Kaplink 003 Holdings Ltd v BC Lynbrook Pty Ltd
[2024] VSC 194
•23 April 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2022 05106
| KAPLINK 003 HOLDINGS LTD | Plaintiff |
| v | |
| BC LYNBROOK PTY LTD (ACN 620 643 094) & ORS (according to the attached schedule) | Defendants |
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JUDGE: | Goulden AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 March 2024 |
DATE OF RULING: | 23 April 2024 |
CASE MAY BE CITED AS: | Kaplink 003 Holdings Ltd v BC Lynbrook Pty Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2024] VSC 194 |
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PRACTICE AND PROCEDURE – Application for summary judgment pursuant to s 61 of the Civil Procedure Act 2010 (Vic) and r 22.03 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Whether the defendants’ defences have a real chance of success – Whether the defendant has shown cause against the application under r 22.05 of the Rules where no evidence opposing the application filed by defendants – Whether the plaintiff has verified the cause of action against the third defendant in accordance with r 22.03 – Hausman v Abigroup Contractors Pty Ltd (2009) VR 213 – Application for summary judgment successful in part.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Rubenstein | Colin Biggers & Paisley |
| For the First Defendant | No Appearance | |
| For the Second Defendant | Mr Barnes in person | |
| For the Third Defendant | No Appearance |
TABLE OF CONTENTS
Background......................................................................................................................................... 1
Summary Judgment Application.................................................................................................... 3
Summary Judgment Against the First Defendant....................................................................... 9
Summary Judgment Against the Second Defendant (Mr Barnes)......................................... 11
Summary Judgment Against the Third Defendant................................................................... 12
Conclusion and Orders................................................................................................................... 16
HER HONOUR:
By summons filed 14 December 2023, the plaintiff applies pursuant to s 61 of the Civil Procedure Act 2010 (Vic) (‘CPA’), alternatively r 22.03 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’), for summary judgment against each of the defendants.
Background
This proceeding concerns a debt allegedly due to the plaintiff from the first and second defendants as debtor and guarantor respectively and includes a claim for damages for misleading conduct said to have been engaged in by the defendants. The plaintiff’s claims against the defendants are contained in the Amended Statement of Claim dated 10 March 2023 (‘ASOC’).
On or around 1 August 2017, the plaintiff agreed to subscribe for 4 million units in the BC Lynbrook Investment Trust (‘Trust’) at a price of $1 per unit (‘Subscription Agreement’). The first defendant was the trustee of the Trust. A unitholders’ agreement was also entered into around the same time between the plaintiff, the first defendant and by Mr Barnes in his capacity as a director of another company called Barnes Capital Projects Pty Ltd in its capacity as trustee for the Barnes Capital Projects Investments Trust (‘Unitholders’ Agreement’).
The Subscription Agreement included terms to the effect that each unit was entitled to a fixed dividend from the Trust equal to 28.25% per annum. The dividend was payable on a day 24 months after the initial advance. The units were to be repurchased by the first defendant at their face value amount two years after issue (or earlier if so determined by the first defendant).
The second defendant was a director of the first defendant and guaranteed the first defendant’s obligations, including for the payment of the dividends and the repurchase of units, under the Subscription Agreement (‘Guarantee’).
Clause 5 of the Subscription Agreement records that the monies were advanced for the specific purpose of the Trust purchasing and developing a commercial site located in Lynbrook and to cover project management costs and to secure blue-chip tenants. The plaintiff alleges in the ASOC that prior to its entry into the Subscription Agreement and Unitholders’ Agreement, the defendants variously represented, including by letter dated 6 September 2017 on the letterhead of the third defendant (‘6 September 2017 Letter’) and a further letter dated 8 September 2017, also on the third defendant’s letterhead (’8 September 2017 Letter’), that the monies were to be used for the sole purpose of the acquisition and development of the Lynbrook property.
The plaintiff paid the $4,000,000 in subscription monies to the first defendant as follows:
(a) $1,300,000 on 1 August 2017;
(b) $730,000 on 1 September 2017; and
(c) $1,970,000 on 29 September 2017.
Two years later, between 11 and 28 September 2019, the first defendant repurchased 3,173,112 units at their face value of $3,173,112 and paid $1,660,277 as a dividend in respect of the units held by the plaintiff.
