Findex Group Limited v McKay
[2022] ACTSC 192
•27 July 2022
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Findex Group Limited v McKay |
Citation: | [2022] ACTSC 192 |
Hearing Dates: | 4 February, 24 March, 24 April, 23 September, 28 October 2021 |
Submissions last received: | 22 November 2021 |
DecisionDate: | 27 July 2022 |
Before: | McWilliam AsJ |
Decision: | (1) Paragraph [110] of the Amended Statement of Claim filed 9 October 2020 is struck out. (2) The Amended Application in proceeding filed 22 June 2020 is dismissed. (3) Within 7 days of the making of these orders, the parties are to provide the Court with either agreed or competing short minutes of order providing for: (i) the filing of submissions in relation to the question of costs, limited to 5 pages, (ii) any evidence in support of an application for costs, and (iii) either a further listing of the matter for oral hearing, or for the question of costs to be determined on the papers. |
Catchwords: | PRACTICE & PROCEDURE – INTERLOCUTORY APPLICATION – summary dismissal – where lengthy history of litigation between the parties – whether plaintiffs estopped from bringing fresh proceedings – whether doctrine of Anshun estoppel applies – whether proceedings otherwise precluded by privity of contract – where threshold for summary judgment not met – application dismissed |
Legislation Cited: | Australian Securities and Investments Commission Act 2001 (Cth) Competition and Consumer Act 2010 (Cth) Sch 2; ss 232, 236, 237 Fair Trading (Australian Consumer Law) Act 1992 (ACT) |
Cases Cited: | Agar v Hyde [2000] HCA 41; 201 CLR 552 Bahr v Nicolay (No 2) (1988) 164 CLR 604 Young v Hones [2014] NSWCA 337 |
Parties: | Findex Group Limited (First Plaintiff) Findex Services Pty Ltd (Second Plaintiff) Financial Index Australia Pty Limited (Third Plaintiff) Spiro Paule (Fourth Plaintiff) Danielle Bartholomeusz (Fifth Plaintiff) Phillip Hart (Sixth Plaintiff) David McKay (Defendant) |
Representation: | Counsel Mr Neil SC and Mr Friedgut (Plaintiffs) Mr Karam (Defendant) |
| Solicitors Harmers Workplace Lawyers (Plaintiff) Just Dispute Resolution (Defendant) | |
File Number: | SC 464 of 2019 |
McWilliam AsJ:
Mr McKay, the defendant, is seeking summary dismissal of proceedings that have been brought against him by his former employer, Findex Services Pty Ltd (the second plaintiff) and related corporate entities and individuals. The issue for the Court is whether to strike out the plaintiffs’ claim and either dismiss or permanently stay the proceedings.
The parties
Some understanding of the corporate relationships is useful context for the procedural arguments to be determined.
The first three plaintiffs are corporations collectively described as the Findex Group. Findex Group Limited (ACN 128 588 714) (Findex) is the first plaintiff. It was formerly known as Findex Australia Pty Ltd, the holding company of the second and third plaintiffs.
The second plaintiff, Findex Services Pty Ltd (ACN 128 588 705) (Findex Services), is a wholly owned subsidiary of Findex and operates as a service company for the Findex Group. It was the corporate entity that employed the defendant from about June 2010 to September 2012.
The third plaintiff, Financial Index Australia Pty Ltd (ACN 094 287 037) (Financial Index), is another subsidiary of Findex. It is the company through which Findex operated its financial services business, and is the express subject of some of the material said to have been published by the defendant, including a document bearing the title (formatted in capitals) “KKR – Why Would You RISK Investing in Financial Index Australia?”
The fourth plaintiff is Mr Spiro Paule, the Managing Director and Chief Executive Officer of Findex and a Director of both Findex Services and Financial Index.
The fifth plaintiff is Ms Danielle Ludbey or now Ms Bartholomeusz, as she has changed her surname. She has been the Head of Professional Standards of Findex since January 2015 and was previously employed by Findex Services from March 2007 to April 2017.
The sixth plaintiff is Mr Phillip Hart, the former Director of Findex, Findex Services, and Financial Index.
The defendant, Mr David McKay, was an employee of Findex Services from June 2010 to September 2012.
The claim and broader litigation context
The substantive proceeding has arisen following the cessation of the defendant’s employment with Findex Services. It was originally commenced on 1 March 2019 in the NSW Supreme Court, but was transferred to this Court by consent on 20 June 2019.
By their amended statement of claim filed 9 October 2020 (Claim), the plaintiffs allege that the defendant was a disgruntled former employee who sent emails using a false name and email address and delivered other documents to investors or clients of the Findex Group, disparaging the members of the group (first to third plaintiffs), or one of its directors (fourth plaintiff) a former director (fifth plaintiff) or one of its employees (the sixth plaintiff) who was, and is, the Head of Professional Standards for the first plaintiff.
It is further alleged that at the time of the conduct pleaded, the defendant was employed (indirectly through a company known as Vandaman Pty Limited) by StrategyOne Advice Network Pty Limited (StrategyOne), who was described in the Claim as a competitor of Findex in the financial services industry.
The Claim frames the allegations as breaches of an employment contract held by the defendant by the dissemination of confidential and misleading information, and as misleading and deceptive conduct in breach of the Australian Consumer Law (ACL) (situated at sch 2 to the Competition and Consumer Act 2010 (Cth)), as it applies in NSW, and also in the Territory, through the Fair Trading (Australian Consumer Law) Act 1992 (ACT). It is useful to understand some of the key terms that the parties refer to in their arguments below.
In terms of the parties to the Employment Agreement, the document states that the Employment Agreement is between the second plaintiff, Findex Services, and Mr McKay. In the Recitals, Findex Services is listed as the company who has agreed to employ Mr McKay on the terms and conditions contained in the Employment Agreement.
Under the heading “Duties” is the following clause 2.1:
2.1 Findex Group
The Findex Group (Findex Group) comprises Findex Services Pty Ltd and its affiliated entities, including its related bodies corporate (as that term is defined under the Corporations Act 2001). The Employee agrees that their obligations under this Agreement are owed to the Findex Group, and that the performance of their duties will be for the benefit of the Findex Group.
