Grant Thornton Australia Ltd v Crossbred Nominees Pty Ltd - [2021] WADC 83

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   GRANT THORNTON AUSTRALIA LTD -v- CROSSBRED NOMINEES PTY LTD [2021] WADC 83
CORAM:   DEPUTY REGISTRAR HEWITT
HEARD:   13 AUGUST 2021
DELIVERED          :   27 AUGUST 2021
FILE NO/S:   CIV 3164 of 2020
BETWEEN:   GRANT THORNTON AUSTRALIA LTD
Plaintiff

AND

CROSSBRED NOMINEES PTY LTD
First Defendant

GEOFFREY CHARLES HENRY PERKINS
Second Defendant

Catchwords:

Practice and procedure - Application to strike out portions of the defendants' defence and counterclaim - Turns on its own facts

Legislation:

Nil

Result:

Dismissed

Representation:

Counsel:

Plaintiff	:	Mr S D Majteles
First Defendant	:	Mr A Metaxas
Second Defendant	:	Mr A Metaxas

Solicitors:

Plaintiff	:	Murcia Pestell Hillard
First Defendant	:	Metaxas Legal
Second Defendant	:	Metaxas Legal

Case(s) referred to in decision(s):

Nil

DEPUTY REGISTRAR HEWITT:

In this matter I am required to determine a chamber summons which was filed by the plaintiff on 4 June 2021 seeking to strike out a considerable number of paragraphs of the defendants' defence and counterclaim, an extension of the entry for trial milestone and an extension of time within which to file a reply and defence to counterclaim.
By an amended summons filed 13 August 2021 the plaintiff applied for leave to bring the strike-out application out of time and withdrew the application against a number of paragraphs which had previously been under attack.
The paragraphs remaining under attack are pars 26 and 27 and various subparagraphs of those paragraphs are identified as those sought to be struck out.
Even in its amended form the chamber summons does not identify the rule which is apparently relied upon by the plaintiff to support the strike‑out but I take it to be that the paragraphs remaining under attack disclose no reasonable cause of defence or counterclaim.
Before I embark upon an analysis of the application, it is necessary to give a little background to the action which is being pursued by the plaintiff and the cross‑claim which has been advanced by the defendants.
The plaintiff is a firm of accountants who were engaged to assist the defendants in what was essentially a succession plan by which a business conducted by the second defendant could be transferred to his children. The total fees charged by the accountants and lawyers for the services provided was in the vicinity of $420,000 and the plaintiff's claim is for approximately $119,000 together with interest being the balance of that sum remaining unpaid.
The counterclaim is based on an allegation by the defendants that the proposed arrangements to give effect to the transition were beyond the financial capacity of the parties and that the plaintiff should have appreciated that, advised the defendants of that and that as a consequence a great deal of the work which was done by the plaintiff was wasted and of no benefit.
The defendants therefore seek a significant counterclaim of a sufficient size to not only overwhelm the plaintiff's claim but to go well beyond that sum and seek a substantial judgment in their favour.
When the application was originally brought, an attack was levelled at a large number of paragraphs beyond those which I have identified above. The application insofar as those paragraphs are concerned has been abandoned.
The defendants complain that the plaintiff is delaying the resolution of this matter by failing to plead a reply and defence to counterclaim. For its part, the plaintiff says there are defects within the defence and counterclaim which are such that it is not appropriate to plead to that defence and counterclaim until those defects are overcome. As I have mentioned earlier, the list of defects has shortened very significantly and is now limited to pars 26 and 27.
I also pause to mention that the defence and counterclaim runs to 75 pages and 124 separate paragraphs. Therefore, there is not a very significant contamination of the pleading if indeed there is anything wrong with the paragraphs under attack.
Paragraph 26 of the amended defence and counterclaim is framed in the following terms:
26The defendants admit paragraph 26 of the statement of claim and say further:
26.1on 20 May 2019;
(a)at 14:19 Metaxas for Chris, Joanne and Shane sent an email to Taylor in which he stated, in effect, that Chris, Joanne and Shane sought to vary the Mediation Agreement so that first defendant (which it was proposed Chris, Joanne and Shane would control) retained 50% ownership of the Narrogin Premises and it followed that the rent for those premises payable to Geoff would be 50% of the market rent;
(b)at 14.26 Taylor sent an email to Metaxas in which he asked, in effect, how Chris, Joanne and Shane would pay the balance of the proposed settlement amount to Geoff;
(c)at 14:34 Metaxas sent an email to Taylor in which he stated, in effect, that Chris, Joanne and Shane did not propose to pay the balance of the proposed settlement amount;
26.2at 11:34 on 21 May 2019 Taylor sent an email to Metaxas, in effect, seeking information in relation to, amongst other things, the capacity of Chris, Joanne and Shane to implement on Mediation Agreement;
