Scandi International Pty Ltd v Larkfield Industrial Estate Pty Ltd
[2017] VCC 1153
•22 August 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-16-02981
| SCANDI INTERNATIONAL PTY LTD (ACN 082 473 747) and CASUALIFE FURNITURE INTERNATIONAL LIMITED (a Hong Kong Corporation) | First Plaintiff Second Plaintiff |
| v | |
| LARKFIELD INDUSTRIAL ESTATE PTY LTD (ACN 006 067 965) AND BETWEEN LARKFIELD INDUSTRIAL ESTATE PTY LTD (ACN 006 067 965) and SCANDI INTERNATIONAL PTY LTD (ACN 082 473 747) and | Defendant Plaintiff to Counterclaim Defendants to Counterclaim |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 July, 3 August 2017 | |
DATE OF RULING: | 22 August 2017 | |
CASE MAY BE CITED AS: | Scandi International Pty Ltd & Anor v Larkfield Industrial Estate Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1153 | |
REASONS FOR RULING
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PRACTICE AND PROCEDURE – application to amend defence and counterclaim and to join further parties – conspiracy allegations – necessary elements – leave given to make some of the amendments sought and to join one of the proposed further parties
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiffs and first and second defendants to counterclaim | Mr A T Schlicht | Challenge Legal |
| For the defendant and For the third defendant to counterclaim | Mr M McKillop | HWL Ebsworth Lawyers Mr J Guss, in person |
HER HONOUR:
1 Larkfield Industrial Estate Pty Ltd (Larkfield) is the defendant and counterclaimant in this matter. It seeks leave to amend its current defence and counterclaim and to join two further parties as defendants to counterclaim.
2 For the reasons given below, I will allow some, but not all, of the proposed amendments. I will allow joinder of the company ACN 112 314 502 (described in these reasons as LHV) but not the bringing of the proposed conspiracy claim against it. I will not allow joinder of Mr Ali.
Background
3 On 1 October 2013, Mr Joseph Guss deposited various goods in a shed belonging to Larkfield. At the time he deposited those goods, Larkfield says that he told it that he was doing it on behalf of Casualife Furniture International Pty Ltd (CFIAUS). He provided an Occupancy Agreement, which Larkfield says he signed purportedly on behalf of CFIAUS. He also provided a Certificate of Currency of Insurance dated 7 October 2013, which named three relevant companies as having an interest in the goods: CFIAUS, Scandi International Pty Ltd (Scandi), and Casualife Furniture International Limited (a Hong Kong corporation) (CFIHK).
4 The goods continued to be held by Larkfield. Monthly payments for their storage were made, purportedly by LHV but these later stopped. On 10 September 2015, Larkfield sent a notice to Mr Guss terminating the licence to occupy its shed. Larkfield then retook possession of the shed and took possession of the goods stored in it. On 14 October 2015, it sent a notice to Mr Guss, indicating it was going to dispose of the goods.
5 Subsequently, these proceedings were instituted. The central dispute is who is entitled to the goods in the circumstances, and whether Larkfield is entitled to damages.
Statement of claim
6 On 12 July 2016, Scandi and CFIHK issued these proceedings against Larkfield. By their amended statement of claim filed 24 July 2016, they allege relevantly that Scandi is the owner of the goods in the shed, and that CFIHK is “entitled to demand and recover in its name” other goods pursuant to various mortgage debentures which had crystallised. Particulars set out that three companies, which were subsequently deregistered, had all given mortgage debentures charging their assets in favour of CFIHK. Those three companies included LHV and CFIAUS. Scandi and CFIHK say that Larkfield was on notice that the property of Scandi and CFIHK would be stored in its shed by the Certificate of Currency of Insurance, which named Scandi and CFIHK as the insured and Larkfield as an interested party. Relevantly, they say there was no relationship created between Scandi and CFIHK on the one hand, and Larkfield on the other, which would entitle Larkfield to refuse them the right to collect their goods.
7 They allege that after the letter of 10 September 2015, when Larkfield retook possession of the shed and the goods, Larkfield received the goods from Scandi and CFIHK by way of constructive delivery and became an involuntary bailee of the goods.