A further clause that is central to the claim is clause 12, which is in the following terms:
12 NO DISPARAGEMENT
The Employee must not at any time, either during their employment or at any time after its termination, disparage or otherwise make any statement, or permit or authorise any statement to be made, which is calculated or reasonably likely to damage the reputation or cause other damage to the Findex Group or any of its employees or officers.
The plaintiffs seek injunctive relief to prevent further conduct of the kind alleged, along with presently unspecified damages, costs and interest. Hereafter, I will refer to the present proceeding as the “Breach of Contract proceeding”.
A number of the parties to the proceeding have been involved in litigation against each other in various jurisdictions since 2016, including in the NSW Supreme Court and in the Federal Court.
The proceeding in the NSW Supreme Court involved a dispute over access to documents that had been seized from Mr McKay pursuant to ex parte search orders in 2016 (the Search Order proceeding). The proceeding was finally determined by Ward CJ in Eq (as her Honour then was) on 11 September 2019: see Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198 (Findex v iiNet). Access was not granted to the documents that had been seized but the NSW Supreme Court did grant a release from the Harman undertaking in respect of specified documents.
The proceeding in the Federal Court was commenced on 26 August 2016 against Mr McKay for alleged breaches of a restraint clause in a shareholders’ agreement, and breaches of the Corporations Act 2001 (Cth) (the Restraint proceeding). The proceeding related to Mr McKay’s alleged solicitation of Findex’s clients and interference with Findex’s business following the cessation of his employment. The applicants in that proceeding include the Findex Group but not the individual plaintiffs here. The proceeding was heard by Stewart J over 11-15 March 2019 and determined on 18 December 2019: see Findex Group Limited v McKay [2019] FCA 2129.
The reasons for judgment in the Federal Court proceeding disclose that there was an issue whether Mr McKay was personally bound by a restraint provision in a shareholders’ agreement that he had signed. Stewart J found (at [61] and [82]) that he was. However, the restraints were held to be unenforceable because they were unreasonable as to the parties whose conduct they sought to restrain, and to the extent of that unreasonableness, they were not severable (see [187]).
In this Court, there are two further extant proceedings involving Mr Paule and Mr McKay:
(a) A defamation proceeding brought by Mr Paule against Mr McKay which has also been cross-vested from the NSW Supreme Court: see Paule v McKay [2020] ACTSC 145 and Paule v McKay (No. 2) [2022] ACTSC 190.
(b) A proceeding in trespass commenced in this Court on 23 March 2020 by Mr McKay against Findex Group Limited, Mr Paule, Ms Ludbey and Mr Hart, seeking damages as well as aggravated and exemplary damages: see McKay v Findex Group Limited [2022] ACTSC 191.
The complex litigation history is relevant to the interlocutory application presently for determination.
The Application
The defendant’s amended application dated 22 June 2020 seeks orders striking out, in whole or in part, the plaintiffs’ Claim and summarily dismissing the entirety of the Breach of Contract proceeding.
Part of the amended application also sought an order regularising the notice of appearance filed for the defendant and an order dealing with that aspect of the application was made by consent on the first day this application was heard, being 4 February 2021.
As to the remainder of the relief sought in the amended application, the defendant relied on the following grounds:
(1) Anshun estoppel: The plaintiffs are estopped from bringing the present proceedings because a materially identical claim, arising on materially the same facts, was brought in the Federal Court proceeding and inexplicably abandoned shortly prior to the trial in that proceeding in early 2019.
(2) Abuse of process: Alternatively, the proceeding is an abuse of process, for the same reason that the proceeding has in substance already been brought and abandoned.
(3) Privity of Contract: Only the second plaintiff (Findex Services) is a party to the Employment Agreement with the defendant. The claims of the first and third to sixth plaintiffs cannot be maintained because they are not parties to the Employment Agreement and have not established any arguable basis as to why they should be permitted to sue under that agreement.
(4) Deficient damages claim: The damages claim has not been properly pleaded and should be struck out as failing to disclose a reasonable cause of action. As damages are an essential element of the causes of action made, the claims reliant on such damage should also be struck out.
(5) Other pleading deficiencies: The pleadings of the alleged “Non-Disparagement Agreement”, “Non-Disparagement Representation” and “Trust Property” as those terms are defined in the Claim are also deficient.
The Court’s discretionary power to grant summary dismissal
The defendant’s application was made pursuant to r 1147 and/or r 425 of the Court Procedures Rules 2006 (ACT) (Rules).
Rule 1147 permits the Court to enter summary judgment for the defendant if satisfied that either the claim (or part of it) is frivolous or vexatious; or there is a good defence on the merits; or the proceeding should be finally disposed of summarily or without pleadings.
Rule 425 permits the Court to strike out a pleading in whole or in part if it:
(a)discloses no reasonable cause of action or defence appropriate to the nature of the pleading,
(b)may tend to prejudice, embarrass or delay the fair trial of the proceeding,
(c)is frivolous, scandalous, unnecessary or vexatious or
(d)is otherwise an abuse of the process of the court.
Given the detail of the arguments that unfolded in written submissions, oral argument and then further written submissions, it is important to record that the task being undertaken by the Court as to whether the proceedings ought to be dismissed or the pleading struck out is at a summary level.
The grant of summary relief (whether in part or in whole) is a discretionary remedy, to be exercised with the utmost caution and only in very clear cases: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 128-129; Young v Hones [2014] NSWCA 337 at [163].
A case is not to be summarily dismissed unless there is a high degree of certainty that it would fail if it were allowed to go to trial in the ordinary way: Agar v Hyde [2000] HCA 41; 201 CLR 552 at [57].
The principles applying to an application for summary judgment pursuant to r 1147 or striking out a pleading pursuant to r 425 have been set out in Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132 (Galovac)at [5] per Jagot J. Her Honour there considered a similar application pursuant to rr 425 and 1147 and helpfully collected the leading authorities from which the principles guiding the exercise of the Court’s discretion have emerged at [5]:
There was no dispute about the principles that apply:
(1)The party seeking summary judgment faces a “very high threshold” (Financial Integrity Group Pty Limited v Farmer[2009] ACTSC 143 at 12).
(2)The lack of a cause of action must be “clearly demonstrated” (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129).
(3)The procedure calls for “exceptional caution” (General Steel at 129).
