Dense Medium Separation Powders Pty Limited (trading as DMS Powders) v Gondwana Chemicals Pty Limited& Anor [2011] NSWSC 76 (17 February 2011)

Last Updated: 15 April 2011

Supreme Court New South Wales

Case Title:	Dense Medium Separation Powders Pty Limited (trading as DMS Powders) v Gondwana Chemicals Pty Limited & Anor
Medium Neutral Citation:	[2011] NSWSC 76
Hearing Date(s):	16 February 2011
Decision Date:	17 February 2011
Jurisdiction:
Before:	Einstein J
Decision:	The Courts orders are as follows : (1) The plaintiffs amended notice of motion dated 16 February 2011 is dismissed with costs of that notice of motion to be paid by the plaintiff; (2) The second defendant's application for further security for costs is granted and the plaintiff is to pay the additional sum of $50,000 to the defendant's solicitors on or before 25 March 2011. Costs of the second defendant's application for further security to be paid by the plaintiff.
Catchwords:	Leave to file a further amended commercial list statement; Security for costs
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Cement Australia Pty Ltd v ACCC [2010] FCAFC 101 Dye v Commonwealth Securities Ltd [2010] FCAFC 118
Texts Cited:
Category:	Procedural and other rulings
Parties:	Dense Medium Separation Powders Pty Limited (trading as DMS Powders) (Plaintiff) Gondwana Chemicals Pty Limited (First Defendant) David Maxwell Willetts (Second Defendant)
Representation
- Counsel:	Counsel: Mr J Simpkins SC, Ms V McWilliam (Plaintiff) Mr A Cheshire (Second Defendant)
- Solicitors:	Solicitors: PricewaterhouseCoopers (Plaintiff) Colin Biggers & Paisley (Second Defendant)
File number(s):	2010/0059719
Publication Restriction:

Judgment

The applications

1. There are two applications before the Court :
   
   • (1) The first pursued by the plaintiff seeks leave to file a further amended commercial List statement and a further amended Summons;
     
   • (2) The second pursued by the second defendant seeks security for costs.
     

Dealing with the first application

2. The heart of the plaintiff's application is to join Mr Blair into the proceedings and additionally to join too further defendants to the proceedings
   
3. Both parties seek to contend that the other is responsible for the state of affairs which exists so far into the current case management of the proceedings.
   

The plaintiff's contentions

4. The plaintiff contends that there has been no delay in making the application. Its contention is that the present iteration of the Commercial List Response, filed on 19 November 2010, pleads for the first time that the plaintiff consented, acquiesced or knew of the conduct said to constitute the breach of the Agency Agreement and fiduciary duties.
   
5. The conduct of Mr Blair, a former director of the plaintiff, is expressly relied upon in that regard.
   
6. On 24 December 2010, the second defendant served the affidavit of David Willetts. It contains a number of conversations between the second defendant and Will Blair which are relevant to:
   
   • (1) The question of the terms of the Agency Agreement pleaded;
     
   • (2) Whether the plaintiff consented, knew or acquiesced in the defendants conduct which it alleges breached the Agency Agreement and their fiduciary duties;
     
   • (3) Whether other entities benefited from the conduct of Will Blair and the defendants.
     
7. The plaintiff's contention is that these issues cannot be resolved without factual finding s being made in respect of Mr Blair. The contention is that rights of the defendants will be affected by those findings, as will the right of the plaintiff to recover against the present defendants or Mr Blair.
   
8. The plaintiff's contention is that the joinder of the fourth and fifth defendants is a corollary of the conduct of Mr Blair. Mr Blair was a director of both those companies, and the evidence suggests that they have benefited financially from the conduct of Mr Blair and the first and second defendants.
   

The defendant's contentions

10 The second defendant takes violent issue with the plaintiff's contentions. It's propositions are as follows :

(4) The plaintiff has not provided evidence that would justify the Court exercising its discretion to allow the amendments and the second defendant would suffer significant prejudice were they to be allowed.

(5) If the amendments are allowed then there will be a very significant increase in costs and there would be no prospect of a final hearing this year.

(6) The plaintiff's counsel has informed the second defendant's counsel that none of the allegations made in the proposed amendments are to be made in the case against the First and second defendants. He should be required to confirm in open Court that this is the case, but if it is the case then there is no justification for seeking to introduce a case solely against the proposed Third to Fifth defendants into these proceedings.

