Lo Pilato (Trustee) v Gold Coast Hinterland Tree Houses Pty Ltd (No 2)
[2022] FCA 911
•2 August 2022
FEDERAL COURT OF AUSTRALIA
Lo Pilato (Trustee) v Gold Coast Hinterland Tree Houses Pty Ltd (No 2) [2022] FCA 911
File number: QUD 12 of 2022 Judgment of: LOGAN J Date of judgment: 2 August 2022 Catchwords: PRACTICE & PROCEDURE – application for order for particulars – where defence alleges an agreement whereby a bankrupt received valuable consideration for payment to corporation in the form of sexual services provided by one of the corporation’s directors – where reply alleges that such agreement contravened s 229H of the Criminal Code (Qld) and was therefore unenforceable – where further particulars sought of allegation of criminality – where reply merely picked up material facts pleaded in the defence – application refused Legislation: Federal Court Rules 2011 (Cth) r 16.41, r 16.43, r 16.45
Criminal Code (Qld) ss s 229E, 229H
Cases cited: Castlemaine Perkins Ltd v Queen Street Hotels Pty Ltd [1968] Qd R 501
Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 3) [2011] FCA 539
Ridge Street Medical Clinic Pty Ltd v Christian Outreach Centre & Ors [1991] QSC 285
Saunders v Jones [1877] 7 Ch D 435
R v Associated Northern Collieries (1910) 11 CLR 738
Zierenberg v Labouchere [1893] 2 QB 183
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 21 Date of hearing: 2 August 2022 Counsel for the Applicant: Mr S Lee Solicitor for the Applicant: HWL Ebsworth Solicitor for the Respondents: Frigo Adamson Legal Group ORDERS
QUD 12 of 2022 BETWEEN: FRANK LO PILATO AS TRUSTEE OF THE PROPERTY OF JOHAN FREDERICK WILHELM DURR, A BANKRUPT
Applicant
AND: GOLD COAST HINTERLAND TREE HOUSES PTY LTD ACN 625 901 126
First Respondent
JESSICA LEE MILGROOM (ALSO KNOWN AS MARSHALL)
Second Respondent
ORDER MADE BY:
LOGAN J
DATE OF ORDER:
2 AUGUST 2022
THE COURT ORDERS THAT:
1.The parties file electronically the written submissions sent to the Associate to Justice Logan this day forthwith.
2.The interloctory application filed 15 July 2022 be dismissed.
3.The respondents pay the applicant’s costs of and incidental to that interloctory application, to be fixed by a registrar if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)LOGAN J:
Mr Frank Lo Pilato (Trustee) is the trustee of the bankrupt estate of Mr Johan Frederick Wilhelm Durr (Bankrupt). The Trustee has instituted proceedings in which he claims that a payment of $700,000 to the first respondent, Gold Coast Hinterland Tree Houses Pty Ltd (GCHTH), was an undervalued transaction as the Bankrupt did not receive consideration of any value from GCHTH for the payment. The defence includes a denial, based on allegations found in [42] and [43], that the Bankrupt received valuable consideration on behalf of Gold Coast Hinterland in the form of what is said in the pleading to be the “Exclusive Arrangement”.
It is necessary now to set out [23], [42] and [43] of the defence:
23.The First Respondent denies the allegations in paragraph 23 of the Statement of Claim because the Bankrupt received valuable consideration, on behalf of the First Respondent, in the form of the Exclusive Arrangement as pleaded in paragraphs 42 and 43 below.
…
42.In December 2018, in consideration for the Payment, the Second Respondent, on behalf of the First Respondent, agreed to:
(a)provide Services to the Bankrupt on an exclusive and ongoing basis for an indefinite period, such Services including sexual and non-sexual services, including conversation, taking phone calls, responding to emails and text messages, and other non-sexual time spent with the Bankrupt such as sharing meals, going with the Bankrupt to social occasions and other recreational activities;
(b)cease providing Services to any other person;
(c)cease advertising her Services online; and
(d)make herself available to provide Services to the Bankrupt, "on call" as required by the Bankrupt,
(Exclusive Arrangement).
