Yap v Chong

Federal Court of Australia|2024-11-18|Before: Colvin J

Pursuant to rules 16.21(c) and (d) of the Federal Court Rules 2011 (Cth), paragraphs 15, 18, 19, 20, 21, 22, 23, 28, 30, 31, 33 and 34 of the defence dated 12 July 2024 be struck out.
The respondents have leave to replead a defence.
The respondents file and serve an amended defence on or before 27 November 2024.
The matter be listed for a case management hearing on 19 December 2024 at 10.45 am AWST. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

AND: JOHN TSE-LIANG CHONG First Respondent

AUSTRAL MIGRATION CONSULTANCY PTY LTD (ABN 15 601 686 042) Second Respondent

AUSTRAL MIGRATION CONSULTANCY SDN BHD (MALAYSIAN COMPANY NUMBER 201201032377) Third Respondent

order made by: COLVIN J DATE OF ORDER: 18 november 2024

The respondents do pay the costs of and incidental to the interlocutory application dated 3 October 2024 forthwith, such costs to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 In 2015 and 2016, Mr Thai Choy Yap, also known as Billy Yap, had dealings with Mr John Tse-Liang Chong about obtaining an Australian business visa. It appears that those dealings led to Mr Yap depositing $1.5 million into the bank account of Morena Perro Pty Ltd in 2016. The precise character of the payment is a matter in dispute. Mr Yap says it was an investment. Mr Chong appears to rely upon alleged dealings by which Mr Yap entered into a shareholders agreement and was issued with shares in Morena as being relevant to any determination of the character of the payment made by Mr Yap. 2 Mr Yap claims that he was induced to make the investment by representations made by Mr Chong to the effect that his investment would be secured over land owned by Morena and would be repaid within three years. Mr Chong is alleged to have made those representations on his own behalf, or as a director of Austral Migration Consultancy Pty Ltd (AMCA), or as a director of Austral Migration Consultancy Sdn Bhd (AMCB). 3 It appears to be common ground that Morena retains the amount of $1.5 million. 4 In proceedings commenced in this Court, Mr Yap claims that each of Mr Chong, AMCA and AMCB have engaged in misleading or deceptive conduct in breach of statutory proscriptions not to do so. Mr Yap relies, in particular, upon the terms of an email dated 22 August 2016 (August Email) sent by Mr Chong to Mr Yap. In his statement of claim, Mr Yap says (para 15) that the August Email stated, in effect: a. the term of the Applicant's investment would be between two to three years, after which the Applicant would be repaid his investment; b. the two to three year time frame worked well for the Applicant's visa requirements; c. interest on the Applicant's investment would be paid at the rate of 6.5% per annum; and d. security for the Applicant's investment would be provided over a piece of land purchased for $8.4 million. 5 Mr Yap then says that, at the request of Mr Chong (for himself or AMCA or AMCB), he deposited $1.5 million into Morena's bank account (para 17) and did so in reliance upon the representations made by Mr Yap in the August Email (para 23). He then says that at the time of the transfer of $1.5 million to Morena the amount was not secured against a piece of land that had been purchased for $8.4 million (para 28). That allegation is said to falsify the representation to the effect that the investment would be secured over land that had been purchased for that amount (para 29). Mr Yap also pleads, in the alternative, that the representation about security over land 'was a representation as to a future matter within the meaning of section 4 of the Australian Consumer Law' (para 30). He says said that by operation of s 4 of the Australian Consumer Law (ACL), the representation is taken to be misleading unless the maker had reasonable grounds at the time it was made and the maker is taken not to have reasonable grounds unless evidence is adduced to the contrary (para 31). 6 The alleged representation that there would be repayment within three years is also said to have been a representation as to a future matter (para 33) that is falsified by the application of s 4 of the ACL (para 34). 7 Section 4(1) of the ACL provides: If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. 8 Further, s 4(2): For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. 9 Relevantly for present purposes, the defence filed by Mr Chong, AMCA and AMCB (respondents) has the following features: (1) The respondents admit that Mr Chong sent the August Email to Mr Yap. (2) The respondents deny that the email had the meaning and effect alleged by Mr Yap and say 'that the respondents will rely upon the terms of the email for their full meaning and effect' (para 15). (3) The respondents admit the deposit by Mr Yap of $1.5 million into Morena's bank account and state that certain events (as specified in the defence) occurred in relation to a shareholders agreement for Morena, the issue of preference shares in Morena and the appointment of Mr Yap as a director of Morena (para 17). (4) The respondents deny that by sending the August Email any of them made the alleged representations (paras 20-21). (5) As to the claim that the $1.5 million was paid to Morena in reliance upon the representations, the respondents deny the allegation and state 'that the respondents will plead in response to the allegations contained in [the paragraph] upon the provision of proper particulars thereof' (para 23). (6) As to the claim that at the time of the August Email and at the time of depositing the $1.5 million, the amount of $1.5 million was not secured against a piece of land that was secured for $8.4 million, the respondents deny the allegation and state that they 'will plead in response to the allegations contained in [the paragraph] upon provision of proper particulars thereof' (para 28). The respondents also deny the plea that by reason of such matters the alleged representation about security was false (para 29). (7) As to the reliance by Mr Yap upon s 4 of the ACL the respondents deny the relevant allegations and say that the respondents 'will plead in response to the allegations contained in [the paragraph] upon provision of proper particulars thereof' (paras 30-31, 33-34). 10 In addition, as to the claim that the representations were made in trade or commerce, the respondents deny that allegation 'and further state that the respondents will plead in response … upon provision of proper particulars' (para 22). 11 Also, as to other allegations in the statement of claim concerning other documents that bear upon the context in which the alleged conduct of the respondents is alleged to have occurred, the respondents deny that those documents had the meaning and effect alleged and 'further state that the respondents will rely upon the terms of the [documents], in their context, for their full meaning and effect' (paras 18-19).

