Chopsonion Pty Ltd v Mulga Corporation Pty Ltd (No 2)
[2025] FedCFamC2G 1418
•29 August 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Chopsonion Pty Ltd v Mulga Corporation Pty Ltd (No 2) [2025] FedCFamC2G 1418
File number(s): ADG 261 of 2020 Judgment of: JUDGE BROWN Date of judgment: 29 August 2025 Catchwords: PRACTICE AND PROCEDURE – Application in a proceeding – application for a further amended statement of claim – pleads alleged misleading and deceptive conduct under Australian Consumer Law– need for precision – whether pleading confusing or embarrassing – whether pleading reveals a reasonable cause of action – pleading accessorial liability – whether the amended statement of claim should be accepted – whether leave to replead paragraphs struck out – matters to be considered Legislation: Competition and Consumer Act 2010 (Cth) s138A
Competition and Consumer Act 2010 (Cth)
Schedule 2 (Australian Consumer Law) ss 18, 21, 236, 237
Corporations Act 2001 (Cth) s182
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 5, 143, 174, 190, 192
Federal Court of Australia Act 1976 (Cth) ss 5, 31A
Federal Court Rules 2011 (Cth) rr 8.05, 16.02, 16.21
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 1.04, 1.06, 4.01, 4.04, 4.05, 30.04
Cases cited: Adachi v Qantas Airways Limited [2019] FCCA 1107
Aon Risk Management Limited v Australian national University (2009) 239 CLR 175
Australian Automotive Repairers Association (Political Action Committee) Inc v NRMA Insurance Limited [2002] FCA 1568
Banque Commerciale SA (EN Liquidation) v Akhil Holdings Ltd (1990) 169 CLR 279
Bruce v Oldhams Press Ltd [1936] 1 KB 697
Chopsonion Pty Ltd v Mulga Corporation Pty Ltd [2024] FedCFamC2G 1450
Gaven & Gaven (No 2) [2012] FMCAfam 1005
Gupta v Menulog Pty Ltd [2022] FCA 1247
Kakazych v Santa Sabinda College & Anor [2020] FCCA 11
Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd [2021] FCCA 552
Personal Property Securities Act 2009 (Cth)
Re Minister for Immigration & Multicultural Affairs: Ex parte Lam (2003) 195 ALR 502
Sabapathy v Jetstar Airways [2021] FCAFC 25
Takemoto v Moody’s Investors Service Pty Limited [2014] FCA 1081
Division: Division 2 General Federal Law Number of paragraphs: 175 Date of hearing: 15 August 2025 Place: Adelaide Counsel for the Applicant: Mr Belperio Solicitor for the Applicant: Charlton Rowley Counsel for the Respondent: Mr Djurdjevic via Webex Solicitor for the Respondent: DWF Law ORDERS
ADG 261 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: CHOPSONION PTY LTD (APPOINTED CONTROLLER) (ACN 142 897 971)
Applicant
AND: MULGA CORPORATION PTY LTD (ACN 144 810 435) AS TRUSTEE OF THE MULHERIN FAMILY TRUST
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
26 AUGUST 2025
THE COURT ORDERS THAT:
1.The Applicant’s application dated 24 April 2025 is dismissed and leave to replead the various paragraphs of the statement of claim filed on 5 August 2022 is refused.
2.No further leave is to be granted to the Applicant to file any further amended statement of claims in this matter.
3.Further consideration of the matter is hereby adjourned to 26 November 2025 at 9.30am (Adelaide time) before Judge Brown for mention.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These proceedings were commenced on 28 July 2020. After 5 years, neither party has filed any evidence referencing the issues in dispute between them. Although a final hearing date was appointed, by me, which was scheduled for May of 2023, that hearing did not proceed.
Rather, the parties remain mired in controversy regarding the adequacy of the pleadings filed in the case thus far. In general terms, the main dispute centres on what, if any, is the basis of a claim for compensation arising from the deposit of a sum of $130,000.00, in a professional trust account, between October 2014 and April 2015.[1] Accordingly, in general terms, the cause of action arose over a decade ago.
[1] It is significant to note that it is agreed between the parties that the payment was made in instalments starting with $100,000.00 on 30 October 2014 with a further $30,000.00 being paid on 9 February 2015.
Doing the best I can, with what I have been provided, the evidentiary issues in the case are whether the disbursement of the sum was properly and professionally authorised and, if not, what are the damages which flow from it.
The application is based on the provisions of section 18 of the Australian Consumer Law,[2] which is contained in schedule 2 of the Competition and Consumer Act 2010 (Cth). Section 18(1) prohibits any person, whilst involved in trade or commerce, from engaging in conduct that is misleading or deceptive.
[2] Hereinafter referred to as “the ACL”.
In turn, this section potentially engages remedial provisions in the ACL, contained in sections 236 and 237 of the ACL. These sections authorise the recovery of loss or damage suffered by any person who has been injured by any breach of the ACL. In broad terms, the application of section 237 is broader than that of section 236, as it does not require a person to prove causation. It can apply when loss or damage is likely to be suffered.
In the current matter, there is no dispute that the sum of $130,000.00 was paid, on behalf of the applicant, to the respondent, a firm of chartered accountants, and has not been returned to it. Controversy seems to arise as to the basis of the payment and what instructions were provided in respect of its disbursements.
More significantly, so far as the current matter is concerned, controversy arises as to what level of compensation, if any, should be paid and whether it should be calculated pursuant to section 236 or section 237, or at all.
At the time of its application, in addition to seeking the restitution of the sum of $130,000.00, the applicant sought compensation in an amount of $626,751.00, which it has calculated was the sum it would have saved, if it had applied the amount of $130,000.00 to a finance facility, which it held in an amount of $1.175m and which attracted interest at the rate of 6% per month.
In general terms, the respondent claims the applicant has not properly pleaded the material facts which it asserts represents its alleged misleading and deceptive conduct. Further it has not properly pleaded what were its ethical and professional obligations to the applicant in respect of the disbursement of the monies.
Finally, there are controversies relating to what obligations, arising under section 182 of the Corporations Act 2001, the respondent owed to the applicant and whether these have been adequately pleaded to disclose a cause of action.
This controversy arises in the context of Chopsonion being placed under the control of its creditors, who, in effect bring the current action, whereas the respondent engaged with its previous director at the time of the deposit of the monies relevant to this matter.
GENERAL PRINCIPLES OF CIVIL LITIGATION
This court was created by the Federal Circuit and Family Court of Australia Act 2021 (Cth).[3] It is a lower-level federal court directed to focus on less complicated litigation in order to free up the resources of both the Federal Court and Division 1 of this Court for more complicated litigation.
[3] Hereinafter referred to as “the FCFCOA Act”.
Section 190 of the FCFCOA Act provides a directive to the court, in the application of its practice and procedure, to facilitate the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible. This reflects the objects of the Act as contained in section 5 and is referred to as the Court’s overarching purpose.
Section 174 of the FCFCOA Act authorises the Court to make rules to govern its practice and procedure but in circumstances in which those rules prove to be deficient it may apply the Federal Court Rules 2011 (Cth).[4] The court is entitled to modify these rules to suit its own idiosyncratic jurisdiction.
[4] Hereinafter referred to as “the FC Rules”.
The relevant rules of Division 2 of the Court are the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).[5] Rule 1.04 delineates the obligation of parties to assist the Court to achieve its objectives delineated in the overarching purpose. They too are required to avoid undue delay, expense and technicality. They are also directed to consider options for primary dispute resolution as early as possible.
