IMO Officar Pty Ltd
[2018] VSC 125
•9 February 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2016 01115
IN THE MATTER of OFFICAR PTY LTD (ACN 142 983 042)
| QIANG LI | Plaintiff |
| v | |
| OFFICAR PTY LTD ACN 142 982 042 AND OTHERS (according to the attached schedule) | Defendants |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 September 2017 |
DATE OF JUDGMENT: | 9 February 2018 |
CASE MAY BE CITED AS: | IMO Officar Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2018] VSC 125 |
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CORPORATIONS – Plaintiff’s proceeding claims relief for oppressive conduct under Part 2F.1 of the Corporations Act 2001 (Cth) – Defendant to plaintiff’s proceeding files counterclaim in respect of alleged breach of contractual arrangements by the defendants to counterclaim which only involve the plaintiff on the periphery – Application to strike out counterclaim without prejudice to assert the counterclaim in a separate proceeding pursuant to rule 10.06(c) of the Supreme Court (General Civil Procedure Rules) 2015 – Application for alternative orders that there be separate trials of the claim and counterclaim under rule 10.06(a) – Held, striking out counterclaim, that if counterclaim is heard with principal proceeding, will delay the hearing of the plaintiff’s proceeding – Little ‘overlap’ – Not convenient to be heard at the same time as the plaintiff’s proceeding – Counterclaim struck out.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Caillard | Nevett Ford |
| For the Defendants and Plaintiffs by Counterclaim | Mr M Black | Melbourne Legal Chambers |
| For the Second to Fifth Defendants by Counterclaim | Ms C Ballantyne, solicitor | Madgwicks Lawyers |
HIS HONOUR:
By a summons filed 10 August 2017, the plaintiff seeks an order pursuant to rule 10.06(c) of the Supreme Court (General Civil Procedure) Rules 2015 that the counterclaim filed by the defendants on 4 August 2017 be struck out without prejudice to the defendants to assert the counterclaim in a separate proceeding. Alternative orders are sought including that there be separate trials of the claim and counterclaim pursuant to rule 10.06(a) of the rules.
The summons is supported by an affidavit of Gregory Doran sworn 10 August 2017. The defendants oppose the application and rely on an affidavit of Mario Merlo sworn 24 August 2017. In addition, an affidavit has been filed by the solicitor for the second to fifth defendants by counterclaim, Catherine Ballantyne, sworn 14 September 2017. Ms Ballantyne states that the parties whom she represents support the plaintiff’s application.
Rule 10.06(c) provides that notwithstanding rules 10.02 and 10.03, where a counterclaim may embarrass or delay the trial of the claim of the plaintiff or cause prejudice to any party or otherwise cannot conveniently be tried with that claim, the Court may order that any person joined as defendant to the counterclaim cease to be a party to the counterclaim.
The proceeding was commenced by originating process on 27 May 2016. It has since been the subject of a judicial mediation and several directions hearings.
On the occasion that the matter was before the Court on 27 July 2017, I ordered that the defendants have leave to file and serve their defence and counterclaim, substantially in a form proposed by the defendants at that time. I ordered that the plaintiffs and defendants by counterclaim file and serve any application in respect of the defence and counterclaim and any affidavit in support on which they intended to rely by 4.00pm on 10 August 2017. The parties have also filed and served written submissions.
The Original Claim
The plaintiff’s claim is what might be described as a conventional oppression proceeding and seeks relief under sections 232, 233, 234 and 461(1)(e), (f), (g) and (k) of the Corporations Act 2001 (Cth). The parties to the originating process are the plaintiff and the first and second defendants, being Officar Pty Ltd (‘Officar’) and Christos Petropoulos. The plaintiff’s claim seeks orders in respect of her directorship and shareholding in Officar Pty Ltd and her unit holding in the Officar Unit Trust. She alleges that Mr Petropoulos transferred her interest in Officar and the unit trust for nominal consideration without her consent.
The principal asset of Officar is a warehouse in West Sunshine (‘the warehouse’) which was purchased by Officar in June 2010. In their defence, the defendants allege that the plaintiff made no contribution towards the purchase of the warehouse, and that funds were advanced by a Hong Kong company Hausen Resources Pte Ltd (Hausen HK) by way of loan to the third defendant (‘GRI’) who then advanced the funds to Officar towards the purchase of the warehouse. The defendants contend that the balance of the funds required were borrowed from the ANZ Bank with Mr Petropoulos guaranteeing that loan. The defendants also contend that the plaintiff resigned as a director of Officar and agreed to transfer her shareholding and unit holding because she was not prepared to agree to provide a personal guarantee for the ANZ loan.