8 By the letter dated 14 October 2015, Larkfield purported to give notice to Mr Guss under s66 of the Australian Consumer Law andFair Trading Act 2012 (the Act), that it would dispose of the goods in shed 43A. Larkfield sent a letter on 1 December 2015 to CFIHK purporting to give notice under s66 of the Act. Scandi and CFIHK say that the goods are not uncollected goods under s54 of the Act and so the Act does not apply to them. They say that as Larkfield does not have the right to demand payment of a relevant charge under s55 of the Act, Larkfield is not entitled to demand any payment as a precondition of allowing delivery of the goods to Scandi and CFIHK.
9 The effect of the claims is that Scandi and CFIHK say Larkfield is not entitled to dispose of the goods and apply those proceeds against costs it has incurred in connection with them.
10 There are other claims alleged, which are not relevant to these reasons.
Defence
11 By its further amended defence, Larkfield says the goods were stored by Mr Guss acting on his own behalf, that LHV was at no time party to any agreement with it, and that any payments made to it by LHV were at the direction of Mr Guss and on his behalf. It otherwise generally denies matters and relies on its counterclaim.
Counterclaim
12 Larkfield instituted a counterclaim against Scandi, CFIHK and Mr Guss. Its current claims are put in a variety of ways. Those that are relevant to the amendments now sought are summarised below.
13 Larkfield pleads that, first of all, Mr Guss’ actions in October 2013 amounted to him making a representation (the Authority Representation) that he had authority to act for CFIAUS, that this representation was made in trade or commerce, and was misleading and deceptive in breach of s18 of the Australian Consumer Law (ACL), because CFIAUS was, at that stage, already wound up and Mr Guss had no authority to enter into the contract or act for it. Larkfield relied on that representation by storing the goods, when in fact CFIAUS had no capacity to pay any rental or other fees for the goods.
14 It says that Scandi and CFIHK were aware of the Authority Representation and its falsity and permitted Mr Guss to store the goods in which they claim an interest. They were therefore involved in the ACL breach. Larkfield claims that this was unconscionable conduct under s20 of the ACL. Damages are claimed.
15 Alternatively, Larkfield says that Scandi and CFIHK cannot assert their ownership or security interest as against Larkfield due to their unconscionable actions. This claim is made under the ACL on the basis that Mr Guss was the agent for them in arranging storage of their goods and insurance, purporting to seek to recover, and acting as a consultant and solicitor in this proceeding. Larkfield says they were aware of what Mr Guss was doing.
Summons
16 On 8 May 2017, Scandi gave discovery of two documents. They were both dated 1 September 2009. One was a power of attorney from Mr Jaffar Ali, the director of Scandi, appointing Mr Guss and Mr Nazrul Islam as his attorney and authorising them jointly and severally to do anything he could lawfully authorise an attorney to do. The other document was a letter from Scandi to Mr Guss authorising Mr Guss to enter agreements and sign all documents for Scandi. These documents had not previously been discovered by any party in the proceeding.
17 Another significant matter that came to the attention of Larkfield in May or June 2017 was that LHV, which had been deregistered on 18 May 2014, was re-registered at some point between 6 December 2016 and 22 May 2017. In an affidavit sworn by Mr Guss, he said he was given instructions by Mr Ali to re-register LHV.
18 A further matter which Larkfield recently became aware of is that there were transfers of the relevant mortgage debentures relied on by CFIHK to Mr Guss at some point.
19 By its summons of 15 June 2017, Larkfield seeks to file a second further amended defence and second further amended counterclaim. It wants to join LHV (now called ACN 112 314 502 Pty Ltd, but for convenience I will continue to refer to it as LHV in these reasons) as a defendant to the counterclaim. It also wants to join Mr Ali as a defendant to the counterclaim. The other parties oppose these orders.
20 The hearing of the summons commenced on the afternoon of 26 July 2017 and ran for approximately two hours (the listed time). The matter was adjourned over to 3 August, the next available date, as more time was required. Larkfield was asked to file a table making clear its claims and the alternative ways in which it put its claims against different parties. It was also asked to clarify the basis on which the various heads of damages are sought in the prayer for relief and to follow-up in relation to what it wants to do with paragraph 6 of the proposed second further amended defence.
21 A second draft of the proposed second further amended defence, and further submissions were filed on behalf of Larkfield by 3 August. At the hearing on 3 August 2017, Counsel for Larkfield sought to make further changes to it. Larkfield completed its oral submissions and the plaintiffs and Mr Guss put their submissions in opposition to the relief sought by Larkfield. A third version of the proposed pleadings were filed by Larkfield (with leave) on 4 August 2017, together with an updated table indicating the different claims put.
