Rudenko v Rudenko & Sons Pty Ltd

PROCEDURAL BACKGROUND

1. In about late June or early July 2018, GTC Lawyers, the former lawyers of the plaintiff, ceased acting for the plaintiff in these proceedings.
2. At the hearing of a notice of motion brought by the plaintiff on 12 July 2018, her Honour Associate Justice Harrison made, inter alia, the following orders: (1) Grant leave to the plaintiff to amend his notice of motion so order (1) is to read: "1. An order pursuant to s 64 of the Civil Procedure Act 2005 (NSW) that leave be granted to the plaintiff to file a further amended statement of claim." (2) The plaintiff is to serve a copy of the proposed further amended statement of claim and any affidavits on or before 6 September 2018. (3) The defendant is to file and serve any affidavits and submission by 13 September 2018. … (5) The plaintiff is to pay the defendant's costs of today and the costs thrown away by the amendment.
3. On 7 August 2018, Carroll & O'Dea, the plaintiff's current lawyers, received instructions from the plaintiff to act in these proceedings.
4. On 14 September 2018, the proposed further amended statement of claim ("PFASOC") and supporting affidavit were served on the defendants' solicitors.
5. On 8 November 2018, the plaintiff served an amended notice of motion seeking leave to amend its pleading.
6. It may be noted the defendants contended that their requests for further and better particulars of the PFASOC did not clarify the claim. No application was expressly made in that respect.
7. At the directions hearing on 17 December 2018, Registrar Bradford fixed the amended notice of motion for hearing on 19 March 2019.

THE RELEVANT PRINCIPLES

1. There was no dispute about the relevant principles as they were articulated by the plaintiff. I consider them to be correct and represent the source of that which follows.
2. The Court has a broad discretion to grant leave to amend pleadings, which is to be exercised in the way that best promotes the Court's overarching purpose set out in ss 56 and 57 of the Civil Procedure Act of facilitating the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. The Court may, at any stage of the proceedings, on application by a party, order that a party have leave to amend a pleading in the proceedings, in such manner as the Court thinks fit: s 64 of the Civil Procedure Act.
3. Subject to the dictates of justice described in s 58 of the Civil Procedure Act, "all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending upon the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings": s 64(2) of the Civil Procedure Act.
4. In considering an application for leave to amend Courts have been guided by the following principles: 1. the object of the court is to ensure that a decision can be made on the real matters in controversy: Unilever Australia Ltd v Revlon Australia Pty Ltd (No 7) [2015] FCA 137 at [44]; 2. the "starting point [is] that all amendments should be made and allowed that are necessary to ensure the real questions in controversy between the parties are decided": Oswal v Apache Corporation (No 3) [2014] FCA 835 ("Oswal") at [5]; 3. Courts do not, at least in the current era, take an unduly technical or restrictive approach to pleadings: Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15 ("Thomson") at [13] (see also Oswal at [7]). Pleadings are "not an end in themselves, instead they are a means to the ultimate attainment of justice between the parties to litigation": Thomson at [13]. 4. leave to amend should be granted unless the proposed amendment is futile, such that the issue sought to be added is unlikely to succeed, the amendment is likely to be struck out or would cause substantial prejudice or injustice to the opposing party in a way that cannot be compensated by costs: Caason Investments Pty Ltd v Cao (2015) 328 ALR 396; [2015] FCAFC 94 at [21].