(4)The necessity for argument, even extensive argument, is no bar. However, as soon as it appears that there is a “real question” to be determined on which relief depends, the summary judgment procedure is not available (General Steel at 130 citing Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91).
(5)Mere implausibility of the claim or improbability of success is insufficient; there must clearly be no real question to be tried in the sense that the claim is bound to fail (Seven Network Ltd v News Ltd (No 4)(2005) 214 ALR 686; [2005] FCA 244 at [14] citing Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (Ch D) at 5; [1991] 4 All ER 961 at 965).
(6)The application is to be assessed on the assumption that every fact pleaded by the plaintiff is true (West v New South Wales[2007] ACTSC 43 at [9]).
(7)The application must be determined on the substance, not the mere form or expression, of the claim (Financial Integrity Group at [15]).
The principles set out in Galovac are well-established, and have been reiterated by this Court in cases including Commissioner for ACT Revenue v Arcidiacono t/as Rose Cleaning Service [2017] ACTSC 379 at [18] per Murrell CJ; McColley v Commonwealth of Australia [2014] ACTCA 21 at [31] per Murrell CJ, Refshauge and Penfold JJ;and Bolas v Calvary Healthcare Limited [2016] ACTSC 58 at [1] per Mossop AsJ (as his Honour then was).
Accordingly, there is a very high threshold for the defendant to succeed on a summary basis. The Court must be satisfied the claim is obviously untenable, in that there must be a high degree of certainty that there is no real prospect of success on all or part of the plaintiffs’ claim. The application is assessed on the substance, not the form or expression of the claim.
Are the plaintiffs prevented from pursuing their claim on the basis of Anshun estoppel?
Extensive argument was directed to whether Anshun estoppel applied to the proceeding and the discussion that follows reflects the comprehensive attention to the law and factual detail devoted by the parties to the issue. However, the application was not brought as a preliminary point; it was brought and argued on a summary basis and the defendant accepted that the principles set out above in Galovac applied.
General principles
Anshun estoppel precludes a party from relying upon a cause of action or an issue if it was “so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it”: Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589 (Anshun) at 602; see also Timbercorp Finance Pty Ltd v Collins [2016] HCA 44; 259 CLR 212 (Timbercorp) at [56]; Clayton v Bant [2020] HCA 44 (Clayton) per Edelman J at [70].
This type of estoppel is sometimes referred to as the “extended principle” in Henderson v Henderson: Clayton at [70]; Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507 (Tomlinson) at [22]. That is a reference to what was said by Wigram VC in Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 (Henderson) at 319 (emphasis added):
“… where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”
The above extract in Henderson was also cited in Wagdy Hanna and Associates Pty Ltd v National Library of Australia [2012] ACTSC 126 per Refshauge ACJ at [270].
The test for whether the issue ought to have been litigated as part of the earlier proceedings is based on the reasonableness or otherwise of the conduct of a litigant in the earlier proceedings: see Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 434; 263 ALR 556 at [60].
The mere fact that the issue could have been raised does not mean it should have been raised. There may be a variety of circumstances why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings: Anshun at 603.
Anshun estoppel is not based on degrees of similarity, but on whether the court is satisfied that the issue was so relevant to the subject matter of the first action as to make it unreasonable not to raise it: Anshun at 602; Timbercorp at [56]. A party will be estopped from bringing an action where, if it succeeds, it would result in a judgment which conflicts with an earlier judgment: Anshun at 603.
The plaintiffs also drew attention to Re Combined Projects (Arncliffe) Pty Ltd [2019] NSWSC 1070, where Ward CJ in Eq (as her honour then was) stated at [93] that “substantial similarity in the factual basis for the claims is said to be a necessary but not sufficient condition for application of the principle”, citing Gibbs v Kinna [1999] 2 VR 19; [1998] VSCA 52 at [23] per Kenny JA.
Where the parties are different
The common parties to the present proceeding and the Federal Court proceeding were the Findex Group and Mr McKay. The individual plaintiffs here were not parties to the Federal Court proceeding. However, Anshun estoppel may arise even though the parties to the second proceeding are not the same as the first: Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 (Habib) at [83] per McColl JA (with whom Giles and Campbell JJA agreed); Equuscorp Pty Ltd & Anor v Acehand Pty Ltd & Ors [2010] VSC 89 at [27].
In Habib, McColl JA went on to state at [84] and [85] (with emphasis added):
[84] A strict approach is necessary in anAnshun estoppel case to the inquiry whether there exists the requisite identity between the proceedings; the mere fact that the proceedings are closely related is insufficient; a technical approach is not helpful, the doctrine being concerned with substance and not form: see Bazos and Anor v Doman and Ors [2001] NSWCA 347 (at [44]) per Stein JA (Priestley and Beazley JJA agreeing) and the authorities to which his Honour refers. In determining whether anAnshun estoppel has been established, the court inquires into realities and not mere technicalities: R v Humphrys [1977] AC 1 (at 41) per Lord Hailsham; cited with approval by Handley JA (Young CJ in Eq agreeing) in Cleary v Jeans [2006] NSWCA 9; (2006) 65 NSWLR 355 (at [19]). The Court can look at “any material that shows what issues were raised and decided”: Rogers v R (at 263) per Brennan J.
[85] In considering whether an Anshunestoppel has been established it is necessary to bear in mind that “shut[ting] out a claim ... a party wishes to pursue, without determination of its intrinsic merit, on the ground that it ought to have been raised in earlier litigation...is a serious step, [and] a power not to be exercised except ‘after a scrupulous examination of all the circumstances’”: Ling v Commonwealth (1996) 68 FCR 180 (at 182) per Wilcox J, approved in Bazos (at [45]) per Stein JA (Priestley and Beazley JJA agreeing); see also Brisbane City Council v Attorney-General (Qld) [1979] AC 411 (at 425) per Lord Wilberforce.
Where claims have been brought but abandoned or discontinued
The defendant relied on the comprehensive analysis of the applicable principles summarised by Kenneth Martin J in Mineralogy Pty Ltd v Sino Iron Pty Ltd [2020] WASC 40 at [68], which dealt with matters relevant to both Anshun estoppel and abuse of process and which in turn drew on the decision (among others) of UBS AG v Tyne (2018) 265 CLR 77 (UBS v Tyne).