The Counterclaim
The counterclaim which was filed on 4 August 2017 identifies three plaintiffs by counterclaim, Christos Petropoulos, Officar and Jacqueline Petropoulos, the wife of Christos Petropoulos. There are five defendants by counterclaim, being the plaintiff, Mighai Li (‘Richark’), Aiping Zhang (who are respectively the aunt and uncle of the plaintiff), Hausen HK and Hausen Resource Pty Ltd (referred to in the counterclaim as ‘Hausen AUS’).
The counterclaim, after identifying the various personalities, contends that the first plaintiff by counterclaim, GRI, by an agreement which is referred to as the ‘2010 agreement’, was to procure iron ore and other commodities for Chino Minerals Corporation Limited (‘Chino’), a company incorporated in China, and Hausen HK. The terms of that agreement were oral and implied. Both of those companies are said to be associated with Richark and are involved in the resources industry, in particular the supply of iron ore and ferrous alloys. Richark is also said to hold a one third share in a property at Newport Victoria with the balance of the interests being owned by Mr Petropoulos and his wife. The counterclaim then sets out, in paragraph 31, what are apparently elaborate terms of the agreement. Neither Officar nor the plaintiff are parties to the 2010 agreement. It is contended that the agreement was breached and the alleged breaches are set out in paragraph 33. The only mention of the plaintiff in such alleged breaches is that, as an officer of Officar, she refused to sign the guarantee which has been mentioned and GRI was forced to borrow the funds and advance them to Officar for the purpose of purchasing the warehouse where the minerals were to be stored.
The counterclaim then alleges a ‘2012 agreement’ whereby several parties (none of which are the plaintiff or the original defendants in this proceeding save for Mr Petropoulos) agreed that GRI would allow Hausen AUS to take over the operation of the business then conducted by GRI and represent it as a business conducted by Richark and Aiping for the purpose of making an application for permanent Australian immigration visas. The terms of the 2012 agreement are again oral save for the implied terms. Paragraph 37 alleges breach of the 2012 agreement but none are directed to the plaintiff. Sub-paragraphs 38(a) to (p) seek orders and declarations in favour of GRI and Petropoulos, either against Hausen HK or against Hausen AUS.
Sub-paragraphs 38(q) and (r) claim remedies which are crafted in reaction to the case put by the plaintiff in the original proceeding, namely that the plaintiff, Qiang Li, has no interest in Officar and a declaration that she has no interest in the warehouse. Similarly, sub-paragraph 38(s) makes alternative claims for declarations and orders, which are also reactive to the claim made by the plaintiff in the original proceeding relating to the acquisition of the warehouse.
Paragraph 39 of the counterclaim makes allegations of misleading and deceptive conduct against Richark, none of which involve the plaintiff. The representations that are alleged to be misleading and deceptive were said to be partly oral, between Richark and Petropoulos, and partly to be implied. Paragraph 41 contends that they were false and untrue. The plaintiff is only mentioned on the periphery in sub-paragraphs 41(m) and (o), which repeat the assertions that the plaintiff refused to sign the personal guarantee and resigned from Officar, both allegations which are in my view are reactive to the original proceeding. Relief in respect of that alleged conduct is only claimed against Richark.
Finally, there is a claim made in respect of a Newport property at Blackshaws Road, Newport, which involves an alleged agreement between Richark and Petropoulos to purchase the property for the purpose of development. There is no involvement of the plaintiff alleged in that part of the claim and no relief is sought against her.
Paragraphs Q R and S of the prayer for relief seeks declarations that the plaintiff has no interest in Officar or in the warehouse, together with alternative relief. Again in my view that relief is properly characterised as reactive to the case put by the plaintiff in the original proceeding and stands separately from the other relief claimed against Hausen HK, Hausen AUS and Richark and is peripheral to the central subject matter of the counterclaim.
The plaintiff’s submissions
The plaintiff contends that she was a director and shareholder in Officar, as well as a unit holder in the related unit trust until Mr Petropoulos transferred her interest for nominal consideration without her knowledge or consent.
The plaintiff identifies the two principal defences by Mr Petropoulos to her claim as being:
(a) an assertion the plaintiff made no contribution towards the purchase of the warehouse as the funds were advanced by Hausen HK to GRI and treated as a loan by those parties, and then on-lent by GRI to Officar, and
(b) the plaintiff agreed to transfer her interest in the company and the unit trust.
