Craig v Silverbrook

[2016] NSWSC 530

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Craig v Silverbrook [2016] NSWSC 530

Hearing dates:

14 April 2016

Date of orders:

28 April 2016

Decision date:

28 April 2016

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Pleading struck out as against the 12th, 17th, 19th, 21st, 22nd, 27th and 28th defendants, with costs.

Catchwords:

PROCEDURE – application to strike out Statement of Claim as against 12th to 24th, 27th and 28th defendants – application by plaintiffs to amend Statement of Claim - leave granted for proceedings to be discontinued as against defendants in liquidation, namely 13th to 16th, 18th, 20th, 23rd and 24th defendants – whether Statement of Claim discloses a reasonable cause of action or constitutes an abuse of process - whether leave to re-plead should be given.

Legislation Cited:

Civil Procedure Act 2005, s 98
Equity Act 1880, ss 70, 71, 73 and 77
Uniform Civil Procedure Rules 2005, r 14.28(1)(a) and (c)

Cases Cited:

Cabassi v Vila (1940) 64 CLR 130
Coshott Co v Kam Tou Mak [1998] FCA 147
Harrison v Schipp (2002) 54 NSWLR 612; [2002] NSWCA 78
Loretta Kistmah Craig & Ors v Kia Silverbrook & Ors [2013] NSWSC 1687
Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534

Category:

Procedural and other rulings

Parties:

First Plaintiff: Loretta Kistmah Craig
Second Plaintiff: Vincent Desmond Craig
Third Plaintiff: D & L Craig & Associates Pty Ltd [ACN 003 583 319]
Fourth Plaintiff: DLC Properties Pty Limited [ACN 071 433 675]
Fifth Plaintiff: DLCF Pty Limited [ACN 123 783 246]
Twelfth Defendant: Memjet Technology Limited [Company Number 335478]
Thirteenth Defendant: Delo Finance Limited [Company Number 351329] (in liq)
Fourteenth Defendant: Sodep Limited [Company Number 322834] (In liq)
Fifteenth Defendant: Hanric Limited [Company Number 313806] (In liq)
Sixteenth Defendant: Corrizen Limited [Company Number 370817] (In liq)
Seventeenth Defendant: Vandini Limited [Company Number 365376]
Eighteenth Defendant: Monaxis Limited [Company Number 370300] (In liq)
Nineteenth Defendant: Kamath Limited [Company Number 380291]
Twentieth Defendant: Verifor Limited [Company Number 313914] (In liq)
Twenty-First Defendant: Levon Limited [Company Number 322965]
Twenty-Second Defendant: Milron Limited [Company Number 322721]
Twenty-Third Defendant: Elberino Limited [Company Number 419951] (In liq)
Twenty-Fourth Defendant: Hedblom Limited [Company Number 420022]
Twenty-Seventh Defendant: Memjet Holdings Limited [Republic of Ireland Company Number 515252]
Twenty-Eighth Defendant: Memjet North Pty Limited [ACN 158 185 883]

Representation:

Counsel:

 

Plaintiff: J. Curtin
12th – 24th, 27th and 28th Defendants: R. C. A. Higgins

 

Solicitors:

  Plaintiff: Self-represented
12th – 24th, 27th and 28th Defendants: Andrew Salgo, Baker & MacKenzie

File Number(s):

2016/62045

Publication restriction:

No

Judgment

1. The 12th to 24th, 27th and 28th defendants (“the Global defendants”) in these proceedings apply to strike out as against them the plaintiff’s Statement of Claim filed on 26 February 2016. They apply under Uniform Civil Procedure Rules (“UCPR”), r 14.28(1)(a) and (c) by Motion filed on 30 March 2016. They contend that the Statement of Claim discloses no reasonable cause of action against them and constitutes an abuse of process. The Global defendants further seek an order that the plaintiffs pay their costs pursuant to Civil Procedure Act 2005, s 98 and UCPR, r 42.1.

2. The Global defendants’ Notice of Motion was heard on 14 April 2016, when the Court granted leave to the plaintiffs for proceedings to be discontinued so far as they concerned certain other defendants, the 13th to 16th, 18th, 20th, 23rd and 24th defendants. Each of these other defendants is in liquidation. But the remaining Global defendants, namely the 12th, 17th, 19th, 21st, 22nd, 27th and 28th defendants continue to pursue their application to have the Statement of Claim struck out as against them.