22 These reasons for ruling deal with the final version of the proposed second further amended defence, and proposed second further amended counterclaim counterclaim, received by the Court on 4 August 2017.
Principles regarding pleading amendments
23 In reaching my decision below, I have applied the relevant principles regarding pleading amendments in Victoria, summarised by Derham AsJ in ABL Nominees Pty Ltd v MacKenzie (No. 2) [2014] VSC 529:
· the power to amend in r 36.01 of the rules authorizes the court to order that a party have leave to amend any pleading for the purpose of determining the real question in controversy between the parties to any proceeding, correcting any defect or error or avoiding multiplicity of proceedings;
· an amendment which is futile because it is obviously bad in law will not be allowed;
· if a proposed amendment would be liable to be struck out if it was in an original pleading, if bad in law or defective as a pleading, then leave to file it will not be allowed;
· the test is best expressed in the words of s 63 of the Civil Procedure Act 2010 in terms of if the amendment has no real prospect of success at trial that would be a highly relevant factor in the exercise of the discretion to refuse the application; and
· limits on re-pleading take account of the factors identified by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [38].
Proposed second further amended defence
24 Initially, Larkfield had sought to add a claim that there were transfers of the mortgage debentures to Mr Guss and, therefore, CFIHK has no interest in the goods those debentures relate to. However, Mr Guss filed an affidavit, dated 24 July 2017, explaining that him being named as transferee was an administrative error by ASIC. Counsel for Larkfield later advised that it no longer seeks to make that amendment.
25 Larkfield seeks a minor amendment to paragraph 31(a) of the defence, which presently says “It says further that it relies on the matters disclosed on its counterclaim as a complete answer to the plaintiffs’ claim”. It seeks to add the words “and incorporates them in the defence as if pleaded in it”. That alteration is inconsequential. Larkfield seeks to rely on it as a result of an issue raised with the previous wording by the plaintiffs. I will allow that amendment.
Proposed second further amended counterclaim
Lien claim
26 Larkfield seeks to add a new paragraph 56(c) to the counterclaim which states:
“further, Larkfield is entitled to a lien over the Subject Goods for its costs of storing and securing the Subject Goods whilst they have been in its possession as against the plaintiffs, such costs including the relevant charge referred to in paragraph 55B above.”
27 Whilst the costs of storing and securing the goods “include the relevant charge referred to in paragraph 55B” of the proposed second further amended claim, no particulars are given of what the costs might otherwise be.
28 Paragraph 55B of the proposed second further amended counterclaim pleads as payable to Larkfield by Mr Guss or LHV (if Larkfield is found to have contracted with Mr Guss or LHV in relation to the storage of the goods):
(a) pursuant to section 55(2)(a)(ii) of the Act, storage costs for the goods up to and including 26 July 2016 being the date of the disposal notice given to Mr Guss;
(b)pursuant to section 55(2)(b) of the Act, storage costs payable in respect of storage of the goods after 26 July 2016;
(c)pursuant to section 55(2) of the Act, such other amounts as the Court determines. (Larkfield claims these includes its legal costs of this proceeding, its legal costs prior to the issue of the proceeding relating to the Subject Goods, and its costs of its attempted sale of the goods, nett of any sum to be released to it from sums paid as security into Court by Scandi and CFIHK).
29 In other words, at least so far the reference to the paragraph 55B ‘relevant charge’ is concerned, Larkfield is claiming a lien over goods owned by Scandi or CFIHK relating to costs it says are otherwise payable by Mr Guss or LHV, arising under the Act.
30 No details or particulars of how the lien arises are given.
31 Counsel for Larkfield says that this claim is to be added to explicitly plead a preservation lien arising in favour of Larkfield against Scandi and CFIHK, under the principles set out in Re Universal Distributing Co Ltd (in liquidation) (1933) 48 CLR 171. It says this claim had been previously identified as arising as a basis for Scandi and CFIHK being unable, as a matter of conscience on the basis of paragraph 45 of the second further amended counterclaim to assert their interest in the goods. Larkfield now seeks leave to plead it as a separate claim.
32 Larkfield says it relies on the general equitable principle that where a person has incurred costs to preserve or realise a valuable asset, others claiming an interest in that asset (and benefitting from the preservation of the asset by the first person) must pay the first mentioned person’s costs, expenses and fees in preserving or realising the assets. It says the person does not need to be a liquidator, receiver or other insolvency practitioner.
