Cheng v Bullseye Mining Ltd [No 3] - [2024] WADC 81

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   CHENG -v- BULLSEYE MINING LTD [No 3] [2024] WADC 81
CORAM:   DEPUTY REGISTRAR HARMAN
HEARD:   27 AUGUST 2024
DELIVERED          :   17 SEPTEMBER 2024
FILE NO/S:   CIV 1987 of 2020
BETWEEN:   SAM CHENG
Plaintiff
AND
BULLSEYE MINING LTD
Defendant (Plaintiff by counterclaim)
AND
HONGKONG XINHE INTERNATIONAL INVESTMENT COMPANY LTD
Third defendant by counterclaim
YIYANG QIU
Fourth defendant by counterclaim
KEVIN DUNDO
Seventh defendant by counterclaim

Catchwords:

Practice - Practice under the Rules of the Supreme Court 1971 (WA) - Application to strike parts of the defence - Turns on its facts

Legislation:

Nil

Result:

Application successful in part

Representation:

Counsel:

Plaintiff	:	Mr A J Tharby
Defendant (Plaintiff by counterclaim)	:	Mr M C Goldblatt
Third defendant by counterclaim	:	Not applicable
Fourth defendant by counterclaim	:	Not applicable
Seventh defendant by counterclaim	:	Not applicable

Solicitors:

Plaintiff	:	Bennett
Defendant (Plaintiff by counterclaim)	:	Murcia Pestell Hillard
Third defendant by counterclaim	:	Bennett
Fourth defendant by counterclaim	:	Bennett
Seventh defendant by counterclaim	:	HopgoodGanim

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

Nil

DEPUTY REGISTRAR HARMAN:

The plaintiff has applied to strike out the second re‑amended defence. The defendant subsequently filed the third re-amended defence and it was the version of the pleading addressed at the hearing.
Despite the terms of the application, by his written submissions the plaintiff only addresses particular paragraphs of the defence. Although upon the hearing the plaintiff addressed a wider scope of the pleading, the application will be considered as limited to his written submissions and to his oral submissions that relate to the amendment.
The plaintiff's claim draws upon an agreement with the defendant by which he was obliged to provide particular services to the defendant and the defendant was obliged to pay him a monthly fee.
It is common ground that after the agreement became effective in 2013 the defendant paid the monthly fees; that from time to time the plaintiff provided relevant services; and that the last instalment of the fee was paid on 8 May 2018.
The claim made is for payment of fees for the period commencing on 8 June 2018 until lodgement of the writ.
Paragraph 3 of the defence is in part as follows:
… it was an implied term of the Consultancy Agreement that:
3.1the payment of the monthly fee to [the plaintiff] would only continue so long as [the plaintiff] continued to render services under the Consultancy Agreement; …
Its case for importing the terms is outlined by a series of conclusions characterised as particulars put as follows:
(i)they are necessary to give business efficacy to the Consultancy Agreement;
(ii)they are fair, just and equitable;
(iii)they are reasonable in the circumstances;
(iv)they are obvious; and
(v)they do not contradict an express term of the Consultancy Agreement.
It is clear that subpars (i) - (v) do not outline the perimeter of evidence by which par 3.1 would be established, rather they may be taken to present the common law foundation of a submission that the defendant would put at trial in order to import par 3.1. The material is inappropriately presented in the pleading.
In circumstances where the timing of performance of the obligation to pay is clear but the timing of performance of the obligation to provide services is not, whether subpar (i) permits par 3.1 to be imported into the agreement depends upon there being only a single and affirmative response to the proposition that the obligation to pay an instalment of the fee would depend upon some measure of performance of the obligation to provide relevant services in an undefined period after the previous instalment was paid.
It is open to consider that the obligation to pay would not depend upon services being rendered in any particular period.
The issue raised by the proposition that par 3.1 be imported into the agreement is whether the words 'so long as [the plaintiff] continued to render services under the Consulting Agreement' obliged the plaintiff to render relevant services in the period since the obligation to pay the previous instalment of the fee had been generated.
Clearly business efficacy could accommodate the proposition that the obligation to pay was not dependent on whether relevant services had been provided in some discrete period. It follows that par 3.1 would not be established as necessary to give business efficacy to the agreement.
In any event, to import par 3.1 into the agreement would establish no greater clarity in considering the incidence of the obligation on the defendant. Under par 3.1 it would be no more than open to consider that the obligation to pay was dependent upon some unspecified measure of service provision by the plaintiff within an unspecified period. It would remain open to consider that such a period may not be determined by reference to the calendar but rather to either a relevant request of the defendant or conceivably simply the plaintiff's perception of an expectation of the defendant. The utility of importing par 3.1 would depend upon material that is yet to be pleaded.
In considering the terms by which r 19(1) of the Rules of the Supreme Court 1971 (WA) is expressed, courts have exhibited a preference to apply the term 'prejudice, embarrass or delay the fair trial of the action' as a single proposition. The disadvantage of doing so is that it diminishes the significance of each of its component parts. When used in the context of regulation of the pleading process, the word 'embarrass' is taken to mean to weigh down, impede, complicate or encumber.
The allegation at par 3.1 will be struck out as its presence in the pleading introduces complexity but no utility. Thereby it burdens the pleadings to the disadvantage of each party.
By par 4 the defendant proposes that four additional terms would be imported into the agreement. It is as follows:
4.It was a term of the Consultancy Agreement, implied in fact, alternatively, by operation of law, that [the plaintiff]:
4.1would do all that was reasonably necessary to secure performance of the Consultancy Agreement;
4.2would act honestly in the service of [the defendant];
4.3would act in the best interests of [the defendant] and not in pursuit of his own interests in relation to [the defendant's] affairs; and
4.4was under an obligation of confidence not to disclose the confidential information of [the defendant], of which he acquired knowledge in the course of discharging his obligations under the Consultancy Agreement.
Particulars
[The defendant relies upon the particulars of par 3].
The primary consideration given to the mechanism for importation of the terms is the same as has been expressed in relation to what are characterised as particulars of par 3.
The submissions of the plaintiff address each of the duties proposed by pars 4.2 - 4.4.
Before passing over par 4.1, it is worth recording that in a context that generates no other momentum for its importation, by contrast with pars 4.2 - 4.4, it is straightforward that it could be reconciled with the relationship established by the agreement.
Insofar as the duty recorded at par 4.2 would be generated by law, neither party pleads that by the agreement the plaintiff had been constituted as being in the service of the defendant. Insofar as the duty would be generated by fact, by par 4.2 the defendant pleads the existence of a relationship that is not founded upon any allegation of material fact.
The duty expressed by par 4.3 is one that common law would impose upon an employee. As the allegation is presented in a context that would not import the duty by a straightforward engagement of law, its importation depends upon some material yet to be pleaded. As the allegation is presented with reference to the defendant's affairs, the duty is more broadly expressed than the extent of the services to be provided under the agreement. It follows that the term proposed could not satisfy the part of the test expressed by subpar (i).
In relation to the duty pleaded at par 4.4, the plaintiff submitted that as equity would impose an obligation not to disclose confidential information, to import the duty either by law or fact would not satisfy subpar (i) regardless consideration of business efficacy. Putting the proposition in those terms illustrates the significance of the protection accorded to the plaintiff by equity.
No law establishes that the duty would be imported into an agreement for the provision of services.
There is no pleading that suggests that par 4.4 would be imported for the purposes of performance by the plaintiff of his obligation under the agreement.
The allegations put by pars 4.2 - 4.4 will be struck out, as upon the relationship established by the agreement, none of the duties would be imported as a matter of law and there is no pleading of any reason to consider that each duty would necessarily be imported.
Paragraph 5 is in part as follows:
5.[The defendant] reposed trust and confidence in [the plaintiff] in respect of [the plaintiff] undertaking or agreeing, to act for, or on behalf of, or in the interests of, [the defendant] in the exercise of a power or discretion, which would affect the interests of [the defendant] in a legal or practical sense, in that, at all material times [the plaintiff]:
…
5.6from 9 October 2013 until on or about 8 December 2017, was privy to all of [the defendant's] confidential information, namely:
5.6.1information relating to [the defendant's] tenements, including tenement reporting and expenditure data and documents lodged with the Department of Mines, Industry Regulation and Safety (DMIRS);
5.6.2mining proposal and mine closure plans;
5.6.3key contracts between [the defendant] and drilling contractors, suppliers and consultants;
5.6.4geological data, reports and studies and workings and data for all project feasibility studies;
5.6.5from his attendance at most of the meetings of [the defendant's] board, during the period 1 April 2014 to 4 October 2017, and minutes of [the defendant's] board meetings;
5.6.6information about its financial affairs;
5.6.7from [the plaintiff] working on [the defendant's] sites with field crews, who were working on drilling programs, which included soil sampling and processing drill samples, and having access to the results of such drilling programs; and
5.6.8from working closely with the executive directors of [the defendant] and being seated between them on the second floor of [the defendant's] offices specifically so that he could see and hear everything that was occurring in relation to [the defendant's] business.
By par 5.6 the defendant pleads that the plaintiff was privy to 'all of [the defendant's] confidential information' without expressing any detail of the information made relevant for the purposes of the plea. The reader is unable to identify any information to which the pleading at par 5.6 relates.
By par 6 the defendant alleges that the plaintiff owed the defendant fiduciary duties as follows:
6.1not to act inconsistently with the interests of [the defendant]; and
6.2not to make a profit for himself, or some other person, out of the fiduciary position, which he occupied at [the defendant].
By par 8.8 the defendant alleges breach of fiduciary duty however at that point too it does not specify the information that the defendant proposes was confidential.
By par 8.9 the defendant alleges that the plaintiff showed the confidential material to third parties and at par 8.10.2, that by disclosing the confidential information he breached the agreement. Neither of those allegations identifies any relevant material of the defendant.
By pars 5.6, 8.8, 8.9 and 8.10.2 the defendant presents a raft of allegations that depend upon identification of information in order to assess the conclusion that it was confidential. Those allegations fail the fundamental purpose of pleading: that the reader is informed.
By par 8.9 the defendant provides submissions by which it would invite the court to draw inferences. The submissions are not properly included in the pleading.
Paragraphs 5.6, 8.8, 8.9 and 8.10.2 burden the pleadings to the disadvantage of the plaintiff. Each of those paragraphs is struck out.
By par 16 the defendant pleads that by the plaintiff's breaches of the agreement and the breaches of fiduciary duty, it has suffered loss and damage the subject of the counterclaim.
The counterclaim has been struck. Although the latest amendment to the pleading cites different particulars of loss and damage, the pleading is no longer tenable and is struck out.
By way of summary, par 3.1 along with the particulars of par 3; pars 4.2 ‑ 4.4, along with the particulars of par 4; pars 5.6, 8.8, 8.9, 8.10.2 and 16 have been struck. There may be consequential impacts of each determination that are yet to be addressed. It is proposed that these reasons be circulated and an order be made to give them effect; with liberty to apply to relist upon notice of any further order sought.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
AC
Court Officer
13 SEPTEMBER 2024