Modakboard Australia Pty Ltd v Matthew Howard Brady - [2018] NSWSC 399 - NSWSC 2018 case summary — Zoe

NSWNSWSC

Modakboard Australia Pty Ltd v Matthew Howard Brady

[2018] NSWSC 399

Supreme Court of NSW|2018-03-06|Before: Ward CJ, Rein J, Abn AM

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2018-03-06

Before

Ward CJ, Rein J, Abn AM

Catchwords

CIVIL PROCEDURE - Pleadings - Amendment

Source

Original judgment source is linked above.

Catchwords

CIVIL PROCEDURE - Pleadings - Amendment

Judgment (40 paragraphs)

[1]

Background and procedural history to the present applications

Modakboard is a company that produces a certain type of building material. Its claim against the defendants, in essence, is that it was at all material times the owner of a particular website that had been built by Mr Brady on its behalf (allegedly for consideration in the form of shares in the company) and of a domain name registered by Mr Brady on its behalf (see statement of claim at [20]; [22]; [23]). Mr Brady was one of the two founding directors of Modakboard, which was incorporated on 19 April 2011. He resigned as a director on 11 April 2015. The steps taken by him at that stage in relation to the company's website, domain name and email communications were the subject of Modakboard's claim for urgent injunctive relief.
The other founding (and now, as I understand it, sole) director of Modakboard is Mr Peter Jones (the proposed third cross-defendant). However, there was at one stage a third director of the company (a Mr Peter Newman), whose affidavit dated 29 July 2016 was read by the defendants/cross-claimants on the present applications (whether it was sworn or affirmed is a mystery on the face of the affidavit).
The second defendant, Crewmark, is a company controlled by Mr Brady as its sole director and shareholder. Crewmark has invoiced Modakboard for the work carried out by Mr Brady. Some of Crewmark's invoices have been paid by Modakboard, on Mr Brady's evidence. The unpaid balance is in contention as is Crewmark's claim for an unpaid minimum annual consultancy fee.
Libbie, as trustee for the Libbie Superannuation Fund, holds shares in Modakboard. Ms Cohen and/or Libbie (a company in which Ms Cohen has an interest) have apparently made loans at various times to Modakboard (this being one of the matters to which the defendants/cross-claimants point for the proposition that Ms Cohen has an interest in the outcome of the proceedings).

[2]

(i) Leave to amend

The principles applicable on an application such as this for leave to amend pursuant to s 64 of the Civil Procedure Act and rule 19.1 of the UCPR were not in contest. They are well known. The application for leave to amend must be made for a proper purpose; the proposed amendment must be proper both as to substance and form and not liable to be struck out; the amendment must not cause undue prejudice to the other party; and the amendment must be consistent with the dictates of justice.
It is submitted for Ms Cohen that, subject to the constraints in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69, leave should not be granted for the filing of the proposed further amended cross-claim if (which she submits is the case) it would be liable to be dismissed under r 13.4 of the UCPR, as not disclosing a reasonable cause of action, or liable to be struck out under r 14.28, as not disclosing a reasonable cause of action or other case appropriate to the nature of the pleading or as having a tendency to cause prejudice, embarrassment or delay in the proceedings. Ms Cohen stresses the importance of pleadings (and particulars) as recognised in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 per Ipp JA (at [419]-[428]).
Both parties referred to my decision in Smith v Australian Executor Trustees Limited [2017] NSWSC 1406 - Ms Cohen for the statements at [67]-[76] as to the requirements of a proper pleading; the defendants/cross-claimants for the statements at [68]-[70] as to the threshold to be met before a claim will be summarily dismissed (though the present is not a summary dismissal application as such).
Ms Cohen also referred to the following statements of principle in other authorities: that a pleading should not create a multitude of possibly arguable causes of action, leaving identification of the true nature of the case to final addresses or, perhaps, for ultimate identification by the trial judge or appellate court (see Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76 at [87]; 348 ALR 1); that a pleading containing "rolled up" allegations is undesirable by reason of the difficulties it can cause and may be embarrassing (Johnston v Australia & New Zealand Banking Group Ltd [2006] NSWCA 218, per Basten JA at [60]-[65]); and that a pleading of misleading or deceptive conduct, in addition to pleading representations must also show why those representations were misleading and must link the representations to the particular conduct said to demonstrate the falsity of the representations (see Lynx Engineering Consultants Pty Ltd v The ANI Corporation Limited trading as ANI Bradken Rail Transportation Group (No 2) [2009] FCA 363 at [66]).
For Ms Cohen, it is submitted that the proposed pleading does not reveal arguable causes of action and/or does not adequately or properly plead the various proposed causes of action against her (or against Mr Jones and Modakboard, for that matter); and that it is embarrassing and likely to lead to considerable wastage of time and expense. Ms Cohen further submits that, having regard to the history of the matter, if leave is not granted the cross-claimants should not have any further leave to re-plead - in effect, that they have had long enough. The defendants/cross-claimants' response to this, broadly, is to argue that the proposed pleading adequately discloses a prima facie cause of action and that much of the complaint goes to matters that will fall to be determined in due course on the evidence, the merits of which are not here to be determined. However, if leave to file the proposed further amended cross-claim is refused they seek a further opportunity to plead the claims sought to be brought against Ms Cohen and Mr Jones. It was submitted that the "benchmark minimum" in that regard would be that there are "at least visible signs of causes of action within those pleadings" - T 56.

[3]

The proposed further amended cross-claim

The claims sought to be made against Ms Cohen are for damages for: misleading or deceptive conduct in breach of s 18 of the Australian Consumer Law by the making of certain alleged payment representations (the First Payment Representations, defined at [25] of the proposed further amended cross-claim, and the Second Payment Representations, defined at [29] of the proposed further amended cross-claim) which it is alleged were false and/or misleading or deceptive or likely to mislead or deceive (see [40]-[44]; [45]-[49], respectively); accessorial liability as a person involved in the alleged misleading or deceptive conduct ([50]); unconscionable conduct in breach of s 21 of the Australian Consumer Law ([51]); accessorial liability as an involved person in the alleged unconscionable conduct ([52]); and negligent misstatement ([53]).
The claims sought to be made against Mr Jones are in broad terms the same, although the statements alleged to have been made by him and constituting the respective Payment Representations are, unsurprisingly, not in the same terms as those relied upon against Ms Cohen.
The conduct alleged on the part of Ms Cohen as giving rise to liability on her part in relation to the misleading or deceptive conduct claims is, broadly, giving an assurance that the consultancy services provided by Crewmark and/or by Mr Brady commencing April 2011 (including services already provided) would be paid for by Modakboard with no other condition placed upon the payment for those services than the provision thereof (see [25.a] (the First Payment Representations) and later giving further assurances in relation to payment for the provision of consultancy services - (a) on 23 June 2011, that a particular agreement (the Second Consultancy Agreement) "guaranteed" the right of Mr Brady and Crewmark to payment by Modakboard and the Modak Group for payment for the services since April 2011 and from that point in time onward (see [29.a]); (b) on 30 September 2014, that Modakboard would commence paying Mr Brady in the following month ([29.b]); (c) in about November 2014, that Modakboard would commence paying Mr Brady in the following month and would ensure that he and, it is said, Modakboard (though this presumably is a typographical error) were paid for the consultancy services provided to date ([29.c]); and (d) on about 25 December 2014, that Modakboard would pay all money owed to Mr Brady and Crewmark in relation to the consultancy services ([29.d]) (the Second Payment Representations).
It is alleged that Mr Brady "individually and on behalf of Crewmark" relied upon the respective Payment Representations - first, in continuing to provide the Initial Consultancy Services to Modakboard notwithstanding the absence of timely, or any, payment, for such services in the period from April 2011 to 23 October 2011 (see [26]; [43] - the latter paragraph also including the allegation that this was notwithstanding the breaches of the Initial Consultancy Agreement as a consequence of "such untimely or non-payment"); and, second, in continuing to provide the Further Consultancy Services to Modakboard notwithstanding the absence of timely, or any, payment for such services in the period from 26 October 2011 to 1 April 2015 (see [30]; [48] - the latter paragraph including a similar additional statement to that contained in [43]). In each case it is alleged that, but for the Payment Representations, the defendants/cross-claimants would not have provided services during the relevant period "in the absence of timely payment, or any payment at all, for such services" ([27], [31]).
It is alleged that, by reason of the misleading or deceptive conduct, "the plaintiff" (this is conceded to be a typographical error and is said to be intended to mean the cross-claimant(s)) has suffered loss or damage. That loss or damage is particularised, in relation to the First Payment Representations, by reference to unpaid Crewmark invoices or expenses totalling the amount of $16,546.85 plus interest ([44]); and, in relation to the Second Payment Representations, as that amount together with damages in the amount of $792,000 incl GST, that being defined as the "Unpaid Further Consultancy Amount" (calculated at $132,000 per annum for 6 years from October 2011 to October 2017). (The disparity between the $924,000 claim and the $792,000 claim is not clear to me but ultimately nothing turns on it because, as I explain below, even the lesser amount is conceded to be unsustainable.)
The defendants/cross-claimants now concede that the whole of the amounts presently sought to be claimed by way of loss or damage cannot be maintained (see for example [111], [133], [176], [195] below) and seek leave to amend the particulars of loss and damage in various places in the proposed further amended cross-claim. Relevantly, they are abandoning any claim for what is defined as the "Additional External Consultancy Loss and Internal Consultancy Costs" (of $3,152.79) or any claim for the Unpaid Further Consultancy Amount after the time that Mr Brady ceased to provide services to Modakboard in April 2015 (the quantum of that claim is now to be reduced to around $500,000).
The accessorial liability claim in respect of the misleading or deceptive conduct is based on an allegation that Ms Cohen: aided and abetted the contraventions by speaking the words which constituted the Payment Representations (and therefore the conduct which is alleged to be misleading or deceptive) ([50.a]); and was directly and knowingly concerned in and a party to the contraventions by speaking those words, "knowing or ought to be knowing" by virtue of the "Cross-Defendants' Knowledge of Modakboard Affairs" (a term earlier defined at [33]), the import of the words and the "reliance had" upon the misleading or deceptive conduct by the defendants/cross-claimants ([50.b]) by virtue of the direct involvement of Ms Cohen in the entity for which the consultancy services were provided.
Counsel for the defendants/cross-claimants conceded in oral argument that the reference in the proposed pleading to Ms Cohen's "direct involvement" in Modakboard is "not elucidated in that particular pleading" (T 55.45-55.46) but points to the reference to the "knowledge of Modakboard affairs", which is said to plead "the full extent of her involvement". The latter proposition is untenable once one looks at the generality of what is comprised by that defined term - see below at [40-[41]).
The unconscionable conduct claim against Ms Cohen, in essence, is that she made the payment representations in order to induce, by the promises which they contained, Mr Brady and Crewmark to continue to provide the consultancy services without timely payment or payment at all and notwithstanding the breaches of the alleged agreements as a consequence of such untimely or non-payment ([51.a]). The making of the representations is alleged to be unconscionable in that: Mr Brady and Crewmark were not paid for the provisions of the Further Consultancy Services; and Ms Cohen "knew or ought to have known by virtue of the Cross-Defendants' Knowledge of Modakboard Affairs": the terms of the agreements; that they would not be paid for the services pursuant to the terms of the agreements or at all; that such non-payment would be and was in breach of an essential term of the agreements; and that such non-payment was reasonably foreseeable" ([51.b]). The loss claimed by the "plaintiff" is again particularised as damages in the amount of $792,000 incl GST and the Unpaid Crewmark expenses of $16,546.85 ([51.d]).
The allegation of involvement in the alleged unconscionable conduct is pleaded in similar terms to the allegation of involvement in the alleged misleading or deceptive conduct (see [52]).
The negligent misstatement claim, pleaded further and in the alternative, alleges (at [53]), relevantly: (a) that Ms Cohen owed a duty of care to Mr Brady and Crewmark "by virtue of the Cross-Defendants' Knowledge of Modakboard Affairs"; (b)-(c) that she made the said payment representations and did so in order to induce, by the promises which the representations contained, Mr Brady and Crewmark to provide the Initial Consultancy Services without timely payment or payment at all and notwithstanding the breaches of the Initial Consultancy Agreement as a consequence of such untimely or non-payment; (d) that at the time of making the representations, Ms Cohen knew or ought to have known "by virtue of the Cross-Defendants' Knowledge of Modakboard Affairs" certain matters (the terms of the agreements; that Mr Brady and Crewmark would not be paid for the Initial or Further Consultancy Services pursuant to the terms of the agreements or at all; that such non-payment would be and was in breach of an essential term of the said agreements; and that Mr Brady and Crewmark would "rely upon the veracity of the statements" in continuing to provide the Further Consultancy Services notwithstanding late payment of non-payment of the Consultancy Fees); (e) that Ms Cohen could reasonably foresee that in the event that the payment representations were untrue Crewmark and Mr Brady would suffer economic loss as a result; (f) that, but for the payment representations, they would not have suffered economic loss as they would not have continued to provide the services; (g), that by reason of the matters pleaded at [50(a)-(f)] (presumably a reference to [53.a-f]), the statements constituting the payment representations were made: i. with negligent indifference as to: 1. the truth of the matters contained in those representations; 2. the harm to be caused to Crewmark and Mr Brady by the making of those statements if they were untrue. and, (h), that the statements were untrue, were negligently made, breached the duty of care owed to Crewmark and Mr Brady, and caused economic loss.
Again, the loss pleaded is particularised as the damages claim of $792,000 (now to be reduced to around $500,000) and the Unpaid Crewmark expenses claim of $16,546.85.
Returning to what is comprised by the term (used later in the pleading as the basis for the allegation that Ms Cohen knew or ought to have known certain things and relied upon in oral submissions as disclosing the full extent of her involvement in the company) "the Cross-Defendants' Knowledge of Modakboard Affairs", this is defined at [33] but it is defined not in terms of what is alleged to be the knowledge, as such, but as to what matters are "relevant" to the alleged knowledge. Paragraph 33 of the pleading thus commences: 33. The following factual matters are relevant to the knowledge of the operational, financial, and legal matters relating to Modakboard generally, and specifically relevant to matters relating to the First Consultancy Agreement and the Second Consultancy Agreement, held by Mr Jones and Ms Cohen respectively ("the Cross-Defendants' Knowledge of Modakboard Affairs") [my emphasis].
In relation to Ms Cohen, those factual matters (at [33.b]) are that she: i. is and was at all material times: 1. a barrister-at-law with a practising certificate issued in New South Wales; 2. a sole director shareholder of Libbie Pty Limited A.C.N 098 093 255 as trustee for the Libbie Superannuation Fund, which is a 35% shareholder in Modakboard; 3. a de facto and/or shadow director of Modakboard as defined by section 9 of the Corporations Act 2001 (Cth), as alternately: a. Ms Cohen acted in the position of a director of Modakboard; and b. the directors of Modakboard were accustomed to act in accordance with the [sic] Ms Cohen's instructions and/or wishes. 4. a legal representative of, and legal advisor to, Modakboard relating to: a. operational matters; b. financial matters; c. investment matters; d. legal matters. ii. was the drafter of the written Second Consultancy Agreement; [I interpose to note that this is denied by Ms Cohen] iii. was present at the execution of the Second Consultancy Agreement by Mr Brady on behalf of himself and Crewmark on 26 October, 2011; iv. undertook to sign the Second Consultancy Agreement on 26 October, 2011; v. attended Modakboard board meetings and general meetings; vi. was kept apprised of Modakboard affairs daily; vii. was the maker of some of the statements constituting the First Payment Representations and the Second Payment Representations; viii. provided legal advice to Mr Brady.
There is no articulation of what legal advice is referred to at [33.b.viii]; or of the basis for any of the conclusory matters stated at [33.b.i]. Therefore, the suggestion that this discloses "the full extent" of Ms Cohen's "involvement" with the company cannot possibly be accepted.

