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ACN 120 316  663  PTY LTD (ACN 120 316  663 ) (IN LIQ) -v- QUACH [2019] WASC 126 (17 April 2019)

Supreme Court of Western Australia

ACN 120 316  663  PTY LTD (ACN 120 316  663 ) (IN LIQ) -v- QUACH [2019] WASC 126 (17 April 2019)

Last Updated: 17 April 2019

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ACN 120 316  663  PTY LTD (ACN 120 316  663 ) (IN LIQ) -v- QUACH [2019] WASC 126

CORAM : QUINLAN CJ

HEARD : 12 APRIL 2019

DELIVERED : 12 APRIL 2019

PUBLISHED : 17 APRIL 2019

FILE NO/S : CIV 1210 of 2018

BETWEEN : ACN 120 316  663  PTY LTD (ACN 120 316  663 ) (IN LIQ)

Plaintiff

AND

LONG QUAN QUACH

MAI THANH HONG

MY LINH TRAN

Defendants

LONG QUAN QUACH

MAI THANH HONG

MY LINH TRAN

Plaintiffs by counterclaim

ACN 120 316  663  PTY LTD (ACN 120 316  663 ) (IN LIQ)

ACN 120 316 716 PTY LTD (ACN 120 316 716) (IN LIQ)

Defendants by counterclaim

ACN 120 316  663  PTY LTD (ACN 120 316  663 ) (IN LIQ)

JIMMY TRPCEVSKI AS LIQUIDATOR OF ACN 120 316  663  PTY LTD (ACN 120 316  663 ) (IN LIQ) DAVID ASHLEY NORMAN HURT AS LIQUIDATOR OF ACN 120 316  663  PTY LTD (ACN 120 316  663 ) (IN LIQ)

Plaintiffs by further counterclaim

LONG QUAN QUACH

MAI THANH HONG

MY LINH TRAN

Defendants by further counterclaim

Procedure - Summary relief - Application for summary judgment against second defendant by counterclaim - Declaration sought as to deemed admissions and to the legal relationship between the parties - Declarations sought relate to contentious matters which are triable issues - Summary judgment refused

Procedure - Summary relief - Application to strike out portions of second counterclaim - Issues of proper construction - Second limb of Barnes v Addy raised - Accessorial liability - No proper basis for striking out the pleading. Strike-out application refused

Legislation:

Corporations Act 2001 (Cth)

Result:

Summary judgment and strike-out application refused

Category: B

Representation:

Counsel:

Solicitors:

Case(s) referred to in decision(s):

QUINLAN CJ:

(This decision was delivered extemporaneously on 12 April 2019 and has been edited from the transcript.)

1. This is an application for summary relief brought by the defendants, Long Quan Quach, Mai Thanh Hong and My Linh Tran. The defendants, who are also the plaintiff by counterclaim and defendants by second counterclaim, previously conducted business as a partnership trading as Golden West Bakery (Golden West).
2. Golden West's application for summary relief consists of:

(a) an application for summary judgment against the second defendant by counterclaim, ACN 120 316 716 Pty Ltd (In liq). ACN 120 316 716 Pty Ltd (In liq) is a company in liquidation that previously traded as Mias Bakery (Mias Bakery); and

(b) an application to strike out portions of the second counterclaim brought by the plaintiffs by counterclaim, ACN 120 316  663  Pty Ltd (In liq), and its liquidators. ACN 120 316  663  Pty Ltd (In liq) previously traded as West Coast Milling (West Coast Milling).