26.3by email sent to Mills Oakley at 15:30 on 21 May 2019 Geoff instructed that firm, in effect, that if Chris, Joanne and Shane had been able to borrow the monies required by them to implement the terms in paragraphs 25.1 (a), (b) and (c) of the Mediation Agreement then they would not be able to make the payments in paragraphs 25.1 (d);
26.4at 10:07 on 23 May 2019 Metaxas sent to Taylor a copy of a valuation of the Narrogin Premises dated 26 April 2017 prepared by LMW acting on instructions from the Commonwealth Bank trading as Bankwest in which the market value of the Narrogin Premises was assessed to have been $980,000;
26.5at 11:54 on 23 May 2019 Metaxas sent to Taylor the email in paragraph 26.2 above which included in red coloured font information from Joanne to the following effect:
(a)the Narrogin Premises were valued at $980,000 in 2017 and Bankwest assessed the security value of that property on the basis of a Loan to Value Ratio ('LVR') of 70% at $686,000;
(b)Geoff's home at 17 Gray Street, Narrogin had been valued at $400,000 and Bankwest assessed the security value of that property at $320,000 based on a LVR of 80%;
(c)the combined equity of Chris, Joanne and Shane in the homes owned by each of them (and their respective spouses) as was available to secure loans from Bankwest was $682,000 and Bankwest assessed the security value of that equity at $545,500 based on a LVR of 80%;
(d)the limit of the Bankwest Facilities was $1,329,000; and
(e)as at 23 May 2019 the Bankwest Facilities were drawn to $1,012,000;
26.6at 14:35 on 23 May 2019 Geoff sent an email to Taylor in which he wrote, in effect, that Mills Oakley should not spend any further time on the Mediation Agreement on the basis that Chris, Joanne and Shane had not progressed their application for finance and the legal costs were well in excess of the initial estimates;
26.7on 27 May 2019 Sam Hagdorn of Mills Oakley sent to Geoff and Mucciacciaro the email in paragraph 26.5 above together with an email from Taylor to Metaxas sent at 15:43 on 27 May 2019 in which Taylor wrote, in effect, that Geoff would only proceed with the Mediation Agreement after Chris, Joanne and Shane provided confirmation that they could proceed under that agreement;
26.8by email sent from Taylor to Metaxas at 16:45 on 12 June 2019 Taylor, informed Metaxas, in effect, that if the Mediation Agreement could not be implemented because Chris, Joanne and Shane could not obtain finance then the Businesses might have to be sold;
26.9by email from Metaxas to Taylor sent 24 June 2019 Geoff was requested to sign documents so that Bankwest would approve a temporary increase in Crossbred's overdraft of $250,000 on the basis that the Bankwest Facilities were undrawn to the extent of about $207,000 and that Crossbred was required to make payments as follows:
(a)CNH, a parts supplier - $135,000 which was overdue;
(b)wages for the Narrogin Business and the Northam Business due to be paid on 27 June - $45,000;
(c)Mastercard - $31,000;
(d)BAS for the Northam Business and the Narrogin Business of $49,000;
26.10by 25 June 2019 it was apparent to Chris, Joanne and Shane that they could not obtain finance to give effect to the Mediation Agreement and on that day Metaxas sent an email to Taylor in which Chris, Joanne and Shane proposed, in lieu of the Mediation Agreement, that:
(a)Geoff transfer his shares in GPFM and Crossbred and his units in the Narrogin Trust to the Chris, Joanne and Shane;
(b)the Narrogin Property remain owned by Crossbred;
(c)Geoff retire as a director of Crossbred and GPFM;
(d)Chris, Joanne and Shane pay Geoff $700,000 on completion of the sale and purchase of his interests plus $50,000 per annum for 10 years;
(e)Chris, Joanne and Shane would arrange for Bankwest to release Geoff's guarantee and securities; and
(f)Chris, Joanne and Shane would pay a further $15,000 towards the Geoff's legal costs after business creditors had been paid;
26.11by email from Geoff to Taylor sent 26 June 2019 Mills Oakley was instructed not to waste time drawing up an agreement to give effect to the Mediation Agreement or any amended proposal by Chris, Joanne and Shane;
26.12at 16.23 on 23 August 2019 Metaxas sent an email to Taylor in which he wrote, in effect, that:
(a)no finance had been secured by Chris, Joanne and Shane from Bankwest;
(b)in his (Metaxas) opinion the parties would be best advised to vary the proposed agreement so that:
(1)Geoff would be paid $120,00 [sic] on completion and then annually thereafter for 4 years so he would then have been paid $600,000;
(2)after the 5 years in (1) the unpaid balance from the $1,200,000 proposed to be paid would be financed and paid out;
(3)if the $700,000 could not be financed and paid then Chris, Joanne and Shane would pay $120,000 per annum for a further 5 years;
(4)Geoff would have security over the assets of the Businesses and the other properties Bankwest proposed to use as part of its overall security package subject to the existing mortgages;
26.13by letter from Taylor to Metaxas dated 16 September 2019 (hereafter the '16 September Offer') which was copied to the plaintiff at 10:11 that day Geoff proposed, subject to finance within 28 days after execution of a deed of settlement, that he purchase the interests of the CJS Trusts in Crossbred, the Narrogin Trust and GPFM (hereafter the 'CJS Interests') on the following terms:
(a)Geoff would pay to the trustees of the CJS Trusts 85% of the amounts owed to each of them by Crossbred as trustee for the Narrogin Trust as at 30 June 2019 (subject to finalisation of the financial statements for the Narrogin Trust as at 30 June 2019) hereafter referred to as the 'CJS Loan Accounts';
(a) [sic]the amount to be paid by Geoff to the Sefton‑Park Trust would be $50,000 on completion and about $205,109 by 10 equal annual instalments on the basis of the amount owed as at 30 June 2018;
(b)the amount to be paid by Geoff to the West‑Sefton Trust would be $50,000 on completion and about $156,196 by 10 equal annual instalments on the basis of the amount owed as at 30 June 2018;
(c)the amount to be paid by Geoff to the Perkins‑Sefton Trust would be $50,000 on completion and $206,819 by 10 equal annual instalments on the basis of the amount owed as at 30 June 2018;
(d)if the Narrogin Business was sold before the payments above had been paid then the unpaid amount would be paid from the proceeds of sale;
(e)completion would be within 28 days after approval of finance;
(f)on completion each of Chris, Joanne and Shane would:
(1)transfer his/her shares in GPFM and units in the Narrogin Trust to Geoff;
(2)resign as a director of GPFM;
(3)resign as an employee of Crossbred;
(4)be paid his/her accumulated entitlements as an employee of Crossbred ('unpaid employee entitlements');
(g)Geoff would use all reasonable endeavours to procure the release the guarantees provided by Chris, Joanne and Shane and their respective spouses and the discharge of any related securities; and
(h)the terms would be recorded in a deed of settlement and release to be prepared by Mills Oakley;
26.14on 25 October 2019 Hagdorn sent an email, in effect, to Geoff and the plaintiff in which he wrote, in effect, that Geoff was intending to purchase the CJS Interests and on 28 October 2019 Mucciacciaro informed Mills Oakley by email sent at 12:00 that the plaintiff had prepared a form 484 to be lodged at ASIC so that Geoff would be the sole director of Crossbred and the plaintiff also prepared the 28 October Engagement Letter;
26.15on 29 October 2019 Hagdorn forwarded to Geoff and Mucciacciaro an email sent to Taylor by Metaxas in which he, in effect, that he had referred Chris, Joanne and Shane to an accountant for advice and that accountant had advised that the Northam Business should be closed immediately, the Narrogin Business was servicing excessive debt and that there would be severe financial consequences for Geoff, Chris, Joanne and Shane unless there was an immediate resolution of the dispute between them;
26.16by email from Metaxas to Taylor sent at 12:24 on 30 October 2019 Chris, Joanne and Shane proposed, in effect, that Geoff purchase their interests in Crossbred and the Businesses on the following terms:
(a)Geoff cause to be paid the amounts owed by Crossbred to each of the Sefton-Park Trust, the West-Sefton Trust and the Perkins-Sefton Trust as at 30 October 2019;
(b)Geoff cause the guarantees provided by Chris, Joanne and Shane and their respective spouses to Bankwest to be released and any associated securities to be discharged;
(c)Geoff indemnify Chris, Joanne and Shane and their respective spouses from claims against them relating to the Businesses;
(d)Chris, Joanne and Shane pay to GPFM moneys owed by them to GPFM as at 30 October 2019 from the moneys paid to them in (a) above;
(e)on completion each of the Chris, Joanne and Shane would:
(1)cause to be transferred to Geoff his/her shares in GPFM and units in the Narrogin Trust;
(2)resign as a director of Crossbred and GPFM:
(3)resign as an employee of Crossbred at which time the accrued entitlements of each as an employee as at 30 October 2019 would be paid;
26.17by email from Taylor to Metaxas sent at 16:20 on 30 October 2019 (hereinafter the '30 October Offer') Geoff informed Chris, Joanne and Shane that he was generally agreeable to their offer in paragraph 26.16 above subject to:
(a)the amounts payable under 26.16 (a) and (d) being confirmed by the plaintiff based on a review of the accounts for Crossbred and GPFM for the financial years ended 30 June 2018, 2019 and part of 2020 and recorded in the proposed deed of settlement;
(b)Geoff would use his best endeavours to have the guarantees by Chris, Joanne and Shane and their respective spouses to Bankwest released as soon as possible and to the extent those guarantees were unable to be released before completion Geoff would indemnify those guarantors;
(c)the parties entering into a deed of settlement and release (to be prepared by Mills Oakley) including the terms agreed, terms still to be negotiated and all of the standard terms usually contained in such deeds;
(d)there would be no binding agreement until the deed was executed by all parties;
(e)Chris, Joanne and Shane would co-operate in the performance of their day to day roles in the Businesses pending completion; and
…
Paragraph 26 simply states that the children were unable to purchase the second defendant's (Geoff's) interest and the family dispute was not resolved in accordance with the agreement pleaded in par 25 or otherwise.
The attack on the content of par 26 is set out in par 47(b) of the submissions filed by the plaintiff and is as follows:
(b)By paragraph 26 of the Defence and CC, the defendants admit paragraph 26 of the SOC by which the plaintiff alleges the Children could not raise the finance to make good on their offer to buy the second defendant out of his interest in the First Defendant. The defendants then spend the following 8 pages summarising the evidence that makes good on that admission and they explain the negotiations that took place between May and October 2019 directed to salvaging the settlement agreement. The agreement described in [26] of the SOC was not salvaged; and it does not form part of the defendants' defence nor is it relevant to the cause of action underlying the counterclaim. It is difficult to imagine a better example of content that would offend the basis rules of pleading and should be struck out.
The defendants however, have argued that the information contained in the paragraph is necessary to give context to its defence and counterclaim and this material was included for that purpose. On the other hand the plaintiff says that it faces certain difficulties in pleading to the paragraph because in many places the defendants pleads the meaning of various communications with which it may not agree. That hardly imposes a pleading problem on the plaintiff. All the plaintiff needs to do, if it is the fact, is admit the communication but not admit the pleaded meaning.
By adopting that course, if the content of the communication is in issue and if it is ambiguous, the plaintiff will need to place the document before the court to allow the court to place its own interpretation on the words used and no difficulty at all will arise.
In par 27 of the statement of claim the plaintiff pleaded as follows:
27During the period commencing on a date after the mediation described in paragraph 24 above, the Children obstructed and delayed the second defendant accessing the books and records of the first defendant and the Business.
Particulars
The second defendant was:
(a)not given details to log in to the first defendant's accounting system by the Children; and
(b)not given financial information as to the revenue and expenses of the first defendant.
I note that on the filed pleading, par 27 of the defence and counterclaim is misnumbered as par 26. That paragraph is reproduced below:
26Paragraph 27 of the statement of claim is denied and Geoff says further:
27.1Crossbred authorised the plaintiff to request documents from Dew Dallimore on 29 October 2019;
27.2attached to an email sent at 17:14 on 30 October 2019 by Metaxas to Mills Oakley were draft financial statements for the Narrogin Trust and GPFM as at 30 June 2019;
27.3by email to Taylor sent at 15:03 on 1 November 2019 Metaxas informed Geoff that so far as Chris, Joanne and Shane were aware Geoff had the up-to-date financial information as regards the Businesses;
27.4on 5 November 2019 the plaintiff printed at the Premises the general ledgers for Crossbred, the Narrogin Trust and GPFM;
27.5on 20 November 2019 at 16:49 Craig Dew sent an email to Mucciacciaro attaching 'requested general ledger reports' for the financial years ended 30 June 2018 and 2019;
27.6on 20 November at 17:02 Mucciacciaro sent an email to Joanne requesting a copy of the general ledger for 1 July 2019 to 31 October 2019 for GPFM by 17:00 on 22 November 2019;
27.7on 20 November 2019 at 17:43 Joanne sent an email to Mucciacciaro in which she wrote, in effect, that:
(a)she was happy to supply whatever he needed to finalise the exit of Chris, Joanne and Shane from the Businesses as soon as possible; and
(b)if he was requesting the 'full general ledger transactions, not just the balance sheet, P&L, DOC' then that would be a large file so Mucciacciaro should clarify what he was seeking in the 'full general ledger for the period 1 July 2019 to 31 October 2019' for GPFM;
27.8on 20 November 2019 at 18:37 Mucciacciaro sent an email to Joanne in which he wrote, in effect, that he was seeking the 'full ledger';
27.9on 21 November 2019 at 07:31 Joanne sent an email to Mucciacciaro asking, effect, for what purpose he wanted the general ledger for GPFM;
27.10on 21 November 2019 at 07:41 Mucciacciaro sent an email to Joanne in which he wrote, in effect, that he was seeking the 'full ledger' on the basis that the plaintiff was to prepare financial statements for GPFM for the period to 31 October 2019;
27.11as at 21 November 2019 the plaintiff should have known that Geoff was 1 of the 4 directors of GPFM and as such Geoff had no authority appoint the plaintiff to prepare financial statements for GPFM for the period to 31 October 2019 or any other period;
27.12on 21 November 2019 at 07:54 Joanne sent an email to Mucciacciaro stating that Dew Dallimore continued to act as accountants for GPFM;
27.13on 21 November 2019 at 08:20 Mucciacciaro sent an email to Joanne in which he wrote, in effect, that if Dew Dallimore was still acting as the accountants for GPFM then the general ledger for GPFM for the period 1 July 2019 to 31 October 2019 should be sent to that firm;
27.14on 21 November 2019 at 10:00 Craig Dew sent an email to Mucciacciaro stating that Dew Dallimore would prepare the October 2019 interim financial statements for GPFM; and
27.15Geoff had access to all of Crossbred's financial records and bank accounts for many years and had access to those records and accounts at all times after 1 January 2019 albeit that Geoff may have required the assistance of a person experienced in the software programs to access those records.