[4]

Claim for loss incurred by Mr Brady personally

The first complaint made by Ms Cohen in relation to the proposed pleading goes to the claim by Mr Brady in his personal capacity for $792,000 (incl GST) for loss and damage by reason of the various alleged contraventions of the Australian Consumer Law or negligent misstatement. (I note here that, logically, the same pleading difficulty arises with the claim by Mr Brady personally for loss in respect of the Initial Consultancy Services Agreement - the "Initial Unpaid Invoice Amount" - of $2,698.21, where the terms of the pleaded agreement provide for payment to be made to Crewmark for those services; and in respect of amounts invoiced by Crewmark (not Mr Brady) in relation to the internal consultancy costs and external consultation costs arising under cll 3 and 5 of the Second Consulting Agreement in the Unpaid Costs Invoices of $10,695.85.)
Ms Cohen submits that there is nothing in the proposed further amended cross-claim which explains the basis on which Mr Brady claims, in his personal capacity, to have suffered loss and damage as a result of the non-payment by Modakboard of the claimed consultancy fee under the Second Consultancy Agreement (see, for example, [39] of the proposed further amended cross-claim - there pleaded as $924,000, whereas elsewhere it is put at $792,000) in circumstances where that amount, on the terms of the Second Consultancy Agreement (pleaded at [13] of the proposed further amended cross-claim), is payable to Crewmark (not to Mr Brady) - see cl 2 of the service contract dated 19 April 2011 annexed to the 3 June 2015 affidavit of Mr Brady to which reference is made in the particulars to [15.h].
It is submitted for Ms Cohen that any such loss must be a loss incurred by Crewmark. Ms Cohen argues that there is no basis for assuming that, because Mr Brady was the sole shareholder of Crewmark, he sustained an equal or any loss. It is submitted that, apart from impermissibly piercing the corporate veil, such a contention ignores the particular financial circumstances of Crewmark at each relevant financial period over the span of time concerned. Thus, it is submitted that the claims by Mr Brady (cast in various ways) for loss and damage as a result of the alleged breach of the Second Consultancy Agreement for failure to pay the Unpaid Further Consultancy Amount are incompetent and do not disclose a reasonable cause of action.
While Ms Cohen accepts that the same issue would not necessarily arise in respect of claims for reimbursement of what are described in the pleading as internal costs (see cl 3 of the Second Consultancy Agreement) or external service contractors' costs (see cl 5 of the Second Consultancy Agreement) - since the alleged contract is one under which both Crewmark and Mr Brady were to be reimbursed or, as the case may be, were to recover such amounts - Ms Cohen points out that the invoices issued in respect of those costs are all invoices issued by Crewmark (not by Mr Brady) (as pleaded at [20] of the proposed further amended cross-claim). The amount claimed for those amounts (defined in the pleading as the Unpaid Costs Invoices Amount) is relatively small ($10,695.85 - see [22], [36]).
The response by the defendants/cross-claimants to this criticism of the proposed further amended cross-claim included the submission that any criticism as to whether $792,000 is in fact payable (by reference to whether the payment of the consultancy fee was approved by the board and, if so, whether such approval was retrospective in effect or not) is an evidentiary matter and that, for the purposes of a strike out application, allegations in the pleading are taken to be factually sustained (referring to Empire Shipping Co Inc v Owners of the Ship Shin Kobe Maru (1991) 32 FCR 78; 104 ALR 489). Whatever the ultimate determination of the factual dispute as to whether the Board gave the approval referred to in the contract and whether or not such approval operated retrospectively, that does not in my opinion address the gravamen of Ms Cohen's complaint as to the lack of any pleading of any matters giving rise to a claim by Mr Brady in his personal capacity for loss or damage sustained as a result of non-payment of amounts said to be contractually due to (or invoiced by) Crewmark.
As to that issue, the defendants/cross-claimants maintain that the complaint as to the competency of Mr Brady's personal claim "is predicated upon deficient logic and an erroneous conflation of payment of contractual entitlements and the rights of the parties pursuant to the contract". What is said, in essence, is that Mr Brady is a party to the contract and that the contractual stipulation that the payments be made "to" Crewmark "does not abrogate the right of Mr Brady to claim damages pursuant to a breach of contract by the counterparties, nor does it diminish in any way the ultimate entitlement of Mr Brady to the payments themselves as a party".
It is submitted by the defendants/cross-claimants that "[t]he mere obligation" that payment be made to Crewmark "is a contractual obligation as to the entity to which payment must flow". In oral submissions it was put that the alleged contractual term providing for payment of moneys to Modakboard "is merely a procedural element"; that "procedurally … the moneys are to be paid to Crewmark, but that the right to claim that money arises in relation to Mr Brady also as a party to the contract"; and that "[t]he fact that clause 2 refers to the flow of the actual payment of the consultancy fees, our contention is that is merely the pathway by which the money is to be paid" (see T 36-37).
The defendants/cross-claimants maintain that as Mr Brady is the sole director and shareholder in the corporate entity Crewmark "thereby, the losses or damages to Crewmark is realised with full equivalence by Mr Brady" and that this applies equivalently to the claims based on contraventions of the Australian Consumer Law. It is submitted that Mr Brady, as sole director and shareholder, is the "corporate conscience" of Crewmark and that: Those damages accruing contractually whether personally or by losses suffered to a wholly owned entity are equally attributable to the representations and other actions of the Cross Defendants manifesting by virtue of those breaches. But for the breaches, the decisions of Mr Brady personally, and as the corporate mind of Crewmark, would have taken other courses of action, avoiding the claimed detriment.
It is submitted that: In any case, as stated above, Mr Brady is a party to the contract and the failure of counter-parties to make payment is enforceable against the counter-parties on that basis, regardless of the contractual stipulation that the monies be paid to Mr Brady's wholly owned entity or otherwise.
This, in my opinion, misses the point. The loss claimed by Crewmark for breach of contract (or otherwise) in relation to the $792,000 Unpaid Further Consultancy Amount is loss referable to its claimed contractual entitlement to that amount (or the representation(s) said to have been relied upon to its detriment that that amount would be paid). Under the alleged agreement, Mr Brady had no personal entitlement to payment of that amount. Whether, as a party to the contract, he might have had standing to seek an order to compel performance by Modakboard of its contractual obligation to Crewmark is beside the point - here, he is asserting a claim for loss sustained personally as a result of the non payment. Similarly, whether or not he is the corporate "conscience" or corporate mind of Crewmark is irrelevant to the question whether he has personally suffered loss or damage as a result of the fact that the payment was not made to Crewmark.
Mr Brady argues that it is a matter of clear logic that he has suffered loss, on the basis that "[t]he diminution in value of a wholly owned asset is met perfectly with the equivalent loss or damage to the owner" and that the particular financial circumstances of Crewmark are irrelevant to the consideration that failure (by Crewmark) to receive a particular sum is "equivalently reflected" in loss/damage to the owner of that entity. It is submitted that (T 37): There is an obligation. I am now talking about the other side of the equation and the right to those moneys and the damages which would flow from those moneys not being paid. …The contention is … [that] $100,000 going to Crewmark is as valuable to Mr Brady as $100,000 going to Mr Brady and vice versa.
I disagree. If Mr Brady has a personal claim to damages for loss in some way suffered as a result of non-payment of moneys said to be contractually owed to the company of which he is the sole shareholder, then the basis for that claim should be pleaded. If, for example, it is said that he (personally or as the corporate mind of Crewmark) would have taken other action (or caused Crewmark to take other action), that would need to be properly pleaded. In other words if Mr Brady alleges he personally suffered loss as a result of a failure by Modakboard to pay moneys to Crewmark or by reason of reliance by him (as opposed to Crewmark) on a representation that moneys would be paid to Crewmark, it would be necessary for him to plead the facts, matters and circumstances giving rise to that loss. It cannot simply be assumed. Ms Cohen (and, for that matter, Mr Jones) should not be expected to meet a case that has nowhere been articulated in that regard.
Not only have no facts, matters or circumstances been pleaded that would (if established at the ultimate hearing) give rise to a claim by Mr Brady for loss or damage calculated by reference to the Unpaid Further Consultancy Amount (or any other amount payable to or invoiced by Crewmark), no such claim was able to be articulated by Counsel for Mr Brady at the hearing before me. There was simply reliance on the fact that Mr Brady was a party to the contract and an assumption that the company's loss must necessarily equate to the sole shareholder's loss. Mr Brady's claims for damages in that regard are misconceived and leave should not be given for the filing of any proposed further amended cross-claim which includes those claims. Mr Brady has had ample opportunity to articulate the basis for any such claimed loss. The fact that he has not done so suggests that there is none.

[5]

Complaint as to pleading of Payment Representations

The second complaint (or, more accurately, series of complaints) is as to the pleading of the alleged payment representations (at [25] and [29] respectively), which form the basis of the misleading or deceptive conduct claims ([40]-[44]; [45]-[49]) and on which the unconscionable conduct, accessorial liability and negligent misstatement claims are also premised. The complaint for the most part in this regard is as to ambiguity in the pleadings although it is also argued that no reasonable cause of action is disclosed (see T 29, in regard to the claimed reliance over a three year period on alleged representations made in October 2011).
For Ms Cohen, it is submitted that what the pleader must identify in a misleading or deceptive conduct case is what it is alleged that the impugned statements conveyed to their intended audience (referring to In the matter of Idylic Solutions Pty Ltd - Australian Securities and Investments Commission v Hobbs [2012] NSWSC 1276 at [1463]; Addenbrooke Pty Ltd v Duncan (No 2) at [87]); and that it is necessary for the claimant to prove both what the alleged conduct was and the circumstances which rendered the conduct misleading (referring to Watson v Foxman (1995) 49 NSWLR 315 per McLelland CJ in Eq at 318-9).
As to [25.a], complaint is made that: the pleading does not set out any material facts in support of the allegation that Ms Cohen made the alleged statement in the capacity as a de facto director of Modakboard; there is no clarity as to what the impugned statements are alleged to have conveyed to Mr Brady (in particular, insofar as the First Payment Representation is formulated as a promise, how it is alleged that it was misleading or deceptive); and the pleading does not identify whether the promise referred to is relied on as a representation of present intent, a representation as to a future matter or a statement of presently held opinion. It is noted that if the allegation is as to intent, there is no allegation that Ms Cohen did not hold that intent; if the allegation is as to opinion, there is no allegation that Ms Cohen did not have a reasonable basis for the opinion.
Particulars are provided of the First Payment Representations, being responses allegedly made to "the question of payment of fees for the provision of consultancy services by Mr Brady since April 2011" by each of Mr Jones and Ms Cohen. The particulars assert that, in making the representations, each of Mr Jones and Ms Cohen "spoke as representatives of Modakboard" in that Mr Jones was a director of Modakboard; Ms Cohen was a de facto director of Modakboard; and "[t]he circumstances in which the discussions were had, in that, in response to Mr Brady, both Mr Jones and Ms Cohen purported to speak on behalf of, and with the actual or apparent authority of Modakboard".
For Ms Cohen, it is submitted that the First Payment Representation is not reasonably capable of being inferred from the statements alleged in the particulars to [25] in that, on 23 June 2011 Mr Brady was a director and shareholder of Modakboard Australia Pty Limited and in his capacity as a director he necessarily undertook the duties and obligations of corporate governance including matters pertaining to the financial status of Modakboard and its capacity to trade and discharge its debts.
It is further submitted that the statements attributed to Ms Cohen and Mr Jones by their own terms cannot support the representation alleged at [25.a.i] and, on one view, are no more than words of encouragement (having regard to Mr Brady's capacity and duty as a director to satisfy himself at any time as to the financial status and capacity of Modakboard to discharge its debts as they were incurred). It is submitted that, even at their highest and taken literally, the statements are no more than statements that past services would be paid for and are not statements about future services, since they were allegedly made in response to the query about payment for services provided since April 2011.
For Ms Cohen, it is submitted that there is no allegation of fact or context or circumstance that would support any wider inference as to the meaning of the statements as particularised. Pausing here, there is an obvious problem with reliance on a representation allegedly made in June 2011 being alleged by reference to conduct in a period prior to the time at which the representation was made, as is the case here where the relevant reliance is pleaded by reference to the period spanning April to October 2011; but that may simply be infelicity in the pleaded reliance case.
As to the particular at (2.b) to [25], that the statement by Ms Cohen ("Of course you'll be paid") was made as a representative of Modakboard in that Ms Cohen was a de facto and/or shadow director of Modakboard, the complaint made is that this is a "rolled up" allegation and that the proposed pleading does not identify the facts and circumstances alleged to support a finding that Ms Cohen was either or both a de facto or shadow director of the company. It is said that no assistance can be drawn in that regard from the pleading (at [4.c]) as that is a bare assertion that Ms Cohen is and was at all material times a de facto and/or shadow director as defined by s 9 of the Corporations Act.
Ms Cohen argues, that while it is possible for a person to be both, those definitions encompass different roles (see Chameleon Mining NL v Murchison Metals Limited [2010] FCA 1129 at [87]-[99]). So, for example, complaint is made that the proposed further amended cross-claim does not identify the conduct alleged to have been engaged in by Ms Cohen necessary to establish the allegation that she was either a de facto director or a shadow director; and does not identify the basis on which it is alleged that the directors of Modakboard were accustomed to acting in accordance with the instructions or wishes of Ms Cohen. It is submitted that the facts and matters relied on to support the allegations are vital to establishing the means of knowledge of Ms Cohen which would underlie the misleading nature of any representations alleged to have been made by her with respect to payment by Modakboard.
Similarly, complaint is made as to particular (2.c) to [25], which refers in general terms to "[t]he circumstances in which the discussions were had", and goes on to identify those circumstances as being "that in response to Mr Brady, both Mr Jones and Ms Cohen purported to speak on behalf of, and with the actual or apparent authority of Modakboard". It is submitted that the pleading does not identify the facts matters and circumstances on which the defendants/cross-claimants rely for the allegation that, in responding to Mr Brady's question on 23 June 2011, Ms Cohen purported to speak on behalf of Modakboard, nor for the allegation that she did so with the actual or apparent authority of Modakboard.

[6]

