Royal Guardian Mortgage Management Pty Limited v Beth Ngoc Nguyen

Judgment 1HER HONOUR: There are two notices of motion before the Court. By notice of motion filed 5 May 2011, the defendants seek an order that the plaintiff provide security for costs. This motion has been resolved with costs being reserved. 2By notice of motion filed 29 July 2011, the defendants seek an order that the plaintiff's statement of claim be struck out and that judgment be entered in favour of the defendants. 3The plaintiff is Royal Guardian Mortgage Management Pty Limited (" Royal Guardian"). The first defendant is Beth Ngoc Nguyen. The second defendant is Ian Stolyar. The defendants relied on the affidavit of Francisco Gutierrez sworn 1 August 2011. Mr Gutierrez is the defendants' solicitor and deposes that he has read the plaintiff's statement of claim and has come to the conclusion that the statement of claim "has no reasonable cause of action."

The pleadings 4On 29 April 2010, by statement of claim, Royal Guardian commenced proceedings against the defendants. On 11 June 2010, the defendants filed their defences. Royal Guardian carries on business as a mortgage originator and manager. 5It is common ground that on 1 February 2002, Royal Guardian employed both defendants. Ms Nguyen was employed as a general manager and Mr Stolyar as senior manager. Their agreements were for terms of two years with an option to extend for another two years. The agreements are in writing. Approximately two years later both defendants exercised options to extend the terms of the two year agreement. 6It is alleged that it was a term of each defendants' employment that they would serve the plaintiff faithfully and diligently and exercise all due care; act in the best interests of the plaintiff at all times; refrain from acting or giving the appearance of acting contrary to the interest of the plaintiff; use their best endeavours to protect and promote the plaintiff's good name and reputation; and perform their duties to the best of their ability. 7It is common ground that from 11 February 2003 to 12 May 2005 ("the referral period"), Royal Guardian received referrals of proposed loans ("the Dibelle referrals") allegedly from Denise Chahine trading as Dibelle Finance ("Dibelle Finance") and from Dibelle Financial Services Pty Ltd ACN 111 481 719 ("Dibelle Financial Services"). During the referral period, it was the practice of Royal Guardian to pay a commission to persons other than its employees who referred proposed loans to it in cases where those proposed loans were approved and became settled. The commissions were paid whether the loan was for a new borrower or whether the loan was a refinance from one lender to another. 8The next part is in dispute. 9In either June 2005 or 2006, both defendants' employment was terminated. 10It is alleged that the Dibelle referrals were referrals of potential borrowers and loans known to the defendants who the defendants refrained from introducing directly to Royal Guardian but instead caused them to be referred to it via Dibelle ("the Dibelle conduct"). By engaging in the Dibelle conduct, it is alleged that the first defendant breached the Nguyen agreement and the second defendant breached the Stolyar agreement ("the breaches") in that by doing so they did not serve the plaintiff faithfully and diligently and exercise all due care; they did not act in the best interest of the plaintiff; they did not refrain from acting contrary to the interests of the plaintiff; and they did not perform their duties to the best of their abilities. It is alleged that the Dibelle conduct breached the terms of their employment contracts because it would have been more in Royal Guardian's interest for the defendants to refer the potential loans and borrowers to it directly rather than via Dibelle (S/C [9] - [13]). The plaintiff claims damages in the sum of $2,093,124.36. How this claim is quantified is set out in affidavit evidence and in particulars. 11Counsel for the defendants submitted that the statement of claim was not properly pleaded and should be struck out. Counsel for the defendant referred to McGuirk v The University of New South Wales [2009] NSWSC 1424, where Johnson J stated: "Principles Concerning Pleadings [21] The function of pleadings is to state with sufficient clarity the case that must be met by a defendant. In this way, pleadings serve to define the issues for decision and ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her: Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 296 and 302-3. The issues defined in the pleadings provide the basis upon which evidence may be ruled admissible or inadmissible at trial upon the ground of relevance: Dare v Pulham [1982] 148 CLR 658 at 664; Banque Commerciale at 296. [22] In Perpetual Trustees Victoria Ltd v Dunlop [2009] VSC 331, Forrest J observed at [24] that the rules of pleading are "the servants of the interests of justice", with those interests demanding that a party have every opportunity to plead out an arguable case against other parties, but that those other parties have, at an early point in the proceedings, the opportunity to be properly appraised of the case against them. ... [24] Proper pleading is of fundamental importance in assisting courts to achieve the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings: s 56 Civil Procedure Act 2005. ... [27] For a Statement of Claim to comply with the rules of court, a party should plead, in a summary form, a statement of the material facts upon which the party relies, but not the evidence by which those facts are to be proved: r 14.7 UCPR. In doing so, the pleadings should be as brief as the nature of the case admits: r 14.8 UCPR. [28] In Kirby v Sanderson Motors Pty Ltd (2001) 54 NSWLR 135, Hodgson JA (Mason P and Handley JA agreeing) said at 142-143 [20]-[21], with respect to the requirement for a pleading to state material facts: 'It might appear that these rules [the Supreme Court Rules] do not require that