Diamantidis Group Pty Ltd Trading as Ray White St Marys v The Agarwal Group Real Estate Pty Limited

[2024] NSWDC 354

District Court

New South Wales

Medium Neutral Citation:

Diamantidis Group Pty Ltd Trading As Ray White St Marys v The Agarwal Group Real Estate Pty Limited [2024] NSWDC 354

Hearing dates:

19 April 2024

Date of orders:

19 April 2024

Decision date:

19 April 2024

Jurisdiction:

Civil

Before:

Neilson DCJ

Decision:

The Notice of Motion is dismissed.

Catchwords:

PLEADINGS – Adequecy – “Dishonest and Fraudulent Design” - a term of art: unnecessary to provide further particulars as not an allegation of the tort of fraud.

Legislation Cited:

Nil.

Cases Cited:

Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609

Wentworth v Rogers(No 5) [1986] NSW LR 534, 538.

Texts Cited:

Nil.

Category:

Procedural rulings

Parties:

Plaintiff – Diamantidis Group Pty Ltd Trading As Ray White St Marys
First Defendant - The Agarwal Group Real Estate Pty Limited
Second Defendant – Vedent Agrawal
Third Defendant – Tag Re Sales Pty Ltd
Fourth Defendant – TAG RE Property Management Pty Limited
Fifth Defendant – Hailey Jane Nelson

Representation:

Counsel:
Plaintiff – Jemmeson, L.
Defendants – Rogers, A.

Solicitors:
Plaintiff – Jemmeson & Fisher.
Defendants – Alexander Richards Lawyers.

File Number(s):

2023/00359910

Publication restriction:

Nil.

Judgment

1. HIS HONOUR: By a Notice of Motion filed on 26 March 2024, the defendants seek the following relief:

“1. Within 14 days of these orders, that the Plaintiff give proper particulars of paragraphs 53 and 61 of the Amended Statement of Claim…of what the Second Defendant and the Fifth Defendant are alleged to have done, that is said to have constituted ‘exploiting Client and Customer Information, coming into their knowledge during their employment’, as pleaded in the said paragraphs 53 and 61.

2. That paragraph 75 of the Amended Statement of Claim filed herein be struck out.

3. In the alternative to prayer 2:

(i) that the plaintiff file a further amended statement of claim within 14 days of these orders, giving particulars of any fraud alleged in para 75 of the Amended Statement of Claim;

(ii) in default of compliance with prayer 3(i) hereof, liberty to the Second Defendant to re-list the matter on three days’ notice to seek an order in the nature of prayer 2 hereof.”

2. Of course, there is usual prayer for costs thereafter, but that is completely unnecessary. The parties to these proceedings are all involved in the real estate business. The plaintiff trades as Ray White St Marys. The first defendant is a company that is controlled by the second defendant. The second defendant is Mr Vedant Agrawal. The third defendant is Tag Re Sales Pty Ltd. The fourth defendant is TAG RE Property Management Pty Limited. The fifth defendant is Ms Hailey Jane Nelson.

3. Mr Agrawal was employed by the plaintiff between 1 March 2021 until he became an independent contractor to the plaintiff on 1 December 2022. Mr Agrawal’s contract of employment with the plaintiff’s company was executed by him on 25 February 2021 and commenced on 1 March 2021. It was a fairly basic employment contract.

4. Mr Agarwal was at the time aged 20 years. On an unspecified date, Mr Agarwal signed an independent contractor agreement between the plaintiff and the Agarwal Group Real Estate Pty Limited, the first defendant. That was for a period from 1 December 2022 until the 1 December 2023.

5. Ms Nelson signed an employment contract with the plaintiff on 27 September 2021 as a real estate employee level 2 on a full-time basis. That employment contract was to commence on 11 October 2021. The pleading alleges that on 11 May 2023, Ms Nelson resigned from her employment with the plaintiff, nominating her final day of service as being 31 May 2023. The same pleading alleges that Mr Agarwal resigned from the plaintiff’s team, if I may use that expression, on 1 December 2023. That is, there was no renewal of the agreement that he had signed on behalf of the first defendant at the time of the expiry of that agreement. According to the pleading, the third defendant was registered with ASIC on 13 March 2023, as was the fourth defendant. It is alleged that each of the first, third and fourth defendants were controlled by the second defendant, Mr Agarwal.