43.The Exclusive Arrangement was put into effect and remained in place between December 2018 and about 4 November 2019.
In the reply the Trustee, as to [42] of the defence, pleads at [15] as follows:
15. As to paragraph 42 of the Defence, the Applicant:
(a)Denies the allegations;
(b)In the alternative, says that:
(i)Pursuant to s 229H of the Criminal Code (Qld), a person who knowingly participates, directly or indirectly, in the provision of prostitution by another person commits a crime;
(ii)If, which is denied, the Second Respondent provided sexual services to the Bankrupt, on behalf of the First Respondent, pursuant to the Exclusive Arrangement, the First Respondent thereby committed the crime of knowing participation in the provision of prostitution in breach of s 229H of the Criminal Code (Old);
(iii)In the premises, the alleged Exclusive Arrangement (which is denied) is and was contrary to public policy, illegal and unenforceable.
The respondents have sought particulars of [15(b)]. The riposte of the Trustee is that [15] is responsive to and takes its particularity from [42] of the defence. The respondents, being dissatisfied with that, have sought an order that the Trustee give particulars of [15(b)].
The respondents rely upon r 16.41, r 16.43 and r 16.45 of the Federal Court Rules 2011 (Cth) (Federal Court Rules), which provide:
r 16.41General
(1)A party must state in a pleading, or in a document filed and served with the pleading, the necessary particulars of each claim, defence or other matter pleaded by the party.
Note:See rule 16.45.
(2)Nothing in rules 16.42 to 16.45 is intended to limit subrule (1).
Note 1:The object of particulars is to limit the generality of the pleadings by:
(a)informing an opposing party of the nature of the case the party has to meet; and
(b)preventing an opposing party being taken by surprise at the trial; and
(c)enabling the opposing party to collect whatever evidence is necessary and available.
Note 2:The function of particulars is not to fill a gap in a pleading by providing the material facts that the pleading must contain.
Note 3:A party does not plead to the opposite party's particulars.
Note 4:Particulars should, if they are necessary, be contained in the pleading but they may be separately stated if sought by the opposite party or ordered by the Court.
r 16.43Conditions of mind
(1)A party who pleads a condition of mind must state in the pleading particulars of the facts on which the party relies.
(2)If a party pleads that another party ought to have known something, the party must give particulars of the facts and circumstances from which the other party ought to have acquired the knowledge.
(3)In this rule:
“condition of mind”, for a party, means:
(a)knowledge; and
(b)any disorder or disability of the party’s mind; and
(c)any fraudulent intention of the party.
r 16.45Application for order for particulars
(1)If a pleading does not give a party fair notice of the case to be made against that party at trial and, as a result, the party may be prejudiced in the conduct of the party's case, the party may apply to the Court for an order that the party who filed the pleading serve on the party:
(a)particulars of the claim, defence or other matter stated in the pleading; or
(b)a statement of the nature of the case relied on; or
(c)if there is a claim for damages--particulars of the damages claimed.
(2)An application under subrule (1) may be made only if:
(a)the particulars in the pleading are inadequate; and
(b)the party seeking the order could not conduct the party's case without further particulars.
(3)A respondent who applies to the Court for an order under subrule (1) before filing the respondent's defence must satisfy the Court that an order is necessary or desirable to enable the respondent to plead.
Note:The intent of the pleading rules is that a party should include all material facts in its pleadings as initially filed so that there is no unfairness to another party by any lack of particularity. If the party has not done so, the Court may at trial refuse to allow the party to present a case that is outside the terms of their pleading.
More particularly, the respondents point to a need, where criminal conduct is alleged in a pleading, for adequate particularly of that conduct to be furnished by the party alleging the criminal conduct. They point, by way of example, to observations of Williams J in the Queensland Supreme Court case Ridge Street Medical Clinic Pty Ltd v Christian Outreach Centre& Ors [1991] QSC 285 (Ridge Street Medical Clinic v Christian Outreach Centre).
