Hong v Chua
[2000] QSC 382
•26 October 2000
SUPREME COURT OF QUEENSLAND
CITATION: Hong v Chua and Ors [2000] QSC 382 PARTIES: HUI-YUN HONG
(plaintiff/respondent)
v
BEE LAY CHUA
(first defendant)
HSIN HONG LIN
(second defendant)
LONG-YI CHEN
(third defendant/applicant)FILE NO/S: S9841 of 1999 DIVISION: Trial DELIVERED ON: 26 October 2000 DELIVERED AT: Brisbane HEARING DATE: 17 October 2000 JUDGE: Williams J ORDER: 1. That the Amended Statement of Claim against the
Third Defendant filed 28 February 2000 be struck out.2. Grant the Plaintiff leave to replead against the Third
Defendant.3. That the Plaintiff pay the Third Defendant’s costs of
and incidental to this application and of the action to
date to be assessed on the standard basis.CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – PLEADING – STATEMENT OF CLAIM – application to have plaintiff’s action against third defendant dismissed or alternatively for other relief including striking out of amended statement of claim – claim for breach of fiduciary duty – where allegations insufficiently particularised – nothing in amended statement of claim to support allegations of dishonesty on part of third defendant.
Uniform Civil Procedure Rules (Qld) 1999, r 150(3), r 444
COUNSEL: G Egan for third defendant/applicant
P Kronberg for plaintiff/respondentSOLICITORS: Hopgood Ganim for third defendant/applicant
Leo Cruise & Co for plaintiff/respondent
WILLIAMS J: This is an application by the third defendant in the action, Long-Yi Chen, to have the plaintiff’s action against him dismissed or, alternatively, for other relief including the striking out of the Amended Statement of Claim delivered pursuant to the order of Fryberg J of 5 January 2000.
The proceeding was commenced on 3 November 1999 and the endorsement on the claim sought “the sum of $240,000 being money had and received plus damages and interest from 1 May 1997”; that claim was made against the three named defendants. The accompanying statement of claim concluded with a statement that the plaintiff claimed “the sum of $240,000 plus damages and interest”. There then followed a notice purportedly complying with r 150(3) of the UCPR as follows:
“The plaintiff claims:
$240,000 for moneys had and received.
$120,000 for damages.
$ 36,000 for interest …”
The third defendant filed and delivered a Notice of Intention to Defend on 29 November generally denying all allegations and on 3 December 1999 served on the solicitors for the plaintiff a letter in accordance with r 444. That was followed by an application filed 23 December 1999, returnable 5 January 2000, which came before Fryberg J; he made an order in the following terms:
“1.Within seven (7) days of this Order the Plaintiff deliver to the First, Second and Third Defendants copies of the documents referred to in the Plaintiff’s Statement of Claim as requested in the letter from the Third Defendant’s solicitors to the Plaintiffs solicitors dated 3 December 1999;
2.The Plaintiff have leave to amend the Statement of Claim, generally on or before 18 February 2000;
3.The Plaintiff to provide particulars in accordance with both Exhibit 1 and the letter of Third Defendant dated 23 December 1999, those particulars to be incorporated into the Statement of Claim in a different typeface save all just exceptions."
Consequent upon that order the plaintiff delivered an Amended Statement of Claim which was filed 28 February 2000. No point is taken with respect to the late filing thereof. Nor is any point taken that the Amended Statement of Claim does not include the particulars ordered in a different typeface.
The solicitors for the third defendant delivered letters in accordance with r 444 to the plaintiff’s solicitors dated 13 March 2000 and 18 July 2000. Those letters addressed alleged deficiencies in the amended statement of claim. There was no response. That precipitated this application filed 4 October 2000. The amended statement of claim has dramatically altered the nature of the plaintiff’s claim against each defendant. The claim is now framed as one for compensation for breach of fiduciary duty and an account of profits.
This application is only concerned with the claims against the third defendant, and I will only refer to allegations against the other defendants where that is necessary in order to understand the claim against the third defendant.
The plaintiff is a Taiwan national who was desirous of migrating to Australia. She was interested in acquiring what is described in the pleading as an “Australian Business Migration Visa (sub class 457)”. Accord International Corp Limited (“Accord”) was a company which held itself out as carrying on the business of immigration agents with respect to migration to Australia. The pleading does not make clear where that company was incorporated. The second defendant is alleged to have been the managing director thereof and the third defendant the chairman of directors. Both of those defendants were Taiwanese entitled to permanent residence in Australia.