3. The plaintiffs acknowledge there are problems in the Statement of Claim. They now seek the Court’s leave to re-plead. But the remaining Global defendants argue that in the particular circumstances of this case the plaintiffs should not be allowed to re-plead, and that their claim should now be struck out in its entirety as against them.

4. Ms J Curtin of counsel represented the plaintiffs. Ms R. Higgins of counsel, instructed by Baker & McKenzie, represented the Global defendants.

5. In order to understand the current contest some background is provided.

Background to this Litigation

6. The parties were involved in previous proceedings commenced in October 2010 (“the first case”). Five plaintiffs commenced the first case against 25 named defendants. The principal axis of dispute in the first case was between the first and second plaintiff in the current proceedings, who were also two of the plaintiffs in the previous proceedings, Ms Loretta Craig and her husband, Mr Vincent Craig (“the Craig Parties”), and the first and second defendant in the first case, an inventor, Mr Kia Silverbrook, and his wife and the manager of his financial and legal affairs, Ms Janette Lee, who are also the first and second defendants in these proceedings (“the Silverbrook Parties”).

7. In the first case the Craig Parties claimed that from 1992 to 2002 they advanced about $2.14 million to Mr Silverbrook to develop and commercialise his inventions, and that, in turn, they were entitled to a share of the profits generated from his success. Their claim included profits Mr Silverbrook is said to have made from his invention, the Memjet technology. During the first case and the current proceedings, the Craig Parties and the other plaintiffs allege that the 12th to 24th defendants in the first case entered into various partnerships with the 1st to 12th defendants, entities more closely associated with the Silverbrook parties.

8. On 3 May 2012 the Silverbook Parties and their associated companies, together with a number of the remaining Global defendants entered into an agreement which is called the Memjet Restructure Agreement, that need not be detailed further in these reasons.

9. On 15 September 2012 the plaintiffs entered into a settlement agreement (“the Settlement Agreement”) with the 12th to 24th defendants and the 28th defendant in the current proceedings, Memjet North Ryde, in which the plaintiffs: (1) agreed to settle all claims for relief against the 12th to 24th defendants on the terms set out in the Settlement Agreement (clause 1.9); (2) agreed to terminate the previous proceedings by discontinuance against the 12th – 24th defendants (clause 4); (3) irrevocably released and surrendered all claims for relief against parties including the 12th to 24th defendants and the 28th defendant "whether similar to the claims asserted in the Australian Action or not similar" (clause 5.1); (4) undertook that they would not commence any action, suit or proceeding against any released party which was materially inconsistent with the terms of that release (clause 5.8.1); (5) agreed that the release contained within clause 5.1 of the Settlement Agreement may be pleaded by the 12th to 24th defendants and the 28th defendant as an absolute bar to any action, suit or proceeding commenced now or taken at any time by any of the plaintiffs against any of the Released Parties which is materially inconsistent with the terms of the release (clause 5.8.2); and (6) agreed that the High Court of Justice, Queen's Bench Division Commercial Court, London shall have exclusive venue and jurisdiction of any dispute arising under the Settlement Agreement (clause 9.3).

10. In apparent performance of the Settlement Agreement, on 24 September 2012, the plaintiffs filed a notice discontinuing the first case against the 12th to 24th defendants, following which the 12th to 24th defendants were no longer involved in the first case. But the plaintiffs continued the first case against the remaining defendants.

11. In April 2013 Ms Craig was diagnosed with cancer. Her treatment began in July 2013 but was halted at her request during the trial before Sackar J. On 15 November 2013, Sackar J dismissed the plaintiff’s claim: Loretta Kistmah Craig & Ors v Kia Silverbrook & Ors [2013] NSWSC 1687.

12. On 29 January 2014 the remaining Global defendants entered into a Confidential Settlement Agreement with the Silverbrook Parties and their associated companies. The effect of this agreement was that interests, held by the 1st to 11th defendants in the first case transferred their partnership shares in the subject intellectual property to the remaining Global defendants and GKFF (“the Confidential Settlement Agreement”).

13. On 25 February 2014 the Craig Parties and other plaintiffs sought to appeal from Sackar J’s decision. But in April 2014 Ms Craig says that she discovered that her cancer had worsened, and in August 2014 she underwent surgery. Her evidence is that as a consequence she gave instructions for the appeal to be dismissed by consent.

