Platinum Systems Resourcing Pty Ltd v NRW Holdings Ltd
[2013] WASC 376
•14 OCTOBER 2013
PLATINUM SYSTEMS RESOURCING PTY LTD -v- NRW HOLDINGS LTD [2013] WASC 376
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 376 | |
| Case No: | CIV:1894/2013 | 8 OCTOBER 2013 | |
| Coram: | LE MIERE J | 14/10/13 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | First defendant's defence struck out in part | ||
| B | |||
| PDF Version |
| Parties: | PLATINUM SYSTEMS RESOURCING PTY LTD LEANNE CURTIS ZILIA KORPAS NICOLA WILSON CORINNE LENDON NRW HOLDINGS LTD KIMBERLY HYMAN MARK WALLACE SUSAN WORRALL |
Catchwords: | Practice and procedure Defence Strike out application Dishonest and fraudulent scheme pleaded |
Legislation: | Legal Profession Conduct Rules 2010 (WA), r 36(3) Rules of the Supreme Court 1971 (WA), O 20 r 9(1), O 20 r 13 |
Case References: | Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 57 FCR 360 Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
LEANNE CURTIS
Second Plaintiff
ZILIA KORPAS
Third Plaintiff
NICOLA WILSON
Fourth Plaintiff
CORINNE LENDON
Fifth Plaintiff
AND
NRW HOLDINGS LTD
First Defendant
KIMBERLY HYMAN
Second Defendant
MARK WALLACE
First Third Party
SUSAN WORRALL
Second Third Party
(BY ORIGINAL ACTION)
NRW HOLDINGS LTD
First Plaintiff by Counterclaim
AND
PLATINUM SYSTEMS RESOURCING PTY LTD
First Defendant by Counterclaim
LEANNE CURTIS
Second Defendant by Counterclaim
MARK WALLACE
Third Defendant by Counterclaim
SUSAN WORRALL
Fourth Defendant by Counterclaim
(BY COUNTERCLAIM)
Catchwords:
Practice and procedure - Defence - Strike out application - Dishonest and fraudulent scheme pleaded
Legislation:
Legal Profession Conduct Rules 2010 (WA), r 36(3)
Rules of the Supreme Court 1971 (WA), O 20 r 9(1), O 20 r 13
Result:
First defendant's defence struck out in part
Category: B
Representation:
Original Action
Counsel:
First Plaintiff : Mr M L Bennett
Second Plaintiff : Mr M L Bennett
Third Plaintiff : Mr M L Bennett
Fourth Plaintiff : Mr M L Bennett
Fifth Plaintiff : Mr M L Bennett
First Defendant : Mr B H Taylor
Second Defendant : Mr B H Taylor
First Third Party : Mr L F Swanson
Second Third Party : Mr L F Swanson
Solicitors:
First Plaintiff : Bennett + Co
Second Plaintiff : Bennett + Co
Third Plaintiff : Bennett + Co
Fourth Plaintiff : Bennett + Co
Fifth Plaintiff : Bennett + Co
First Defendant : Rockwell Olivier
Second Defendant : Rockwell Olivier
First Third Party : Hotchkin Hanly
Second Third Party : Hotchkin Hanly
Counterclaim
Counsel:
First Plaintiff by Counterclaim : Mr B H Taylor
First Defendant by Counterclaim : Mr M L Bennett
Second Defendant by Counterclaim : Mr M L Bennett
Third Defendant by Counterclaim : Mr L F Swanson
Fourth Defendant by Counterclaim : Mr L F Swanson
Solicitors:
First Plaintiff by Counterclaim : Rockwell Olivier
First Defendant by Counterclaim : Bennett + Co
Second Defendant by Counterclaim : Bennett + Co
Third Defendant by Counterclaim : Hotchkin Hanly
Fourth Defendant by Counterclaim : Hotchkin Hanly
Case(s) referred to in judgment(s):
Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 57 FCR 360
Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82
1 LE MIERE J: The first defendant, NRW Holdings Limited (NRW), is a public company listed on the Australian Securities Exchange which carries on the business of providing mining and engineering services. The plaintiff, Platinum Systems Resourcing Pty Ltd (Platinum), is a company that carries on the business of providing technology consultant services and job placements in technology projects. On 12 April 2012 NRW and Platinum entered into an agreement, or purported to do so, called a Master Services Agreement. Under the Master Services Agreement Platinum agreed to provide consultancy services to NRW. Between April 2012 and May 2013 Platinum provided consultants to carry out work for NRW. Platinum rendered invoices to NRW. NRW has refused or failed to pay some of the invoices. Platinum claims that NRW is indebted to Platinum in the sum of $1,093,955.50 which is the amount of the unpaid invoices. Platinum also claims that the second defendant, Hyman, the company secretary of NRW, made publications defamatory of the second to fifth plaintiffs, Curtis, Korpas, Wilson and Lendon. Platinum also claims that NRW unlawfully terminated the Master Services Agreement, unlawfully solicited consultants contracted by Platinum to work for NRW and unlawfully interfered with the agreement between Platinum and its consultants.
