JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CHARACTER DESIGN PTY LTD -v- KOHLEN [No 2] [2013] WASC 340
CORAM: EDELMAN J
HEARD: 6 SEPTEMBER 2013
DELIVERED : 6 SEPTEMBER 2013
FILE NO/S: CIV 1205 of 2013
BETWEEN: CHARACTER DESIGN PTY LTD
Plaintiff
AND
PETER JOSEPH KOHLEN
Defendant
Catchwords:
Practice and procedure - Strike out application - Plea of sham agreement - Basis of plea an illegal agreement to deceive financier - Whether plea should be struck out
Practice and procedure - Strike out application - Plea of equitable estoppel - First strike out application in relation to similar plea unsuccessful - Case management considerations - Whether any basis to strike out plea - Plea should not be struck out
Legislation:
Criminal Code 1913 (WA), s 409, s 558
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr L A Tsaknis
Defendant: Mr M S Macdonald
Solicitors:
Plaintiff: Hotchkin Hanly
Defendant: Macdonald Rudder
Case(s) referred to in judgment(s):
3 Oceans Wine Company Pty Ltd v Heyshott Pty Ltd [2011] WASC 12
Aquital Holdings Pty Ltd v Marlin Group Pty Ltd [2012] WASC 198
Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82
Boase v Axis International Management Pty Ltd [2009] WASC 331
Bonney v Ngunythju Tjitji Pirni Aboriginal Corporation [2009] WASC 209
Commodore Homes WA Pty Ltd v Goldenland Australia Property Pty Ltd & Anor [2007] WASC 146
DHJPM Pty Ltd v Blackthorn Resources Ltd [2011] NSWCA 348; (2011) 285 ALR 311
Equuscorp v Haxton [2012] HCA 7; (2012) 246 CLR 498
Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (No 2) [2011] WASC 136
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
Fitzgerald v Leonhardt [1997] HCA 17; (1997) 189 CLR 215
Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101
Hadjiloucas v Crean [1988] 1 WLR 1006, 1019; [1987] 3 All ER 1008
Hitch v Stone [2001] EWCA Civ 63
Holman v Johnson (1775) 1 Cowp 341; (1775) 98 ER 1120
Joyce v Palassis [No 4] [2008] WASC 45
Kimberley Downs Pty Ltd v Western Australia (Unreported, WASC, Lib No 6414, 25 August 1986)
Kirika v Zurich Australian Insurance Ltd & Anor [2002] WASCA 233
Londsdale Investments Pty Ltd v OM (Manganese Ltd) [2009] WASC 188
MacMahon Contractors Pty Ltd v Woodside Energy Ltd [2008] WASC 271
Marles v Philip Trant & Sons Ltd; Mackinnon, Third Party [1954] 1 QB 29
Miller v Miller [2011] HCA 9; (2011) 242 CLR 446
Neilson v City of Swan [2006] WASCA 94
Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 53
Pickersgill and Harvey v Tsoukalis [2009] SASC 357
Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation [2008] HCA 21; (2008) 238 CLR 516
Saleh v Romanous [2010] NSWCA 274; (2010) 79 NSWLR 453
Sharrment Pty Ltd v Official Trustee in Bankruptcy [1988] FCA 179; (1988) 18 FCR…
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- Case
- [2013] WASC 340
- Decision Date
CaseChat Overview and Summary
The court considered whether there was any basis to strike out the plea of sham agreement. It examined whether the plea involved a contract or class of contracts that was prohibited by statute. The court noted that a court should not hold that any contract or class of contracts is prohibited by statute unless there is a clear implication or necessary inference. The court also considered the proportionality between the seriousness of the alleged illegality and the need to further the purpose of the statute. Furthermore, the court highlighted the importance of a careful analysis of the facts when determining whether an act or document is a sham. In the case of Pickersgill and Harvey v Tsoukalis, the Full Court of the Supreme Court of South Australia enforced an agreement involving a sham.
The court held that there was no basis to strike out the plea of sham agreement. It found that there was no clear implication or necessary inference that the contract in question was prohibited by statute. The court also considered the proportionality between the seriousness of the alleged illegality and the need to further the purpose of the statute. Furthermore, the court acknowledged the importance of a careful analysis of the facts when determining whether an act or document is a sham. The court found that the plea should not be struck out.
No orders were made.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Similarly, as Devlin J explained in St John Shipping Corporation v Joseph Rank Ltd[38] in a passage quoted by Heydon J (in dissent) in Equuscorp v Haxton,[39] 'A court should not hold that any contract or class of contracts is prohibited by statute unless there is a clear implication, or "necessary inference"…'[38] St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267, 288.[39] Equuscorp v Haxton [2012] HCA 7; (2012) 246 CLR 498, 547 [121]. Secondly, as McHugh J explained in Nelson v Nelson,[40] an assessment of whether any statutory illegality precludes enforcement of a contract in the absence of an express or implied prohibition requires a consideration of (1) the proportionality between the seriousness of the illegality involved, as well as (2) the need to further the purpose of the statute.[40] Nelson v Nelson (1995) 184 CLR 538, 612 - 613. The seriousness of the illegality involved requires consideration of the terms of the statute, here the Criminal Code, as well as the conduct which infringes that statute. An offence of conspiracy to defraud can occur in an extremely wide range and variety of circumstances. So too, an assessment of the need to further the purpose of the statute may require a close consideration of the context in which the infringement occurred in order to determine the appropriate response consistent with the statutory policy. For instance, if the sham contract price is recognised or enforced, would the financier who Character Design says was defrauded have a claim against Mr Kohlen or Character Design or both? Would the issue of enforcement of the sham contract price be affected by whether the prime mover in an illegal scheme was Character Design (by Mr Cottle) or Mr Kohlen? Or which party benefitted from it or benefitted the most from it? The two latter considerations are sometimes described, again in Latin, as involving situations where the parties are non in pari delicto, that is, their acts are not of equal turpitude. These considerations are exacerbated in the instance of an allegation of sham. As Kirby J explained in Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation,[41] 'where it is legally warranted, sham analysis affords the court a ground for ignoring, instead of merely construing, the primary documentary material in determining the rights and obligations of the parties'. An inquiry as to whether an act or document is a sham therefore 'requires careful analysis of the facts'.[42][41] Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation [2008] HCA 21; (2008) 238 CLR 516, 561 [142].[42] Hitch v Stone [2001] EWCA Civ 63 [64] (Arden LJ, Sir Martin Nourse & Kay LJ agreeing). Thirdly, an agreement involving a sham, similar to this case, was enforced by the Full Court of the Supreme Court of South Australia in Pickersgill and Harvey v Tsoukalis.[43][43] Pickersgill and Harvey v Tsoukalis [2009] SASC 357. In that case, the appellants were a husband and wife who undertook the development of land. The respondent, a licensed general builder, carried out building work on the land. The respondent stopped work when the appellants refused to make further progress payments to him.