General

1. The plaintiff contended that the amendments brought about by the PFASOC concerned the following: 1. The pleading and particularisation of numerous loans provided by the plaintiff to the second defendant which have not been repaid and the relief consequent thereon; and 2. The pleading and particularisation of monies owed to the plaintiff by the second defendant pursuant to a Joint Venture Agreement to develop residential properly which the second defendant has breached, and relief consequent thereon.
2. The plaintiff further submitted: The defendants have objected to all of the amendments in the proposed FASOC, however in correspondence on this issue there has been a complete failure by the defendants to offer any clear or rational basis for its objections. The defendants' objections lack substance, particularly in light of the following: i. Leave to amend should be granted if the application is made in a timely manner and for a proper purpose. As to timing, the plaintiff's amendments were proposed shortly after the plaintiff instructed its current solicitors, Carroll & O'Dea, to act in the proceedings and those solicitors had the opportunity to review the file, including the state of the pleadings, and determine the appropriate steps for the plaintiff to take. ii. The FASOC essentially reformulates and refines the prevailing claims within the scope of the existing factual matrix, and are necessary to determine the real issues in dispute. iii. There has been no joinder of issues as the defendants are yet to file a defence. iv. The amendments clearly state what the plaintiff's position is in relation to the loans advanced by the plaintiff and the Joint Venture Agreement. There is nothing uncertain or unclear in how those issues are put forward by the plaintiff. v. The defendants will suffer no material prejudice by reason of the proposed amendments in the FASOC. [Footnotes omitted.]
3. The defendants initially objected to all amendments in the PFASOC but, as observed above, the contentions fixed upon the pleadings in the following in paragraphs: 7(a), 373, 375, 388 and 393.
4. The defendants contended that the PFASOC was embarrassing and likely to cause prejudice to the defendants.
5. I shall deal with each particular issue below seriatim.

The First Issue: Para 7(a) (the First Repayment Loan)

1. The pleading in para 7 appeared under the heading "Loan 1". It was pleaded that, by a contract made on or about 13 March 2011 between the plaintiff and the second defendant, the plaintiff agreed to lend to the second defendant the sum of $6,400 and the second defendant agreed to pay that amount. That was described as Loan 1.
2. In order to understand the argument developed with respect to the pleading in para 7, it is necessary to extract from the pleadings paras 7 and para 8. Those paragraphs appear below: 7. It was a term of the contract that the second defendant would repay the amount at the earlier of: a. receipt of income to enable repayment; or b. at the time of the sale of residential property from a proposed subdivision of 2A Shaw Street Killarney Vale NSW 2261 (DP 781/595549), into 4 and 6 Shaw Street Killarney Vale NSW respectively, which the plaintiff and second defendant were developing and owned as tenants in common in equal shares. (together First Repayment Term) 8. It was a further term of the contract that on the date of repayment of Loan 1, the second defendant would pay to the plaintiff, in addition to the amount advanced, the interest and bank charges incurred by the plaintiff in respect of Loan 1 at a rate or rates applied to those funds by the plaintiff's financiers (Second Repayment Term).
3. The first issue fixes upon the terms of pleading para 7(a).
4. The defendants contended: 1. The pleading is inconsistent with prior iterations of the statement of claim or particular thereof and not pleading in the alternative (see r 14.18 if the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). 2. Illustrations were provided in that respect. In the statement of claim, the plaintiff pleaded (at para 17), it was claimed the plaintiff and the second defendant verbally agreed that all loans would be repaid in full by the first and second defendant. The amended statement of claim was silent on when the alleged loan agreements were to be repaid. A request for further and better particulars asked "when the loan amounts were to be repaid". The reply to that request was "I will repay the money to you by the end of the month and/or after the current project is complete". Further, the plaintiff gave as particulars "that it was a term of each loan agreement that the money was to be repaid by the end of the month in which it was transferred and/or after the current project the First and Second Defendant was working on finalised" and that: "It was an implied term of each loan agreement that the First and Second Defendant were jointly and severally liable to each loan and/or the total loan amounts". 3. A further illustration concerned a draft table provided by the plaintiff on 22 December 2017 for each of the alleged loans. It was stated the loans were repayable at the earlier of: (1) Completion of the project at 6 Shaw Street, Killarney Vale (6 Shaw Street Project); or (2) Upon receipt by the Second Defendant of progress payments in respect of the 6 Shaw Street Project. 1. That may be compared to the present pleading: "receipt of income to enable repayment". 2. The pleading is vague and embarrasses. The pleading does not indicate to whom the receipt of income was to be given and by what amount. By way of example, it was submitted that it may be alleged that one month after monies were lent, the first and second defendants had sufficient money to trigger this condition of the contract. 3. The plaintiff did not press the issues raised in its written submission as to what was said and who said it. 4. There was no dispute that the pleading in para 7(b) was clear.
5. In summary, the plaintiff contended: 1. The plaintiff is being asked to plead and, therefore, prove a negative such as what income were required to earn. 2. The issue is irrelevant because para 7 (and similar paragraphs) contain a "qualifier" of being "at the earlier of". 3. Receipt of income simply means "funds available" or "ability to repay the loan". It was submitted "you can repay the loan at some point [when] you have income to repay the loan, or if not, at the sale of the properties". 4. The pleading in para 7(a) does not plead breach. The breach only relates to para 7(b). 5. The rule against inconsistency in pleadings only relates to an inconsistency with the proposed pleading not as to successive iterations of the pleadings.
6. The pleading in para 7(a) of the PFASOC is vague and uncertain. It is no answer to submit that the pleading operates in either of the circumstances contemplated by subparas (a) and (b). The pleading in para 7(a) is said to be one of the triggers for the requirement to repay the loan. It does not specify: 1. whom is the recipient of money; or 2. what sum of monies by way of "income" would activate the condition.
7. Ultimately the plaintiff accepted that para 7(a) would not be pressed as it would not be contended there was a breach in that respect. In view of the findings I have made that is an appropriate concession.