[5] Hereinafter referred to as “the Division 2 Rules”. Rule 1.06 provides that these Rules principally govern general federal law proceedings in Division 2 of the Court.
The overarching purpose has application not only to how individual parties to proceedings conduct the litigation relevant to them. Fundamentally, the court has an obligation to apply it to how it manages all the litigation coming before it for the overall benefit of all court users.
This is the central raison d’étre of case management. Essentially, it is prejudicial to other litigants, who need their disputes adjudicated, if one set of litigants monopolise court time through the inefficient management of their litigation and so delay everybody else’s case.
As was pointed out by French CJ in Aon Risk Management Limited v Australian National University [6] courts have an obligation to ensure that the litigation coming before them is transacted effectively and efficiently, not only in the interests of the individual parties concerned but also in the interests of other litigants and users of the court, whose cases are inevitably affected by how other cases in the system are managed.
[6] Aon Risk Management Limited v Australian National University (2009) 239 CLR 175.
His Honour said as follows:
…the adversarial system has been qualified by changing practices in the courts directed to the reduction of costs and delay and the realisation that the courts are concerned not only with justice between the parties, which remains their priority, but also with the public interest in the proper and efficient use of public resources.[7]
[7] See Aon Risk Management Limited v Australian National University (2009) 239 CLR 175 at [23].
In the case, French CJ also noted that courts have the inherent authority to control their processes and prevent their application in a way which would be unfair to a party or would otherwise bring the administration of justice into disrepute among right-thinking people.[8]
[8] See Aon Risk Management Limited v Australian National University (2009) 239 CLR 175 at [33].
Section 138A of the Competition and Consumer Act confers jurisdiction on Division 2 of the Court in respect of consumer law matters but confines its jurisdiction for awards for loss and damage to amounts that do not exceed $750,000.00.
In keeping with the overarching principle and also its place on the lowest rung of the Federal judiciary, the court’s rules provide a simplified process for the institution of proceedings. The relevant provisions are contained in division 4.1 of the rules.
In general terms, rule 4.01 indicates that an application is to be started by the filing of an approved application which, pursuant to the provisions of rule 4.04, is to be supported by an affidavit, which is directed to contain the facts relied on. As indicated above, in the current matter, no such affidavit has, as yet been filed.
However, pursuant to the provisions of rule 4.04(2)(b) such an affidavit is not required if a statement of claim is filed. Accordingly, in general federal law matters coming before Division 2 the rules create an election for applicants, who can commence proceedings by way of application/affidavit or by a statement of claim.
If such election to procced by pleadings is utilised, it engages the provisions of rule 4.05(3) which require the filing of a defence instead of such a response supported by an affidavit.
Accordingly, in general terms, in reflection of its limited jurisdiction and the overarching purpose to which it is subject, it is to be envisaged that parties in Division 2 will utilise, more often than not, simplified processes, in which issues are delineated by a reference to evidence in affidavit, rather than one based on pleadings per se.
In these circumstances, it is pertinent to point out what is the nature of a pleading. The term pleading refers to the formal documents, in which litigants set out the presentation of their claims and defences to those claims, in the suit, which they wish the court to determine.
They are filed and served sequentially, according to the rules of the particular court in question. In Takemoto v Moody’s Investors Service Pty Limited,[9] Flick J observed that as a general proposition the function of pleadings is to state with sufficient clarity the case that must be met.
[9] Takemoto v Moody’s Investors Service Pty Limited [2014] FCA 1081 at [23] (Flick J).
A statement of claim must identify a set of alleged facts that have a particular quality which, if established at trial, will entitle the applicant to the remedy or remedies claimed. A defence is the formal rebuttal of those alleged facts. Pleadings are required to contain statements of material fact, which a defence, in turn, will either admit or deny.
An admission will have the effect of ending factual controversy about an allegation made in a statement of fact. The intent is to confine the issues to be determined by the court invoked to resolve the dispute between the parties concerned.
Essentially, a respondent is made aware of the case it is required to meet, and an applicant knows which elements of that case are in dispute. From the court’s perspective, the controversies that it is required to adjudicate are clearly delineated at an early stage. The object being, for all concerned, the ready clarification of issues and a saving of time and resources as any need for investigation of superfluous issues is avoided.
A material fact is, as its descriptor indicates, one which is essential to the delineation or elucidation of the issue, which is before the court for its adjudication. Necessarily, it is a fact which is significant, relevant and important to the relevant case in question.
Material facts, in this context, have been defined as facts, whose existence is necessary for the purpose of formulating a complete cause of action.[10] By necessary implication, to provide a legal answer to the cause of action so raised, a defence must provide a rebuttal of each such material fact. Accordingly, there must be a connection between the material fact alleged and a legal principle, which founds the relevant cause of action.
[10] Bruce v Oldhams Press Ltd [1936] 1 KB 697 at 712 (Scott LJ).
In Australian Automotive Repairers Association (Political Action Committee) Inc v NRMA Insurance Limited[11] Lindgren J said as follows:
The requirement that material facts be stated has two purposes: the natural justice purpose of adequately informing the other party of the nature of the case alleged against that party; and the purpose of providing a basis for determining whether that alleged case, so exposed, constitutes a cause of action cognisable at law.
[11] Australian Automotive Repairers Association (Political Action Committee) Inc v NRMA Insurance Limited [2002] FCA 1568 at [15].
In Banque Commerciale SA (En Liquidation) v Akhil Holdings Ltd[12] Mason CJ and Gaudron J described the function of pleadings as being to state with sufficient clarity the case that must be met so as to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him, her or it, and incidentally, to define the issues for decision.
[12] Banque Commerciale SA (En Liquidation) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286.
Prior to its current incarnation as Division 2 of the Federal Circuit and Family Court, the Federal Circuit Court, as one of its objectives, was directed to operate as informally as possible. This is no-longer the case. The objectives of the court now being centred on the resolution of disputes occurring as quickly, inexpensively and efficiently as possible.[13]
[13] See FCCA Act at section 6
In Sabapathy v Jetstar Airways,[14] a case which predates the current FCFCOA Act, the Full Court, whilst noting the broadness of the court’s jurisdiction, still emphasised the need for it to ensure all proceedings coming before it were conducted in a procedurally fair manner.
[14] Sabapathy v Jetstar Airways [2021] FCAFC 25.
The court went on to endorse comments made by Gleeson CJ in Re Minister for Immigration & Multicultural Affairs: Ex parte Lam[15] in respect of a concept, which he referred to as practical injustice:
Fairness is not an abstract concept. It is essentially practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice.
[15] See Re Minister for Immigration & Multicultural Affairs: Ex parte Lam (2003) 195 ALR 502 at [37].
In Sabapathy, given the significance of the proceedings for the respondents concerned in the case – civil remedies proceedings involving the possibility of a fine being imposed on employees of a company – it was considered that the rules of pleading should be applied.[16] Such strictures being necessary to avoid such practical injustice.
[16] Sabapathy v Jetstar Airways (supra) at [42].
For self-evident reasons, the procedures of the court should be inimical to the imposition of any form of injustice on any party coming before him. The court is to approach such matters in practical terms. What that entails in this court, I think, must turn on close examination of what has actually occurred in a case rather than on theory or ideas. The focus being on what approach is likely to be effective or feasible to put into effect to give effect to the overarching principles.
