Liu v Liu
[2011] SASC 183
•20 October 2011
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
LIU v LIU & ANOR
[2011] SASC 183
Reasons for Decision of The Honourable Justice Stanley
20 October 2011
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - OTHER MATTERS ARISING BEFORE TRIAL
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS
Second defendant's application seeking to strike out paragraphs of the plaintiff's statement of claim and other case management orders - the plaintiff opposes the application - whether the impugned pleadings disclose a reasonable cause of action - whether a resulting trust claim is arguable - whether the Fair Trading Act 1987 (SA) (as it was in 2007) could have any extraterritorial operation – whether any extraterritorial operation was confined by the Trade Practices Act 1974 (Cth) – whether the pleaded facts allege conduct that is in ‘trade or commerce’.
Held: A resulting trust claim is arguable and the relevant paragraphs of the plaintiff’s statement of claim will remain - arguable that the Fair Trading Act had extraterritorial operation and that there was a connection between the cause of action and South Australia – however the pleadings do not satisfy the description of conduct in ‘trade or commerce’ – the Fair Trading Act claim is therefore untenable – order the relevant paragraphs be struck out.
Fair Trading Act 1987 (SA) s 54, s 55, s 56, s 4A, s 75, s 81, s 87; Supreme Court Civil Rules 2006 (SA) r 104, r 117; Trade Practices Act 1974 (Cth) s 5, s 6, referred to.
Houghton v Arms (2006) 225 CLR 553, distinguished.
Riverland Fruit Cooperative Ltd (In Liq) v 007 953 380 Pty Ltd & Ors [2008] SASC 258; Danae Investment Trust PLC v Macintosh Nominees Trust PLC (1993) 61 SASR 341; Lipohar v The Queen (1999) 200 CLR 485; Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; O'Brien & Anor v Smolonogov & Anor (1983) 53 ALR 107; Argy & Anor v Blunts & Lane Cove Real Estate Pty Ltd & Ors (1990) 26 FCR 112; Napier v Public Trustee (WA) (1980) 32 ALR 153, discussed.
Wunda Joinery Pty Ltd (In Liq) & Anor v Wunda Projects (Australia) Pty Ltd & Ors [2007] SASC 301; Egan v Commonwealth Minister for Transport (1976) 14 SASR 445; Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241; Re Ku-Ring-Gai Cooperative Building Society (No 12) Ltd (1978) 22 ALR 621, considered.
LIU v LIU & ANOR
[2011] SASC 183Civil
STANLEY J: This action concerns a residential property in Rosslyn Park which was transferred by the plaintiff to the defendants in late 2007. The defendants were at the relevant time husband and wife. The first defendant is the plaintiff’s nephew.
The plaintiff alleges the transfer of the property occurred without valuable consideration pursuant to an agreement whereby the property was transferred for the purposes of facilitating an application for a business migration visa by the defendants. The plaintiff alleges the defendants agreed to re-transfer the property to the plaintiff once they had obtained visas.
In the proceedings as originally instituted, the plaintiff alleged that in breach of trust the second defendant failed or refused to execute a transfer to the plaintiff of her interest in the property upon request in the latter part of 2009.
The defendants have now separated. On 12 October 2009 the first defendant executed a memorandum of transfer in respect of the property.
As the matter approached trial a dispute occurred between the parties as to the basis of the plaintiff’s claim. The plaintiff foreshadowed her intention to found her claim on the breach of a resulting or constructive trust in the alternative to any claim for the breach of a simple or express trust. The plaintiff was given leave to plead such a claim.
In consequence she filed and served a second statement of claim on 23 September 2011. In addition to the resulting and constructive trust claims which had been foreshadowed, a claim was also pleaded under the Fair Trading Act 1987 (SA) (“the FTA”).
The second defendant filed an interlocutory application on 6 October 2011 pursuant to which orders were sought to strike out certain paragraphs of the second statement of claim and for the subsequent management of proceedings.
The second defendant seeks an order that paragraphs [51], [53] – [57], [61] and [63] of Part 1 and paragraphs [5] and [8] of Part 2 of the second statement of claim be struck out. These paragraphs relate to a cause of action based on breaches of s 54 and s 56 of the FTA and remedies sought under that Act.
The second defendant also seeks an order that paragraphs [48], [54], [55] and [65] of Part 1 and paragraph [3] of Part 2 of the second statement of claim be struck out. These paragraphs relate to the plaintiff’s plea that the second defendant holds the property located at Rosslyn Park as trustee for the plaintiff pursuant to a resulting trust.
The orders are opposed by the plaintiff.
The application is brought pursuant to 6SCR104 and 6SCR117 of the Supreme Court Civil Rules 2006 (SA) (“the Rules”).
