Repose Nominees Pty Ltd v Phillip Capital Ltd
[2019] VCC 78
•11 February 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-18-01025
| REPOSE NOMINEES PTY LTD (ACN 071 300 895) | Plaintiff |
| v | |
| PHILLIP CAPITAL LTD (ACN 002 918 247) | Defendant |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 February 2019 | |
DATE OF RULING: | 11 February 2019 | |
CASE MAY BE CITED AS: | Repose Nominees Pty Ltd v Phillip Capital Ltd | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 78 | |
REASONS FOR RULING
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Subject: SUMMARY JUDGMENT
Catchwords: PRACTICE AND PROCEDURE – Application by the plaintiff to strike out amended defence – alternatively, summary judgment pursuant to ss61 and 63 of the Civil Procedure Act 2010 (Vic)
Legislation Cited: Civil Procedure Act 2010 (Vic);
County Court Civil Procedure Rules 2008
Cases Cited:Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499;
Bodycorp Repairers Pty Ltd v Holding Redlich [2018] VSCA 17;
Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665;
Hausman v Abigroup Pty Ltd [2009] VSCA 288;
Lysaght Building Solutions Pty Ltd v Blanlko Pty Ltd (2013) 42 VR 27;
Repose Nominees Pty Ltd (ACN 071 300 895) v Phillip Capital Limited (ACN 002 918 247) (Ruling) [2018] VCC 1718;
Spencer v Commonwealth of Australia (2010) 241 CLR 118;
Wickstead v Browne [1992] NSWCA 272
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Levine | Maciel Pizzorno & Co |
| For the Defendant | Mr G Harris QC | Wotton & Kerney |
HER HONOUR:
1 By its amended summons dated 16 January 2019, the plaintiff seeks:
(a)to strike out the defendant’s amended defence dated 24 December 2018 and consequent upon the defence being struck out, judgment be entered against the defendant; alternatively
(b) summary judgment pursuant to s61 and/or s63 of the Civil Procedure Act 2010 (Vic) (“the CPA”).
Strike out application
2 The plaintiff contends the amended defence dated 20 December 2018 should be struck out because it fails to plead all of the material facts relied upon:
(i) to justify the forfeiture of the plaintiff’s shares as pleaded in paragraph 5 of the defence; and
(ii) causation in paragraph 11.
3 In order to understand the criticisms made of the pleading, it is necessary to have some understanding of the claims as formulated by the parties. These claims were helpfully summarised by his Honour Judge Smith in an earlier application relating to security for costs which will become relevant when considering the oral cross-claims made by the defendant in this application. In paragraph 18 of his Honour’s ruling dated 25 October 2018,[1] he summarised the claim made by the plaintiff ( “Repose”) as follows:
[1][2018] VCC 1718
“In summary, the claim pleaded by Repose is that:
·Repose retained the defendant as its share broker and financial adviser in about March 2012.
·On or about 13 March 2012, Repose instructed the defendant to procure 5 million shares in a company, 2UP Gaming PLC (“2UP”) and that the defendant did so.
·On 14 March 2012, the defendant removed the 5,000,000 shares in 2UP from Repose’s account without its instructions.
·This conduct constituted a breach by the defendant of the terms of the retainer and a breach of fiduciary duty owed to Repose.
·In June 2012, the defendant agreed to reimburse to Repose an amount of $140,000 being the amount that the defendant had charged Repose by way of fees.
·The defendant had not reimbursed the fees.
·In addition, Repose claims loss of value of the value of the 2UP shares.”
4 At the hearing before me, counsel for the plaintiff adopted the summary of the claim made by Judge Smith as being an accurate description of Repose’s claim.
5 Judge Smith summarised the defendant’s claim as follows:
“In summary, in its defence, the defendant alleges that:
·It (or its predecessor) had entered into a retainer with Repose in about September 2011 to conduct share trading activities on ASX-quoted equities on its behalf.
·Subsequently, it had been engaged by 2UP to effect and record the transfer of ownership in 2UP shares for which it was paid a fee by 2UP.
·On 1 February 2012, the defendant received notification from 2UP that Repose had purchased 5 million 2UP shares from 2UP.
·On 13 March 2012, in accordance with the instruction from 2UP, the defendant effected and recorded the transfer of ownership of 5 million 2UP shares to Repose.
