known." This allegation conflates the imputed knowledge of the corporate respondents, the alleged actual knowledge of the directors and their constructive knowledge which is pleaded in the alternative. Constructive knowledge does not establish knowing concern or participation in contraventions of the Trade Practices Act. The reliance upon constructive knowledge appears from the oddly phrased assertions that the directors "were well aware alternatively...elected to remain purposely ignorant of the fact...". Constructive knowledge is insufficient for accessorial liability - Compaq Computer Australia Pty Ltd v Merry (unrep, Fed Court, 14 August 1998). The knowledge that is required is knowledge of the essential elements of the conduct that constituted the relevant contravention. This does not strictly require a subjective appreciation that the representations were false or misleading - Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670; Cassidy v Medical Benefits Fund of Australia (No 2) [2002] FCA 1097 at [72] and [73] (Finklestein J).

20 Suspicious circumstances together with want of inquiry may support an inference of actual knowledge but particulars to support such an inference are not set out in the pleading. But actual knowledge, while a necessary element of accessorial involvement under s 75B, is not sufficient to establish that involvement. The assertions of actual knowledge in this case are made baldly.

21 In this case the knowing concern in the contraventions on the part of the directors, as particularised, appears to derive from a combination of actual or constructive knowledge with a failure to take steps "to correct or prevent the misrepresentations made by Wright ... or to ensure that the representations made were accurate". There is no suggestion that any of the directors was involved in any way in the actual making of the representations complained of. Nor is there any plea that they gave instructions which led to the making of the representations. The case appears to be entirely based on the failure of the directors to take preventive activity. In my opinion the plea of accessorial involvement is a speculative construct. In so far as it relies upon constructive knowledge or the oxymoron "purposely ignorant", it is not sustainable. In my opinion the allegations of accessorial involvement do not disclose a reasonable cause of action and should be struck out.

22 It should be noted that in the pleas of accessorial involvement for group members other than the first group member, there is an additional allegation in the following terms:

"The Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent were knowingly involved in the creation of plans for the purpose of leasing tenancies at the Shopping Centre, that purported to represent the proposed retail tenancy mix of the Shopping Centre, and which falsely represented the same."

It is not apparent what meaning is to be given to that paragraph and, in my opinion, it does not save the pleading.

Conclusion

23 The present proceeding was instituted on 6 April 2001. The applicant has not been legally represented until recently. She did evidently receive some form of legal assistance early in the piece but not enough to establish a viable statement of claim. The proceeding was from the outset an unwieldy and burdensome use of the representative process. Absent proper legal advice it proceeded slowly and has not yet reached the stage at which defences can be filed. The case against the corporate directors has never been properly formulated and has the character of causes of action in search of respondents. In my opinion, it is questionable now whether the action is viable at all having regard to the history of difficulty with the pleading, the time that has elapsed and the obviously constructed nature of the allegations against the directors. I propose to dismiss the proceedings as against them. It will be necessary to remove the applicant and to dismiss so much of the proceeding as relates to her claim and that of her father, they never having had a sufficient interest to bring the claim. That is a result of the terms of the Trust Deed under which they were operating their business. The orders I will make are as follows:

1. The applicant be removed as representative of the Group Members.

2. So much of the substituted statement of claim as relates to the causes of action asserted by the First Group Members be struck out.

3. So much of the substituted statement of claim as alleges the accessorial involvement of the third, fourth and fifth respondents be struck out.

4. The proceedings be dismissed as against the third, fourth and fifth respondents.

5. The applicant pay the third, fourth and fifth respondents' costs of the application.

6. There be liberty to apply to substitute another Group Member or Group Members for the applicant.

I certify that the preceding twenty three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Acting Associate:

Dated: 10 September 2002

Counsel for the Applicant:	Mr SG Leslie
Solicitor for the Applicant:	Wilson & Atkinson
Counsel for the First and Second Respondents:	No Appearance
Counsel for the Third Respondent:	Mr DM Meagher
Solicitor for the Third Respondent:	Meagher & Co Mr KA Pownall, the Fourth Respondent, appeared on his own behalf. Mr BJ Bowler, the Fifth Respondent, appeared on his own behalf.
Date of Hearing:	6 August 2002
Date of Judgment:	10 September 2002