2 NRW has filed a defence which raises a number of defences and a counterclaim. Platinum has applied to strike out [20] to [27] of the defence and counterclaim. Those paragraphs plead that the second to fourth defendants by counterclaim, Worrall, Wallace and Curtis, agreed to participate in a dishonest and fraudulent scheme and carried it out. Wallace and Worrall were the Chief Financial Officer and Chief Information Officer respectively of NRW. Curtis was engaged by NRW as Applications Program Manager for the project and was responsible for procuring IT consultants for the project and approving timesheets submitted by IT consultants engaged by NRW to assist with the project on behalf of NRW. Curtis reported to Worrall. The scheme is said to involve the incorporation of a company, Platinum, controlling the company and entitlement to its profit through arrangements with family members and friends who became officers of the company, procuring NRW to engage the company to provide services to NRW and to pay for those services at such rates as they determined regardless of whether the rates were in excess of those that could be properly and reasonably payable for such services, causing NRW to pay the amounts invoiced by the company without proper scrutiny and not disclosing their connection with, and control of, the company to NRW.
Responsible use of court process
3 Order 20 r 9(1) of the Rules of the Supreme Court 1971 (WA) requires a party to specifically plead fraud or any matter which, if not specifically pleaded, might take the opposite party by surprise. Order 20 r 13 requires a pleading to contain particulars of any fraud on which the party relies.
4 Counsel for the plaintiff referred to the Legal Profession Conduct Rules 2010 (WA) r 36(3) which provides that
[a] practitioner must not draw or settle any court document that alleges criminality, fraud or other serious misconduct by a person unless the practitioner believes on reasonable ground that:
(a) factual material already available to the practitioner provides a proper basis for the allegation; and
(b) the evidence by which the allegation is made will be admissible; and
(c) the practitioner's client wishes the allegation to be made, after having been advised of the seriousness of the allegation and of the possible consequences for the client and the client's case if it is not made out.
5 In Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 57 FCR 360, 372 Hill J after stating that an allegation of fraud is a serious matter and should be the subject of anxious concern by a pleader said:
It is sufficient if the material known, which can include not only documentary material but also oral statements of witnesses and matters of instructions, provides a reasonable basis for the allegation if nothing else were to be proved (372).
- Hill J went on to say that he should not be taken as accepting the proposition that had counsel who signed the pleading objectively breached the ethical rule, that fact alone would constitute the pleading as drafted an abuse of process justifying the writ being struck out. His Honour continued:
A litigant in person, for example, would not be bound by the ethical rules of the Bar. If this be so how could a writ framed by such a litigant be struck out as an abuse of process on the grounds that the ethical rule was not complied with? Where the litigant happens to be represented, breach of the ethical rule would, in an appropriate case, give rise to disciplinary proceedings against the barrister concerned, but should hardly be visited upon the client.
Nature of defendants' pleading
7 Paragraphs 20 to 27 of NRW's defence appear under the heading 'Equitable fraud'. Counsel for the plaintiffs submitted that [20] of the defence makes it plain that NRW's defence is not based on some equitable fraud but is a direct and open allegation of a dishonest and fraudulent scheme on the part of Worrall, Wallace and Curtis. Counsel for NRW, while submitting that a dishonest and fraudulent design according to equitable principles is not the same as an allegation of fraud, acknowledged that NRW's defence alleged a dishonest and fraudulent design by Curtis, Worrall and Wallace, that the allegation is a serious one and the parties against whom the design is pleaded are entitled to particulars.
8 Having regard to the rules and the general law, the dishonest and fraudulent scheme alleged by NRW must be specifically pleaded and NRW must give proper particulars of the dishonest and fraudulent scheme.
Dishonest and fraudulent scheme specifically pleaded
9 NRW has complied with its obligation to specifically plead the dishonest and fraudulent scheme. Paragraph 20 of the defence pleads that in or about March 2012 Worrall, Wallace and Curtis orally agreed to participate together in a dishonest and fraudulent scheme. Subparagraphs 20.1 to 20.5 then set out the constituent elements of the scheme:
1. to procure the incorporation of a company;
2. to obtain and maintain control of the company and entitlement to its profits through agreements, arrangements and understandings to be made with family members and friends who they would procure to become officers and shareholders of the company;
3. to procure NRW to engage the company to provide services to NRW and to pay for those services at such rates as they determined, regardless of whether the rates were in excess of those that would be properly and reasonably payable for such services;
4. to cause NRW to pay amounts invoiced by the company without proper scrutiny (meaning without scrutiny by someone other than Worrall, Wallace or Curtis); and
5. not to disclose their connection with, and control of, the company to NRW.