Relevant principles
6SCR104 empowers the Court to strike out a pleading, in whole or in part, if the pleading does not comply with the Rules and is an abuse of the process of the Court or prejudices the proper conduct of the action.
6SCR117 empowers the Court to strike out a document or proceeding if the Court considers it is frivolous, vexatious or an abuse of the process of the Court.
In Riverland Fruit Cooperative Ltd (In Liq) v 007 953 380 Pty Ltd & Ors Bleby J said:[1]
Under the 1987 Rules the pleading proposed would be struck out as disclosing no reasonable cause of action or as having a tendency to cause embarrassment in the proceedings. There is no direct counterpart in the 2006 Rules. However, r 104(b) of the 2006 Rules enables the court to strike out a pleading if it is “an abuse of the process of the court or prejudices the proper conduct of the action”. In my opinion, it is implicit in that rule that a pleading could be struck out for the same reasons, as mentioned above, especially if the statement of claim does not comply with the requirements of r 99, namely that it must state the basis of each cause of action and must contain a short statement of the material facts on which the cause of action is based. [Footnotes omitted].
[1] [2008] SASC 258 at [29].
A reasonable cause of action means one with some chance of success when only the allegations and the pleadings are considered.[2]
[2] Pillay & Pillay v Lloyd & Ors; Jervis & Jervis v Lloyd & Ors [2000] SASC 208 at [71].
The test to be applied is whether the impugned pleadings disclose a reasonable cause of action, assuming, for the purposes of argument, that the plaintiff can prove the material facts she pleads in the second statement of claim. I remind myself that the authorities emphasise that a plaintiff should only be kept from prosecuting a cause of action in circumstances where the plea is so obviously untenable that it could not possibly succeed.[3] Accordingly, the threshold to be met by the second defendant on her application is onerous.
[3] Wunda Joinery Pty Ltd (In Liq) & Anor v Wunda Projects (Australia) Pty Ltd & Ors [2007] SASC 301 at [18]; Egan v Commonwealth Minister for Transport (1976) 14 SASR 445 at 448; Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 271.
The FTA claims
The second defendant seeks to strike out the FTA claims on two bases:
1.the reliance upon representations pleaded at paragraphs [8] – [12] and [14] of the second statement of claim are alleged to have taken place in 2007 outside Australia and accordingly, the FTA has no application; and
2.the pleaded conduct was not in trade or commerce.
FTA and extraterritoriality
The second defendant submits that the FTA cannot have any extraterritorial operations, or at least, did not do so in 2007, prior to the enactment of s 4A, which provides for extraterritorial application where the impugned conduct results in loss or damage in South Australia. Section 4A of the FTA commenced operation on 1 January 2011.
As the conduct pleaded by the plaintiff in paragraphs [8] – [12] and [14] of the second statement of claim took place in China, in October 2007, the second defendant contends those pleadings should be struck out.
The second defendant calls in aid the decision of the Full Court in Danae Investment Trust PLC v Macintosh Nominees Trust PLC[4] where King CJ, in considering the provisions of the Securities Industry (South Australia) Code, an Act of the South Australian Parliament, held that the prima facie presumption is that the operation of legislation is territorial. That presumption can be displaced only by a sufficient indication in the legislation of a legislative intention to displace it. The Chief Justice further held that the general presumption was even more strictly applied in the case of penal statutes. [5]
[4] (1993) 61 SASR 341.
[5] (1993) 61 SASR 341 at 347.
The second defendant submitted that the FTA should be considered a penal statute as it contains penal provisions in s 75, s 81 and s 87.
Further, the second defendant submitted, in the alternative, that if the FTA had any extraterritorial operation it was confined by a consideration of the legislative scheme to be found in the Trade Practices Act 1974 (Cth) (“the TPA”), in particular s 5 and s 6, such that it could only apply to circumstances of the kind considered by Gleeson CJ in Lipohar v The Queen.[6] I will come back to this.
[6] (1999) 200 CLR 485 at 503.
I do not accept the second defendant’s argument in relation to extraterritoriality for the purposes of her application to strike out the FTA claim.
The argument is complex. In my view it is not convenient to dispose of the matter on an interlocutory basis.
The FTA claim concerns various representations and promises concerning real property in South Australia. While some of those representations were allegedly made in China, those discrete representations form part of a pattern all of which was directed to securing the transfer of the plaintiff’s property to the defendants. I do not consider that the plaintiff’s argument that the Court would err if it isolated a portion of that conduct and found the plaintiff was precluded from prosecuting part of her claim based on the FTA because of questions as to the extraterritorial operation of the Act, is so untenable that the pleas should be struck out at this stage of the proceedings.
At the relevant time s 55 of the FTA provided that the Act applied to, and in relation to, transactions that took place, conduct that occurred and representations that were made within the State, whether wholly or partly.