3. It is uncontroversial, on the pleadings, that Mias Bakery and West Coast Milling were related companies, as part of the Mias Group of Companies and had common personnel, including Mr Conrad Mias (Managing Director), Mr David Dryland (General Manager) and Ms Jodie Fenttiman (Administrator).
4. As will become apparent, the summary judgment application, and the strikeout application, seek relief in relation to only part of the claims between the parties in these proceedings. In that regard, the proceedings raise manifold factual and legal issues, by way of claim and counterclaim, including that rare, but not wholly unknown, beast: a plaintiff's counterclaim.[1]
5. As will also become clear, the issues for which Golden West seeks summary relief are closely connected with those parts of the claim, counterclaim and second counterclaim that remain untouched by the summary judgment application and the strikeout application.
6. The variety and complexity of those factual and legal issues provides reason for pause, in addition to that which ordinarily applies as to whether summary relief is appropriate.
7. Before turning to the relief sought by Golden West, it is appropriate to briefly summarise the issues raised on the pleadings.

Issues on the pleadings

8. The claim by West Coast Milling is relatively simple. West Coast Milling claims $1,107,584.73, together with interest, as a debt due and payable by Golden West to West Coast Milling. That debt is said to relate to the delivery of baking ingredients (the Ingredients) by West Coast Milling to Golden West from about August 2015 to July 2017.[2]
9. West Coast Milling pleads that the Ingredients were supplied to Golden West under an agreement, or series of agreements, between West Coast Milling and Golden West. The agreement, or series of agreements, West Coast Milling pleads, are to be inferred from a series of invoices. Alternatively, West Coast Milling relies upon the series of invoices in combination with others matters, including a document headed 'Memorandum of Understanding between the Mias Group of Companies and Golden West Bakery' dated 17 October 2013 (the MOU). [3]
10. Golden West, in its substituted defence and counterclaim dated 24 December 2018 (Defence and Counterclaim), denies that it owes a debt to West Coast Milling. In that context, Golden West pleads that it had an agreement for the supply of, and payment for, the Ingredients with Mias Bakery, not West Coast Milling.[4] That agreement also provided for the supply, by Golden West, of baked products to Mias Bakery.
11. Golden West relies on the MOU and contends that, on its proper construction, West Coast Milling was not a party to the MOU. Further and in the alternative, Golden West contends that, to the extent that West Coast Milling asserts rights against Golden West under any agreement, any such agreement was subject to the qualification that any obligation upon Golden West to pay West Coast Milling was conditional upon payment by Mias Bakery to Golden West for the baked products provided by Golden West. This was referred to by Golden West in submissions as a 'pay when paid' arrangement.
12. That qualification is variously pleaded as arising from an implied condition, an estoppel, a variation or a waiver.[5] The pleading as to estoppel, in particular, identifies the arrangement as commencing from early 2015 or, in any event, by October 2015. Accordingly, the pleading, as Golden West accepted in submissions, is to the effect that the 'pay when paid' arrangement arose at some point after the MOU (that is, after 17 October 2013).
13. The Defence and Counterclaim goes on to plead claims by Golden West against West Coast Milling for misleading and deceptive conduct and unconscionable conduct. The alleged misleading or deceptive conduct and unconscionable conduct form the basis for a counterclaim by Golden West, against both West Coast Milling and Mias Bakery. The relief against West Coast Milling includes claims for damages and equitable setoff. It also includes a claim for declarations that West Coast Milling:[6]

24.6.1 Is not a party to any contract with Golden West, and;

24.6.1A Is not a third-party beneficiary of any contract with Golden West within the meaning of subsection 11(2) of the [Property Law Act];

24.6.2 Has no rights capable of assertion as against Golden West.

14. The prayer for relief against Mias Bakery includes a claim for a declaration that:[7]

Mias Bakery is a party to an agreement with Golden West, constituted by the MoU, to the exclusion of West Coast Milling.