It is then alleged that on 10 April 1997 the plaintiff and Accord entered into two contracts. By the first the plaintiff authorised Accord to obtain the requisite visa for her. It is alleged that if the contract could not be carried out completely all moneys paid pursuant to it by the plaintiff would be returned. By the second contract the plaintiff authorised Accord to form an Australian investment company on her behalf in which she would invest the sum of $250,000. It is not asserted that the third defendant personally played any role with respect to the formation of either contract.
It is then alleged that on 11 April 1997 a company, Honway Enterprise Pty Ltd, ACN 078 172 102 (“Honway”) was established with the plaintiff as sole director and shareholder and giving as her address the residence of the third defendant in Queensland. Again it is not asserted that the third defendant played any specific role in relation to the formation of that company.
The plaintiff did not have sufficient funds to pay the amount specified in the second contract and she arranged to borrow $150,000 from the third defendant to meet the shortfall. No particulars of the loan agreement are pleaded.
Then the amended statement of claim alleges that in April 1997 “the plaintiff was required by one William Martin Miller to sign” documents opening a bank account in the name of Honway and authorising the first defendant to be the sole signatory thereof. There is nothing in the amended statement of claim to indicate the relationship between Miller and any of the defendants, particularly the third defendant.
The next material allegation is that on 30 April 1997 the plaintiff, accompanied by the second and third defendants, deposited at a bank in Taiwan the necessary funds to meet her obligations under the second contract; $150,000 thereof being moneys loaned to the plaintiff by the third defendant.
The plaintiff obtained a “business class visa (sub class 456)” and not sub class 457 as provided for in the contract. That was not satisfactory to her and did not constitute compliance with the contract. The amended statement of claim alleges in various places that (partly because the plaintiff was unable to read or speak English) she placed reliance on Accord for advice with respect to the visa application and the financial dealings associated therewith.
The amended statement of claim then alleges that the first defendant owed the plaintiff a fiduciary duty with respect to the moneys invested by her in Honway. The allegation is then made that in breach of that duty the first defendant paid out $100,027 to the second defendant personally and (over a period of time) $123,400 to Accord. Further it is alleged the first defendant appropriated from those funds $24,480 to her own use.
There then follows an allegation that “Accord owed to the Plaintiff a fiduciary duty”. It is then said that Accord was managed and controlled by the second defendant and that in consequence the second defendant was aware of the impugned conduct of the first defendant. There is a specific (but unparticularised) allegation that the second defendant personally requested the first defendant to remit to him the $100,027.
There is then an allegation (in paragraph 29) that the receipt by Accord of the $123,400 was “caused by the dishonest and wilful design of Accord and the Second Defendant to benefit either or both Accord and the Second Defendant personally”. As I read the pleading Accord was said to be guilty of “dishonest and wilful design” because of the conduct of the second defendant; Accord is not a party and no relief is claimed against it.
Then come the paragraphs in the pleading (31 to 35 inclusive) which deal specifically with the third defendant. After a general reference to matters pleaded previously, paragraph 31 alleges that the third defendant “was (by inference) from time to time informed of the financial affairs of Accord particularly including its bank accounts, investments and other financial records so as to supervise and safeguard his investments and to ensure the repayment of his loan to the plaintiff within three years.” It is not clear to me what the latter part thereof means. The allegation is then made (para 32) that the Third Defendant was aware that “Accord and/or the Second Defendant had control of the Plaintiff’s funds.” In support of that the following particular is given: “In conversation with the Plaintiff on 13 June 1999 the Third Defendant said to the Plaintiff that she was not able to obtain a permanent resident visa and that the Second Defendant would refund the Plaintiff with her money”.
Then follows paragraphs 33 to 35 which are of critical importance, and it is necessary to quote them in full:
“33.By virtue of the matters pleaded in paragraphs 31 and 32 hereof the Third Defendant was aware or ought to have been aware that:-
(a)the Plaintiff relied on Accord for advice with respect to her financial affairs so as to obtain her business visa and permanent residence.
(b)large sums of money were transferred to the benefit of Accord which were far in excess of Accord’s usual agency fees;
(c)the Plaintiff had invested the sum of A$240,000.00 in an Australian bank account, of which the First Defendant was sole signatory;
(d)the Second Defendant and/or Accord had control (either actual or effective) over the Plaintiff’s moneys;
(e)the Plaintiff’s moneys were to be invested in Australia so the Plaintiff could ultimately obtain permanent residence;
(f)the remittance of large sums of money to Accord had no patent connection with advancing the Plaintiff in obtaining permanent residence.