33 Scandi and CFIHK oppose this amendment. They say that the lien being claimed is a possessory lien. An essential element of a possessory lien is that possession must be acquired in the right way: it must not have been obtained by fraud or without authority. The lien must have been created either by the owner of the goods or a person acting with the owner’s authority. Someone who obtains possession from someone else who is in possession without the authority of the owner, cannot claim a possessory lien in respect of a debt owed by the latter: Protean Enterprises (Newmarket) Pty Ltd v Randall [1975] VR 327.
However, in incorporating reference to the ‘relevant charge’ referred to in paragraph 55B of the counterclaim, it seems that Larkfield is arguing:
· Mr Guss or LHV was initially in possession of the goods with the authority of Scandi and CFIHK; and
· Larkfield obtained possession of the goods from Mr Guss or LHV when it took possession of the shed and its contents.
It seems that Larkfield seeks to argue that it acquired possession from Mr Guss or LHV in circumstances where Mr Guss or LHV first had possession with the authority of Scandi and CFIHK, and thus acquired possession in the right way. Whether it did acquire possession in the right way, and whether it is able to seek costs under the Act as it has done, is a complex issue. I am not satisfied that the claim has no reasonable prospects of success for the purposes of refusing to give leave to make it at this stage. It will need to be decided once the facts have been determined, and with the benefit of detailed legal argument, at trial.
Mr Guss also opposes the lien being added, although the claim is not made against him. He says that the general equitable principle is limited on the authorities to liquidators or receivers or persons in like position. He says liquidators and receivers have the benefit of the lien as they are entitled to get their fees because they have recovered money for other people. Larkfield says the principle is not so limited, that there is dicta that it extends to other people who spend money looking after an asset. Mr Guss says this is not that sort of case.
Re Universal involved a claim for remuneration by a liquidator for work done for the express purpose of raising the fund in question, where it was held that the costs of raising the fund were able to be charged upon it. Dixon J stated at 175:
“In applying this principle, only those expenses appear to have been thrown against the fund belonging to the debenture holders which have been reasonably incurred in the care, preservation and realisation of the property. In the present case the liquidator has employed a material part of his time and energies in recovering monies…. which enure for the debenture holder, and in so far as these services increase the remuneration which he receives, I see no reason why the burden should not be thrown upon the proceeds”.
38 A helpful discussion of the principles underlying liens of this nature is set out in the judgment of Robson J in Re S&D International Pty Ltd (in Liq) (rec and mgr apptd) [2009] VSC 225 at [254] to [276]. I accept the proposition put by Mr Guss that generally this sort of lien has dealt with persons in the nature of liquidators and receivers, who have expended efforts creating a fund over which they then make a claim, including by selling and getting assets in, and that such persons are in a different position to a storer of goods as Larkfield is here. However, the law relating to liens is complex, and the class of relationships or particular circumstances in which equity may imply a lien are not closed: Coad v Wellness Pursuit Pty Ltd (in liq) [2009] WASCA 68 per Buss JA at [45] referencing Gibbs CJ in Hewett v Court [1983] HCA 7, (1983) 149 CLR 639; Thackray & Ors v Gunns Plantations Ltd [2011] VSC 380 at [40] - [41]. Whether the sort of lien apparently being claimed by Larkfield in this case exists is arguable. It is an argument that should occur in trial, with the benefit of a full hearing on facts and detailed submissions on the relevant law.
39 I will allow the amendment to plead the lien.
LHV – joinder
40 Larkfield seeks to join LHV as a defendant to counterclaim, and amend its claim accordingly, so that it can make various claims against LHV now that is has been re-registered. It presently seeks a disposal order pursuant to section 68 of the Act against Mr. Guss, Scandi and CFIHK. It seeks against those parties a declaration that it is entitled to dispose of the goods. It seeks against Scandi and CFIHK a final order pursuant to section 232(1) of the ACL restraining them from asserting any interest in the goods or the proceeds of their sale in priority to any claim on the goods made by Larkfield. It seeks against Mr. Guss an order for payment under the storage contract it says it entered into with him.
41 Larkfield now seeks to make those same claims also against LHV and therefore has proposed consequential changes to the pleading to make those claims.
42 Order 9.06(b) of the Rules stipulates that the Court may order that a person be added as a party to the proceeding where:
“(i) a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(ii) a person between whom and any party to the proceeding there may exist a question arising out of or relating to or connected with any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding;…”
43 I am satisfied that the requirements of order 9.06(b) of the Rules are made out. I will order that Larkfield has leave to join LHV as a defendant to the counterclaim, and to make the proposed amendments to its counterclaim founding those claims.
