Nazdall Pty Ltd, in the matter of Yowdall Pty Ltd (as trustee for the Yowdall Unit Trust) v Herrmann

Federal Court of Australia|2013-02-15|Before: Reeves J

Paragraphs 24 to 31 and the words "in relation to Davies' and WG's fraud as referred to in paragraph 29 above" in the particulars to paragraph 34 of the points of defence filed 21 December 2012 are struck out.
Paragraph 18 of the points in reply and defence to cross-claim filed 4 February 2013 are struck out.
Costs are reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA northern territory DISTRICT REGISTRY GENERAL DIVISION VID 427 of 2012

IN THE MATTER OF YOWDALL PTY LTD (ACN 115 340 433) (AS TRUSTEE FOR THE YOWDALL UNIT TRUST) BETWEEN: NAZDALL PTY LTD (ACN 009 649 843)

YOWDALL PTY LTD (ACN 115 340 433) (AS TRUSTEE FOR THE YOWDALL UNIT TRUST)

JUDGE: REEVES J DATE: 15 FEBRUARY 2013 PLACE: BRISBANE

REASONS FOR JUDGMENT 1 These proceedings are set down for trial in Darwin to commence on 25 March 2013. They relate to the affairs of the Yowdall Unit Trust, of which the fourth respondent is the trustee. At the pre-trial directions hearing held on 7 February 2013, the parties made competing applications directed to either removing, or retaining, a particular issue that was raised during the course of the recent exchange of points of claim, defence and reply in these proceedings. For the reasons that follow, I consider that the issue in question - which I will refer to as the Auleth/WG dispute - raises a false issue which has the potential to delay the trial of these proceedings and needlessly waste the Court's time and resources in the process. It follows that I consider the paragraphs that plead that issue should be struck out of the defendants' points of defence.

Background 2 The Yowdall Unit Trust was first created in July 2005. At that time, Nazdall Pty Ltd, the plaintiff in these proceedings, held 50% of the units in the Trust. Mr Craig Davies was, and is, a director and shareholder of Nazdall and a director of Yowdall Pty Ltd. 3 Chun Yow Pty Ltd, the second defendant, and Chi Kung Pty Ltd, the third defendant, are the other unit holders in the Yowdall Unit Trust. Mr Murray Herrmann was, and is, a director of Chin Yow and a director of Yowdall. His partner, Diane Davis was, and is, a director of Chi Kung. 4 Initially, Chun Yow held the other 50% of the units in the Trust, along with Nazdall. However, subsequent changes were made to the unit holdings in the Trust so that by mid 2010 Nazdall held 41.6%, Chun Yow held 45.7% and Chi Kung held 12.7%. 5 From about 2005 until about late 2008, the Yowdall Unit Trust was used as the vehicle for Mr Davies and Mr Herrmann and their respective companies to undertake a residential subdivisional development into 22 lots of land at Parap (the Parap development). Parap is an inner suburb of Darwin in the Northern Territory. 6 The dispute in these proceedings essentially relates to the accounting between the parties for the income received and the expenses incurred by the Yowdall Unit Trust in connection with the Parap development and the resulting distribution of the profits from that enterprise to the unit holders of the Trust.