Response by the defendants/cross-claimants to the above criticisms

As to the complaint that the material facts as to Ms Cohen's position as a de facto or shadow director are not pleaded, the defendants/cross-claimants point simply to the proposed pleading (which contains the bare allegations that Ms Cohen acted in the position of a director of Modakboard and that the directors of Modakboard were accustomed to act in accordance with Ms Cohen's instructions and/or wishes), saying that evidentiary matters are to be determined at trial, and referring to affidavit evidence of Mr Brady "attesting to such conduct consistent with shadow and/or de facto directorship" and corporate documents making reference to Ms Cohen as a company director.
As I have said elsewhere (see Watiwat v Dixon [2017] NSWSC 360), it is not for a party to have to trawl through affidavit evidence to try and ascertain the case made against it. In Northam v Favelle Favco Holdings Pty Ltd (Supreme Court (NSW), Bryson J, 7 March 1995, unrep) Bryson J pointed to the unfairness to a party if that party is required "to flesh out general expressions or indirect allusions by piecing together information in other documents such as affidavits or experts' reports". See also Collier v Country Women's Association of New South Wales [2016] NSWSC 1361 per McCallum J. The answer that there is material in the affidavit evidence to support the allegation that Ms Cohen was a de facto and/or shadow director of Modakboard does not address the pleading defects in that regard.
As to the complaint made as to the lack of clarity as to what the impugned statements are alleged to have conveyed to Mr Brady, (which Counsel for the defendants/cross-claimants found vexing - T 40) the defendants/cross-claimants say that this has no substance - urging that "clarity could not be higher than to have the verbatim text cited without a gloss of translation or effect". That, however, misses the point. The complaint is that it is not clear whether it is contended that the statements amounted to a promise of payment or a statement of intention; nor is it made clear what is said to be misleading or deceptive about the statements (bearing in mind that in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88, referred to in Fubilan Catering Services Limited v Compass Group (Australia) Pty Ltd [2007] FCA 1205 at [546], it was said that to make a promise which is not performed or prediction which is not fulfilled is not of itself misleading or deceptive).
As to the complaint that there is no allegation (at [25.a]) as to intention/or as to lack of a reasonable basis for opinion, the defendants/cross-claimants say that there is no requirement of an intention to mislead (referring to Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 and Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59. However, what the complaint by Ms Cohen here addresses, as I understand it, is that it is not clear whether the allegation is as to a representation of intention or promise or opinion. The defendants/cross-claimants in their written submissions contend that the pleaded representations must be read as representations as to future payment to the cross-claimants by Modakboard and that such moneys will be paid. They say that the promise is as to a future matter (the future payment for services rendered or to be rendered). If so, that should be made clear in the pleading, particularly where it is then contended that, by virtue of the matters pleaded at [41.b] and the Cross Defendants' Knowledge of Modakboard Affairs (see [33]), the cross-defendants knew or ought to have known that this would not occur.
I consider in due course the adequacy of the pleading at [33]. Suffice it for present purposes to say that what the further amended cross-claim fails to make clear is that which is now asserted by the defendants/cross-claimants - namely that this is an allegation of a representation as to future payment - and that this is relied on as a promise (not as a statement of present intention as to a future matter). It is particularly important to make this clear if what is sought to be relied upon by the defendants/cross-claimants (as their argument suggested) is the operation of s 4 of the Australian Consumer Law to deem the promise misleading unless the person who made the representation adduces evidence that there were reasonable grounds for making it.
In that regard, I note that s 4(1) of the Australian Consumer Law provides: If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading.
In oral argument, it was argued for Ms Cohen that, to the extent that the proposed cross-claim alleged the making of a representation as to a future matter, the pleading was deficient, referring to what was said by French J, as his Honour then was, in Fubilan at [547]: In my opinion a pleading of misleading or deceptive conduct which relies upon s 51A should make clear that it involves the allegation that the representor did not have reasonable grounds for making the statement alleged.
It was pointed out that the proposed further amended cross-claim contains no allegation of a want of reasonable grounds. However, his Honour also said (at [547]): If a pleading of misleading or deceptive conduct based upon a statement about future facts does not expressly plead want of reasonable grounds yet invokes s 51A, then it should be taken to so plead or if that implication is not open it should be regarded as deficient.
The approach in Fubilan was applied in Bennett v Elysium Noosa Pty Ltd (in liq) [2012] FCA 211 at [105]; 291 ALR 191; and in North East Equity Pty Ltd v Proud Nominees Pty Ltd [2007] FCA 1587 at [20]. There is, however, a decision to contrary effect (Adelaide Petroleum NL v Poseidon Ltd (1988) ATPR 40-901), where French J said: It was submitted by the respondents that the applicants should be obliged to plead as material facts the reasonable grounds said to be lacking. In my opinion that is not a requirement of a viable plea in reliance upon s 51A.
Whether or not that controversy was ultimately resolved in relation to s 51A of the now repealed Trade Practices Act 1974 (Cth) (see R Miller, Miller's Australian Competition and Consumer Law Annotated (Thomson Reuters), [4.200]), s 4(1) has been taken as an attempt to change and clarify the law on the separate issue of burden of proof (see Miller, [4.180]). (On that issue in relation to the former s 51A, see North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60 at [29]-[35].)
Without entering into the debate that previously raged in relation to s 51A of the former Trade Practices Act, as to whether and how reliance on that section was required to be invoked in a pleading, it is in my opinion not unreasonable for Ms Cohen to require clarification of precisely what is pleaded against her in this regard. Insofar as it has now been made clear in submissions that the defendants/cross-claimants are here asserting that the statements by Ms Cohen were representations as to a future matter, being a promise that the services would be paid for by Modakboard (without any further condition being placed on the obligation to make payment other than that the services be provided) - see T 40/41; if the pleading goes forward that should be clearly articulated. (If there is a dispute as to the operation of the deeming provision that will be a matter for trial.)
As to whether the alleged representation is able to be divined from the statements alleged to have been made, the defendants/cross-claimants say this is a finding of fact to be made by the Court at trial, "and as such the Cross Defendants' opinion in the matter is irrelevant to the question of pleading". I accept that issues of fact are to be determined at trial. However, Ms Cohen is in my opinion entitled to clarification as to just what it is that the alleged representations are alleged to have conveyed to the defendants/cross-claimants, particularly where it is alleged that Ms Cohen knew or ought to have known of the falsity of the alleged representations.
As to the "de facto" director allegation, the defendants/cross-claimants submit that "[f]urther, the representations are in and of themselves indicia of the degree of control possessed and exercised by Ms Cohen within the organisation". This involves to my mind a degree of circularity of reasoning. It seems to be argued that the making of the alleged statement by Ms Cohen (to the effect that one or another of the defendants/cross-claimants would be paid) is of itself a matter on which reliance can be placed to demonstrate that, in so acting, Ms Cohen was speaking as a de facto or shadow director as on behalf of and with the actual or apparent authority of Modakboard.
At T 42.48, Counsel for the defendants/cross-claimants submitted that "the very fact that Mr Jones and Miss Cohen responded to those questions [rather than he or she answering that he or she did not know] … is prima facie evidence in itself" of them having that authority.
If that is the only basis for the allegation of actual or ostensible authority then it is difficult to see how the allegation of authority can properly be made but if it is to be made then the basis for it should be properly pleaded. I note that in oral argument (T 43) the basis for this pleading was limited to the fact that there was an answer given to an unparticularised question by Mr Brady that went beyond "I don't know". If that is the basis for the pleading, then that should be made clear and the defendants/cross-claimants' case on authority should be understood as limited to that.

[8]

Response by defendants/cross-claimants

The defendants/cross-claimants argue that the intention of a person is a matter of fact and a finding of that fact is an evidentiary matter to be determined by the Court. They submit that "[n]o further pleading of the issue is required, warranted, or feasible" (my emphasis). Reference is made to the decision of the Queensland Court of Appeal in Australian Commercial Research and Development Ltd v Commonwealth of Australia [1995] 2 Qd R 336 at 339 that "[w]hether there was a particular intention, and if so who held it, are distinct matters of fact" and to the statement of the Queensland District Court that "where it was material to allege knowledge, it was sufficient to allege it as a fact without setting out the circumstances from which it was to be inferred" (Millhouse IAG Pty Ltd v Environautics Pty Ltd [2000] QDC 196 at [19]).
It is also submitted that the proscription, in s 18 of the Australian Consumer Law, of misleading or deceptive conduct in trade or commerce is one which calls for an objective assessment and imposes strict liability, in that intention is not an essential element, and that the "benchmark" is merely that the cross-claimants were misled by the cross defendants' actions, noting that whether conduct would be misleading or deceptive or likely to mislead or deceive "is not a question which turns upon ... intention" (referring to the High Court's decision in Yorke v Lucas) and that intention is not a necessary element of the cause of action (though, if established, may act as the indicia that the recipient was indeed misled or deceived).
Pausing there, it is all very well to say that intention is not a necessary element of a misleading or deceptive conduct claim. However, by their very pleading (at [40]), the defendants/cross-claimants have put it in issue. If they choose to do so then they should properly plead the facts, matters and circumstances on which they rely for this allegation or intention. The submission by the defendants/cross-claimants that it is not "feasible" to do so rather suggests that the defendants/cross-claimants are unable to plead such an allegation and that it should not be permitted to be made.
As to the complaint made about the alleged ambiguity inherent in the significant difference in an allegation as to knowledge that payments would not be timely and as to knowledge that payments would not be made at all, the response by the defendant/cross claimants is simply that in any pleaded alternative, there are differences and these assertions of intention are findings of fact to be made by the Court based upon evidence. That, however, does not answer the complaint that the pleading is embarrassing in that it is not clear what is here being asserted. I consider this further in due course.

[10]

Complaint as to pleading of misleading or deceptive conduct

Again from the allegation of falsity, the following difficulties are identified with the proposed pleading of misleading or deceptive conduct. First, that there is nothing pleaded which would enable the alleged First Payment Representation to be elevated to anything more than a statement that Crewmark would be paid for its past work; no pleading that the representation contained an implied representation that Modakboard had the ability and intention to fulfil the promise; and no allegation that the maker of the promise knew it to be false other than the allegation (unparticularised other than by reference to the "Cross-Defendants' Knowledge of Modakboard Affairs") that Ms Cohen "knew or ought to have known" that Mr Brady and Crewmark would not be paid pursuant to the terms of the Initial Consultancy Agreement or at all.
Complaint is made that constructive knowledge is irrelevant to the consideration of the issues raised under s 18 of the Australian Consumer Law and thus the proposed pleading raises a false issue. In any event, it is submitted that the allegation that Ms Cohen "knew or ought to have known" that the cross claimants would not be paid for the Initial Consultancy Services is not supported by any pleaded facts or circumstances. It is noted that there is no allegation in the pleading that Modakboard did not have the capacity to pay Crewmark in respect of its past work or that there was no reasonable expectation that it would not be able to pay Crewmark for future services provided. It is submitted that any allegation as to expectation concerning future capacity to pay would have to be very specific having regard to the fact that Modakboard was a new and developing company at the time of the alleged representation.
Further, it is said that, absent falsity and in so far as the representation is said to be misleading, it is necessary for the pleading to make clear whether the allegation is that Ms Cohen had no reasonable basis for making the statement and the basis for any such allegation. If the alleged representation is read as a representation as to future payment, it is noted that it would span an indefinite period of time. Ms Cohen notes that non-payment for the services (as alleged at [4.a]) does not establish that the representations, when made, were misleading or deceptive.
Complaint is also made that there is no allegation as to when, in relation to the date of the alleged representations, the services to which the outstanding amount of $2,698.21("the Initial Unpaid Invoice Amount") relates were provided. It is noted that (at [10], [11] and [34] of the proposed pleading) the allegation is not as to non-payment for the services in their entirety but only as to non-payment of the balance outstanding (that being the difference between the invoiced $45,661.33 and the amount paid of $42,963.12); in other words, that claims were submitted and payments were made over a lengthy period, extending after the alleged representation was made. Complaint is made that the pleading does not address why there was a balance on account of $2,698.21 or how this outstanding balance relates to the alleged representations.
Insofar as it is alleged (at [41.b.iii]) that Ms Cohen knew or ought to have known that "such non-payment would be, and was, in breach of an essential term of the Initial Consultancy Agreement", the complaint is that this introduces "a further layer of uncertainty and irrelevance". It is submitted that this allegation is immaterial to whether or not the alleged representation was misleading or deceptive. (I also note that there does not appear to be any allegation in the pleading that payment or timely payment was an essential term of the Initial Consultancy Agreement, this being introduced - as it were - by a sidewind with the allegation that Ms Cohen knew or ought to have known that it was. A similar issue arises in relation to the Second Consultancy Agreement where the allegation of an essential term is rolled up in the allegation of breach of an essential term - see [38].)

[11]

Response by defendants/cross-claimants

As to the complaint as to the generality of what is alleged at [41], the cross-claimants take issue with the submission that "there is nothing pleaded which would enable the alleged representation to be elevated to anything more than a statement that Crewmark would be paid for its past work". They say that the actual words, circumstances in which the words were spoken, and effect of those words are comprehensively pleaded at [25]; that the cross-defendants' characterisation as to the import of the representations is the cross-defendants' own choice of interpretation, but that these matters "are for submissions at trial, and are evidentiary matters" and have no effect upon the validity of the pleading.
As to the submission that there is no pleading that the representation contained an implied representation that Modakboard had the ability and intention to fulfil the promise, it is said that no such implied representation is pleaded "nor is it required to be pleaded to establish that the representation was misleading and deceptive, nor likely to be". The defendants/cross-claimants also take issue with the proposition (at [30(b)] of Ms Cohen's submissions) that "a promise is not deceptive unless the maker knew it to be false".
The defendants/cross-claimants reiterate that the test is whether the acts were misleading or deceptive or likely to mislead; nor is there any requirement of knowledge of the falsity of representations in order to make out misleading or deceptive conduct under s 18 (though they say such knowledge or intention is considered to be one of the indicia that such conduct was misleading, specifically - that "where there is such a finding of intention to deceive, the court may more readily infer that the intention has been or in all probability will be effective").
As to the complaint (at [30(c)] of Ms Cohen's submissions) as to the pleading that Ms Cohen "knew or ought to have known", the defendants/cross-claimants reiterate that there is no requirement of knowledge of the falsity of representations in order to make out misleading or deceptive conduct. In that regard, as I indicated earlier, insofar as an allegation of knowledge or constructive knowledge or intention is here made, in my opinion it must be properly pleaded. The defendants/cross-claimants argue that this pleading is supported comprehensively by the "defined characteristics as to why the Cross Defendants knew or ought to have known", being those matters pleaded at [41.b.i.-iii] under the term "Cross Defendants' Knowledge of Modakboard Affairs" (at [33]), but that in my opinion is not a pleading of knowledge at all - it is a pleading of the facts or matters said to be relevant to assessing the knowledge of Ms Cohen without saying what it is alleged that knowledge was, and it is breathtaking in its generality.
The defendants/cross-claimants say (in response to [30(e)] of Ms Cohen's submissions) that they have fully pleaded a claim that the statements made by the cross-defendants were or were likely to be misleading or deceptive, and that they subsequently suffered damage as a result; and that that is sufficient for the pleading of the allegation. It is said that any defence on the basis that such representations as are found to be misleading or deceptive were based upon reasonably held opinions is a matter for the cross-defendants, and that it is not for the defendants/cross-claimants to plead this negative assertion. The defendants/cross-claimants thus say it is not necessary for the pleading to assert whether the allegation is that Ms Cohen had no reasonable basis for making the statement and the basis for that allegation (cf [30(e)] of Ms Cohen's submissions). They say that if the cross-defendants wish to establish those matters, this is a matter for submissions of the cross-defendants and evidentiary matter at trial. (That raises again the kind of pleading issues considered in Fubilan and discussed above.)
As to the submission (at [30(g)] of Ms Cohen's submissions) that "[n]on-payment for the services as alleged in paragraph 4.a. does not establish that the representations, when made, were misleading or deceptive", the defendants/cross-claimants say that there is no claim that this one aspect in isolation amounts to the cause of action; rather they say that it is one of the indicia of the claim.
As to the submission that the pleading does not address why there was a balance on account of $2,698.21 or how this outstanding balance relates to the alleged representation, the defendants/cross-claimants say that the pleading makes clear that the outstanding amount ("the Initial Unpaid Invoice Amount" of $2,698.21) is predicated upon services provided between April 2011 and 24 October 2011; and that such deficit of payment remains between invoiced and paid amounts.
The defendants/cross-claimants say that the deficit described at [10] of the proposed further amended cross claim goes to both the lack of timely payment, or to payment at all, which lead to the losses particularised at [49]. It is said that the First Payment Representations (the alleged misleading or deceptive conduct) occurred on 23 June 2011 accounting for the continuation of work through to 24 October 2011.
The defendants/cross-claimants say that Ms Cohen's submission as to the fact that payments were made over a lengthy period and that some payments were made extending after the alleged representation was made "is a confused conflation of the effect of the misleading and deceptive conduct", which has no bearing on the cross-defendant's decisions in paying for some of the work done, but merely upon the cross-defendants' continuation of work without payment. It is said that "the cross-defendants' liability for losses as a result of the misleading and deceptive conduct occurred subsequent to the First Payment Representation of 23 June, 2011, … which induced the [defendants/cross-claimants] to work until 24 October, 2011" (written submissions in reply of the defendants/cross-claimants, [63]). They say that subsequently those losses pleaded as suffered as a result of the misleading or deceptive conduct, being the Initial Unpaid Invoice Amount of $2,698.21 at [11] are incorporated into the quantum of losses due to the cross-defendants' conduct pleaded at [49.ii.1], being the Initial Unpaid Invoice Amount.
The defendants/cross-claimants say that the effect of the agreement was ongoing after the representation of 23 June 2011, and it was those representations in relation to Modakboard's compliance with the term of the agreement that make the cross-defendants' knowledge of those matters "as supported in the definition of the Cross-Defendants' Knowledge of Modakboard Affairs" pleaded at [33], "entirely relevant and certain". Nothing could be less clear.