15. As will be seen, the relief sought in the summary judgment application is, in essence, relief in the form of that declaration.
16. The Further Amended Reply, Defence to Counterclaim and Counterclaim dated 18 January 2018 (Plaintiff's Counterclaim), filed by West Coast Milling and its liquidator, joins issue with the pleadings in the Defence and Counterclaim in relation to the effect of the MOU. The Plaintiff's Counterclaim includes an alternative plea to the effect that, if the MOU was in force at the relevant time and was otherwise inconsistent with West Coast Milling's claim, that the MOU was varied by conduct so that West Coast Milling became a party to it.[8]
17. The Plaintiff's Counterclaim also joins issue with the counterclaim in the Defence and Counterclaim, including denying that Golden West is entitled to the relief claimed or any relief.[9]
18. The Plaintiff's Counterclaim goes on to bring a counterclaim against Golden West consisting of two broad allegations.
19. First, West Coast Milling and its liquidator plead that if (which is denied) there was an enforceable variation, waiver or estoppel, as pleaded by Golden West in the Defence and Counterclaim, that the transaction constituted by the variation, waiver or estoppel would be a voidable transaction under s 588FE of the Corporations Act 2001 (Cth).[10] A similar plea is made in relation to the claims for misleading and deceptive conduct; that is, that an order based on that alleged conduct would be a voidable transaction.[11] Golden West does not apply to strike out those pleadings.
20. Secondly, the Plaintiff's Counterclaim pleads that, if there was an enforceable variation, waiver or estoppel as pleaded by Golden West in the Defence and Counterclaim:

(a) the acts giving rise to them were in breach fiduciary duties owed to West Coast Milling by Mr Mias and Ms Fenttiman;[12] and

(b) Golden West knowingly assisted or participated in those breaches.[13]

By this plea West Coast Milling and its liquidator make a claim against Golden West under both the second limb of Barnes v Addy,[14] and the analogous provisions in the Corporations Act giving rise to a right to compensation under s 1317H of the Corporations Act.

21. With this, necessarily brief, summary of the issues, I turn to each of Golden West's claims for summary relief.

The summary judgment application

22. As noted above, Golden West seeks summary judgment against Mias Bakery on its counterclaim. The relief it seeks on the summary judgment application is declaratory relief.
23. The nature of the claim is best illustrated by setting out the declarations sought by Golden West. They are:[15]
    1. Upon admissions which A.C.N. 120 316 716 Pty Ltd (ACN 120 316 716) (In liq.) (formerly known as Mias Bakery Pty Ltd) is taken to have made, it is declared that:

Between October 2013 and August 2017 inclusive, A.C.N. 120 316 716 Pty Ltd (ACN 120 316 716) (In liq.) (formerly known as Mias Bakery Pty Ltd) is or was a party to an agreement with the partnership known as Golden West Bakery, entitled 'Memorandum of Understanding Between the Mias Group of Companies (Mias Bakery Pty Ltd 29 Catalano Road Canning Vale WA) and Golden West Bakery (Unit 2/1 Resources Way Malaga WA), to the exclusion of A.C.N. 120 316  663  Pty Ltd (ACN 120 316  663 ) (In liq.) and formerly known as West Coast Milling Pty Ltd.

Alternatively:

2. Upon admissions which A.C.N. 120 316 716 Pty Ltd (ACN 120 316 716) (In liq.) (formerly known as Mias Bakery Pty Ltd) is taken to have made, it is declared that:
   1. Between October 2013 and August 2017 inclusive A.C.N. 120 316 716 Pty Ltd (ACN 120 316 716) (In liq.) (formerly known as Mias Bakery Pty Ltd), and A.C.N. 120 316  663  Pty Ltd (In liq.) (formerly known as West Coast Milling Pty Ltd) were parties to an agreement with the partnership known as Golden West Bakery, entitled 'Memorandum of Understanding Between the Mias Group of Companies (Mias Bakery Pty Ltd 29 Catalano Road Canning Vale WA) and Golden West Bakery (Unit 2/1 Resources Way Malaga WA).
   2. It was an express or implied condition of that agreement that any obligation upon Mias Bakery Pty Ltd to pay West Coast Milling Pty Ltd for the supply of Premix Formulated Flour in particular month accrued upon Mias Bakery Pty Ltd paying Golden West Bakery for the baked product in a particular month.