The issues raised in these proceedings 7 Nazdall commenced these proceedings in mid-2012 seeking interim and interlocutory orders to restrain Mr Herrmann, Chun Yow and Chi Kung (who, for convenience, I will hereafter refer to as the Herrmann defendants) from drawing and presenting two cheques for the total amount of $1,020,000 on the bank account of Yowdall. Nazdall also sought orders to restrain the Herrmann defendants from dealing with the assets of the Yowdall Unit Trust pending the resolution of these proceedings. Further, Nazdall sought the following orders by way of final relief: 3. A declaration that the drawing and presentation of the disputed cheques: (a) was not authorised by Yowdall; (b) was a breach of the [Mr Herrmann's] duties as director of Yowdall; (c) constituted a conversion of the property of Yowdall (as trustee of the Yowdall unit trust). (d) was not authorised by the trust deed of the Yowdall unit trust; (e) was a breach of the terms of the Yowdall unit trust. 4. There be an account. 5. [The Herrmann defendants] pay to Yowdall: (a) the traceable proceeds of the disputed cheques; (b) restitution in the amount of the disputed cheques; and/or (c) compensation, equitable compensation or damages. 6. Further or in the alternative, the following orders be made: (a) a receiver be appointed to the Yowdall unit trust; (b) the trustee of the Yowdall unit trust be replace; and/or (c) for the vesting of the Yowdall unit trust. Interim restraining orders were made to the effect sought (above) in June 2012. Soon thereafter those orders were replaced by undertakings given to the Court by the Herrmann defendants, essentially to the same effect as the interim orders. Those undertakings remain in place. 8 In November 2012, the parties were directed to exchange points of claim, points of defence and points of reply. In its points of claim, Nazdall alleged that the annual accounts for the Yowdall Unit Trust prepared up to and including the year ending 30 June 2011 were true and correct, except to the extent that those accounts did not include, as a liability, a sum of $14,000 that Nazdall claimed it had paid on behalf of the Yowdall Unit Trust. Encapsulated in this allegation (about the accuracy of the annual accounts of the Trust) was a claim pleaded elsewhere in Nazdall's points of claim that it had made a valid expense claim for a project management fee for the work it did in connection with the Parap development. It claimed that fee in June 2009 by rendering an invoice to the Yowdall Unit Trust for the sum of $415,000 + 10% GST (totalling $456,500). That invoice was subsequently paid by the Trust. 9 In the concluding paragraphs of its points of claim, Nazdall summarised its position in these proceedings as follows: 39. Nazdall's position is that: (a) the unit holding in the Yowdall unit trust is and was as set out in paragraphs 12 to 16. (b) the 2011 accounts are true and correct, including the entries in respect of the following: i) the MHFT loan ii) the Chi Kung loan; iii) the Nazdall loan save that it ought to include an adjustment in respect of the Nazdall payment. 40. What adjustments need to be made to the 2011 accounts to bring those accounts up to date. It is difficult to reconcile these statements with the final relief sought by Nazdall in its originating application (see at [7] above). Nonetheless, that is not a matter that needs to intrude upon my consideration of the present applications. 10 It is also convenient, at this point, to note that the Herrmann defendants do not appear to have raised any issue about the accuracy of the unit holdings in the Yowdall Unit Trust, viz the issue raised in 39(a) of Nazdall's points of claim above. In the end result, therefore, the issue that remains to be resolved on Nazdall's points of claim is that raised by 39(b) above relating to the accuracy of the accounts of the Trust and the adjustment that Nazdall says should be made to the annual accounts of the Yowdall Unit Trust to take into account the sum of $14,000 that it claims to have paid on behalf of the Trust (see at [8] above). 