[16]

Allegations as to the Second Payment Representations - [29]-[32] and [45]-[49]

Similar issues arise in relation to the allegation of the Second Payment Representations alleged to have been made by Modakboard on 26 October 2011, 30 September 2014, in or about November 2014 and on or about 25 December 2014. These form the basis of the claim for damages for misleading or deceptive conduct pleaded at [45]-[49] and are conduct on which the remaining claims of unconscionable conduct and the like are also premised.
Again, it is submitted that there are a number of difficulties and ambiguities arising from the pleadings in these paragraphs of the proposed further amended cross-claim.
As to the representations alleged at [29.a] in relation to guaranteed payment, it is said that as pleaded these are ambiguous, contain conclusions of law and cannot be reasonably inferred from the supporting particulars setting out the alleged statements by Mr Jones and Ms Cohen.
Complaint is made that it is unclear what is meant by the allegation that it was represented that the Second Consultancy Agreement "guaranteed" the right of Mr Brady and Crewmark to payment "pursuant to the terms of the Second Consultancy Agreement" or "subject to the terms of the Second Consultancy Agreement"; i.e., whether it means any more than an assurance that the Second Consultancy Agreement provided them with a contractual entitlement to payment. In that regard it is submitted that the representation as pleaded is vague, ambiguous and embarrassing. (In oral submissions, Counsel for the defendants/cross-claimants said that what was specifically conveyed by that representation was that the Consultancy Agreement had the effect of guaranteeing that payment - see T 44.20.)
Complaint is also made as to the particulars of the statements alleged to have been made by both Mr Jones and Ms Cohen giving rise to the representations as formulated; and that it is unclear whether these are asserted to be statements of opinion or intention. Insofar as the particulars assert that Ms Cohen "nodded in agreement" to a particular statement by Mr Jones, it is said that this gives rise to the uncertainty as to what is there being alleged - for example, whether it is alleged that she had material knowledge of Mr Jones' opinions or beliefs. Insofar as the statements relied upon are ambiguous, complaint is made that nothing is pleaded to enable the inference to be drawn that the statement was reasonably understood to constitute some type of guarantee as pleaded and, if construed as a promise, it suffers from the same deficiencies identified in relation to the First Payment Representations.
Similar complaint is made as to the representation pleaded at [29.b]. It is noted that, apart from the allegation that the statement was made in the presence of Ms Cohen, there is nothing in the pleading to suggest that the statement was adopted or assented to by her (not even an allegation that she was participating in the conversation or listening). It is submitted that an allegation of this type against Ms Cohen cannot have any significance unless it can somehow be construed as a representation by silence but that such an allegation would entail an enquiry as to whether Mr Brady and Crewmark had a reasonable expectation of disclosure and the characterisation of the conduct must be undertaken by reference to circumstances and context (reference being made to Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167, per Sackville AJA (with whom Beazley JA, as her Honour then was, and Campbell JA agreed) at [209]; cited with approval by Barrett JA (with whom Bathurst CJ and Beazley P agreed), and Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [192]). In circumstances where the allegation as pleaded is silent as to any of these matters, the complaint is that it is embarrassing in that regard.
Again, similar complaint is made as to the allegation at [29.c]. It is noted that there is no allegation that the promise attributed to Mr Jones contained any implied representations which were untrue or were made without a reasonable basis, nor is there any pleading of the necessary context, facts and circumstances to support such an allegation; and that the statement attributed to Ms Cohen in support of this representation is ambiguous and uncertain in meaning (and there is no allegation that the statement contained any implied representation which was untrue).
Finally, in relation to the representation alleged at [29.d], the same complaint is made. It is noted that, apart from the allegation that the statement was made in the presence of Ms Cohen, there is nothing in the pleading to suggest that the statement was adopted or assented to by her and no allegation that it somehow constituted a representation by silence or that there was any reasonable expectation on the part of Mr Brady that Ms Cohen would respond in some way.
As to the allegation at [45], the same complaints are made as those in relation to the similar allegation at [40]. Similarly, the allegation at [46] is said to suffer from the same deficiencies as identified with respect to [41] with respect to the reference to the Second Payment Representations being "false and/or misleading or deceptive" and as to the matters pleaded at [46.a] and [46.d].
As to reliance, the same complaint is made of [48] as was made with respect to [43].

[17]

Response by defendants/cross-claimants

The defendants/cross-claimants assert that there is no ambiguity in the pleading at [29.a]; nor, they say, is any conclusion of law there involved. It is submitted that the pleadings are assertions by the defendants/cross-claimants as to what was conveyed by the Second Payment Representations and that the fact that such representations conveyed such meanings which included legal conclusions as to the effect of the Agreements, does not preclude that such was the meaning conveyed. They argue that the cross-defendants erroneously conflate the prohibition upon one pleading a legal conclusion without basis, with the meaning conveyed by the representation which incorporated those conclusions as to the Agreements as pleaded. (As noted above, in oral argument it was said that the representation is alleged to have been a representation as to the legal effect of the Second Consultancy Agreement - T 44.)
As to what is meant by the alleged representation as to guarantee, it is said that whether this may be reasonably inferred is a matter of evidence and a matter for a finding of fact at trial; and that the cross-defendants' submissions as to the defendants/cross-claimants' version of what was conveyed is a matter for evidence and trial. Similarly, it is said that the submissions as to the meaning conveyed and import of the Second Payment Representations pleaded at [29] are submissions for trial and do not affect the standing of the pleading.
The defendants/cross-claimants assert that the pleading at [29.a] is prima facie supported by the factual matters pleaded in support, and the evidence. They say that the submissions made as to Ms Cohen's "nod in agreement" being a "meaningless embellishment to the pleading" is a "prima facie exceptional mischaracterisation of the act" and that its plain meaning is as a sign of agreement and acquiescence to the matters raised immediately prior to the nod.
Similarly, the defendants/cross-claimants say that the effect and meaning conveyed by the factual matters of the representations pleaded at [29.b] are matters for submission at trial and matters of evidence. They argue that the pleadings of [29.b] are prima facie supported by the factual matters pleaded in support, and the evidence.
As to the matters raised at ([35(j)]) of the cross-defendants' submissions as to the silence of Ms Cohen, the defendants/cross-claimants say that the High Court has determined that the pivotal focus in relation to silence is the question "what is the likely effect of non-disclosure in the circumstances?" and that the requirement of a reasonable expectation of disclosure has been applied in situations similar to the present case, with the accompanying silence of the defendant in those other cases being held to be misleading or deceptive conduct for the purposes of s 52 of the former Trade Practices Act.
Similarly in relation to the submissions as to the effect and meaning conveyed by the factual matters of the representations pleaded at [29.c], the defendants/cross-claimants say these are matters for submission at trial and matters of evidence but assert that the pleadings are prima facie supported by the factual matters pleaded in support, and the evidence. The question of reasonable basis for such statements made by the cross-defendants is said to be a matter for the defence "if such a basis indeed existed". It is argued that there is no basis in the submissions of the cross-defendants to impugn the pleadings as they stand based upon argument as to the actual meaning conveyed. Similar submissions are made as to [29.d].
As to the submissions in relation to [45], [46], and [48], the defendants/cross-claimants repeat their submissions in relation to the complaints made as to [40], [41] and [43] of the proposed amended cross-claim.

[18]

Allegation of loss - [49]

Similar complaint is made in relation to the pleading of loss in relation to the Second Payment Representations as was made in relation to the First Payment Representations (see [36]). In particular, it is again noted that under the Second Consultancy Agreement, the Consultancy Fee (referred to at [15.d]) was payable to Crewmark and not to Mr Brady (Mr Brady's entitlement, if any, being to recover - with Crewmark - reasonable costs and expenses as referred to at [15.e] and other costs incurred by them as referred to at [15.g]).
It is submitted that at least to the extent that Mr Brady seeks to recover the amount referred to in the particulars at [49.i], the proposed claim is incompetent and, insofar as Mr Brady seeks to recover any additional amount referred to in the particulars at [49.ii], the claim is deficient in that it fails to identify the loss actually attributable to Mr Brady rather than Crewmark.
Further, Ms Cohen argues that a fundamental deficiency in the pleading at [49] in relation to the claim for damages in the amount of $792,000 in respect of the Unpaid Further Consultancy Amount is that the pleaded case (as set out at [30]) is of reliance on the Second Payment Representations in continuing to provide the Further Consultancy Services notwithstanding the absence of payment in the entire period between 26 October 2011 and 11 April 2015. Ms Cohen argues that the representation on 26 October 2011 as pleaded at [29.a] is ambiguous in its meaning and not capable of supporting a finding of reliance as pleaded; and that nor is the alleged representation on 30 September 2014 capable of supporting a representation by Ms Cohen. It is submitted that, having regard to these two alleged representations, there is no sustainable case against Ms Cohen that could give rise to loss on the part of either Mr Brady or Crewmark arising from the alleged Second Payment Representation over a period of three years.
It is noted that the allegation at [19] is that the Further Consultancy Services were provided from 26 October 2011 until 3 August 2015; whereas the loss claimed in respect of the Unpaid Further Consultancy Amount is calculated for the period of 6 years from October 2011 to October 2017. Ms Cohen argues (not surprisingly) that the full amount there claimed (even if it may be the amount that Crewmark would be entitled to as the measure of its expectation damages upon establishing a breach of contract by Modakboard) cannot be the proper measure of loss or damage suffered "because of the conduct" of Ms Cohen or any of the other proposed cross-defendants for the purposes of s 236(1) of the Australian Consumer Law and that, even at its highest, the claim for damages for misleading conduct could not go beyond 3 August 2015.
Pausing there, the defendants/cross-claimants accept the force of the above submission and indicated that they would seek leave to amend the Particulars of Damages at [49.i] to limit damages to the period of October 2011 to 3 August 2015 on a pro rata basis of $132,000 p.a. being an amount of $507,024.66.
Complaint is also made that there is nothing in the pleading to identify how the alleged misleading or deceptive conduct caused Crewmark the loss of $720,000 in respect of the Consultancy Fee. The essential difficulty with the pleading at [49] is said to be that it does not in any way articulate the basis on which the loss claimed is alleged to have been caused by the alleged misleading or deceptive conduct.

[19]

Response to the complaints made as to [49]

The defendants/cross-claimants confirm the typographical error contained in [49]. Otherwise their position as to the question of entitlement as between Crewmark and Mr Brady, as pleaded, is as set out earlier. It is said that these submissions apply equivalently to the contraventions of the Australian Consumer Law, namely that: Mr Brady, as sole director and shareholder is the corporate mind of Crewmark. Those damages accruing contractually whether personally or by losses suffered to a wholly owned entity are equally attributable to the representations and other actions of the Cross Defendants manifesting by virtue of those breaches. But for the breaches, the decisions of Mr Brady personally, and as the corporate mind of Crewmark, would have taken other courses of action, avoiding the claimed detriment.
Insofar as Ms Cohen has referred to the time periods between the representations which constitute two of the representations which go to the Second Payment Representations and has argued that there is no sustainable case against her that could give rise to loss on the part of either Mr Brady or Crewmark arising from the alleged Second Payment Representation for a period of three years, the defendants/cross-claimants maintain that there is no explanation there given as to how or why the Second Payment Representations, comprised of representations made on 26 October 2011 ([29.a]), 30 September 2014 ([29.b]), November 2014 ([29.c]), and 25 December 2014 ([29.d]), cannot support a pleading of reliance upon them for a period from 26 October 2011 until 11 April 2015.
The defendants/cross-claimants "wholly refute" the assertion of the cross-defendants (in submissions at paragraph 41(k)) that [49] does not properly articulate how the loss claimed is alleged to have been caused by the misleading or deceptive conduct of the cross-defendants as pleaded (referring in particular to the matters pleaded at [41]-[49]), without further elaboration.

[20]

"Knowledge of Modakboard Affairs" - [33]

I have already referred to the compendious term used in the pleading "the Cross-Defendants' Knowledge of Modakboard Affairs". Complaint is made by Ms Cohen that the generality of the allegations and the absence of any particulars obscure the case that the defendants/cross claimants would seek to prove by admissible evidence and make it difficult, if not impossible, for Ms Cohen to plead to the more critical allegations. As already noted, what [33.b] does is to set out factual matters said to be "relevant" to Ms Cohen's knowledge of the operational, financial and legal matters relating to Modakboard generally and specifically relevant to matters relating to the First Consultancy Agreement and the Second Consultancy Agreement, without specifying any particular item or items of knowledge. It is, in effect, a list of matters from which it might well be that knowledge of some kind would have been acquired by Ms Cohen without specifying what the relevant knowledge is alleged to have been acquired by Ms Cohen (or which she ought to have had).
Complaint is made that the relevance of a number of the facts listed at [33.b] has not been identified in the pleading (such as the matters at [33.b.i.1, 2 and 4]). As I have already noted, complaint is made that no facts have been pleaded in support of the allegations at [33.b.i.3] that Ms Cohen was a de facto director and/or a shadow director of Modakboard (the matters at (a) and (b) being conclusory or rolled up allegations).
The allegation at [33.b.i.5] is said to be a bare assertion, which is embarrassing for a number of reasons: the allegation that Ms Cohen gave "directions" does not specify when, how or to whom the directions were given or whether the directions were with respect to some or all of the operational matters, financial matters, investment matters or legal matters or, if some, which ones; the same deficiency arises with the allegations that Ms Cohen gave "advice" and "had involvement" (the latter being compounded by the generality of the allegation of involvement). There is no identification of any of the matters to which reference is there made. Ms Cohen points out that the events referred to are alleged to have occurred over a time span of some four years and, in the circumstances, she submits that the allegations are of such generality as to be embarrassing and oppressive.
As to the allegation at [33.b.iv], this is criticised as being imprecise and ambiguous in its meaning and devoid of any supporting facts or particulars. Complaint is made as to the allegation at [33.b.v] that there is no particularisation as to which Modakboard board meetings and general meetings Ms Cohen attended or the capacity in which she attended those meetings; and that it is of such generality as to be embarrassing and oppressive. Similarly as to the allegation at [33.b.vi], the complaint is made that this is devoid of particulars; vague and imprecise having regard to the time span involved; and fails to specify which affairs (financial, technical, marketing or legal) of Modakboard are there referred to or the actual knowledge which Ms Cohen is said to have gained from being so apprised. Again, the complaint is that the allegation is of such generality as to be embarrassing and oppressive.
As to [33.b.vii], the allegation that Ms Cohen was the maker of some of the statements constituting the First Payment Representation and the Second Payment Representations is said to involve inescapable circularity.
Finally, as to [33.b.viii], complaint is made as to the allegation that Ms Cohen provided legal advice to Mr Brady on the basis that it is vague and uncertain in its meaning and as to its significance (or, perhaps, relevance to the pleading). Ms Cohen notes that no particulars are provided as to what advice was provided to Mr Brady, when such advice was provided or as to its relevance to Ms Cohen's alleged knowledge of the operational, financial or legal matters relating to Modakboard. No material facts are pleaded to establish the relevance or materiality of this allegation. Again, the complaint is that this allegation is of such generality as to be embarrassing and oppressive.