(original emphasis)

24. It will be immediately apparent from the nature of the relief sought by Golden West that it has the following features:

(a) it seeks declaratory relief based upon admissions made by the Mias Bakery. Indeed, on the face of the proposed declarations, the relief is based upon deemed admissions said to arise in default of defence;[16]

(b) it seeks declarations as to the legal relationship between Mias Bakery and Golden West that by their very terms purport to declare aspects of the legal relationship between Golden West and West Coast Milling. The first form of declaration, for example, seeks to declare an agreement 'to the exclusion of' West Coast Milling and the second declaration proposes a declaration of an agreement to which West Coast Milling is a party and seeks to declare the express or implied conditions of that agreement; and

(c) the declarations are posed in the alternative.

25. As will be seen, in my view, each of these three features of the relief sought by Golden West provide compelling reasons why the relief should be refused.
26. Before turning to those issues, I note that West Coast Milling raised a number of procedural objections to the application for summary judgment, including the absence of a proper affidavit deposing to the actual belief by the deponent of the truth of every fact required to establish Golden West's claim, and the absence of any fact that could ground a defence in fact or in law.[17]
27. There is something to be said for these criticisms. In particular the affidavit in support of the application, sworn by Golden West's solicitor, does little more than annex a copy of the MOU and 'verify' the paragraphs of the Defence and Counterclaim in relation to the creation of the MOU.[18] Nevertheless, I prefer to deal with the application on a more fundamental basis.
28. First, the relief sought is by way of summary judgment. Before granting relief, the court must be satisfied that there is no real question to be tried and should not decide the issues raised in a summary way except in the clearest of cases. As was observed in Agar v Hyde:[19]

The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.

