Chan & Ors v Macarthur Minerals Ltd & Ors

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SUPREME COURT OF QUEENSLAND

CITATION:

Chan & Ors v Macarthur Minerals Ltd & Ors [2019] QSC 143

PARTIES:

SING CHUK CHARLES CHAN

(first plaintiff)

and
WAI LAP VICTOR CHAN
(second plaintiff)
and
WAI TAK KWOK
(third plaintiff)
v
MACARTHUR MINERALS LIMITED
ACN 103 011 436

(first defendant)
and
ALAN PHILLIPS
(second defendant)
and
JOE PHILLIPS
(third defendant)

FILE NO:

No 518 of 2016

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

7 June 2019

DELIVERED AT:

Brisbane

HEARING DATE:

8 May 2019

JUDGE:

Flanagan J

ORDER:

1.    Paragraphs 53, 54, 55, 56, 57, 58, 59, 59A, 59B, 65(a)(ii), (b) and (c) of the Third Further Amended Statement of Claim be struck out.

2.    The proceeding be dismissed.

3.    I will hear the parties as to costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT PLEADINGS – GENERALLY – where the second and third defendants and first and third plaintiffs had discussions to exploit certain mining tenements – where the plaintiffs became directors of a company which entered into an option agreement to purchase those mining tenements – where it is pleaded that the first defendant represented that it would enter into an option agreement to purchase the shares in the company – where it is pleaded that, in reliance on that representation, the plaintiffs caused the company to incur debts and in so were exposed to the risk of personal liability for those debts – where it is alleged that the first defendant decided not to enter into the proposed option agreement without communicating that decision to the plaintiffs – where it is alleged that the second and third defendants were knowingly involved in the first defendant’s alleged misleading or deceptive conduct – where the plaintiffs eventually suspended the company’s operations – where the company went into liquidation – where a judge of the Supreme Court ordered the plaintiffs to pay amounts representing the company’s outstanding debts – where the pleading alleges a causal link between the defendants’ conduct and the judgment debt – whether the pleading should be struck out for failing to disclose a reasonable cause of action

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT PLEADINGS – GENERALLY – where the defendants argue that allegations essential to the cases against each of the defendants cannot be supported or are inadequately particularised – whether these allegations should be struck out

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – GENERALLY – where the plaintiffs’ pleading has been amended on four occasions – where a previous version of the pleading has been struck out – where the plaintiffs took over a year to file a new pleading after the previous version was struck out – where the defendants apply for the proceeding to be dismissed – whether the pleading discloses a reasonable cause of action – whether the proceeding is frivolous, vexatious or an…

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Details
Case
[2019] QSC 143
Decision Date

CaseChat Overview and Summary

In the case of Chan & Ors v Macarthur Minerals Ltd & Ors, the plaintiffs, who were directors of a company involved in mining operations, sued the defendants for misleading and deceptive conduct and knowing involvement in such conduct. The plaintiffs alleged that the defendants, including the first defendant who had discussions with the plaintiffs about exploiting certain mining tenements, misled them into causing the company to incur debts, thereby exposing themselves to personal liability. The company eventually went into liquidation, and the plaintiffs were ordered to pay the company’s outstanding debts. The defendants sought to have the plaintiffs' pleadings struck out on the grounds that they failed to establish a reasonable cause of action.

The central legal issues the court needed to address were whether the plaintiffs' pleadings adequately established a causal link between the defendants' alleged conduct and the plaintiffs' losses, and whether the pleadings sufficiently particularised the allegations against each defendant. The court also had to consider whether the proceeding was frivolous, vexatious, or an abuse of process, given that the pleadings had been amended multiple times and the plaintiffs had taken a significant amount of time to file a new pleading after a previous version was struck out.

