Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 2)
[2021] FCCA 1000
•12 May 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 2) [2021] FCCA 1000
File number(s): SYG 2771 of 2019 Judgment of: JUDGE BAIRD Date of judgment: 12 May 2021 Catchwords: PRACTICE AND PROCEDURE – application for leave to further amend the amended statement of claim – objections from the First, Second, Fifteenth Respondents and the Sixth Respondent – application allowed subject to terms. Legislation: Competition and Consumer Act 2010 (Cth) ss 86AA, 138A, Sch.2 ss 82, 236
Federal Circuit Court Rules 2001 (Cth) rr 1.03, 7.01
Federal Court Rules 2011 (Cth) rr 16.01, 16.02, 16.03, 16.06, 16.21Cases cited: ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65;
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27
Banque Commerciale SA (in Liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11
Baxter v Obacelo Pty Ltd (2001) 2005 CLR 635; [2001] HCA 66
Chandra v Perpetual Trustees Victoria [2007] NSWSC 694
City of Sydney v Streetscape Projects (Australia) Pty Ltd (2011) 94 IPR 35; [2011] NSWSC 1214
Clayton v Bant (2020) 385 ALR 41; [2020] HCA 44
Hashtag Burgers Pty Ltd v In‑N‑Out Burgers, Inc (2020) 385 ALR 514; [2020] FCAFC 235
Lifeplan Australia Friendly Society Ltd v Woff [2016] FCA 248
Lucantonio v Benscrape Pty Ltd [2020] NSWSC 579
Pittmore Pty Ltd v Chan; Chan v Tan [2020] NSWCA 344
Sea Shepherd UK v Fish &Fish Limited [2015] UKSC 10
Shelton v National Roads and Motorists’ Association and Ors (2004) 51 ACSR 278, [2004] FCA 1393
Self Care Corporation Pty Ltd v Green Forest International Pty Ltd [2021] FCCA 129
State Street Global Advisors Trust Company v Maurice Blackburn Pty Ltd (No. 2) [2021] FCA 137
Qualify Me Pty Ltd v Get Qualified Australia Pty Ltd [2016] FCA 192
Number of paragraphs: 236 Date of last submission/s: 8 April 2021 Date of hearing: 17 February 2021, 10 March 2021, 15 March 2021, and 23 March 2021 Place: Sydney Counsel for the Applicants Mr J Hennessy SC Solicitor for the Applicants: Gilbert + Tobin Counsel for the First, Second, Fifteenth, and Seventeenth Respondents Mr D Parish Solicitor for the First, Second, Fifteenth, and Seventeenth Respondents H&H Lawyers Counsel for the Sixth Respondent Mr G Sirtes SC and Mr B Le Plastrier Solicitor for the Sixth Respondent Taylor David Lawyers ORDERS
SYG 2771 of 2019 BETWEEN: SELF CARE CORPORATION PTY LTD
First Applicant
SELF CARE IP HOLDINGS PTY LTD
Second Applicant
AND: GREEN FOREST INTERNATIONAL PTY LTD
First Respondent
YAOAN (ERIC) CHEN
Second Respondent
YILIN TRADING PTY LTD ACN 626 244 479 (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
JUDGE BAIRD
DATE OF ORDER:
12 MAY 2021
THE COURT ORDERS THAT:
1.The Applicants have leave to amend the Amended Statement of Claim dated 24 July 2020, and to file and serve a pleading substantially in the form of the draft Further Amended Statement of Claim dated 19 March 2021, incorporating the further amendments allowed and those foreshadowed by the Court in the reasons of the Court delivered today, and as may otherwise be agreed between the Applicants and the Sixteenth Respondent.
2.The Applicants have leave to file and serve an amended Application to the extent necessary to bring the prayers for relief into conformity with the Further Amended Statement of Claim, so allowed.
3.Costs be reserved.
REASONS FOR JUDGMENT
JUDGE BAIRD
INTRODUCTION
Application to further amend the amended statement of claim
By paragraph 4 of application in a case dated 16 February 2021, the Applicants, Self Care Corporation Pty Ltd and Self Care IP Holdings Pty Ltd, seek leave to further amend the amended statement of claim dated 24 July 2020, and filed 27 July 2020 (ASOC). The form of the proposed further amended statement of claim before me for decision is the draft further amended statement of claim dated 19 March 2021 (March FASOC), served further to orders I made on 15 March 2021 (15 March Orders). I set out the 15 March Orders below at [38].