29. In the present case, the relationships between Golden West, Mias Bakery and West Coast Milling are all very much in issue.
30. As the brief summary above demonstrates, Golden West and West Coast Milling have joined issue in relation to the nature of the relationship between them, including the extent to which that relationship is governed by the MOU, or by other forms of agreement, including an agreement to be inferred from various invoices, none of which are in evidence before me.
31. Significantly, on this application, Golden West does not seek summary judgment against West Coast Milling, in either the original claim or the counterclaim. All of the issues joined between Golden West and West Coast Milling would remain in issue.
32. The declarations sought on the summary judgment application, as against Mias Bakery, however, would essentially cut across those issues. The declarations purport to describe the relationship between Golden West and Mias Bakery, from October 2013 to August 2017, in a manner that necessarily purports to decide the extent to which West Coast Milling formed part of that relationship. I should note that in its oral submissions, Golden West suggested that the dates referred to in the declaration might be adjusted to reflect the express term of the MOU, a matter I will come to later.
33. It is true that a declaration only binds the parties and their privies[20] and there was some argument before me as to whether the parties, including West Coast milling, would be bound by the form of declaration. Whether that would be so, in a case such as the present where the declaration is sought in the context of a counterclaim in which the very issue sought to be resolved by the declaration remains in issue between the other parties, would, in my view, be wholly artificial to regard the declaration as only affecting rights as between Golden West and Mias Bakery.
34. Indeed, in its Submissions in Reply, Golden West contended that it would be a consequence of the summary judgment that many of the issues in the Original Claim would be res judicata[21] and in its oral submissions raised the prospect that an issue estoppel would arise. Golden West went so far as to contend that the potential application of the principles of res judicata or issue estoppel, were matters in favour of summary judgment.
35. I disagree. In my view, to treat this application as an application for summary judgment as to West Coast Milling rights (simply because it is a party), would not be a proper use of the Court's power to enter summary judgment. A properly constituted application for summary judgment against West Coast Milling, in the original action, would include evidence supporting the conclusion that West Coast Milling's claim was so clearly untenable that it cannot possibly succeed.[22] Needless to say there is no evidence to that effect.
36. This raises the second problem with the application: the declarations are not proposed to be made on determined or agreed facts, but rather upon deemed admissions as a result of the default of defence on the part of Mias Bakery, together with the evidence of the MOU itself. While it is true that there may be some contexts in which it may be appropriate to grant declaratory relief where there has been no positive defence, those cases will be rare and will usually involve some public interest issue.[23] That is not the case here. The declarations sought relate to contentious matters between the parties, in relation to which there are triable issues.
37. In this respect, Golden West appears to put the case on the basis that the proper construction of the MOU, and its application to the relationship between all of the parties, is so clear as to admit of no other meaning or effect (as would be necessary for the purposes of summary judgment). Again, I disagree. On Golden West's own case, the MOU is 'poorly drafted',[24] and admits of at least two possible constructions.[25]
38. To take but two examples of the issues raised by the MOU.
39. First, the MOU, on its face, is ambiguous as to the identity of the contracting parties. While it refers to being a memorandum between 'two (2) parties', in addition to referring to Golden West, it refers to the Mias Group of Companies Pty Ltd, Mias Bakery Pty Ltd and, in the Schedule, to West Coast Milling. The document, as a whole, is titled 'Memorandum of Understanding between the Mias Group of Companies and Golden West Bakery'.
40. Secondly, the MOU itself provides that 'the term of this agreement shall be said to be enforceable by either party for a period of twelve (12) months from the date of signing of this document'. The MOU is dated as having been signed on 17 October 2013. On its face, therefore, in the absence of an extension or variation, the MOU was to have expired by 17 October 2014; that is, the year prior to the events the subject of the claim by West Coast Milling.
41. There is no evidence, on this application, as to whether or how the MOU was extended. Indeed, other than the MOU itself, there is no evidence at all of the conduct of the parties after October 2013, save for the attachment to the affidavit of a report from the liquidator of Mias Bakery.
42. In those circumstances, there could not be any basis for making a declaration as to the status of the MOU, or its proper construction, over the period the subject of West Coast Milling's claim (August 2015 to July 2017). Less still is there any basis for doing so on a summary basis. In that context, to amend the dates in the proposed declarations to confine them to the original term of the MOU on its face, that is from 17 October 2013 to 17 October 2014 (as Golden West submitted orally) would, in addition to suffering from other the problems I have already identified, raise real questions as to its utility. What would be the purpose of declaration in relation to a period not the subject of any claim?
43. Finally, the inappropriate nature of the relief sought is, in my view, demonstrated by the fact that it is posed in two mutually exclusive alternatives. In circumstances in which the law requires that declarations be made based upon agreed or admitted facts, proffering two mutually exclusive factual and legal statements only serves to manifest the absence of a proper foundation for the making of a declaration.
44. The summary judgment application must be refused.

The strike-out application

45. The strikeout application relates to the second limb of Barnes v Addy claim pleaded by West Coast Milling from [27] through to [45] of the Plaintiff's Counterclaim. In relation to this application West Coast Milling raises the procedural objection that the application is out of time. I need not deal with that issue as, again, I prefer to deal with the matter substantively.
46. The impugned paragraphs plead that Mr Mias, West Coast Milling's sole director, and Ms Fenttiman, an agent of West Coast Milling, breached their fiduciary duties by entering into a transaction that 'by reason of its inherent qualities or characteristics' was not in the best interests of West Coast Milling, but was substantially to the advantage of each of Golden West and Mias Bakery.[26]
47. Those inherent features and qualities are pleaded in [19] of the Plaintiff's Counterclaim. That paragraph appears in the context of the plea that the transaction constituted by the variation, waiver or estoppel would be an uncommercial and voidable transaction under s 588FE of the Corporations Act 2001. It sets out the 'pay when paid' transaction and what West Coast Milling pleads are its inherent features, including the following

(g) Golden West Bakery obtained the use of the Ingredients from West Coast Milling without being obliged to pay West Coast Milling any particular, regular or reasonable price for them, alternatively by deferring (wholly or partly) its obligation to make a payment of a particular, regular or reasonable price for them until such time (if ever) as the state of the accounts between Golden West Bakery and Mias Bakery would permit West Coast Milling to demand such payment;

(h) Mias Bakery obtained the benefit of offsetting its liability to Golden West Bakery or deferring its obligation to make payment (in whole or part) for its liability to Golden West Bakery, by reference to the value of the Ingredients supplied by West Coast Milling; and

(i) neither Golden West Bakery, nor Mias Bakery, provided any, or any adequate, consideration to West Coast Milling in return.