In my view it is at least arguable that s 55 evinces an intention on the part of the Parliament to give the FTA an extraterritorial operation.
For the purposes of the determination of the strike out application, I need only be satisfied that it is arguable there was, to adopt the expression of Gleeson CJ in Lipohar,[7] “a real connection between the [cause of action] and South Australia”.
[7] (1999) 200 CLR 485 at 503.
In my view there is such a connection.
The property is in South Australia. Certain representations upon which reliance is made occurred in South Australia. Those representations made in South Australia concerning the property in South Australia were part of a pattern of conduct concerning the property, which pattern included pleaded representations made outside of Australia.
In these circumstances I do not consider that it is beyond argument that the FTA applies to those representations.
Accordingly, I am not prepared to strike out the FTA claim on this basis.
Trade and commerce
The second defendant submits that it is a precondition to the application of the FTA to the plaintiff’s claim that the misleading or deceptive conduct pleaded must have occurred in “trade or commerce”.
At the relevant time s 56 provided:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 54 applied to any claim alleging a contravention of s 56 based on a representation as to a future matter.
Paragraphs [51], [53] – [57], [61], [63] in Part 1 and paragraphs [5] and [8] of Part 2 of the second statement of claim all relate to a claim for relief in consequence of an alleged breach of s 56.
In order to establish a contravention of s 56, the second defendant submits there must be conduct “in trade or commerce”.
The second defendant submits that on the pleaded facts, the plaintiff does not allege that the defendants have engaged in conduct that is “in trade or commerce”. To emphasise her point, the second defendant points to the fact that the second statement of claim does not include any plea that the representations were made or the conduct complained of occurred “in trade or commerce”.
The term “in trade or commerce” is not a term of art. The words are of the widest import. They are expressions of fact and terms of common knowledge. The expression includes every aspect of what is ordinarily understood to comprise a commercial arrangement.[8]
[8] Re Ku-Ring-Gai Cooperative Building Society (No 12) Ltd (1978) 22 ALR 621 per Bowen CJ at 624‑625 and Deane J at 648-649.
In Concrete Constructions (NSW) Pty Ltd v Nelson,[9] the majority of the High Court held that the equivalent phrase under the TPA was:[10]
concerned with … the conduct of a corporation towards persons, be they consumers or not, with whom it … has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character.
[9] (1990) 169 CLR 594.
[10] (1990) 169 CLR 594 at 604.
The conduct may itself only be an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character.[11]
[11] (1990) 169 CLR 594 at 603.
The majority however, rejected a construction which would encompass all conduct in the course of the myriad of activities which are undertaken in the course of, or incidental to, the carrying on of an overall trading or commercial business as falling within the meaning of “in trade or commerce”.
Yet as the High Court explained in Houghton v Arms:[12]
Statements made by a person not … engaged in trade or commerce may answer the statutory expression if, for example, they are designed to encourage others to invest, or to continue investments, in a particular trading entity.
[12] (2006) 225 CLR 553 at 565.
In my view the conduct complained of in the second statement of claim, insofar as it relates to the FTA claim, does not satisfy the description of conduct “in trade or commerce”.
In my view this is so on any view of the facts pleaded.
The defendants were married to each other at the relevant time. The plaintiff is the aunt of the first defendant. The transfer of the property from the plaintiff to the defendants was for the purpose of assisting the defendants with an application for permanent residency in Australia. The property is residential. The transfer was effected without consideration.
None of these matters point to conduct with the character of an aspect or element of trading or commercial activities or transactions.
The plaintiff relies on the following matters as satisfying the requirement that the conduct be “in trade or commerce”:
1.the animus of the plaintiff towards the second defendant and the plaintiff’s initial refusal to transfer the property to the defendants as requested by them and her decision to engage an agent, Mr Ho, to ensure that her proprietoral interests in the property were properly documented and thereby protected;
2.in light of the animus felt by the plaintiff towards the second defendant, the plaintiff transferred the property to the defendants only for one purpose, namely, to assist with an application for permanent residency;
3.the transaction did not involve the plaintiff selling her own place of residence, but rather making available her own capital asset to a family member and a third party under the terms of an agreement that it must be restored to her upon the achievement of permanent residency pursuant to the Business Migration Scheme or upon request;
4.the transaction was recorded by way of a deed of trust; and
5.the representations made by the defendants were designed to encourage the plaintiff to enter into a business transaction.
In my view none of the factors identified by the plaintiff invest the conduct with the necessary commercial character so as to meet the description of the relevant conduct as being “in trade or commerce”.
