Argyle Diamond Mines Joint Venture v Kay Nominees Pty Ltd - [2001] WADC 292

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: ARGYLE DIAMOND MINES JOINT VENTURE -v- KAY NOMINEES PTY LTD [2001] WADC 292

CORAM: DEPUTY REGISTRAR HEWITT

HEARD: 16 NOVEMBER 2001

DELIVERED : 20 DECEMBER 2001

FILE NO/S: CIV 8133 of 1990

BETWEEN: ARGYLE DIAMOND MINES JOINT VENTURE
Plaintiff
AND
KAY NOMINEES PTY LTD (ACN 067 296 173)
Defendant

Catchwords:

Practice and Procedure - Western Australia - Amendment of pleading - Whether proposed amended statement of claim discloses a cause of action

Legislation:

Nil

Result:

Amendment allowed

Representation:

Counsel:

Plaintiff: Mr J R B Ley
Defendant: Mr T R Stephenson

Solicitors:

Plaintiff: Freehills
Defendant: Michael Rennie

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

DEPUTY REGISTRAR HEWITT: This action had its genesis in an interpleader proceeding which was brought by the State of Western Australia in regard to a quantity of diamonds in its possession by virtue of the execution of a warrant by the Commissioner of Police.
As originally constituted the present plaintiff and Lindsay Gordon Roddan were the claimants, however by a succession of procedural orders the action was converted to its present form. From about 1993 till about 2000 little progress was made in relation to the determination of the issue between these parties. The matter however has been revived and is now proceeding. In an earlier application I ordered that a paragraph of the plaintiffs then statement of claim be struck out and further ordered that the plaintiff do file and serve a minute of proposed amended statement of claim together with an affidavit of verifying the facts upon which the amendment was to be based within 35 days.
The matter for determination today involves the consideration of a minute of proposed amended statement of claim dated the 15 November 2001 filed subsequent to that order. The issue to be determined is whether or not that minute of proposed amended statement of claim sets out a viable cause of action in these proceedings. It is the contention of the defendant that the minute of proposed amended statement of claim neither sets out a valid cause of action nor is susceptible of amendment which would disclose such a cause of action. The defendant submits that I should refuse the application to amend into the form of the minute and furthermore in the light of its submissions should determine this action in favour of the defendant with appropriate orders.
The background to the matter and the pleading is most unusual and deserves scrutiny. The plaintiff is a joint venture carrying on the business of mining diamonds in the Argyle region of Western Australia. Its claim to the diamonds seized is, and here I paraphrase it, (a) that the diamonds seized exhibit unique marks structures and shapes which indicate they were mined from the plaintiffs mine; (b) that the diamonds could have only been obtained from the plaintiff unlawfully because (i) they were uncut; (ii) they were of a considerable size and quality and; (iii) such diamonds are not procurable in the market place.
In effect the plaintiffs case against the defendant is one in which it proposes to exclude as reasonable possibilities the fact that the defendant procured these diamond from a legitimate source as a consequence of which the plaintiff asks the Court to infer firstly that the diamonds were unlawfully procured and secondly that they are the property of the plaintiff.
The forensic difficulties of such a task are obvious however my concern as the present time is not whether or not such propositions are capable of being established by evidence but whether or not if those propositions are established they might be capable of persuading a Judge that the diamonds are the property of the plaintiff. I will study the matter in more detail.
The relevant pleading is contained at par 7 of the minute of proposed amended statement of claim and I think it is useful to reproduce the whole of that proposed pleading:
"7Save for the diamonds designated "KM3" and "B26" above, the said seized diamonds are and were at all material times the property of the plaintiff (the said seized diamonds, other than those designated "KM3" and "B26" are hereinafter referred to as "the diamonds") in that:
(a)the Diamonds were lawfully mined by the plaintiff from the Mining Tenements:
PARTICULARS
(1)All of the diamonds exhibit unique marks, structures and shapes which show that they were mined from the underground pipe of the plaintiff’s mine located on the Mining Tenements;
(2)None of the Diamonds exhibit those marks, structures and shapes which indicate that they were alluvial diamonds;
(3)Diamonds of the size, quality and quantity of the Diamonds could not have been obtained from the Mining Tenements without the use of the plant and equipment used by the plaintiff at the plaintiff’s mine.
(b)the diamonds can only have been obtained from the plaintiff unlawfully and without the knowledge or authority of the plaintiff because:
(1)one of the diamonds, namely that designated TL52 has not been treated with acid to remove dirt and the plaintiff does not sell or supply and has never sold or supplied diamonds to any person that are or were not treated with acid to remove dirt;
(2)all of the diamonds mined by the plaintiff from the Mining Tenements were disposed of in the manner set out at paragraphs (b)(3) to (5) below;
(3)save for the diamonds referred to at paragraph (4) and (5) below, the plaintiff sold all diamonds mined by it from the mining Tenements until February 1990, of the size and quality of the Diamonds, to the Central Selling Organisation (the CSO) only, and no one client of the CSO could legitimately acquire diamonds sourced from the plaintiff’s mine of the size, quality and quantity of the Diamonds;
PARTICULARS
After it had purchased diamonds from the plaintiff and others of its suppliers, the CSO pooled those diamonds, sorted them into boxes of similar size stones and sold the boxes to its clients.
(4)To the extent that the plaintiff retained diamonds of the size and quality of the Diamonds, the plaintiff manufactured or arranged for those diamonds to be manufactured and did not sell such diamonds as rough diamonds;