In that case, and with reference to Castlemaine Perkins Ltd v Queen Street Hotels Pty Ltd [1968] Qd R 501 and Zierenberg v Labouchere [1893] 2 QB 183, Williams J stated, at 8, that:
… I do not doubt for one moment the correctness of the reasoning in Castlemaine Perkins Limited v Queen Street Hotels Pty Ltd and Zierenberg v Labouchere, at least insofar as those cases establish the necessity of pleading unlawful conduct with particularity. It must not be overlooked that already the defendants have given considerable particularity of the unlawful conduct alleged against the plaintiff. It is not a case where some vague general allegation of unlawful criminal conduct is made. It is specifically alleged that the plaintiff has breached s 224 of the Code. Particulars are given of the force used to procure the abortion – a requirement of the section; it is said that the force in question was the use of vacuum curettage with dilation to evacuate the contents of the gravid uterus. It is then specifically alleged that in all cases the patients underwent abortions merely for reasons of convenience or financial reasons and not because of any consideration associated with the physical or mental health of the woman.
A little later, at 8 to 9, his Honour further observed:
… In the circumstances of this case the inability of the defendants to be able to provide names of the women the subject of the procedures is not necessarily to indicate that they cannot prove a breach or breaches of s 224 of the Code. Such offences could be proved in the civil proceedings without either naming or calling the women with respect to whom an offence was committed.
In this particular case, the relevant section of the Criminal Code said to give rise to offending conduct and, thus, the unenforceability of the exclusive arrangement is materially s 229H(1) of the Criminal Code (Qld). That provides:
229H Knowingly participating in provision of prostitution
(1)Aperson who knowingly participates, directly or indirectly, in the provision of prostitution by another person commits a crime.
Maximum penalty—
(a) for a first offence—imprisonment for 3 years; or
(b) for a second offence—imprisonment for 5 years; or
(c) for a third or subsequent offence—imprisonment for 7 years.
Examples of the crime—
Example 1—
a person who knowingly participates in the provision of prostitution by another person through a company, or other entity, or through another individual
Example 2—
a person who provides financial or other resources to enable the establishment of premises from which prostitution is carried out or coordinated knowing that the premises will be so used
Example 3—
a person who receives financial or other benefit from another person engaging in prostitution in return for the procuring of clients
Example 4—
drivers, operators and hirers of vehicles who provide transport, or the means of transport, for prostitutes or clients knowing that the transport provided is assisting prostitution unless section 229HA(4)(b)(ii) applies
Example 5—
a person who receives, directs or redirects telephone calls or other forms of messages, or who takes bookings or receives money, knowing that the action is in connection with the engaging in of prostitution by another person unless section 229HA(5) applies
Example 6—
a person who participates, directly or indirectly, in any service, action or matter for the purpose of knowingly enabling another person to engage in prostitution
Note—
Some of these examples may also illustrate the offence defined in section 229HB.
[emphasis in original]
In its statement that a party must state in a pleading or in a document filed and served with the pleading the necessary particulars of each claimed offence or other matter pleaded by a party, r 16.41(1) of the Federal Court Rules raises no new subject. Indeed, that understanding of particulars predates the Judicature Acts system of pleadings. Thus in the third (1868) edition of Bullen & Leake’s Precedence of Pleadings, at p 56, the learned authors state, citing authority, this proposition:
The object of the particulars of demand is to control the generality of the declaration and to restrict the plaintiff at the trial and to give the defendant such information as may enable him to frame his defence or pay money into court if necessary.
That statement was obviously made in relation to a pleading which sought the payment of a particular amount on demand, but reflects an understanding of the object of particulars which has not changed in the more than century and a half which has passed since then. That the Judicature Acts and the pleading system thereunder did not effect a change in terms of the objective particulars is evident in a judgment of Thesiger LJ in Saunders v Jones [1877] 7 Ch D 435, at 451, where his Lordship stated:
… In the second place, in an action where general allegations were made in the pleadings either by the Plaintiff or by the Defendant, either party could obtain particulars, the object of which was to limit the generality of those pleadings and enable the other party to know accurately what was the case to be brought against him.