[22]

Allegation that Ms Cohen and Mr Jones are liable as "involved" persons for the alleged misleading or deceptive conduct - [50]

The complaint here made is that [50] is a "rolled up" pleading that combines allegations of involvement in the form of paragraph (a) of the definition of "involved" (aiding and abetting) and paragraph (c) (knowing concern in or being party to the contravention). Ms Cohen notes that different legal and evidentiary requirements apply to each of those elements and emphasises that the concept of accessorial liability imports criminal standards in imposing liability (citing Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820 per Jacobson J at [6]). (I note his Honour there said that the concept of accessorial liability imports quasi criminal standards in imposing civil liability.) It is noted that in Addenbrooke, his Honour (at [12]) said that a pleading that does not contain the critical elements identified in Yorke v Lucas and later authorities is liable to be struck out. Ms Cohen refers to what was said by Hely J in Fernandez v Glev Pty Ltd [2000] FCA 1859 at [18]: The facts necessary to sustain a conclusion that the individuals were involved in the contravention of s 52 should be pleaded. That includes whatever involvement in, or knowledge of, the making of the representations is relied upon and knowledge of the falsity of the representations in question.
As to the aiding and abetting allegation ([50.a]), it is said that in order to establish this, it is necessary for the defendants/cross-claimants to plead facts which, if accepted, establish that Ms Cohen intentionally aided and abetted a contravention and that she knew the facts that gave rise to the contravention and that knowledge extended to the essential elements of the contravention (citing Yorke v Lucas at [9]-[10]). Ms Cohen argues that the pleading is deficient in that: it does not specify that she intentionally aided and abetted the alleged contraventions by speaking the words alleged to have constituted the representations; it does not allege that she knew the facts that gave rise to the contravention alleged, nor are those facts identified (noting that the fact, if it be accepted, that she made the alleged statements does not establish that the statements were misleading or deceptive); and there is no allegation that that any knowledge she had extended to the essential elements of any contravention.
As to the knowing concern/party to contravention allegation at [50.b], this is said to be deficient because: it rolls-up in the one allegation (that Ms Cohen was "directly knowingly concerned in and a party to the contravention") two different concepts (that of being "knowingly concerned in" and that of being "party to" the alleged contravention (see Yorke v Lucas at pp 669-670)); the allegation at [50.b.i] suffers from the same deficiencies as those referred to with respect to [50.a] above; and the allegation at [50.b.ii] as to knowledge or constructive knowledge suffers from the following additional difficulties. First, it is said that the pleading makes no attempt to identify the essential facts constituting contravention or to identify the basis on which it is alleged that Ms Cohen had the necessary knowledge of some or all of those facts. Second, it is said that the allegation that Ms Cohen knew or ought to have known of the matters pleaded at [50.b.ii.1 and 2] is untenable.
Ms Cohen relies on Giorgianni v The Queen (1985) 156 CLR 473 for the proposition that, for the purposes of accessorial liability, the intentional participation and requisite knowledge cannot be based on constructive knowledge, unless there is a combination of suspicious circumstances and failure to inquire that may lead to the conclusion that a person had sufficient knowledge to be implicated in the contravention. Complaint is made that the pleading alleges knowledge and constructive knowledge as alternatives without identifying, to the extent that constructive knowledge is relied on, the facts and circumstances alleged to give rise to such constructive knowledge.
Ms Cohen argues that the allegation at [50.b.ii.1] that she knew (or ought to have known) the import of the words "spoken in the First Misleading and Deceptive Conduct and the Second Misleading and Deceptive Conduct" is embarrassing, without any identification of: the alleged import; the facts and circumstances alleged to give rise to that import; and the knowledge she is alleged to have had of the Modakboard affairs at the time that each of the alleged representations was made that is alleged to have resulted in her knowing of the import or which put her on notice (in the Giorgianni sense) of that import. The same complaint is made as to the allegation at [50.b.ii.2] as to knowledge of the reliance Mr Brady and Crewmark are alleged to have had on the "First Misleading and Deceptive Conduct" and the "Second Misleading and Deceptive Conduct".
It is submitted that none of the above objections is answered by the reference at the conclusion of [50.b.ii]] to the "direct involvement" of Ms Cohen in the entity for which the Initial Consultancy Services and the Further Consultancy Services were provided (there being no identification of what that direct involvement is said to have been), including the Cross-Defendants' Knowledge of Modakboard affairs (presumably there being intended to refer in her case only to her knowledge but even so, not stating what that her knowledge of Modakboard affairs was).

[23]

Response by defendants/cross-claimants

The defendants/cross-claimants say that the allegations, as they relate to the definition of "involved" in s 2 of the Australian Consumer Law (at (a) and (c) of that definition), are not "rolled up" but are separately pleaded at [50.a] and [50.b]. They say that each separate head of identification of the cross-defendants as an "involved person" is supported by reference to those specific matters, which equate to the aiding and abetting allegations and the being directly and knowingly concerned in, and a party to, the contraventions allegations; and hence that the pleading of involvement in the contraventions is fully and properly pleaded.
It is accepted that the requirement of intention is present as regards the level of knowledge of "involved persons", as distinct from those directly liable for the misleading or deceptive conduct. However, it is submitted that the pleading contains the requisite particularity in order to make out the claim.
It is said that, collectively, the matters pleaded at [50] give rise to the required degree of knowledge of the elements of the contravention and, based upon such knowledge, a direct inference of intention "based upon the coalescence of knowledge and action". It is submitted that the elements as pleaded are sufficient to give rise to a finding of fact of those matters, whilst the finding of such fact is a matter for the Court. Accordingly it is submitted that the submissions of the cross-defendants as to the failure to plead the matters relating to the cross defendants' definition of involved persons pursuant to as having aided and abetted the contraventions, and the ruling in Yorke v Lucas, is without merit.
It is acknowledged by the defendants/cross-claimants that the provisions of 2(c) as regards "involved persons" contain two distinct categories of "involved persons" - specifically those "directly and knowingly concerned in" and "a party to" the contravention. However, the defendants/cross-claimants do not accept that the allegations are "rolled up" in the pleading. It is submitted that the allegation is that Ms Cohen and Mr Jones were both directly and knowingly (citing Yorke v Lucas, per Brennan J, as his Honour then was, at [14] and Houghton v Arms at [17]) concerned in, and a party to, the contravention. It is said that it is appropriate on this basis to allege the two in pleadings simultaneously, even more so due to the fact that the assertions are predicated upon the identical factual matter as pleaded.
It is said that the proposition that constructive knowledge cannot be a basis for accessorial liability (in impugning the pleading at [50.b.ii]) is not absolute. Reference is made to more recent case authority that it is said has established the possibility of inference in establishing accessorial liability in the context of "involved persons" under s 75B of the former Trade Practices Act in Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 at 5 that "where there is a combination of suspicious circumstances and a failure to make an enquiry it may be possible to infer knowledge of the relevant essential matters". (Pausing there, however, Counsel for the defendants/cross-claimants accepts that they do not plead any suspicious circumstances - so this response as to the complaint made of the accessorial liability pleading is seemly academic on the defendants/cross-claimants' part.)
It is submitted that, in this regard, those factual matters pleaded in support of the assertions that Ms Cohen and Mr Jones are involved persons going directly to knowledge and intention as to the contravention ([at [50]) collectively give rise to the required degree of knowledge of the elements of the contravention, and based upon such knowledge, a direct inference of intention based upon the coalescence of knowledge and action. The elements as pleaded are said to be sufficient to give rise to a finding of fact of those matters, whilst the finding of such fact is a matter for the Court.

[24]

Unconscionability claim - [51]

The complaint as to the pleading of the "unconscionable conduct" is put against the background that what is now recognised as unconscionable conduct in this context is conduct that involves "moral obloquy" in the sense of a "deviation from rectitude or right practice or of delinquency" and that the jurisdiction to remedy loss caused by unconscionable conduct has, as its root, the protection of vulnerable parties from the strong (see Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 1472 per Yates J at [128]-[142]; Spigelman CJ in Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583 [121]; [2005] NSWCA 261; Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR199; [2015] FCAFC 50 per Allsop CJ at [262]; [282]).
Ms Cohen argues that, at the core of the proposed further amended cross-claim is an unsigned document between Modakboard, Modak Australia Pty Ltd, Modak Homes Australia Pty Ltd, Mr Brady and Crewmark, which is relied on by Mr Brady and Crewmark as a written agreement for payment (CB Tab 6) but which Modakboard does not admit was ever signed or agreed. It is noted that the document itself provides that a condition of any entitlement of Crewmark to payment of a consultancy fee was its adoption by resolution of the management board of Modakboard; and that at the time Mr Brady and Jones effectively comprised the management board.
It is submitted that it cannot be said that Modakboard engaged in unconscionable conduct in failing to pay the amounts claimed when Mr Brady, who is alleging that conduct, was one of the controlling members of the company's management team at the time but that, if that is the case sought to be made then more is required of the pleading than simple reliance on the alleged representations. Ms Cohen submits that it is essential to define with precision the factual issues that are alleged and that the trial be confined to those factual issues, since otherwise there is uncertainty as to the case being pursued, with the prospect of undue lengthening of the proceedings and prejudice to the proposed cross-defendants.
Complaint is made that the pleading at [51] suffers from the following deficiencies.
First, as to [51.a and b.i], that the pleading rolls up both the First Payment Representation and the Second Payment Representation as constituting the inducement, or the unconscionable conduct, without distinguishing between (in the case of 51.a) the First Consultancy Agreement and the Second Consultancy Agreement and (in the case of both 51.a and 51.b.i) without distinguishing or identifying the circumstances specifically pertaining to each.
Second, as to [51.b.ii], which makes the allegation that Ms Cohen "knew or ought to have known" certain matters by virtue of "the Cross-Defendants' Knowledge of Modakboard Affairs", Ms Cohen argues that constructive knowledge cannot form the basis of a claim for unconscionable conduct, which at least requires "deviation from rectitude or right practice or of delinquency" but, in any event, no facts or circumstances are pleaded which would support a finding of constructive knowledge against Ms Cohen.
In particular, as to [51.b.ii.2], it is said that no facts or circumstances are pleaded to support the allegation that Ms Cohen knew (or ought to have known) that Mr Brady and Crewmark would not be paid for the Initial Consultancy Services or the Further Consultancy Services pursuant to the terms of the First Consultancy Agreement and the Second Consultancy Agreement. It is submitted that this allegation "is of breathtaking width, spanning a number of years and is devoid of any particularity as to the circumstances pertaining at any particular time relevant to Ms Cohen's alleged knowledge that Mr Brady and Crewmark would not be paid". A number of potential allegations that might fall within that very general allegation were postulated by way of example as to the uncertainty of the pleaded case on this issue.
Similar complaint is made as to [51.b.ii.3] in the absence of a pleading of the relevant facts and circumstances on which the allegation of knowledge or constructive knowledge is based.
As to [51.b.ii.4], which pleads that "such non-payment was reasonably foreseeable", complaint is again made that no particulars are provided in support of this allegation.
Ms Cohen submits that the pleading does not address any of the indicia referred to in s 22 of the Australian Consumer Law relevant to determining whether there has been a contravention of s 21. It is noted that the pleading does not address the issue of any alleged vulnerability on the part of Mr Brady or Crewmark, noting Mr Brady's status as a director and shareholder of Modakboard and the absence of any pleading that Mr Brady: was unaware of the financial position of Modakboard or its ability to pay for the consultancy services from time to time over a period spanning some four years or of any decision taken by Modakboard without his knowledge; was in some way excluded from the decision making of Modakboard; would not have been privy to any such decision; or did not have access to Modakboard's financial information or was in some way prevented from having access. The criticism of the pleading in this regard is that it does not plead allegations that could sustain a claim for unconscionable conduct.
As to the claim for damages (at [51.d]) in the amount of $792,000 (the amount of the allegedly unpaid Consultancy Fees), again the complaint is that this cannot be the proper measure of loss or damage suffered "because of the conduct" of Ms Cohen or any of the other cross defendants; any such loss would be the loss of Crewmark; and no particulars of the claimed damage have been provided. The same response on the question of loss in this regard is made by the defendants/cross-claimants.

[25]

Response on the unconscionability claim pleading

The defendants/cross-claimants cavil with the submission that the First and Second Payment Representation are "rolled up" in the pleading; maintaining that the particulars and factual matters in support of those individual representations are pleaded and particularised comprehensively at [25] and [29] respectively.
They take issue with the proposition that constructive knowledge cannot form the basis of a claim for unconscionable conduct. Reliance is placed on the High Court's decision in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 for the proposition that the mere possibility of knowledge is sufficient, suggesting that Gibbs CJ there determined "such a level of knowledge to be equivalent to actual knowledge". (In that regard, I beg to differ - what his Honour said was that the result would be the same if there was an awareness "of the possibility that that situation may exist or … of facts that would raise that possibility in the mind of any reasonable person", not that constructive knowledge is equivalent to actual knowledge. Moreover, the defendants/cross-claimants disavow any claim based on unconscionability in the Amadio special disadvantage sense.) In any event, the assertion of the defendants/cross-claimants in the present case is that the factual matters pleaded lead "inexorably" to a finding of actual or constructive knowledge in relation to those matters.
The defendants/cross-claimants further cavil with the proposition that they have not pleaded the facts or circumstances to support the allegation that Ms Cohen knew (or ought to have known) that Mr Brady and Crewmark would not be paid for the Initial Consultancy Services or the Further Consultancy Services pursuant to the terms of the First Consultancy Agreement and the Second Consultancy Agreement. They refer in this regard to the matters contained in the Cross-Defendants' Knowledge of Modakboard Affairs.
As to the balance of the complaints, the defendants/cross-claimants maintain that there is no requirement that the pleadings plead directly to the indicia contained at s 22 of the Australian Consumer Law and says that those indicia are "merely those matters (not comprehensively), to which a Court may have regard in determining whether a person has contravened s 21 in connection with the supply or possible supply of goods or services to a person". They submit that the fact that the pleading does not directly address any of the indicia is of no consequence to the pleading.
As to the complaint that the pleading does not address the critical issue of any alleged vulnerability on the part of Mr Brady or Crewmark, the defendants/cross-claimants maintain that the matters raised at [62(a)-(d)] of Ms Cohen's submissions "have no bearing upon the construction of a cause of action in unconscionability", which they maintain "has been fully accomplished" by way of the current pleadings. They argue that a claim of unconscionability pursuant to s 21 of the Australian Consumer Law is not predicated "critically" upon a question of any vulnerability on the part of the affected party and they say that vulnerability is not a component of the "moral obloquy" which is an essential component of s 21 unconscionability and which they say is to be distinguished from s 20 unconscionability or Amadio unconscionability, which are predicated upon the relative disparity in bargaining power of the entities.
The defendants/cross-claimants argue that "[m]ere reference to the considerations list contained at s 22 alerts one to the fact that the relative strengths of the parties is but one consideration in a list principally focussed not upon the characteristics of the parties but by the conduct of those same parties". They argue that for conduct to be unconscionable "serious misconduct or something clearly unfair or unreasonable must be demonstrated". Notwithstanding this, they say that it is their intention to lead evidence as to the respective position of control and knowledge of the parties. (I interpose to note that if the defendants/cross-claimants are relying on control or knowledge for the allegation that the contract was unconscionable then the facts said to amount to such control or knowledge must be properly pleaded or particularised as the case may be, so that the proposed cross defendants are squarely on notice of the claim made against them.)
As to the submissions as to the damages as a result of the alleged unconscionable conduct, as noted above, they accept that the entire quantum of contractual damages cannot be attributed to the impugned conduct of unconscionability in the premises. Accordingly they seek leave to amend the Particulars of Damages at [51.d.i] to limit damages to the period from October 2011 to 3 August 2015 on a pro rata basis of $132,000 per annum, being an amount of $507,024.66.

[27]

Negligent Misstatement Claim - [53]

Ms Cohen refers to the statement of principles set out in the joint judgment of Jacobson, Gilmour and Gordon JJ in ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1 at 109 [573]; [2014] FCAFC 65. The pleading of the negligent misstatement claim is said to be deficient for the following reasons.
First, as to the duty of care. It is said that there is a failure to plead any facts or circumstances pertaining to any special relationship between Ms Cohen and Mr Brady and Crewmark that are alleged to give rise to the alleged duty of care. Insofar as [53.a] alleges a duty of care owed to Mr Brady and Crewmark by virtue of the "Cross-Defendants' Knowledge of Modakboard Affairs", it is noted that there is no specification as to what Ms Cohen's knowledge was or how that knowledge was relevant to the existence of the alleged duty of care. There is no specification as to what the alleged duty of care was and its scope.
Second, as to the risk of harm, complaint is made that the pleading fails to address the risk of harm in accordance with s 5B of the Civil Liability Act 2002 (NSW) or to identify what precautions a reasonable person in Ms Cohen's position would have taken.
Third, complaint is made as to the failure to specify the nature of the representations (i.e., whether they are pleaded as representations of present fact, or intention or opinion), noting that different considerations apply in each of these circumstances and that there is no pleading as to the circumstances that made it reasonable for Mr Brady and Crewmark to accept and rely on the alleged representations. The latter is said to be a critical issue, having regard to Mr Brady's status as a director and shareholder of Modakboard and the absence of any allegation that would have made it reasonable to assume that he had no relevant knowledge or means of knowledge in relation to the matters the subject of the representations.
Ms Cohen also points to the failure of the pleading to allege vulnerability on the part of Mr Brady and Crewmark or to set out the basis relied on to establish such vulnerability.
As to the allegation at [53.c] that the representations were made by Ms Cohen in order to induce Mr Brady and Crewmark to continue to provide the Initial Consultancy Services, it is pointed out that the Initial Consultancy Services were provided only during the period between 3 May 2011 and 26 October 2011 and, in any event, there is no pleading of the circumstances relied on to establish that Ms Cohen realised or ought to have realised that Mr Brady and Crewmark intended to act on the information.
As to [53.d], the same deficiencies are identified as those in relation to the same allegations made elsewhere in the pleading.
As to the allegation at [53.e], this is criticised as a bare assertion of foreseeability without any specification as to the circumstances making it reasonably foreseeable that, if the representations were untrue, Crewmark and Mr Brady would suffer economic loss as a result.
As to the allegation at [53.g.i] of "negligent indifference", it is submitted that this language is foreign to this area of discourse, meaningless and embarrassing as employed. Ms Cohen notes that no particulars are provided to substantiate this claim.
As to [53.h.i-iii], which allege that the statements were untrue, negligently made, breached the duty of care and caused economic loss, which broadly summarise the earlier parts of the negligent misstatement pleading, the same criticism is made as above. Again, the complaint as to the particulars of economic loss is that the claim brought by Mr Brady for the unpaid Consultancy Fee is incompetent and that there is no attempt to relate the claim for damages in the amount of $792,000, which is in the nature of expectation damages, to the alleged breach of duty by Ms Cohen.

