(2000) 201 CLR 552
- Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11
(1990) 169 CLR 279
- Bowden v Weldon [2014] NSWSC 109
- General Steel Industries Inc v Commissioner for Railways [1964] HCA 69
Source
Original judgment source is linked above.
Catchwords
(2000) 201 CLR 552
- Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11(1990) 169 CLR 279
- Bowden v Weldon [2014] NSWSC 109
- General Steel Industries Inc v Commissioner for Railways [1964] HCA 69
Judgment (3 paragraphs)
[1]
Solicitors:
Russo & Partners (Plaintiffs)
Barraket Stanton Lawyers (First and Second Defendants)
McGirr Lawyers (Third and Fourth Defendants)
File Number(s): 2013/205000
[2]
Judgment - EX TEMPORE
By notice of motion filed on 22 June 2015, the Third and Fourth Defendants seek an order disallowing an amendment made by the Plaintiffs in their Amended Statement of Claim filed on 15 June 2015. The Court has power to disallow an amendment to a pleading under Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 19.4, to which Mr Ireland, who appears for the Third and Fourth Defendants, refers. That rule provides that, if on the hearing of an application to disallow a pleading, the Court is satisfied that it would not have granted leave to make the whole or some part of the amendment, the Court must disallow the amendment or that part, as the case may be. The language of that rule is potentially significant for this application so far as it provides for mandatory disallowance of the amendment, if leave to make it in a particular form would not have been granted.
So far as the fundamental basis of attack on the amendments is concerned, Mr Ireland refers to r 13.4 and r 14.28 of the UCPR. Rule 13.4 of the UCPR deals with the position where no reasonable cause of action is disclosed, and permits a claim in proceedings to be dismissed on that basis. In this particular application, the only claim that is in issue, that includes the Third and Fourth Defendants, is the claim pleaded in paragraph 25 of the Amended Statement of Claim. The case law establishes that the power to dismiss a claim under r 13.4 can only be exercised in a plain or obvious case. In Shalhoub Holdings Pty Ltd v Commonwealth Bank of Australia [2006] NSWSC 607, after a comprehensive review of the case law, Rothman J observed that the Court may strike out a claim where it depends upon facts that cannot be proven, but that the Court can only take that course "in exceptional circumstances and only where it came to the view that to proceed further would be futile".
UCPR r 14.28 in turn permits the Court to order that the whole or part of a pleading be struck out if it discloses, relevantly, no reasonable cause of action or has a tendency to cause prejudice, embarrassment or delay in the proceedings or is otherwise an abuse of process. The test for such an order is that recognised in, inter alia, General Steel Industries Inc v Commissioner For Railways [1964] HCA 69; (1964) 112 CLR 125 and Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552, which point to the importance of allowing a party, in the ordinary course, the opportunity to place his or her case before the Court in the ordinary way. In exercising its powers under UCPR r 14.28, the Court must also give effect to the overriding purpose stated in s 56(1) of the Civil Procedure Act 2005 (Cth), namely to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. At the same time, the Court may strike out a pleading that is either unintelligible, ambiguous or is vague or general, such that it would embarrass the other party so that he or she does not know the case that is alleged against him: McGuirk v University of New South Wales [2009] NSWSC 1424. That proposition reflects the fundamental purpose of pleadings, in allowing the other party to know the case that he or she has to meet, which is in turn an important aspect of the requirement of procedural fairness: Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 286, 296, 302-303.
In the present case, there are essentially three bases for the Third and Fourth Defendants' application, namely that the factual basis of the claim pleaded in paragraph 25 of the Amended Statement of Claim cannot be established on the evidence; an attack on the form of pleading of that claim; and a claim that the paragraph does not sufficiently plead the elements necessary to exclude indefeasibility on the part of the Third and Fourth Defendants under s 42 of the Real Property Act 1900 (NSW).
The Third and Fourth Defendants rely, in support of the application, on an affidavit of their solicitor, Mr McGirr, dated 18 May 2015, of which paragraphs 31-37 were read. That affidavit demonstrates that the Third and Fourth Defendants had purchased a property known as 20 Halls Road, Arcadia in September 2009 for a consideration of $1,750,000, and the contract for that purchase is in turn in evidence. That proposition indicates a first difficulty with the Amended Statement of Claim, where there is reference in both paragraph 8 of the relief sought and in paragraph 18 of the pleading to the purchase of a property known as 16 Halls Road, Arcadia, which in turn has the folio identifier which is in fact referable to 20 Halls Road, Arcadia. I understand that to be the property that is referred to in paragraph 25 of the Amended Statement of Claim, and Mr Eardley has accepted, in the course of submissions, that the reference to 16 Halls Road in the pleading should refer to 20 Halls Road.