The court found that the plaintiffs' pleadings did not adequately establish a causal link between the defendants' conduct and the plaintiffs' losses. The plaintiffs had not pleaded material facts that would justify a reasonable inference that the impugned conduct was a direct or indirect contributing cause for the plaintiffs' decision to cause the company to incur debts while insolvent. The court also found that some of the allegations essential to the misleading or deceptive conduct and knowing involvement cases were not supported or were inadequately particularised. Furthermore, the court concluded that the proceeding was frivolous, vexatious, or an abuse of process due to the plaintiffs' repeated failure to properly plead their case and the significant delay in filing an amended pleading.

The court ordered that certain paragraphs of the plaintiffs' pleadings be struck out and the proceeding dismissed. The court also directed that the parties be heard on the issue of costs.

Orders

Orders of the court

1. Paragraphs 53, 54, 55, 56, 57, 58, 59, 59A, 59B, 65(a)(ii), (b) and (c) of the Third Further Amended Statement of Claim be struck out.

2. The proceeding be dismissed.

3. I will hear the parties as to costs.

Background

Background to the litigation

In the course of his Reasons, Bond J, correctly in my view, identified what is required to establish causation in misleading or deceptive conduct cases:[34][34] [2017] QSC 13, [37]-[40].“[37] The relevant aspects of the substantive law may be briefly stated:(a)A plaintiff is entitled pursuant to s 82 of the Trade Practices Act to recover loss or damage which the plaintiff has suffered ‘by’ conduct which contravened s 52.(b)The plaintiff must show that the losses suffered are causally related to the contravening conduct. In this regard, in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525, the joint judgment of Mason CJ, Dawson, Gaudron and McHugh JJ stated that s 82(1) should be understood as taking up the common law practical or common-sense concept of causation as discussed in March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506.(c)Of course, the offending conduct need not be the sole cause of the plaintiff’s loss: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [33] and [216]. It will suffice if the contravening conduct was a cause which materially contributed to the loss, despite the fact that there may have been other causes.(d)The reference to ‘by’ in s 82 has been interpreted as including the common law’s approach in contract and tort to limiting damages by reference to concepts such as remoteness. As McHugh J stated in Henville v Walker (2001) 206 CLR 459 at [136] (Gummow J agreeing):‘Given the long history of the common law's recognition of the concept of remoteness in assessing damages in contract and tort and its relationship with the issue of causation, it seems proper to read the term “by” in s 82 as including the concept of remoteness. By remoteness, I mean that the loss or damage was not reasonably foreseeable even in a general way by the contravener.’[38] As many of the defendants’ complaints concern the adequacy of the plaintiffs’ pleading of the causal link between the conduct which the plaintiffs impugn and the loss which they say they suffered, it is also appropriate to set out some general propositions concerning the requisite content of an adequate pleading of a causal link in such circumstances.[39] As a general proposition, the defendants are entitled to have pleaded a direct and unambiguous identification of the material facts relied on to establish the causal link which the law requires and which, at least arguably establishes that link: Lee v Abedian [2016] QSC 92 at [81].[40] In Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, Jackson J collected some further general statements of principle, to similar effect (emphasis added and footnotes omitted):‘[26] However, there is no shortage of relevant case law [concerning the extent of pleading required to establish causal link between breaches of contract or negligence and loss]. In Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd, Chesterman J said:“In any cause of action in respect of which causation is an essential element it is necessary to plead the material facts which are said to give rise to the causal connection. In particular it is necessary to plead the facts which lead to a reasonable inference that the acts complained of (here the relevant non-disclosure) and the alleged later event (here the making of the dragline agreement) stand to each other in the relation of cause and effect. …”[27] Another well-known judgment in this area is Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd, where French J said:“The material facts establishing the necessary causal link should be pleaded. In cases of contravention of s 52 said to be constituted by misrepresentation this will generally require more than appears in the opening words of par 50: ‘by reason of such conduct ...’.Some guidance to the proper approach may be derived from the ordinary rule of pleading applicable in cases of fraud of which Lord Watson said in Dow Hager Lawrance v Lord Norreys (1890) 15 App Cas 210 at 221:‘... The ordinary rule of pleading applicable to cases of fraud, ... was thus expressed by Earle Selborne in Wallingford v Mutual Society (1880) 5 App Cas 685 at 697: “General allegations, however strong may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any court ought to take notice.” It is not a sufficient compliance with the rule to state facts and circumstances which merely imply that the defendant, or someone for whose action he is responsible, did commit a fraud of some kind. There must be a probable, if not necessary, connection between the fraud averred and the injurious consequences which the plaintiff attributes to it; and if that connection is not sufficiently apparent from the particulars stated, it cannot be supplied by general averments. Facts and circumstances must in that case be set forth, and in every genuine claim are capable of being stated, leading to a reasonable inference that the fraud and the injuries complained of stood to each other in the relation of cause and effect.’A perusal of the relevant precedents in [Bullen, Leake & Jacob’s Precedents of Pleadings 12th ed, pp 702–7] supports the view that the approach enunciated by Lord Watson is equally applicable to actions for negligent misstatement.”’” [footnotes omitted]

