Salim v Loh

Federal Court of Australia|2004-04-06|Before: French J

REASONS FOR JUDGMENT ON MOTIONS TO STRIKE OUT PLEADINGS, TO DISMISS APPLICATION, FOR SECURITY FOR COSTS AND ON COSTS OF DECONSOLIDATION ORDERS Introduction 1 Two applications are brought by investors in an ostrich farm project operated in 1998 and subsequently by Ostrich Meat & Marketing Company (Australia) Ltd (OMM) now in liquidation. The application in WAD9 is brought by an Indonesian citizen who lives in Jakarta although he has family living in Australia. The other application, WAD10 of 2004, is brought by his parents who, it is said, live in this country. 2 The applicants complain that they were induced to sign agreements with, and pay money to, OMM by reason of misleading or deceptive conduct on the part of OMM and negligent non-disclosure of material facts which also amounted to a breach of fiduciary duty. They claim damages and equitable compensation under various causes of action which they set up. Their claim is brought against the company and its four directors. The proceedings have a long and unhappy history which is referred to in an earlier judgment, Kurniadi v Loh [2005] FCA 49, and later in these reasons. 3 Three of the respondents, former directors of the company, seek to strike out substituted statements of claim which have been filed by the applicants in the two proceedings. The second respondent seeks summary dismissal of the application in WAD10. The second, third and fourth respondents also seek orders for security for costs. The applicants seek directions as to the conduct of the trial of the two applications and the mode of taking evidence. 4 For the reasons which follow I have come to the conclusion that although the substituted statements of claim and their proposed successors, amended substituted statements of claim, have significant difficulties the thrust of the applicants' case is clear enough. It is, in my opinion, inappropriate to add to the expense and delay already incurred in these proceedings by striking out the numerous paragraphs of the substituted statement of claim, and its proposed successor, to which the respondents have taken objection. On the other hand, given the undoubted difficulties with the pleading, I do not think that the respondents should be required to file defences to them. I propose therefore to order that pleadings be dispensed with and that the respondents be required to file statements of their contentions of fact and law. The sums of money involved in the alleged investment by the applicants are relatively small and, I suspect, are dwarfed by the legal costs incurred in these proceedings up to date. 5 I do propose to accede to the applications for security for costs made by the second, third and fourth respondents and will direct that the applicant in WAD9 provide security in the sum of $30,000 in respect of each of the second, third and fourth respondents. Stay orders will be made in that application and in WAD10 in the event that security is not provided. A motion for summary judgment against the applicants in WAD10 brought by the second respondent is dismissed. I propose to make orders as to the conduct of the trial which are foreshadowed in these reasons. Procedural history 6 The history of these proceedings from their commencement in this Court to their transfer to the Federal Magistrates Court, their consolidation in that Court, their re-transfer to this Court and their subsequent deconsolidation, is set out in the reasons for judgment in Kurniadi. 7 Upon the deconsolidation of these and a number of other related proceedings the applicants in each of WAD9 and 10 of 2004 were directed to file and serve a substituted statement of claim on or before 18 February 2005. Directions were also given requiring the respondents to file any motion for security for costs by the same date. Any motions to strike out the statement of claim were to be filed and served by 25 February 2005. Following these directions a number of events occurred: 1. A substituted statement of claim was filed in each of WAD9 and 10 on 11 February 2005. 2. Motions to strike out the substituted statement of claim were filed in WAD9 by the second, third and fourth respondents on 24, 25 and 25 February respectively. A motion to strike out the substituted statement of claim in W10 was filed by the fourth respondent on 25 February. 3. On 9 March 2005, a motion was filed by the second respondent seeking, by way of summary judgment, to dismiss the application in WAD10 in its entirety. 4. Motions for security for costs were filed in WAD9 and WAD10 by the second and fourth respondents and in WAD9 by the third respondent on 15, 18 and 21 February respectively. 8 The applicants have subsequently filed in each case an amended substituted statement of claim in an endeavour to meet objections to the substituted statement of claim reflected in the strike out motions. Submissions have also been filed relating to the costs of the deconsolidation proceedings. The substituted statement of claim 9 It is convenient first to deal with the substituted statement of claim (SSC) which has been filed in each of these matters. 10 The SSC in WAD9/2004 pleads causes of action said to support claims for relief against the various respondents by way of damages pursuant to s 82 of the Trade Practices Act 1976 (Cth) (the Act), ss 945 (presumably s 995) and 1005 of the Corporations Law, damages at law and for breach of contract. Equitable compensation for breach of fiduciary duty is claimed, together with indemnity costs and interest. 11 The applicant alleges that OMM, the fifth respondent, is a company incorporated in Western Australia on 31 October 1994 which was made the subject of a winding up order in the Supreme Court of Western Australia on or about 22 January 2002. The action against OMM is brought pursuant to leave granted by the Supreme Court of Western Australia on 25 June 2003. It appears that there has been no formal joinder of OMM although it has been treated as a party in the proceedings. The applicants seek to rectify that defect by moving for its joinder. OMM is said to have no assets from which to pay any dividends in the winding up and/or to pay any creditors including the applicant. The other four respondents, Messrs Loh, Ashman, Marshall and Pollard are said to have been directors at the material times. 12 In pars 4 to 25 of the SSC a number of matters, including the state of global markets for ostrich hides, are pleaded to establish that in 1994 and subsequently OMM, which operated an ostrich farm near Pinjarra, was a failing company in a parlous financial position. In summary the matters set up are as follows:

Associate: Dated: 6 April 2005 Counsel for the Applicants in WAD9 of 2004 and WAD10 of 2004: Mr S Jacobs and Ms K Garrett

Solicitor for the Applicants in WAD9 of 2004 and WAD10 of 2004: Hancocks Solicitors

Counsel for the Second Respondent: Mr S Forbes Solicitors for the Second Respondent: Paiker & Overmeire Counsel for the Third Respondent: Solicitors for the Third Respondent: Mr NG Pakes Counsel for the Fourth Respondent: Murcia Pestell Hillard Solicitors for the Fourth Respondent:

Mr T Chin Lawton Gillon

Date of Hearing: 31 March 2005

Date of Judgment: 6 April 2005

THE COURT ORDERS THAT: A. On each of the Second, Third and Fourth Respondents' motions to strike out the substituted statement of claim or parts thereof: 1. The motion is dismissed. 2. The costs of the motion is in the cause. B. On each of the Second, Third and Fourth Respondents' motions for security for costs: 1. The applicant is to provide security for the costs of the action up to and including trial in the amount of $30,000 for each of the second, third and fourth respondents, such security to be provided by way of bank guarantee in a form approved by the Registrar or as otherwise agreed on or before 6 May 2005. 2. In the event that security is not provided as directed the proceedings are stayed from 7 May 2005 until further order. 3. The costs of the motions are reserved. 4. Out of the sum of $6,000 paid into Court pursuant to the order of McInnis FM, the sum of $700 will be paid out to the second respondent by way of its costs of the motion for security before McInnis FM. 5. The sum of $5,300 paid into Court by all applicants in the previously consolidated proceedings shall remain in Court pending the resolution of all proceedings or further order. C. The orders made on 4 February 2005 as to the costs of the deconsolidation motion be varied so that each party bears its own costs of the motion. The order that costs thrown away are the respondents' costs in the proceedings is not varied. D. On the Applicant's motion for directions: 1. The Ostrich Meat & Marketing Company (Australia) Ltd (In liquidation) be joined as fifth respondent. 2. The applications WAD9 and WAD10 of 2004 be heard concurrently with evidence in one being evidence in the other. 3. Pleadings be dispensed with. 4. The applicants' amended substituted statement of claim is to stand as a statement of its contentions of fact and law. 5. The respondents are each to file and serve contentions of fact and law by times to be directed. 6. Evidence at the trial of the application is to be by way of affidavit and alternatively witness statements to be adopted by the witness as part of his or her evidence-in-chief. 7. Liberty to apply for further directions as to timetabling. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

A. On the Second Respondents' motion for summary judgment: 1. The motion is dismissed. 2. The costs of the motion are reserved. B. On the Fourth Respondent's motion to strike out parts of the substituted statement of claim: 1. The motion is dismissed. 2. The costs of the motion are in the cause. C. On the Second and Fourth Respondents' motions for security for costs: 1. The proceedings will be stayed on and from 7 May 2005 until further order in the event that, by that date, the applicant in WAD9 of 2004 has failed to provide the security ordered in those proceedings. D. The order made on 4 February 2005 as to the costs of the deconsolidation motion be varied so that each party bears its own costs of the motion. The order that costs thrown away are the respondents' costs in the proceedings is not varied. E. On the Applicants' motion for directions: 1. The Ostrich Meat & Marketing Company (Australia) Ltd (In liquidation) be joined as fifth respondent. 2. The applications WAD9 and WAD10 of 2004 be heard concurrently with evidence in one being evidence in the other. 3. Pleadings be dispensed with. 4. The applicants' amended substituted statement of claim is to stand as a statement of its contentions of fact and law. 5. The respondents are each to file and serve contentions of fact and law by times to be directed. 6. Evidence at the trial of the application is to be by way of affidavit and alternatively witness statements to be adopted by the witness as part of his or her evidence-in-chief. 7. Liberty to apply for further directions as to timetabling. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Trade Practices Act 1976(Cth)s 52, s

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