In UBS v Tyne, a trustee of a trust had commenced and then discontinued proceedings in the Supreme Court of NSW. Subsequently, a different trustee of the same trust commenced fresh proceedings in the Federal Court of Australia, raising in substance the same factual circumstances and allegations as in the earlier proceeding.
The plurality (consisting of Kiefel CJ, Bell and Keane JJ) referred at [38] to choices being made respecting what claims are made and how they are framed, before stating that “if reasonable diligence would have led to the bringing of the claim in the existing proceedings, any further proceeding might be met by a stay on Anshun grounds.”
In relation to “serial actions” commenced but then discontinued, the plurality in UBS v Tyne first referred at [46] to the concern to prevent undue vexation, which does not arise only when proceedings in respect of the same issue have been concluded by a judgment on the merits. The plurality then stated (in the same paragraph):
Serial proceedings discontinued prior to judgment would be an obvious example of an abuse of process. The pursuit of substantially the same claim by serial proceedings conducted by different entities under common control is no less obviously an abuse of process.
This brought the plurality at [55] to consider the facts before it, where there were multiple corporate entities orchestrated by a single mind and will (Mr Tyne) (citations omitted):
Mr Tyne perceived a forensic advantage to the Tyne-related parties in holding back the Trust's claim. This was a decision that, were Telesto's claim to be stayed, would lead to a duplication of resources and increased costs, and would delay the resolution of the dispute between the Tyne-related parties and UBS. Hiving off the Trust's claim, with a view to bringing it in another court after the determination of the SCNSW proceedings, was the antithesis of the discharge of the duty imposed on parties to civil litigation in the Supreme Court of New South Wales and in the Federal Court. That duty is to conduct the proceedings in a way that is consistent with the overriding/overarching purpose.
The competing arguments of the parties
The defendant submitted that there was a five-month period during the Federal Court proceeding, where the applicants in that proceeding amended their claim to plead matters that were identical to those relied upon by the plaintiffs in the present proceeding.
In the Federal Court proceeding, the further amended statement of claim pleaded (among other things) that Mr McKay:
(a) was an employee of Findex Services,
(b) owed an equitable duty of confidence under the shareholders’ agreement, and
(c) was required to comply with s 183(1) of the Corporations Act, which prohibited him from using information obtained in his position as an employee to gain an advantage for himself or someone else; or to cause detriment to Findex Services.
Included in the further amended statement of claim in the Federal Court proceeding was an allegation that Mr McKay breached the shareholders’ agreement and s 183 of the Corporations Act by (again, among other things) interfering with the business of Findex, and using and disclosing confidential information for his own benefit or others, including StrategyOne.
One of the particulars supporting that pleaded allegation was the following:
From about 2014, McKay, including under the alias ‘Chris Thompson’, and under the alias ‘Alex Stranakas’ denigrated the Applicants and their officers and employees in communications he prepared and sent to third parties, which communications include the documents at Tabs 1 to 14 and 16 to 17 of the Affidavit of Michael Doucas affirmed on 29 March 2018 and the email from McKay to Florine Simon sent on 27 August 2015. Further particulars may be supplied.
On the eve of the trial, the applicants in the Federal Court proceeding abandoned those claims and commenced the present proceeding in the NSW Supreme Court.
In written submissions supporting the present application, the defendant provided a table of documents comparing the documents that were contained in affidavit material in the Federal Court proceeding (referred to in the applicants’ pleaded particulars) with the documents that are annexed to the Claim here and which form the basis of the present allegations for breach of employment contract and misleading and deceptive conduct.
Through that comparison, the defendants argued that the documents are either identical, or they are materially the same documents. On the application of the established principles (outlined below), the close connection between the facts in this proceeding and those in the Federal Court proceeding made it unreasonable for the plaintiffs not to have agitated their claim in the earlier proceeding.
The plaintiffs made the following points (in summary):
(1) There was no allegation pleaded in relation to Mr McKay’s employment contract in the Restraint proceeding. The evidence of Mr Doucas was not ultimately relied upon.
(2) Some of the documents were identical. But a number of the documents that are annexed to the Claim were sent at different times and to different recipients and are otherwise slightly different in content from the documents that were annexed to affidavits in the Restraint proceeding. Those documents were part of the seized documents which were subject to a Harman undertaking, from which the plaintiffs in the Search Order proceeding were only released after the hearing of the Restraint proceeding had occurred.
(3) The plaintiffs here did not hold back any claims in the Restraint proceeding. Whether characterised as breach of employment contract or misleading and deceptive conduct, they had notified Mr McKay that they wished to pursue a cause of action based on what they described as Mr McKay’s campaign of disparagement through his communications with third parties, however, there were two difficulties:
(a) First, the plaintiffs did not have access to the totality of the documents they believed they required in order to form a view about the nature and extent of the causes of action they had contemplated bringing.
(b) Second, even if they failed in gaining access to the seized documents through the Search Order proceedings that were in progress, because they had been disclosed by compulsory process those documents were also then subject to the Harman undertaking (as to which see the judgment of Ward CJ in Eq in Findex v iiNet).
(4) Access to the documents was pursued through the Search Order proceeding. Judgment at first instance was delivered on 19 October 2018. It was appealed. As at the date the Restraint proceeding was heard (namely in March 2019), the NSW Court of Appeal had not delivered its decision. That judgment was later delivered on 3 May 2019 (see Findex Group Ltd v McKay [2019] NSWCA 93).
(5) A release from the Harman undertaking was also sought in the Search Order proceeding from January 2018, but due to the other issues being determined in that proceeding, that matter was not litigated until 24 June 2019. Thus, at the time the Federal Court proceeding was heard, no such release from the Harman undertaking had been granted.
(6) In the meantime, the applicants in the Restraint proceeding did not simply allow the causes of action to proceed in the Federal Court knowing that there were additional causes of action that may be brought in relation to similar issues. They sought to delay the filing of evidence. That was opposed. They sought to join the two proceedings together. That was opposed. They sought permission from Mr McKay to use documents that were not disputed in the Restraint proceeding. That was opposed.
(7) In June 2018, the applicants in the Restraint proceeding formally sought a stay of that proceeding, pending the hearing and determination of the Search Order proceeding. It was the applicants’ intention that all claims could proceed in the Federal Court once that proceeding in the NSW Supreme Court had been completed. That application was again opposed by Mr McKay and refused by the Federal Court.