11 In their points of defence, the Herrmann defendants claimed that the 2009, 2010 and 2011 annual accounts for the Yowdall Unit Trust are inaccurate. In particular, they identified three areas of concern to them. The first area was Nazdall's entitlement to claim the project management fee described in [8] above. The Herrmann defendants alleged that Nazdall was not entitled to claim this project management fee as its entitlements were confined to its rights to participate in the profits as a unit holder in the Yowdall Unit Trust. They also alleged that the work that was undertaken by Mr Davies was performed in his capacity as a director of Yowdall, not Nazdall. The Herrmann defendants therefore claimed the 2009 annual accounts of the Yowdall Unit Trust required adjustment as follows: 21.1. In the 2009 accounts, expenses should be debited by $415,000 and profit credited in the same amount. The increased profit should be distributed to the beneficiaries in accordance with the unit holdings set out in paragraph 14 of the Points of Claim and appropriate adjustments then made to the beneficiaries loan accounts in this and subsequent accounts; 21.2. In the 2009 and subsequent accounts: 21.2.1. Nazdall's loan account (shown as a liability of Yowdall) should be debited with the sum of $456,500; 21.2.2. Yowdall's tax liabilities should be credited with the sum of $41,500. 12 The second area of concern to the Herrmann defendants related to an invoice numbered 300990 that a company called Wolpers Grahl Pty Ltd (WG) rendered to the Yowdall Unit Trust on or about 1 March 2010 for the sum of $398,743.61, plus 10% GST (totalling $438,617.98). WG is a building contractor that carried out certain construction works for the Yowdall Unit Trust in connection with the Parap development. The Herrmann defendants alleged that this invoice no. 300990 was falsely rendered by WG and the payment of it by Yowdall was, in reality, made for the benefit of Mr Davies. The Herrmann defendants made this allegation in paras 34 to 36 of their points of defence in the following terms: 34. The payment by Yowdall to WG of the said sum of $438,617.98 was for Davies' and WG's benefit not for Yowdall's benefit. Particulars Insofar as invoice no.300990 suggested that Yowdall then owed WG for work done on the subdivision it was false. The First, Second and Third Respondents repeat the particulars to paragraph 17 above. Further, Yowdall had no obligation to pay interest to WG. Rather, the purpose and effect of this payment was to discharge Davies' and WG's liability to Auleth in relation to Davies' and WG's fraud as referred to in paragraph 29 above [set out at [16] below]. 35. In about March 2010: 35.1. contrary to the facts set out in paragraph 34 above, Davies' falsely represented to Herrmann that the work the subject of the Auleth/WG Invoices had in fact been provided to Yowdall by WG on the development and for which Yowdall had not paid WG; 35.2. believing the truth of Davies' representation in paragraph 35.1 above, Herrmann agreed with Davies that: 35.2.1. Yowdall would pay invoice no.300990; 35.2.2. invoice no.300990 should be treated as an expense of Yowdall; 35.3. had Herrmann known of the facts set out in paragraph 34 above, he would only have agreed to Yowdall paying invoice no.300990 on the basis that the payment was treated as a loan by Yowdall to Davies or Nazdall. 