[28]

Response by defendants/cross-claimants

The defendants/cross-claimants maintain that the criticism that they have failed to plead any facts or circumstances pertaining to any special relationship between Ms Cohen and Mr Brady and Crewmark alleged to give rise to that duty of care is unfounded, pointing to the pleading at [53.a] of the matters contained in the "Cross-Defendants' Knowledge of Modakboard Affairs" in support of the manifestation of a duty of care as between the defendants/cross-claimants and the cross-defendants. They argue that, leaving aside the question of any special relationship, the basic principle applicable in Donoghue v Stevenson [1932] AC 562 applies, on the basis that the parties were in proximity to each other (see T 67). The argument seems to be that proximity is relevant such that this is a case where the acts or omissions of the cross-defendants could be reasonably foreseen to cause damage to those so closely affected by those acts or omissions.
Pausing here, that submission flies in the face of what was said by the High Court in Sullivan v Moody (2001) 207 CLR 562; [2001] HCA 49 at [48] (per Gleeson CJ, Gaudron, McHugh, Hayne and Callinan JJ), namely that: As Professor Fleming said (Fleming, The Law of Torts, 9th ed, (1998) at 151) "no one has ever succeeded in capturing in any precise formula" a comprehensive test for determining whether there exists, between two parties, a relationship sufficiently proximate to give rise to a duty of the kind necessary for actionable negligence. The formula is not "proximity". Notwithstanding the centrality of that concept, for more than a century, in this area of discourse, and despite some later decisions in this Court which emphasised that centrality, it gives little practical guidance in determining whether a duty of care exists in cases that are not analogous to cases in which a duty has been established. It expresses the nature of what is in issue, and in that respect gives focus to the inquiry, but as an explanation of a process of reasoning leading to a conclusion its utility is limited. The present appeals provide an illustration of the problem. To ask whether there was a relationship of proximity between the medical practitioners who examined the children, and the fathers who were suspected of abusing the children, might be a convenient shorthand method of formulating the ultimate question in the case, but it provides no assistance in deciding how to answer the question. That is so, whether it is expressed as the ultimate test of a duty of care, or as one of a number of stages in an approach towards a conclusion on that issue. [some citations omitted]
The defendants/cross-claimants argue further that "the mere proffering of the advices as defined in the Representations pleaded at paras 25 and 29" is sufficient to manifest the duty (referring to Mutual Life and Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 574; [1968] HCA 74). They argue that whether this manifests the requisite duty of care and breach of such duty is an evidentiary matter and will require a determination of fact by the Court. They say that in the present case, the nature of the relationship between the parties "as evident in the pleadings of factual matters contained in paras. 1 - 24" and the resultant potential for financial gain in connection with the representations "is determined at law as prima facie manifesting such a duty of care" (referring to Presser v Caldwell Estates Pty Ltd [1971] 2 NSWLR 471 at 493).
They point to the following, which they say are essential elements of the cause of action: the pleaded detail of the negligent acts themselves (at [53.b] and defined at [25] and [29]; the pleaded knowledge by the cross-defendants of reliance by the defendants/cross-claimants (at [53.d.iv]), referring to MLC v Evatt at 571); the pleaded knowledge held by the cross-defendants in manifesting such reliance (at [53.d]), including the "Cross-Defendants' Knowledge of Modakboard Affairs" defined and particularised at [33] (though somewhat contradicting their submission, they then assert that this is not an essential element of the tortious conduct, referring to MLC v Evatt at 574); the pleaded reasonable foreseeability of losses (at [53.e]; the pleading of actual reliance (at [53.f]); and "the negligence of the acts themselves" (at [53.g).
As to what is meant by "negligent indifference" it is said that this means "indifference as to the potential for loss or gain on the part of the counter‑party" and "in this case, it goes specifically to the truth of the matters that were contained. So no real turning of any discerning ‑ no real discernment as to the truth or otherwise of those particular representations or as to the harm that may be caused as a result" (T 63).
Thus the defendants/cross-claimants argue that the claim of negligent misstatement is properly pleaded and manifests a prima facie cause of action in the proceedings. I disagree.
As to the submissions in relation to damages, again the defendants/cross-claimants accept that the entire quantum of contractual damages cannot be attributed to the impugned conduct of negligent misstatement and seek leave to amend the Particulars of Damages at [53.h.iv.1] to limit damages to the period of October 2011 to 3 August 2015 on a pro rata basis of $132,000 pa, being an amount of $507,024.66.

[31]

Determination

As noted earlier, I am of the view that the proposed pleading does not disclose any basis on which Mr Brady has a personal claim for loss or damage in relation to the small amount claimed by way of moneys outstanding under the Initial Consultancy Agreement or for the Unpaid Further Consultancy Amount claimed by reference to the Second Consultancy Services Agreement. Nor am I satisfied that any such basis would be articulated if a further opportunity were now to be afforded to Mr Brady to do so - since none was proffered in argument on his behalf and there has been ample opportunity (over six iterations of the prepared amended cross-claim) to do so if there had been such a basis.
As to the $10,000 odd claimed for Unpaid Costs Invoices Amount (the internal and external consultancy fees) a claim for breach of contract could potentially be maintained by Mr Brady against Modakboard (assuming the relevant expenses were incurred by him) but that is not the claim here put. Rather, the allegation is that invoices were issued by Crewmark. There is no differentiation between what amounts if any are said to be payable to Mr Brady for reimbursement of his expenses (as opposed to those of Modakboard). Insofar as the loss is claimed by Mr Brady for contraventions of the Australian Consumer Law in relation to those particular amounts, the pleading would need clearly to articulate the causal link between particular conduct/responsibilities and the incurring of those particular expenses, which it currently does not do. Having regard to the disproportion between the amount claimed (at its highest around $10,000) for this component of the claim and the likely costs of that claim (unless had it been made in isolation would have been no more than a small money claim), and the time and expense that has seemingly been wasted in what can only be described as the pleading fiasco to date, I would not allow any further opportunity to Mr Brady to make good his pleading in that regard.
As to the proposed cross-claim by Crewmark for misleading or deceptive conduct and or for unconscionable conduct, I consider that the bulk, if not all, of the complaints made by Ms Cohen as to the difficulties or arguments in the pleading have force. The question is not whether a prima facie case is "established" or "visible" on the pleading (as Counsel for defendants/cross-claimants consistently asserted). This is not a strike-out application. The amended cross-claim was struck out by consent in September 2017. This is an application for leave to file a proposed further amended cross-claim. For such leave to be granted I need to be satisfied that the proposed pleading not only discloses an arguable cause of action but one that is properly pleaded and is not embarrassing. The one that is presently put in the proposed further amended cross-claim does not meet that threshold for the reasons discussed above. Nor does it even specify the relief that is sought (another pleading defect).
In particular, the allegations based on intention, knowledge and constructive knowledge fail to articulate the relevant facts, matters and circumstances on which they are based and, as to [33], conspicuously fail to specify what the knowledge it is said Ms Cohen had or ought to have had.
There are ambiguities as to the pleaded representations (whether they are promises or representations of present intention as to future matters). There are ambiguities as to what is meant by "without timely payment, or any payment at all". The pleading as to the facts, matters and circumstances supporting the allegations that Ms Cohen was a de facto director, a shadow director, or that she spoke as a representative of Modakboard (or with its actual or ostensible authority) is hopelessly deficient.
The unconscionable conduct allegation similarly suffers from the ambiguities and difficulties highlighted in Ms Cohen's submissions. True it is, that the pleading need not address each of the particular indicia in s 22 of the Australian Consumer Law. However, its failure to do so gives rise to legitimate questions as to what is the case being alleged against Ms Cohen. It was put in oral submissions as a case based on moral obloquy. If so, it needs to be properly pleaded so that it is clear to Ms Cohen what it is alleged constituted the departure or deviation from the path of moral rectitude in what she is alleged to have said and done.
The negligent misstatement pleading fails to meet the standards required for a pleading of such a claim - a clear articulation as to the alleged duty of care, scope of the alleged duty, what a reasonable person in the position of Ms Cohen would have done, and the like. There is little more than a formulaic incantation of risk of harm, for example. It involves the novel concept of "negligent indifference" and it has the obvious difficulties insofar as it is alleged that a shareholder of a company that owns shares in another company owes a duty of care to a director of that other company.
The defendants/cross-claimants argue that, but for exceptional circumstances, it is normal practice of the Courts to grant leave to re-plead subsequent to the strike out of part or all of a pleading. It is submitted that refusal of leave to file the proposed further amended cross-claim (or an amended version of it) would be "tantamount to stifling the Cross Claim proceeding in equivalence to a dismissal of the proceedings", without any consideration of the merits of the proposed cross-claim being agitated before the Court. It is submitted that the benchmark considerations of the condition of a pleading such that a proceeding warrants summary dismissal are substantially high and inapplicable in the instant case as the proposed cross claim "reveals the substantial causes of action" against the cross-defendants. (Reference is made to Kenneth A Pethers v Minister for Agriculture [2010] NSWSC 805 in this regard.)
The defendants/cross-claimants have nevertheless indicated various aspects of the pleading that they would now seek to amend, including: typographical errors; the deletion of Libbie as fourth-cross-defendant; amendments to the particulars of the damages claim in relation for the minimum annual consultancy fee claimed; and deletion of the claim for Additional External Consultancy Costs and Internal Consultancy Costs invoiced since 20 April 2015. Thus, even were I otherwise to have been of the view that the pleading could go forward at this stage it would require amendment.
I have misgivings as to the ability of the defendants/cross-claimants at this stage properly to address the pleading difficulties given that they have had a number of attempts and ample time to do so already and given that they were put on notice of the then perceived pleading deficiencies some three versions of the proposed further amended cross-claim ago (in September last year). The rhetoric with which Ms Cohen's pleading complaints were sought to be dismissed gives me little confidence in that regard.
However, in circumstances where the 'price' of any further opportunity to prepare an adequate pleading might be said to be the costs orders I propose to make for the payment forthwith of the costs already ordered and for the costs thrown away by the amendment (though recognising - as was made clear in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 that costs are not a panacea for all ills) and where refusal of a final opportunity would effectively foreclose the bulk of the proposed cross-claim, I propose to make directions to allow a final opportunity for Crewmark properly to plead its proposed cross-claims against Ms Cohen and Mr Jones for misleading or deceptive conduct and unconscionable conduct. I do not consider that any basis has been shown to indicate that a claim in negligent misstatement could be properly pleaded and I would not give any further opportunity in that regard; and, and as noted above, I will not permit Mr Brady a further attempt to plead a claim for personal loss where none has been able to be articulated. In saying that, I note that no reference has been made to particular expenses for which he might be able to claim a contractual entitlement to reimbursement and claims in relation to any unpaid internal or external costs (not invoiced by him) under the Second Consultancy Agreement would be for an amount wholly disproportionate to the costs that have been involved in the proceedings to date.

[34]

Ms Cohen's submissions

Ms Cohen relied on an affidavit sworn 22 February 2018 by her solicitor, Ms Dora Jabbour, in which Ms Jabbour estimates that, if leave were given to file (what was then the 8 November 2017 iteration of) the proposed amended cross-claim then the hearing is likely to take about 5 days and her fees, including Counsel's fees and disbursements will be in excess of $250,000, including fees incurred to date. The latest version of the cross-claim seems unlikely to cause a downward change in the estimated costs in this regard since it raises the same broad issues.
Ms Jabbour's estimate (based on her experience as a solicitor) as to the time likely to be taken for a contested hearing of the disputes is made having regard to the following: the defendants/cross-claimants have already served affidavits of four witnesses; there has been what she describes as substantial evidence already served by Mr Jones but since the cross-claim raises new issues, there would be further evidence from him; and she anticipates that there will be four witnesses in Ms Cohen's case. The defendants/cross claimants do not cavil with this time estimate.
Ms Jabbour deposes that Ms Cohen has to date drafted most of the documents in this matter but that she, Ms Jabbour, has been involved to some extent in the drafting, settling, filing and service of those documents and attending to correspondence. The estimated costs include costs referable to Ms Cohen's legal work to date ($35,000) as well as an estimate of Ms Cohen's costs in relation to the drafting of court documents to the date of the hearing ($10,000), attendances by Ms Cohen prior to the matter being listed for hearing ($5,000), estimated fees for Ms Cohen for preparation for the hearing ($20,000), and hearing fees for Ms Cohen ($20,000).
Including costs referable to Ms Cohen's time, the estimate of costs to the date of hearing (on a solicitor-client basis) is $270,352.50.
It is submitted that documents produced by the defendants/cross-claimants in answer to notices to produce served on 19 January 2018 establish that neither Mr Brady nor Crewmark will be able to pay the costs of Ms Cohen if she is ultimately successful in the proceedings. Those documents include Crewmark's financial statements for the year ended 30 June 2016 which show total current assets of $31,388 and total current liabilities of $114,704 (leaving a net asset position in the negative of $83,316). There is an operating deficit after income tax of $33,216. (The net asset position was also negative for the financial year ended 2015 and there was a similar operating deficit in that year.) Bank account statements for the company as at January 2018 show the company was is in overdraft ($19,926.76 DR) with no available credit. The documents produced also include a 30 November 2017 notification from the Australian Tax Office in relation to a tax debt of $52,337.82.
Documents produced by Mr Brady show a taxable income for the 2014/2015 tax year of $23,520; that he has a one-hundredth share in the home he owns with his partner, which is subject to a mortgage to the Bank of Queensland Ltd; a cheque account in debit as at March 2017 and a savings maximiser account with a very small credit balance as at December 2017 and a credit card account as at January 2018 with a closing balance at almost the credit limit.
It is submitted for Ms Cohen that the claim by Mr Brady for damages in the amount of $792,000 is incompetent and that the true plaintiff in that regard can only be Crewmark. In those circumstances, Ms Cohen submits that the claim by Mr Brady in his personal capacity is for only a modest sum, yet the nature and extent of the allegations will involve considerable forensic time and cost disproportionate to the value of his claim. It is submitted that the claim as formulated on behalf of both Mr Brady and Crewmark is demonstrably weak against Ms Cohen and has little prospect of success. Ms Cohen notes that she has to date incurred significant cost in relation to the defendants/cross claimants' attempts to plead their cross claim.

