Central Areas Ltd v Zuks [No 2] - [2020] WASC 316

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   CENTRAL AREAS LTD -v- ZUKS [No 2] [2020] WASC 316
CORAM:   ALLANSON J
HEARD:   ON THE PAPERS
DELIVERED          :   4 SEPTEMBER 2020
FILE NO/S:   CIV 2917 of 2017
BETWEEN:   CENTRAL EXPLORATION PTY LTD
First Plaintiff
CENTRAL AREAS LTD
Second Plaintiff
RTG MINING INC
Third Plaintiff
AND
NIKOLAJS ZUKS aka NIKS ZUKS, NICHOLAIS ZUKS, NICHOLAS ZUKS, NIKOLIS ZUKS AND NIKOLAIS ZUKS
First Defendant
KALIA HOLDINGS PTY LTD
Second Defendant
KALIA LTD
Third Defendant
DAVID ALBERT LLOYD JOHNSTON
Fourth Defendant
TERRENCE ARTHUR LARKAN
Fifth Defendant
ADAM NIKOLAIS ZUKS
Sixth Defendant

Catchwords:

Practice and procedure - Where plaintiffs apply for leave to re‑plead after strike out application - Whether plea of tortious conspiracy discloses a reasonable cause of action

Legislation:

Nil

Result:

Application granted in part

Category: B

Representation:

Counsel:

First Plaintiff	:	No appearance
Second Plaintiff	:	No appearance
Third Plaintiff	:	No appearance
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance
Fifth Defendant	:	No appearance
Sixth Defendant	:	No appearance

Solicitors:

First Plaintiff	:	Bennett + Co
Second Plaintiff	:	Bennett + Co
Third Plaintiff	:	Bennett + Co
First Defendant	:	Bruce Legal Consultants (Perth)
Second Defendant	:	Tottle Partners
Third Defendant	:	Tottle Partners
Fourth Defendant	:	Lemonis & Tantiprasut Lawyers
Fifth Defendant	:	No appearance
Sixth Defendant	:	Bruce Legal Consultants (Perth)

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

Chong v CC Containers Pty Ltd [2015] VSCA 137
Little v Law Institute of Victoria [No 3] [1990] VR 257
R v Associated Northern Collieries (1911) 14 CLR 387

ALLANSON J:

Background

By an application dated 6 March 2020, the plaintiffs seek leave to amend their statement of claim in terms of the proposed second further amended statement of claim filed 6 March 2020 and amended 16 March 2020.
The revised statement of claim follows my decision delivered 21 February 2020. In summary, I held that the plea of tortious conspiracy may embarrass or delay the fair conduct of the proceedings, due to its circularity and failure to define with clarity and precision the elements of the claim. The plaintiffs were required to apply for leave to re-plead.
The first and fourth defendants object to the leave application in so far as it relates to the re-pleaded tortious conspiracy claim in pars 102 to 104 of the plaintiffs' minute.