However, as at 29 September 2019, the plaintiff claims that the first defendant failed to repurchase 826,893 units for the sum of $826,893.13 as it was obliged to do under the terms of the Subscription Agreement. Further, the plaintiff alleges that the first defendant failed to pay the balance of the dividend of $373,723 due on those units under the terms of the Subscription Agreement.
On 2 June 2022, the plaintiff issued a demand to the first defendant seeking payment of the redemption amount of $826,893 and the outstanding dividend pursuant to the terms of the Subscription Agreement.[1] The demand remains unsatisfied.
[1]The demand overstates the amount due. The plaintiff accepts that an error was made in calculating the dividend as expressed in the demand and subsequently in the ASOC, and that the amount identified in the plaintiff’s submissions of $1,200,616 (plus interest under the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’)) is the correct amount.
On 25 November 2022, the plaintiff issued a demand on the second defendant, Mr Barnes, for payment of the redemption amount of $826,893 and for payment of the outstanding dividend under the terms of the Guarantee.[2] That demand remains unsatisfied too.
[2]This demand again overstated the amount due as described in n 1 above.
The plaintiff issued these proceedings on 13 December 2022, and amended the claim and joined the third defendant on 10 March 2023.
The first and second defendants filed a Defence dated 18 April 2023. Neither of them is presently represented by a solicitor. The third defendant filed its Defence on 5 July 2023. It is also not presently represented by a solicitor.
On 4 July 2023, the plaintiff served a Notice to Admit on the defendants relating to documents annexed thereto, which included the Subscription Agreement, the Guarantee, the Unitholders’ Agreement, a WhatsApp message from the second defendant, the 6 September 2017 Letter and the 8 September 2017 Letter. The plaintiff did not receive any responses on behalf of any of the defendants disputing the authenticity of the documents annexed to the Notice to Admit.
Summary Judgment Application
In making its application for summary judgment against the defendants, and in addition to its written submissions, the plaintiff relies on the:
(a) affidavit of Colin Ken Bennett affirmed 14 December 2023 and the exhibits thereto (‘Bennett Affidavit’); and
(b) affidavits of Natasha Sheetal Chand affirmed 14 December 2023 and 18 March 2024 and the exhibits thereto.
Despite a timetable being fixed to do so, none of the defendants has filed any submissions in relation to, nor any affidavits in opposition to, the application for summary judgment.
The plaintiff seeks summary judgment under s 61 of the CPA against the first and second defendants for a debt due to the plaintiff under the terms of the Subscription Agreement and the Guarantee, and as against the third defendant for misleading and deceptive conduct in contravention of s 18 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (‘ACL’). The plaintiff does not seek summary judgment in relation to any of the other claims set out in the ASOC against any defendant, for example for breach of trust.
The policy behind Part 4.4 of the CPA (in which s 61 and associated provisions are housed) is to enable disposition of unmeritorious claims and defences so as to save the costs, time and resources of the courts.[3] Section 61 of the CPA entitles a plaintiff to apply for summary judgment in a civil proceeding on the ground that the defendant’s defence has no real prospect of success, and the court can give judgment summarily if it is so satisfied on application by the plaintiff under s 63(2)(a).
[3]See Explanatory Memorandum, Civil Procedure Bill 2010 (Vic), [24].
The test under s 63 of the CPA is whether the defendant’s defence has a ‘real’ as opposed to a ‘fanciful’ chance of success.[4] It is not sufficient for a party to merely have an arguable case, it must have a real prospect of succeeding. In the case of Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (‘Lysaght’),[5] the Victorian Court of Appeal stated that the test whether a claim ‘has no real prospect of success’:
…should be construed as one of whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success; that the ‘real chance of success’ test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test; and that, as the law is at present understood, the real chance of success test permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent’s case is not ‘hopeless’ or ‘bound to fail’, it does not have a real prospect of succeeding.[6]
[4]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27, [35] (Warren CJ, Nettle JA) (‘Lysaght’); also see Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 at [15] (Dixon J); also see Matthews v SPI Electricity Pty Ltd; SPI Electricity Pty Ltd v Utility Services Corporation Ltd(Ruling No 2) (2011) 34 VR 584; and see APN Funds Management Ltd v Australian Property Investments Strategic Pty Ltd [2011] VSC 555.