The Second Issue: Paras 373 and 375

1. After pleadings as to 52 loans in relevantly the same terms as Loan 1, save for the amounts claimed, the plaintiff made a pleading concerning all of the loans under the heading "Failure to Repay Loans 1-52". In order to understand the issue developed, with respect to para 375, it would be convenient to take in paras 372-376 under that heading, as follows: 372. In the premises, between March 2011 and April 2015 pursuant to Loans 1 to 52 inclusive pleaded herein, the plaintiff loaned to the second defendant the amount of $644,559.24. 373. The plaintiff has incurred interest charges totalling $65,693.90 in respect of moneys loaned to the second defendant pursuant to Loans 1 to 52 inclusive. 374. The plaintiff has incurred bank charges totalling $3.586.00 in respect of moneys loaned to the second defendant pursuant to Loans 1 to 52 inclusive. 375. In or about early June 2015 the plaintiff orally demanded the second defendant repay him the amount of all loans then outstanding, being loans 1 to 52 inclusive. 376. On or about 21 October 2016, the plaintiff, through his solicitors, GTC Lawyers, demanded that the second defendant repay to him the amounts owing pursuant to Loans 1 to 52 inclusively and additional sums loaned not pleaded herein.
2. In written submissions, the defendants contended: 28. The plaintiff alleges at paragraph 375 of the PFASOC (at 442) that an oral demand was made by the plaintiff to the second defendant in or about early June 2015. The defendants requested particulars of the alleged oral demand. The plaintiff replied (point 21 at 465) that this was not a proper request for particulars. 29. The plaintiff relies also upon a written demand sent on 21 October 2016 in the PFASOC at paragraph 376.(page 443) The letter of demand referred to in the PFASOC (at 151) refers to loans to the first defendant at paragraph 13. This places greater importance upon the allegation of an oral demand in circumstances where the written demand is likely defective as it refers to loans to company, not the second defendant. 30. Further was the oral demand for the alleged loans to the second defendant or was it an oral demand to the second defendant as the director of the first defendant to repay these alleged loans? It is unclear at this stage.
3. It was further submitted: 1. There is a defect in the written demand referred to in para 376 because the demand was made to the first defendant. 2. The flaw created an issue as to the particulars of the oral demand, namely, as to whether it was directed to the first or second defendant. 3. Further, para 373 inadequately pleads what interest is sought and what charges the plaintiff is entitled to given the pleading consists of 52 loan agreements and there not being an unliquidated claim. For example, para 8 pleads a claim that interest on bank charges incurred by the plaintiff with respect to loan 1. 4. It was not pleaded there was a general arrangement that all interest or charges be paid. 5. Further and better particulars were not sufficient as a global sum was pleaded, and the plaintiff was not entitled to a global sum.
4. The plaintiff contended that the pleading in para 375 clearly states that an oral demand was made to the second defendant to repay him.
5. In my view, that pleading is clear. The defendant speculates that it may be a demand to the second defendant as director of the first defendant but that is not pleaded. A possible defect in the written demand pleaded in para 376 does not diminish that conclusion. Nor was that issue ventilated, as such, in the challenge to the PFASOC.
6. There was a question raised as to the answer to particulars with respect to para 375 but that matter is not before the Court.
7. As to para 373, the plaintiff contended that the issues raised by the defendant had not been raised with respect to any prior pleadings nor had further and better particulars been sought by the defendants.
8. It was submitted that there was no necessity to particularise the interest or charge for each loan. A global sum was sufficient where the global sum is specified.
9. There is no barrier to the defendants pleading whether or not there was a term of the "agreement" requiring the payment of interest or charges. Further, it was submitted there was a term of the agreement as to the amount of interest or charges payable under the loan.
10. The plaintiff is correct to submit that there was pleaded in the amended statement of claim that it was a term of each loan agreement that the second defendant would repay the loans together with interest and charges, with respect to those loans, at the rate or rates applied by the plaintiff's financiers.
11. Those words are not pleaded, in substance, in the same terms, for example, in para 8. Paragraphs 373-374 provided particulars of interest and charges albeit in a global amount. The particular sums per loan is properly a matter for further and better particulars.
12. I reject the submissions of the defendants with respect to paras 373 and 375 of the PFASOC.

