Royal Guardian Mortgage Management Pty Limited v Nguyen

The joinder motion and the application for leave to bring a cross-claim 6Ms Nguyen and Mr Stolyar's preferred position is that they be given an extension of time to bring a cross-claim in the 2010 proceedings. In the alternative, they pressed to have the proceedings joined. The two applications have the same practical effect. 7Royal Guardian opposed either course being adopted. Its view was that while both proceedings had emerged out of the former employment relationship, the issues raised were so disparate, that it would not be consistent with the overriding purpose specified in s 56 of the Civil Procedure Act 2005, for either course to be adopted, particularly when the resulting delay in the hearing of its case was considered. Alleged difficulties in the pleadings were also relied on, although it was accepted that in the ordinary course, if those submissions were accepted, Ms Nguyen and Mr Stolyar would be given an opportunity to amend their pleadings. 8It was also submitted for Royal Guardian that it was an abuse of process for Ms Nguyen and Mr Stolyar to lodge a cross-claim in proceedings in essentially identical terms to a claim already advanced in other proceedings. Consideration had to be given to why differing proceedings were commenced in the first place and what circumstances had changed, which warranted a different course, being taken. 9The affidavit evidence supporting the motions did not explain why Ms Nguyen and Mr Stolyar's new legal advisers took a different view to that of their former advisers, as to how their claims should best be advanced and Royal Guardian's case best defended. The undisputed fact is, however, that a different view has been taken by new legal advisers and that as a result, Ms Nguyen and Mr Stolyar have brought their two applications. Their case is that it would be consistent with the overriding purpose of the Civil Procedure Act 2005, that they be permitted to now advance their claim by way of cross-claim brought in the 2010 proceedings, rather than in separate proceedings. 10There is no issue that Ms Nguyen and Mr Stolyar could have advanced their case by way of cross-claim, brought in the 2010 proceedings. Indeed, that was what Royal Guardian's solicitor suggested ought to have been done, when the 2011 proceedings were first commenced. Since then there has been a change in Ms Nguyen and Mr Stolyar's legal representation and they have now been advised that the better course is to press a cross-claim in the 2010 proceedings, or at least for the matters to be joined, but Royal Guardian has also changed its position and opposes either course being adopted. 11Ordinarily, consistently with the overriding purpose provided in s 56 of the Civil Procedure Act, the just, quick and cheap resolution of the real issues in the proceedings, if there is a relevant connection between claims in issue between the same parties, irrespective of whether a claim is brought by way of cross-claim, or in separate proceedings, the claims ought to be heard together. Even if a cross-claim is brought, however, and there is no relevant connection between the claims which the parties respectively advance, then the cross-claim may be separately tried (see Rule 9.8 of the Uniform Civil Procedure Rules 2005). 12In this case, it seems to me, that there is sufficient commonality between the factual issues underpinning the claims advanced in the 2010 and 2011 proceedings, particularly as to the parties' contractual relationships, that the leave sought by Ms Nguyen and Mr Stolyar to file a cross-claim in the 2010 proceedings should be granted. This is revealed by the claims advanced in the various pleadings. Royal Guardian's statement of claim pleads, amongst other things:

• in relation to Ms Nguyen, a contract of employment entered in February 2002, extended by the exercise of an option in February 2004, a relationship which continued until the employment came to an end in June 2005; and
• in relation to Mr Stolyar, a contract of employment entered in February 2002, a relationship which also continued until the employment came to an end in June 2005; and
• referrals between February 2003 and May 2005 from Denise Chahine trading as Dibelle Finance and Dibelle Financial Services Pty Ltd, which resulted in payments ('the Dibelle payments') which involved a breach of Ms Nguyen and Mr Stolyar's employment contracts, or terms implied into any other contracts which came into existence between the parties, in the relevant periods; and
• breaches of obligations owed under s 182 of the Corporations Act 2001 (Cth). 13Ms Nguyen and Mr Stolyar's defences admit that there were contractual relationships between the parties, but:
• deny that various terms relied on by Royal Guardian were binding; and
• claim that it made various relevant representations and that relevant variations were agreed to the parties' contracts, which it did not honour, with the result that they did not receive their entitlements to profit share and other moneys owed to them; and
• claim that Royal Guardian breached other terms of the parties' agreements; and
• deny that they breached their agreements or had the benefit of the Dibelle payments and that Royal Guardian knew of and consented to the arrangement entered in relation to the Dibelle payments and was estopped from denying its knowledge and consent; and