6. In paragraph 10 of the Statement of Claim, the chapeau before the particulars is this:

“Ray White maintains electronic databases including VaultRE, Inspect Real Estate, Property Me, Microsoft’s suite of software and paper records of Confidential Information pertaining to past, present, and prospective Clients and Customers, as well as information relating to their properties, property transactions and information not publicly available but made known to Ray White and or Ray White employees while performing real estate services (together Customer Information) and Ray White had in place measures to guard the secrecy of their Customer Information.”

7. Some of the words capitalised in that chapeau are repeated elsewhere in the Statement of Claim. For instance, “Confidential Information” is used later in the pleading, as are the words, “Clients and Customers”, as are the words “Customer Information”. In paragraphs 29 and 30, the plaintiff alleges that there was an implied term in each of the contracts of employment of “fidelity”. This is then termed the “Fidelity Term”. In paragraphs 31 to 34 there are allegations that Mr Agarwal owed the plaintiff a “Fiduciary Duty”, which appears to be adopted thereafter as a term of art in the pleading. At paragraph 34, there is an allegation that there was an Equitable Obligation of Confidence placed upon each of the first and fifth defendants imposed by law. Again, the words, “Equitable Obligation of Confidence” are used thereafter as a term of art.

8. Preceding paragraph 53 of the Statement of Claim is a heading, “Copying the plaintiff’s Confidential Information”. Paragraph 53 is this, and I should also add paragraph 53A, which immediately follows it and is the result of the initiating process having been amended into the form of an Amended Statement of Claim which was filed by consent on 18 January 2024:

“53. Mr Agrawal and or Ms Nelson and or TAGRE [third defendant], breached the CI term by exploiting Client and Customer Information coming into their knowledge during their employment (for Mr Agrawal and Ms Nelson) and during their commercial relationship, (for TAGRE) whether in the Ray White Software and or the Ray White PM Software for the properties listed in the table at paragraph 59 below, causing loss and damage to the plaintiff.

53A. Mr Agrawal, on at least 19 May 2022, did download and export a list of Clients and Customer Information and then caused the compiled list of Client and Customer Information to be emailed to a private email address of Mr Agrawal.

Particulars

On 19 May 2022, send from email [email protected] to [email protected] a compiled list of Ray White Clients and Customer Information.”

9. I assume that when “Clients and Customer Information” was used it should refer to client in the singular rather than in the plural to maintain the earlier definitions. The particulars of paragraph 53 in the defendants’ request of 15 December 2023 are these:

“(iv) What Client and Customer Information coming into Mr Agrawal’s knowledge, did Mr Agarwal exploit?

(viii) In what way did Mr Agrawal exploit such Client and Customer Information coming into his knowledge during his employment?

(ix) What Client and Customer Information coming into Ms Nelson’s knowledge did Ms Nelson exploit?

(x) In what way did Ms Nelson exploit such Client and Customer Information coming into her knowledge during her employment?

(xi) What Client and Customer Information coming into TAGRE’s knowledge during the commercial relationship pleaded, did TAGRE exploit?

(xii) In what way did TAGRE exploit such Client and Customer Information coming into its knowledge during the commercial relationship pleaded?”

10. In a second letter from the defendants’ solicitor to the plaintiff’s solicitor dated 9 February 2024, the defendant stated this about paragraph 53:

“We note that our request with respect to paragraph 53 of the Amended Statement of Claim are largely unanswered on the basis that they are matters of evidence (coupled with a reference to paragraph 53A of the ASOC).

We are of the opinion that this is an inadequate response.

In our request, we are seeking to know what it is that Mr Agarwal and Ms Nelson are said to have done that constituted ‘exploiting Client and Customer Information coming within their knowledge during their employment’.