My reading the pleading of par 27 and the various subparagraphs are the material facts upon which the defendants rely to establish that the proposition that there was obstruction as pleaded in par 27 of the statement of claim is inaccurate.
Paragraph 27 of the defence and counterclaim seems to me to contain a chronological list of the various requests and actions which were undertaken by the defendants at the relevant times and which are relied upon by the defendants to refute the allegation that the children were obstructive as is alleged by the plaintiff's statement of claim.
I see nothing within the paragraph worthy of a strike‑out order and I decline to make such an order.
In the present day and age a more liberal approach to pleading rather than a technical approach to pleading has been adopted by the courts of the State and elsewhere. The objective of a pleading is to convey to the receiving party the propositions which are intended to be advanced by the pleading and the facts upon which they rely for that advancement. Stepping back from these pleadings the thrust of the defence and counterclaim is perfectly clear. The allegation is that the plaintiff did a great deal of unnecessary work at great cost which they as professionals should have realised was unnecessary and pointless and for which they should not be entitled to recover further moneys and indeed should be required to repay a proportion of the moneys which have already been advanced by the defendants.
Once one steps back and takes a broader view of the case, I think it clear that the pleading which is advanced by the defendants, satisfies that objective test. The plaintiff knows what the complaint is and knows the facts which the defendants intend to prove to establish those matters.
Admittedly the defence and counterclaim is huge, but it is notable that the attacks by the plaintiff by way of strike‑out have in many respects withered and died during the course of the application. It is also significant that it was only at the eleventh hour, notwithstanding the point being raised at an earlier stage, that the plaintiff sought the leave of the court to pursue its application out of time.
I do not intend by this decision to suggest that the pleading advanced by the defendants is perfect. It is not. What it is, is good enough to satisfy the purpose of a pleading and I see no prejudice which has caused to the plaintiff by anything which is pleaded in the various paragraphs which are attacked and for that reason I dismiss the application, although allowing leave to bring it.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
DH
Court Officer
27 AUGUST 2021