[35]

Position of the defendants/cross-claimants

As noted above, the defendants/cross-claimants resist the application for security for costs. They do not appear to cavil with the five day hearing estimate but their solicitor, Mr Tyndall, has apparently estimated the costs on a party/party basis of the hearing at closer to $50,000, including Counsel and solicitor fees.
The defendants/cross-claimants emphasise that the burden of proving that there is reason to believe that a corporation will be unable to pay the costs of a defendant if ordered to do so (for the purposes of r 42.21(1)(d) of the UCPR) lies on the applicant for security for costs (here, Ms Cohen). As to the jurisdiction under the Corporations Act, the defendants/cross-claimants emphasise that the word "credible" in s 1335(1) indicates a requirement that the material before the Court be sufficiently persuasive to permit a rational belief to be formed that, if ordered to do so, the corporation would be unable to pay the costs of that party upon disposal of the proceedings. (Ms Cohen does not contend otherwise. Nor does she suggest that proof on that issue deprives the Court of its discretion in relation to the order for security for costs.)
The defendants/cross-claimants maintain that Ms Cohen has not satisfied the burden of establishing the threshold issue in relation to Crewmark. They argue that there is no basis in the evidence for the stated concern of Ms Cohen that any order for costs will have no value as there will be no funds in either the name of the first or second cross claimant to allow the costs to be recouped.
The defendants/cross-claimants point to evidence of Mr Brady as to the "steady and pecunious" state of Crewmark, being: a sixteen year trading history; no court actions, payment defaults or insolvency notices in that time; and a credit score issued by Creditor Watch in the lowest possible range.
As to Mr Brady's position (and the evidence of a conversation in which it is said that Mr Brady said his home had been put into his name as to a one hundredth share and as to his wife's name as to a 99/100 share "in case I get into any financial difficulty with my businesses in the future"), the defendants/cross-claimants appear to accept that this points to an alleged impecuniosity of Mr Brady but say that no "divestment" has occurred, in that the property in question has always been owned by Mr Brady's wife and that the arrangement was made prior to him even working for Modakboard.
Counsel for the defendants/cross-claimants also argued that when the matter was before Rein J it was indicated that the application for security for costs would not be pressed. However, much water has flowed under the bridge since then and in any event there is nothing to suggest that any kind of estoppel flows from the forensic decision on that occasion not to press for security. I consider it not unreasonable for Ms Cohen now to have pressed for security for her ongoing costs, given their anticipated quantum and the financial position of the defendants/cross-claimants as it is revealed in the evidence.
It is submitted that, even if Crewmark "is deemed to be impecunious", an order for security for costs does not automatically flow. The defendants/cross-claimants maintain that the "default position" is against an order for security for costs, referring to what was said in Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57 by the High Court in rejecting the argument that impecuniosity of an appellant provides a prima facie justification for ordering security for costs, to be displaced only by some disqualifying conduct on the part of the respondent such as delay or because the respondent's actions brought about the impecuniosity. They argue that there is no predisposition to the granting of security for costs where a company is impecunious (citing MA Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97; 1 ACLC 404; Heller Factors Pty Ltd v John Arnold's Surf Shop Pty Ltd (in liq) (1979) 4 ACLR 492; Spiel v Commodity Brokers Australia Pty Ltd (in liq) (1983) 35 SASR 294; 8 ACLR 410; Plaza Print Pty Ltd v South British Insurance Co Ltd (1984) 54 ACTR 3; 68 FLR 340; National Bank of New Zealand Ltd v Donald Export Trading Ltd [1980] 1 NZLR 97).
If the threshold question is satisfied and the question of discretion arises, the defendant/cross-defendants say that security should be refused for a number of reasons.
First, they maintain that the cross-claim is effectively a defensive proceeding, noting that it has been said (in Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 at 627) that: … If they are "defensive" proceedings, either directly resisting proceedings already brought or seeking to "halt self-help procedures", it would seem that to require security would be oppressive, or at least would provide serious grounds for refusing to make an order.
In asserting that the cross-claim is defensive, the defendants/cross-claimants argue that there almost a total overlap in the subject matter (as opposed to the type of relief sought) of the respective proceedings when juxtaposed; that the statement of claim filed on 18 June 2015 pursues declaratory relief and ownership rights including possession in relation to property produced by and/or under the control of the cross-claimants, whilst the proposed cross-claim claims moneys owed in respect of damages relating to the performances of professional services to Modakboard, including producing and/or dealing with that property sought in the statement of claim.
Thus they say that the basis of the proposed further amended cross-claim revolves entirely around services provided in relation to the two service agreements (the Initial Consultancy Services Agreement and the Further Consultancy Services Agreement). It is submitted that this overlap in effect means that the cross-claimants were "forced to litigate". They argue that the cross-defendants are the "legal aggressors", adopting the language used in the Supreme Court of Victoria in Interwest Ltd v Tricontinental Corporation Ltd. They argue that "[t]he overlap itself is a consequence of the defensive posture of the Cross Claimants in the proceedings, notwithstanding the 2nd and 4th Cross Defendants are not a party to the primary proceeding, the reasons for which are the intensive crossover of control and interests between the Plaintiff and those Cross Defendant".
In that regard, the defendants/cross-claimants emphasise the positions occupied and role played by the respective cross-defendants (including that Ms Cohen, through her superannuation fund and personally, claims to have lent moneys to the company). The defendants/cross-claimants submit that the proposed cross-defendants have a financial interest and connection with the plaintiff in the primary proceedings; and that the control and interests of the proposed cross-defendants are such that it is a reasonable inference that the cross-defendants were the aggressors in the primary proceedings behind the plaintiff corporation.
As to Mr Brady, it is submitted that he, as owner, is not seeking to use the corporation as a "shield" and "indeed stands next to the corporation in the proceedings as the First Cross Claimant". (That ignores, however, that he is a claimant in his own right.)
Second, the defendants/cross-claimants submit that the failure of Modakboard "directed to some degree by the 2nd and 3rd Cross Defendants" to pay moneys owing under the agreements has deprived the cross-claimants of a substantial amount of money (noting the amount of the contractual damages that have been claimed). It is submitted that "[s]uch damages were exacerbated by the actions of the Cross Defendants as is stated in the proposed Cross Claim". (The assertion that the non-payment was "directed to some degree" is vague and is unpleaded.)
In particular, the defendants/cross-claimants say that the expenses relating to legal action stemming from the actions of the cross-claimants in the pursuit of relief, together with the defence of the original claim brought by Modakboard (shown in the 2016 financial reports of Crewmark as $61,691.73), are solely attributable to those proceedings and that those expenses have turned a company profit for Crewmark into a loss (which they say "is a directly commensurate loss" of Mr Brady - a submission that I have already addressed).
It is submitted that the contractual damages claimed represent a significant burden upon the financial position of both cross-claimants and that the actions of the cross-defendants are "directly attributable to the extant financial position of the Cross Claimants and the burden remains until resolution of the proceedings". Reference is made in that regard to O'Keefe v Seafresh Holdings Pty Ltd trading as Westmore Seafoods [2009] NSWSC 1090, where security was refused. It is submitted that the connection between the conduct of the cross-defendants and the cross-claimants is "directly attributable to the extreme diminution of the financial position of the Cross Claimants" (my emphasis).
Reference is made to the statement made by the Queensland Supreme Court in Contamination Control Laboratories Pty Ltd v Reyer [2010] QSC 1 that what must be shown is a real connection between the conduct and the impecuniosity which, in the exercise of the Court's discretion, would make it unjust to require security; and that it must be established that the applicant for security for costs has been guilty of some form of misconduct or unacceptable business dealings qua the respondent (there citing Melunu Pty Ltd v Claron Constructions Pty Ltd [2004] NSWSC 1064 at [31], which in turn cited Rolfe J in Dalma Formwork Pty Ltd v Concrete Constructions Group [1998] NSWSC 472).
The defendants/cross-claimants submit that in the present case the effect of the role played by the cross-defendants in the impecuniosity of both the defendants/cross-claimants is "real, palpable, demonstrable in evidence" and that the application for security ought to be dismissed on that basis.
The defendants/cross-claimants argue that there is "no separation" of Mr Brady, the sole director and shareholder of Crewmark, and Crewmark in the proceedings "either in terms of the direct financial support provided by one to the other, but in the direct connection and therefore liability to costs of Mr Brady as the First Cross Claimant". They argue that: … there can therefore be no likely inability of the corporate litigant to be unable to meet its obligations than that of Mr Brady himself, but further, the point is rendered moot in that Mr Brady does not "hide behind the skirt" of the corporate entity - the Cross Defendants [sic] position in that regard is already as secure as it could possibly be.
It is submitted that any attempt to impose "a large security for costs" as against Crewmark would be oppressive to Mr Brady as a natural person and his ability to seek justice; and would abrogate the fundamental principle that a person may seek to enforce his rights in Court.
Third, the defendants/cross-claimants submit that the amount estimated by the applicant is excessive. Pausing there, in circumstances where the legal expenses of the company in defending the proceedings to date and in pursuing the cross-claims are noted in the accounts at some $61,000 odd, the estimate of $50,000 by the defendants/cross-claimants' solicitor to the end of a five day hearing seems to me highly questionable.
In summary, the defendants/cross-claimants submit that their cross-claim clearly falls within the realm of a defensive proceeding; that the weight of authority indicates against the award of a security for costs against them as oppressive and counter to the realisation of justice for the parties. It is submitted that the cross-defendants' "interests and control of the Plaintiff in the primary proceedings appears obvious". It is submitted that there is a demonstrable effect which the direct actions of the cross-defendants have had upon the defendants/cross-claimants; and that the fact that the corporate cross-claimant is accompanied as a party in the cross-claim by the natural person, Mr Brady, beside it, renders moot the question of impecuniosity of the cross-claimant company.

[36]

Determination

The threshold question to be determined on the application for security to be provided by Crewmark is whether there is reason to believe that Crewmark will be unable to pay Ms Cohen's costs of defending the cross-claim if it were to be ordered to do so. That requires the formation of an opinion as to the financial position of Crewmark as it will be at the time of judgment and immediately thereafter.
It is not disputed that the onus is on Ms Cohen, as an applicant for security, to establish that there is reason to believe that Crewmark will be unable to pay the costs of the litigation if unsuccessful (see Cornelius v Global Medical Solutions Australia Pty Ltd; Farrag v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65 at [17], [56]-[59]; 98 ACSR 301).
The test as to whether there is reason for the requisite belief is not a demanding one (see Beach Petroleum NL v Johnson [1992] 7 ACSR 203; Meni's Tailoring & Alterations v Jeanswest Corporation Pty Ltd [2003] FCA 1108; HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 87) and it has been said that there is a low threshold (Living Spring Pty Ltd v Kliger Partners (2008) 20 VR 377; [2008] VSCA 93 at [15]-[16]) and Cornelius v Global Medical at [57]-[60]; In the Matter of Felan's Fisheries Pty Limited [2016] NSWSC 1351 at [10]). It has also been said that the Court should adopt a "practical commonsense approach" to the examination of the financial affairs of the corporation (Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 at [28]).
I am satisfied that there has been credible evidence put forward by Ms Cohen that provides more than sufficient reason to believe that Crewmark will be unable to meet an order for costs if such a judgment were to be made at the end of a contested hearing and hence that the threshold issue is satisfied. (I note that the submissions made to the effect that security would stifle the cross claim proceeding is telling support for such a conclusion.)
Once the threshold question is satisfied, the next issue to be considered is whether, in the exercise of the Court's discretion, security should be granted and in that regard it has been said that there is an evidentiary onus on the part of the party from whom security is sought to establish a reason why security should not be granted (see Wollongong City Council (at [30]) and Cornelius v Global Medical (at [18]-[20])).
In Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, McHugh J said at 97 that: [T]he jurisdiction to award security for costs should thus be seen as protecting the efficacy of the exercise of the jurisdiction to award costs. The discretion should be exercised with the same rationales in mind, namely that, to the extent it can be avoided, the court should not permit a situation to arise where a party's success is pyrrhic.
At [52] in Idoport Pty Limited v National Australia Bank Limited; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [2001] NSWSC 744), Einstein J said: The purpose of a security for costs order is therefore a protective jurisdiction to ensure that the primary purposes for having costs orders themselves, can be achieved. A defendant is protected against the risk that a costs order obtained at the end of the day may turn out to be of no value by reason of the impecuniosity of the plaintiff. The jurisdiction therefore assists both the compensation purpose as well as the public interest objective.
A number of discretionary considerations have been identified as relevant in this context by Beazley J (as her Honour then was) in KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] 56 FCR 189 (at 196-198)). They include: the strength of the case; whether the relevant party's impecuniosity is attributable to the applicant for security; whether the application for security is oppressive; whether there is any person behind the company to benefit from the litigation; and whether, where security is sought against a cross-claimant, the cross-claimant is in substance a plaintiff. Those matters are now largely reflected in amendments to r 42.21 of the UCPR which came into effect on 9 August 2013.
Of the non-exhaustive considerations set out in r 42.21(1A) of the UCPR, the first is the prospects of success and genuineness of the proceedings (r 42.21(1A)(a)-(b)). Although much criticism has been made as to the pleaded claim, I would accept (assuming the pleading defects can be remedied), that this case falls within the general rule, namely that where a claim is prima facie regular on its face and discloses a cause of action then, in the absence of evidence to the contrary, the Court should proceed on the basis that the claim is bona fide and has reasonable prospects of success (KP Cable at [197]). While I consider that there may well be difficulties in establishing the misleading or deceptive conduct and unconscionable conduct claims based solely on the face of the representations alleged to have been made by Ms Cohen, I cannot conclude that such a claim is untenable.
As to impecuniosity (r 42.21(1A)(c)), this not only enlivens the Court's discretion under s 1335(1) of the Corporations Act but it has also been recognised as a substantial factor favouring the exercise of the discretion to order security (see Idoport Pty Ltd v National Australia Bank Limited [2002] NSWCA 271 at [40] (Mason P); Tyneside Property Management Pty Limited v Hammersmith Management Pty Ltd [2013] NSWCA 404 at [18] (Sackville AJA)).
In the Idoport proceedings, Einstein J noted that the possibility of stultification of proceedings is a powerful factor to be taken into account in exercising its discretion as to whether an order is appropriate (citing KP Cable and also Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542). However, his Honour also noted the observation of Clarke J (as his Honour then was) in Yandil that the fact that a plaintiff is financially unable to provide security does not lead to the inevitable conclusion that the making of the order will stultify the plaintiff's claim nor does it lead to the automatic refusal of an order (referring also to cases where the financial position of those standing behind the plaintiff was taken into account).
Although it is here submitted that the company's impecuniosity is attributable to the failure to pay the consultancy fees, and I am prepared to accept Mr Brady's evidence to the effect that the company otherwise has had a positive finding history and credit rating, it is impossible at this stage to sheet home responsibility for its current financial position to the fault of Ms Cohen.
As to whether Crewmark, as cross-claimant, is effectively in the position of a defendant (r 42.21(1A)(e)), as it strongly maintains, it is relevant to note that in Interwest v Tricontinental (at 627) Ormiston J noted that proceedings have been characterised as defensive where they are either directly resisting proceedings already brought or seeking to halt self-help procedures, observing that in those circumstances: It would seem that to require security would be oppressive, or at least would provide serious grounds for refusing to make an order. At the least it is a factor to be considered in the exercise of the discretion. In particular, it is a basis for adducing the amount of security ordered to a sum relating to the cost of those claims which cannot be characterised as defensive.
Examples of what may be characterised as defensive proceedings to halt self-help procedures may be seen in KP Cable at [199]-[202]); John Arnold's Surf Shop (in liq) v Heller Factors Pty Ltd [1979] 22 SASR 20; (1979) 4 ACLR 492 and Interwest. In Sydmar Pty Ltd v Statewise Developments Pty Ltd [1987] 11 ACLR 616 (at 626-627), Smart J said that the Court would be slow to allow a situation where the action is stayed because of the inability to provide security but the cross claim covering substantially the same factual areas proceeds.
Here, there is obviously an overlap in the subject matter of the proceedings, but it is to be noted that Modakboard is not now actively pursuing any relief in the proceedings. The cross-claim against Modakboard could have been brought absent any earlier dispute as to the website/domain name ownership issues. Moreover the claim against Ms Cohen is quite separate from any dispute as to ownership of the website/domain name/email communication.
In Sydmar (at 302), Smart J considered that the defendant/cross-claimant was, in the words of Legoe J in John Arnolds Surf, "one seeking to go out for the recovery from the opposition by attack". I consider that description applies here. This is a factor which must be balanced against all the others, but in my opinion it weighs in favour of the grant of security.
There was no submission that there had been delay on the part of Ms Cohen in making her application for security for costs (the factor referred to in r 42 (1A)(i)). Nor do the factors in r 42.21(1A)(g)-(h) appear to be applicable.
As to the factor raised in r 42.21(1A)(j), namely as to the costs of the cross-claim, where a party is likely to incur significant legal costs in defending the claim, and will be unprotected if no order for security is made, this is a consideration for the making of an order for security (see Porter v Gordian Runoff Limited [2004] NSWCA 171 at [13]-[32]). In the circumstances, (leaving aside the question of Ms Cohen's own legal fees) there is no reason not to accept Ms Jabbour's estimate that significant costs are likely to be involved in defending the cross claim as being a genuine one. On its face it appears not unreasonable. There is every likelihood, therefore, that significant costs will be incurred in defending the cross-claim and a real risk that they will be irrecoverable.
Balancing the above factors, I am of the view that the discretionary matters favour an order for security for costs being made against Crewmark in this case. The submission that such an order will be sheeted home in some fashion to Mr Brady was not supported by any evidence.
As to the position of Mr Brady, this is somewhat different. Security for costs orders sought against an impecunious plaintiff (and, as cross-claimant he is nevertheless in my opinion here proceeding, in effect, as a plaintiff) are generally more difficult to obtain due to the potential that orders will stifle the proceedings. However, the disproportion between this claim and the cost of his cross-claim is also a factor to take into account in that respect and there is nothing other than Mr Brady's assertion from which to conclude that such an order would stifle his cross-claim. However, in circumstances where I am not proposing to allow a further opportunity for Mr Brady to prepare a further proposed amended cross-claim, that issue does not arise.