Without the information, neither can plead to the allegation.”

11. One will note that at the end of paragraph 53, there is reference to the table in paragraph 59 of the Amended Statement of Claim. When one goes to paragraph 59, there is a chapeau before the table. The chapeau is this:

“59. As a consequence of the conduct pleaded in paragraphs 52, 53, 53A, 54, 55, 56, 57 and 58, Mr Agrawal and Ms Nelson’s breach of the Agrawal Contract and the Nelson Contract, together with breaches of the ICA [the second contract signed by Mr Agrawal on behalf of the first defendant], the first defendant and/or third defendant and/or the fourth defendant did accept instructions to perform real estate services from and in respect of the Clients and property set out below in the table below and Ray White did otherwise suffer loss and damage.”

12. The table sets out an address, then the client or customer of Ray White and then a sale price or management losses. The first particular gives the details of a private residence, its owner and in the third column states sold - $1,195,000, beneath that, 18 September 2023. One can read this information as a statement that the owner of the property at the address given was a customer of Ray White and instructions were taken by or on behalf of Mr Agrawal to take over the sale and that was a sale lost to the plaintiff for which it would have recovered commission for the sum of $1,195,000.

13. The second item concerns three residential properties at Kingswood. The customer’s names are then given, and in the third column is this: “Diverted Management Rent pw [per week] $965 @ 5.5% x the Multiplier. $8,279.00.” One can readily infer that the allegation is that the customers of Ray White had entrusted Ray White to manage their three rental properties and that the management of the rental premises was diverted from Ray White to either Mr Agrawal or one of the first, third or fourth companies. And as a result, Ray White lost commission, which it was otherwise receiving. There are, all told, 20 such sets of details.

14. Another set of details are clearly allegations that a former customer of Ray White had a property or properties on the market for rent and that the property management was later taken on by Mr Agrawal or one of the three companies joined in these proceedings as defendants so that the plaintiff did not obtain any commission on rents paid to the owner of the property once the property was placed in the hands of one of the defendants to manage.

15. In short, one can make out from the pleading what is alleged in paragraph 15 of the Amended Statement of Claim, it is clearly a fairly straightforward allegation of 20 separate customers of the plaintiff who were, to use the vernacular, “poached” by the defendants. One might think, as has been submitted by the plaintiff’s solicitor, that the third defendant was engaged in the selling of properties and the fourth defendant was in the business of managing properties that were on the rental roll of its business. The allegation has been made against both Mr Agrawal the second defendant, Ms Nelson the fifth defendant and TAGRE the first defendant, because they were the relevant people entrusted with the defendant’s information during their service, with a contractual duty to the plaintiff. I find nothing more that need be provided to the defendants to allow them to plead to paragraph 53 of the Amended Statement of Claim.

16. The next complaint is, paragraph 61. One can work out from the pleading what is involved, but it is circuitous. Paragraph 61 is this:

“Mr Agrawal through either the first, third or fourth defendant:

(a) On 21 March 2023, clients of Ray White communicated that they had received an unsolicited SMS from Vedant Agrawal

(b) On or around 21 July 2023, used and exploited Confidential Information of Ray White, which was contained in the Ray White Software and Ray White, PM Software during Mr Agrawal and Ms Nelson’s employment with Ray White, which was subsequently copied and then used to communicate with Clients and Customers of Ray White on behalf of TAGRE, stating they had the Ray White database:

Particulars

(i) Ray White received a complaint from Manish Malik regarding how TAG RE came to have a copy of his personal information that he had provided to Ray White.

(ii) Caller from tag, TAG RE identified himself as Rudra Agrawal and called from telephone number [redacted]

(iii) The Confidential Information pertaining to Marnish Malik were contained in the secured property management software of PropertyMe.

(iv) Ms Nelson had access to Manish Maliks [sic] Confidential Information while an employee of Ray White.