In Gaven & Gaven (No 2) Judge Jarrett, formerly of this court, succinctly summarised the distinction between an affidavit and a pleading in the following terms:
An affidavit is a statement, sworn or affirmed, by a deponent who gives evidence. The purpose of an affidavit is to provide evidence. An affidavit is different to a pleading. A pleading alleges facts and facts alone (or at least is intended so to do). An affidavit, however, is of a quite different character.[17]
[17] Gaven & Gaven (No 2) [2012] FMCAfam 1005 at [8] (Jarrett J).
Formal pleadings are not mandated in Division 2 of the Court pursuant to the Division 2 Rules. However, at the same time, the Rules recognised that some types of proceedings are likely to be better served by the use of pleadings. The Division 2 Rules do not specifically indicate which type of cases is better suited to the use of affidavits and which is more amenable to pleadings.
This, in my view, is the source of what I have termed the perennial problem of whether it is better for applicants to set out what they assert is their case in affidavit form, which is the more usual course as stipulated in the rule 4.04, or take the option of not providing any affidavit evidence and proceeding by way of a statement of claim, as is open pursuant to rule 4.04(3), when read in conjunction with rule 30.04.
Whether a matter proceeds by way of an application and affidavit or by pleadings, given the context of the overarching purpose, the intent of each process is clear, namely the production of documents which enable the efficient conveyance of information between parties and to the court to enable the efficient adjudication of disputes.
All court cases arise in a factual and human matrix. Who did or said what to whom and why. What were the consequences of these actions. In effect, a court case is a narrative or story told from differing perspectives, which the court is called upon to resolve.
As such whether a case proceeds by way of affidavit or pleadings, at some stage, if the matter remains unresolved, it becomes necessary for each competing party to tell his/her or its story, in the form of an affidavit, which is in effect a linear chronology of events.
A case which is pleaded is usually more apposite to professionally assisted litigants, who are able to delineate the applicable narrative of events in pithy chunks of asserted material facts to which are attached any relevant provisions of legal principles asserted to be applicable to the resolution of anticipated controversies.
However, whether a case proceeds by way of affidavit or pleadings, the objective of each remains the same – the ready understanding by both the opposing party and the court as to what is each party’s narrative of events, which brings them to court and the essential facts, on which they agree and disagree.
In this context, comments made by Judge Driver in Kakayzich v Santa Sabinda College & Anor are pertinent. His Honour said as follows:
[I]t is pertinent to note that the Federal Circuit Court, unlike the Federal Court, is not generally a court of pleadings. Matters most commonly proceed in the absence of pleadings on the basis of written evidence. It is with this in mind that this Court has simply adopted the rules of the Federal Court in relation to pleadings for the relatively small number of cases in which pleadings are necessary. The Parliament has tasked this Court to deal with matters of less complexity than those dealt with by the Federal Court and the Family Court... Drawn out interlocutory disputes as to the quality of a pleading so sought and provided are alien to the normal practice and procedure of the Court and should, in my view, be discouraged.[18]
[18] Kakayzich v Santa Sabinda College & Anor [2020] FCCA 11 at [134] (Driver J).
In a later case, Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd, Judge Driver after having noted the court’s remit as a lower-level court directed towards resolving cases in a quick and cost-effective manner with as little adherence to legal technicality as possible, observed further as follows:
The Court has, as I have noted, taken a liberal attitude to the drafting of pleadings, and I have myself had cause to express some frustration with demands for different pleadings on the basis of perceived technical defects.[19]
[19] Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd [2021] FCCA 552 at [8] (Driver J).
However, in general terms, it would appear to be axiomatic that a well-drawn pleading will serve the overarching purpose to which the court is enjoined by section 190 of the Act. One which is obscure or unrealistic in its ambit or drafted for some ulterior purpose patently not.
Regrettably, given the period of time these proceedings have been before the court and the controversy which remains extant regarding the relevant pleadings, the court’s aspirations as to efficient and expedient application of its jurisdiction has not been achieved.
The current proceedings are directed towards resolving pleading controversies relating to a third iteration of a statement of claim. Regrettably, I confess to still be somewhat uncertain as to significant aspects of each party’s narrative.
In this context, the question arises – would it be preferable to compel the parties to provide affidavits, from the various human actors, named in the proceedings (presuming all are available, which I suspect cannot be guaranteed) or would this only add to the expense and delay in the case, already at a high level.
In this context, would such a process assist in one of the parties being able to formulate any application for summary dismissal of a case which has no reasonable prospect of being prosecuted successfully. On the other hand, would such a process of filing affidavits of evidence lead to issues being crystallised and competing narratives more pellucidly delineated.
What is clear to me is that the current state of affairs is unacceptable and something must be done to advance the proceedings. The current impasse, in my view, is one which is calculated to bring the administration of justice into disrepute among right-thinking people.
The rules do not contain specific procedures relating to the striking out of pleadings. However, section 192(4)(b) authorises the court to strike out, amend or limit any part of a parties claim or defence.
In addition, as previously noted, the court is conferred with a discretion, pursuant to rule 1.06(2) of its rules to apply the FC Rules to cure any deficiencies in its own practices and procedures.
Part 16 of the FC Rules, as befits a court conferred with the jurisdiction of a superior court of record,[20] contains a specific part dealing with the issue of pleadings and requires that applications more often than not be commenced with a statement of claim, in distinction to the Federal Circuit and Family Court of Australia.[21]
[20] See Federal Court of Australia Act 1976 (Cth) s 5.
[21] See Federal Court Rules 2011 (Cth) r 8.05.
Rule 16.02 of FC Rules provides that pleadings are required, amongst other things, to detail:
·The issues required to be resolved by the Court;
·To state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial but not the evidence by which such facts are to be proved; and
·The provisions of any statute relied upon.
The formality of this process of pleadings, as delineated above, being aimed at enabling the court to know what specific allegations are admitted and which are denied, thus allowing the parameters of the applicable case to be defined well in advance of trial.
Rule 16.21 of the FC Rules provides a specific mechanism for the striking out of a pleading. It provides as follows:
(1)A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:
(a) contains scandalous material; or
(b)contains frivolous or vexatious material; or
(c)is evasive or ambiguous; or
(d)is likely to cause prejudice, embarrassment or delay in the proceeding; or
(e)fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(f)is otherwise an abuse of the process of the Court.
In general terms, a pleading is to be regarded as embarrassing if it is assessed to be vague or ambiguous or states a conclusion, which is unsupported by any asserted material facts. It will also be embarrassing if it generally unintelligible or general to such a degree that the opposing party does not know what is alleged against it.[22]
[22] See Takemoto (supra) at [18].
Other complimentary provisions, in both the FC Act and the FCFCOA Act, emphasise the importance of the expeditious settlement of the parameter of the dispute the court is required to resolve. These are the provisions for summary disposal of cases found to have no reasonable prospects of being successfully prosecuted.[23]
[23] Federal Court of Australia Act 1976 (Cth) s 31A; Federal Circuit and Family Court of Australia Act 2021 (Cth) s 143.
It is in the interests of both the efficient administration of justice and the overarching purpose that unmeritorious cases are identified expeditiously before either a prosecuting or defending party is put to unnecessary expense. Clearly, before the court can exercise its discretion to award summary judgment, it must know the cases on which each party depends, in terms of what are the material facts, either admitted or denied.