14. Ms Craig gives further evidence on this application that in January 2015 she examined the evidence provided by the defendants during the hearing of the first case before Sackar J. She says that as a result of her examination of this evidence she now believes that the Silverbrook Parties have undertaken repetitive transactions to conceal the money advances that were made by the Craig Parties to the various partnerships and sought to disguise those advances as having come from the Silverbrook Parties rather than from the Craig Parties.

15. Ms Craig explains in her evidence that from April 2015 to August 2015 she prepared the Statement of Claim together with an affidavit for the current case, largely without the benefit of legal advice.

16. On 26 February 2016, the Craig Parties, together with three associated companies, filed the Statement of Claim as plaintiffs in these proceedings instituting action in the current case against some 31 named defendants. The first 25 of these defendants in the current case were the first 25 defendants in the first case.

17. The Statement of Claim seeks the following relief:

1. An order that the Judgment of Justice Sackar in the proceedings styled 2010/333159 be set aside under UCPR 36.15 on the basis that it was obtained by fraud.

2. An order that the Judgment in case number 2014/19421 and 2014/19412 be set aside on the basis of an error of law.

3. The plaintiffs repeat the relief sought in the Further Amended Summons filed on 15 October 2012 save for the Cash payments set out in paragraph 3 (c) vii and the plaintiffs' share of 4.34% in the Memjet Technology which is to be amended to 50% of 15.0186% of the Silverbrook Interest as defined in the Memjet Restructure Agreement.

4. An order that the Confidential Agreement of 15 January 2014 between the parties defined in the Memjet Restructure Agreement be set aside on the basis that Kia Silverbrook, Janette Lee and SRPL unlawfully assigned the valuable share of 15.0186% in the Memjet Technology to the Memjet Companies for €0.01 per share.

5. An order that the parties to the Memjet Restructure Agreement, the parties to the Confidential Agreement of 15 January 2014 transfer or procure the transfer of 50% of 15.0186% in the Memjet Technology as defined in the Memjet restructure Agreement to the plaintiffs.

18. On 7 April 2016 the matter was referred by the Registrar to the Equity Duty Judge. Kunc J adjourned the matter for seven days to enable the plaintiffs to obtain legal advice and respond to the defendants’ strike out application.

19. Ms Curtin was first retained as counsel for the plaintiffs only on 11 April. She provided a written submission before the matter was argued and another with leave after argument, in order to show what more detailed allegations might be pleaded, were the plaintiffs given the opportunity to re-plead the Statement of Claim as against the Global defendants, rather than have them struck out.

20. On 14 April 2014 the strike out Motion was heard in the Duty List. The Court gave leave for proceedings to be discontinued as against the defendants in liquidation.

21. The plaintiffs concede that: (1) the relief claimed by prayers 1 to 3 of the Statement of Claim cannot affect the Global defendants as they were not parties to the original proceedings, (2) the Statement of Claim discloses no reasonable cause of action against the Global defendants and is liable to be struck out in relation to those parties on that basis and (3) that Ms Craig when drafting the Statement of Claim had done so without the benefit of legal advice or representation, and by virtue of this, the pleading suffered from various defects.

22. The plaintiffs have since retained legal representation. Through Ms Curtin they now seek leave of the Court to amend the Statement of Claim. They wish to re-plead the following causes of action against the remaining Global defendants: (1) a claim for misleading or deceptive conduct under the Australian Consumer Law in relation to the entry by the Plaintiffs and the remaining Global defendants into the Settlement Agreement on 15 September 2012; and (2) claims for breaches of obligations owed by the remaining Global defendants to the plaintiffs arising expressly and/or impliedly as a result of the Settlement Agreement, which breaches are allegedly further evidenced by the Confidential Settlement Agreement of 29 January 2014.

The Statement of Claim, its Inherent Defects and Prolixity

23. The surviving contest between the remaining Global defendants and the plaintiffs is whether the plaintiffs should be given leave to re-plead, now the plaintiffs have accepted that their pleading is defective. The Court’s exercise of discretion on this issue is partly informed by the pleading which is already presented and the nature of the amendments which are foreshadowed that will be made, now that the plaintiffs have legal advice available to them.

24. The existing Statement of Claim is defective at many levels, not only against the remaining Global defendants but against other parties. As a result of the Settlement Agreement the Global defendants exited the first case. Thus relief seeking to set aside Sackar J’s judgment is not relevant to them. But the relief claimed against these other parties give some indications of the plaintiff’s approach to this litigation. The Statement of Claim is 204 pages long and comprises 1504 paragraphs.