(v) Iffath Shamuna of [redacted address] indicated that she was contacted by SMS of TAGRE in circumstances that [s]he had no previous dealing with that company nor had provided them with her private information.

(vi) Shanky Chalany the owner of [address redacted] indicated that they were contacted by SMS of TAGRE in circumstances that he had no previous dealing with that company, nor had provided them with their private information.”

17. As I normally do, I note with dismay that in the sub-paragraph (v) one person is described twice with feminine pronouns and once with a masculine pronoun, and that an individual referred to in subparagraph vi is described in the plural and then in the singular. Grammar, unfortunately, does not go well in modern life.

18. The particulars requested of paragraph 61 is this: “(xv) In what way did Mr Agrawal exploit confidential information of Ray White as pleaded in paragraph 61?” Paragraph 61 makes no such allegation, meaning this information provided to the plaintiff which may have led the plaintiff to the belief that attempts were being made to “poach” the plaintiff’s customers, is really a matter of particulars. Since there was no pleading in paragraph 61 that the defendant exploited any particular information it is merely an allegation of complaints made by customers of the plaintiff that approaches had been made by or on behalf of the defendant. The second prayer for relief is that paragraph 75 of the Amended Statement of Claim be struck out. Paragraph 75 is this:

“The breaches of the Fiduciary Duty pleaded against Mr Agrawal in paragraph 70 above involved a dishonest and fraudulent design on the part of Mr Agrawal, (within the meaning of the second limb of Barnes v Addy [1874] LR9 Ch App 244).

Particulars of dishonesty

The conduct of Mr Agrawal was contrary to usually acceptable standards of honest conduct.”

19. This is not a pleading of the tort of fraud, nor is it the pleading of a criminal offence. Learned counsel for the defendants referred me to Wentworth v Rogers(No 5) (1986) NSWLR 534. At 538D, Kirby P (as his Honour then was) stated this:

“First, the essence of the action is fraud. As in all actions based on fraud, particulars of the fraud claimed must be exactly given and the allegations must be established by the strict proof which such a charge requires: Jonesco v Beard [1930] ACT 98 at 301; McHarg v Woods Radio Pty Ltd (at 497).”

20. That was an application to set aside a judgment alleged to have been obtained by fraud. Here, the pleading is not of the tort of fraud, but it is merely using a term of art. In Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609, that term of art is discussed by Leeming JA with his Honour’s usual depth of knowledge and precision, commencing at [121] of the judgement. His Honour said this:

“(iv) The meaning of “dishonest and fraudulent design”

[121] The foregoing brings to mind Buckley LJ’s statement in Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] Ch 250 at 267:

“[Lord Selborne’s] formulation has stood for more than 100 years. To depart from it now would, I think, introduce an undesirable degree of uncertainty to the law, because if dishonesty is not to be the criterion, what degree of unethical conduct is to be sufficient?”

[122] There was good reason for Lord Selborne to insist that when the third party fell short of procuring the breach of trust, but did participate in it, the third party was liable only if the breach were “dishonest” as well as “fraudulent”. Famously, there was great confusion as to the meaning of “fraud” at common law and in equity, which became acute following its apparent reconciliation in Derry v Peek (1889) 14 App Cas 337, at least until the position in equity was clarified by Nocton v Lord Ashburton [1914] AC 932. Professor Hanbury said that common law and equity practitioners “quarrelled over the possession of the word ‘fraud’ like two dogs over a bone, off which neither side was sufficiently strong to tear all the meat”: HG Hanbury, Modern Equity: The Principles of Equity (8th ed, 1962, Stevens & Sons) at 643. The dispute and resultant confusion were very much alive when Barnes v Addy was determined. It may readily be seen, by reference to Slim v Croucher (1860) 1 De G F & J 518; 45 ER 462 and Ramshire v Bolton (1869) LR 8 Eq 294, in the illuminating account of Nocton v Lord Ashburton by Justice Edelman in C Mitchell and P Mitchell (eds), Landmark Cases in Equity (2012, Hart Publishing), 473 at 477–481.