Application by Mr Yap to strike out certain paragraphs of the defence 12 Mr Yap objects to key aspects of the defence as being evasive and failing to disclose the true nature of the respondents' defence. He brings an application to strike out the relevant paragraphs of the defence (being, he says, paras 15, 18-23, 28, 30-31 and 33-34).

Relevant principles 13 The Federal Court Rules 2011 (Cth) specify the required characteristics for a pleading: r 16.02. Of present relevance are the requirements for the pleading to 'identify the issues that the party wants the Court to resolve', 'state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial' and 'not … be evasive or ambiguous'. 14 The required characteristics as specified in the Rules ensure that the pleadings in any case fulfil their function as stated by the High Court in Dare v Pulham (1982) 148 CLR 658 at 664, namely (a) they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it; (b) they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial; and (c) they give an understanding of the claim in aid of the right to make a payment into court. 15 The modern approach to pleadings eschews undue technicality or any counsel of perfection in favour of a practical approach which seeks to ensure that pleadings fulfil their functions. It gives effect to the overarching purpose of the Court's procedure now expressed in s 37M of the Federal Court of Australia Act 1976 (Cth). 16 It is just as important for pleadings to disclose with clarity what is not in issue as it is for them to disclose the nature of the case that is to be advanced. A statement of claim should be clear as to how far the claims goes and a defence should be clear as to those aspects of the case advanced by the applicant that are not in issue. Therefore, in considering whether a pleading exhibits the required characteristics (and thereby serves its required functions), it is important to evaluate what is contained within the pleading as well as what is absent, particularly whether the pleading fails to articulate the limits of what is in issue. 17 More generally, there is a duty upon counsel to expose the real issues and also to carry out instructions to defend consistently with the performance of that duty: Dyczynski v Gibson [2020] FCAFC 120; (2020) 280 FCR 583 at [214]‑[220] (Murphy and Colvin JJ). Consistently with those obligations, a defence must disclose precisely what is in issue. It must disclose the true ambit of what is to be relied upon in answer to the claim.

Outcome 18 At the hearing of the interlocutory application, I concluded that the defence is deficient in the three respects contended for by Mr Yap. I allowed the application to strike out the identified paragraphs of the defence. Quite properly, Mr Yap did not object to there being an opportunity to replead. I allowed the respondents an unconfined opportunity to replead so they can put on a defence that conforms to the relevant requirements. I then heard submissions as to the appropriate order for costs. Mr Yap sought an order requiring the respondents to pay his costs of the application forthwith. I reserved my decision on the question of costs. 19 These reasons are both my reasons for allowing the interlocutory application to strike out paragraphs of the defence with liberty to replead and my reasons for now ordering that the costs of the application be paid forthwith, such costs to be taxed if not agreed.