The Third Issue: Para 388

1. This pleading concerns money lent by the plaintiff to the first defendant.
2. Paragraph 388 of the pleadings was in the following terms: 388. In the alternative, the plaintiff claims the sum of $644,559.24, being money lent by the plaintiff to the first defendant between 2011-2015 in amounts pleaded herein as Loans 1 to 52, being repayable on demand.
3. The defendants submitted the pleading was manifestly inadequate because the pleading does not disclose "what were the terms, were they the same, what were the circumstances surrounding those circumstances". The terms referred to in that submission concerned the question of what monies were lent and what repayment was required.
4. The plaintiff contended that the pleading was purely an alternative which brought in the first defendant and prevented the need for replication if there is a defence raised that the loans were not with the second defendant. The pleading intends to repeat the pleading against the second defendant against the first defendant. This pleading is to the effect the second defendant is a director of the first defendant. The issue has not been raised previously by the defendant.
5. There is substance to the defendants' submissions, in this respect, although it is plain that the plaintiff intends to bring in an alternative pleading against the first defendant in consequence of the second defendant being a director of the first defendant.
6. I accept the submissions of the defendants in this respect.

The Fourth Issue: Para 393

1. The fourth issue concerns the joint venture agreement. Under the headings "Claims in Relation to the Killarney Vale Joint Venture" and the "Joint Venture Agreement", the plaintiff made a number of pleadings. The point of contention was para 393 but it will be convenient to address the issues raised in that respect to extract below the pleadings in paras 389-394 of the PFASOC: 389. In or about September 2001, the plaintiff and the second defendant entered into an agreement to join in a common business enterprise whereby they would jointly purchase residential property and develop the properties for sale on the residential property market (Joint Venture) and that the plaintiff and the second defendant would be equal partners in the said business (Joint Venture Agreement). 390. The Joint Venture Agreement contained the following terms: (a) the plaintiff and the second defendant would share the profits and bear the losses of the Joint Venture in equal shares; (b) the assets of the Joint Venture would belong to the plaintiff and the second defendant in equal shares; (c) that the plaintiff and the second defendant would contribute to the capital of the said business in equal shares; and (d) the plaintiff and the second defendant would act bona fide in the interest of the Joint Venture. 391. Further or in the alternative to sub-paragraph 390(d), it was an implied term of the Joint Venture Agreement that the parties would cooperate in the mutual interests of the Joint Venture and for the benefit of the joint venturers. 392. By reason of the plaintiff and the second defendant entering into the Joint Venture Agreement to cooperate in achieving the outcomes to which Joint Venture Agreement was directed and in doing so for their mutual benefit and interest, the plaintiff and the second defendant depended upon each other and reposed trust and confidence in each other, such that they owed the other fiduciary obligations under or in respect of the Joint Venture Agreement. 393. On or about 14 September 2001, and concomitant with the entry into of the Joint Venture Agreement, the plaintiff and second defendant purchased as tenants in common in equal shares, a block of land referred to as 2A Shaw Street, Killarney Vale NSW 2261 (Killarney Vale Property). 394. On or about September or October 2001, the plaintiff and the second defendant agreed that they would, pursuant to the Joint Venture Agreement, develop the Killarney Vale Property into two separate lots being known as 4 and 6 Shaw Street, Killarney Vale NSW 2261 (respectively, the 4 Shaw Street Property, and the 6 Shaw Street Property) and erect a dwelling on each.
2. The essential complaint regarding para 393 of the PFASOC was the use of the words "and concomitant with entry into the Joint Venture Agreement".