[5]Referenced at n 4 above.
[6]Lysaght, [29].
Although the changes introduced by Part 4.4 of the CPA liberalised the test for summary judgment, the authorities urge caution when exercising the power to terminate a proceeding summarily given that, in consequence, the party against whom summary judgment is given will be deprived of the chance to pursue their claim or defence.[7] Courts should, therefore, only exercise the power where it is clear there is no real question to be tried. The authorities also establish that in exercising the power the Court must take into account the overarching purpose, including the just, efficient, timely and cost effective determination of the real issues in dispute.[8]
[7]Ibid [35(d)] (Warren CJ & Nettle JA), [42] (Neave JA).
[8]See section 9 of the CPA; and see Lysaght, [42] (Neave JA).
Order 22 of the Rules provides that an application by a plaintiff for summary judgment under s 61 of the CPA must be made by summons supported by an affidavit verifying the facts of the claim to which the application relates and stating that it is the belief of the deponent that the defence to the claim has no reasonable prospects of success.[9] The defendant ‘may show cause against the application by affidavit or otherwise to the satisfaction of the Court.’[10]
[9]R 22.03 and 22.04.
[10]R 22.05(1).
In Hausman v Abigroup Contractors Pty Ltd (‘Hausman’),[11] the Victorian Court of Appeal, deciding a case under Order 22 of the Rules as they existed prior to the introduction of the CPA, considered that once the applicant for summary judgment had put before the Court evidence to support the application, it was for the respondent to the application to put forward material that provides an arguable response to the claim.
The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.[12]
In Bendigo and Adelaide Bank Limited v Grahame,[13] Sloss J described it thus: ‘Once the plaintiff has established the elements of its cause of action, there is “something akin” to a shifting of the evidential burden to the defendant.’[14]
[11](2009) 29 VR 213 (‘Hausman’).
[12]Hausman, 226 (Weinberg & Bongiorno JJA, Williams AJA).
[13][2020] VSC 86.
[14]Ibid at [31].
Applying these rules subsequently, this Court has held that the principles espoused in Hausman have remained ‘good law since the advent of the CPA’[15] and that:
‘…it is difficult to see how a plaintiff or defendant could obtain, or resist an application for, summary judgment without supplying an affidavit of [the kind required by rr 22.04 or 22.05], fashioned according to the nature of the case’.[16]
[15]Ibid at [33].
[16]Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd & Ors [2012] VSC 163 at [9] (Bell J).
That said, consistently with the wording of the rule, it is not impossible for a defendant to resist a summary judgment application by showing cause to the satisfaction of the Court ‘otherwise’ than by affidavit, for example, by relying on its pleadings, especially if signed by counsel and where a proper basis certification is filed.[17]
[17]Portbury Development Pty Ltd v Ottedin Investments Pty Ltd & Ors [2012] VSC 490 [27] (Pagone J).
Although the defendants have been given an opportunity to file affidavit material in response to the plaintiff’s application[18] they have not done so. The first and third defendants also did not instruct solicitors to appear at the hearing of this application, which they are required to do to take any step in the proceeding.[19]
[18]See orders 2 and 4 of the Order made by Her Honour Justice Matthews made 15 December 2023.
[19]Rule 1.17 of the Rules.
Relevantly, by the Defence filed 18 April 2023:
(a) the first defendant denies it agreed to or entered into the Subscription Agreement;
(b) the second defendant denies that he entered into the Guarantee;
(c) the first defendant denies that it entered into the Unitholders’ Agreement;
(d) the first and second defendants deny that the plaintiff subscribed for units in accordance with the Subscription Agreement; and
(e) the first defendant denies that the payments made by it to repurchase the units from the plaintiff in September 2019 were made to the plaintiff in accordance with the terms of the Subscription Agreement.
None of these denials is particularised. The pleading is not signed by counsel, and no proper basis certificate has been filed on behalf of either defendant.
Relevantly, in its Defence filed 5 July 2023, the third defendant:
(a) admits providing the 6 September 2017 Letter to the plaintiff but otherwise denies it made the 'Representation’ as alleged;
(b) denies that it provided the 8 September 2017 Letter, saying it was provided by Barnes Capital Projects Pty Ltd;
(c) denies the plaintiff relied on the alleged ‘Representation’;[20]
[20]Defence of the Third Defendant, 4 July 2023, [10].