48. Golden West does not seek to strike out [19], although in its Submissions in Reply, Golden West did make various submissions to the effect that the arrangements pleaded were not in breach of the duties owed by Mr Mias and Ms Fentimann. For example, while [19(i)] of the Plaintiff's Counterclaim pleads that 'neither Golden West Bakery, nor Mias Bakery, provided any, or any adequate, consideration to West Coast Milling' in return for the arrangements, Golden West contended that there was compensation (in the form of a contingent promise). Moreover, Golden West submitted, 'it cannot be said that no reasonable director in all of the circumstances' would have entered into that arrangement.[27]
49. These are, however, quintessentially matters for evidence at trial. They do not provide a proper basis for striking out the pleadings. If the facts pleaded conceivably give rise to relief, then the cause of action should be held to be reasonable.[28] This is especially so in a case such as the present where, as Golden West itself submits, whether the relevant duties have been breached will depend upon all of the circumstances.[29] The matters pleaded in under [19], when read with [28] through to [36], in my view sufficiently identify facts that could conceivably establish a breach of duty, amounting to a dishonest or fraudulent design.
50. In relation to Golden West's alleged accessorial liability, the Plaintiff's Counterclaim pleads as follows:
    38. At all material times, Golden West Bakery knew of the facts giving rise to the estoppel, waiver or variation as pleaded in paragraphs 3.2.7.2, 3.2.7.3, 11, 12 and 17 of the Defence and particularised in the Particulars Document.

Particulars

The knowledge was held by My Linh Tran and is to be inferred from the matters upon which Golden West Bakery relies to establish the representation to Ms Tran pleaded in paragraph 11 of the Defence and particularised in the Particulars Document and the matters relied upon for the pleas in paragraphs 3.2.7.2, 3.2.7.3, 11 and 12 (which, in turn, are said to give rise to the estoppel, waiver or variation that binds West Coast Milling).

39. At all material times, Golden West Bakery knew that each or either of Mr Mias and Ms Fenttiman were by their acts or omissions involving West Coast Milling in a transaction with Golden West Bakery with the inherent qualities or characteristics pleaded in paragraphs (d) to 19(i) above. Alternatively, Golden West Bakery knew of circumstances which would have indicated that matter to an honest and reasonable person.

Particulars

West Coast Milling repeats the particulars to paragraph 38 above. If, as is alleged by Golden West Bakery, Ms Tran was the recipient of the alleged representation, and relied upon it, or upon the assumption referred to in paragraph 3.2.7.2 of the Defence or the impression referred to in paragraph 3.2.7.3 of the Defence, it follows that Ms Tran had this knowledge or had knowledge of circumstances which would have indicated that matter to an honest and reasonable person.

40. At all material times, Golden West Bakery knew that the transaction was not in the best interests of West Coast Milling, but was substantially to the advantage of each of Golden West Bakery and Mias Bakery. Alternatively, Golden West Bakery knew of circumstances which would have indicated that matter to an honest and reasonable person.

Particulars

West Coast Milling repeats the particulars to paragraph 39 above. Further, to all outward appearances, the transaction was not in the interests or the best interests of West Coast Milling, but was substantially to the advantage of each of Golden West Bakery and Mias Bakery. Ms Tran knew of no circumstances suggesting or indicating that, despite those outward appearances, the transaction was nevertheless in the interests or the best interests of West Coast Milling. Nor did Ms Tran make any inquiry about, or make any other attempt to determine, whether the transaction positively was in the interests or the best interests of West Coast Milling.

