GFIN Pty Limited v Gooden, in the matter of GFIN Pty Limited
[2019] FCA 1313
•15 August 2019
FEDERAL COURT OF AUSTRALIA
GFIN Pty Limited v Gooden, in the matter of GFIN Pty Limited [2019] FCA 1313
File number: NSD 1518 of 2018 Judge: GLEESON J Date of judgment: 15 August 2019 Date of publication of reasons: 21 August 2019 Catchwords: PRACTICE AND PROCEDURE – application to strike out counter-claim – self-represented litigant – where counter-claim is hopelessly defective – application granted Legislation: Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth) ss 16.21, 23
Federal Court (Corporations) Rules 2000 (Cth) r 1.3(2)
Federal Court Rules 2011 rr 15.01, 15.02, 15.06(1)(b)
Cases cited: Polar Aviation Pty Ltd v Civil Aviation Safety Authority [2012] FCAFC 97; (2012) 203 FCR 325
Wride v Schulze [2004] FCAFC 216
Date of hearing: 15 August 2019 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 28 Counsel for the Plaintiff: R Marshall SC with R Johnson Solicitor for the Plaintiff: Keypoint Law Counsel for the First Defendant: The First Defendant appeared in person Counsel for the Second Defendant: The Second Defendant did not appear ORDERS
NSD 1518 of 2018 IN THE MATTER OF GFIN PTY LIMITED (ACN 143 274 800)
BETWEEN: GFIN PTY LIMITED (ACN 143 274 800)
Plaintiff
AND: MALCOLM BOYD GOODEN
First Defendant
BEAGLE FINANCIAL PTY LIMITED (ACN 143 274 766)
Second Defendant
JUDGE:
GLEESON J
DATE OF ORDER:
15 AUGUST 2019
THE COURT ORDERS THAT:
1.The first and second defendants’ “Statement of Counterclaim” be struck out.
2.The first defendant pay the plaintiff’s costs of the interlocutory application filed 4 June 2019.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GLEESON J:
By interlocutory application filed 5 June 2019, the plaintiff (GFIN) sought an order striking out the “Statement of Counterclaim” (counterclaim) contained in a defence filed by the first defendant (Mr Gooden) on 23 April 2019.
For the reasons which follow, I made that order.
BACKGROUND
In the proceeding, GFIN seeks to recover monies allegedly dealt with by Mr Gooden in breach of his duties owed as a director of GFIN and received, in part, by the second defendant (Beagle). Mr Gooden is the sole director and sole shareholder of Beagle.
The proceeding is brought in the name of GFIN by leave granted by a judge of this Court on 5 September 2018 pursuant to s 236 and s 237(2) of the Corporations Act 2001 (Cth) (Corporations Act). The leave was granted to three of the four shareholders in GFIN: UTS Capital Pty Ltd, J Gale Family Investments Pty Ltd and JKB Capital Pty Ltd. Together, these three shareholders own 49% of the issued share capital in GFIN. The remaining 51% is owned by Beagle.
Mr Gooden is representing himself in the proceeding. Beagle is unrepresented although Mr Gooden has purported to act on behalf of Beagle in the proceeding in signing the defence.
The other directors of GFIN were and are Stuart Cameron and Jeremy Gale.
LEGAL FRAMEWORK
The Federal Court (Corporations) Rules 2000 (Corporations Rules) apply to this proceeding because it is a proceeding under the Corporations Act. However, by r 1.3(2) of those rules, the other rules of the Court apply, to the extent that they are relevant and not inconsistent with the Corporations Rules.
Part 15 of the Federal Court Rules 2011 (Rules) makes provision for the filing of cross-claims. A cross-claim is defined to include a counter-claim, cross-action, set-off and third party claim. Rule 15.01 provides:
A respondent may make a cross-claim in a proceeding:
(a)against an applicant—for any relief to which the respondent would be entitled against the applicant in a separate proceeding; or
(b)against any other respondent or person—for any relief, including for contribution or indemnity, that is related to the subject of the proceeding.
For the purposes of the Rules, each of Mr Gooden and Beagle is a “respondent”: see Sch 1 to the Rules.
Accordingly, a cross-claim requires the identification of a claim for relief by a respondent against some other person. A cross-claim is brought by filing a notice of cross-claim (Form 31), accompanied by a statement of cross-claim: r 15.02 and r 15.06. A statement of cross-claim is a “pleading” under the Rules and must comply with r 16.01 and r 16.02. These are not just technical rules. A compliant statement of cross-claim permits both the claimant to demonstrate the existence of an arguable claim and the person against whom the claim is made to understand the case against them.
Rule 16.21 provides:
(1)A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:
(a)contains scandalous material; or
(b)contains frivolous or vexatious material; or
(c)is evasive or ambiguous; or
(d)is likely to cause prejudice, embarrassment or delay in the proceeding; or
(e)fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(f)is otherwise an abuse of the process of the Court.