25. The material pleaded against the remaining Global defendants on its face barely makes sense. It does not disclose a cause of action even though it only covers the following eight paragraphs of the total pleading which are set out below:

“THE MEMJET COMPANIES AND THE SALE OF THE MEMJET TECHNOLOGIES

1497.   On or about 15 September 2012 the plaintiffs entered into an agreement with the Memjet Companies and the GKFF. The effect of the agreement was that:

(a)   The plaintiffs discontinue the proceeding against the Memjet Companies; and

(b)   that the plaintiffs only relief was against the 15.0186% held by the Silverbrook Interest as defined in the Memjet Restructure Agreement.

1498.   In the period 6 December 2012 and 24 April 2014 the parties in the Restructure Agreement participated in Arbitration through the London Court of Arbitration.

1499.   The parties in the Restructure Agreement failed to disclose plaintiffs' claims, rights and interests in the Memjet technology arising out of the matters pleaded in the Third Further Amended Commercial List Statement in the proceedings 2010/333159 to the London Court of Arbitration. As a consequence the plaintiffs rights were ignored.

1500.   On or about 24 April 2014 the London Court of Arbitration handed down AWARD Arbitration Number 122270.

1501.   On or about 29 January 2014 the Memjet Companies in Ireland, USA,

Singapore and parties in the Memjet Restructure Agreement in full knowledge of plaintiffs' claims, rights and interests in the Memjet technology entered into a Confidential Settlement Agreement. (Confidential Settlement Agreement) the effect of which was:

(a)   that the Silverbrook Interest as defined in the Memjet Restructure agreement transferred the valuable partnership shares to the Memjet Companies and the GKFF for € 0.01 per share.

1502.   By reason of matters set out in paragraphs 1499 to 1502 each of Kia

Silverbrook, Janette Lee, SRPL and their associated companies, each of Ray Stata, RSIS LLC and the Irish companies defrauded Lorretta and Des Craig of their fair share of the Memjet Technology, its profits and income.

Particulars

Paragraphs 3254 - 3274 of the affidavit in chief of Lorretta Craig.

1503.   Prior to the making of the $2.14 million in advances, the plaintiffs were in a position of financial strength, owned eight real properties and valuable shares. Now the plaintiffs own no property and have no assets.

1504.   By reason of the matters pleaded above the plaintiffs seek the relief set out above in this Statement of Claim.”

26. But as against the other defendants the pleading, particularly commencing paragraphs [142] and following, seeks to raise extensive alleged errors of fact and law in or leading to Sackar J’s judgment, as if the matter were on appeal. The appeal from Sackar J’s decision was withdrawn as the chronology shows. Moreover this Court has no jurisdiction of the kind formerly available in the old bill in Equity procedure for a trial judge in a trial division of this Court to seek relief in the nature of a bill of review; such procedure was long ago abolished by the Equity Act 1880, ss 70, 71, 73 and 77: see Harrison v Schipp (2002) 54 NSWLR 612; [2002] NSWCA 78.

27. But the rest of the pleading is defective in other ways. The plaintiffs appear to be contending that by perjury and deception the Silverbrook Parties and wider associated defendants fraudulently procured the outcome before Sackar J. But such a case comes squarely up against the public policy rules perhaps best stated in Cabassi v Vila (1940) 64 CLR 130 that hold that no civil action lies in respect of evidence given by witnesses in the course of judicial proceedings. Thus, neither can the judgment be overturned by what here looks like the old bill in Equity procedure, nor is any action maintainable against the parties or witnesses to the prior action. The parties are of course covered by a res judicata. The only proper form of review of Justice Sackar’s decision is on appeal which is now withdrawn. The approach of the Statement of Claim seems to be an attempt to circumvent the plaintiff’s withdrawal of their appeal against Sackar J’s decision.

The Proposed Claims for Misleading Conduct and Breach of the Settlement Agreement

28. The plaintiffs seek to amend their Statement of Claim to plead that they would not have entered into the Settlement Agreement but for misrepresentations made by the remaining Global defendants among others prior to the plaintiffs entry into the Settlement Agreement with respect to the sale of the intellectual property rights to the Memjet Technology. It is also proposed to be alleged that the remaining Global defendants failed to disclose to the plaintiffs before entry into the Settlement Agreement facts which, in the circumstances, the plaintiffs contend they were reasonably entitled to expect would be disclosed to them.