(d) admits the existence of the letter dated 20 November 2017 but denies it was sent in relation to the alleged Subscription Agreement;[21] and
(e) denies that it engaged in misleading and deceptive conduct.[22]
None of these denials is particularised. Again, the pleading is not signed by counsel, and no proper basis certificate has been filed on behalf of the third defendant.
[21]Ibid, [11].
[22]Ibid, [29-30, 32].
In the Bennett Affidavit, Mr Bennett deposes to the execution of the Subscription Agreement with an effective date of 1 August 2017[23] by the plaintiff, by Mr Barnes on behalf of the first defendant and by Mr Barnes personally as ‘Founder’.[24] The Subscription Agreement is exhibited to the Bennett Affidavit. A copy of the Subscription Agreement was annexed to the Notice to Admit that was not disputed by the defendants, and so, the plaintiff contends, its authenticity has been admitted.
[23]This is the nominated ‘Completion Date’ in the Subscription Agreement (exhibit CKB-1 to the Bennett Affidavit, 35).
[24]Exhibit CKB-1 to the Bennett Affidavit, 35.
In the Bennett Affidavit, Mr Bennett deposes to the execution of the Guarantee (given by deed poll and with an effective date of 1 August 2017) by the second defendant in the presence of Mr Bennett on behalf of the plaintiff. The Guarantee is exhibited to the Bennett Affidavit. A copy of the Guarantee was annexed to the Notice to Admit that was not disputed by the defendants, and so, the plaintiff contends, its authenticity has been admitted.
Mr Bennett deposes to the execution of the Unitholders’ Agreement (with an effective date of 1 August 2017) by the plaintiff, by Mr Barnes on behalf of the first defendant and by Mr Barnes in his capacity as a director of Barnes Capital Projects Pty Ltd in its capacity as trustee for the Barnes Capital Projects Investments Trust. The Unitholders’ Agreement was annexed to the Notice to Admit that was not disputed by the defendants, and so, the plaintiff contends, its authenticity has been admitted.
Mr Bennett also exhibits bank records for the first defendant showing the receipt by it of monies paid by order of Mr Bennett and/or the plaintiff.[25] Mr Bennett also exhibits letters or emails from the defendants acknowledging elements of the transaction, and in one instance in a letter dated 20 November 2017, acknowledging receipt of ‘principle [sic] amounts’ in relation to the Trust and the obligation that ‘the above principle [sic] amounts plus interest will be repaid two years from the date received.’[26]
[25]Exhibit CKB-1 to the Bennett Affidavit, 172–4.
[26]Exhibit CKB-1 to the Bennett Affidavit, 177.
Mr Bennett exhibits to his affidavit the 6 September 2017 Letter and the 8 September 2017 Letter, together with other letters from the defendants in relation to the transaction and the proposed development. The 6 and 8 September 2017 Letters and letters dated 20 November 2017 and 30 November 2021, were each annexed to the Notice to Admit that was not disputed by the defendants, and so, the plaintiff contends, their authenticity has been admitted.
Mr Bennett also exhibits to his affidavit a copy of a WhatsApp message he says was sent to him by Mr Barnes on 23 February 2023. The WhatsApp message says:
…you will get paid, it’s only a matter of time.
This case is going to cost us both a lot of money unnecessarily when I have no defence as I agree that I owe [the plaintiff] the funds, there is no dispute and I am doing my utmost best to ensure the debts are satisfied.[27]
The WhatsApp message was included as an annexure on the Notice to Admit that was not disputed by the defendants, and so, the plaintiff contends, the authenticity of the message has been admitted.
[27]Exhibit CKB-1 to the Bennett Affidavit, 238.