It is in this context that the rules in respect of pleadings must be examined. Pleadings should be an aid rather than a hindrance in determining what a party’s case is. Judge Barnes pointed to some of the bases on which a pleading can be struck out in Adachi v Qantas Airways Limited.[24] They include:
•If the pleading is susceptible to various meanings, contains inconsistent allegations, alternatives which are confusingly intermixed;
•The pleading contains defects which result in it being unintelligible, ambiguous, vague or too general;
•The pleading does not disclose a reasonable cause of action in the sense that it does not set out the material facts necessary to formulate a complete cause of action.
[24] Adachi v Qantas Airways Limited [2019] FCCA 1107 at [23]-[26].
All these deficiencies lead to a situation in which a pleading has failed to define the issues with sufficient clarity to enable the other party to understand the case which it has to meet. However, at the same time, relevant authorities indicate that the power to strike out pleadings is discretionary and, as such, is to be used sparingly and only in a clear case. In Gupta v Menulog Pty Ltd O’Sullivan J said as follows:
The authorities make it clear that the power to strike out a pleading because it discloses no reasonable cause of action is only exercised in plain and obvious cases, where it is clear no reasonable amendment can cure the alleged defect, and there is no reasonable question to be tried…[25]
[25] Gupta v Menulog Pty Ltd [2022] FCA 1247 at [20].
Again, it is axiomatically not in the interests of the administration of justice that a potentially meritorious case is dismissed because of technical defects in pleadings, which will be ironed out as a case proceeds to trial. At the same time, it is unfair to the opposing party to put to unnecessary expense whilst an inept party haphazardly attempts to cure such defects.
BACKGROUND
With these principles in mind, I will attempt to ascertain what is each parties’ essential narrative of facts and law, from the copious and lengthy documents, which have hitherto been filed.
Due to the lack of any significant affidavits of evidence being filed in the matter, I confess that the background and context of these proceedings is, from my perspective, still shrouded in mystery.
Doing the best I can, from what I have been provided, the applicant – Chopsonion Pty Ltd[26] - is a company incorporated in New South Wales. What was the nature of its business is unclear to me. Its director, prior to the appointment of its current controller in October of 2016, is said to be James Sharpe.[27]
[26] Hereinafter referred to as “Chopsonion”.
[27] Original Statement of Claim filed 28 July 2020 at 1.1.
Chopsonion apparently entered into some form of lending agreement, at some unspecified time in the past, the provisions of which were registered pursuant to the provisions of the Personal Property Securities Act 2009 (Cth). In general terms, this legislation enables the registration of a lender’s security interest, which if the relevant debtor becomes insolvent, enables it to protect its interests.
In this context, on 20 October 2016, a controller was appointed in respect of Chopsonion, at the instigation of its various creditors. The controllers concerned were Nicholas Cooper, a chartered accountant and Richard Willson, a solicitor. The administration was concluded in July 2020 and revealed the company had no assets and no dividend was paid to creditors.
The controller is, it would seem, in effect, the various creditors of Chopsonion, pursuant to the loan agreement between various corporate entities and it. Necessarily, their interests (and perhaps perspectives on the case) are not congruent with those of Mr Sharpe.
The first statement of claim
Chopsonion commenced these proceeding on 29 July 2020 filing an application and a statement of claim.[28] The application is a brief document. It seeks compensation in an amount of $130,000.00 and alternatively damages or compensation in an amount of $626,751.00.
[28] Hereinafter referred to as SOC 1.
As noted above, it was between October 2014 and early-2015 that various sums which amounted to $130,000.00, were paid to the respondent, which is the corporate trustee of a family trust – the Mulherin Family Trust – which carries on business as a firm of chartered accountants in Sydney, under the name of Mulherin Schier.[29]
[29] Hereinafter referred to the respondent.
The application asserts that the respondent, between December 2014 and April 2015, caused certain payments to be made from its trust account which entirely dissipated this sum, which payments had been made without the authority of the applicant or for its benefit.
The first statement of claim is also a concise document. Why the sums in question were paid is not clear other than the statement of claim asserts it was paid by one David Anderson on behalf of a company FG Agri Pty Ltd.[30] What is the relationship of these persons to Chopsonion is not specified.
[30] See SOC 1 at 4.
Chopsonion assert that the various payments made, by Mr Anderson, created an equitable trust, of which Chopsonion was the beneficiary.[31] What was the relationship between Mr Anderson, FG Agri Pty Ltd and Chopsonion is unclear from the statement of claim.
[31] See SOC 1 at 5.3.
It is then alleged that monies were disbursed from the original deposit between 1 December and 16 April 2015, by the respondent, which were in breach of its duty of trust to Chopsonion and amounted to misleading and deceptive conduct on its part.
The details of this misleading and deceptive conduct are asserted to be that the respondent failed to enquire of Chopsonion as to whether these payments were authorised by it or would be beneficial to it, in circumstances in which is said to be self-evident that the payments were not.[32]
[32] See SOC1 at 10.
The case was listed for its first directions on 5 November 2020. In advance of this hearing, on 30 October 2020, a defence was filed.[33] In a formal sense, the respondent admitted receiving monies amounting to $130,000.00 and distributing the sums. However, significantly, it denies that Chopsonion, in its current control, was or is entitled to the sum in question as it has consciously failed to account for any benefit of the dispersal of the fund accrued to Mr Sharpe.[34]
[33] Hereinafter referred to as D1.
[34] D1 at 11.
In this context, the effect of the defence filed can be summarised as follows:
·Mr Sharpe, prior to the appointment of the controller, entered into a commercial transaction with Mr Anderson and FG Agri Pty Ltd;
·The respondent was not a party to that transaction but permitted its office trust account to be used by Mr Sharpe and Mr Anderson to transfer funds between them. In this context, it was Mr Anderson who deposited the funds into the relevant account;
·Mr Sharpe and his wife Wendy Sharpe provided direction to Mr Anderson as to how the funds were to be distributed and, in turn, Mr Anderson provided directions to the respondent as to whom it was to be paid;
·As a result of these directions relevant monies were paid to:
·A company of which Mr Sharpe was sole director and shareholder;
·Two companies which were involved in a joint venture concerning Mr Sharpe and Mr Anderson.
·In these circumstances, the overall import of the claim against it is for the controller to make good a debt owed to it, which was incurred before it took control of Chopsonion.
In lay terms, the defence is that the character and interests of Chopsonion have fundamentally changed upon it coming under the control of its creditors, who are attempting to recover monies, which it (the respondent) legitimately disbursed, at the direction of its former director Mr Sharpe or his wife, to entities directly related to him or Mr Anderson.
Implicit in this assertion is the contention that the respondent cannot have owed a specific duty of trust to Chopsonion, as it is currently manifest, because when the controversial monies were disbursed, it was controlled by Mr Sharpe and it did what it was directed to do by him.
In this context, it would appear to me to be evident that the nature and basis of the professional and equitable breach of trust alleged to have been committed by the respondent, along with the material facts of what actions were alleged to have constituted false and misleading conduct on its part, in the context of the ACL, were likely to be central aspects of Chopsonion’s case. These were not provided in the original statement of claim.
The process of litigation
On 5 November 2020, Judge Heffernan, formerly of this court, made orders for general discovery and referred the parties to court-based mediation. The case was then adjourned until 25 March 2021. This process of mediation was commenced on 4 March 2021 but did not conclude.
