Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors

Supreme Court of Victoria|2017-03-06|Before: VICKERY J

PRACTICE AND PROCEDURE - Application to amend defence in course of final address - Cross application to plead a reply to amended defence - Cross application to amend statement of claim in response to amended defence - Balancing of competing claims of prejudice in exercise of discretion - Case management issues in exercise of discretion.

1 The trial has been conducted pursuant to a 'sequential trial' model described and ordered in Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 1).[1]

2 On 8 February 2017 the Court delivered its reasons on the First Tranche Questions on 8 February 2017.[2]

3 The Court said in its reasons in relation to First Tranche Question 3:[3]

In answer to the First Tranche Question 3: Is Lumarkye a constructive trustee with respect to the Sydenham Property and Lot 202 or is it required to pay compensation to Ying Mui? The answer is that the Court is presently unable to answer this question in the light of the submissions that have been made.

It is a matter of note that, although the two properties comprised real estate which was, in all likelihood, subject to the Torrens system of land registration in Victoria, no defence of indefeasibility of title was either pleaded by Lumarkye or contended for in submissions. In Farah Constructions, the High Court held that the recipient of the real estate there in question had obtained indefeasible title to the properties transferred upon registration under the Torrens system. For this reason, it was held that the recipients could not be liable for knowing receipt, even if they had received the properties with notice of the breach of fiduciary duty. With some exceptions, indefeasibility of title protects registered proprietors from adverse claims to land in the absence of actual fraud on their part or on the part of their agents. The breach of fiduciary duty on the part of the fiduciary in Farah Constructions even if it had occurred, was held not to be of such an order that it could be described as "actual fraud". For this reason, the recipients, who became the registered proprietors of the properties in question, could not be guilty of fraud, even if they had received the properties with actual knowledge of the fiduciary's breach.

However, no such case was pleaded or at this point pressed in submissions.

The Court will need to hear further from the parties as to whether any and what amendment to the pleadings and further submissions should be entertained before determining this part of the First Tranche Question 3.

4 This consideration of First Tranche Question 3 arose out of positive findings made by the Court that the present owner of the Sydenham property and Lot 202, Lumarkye, received those properties from Ying Mui where it took a transfer of those properties in circumstances which constituted knowing receipt within the second limb of Barnes v Addy.

5 In response to the observations of the Court, the Sixth Defendant, Lumarkye, now makes an application to amend its defences in the form of an Amended Defence to the Consolidated Statement of Claim (the 'Consolidated Statement of Claim') dated February 2017 (the 'Amended Defence').

6 By paragraph [321] of the Amended Defence, Lumarkye proposes to plead that, upon registration of the Sydenham property under the Torrens system of land registration in Victoria, the Transfer of Land Act 1958 (Vic) (the 'TLA'), it gained an indefeasible title to the property.

7 By paragraph [347] of the Amended Defence, Lumarkye proposes a similar pleading in relation to the Lot 202 property.

8 The position of the Plaintiffs and the First to Fifth Defendants is that they do not oppose the amendments sought by Lumarkye.

9 However, the Plaintiffs contend that, in order to address the prejudice they claim they will suffer, in addition to the appropriate orders as to costs, two further groups of orders ought to be made, namely they be permitted to file and serve:

(a) a Reply in the terms of their draft Reply to Defence of Sixth Defendant, which relevantly pleads:

(i) an admission that the two properties were registered under the TLA with Lumarkye as the registered proprietor; and

(ii) that the title of Lumarkye was defeasible by reason of a fraud and by reason that Ying Mui has an in personam claim against Lumarkye, which are both particularised.

(b) an amended pleading in the terms of its draft Amended Consolidated Statement of Claim which relevantly pleads four new groups of claims and consequential amendments, being:

(i) alternative claims for relief being an account of profits and equitable rescission;

(ii) the proposed joinder of Dominic Low as a party;

(iii) amendments in relation to the Joint Investment Agreement (the 'JI Agreement') to conform with the findings made by the Court in answer to the First Tranche Question 1; and

(iv) claims that Lynn Ho acted as agent of Lumarkye and Dominic Low in relation to the two properties transferred to it as pleaded in the draft by paragraphs [315A], [342A], [323A], [349A], [335A] and [362A].

10 While Lumarkye and the First to Fifth Defendants do not oppose the application of the Plaintiffs to file and serve their proposed draft Reply to Defence of Sixth Defendant, Lumarkye opposes the application of the Plaintiffs to file and serve their draft Amended Consolidated Statement of Claim insofar as it pleads the amendments listed in sub-paragraphs (i), (ii) and (iv) above, and the First to Fifth Defendants oppose all of the amendments listed above.