·On 8 November 2012, the defendant was instructed by 2UP to cancel the said transfer of ownership of the 5 million 2UP shares which it effected 4 days later.” (Defence paragraphs 5 (a) and (b))
6 Judge Smith was satisfied that the threshold question as to whether the jurisdiction for security costs had been enlivened. But his Honour declined to make an order on the basis that the defence had not pleaded to a crucial part of the plaintiff’s claim, namely, that the share transfer recorded by the defendant on 13 March 2012 had been reversed by it on 14 March 2012. His Honour noted the defendant simply denied the allegations in paragraph 5 and pleaded other matters which did not appear to be consistent with the content of the defendant’s account for Repose. Therefore, he was not prepared to make an order for security at that time but as his Honour said:
“… ‘at this time’ because it may be the case that the defendant will amend its defence to address this crucial issue and the court’s discretion might be exercised quite differently.”
7 Since the application before Judge Smith, the defendant did substantially amend paragraph 5 of its defence. The amendments are set out in the amended defence dated 24 December 2018. In the amended version of paragraph 5, the defendant pleads that 2UP maintains Repose did not provide the consideration required under the 2UP contract. A written call-up notice dated 30 May 2012 was provided to Repose by 2UP seeking payment of GBP 500,000 within 21 days to avoid forfeiture of the 5 million shares. Additionally, a written notice of forfeiture of shares, incorrectly dated 13 June 2012, was provided to the plaintiff on or after 29 June 2012 by 2UP, advising that because of the plaintiff’s failure to pay the GBP 500,000, 2UP had cancelled the 5 million shares. This is referred to thereafter as the cancellation. Paragraph 5 continues that on 8 November 2012, 2UP notified the defendant of the cancellation and subsequently the defendant recorded the terms of the cancellation notification but with effect from 14 March 2012 in accordance with its usual practice for such notification. Finally, it is pleaded that if the plaintiff had any interest in the shares the subject of the 2UP contract, that interest was not affected, altered or otherwise lost by reason of the subsequent recording by the defendant.
8 In summary, the effect of the amendment is that the defendant asserts that 2UP cancelled the shares because of the plaintiff’s failure to pay. There is a conflict on the evidence before the Court in this application whether the consideration for the shares was paid.
9 The plaintiff argues the amended paragraph 5 is still deficient because it should have pleaded the following matters:
(a)the terms of the Articles of Association of 2UP that relate to the forfeiture of shares; and
(b)that the company, namely 2UP, complied with the aforementioned Articles of Association when it forfeited the shares.
10 The plaintiff’s counsel produced Articles of Association of 2UP which is a UK company. This was tendered into evidence as Exhibit P1 without objection, subject to counsel for the defendant noting that his client was not in a position to say whether the document produced was the applicable version
11 I was taken to various articles in Exhibit P1. Reference was made to article 61(4) as providing a basis for saying that there should be a record of what happened to the shares, which in turn produces a positive requirement upon the defendant to plead where the shares actually went.
12 Counsel for the plaintiff said that there had been no enforcement notices required under article 53(1)(a) and that this should have been pleaded. In respect of the notice of forfeiture, there was disputed evidence about its receipt.
13 Paragraph 5 of the amended defence pleads matters which were made known to the defendant by 2UP’s directors. This is referred to in the affidavit of Mr Lux, the solicitor for the defendant, sworn on 4 December 2018. He deposes in paragraphs 12 and 13 of his affidavit to the conversations he had with two directors of 2UP, being Mr Marino Sussich and Mr Peter Lombardo who informed Mr Lux of the matters pleaded in paragraph 5. The plaintiff’s counsel was at pains to stress that the cancellation of the shares was done improperly for the reasons that the consideration was in fact paid and further, that the notice of forfeiture suffered from various technical defects which he outlined. If, in fact, those matters are subsequently proved, then it may well be as counsel for the defendant pointed out the purported forfeiture and cancellation of shares was invalid, in which case the plaintiff is entitled to ownership of the shares. If that were so, then the plaintiff may not have sustained any loss at all.
14 I do not accept the plaintiff’s counsel’s submission that there was an obligation upon the defendant to plead terms of the articles in the Articles of Association of 2UP and to plead positively that 2UP acted in accordance with its articles when forfeiting the plaintiff’s shares. Both the terms of the relevant articles and the legality of compliance with them by 2UP, including the right to forfeit the shares, are clearly not matters within the defendant’s knowledge or control.
15 I am not persuaded in the circumstances there was any positive obligation upon the defendant to plead that 2UP complied with its Articles of Association and its forfeiture of the shares was justified, such that the defendant’s failure to do so should lead to the defence being struck out. I am not satisfied that the pleading in paragraph 5 is defective in the manner suggested by the plaintiff and accordingly, I will not strike it out.