10 The defence specifically pleads that the dishonest and fraudulent scheme was carried out. Paragraph 23 pleads the steps taken by Wallace, Worrall and Curtis to effect the pleaded scheme. That defence adequately informs the plaintiff of the dishonest and fraudulent scheme which is charged.
Particulars required
11 The plaintiff contends that because allegations of fraud and dishonesty have been made against it, it is entitled to know with particularity and precision the material facts with which it is charged. The rules require that every pleading must contain particulars of any fraud on which the party pleading relies. The broad principles are well settled. The difficulty lies in determining what particulars are necessary in the circumstances of this case.
12 The court should bear in mind the function and purpose of particulars. In Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 Martin CJ referred to the role of pleadings in the context of case management techniques and pre-trial directions. The Chief Justice observed that these processes leave little opportunity for surprise or ambush at trial. The Chief Justice said that particulars
should be provided, in an appropriate case, where they are necessary to meet the fundamental objectives to which I have referred; that is to say, the true enunciation of the issues that are to be tried and the identification of the case that has to be met. The need to provide particulars must also be assessed in the case management environment to which I have referred; that is to say, an environment in which the parties can be assured that the case will not go to trial before various orders have been made requiring the pre-trial disclosure of all the evidence that will be adduced at trial [16].
13 In my opinion, these general principles apply to pleadings of fraud or dishonesty although considering what particulars should be provided in an appropriate case will require the court to have regard to the gravity of the allegations pleaded. In this case NRW must give particulars of the alleged scheme and the particulars must be capable of supporting the alleged fraud or dishonesty.
The particulars given
14 Paragraph 20 of the defence pleads that Worrall, Wallace and Curtis agreed to participate in a dishonest and fraudulent scheme. As I have said, the defence sufficiently identifies the scheme. Particulars are given. The particulars are that the agreement is to be inferred from a number of matters including the matters pleaded in [21], [22] and [23]. The plaintiff says that that plea is circular because the particulars to par 21 include the matters pleaded in [20] and the particulars to [22] include the matters pleaded in [21]. The pleadings would be circular if they did no more than say that each alleged fact is to be inferred from the other alleged facts. However, the pleading goes beyond that. Paragraph 20 pleads facts other than the matters pleaded in [21], [22] and [23]. Paragraphs 21 and 22 set out additional facts to those particularised in [20].
15 The facts pleaded in [20] to [23], including the particulars subjoined to those paragraphs, must be considered together with the facts pleaded or admitted elsewhere in the defence which provide the context for those pleaded facts. For example, the facts pleaded as particulars to [20], include that Wallace had numerous communications in March and April 2012 with Kensington Partners, a firm of accountants, which procured, or was involved in procuring the incorporation of Platinum and his office became the registered office of Platinum. The dates are significant because Platinum was incorporated on 2 April 2012 - see statement of claim [1.2] admitted by [1.1] of the defence. Further, Worrall signed the Masters Services Agreement on behalf of NRW on 12 April 2012 - statement of claim [10] and defence [10.1].
16 NRW says that the facts pleaded as particulars to [20], including facts pleaded in [21], [22] and [23] which are incorporated by reference into the particulars to [20], support the plea in [20] that Worrall, Wallace and Curtis agreed to participate in the dishonest and fraudulent scheme pleaded. The plaintiff says that none of those facts, if proved, are capable of supporting the pleaded agreement to participate in a dishonest and fraudulent scheme and the carrying out of the scheme. It is true that none of those facts, taken alone, are capable of supporting the pleaded scheme. However, NRW's case is one of indirect or circumstantial evidence. In some indirect evidence cases an analogy can be drawn with a rope comprised of several strands. One strand might be insufficient to sustain the weight but several stranded together may be of sufficient strength. There may be a combination of facts or circumstances, no one of which would raise a reasonable case, but the whole taken together may raise an inference that makes out the case.