41. At all material times, Golden West Baker knew that, in involving West Coast Milling in the transaction, each or either of Mr Mias and Ms Fenttiman acted for the sole or prevailing purpose of conferring a benefit or advantage upon Mias Baker, Golden West Baker, or both, and without nay, or any genuine, belief that they were acting to the benefit West Coast Milling. Alternatively, Golden West Baker knew of circumstances which would have indicated that matter to an honest and reasonable person.
51. Those paragraphs, in my view, adequately plead a basis for 'knowing assistance' within the meaning of the second limb of Barnes v Addy. The last word by the Court of Appeal in this State in relation to that issue may be found in Westpac Banking Corporation v Bell Group Ltd (in liq) [No 3],[30] applying the decision of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd.[31]
52. Those cases confirm that 'knowledge' for the purposes of the second limb of Barnes v Addy, includes the first four categories of knowledge referred to in Baden v Société pour Favoriser le Développement du Commerce et de l'Industrie en France SA, namely:[32]

(i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man.

53. The pleadings set out above sufficiently articulate a reasonable cause of action in accordance with these categories, including category (iv): knowledge of circumstances which would indicate the facts to an honest and reasonable person.
54. Whether West Coast Milling can prove those matters, in particular the matters pleaded at [40], is another matter. But that is what it has set out to do, and there is no proper basis for depriving it of the opportunity to do so by striking out the pleading.
55. The submissions made by Golden West to the contrary must be rejected.
56. Golden West raises a number of matters in this regard, some of which I have already touched upon.
57. The first matter is that accessorial liability could only be established if it was pleaded that Golden West knew that West Coast Milling was not to be compensated at all.
58. I reject that submission for the following reasons.
59. First, as noted above, [19(i)] of the Plaintiff's Counterclaim concludes that the transactions were to the effect that:

Neither Golden West Bakery, nor Mias Bakery, provided any, or any adequate, consideration to West Coast Milling in return.

(emphasis added)

60. The plea is, therefore, not that there was no compensation, but rather that the transaction was not in the best interests of West Coast Milling. That is precisely the knowledge that West Coast Milling pleads at [40] of the Plaintiff's Counterclaim and what it has undertaken to prove at trial.
61. Secondly, it is to be remembered that the accessorial liability pleading only arises in the event that it has been established that Golden West in fact entered into the agreement with West Coast Milling (that is, contrary to Golden West's primary defence) and that it conducted itself vis a vis West Coast Milling in the manner pleaded in [3.27] of the Defence and Counterclaim. That would be the context, and the only context, in which the knowledge pleaded by West Coast Milling will arise. That point could only be reached in the event that there is evidence from one or other of the parties as to the circumstances giving rise to the change in arrangements following the MOU.
62. The second matter raised in Golden West's submissions was that West Coast Milling did receive consideration in the form of a contingent promise of payment. That is, with respect, a matter for trial as to whether or not the breach of fiduciary duty pleaded by West Coast Milling is made out.
63. The third matter is that Ms Fenttiman acted with the authority of the Board as there was no pleading or material fact that she acted without the authority of the Board.
64. This plea, of course, could not affect in any way the case for accessorial liability made on the basis of the acts and omissions of West Coast Milling's sole director, Mr Mias. In that regard it does not demonstrate that the pleadings as a whole have no reasonable prospect of success. In any event, the Board of directors to whom the submission refers is in fact Mr Mias himself. The notion that Ms Fenttiman's alleged breach of fiduciary duty is not arguable by reason of the fact that it was authorised by another officer of West Coast Milling who was, himself, in breach of his fiduciary duty should be rejected.
65. In relation to that claim much would depend as to the factual circumstances revealed by the evidence led in support of the pleas that have been made, particularly in [30] through to [34] of the Plaintiff's Counterclaim. A subsidiary matter raised by Golden West was that the two individuals were not joined in relation to that issue. No relief is sought against either of those individuals, and while it may be open for them to be joined, it does not, in my view, affect whether or not the pleading by the plaintiff, by the Plaintiff's Counterclaim, reveals a reasonable cause of action.
66. Finally, Golden West notes that the counterclaim contains no pleading that Golden West in any way authorised or requested any breach of duty. That criticism may be dealt with quickly. There is, in my view, nothing in the authorities in relation to the second limb in Barnes v Addy which requires that the party lending knowing assistance 'request' the relevant breach of duty.
67. Of course, requesting a breach of duty may, in a particular case, demonstrate the relevant knowledge for the purpose of knowing assistance. Nevertheless, the authorities make clear that other forms of knowledge and assistance may be sufficient.
68. The pleading is adequate in that regard.
69. For these reasons, the strikeout application must be refused.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