Summary Judgment Against the First Defendant
In support of its application against the first defendant, the plaintiff:
(a) has produced the Subscription Agreement;
(b) identified the relevant terms of the Subscription Agreement it alleges were relevant to its purchase of units in the Trust from the first defendant;
(c) provided evidence in support of its allegation that it paid $4,000,000 to purchase units in the Trust;
(d) provided evidence in support of its allegation that in September 2019 the first defendant repurchased from it 3,173,112 units in the Trust at their face value of $3,173,112 in accordance with the terms of the Subscription Agreement;
(e) provided evidence of its allegation that in September 2019 the first defendant paid to it the sum of $1,660,277 as a dividend in respect of the units redeemed;
(f) provided evidence of the alleged shortfall in the repurchase of 826,893 units at their face value of $826,893;
(g) provided evidence of a shortfall in the payment of the dividend of $373,723;
(h) provided evidence of its demand for payment from the first defendant on 2 June 2022;
(i) provided evidence of its allegation that the demand has not been satisfied such that the first defendant remains liable to pay a debt due to the plaintiff comprising:
(i) $826,893 in relation to the repurchase of the balance of the units;
(ii) $373,723 in respect of the unpaid dividend.
Having regard to:
(a) the bare denials in its Defence as to the existence of the various agreements;
(b) the absence of any explanation in this application, by way of affidavit material or otherwise, for the existence of the executed contractual documents if they were not entered into by the first defendant or challenging their authenticity or validity, or for the first defendant’s apparent performance of the terms of the agreements;
(c) the fact that its pleading was not settled by counsel and no proper basis certificate has been filed;
(d) Mr Barnes’ statement in the hearing of the application that he does not dispute the obligation to pay the repurchase and dividend monies to the plaintiff and the contents of the WhatsApp message;[28]
I am satisfied that the plaintiff has established for the purposes of its summons that the first defendant’s defence of the claim against it for payment of the monies due under the Subscription Agreement does not enjoy a real prospect of success.
[28]Transcript of Proceedings (19 March 2024), 32.
The plaintiff is entitled to judgment against the first defendant for the amount of the monies outstanding under the Subscription Agreement together with interest calculated under s 58 of the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’) from the date on which the debt became payable under the terms of the Subscription Agreement.
Summary Judgment Against the Second Defendant (Mr Barnes)
In support of its application against the second defendant (Mr Barnes), the plaintiff has:
(a) produced the Guarantee given personally by Mr Barnes;
(b) established the claim against the first defendant for monies due and payable under the Subscription Agreement, which monies are guaranteed under the terms of the Guarantee; and
(c) produced the demand under the Guarantee made upon Mr Barnes.
Having regard to:
(a) the bare denials in his Defence as to the existence of the various agreements including the Guarantee;
(b) the absence of any explanation in this application, by way of affidavit material or otherwise, for the existence of the executed contractual documents if they were not entered into by the first or second defendants or challenging their authenticity or validity, or for the first defendant’s apparent performance of the terms of the agreements;
(c) the fact that his pleading was not settled by counsel and since no proper basis certificate has been filed,
I am satisfied that the plaintiff has established for the purposes of its summons that the second defendant’s defence of the claim against him for payment of the monies due under the Guarantee does not enjoy a real prospect of success.
At the hearing of the application, Mr Barnes asserted that the Guarantee was procured as a result of pressure exerted by Mr Bennett on him in 2021. The assertion flirts with the possibility of a duress defence to the claim under the Guarantee. However, this was the first occasion that Mr Barnes has made the assertion and there was no evidence before the Court by affidavit or otherwise which supports it. Mr Barnes could not explain why, if that were true, it was not raised in the Defence which was prepared and filed by Mr Barnes’s solicitors in 2023, and why it has not otherwise previously been raised with the plaintiff. In the circumstances, I do not accept that the assertion, lacking as it does any evidentiary support, is sufficient to show cause against the plaintiff’s case for summary judgment.
Mr Barnes also asserted that he had other evidence to file in relation to the summary judgment application concerning the first and second defendants’ abilities to pay the debt such that he needed the hearing to be adjourned so that he could do so, and also so that he could obtain legal advice. However, Mr Barnes admitted in the hearing the debt was due and payable,[29] and acknowledged the foreshadowed evidence concerned only the ability to pay as distinct from the obligation to pay. Mr Barnes could also not explain why he had not previously sought to adduce the evidence, including in response to the plaintiff’s application when he had been given months in which to do so, nor did he identify what steps he had taken to engage any lawyers, or provide evidence to support those steps.
[29]Transcript of Proceedings (19 March 2024), 32, 35.
The plaintiff is entitled to judgment against the second defendant under the terms of the Guarantee for the amount of the monies outstanding under the Subscription Agreement together with interest due on those monies calculated under s 58 of the Supreme Court Act.