On 9 November 2020, the respondent filed an application for security for costs supported by an affidavit indicating the impecuniosity of Chopsonion. Shortly afterwards, Mr Mulherin and Mr Willson filed affidavits of documents. After the partly completed mediation, each party made complaints about the adequacy of discovery of the other.
The application for security of costs was dealt with by Judge Cameron on 25 May 2021. He ordered security in an amount of $45,000.00 be provided prior to mediation with the respondent being at liberty to apply for further security after mediation. The security was to be provided within 21 days.
It was not provided and, on 19 January 2022, the respondent applied for the dismissal of the action on the basis that the applicant had failed to take any necessary step in the proceedings for a period of approximately six months after the relevant order.
In response, the solicitor for Chopsonion, Mr Rowley deposed that problems had arisen due to delays in obtaining advice from counsel and the serious illness of one of the controllers due to covid. However, it was also said that the security would soon be available for payment.
In these circumstances, on 21 March 2022, with the consent of the respondent, the time for its provision was extended to 26 May 2022. The security was, in fact, paid and the matter returned to mediation.
It would appear that in the context of the mediation, issues were raised about the adequacy of the statement of claim. It was agreed that an amended statement of claim could be served by early August with a defence to be filed by 19 August 2022. The mediation, still incomplete, was to resume on 21 September 2022 and the matter return to court on 26 September 2022. By this stage the amended statement of claim[35] and amended defence,[36] as ordered had been filed.
[35] Hereinafter referred to as SOC 2.
[36] Hereinafter referred to as D 2.
Needless to say, the mediation did not resolve the matter. The matter came back before me. I was concerned that a period in excess of two years had elapsed – albeit that this period had also coincided with the disruption occasioned by the pandemic emergency.
For obvious reasons, I was concerned at the lack of progress and decided that the matter need to be fixed for final hearing. The date allocated was the week commencing 22 May 2023 – around eight months away, which naively I considered would be ample time for all necessary affidavits of evidence to be prepared and filed. The Judge of Division 2 nominated to hear the matter was Judge Lucev, based in Perth, who at the time was assisting the Adelaide registry of the court with the hearing of general federal law matters.
On 25 October 2022, the respondent filed an application seeking a further amount of security against costs and more significantly for four aspects of SOC 2 to be struck out pursuant to the provisions of section 192(4)(b) of the FCFCOA Act.
As the judge nominated to conduct the trial, the application was listed before Judge Lucev for hearing on 24 February 2023. Prior to trial, Mr Rowley filed lengthy affidavits from each of his clients, each of whom acknowledged lending significant amounts of money to Chopsonion, leading to them assuming its control. These affidavits went to their respective not insignificant personal financial worth and willingness to provide personal undertakings as to costs.
The hearing before Judge Lucev took part as scheduled on 24 February 2023 but only in respect of the strike out application as the parties were able to agree on the security issues on the basis of the provision of undertakings by the various lenders to Chopsonion. After the hearing of the matter, Judge Lucev indicated as follows:
All right. Thank you, Mr Djurdjevic. Thank you, Mr Belperio. The court might just take some time to deal with the matter. So I will reserve judgment to a date to be fixed conscious of the fact that the trial is not that far away. We will adjourn.
Judgment was delivered on 24 December 2024[37] His Honour made the following order:
Paragraphs 10 and 11A and subparagraphs 1.4 and 10.3 of the amended statement of claim filed by the Applicant on 5 August 2022 be struck out, with leave to the Applicant to replead those paragraphs and subparagraphs on or before 31 January 2025.
[37] Chopsonion Pty Ltd v Mulga Corporation Pty Ltd [2024] FedCFamC2G 1450 Hereinafter referred to Chopsonion (No 1).
Given the delay in resolving the pleading issue, on 11 April 2023, Judge Lucev vacated the trial scheduled for 22 May 2023. The case was listed for case management on a date to be determined by the court.
The applicant did not take up the opportunity to replead by 31 January 2025. It did however circulate some form of amended statement of claim to the respondent, which indicated it did not consent to its filing. In these circumstances, on 24 April 2025, the applicant applied to file the further amended statement of claim.[38]
[38] Hereinafter referred to as SOC 3.
Ultimately, this application was listed for hearing before me on 15 August 2025. These reasons for judgment are directed to resolving whether there should be a further amended statement of claim and how the proceedings should proceed generally.
No defence has been posited in respect of SOC 3. Counsel for the respondent, Mr Djurdjevic opposes any further amendment pointing to the delay of five years in the case, which he submits cannot be attributed to any omission on the part of his client and the fact that the applicant has already had two opportunities to amend its claim and should not be afforded a third one.
The underpinning of this submission being that the claim as a whole is misconceived and certainly from the perspective of the respondent, it still does not know what was the nature of the professional obligations said to have been breached by it to the applicant; what was its misleading and deceptive conduct; and how has it any accessorial liability for the actions of Mr or Mrs Sharpe (or indeed Mr Anderson).
In these circumstances it is necessary to isolate the aspects of SOC 2, which Judge Lucev struck out before turning to the proposed amendment constituted by SOC 3. In this context, if leave is not granted to amend the claim further, a further issue arises, namely whether it is appropriate to list what remains of SOC 2 for final hearing.
In addition, as indicated earlier in these somewhat discursive reasons, will there be any useful purpose in directing the filing of affidavits of evidence. In particular, will such a course more readily lead to the coalescence of evidentiary issues between the parties and delineate a clear professional or contractual relationship between them, which is capable of being subject to the court’s jurisdiction under the ACL.
The second statement of claim
(a) The first impugned subparagraph – 1.4
The relevant objection turns on the designation of Chopsonion being a client of the respondent and therefore any dealings between the two being subject to what were characterised as applicable ethical standards.
Mr Djurdjevic characterised the application of a breach of applicable ethical standards as being amorphous and rhetorically asked what standards? The conclusion being that it was not an allegation to which his client could fairly respond. Judge Lucev agreed.[39]
[39] Chopsonion (No 1) at [17].
(b) The second impugned paragraph – 10
This is a lengthy paragraph of some three major chapeau to which many more paragraphs are subsidiary. It is dependent on paragraph 8, which Judge Lucev described as long and complex. I agree with this characterisation. It, paragraph 8 is headed Breach of Trust. In my assessment, it is the metaphorical engine room of the applicant’s claim and remains extant in SOC 3. In my view, it also raises potential jurisdictional issues, if paragraph 10 is not replaced as sought in SOC 3.
As previously indicated, the respondent has formally admitted receiving the sum of $130,000.00 from Mr Anderson but denies any trust was established of which it was the trustee. It also admits distributing the sum in question. In this context, clause 8 of SOC 2 and clause 8 of D 2 take issue with one another.
In general terms, Chopsonion asserts that the transaction was governed by the provisions of the Accounting Professional & Ethical Standards, which required the respondent to apply some level of diligence in respect of the monies received by it; generate some level of professional documentation in respect of the sum; inquire as to the source of the funds (presumably from its depositor); and inform Chopsonion, when the sum was disbursed.
In clause 8.3.2 of SOC 2 Chopsonion asserts as follows:
8.3.2 As at 21 October 2014, the Respondent knew or ought to have known the following:
The Applicant had issued the Invoice to FGA for the purchase of the Equipment.
The Deposit was for the purchase of the Equipment was in the amount of $100,000, was paid by FGA for the Purpose and was to be held by the Respondent in the Office Trust Account.