36. The payment by Yowdall to WG of the said sum of $438,617.98 has been accounted for in Yowdall's 2010 accounts wrongly on the basis that the total of $438,617.98 (inclusive of GST) is an expense of Yowdall and not a loan to Davies or Nazdall. At this point, it is convenient to interpolate that since I have concluded that the allegations in paras 24 to 31 of the Herrmann defendants' points of claim should be struck out, I consider the cross-reference to the allegation of fraud in para 29 contained in the concluding parts of the "Particulars" to para 34 above should also be struck out. 13 Accordingly, the Herrmann defendants claimed that the 2010 annual accounts for the Yowdall Unit Trust required adjustment as follows: 37.1. In the 2010 accounts, expenses should be debited by $398,743.61 and profit credited in the same amount. The increased profit should be distributed to the beneficiaries in accordance with the unit holdings set out in paragraph 16 of the Points of Claim and appropriate adjustments then made to the unit holders' loan accounts in this and subsequent accounts; 37.2. In the 2010 and subsequent accounts: 37.2.1. Nazdall's loan account (shown as a liability of Yowdall) should be debited with the sum of $438,617.98; 37.2.2. Yowdall's tax liabilities should be credited by $39,874.37. 14 The final area of concern for the Herrmann defendants with the annual accounts for the Yowdall Unit Trust related to certain transactions that the Trust's accountants had carried out on the instructions of Mr Davies. Those transactions related to reimbursements made by the Yowdall Unit Trust to Nazdall for moneys that Nazdall claimed it had paid on behalf of the Trust. The Herrmann defendants alleged that Nazdall had not properly accounted for those claims. The transactions concerned are set out (somewhat obscurely) in para 39 of the defendant's points of defence as follows: 39.1. $71,062.64 for "accruals - Accountant JNL ADJ (c)" on 30/6/2008; 39.2. $207,637.78 for "accounts Pd 9/2005 to 10/2007 (b)" on 30/6/2008 (subject to a credit for "accountant Adj Loan Acc (c)" of $66,848.17); 39.3. $220,000 for "Wolpers (exc GST) - Paid direct" on 1/7/2008; 39.4. $120,000 for "Wolpers (exc GST) - Paid direct" on 9/12/2008. 15 Reflecting these three areas of concern, at the conclusion of their points of defence, the Herrmann defendants set out the following issues as issues that they claimed needed to be determined by the Court at the trial of these proceedings: 45.2. The Court will need to determine 3 specific disputes in relation to the accounts of Yowdall: 45.2.1. Whether the fee invoice should be accounted for as an expense or as a loan to Nazdall; 45.2.2. Whether WG invoice no.300990 should be accounted for as an expense or as a loan to Nazdall; 45.2.3. Whether Nazdall has been fully reimbursed or had its loan account credited for costs it has paid on behalf of Yowdall including in relation to the Nazdall payment and in relation to the sum of $50,000 (exclusive of GST) claimed in the fee invoice. 16 While it is lengthy, Nazdall's points of reply essentially does two things. First, it purports to provide details (including two attachments) by way of explanation for many of the disputed transactions appearing in the accounts of the Yowdall Unit Trust. Secondly, it joins issue with the Herrmann defendants on the areas of dispute raised in their points of defence and pleads some further facts in relation thereto. Nonetheless, aside from the area of dispute outlined below, it does not expand on the areas of dispute between the parties and it is therefore unnecessary to summarise its contents for the purposes of determining the present applications. Finally, I should record that the Herrmann defendants' points of defence also includes a cross-claim. As a consequence, Nazdall's points of reply also addresses that cross-claim. However, neither the cross-claim nor Nazdall's points of reply to it expand the issues of dispute above so it is also unnecessary to summarise them for the purposes of determining the present applications.