11 The Sixth Defendant put on no evidence by way of affidavit or otherwise in support of its application to amend its proposed Amended Defence.

12 However, for the following reasons, I will grant the amendments:

(b) registration of the two properties under the TLA is admitted, and no new evidence is to be called in support of the pleas, which will be confined to legal argument;

(c) as a matter of justice, the issue ought to be ventilated and determined; and

(d) any prejudice can be addressed by an appropriate order as to costs.

13 It is appropriate to grant leave to the Plaintiffs to file and serve a Reply in the terms of their draft Reply to Defence of Sixth Defendant, and I will do so for the following reasons:

(b) the plea as to the defeasibility of title, if made out on the facts as to fraud, has an established legal basis[4] and the plea as the in personam claim ought to be argued;

(d) no new evidence is to be called in support of the pleas, which will be confined to legal argument;

(e) as a matter of justice, the issue of defeasibility of title ought to be ventilated and determined; and

(f) any prejudice can be addressed by an appropriate order as to costs.

Amendments to Consolidated Statement of Claim Sought by Plaintiffs

14 The case of Namberry Craft v Watson was cited in argument.[5] Although it is hard to imagine a case which is factually more distant from the present, an important principle derived from Aon Risk Services Australia v Australian National University[6] was adopted by the Court:[7]

As said in Aon, the observations by Gleeson CJ, Gaudron and Hayne JJ in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission are apposite:

"Discretion" is a notion that "signifies a number of different legal concepts". In general terms, it refers to a decision-making process in which "no one [consideration] and no combination of [considerations] is necessarily determinative of the result". Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made.

15 The discretions to be exercised in this case will be undertaken judicially applying the unique combination of factors which are found the be relevant.

16 The Plaintiffs claim that in order to redress the prejudice they will suffer by reason of now being exposed to the indefeasibility claims of Lumarkye in relation to the two properties wrongfully transferred to it, they ought to be placed in a position to claim alternative relief by way of an account of profits and equitable rescission. It was submitted that the Plaintiffs would have conducted their cases differently had the indefeasibility pleas been in place at an earlier time, however no particulars of this submission were provided.

17 It is to be noted that in Super 1000 v Pacific General Securities,[8] White J was prepared to entertain submissions from the parties in relation to a claim for an account of profits where it appears no such remedy had been sought by the claiming party and no submissions had been made about the availability of such relief. The Court invited the relevant parties to make further submissions on the question.[9]

18 The claims for relief amendments are opposed by Lumarkye and the First to Fifth Defendants on a number of grounds, namely:

(a) the grant of the amendment would result in inconsistent claims for relief in circumstances where an election as to relief has already been made by the Plaintiffs;

(b) a new case will now be advanced with the prospect of new evidence being called; and

(c) in terms of the position of the First to Fifth Defendants, they had no part in causing the problem giving rise to the application of Lumarkye amending its Defence, and ought not to be prejudiced by additional claims for relief now sought by the Plaintiffs.

19 One option was to defer the determination of this application until after a determination had been made on the indefeasibility question. However, I prefer the view that, if amendments are to be made, the earlier in the process these are undertaken, the better. All parties are then placed in the best possible position to be appraised of the cases they have to meet and at the earliest possible opportunity. This will not only be in aid of trial preparation but also can only assist in working towards any possible mediated settlement.

20 As to alternative and inconsistent remedies, a plaintiff is required to choose, or elect between them. However, the timing in this case is important. A plaintiff is not required to make the choice when the proceedings are commenced, or during the hearing of the trial. The plaintiff must make an election between alternative and inconsistent remedies before judgment is given and the Court is asked to make orders against a defendant.[10]

21 At present, this sequential trial has not reached the stage of making any final orders. Issues in relation to the quantum of any loss or damage or other compensatory relief have not yet been ventilated.

22 The Plaintiffs have not been put to their election, and are not at this stage obliged to make any election. Accordingly, no breach of the principles relating to alternative and inconsistent remedies arises.

23 As to a new case now being advanced with the prospect of new evidence being called, although new claims for relief are contemplated, with the prospect of evidence being called on the question of an account of profits, I am not satisfied that this will adversely impact on the case management of the trial.

24 The conduct of the present trial as a sequential trial by issues is quite different to the conduct of the trial in Amcor Ltd v Barnes,[11] where a late amendment to include a claim for relief by way of an account of profits was refused, and where the interests of self-represented parties and the way in which they conducted their cases were also taken into account.