Summary Judgment Against the Third Defendant
I am not satisfied that the plaintiff has met its burden in demonstrating it should be entitled to summary judgment against the third defendant in respect of alleged misleading conduct by the third defendant in contravention of s 18 of the ACL. This is the only claim made against the third defendant in the proceeding.
The plaintiff alleges at paragraph 9 of the ASOC that:
Prior to entering into the Subscription Agreement and the Unitholders’ Agreement the First Defendant and/or the Second Defendant and/or the Third Defendant represented to the Plaintiff, in trade or commerce, that the Subscription Price would be used for the sole purpose of the acquisition and development of the Property (Representation).
PARTICULARS
The Representation was written and oral:
(a)In so far as it was written, it is contained in the following written documents which may be inspected at the offices of the Plaintiff's solicitors during office hours by appointment:
(i)The Subscription Agreement. The Plaintiff refers to the particulars subjoined at paragraph 5(a) above;
(ii)The Unitholders’ Agreement which provided, inter alia, that the business of the Trust was the "ownership and Development of the Property;
(ii)A letter dated 6 September 2017 written to the Plaintiff by the Third Defendant signed by the Second Defendant by which the Third Defendant advised that it had agreed to buy back the development located at the Property from the Plaintiff;
(iv)An undated terms sheet provided by the Third Defendant;
(v)A letter dated 8 September 2017 addressed to the Plaintiff from Barnes Capital advising how funds raised for the project located at the Property were to be allocated; and
(b)In so far as it was oral, it was contained in various conversations between the Second Defendant and Mr Colin Ken Bennett…of the Plaintiff on occasions too numerous to recall prior to 29 September 2017 to the effect as alleged.
The plaintiff alleges further at paragraph 10 of the ASOC that it relied on the Representation (as defined in paragraph 9 of the ASOC quoted above) to its detriment to enter the Subscription Agreement and the Unitholders’ Agreement and to subscribe for units in the Trust. In its Defence, the third defendant admits providing the 6 September 2017 Letter but otherwise denies the allegations in paragraphs 9 and 10, including that it made the Representation.
In its summary judgment application, the plaintiff argues that the third defendant is liable for misleading and deceptive conduct in accordance with its allegations at paragraphs 9 and 10 of the ASOC because it provided the 6 September 2017 Letter. The plaintiff says further that the representation alleged concerned a future matter, and in consequence, there is a shifting of the evidentiary burden such that the third defendant needs to demonstrate it had reasonable grounds for making the representation. The plaintiff submits that it relied upon the representations in the 6 September 2017 Letter ‘in entering the Subscription Agreement, and in so far as [the third defendant] is concerned, when it advanced the subscription money including payment of $1,970,000 on 29 September 2017’.[30] The plaintiff says that it has lost the portion of the subscription monies paid by it and which have not been returned, i.e. the sum of $826,893. The plaintiff points to the fact that the third defendant has denied the substance of the allegations in paragraphs 9 and 10 of the ASOC, that the third defendant makes no other substantive defence and has filed no affidavit material to show cause against its application, such that it is entitled to summary judgment.
[30]Outline of Submissions in Support of Plaintiff’s Application For Summary Judgment (18 March 2024) [11(c)].
Nowhere in the evidence filed by the plaintiff in support of its application is there any evidence that the plaintiff actually relied upon any representations in deciding to enter the Subscription Agreement and the Unitholders’ Agreement or to pay the subscription monies. Rather, Mr Bennett deposes at paragraph 29 of the Bennett Affidavit as follows:
I had relied on the correspondence between Mr Barnes and [the plaintiff] from 2017 to 2021 and his representations that Property had been purchased and the Development was progressing.
That evidence does not satisfy me for the purposes of this application that the plaintiff relied on anything contained in the 6 September 2017 Letter, which in any event post-dates the effective date of the Subscription Agreement and the Unitholders’ Agreement and the payment of two instalments of subscription monies in order to execute those documents or to pay the subscription monies. In particular, there is no evidence that, had the plaintiff not received the 6 September 2017 Letter, then it would not have paid, nor been contractually obliged to pay, the final instalment of the subscription monies totalling $1,970,000.