Mr Caillard, counsel for the plaintiff, observes that the counterclaim was filed on 4 August 2017, some 15 months after the proceeding commenced and after the parties to the original proceeding had attended mediation and a number of directions hearings. There are five additional parties.
He observed that the counterclaim is unusual for a counterclaim being brought by a defendant against the plaintiff as contemplated by rule 10.02. He observes that it is not a counterclaim being brought by a defendant as an alternative to bringing separate proceedings against the plaintiff in that:
(a) the counterclaim relies on new claims and agreements which have nothing to do with the plaintiff. In particular, Mr Petropoulos seeks damages in relation to the 2010 agreement and the 2012 agreement and he observes there is no suggestion that the plaintiff ever had any involvement in those agreements;
(b) a substantial part of the counterclaim, that is paragraphs 39 to 45, alleges misleading and deceptive conduct in 2010 by Richark, one of the new defendants by counterclaim, not the plaintiff, in relation to iron ore commodity trading. There is no suggestion that the plaintiff had any involvement with that business;
(c) paragraphs 46 to 49 of the counterclaim relate to an agreement described as the Newport Property Agreement and there is no suggestion this has anything to do with the plaintiff. The claim is being brought jointly by the second defendant’s wife, Mrs Petropoulos, against Minghai Li, neither of whom are parties to the original claim.
Mr Caillard submits the new claims substantially change the nature of the proceeding. He states that it is not necessary for the plaintiff to be involved in the new claims and she wishes to avoid the unnecessary cost and delay associated with being a party to those new claims. If the counterclaim is heard together with the plaintiff’s claim she will be required to be involved in a complex and lengthy piece of litigation when she has no involvement in the subject matter of that litigation.
Mr Caillard contends that this is not a case where there are new issues of common fact or law and the rights claimed do not arise out of the same transactions. He submitted that there is insufficient connection between the original proceeding and the new claims to justify the substantial delay and costs that would necessarily be incurred by the plaintiff if the claims were heard together and that it would be unfair to compel the plaintiff, with no involvement in the matters that are the subject of the counterclaim, to participate in a large and costly proceeding.
Mr Caillard submitted that under the terms of rule 10.06(c) of the rules, the Court may strike out the counterclaim without prejudice to the right of the defendant or serve the claim against the new parties under separate proceedings where the counterclaim may delay the trial of the claim, cause prejudice to any party, or otherwise cannot be conveniently tried with that claim .
He stated the original claim is not complex but the new claims involve different issues of fact and law, and there is little, if any, commonality. He also points to the delay which would be occasioned having regard to the fact the original proceeding has been on for well over a year and is close to being set down for trial. Further, he submitted that the claims against the new defendants are not a defence to the claims but are legally distinct and that an order striking out the claim and the counterclaim will not prevent the defendants from bringing the new claims.
Mr Caillard also submitted that if the claims and additional parties the subject of the counterclaim are joined, the trial will involve witnesses who reside overseas and the need for interpreters which would otherwise be unnecessary, and extensive evidence being given in relation to the 2010 and 2012 agreements which have nothing to do with the plaintiff and which are said to be oral and implied. . He contended there will be delay and unnecessary expense incurred by the plaintiff in respect of extensive interlocutory steps resulting from the new claims being introduced at such a late stage in the proceeding, as well as in respect of further mediation and extensive discovery. This, he says, will cut across the requirements of the Civil Procedure Act 2010 which require resolution of proceedings in a timely and cost effective manner.
He concludes that the claim the subject of the counterclaim is not of the type contemplated by rules 10.02 and 10.03, and that having the new claims heard together with the original claim will inevitably delay the trial of the claimants and substantially increase the cost to the plaintiff.
In her affidavit, Ms Ballantyne, who is the solicitor for the newly joined defendants by counterclaim, states that she has been instructed that her clients intend to deny the agreements referred to in the counterclaim. She states that there would be a significant amount of court time and evidence involved in a consideration of those alleged agreements which do not relate to the plaintiff’s claim. She states that her clients will require interpreters and that the second and fourth defendants by counterclaim live in China. She estimates the hearing of the counterclaim will take between two to three weeks and there is likely to be substantial discovery and expert evidence. Her clients did not attend mediation. There may also be jurisdictional issues which arise by reason of the fact that many oral conversations between the parties took place overseas. This accords with the submissions of Mr Caillard outlined above.
