This is the Court's second judgment in these proceedings. In the Court's first judgment it: (1) continued certain freezing orders against the defendant and ordered that each party's costs of the application for freezing orders would be that parties cost in the proceedings; and (2) extended time for the plaintiffs to serve on the defendant and provide to the Court a Further Amended Statement of Claim: Liu v Lin [2023] NSWSC 750.
The plaintiffs provided a Further Amended Statement of Claim ("the new pleading") in accordance with the orders made at the time of the first judgment. Minor parts of the new pleading are still in dispute. At a brief post-judgment hearing on 28 August 2023 the Court heard supplementary submissions and directed the filing and serving by the plaintiff by 1 September 2023 of short further written submissions in relation to the new pleading, dealing with the remaining disputed questions raised by the defendant.
This judgment should be read with the Court's first judgment. Events, matters and persons are referred to in both judgments in the same way.
Mr E. Cox SC and Mr A.L. Oakes of counsel, instructed by Broaden Legal continued to appear for the plaintiff on this remaining part of the March motion. Mr D Pritchard and Ms A. Lim of counsel, instructed by BY Associates Lawyers continued to appear for the defendant.
The defendant's written submissions acknowledge that there had been significant simplification of the plaintiff's claim in the new pleading. But the defendant contended that despite that simplification the new pleading was still inadequate in its pleading of the call representation said to constitute fraud (described in the pleading as the "genuineness representation") as well as the pleading of causation in the misleading and deceptive conduct claim.
The defendant contends that the allegations of fraud cannot be either understood or pleaded to or met in a fair way because of these two defects. The plaintiffs' lodged written submissions in reply. In these reasons the Court has decided to allow the pleading to be filed and only refers to the plaintiffs' written submissions in the course of analysis of the defendants' submissions.
In relation to the genuineness representation, the defendant's submissions set out the argument:
"3. The Genuineness Representation, as amended, reads (for the first plaintiff):
146 By engaging in the conduct pleaded in paragraphs 16-18 and 24-65 above or such part of the conduct that is found to have been proved (taken cumulatively and up to the time of each P1 Transfer), the defendant represented to Ms Liu that Haihui operated a genuine foreign exchange investment platform (P1 Genuineness Representations).
4. This representation is the sole representation (allegedly made to the first plaintiff) which is pleaded to be fraudulent:
176 When the defendant made each Genuineness Representation, she:
a. knew the representation to be false, or
b. in the alternative, was reckless or careless as to whether the representation was false or not.
5. This pleading device, however, begs three questions:
(a) what was the conduct said to have constituted the Genuineness Representation?
(b) what did Ms Lin intend by such conduct?
(c) when was the representation made?"
After citing authority of Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11;169 CLR 279 at 286 in relation to the principle of fairness intrinsic to pleading, the defendant's submissions continued:
"8. Ms Lin cannot know, from this pleading, what feature of the conduct must be disproven to disprove the allegation of fraud.
9. Further, it is impossible to plead to an allegation which relies on the Court's ultimate findings of fact as part of its formulation. This is a fortiori when part of the alleged conduct is admitted - is the pleading party obliged to plead as to whether the admitted conduct constitutes the representation, or whether the totality of the alleged conduct constitutes the representation?
10. Secondly, if this is an allegation of fraud, then in accordance with the passage from Forrest v ASIC (2012) 247 CLR 486 at 502-503 quoted at PS [18], the primary focus must be on what the person making the statement intended to convey by its making. That intention must, by its very nature, be held at the time of the making of the representation.
11. Again, the failure to precisely formulate what the conduct which constituted the representation means that the paragraph is embarrassing and cannot be pleaded to.
12. This is compounded by the failure to specify when the representation is made. Paragraph 176 focuses Ms Lin's knowledge of falsity on the time that the representation was made but does not specify that time.
13. The only inference that is available to be drawn from the pleading of causation is that the Genuineness Representation must be complete by the time the first payment is made by each plaintiff (26 April 2021, 11 March 2021 and 27 April 2021 respectively).
14. The P1 Genuineness Representation is alleged to include conduct on 14 November 2021, yet to have been made before the time the first payment is made on 26 April 2021. This demonstrates that it is pleaded in a way that does not allow it to be clearly understood. As an allegation of fraud, it does not meet the requirements of fraud pleadings and is vexatious and embarrassing. It should not be allowed."
In the Court's analysis the position from the defendants' point of view is not as unfair as the defendants say but the new pleading has been improved by various suggested amendments with the plaintiff submissions in reply and because of those improvements the Court will allow the new pleading so modified to be filed.
But the Court would observe that it is possible to plead matters based upon Court's ultimate findings of fact as part of its formulation. That is all the plaintiffs can rely upon to make out their case at the end of the day. And if some the conduct constituting representations extends past the time of the making of payments then the conduct causing a particular payment will be taken only to be the conduct occurring before that payment.
In relation to the pleading of causation the defendants submitted the following:
"15. The plaintiffs plead multiple representations as the basis for their claim for damages in misleading and deceptive conduct. However, the causation pleading is embarrassing; it is not clear whether each representation separately caused the loss, or jointly caused the loss - ie whether it is alleged that each representation is independently causative of the transfers, or that each representation is a link in a continuous causal chain leading to the transfers. There is a significant difference in these two constructions, both of which are available on the form of the allegation as pleaded."
Issues of causation are matters for submission at final hearing. The plaintiff should not have to unstring and try and plead the different combinations of causation in the pleading. To do so would create an unnecessarily complex pleading.
The Court will allow the new pleading to be filed subject to the usual order that the plaintiff pay the costs thrown away by the amendment (and there may be none). Otherwise, costs will be borne by each party in accordance with the costs orders they agree between them. It is important these parties now concentrate on the main issues in the proceedings, which do not involve a large sum of money from the Supreme Court and therefore the strictures of Civil Procedure Act 2005, ss 56 - 60 should be observed closely. For these reasons, the Court makes the following orders and directions:
1. Grant leave to the plaintiffs to file a further amended statement of claim in accordance with the Court's order (2) made on 30 June 2023 with the plaintiff's final submissions dated 1 September 2023; and
2. order the plaintiffs to pay any costs thrown away by the amendment.
[2]
Amendments
03 November 2023 - Representation on coversheet amended, paragraph 4 of judgment reflecting representation amended.
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Decision last updated: 03 November 2023