The balance of the purchase price for the Equipment was due to be paid by FGA to the Applicant within 7 days of the Equipment landing in Sydney.
The Applicant required funding to purchase the Equipment.
Any prospective funder of the Equipment would rely on the truth of the information contained in the Invoice when considering whether to fund the purchase of the Equipment.
In D 2 the respondent asserts that it complied with the relevant professional standards but in any event it is the common law which applies to cases involving an allegation of breach of trust. It denies the above subparagraph.
In my view, the above subparagraph is not particularly lucid. It seems to assert that Chopsonion was in the process of selling some undisclosed equipment to FG Agri Pty Ltd, which was to paid for by a deposit with the balance due when the equipment arrived in Sydney. No material facts have been provided as to why the respondent ought to have known about the transaction.
Again, as previously indicated, the respondent has asserted that it was not a party to any transaction or contract between Chopsonion/Mr Sharpe and FG Agri/Mr Anderson but allowed its trust account to be utilised as a conduit for the transfer of funds between them. In this context, it has asserted that Mr Sharpe and/or his wife Mrs Wendy Sharpe provided directions to Mr Anderson for distribution of the funds by him into the respondent’s office trust account.
As noted above, at the time (October 2014), Chopsonion was not under the control of its lending creditors but of Mr Sharpe, its director. SOC 2 does not seek to impugn his conduct directly or that of his wife or indeed Mr Anderson.
In my view the implication, sought be drawn from the pleading, is not one which arises with any great degree of either intellectual or legal logic. In my view, they are assertions without factual or legal support in the paragraph itself.
Essentially it is that the respondent ought to have either known that the direction provided to it vis-a vis the distribution of the $130,000.00 was either illegitimate; or, if uncertain in this regard, was obliged to inquire of someone (whose identity is not specified) as to its legitimacy.
This purported knowledge or duty to inquire arising in circumstances in which the direction provided to it came from the person who had deposited the funds with it, in the first place, in tandem with the persons, whom it knew were in control of Chopsonion, at the time of the direction to it. In general terms, these obligations are asserted to arise as a consequence of the professional standards applicable to accountants.
Judge Lucev characterised paragraph 8 in similar terms and it was as a consequence of this determined to strike out paragraph 10. His Honour said as follows:
[P]aragraph 8 of the Amended SOC … is a long and complex paragraph which contains pleadings of an alleged breach of trust. The alleged impugnable misleading or deceptive conduct is not identified with any precision in paragraph 8 of the Amended SOC and whether the impugnable conduct took the form of something written, something oral, something gestural, or silence in circumstances where an explanation was necessary, or any combination of these things, is not made apparent. Nor is it apparent whether the alleged conduct occurred on one or more occasions. There is no pleading that any representation was false or that any conduct led to a misleading and deceptive state of affairs, or that if there was such conduct who precisely was misled or deceived by that conduct, or that MFT had any knowledge of any falsity.
MFT is therefore required to engage in speculation as to precisely what circumstances give rise to conduct which is said to be misleading or deceptive on the basis of the alleged facts in connection with paragraph 8 of the Amended SOC, and on that basis paragraph 10 of the Amended SOC is embarrassing and ought to be struck out.[40]
[40] See Chopsonion (No 1) at [19] – [20].
Essentially, the question which arises at this point is what is the material fact or matter of law alleged by the applicant, which resulted in there being a state of affairs in the relevant period of 2014/15, from which the respondent knew or ought to have known that there was something untoward arising from how it was being directed to deal with the monies deposited with it or alternatively what was the legal obligation, which obliged it to refrain from complying with the direction provided to it until it had done certain things.
Judge Lucev, with whom I respectfully agree, asserts that the pleading, as then drafted, does not provide any such material fact or matter of law but merely asserts that the respondent ought to have known or done certain things. No aspect of the pleading provides any explanation as to why this should be so.
The conclusion to the matters pleaded in paragraph 8 is that the alleged breach of trust founds Chopsonion’s claim for reimbursement of the sum of $130,000.00, which was the deposit said to have been provided by Mr Anderson for the purchase of equipment.
This allegation is formally denied but as the pleadings currently stand remains an issue subject to the court’s adjudication. Necessarily, the confines of the issues in dispute arising from this matter are relatively confined and do not turn on any application of the ACL, albeit that there may well be controversy as to whether it falls within the jurisdiction of a division 2 court, given it is a court of statutory jurisdiction.
In this overall context of the court’s jurisdiction, the contents of paragraph 10 of SOC 2 were and remain crucial, given the form of their current proposed iteration. This is that paragraph which ties up the allegations of professional misfeasance in paragraph 8 with the allegation that the respondent has, in some way, breached the provisions of section 18 of the ACL and which in turn founds the consumer protection jurisdiction of this court.
As previously indicated, this in turn founds the jurisdiction of the court to make orders for either damages or compensation said to have accrued to Chopsonion in servicing the loan agreement with its financier pursuant to the provision of either section 236 or 237 of the ACL.
Again paragraph 10 of SOC 2 is long and complex and, in my respectful opinion, a somewhat convoluted piece of legal drafting. It is headed misleading and deceptive conduct picking up the phraseology of section 18.
Doing the best I can, in the context of its expression, its objective seems to me to be an attempt to sheet home some form of accessorial liability for what are alleged to have been the misleading and deceptive actions of Mr and Mrs Sharpe in respect of their dealings with their creditors, who would seem to be the present controllers of Chopsonion, vis-à-vis the diversion of the sum of $130,000.00 out of the respondent’s account and back into their (the Sharpes) personal control.
In paragraphs 10.2.2.1 and 10.2.2.1A it is asserted that as of April 2014, as a consequence of its finance facility, Chopsonion had an overdraft of around $1.175m, which gave its financier a right to take possession of monies due to it. This is an assertion of fact, which may or may not be true. In any event, it pre-dates the actual appointer of a controller to the company.
The gravamen of the allegation would appear to be that the respondent did or should have known this. It is not specifically alleged that either Mr Sharpe or Mrs Sharpe were themselves aware of this allegation, but it appears implicit from what follows. In this context, it was asserted that the respondent should have made inquiries of Chopsonion as to whether the payments out of its account were authorised by it.
Whilst Chopsonion is to be approached as being a legal person, it is a corporation. As such, its affairs are managed by corporeal persons, most usually its appointed directors and managers. The pleading does not specify who, other than Chopsonion itself, the respondent was required to make its inquires to. The presumption, not specified in the pleading, was that it must be some other person than either Mr Sharpe or Mrs Wendy Sharpe, the former of whom was its sole director at the time of disbursement of the funds.
In what follows, it seems to be obliquely suggested that the current controllers are to be regarded, at the time, of disbursement of funds, as being in someway Chopsonion. No material facts are provided in this respect. How such a connection is to be made is not specified. More significantly, it is not specified how this failure was false and misleading in the context of the ACL, presumably it is some sort of deception by omission.
In what follows [10.3] is an attempt to sheet home what is characterised as the misleading and deceptive conduct of Mr and Mrs Sharpe, in an accessorial sense, to the respondent. This allegation appears to turn on an email sent by the respondent to Mr Sharpe, which indicated that the monies held by it, which the pleading characterises as the deposit related to abattoir equipment. No facts are provided as how this characterisation is made and by whom.