The proposed tortious conspiracy plea

The plaintiffs plead:
102If (which is denied):
102.1the association of Mr Zuks, Mr Johnston and Mr Larkan (the Conspirator Defendants) and Mr Zuks Junior, Mr Sirr and Mr O'Sullivan was not formed to carry on a business with a view to profit and did not constitute a partnership at law as pleaded in paragraph 10 hereof; and
102.2Mr Zuks' conduct in paragraphs 70, 74, 75, 76, 79, 84, 86 and 92A to 92C hereof did not constitute a breach of the Separation Deed, the [Non-Disclosure Agreement] nor his director's duties (which is denied),
then in the alternative to paragraphs 87A, 93 to 95, 99B and 100B hereof, by no later than in or about August 2017 the Conspirator Defendants agreed to combine with a common design:
102.3for the sole or predominant purpose of causing detriment to or interfering with the plaintiffs' prosecution and development of the CEPL Project Interests[1] and discrediting the plaintiffs to the ABG; and
[1] Defined in par 57.3 as 'any and all interests of [the first and second plaintiffs] relating to the CEPL Joint Venture Agreement and activities in the Panguna region of Bougainville (including for the avoidance of doubt, the surrounding areas or within the Panguna Mine Area)'.
102.4with an intent to injure the plaintiffs,
(Common Design).
Particulars
(a)The Conspirator Defendants' agreement can be inferred from the concurrence of time, character, direction and result of the conduct pleaded in paragraphs 70, 74, 76, 79, 84, 85 and 86 hereof and the concurrence of character, direction and result of the conduct pleaded in paragraphs 92A to 92C hereof.
(b)The purpose and intent of the Conspirator Defendants' Common Design can be inferred from:
(i)the knowledge of the Conspirator Defendants as to the commercial intentions of the plaintiffs in respect of seeking to obtain directly or indirectly an interest in a mining or exploration licence in respect of the Panguna Mine in the circumstances pleaded in paragraphs 34, 35, 41 to 43A and 45 to 53A hereof;
(ii)the content of the August Presentation, the First October Presentation and the Second October Presentation; and
(iii)the conduct of each of the respective Conspirator Defendants referred to in paragraphs 70, 74, 76, 79, 84, 85, 86 and 92A to 92C hereof which, if it was engaged in without any view to profit (which is denied), affords no reasonable alternative explanation other than the Conspirator Defendants intended to injure the plaintiffs.
103Pursuant to and in furtherance of the Conspirator Defendants' Common Design:
103.1Mr Zuks engaged in the conduct pleaded in paragraphs 70, 74, 76, 79, 84, 86 and 92A to 92C hereof;
103.2Mr Johnston engaged in the conduct pleaded in paragraphs 70, 84 and 86 hereof; and
103.3Mr Larkan engaged in the conduct pleaded in paragraphs 84, 85 and 86 hereof.
104By reason of the conduct of the Conspirator Defendants, the plaintiffs RTG and CEPL have suffered loss and damage.
Particulars
The plaintiffs RTG and CEPL refer to paragraph 117 hereof.
The conspiracy plea must also be put into the factual context (as pleaded). The internal references within pars 102 to 104 also require brief explanation.
The plaintiffs plead that since 2015, Central Exploration has been actively pursuing its commercial interests to obtain mining or exploration rights in Central Bougainville.[2] In 2016 it entered into a joint venture agreement for the purpose (broadly stated) of obtaining an exploration licence for areas proximate to the Panguna Mine.[3]
[2] Statement of claim [13].
[3] Statement of claim [18].
In December 2016, Mr Zuks and Kalia Holdings entered into a written Separation Deed with the plaintiffs which, relevantly, referred to Central Areas' and Central Exploration's interests relating to the CEPL Joint Venture Agreement and activities in the Panguna region of Bougainville (including the surrounding areas or within the Panguna Mine Area).[4]