The power to strike out a pleading (in this case, the statement of claim) requires a consideration of the terms of that document. It must be apparent on the face of the pleading that the facts pleaded, if proved, would establish the cause of action relied upon by the relevant claimant or claimants. In Wride v Schulze [2004] FCAFC 216 at [25], a Full Court said:
[T]he pleadings must disclose a reasonable cause of action against the party against whom the cause of action is brought and must state all material facts necessary to establish that cause of action and the relief sought. A “reasonable cause of action” for this purpose means one which has some chance of success if regard is had only to the allegations and the pleadings relied on by the applicant.
The power to strike out a pleading because it discloses no reasonable cause of action will be exercised only in a plain and obvious case, where it is clear that no reasonable amendment can cure the alleged defect and there is no reasonable question to be tried: Polar Aviation Pty Ltd v Civil Aviation Safety Authority [2012] FCAFC 97; (2012) 203 FCR 325 at [43].
In this case, as explained below, it is arguable that the counterclaim does not fall within the meaning of a “pleading” for the purposes of r 16.21 because it is not a cross-claim within the meaning of r 15.01.
Accordingly, it is relevant to note that s 23 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) provides that the Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.
STATEMENT OF COUNTERCLAIM
The defence sets out 84 paragraphs in response to GFIN’s statement of claim. In addition, under the heading “Statement of Counterclaim”, there are paragraphs numbered 85 to 215.
Paragraph 85 states:
This counterclaim is made by the first and second defendants against
GFIN PTY LTD (143 274 800) and others
Plaintiffs
The principal difficulty with the counterclaim is that it does not appear to set out facts which would support a claim for relief by either Mr Gooden or Beagle. It does not appear to contain any claim for any relief to which either Mr Gooden or Beagle would be entitled:
(a)against GFIN in a separate pleading, or
(b)against any other person for any relief that is related to the subject of the proceeding.
That is, on its face, the counterclaim does not appear to contain a cross-claim within the meaning of r 15.01 by Mr Gooden and Beagle, who are each only entitled to bring claims on their own behalf.
The counterclaim is organised under three headings:
(1)“GFIN” (paras 87 to 190);
(2)“Legal grounds for relief sought” (paras 191 to 202); and
(3)“Relief sought” (paras 203 to 215).
Under the heading “Relief Sought”, the counterclaim sets out the following principal relief sought:
(1)Five declarations concerning the conduct of Mr Cameron, Mr Gale and a “Mr Bignell”, including that:
(a)Mr Cameron and Mr Gale have breached their duties as directors, which I took to be as directors of GFIN;
(b)each of them has breached their duties as shareholders;
(c)each of them has provided false and misleading information to the administrators of GFIN, and to the Court; and
(d)Mr Gale has provided false and misleading information to ASIC and the ASX.
(2)Two orders that a forensic accountant investigate certain matters including:
(a)uncommercial transactions relating to Mr Cameron, Mr Gale and Mr Bignell; and
(b)unfair director related payments.
(3)Orders that each of Mr Cameron, Mr Gale and Mr Bignell “repay equitable compensation”, including certain amounts.
(4)Compensation for stress and injury to Mr Gooden and his family for a yet to be determined amount.
The counterclaim does not reveal a basis for either of Mr Gooden or Beagle to be entitled to claim any of this relief against any person, particularly Mr Cameron, Mr Gale and Mr Bignell.
To the extent that the relief sought is relief to which Mr Gooden or Beagle claims that GFIN is entitled, neither of them has standing to seek that relief.
The claimed declaration for breach of duties as shareholders is hopeless on the pleaded facts. There is a shareholders agreement pleaded but the alleged parties to the agreements are Beagle and the three companies referred to at [4] above, not any of Mr Cameron, Mr Gale and Mr Bignell.
The claims for equitable compensation are not expressed as claims payable to either of Mr Gooden or Beagle and there is no allegation that either Mr Gooden or Beagle paid any amount to any of Mr Cameron, Mr Gale and Mr Bignell. Various facts are alleged concerning receipts by Mr Cameron, Mr Gale and Mr Bignell (see for example, paras 130 and 190 (Mr Gale), paras 135 and 145 (Mr Cameron) and paras 147 to 149 (Mr Bignell)) but the person who paid the receipts or provided the relevant computer hardware and IT support is not identified.
The only claim that is clearly expressed as a claim for relief by Mr Gooden is in [21(4)] above, but the pleaded facts do not provide any basis for an entitlement to damages from GFIN (or any other person) for “stress and injury”.
Accordingly, the counterclaim is hopelessly defective and was struck out pursuant to r 16.21 of the Rules or s 23 of the Federal Court Act. I ordered that costs follow the event.
I also informed Mr Gooden that, if he wishes to attempt to bring another cross-claim, he may do so by filing an application for leave to file a cross-claim (that is, a notice of cross-claim accompanied by a statement of cross-claim). I have previously explained to Mr Gooden that by r 4.01(2) of the Rules, a corporation must not proceed in the Court other than by a lawyer. If Beagle wishes to bring a cross-claim, it may only do so through a lawyer unless the Court dispenses with the requirement for compliance with r 4.01(2).
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate:
Dated: 21 August 2019
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