• deny having obtained any improper advantage in breach of the Corporations Act. 14In their case, Ms Nguyen and Mr Stolyar also pursue damages for breach of contract. Ms Nguyen, for example, pleads amongst other things, that she was headhunted by Royal Guardian; that she was employed as the general manager of its mortgage lending business; and that agreements were reached as to the terms of profit sharing arrangements, under which she also transferred shares in Royal Guardian and under which she was entitled to be paid certain bonuses. Royal Guardian has, however, refused to account for the profit shares owing under the agreement; engaged in false and misleading conduct; and failed to pay bonuses due to her. Similar claims are pursued by Mr Stolyar. 15No defence has yet been filed in relation to these claims. Instead Royal Guardian presses its application to have the statements of claim dismissed, given deficiencies in the pleadings. 16Nevertheless, it is apparent that the claims and counter-claims will require consideration of the same contractual documents and that evidence will have to be led from Ms Nguyen and Mr Stolyar, as well as from those referred to in the pleadings as having been involved in various negotiations on Royal Guardian's part. It appears that they all they have relevant evidence to give on the various matters raised in the two sets of proceedings. The parties' cases will require consideration to be given to some material which is not relevant to all of the various claims, nevertheless, given the commonality of a significant part of the factual issues as to the parties' contractual positions and their dealings with each other, it seems to me that the better course is for the entirety of the parties' dispute to be dealt with in the one proceedings. 17While delay is one of the matters which arises for consideration in the exercise of the discretion here in question, I have concluded that it is not an overriding consideration in the circumstances, particularly given that discovery is not yet complete and evidence not yet served. The issues pursued by the parties are certainly not identical, but given the evidentiary cases necessary to be advanced in the two proceedings, in order that the various issues lying between these parties may be resolved, it seems to me that the course most consistent with the overriding purpose specified in s 56 of the Civil Procedure Act, is to have all of the issues dealt with in the one proceeding. 18Royal Guardian opposed that course, urging the view that the issues were completely different and that if there was a concern about the timing of orders made in separate proceedings, an application could be made to have the orders in the first heard proceedings stayed, pending determination of the second proceedings. It seems to me, however, that is not a convenient or practical approach, particularly when it is considered that it might result in different judges hearing the two sets of proceedings. 19The result may then be that different views are reached as to the parties' contractual positions, rights and obligations, given that in part, the issues lying between the parties will depend on an assessment of the credibility of the same witnesses. This possibility will be avoided by allowing Ms Nguyen and Mr Stolyar to press their case by way of cross-claim in the 2010 proceedings. That will also minimise Court time and costs incurred in respect of the receipt of the same evidence relevant to the parties' respective cases.

Pleading deficiencies 20Royal Guardian criticised Ms Nguyen and Mr Stolyar's pleadings as not adequately particularising their claims. Particulars have been sought and provided, but it was complained that they are inadequate. One of the complaints advanced was that the pleadings appear to seek an account, while claims are pressed for damages. 21It is clear both from the pleadings and the submissions advanced for Ms Nguyen and Mr Stolyar that no accounting is sought. It was explained that some of the money amounts pursued rest on calculations which are based on information which they have and on which they seek to rely. The basis of those calculations has, however, not been made clear on the particulars as presently pleaded or provided. 22For example, while it is pleaded in Ms Nguyen's case that the claim in respect of profit share pursued in paragraph 30 of the cross-claim, requires assessment on the evidence, in paragraph 31 there is a claim for an outstanding sum of some $2,444,565.31 in respect of the profit scheme. It was explained that this figure was based on known transactions, but the pleadings do not reveal this, or the basis of the calculation undertaken. That the money amount claimed should be understood as reflecting a claim that in each relevant month, a relevant threshold figure of $2M had been exceeded, is not readily apparent. While pleadings should contain only material facts, not evidence, the facts pleaded must be couched in such a way that the pleading can be clearly understood and that important facts are not left to be inferred, from an interpetation of differing parts of the pleading. That has not been achieved in the proposed cross-claim. 23In the case of certain other damages pursued, an assessment is sought on evidence yet to be led. In some cases, however, the pleading is entirely unclear. In paragraph 11 of the cross-claim, it is pleaded, for example: "11 On or about 20 February 2007 the first cross-claimant and the cross-defendant agreed that: (a) the first cross-claimant's salary would be $150,000.00 plus superannuation; (b) the first cross-claimant would be entitled to 0.25% plus GST for all settlements (securitised) from the commencement of employment to date; (c) the first cross-claimant would maintain full operational control; (d) all commissions to be paid by the 15th of every month; (e) the first cross-claimant would be entitled to a profit share being 25% of the profits of the cross-defendant for the financial year ending 2007, by 30 September 2007 50% and by 31 December 2007 50%. ("third profit share agreement") Particulars (a) The agreement was express. (b) The agreement was writing. (c) The agreement was signed by Anthony Tomazin (Managing Director of the cross-defendant) and the first cross-claimant and dated 20 February 2007." 