In addition, paragraph 10 also introduces another entity characterised as the lenders, who those lenders are is not specified other than by implication it is Chopsonion’s financier, who took control of it in 2016.
The pleading provides no facts, material or otherwise, in respect of this connection but at [10.3.8] allege that it was Mr Sharpe who caused Chopsonion to enter into the relevant finance agreement in January 2015. Necessarily, this was after Mr Anderson had paid the first tranche of monies to the respondent – in the amount of $100,000.00 – on 30 October 2014.
The pleading identifies Annette Conn as being the relevant representative of the lenders. The pleading goes on to allege that she was in some way mislead by the email referred to above and another one provided to her by Mr Anderson, which confirmed that he had made a payment to Chopsonion, which represented the deposit for purchase of the equipment and the balance would be paid.
The pleading alleges the lenders were misled by the combination of the email sent by Mr Sharpe with that of the one sent by Mr Anderson to lend money to Chopsonion in January 2015. This allegation led to the following paragraph:
The Respondent’s knew or ought to have known that potential financiers funding the acquisition of the purchase of the Equipment including the Funders would rely on confirmation provided by the Respondents that the Respondents held the Deposit in the Office Trust Account when considering whether to provide financial accommodation to Sharpe or entities related to him by virtue of the matters…[41]
[41] See SOC 2 at [10.3.9].
The implication of this subparagraph being that Mr Sharpe and others associated with him misled the lenders through their characterisation of the monies held with the respondent. Axiomatically, the individuals primarily concerned with this characterisation are Mr Sharpe and Mr Anderson who deposited the sum. This would appear to be the misleading conduct.
In the context of allegedly having been misled and deceived by Mr Sharpe and others, the current incarnation of Chopsonion, in the impugned pleading, assert that the respondent was involved in this deception by its provision of the relevant emails – axiomatically authored by persons not associated with it – on which it relied to lend money to the entity which is has subsequently assumed control of.
In particular, Chopsonion alleges that the respondent bears accessorial liability for the actions of Mr and Mrs Sharpe and/or Mr Anderson, arising from its reliance on these emails, within the parameters envisaged by section 2(1) of the ACL, which defines the concept of involvement in breaches of consumer law, which is constituted by one of more of the following if the person concerned:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced the contravention, whether by threats or promises or otherwise; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d)has conspired with others to effect the contravention.
I concede, as indeed did Judge Lucev, that silence or non-disclosure, in certain circumstances may amount to false and misleading conduct. However, that is not alleged. It is not asserted that the respondent knew what was contained in the relevant emails was not true but determined to remain silent about it.
In my view, in order to be a proper pleading, it is necessary for there to be provision of the various facts which give rise to the allegation that the respondent – presumably by accepting the deposit of monies into its account and providing details of what it had been told in respect of their characterisation by others – was in some way involved in whatever deception was later practiced on the lenders by Mr Sharpe.
In his judgment, Judge Lucev concluded that the allegation of accessorial liability was one based on no more than a bare assertion and therefore disclosed no reasonable cause of action. Given my own analysis of the pleading, I respectfully agree.
The essential issue being the lack of material facts pleaded to indicate that the respondent was knowingly involved either directly or indirectly in the alleged deception of Mr Sharpe and those associated with him. His Honour said as follows:
Knowledge of falsity, misleading and deceptive character needs to be pleaded, and in subparagraph 10.3 pf the Amended SOC there are no proper pleadings of falsity, by anyone, or pleadings of knowledge of that falsity. A further difficulty is that the pleading of involvement at sub-subparagraph 10.3.13 of the Amended SOC does not identify which of the paragraphs of the definition of “involved” in s 2(1) of the ACL are alleged to be the grounds of the alleged involvement.[42]
[42] Chopsonion (No 1) at [25].
(c) Third impugned paragraph – 11A
This paragraph attempted to enlist the provisions of the Corporations Act 2001 (Cth) to assert that the respondent had assisted Mr Sharpe to breach his directorial duties owed to Chopsonion. The implicit admission arising from this paragraph being that the person who has misled the lenders – whether constituted by the current incarnation of Chopsonion or otherwise – is Mr Sharpe (perhaps in combination with Mr Anderson).
In these circumstances, the same objections to this pleading arise in those advanced in respect of the former - namely the absence of any material facts to connect the dereliction of a directorial duty alleged against Mr Sharpe with any action or knowledge – either in the form of omission or silence – done or held by the respondent. In these circumstances, Judge Lucev also struck out this pleading on the basis that it was confusing and embarrassing as it did not establish any reasonable cause of action.
I have done my best to decipher the aspects of the struck out statement of claim before coming to what is submitted should replace it. This is because the subsequent pleading has been prepared in the light of the comprehensive ruling of Judge Lucev.
Necessarily the subsequent pleading should correct the errors of the former otherwise it will have achieved nothing and in its turn be subject to rejection. In broad terms, it should provide the material facts or statements of law, which found Chopsonion’s basic allegation that the respondent firm of accountants bears accessorial liability for having misled or deceived it by accepting a sum of money into its account from a person with whom it had no contractual relationship, in the context of a contract to which it was not a party, leading to it being in some way complicit with the actions of another person (Mr Sharpe), who is alleged to have misled the persons designated as the lenders, who appear to be the current controllers of it but who were not so placed at the time of impugned action.
I appreciate that the forgoing is an extraordinarily convoluted sentence. It is my attempt to decipher the pleading in the case, which Judge Lucev, in my view, rightly rejected. A well drafted pleading should provide elucidation of the areas of controversy between the parties concerned. It should not require the legal equivalent of a Rosetta Stone to decipher it.
Regrettably, in my view, the relevant statement of claim is far from lucid. Rather how the respondent is said to have breached both the ACL and the Corporations Act rest on inuendo rather than on clearly articulated statements of fact. The aim being to link the complaints against Mr Sharpe with some omission against the respondent solely on the basis that there was a professional relationship between the two. In cases alleging fraud or falsity unequivocal pleadings need to be provided, as Judge Lucev pointed out.
In addition, if a party makes the election to proceed by way of pleadings rather than by filing an affidavit of evidence, the resulting statement of claim is required to contain a completed cause of action, not one which it is hoped may grow in the telling. As a matter of natural justice, the other party is entitled to know what is the cause of action against them rather than respond to some form of inchoate insinuation that some wrong has been inflicted.
The Third Proposed Statement of Claim
At the conclusion of his judgment, Judge Lucev indicated his view that there were some obviously not insignificant legal and factual complexities involved in the matter. I have attempted to identify these matters, which I think can be characterised currently as known unknowns in the sense that the areas of dispute are identified but not what are the facts and legal principles which support them.
Essentially, how can the respondent be legally liable for the deception of Mr Sharpe and others related to him. The second statement of claim did not provide the required degree of fact to enable the respondent to plead to that.
Judge Lucev also indicated, at the time of delivery of his judgment, that it was not apparent to him that these issues could not be properly pleaded. In these circumstances, he granted the applicant a period of five weeks to replead – a time limit which was not met. His Honour also invited those advising the applicant to consider whether less is better. The implication being that a concise pleading is likely to be more elucidating than a long one.
The relevant attempt at repleading, has substituted the expression the accounting and professional and ethical standard APESS, which are said to have governed dealings between the parties, more particularly APESS 110 and 310.