(5)Pursuant to its obligations the JVA, for the period from 1982 to October 1989, the plaintiff distributed to the West Australian Diamond Trust (WAD) 5% of its total productions and by reason of the selling practice of the WADT and its clients, the Defendant could not have lawfully acquired rough diamonds sourced from the plaintiff’s mine of the quality, size and quantity of the Diamonds;
PARTICULARS
(A)For the period from July 1988 to October 1989 the WADT sold all the diamonds it received from the plaintiff including those diamonds of the quality and size of the Diamonds, to one of either the CSO, the plaintiff or Nathan Aftergut (Mr Aftergut);
(B)the CSO dealt with all diamonds purchased by it from WADT in the manner pleaded at paragraph (b)(3) above;
(C)the plaintiff dealt with all diamonds purchased by it from WADT in the manner pleaded at paragraph (b)(2) or(b)(4) above;
(D)Mr Aftergut sold all diamonds purchased by him from the WADT of the size and quality of the Diamonds to the diamond manufacturers.
PARTICULARS
(I)Mr Aftergut is a diamond merchant in Antwerp;
and
(II)Mr Aftergut does not and did not sell rough diamonds from consignments of the size, quality and quantity of those sold to him by the WADT to any one other than diamond manufacturers;
(E)For the period prior to July 1988 the WADT sold all the diamonds it received from the plaintiff, including diamonds of the size and quality of Diamonds, to various diamond merchants and it was at all material times the invariable practice of such diamond merchants to sell rough diamonds from consignments of the size, quantity and quality of those sold to them by the WADT to diamond manufacturers only;
(F)For the period after October 1989 the diamonds of the WADT were sold by the plaintiff in the manner specified at paragraph (b)(2) or (b)(5) above;
(c)any person including the defendant who subsequently acquired the Diamonds once they have been unlawfully obtained from the plaintiff, has no title to them against the plaintiff."
To analyse par 7 by its individual sub-paragraphs, par A contains the basis upon which the plaintiff seeks to demonstrate that the relevant diamonds were sourced from its mine. I regard that paragraph as being relatively uncontentious. Paragraph B sets out the basis upon which the plaintiff seeks to infer that the diamonds were; (a) its property and (b) taken from it unlawfully. Subparagraph 1 is not contentious and is clear that insofar as diamond TL52 is concerned there is a case pleaded which should be allowed to proceed. Paragraph 2 and par 3 indicate that the diamonds mined by the plaintiff were either sold to the central selling organisation, retained by it for manufacture and not for sale as rough diamonds or distributed to the Australian Diamond Trust. I will first deal with subparagraph 3 where it is said that no one client of the central selling organisation could legitimately acquire diamonds sourced from the plaintiffs mine in the quality and quantity of the relevant diamonds because the manner in which the Central Selling Organisation sold the diamonds made it improbable that any one of its clients would come into possession of a parcel of diamonds of this quality and quantity. I immediately pause to comment that it is not immediately apparent to me that because no one client would come into possession of such a collections of diamonds there is no pleaded reason that I can perceive that a person or entity dealing with a number of clients of the Central Selling Organisation could not legitimately acquire the diamonds. The flaw as I perceive it in the relevant paragraph is that there is nothing to indicate that the clients of the Central Selling Organisation do not themselves have clients who could amass whatever selection and quantity of diamonds produced from the mine as they choose. It is really a question of how far the particulars need to go to alert the defendant to the propositions upon which the plaintiff intends to rely to establish the proposition that the diamonds were acquired from it unlawfully. As to subparagraph 4 that speaks for itself and is an indication that other than sales and distributions as detailed in par 3 and par 5 the plaintiff did not make rough stones available to the market.
I now turn to subparagraph 5 which concerns the distribution to the West Australian Diamond Trust. It is said that the defendant could not have lawfully acquired the diamonds through the trust because the trust either sold its diamonds through the Central Selling Agency, resold them to the plaintiff or sold them to one Nathan Aftergut (whom himself only sold to diamond manufactures) and to various diamond merchants who likewise only sold to diamond manufacturers.
The question I have to ask myself is whether if all of these facts were proved could (not would) a Judge as a matter of law conclude (a) that the diamonds were not legitimately obtained and (b) are the property of the plaintiff.
The pleading makes it obvious that diamonds of the required quantity and quality were sold by it to the market or distributed to the diamond trust. If the diamonds were in fact stolen would the facts as alleged in the pleading be sufficient to identify the plaintiff as the owner of those diamonds?
It is important at this point to distinguish evidence from pleadings. The plaintiff is not required to prove its case at this stage but simply to advance propositions which if proved are capable of, but not necessarily would, sustain a judgement in its favour. I regard the pleading in regard to the diamond TL52 as crucial. That is a diamond which, on the pleadings could not have been obtained legitimately and could only have been obtained from the plaintiff.
If the plaintiff is able to establish as it has pleaded, that it is unlikely that this collection of diamonds was acquired legitimately , then the presence among those diamonds of diamond TL52 might be sufficient to persuade a Judge to the necessary standard that the y were not only unlawfully obtained, but that the true owner of the collection is the plaintiff. At this level of determination it is not necessary for me to decide whether such an inference should be drawn but merely that it could be drawn.
On that basis I consider the proposed statement of the claim filed by the plaintiff is satisfactory and it should be permitted to amend in those terms.