24The intent of this paragraph was explained in submissions in terms which made it apparent that it needs to be repleaded. It was explained that this pleading reflected the terms of the contractual provision in question. If that be so, the term was deficiently drafted. The Uniform Civil Procedure Rules require that if documents or spoken words are referred to in pleadings, the effect of the document or spoken words must, so far as IS material, be stated; as must matters which, if not pleaded, would take the opposite party by surprise; and that particulars of alleged breaches be provided (see Rule 14.9). It follows that notwithstanding the ambiguity of the contractual term, the cross-claim must clearly reveal what Ms Nguyen and Mr Stolyar's contend the term means. 25In the circumstances, while Ms Nguyen and Mr Stolyar may have leave to pursue their claims by way of cross-claim brought in the 2010 proceedings, they may not proceed on the basis of the proposed cross-claim, but must be given leave to amend that proposed pleading, to rectify its deficiencies.

The implied undertaking 26By this motion Royal Guardian sought to be released from its implied undertaking in respect of certain business records produced on subpoena by the National Australia Bank, Westpac Banking Corporation, Commonwealth Bank of Australia, Andrew Kotrolos trading as Andrew Court & Associates and Nexia Court & Co, in order that they could be provided to the police. There was no issue between the parties that the documents were the subject of the implied undertaking. 27Those who have produced the documents to the Court have not been given any notice of this application. Whether they have any objection to the leave sought is not known. Contrary to the submissions advanced for Royal Guardian, it seems to me that before such leave is granted, they must be put on notice of the application and be given an opportunity to be heard, in the event that they have any opposition to the grant of the leave sought. Until that occurs, the orders sought should not be granted. It ought not to be assumed that the grant of the leave could give rise to no prejudice to the third parties who have produced the documents to the Court, or that they might not wish to be heard on the application. 28The position is that, as yet, Royal Guardian has not made any report to the police about any alleged fraud on the part of Ms Nguyen and Mr Stolyar. It does not require the documents in question in order to do so. On the evidence, it has now received legal advice that the documents produced show a money trail from Royal Guardian to Ms Nguyen and Mr Stolyar, relevant to the commission of a criminal fraud. Royal Guardian's solicitor deposed that the police were likely to take an allegation of fraud more seriously, if accompanied by the documents in question. 29It was not in issue that the documents may assist the police in their consideration of an allegation of fraud, or that the police could themselves take steps to obtain the documents, if a decision was made to investigate any alleged fraud. The offence in question is that provided by s 192E of the Crimes Act 1900, which provides: "192E Fraud (1) A person who, by any deception, dishonestly: (a) obtains property belonging to another, or (b) obtains any financial advantage or causes any financial disadvantage, is guilty of the offence of fraud. Maximum penalty: Imprisonment for 10 years. (2) A person's obtaining of property belonging to another may be dishonest even if the person is willing to pay for the property. (3) A person may be convicted of the offence of fraud involving all or any part of a general deficiency in money or other property even though the deficiency is made up of any number of particular sums of money or items of other property that were obtained over a period of time. (4) A conviction for the offence of fraud is an alternative verdict to a charge for the offence of larceny, or any offence that includes larceny, and a conviction for the offence of larceny, or any offence that includes larceny, is an alternative verdict to a charge for the offence of fraud." 30It was Royal Guardian's case that the factual matters advanced in its statement of claim could constitute a fraud under s 192B, even though the only fraud there pleaded was a claim of fraudulently concealing certain things, for the purpose of the Limitation Act 1969. Its position was that it was entitled to pursue its contractual rights in relation to the money in question and did not have to allege fraud, to make out its case. 31The parties were agreed that a party will be released from the implied undertaking if special circumstances are shown and that the way in which the exercise of the discretion in question should be approached, is as discussed by Wilcox J in Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 110 ALR 685 at 693: "For "special circumstances" to exist it is enough that there is a special feature of the case which affords a reason for modifying or releasing the undertaking and is not usually present. The matter then becomes one of the proper exercise of the court's discretion, many factors being relevant. It is neither possible nor desirable to propound an exhaustive list of those factors. But plainly they include the nature of the document, the circumstances under which it came into existence, the attitude of the author of the document and any prejudice the author may sustain, whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain, the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information), the circumstances in which the document came into the hands of the applicant for leave and, perhaps most important of all, the likely contribution of the document to achieving justice in the second proceeding." 