Raphael v Core International Pty Ltd
[2021] WASC 138
•6 MAY 2021
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RAPHAEL -v- CORE INTERNATIONAL PTY LTD [2021] WASC 138
CORAM: MASTER SANDERSON
HEARD: 15 MARCH 2021
DELIVERED : 15 MARCH 2021
PUBLISHED : 6 MAY 2021
FILE NO/S: CIV 2216 of 2020
BETWEEN: FABIANE MICHEL RAPHAEL
Plaintiff
AND
CORE INTERNATIONAL PTY LTD
First Defendant
RESHAT KOCADAGLI
Second Defendant
Catchwords:
Practice and Procedure - Application for release from Harman Undertaking - Turns on own facts
Legislation:
Nil
Result:
Plaintiff released from Harman Undertaking
Representation:
Counsel:
| Plaintiff | : | CR Bailey |
| First Defendant | : | KJ Morgan |
| Second Defendant | : | KJ Morgan |
Solicitors:
| Plaintiff | : | Williams & Hughes |
| First Defendant | : | Murfett Legal |
| Second Defendant | : | Murfett Legal |
Case(s) referred to in decision(s):
Hearne v Street (2008) 248 ALR 609
Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217
MASTER SANDERSON:
By chamber summons filed 18 January 2021 the plaintiff sought an order that it have leave to use in these proceedings an affidavit of Reshat Kocadagli sworn 5 November 2020 filed in the Supreme Court of Western Australia matter COR 135 of 2020, including its annexures. The defendants opposed the application. At the conclusion of the hearing I indicated to the parties I would make the order sought by the plaintiff. I said I would publish reasons at a later date. These are those reasons.
The relevant background facts are uncontroversial. On 1 May 2020, the plaintiff in these proceedings served a statutory demand on the first defendant. The first defendant applied to set aside the demand and filed an affidavit of the second defendant in support of the application. The statutory demand claimed a debt allegedly owing to the plaintiff under a land development joint venture agreement (JV Agreement) entered into between the plaintiff and the first defendant in 2015. On receipt of the application to set aside the demand and the accompanying affidavit, the plaintiff elected not to pursue the statutory demand. She was advised by her solicitors that the affidavit on its face raised a genuine dispute. On 23 November 2020, I made orders by consent that the statutory demand be set aside. Instead, she elected to commence these proceedings to pursue her claims said to arise under the JV Agreement.
In his written submissions, counsel for the plaintiff said, as a consequence of the matter not proceeding to a hearing, the affidavit in support of the application to set aside the demand had not been admitted into evidence. Counsel for the defendants accepted that proposition and the matter was argued on that basis. Although these reasons accept that to be the case, it should not be thought I necessarily agree with that proposition. An application to set aside a statutory demand requires both an originating process and an affidavit in support of the application. Absent an affidavit, the application cannot succeed. That elevates the status of any affidavit beyond what is usual in general litigation. In this jurisdiction the practice is for parties to file affidavits and to rely upon those affidavits in the course of a hearing. On occasions counsel will refer to an affidavit and seek to rely upon the deponent's evidence. Strictly speaking, that should probably happen in every case. But the practice is by no means universal. Affidavits are more often than not, taken as read. Objections may be raised to part of the affidavit and if the objection is made out then the offending part is struck out. But either way, there has in effect to be a ruling by the court as to whether or not the affidavit ought be received into evidence. The position is different in the statutory demand procedure. That may mean, even if an application to set aside a demand is not taken to a final hearing, the affidavit has a status which would not apply in the usual case. Having flagged that issue I will develop the point no further.
The indorsement of claim on the writ of summons is in the following terms:
1.The Plaintiff's claims arise from an investment made in around April 2015 in a proposed land development in Forrestdale, Western Australia, the terms of which were subsequently recorded in a 'Land Development Joint Venture' deed.
2. The Plaintiff's claims against the First Defendant include breach of contract, breach of fiduciary duty and misleading and deceptive conduct.
3. The Plaintiff's claims against the Second Defendant include misleading and deceptive conduct (and/or involvement in misleading and deceptive conduct by the First Defendant) and accessorial liability for breach of fiduciary duty.
4. The Plaintiff claims damages, equitable compensation, return of funds invested and/or other relief arising from the claims described above.
An affidavit of John Andrew Robertson sworn 18 January 2021 and filed in support of the application provides more detail as to the plaintiff's cause of action. Mr Robertson attaches a copy of the JV Agreement. It shows the plaintiff was described as the 'Investor'. The first defendant was described as the 'Developer'. The parties were to jointly develop land in Forrestdale by undertaking a subdivision and construction of nine separately titled industrial units. The plaintiff agreed to advance a loan of $1,000,000 which the parties acknowledged had occurred on 1 April 2015 prior to the execution of the JV Agreement. The first defendant was to contribute the land to the development and meet all costs of the development over and above the loan.
The JV Agreement contained a Conditions Subsequent which provided relevantly that the first defendant must use all reasonable endeavours to do or procure the grant of all necessary planning, construction and subdivision approvals within 24 months from the date of execution of the JV Agreement. If this condition was not met within the time allowed then the plaintiff was entitled to terminate the JV Agreement by notice in which case the agreement would terminate and the loan was immediately repayable. The Conditions Subsequent were not met within the time allowed and on 15 April 2020, the plaintiff gave notice to the first defendant electing to terminate. One of the plaintiff's claims is, accordingly, for repayment of the loan which has not been repaid. The plaintiff says, correctly, this claim can be pleaded without the use of any material contained in the affidavit.