The three complaints about the defence 20 The three issues raised by Mr Yap concerning the defence were to the following effect: (1) the respondents' bare denial of the plea relying upon s 4 of the ACL was evasive or ambiguous; (2) the respondents had failed to disclose the nature of the case to be advanced in answer to Mr Yap's claim as to the effect of what was communicated by the August Email; and (3) the respondents' repeated pleas that they will plead their case in response upon provision of proper particulars failed to conform to the requirements of a proper pleading, especially where no particulars had been sought and operated as a means to defer delivering a defence.

As to (1), bare denial of reliance upon s 4 of ACL 21 There is a considerable body of law as to when a representation will be with respect to a future matter for the purposes of the provision: see, for example, Australian Competition and Consumer Commission v Woolworths Group Limited (formerly called Woolworths Limited) [2020] FCAFC 162; (2020) 281 FCR 108 (ACCC v Woolworths Group Limited) at [125]-[133] (Foster, Wigney and Jackson JJ). 'A representation will only be with respect to a future matter if it is in the nature of a promise, forecast, prediction or other like statement about something that will only transpire in the future': Lin v Zheng [2023] NSWCA 174 at [34] (Payne JA, Bell CJ and White JA agreeing). 22 As was explained by Thawley J in Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Hearing) [2023] FCA 420 at [16]: Section 4 of the ACL focusses attention on whether a person in fact had reasonable grounds for making a representation with respect to a future matter, not simply on whether there were reasonable grounds for making a representation. One way of articulating one of the intended effects of s 4 is to say that it 'require[s] the representor to identify the facts or circumstances (if any) actually relied upon before turning it over to the trier of fact to decide whether they were objectively reasonable and whether they support the representation made'. 23 Where a claimant relies upon s 4 of the ACL in respect of a representation as to a future matter, a respondent who seeks to justify the representation must establish an objectively reasonable basis for the representation which, in fact, was the basis for the respondent making the representation at the time it was made. 'The focus is on the reasonableness of the grounds as then known, not what may later become known': Australian Competition and Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114 at [182] (Gilmour, McKerracher and Gleeson JJ) (concerning the statutory predecessor to s 4 of the ACL). 24 As to what must be established by a respondent who seeks to meet the requirements of s 4 of the ACL, see the statement by Heerey J in Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513, applied in Crowley v Worley Limited [2022] FCAFC 33; (2022) 293 FCR 438 at [117] (Jagot and Murphy JJ), but noting the reservations in ACCC v Woolworths Group Limited at [74]-[75]. 25 Reliance upon s 4(1) may be pleaded in the alternative to a claim that the material facts relied upon gave rise to a representation of present fact: Tang v Yu [2024] FCA 297 at [74] (Stewart J). 26 It follows that a respondent who seeks to answer a claim that there was a representation as to a future matter to which s 4 applies must plead any matters relied upon to rebut the operation of the provision. In particular, the respondent must specify (a) whether it is denied that the representation is as to a future matter and any basis for that denial; (b) if the representation is established, whether any case is advanced in the alternative that there were reasonable grounds for making a statement of the kind alleged (noting the forensic inconsistency in advancing such an alternative); and (c) if there is said to have been reasonable grounds, the material facts relied upon to support that aspect of the defence. 27 In the present case, the plea by the respondents in answer to the reliance by Mr Yap on s 4 of the ACL was a bare denial coupled with a statement that the respondents will plead in response to the allegations 'upon provision of proper particulars thereof'. The submissions as to why a plea in that form might be appropriate were difficult to follow. They appeared to reduce to the proposition that the representations that were alleged could not be demonstrated and therefore it would be necessary for Mr Yap to amend his case and until that was done the plea was appropriate. 28 The position of the respondents cannot be sustained. The form of the existing plea, in substance, is a refusal to plead a defence as to a key part of the case advanced for Mr Yap. This is especially so in circumstances where the respondents have made no request for particulars (and have not demonstrated any proper basis for making such a request nor any reason why pleading a defence should be deferred until those particulars have been provided). 29 In conferral between solicitors, the respondents have stated that they do not seek to advance any case that there were reasonable grounds for the representations. Rather, their position is that the representations were not made and consequently there was nothing done in reliance upon them. There was no suggestion that any issue was raised as to whether the representations as formulated were in respect of future matters. These matters are not apparent from the defence. To the contrary, the claim that particulars are required and when provided there will be a plea in response suggests that there is some case to be advanced. 30 Plainly, the plea is evasive and ambiguous.