32In Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FLAFC 3; (2005) 218 ALR 283, the Full Court of the Federal Court observed at [31]: In order to be released from the implied undertaking it has been said that a party in the position of the appellants must show "special circumstances": see, for example, Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 ; 110 ALR 685. It is unnecessary to examine the authorities in this area in any detail. The parties were not in disagreement as to the legal principles. The notion of "special circumstances" does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined. In Springfield Nominees ..." 33The application was opposed by Ms Nguyen and Mr Stolyar, who submitted that it was relevant that the case brought against them in these proceedings advanced no allegation of fraud, but merely a breach of contract; that there has been no complaint to police to date, notwithstanding that Royal Guardian had been in possession of the relevant facts for many years; that the police had relevant powers to issue warrants, which would compel production of the documents in question, if an investigation was ever pursued; that the release of the undertaking would involve an invasion of the privacy of various third parties; that there was no evidence of consent from those who had produced the documents; and that the application amounted to nothing more than an attempt to intimidate them, which would not be condoned by the Court. 34It was also submitted to be bizarre that Royal Guardian urged the Court to release the documents to police, who would have to prove the essential elements of any fraud offence beyond reasonable doubt, but itself did not pursue any allegation of fraud in these proceedings, which would have to be proven only on the balance of probabilities. It was submitted that Royal Guardian had not provided a sufficient explanation as to why it had not gone to police in 2005 with allegations of fraud, or even pursued an application to this Court for relief such as freezing orders. It was submitted that it would be of concern to the Court that documents produced to the Court in 2012 would be released to the police. It defied belief that complaint could not have been earlier made, so that the police could have obtained warrants in respect of the relevant documents. There would be significant prejudice to Ms Nguyen and Mr Stolyar if the release from the undertaking was granted. If charges were laid, an application to stay the proceedings would have to be made. The proceedings could not be maintained until the criminal proceedings were disposed of. 35For Royal Guardian it was submitted that the fact that there had never been a complaint made to police was not determinative (see Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476). It was a matter for the police to determine whether or not an investigation would not proceed because of a delay in complaint. What was important was whether the documents appeared to warrant investigation as to whether a criminal offence had been committed (see Andrew Koh Nominees v Pacific Corporation Ltd (No 2) [2009] WASC 207 at [52]). Even if there had been a complaint, which the police were not interested in pursuing, that would not be a basis upon which a release from the undertaking would be refused (see North East Equity Pty Ltd v Goldenwest Equities Pty Ltd [2008] WASC 190). It was sufficient if the documents provided significant evidence as to one of the elements of a fraud. 36Royal Guardian also submitted that the documents showed the financial advantage which Ms Nguyen and Mr Stolyar had obtained, given declarations of trust in their favour, in relation to shares held in the entities to which the Dibelle payments had been made, entities in which, by their pleadings, they claimed they had no interest. This provided cogent evidence relevant to the investigation of a fraud and was not information known to Royal Guardian, until the documents in question were produced. 37The application raises two competing public interests, discussed by Lee J in Bailey v Australian Broadcasting Corporation at 488, namely the protection of a party's right to privacy and confidence with respect to his or her documents, save to the extent necessary for the conduct of the proceedings and the location and prosecution of offenders. His Honour discussed the difference between offences which involve the infringement of private or individual rights, in respect of which, if infringed, there may be adequate civil remedies available to the wronged party and other types of offences. 38This distinction was considered by Jessup J in Websyte Corporation Pty Ltd v Alexander [2012] FCA 69, who observed at [17]: " The offences which Victoria Police are investigating correspond with civil wrongs in relation to which the applicant sues in this proceeding. Broadly, what is under consideration is the addition of a criminal sanction to the civil remedies which are available here. The offences being investigated fall into the category of those described by Lee J, in Bailey, as involving the infringement of private or individual rights rather than, by contrast, involving conduct which injures or damages the community or a section of it, or alleged criminal conduct which "it may be in the greater public interest to uncover". This is not for a moment to diminish the importance, in the public interest, of offences such as those now being investigated by Victoria Police being uncovered and, where appropriate, prosecuted, but it is a valid distinction nonetheless and one which, like Lee J, I consider relevant to the discretionary exercise upon which I am engaged." 