The submissions of the defendants and plaintiffs by counterclaim
In his submissions, Mr Black submitted that even if the Court forms the view that the preconditions in rule 10.06 (embarrassment or delay of the trial, prejudice to any party, or otherwise cannot be conveniently tried with the plaintiff’s claim) are satisfied, the Court still has a discretion. Mr Black contends that the plaintiff does not say the claim will embarrass her in the technical sense. He contended that the tenor of rule 10.06 is that it should only be applied in circumstances where a counterclaim is raised for the purposes of causing delay of the trial such as by raising claims that have no bearing on the plaintiff’s claim and are raised solely to frustrate the proceeding.
I do not accept the submission that the tenor of rule 10.06 is such that it must be established that the counterclaim is being raised for the purpose of causing delay for it to be invoked. In my view it is a question of objectively looking at the circumstances and seeing what the effect of joining the counterclaim will be, that is, will it embarrass or delay the trial of the plaintiff’s claim, cause prejudice to any party, or be otherwise not convenient to try it with the plaintiff’s claim .
Mr Black contended that there will be extensive, if not total, overlap between the matters raised in the defence and the matters raised in the counterclaim because of the plaintiff’s admission that she was acting as agent for and on behalf of either her uncle or her aunt, the second and third defendants by counterclaim respectively.
I do not accept that there is substantial overlap of the order contended for by Mr Black and in that regard I refer to the above analysis of the counterclaim. There is some degree of interaction between the claim and the counterclaim which is not entirely clear but the plaintiff and Officar are, it seems, at the periphery of the matters the subject of the counterclaim.
Mr Black referred to the decision of Negri Pty Ltd v Technip Oceania (’Negri’),[1] a decision of Vickery J, wherein the plaintiff argued that the claim significantly enlarged the issues before the Court and were in respect of separate and substantial claims. In that case, Vickery J determined that any additional time that would be taken by hearing both claim and counterclaim together was warranted, that there would likely be factual and evidentiary overlap between the claim and the counterclaim, and that there were likely to be common issues in the proceedings.[2] In my view that is quite different to the situation here. While there have been dealings with interests associated with the plaintiff and the parties involved in the counterclaim, it is not apparent to me that there is significant factual overlap anywhere near of the order of that in Negri.
[1][2009] VSC 543.
[2]Ibid [40]-[42].
Consideration
In my view, the counterclaim should be struck out without prejudice to it being commenced by a separate proceed as contemplated by rule 10.06(c). The hearing of the two proceedings together will result in very significant delay in hearing the original proceeding, perhaps by a year or more. The proceeding has already been the subject of a mediation. The delay in commencement of the proceeding has not been cogently explained and I do not accept the submission by Mr Black that the plaintiff’s claim has been filed in a quest to quarantine one particular aspect of the parties disputes from other matters to the unfair advantage of the plaintiff and her uncle and aunt; the plaintiff’s claim was filed over a year before the counterclaim. My principal reason for striking out the counterclaim is that it will involve the plaintiff in a proceeding in which she is at best as I can assess on the periphery of the matter. If the claim and counterclaim are heard together it will draw her into a very significant piece of commercial litigation.
I will order that the counterclaim be struck out. This does not, of course, prevent the second defendant in the original proceeding from pursuing rights that he may have against the new parties in a separate proceeding.
If the parties cannot agree as to what order should be made as to the costs of the application, I ask that they file brief written submissions in that regard with my associate. Such submissions should not exceed three pages.
SCHEDULE OF PARTIES
S ECI 2016 01115
BETWEEN
QIANG LI Plaintiff - and - OFFICAR PTY LTD (ACN 142 983 042) First Defendant CHRISTOS PETROPOULOS Second Defendant GLOBAL RESOURCE INNNOVATION PTY LTD (ACN 128 673 683) Third Defendant AND BETWEEN GLOBAL RESOURCE INNNOVATION PTY LTD (ACN 128 673 683) First Plaintiff by Counterclaim CHRISTOS PETROPOULOS Second Plaintiff by Counterclaim OFFICAR PTY LTD (ACN 142 983 042) Third Plaintiff by Counterclaim JACQUELINE PETROPOULOS Fourth Plaintiff by Counterclaim - and - QIANG LI First Defendant by Counterclaim MINGHAI LI Second Defendant by Counterclaim AIPING ZHANG Third Defendant by Counterclaim HAUSEN RESOURCES PTE LIMITED Fourth Defendant by Counterclaim HAUSEN RESOURCE PTY LTD (ACN 126 690 248) Fifth Defendant by Counterclaim
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