3. The root of the concern was explained by the defendants as follows: 34. The plaintiff appears to proceed upon the basis that there was a joint venture between the plaintiff and the second defendant, where notwithstanding any other projects or the length of the joint venture, the plaintiff was entitled to half of the net sale proceeds from one project in isolation, without any consideration of any expenses, liabilities or contributions to the alleged joint venture in its entirety. 35. The reliance by the plaintiff on a joint venture agreement, without providing proper particulars of what that joint venture agreement entailed, to pursue a claim for one aspect of the joint venture, prevents the defendants from being able to meet the claim. 36. In other words, there is a joint venture agreement, but don't worry about this and only concern yourselves with one project. The defendants are entitled to know the case they have to meet.
4. The defendants sought to distinguish payment by the plaintiff to the first defendant alleged to be loans to the second defendant from payments made by the plaintiff to the joint venture.
5. The defendant accepted the issue may fall into the area of particularisation and stated that they had sought particulars to no avail. The particulars were directed to what was the joint venture agreement. Attention was fixed upon the following: 1. What were the arrangements between the plaintiff and the first defendant? 2. If the first defendant was the vehicle for the joint venture, what amounts had the plaintiff contributed to the first defendant? 3. What was the extent of the works and projects undertaken, the subject of the alleged joint venture? 4. What were the expenses associated with the 6 Shaw Street property, considering the plaintiff had informed the defendants, that the first defendant constructed the dwelling on 6 Shaw Street?
6. The plaintiff correctly submitted that para 390 squarely sets out what the joint venture agreement contained and what it was directed to. There was only one property the joint venture agreement related to and that was the pleading in para 390.
7. It was pleaded the plaintiff and the second defendant would share or bear losses in equal shares and the assets would be held in equal shares.
8. In my view, as conceded by the defendants, the issues raised by the defendant, in this respect, are a matter for particularisation and that the terms of paras 389, 390 and 393 adequately plead the existence of the joint venture, the parties to it, its purposes and its relationship with the pleaded property.
9. I reject the defendants' submissions in this respect.

CONCLUSIONS

1. As earlier mentioned, the plaintiff effectively conceded the challenge to para 7(a) of the PFASOC.
2. The defendants accepted that, if that be the only lacuna in the pleadings, they would not oppose leave being granted. Implicitly, the defendant opposed leave if the defects in the pleadings extended beyond that point.
3. The Court has found that the pleadings in para 388 should also be rejected for vagueness and uncertainty as alternative pleadings against the first defendant for all loans.
4. Having regard to the aforementioned relevant principles bearing upon the application in the matter and the submissions of the plaintiff, as extracted at subparas (i)-(v) (absent the preamble) in [22] above, it would appear there is a proper basis to grant leave to amend in terms of the PFASOC, save as to paras 7(a) and 388. I will make provision for the parties to file further written submissions in that respect, if they desire, within 7 days. If that step is taken the Court will determine any further issues on the papers.
5. The plaintiff initially accepted that in circumstances where he was seeking leave to bring the PFASOC, he consented to an order that he pay costs thrown away in consequence of the amendments.
6. It was, however, argued that the plaintiff should have costs of the application to amend, if successful, because the defendant has caused costs to be incurred by their application ("the second costs consideration").
7. In light of the conclusions reached by the Court in this judgment, the contention as to costs by the plaintiff, with respect to the second costs consideration, must fail.
8. The defendants shall have costs thrown away with respect to the PFASOC and of the hearing of the application to amend the amended statement of claim.

DIRECTIONS

1. The Court makes the following directions: 1. The parties shall file and serve any submissions, if required, as to the disposition of the issue of leave having regard to the terms of this judgment within 7 days of the publication of this judgment. 2. In the event the parties agree upon the appropriate orders, the plaintiff shall file consent orders within 7 days of the publication of this judgment.

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: 10 May 2019