Second, the Third and Fourth Defendants rely on the affidavit of Mr McGirr dated 22 June 2015, which records information provided to him by Mr George Takchi, a director of the Third Defendant, that there was no glasshouse on the property and no business being conducted on the property at 20 Halls Road when they purchased the property. There seems to be some support in that proposition in the terms of the contract, which refer to a residential property, rather than to a sale and purchase of a business. An affidavit of Mr Tony Takchi, a director of the Fourth Defendant, dated 3 July 2014 was in turn read in reply, and he also confirms that there was no nursery business on the property when he and his brother, or their associated companies, purchased it, although he acknowledges that Mr Eddie Takchi had run a nursery business on an adjacent property at 16 and 18 Halls Road, Arcadia.
On the other hand, the Plaintiffs rely on the affidavit of Mr Moussa dated 6 July 2015, which refers to a property located at 16-20 Halls Road, Arcadia, or to properties located at those addresses, which are in turn defined as the "Halls Road properties", and identifies the fact that a nursery business was run from those properties. Mr Ireland points out, and I accept, that this affidavit is fundamentally ambiguous. It does not, in terms, assert that a nursery business was conducted at 20 Halls Road, Arcadia, and is consistent with, at least potentially, the evidence of Messrs Takchi that a nursery business was conducted at the adjacent property. This is a matter of considerable significance, and neither Mr Moussa nor his legal advisers should fail to recognise that. It would be a very significant imposition on Messrs Takchi to put them through a three-day hearing, if Mr Moussa is not prepared to give clear and unequivocal evidence that the relevant business was in fact conducted on 20 Halls Road. That matter would seem to me to verge on the irresponsible, or the improper, if it took place. I should emphasise, strongly, that it is a matter for Mr Moussa, and indeed his legal advisers, to determine whether he does in fact contend that a nursery business was conducted on 20 Halls Road, Arcadia, because if he does not, the fundamental premise of the allegations which he puts in this case is seriously in question.
I now turn to the matters which are relied upon to seek to disallow the relevant pleading. The first is, on Mr Ireland's submissions, that the evidence cannot support the proposition that a nursery business was conducted on 20 Halls Road, Arcadia. That proposition is, as I have noted, critical to the Plaintiffs' case, so far as the substance of that case is, it appears, that consideration was paid for the residential property at 20 Halls Road, but not for the nursery business conducted on that property. I accept that, on the evidence as it stands, the balance of the evidence might suggest that a nursery business was not conducted on 20 Halls Road, so far as Messrs Takchi lead evidence in plain terms of that position, and Mr Moussa leads evidence only in ambiguous terms which may or may not be to the contrary of that proposition. However, the Courts have repeatedly emphasised the need not to determine issues of fact, in an application of this kind, where they are contested matters of fact at a hearing. It may be that Mr Moussa will be prepared to give clear evidence as to this proposition, as to where the business was conducted, or that Messrs Takchi will concede, on cross-examination, that the business was conducted in that way. It seems to me preferable not to reach a view, based on affidavit evidence that has been untested by cross-examination, at this point.
Given the findings that I reach in respect of the pleadings, and the view which I propose to take in respect of the pleadings, it is ultimately not necessary to take a view as to this matter, because the course which I will adopt in respect of the pleadings will have the result that Mr Moussa will need to commit, or alternatively not commit, to the proposition that he seeks to advance as to what business was conducted on 20 Halls Road in a clear way.
Next, the Third and Fourth Defendants criticise, for good reason, the pleading of paragraph 25 of the Amended Statement of Claim. That paragraph had once previously been struck out by Brereton J, when it was formulated as a merely conclusory allegation of a contravention of s 37A of the Conveyancing Act 1919 (NSW). The amended pleading is somewhat more fulsome, but has several difficulties, ranging from misprints to more significant issues. The first difficulty, which I accept could readily be corrected, is that it does not refer to s 37A of the Conveyancing Act, but to s 39 of the Conveyancing Act, which is not relevant. The second difficulty, which seems to me to be more fundamental, is that the pleading does not clearly identify which property the allegation is said to be made about, and that is a deficiency of substance, given the factual issues as to which property the relevant business was conducted on. If Mr Moussa seeks to contend that a nursery business was conducted on number 20 Halls Road, Arcadia, then it seems to me that the least he could do is plainly plead that proposition, and verify it, in his affidavit verifying the Statement of Claim.
Next, there are difficulties with the introductory sentences of the paragraph, which are unclear as to who is said to have had what intention so as to seek to establish the elements of a claim under s 37A of the Conveyancing Act, appearing to focus on the intention of the Third and Fourth Defendants through their directors, rather than the intention of the late Eddie Takchi. At the least, the linguistic difficulties of the paragraph are such that the case which it seeks to plead does not clearly emerge, so that the case which the Third and Fourth Defendants have to meet is not apparent from it.