44 However, for the reasons given below, I do not allow the proposed amendments insofar as Larkfield seeks to make a conspiracy claim against LHV.
Conspiracy claim
45 The principal changes proposed to the second further amended counterclaim are to allege that there was a conspiracy in which Scandi, CFIHK, Mr Guss, LHV and Mr Ali were involved.
46 The claim is principally set out at paragraphs 63-66 of the pleading which states:
63. The plaintiffs:
(a)commenced this proceeding asserting an entitlement to possession of the goods; and
(b)took steps to pursue their cause of action in this proceeding.
for the purpose of depriving Larkfield of any assets to realise to recover its outstanding costs from in relation to the storage and related costs of the goods.
64. Mr Ali:
(a)permitted Mr Guss to control Scandi as alleged above;
(b)permitted the prosecution of this proceeding by Scandi for the purpose of depriving Larkfield of any assets to realise to recover its outstanding costs from in relation to the storage and related costs of the goods;
(c)permitted the prosecution of this proceeding by Scandi without his input or involvement for the purpose of depriving Larkfield of any assets to realise to recover its outstanding costs from in relation to the storage and related costs of the goods;
(d)failed to properly exercise his duties as a director of Scandi in relation to this proceeding;
(e)instructed Mr Guss to arrange for LHV Pty Ltd to be re-registered;
(f)failed to inform Larkfield that LHV Pty Ltd had been re-registered in circumstances where he was aware, or should have been aware, of this proceeding and the matters pleaded herein.
65. Mr Guss:
(a)made the Authority Representation with the actual or constructive knowledge of each of Scandi, CFIHK, Mr Ali and LHV Pty Ltd;
(b)had the purpose in doing so, to the knowledge of each of Scandi, CFIHK, Mr Ali and LHV Pty Ltd, to:
(i) ensure that Larkfield has no contracting counterparty whom it could successfully bring a claim for the storage and related costs of the goods in the event the said costs were left unpaid, whether that be CFIAUS or LHV Pty Ltd; and
(ii)ensure that Scandi and CFIHK would be in a position to recover the goods in reliance on their interests either as purported owner or security interest holder in respect of the goods.
66. Mr Guss:
(a)caused the plaintiffs and LHV Pty Ltd to bring or become involved in this proceeding to further the Scheme (as defined below);
(b)was assisted by Scandi, CFIHK, Jaffar Ali and LHV Pty Ltd in pursuing the Scheme (as defined below) by:
(i)bringing and prosecute the proceeding in the case of the plaintiffs;
(ii)in allowing Mr Guss to control Scandi despite his powers as a director of Scandi to do otherwise in the case of Jaffar Ali;
(iii)by allowing Mr Guss to assert in his own defence and in the proceeding that it was the contracting party with Larkfield, in the case of LHV Pty Ltd.
(paragraphs 63 to 66 collectively, the Scheme).
67.By reason of their part in the Scheme, any two or more of Mr Guss, Scandi, CFIHK, LHV Pty Ltd and Mr Ali together, wrongfully and with intent to injure Larkfield conspired and combined against Larkfield to attempt to prevent Larkfield from recovering its fees for the storage of the goods subject of this proceeding and related costs, whether by debt recovery action or executing against the goods.”
47 In AED Oil Limited –v- Back & Ors [2009] VSC 158 Justice Judd said as follows (citations omitted):
“The elements of the torts of conspiracy which the plaintiffs purport to plead against the defendants are helpfully summarised by Hely J in Australian Wool Innovation Ltd v Newkirk:
Like fraud, conspiracy is not an allegation that should lightly be made: Hughes v Western Australian Cricket Assn Inc (1986) 69 ALR 660 at 700 (Toohey J).
Conspiracy is the agreement of two or more persons to do an unlawful act, or to do a lawful act by unlawful means. Historically, there are two kinds of conspiracy, the elements of which are distinct:
(1)an ‘unlawful means’ conspiracy in which the participants combine together to perform acts which are themselves unlawful; and
(2)a combination to perform acts which, although not themselves unlawful, are done with the sole or predominant purpose of injuring the claimant.
See Bullen & Leake & Jacob’s Precedents of Pleadings, Vol 2, 15th edn, Sweet & Maxwell, London, 2004, at [50-01]; McKellar v Container Terminal Management Services Ltd (above) at [135] – [154].