What are these standards, in particular, and how they relate to other aspects of the statement of claim is not specified. In written submissions, Mr Djurdjevic points to the fact that the first standard is 245 pages long and the second is one of 24 pages. Accordingly, the amendment addresses none of the concerns raised by Judge Lucev. The respondent can be no wiser as to what it has done to breach section 18 of the ACL. I agree.
Paragraph 10.1.1, in its amended form, reads as follows:
10.1.1.1.The Respondent knew that the Deposit was for the purchase of Equipment as pleaded at [8.3.2.2];
10.1.1.2.The Respondent knew that a prospective funder would rely on the truth of the information contained in the Invoice as pleaded at [8.3.2.5];
10.1.1.3.The Respondent knew that the Deposit Confirmation would be used by the Applicant to provide to funders or potential funders as pleaded at [8.3.4] to [8.3.6];
10.1.1.4.The Respondent knew that the Lenders and potential financiers relied on the truth of the matters pleaded at [10.3.8] and [10.3.9];
10.1.1.5.The Respondent knew that the Payments were made for a purpose inconsistent with the Purpose or not for the benefit of the Applicant as pleased at [8.3.7.4];
10.1.1.6.The Respondent therefore knew that the Lenders and potential funders were relying on the matters pleaded at [10.1.1.2] to [10.1.1.4] that were in fact false and untrue;
10.1.1.7.Knowing the above, the Respondent remained silent when it ought to have corrected the false and untrue representations that it knew the Lenders and potential funders were relying upon.
Mr Djurdjevic characterises this paragraph, given the numbers of subparagraphs, as being confusing. I agree. The chief difficulty being, in my view, the absence of specific detail as to what is the false and misleading conduct alleged against the respondent.
It is all well and good to assert fault against Mr and Mrs Sharpe, but they are not parties to the proceedings. The pleading is an attempt to attribute their fault (or deception) to the respondent by asserting it knew about it.
In these circumstances, in my view, it is incumbent on the applicant to assert not only that the respondent had more than bare knowledge of the deposit of the monies in question and their ultimate disbursement but knew that the devices adopted by Mr and Mrs Sharpe were deceptive and misleading and it stood by and did nothing. The pleading does not assert that.
Essentially the assertion that the result of the transaction was deceptive and misleading to the current incarnation of the applicant and the respondent was involved in the mechanism of the disposal of monies, at the direction of Chopsonion’s previous director is not sufficient. The pleading must establish actual knowledge that the whole enterprise was a deceptive ruse.
The best I can glean is that the various subparagraphs assert that the respondent knew certain things, which were also known to Mr Sharpe and perhaps Mr Anderson. It is also possible that Mr Sharpe may have said different things to different people at different times. I do not know.
How this is so is not clear. It appears to rely on some form of imputed knowledge arising from the relationship between Mr Sharpe and the respondent. It does not attempt to differentiate between the two different incarnations of Chopsonion.
In my view, for this to be a proper pleading, it is necessary for the applicant to do more than bluntly assert what Chopsonion knew. It must specify why the holding of this knowledge amounted to deceptive and misleading conduct. The current proposed pleading does nothing to move the matter on from the insinuation or inuendo of the previous rejected statement of claim.
In my view, on the basis of these uncertain and inchoate allegations, the pleading at 10.1.2 reaches the conclusion that the respondent was involved in the misleading and deceptive conduct of Mr and Mrs Sharpe (and possibly Mr Anderson). This is a conclusion that is not based on any clearly articulated material facts and therefore should not be admitted into the proceedings.
The proposed paragraph 11A, which attempts to attribute accessorial liability to the respondent for the directorial omissions of Mr Sharpe is as follows:
11A. Yet Further or in the alternative to the matters pleaded in paragraphs [8] to [10] herein:
11.A1.By Virtue of the matters pleaded in paragraph [1.1] herein, Sharpe owed a duty to the Applicant not to improperly use his position to gain an advantage for himself pursuant to s182 of the Corporations Act 2001 (Cth).
11A2.Sharpe contravened his obligations to the Applicant under s182 of the Corporations Act 2001 (Cth) by engaging in the conduct pleaded in paragraph [10.3] herein.
11A3.The Respondent was involved in the contravention by Sharpe of his obligations to the Applicant under s182(2) of the Corporations Act 2001 (Cth) by engaging in the conduct pleaded in paragraphs [8] and [10.3] herein.
11A4.Had the Respondent not involved itself in the conduct referred to in paragraphs [8] and [10.3] herein, the Payments would not have been made and would have been applied or been available to have been applied by the Lenders in manner pleaded in paragraph [10.2.2.5] herein.
11A5.In consequence of the matters pleaded in paragraphs [11A.1] to 11A.4] herein, the Applicant is entitled to compensation from the Respondent pursuant to s1317H of the Corporations Act 2001 (Cth)
In my view, the deficiencies in this pleading are the same as in its predecessor and indeed replicate those relating to the allegation of a breach of the consumer law by the respondent on account of it having knowledge of the deceptive conduct of Mr Sharpe, arising only because it was Chopsonion’s accountant not because of any specified occurrence or detail contained in an assertion of material fact.
Rather the pleading alleges the respondent bears some form of accessorial liability for Mr Sharpe’s breach of a directorial duty to Chopsonion rests on little more than bare assertion and as such can amount to a material fact and as such are to be characterised as embarrassing.
CONCLUSIONS
At the end of the process of closely examining three sets of pleadings, the case alleged against the respondent remains that it knew (or ought) to have known that an action attributed to the former director of Chopsonion (Mr Sharpe), in conjunction with dealings with Mr Anderson, was misleading and deceptive and, as a result, it was obliged to inform the individuals, who now control the respondent, of that director’s deception. As a result, the respondent is in some way alleged to be complicit with the deceptive behaviour of that director.
How the respondent should have known of this deception, other than it was a firm of accountants, and what are the precise steps it should have taken to inform the current controllers of Chopsonion of the knowledge imputed to it is not specified. Thus, in my assessment, it has not identified how and when either the ACL or the Corporations Act has been contravened by the respondent, in distinction to any such breach by Mr Sharpe.
For these reasons, in my view, the proposed pleading remains defective in the same manner as identified by Judge Lucev. As such, in my assessment, it would constitute a species of practical injustice to the respondent to allow the case to proceed on the basis on which it is proposed to plead it.
At this juncture, I can see no utility in allowing the applicant a further attempt to remedy its statement of claim. The case has been on foot for five years, in respect of a cause of action which is asserted to have arisen at least five years before that. The application has been marked by delay – in this context, I concede the court itself has contributed to this delay – however, axiomatically, how the case has proceeded is not consistent with the overarching principles pertaining to the conduct of civil litigation.
The applicant has had three attempts at formulating its case, which for the reasons provided above, still remains a bare assertion that the respondent is accessorily liable for the actions of Mr Sharpe (and other associated with him). It would not be consistent with the objectives of the FCFCOA Act to allow the applicant a fourth attempt to articulate its case.
Accordingly leave to replead the various paragraphs of the statement of claim filed on 5 August 2022 is refused. In these circumstances, I propose to list the case for directions on 26 November 2025 at 9.30am (Adelaide Time). By this stage, the parties can consider whether it is appropriate for the case to proceed on the basis of the remainder of the statement of claim currently filed or whether any other interlocutory application should be brought before the court.
For these reasons, the orders of the court will be as set out at the commencement of these reasons for judgement.
I certify that the preceding one hundred and seventy-five (175) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 29 August 2025
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