39In this case, of course, civil remedies have, in fact, been pursued, against Mr Stolyar and Ms Nguyen, but not in relation to any fraud. There has, as yet, been no complaint to the police. That is not fatal to Royal Guardian's application, but the fact that there is no criminal investigation, because there has never been any complaint made to the police, is relevant to the exercise of the discretion. The parties did not attempt to make any assessment as to the viability of any criminal charge, resting on the documents in question. Given the nature of the documents in question, however, it must be accepted that they may be relevant to an assessment of whether there has been any offence committed. That would also depend, it would appear, on an assessment of the case advanced in these proceedings by Ms Nguyen and Mr Stolyar, as to Royal Guardian's knowledge as to the basis of the payments in question and the circumstances in which they were made. 40The documents have been obtained by subpoena from a number of third parties. In Websyte Jessup J was concerned that the court should not give currency to the notion that the search order there in question, would become in effect 'the first of a two-step process, in which if the documents so recovered appeared to be incriminating, the second step might involve a criminal prosecution for what is essentially the same delict' (see at [23].) His Honour refused to grant the release sought, having in mind the earlier conduct of the party then seeking that relief, which he considered had already breached the undertaking. That is not this case. 41The circumstances here are in summary that Royal Guardian has for some years been aware of the Dibelle payments which caused it in 2010 to bring civil proceedings against Ms Nguyen and Mr Stolyar; even so, it has not alleged any relevant fraud in these proceedings; nor has it ever complained to police that the matters which lie at the heart of these proceedings involve any offence; documents have now been produced on subpoena, which have revealed certain information of which Royal Guardian says it was not previously aware, namely Ms Nguyen and Mr Stolyar's interest in the entity to which the Dibelle payments were made; it has received legal advice that the documents evidence that an offence has been committed; it is in these circumstances that it seeks to be released from the implied undertaking; but it has not given any notice of the application to be released from the undertaking, to those who have produced the documents in question to the Court. 42In all of those circumstances I am not satisfied that Royal Guardian should, as yet, be released from its implied undertaking in relation to the documents in question. A different view may be taken if those who produced their business records to the Court are given an opportunity to be heard. They may oppose Royal Guardian's application and if they do, their position must be considered. 43In these proceedings Royal Guardian pursues the payments in issue, relying on contractual and statutory obligations which it claims lay between it and Ms Nguyen and Mr Stolyar. It does not pursue a claim in fraud. It does not seem to me that it is obliged to do so. It is not in issue that Royal Guardian is entitled to make a report to the police. Given the nature of the documents which have now come into its hands, it is apparent that they are relevant to a consideration of an allegation of fraud, if made to the police. That there is a possibility that the police will decide to investigate and may take a view that an offence has been committed, with the result that charges are laid and that this may have an impact on the parties' pursuit of these proceedings, is not itself a basis for refusing the release which Royal Guardian seeks from the undertaking. 44If those who produced the documents in question to the Court have no objection to their business records being produced to the police, it is difficult to see that a basis for Royal Guardian's release from its implied undertaking would not thereupon arise in the present circumstances 45I have not been persuaded, however, that the Court's discretion should at this stage be exercised in the way which Royal Guardian has urged. In the circumstances I take the view that its motion should not be dismissed, but it should be given leave to further pursue its application, if it wishes, after service of the motion upon those who have produced the documents to the Court.

Costs 46I will hear the parties on costs, noting that the usual order is that they follow the event.

Orders 47The parties should confer as to costs and the further course of the litigation, given the conclusions I have reached. For now, I make the following orders:

1. Grant Ms Nguyen and Mr Stolyar an extension if time to bring a cross-claim in the 2010 proceedings, but refuse Ms Nguyen and Mr Stolyar leave to proceed on the proposed cross-claim.
2. Dismiss Ms Nguyen and Mr Stolyar's joinder motion.
3. Grant Ms Nguyen and Mr Stolyar leave to file an amended cross-claim within 14 days of this judgment.
4. Grant Royal Guardian leave to further press its application for release from its implied undertaking in relation to documents produced to the Court under subpoena, after service of its motion upon those who have produced the documents in question to the Court.
5. List the matter for directions before me at 9.30 am on 2 July 2012.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 August 2012