In the matter of St Gregory's Armenian School Inc

[2016] NSWSC 1047

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of St Gregory’s Armenian School Inc [2016] NSWSC 1047
Hearing dates:	29 July 2016
Date of orders:	29 July 2016
Decision date:	29 July 2016
Jurisdiction:	Equity
Before:	Barrett AJA
Decision:	(1)   The plaintiffs pay the defendant's costs thrown away by the amendments made in the further amended statement of claim filed 22 July 2016. (2)   The whole of the further amended statement of claim filed 22 July 2016 be struck out. (3)   Grant leave to the plaintiffs to replead. (4)   Direct that the plaintiffs serve on the defendant a proposed second further amended statement of claim on or before 19 August 2016. (5)   List the matter for directions on 22 August 2016. (6)   The plaintiffs pay the defendant's costs of the interlocutory process filed 22 April 2016.
Catchwords:	PROCEDURE – pleading – application for order striking out further amended statement of claim in its entirety – pleading as a whole seriously deficient against the standard referred to in r 14.28(1)(b) – order made with liberty to replead – no matter of principle.
Legislation Cited:	Corporations Act 2001 (Cth), ss 482, 504 Uniform Civil Procedure Rules 2005 (NSW), r 14.28
Category:	Procedural and other rulings
Parties:	(P1) Michael Ghougassian (P2) Daniel Ghougassian (D) Roderick Mackay Sutherland liquidator of St Gregory’s Armenian School Inc (in liq) (ABN 18 283 910 231)
Representation:	Counsel: Ms JK Taylor - Applicant on the motion (Defendant) Mr PE King - Respondents on the motion (Plaintiffs)   Solicitors: Thomson Geer Solicitors - Applicant on the motion (Defendant) Robert Balzola & Associates (Legal) - Respondents on the motion (Plaintiffs)
File Number(s):	2015/190855
Publication restriction:	Nil

Judgment

1. BARRETT AJA: I am dealing with an application by the defendant, the liquidator of St Gregory’s Armenian School Inc by interlocutory process filed on 22 April 2016 for an order striking out in its entirety the plaintiffs' statement of claim. That is the principal relief sought by the interlocutory process.

2. Argument before me today proceeded on the basis that the application should be taken to relate to the further amended statement of claim filed on 22 July 2016.

3. Two causes of action are propounded by the plaintiffs in a single proceeding; one under s 482 of the Corporations Act 2001 (Cth) for an order terminating the winding up of St Gregory's Armenian School Inc, and the other under s 504 of the Corporations Act for a review of the remuneration of the defendant liquidator, which remuneration was fixed by a resolution or resolutions passed at meetings of creditors. The Corporations Act provisions are applied by State law to the incorporated association.

4. Under the respective sections, an application may be made by, inter alia, a creditor of the company. The amended statement of claim of 22 July 2016 is the third iteration of the pleading.

5. The defendant's position, generally stated, is that the pleading of 22 July 2016 is embarrassing because in a significant number of key areas it is vague, ambiguous, imprecise and unclear in meaning in such a way that the defendant is not put fairly on notice of the case sought to be made against him and is therefore deprived of the essential ability to understand what is alleged so that he can formulate responses which, by admitting, not admitting or denying, distil issues for trial.

6. To take one example already foreshadowed, there is no allegation that the plaintiffs are creditors and have a relationship with the company essential to their standing to sue for either order sought.

7. The defendant's objections to the pleading are set out in written submissions handed up by Ms Taylor of counsel. Her focus is principally on r 14.28(1)(b) of the Uniform Civil Procedure Rules 2005 (NSW) and the proposition that the pleading "has a tendency to cause prejudice, embarrassment or delay in the proceedings." This is said to be so for the basic reason I have already mentioned.

8. In the course of the hearing, Mr King, counsel for the plaintiffs, indicated that certain parts of pleading objected to by the defendant were "not pressed" – in the sense, apparently, that there was no expectation any longer that the plaintiffs should plead to them. That was said specifically about paragraphs C and E on page three, and all words in paragraph D on the same page before "a sum in excess of $2 million".

9. These aspects were among those with which the defendant takes issue. Others include the following:

(1)   Paragraph B on page three refers to "the unnecessary taking of accounts before his Honour Justice White" after an earlier reference to the Court having ordered that an account be taken. The substance and foundation of the allegation that the taking of an account in accordance with the order of the Court was “unnecessary” is therefore, at the least, obscure.

(2)   In the same context, there is reference to delay by the liquidator in failing to provide creditors with "the materials necessary in a timely fashion to bring a quick and just solution to this liquidation". The concept of a “quick and just solution to” a winding up is of obscure meaning, as are the nature and content of the "materials" that are necessary for a liquidator to provide to creditors to enable such a "solution".

(3)   Paragraph C, one of the provisions Mr King suggests is “not pressed”, alleges a constructive trust, but there is no allegation of any facts upon which any finding of constructive trust could conceivably be based.