17 I find that the facts pleaded are sufficient to support a pleading that Worrall, Wallace and Curtis agreed to participate in a scheme to incorporate and control Platinum, to cause NRW to engage consultants exclusively from Platinum and to cause NRW to engage consultants from other personnel suppliers through Platinum at increased rates. The dishonest elements arise from the relationship of Worrall, Wallace and Curtis to NRW, their failure to disclose their connection with and control of Platinum to NRW and the false representations allegedly made by Curtis to persons who would otherwise have provided services directly to NRW and to other personnel suppliers, to the effect that such persons and suppliers had to be provided through Platinum to NRW or that NRW preferred to have services provided through Platinum.
18 I find that the facts pleaded and particulars given in the defence do not support the pleading in [20.3] that the alleged scheme included procuring NRW to pay for services provided to it at such rates as they determined regardless of whether the rates were in excess of those that would be properly and reasonably payable for such services. The words 'at such rates as they determined, regardless of whether the rates were in excess of those that would be properly and reasonably payable for such services' in [20.3] should be struck out.
19 Paragraph 21 pleads an agreement made pursuant to the agreement pleaded in [20]. Particulars state that the agreement is to be inferred from the matters pleaded in [20] and the fact that Wilson, Lendon, Mercovich and Welsh allowed Worrall, Wallace and Curtis to control Platinum. I find that those facts, including the pleaded fact that Wilson, Lendon, Mercovich and Welsh allowed Worrall, Wallace and Curtis to control Platinum, support the agreement pleaded in [21] except for that part of the agreement pleaded in [21.3] that the shares in the new company would be held by Mercovich and Welsh in trust for the benefit of Worrall, Wallace and Curtis. Paragraph 21.3 should be struck out.
20 Paragraph 22 pleads a further agreement. The particulars are that the agreement is to be inferred from:
(a) the matters pleaded in [21];
(b) the fact that shares in Platinum were and are not held beneficially by each of Welsh, Wilson and Lendon; and
(c) the fact of the changes and transfer pleaded in [22.1] to [22.3] above.
I take particular (c) to mean that the changes in office and the share transfers which are pleaded in [22.1] to [22.3] to have been the subject of an agreement were in fact carried out.
21 I will strike out part of [22.1]. An agreement between Wallace, Worrall, Curtis, Mercovich and Korpas that Mercovich would cease to be a director and company secretary of Platinum cannot be inferred from the fact that Mercovich ceased to be a director and company secretary even taken together with the fact that the shares were not held beneficially by Welsh, Wilson and Lendon and the matters pleaded in [21], including that Wilson, Lendon, Mercovich and Welsh allowed Worrall, Wallace and Curtis to control Platinum. I will strike out from [22.1] the words 'that Mercovich would be removed as a director and company secretary of Platinum and'.
22 It cannot be inferred that Wallace, Worrall, Curtis, Welsh and Wilson agreed that Welsh would transfer the shares in Platinum which he held to Wilson who would hold them in trust for the benefit of one or more of, Wallace, Worrall and Curtis from the fact that Welsh transferred the shares to Wilson even together with the other particulars given of [22]. I will strike out [22.2]. I will strike out [22.3] for the same reason.
23 Paragraph 23 pleads material facts without particulars. Some of those paragraphs are pleaded at a high level of generality. The plaintiff should plead further material facts to support those pleas or give particulars of the plea. Paragraph 23.4 and 23.6 are such paragraphs. Paragraph 23.8(b) and (c) should be further particularised.
24 Furthermore, the plaintiff is entitled to particulars of some of the facts pleaded in [23]. Paragraphs [23.5] and [23.7] allege false representations by Curtis. The plaintiff is entitled to particulars of the false representations.
Discovery
25 During the course of this application there was reference to circumstances in which the defendant should be given discovery before providing particulars. I have determined that some paragraphs of the defence should be struck out on the grounds that the material facts pleaded do not support the scheme pleaded not because they have not been sufficiently particularised. Insofar as I have ordered that the defendant should give particulars of facts pleaded in [23] I have not determined whether giving those particulars should be deferred until after discovery because the defendant has not yet applied for discovery. Counsel for the defendant explained that it was not practical to do that until the court had determined whether the challenged paragraphs of the defence should be struck out. NRW may be able to give particulars of the paragraphs I have decided it should give particulars of. If it is unable to do so then it will have to consider whether or not to apply for discovery before providing the particulars.
Conclusion
26 For the reasons stated the following paragraphs of the defence should be struck out:
1. The words 'at such rates as they determined, regardless of whether the rates were in excess of those that would be properly and reasonably put for such services' in [20.3].
2. Paragraph 21.3.
3. The words 'that Mercovich would be removed as a director and company secretary of Platinum and' in [22.1].
4. Paragraph 22.2.
5. Paragraph 22.3.
The defendant should give particulars of [23.4], [23.5], [23.6], [23.7], [23.8(b)] and [23.8(c)].
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