As to (2), the effect of what is stated in the August Email 31 The allegation by Mr Yap as to the effect of what is stated in the August Email is at the heart of his claim. It is the conduct of sending the August Email containing statements to the effect as alleged (when considered in the context of the other matters pleaded) that is said to give rise to the two representations; namely, that the $1.5 million investment would be secured against land purchased for $8.4 million and the investment would be repaid within three years. 32 In answer, the respondents admit that the email was sent. They admit that the $1.5 million was deposited into the bank account of Morena. They admit that $1.5 million has not been repaid to Mr Yap. They deny that the effect of what was stated in the email was as alleged by Mr Yap in the email. They say nothing of what their case is as to the effect of what was stated in the email. Yet, they maintain that they can refer at trial to the email for its meaning and effect indicating that there is some unstated respect in which the contents of the August Email will support some answer to the claim as to its alleged effect. That is to say, the respondents seek to advance a case that goes beyond simply saying that it does not say what Mr Yap alleges it says. 33 The consequence of a bare denial is that the respondents will not be able to raise a positive case. Any such case must be positively pleaded: O'Brien v Komesaroff (1982) 150 CLR 310 at 318. In submissions, the respondents disavowed any positive case. However, the respondents also submitted that: 'Statements which are alleged to comprise misleading or deceptive conduct … particularly a single email, are apt to be construed and considered within the entirety of the factual matrix within which any such statement is made. At least the entirety of the [August] Email chain would comprise part of that context …'. There were also somewhat oblique references to the significance of the shareholders agreement for Morena, the issue of preference shares in Morena and the appointment of Mr Yap as a director of Morena. As has been mentioned, these matters are pleaded in the defence but precisely how they are said to relate to the effect of the August Email is unclear. 34 Much was sought to be made by the respondents of an alleged 'mystery' as to the 'investment' said to have been made by Mr Yap. There is no such mystery. His case is that he paid $1.5 million into the bank account of Morena and that he was induced to do so by the representations which were misleading or deceptive. He says that he would not have paid the money had the representations not been made. He says that in reliance upon the representations he paid $1.5 million into Morena's bank account. He says that at the request of Mr Chong in his personal capacity or as a director of AMCA or AMCB he 'invested the sum of $1.5 million in Morena'. He says that despite demand no repayment of any part of that amount has been made. On the basis of those allegations, he claims the relief in the originating application which includes a claim for damages of $1.5 million and interest. 35 There is no plea in terms in the statement of claim that Mr Yap suffered loss or damage. But it is plain enough that his claim is that in reliance upon the representations he paid $1.5 million into the bank account of Morena as an investment of some kind and he has lost the money. He makes no claim based upon the nature of the investment or its true legal character. For example, he does not say that it is a loan that is repayable. Rather, he says that he was induced to pay over the money by the representations and he would not have done so if the representations had not been made. On that basis he says that he is entitled to damages of $1.5 million plus interest. 36 The only mystery concerns the nature of the defence to be advanced to that claim. In written submissions, the respondents said: The mystery of the 'investment' will need to be reconciled with the 3,300 'RDPC Redeemable Preference Shares' ('Preference Shares') issued by Morena Perro to the applicant and still held by the applicant (see 1 of the Claim). The ASIC records for Morena Perro state that the total amount paid for those shares was $1,499,982. By inference those shares are the 'investment'. The respondents will rely upon the [August] Email for its full meaning and effect. The respondents will also rely upon the entirety of the context within which the [August] Email was sent. That does not however require any positive plea of that context, which ultimately comprises of evidence, rather than material fact. (original emphasis) 37 Having regard to these submissions, the suggestion that a bare denial was sufficient compliance with the obligation to plead the nature of the case to be advanced by the respondents was unjustifiable. If these matters are to be relied upon, they must be pleaded. Plainly, the case that the respondents propose to advance by way of defence is not a bare denial as that term is properly understood. 38 Finally, as to this aspect, it was said that the respondents were not obliged to advance an alternative interpretation of the August Email. So much may be accepted. It is possible that their answer to the claim by Mr Yap is that the August Email did not contain any statement to the effect alleged. A case of that kind would be advanced by pointing to an absence of anything in the August Email to support such a claim. However, it is apparent from the submissions advanced for the respondents that their case is not of that kind. As has been explained, they say that regard to matters of context and the nature of the 'investment' that was made (and perhaps events that occurred between the August Email and the payment of the $1.5 million into Morena's bank account), demonstrate that something else was communicated to Mr Yap about the character of the 'investment'. That is to say, the way the respondents' case is to be run is to say that something else was communicated by the August Email when considered in the context of the events that occurred or that by reason of what occurred after the August Email there was no operative representation of the kind alleged by the time Mr Yap paid over his money.