[4] Statement of claim [56] - [57].
In April 2017, Central Exploration entered another joint venture agreement, extending the scope of the joint venture's proposed activities to the area of the Panguna Mine.[5]
[5] Statement of claim [66].
The plaintiffs plead, in substance, that in or about May or June 2017, Mr Zuks, Mr Johnston, Mr Larkan, and three others (Mr Adam Zuks, Mr Rudi Sirr and Mr Kevin O'Sullivan), formed a partnership under the name or style Innovative Economic Solutions (or IES), which carried on the business of providing relevant advice and services to the Autonomous Bougainville Government (the ABG).[6]
[6] Statement of claim [10].
In August 2017, Mr Zuks and Mr Johnston prepared and published to persons on Bougainville a presentation on matters relating to economic development on Bougainville, including matters relating to the Panguna mining area.[7]
[7] Statement of claim [70].
The August presentation set out a 'Panguna specific action plan', which included the creation of an offshore corporate entity (Liberty Minerals), with the ABG as 100% shareholder. Under the plan, the Panguna mining licence was to issue to Liberty Minerals.[8] It is not alleged that the August presentation contained content to the effect that the plaintiffs, or any one of them, was not a viable option to be granted the Panguna licence.
[8] Statement of claim [71].
In October 2017, Mr Zuks and Mr O'Sullivan delivered two presentations to persons in Bougainville.[9]
[9] Statement of claim [74], [76], and [79].
The October presentations also put forward Liberty Minerals as the preferable option for the ABG and Landowners to consider when deciding to whom it would grant the licence to develop the Panguna Mine. Those presentations are alleged to have included terms that the plaintiffs were not a viable option to be granted the Panguna license.
The plaintiffs allege that by the August presentation, Mr Zuks and Mr Johnston directly competed with or involved the CEPL Project Interests; caused detriment or interfered with the plaintiffs' development of the CEPL Project Interests; and put forward an alternative option (Liberty Minerals) to the ABG when it was considering who would be granted the licence to redevelop the Panguna Mine.[10] The plaintiffs further allege that, by the October presentations, Mr Zuks 'sought to discredit the plaintiffs to the ABG', and discredited the plaintiffs.[11]
[10] Statement of claim [72].
[11] Statement of claim [78], [81].
Paragraphs 84, 85 and 86 plead matters relating to the incorporation of Liberty Minerals by one or the other of the defendants. The relevant conduct is alleged between 31 October 2017 (the reservation of the name) and 2 November 2017 (the incorporation). The plaintiffs allege that Liberty Minerals was incorporated as 'an alternative entity to the plaintiffs for the ABG to consider when deciding to whom it would grant the licence to redevelop the Panguna Mine', and the creation of Liberty Minerals was conduct furthering and implementing the presentations in August and October 2017.[12] The shares in Liberty Minerals are pleaded to be held by Mr Larkan, 'purportedly on trust for the ABG'.[13]
[12] Statement of claim [87].
[13] Statement of claim [11], see also [85].
Paragraph 92A pleads that, in June to December 2018, Mr Zuks negotiated with landowners in an area 'surrounding the Panguna Mine', and Mr Zuks entered into a deed agreement, land access agreement and joint venture agreement with the Landowners with respect to mining in that area. In about June and July 2019, Wyndale Holdings Pty Ltd (a company in which Mr Zuks is a director and shareholder) published presentations to prospective investors in Wyndale Holdings regarding opportunities in Bougainville.[14]
[14] Statement of claim [92B], [92C].