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

His Honour also dealt with a complaint that there was no support for the allegation that the first defendant had decided in April 2010 not to enter into the pleaded option agreements[37] and to put negotiations on hold. This is relevant because the defendants submit that the present pleading suffers from a similar problem.[37] It should be noted that the pleaded option agreements in the original pleading were in slightly different terms to the pleaded option agreements that now appear in the present pleading.Consideration The defendants seek the striking out of paragraphs 53, 54, 55, 56, 57, 58, 59, 59A, 59B and 65 of the present pleading. Paragraphs 53 to 58 consist of allegations that are essential to the misleading or deceptive conduct and knowing involvement cases. Paragraphs 59, 59A, 59B and 65 form part of the pleaded causal link between the defendants’ impugned conduct and the plaintiffs’ losses. I will first deal with the paragraphs concerning causation, as the majority of the parties’ submissions were directed towards this issue. I will then turn to the paragraphs concerning misleading or deceptive conduct and knowing involvement. As is evident from the Reasons of Bond J and his Honour’s analysis of the relevant cases, the issue is whether the plaintiffs have pleaded material facts in the present pleading which “as a matter of common sense and experience lead to a reasonable inference that the impugned conduct and the relevant category of loss stand in the relationship of cause and effect”.[38] The defendants submit that the plaintiffs have failed to heed Bond J’s reasoning and that no attempt has been made to plead material facts which justify a reasonable inference that the impugned conduct was a direct or indirect contributing cause for the plaintiffs’ decision to cause First Strategic to incur debts whilst insolvent. The consequence of this, according to the defendants, is that the plaintiffs have failed to plead a relationship of cause and effect between the impugned conduct and the losses alleged such that the present pleading fails to disclose any reasonable cause of action.[39][38] [2017] QSC 13, [47].[39] Submissions of Defendants/Applicants filed 21 January 2019, paragraph 34. For the purposes of considering the causation issue, I proceed on the basis that the defendants did engage in the pleaded misleading or deceptive conduct. The issue is whether the plaintiffs have pleaded the necessary causal link between that conduct and their alleged losses arising from the orders of 4 April 2014. The plaintiffs’ case as now pleaded is that the relevant conduct on the part of the defendants exposed the plaintiffs to the risk of and ultimately, actual personal liability for the post-April 2010 debts.[40] The losses claimed are therefore pleaded to constitute a foreseeable consequence of the defendants’ contraventions of the Trade Practices Act.[41]The original pleading did not plead causation in any significantly different way. Paragraph 59 of the original pleading stated:“In committing First Strategic to the obligations under the Drilling Agreement and the Project Management Agreement, and allowing First Strategic to incur the debts referred to in paragraph 40 Mr Charles Chan, Mr Victor Chan and Mr Kwok as directors of First Strategic exposed themselves to being liable to First Strategic or any liquidator appointed to First Strategic for the obligations made under those agreements and for those debts.”[40] Third Further Amended Statement of Claim filed 29 March 2019, paragraph 59(b) and 59B.[41] Third Further Amended Statement of Claim filed 29 March 2019, paragraph 66.