I am also not satisfied that the plaintiff has adequately verified its case on its loss and damage, especially to justify the order that it seeks for judgement for the fixed sum of $826,893 in damages against the third defendant. The plaintiff asserts that, by way of loss and damage, it is entitled to recover the subscription monies it paid in reliance on the third defendant’s misleading representation which have not been recovered by reason of the first defendant’s failure to redeem the 826,893 units. However, if it is the plaintiff’s case, as has been submitted by it, that the plaintiff would not have paid the third instalment of subscription monies at all, then it would not have paid any of the $1,970,000 in subscription monies after 6 September 2017, and it would not have received a dividend in respect of the units that were subsequently repurchased form that third instalment (i.e. the dividend that was paid on the repurchased units with a face value of $1,143,107).[31] In other words, the plaintiff fails to account for the dividend profit the plaintiff has made on the monies it says it would not have invested in determining the plaintiff’s alleged loss and damage.
[31]That is of the 1,970,000 units purchased after 6 September 2017, units with a face value of $1,143,107 were repurchased and a dividend paid in respect of them by the first defendant in September 2019.
Therefore, I am not persuaded that the evidence filed in relation to this part of the plaintiff’s application verifies the facts on which the plaintiff’s case is based such that it can be entitled to summary judgment on the claim. The plaintiff has not discharged its burden under r 22.03 to verify for the purposes of its summary judgment application that it has a good cause of action.[32]
[32]Hausman [60].
As noted above, the plaintiff sought to rely on the fact that the third defendant denies the allegations in paragraphs 9 and 10 of the ASOC in its Defence, and has filed no additional material in opposition to the plaintiff’s application to suggest that the third defendant has not shown cause against the application in accordance with r 22.05. Even if I was satisfied that the evidentiary burden or something akin to it had shifted (which for the reasons set out above I am not), I would not find that the defendant had failed to show cause against this claim.
The difficulty with the plaintiff’s pleading of misleading conduct is that it makes one rolled-up allegation against the first ‘and/or’ the second ‘and/or’ the third defendant as to the making of a representation ‘prior to entering into’ the relevant agreements. The particulars then rely on different documents said to contain the representation expressly, with the only one relied upon[33] as against the third defendant being the 6 September 2017 Letter which post-dates the effective date for the Subscription Agreement and Unitholders’ Agreements and the payment of two instalments of subscription monies. In the circumstances, this is a difficult allegation for the third defendant to plead to beyond furnishing a general denial. That denial places in issue the making of the representation, when it was made and by whom (i.e. the first, second or third defendants) and whether it was relied upon by the plaintiff in entering into the transaction. Even though no additional material has been filed by the third defendant in response to the plaintiff’s application, I am satisfied based on the third defendant’s pleading alone that there is likely to be a real issue to be tried in relation to this claim and accordingly, I am not persuaded that the third defendant’s defence enjoys no real prospect of success.
[33]In paragraph 9 of the ASOC, the undated terms sheet is said to have been provided by the third defendant but the case as articulated in the plaintiff’s submissions appears to have evolved to focus exclusively on the 6 September 2017 Letter as containing the relevant representations as made expressly by the third defendant — see Outline of Submissions in Support of Plaintiff’s Application For Summary Judgment (18 March 2024) [32(a)].
Conclusion and Orders
For the above reasons I will order that there be summary judgment in favour of the plaintiff on the debt claim made against the first and second defendants in the amount of $1,200,616 together with interest from the date the debt became payable to the date of this judgment calculated pursuant to s 58 of the Supreme Court Act. The balance of the claims as against them will be dismissed. I will also order that the first and second defendants pay the plaintiff’s costs of the proceeding as against them (including the costs of this application and reserved costs) on a standard basis to be taxed in default of agreement.
I will not award summary judgment against the third defendant, and it shall have leave to defend. That part of the plaintiff’s summons will be dismissed, with the plaintiff to pay the third defendant’s costs of the summons.
I ask the plaintiff to provide a proposed order to give effect to these reasons.
SCHEDULE OF PARTIES
| S ECI 2022 05106 | |
| BETWEEN: | |
| KAPLINK 003 HOLDINGS LTD | Plaintiff |
| - v - | |
| BC LYNBROOK PTY LTD (ACN 620 643 094) | First Defendant |
| MARTYN BRAIG BARNES | Second Defendant |
| BARNES CAPITAL PTY LTD (ACN 121 832 675) | Third Defendant |
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