Next, the paragraph contains seven particulars, which are in fact pleadings of material fact, inserted in the particulars to the paragraphs. The Courts are less strict, than they have historically been, in requiring that material facts be pleaded, rather than particularised, particularly in complex cases. However, in the present case, it seems to me important that the material facts be pleaded, so that it is clear that Mr Moussa has in fact verified them, not least because of the ambiguity in his position as to whether a nursery was conducted on 20 Halls Road, and the need for him to clearly commit himself to that proposition, if it is advanced. There are also other difficulties in those particulars, of a more technical character. Particular (c), for example, is that the Third and Fourth Defendants knew that the property was comprised of a home and nursery business, without clearly identifying which property is referred to, and indeed without alleging the fact of which they are alleged to have had knowledge, as distinct from their knowledge of it. Particular (d) is that the Third and Fourth Defendants were aware that the consideration paid for the home was significantly less than the market value of the consideration for the land and the nursery business, again without clearly pleading the factual basis of the matters of which they are alleged to have had knowledge. In particular, it is implicit, but not pleaded, that it is said that, first, a nursery business was in fact conducted on 20 Halls Road, and second, that it had a market value, which was not paid. The form of that particular presently leaves ambiguous whether it is contended that the consideration was not paid at all, although Mr Eardley has confirmed, in the course of submissions, that the case is focused upon the failure to pay the market value for the nursery business, or attributable to the other activities conducted on the land, rather than a suggestion that the amount specified in the contract for purchase of the residential property was not paid. Paragraph (e) is directed to the intentions of the Third and Fourth Defendants, and is unclear whether the relevant allegation to defeat the creditors is in fact made against them, rather than Mr Takchi, in circumstances that a claim under s 37A of the Conveyancing Act must at least originate with Mr Takchi's intention.
For all of these reasons, it seems to me that the present paragraph does not adequately plead either the material facts which support the allegation, or the legal consequences which are said to follow from it, in respect of the intention that is alleged as against Mr Takchi, and the relevance, if any, of any intention of the Third and Fourth Defendants in that respect. I will return to the consequences of that position below.
Finally, Mr Ireland submits that the pleading does not clearly plead a case of fraud as against the Third and Fourth Defendants, and that it is necessary for the Plaintiffs to plead such a claim, having regard to the indefeasibility of title under s 42 of the Real Property Act. Mr Ireland refers to the decision of the Court of Appeal in Simmons v NSW Trustee and Guardian [2014] NSWCA 405, which is a decision dealing with a claim for knowing receipt of trust property, rather than a claim under s 37A of the Conveyancing Act. It seems to me that Mr Ireland's submission raises an intriguing legal point, but one which is plainly not appropriate for a summary dismissal application. It might well be that there is an issue to be determined as to how s 37A of the Conveyancing Act and s 42 of the Real Property Act interact, where s 37A provides that a transaction having the particular characteristics is voidable, and s 42 of the Real Property Act confers indefeasibility upon the persons who are the transferees under that transaction, absent proof of fraud. It is by no means apparent to me, at least to the level that would be necessary to support summary dismissal, that it is essential to establish a case of fraud against a transferee, in order to bring a claim under s 37A of the Conveyancing Act. There are at least two possible difficulties with that proposition. The first is that many cases are brought under s 37A of the Conveyancing Act, and many transferees have been found liable under that section, without the Plaintiffs alleging or the Court finding fraud on their part: see, for example, Marcolongo v Chen (2011) 242 CLR 546; Bowden v Weldon [2014] NSWSC 109; Young v Smith [2015] NSWSC 400. When the High Court formulated the elements necessary to establish a claim under s 37A of the Conveyancing Act, in Marcolongo v Chen, in terms that have frequently been applied subsequently, it did not suggest that it was also essential, where a transferee of property had acquired a registered title, to establish a claim of fraud for the purposes of s 42 of the Real Property Act to grant relief under s 37A of the Conveyancing Act.
The second possible difficulty with Mr Ireland's submission in this regard is that, if it is correct, then s 37A(3) of the Conveyancing Act seems to be superfluous. If Mr Ireland is correct, in order to succeed, the Plaintiffs must establish fraud on the part of the transferee, who has acquired indefeasible title to the property, and that would be a part of the matters that the Plaintiffs need to establish to succeed. In those circumstances, occasion would rarely, if ever, arise, at least in the case of dealing with real property, for a defendant to seek to establish the defence under s 37A(3) of the Conveyancing Act, of a purchase in good faith or the lack of notice of the intent to defraud creditors, because the Plaintiffs would first have had to establish that the transferee was fraudulent, in order to succeed against him, excluding any possibility that the defence might be established.