The issues

The strike out application effectively reduces to two issues:
(1)on the material facts pleaded as to the acts undertaken by the defendants, could the plaintiffs lead evidence from which the court could infer an agreement formed in or about August 2017 pursuant to which the defendants made the presentations in August and October of that year and incorporated Liberty Minerals; and
(2)on those facts, could the court infer the sole or predominant purpose of the defendants was to injure the plaintiffs.
In the earlier application, I struck out the conspiracy plea on the basis that it had a circularity which made it embarrassing. I did not intend to suggest, and it would be wrong to do so, that a party cannot plead and prove an antecedent agreement from the acts later done in furtherance of it. A court may infer an express agreement from the overt acts pleaded. As the court said in Chong v CC Containers Pty Ltd:
As conspirators will ordinarily conceal their unlawful agreement, it will often be the case that there is no direct evidence of the combination. The conspiracy may be proved without direct evidence of an express agreement or understanding as to the common design. It is generally a matter of inference deduced from certain acts of the parties done in pursuance of the apparent purpose in common between them. The overt acts done in furtherance of the combination may support the inference that there was such an agreement or understanding to further the common unlawful object of the combination. Separate acts of co‑conspirators may be relied upon which have such a concurrence of time, character, direction and result as naturally leads to the inference that these separate acts were the outcome of pre-concert or some mutual contemporaneous engagement evidencing the common object of the combination. A mere co-incidence of separate acts however, which by their conjoined effect cause damage, will not suffice. The evidence must be such as to permit it to be inferred that the acts were undertaken in pursuit of the common object so that it may be said that the actors acted in concert towards the common end.[15]
[15] Chong v CC Containers Pty Ltd [2015] VSCA 137 [133]. The phrase 'concurrence of time, character, direction and result' is from the decision of Isaac J in R v Associated Northern Collieries (1911) 14 CLR 387, 400.
On this application the court is not concerned with the evidence by which the pleaded facts will be proved. In this application the court should accept that the material facts pleaded are true. That is Mr Zuks and Mr Johnston 'prepared and published' the August presentation 'in their capacity as partners, alternatively associates, of IES'.
There is, in my opinion, sufficient concurrence in time, character and direction of the conduct pleaded in relation to the three presentations to permit the inference that Mr Johnston and Mr Zuks were acting in pursuit of a common object in making them. While it is not pleaded that Mr Johnston prepared or delivered the October presentations, the three presentations were comparatively close in time, presented to persons in Bougainville, related to mining, and connected through the promotion of Liberty Minerals as the preferable option to be granted the licence to redevelop Panguna Mine.
Mr Larkan is not pleaded to have acted in any of the presentations or to have had any knowledge of them. His involvement is confined to the incorporation of Liberty Minerals. It could, however, be inferred that Liberty Minerals was incorporated as part of an overall plan to promote it as a preferred licensee.
Counsel for Mr Johnston submitted that the entire plea against him relied on a single fact ‑ the appearance of his email address on a slide. That is not itself a reason to strike out the plea. The reference to Mr Johnston's email address in particulars is not the whole of the material facts relied on, merely a particular of evidence.
The second issue is whether the common object, the sole or predominant purpose of the defendants to injure the plaintiffs in the manner alleged, could be inferred from the pleaded facts. The plaintiffs rely on the availability of an inference of intent to injure from the knowledge of the defendants as to the plaintiffs' commercial intentions to obtain, directly or indirectly, an interest in a mining or exploration licence in respect of the Panguna Mine, and from the content of the presentations. They rely also, in this plea in the alternative, on the absence of any purpose of the defendants to themselves profit.
The inference of knowledge is pleaded by reference to pars 34, 35, 41 to 43A and 45 to 53A of the statement of claim. None of those paragraphs allege Mr Johnston received information about or was aware of the plaintiffs' commercial interests in Bougainville. Nor could an inference of knowledge on his part be drawn from those facts.
The defendants submitted that the plea of tortious conspiracy is inconsistent with the plea that the defendants' conduct was in the course of a partnership carried on for profit. It is an alternative plea, and I know of no rule of pleading that would prevent the plaintiffs pleading inconsistent purposes as an alternative.
But I accept the defendants' submission that the facts relied on would not permit the finding of an intent to injure. The plaintiffs, at trial, would not need to prove that intent is the only alternative inference arising from the facts, but that it is the more probable explanation of the defendants' conduct. The question is whether the overt acts relied on are capable of sustaining the conclusion that the defendants had the pleaded intent.[16]
[16] See Little v Law Institute of Victoria [No 3] [1990] VR 257, 271.
The making of the presentations, together with their content, and the incorporation of Liberty Minerals ‑ the material facts on which the plaintiffs rely ‑ are not capable of sustaining the intent for which the plaintiffs contend. The fact (assuming it be found) that the association of Mr Zuks, Mr Johnston and Mr Larkan, together with Mr Adam Zuks, Mr Sirr and Mr O'Sullivan was not formed to carry on a business with a view to profit and did not constitute a partnership at law,[17] does not cure that insufficiency. The fact that the defendants were not acting in the ordinary course of the business of a firm, or with the authority of their co-partners, in making the presentations and incorporating Liberty Minerals could not sustain an inference that their sole or predominant purpose was to harm one or more of the plaintiffs.
[17] Statement of claim [102.1]. The allegations pleaded in [102.2] regarding Mr Zuks breach of the Separation Deed, the Non Disclosure Agreement, and his director's duties, are not relevant.

The Wyndale Holdings plea

The plea regarding Wyndale Holdings in pars 92A to 92C raises a distinct issue. The agreement pleaded in par 92A and the presentations with regard to Wyndale Holdings are not pleaded to be related to Liberty Minerals, or to the promotion of an alternative licence holder for the Panguna mine. The facts relied on are connected primarily, if not solely, through their relation to the exploitation of land in an area surrounding the Panguna mine.
Although it is alleged that the second presentation included photographs featuring Mr Zuks, Mr Johnston, and Mr Larkan the plaintiffs do not clearly allege any association between Mr Johnston, Mr Larkan and the Wyndale Holdings management team.
The facts pleaded are not capable of sustaining an inference that the incorporation and promotion of Wyndale Holdings was part of some common design between Mr Zuks, Mr Johnston and Mr Larkan to which the presentations in 2017 and the incorporation of Liberty Minerals were also directed. The participation of Mr Zuks in the events in 2017, and in matters of a quite different character relating to Wyndale Holdings, is not sufficient connection from which the alleged agreement could be established.

Conclusion

The plaintiffs will not be given leave to amend to include the plea of conspiracy in paragraphs 102 to 104.
The plaintiffs will otherwise have leave to amend in terms of the minute filed 16 March 2020.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson
4 SEPTEMBER 2020