(8) It was in those circumstances that shortly before the hearing of the Restraint proceeding, the plaintiffs commenced the Breach of Contract proceeding in the NSW Supreme Court and withdrew a similar allegation made in relation to business interference in the Restraint proceeding. They filed the statement of claim in the NSW Supreme Court based on communications already in their possession before the Search Order proceeding was brought.
(9) Accordingly, the current issues had been raised in litigation before the Restraint proceeding was heard. It was not a case of a forensic decision being made by the plaintiffs to delay raising the claims, awaiting the outcome of the Restraint proceeding.
The defendant’s response to this was that the claim that the defendant denigrated the applicants and their officers and employees in communications he prepared and sent to third parties was actually brought in the Restraint proceeding and abandoned. He complained that the plaintiffs cannot now choose to run it again here under the guise of a different cause of action. The defendant argued that the facts underlying each claim are identical and no explanation was proffered by the plaintiffs as to why they adduced those facts in support of denigration claims and then abandoned them.
The defendant further submitted that the fact that additional documents relating to the same subject matter might have been in existence is not a reason to hold back the additional causes of action, because those documents could have been sought in discovery.
Resolution – the issue is arguable
The task is to determine whether the defendant has established that the plaintiffs’ causes of action would be bound to fail by reason of Anshun estoppel. As can be seen from setting out the plaintiffs’ arguments, there is a genuine issue to be tried as to whether the plaintiffs’ conduct in not pursuing causes of action in breach of contract and misleading and deceptive conduct was unreasonable, in the sense that the subject matter was so relevant to the Restraint proceeding that it should have been included in that earlier proceeding. Although there may have been a variety of paths to reach the conclusion that the plaintiffs’ proceeding is not doomed to fail, it suffices to provide the following reasons:
(a) Substantial similarity in the factual basis for the claims is not sufficient of itself to establish the test articulated in Anshun, as discussed above. There was overlapping evidence relied upon in the particulars to the business interference claim that was then withdrawn, with that aspect of the claim abandoned. But it does not automatically follow from that fact that the plaintiffs’ choice not to bring a separate cause of action based on misleading and deceptive conduct or breach of an employment contract was unreasonable.
(b) There was other evidence that was not accessible and was material to the additional causes of action. The defendant described these documents as
“materially identical” to those relied upon in the Breach of Contract proceedings, but the critical point is that the plaintiffs in the Restraint proceedings were not able to use those documents and the extent of the conduct and the effect of the conduct are each a matter that is relevant to the question of reasonableness.
(c) Importantly, as submitted by Senior Counsel for the plaintiffs in oral argument, material was discovered through the initial preliminary discovery proceedings involving the internet service providers and social media entities. That material revealed that it was the defendant, hiding behind various pseudonyms who was the author of documents already in the plaintiffs’ possession. The same may be said of the material seized pursuant to the Search Order in terms of identifying that it was the defendant who sent the material. However, the plaintiffs could not use any of the material obtained that identified the defendant because of the operation of the Harman undertaking. It is therefore no answer to characterise the documents relied upon as “materially identical” to others in the plaintiffs’ possession when the critical information identifying Mr McKay could not be used to provide the reasonable basis for suing him.
(d) Also critical to whether additional causes of action were raised was the fact that the additional documents had a bearing on the relief sought. Assuming without deciding that the contents of the emails were in breach of a statutory or contractual obligation, if a couple of emails were sent on one day to low-ranking employees with no decision-making power, a party may not consider that conduct to be worthy of litigation or to justify injunctive relief. However, the position may be different if emails were sent on different dates over a longer time period, to a variety of people with the ability to influence whether companies availed themselves of the services of the Findex Group. An injunction might well be considered necessary, quite apart from any question of damages.
(e) Even if the plaintiffs sought remedies in the Restraint proceeding similar to those now sought in this Court, there are different legal questions involved. The same former employee is being sued by some of the same parties. However, soliciting clients in asserted breach of one contract (the shareholders’ agreement) is a materially different subject from an allegation that the same employee disparaged or damaged the reputation of the former employer or its employees in trade and commerce or in breach of an employment agreement, even if it be the case that part of the evidence used to establish either case overlaps. It is not obvious how a judgment on the claims now made would in any way conflict with the judgment of Stewart J in relation to the earlier claim. That is a further matter arguably speaking against the application of the Anshun doctrine to the present proceeding.
(f) The circumstances prevailing at the time are directly relevant to the question of reasonableness. They included that the plaintiffs were awaiting the outcome of proceedings where there may have been documents relevant to those additional claims contemplated, but access to those documents was not necessary to pursue a remedy for restraint of trade.
(g) The defendant’s argument that discovery could have been sought in the Restraint proceeding once the causes of action were added overlooks the difficulty faced by the plaintiffs in that because no release from the Harman undertaking had been given, even seeking discovery of those documents in different proceedings would be use of the knowledge gained about the seized documents and therefore be in breach of the Harman undertaking.
(h) The Findex Group attempted to delay the Restraint proceeding so that all causes of action could be pursued in the one proceeding (including with Mr Paule as a further plaintiff). That course was opposed by Mr McKay. It is arguable that at least the Findex Group attempted to avoid the very issue that Mr McKay now raises against them, and to the extent that further litigation has ensued in a different forum, it is a product of forensic or strategic decisions made by Mr McKay to oppose the course proposed by the plaintiffs. That is not to suggest that any conduct by Mr McKay in that regard was unreasonable; rather, it is to recognise that such conduct has had a consequence which is relevant to the explanation of why the claims were not brought earlier, and whether it was unreasonable not to do so.
(i) With regard to the fourth, fifth and sixth plaintiffs, the breach of contract and misleading and deceptive conduct claims are not plainly so connected with a restraint proceeding based on a shareholders’ agreement that it was obviously unreasonable for those plaintiffs not to seek to be joined in the earlier proceeding. I consider the question to be arguable and therefore to be triable.
It follows that I am not persuaded to strike out the plaintiffs’ claims on the basis that the application of the doctrine of Anshun estoppel is so obvious as to make such claims untenable.
Abuse of process
The circumstances in which a proceeding will be found to amount to an abuse have been said not to be capable of comprehensive definition or exhaustive statement: Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; 226 CLR 256 (Batistatos) at [9]; UBS v Tyne at [1].