[37]

Quantum

As to the quantum (and manner of provision) of security, there are a number of issues that arise.
First, the claimed amount includes not only future but also past costs (in the order of $63,600). There is power to aware security for costs already incurred (if the application is made promptly) (Brocklebank & Co v The King's Lynn Steamship Co (1878) 3 CPD 365; Massey v Allen (1879) 12 Ch D 807; JWH Turner & Co Ltd v O'Riordan (1923) 40 WN (NSW) 64; Harvey v Jacob (1817) 106 ER 59; Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497). Relevant matters to be taken into account in that regard can include the nature of the acts done during the intervening period between commencement of the proceedings and when security is sought (Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114).
In this regard, the promptness with which a party acts to seek security is relevant in that it has been said that a plaintiff is entitled to know its position in relation to the security before it embarks to any real extent to its litigation and before it is allowed to commit substantial sums of money towards litigating its claim (see Buckley v Bennell Design & Construction Pty Ltd per Moffitt P; Bryan E Fencott per French J, as his Honour then was).
Here, there was no significant delay in the seeking of security for costs. The fact that the application was not pressed (and hence not dealt with) in September 2017 is not in my view determinative against the award of security (since the defendants/cross-claimants have been on notice for some time of the concern of Ms Cohen as to the costs position). The amount claimed for costs already incurred as at the date the motion for security for costs was filed is not able to be determined but on the material before me it seems unlikely to have amounted to a significant proportion of the total amount sought (particularly as it includes an amount for Ms Cohen's own fees, which I am not proposing to include in the order for security). I would therefore have been inclined to allow some amount for the past costs. However, I do not propose to do so in circumstances where at least a portion of the past costs will now (presumably) be covered by the costs orders made to date and which I will make on the current application.
Second, the amount claimed includes an amount for Ms Cohen's time. The issue whether a self-represented litigant who is a solicitor (or by extension a barrister) can recover professional costs when acting for himself or herself in proceedings (the so-called Chorley exception) (see London Scottish Benefit Society v Chorley (1884) 13 QBD 872; and see Guss v Veenhuizen (No 2) (1976) 136 CLR 47; [1976] HCA 57) is the subject of an appeal pending before the High Court on the issue of the costs assessor's jurisdiction (being the appeal from the decision in Coshott v Spencer [2017] NSWCA 118). Although there may well be points of distinction between the fact situation in that case, I am not at this stage prepared to order the provision of security by reference to Ms Cohen's own fees.
Third, as to the amount if security, Ms Jabbour has given an indication of the breakdown of the estimated costs. While she has not done so on a party/party basis, it has been recognised that the Court may fix the amount of security based on a general estimate (Allstate Life Insurance v ANZ Banking Group Limited (1995) 134 ALR 187; [1995] FCA 1778). I am satisfied in the present case that adopting a discount of, say, 20% from the solicitor/client costs (as Senior Counsel for Ms Cohen suggested) would not be inappropriate in this regard.
During the hearing I raised the question whether security should be ordered at this stage to the conclusion of the hearing. Senior Counsel for Ms Cohen did not seek to dissuade me from such a course. I am of the view that security should be awarded in tranches, bearing in mind that, as with many matters, this case might not ultimately proceed to a contested hearing. At this stage I propose to order security for the future costs of the proceedings from the date of service of any further proposed amended statement of cross-claim to the close of evidence.

[38]

(iii) Forthwith costs order

Finally, as to the third application, I have already noted that Modakboard and Mr Jones now join in that application and seek an order for their costs incurred from the filing of the amended cross claim on 22 September 2016 (to which they filed a defence) to the date of the hearing before Rein J on 8 September 2017, as costs thrown away by reason of the defendants/cross-claimants' application for leave to file the proposed further amended cross-claim. They argue that even if the defendants/cross-claimants were successful in obtaining the relief sought in their amended notice of motion, the first and third cross defendants would not have incurred the costs so far incurred in relation to the cross claim had the defendants/cross-claimants filed on 24 August 2015 the cross-claim upon which they now wish to rely.
In Fiduciary Limited v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 at [10-[13] Barrett J, as his Honour then was, considered the circumstances in which it was appropriate to make an order for costs to be payable forthwith: namely where the application or aspect in respect of which the particular costs order is made, though before conclusion of the proceedings, represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect; where there is some unreasonable conduct on the part of the party against whom costs have been ordered; and where "there is much to come in the proceedings" and "one can see a fairly long time before the proceedings are disposed of" - in other words where the final determination of the proceedings is far away.
In my opinion, given the delay in the defendants/cross-claimants producing an acceptably pleaded further amended cross claim and the likely delay in the matter proceeding to a final hearing, the costs ordered to date should be payable forthwith.
It was suggested by Senior Counsel for Ms Cohen that leave to proceed further might be conditional on payment of the costs ordered. In Maylord v Nauer Maylord Equity Management Pty Ltd as trustee of the Batterham Retirement Fund v Nauer [2017] NSWSC 634, I had cause to consider orders of that kind made previously by Bergin CJ in Eq, namely for the plaintiff to pay certain costs of the proceedings and staying the proceedings until satisfaction of the costs orders made in the proceedings to date. A similar order was sought here by Ms Cohen. There would be merit in such an order in the present case, having regard to the conduct of the proceedings to date and the misgivings I have as to the likelihood of a properly pleaded claim emanating (even after what have been referred to by Senior Counsel for Ms Cohen as two very expensive "advices on pleading" to date). However, in the Maylord case the costs had been fixed. Here, such an order would potentially place the proceedings further into limbo if the defendants/cross-claimants were to invoke the costs assessment process and in the circumstances I do not propose to make such an order.

[39]

Orders

For the above reasons, I make the following orders: 1. Refuse leave for the filing of the proposed further amended cross-claim in the form annexed to the affidavit of Matthew Howard Brady sworn 5 March 2018 and dismiss with costs the defendants/cross-claimants' amended notice of motion filed 17 January 2018. 2. Give leave for the second cross-claimant (Crewmark Pty Ltd) to serve any further proposed further amended cross-claim (addressing the deficiencies identified in these reasons) on the first cross-defendant (Modakboard Australia Pty Ltd) and the proposed second and third cross-defendants (Ms Cohen and Mr Jones) within 21 days of compliance with order [4] below, such further proposed further amended cross-claim against the proposed second and third cross-defendants to be limited to the second cross-claimant's cross-claims against them in relation to alleged misleading or deceptive or unconscionable conduct (or accessorial liability therefor) but not to include any claim for negligent misstatement. For the avoidance of doubt, I refuse leave for the first cross-claimant (Mr Brady) to serve any further proposed amended cross-claim. 3. If there is objection to the filing of any such further proposed further amended cross-claim on the basis that it does not adequately address the pleading deficiencies identified in these reasons or otherwise, give liberty to the parties to relist the matter before me on 3 days' notice to determine whether leave should be granted to file that further proposed further amended cross-claim. 4. Pursuant to rule 42.21(1) of the Uniform Civil Procedure Rules 2005 (NSW) and s 1335(1) of the Corporations Act 2001 (Cth), order that the second cross-claimant (Crewmark Pty Ltd) provide security within 28 days for the second cross-defendant's (Ms Cohen's) costs of and incidental to the cross-claim from the date of service of any pleading in accordance with order 2 above up to but not including the final hearing of this matter, in the amount of $50,000 (that being calculated at 80% of $60,940 - namely $42,658.00 - rounded up to $50,000), such security to be provided by way of an unconditional bank guarantee in a form acceptable to the proposed second cross-defendant (Ms Cohen). 5. In the event that the security ordered in order 4 above is not provided within the time specified, order that the proceedings on the cross-claim against the proposed second cross-defendant (Ms Cohen) be stayed until further order. 6. Grant the proposed second cross-defendant (Ms Cohen) liberty to apply on 3 days' notice for further security to be provided for the period from the commencement of the hearing or to increase the amount of security ordered in order 4 if that amount proves insufficient or in the event that there is disagreement as to the acceptability of the unconditional bank guarantee provided pursuant to order 4. 7. Order that the second cross-claimant (Crewmark Pty Ltd) pay the proposed second cross defendant's (Ms Cohen's) costs of the motion for security for costs. 8. Order that the defendants/cross-claimants pay the costs of the first cross-defendant (Modakboard Australia Pty Ltd) and the proposed third cross-defendant (Mr Jones) thrown away by the proposed amendment of the initial cross-claim, including the costs of the motion ordered in order 1. 9. Order that the defendants/cross-claimants pay the proposed fourth cross-defendant's (Libbie Pty Ltd's) costs of the proceedings (other than to the extent that these costs have already been made the subject of costs orders). 10. Order that the costs awarded at [1], [8] and [9], as well as the costs ordered by Rein J on 8 September 2017 in favour of the proposed second and fourth cross-defendants (Ms Cohen and Libbie Pty Ltd) be assessable and payable forthwith.

Parties

Applicant/Plaintiff:

Modakboard Australia Pty Ltd

Respondent/Defendant:

Matthew Howard Brady

Legislation Cited (6)

Trade Practices Act 1974(Cth)

Uniform Civil Procedure Rules 2005(NSW)

Corporations Act 2001(Cth)

Civil Liability Act 2002(NSW)

Civil Procedure Act 2005(NSW)ss 3, 64

Competition and Consumer Act 2010(Cth)

Cases Cited (80)

COSTS - Security for costs - application for costs to be payable forthwith Legislation Cited: Civil Liability Act 2002 (NSW), s 5B Civil Procedure Act 2005 (NSW) ss 3, 64 Competition and Consumer Act 2010 (Cth), ss ; 18; s 21(2) of Schedule 2 Corporations Act 2001 (Cth), ss 9, 1335(1) Trade Practices Act 1974 (Cth), ss 51A, 52 Uniform Civil Procedure Rules 2005 (NSW), rr 13.4; 14.28; 19.1, 42.21(d) Cases Cited: ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820 Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76; 348 ALR 1 Adelaide Petroleum NL v Poseidon Ltd (1988) ATPR 40-901 Allstate Life Insurance v ANZ Banking Group Limited (1995) 134 ALR 187; [1995] FCA 1778 Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557; [2005] NSWCA 261 Australian Commercial Research and Development Ltd v Commonwealth of Australia [1995] 2 Qd R 336 Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 1472 Beach Petroleum NL v Johnson [1992] 7 ACSR 203 Bennett v Elysium Noosa Pty Ltd (in liq) [2012] FCA 211; 291 ALR 191 Bhagat v Murphy [2000] NSWSC 892 Brocklebank & Co v The King's Lynn Steamship Co (1878) 3 CPD 365 Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 Chameleon Mining NL v Murchison Metals Limited [2010] FCA 1129 Collier v Country Women's Association of New South Wales [2016] NSWSC 1361 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 Contamination Control Laboratories Pty Ltd v Reyer [2010] QSC 1 Cornelius v Global Medical Solutions Australia Pty Ltd; Farrag v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65; 98 ACSR 301 Coshott v Spencer [2017] NSWCA 118 Dalma Formwork Pty Ltd v Concrete Constructions Group [1998] NSWSC 472 Donoghue v Stevenson [1932] AC 562 Empire Shipping Co Inc v Owners of the Ship Shin Kobe Maru (1991) 32 FCR 78; 104 ALR 489 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 Fernandez v Glev Pty Ltd [2000] FCA 1859 Fiduciary Limited v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 Fubilan Catering Services Limited v Compass Group (Australia) Pty Ltd [2007] FCA 1205 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 Giorgianni v The Queen (1985) 156 CLR 473 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 Grant v Hall [2012] NSWSC 779 Guss v Veenhuizen (No 2) (1976) 136 CLR 47; [1976] HCA 57 Harvey v Jacob (1817) 106 ER 59 Heller Factors Pty Ltd v John Arnold's Surf Shop Pty Ltd (in liq) (1979) 4 ACLR 492 Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59 HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 87 Idoport Pty Limited v National Australia Bank Limited; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [2001] NSWSC 744 Idoport Pty Ltd v National Australia Bank Limited [2002] NSWCA 271 In the Matter of Felan's Fisheries Pty Limited [2016] NSWSC 1351 In the matter of Idylic Solutions Pty Ltd - Australian Securities and Investments Commission v Hobbs [2012] NSWSC 1276 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 John Arnold's Surf Shop (in liq) v Heller Factors Pty Ltd [1979] 22 SASR 20; (1979) 4 ACLR 4 Johnston v Australia & New Zealand Banking Group Ltd [2006] NSWCA 218 JWH Turner & Co Ltd v O'Riordan (1923) 40 WN (NSW) 64 Kenneth A Pethers v Minister for Agriculture [2010] NSWSC 805 KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] 56 FCR 189 Living Spring Pty Ltd v Kliger Partners (2008) 20 VR 377; [2008] VSCA 93 London Scottish Benefit Society v Chorley (1884) 13 QBD 872 Lynx Engineering Consultants Pty Ltd v The ANI Corporation Limited trading as ANI Bradken Rail Transportation Group (No 2) [2009] FCA 363 MA Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97; 1 ACLC 404 Massey v Allen (1879) 12 Ch D 807 Maylord v Nauer Maylord Equity Management Pty Ltd as trustee of the Batterham Retirement Fund v Nauer [2017] NSWSC 634 Melunu Pty Ltd v Claron Constructions Pty Ltd [2004] NSWSC 1064 Meni's Tailoring & Alterations v Jeanswest Corporation Pty Ltd [2003] FCA 1108 Millhouse IAG Pty Ltd v Environautics Pty Ltd [2000] QDC 196 Mutual Life and Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556; [1968] HCA 74 Nadinic v Drinkwater [2017] NSWCA 114 National Bank of New Zealand Ltd v Donald Export Trading Ltd [1980] 1 NZLR 97 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2007] FCA 1587 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60 Northam v Favelle Favco Holdings Pty Ltd (Supreme Court (NSW), Bryson J, 7 March 1995, unrep) O'Keefe v Seafresh Holdings Pty Ltd trading as Westmore Seafoods [2009] NSWSC 1090 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR199; [2015] FCAFC 50 Plaza Print Pty Ltd v South British Insurance Co Ltd (1984) 54 ACTR 3; 68 FLR 340 Porter v Gordian Runoff Limited [2004] NSWCA 171 Presser v Caldwell Estates Pty Ltd [1971] 2 NSWLR 471 Smith v Australian Executor Trustees Limited [2017] NSWSC 1406 Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 Spiel v Commodity Brokers Australia Pty Ltd (in liq) (1983) 35 SASR 294; 8 ACLR 410 Sullivan v Moody (2001) 207 CLR 562; [2001] HCA 49 Sydmar Pty Ltd v Statewise Developments Pty Ltd [1987] 11 ACLR 616 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 Tyneside Property Management Pty Limited v Hammersmith Management Pty Ltd [2013] NSWCA 404 Watiwat v Dixon [2017] NSWSC 360 Watson v Foxman (1995) 49 NSWLR 315 Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57 Winnote Pty Ltd (in liq) v Page (2005) 64 NSWLR 244; [2005] NSWCA 362 Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 Texts Cited: R Miller, Miller's Australian Competition and Consumer Law Annotated (Thomson Reuters) Category: Procedural and other rulings Parties: Modakboard Australia Pty Ltd (Plaintiff/1st Cross Defendant) Matthew Howard Brady (1st Defendant/1st Cross Claimant) Crewmark Pty Ltd (2nd Defendant/2nd Cross Claimant) Elizabeth Cohen (2nd Cross Defendant) Peter William Jones (3rd Cross Defendant) Libbie Pty Ltd (4th Cross Defendant) Representation: Counsel: W Robinson (Solicitor) (Plaintiff/1st and 3rd Cross Defendants) J Manner (1st and 2nd Cross Claimants) D Feller SC (2nd and 4th Defendants)

[1995] FCA 1778

[2010] QSC 1

[1998] NSWSC 472

[2008] VSCA 93

[2000] QDC 196

(2014) 224 FCR 1

(1995) 134 ALR 187

(2009) 239 CLR 175

(2005) 63 NSWLR 557

(1987) 16 FCR 497

(1983) 151 CLR 447

(1998) 157 ALR 1