Chan v MacArthur Minerals Limited

Case [2020] QCA 143

SUPREME COURT OF QUEENSLAND

CITATION:

Chan & Ors v MacArthur Minerals Limited & Ors [2020] QCA 143

PARTIES:

SING CHUK CHARLES CHAN
(first appellant)
WAI LAP VICTOR CHAN
(second appellant)
WAI TAI KWOK
(third appellant)
v
MACARTHUR MINERALS LIMITED
ACN 103 011 436
(first respondent)
ALAN PHILLIPS
(second respondent)
JOE PHILLIPS
(third respondent)

FILE NO/S:

Appeal No 7121 of 2019
SC No 518 of 2016

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:


Supreme Court at Brisbane – [2019] QSC 143 (Flanagan J)

DELIVERED ON:

30 June 2020

DELIVERED AT:

Brisbane

HEARING DATE:

24 October 2019

JUDGES:

Philippides JA and Henry and Brown JJ

ORDER:

The appeal is dismissed with costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – SUMMARY DISPOSAL – where the primary judge struck out various paragraphs of the appellants’ third further amended statement of claim and dismissed the proceeding brought by the appellants against the respondents for misleading and deceptive conduct causing the appellants, in their personal capacity, to suffer loss and damage – where the personal capacity in which the appellants suffered loss or damage was pleaded to have arisen by orders made by the Supreme Court in 2014, consequent on a proceeding being brought by the liquidators of a company (of which the appellants were all directors) for insolvent trading, following the winding up of that company in 2010 – where the appellants have attempted on multiple occasions to produce a competent pleading, with the first pleading being struck out (with leave to re-plead) on the basis that the appellants failed to plead a causative relationship between the misleading and deceptive conduct and the alleged loss or damage – where the second pleading was also the subject a strike out application before the primary judge, after which the appellants were given “one last chance to plead causation” – whether the primary judge erred in striking out the relevant paragraphs of the third further amended statement of claim on the basis that the appellants failed to plead a sufficient causal nexus between the alleged misleading conduct and the loss and damage claimed – whether the primary judge erred in dismissing the proceeding in its entirety

Corporations Act 2001 (Cth), s 588G, s 588M
Trade Practices Act 1974 (Cth), s 52, s 75B

Chan & Ors v Macarthur Minerals & Ors [2017] QSC 13, cited
House v The King (1936) 55 CLR 499; [1936] HCA 40, cited
First Strategic Development Corporation Ltd (in liq) & Anor v Chan & Ors [2014] QSC 60, cited
Medlin v StateGovernment Insurance Commission (1995) 182 CLR 1; [1995] HCA 5, cited

COUNSEL:

F Corsaro SC, with G Handran, for the appellants
L Kelly QC, with D Pyle, for the respondents

SOLICITORS:

McBride Legal for the appellants
Shand Taylor Lawyers for the respondents

THE COURT:

  1. This appeal is against the decision of the primary judge (Flanagan J) given on 7 June 2019 striking out…

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Chan v MacArthur Minerals Limited [2020] QCA 143
Case
[2020] QCA 143
Decision Date

CaseChat Overview and Summary

In the case of Chan v MacArthur Minerals Limited, the appellants, Mr Charles Chan, Mr Victor Chan, and Mr Kwok, brought proceedings against the respondents, seeking damages for alleged misleading and deceptive conduct. This conduct was claimed to have caused them loss and damage in their personal capacity. The appellants were directors of First Strategic, a company that went into liquidation in 2010. The appellants' loss was attributed to orders made by the Supreme Court in 2014, following a proceeding brought by the liquidators of First Strategic for insolvent trading. The primary judge dismissed the proceeding, striking out various paragraphs of the appellants' third further amended statement of claim and finding that the appellants failed to plead a sufficient causal nexus between the alleged misleading conduct and the loss and damage claimed.

The primary issues the court had to address were whether the primary judge correctly struck out the relevant paragraphs of the third further amended statement of claim and whether the primary judge was correct in dismissing the proceeding in its entirety. The appellants argued that they had sufficiently pleaded the causative relationship between the respondents' conduct and their personal loss. The respondents contended that the appellants had failed to establish a causal link between the alleged misleading conduct and the loss claimed.

The court held that the primary judge was correct in striking out the relevant paragraphs and dismissing the proceeding. The court found that the pleadings did not establish a causal link between the respondents' alleged misleading conduct and the appellants' loss. The court emphasised that there was no causative link between the respondents' conduct and the appellants' liability for the post-April 2010 debts, as the debts were incurred by First Strategic, not the appellants personally. Additionally, the court noted that the appellants' liability arose from their contravention of the Corporations Act in their capacity as directors of First Strategic, not from the respondents' conduct. The court concluded that the appellants had failed to plead a sufficient causal nexus between the alleged misleading conduct and the loss and damage claimed.

The appeal was dismissed with costs.