It is of course not appropriate for me to express any final view as to these issues, and I do not express any view as to these issues, in an application of this kind. It is sufficient for me to note that the issue raised by Mr Ireland is both interesting and complex, and not such that it would support, in my view, a summary dismissal on the basis that a claim for fraud under s 42 of the Real Property Act is a necessary step in obtaining relief against a transferee of property under s 37A of the Conveyancing Act. Mr Ireland may ultimately be right, but that is a matter that must be determined by a trial judge, in circumstances that the issue is fully agitated in submissions before him.
I have, in these circumstances, found that there are significant difficulties with the present form of pleading. Mr Ireland's position, for the Third and Fourth Defendants, is that the previous occasion before Brereton J was, in effect, a last opportunity for the Plaintiffs to amend their pleading. It would, obviously, have been preferable if the pleading, as it emerged from amendments made before Brereton J, was clearer than the present pleading. It does not seem to me that, having regard to the principles in s 56 of the Civil Procedure Act and the need for a just, quick and cheap resolution of the matters in dispute, it can be said that the opportunity before Brereton J was a last opportunity, although the further opportunity which I will now afford the Plaintiffs may well be a last opportunity, because time will shortly escape the Plaintiffs, where the matter is presently listed for hearing in the near future. It seems to me that I can, as Mr Eardley suggested, make a direction that the pleading be amended within a very short time, and grant leave to the Third and Fourth Defendants to bring a further application to disallow the amendment if, having reviewed it, they consider that it has not addressed the issues to which I have referred in this judgment. By that time, the matter will be some three to four weeks prior to the hearing, and if the Plaintiffs has not put its pleading in order by that time, then there may be a very strong case to disallow the amendment, without leave for a further attempt to replead.
Accordingly, I propose to make the following directions, subject to hearing counsel as to the dates that are to be adopted:
Paragraph 25 of the Amended Statement of Claim filed 15 June 2015 be struck out.
The Plaintiff have leave to file and serve a Further Amended Statement of claim, repleading its claim against the Third and Fourth Defendants under s 37A of the Conveyancing Act, such further Amended Statement of Claim to be filed and served no later than 4pm, 13 July 2015.
Grant leave to the Third and Fourth Defendants to file and serve any further application to disallow the amendments made by the Further Amended Statement of Claim, no later than 4pm, 15 July 2015, to be made returnable in the Corporations Motions List, 20 July 2015 at 9.45am.
The matter be listed for directions at 9.45am on 20 July 2015.
I will hear Counsel as to those proposed timings directed to bringing any amendment, and any further dispute about the adequacy of the amendment, forward quickly, such that the issue can be resolved one way or the other several weeks prior to this matter going to a final hearing.
(Counsel addressed as to costs.)
Mr Ireland seeks the costs of the application to disallow paragraph 25 of the Amended Statement of Claim. Mr Eardley responds that the normal order for costs would be an order that the costs of the motion be the Third and Fourth Defendants' costs in the cause. The Court has a discretion, under s 98 of the Civil Procedure Act, to make an order for costs that is appropriate in the circumstances, and is not bounded by any standard order in an application of this kind.
It seems to me that, on balance, this is an application where the Third and Fourth Defendants have been substantially successful, and the occasion for this application has resulted from the fact that a pleading made, after Brereton J had granted leave to replead, continued to have significant deficiencies. It seems to me that Mr Ireland is correct that the application was properly brought, in that the difficulties for the Third and Fourth Defendants in going to trial on the basis of the existing pleading would be significant, and there would also be significant unfairness to them in requiring them to go to trial, if the Plaintiff did not in fact plainly and clearly allege that there was a nursery business conducted on 20 Halls Road, Arcadia. In these circumstances, it seems to me that the application was properly brought, both so far as its technical merit was concerned, but also so far as the substantive need to clarify what the Plaintiffs alleged, and whether that allegation was such as to support the pleading.
In these circumstances, it does seem to me that the need for this application is ultimately the product of the form of the present pleading. Conversely, it seems to me that the Third and Fourth Defendants' success in this application would still be real, even if they were ultimately unsuccessful at the substantive hearing. In other words, this application was necessary, and they were successful in it, and they will be no less successful in this application if they are ultimately unsuccessful at a final hearing, when the Plaintiffs have put its pleading in order.
For these reasons, I make a further order, that the Plaintiff pay the costs of and incidental to the hearing of the motion today, as agreed or as assessed.
I make directions in the form that I had previously foreshadowed, having heard counsel as to those directions.
[3]
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Decision last updated: 03 August 2015