The applicable principles are drawn from cases such as Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] AC 529 (Hunter)at 536 (AC); Tomlinson at [24]-[26]; UBS v Tyne at [126]. A Court has inherent power to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair or unjustifiably oppressive to a party to litigation before it, or otherwise bring the administration of justice into disrepute.
The doctrine of abuse of process was distinguished from estoppel by French CJ, Bell, Gageler and Keane JJ in Tomlinson at [24]-[26] (footnotes omitted, emphasis added):
24. ... The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding.
25. Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.
26. Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel.
The defendant also relied upon UBS v Tyne at [7], where Kiefel CJ, Bell and Keane JJ referred to the need to consider all the circumstances. Their Honours referred to Johnson v Gore Wood & Co [2002] 2 AC 1 per Lord Bingham of Cornhill who at 31 explained the court’s consideration as (emphasis added):
…a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.
The Court’s task is informed by the need to resolve disputes in a just manner as quickly, inexpensively and efficiently as possible (pursuant to s 5A of the Court Procedures Act 2004 (ACT) (CP Act), which was explained in Securum Finance Ltd v Ashton [2001] Ch 291 by Chadwick LJ at [34] (which was cited in Batistatos at [68] and UBS v Tyne at [42]):
The position, now, is that the court must address the application to strike out the second action with the overriding objective of the Civil Procedure Rules in mind – and must consider whether the claimant's wish to have 'a second bite at the cherry' outweighs the need to allot its own limited resources to other cases.
Both the private interests of the parties and public interest are to be taken into account. The plurality reasons delivered by Kiefel CJ, Bell and Keane JJ in UBS v Tyne at [38]-[39] referred to s 37M of the Federal Court of Australia Act 1976 (Cth), a provision that has similar terms and objectives to s 5A of the CP Act. Their Honours said at [38]-[39] (emphasis added):
The timely, cost effective and efficient conduct of modern civil litigation takes into account wider public interests than those of the parties to the dispute. These wider interests are reflected in s 37M(2) of the FCA As the joint reasons in Aon Risk Services Australia Ltd v Australian National University explain, the "just resolution" of a dispute is to be understood in light of the purposes and objectives of provisions such as s 37M of the FCA. Integral to a "just resolution" is the minimisation of delay and expense. These considerations inform the rejection in Aon of the claimed "right" of a party to amend its pleading at a late stage in the litigation in order to raise an arguable claim. The point is made that a party has a right to bring proceedings but that choices are made respecting what claims are made and how they are framed. Their Honours speak of the just resolution of the dispute in terms of the parties having a sufficient opportunity to identify the issues that they seek to agitate. The respondent's argument in Aon, that the proposed amendment to raise the fresh claim was a necessary amendment to avoid multiple actions, did not avail. As their Honours observe, if reasonable diligence would have led to the bringing of the claim in the existing proceedings, any further proceeding might be met by a stay on Anshun grounds.
In separate reasons in Aon, French CJ holds that the institution of fresh proceedings by the Australian National University, raising the claim which could have been raised earlier in the existing proceedings, might be an abuse of process. His Honour observes that abuse of process principles may be invoked to prevent attempts to litigate a claim that should have been litigated in earlier proceedings as well as attempts to re-litigate a claim that has been determined. His Honour points to Reichel v Magrath as a longstanding example of a re‑litigation case that was decided on the ground of abuse of process and not on the grounds of res judicata or issue estoppel.
(Citations omitted)
Thus, if the Court is satisfied that a proceeding would amount to an abuse or would clearly inflict unnecessary injustice upon the opposite party, the proceeding should be stayed or dismissed: UBS v Tyne at [126]; Batistatos at [53] citing Cox v Journeaux (No 2) (1935) 52 CLR 713 at 720. In the present case, having found the Anshun estoppel argument is a triable issue, I am not otherwise satisfied that the present proceeding would amount to an abuse or clearly inflict unnecessary injustice upon the defendant. Even taking account of the objectives of procedural rules and broader public interest considerations, such considerations do not of themselves preclude a party from suing the same defendant in multiple proceedings involving separate causes of action.
I have reached that view because of the circumstances in which the Restraint proceedings developed and were heard. The parties prosecuting the earlier claim took steps to attempt to have all issues resolved in the one set of proceedings, but that course of action was opposed by the very defendant who now claims to be twice vexed. If there was any “tactical manoeuvring” of the kind discussed in UBS v Tyne, an argument equally available is that it was the defendant’s strategic choices which resulted in the second proceeding being brought, with that further litigation involving overlapping evidence. Again, without any criticism of the defendant in that regard, the result was that the plaintiffs did not have sufficient opportunity to bring the issues they sought to litigate in the earlier proceedings.
It is not enough, in my view, to find that the possession of some of the documents now relied upon means that the present plaintiffs were aware of the potential causes of action and therefore could have pursued the arguments now raised. The pursuit of additional causes of action was in part dependent upon the plaintiffs ascertaining the extent and nature of the defendant’s conduct. At least the Findex Group and Mr Paule were legitimately pursuing (through the courts) access to, and use of, a significant number of documents that supported the separate causes of action. Indeed, this proceeding was stayed until the finalisation of the Search Order proceeding, which included the determination of the application for the release of the Harman undertaking.
I do not understand the authorities that speak of efficient case management and wider public interests to go so far as to say that a plaintiff in that position must run the anticipated causes of action in the meantime, without the documents it has sought in support of those causes of action, simply because there is other litigation on foot involving similar subject matter and parties.
It need hardly be said that the position may have been different if the circumstances were different. It may have been an abuse of the court’s processes if the plaintiffs had not notified the defendant of any intention to bring proceedings of the kind now brought, so that the defendant was in the position of being entitled to assume that the Restraint proceedings represented the totality of the claims to be made against him and that the dispute was at an end (as was the case in UBS v Tyne, see [58]).
Alternatively, if the defendant had consented to the plaintiffs’ release from the Harman undertaking in respect of the additional documents that are now annexed to the Claim, so that they were available for use in the Restraint proceeding, then it might have been said that the plaintiffs here had received a substantive opportunity to make the informed decision about whether to raise additional causes of action in the extant proceeding, or, in the case of those plaintiffs who were not applicants in the Restraint proceeding, to seek joinder in order to pursue the same causes of action. However, that is not the circumstances of this case, and the result is that I am not persuaded the processes of the court are being abused or that the bringing of the second proceeding falls into the category of an unnecessary injustice.