Orders

Orders of the court

The appeal is dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

As mentioned, the causal relationship between the impugned misleading and deceptive conduct and the appellants’ loss was pleaded in paras [59], [59A], [59B], [65(a)(ii)], [(b)] and [(c)] of the ASC which alleged, in relation to their liability for the post April 2010 debts of First Strategic:“59.Had the defendants (or any of them) informed the plaintiffs (or any of them) of any of the matters referred to in paragraph 53 ante [the April 2010 decision], the plaintiffs would:(a)have immediately suspended and terminated the exploration of Area 317 by First Strategic and would have caused First Strategic not to:(i) enter into the MMS project management agreement;(ii) accept the OD Quote; or(iii) incur the post-April 2010 debts(b)thereby have avoided any exposure to, or actual, personal liability for or reflecting the post-April 2010 debts.59A.Rather and in consequence of the Defendants’ failure to inform the Plaintiffs of the matters in paragraph 53 ante, or any of those, the Defendants’ silence otherwise and in continuing reliance on the truth of the matters set out in paragraph 39A ante [the representation], the Plaintiffs caused First Strategic to:(a)enter into the MMS project management agreement;(b)accept the OD Quote;(c)incur the post-April 2010 debts.59B.In consequence of the matters in paragraph 59A, in the premises the Plaintiffs were exposed to the risk of, and ultimately, actual, personal liability for the post-April 2010 debts.65.In the premises of the allegations in this pleading, the defendants’ contravention of s 52 of [the TPA], as alleged in paragraph 54 [the misleading and deceptive conduct] herein, has caused the plaintiffs to suffer loss or damage in the following amount:(a)as to Mr Charles Chan, the amount of $356,300.20 comprising:(i) …[39](ii) $331,298.82, as one-third of the post-April 2010 debts within the said order on 4 April 2014; and(b)as to Mr Victor Chan, $331,298.82, as one-third of the post-April 2010 debts within the said order on 4 April 2014; and(c)as to Mr Kwok, $331,298.80, as one third of the post‑April 2010 debts within the said order on 4 April 2014.”[39]This paragraph referred to the amount of $25,001.38 being the post-April 2010 payments pleaded in [43] of the ASC.The primary judge’s decision The primary judge observed that the claims by each appellant for loss and damage, in paras 64 and 65 of the ASC, of $331,298.82, being one third of the post-April 2010 debts, reflecting the orders made on 4 April 2014, were in effect in the same terms as in the original pleading, although other claims were also made. His Honour considered that the reasons of Bond J in respect of that version should be “understood in the context that his Honour was considering the causation issue in the same context as arises from the present pleading”.[40] The primary judge noted that, in relation to those claims, Bond J identified[41] the deficiency in the pleading as being how the impugned conduct and the decision to cause First Strategic to incur debts whilst insolvent could arguably stand in the relationship of cause and effect.[40]Reasons at [27].[41]Reasons at [30], referring to Chan & Ors v Macarthur Minerals Ltd & Ors [2017] QSC 13 at [62].

Ratio Decidendi

Legal Principle Established

Importantly, it was not apparent why, on any common sense basis, a representation by Macarthur Minerals to First Strategic, that it intended to enter into a form of call option agreement with it, would cause the directors of First Strategic to behave unlawfully by allowing First Strategic to incur debts when they knew it was insolvent. There was simply no causative link, as found by the primary judge. In advancing this contention, the respondents referred to the following facts to emphasise the lack of causative involvement with any conduct by the respondents:1.First Strategic, as pleaded, had no ability to pay the post-April 2010 debts except from funds lent to it by Mr Charles Chan for that purpose, a situation that was not caused by, nor had anything to do with the respondents.2.The post-April 2010 debts incurred were as debts of First Strategic, not as personal debts of the appellants, but the company which incurred the debts, was not the party bringing the proceeding against the respondents.3.The appellants were pursued by the liquidator in their capacity as directors, for their liability for personal contraventions of s 588G of the Act, in allowing First Strategic to incur the post-April 2010 debts whilst insolvent. Their liability arose pursuant to s 588M of the Act for their contravention as individual directors of s 588G of the Act.4.The respondents played no part causing First Strategic to trade whilst insolvent, nor in causing the appellants, as directors of First Strategic, to permit First Strategic to trade whilst insolvent.5.Whether First Strategic would or would not pay its post-April 2010 debts depended entirely upon the whim of Mr Charles Chan and was not a matter caused by the respondents, as was found by McMurdo J in the First Strategic decision.6.It was entirely Mr Charles Chan’s decision to stop lending to First Strategic (as was pleaded in para 47(c) of the ASC) and to deprive it of funding to enable it to meet its debts, which caused First Strategic to go into liquidation. There was no sensible way to attribute a personal decision by Mr Charles Chan to allow First Strategic to go into liquidation to the respondents.Consideration In considering whether a causative link between the impugned conduct and the alleged loss was sufficiently pleaded, the following context must be firmly kept in mind. The pleading made the following allegations of fact:(a)The impugned conduct was that between April 2010 and July 2010, Macarthur Minerals and the other respondents misled the appellants that Macarthur Minerals would enter into an option agreement with First Strategic that would give it a call option over Area 317 in accordance with the draft MMS option agreement: para 39A of the ASC.(b)The conduct was misleading and deceptive because Macarthur Minerals had resolved by April 2010 that it could not or would not itself or through a subsidiary enter into an option agreement in the terms of, or substantially to the effect of, the draft MMS option agreement: para 53 of the ASC.(c)First Strategic incurred the post-April 2010 debts in circumstances where it had no capacity to pay the debts, except through funds loaned to it by Mr Charles Chan: para 41 of the ASC.(d)While the appellants were liable under s 588M of the Act to pay such of the post-April 2010 debts as were unpaid in the event of a winding up of Frist Strategic, it “would not be wound up because it had the benefit of funding by way of such loans from Mr Charles Chan as aforesaid to meet its debts”: para 44 of the ASC.