25 The amendments sought by the Plaintiffs to plead alternative relief by way of an account of profits and equitable rescission at this stage of the proceedings, in my view, ought to be permitted for the following reasons:

(a) no new evidence on the equitable rescission claims is foreshadowed. This part of the case if it becomes necessary depending on the outcome of the indefeasibility issue, can be dealt with on the evidence as it now stands;

(b) the hearing of any claim for an account of profits, if it becomes necessary depending on the outcome of the indefeasibility issue, will await the hearing of the quantum aspects of the case; and

(c) although it is claimed that the First to Fifth Defendants will be exposed to prejudice caused by no fault on their part in the conduct of their cases, if that be the case, in my view, any such prejudice is outweighed by a prejudice to be suffered by the Plaintiffs if the amendments are not to be granted.

26 This application of the Plaintiffs and the consequential amendments of their Consolidated Statement of Claim are refused for the following reasons:

(a) Dominic Low has been already called as a witness to the proceeding and has been excused. It would not be in the interests of justice for him to become a party at this stage of the proceeding;

(b) although it has been submitted by the Plaintiffs that the joinder of Dominic Low is necessary to support its alternative claim for equitable rescission, in my view this is not necessary; and

(c) this view is strongly supported by the concession given on behalf of Lumarkye by its counsel, that no point will be taken by it that the Plaintiffs' claim for relief by way of rescission is defective by reason that Dominic Low has not been joined as a party.

Amendments to Conform with the Findings of the Court in Relation to the JI Agreement

27 The Plaintiffs ought not be permitted to amend their Consolidated Statement of Claim to achieve conformity with the findings of the Court made in relation to the JI Agreement.

28 This would serve no useful purpose, and give rise to unnecessary expense.

Pleading that Lynn Hoh was the Agent of Lumarkye and Dominic Low

30 The First to Fifth Defendants submitted that this application should be opposed, principally because:

(a) Lynn Hoh, who is the Second Plaintiff by Counterclaim, has already completed her evidence and been cross-examined;

(b) although the case presented by the Plaintiffs was that she was the 'controlling mind' of Lumarkye for the purposes of the sale transactions, it was not put to her that she was also the agent of Lumarkye;

(c) the Plaintiffs seek to amend their Consolidated Statement of Claim to plead the agency allegations in relation to Lynn Hoh for these purposes, and it would be unfair to now allege this to be the case in circumstances where she has not given any evidence in relation to the allegation;

(d) in these circumstances, although the First to Fifth Defendants did not advance a case that an application would be made to recall Lynn Hoh to answer any allegation of agency, they submitted that they could not be shut out from calling further evidence on the agency issue, should they be advised to do so.

31 In my view, it is, on balance, appropriate to grant leave to the Plaintiffs amend their Consolidated Statement of Claim to plead the agency allegations in relation to Lynn Hoh, and I will do so for the following reasons:

(a) the amendments may become necessary to support the alternative plea for equitable rescission, should that plea become enlivened following a determination as to the indefeasibility plea;

(b) the Plaintiffs will not require the recall of Lynn Hoh to advance their pleas of agency, and will rely entirely upon the existing body of evidence already called;

(c) although the First to Fifth Defendants cannot be shut out from re-calling Lynn Hoh or calling other evidence to counter the agency allegations, should the amendments be permitted, there is no certainty that this will be the case because it is too early to expect them to have sought advice and have given instructions on the matter;

(d) the pleading of agency is well particularised by the Plaintiffs in their draft pleading; and

(e) although there may be some prejudice caused to the First to Fifth Defendants by the proposed pleas of agency in having to address this new case, on balance, in my view, the prejudice will be greater to the Plaintiffs if they are to be denied the agency amendments.

32 The Plaintiffs are granted leave to amend their Consolidated Statement of Claim to plead the agency allegations in relation to Lynn Hoh and Lumarkye, and her husband Dominic Low.

Dispensation in relation to Browne v Dunn

33 In the course of argument discussion was entertained as to whether an order should be made dispensing with the rule in Browne v Dunn[12] in relation to 'puttage'.

34 In my view, such an order should be made, and I will make such an order.

35 The Sixth Defendant Lumarkye has not opposed an order that it pay the costs thrown away by its application to amend, and I will make such an order.

36 The plaintiffs are directed to prepare orders to give effect to these reasons in consultation with the other parties, and forward the settled orders to the Court by email for authentication.

[2] Ying Mui & Ors v Frank Kiang Ngan Hoh & Ors (No 3) [2017] VSC 29.

[4] See Russo v Bendigo Bank and Reichman [1999] VSCA 108; [1999] 3 VR 376, 385 [33] (Ormiston JA).

[10] Tang Man Sit v Capacious Investments Ltd [1996] 1 AC 514, 521.

[11] [2012] VSC 434 [130]-[143].

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