[123] The short point is that Lord Selborne’s formulation avoids the potential for dispute as to the meaning of “fraud” in equity, by requiring that there must also be dishonesty on the part of the fiduciary.

[124] Dishonesty amounts to a transgression of ordinary standards of honest behaviour. It is not necessary to say anything else by way of elaboration, save to confirm that it is not necessary to demonstrate that the person thought about what those standards were. (I have paraphrased Lord Hoffmann’s account in Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2006] 1 All ER 333 at [16].)

[125] No differently from most legal tests, there will be borderline cases (consider the facts in Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 AC 164). However, as Chief Justice Gleeson once wrote, the existence of twilight does not invalidate the distinction between night and day: M Gleeson, “Judicial legitimacy” (2001) 20 Australian Bar Review 4 at 11, and it remains sensible to distinguish the land from the sea, although once again the boundary is blurred: Gibbs v Mercantile Mutual Insurance (Australia) Ltd [2003] HCA 39; (2003) 214 CLR 604 at [90]. But there is no conceptual difficulty in this species of liability in equity, where a third party participates in but falls short of procuring or inducing a breach of fiduciary duty, being confined to only those breaches which are dishonest.”

21. His Honour’s historical insight is extremely useful. It shows that the words, “dishonest and fraudulent design”, used in paragraph 75 of the Amended Statement of Claim is a term of art. Furthermore, one has to see the pleading in its context. Prior to paragraph 73 of the Amended Statement of Claim is a heading “Accessorial Liability of the first, third and fourth Defendants”. Beneath that:

“73. Mr Agrawal at all times has been a director and shareholder of the first, third, and fourth defendants.”

74. In the premises pleaded at paragraph 54, 55, 56, 59, 67 above, the breaches of the Equitable Obligation of Confidence pleaded at paragraph 71 above resulted in the first defendant and or third defendant and or fourth defendant acquiring the information contained in the Customer Information in circumstances where it had knowledge of Mr Agrawal’s and Ms Nelsons [sic] breaches of their duty of confidentiality in respect of that information, such that:

(a) the first, third, and fourth defendants also came under the equitable obligation of confidence in respect of that information; and

(b) the first, third and fourth defendants breached that equitable obligation of confidence as a result of using it to obtain management and listings and sales of the Properties.”

22. Then is pleaded paragraph 75, which I have quoted, and then this is pleaded:

“76. In the premises pleaded in paragraphs 59 and 61, the first, third, and fourth defendants had knowledge of the dishonest or fraudulent designs of Mr Agrawal.

Particulars

Further details provided after discovery

77. The first, third and fourth defendants assisted Mr Agrawal’s breaches of the Fiduciary Duty pleaded in paragraphs 68, 69 and 70 above by listing and selling the Properties to which the breaches of the Fiduciary Duty related.

Particulars

Further details provided after discovery

78. In the light of:

(a) the first, third and fourth defendant’s [sic] knowledge of Mr Agrawal’s dishonest or fraudulent designs as pleaded in paragraphs 74, 75, 76 and 77 above; and

(b) the first, third and fourth defendant’s [sic] assistance with Mr Agrawal’s breaches of the Fiduciary Duty as pleaded in paragraph 70 above,

to the extent that it obtained the benefits of Mr Agrawal’s breaches of the Fiduciary Duty, the first, third and fourth defendants are accountable to the plaintiff for those benefits.”

23. Now this is a way of pleading to try to make probably the third and fourth defendants liable for moneys which they may have obtained through the activities of Mr Agrawal himself. It is a way of seeking to establish the liability of a person who has not acted properly. It is a way of trying to establish that a person who did not do any improper act, liable for the improper conduct of another in equity.

24. In those circumstances, I decline to strike out paragraph 2 of the Amended Statement of Claim, and I am likewise not moved by the third prayer for relief. For those reasons the Notice of Motion is dismissed. I order the defendants to pay the plaintiff’s costs of the Notice of Motion.

**********

Decision last updated: 15 August 2024