JS
Research Associate to the Honourable Chief Justice Quinlan

17 APRIL 2019

[1] See Aurel Forras Pty Ltd v Graham Karp Developments Pty Ltd [1975] VicRp 22; [1975] VR 202; Overton Investments Pty Ltd v Murphy [2001] NSWCA 183 [78].
[2] Amended writ of summons dated 16 May 2018. The writ of summons is indorsed with a Statement of Claim (Statement of Claim).
[3] Statement of Claim [3].
[4] Defence and Counterclaim [3.2]
[5] Defence and Counterclaim [3.2.7], [17], [18].
[6] Defence and Counterclaim [24.6].
[7] Defence and Counterclaim [25.1].
[8] Plaintiff's Counterclaim [3(e)(ii)].
[9] Plaintiff's Counterclaim [16(a)].
[10] Plaintiff's Counterclaim [19]-[25].
[11] Plaintiff's Counterclaim [26].

[12] Plaintiff's Counterclaim [28]-[36].

[13] Plaintiff's Counterclaim [37]-[45].
[14] Barnes v Addy (1874) LR 9 Ch App 244.
[15] As set out in the schedule to the Amended Chamber Summons filed 12 March 2019.

[16] Golden West's Outline of Submissions in Reply appear to retreat from this proposition somewhat, stating in their submission that 'in truth, it is not really a case relying on deemed admissions'. I have addressed this below.

[17] In this regard West Coast Milling relies upon Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21, 23.
[18] Defence and Counter Claim [1.3], [3.2.1]-[3.2.6], [25]. The affidavit (Affidavit of Diana Velevski affirmed on 8 April 2019) was received into evidence, save that I did not receive the third annexure to that affidavit (DV3). While annexed to the affidavit, DV3 was not referred to or identified by the deponent in the body of the affidavit.
[19] Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57] (Gaudron, McHugh, Gummow & Hayne JJ).
[20] Australasian Oil Exploration Ltd v Lachberg [1958] HCA 51; (1958) 101 CLR 119, 133-134 (Dixon CJ, McTiernan & Taylor JJ).
[21] Outline of Submissions in Reply [31].
[22] General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 130 (Barwick CJ).
[23] See Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427 (2006) 236 ALR 665 [59] (Kiefel J).
[24] Golden West's Outline of Submissions [9].
[25] Golden West's Outline of Submissions [17].
[26] Plaintiff's Counterclaim [31].
[27] Outline of Submissions in Reply [16].
[28] David Clarke Air Conditioning Pty Ltd Atf David Clarke Air Conditioning Trust v Quann [2016] WASC 73 [14] (Allanson J).
[29] Angas Law Services Proprietary Limited (In liquidation) v Carabelas [2005] HCA 23; [2005] 226 CLR 507 [67] (Gummow & Hayne JJ).
[30] Westpac Banking Corporation v Bell Group Ltd (in liq) [No 3] [2012] WASCA 157; (2012) 44 WAR 1, [2104]-[2111] (Drummond AJA. Lee AJA agreeing)
[31] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, [174]-[178] (Gleeson CJ, Gummow, Callinan, Heydon & Crennan JJ)
[32] Baden v Société pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 at 575-576, 582; [1992] 4 All ER 161, 235; 242-243.