Quach v ATM Residential Pty Ltd [2022] ACTSC 210

By application in proceedings filed on 19 July 2022, ATM seeks to protect its position in various ways. The principal relief sought in the application is an order that ATM be removed as a party to the proceedings pursuant to r 230 of the Court Procedures Rules 2006 (ACT) or that summary judgment be given for ATM against Dr Quach pursuant to r 1147 of the Rules.

Alternatively, ATM seeks an order for security for costs in the sum of $130,000. The basis for that aspect of the application is that Dr Quach is listed as a vexatious litigant in New South Wales and has had a number of costs orders made against him. ATM entertains a concern as to Dr Quach's ability to meet its legal costs in the event that his claim is unsuccessful. ATM did not seek to prove that Dr Quach has failed to pay the costs he has been ordered to pay in various other proceedings. However, it was clear enough from his statements from the Bar table that he has not. Dr Quach explained that those costs are not payable because the parties in question have not sought to enforce them.

In any event, it is not necessary to determine that aspect of ATM's application. I am satisfied that Dr Quach has, indeed, sued the wrong entity and that ATM should be removed as a party to the proceedings. In circumstances where Dr Quach has steadfastly refused to accept that fact in the face of overwhelming evidence, I do not think there is any utility in permitting the proceedings to remain on foot. I am satisfied that the proceedings should be dismissed. My reasons for reaching those conclusions are as follows.

The originating claim explains the nature of the claim in the following terms: “The plaintiff claims ATM Residential Pty Ltd trading as McGrath North Canberra (Michael Fay as the selling agent) engaged in ‘misleading and deceptive conduct’ in breach of chapter 2 part 2-1 of the Australian Consumer Law under the Competition and Consumer Act 2010 (Cth) in relation to the sale of the property [identified] by delaying and selling it at a lesser price of $1,450,000, $55,000 less, instead of the higher bid of $1,505,000 made by the plaintiff.”

As already noted, the pleading of that claim attributes all of the relevant conduct to a real estate agent, Mr Fay.

The Court documents were served on ATM on 11 or 12 April 2022. On 13 April 2022, ATM wrote to Dr Quach to advise him that ATM was not the entity or business responsible for employing Mr Fay or for the sale of the property at the time of his claim. The letter said: “Canberra City Holdings Pty Ltd trading as McGrath Estate Agents Dickson is actually the company you were negotiating with, whom Michael Fay was an employee of at the time of the engagement.”

The letter attached a copy of the agency agreement which showed Canberra City Holdings Pty Ltd as the agent. The letter also explained that ATM had only moved into the premises where the court documents were served in July 2021, after Mr Fay and the directors of Canberra City Holdings had moved their business elsewhere. The letter asked Dr Quach to remove ATM from the proceedings and to re-direct the claim to Canberra City Holdings and Michael Fay. Contact details for both were provided. The letter concluded with a polite offer to discuss the matter by telephone or in person “to give [Dr Quach] some clarity on this”.

Dr Quach was undeterred. The copy of the agency agreement naming Canberra City Holdings as the exclusive agent for the sale of the property and Michael Fay as the individual agent ought to have been enough to satisfy him of the need to remove ATM from the proceedings. Instead, he issued a notice to produce and a notice to admit facts to ATM as well as multiple subpoenas directed to numerous strangers to the litigation. He defended ATM's application vigorously, making an elaborate argument as to why, notwithstanding the plain terms of the agency agreement, ATM should remain a defendant to the proceedings.

In order to understand Dr Quach's argument, it is helpful to know that, apparently contrary to the content of the initial letter sent to Dr Quach, ATM did occupy the same premises as Canberra City Holdings from about April 2020. That occurred in the context of ongoing discussions between the directors of ATM and the directors of Canberra City Holdings as to the prospect of a merger of their respective businesses.

An affidavit affirmed by ATM's principal, Mr Craig Chapman, explained that, in April 2020, at a time when both parties were evidently contemplating that the merger would proceed and when ATM's lease in Gungahlin was about to expire, ATM suggested that it should move into Canberra City Holdings’ business premises at Dickson as they “began to trade as McGrath North Canberra”. The move went ahead but the merger did not. Mr Chapman explained that he continued to work towards the merger for about a year, including by incorporating a new corporation which was to conduct the merged business. However, in April 2021, the directors of Canberra City Holdings told Mr Chapman that they had decided instead to sell their business. He secured what he understood to be a commitment from them to offer him the right of first refusal to purchase the business but it was later sold to a third party without further communication with him.

Dr Quach does not appear to dispute that the proposed merger did not proceed. His argument is more nuanced. Leaving aside the fate of the proposed merger, he rejects ATM's assertion that it has no connection with Canberra City Holdings. He contends that, according to the terms of its McGrath franchise, ATM was permitted only to operate one “business development area”. On the strength of the fact that ATM moved to Dickson and shared offices with Canberra City Holdings, he infers that ATM was instead operating in two areas. He contends that ATM could not do that without breaching its franchise agreement. Dr Quach submitted that ATM is using the newly incorporated company and other corporate entities because they do not have authority to operate in the Dickson area so they are using other entities to operate the franchise agreement for the area as a “silent partner”.

In what was perhaps a different iteration of the same point, Dr Quach submitted that, as at November 2019 when he inspected the property he wished to purchase, the two agencies were selling each other's properties. He relied in that context on the fact that Susie Wells, a director of ATM, signed a contract (which appears at page 50 of the exhibit to Mr Chapman's affidavit) for McGrath Dickson under the company name of Canberra City Holdings. Dr Quach submitted, confusingly, that Susie Wells owes him a duty of care because she advertised Mr Fay as the agent for the sale of the property.

Finally, Dr Quach submitted that, in light of the dealings between the two companies, he could rely on the “neighbourhood principle”, citing the decision in Donoghue v Stephenson [1932] AC 562.

Even assuming that the argument as to the operation of the business by ATM in the Dickson area as a silent partner is correct, it is not Dr Quach's concern. If there has been any breach of the franchise agreement, that would be a matter between franchisor and franchisee. More importantly, it does not follow from that argument, or indeed any of Dr Quach's arguments, that ATM played any role in the sale of the property in question.

For those reasons, it is appropriate, pursuant to r 230 of the Court Procedures Rules, to remove ATM as a defendant to the proceedings. That rule provides that the Court may order that a person be removed as a party to a proceeding if the person has been inappropriately or unnecessarily included as a party. The rule permits the Court to make an order at any stage of the proceedings on the application of the party or of its own motion. The evidence plainly establishes that ATM has been inappropriately and unnecessarily included as the only defendant to the proceedings and accordingly, I propose to make that order.

For the reason already explained, I also consider it appropriate to dismiss the proceedings.

The defendant, ATM, noted that an order removing it as the defendant to the proceedings would not stand as a res judicata and for that reason sought an order precluding Dr Quach from suing it again on the same facts. I am not persuaded that it is appropriate to make a pre-emptive order precluding Dr Quach from commencing any proceedings. However, I record that, in the event that he does bring proceedings against ATM again on the same facts, it would follow, as night follows day, that those proceedings should not be permitted to be prosecuted until the costs order I propose to make today has been satisfied.

For those reasons I make the following orders: (1) Pursuant to r 230 of the Court Procedures Rules, remove ATM Residential Pty Ltd as the defendant to the proceedings; (2) Order that plaintiff pay the defendant’s costs; (3) Dismiss the proceedings.