Bullen & Leake identifies the necessary elements in an action in conspiracy at [50-01.1]:
The claimant must plead and prove the following necessary elements:
(i)a combination or agreement between two or more individuals (required for both types of conspiracy);
(ii)an intent to injure (required for both types of conspiracy but must be shown as the sole or predominant purpose for type (2) above);
(iii)pursuant to which combination or agreement and with that intention certain acts were carried out;
(iv)resulting loss and damage to the claimant.
A conspiracy can be proved without evidence of an express agreement. A court is entitled to have regard to the overt acts pleaded, and to infer from those acts that there was an express agreement to further the common object of the combination. All of those said to be parties to the conspiracy should be sufficiently aware of the surrounding circumstance, and share the same object, for it properly to be said that they are acting in concert.
‘Unlawful means’ includes crimes and tort and breaches of statutory provisions: Trindade & Cane, The Law of Torts in Australia, 3rd edn, Oxford University Press, Melbourne, 199 at p 230. A person is using unlawful means if they are doing an act which they are not at liberty to commit: Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169. It is not open to a party to plead as an alternative to a substantive cause of action already pleaded the tort of conspiracy to commit the substantive wrong, nor can there be a common law conspiracy to contravene the TPA outside the form of conspiracy expressly provided for in s75B(1)(d) of the TPA: McKellar (above) at [195] and [197]. But the first respondent has not taken any objection to the ASC on this account, hence these matters can be put to one side.
The tort requires an intention to injure. As Kiefel and Jacobson JJ observed in Dresna Pty Ltd v Misu Nominees Pty Ltd (supra, at [7]) an agreement to do an unlawful act that results in damage to another party is not the same as a conspiracy to injure that party. In order to prove a conspiracy a claimant must show that the wrongful act complained of was done with a design on injuring the claimant and that it did so. According to their Honours, a conspiracy could be directed not only at a particular individual, but also at a class, in the sense of all members of the class. Their Honours went on to say (at [123]) that the test for an action in conspiracy is: ‘what was the object of those combining, when they acted as they did’. They must have acted in order that, not with the result that, the claimant should suffer damage.”
48 Larkfield submits that in order to establish a conspiracy it is not necessary to have evidence of discussions for example between conspirators and it would be extraordinary if there were such evidence available. A party can ask the Court to infer from evidence available the existence of a scheme and an intention to injure. It says that this is the natural consequence in this case of the “straw man” of CFIAUS being set up, that Larkfield would not be paid once other parties came into the picture. It refers to Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 at paragraphs [13]-[15] which set out that an inference of conspiracy can be pleaded from pleading primary facts and circumstances.
49 Larkfield has clarified that its claim is an unlawful means conspiracy (as opposed to a combination to perform acts which although not themselves unlawful are done with the sole or predominant purpose of injuring the claimant). An unlawful means conspiracy is one in which the participants combine together to perform acts which are themselves unlawful. Larkfield says that the unlawful behaviour is the misleading and deceptive conduct contained in the Authority Representation which is a breach of s18 of the ACL.
50 Larkfield says that the conspiracy involved misleading Larkfield about the identity of the contracting party with a view later if Larkfield sought to recover its loss against the value of the goods stopping that occurring due to security or ownership interests. It says that although it is a mere causative action, it arises out of the facts in the case and is an alternative way to claim against the plaintiffs and Mr Guss. It depends on Scandi and CFIHK being successful in establishing their ownership or rights to the goods (and must also depend on Larkfield not being successful in alleging that they cannot assert those rights due to unconscionability, as otherwise there would be no damages suffered by Larkfield).
51 Various changes are proposed to the existing pleadings in order to pick up points relating to the conspiracy, including setting out details of how the shareholders of Scandi are nominee shareholding companies, and who the directors and shareholders of CFIHK are.
52 Endeavouring to follow precisely how the claim is put is made more difficult by the fact that the pleading jumps backwards and forwards in terms of referring to earlier paragraphs and then later paragraphs, sometimes doing both within the same paragraph. Thus, paragraph 44 pleads that each of the plaintiffs, LHV and Mr Ali, by reason of the matters set out in paragraphs 56(b), 57, 59, 60, 61 and 62, were aware of the matters set out in paragraphs 37 to 41, and that they were aware of and participated in the Scheme (referred to and defined in paragraph 66).