16 The other criticism made by the plaintiff related to paragraph 11 of the amended defence dealing with causation. It was submitted this paragraph was inadequate and should be struck out as there was a positive onus upon the defendant to say who caused the plaintiff’s loss if it was not the defendant. I disagree.
17 The onus is of course upon the plaintiff to prove causation as part of its claim. The defendant has denied that it has caused any loss and goes on to say that if there is any loss, it was not caused by the defendant’s conduct. I do not consider the pleading as currently formulated to be inadequate or defective. Paragraph 11 is simply joining issue with the allegation that the defendant caused the plaintiff to suffer loss. Further, given the plaintiff’s submissions regarding the supposed misconduct of 2UP, it can always if it wishes to do consider joining 2UP as a defendant. But the fact that 2UP may have caused the plaintiff to suffer loss is not a matter which the defendant needs to positively plead when defending the claim made against it. All the defendant need do, which it has done is to plead that it did not cause the plaintiff’s loss. Accordingly, I will not strike out paragraph 11.
Summary judgment application
18 The principles relating to summary judgment applications are well settled. The plaintiff makes its application under s61 and s63 of the Civil Procedure Act. These principles were recently summarised in Bodycorp Repairers Pty Ltd v Holding Redlich [2018] VSCA 17 at paragraph [127] where the Court said:
“[127] The general principles which apply in relation to an application for summary determination under s 63 of the Civil Procedure Act are those set out in Lysaght. The primary judge accurately summarised them as follows:
(w) the test for summary judgment is whether the respondent to the application has a ‘real’ as opposed to a ‘fanciful’ chance of success;
(x) the test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ put forward in General Steel Industries Inc v Cmr for Railways (NSW);
(y) it should be understood, however, that the test is, to some degree, a more liberal test than the ‘hopeless’ or ‘bound to fail’ test put forward in General Steel; and
(z) the power of summary dismissal is to be exercised with caution unless it is clear that there is no real question to be tried (that is, a question which realistically might result in the respondent to an application for summary judgment succeeding in the proceeding).
19 Counsel for Repose argued there was no triable issue over whether the shares had been paid but it is clear from the materials, in particular the affidavit filed by Mr Lux, that there is a dispute on this issue. It is well known that disputed questions of fact cannot be resolved in an interlocutory application of this sort.
20 Leave was sought by the plaintiff to cross-examine Mr Sussich, who was one of the directors of 2UP referred to in paragraph 12 of the affidavit of Mr Lux. I refused leave to cross-examine Mr Sussich because, as rightly pointed out by the defendant, he was not a deponent to any affidavit filed in this proceeding.
21 In respect of the service of the notices at Exhibit NKL-3, counsel for the plaintiff submitted that the address was incorrect and that given this, there could be no triable issue because no affidavit in reply had been served saying that it was the correct address. It was put that in respect of the various payments referred to in Exhibit AM-4 to the affidavit of Mr Murdaca sworn 21 January 2019, that there had been no explanation on affidavit by the defendant disputing that these payments made for and no explanation for the email contained in Exhibit AM-13 dated 13 July. The gist of the plaintiff’s case was that given on its case payment had occurred, 2UP had not acted in accordance with its Articles of Association and various notices sent suffered from defects, that led to the inexorable conclusion that the defendant had no defence to the claim. The fundamental difficulty with all of this is that it relates to alleged failures or breaches by 2UP which are unconnected with the defendant and beyond its control.
22 As the defendant submitted, once the Court is satisfied that there is a real issue “of fact or law material to the claim or defence”, an application for summary judgment is refused. In support of that proposition, the defendant relied on Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27; Spencer v Commonwealth of Australia (2010) 241 CLR 118; Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665; and Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499.
23 The defendant identified the real issues raised by the pleadings and/or the evidence, namely:
(1)Do paragraphs 4 to 11 of the amended statement of claim disclose a cause of action against the defendant or otherwise embarrass them?
(2)Did the plaintiff ever acquire an interest in the 5 million shares and if so how?
(3)Assuming the plaintiff had an interest in the 5 million shares, has that interest been lost and if so how?
(4)What if any effect of the conduct alleged against the defendant have on that assumed interest of the plaintiff in the 5 million shares?
(5)What is the scope, content, subject matter and terms (including those said to be implied) of the retainer between the plaintiff and the defendant?
(6)Does the scope, content and subject matter of the retainer as found and the conduct of the defendant (admitted or proved) give rise to the duties alleged?
(7)Does the conduct of the defendant (admitted or proved) constitute a breach of any of the duties found?
24 Added to that list, in my view, should be whether the losses claimed by the plaintiff have in fact been caused by the defendant’s conduct. Assuming causation is proved, there then follows an assessment of damages.