(4)   Paragraph D, even in the part that Mr King did not indicate would not be pressed, refers to moneys "in excess of $2 million" being "wasted in exorbitant and inefficient practices of the Liquidator". There are particulars to this which refer to work performed by the liquidator being "not reasonably necessary, including but not limited to 3 sets of examinations, and other wasteful processes not used in proceedings". Apart from the reference to the three sets of examinations, and apparently the fact that no material elicited in those examinations formed the basis of any legal proceedings (a consequence that does not of itself bespeak any failing or delinquency), the defendant is left simply to guess what is alleged against him in this part of the pleading.

(5)   In paragraph (b) of the particulars there is an allegation that the defendant "encouraged" the Commonwealth Bank to act in a particular way without any indication of the facts said to amount to encouragement.

(6)   In paragraph (g) of the particulars there is an allegation that the liquidator prolonged the liquidation so as to maximise cash flow to him. But there is no allegation as to the length of time that should properly have been spent or how it was that the alleged prolongation occurred by reference to some standard. The supposed shortcoming is simply not identified by reference to any factual matter.

(7)   Paragraph (n) of the particulars alleges that time spent by the liquidator in performing certain work was significantly less than that charged, without any indication of which items of work are seen as relevant, what time was spent on them and what time was charged for them - necessarily some long time, it appears.

10. I have not mentioned all the points raised by Ms Taylor. The full catalogue can be seen in her written submissions which I will initial and date for identification and place with the court file so that they may be readily identified.

11. I take that step because I am of the opinion, not only in relation to the matters I have expressly mentioned but also in relation to the balance of the matters identified in the written submissions, that the pleading as a whole is seriously deficient against the standard referred to in r 14.28(1)(b) because it does not serve the basic purpose it is meant to serve, that is, to set out the plaintiffs' case with precision and in a form that allows the defendant to know exactly what it is, as a matter of fact, that is alleged against him so that he can, in turn, formulate his response to each and every element of the allegations.

12. As it stands, the further amended statement of claim of 22 July 2016 promotes rather than avoids waste of time and energy.

13. It was submitted on behalf of the plaintiffs that the pleading should be allowed to stand – presumably, I infer, with the particular deletions Mr King foreshadowed orally – and that the precise parameters of the case should be allowed to fall into place, as it were, through particulars and evidence. That, in my opinion, is not a desirable or productive course, either in general or in this particular case, where as Ms Taylor has shown by reference to earlier correspondence, a request for particulars in relation to the statement of claim as originally filed and the reply to that request produced so-called particulars which were discursive, confused and entirely unhelpful. For example, the particulars provided over the signature of Mr Robert Balzola, solicitor, said at one point (Exhibit PJH-1, Tab 35):

“I Michael was the only one allowed in after a long wait of about 2 hours and because of my health condition I could not lift anything out of the school belonging to myself...”

14. There was some discussion during the hearing of the question raised by me whether, with a substantial surplus apparently in the liquidator’s hands, orderly progress might be assisted by separating of the s 482 claim from the s 504 claim. On the surface, at least, there are probably few, if any, issues relevant to the question whether the winding up should be terminated that are also relevant to the question whether the liquidator's remuneration fixed by resolutions of creditors ought to be reviewed by the Court. And, in view of the words “at any time before the deregistration of the company” in s 504, earlier termination of the winding up would not affect the ability of the plaintiffs to pursue an application concerning remuneration.

15. Implementation of any such separation is not a matter currently before me; nor has there been any move by the plaintiffs to amend in respect of the items particularly identified by Mr King as no longer pressed.

16. For the reasons I have stated, I will make an order striking out the statement of claim in its entirety. There will, however, be liberty to replead on the basis that the proposed yet further amended statement of claim is given to the defendant in draft before being filed, so that there can be an opportunity for review and discussion in advance of filing that might avoid or narrow any future controversy of the kind that has been before the Court today and reduce the possibility of such applications in the future.

17. Ms Taylor seeks an order for costs of the interlocutory process determined today, and an order for the defendant's costs thrown away by the amendments in the form of the statement of claim filed on 22 July 2016. Those orders follow from what I have just said.

18. I make the orders in the short minutes of order which I initial and date, namely:

(1)   The plaintiffs pay the defendant's costs thrown away by the amendments made in the further amended statement of claim filed 22 July 2016.

(2)   The whole of the further amended statement of claim filed 22 July 2016 be struck out.

(3)   Grant leave to the plaintiffs to replead.

(4)   Direct that the plaintiffs serve on the defendant a proposed second further amended statement of claim on or before 19 August 2016.

(5)   List the matter for directions on 22 August 2016.

(6)   The plaintiffs pay the defendant's costs of the interlocutory process filed 22 April 2016.

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Decision last updated: 01 August 2016