53 Scandi and HK say that the suggestion in paragraph 63 that by commencing proceedings to recover their goods this was a scheme or overt act to deprive Larkfield of assets is fanciful and embarrassing. They say that what needs to be pleaded is that Scandi and HK participated in or assented to the contraventions with actual knowledge of the essential elements constituting the contravention.
54 Since what is apparently put is that Scandi and HK were at all material times controlled by Mr. Guss, it follows that Larkfield is alleging that Mr Guss’s knowledge at relevant times is to be attributed to Scandi and HK The essential elements of the conspiracy are, I agree, in sketched out form only, and would be better more fully pleaded. I have no doubt the defences to the conspiracy claim will be vigorously pursued at trial, and it may well be that Larkfield is not successful in establishing it. However, I am not satisfied that the claim as against the present defendants to counterclaim has no reasonable prospects of success such that I should refuse leave to Larkfield to amend its claim.
55 Mr Guss averted to the fact that the claim brought by the plaintiffs is a simple and discrete point. However, as there is no application before me for the hearing of a preliminary point, or for the trial to be split, this is not relevant to a consideration of whether or not the amendment should be allowed. In any event, such an application might be difficult to succeed on, given the facts common to both aspects of the claim and the issues raised on the counterclaim.
56 Mr Guss further says that it is a precondition in relying on ss20 and 21 of the ACL that the person who alleges that it is misleading or deceptive conduct must have been engaging in trade or commerce, and that there is no material fact pleaded to show that Larkfield was engaging in trade and commerce. However, the current pleading already involves ACL issues which will require Larkfield to establish that it is engaged in trade and commerce. No defence has been filed to the effect that it was not so engaged. Whether it was, or not, engaged in trade and commerce is not a new point arising due the new ACL claim, and the lack of a pleading about it not a reason to refuse the application to amend.
57 I will allow the pleading insofar as it concerns the present parties.
Conspiracy claim against LHV
58 The case pleaded against LHV in relation to conspiracy is inadequate to found an arguable claim against LHV. It has no real prospects of success at trial.
59 Leave is sought to amend paragraph 62 of the counterclaim to allege that Mr. Guss controls LHV. Paragraphs 55, 59, 60 and 61 are relied on to establish this. The only relevant reference to LHV is in paragraph 60 which refers to the fact that Mr Guss is identified in documents discovered by Scandi and CFIHK relation to the importation, purchase, shipping and other transactions concerning the goods, as the contact for LHV as notifying party in a ‘FCL Sea Arrival Notice” at a business address of which the director of the landlord “has Mr Guss as its contact for the tenant, and his dealings with respect to the property are with Mr Guss”. I reject the proposition that it can be inferred from that fact that Mr Guss controls LHV.
60 Paragraph 65 pleads that Mr Guss made the Authority Representation with the actual or constructive knowledge of LHV, and had a particular purpose in doing so, to the knowledge of LHV. Unless LHV participated or was involved in the alleged conspiracy, its knowledge is irrelevant.
61 LHV’s alleged participation in the Scheme is set out at paragraph 66 of the proposed pleading. Relevantly to the claims against LHV it pleads:
[66]. Mr Guss…
(a) caused … LHV to bring or become involved in the proceeding to further the Scheme …;
(b) was assisted by …..LHV in pursuing the Scheme…. by:
….
(iii) by allowing Mr Guss to assert in his own defence, and in the proceeding that it was the contracting party with Larkfield, in the case of LHV.
62 LHV did not bring, nor is there any evidence that it has it become involved in, this proceeding ‘to further the Scheme’. It is not presently a party to the proceeding, and will only become so after these reasons only as a result of Larkfield’s application to join it as a defendant to counterclaim.
63 Mr Guss can insert such matters as he chooses in his own defence. I do not see how another party “allows” him to assert something when he says something about it. Whether it what Mr Guss says is right or not, it is not a matter of LHV allowing it.
64 I will not give leave for the conspiracy claim to be made against LHV.
Mr Ali
65 Larkfield also seeks to join Mr Ali as a defendant to counterclaim. This is on the basis that it is alleged that he was involved in the conspiracy alleged paragraph 67 of the pleading.
66 At paragraph 44 he is said to have permitted Mr Guss to store the subject goods in which Scandi and CFIHK claim an interest by arrangement with him despite being aware of the Authority Representation and its falsity. No particulars are given of this alleged awareness.