(7) The plaintiff and the proposed Third and Fourth defendants are South African and it is pleaded that the proposed Fifth defendant is the alter ego of its director the Third defendant (paragraph 61). As the proposed Third, Fourth and Fifth defendants' solicitors have indicated, the relationship between those parties and the plaintiff will be governed by South African law, there are differences in the law (including as to limitation, constructive trusts and the operation of the Corporations Act 2001 (Cth) ) and there will be a challenge to forum.

(8) Even if a challenge as to forum were to be unsuccessful, there would be a considerable delay and increase in costs given the need for further commercial list responses, discovery, witness statements and expert evidence as to South African law.

(9) Even though it is said that the new allegations are not made as against the First and second defendants, it is difficult to see how the allegations made as against the First and second defendants in the case as against the Third to Fifth defendants would not impact upon the case as against the First and second defendants.

(10) There are no substantive amendments in respect of paragraphs 1 to 29 of the proposed 2 nd FACLS, but the proposed paragraphs 30 to 68 are new. These include allegations against the First and second defendants of dishonesty and fraud (paragraphs 48, 50, 65), of breach of fiduciary duty (paragraph 57, 64) and of other acts (paragraph 66).

(11) The allegations of dishonesty and fraud are not properly particularised at all let alone to the degree commensurate with the seriousness of those allegations; and the other new allegations against not only the First and second defendants but also the proposed Third to Fifth defendants are not confined to the alleged acts of importation previously particularised against the First and second defendants but instead are put at large until after discovery.

(12) Thus, for instance, the allegations of a dishonest and fraudulent design on the part of the First and second defendant, if made out in the case against the Third to Fifth defendants, would clearly be relevant to the issues in the case as against the First and second defendants, including as to whether there was in fact in force a relevant agency agreement, which forms the main issue in the case as between the plaintiff and the First and second defendants.

(13) The second defendant therefore has a considerable interest in the matters sought to be pleaded about the First and second defendants in the case against the Third to Fifth defendants. Proper particulars ought to have been given of the dishonesty/fraud allegations and, even if the First and second defendants would not be entitled to those (which they do not accept), the Third to Fifth defendants would be.

(14) Further, the plaintiff seeks to widen the case as to wrongful conduct on the part of the First and second defendants, not only as to the dishonesty/fraud allegations but also by not limiting the case to that already pleaded but reserving the plaintiff's position and withholding proper particulars until after discovery, presumably being by all parties.

(15) The plaintiff was aware of the involvement of the proposed Third defendant, the director and alleged alter ego of the Fourth and Fifth defendants (paragraphs 55 and 61), in the actions of the First and second defendants of which it makes complaint, when it first raised those complaints prior to commencing these proceedings.

(16) An explanation is required as to why the plaintiff has not sought to make these allegations before now (see Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 as explained in Cement Australia Pty Ltd v ACCC [2010] FCAFC 101 and Dye v Commonwealth Securities Ltd [2010] FCAFC 118). None has been proffered and the application must fail accordingly.

Decision

11. There is no doubt but that were the plaintiff's current application to be acceded to many of the second defendant's concerns would be justified. In particular the spectre of the litigation bringing in the South African parties will require an excursus into South African law there being differences in the law (including as to limitations, constructive trusts and the operation of the Corporations Act 2001 (Cth).
    
12. I accept that even if a challenge to forum were to be unsuccessful, there would be a considerable delay and increase in costs given the need for further commercial list responses, discovery, witnesses statements and expert evidence as to South African law.
    
13. In all the circumstances my view is that the defendant has not made good its application to join the additional parties. That application is rejected.
    

The application to extend the current regime concerning the second defendants security for costs

14. Security for costs has previously been ordered against the plaintiff, it being a South African company. In my view bearing in mind the current State of the proceedings the defendant is entitled to an additional sum of $50,000, it always being the case that further applications can be made as appropriate
    

Orders

15. The Courts orders are as follows :
    

(1) The plaintiffs amended notice of motion dated 16 February 2011 is dismissed with costs of that notice of motion to be paid by the plaintiff;

(2) The second defendant's application for further security for costs is granted and the plaintiff is to pay the additional sum of $50,000 to the defendant's solicitors on or before 25 March 2011. Costs of the second defendant's application for further security to be paid by the plaintiff.

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