There was a further argument raised by the defendant that the proceedings were also an abuse of process because the plaintiffs were impermissibly bringing claims for vindication of reputation in a way which circumvented the appropriate cause of action for such relief, namely defamation. The defendant argued that by doing so, the plaintiffs avoided the more onerous requirements of a claim in defamation, which included the limitation period that would have precluded the claims of the fourth to sixth plaintiffs, and more stringent requirements for injunctive relief. However, the mere fact that the conduct in question could have been the subject of a different cause of action does not appear to be an abuse if there is at least a prima facie or arguable case on the merits of the causes of action that have been pleaded.
This conclusion means that it is unnecessary to deal with the plaintiffs’ alternative submissions, made during the hearing and developed in written submissions filed 1 October 2021, as to the defendant being the party who is precluded from raising the issue of Anshun estoppel because acting reasonably, he should have raised such a defence years ago.
Privity of Contract
The defendant argued that the only parties to the Employment Agreement were himself and the second plaintiff (Findex Services). That appears to be uncontroversial, as the plaintiffs plead that fact in the Claim.
Due to that fact, Mr McKay argued that the doctrine of privity of contract applied so as to prevent the other plaintiffs from enforcing the terms of the Employment Agreement against him. He argued that the other parties had not established any arguable basis as to why they should be permitted to sue under that Employment Agreement.
This argument only affects the breach of contract claim and not the causes of action raised under the Australian Consumer Law.
The applicable principle relied upon by the defendant was that contained in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 (Trident) and further discussed in Clarence City Councilv Commonwealth of Australia [2020] FCAFC 134; 382 ALR 273 at [76]-[93] (Clarence City Council).
The circumstances in Clarence City Council involved a number of local councils seeking declaratory relief as to the interpretation of a contract where they were not parties to the contract but were affected by it (the payment of rates). The Full Federal Court found that they were entitled to seek declaratory relief (as opposed to enforcement or executory relief) notwithstanding that they were not parties to the contracts in question in that proceeding. In the course of reaching that conclusion, the Court provided a comprehensive discussion of the privity of contract doctrine, with the applicable authorities and references to general commentary on the doctrine set out in detail at [76]-[93]. For present purposes, it suffices to state the following three points as being of relevance to the defendant’s argument here:
(a)First, the doctrine of privity of contract is that a person who is not a party to a contract can neither enforce that contract, nor incur any obligations pursuant to that contract.
(b)Second, where the contract involves one party (here, Mr McKay) contractually promising another party (here, Findex Services) to confer a benefit on a third party (the other plaintiffs), those third parties acquire no right to sue on the promise, because they are not parties to the contract and have given no consideration for the promise.
(c)Third, there is a distinction between seeking to enforce obligations or suing on a contract and seeking declaratory relief about the existence or non-existence of a legal state of affairs. In respect of the latter, the third party is not seeking to sue “on” or “upon” the contract, and on that basis, the doctrine of privity of contract is not engaged.
The plaintiffs affected by this argument (all plaintiffs other than the Findex Services) argued that the Employment Agreement conferred benefits on each of them (being clause 12), so that each plaintiff had a sufficient personal, direct and “real” interest in the matters in issue in the proceedings. That gave each of those plaintiffs standing to be a party to the proceedings. It was argued that those entities and individuals were necessary parties because they were directly affected by the orders that are to be made in the proceedings, including the injunction that is sought.
Further, because of that interest, the affected plaintiffs submitted they had standing to seek declaratory relief by parity of reasoning with Clarence City Council. The plaintiffs accepted that declaratory relief was not currently pleaded, but they argued that the absence of that prayer for relief in the pleading does not permit summary dismissal, because the plaintiffs can amend and have indicated an intention to do so, if it is found to be necessary.
The plaintiffs also invoked the reasoning in Clarence City Council as supporting their standing to seek injunctive relief. Although it was unclear why that was so, given that an injunction is a means of enforcement, I have passed over that submission as it will be seen that it is not critical to the determination of this point.
The plaintiffs emphasised, however, that this was not necessary, because the issues of contractual privity were irrelevant to the causes of action pleaded pursuant to the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). The remedies sought (being injunctive relief and damages) by the plaintiffs other than Findex Services are founded upon those causes of action.
Separately, the plaintiffs have pleaded that Findex Services held the benefit of clause 12 of the Employment Agreement “on trust” for the Findex Group and its officers and employees, which included Findex, Financial Index, Mr Paule, Ms Bartholomeusz (named in pleadings as Ms Ludbey) and Mr Hart.
The plaintiffs’ submissions referred to authorities such as Kowalski v MMAL Staff Superannuation Fund Pty Ltd (ACN 064 829 616) (No 3) [2009] FCA 53 and News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410. Although no specific paragraphs in those cases were identified, the purpose of those references appeared to be to provide examples supporting the way the plaintiffs have pleaded this aspect of their case.
The argument appears to be that the text of the Employment Agreement manifests an intention on the part of Findex Services and Mr McKay, as the contracting parties, to create a relationship which conforms to that of a trust.
That aspect of the pleading was put forward as a reason why the plaintiffs other than Findex Services had “requisite standing to be a party to the proceedings”.
Consideration of the privity of contract argument
I accept that the doctrine of privity of contract applies to the plaintiffs other than Findex Services. The issue is to be resolved by reference to the pleading, and the Claim only pleads Findex Services as a party to the Employment Contract with Mr McKay.
It is also clear that the terms of the Employment Agreement conferred a benefit (in the form of clause 12) on those plaintiffs who were not parties to it. To that extent, those plaintiffs arguably have rights to declaratory relief, but that is not pleaded.
However, there is no basis for entering summary judgment against any of the First, or Third to Sixth Plaintiffs, because I also accept that enforcement rights arise under the other causes of action pleaded. The plaintiffs other than Findex Services have brought their case through the words in the Employment Agreement being a representation to them made in trade or commerce, rather than a contractual promise.