As to (3), repeated pleas that the defence will be pleaded after provision of particulars 39 The position of the respondents concerning the provision of particulars was odd. It seemed to be informed by a view that it was inevitable that Mr Yap would have to change his claim to include a plea as to the nature of the 'investment' that he had made when he paid the $1.5 million into Morena's bank account. As has been explained, that view was misconceived. 40 A respondent may challenge the plea. In an appropriate case, a respondent may even answer aspects of a pleading on the basis that the plea is in a form to which a meaningful response cannot be pleaded beyond a general denial (on the basis that the pleading is too generally expressed to answer with particularity): Fuji Xerox Australia Pty Ltd v Whittaker [2020] FCA 1611 at [20]-[21]. However, it is no proper form of pleading by way of defence to say, in effect, 'I will tell you what my defence is once you plead a case that I consider you need to advance instead of the one you have pleaded'. 41 As has been explained, the paragraphs of the defence that were objected to adopted the formulation: 'the respondents will plead in response to the allegations … upon provision of proper particulars thereof'. However, particulars were not sought. Rather, what seems to have been intended by the plea is to say that unless and until you have pleaded a case that the respondents think is your real case, or the case you will ultimately need to run, the respondents will not plead their defence. 42 Again, this approach seems to be informed by a view about the need for Mr Yap to plead the character of the investment as part of his case. So, for example, it was submitted for the respondents that: 'It is inevitable that the applicant must replead the alleged representations, to properly address the Court as to the central "investment", being the Preference Shares' (original emphasis). Later, it was submitted: 'However, should the Claim change, as it inevitably must, the respondents reserve the right to plead a reasonable basis for any proper plea of "future matters" in relation to any properly pleaded "investment" or antecedent statements to the making thereof, or commitment thereto, by payment of monies in relation to that "investment"' (again, original emphasis). 43 For reasons that have been given, that approach was misconceived.

Conclusion 44 The paragraphs of the defence that have been objected to are evasive. Further, the submissions advanced in opposition to the interlocutory application make plain that the respondents seek to advance a defence the nature of which is not disclosed by the pleading that they have filed. Therefore, the pleading fails to perform its function of adequately disclosing the nature of the defence to be advanced by the respondents. Nor does it disclose the material facts that are said to support that defence. 45 For those reasons, I upheld the application to strike out the paragraphs to which objection was taken.

The appropriate order as to costs 46 Mr Yap seeks an order that the respondents pay the costs of the interlocutory application forthwith. The respondents did not oppose an order that the costs of the interlocutory application follow the event. 47 The Rules provide that generally an interlocutory costs order is not to be taxed until the whole proceedings have concluded: r 40.13. As I have noted, there are good reasons for such a general approach: Sharif v Vitruvian Investments Pty Ltd (No 2) [2023] FCA 619 at [4]. However, as I explained in Richmond v Ora Gold Limited [2020] FCA 70 at [28]-[38], there are circumstances in which it may be appropriate to exercise the discretion as to costs by ordering costs to be paid forthwith where an interlocutory application has been unsuccessful. See also the matters listed by Perram J in Watson v Kriticos (Costs Payable Forthwith) [2022] FCA 4 at [7]. 48 The objections raised by Mr Yap and the basis for them was put to those acting for the respondents. As has been explained, the position adopted by the respondents was unorthodox and could not be justified by a proper understanding of what was required in pleading a defence. Yet, those acting for the respondents persisted in maintaining, in substance, that they did not need to put on their defence. In substance, it was a refusal to plead the defence. That course was an unreasonable one to adopt. It resulted in avoidable delay and in unnecessary costs being incurred. Further, those costs have been incurred at an early stage of the proceeding. Consequently, if the usual approach is adopted, it will be some time until those costs might be recovered. Finally, the issues determined on the application are discrete and not of a kind where it is appropriate for the liability to meet those costs to fall in a way that takes account of the ultimate outcome of the proceedings. 49 For those reasons, I am satisfied that this is an appropriate case in which to require the costs to be paid forthwith. I note that the case for Mr Yap was advanced by two counsel. The costs allowed upon any taxation should be confined to the costs of one counsel. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.

Federal Court Rules 2011(Cth)rr 16.02, 40.13

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