On the plaintiff’s case she was merely transferring the property gratuitously to her nephew and his wife so as to facilitate their applications for Business Migration visas. Nothing in those facts or the obligation, as alleged, that the defendants re-transfer the property to the plaintiff, invest the conduct with the character of an aspect or element of trading or commercial activities or transactions. This is not a case of the kind contemplated in Houghton v Arms where the defendant’s conduct was designed to encourage the plaintiff to invest in a particular trading entity. There was no trading entity here. Neither can it be said that the pleaded obligation to re-transfer relevantly distinguishes the conduct from the circumstances in O’Brien & Anor v Smolonogov & Anor[13] or Argy & Anor v Blunts & Lane Cove Real Estate Pty Ltd & Ors.[14] In each of these cases the sale of private homes which were not utilised for any commercial business purpose were held not to have occurred “in trade or commerce”.
[13] (1983) 53 ALR 107.
[14] (1990) 26 FCR 112.
While it is undoubtedly the case that intra family transactions can occur “in trade or commence”, there is nothing in the facts pleaded in the second statement of claim which evidences any relevant trading or commercial activities or transactions in any aspect or element of the facts alleged. On the contrary, the facts pleaded by the plaintiff allege an arrangement between her and her nephew and his wife to assist them to obtain Business Migration visas by the gratuitous transfer of a residential property she owned and had renovated in anticipation of it being occupied by her son and his wife. The Rosslyn Park property was not rented out by the plaintiff. It was not an investment property as that expression is commonly understood. I cannot identify any commercial or trading activity or transaction in this case. Nor is a commercial or trading activity or transaction introduced to the case by the obligation to re-transfer the property at some future time. Neither does the recording of the arrangement by deed introduce a relevant aspect or element of trading or commercial activity to the transaction. In my view, it cannot be said that the plaintiff was entering into a business transaction. She was not in business, or at least not in a business involving the transfer of property. The fact the transfer occurred in the absence of valuable consideration gainsays the plaintiff’s proposition.
Accordingly, in my view the FTA claim is untenable. It is not a cause of action with some chance of success when only the allegations and the pleadings are considered. In my view it cannot possibly succeed. I would strike it out.
Resulting trust
The second defendant submits that paragraphs [48] and [65] of Part 1 and paragraph [3] of Part 2 of the second statement of claim should be struck out.
The second defendant submits that equity finds a resulting trust in circumstances where it is presumed that a trust was intended but for some reason was never properly constituted. She submits that such trusts generally fall into two categories. First, where there has been a failure of an express trust or secondly, where a volunteer has received legal title to property after another person has provided the purchase price or other accepted kind of contribution but not been given a legal title equivalent to that contribution.
The second defendant contends that the facts pleaded do not bring the plaintiff’s claim into either category. She submits that as the plaintiff has not pleaded a failure of an express trust, the claim for a resulting trust cannot fall within the first category. Neither has there been pleaded a basis for a resulting trust in favour of the plaintiff which falls into the second category. There has been no plea of a contribution by the plaintiff to the purchase price or associated costs of purchase. On this basis the second defendant applies to strike out the above pleas.
This can be disposed of shortly. The second defendant’s application cannot succeed.
There is no basis to conclude that the plea of a resulting trust in favour of the plaintiff and a breach of that trust by the second defendant is so obviously untenable that it cannot possibly succeed. In any event, I am not prepared to form that conclusion at this stage of the proceedings without hearing evidence.
In Napier v Public Trustee (WA)[15] Aickin J, with whom the other members of the High Court agreed, said:[16]
The law with respect to resulting trusts is not in doubt. Where property is transferred by one person into the name of another without consideration … there is a presumption that the transferee holds the property upon trust for the transferor …
[15] Napier v Public Trustee (WA) (1980) 32 ALR 153.
[16] (1980) 32 ALR 153 at 158.
The presumption of a resulting trust arising in favour of A against B where A makes a voluntary transfer of property to B may be rebutted by a consideration of the whole of the relevant facts and circumstances in order to ascertain A’s intention, namely, whether A intended B to take the property beneficially or on trust.[17]
[17] Vandervell v Inland Revenue Commissioners (No 1) [1967] 2 AC 291 at 312D-G; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 708.
In my view, in circumstances where the plaintiff pleads a voluntary transfer by her of the whole of the real property to the second defendant for no consideration, it cannot be said that there is no chance of the plaintiff succeeding on her claim for a breach of trust, on the basis that a resulting trust arose in her favour against the second defendant, where the second defendant has refused to transfer the property to the plaintiff upon request.
Conclusion
I make the following orders:
1.that paragraphs [51], [53], [54], [55], [56], [57], [61] and [63] of the second statement of claim are to be struck out with no leave to re‑plead;
2.that the orders sought in paragraphs [5] and [8] of Part 2 of the second statement of claim are dismissed.
I will hear the parties further as to the question of costs of the within application and the further conduct of the matter.