causes of action be stated in pleadings; the requirement is to have a statement of material facts, and indeed to have only such a statement. However, in my opinion - "Material" means material to the claim, that is, to the cause or causes of action which are relied on. (2) The requirement of a statement of material facts does not exclude the allegation of legal categories, such as duty of care, fiduciary duty, trust and contract. (3) The general requirement to avoid surprise means that material facts must be stated in such a way that the defendant can understand the materiality of the facts, that is, how they are material to a cause of action.' Accordingly, even on the basis of these rules which are common to the District Court and the Supreme Court, I do not take cases such as Konskier as establishing that there is a danger of surprise, which arises particularly where there is lack of precision and clarity in the pleading, it may well be appropriate to require a Plaintiff, either in a statement of claim or in particulars, to explicitly relate the facts it pleads to specific causes of action. ... [35] It is not the function of the court to draw or settle a party's pleading. The court is confined to the function of ensuring that pleadings are within the rules and fulfil the functions for which they exist. Objectionable matter that is so mingled with other matter may lead to the conclusion that the pleading as a whole would tend to embarrass the fair trial of the action ought be struck out: Turner v Bulletin Newspapers Co Pty Ltd (1974) 131 CLR 69 at 72, 87-88 and 97-98; Gunns Ltd v Marr at [57]-[58]; Fleet v Royal Society for the Prevention of Cruelty to Animals NSW [2005] NSWSC 926 at [55]. 12The main source of the defendants' complaint revolves around paragraphs 18 and 19 of the statement of claim. They plead: "18. The defendants fraudulently concealed the Dibelle Conduct from the first plaintiff until late May 2005 in the circumstances that they had an ongoing contractual duty under the Nguyen Agreement, the Stolyar Agreement and/or the Implied Term to reveal to the plaintiff that they knew of the borrowers and loans the subject of the Dibelle Referrals, yet did not reveal that fact. 19. By reason of the defendants' fraudulent concealment, prior to late May 2005 the plaintiff was unaware of the Dibelle Conduct and was not aware that the plaintiff has a cause of action against the defendant as pleaded in the present statement of claim." 13The first point to note is that the defendants' defences plead in response to [18] and [19] of the statement of claim, that as far as Royal Guardian claims it was unaware of the Dibelle conduct prior to May 2005 or that it was not aware that the plaintiff had a cause of action against them, the plaintiff did know at all material times and certainly from February 2003 of the Dibelle referrals and Dibelle conduct. The defendants deny that this conduct was in breach of either an express or implied provision of their employment arrangement and in any event the defendants say that the proceedings are statute barred. 14In these circumstances, it cannot be argued that the defendants do not know what are the allegations are that they have to meet. 15As shown above the defendants plead that the transactions are statute barred and should be struck out. But whether this is so depends upon whether there was fraudulent concealment as alleged. If there was fraudulent concealment then s 55 of the Limitation Act 1969 comes into play and the claim is not be statute barred. 16Section 55 of the Limitation Act relevantly reads: "55 Fraud and deceit (1) Subject to subsection (3) where: (a) there is a cause of action based on fraud or deceit, or (b) a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed, the time which elapses after a limitation period fixed by or under this Act for the cause of action commences to run and before the date on which a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the fraud deceit or concealment, as the case may be, does not count in the reckoning of the limitation period for an action on the cause of action by the person or by a person claiming through the person against a person answerable for the fraud deceit or concealment. (2) Subsection (1) has effect whether the limitation period for the cause of action would, but for this section, expire before or after the date mentioned in that subsection. (3) For the purposes of subsection (1), a person is answerable for fraud deceit or concealment if, but only if: (a) the person is a party to the fraud deceit or concealment, ..." 17On this issue the defendants referred to Slater v Romano & Verduci [2003] NSWSC 333, Wakim v Tadros [2011] NSWSC 308; Lee v Travers [2009] NSWSC 398 and Macpherson v Wingecarribee Shire Council (19 March 1997, Greenwood M, unreported). 18As Bryson J in Lee v Travers explained (at [43]) there are two distinct branches referred to in s 55. The first branch traced through s 55(1)(a) relates to a cause of action based on fraud or deceit, and concealment or fraudulent concealment is not an element of it. In this branch time begins to run when the person have the cause of action first discovers the fraud or deceit, or may with reasonable diligence first discover the fraud or deceit. In the second branch, which applies to any cause of action, including a cause of action based on fraud or deceit, where the cause of action is fraudulently concealed, the running of the time bar is postponed until the person having the cause of action first discovers or might with reasonable diligence discover the concealment. 19The current pleadings under s 55 falls into the second branch. That is the cause of action, namely the alleged breach of the contracts of employment, was allegedly fraudulently concealed. This pleading in relation to s 55 is adequate. It is my view that overall the statement of claim is properly pleaded. 20Both of the defendants' notices of motion should be dismissed. Costs of the motions are reserved.