The Auleth/WG dispute 17 The issue that is at the heart of the present competing applications was raised in paras 22 to 33 of the Herrmann defendants' points of defence. Whilst those paragraphs are lengthy, it is convenient to set them out in full. They are as follows: 22. In 2008, Davies on behalf of Nazdall provided management services to Auleth Pty Ltd ACN 069 644 668 ("Auleth"). 23. Part of the services provided by Davies included signing cheques or otherwise arranging for the payment by Auleth of its creditors. 24. In June and November 2008 respectively, Davies arranged for WG to render to Auleth: 24.1. WG's tax invoice no.23037 dated 14 July 2008 in the sum of $242,000 (inclusive of GST) purportedly for the "installation of transformers and associated electrical works for substation and unit project" by WG for Auleth; 24.2. WG's tax invoice no.2300573 dated 28 November 2008 in the sum of $132,000 (inclusive of GST) purportedly for "electrical works to install power supply from substation to main board as quoted" by WG to Auleth ("the Auleth/WG Invoices"), 25. On or about 9 July 2008 and 9 December 2008 respectively, Davies arranged for Auleth to pay WG for each of the Auleth/WG Invoices in full. 26. No goods and/or services as claimed in the Auleth/WG Invoices had in fact been supplied by WG to Auleth. 27. Davies did not have Auleth's authority to pay the Auleth/WG Invoices. 28. At all materials times, Davies knew of the facts and matters set out in paragraphs 26 and 27 above. 29. In these circumstances, by delivering the Auleth/WG Invoices and by causing Auleth to pay the Auleth/WG Invoices, WG and Davies defrauded Auleth of a total of $374,000. 30. In about February 2010, Auleth discovered WG's and Davies' fraud as referred to in paragraph 29 above. 31. To settle Auleth's claims against WG arising from this fraud, on about 1 March 2010: 31.1. Auleth and WG entered into a deed of settlement ("the Auleth/WG Deed") whereby WG admitted the fraud and agreed to repay Auleth the said sum of $374,000 plus interest at the rate of 10.5% per annum; 31.2. WG issued a credit note to Auleth in relation to the Auleth/WG Invoices and interest thereon at 10.5% in the total amount of $438,617.98. 31.3. WG paid Auleth the said sum of $438,617.98 in discharge of its obligations under the Auleth/WG Deed. 32. Also on about 1 March 2010, WG delivered invoice no.300990 to Yowdall in the total sum of $438,617.98, said to be for $340,000 for "work carried out at Heritage Park, Parap", $58,743.61 for interest and $39.874.37 for GST on both those amounts; 33. Subsequently, Yowdall paid WG the said sum of $438,617.98 in discharge of invoice no.300990. 18 In its points of reply, Nazdall admitted paras 22, 23 and 33 above. As to paras 24 to 31, it stated (in para 18 of its points of reply): (a) it admits that WG rendered the Auleth/WG invoices; (b) it admits that Auleth paid the Auleth/WG invoices; (c) it says that WG repaid to Auleth the amount referred to in (b); (d) it says that the allegations are otherwise irrelevant; (e) it otherwise joins issue. 19 Finally, as to paragraph 32, it stated (in para 19 of its points of reply): (a) it admits that WG delivered the WG invoice 300990 to Yowdall; (b) it says that WG invoice 300090 comprised amounts in respect of work done by WG For the development; (c) it says that the WG invoice 300990 was rendered with the knowledge of Yowdall, Herrmann, Chi Kung and Chun Yow; (d) it otherwise joins issue. 20 It can be seen from paras 24 to 31 of the Herrmann defendants' points of defence that they seek to raise as an issue in these proceedings the existence and effect of a dispute between WG and a company called Auleth Pty Ltd (the Auleth/WG dispute). As pleaded in those paragraphs, the Auleth/WG dispute arose out of two invoices Auleth submitted to WG in 2008. However, as appears from para 31 of the points of defence, that dispute was settled on 1 March 2010 when Auleth and WG entered into a deed of settlement. The link between the Auleth/WG dispute and the issues the Herrmann defendants have raised for determination in these proceedings (see at [15] above) appears to revolve around the facts that: invoice no. 300990 claimed substantially the same items and the identical total sum of $438,617.98 as was at issue in the Auleth/WG dispute; and invoice no. 300990 was issued on the day that dispute was settled. 21 While Nazdall appears to admit the existence and settlement of the WG/Auleth dispute in its points of reply, it claims in para 18(d) thereof that that dispute is "irrelevant" to any issue raised in these proceedings.