67 The proposed second further amended defence and counterclaim pleads that Mr Ali was aware of and participated in the Scheme. At paragraph 64 it is pleaded that he permitted Mr Guss to control Scandi, that he permitted the prosecution of the proceeding by Scandi for the purpose of depriving Larkfield of assets to recover its outstanding costs from in relation to the storage and related goods and permitted it without his involvement, failed to properly exercise his duties as a director of Scandi, instructed Mr Guss to arrange for LHV to be re-registered and failed to inform Larkfield that LHV had been re-registered.
68 As to Mr Ali “permitting” the prosecution of this proceeding, the highest the claim as pleaded goes seems to be that he let Mr Guss control Scandi and Mr Guss has then proceeded to take the actions alleged. There is no allegation or evidence that the Power of Attorney Mr Ali signed was in fact used for any purpose or conspiracy. It seems that the way the case is put is either to say that Mr Guss was able to do the things he was able to do as a result of that Power of Attorney and to that extent it might loosely be said to have been used for the purposes of such a conspiracy if there was such a one; or alternatively that the Court should infer from the fact that he had such a power of attorney that Mr Ali left Mr Guss in charge of Scandi regardless of whether Mr Guss formally used the Power of Attorney. However, it is one thing to plead or argue at trial that Mr Ali’s conduct in letting Mr Guss have effective control of Scandi enabled Mr Guss to act as he did, and Scandi to act as it did. It is another to say that this established that he was involved in the conspiracy.
69 Counsel for Larkfield included the following in written submissions:
“An allegation of conspiracy by unlawful means is added in new paragraphs 57 to 67. The pleading is added because it is the most straight forward cause of action available to encompass the use of multiple entities that are associated with Mr Guss to deprive Larkfield of the recovery of its storage costs. In addition to existing parties and LHV, that includes Mr Ali. It is alleged his part in the conspiracy includes permitting Mr Guss to in effect control Scandi and LHV, despite not being a director on the record of either company. An alternative might be to plead accessorial liability through involvement in the statutory breach, but the parties to the conspiracy other than Guss are not directly involved in the making of the Authority Representation.”
70 The pleading of conspiracy in relation to Mr Ali does not allege as a material fact that he permitted Mr Guss to in effect control LHV (as appears to found part of the reason for seeking to include Mr Ali according to Counsel’s submissions set out above). However, even if that had been pleaded, at most it would seem that on the facts alleged it might then be argued that such actions enabled Mr Guss to act as he did, and not that Mr Ali was involve in a conspiracy. And since the claim against LHV is not maintainable in any event, Mr. Ali enabling its involvement goes nowhere.
71 The matters pleaded in 64(e) and 64(f) in relation to the instructions to allow LHV to be re-registered and not informing Larkfield about it, have no relevance to the claims made in the proceeding.
72 It is incumbent on the Court only to permit such joinder and amendment for which there could be a valid basis.
73 No evidence has been filed justifying the joinder. Whilst counsel for Larkfield referred to earlier affidavit material filed by Mr Stents, that does not deal with the reasons that Mr Ali should be joined as a party, nor was such an application previously foreshadowed.
74 In Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd [2000] VSC 102 at [8],the Honourable Justice Byrne deals with the need for material to be adduced relevant to the exercise of discretion:
“What was submitted to me on behalf of the authority was the FCH must demonstrate that there exists a viable cause of action in the authority against MGZ and that this demonstration must be based upon proper material. In my opinion, the question whether a cause of action is viable in this sense requires the application of the conventional pleading test. Accordingly, I should treat the cause of action as viable unless I am satisfied that it is clearly hopeless. In a case such as the present, FCH must show to that standard that MGZ owed a duty of care to the authority, that it was in breach of that duty and that damages which the authority claims, were, in part at least, caused by this breach. Since the application is not a true pleading application, but an application to join a party, the applicant must adduce material, including, if need be, hearsay in accordance with Rule 43.03(2) sufficient to satisfy the court of these matters as well as the matters which must be relevant as to the exercise of the discretion of the court.”
75 I will not give leave for Mr Ali to be joined in the proceeding.
76 I invite the parties to consider proposed orders consequential on these reasons including regarding costs. If they cannot be agreed, I will list the Summons for further hearing.
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Certificate
I certify that these 21 pages are a true copy of the reasons for ruling of her Honour Judge Marks, delivered on 22 August 2017.
Dated: 22 August 2017
Samantha Marinic
Associate to Her Honour Judge Marks
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