The sixth respondent, Mr Pascal Skelin, and the first, second, fifteenth and seventeenth respondents (the Green Forest parties) object to leave being granted. This is the fourth opportunity (10 March, 15 March, 23 March, 31 March/7 April 2021) Mr Skelin and the Green Forest parties have had to make objections to the Applicants’ proposed pleading (namely, the March FASOC, and its predecessor draft further amended statement of claim served 22 February 2021 (February FASOC)). In these reasons when I refer to the FASOC simpliciter, I mean both drafts unless the context otherwise makes clear.
Mr Skelin now makes objections to some 54 paragraphs of the pleading. The Green Forest parties, make (or expand) objections to some 16 paragraphs. They also adopt other objections made by Mr Skelin.
Other respondents in the proceeding who are also legally represented are the ninth and fourteenth respondents, Ms Yiping Yang and Mr Yulin Wang, and the sixteenth respondent, Australian Vitamin Plus Pty Ltd (AVP).
Ms Yang and Mr Yulin Wang neither oppose nor consent to the Applicants’ application to amend, on the understanding that the issue of costs is reserved. On 22 March 2021, the legal representatives for Ms Yang and Mr Yulin Wang informed the Court by email that their position as advised by their counsel, Mr Heath, to the Court on 10 March 2021 in respect of the February FASOC, applies also to the March FASOC.
AVP now does not oppose the filing of the March FASOC, having reached agreement with the Applicants that one clarifying amendment agreed between the Applicants and AVP will be made to the particulars to paragraph 49H of the March FASOC. Accordingly, I consider the March FASOC so amended. AVP previously had raised a number of objections to the February FASOC, initially in writing, further to the Court’s orders made 17 February 2021. Counsel for AVP, Mr di Francesco, made oral submissions concerning the February FASOC to the Court on 23 February 2021, 10 March 2021, and 15 March 2021.
Background
In Self Care Corporation Pty Ltd v Green Forest International Pty Ltd [2021] FCCA 129 delivered 5 February 2021 (Self Care No. 1) at [9]-[32] I described in brief outline the proceeding, the Applicants and their business, and set out some history of, and interlocutory steps in, the proceeding. These reasons should be read in conjunction with those paragraphs.
The first respondent, Green Forest International Pty Ltd, the second respondent, Mr Yaon (Eric) Chen, and Mr Skelin have been respondents in the proceeding since its commencement on 25 October 2019 by way of urgent application by the Applicants for ex‑parte relief against them and the third, fourth and fifth respondents: Self Care No. 1 [26].
Green Forest is a company involved in the supply of cosmetics and other personal care products in Australia and in the People’s Republic of China. Mr Chen is a director of Green Forest. The seventeenth respondent, Ms Cynthia Li, is a director of Green Forest, and its company secretary. Ms Li and Mr Chen are wife and husband. Ms Li was joined to the proceeding further to leave of the Court on 10 March 2021.
Mr Skelin is a business associate of the fifth respondent, Kefei (Emilio) Wang. I describe Emilio Wang’s relationship to other of the respondents in Self Care No. 1 [3], [13]-[14]. With Emilio Wang, Mr Skelin was a director of the fourth respondent, Freezeframe China Co Pty Ltd (in liquidation), and the seventh respondent, EPAQ International Pty Ltd. On 15 January 2020, Emilio Wang and Mr Skelin, and Mr Yulin Wang put Freezeframe China Co into liquidation; Self Care No. 1 [14], [31]. Mr Skelin was also formerly the sole director of the Hong Kong incorporated company, Freezeframe Co. Ltd (Freezeframe HK), before Emilio Wang became the sole director.
I note whilst I have described Mr Skelin and Emilio Wang’s relationship broadly as set out above, save for admitting certain matters apparent on the face of Australian Securities and Investments Commission (ASIC) corporate records, such as that he and Mr Wang have been directors of Freezeframe China Co and EPAQ International at various times, in his defence dated 19 August 2020 to the ASOC, Mr Skelin has mostly either denied or not admitted any relationships, knowledge or conduct alleged in the ASOC.
In relation to his relationship with Emilio Wang, however, in his defence Mr Skelin has asserted that in late August 2016, he and Ms Amoroso, the CEO of Self Care, met to discuss EPAQ International and Self Care working together, and he informed her that Emilio Wang had a company in mainland China called “Quanjian Group” which marketed and sold cosmetic products and had an expansive network of industry, regulatory and government contacts in China, and that these would enable them to sell freezeframe products to “the China Network”, and subsequently that later in 2016 he and Emilio Wang “on behalf of EPAQ International had numerous telephone conversations” with Ms Amoroso on behalf of Self Care.