For completeness, I also accept that arguments about privity of contract similarly do not affect the First and Third to Sixth plaintiffs’ claims insofar as they are based on a benefit held by Findex Services on trust for them (pleaded at [17] of the Claim). However, it will still be necessary to separately consider Mr McKay’s complaint about the pleading deficiencies concerning the allegation that clause 12 of the Employment Agreement created a benefit that was Trust Property, which Findex Services is entitled to enforce on behalf of the other plaintiffs.
Other pleading deficiencies
The remainder of these reasons deal with whether parts of the Claim should be struck out. The defendant raised a number of pleading deficiencies and sought that [102]-[104], [110] and prayers 3 and 4 of the relief sought in the Claim should each be struck out.
The chief complaint concerned the claim for damages in [110] of the Claim. That paragraph pleads generally that by reason of Mr McKay’s contraventions of s 18 of the Australian Consumer Law, various sections of the ASIC Act and failure to comply with the Non-Disparagement Agreement and Non-Disparagement Representation, the plaintiffs have suffered and are likely to suffer loss and damage. The particulars then traverse professional and business reputations, hurt feelings, embarrassment and mental distress, and substantial expense in investigating the source of the “anonymous and pseudonymous” representations pleaded.
Mr McKay argued that this paragraph was a “rolled up broad summary” disclosing no reasonable cause of action. In addition, it was argued that the paragraph was prejudicial and embarrassing.
If it were accepted that paragraph [110] should be struck out, Mr McKay argued that two consequences would follow. First, the damages relief sought (prayers 3 and 4) should also be struck out. Second, the contraventions of ss 236 and 237 of the Australian Consumer Law, and s 12GF of the ASIC Act ([102]-[104] of the Claim) should also be struck out, because damages were the gist of those causes of action.
In correspondence relied upon on the application, Mr McKay also raised concerns about any cause of action arising from Findex Services holding a benefit on trust for the other plaintiffs. The deficiency complained of was that no cause of action based on a trust or Trust Property arising out of the Employment Agreement was properly pleaded by the First and Third to Sixth plaintiffs.
Dealing with that argument first, I accept the plaintiffs’ submission in response that the contractual benefit referred to in the Employment Contract is capable of creating a trust (see Bahr v Nicolay (No 2) (1988) HCA 16; 164 CLR 604 at 618), but it is not clear why the legal mechanism of a trust is necessary here.
The plaintiffs other than Findex Services, as trust beneficiaries, are able to bring proceedings against Mr McKay in their own name if the trustee has declined to institute proceedings (see Trident per Deane J at 147-148). As the defendant submitted in oral argument and in written submissions (including the solicitor’s letter setting out the argument on this point), the circumstances here are that Findex Services has itself instituted proceedings in contract both for the enforcement of the promise (which includes the non-disparagement of members of the Findex Group and their employees) and for damages occasioned by its breach.
I disagree with the plaintiffs’ argument (also made by relying on solicitor’s correspondence) that their claims have been “set forth with precision” or are “sufficiently clear” in relation to any claim by the First and Third to Sixth plaintiffs based on the Second Defendant holding a benefit for each of them on trust. It is unclear on the face of the pleading (without setting out [17] of the Claim) why Findex Services is suing on behalf of those plaintiffs separately from its own contractual right of enforcement, and further, precisely what relief is sought on their behalf. Further, there is no clear explanation in correspondence or submissions as to how that aspect of the pleading translates to any of the relief sought. I accept the defendant’s submission that if there is such a cause of action pressed, it has not been properly disclosed on the current iteration of the pleading, particularly given the lack of clarity that arises from the way the damages claim is pleaded in [110] of the Claim.
On the other hand, if it is the case that the claims of the First and Third to Sixth plaintiffs are only brought on statutory causes of action, then that should be made clear and the allegations about the creation of a benefit held on trust would appear to be immaterial to the causes of action pleaded.
Similarly, I accept the separate complaint made by Mr McKay that the plaintiffs have not complied with r 417 of the Rules, which requires the parties claiming general damages to include particulars of the nature of the loss or damages which has been suffered and the exact circumstances in which the loss or damage was suffered. The allegation at [110] of the Claim as to the loss and damage suffered referable to each cause of action is rolled up.
The trust allegation at [17] of the Claim is a convenient example of why [110] poses a difficulty from the perspective of a defendant who must plead to it. It is not clear how the Trust Property (or the benefit pleaded at [17]) founds any or all of the relief claimed in [110]. The defendant does not know from the Claim whether the “mental distress” said to have been suffered by the individual plaintiffs is claimed by reference to the statutory causes of action, the breach of contract claim or separately based on their rights as beneficiaries Trust Property. In light of the restrictions on claims for mental distress and loss of reputation in causes of action based on breach of contract (as to which, see Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 362, 366 and 382-3), the complaint by Mr McKay as to what damages are sought in respect of each cause of action, and by which plaintiff, is understandable.
Accordingly, [110] of the Claim will be struck out. Otherwise, I am unpersuaded that any of the remaining pleading points discussed in correspondence between the parties, and specifically those directed to the statutory causes of action under the Australian Consumer Law and the ASIC Act, are in any way deficient. Although damages is an available remedy and has been sought pursuant to ss 236 and 237 of the Australian Consumer Law, the injunctive relief sought is equally available pursuant to s 232 of the Australian Consumer Law. I do not accept that because the single paragraph directed to damages is deficient, the entire pleading of those statutory causes of action must be struck out.
Costs
During the hearing, the parties requested a separate oral hearing in relation to any arguments about costs following the determination of the substance of this interlocutory application. That course was agreed to on the basis that the arguments about costs became somewhat complicated by reason of the withdrawal of part of the relief sought in the amended application. Accordingly, I will hear the parties on costs.
Conclusion
For the above reasons, the orders are as follows:
(1) Paragraph [110] of the Amended Statement of Claim filed 9 October 2020 is struck out.
(2) The Amended Application in proceeding filed 22 June 2020 is otherwise dismissed.
(3) Within 7 days of the making of these orders, the parties are to provide the Court with either agreed or competing short minutes of order providing for:
(i) the filing of submissions in relation to the question of costs, limited to 5 pages,
(ii) any evidence in support of an application for costs, and
(iii) either a further listing of the matter for oral hearing, or for the question of costs to be determined on the papers.
| I certify that the preceding one hundred and seven [107] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Aislinn Grimley Date: 27 July 2022 |
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