the competing strike-out applications 22 Given the approach taken by the parties in their points of defence and points of reply, it is perhaps surprising that the first of the present competing applications was made by the Herrmann defendants, rather than Nazdall. The Herrmann defendants did that by applying to strike-out para 18 of Nazdall's points of reply (see at [18] above) essentially because, so they submitted, it was vague and ambiguous and did not address the allegation of fraud made in para 29 of their points of defence. In particular, Mr Wyvill SC, for the Herrmann defendants, submitted that that paragraph failed to comply with Rule 16.07 of the Federal Court Rules 2011, which required a party to "specifically admit or deny every allegation of fact" in another party's pleading. 23 During the hearing of the Herrmann defendants' strike-out application, Mr Fary, counsel for Nazdall, responded by orally making its own application to strike-out the paragraphs of the Herrmann defendants' points of defence that were addressed in para 18 of Nazdall's points of reply, viz paras 24 to 31. Mr Fary did so essentially on the ground expressed in para 18(d) of Nazdall's points of reply, that the Auleth/WG dispute was "irrelevant" to the issues in dispute between the parties to these proceedings. In support of that application, Mr Fary pointed out that none of the persons involved in the Auleth/WG dispute, as described in those paragraphs, was a party to these proceedings.

Rule 16.21 engaged 24 While neither counsel specifically adverted to Rule 16.21 of the Federal Court Rules 2011, that is plainly the Rule of Court under which both strike-out applications were made. Rule 16.21 allows a party to apply to strike-out all, or part, of an opposite party's pleading on six identified grounds. They include that the offending pleading: "(c) is evasive or ambiguous; or (d) is likely to cause prejudice, embarrassment or delay in the proceeding; or (e) fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading." The contentions of counsel on these competing strike-out applications appear to engage some, or all, of these three grounds. 25 In saying that both parties were plainly applying under Rule 16.21, I should mention a matter that Mr Fary raised about the operation of this rule. He referred to the definition of "pleading" in the Dictionary to the Rules (contained in Sch 1). That definition provides: pleading means: (a) a statement of claim; or (b) a statement of cross claim; or (c) a defence; or (d) a reply; or (e) any pleading after a reply; but does not include: (f) an originating application; or (g) an interlocutory application (h) a notice of any kind; or (i) an affidavit. 26 Mr Fary submitted that, on its face, this definition did not include a points of claim, points of defence or points of reply. Thus, as I understood his submission, the pleadings in this matter did not constitute a "pleading" for the purposes of Rule 16.21. 27 In dealing with this matter, it is apt to begin by noting that, since the Federal Court Rules 2011 are a legislative instrument, they fall to be construed in accordance with the usual principles of statutory construction: see s 13 of the Legislative Instruments Act 2003 (Cth). That means (among other things) that in the absence of a statutory definition the meaning of expressions in the Rules falls to be determined by reference to their text, context and purpose, using the text as the starting point and the language employed in the text as the "surest guide": Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [47] per Hayne, Heydon, Crennan and Kiefel JJ. 28 The necessary starting point in this instance is the fact that the word "pleading" is now exhaustively defined in the Dictionary to the Rules by the use of the word "means" in that definition (cf Andrews v Australia & New Zealand Banking Group Limited (2011) 281 ALR 113; [2011] FCA 388 (Andrews) at [30] per Gordon J regarding the inclusive definition in the former equivalent rule: O 1 r 4). However, while that is so, it is important to note that the expressions "statement of claim", "defence" and "reply" are not defined in the Dictionary. Similarly, none of those expressions is defined in Pt 16 of the Rules, which deals with pleadings. That being so, the meaning of those expressions must be derived from their text and language and, where appropriate, their context, general purpose and policy. Taking that approach, I consider the text and language used in those expressions plainly admits of a meaning that includes documents such as points of claim, points of defence or points of reply. That is so because a document that serves the purpose of stating a party's claim in proceedings before the Court, pleading a defence to a claim, or pleading a reply to a defence, is, by ordinary language, a statement of claim, defence or reply, as the case may be, regardless of whether the word "points" is used instead of the word "statement" in the expression "statement of claim", or whether the words "points of" are added before the expressions "defence" or "reply". In other words, as Gordon J observed in Andrews (at [30]), it is not the presence or absence of a label "pleading" or "statement" of claim that is definitive. Instead, it is the purpose that is achieved by the document that is being referred to. 29 While the language of these expressions is sufficient to resolve this matter, it may also be noted that this construction is consistent with their purpose occurring, as they do, in the context of the pleading rules in Pt 16 of the Rules. While the purpose of pleadings has been described on countless occasions, the statement of the High Court in Dare v Pulham (1982) 148 CLR 658 (at 664) per Murphy, Wilson, Brennan, Deane and Dawson JJ will suffice for present purposes: Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. (Citations omitted) 30 It follows that the language used in the expressions "statement of claim" etc in the definition of the word "pleading" in the Dictionary to the Rules includes the points of claim etc that were exchanged between the parties in these proceedings such that Rule 16.21 applies to these competing strike-out applications.