34.By reason of the matters pleaded in paragraphs 31-33 inclusive hereof the Third Defendant by wilful blindness failed to ascertain and/or was aware of:-
(a)the dishonest and fraudulent transfer of moneys to the Second Defendant and/or Accord without any just or bona fide reason;
(b)the First Defendant’s transfer of moneys at the request of the Second Defendant and/or Accord, without the consent or ratification of the Plaintiff;
(c)the First Defendant’s appropriation to her own use of the moneys pleaded in paragraph 24 hereof, without the consent or ratification of the Plaintiff;
35.The Third Defendant is therefore liable to the Plaintiff in participating in the breach of fiduciary duty of the First and Second Defendants and of Accord.
Finally paragraph 40 should be noted, it says:
“The Second and Third Defendants (by inference from their participation in the breach of fiduciary duty as pleaded) may have received part or all of the Plaintiff’s moneys and may have profited thereby.”
It is in the light of that pleading that the plaintiff claims $247,907 against the third defendant as “compensation for breach of fiduciary duty”. The other relief claimed against the third defendant is as follows:
“4.As against the Second and Third Defendants an account of any profits derived by them upon receipt by them of all or any of the Plaintiff’s moneys;
5.The Second and Third Defendants as directors of Accord, cause Accord to account to this Honourable Court for any profits derived by it upon receipt of any of the Plaintiff’s funds.”
At the outset two significant points should be noted. Firstly, there is no allegation of any conspiracy linking the third defendant with either or both of the other defendants. There is no allegation of any common intention such as may make the third defendant liable for some wrongful conduct of either or both the others. Secondly, it is not claimed that the third defendant is liable as a director for some wrongful conduct by the company Accord by virtue of the operation of the applicable company law.
There are specific allegations of dishonesty made against the first and second defendants, but not against the third defendant. The latter is said to be liable because he knew or ought to have been aware of the dishonesty of the other defendants because he was a director of Accord. However, in my view, there is nothing in the amended statement of claim which supports such an allegation. The pleading, so far as the third defendant is concerned, is no more than a fishing exercise. That is made patently obvious by paragraph 40 in which it is alleged that the third defendant “may have received part or all of the plaintiff’s moneys”. Clearly the plaintiff has no grounds for asserting that the third defendant did, in fact, receive some of her moneys. No particulars are given underpinning the use of the phase “participating in the breach of fiduciary duty” in paragraph 35.
In the course of submissions counsel for the plaintiff said that one of the matters that should be explored at trial was whether or not the third defendant had received some money, and if he had then that would associate him with the dishonesty of the other defendants. That does not necessarily follow. The plaintiff admittedly owed the third defendant $150,000 and in consequence it does not necessarily follow from the receipt by him of some money from the plaintiff’s funds that he received it dishonestly or knowing of the other defendants’ dishonesty.
The letters of 13 March and 18 July 2000 delivered pursuant to r 444 ask for numerous detailed particulars of matters raised in the amended statement of claim. There is some force in the submission by counsel for the plaintiff that some of those requests are objectionable, but nevertheless those requests highlight the total lack of particularity in the amended statement of claim.
Which are the “large sums” referred to in paragraph 33(b) and what were the “usual agency fees”; did the agreement refer to such fees. Why does it follow from the fact that the third defendant knew or ought to have known that the second defendant and/or Accord had effective control over the plaintiff’s money that the third defendant was in breach of a fiduciary duty he owed the plaintiff. What is meant in paragraph 34 by “wilful blindness”; no particulars are given. Why should the third defendant have been aware of the second defendant’s fraudulent conduct assuming that such is proved?
In essence the plaintiff alleges that the third defendant has been guilty of dishonesty without being able to particularise any act on his part or the receipt of any funds on his part which evidences actual dishonesty.
In the circumstances the amended statement of claim cannot be allowed to stand against the third defendant and it should be struck out. At this stage I do not propose to dismiss the action against the third defendant. However, if the plaintiff cannot deliver a viable statement of claim against the third defendant within a reasonable period of time then the action should be struck out.
The orders will therefore be:
1. Order that the Amended Statement of Claim against the Third Defendant filed 28 February 2000 be struck out.
2. Grant the Plaintiff leave to replead against the Third Defendant.
3. Order that the Plaintiff pay the Third Defendant’s costs of and incidental to this application and of the action to date to be assessed on the standard basis.
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