29. The second proposed pleading relates to alleged breaches of obligation the remaining Global defendants owe to the plaintiffs arising out of the Settlement Agreement. Apparently it is said that the remaining Global defendants breached the notice requirements in the Settlement Agreement, clause 7 by failing to give the plaintiffs prompt reasonable notice of any proposal by interests associated with the Silverbrook Parties to dispose of their interests in various companies holding the Memjet intellectual property.

Consideration

30. In her careful and thoroughly presented submissions Ms Curtin pointed to evidence that the plaintiffs had difficulty in obtaining the assistance of legal representatives to perfect her pleading and submitted that it is usually appropriate to grant leave to re-plead in circumstances where the parties subject to the strike an application are self-represented. She points to the authorities that suggest that if a defect in pleading can be cured by an amendment the Court would ordinarily exercise its discretion to grant leave to amend rather than exercise the power to strike out the pleadings: Wentworth v Rogers (No. 5) (1986) 6 NSWLR 534 at 536.

30. Ms Curtin submits that the plaintiffs’ pleading is not beyond saving by legitimate amendment although it may be in need of “heroic surgery”: Coshott Co v Kam Tou Mak [1998] FCA 147. Moreover she says that the plaintiffs have not been given the time and opportunity to remedy the defects in the pleading, such that they should now have the opportunity to re-plead.

31. But in my view there are some special considerations in this case. The procedural background makes the the Court extremely cautious about allowing re-pleading. There has already been a 13 day trial before Sackar J. His Honour gave a judgment of 524 paragraphs in 174 pages after 13 days of hearing. The existing Statement of Claim in most respects against other defendants is prolix and is an attempt to re-litigate matters raised before Sackar J in a non-maintainable fashion, after an appeal from his Honour’s judgment was withdrawn.

32. Conscious of these matters and the fact that Ms Curtin had only come into the matter recently, the Court gave her a further opportunity to explain the nature of the re-pleading in proposed substitution for paragraphs 1497 to 1504 of the existing pleading. That opportunity was given so that the plaintiffs would be able to overcome any prejudice they may have suffered by lack of time.

33. Despite Ms Curtin’s best efforts, set out under the heading in her submissions “The Plaintiff’s Claims Against the Memjet Defendants”, the Court is really none the wiser as to what is going to be alleged. At best the plaintiffs can say that there was a failure to disclose “certain facts”; that there were “certain misrepresentations” made to them; and that “prompt reasonable notice” was not given in breach of clause 7 of the Settlement Agreement, although the consequences of that are failure to give notice are not explained.

34. Ultimately the Court is not confident that a re-pleading will result in the pleading of a clearly articulated cause of action known to the law against the remaining Global defendants.

35. Moreover if the Statement of Claim is struck out, the plaintiffs are not precluded from bringing fresh proceedings; it is a procedural dismissal.

36. In short I do not see that it serves the purposes of Civil Procedure Act, s 56 for the Court to give leave to re-plead so as to further litigate what has already been so prolix. Leave to re-plead is in effect to invite another contest such as the present. If the plaintiffs have a cause of action they can commence fresh proceedings and plead it properly.

Other Matters

38. Such of the pleadings that will remain against other defendants contain allegations that should not remain on the Court record. Paragraph 1487 and 1488 contain allegations which appear, somewhat by a side wind, to challenge the independence of Justice Sackar to hear the proceedings. Such allegations were never raised in the proceedings before his Honour, are on their own quite inadequate to reflect upon his Honour’s independence and are not connected obviously to any other form of relief in the Statement of Claim. In my view they should be struck out.

Conclusion and Orders

39. For the reasons indicated, the Court will strike out the Statement of Claim in these proceedings as against the remaining Global defendants, as defined in this judgment without granting them leave to re-plead.

40. The orders of the Court therefore will be as follows:

1. Strike out the Statement of Claim as against the 12th, 17th, 19th, 21st, 22nd, 27th and 28th defendants;

2. Order the plaintiffs to pay the 12th, 17th, 19th, 21st, 22nd, 27th and 28th defendants’ costs of these proceedings.

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Amendments

03 May 2016 - [40] "plaintiff" to "plaintiffs"

Decision last updated: 03 May 2016