The Auleth/WG dispute should not be agitated in these proceedings 31 Before addressing the contentions of the parties on these competing strike-out applications, it is convenient to record a number of matters about the operation of Rule 16.21 and about the role of pleadings in commercial litigation of this kind. First, an order to strike-out a pleading under Rule 16.21 will "only be made in a plain and obvious case". The test to be applied has been expressed in numerous ways, including that the issue concerned is "so obviously untenable that it cannot possibly succeed", or if it were "to stand [it] would involve useless expense". Secondly, Rule 16.21 is concerned with the adequacy of a pleading as a matter of law. Thus, in considering such an application, the Court is to assume the truth of the allegations made in the pleading in question and to draw all inferences in favour of the non-moving party: see Andrews at [23] and the various authorities for these principles cited therein. 32 Turning then to the role of pleadings in commercial litigation of this kind, it is apt to begin by emphasising the general purpose of pleadings set out above (see at [29]). However, those observations are largely directed to the private rights and obligations of the parties to litigation as between themselves. In addition to those private interests, there is a broader public interest in ensuring that all commercial litigation is conducted efficiently, quickly and inexpensively. These considerations are expressed in the overarching purpose to civil practice and procedure contained in Pt VB of the Federal Court of Australia Act 1976 (Cth) and are illuminated in decisions such as Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27. 33 The pleadings process, whatever form it takes, serves an important purpose in achieving these ends. It does that in at least two respects. First, by requiring the parties to clearly define the issues between them that fall to be determined at the trial so that all concerned are focused closely on those issues. This avoids the time and resources of the parties and the Court being wasted on confusion and ambiguities at the trial: see the observations of Allsop J in White v Overland [2001] FCA 1333 at [4]. Secondly, it requires the parties to confine the issues for determination at the trial so that only those issues that are truly in dispute between them are considered at trial. This avoids private and public resources being wasted at trial on what Gilmour J described as false issues in Radisich v McDonald [2010] FCA 762 (Radisich). 34 In Radisich, an Australian Building and Construction Inspector appointed under the Building and Construction Industry Improvement Act 2005 (Cth) (Building and Construction Industry Act) sought a declaration that a union official, Mr McDonald, and two Unions (one of which Mr McDonald was an official) had engaged in an unlawful industrial action in contravention of s 38 of the Building and Construction Industry Act. The central allegation in the case was that Mr McDonald had urged the unlawful industrial action at two meetings that occurred on 27 and 30 November 2009. The industrial action concerned the accommodation arrangements that were provided for the workers at the Pluto LNG Development Project site in Western Australia. That issue was described in the proceedings as the "motelling" issue. In their defence, (at para 28A) Mr McDonald and the Unions pleaded as an issue the course of industrial action that had been taken by the workers on the Pluto site after the alleged unlawful industrial action had occurred and during the months of December 2009 and January 2010. The reason why the Unions wished to introduce that course of industrial action as an issue in the proceedings was described by Gilmour J (at [22]) as follows: The Unions submit that, as the stoppages in December 2009 and January 2010 are part of the same dispute over Motelling, a full understanding of how important the issue of Motelling was to the Project workers, and the lengths to which they were prepared, and able, to go to oppose its introduction, is necessary for a proper consideration of the events of November and December 2009 pleaded in the soc. To that end, an aspect of the defence sought to be run is that there was strong and persistent motivation, with no involvement by the Unions, on the part of the Project workers to resist the introduction of Motelling. It is evidence of this kind which the Unions contend is capable of undermining an assertion that it was the respondents who organised or aided the December Strike. 35 Gilmour J rejected the introduction of this issue in the proceedings, describing it as a false issue. In doing so, his Honour made the following observations (at [33]): That factual contest cannot logically or rationally and therefore probatively, be aided by proof of those matters pleaded in para 28A of the Unions' defence. A pleading is a means to the achievement not only of procedural fairness but also the efficient use of judicial resources and those of the parties by the identification of what is truly at issue: Australian Competition and Consumer Commission v Craftmatic Australia Pty Ltd at [14]. Paragraph 28A, in my opinion, raises a false issue and therefore does not disclose reasonable grounds for a defence to the allegations in soc at paras 24 and 28. This is the case assuming, for present purposes, the correctness of the particulars under para 28A of the defence. It would additionally cause prejudice to the applicant in having to contest a significant false issue and would inevitably introduce unwarranted delay in the resolution of the real issues. The applicant's case as I have mentioned is based upon what it is that Mr McDonald did and said at the 27 and 30 November 2009 meetings. If para 28A were allowed to stand, on the basis asserted, it would potentially open up evidence as to what occurred between the December Strike and the January industrial action relevant to a full appreciation of why that action was taken, none of which it seems, implicitly, from the particulars to the defence at para 28A, concerned or involved Mr McDonald. Indeed separate proceedings have been brought in this Court (WAD 14 of 2010) by various corporate employers against project workers, but not Mr McDonald or the Unions, in relation to alleged unlawful industrial action taken at the same site on 25, 26 and 27 January 2010. It appears this action again concerned Motelling and indeed is the strike action referred to in the defence at para 28A under particulars (c) and (d). 