The affidavit is the effect the first defendant did not use the plaintiff's loan purely for construction of the units but rather used it in part for the acquisition of land. Clause 5.2(b) provides that the first defendant must only use the loan for the purposes of the 'Development' – defined to mean the construction of the units. Clause 5.3 provides that the first defendant will contribute the land to the Development and meet all costs of the Development over and above the loan. Given the plaintiff's funds were to be used solely for construction, the plaintiff says her funds should have remained in the first defendant's bank account and should have been capable of being repaid immediately. The plaintiff says release from the implied undertaking is necessary if this claim is to be pleaded.
It is clear on the evidence that absent the release from the undertaking, it would not be open to the plaintiff to plead breach of the JV Agreement by the first defendant in using the loan from the plaintiff to acquire the land. It is clear from the evidence that until the plaintiff saw the affidavit in the statutory demand proceeding she did not know the money she had advanced had been used to acquire the land. In fact, in the affidavit the second defendant says he had a discussion with the plaintiff and the use of the funds advanced for the acquisition of the land was agreed. The plaintiff does not accept such a discussion ever took place. Of course that puts the defendants in an awkward position. On the one hand they say no use can be made of the material in the second defendant's affidavit. On the other hand, they say the plaintiff knew of the revised arrangement and agreed to it. Logically then, it is the defendants' position the plaintiff knew of the changed arrangements – the oral variation of the JV Agreement – and does not need to rely upon the affidavit of the second defendant if the plea of breach is to be made. Of course, that is of no comfort to the plaintiff. She says no conversation took place and the affidavit of the second defendant is incorrect. She must therefore rely on the affidavit and she requires the release.
There was no dispute between the parties as to the applicable legal principles. The plaintiff relied upon Hearne v Street[1] where at [96] the court said:
Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits. The appellants did not dispute the existence of this principle, and in particular did not dispute its potential application to the affidavit of Mrs Hesse and the witness statement of Dr Tonin.
[1] Hearne v Street (2008) 248 ALR 609.
In Springfield Nominees Pty Ltd v Bridgelands Securities Ltd,[2] Wilcox J identified a number of considerations which may, depending on the circumstances, be relevant to the exercise of the discretion. These considerations are:
1.the nature of the documents;
2.the circumstances under which the document came into existence;
3.the attitude of the author of the document and any prejudice the author may sustain;
4.whether the document pre‑existed litigation or was created for that purpose and therefore expected to enter the public domain;
5.the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information);
6.the circumstances in which the document came into the hands of the applicant; and
7.most importantly of all, the likely contribution of the document to achieving justice in the other proceedings.
[2] Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217.
This is one of those cases where the affidavit satisfies all of these matters. The affidavit of the second defendant was, it is to be presumed, a statement of the honest belief of the second defendant. True it is that because it was drawn for use in a statutory demand proceeding, it was effectively concerned with the solvency of the first defendant. This was a point emphasised by counsel for the defendants. But, with respect, the argument ignores the reality of the statutory demand procedure. If a demand is not set aside, there arises a presumption of insolvency. But the point at issue in applying to set aside a statutory demand is whether there is a genuine dispute about the debt. It is true that an unsuccessful application to set aside a statutory demand does not equate to a finding the debt is due and payable. But to have a demand set aside, an applicant must establish there is a genuine dispute or a serious question to be tried. That issue is not so far removed from the issues in this case to warrant a refusal to allow use of the affidavit.
In my view, the plaintiff clearly made out there were special circumstances and she was entitled to a release from the undertaking.
There are two further matters which were raised by counsel for the defendants and which require comment. The first has to do with the fact the application was made in these proceedings and was not made in the statutory demand action. The difficulty with counsel's argument is that the statutory demand action has come to an end. I made final orders. It is doubtful whether it would be open to the plaintiff to make an application in that now deceased action. But even if it was, there is no mischief in making an application in these proceedings. All parties who were concerned with the statutory demand proceedings are before the court in this case. In the absence of any prejudice to any party by making the application in these proceedings it would serve no useful purpose to require the statutory demand proceedings to be resuscitated – even assuming that were possible.
The second point made by counsel is that the plaintiff has, in breach of the undertaking, already used affidavit material. This was said to arise in two ways. First, it was said the indorsement of claim could only have been drawn by reference to the affidavit. With respect, that submissions is clearly not correct. The indorsement of claim appears to have been very carefully crafted to ensure no reference is made to material found in the affidavit. The defendants' objection is without substance. The second limb of the defendants' argument was that by referring to the affidavit in the summons and then in the affidavit supporting the application, there was a breach of the undertaking. With respect, that cannot logically be corrected. The plaintiff in making the application had to put all necessary material before the court. The application cannot be decided in a vacuum. Here the plaintiff did only what was necessary to provide the relevant material and in no way breached the implied undertaking.
On publication of these reasons, if the parties cannot agree orders, including orders for costs, then competing minutes (without the need for submissions) ought be filed. This should be done within seven days.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
6 MAY 2021
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