His Lordship’s judgment is also noteworthy for its recognition of the symbiotic relationship which can exist between discovery and the furnishing of particulars. It is not necessary to resolve the present controversy to delve into further that relationship.
In terms of Australian authority, regard might usefully be had to the judgment of Isaacs J in R v Associated Northern Collieries (1910) 11 CLR 738 (Associated Northern Collieries), at 740 to 741. One there sees a like understanding of the function of particulars to that evident in the English authorities I have cited. His Honour’s understanding is that particulars have the purpose of appraising the opposite party of the nature of the case to be met, of placing the opposite party in possession of the broad outlines and constituted facts said to raise a legal liability, and must contain sufficient information to ensure a fair trial and to guard against surprise.
In his helpful and erudite work, Australian Civil Procedure 12th Edition, at 295, Dr B.C. Cairns LLD states, at 295, having referred to Associated Northern Collieries:
An additional requirement is that particulars must operate within the context of case flow management and the court’s control of litigation, including the overriding objective of justice and efficiency: citing Baffico v YMCA of Great Lake Inc [2014] NSWCA 61 at [24] per Bergin CJ in Eq.
Dr Cairns, at 296, makes reference to a judgment of this Court, Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 3) [2011] FCA 539 in which Katzmann J agreed that providing particulars “should not be allowed to unduly increase the cost and delay associated with litigation”.
Dr Cairns’ reference to particulars operating within the context of case flow management is apt in this Court, given the Court’s longstanding practice of active case management.
It may readily be accepted, as did Williams J in Ridge Street Medical Clinic v Christian Outreach Centre, that it is necessary to furnish particulars of an allegation of criminal conduct. In this instance, the Trustee, by his reply, has taken the respondent’s pleading at its highest and with all of its particularity and alleged that the “Exclusive Arrangement” as pleaded amounts to a transgression of s 229H of the Criminal Code.
It is said that there is not adequate particularity of knowledge. That may be tested by inserting into s 229H names of relevant respondent parties. So doing yields the following. GCHTH knowingly participated directly or indirectly in the provision of prostitution by another person, namely the second respondent, Jessica Lee Milgrom (Ms Milgrom). Ms Milgrom is a director of GCHTH. Thus, the allegation is that a corporation by its director has knowingly participated in the provision of prostitution by Ms Milgrom. There is nothing in [15] of the reply which points to any other person having the corporate knowledge, nor would it be necessary to point to any other person given that the director of the company is the person alleged to have performed the services.
It was also submitted that there was an inadequate particularisation of what amounted to prostitution, prostitution being defined by s 229E. It is true that s 229E of the Criminal Code specifies particular activities as amounting to prostitution, but the want of particularity, if there be any in that regard, is a feature of the defence itself, which speaks of “sexual services”. It seems to me that this is one of those cases where the Trustee has given such particulars as necessary, responsive to the way in which the defence has been pleaded.
It also seems to me that the application is one which, on reflection, ought never to have been made. The reply pleading, in my view, contains sufficient particulars, even allowing for the fact that it alleges criminal conduct. The vice in the present application is that it reads the reply in isolation from the pleading to which it is responsive. There is sufficient particularity in the reply to prevent the respondents from being taken by surprise.
I therefore dismiss the application.
As to costs, the respondents resisted an order which would amount to a usual exercise of discretion on the basis of costs following the event because, so it was submitted, the basis upon which the Trustee has succeeded did not correspond to that which was advanced in the Trustee’s written outline of submissions. This, in my view, entails, with respect, a misreading of the Trustee’s outline of submissions. Accordingly, costs should follow the event.
I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan. Associate:
Dated: 8 August 2022
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