36 While it involved a completely different factual context, I consider that these observations of Gilmour J have some resonance with the present strike-out applications, particularly as they identify the effects that the introduction of a false issue can have at a trial in terms of delay and wasted resources. 37 With these principles in mind, I now turn to consider these competing strike-out applications. The central allegation in paras 24 to 31 of the Herrmann defendants' points of defence is that in para 29: In these circumstances, by delivering the Auleth/WG Invoices and by causing Auleth to pay the Auleth/WG Invoices, WG and Davies defrauded Auleth of a total of $374,000. 38 Put briefly, the question posed by these competing strike-out applications is whether this allegation of fraud should be agitated in these proceedings. There is a number of reasons why I do not consider it is either in the interests of justice, or the efficient disposal of these proceedings, that it should be. The first is that para 29 makes a serious allegation of fraud against two persons: WG and Mr Davies, and neither of them is a party to these proceedings. That being so, it necessarily follows that neither of them has been, or will be, afforded basic procedural fairness in relation to this allegation by being given notice of it and being given an opportunity to respond to it. This consideration may not apply with as much force to Mr Davies who, as a director of Nazdall, is a part of the mind and will of the plaintiff in these proceedings and will therefore have received notice of this allegation indirectly through Nazdall. Nonetheless, fraud is such a serious allegation that he should be given notice of it directly and be given an opportunity to respond in person directly, and not through Nazdall. As to WG, that company is a stranger to these proceedings and it will therefore not even receive indirect notice of this most serious allegation against it. 39 Secondly, the allegation of fraud in para 29 does not directly affect the interests of any of the parties to these proceedings. That is amply demonstrated by the fact that the Herrmann defendants have not sought any relief based upon it. That is not surprising because the alleged fraud was not committed against any of them. Instead, it was allegedly committed against Auleth, another stranger to these proceedings. Of course, Auleth settled its claims against WG almost three years ago and signed a deed of settlement. Furthermore, it was paid the sum of $438,617.98 as a part of that settlement. That being so, even if it were a party to these proceedings, it would presumably need to reverse these transactions before it could claim any relief and then its claim would presumably be made against Mr Davies and WG who, as noted above, are not parties to these proceedings. All of these considerations underscore the folly of allowing the Auleth/WG dispute to be agitated in these proceedings. 40 Thirdly, I cannot see how the agitation of the Auleth/WG dispute in these proceedings will advance the interests of the Herrmann defendants. Even assuming that Mr Davies and WG made a fraudulent claim against Auleth and the items underlying that claim were claimed against Yowdall in invoice no 300990 immediately upon the settlement of the Auleth/WG dispute, that does not provide proof of the invalidity of the claim in invoice no 300990. The invalidity of invoice no 300990 is the apposite issue in dispute in these proceedings, not whether three years ago Mr Davis and WG committed a fraud on Auleth. It follows that I consider the Auleth/WG dispute is, to use the descriptor adopted by Gilmour J in Radisich, a false issue in these proceedings. 41 Fourthly and finally, if I were to allow a dispute between three strangers to these proceedings: Mr Davies, WG and Auleth, to be agitated in these proceedings, I consider that would be very likely to lead to significant delays occurring at the trial, to additional costs being incurred for the parties and with a corresponding waste of the Court's time and resources. The impracticalities alone involved in attempting to determine a dispute between persons who are not parties to these proceedings are so obvious they hardly need to be stated. To allow that situation to eventuate would, in my view, be the antithesis of an efficient, quick and inexpensive disposition of these proceedings. 42 For all these reasons, I consider the paragraphs pleading the Auleth/WG dispute should be struck out of the Herrmann defendants' points of defence under Rule 16.21. That being so, the corresponding paragraphs of Nazdall's points of reply will then become otiose and they should also be struck out. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

Building and Construction Industry Improvement Act 2005(Cth)

Legislative Instruments Act 2003(Cth)

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