25 For its part, the plaintiff’s summary of issues is not dissimilar. The issues identified in the plaintiff’s outline of submission at paragraph 7 are:
(a)Did the plaintiff pay for the shares?
(b)Were the shares validly forfeited?
(c)Did the defendant owe the plaintiff any duties?
(d)Did the defendant breach its duties to the plaintiff?
(e)What were the contents of the duties owed by the defendant to the plaintiff, if any?
(f)Did the defendant cause the plaintiff’s loss or damage?
26 As can be readily seen from the issues identified by both parties, none of them are capable of being resolved in an interlocutory application and are self-evidently triable issues of fact and law. That alone is sufficient to dispose of the plaintiff’s application for summary judgment.
27 The other difficulty for the plaintiff was that even if it succeeded on the grounds relied upon its application, there were other matters pleaded which still remained to be determined. This included the claim of reimbursement of fees said to be due in the sum of $140,000 together with claims made for exemplary and or punitive damages relying upon alleged unconscionable conduct by the defendant. These are matters which could not be disposed of summarily which is a factor to take in to account when exercising my discretion to grant summary judgment.[2]
[2]Spencer v The Commonwealth (2010) 241 CLR 118 at [25]; see also Wickstead v Browne [1992] NSWCA 272
28 As a threshold issue, the defendant referred to the statement in the affidavit sworn by Mr Murdaca that he believed that the defendant had no defence to the claims. Mr Murdaca is the husband of Nancy Murdaca, who is the sole director of the plaintiff. In his affidavit dated 12 November 2018, he deposed in paragraph 10:
“The defendant’s defence has no real prospect of success in resisting the claims made against it in the amended statement of claim and judgment should be entered in favour of the plaintiff.”
29 An affidavit was sworn by Nancy Murdaca which did not contain a similar statement. The point made by the defendant was that the statement made by Mr Murdaca did not comply with Rule 22.04(1)(b) and, therefore, the application should fail on that basis alone, the reason being that Mr Murdaca was not the plaintiff or the controlling mind of the plaintiff because he is not a director. That being so, there was no statement made by the plaintiff as is required under the rule.
30 Counsel for the plaintiff submitted that the requirement could be dispensed with but did not make any submissions as to why that ought to be done in the circumstances of this case, assuming dispensation could be made. It has been held that in applications of this type, if there is an irregularity, then a plaintiff may be given an opportunity to cure the defect, for example by filing a further affidavit.[3] I do not consider the application should be dismissed for this reason alone. Had the claim otherwise been sound, then the interests of justice would have dictated the plaintiff be permitted to cure this defect to avoid further time and expense.
[3]Hausman v Abigroup Pty Ltd [2009] VSCA 288 at [62]
31 I am not persuaded the plaintiff has established the defence has no real prospects of success. There are several real issues of fact and law in this case which can only be determined properly after a full hearing of the matter. Accordingly, the application is dismissed and the defendant is given leave to defend.
32 The defendant made an oral application for security for costs which was foreshadowed in its outline of submission dated 1 February 2019. No summons was filed seeking security nor was any earlier notice provided to the plaintiff. The plaintiff objected to this application on the basis there was no summons on foot and the summons seeking security for costs had been dismissed previously by Judge Smith. I consider there is some force in this argument and that the matter, if it was to be pursued, should have been the subject of a fresh summons and sufficient notice been given to the plaintiff beforehand. Accordingly, I will not determine the oral application for security for costs made by the defendant in these circumstances.
33 Similarly, there was an application made to strike out the plaintiff’s amended statement of claim on the basis that it contained a number of deficiencies. Some of the matters raised by counsel for the defendant appeared to have some merit. I was invited to strike the pleading out of my own volition under the Civil Procedure Act, but I am not prepared to do so in the absence of any prior notice having been given such an application would be made and a summons filed. If such an application were to be made, it should have been done with proper notice of the alleged defects in the pleading so that the plaintiff would have had an opportunity to consider and respond in a reasonable time. Additionally, given the matter is listed for trial on 25 February 2019, it was incumbent upon the defendant to have made the application well before the hearing date rather than leave it to such a late stage of the proceeding. Consequently, I do not accede to the oral applications made by the defendant for the relief sought by it on 4 February 2019.
34 Subject to hearing from the parties, I propose ordering the plaintiff pay the defendant’s costs of and incidental to the application, such costs to be taxed on a standard basis in default of agreement.
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Certificate
I certify that these 11 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 11 February 2019.
Dated: 11 February 2019
Associate to Her Honour Judge A Ryan
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