As I stated in Self Care (No. 1), at [27], on 25 October 2019 I made orders restraining the 6 respondents then named, being Green Forest, Mr Chen, the third respondent, Yilin Trading Pty Ltd, Freezeframe China Co, Emilio Wang, and Mr Skelin. I summarized those orders, as:
[27]… orders restraining Emilio Wang and the 5 other respondents then named from dealing in freezeframe products, and counterfeit freezeframe products, from destroying records, orders requiring each of them to provide records and deliver up certain electronic storage devices to the applicants’ solicitors for investigation by an independent engaged computer expert, and orders that the restrained respondents make Norwich Pharmacal affidavits deposing as to their respective current and past holdings of freezeframe products, and customers, and when and how the respondents obtained possession of the products.
The orders I referred to in the above summary included the following:
[6]Until further order, each Respondent be restrained from obtaining, offering to supply or supplying, offering for sale or selling, offering to distribute or distributing, offering to make available or making available, or otherwise dealing in or enabling others to deal in any of the products listed in Schedule A to these orders, or any product under the same name, or in packaging depicting any of those product names (FreezeFrame Products), without the prior written consent of the First Applicant.
(the FreezeFrame Products restraining order)
[8]By no later than 1pm AEDT on Thursday, 31 October 2019, each of the First Respondent (by its proper officer), the Second Respondent, the Third Respondent (by its proper officer), the Fourth Respondent (by its proper officer), the Fifth Respondent, and the Sixth Respondent make and serve on the Applicants’ solicitors an affidavit duly sworn or affirmed by him or her, to the best of his or her knowledge and belief and upon reasonable inquiry:
(a)providing a description of all FreezeFrame Products in the possession, custody or control of the Respondent as at the date of this order;
(b)providing a description of all FreezeFrame Products that have been in the Respondent’s possession, custody or control but which are no longer in the Respondent’s possession, custody or control;
(c)in respect of all such FreezeFrame Products:
i.their location;
ii.how and when they came into the possession of the Respondent;
iii.the identity of any person or entity to whom the Respondent has supplied or is to supply (but for the making of Order 6 above) them.
(the FreezeFrame Products Norwich Pharmacal order).
It can be seen from the above orders that they encompass both genuine and counterfeit products. (Freezeframe Products are also referred to in the course of the proceeding with variations of initialisation, including as ‘freezeframe products’, and ‘Freezeframe products’).
On 23 July 2020, further to an ex-parte application by the Applicants for joinder and injunctive relief, the Court made orders, inter alia, joining the eighth to the sixteenth respondents, including relevantly to the present application, Ms Yang and Mr Yulin Wang, the fifteenth respondent, E‑Go Channel Pty Ltd, and the sixteenth respondent, AVP. E‑Go is a company involved in the supply of cosmetics and other personal care products in Australia. Mr Chen is a director of E‑Go. AVP is a company involved in the supply of cosmetics and other personal care products in Australia.
I made orders restraining each of the eighth to sixteenth respondents in substantially similar terms to the FreezeFrame Products restraining order, and made a preservation of records order in substantially similar terms to that made on 25 October 2019 (not reproduced in these reasons).
On 10 March 2021 on the joinder of Ms Li, I made an order restraining Ms Li in similar terms to the FreezeFrame Products restraining order, and made a preservation of records order in substantially similar terms to that made on 25 October 2019. The Applicants allege that each of Mr Chen and Ms Li are involved in the day to day management of Green Forest, and involved in the day to day management and operations of E‑Go. As I have said above, in these reasons I refer collectively to Green Forest, E‑Go, Mr Chen, and Ms Li as the Green Forest parties.
For the purposes of the present application it is not necessary to describe the other respondents. None of those other respondents are presently participating in the proceeding.
At a case management hearing on 27 August 2020, I made timetabling orders extending the time for filing of defences, made orders requiring notification and exchange of lists of affidavits to be relied upon at final hearing, the provision of draft statements of facts and issues, and short form chronology, and for evidence in answer and in reply. I listed the matter before me for final hearing with an estimate of 5 days plus, commencing on 23 March 2021. I listed the matter for a long case management hearing and trial directions on 3 December 2020.
On 8 September 2020, the Applicants notified the respondents of the affidavits they intended to rely on at the final hearing, and, to the extent not already served on that respondent, served copies of the affidavits notified, and made arrangements regarding service of confidential exhibits.
The Applicants have filed and served their evidence on a rolling basis, and preparation of summaries of key information (including invoices and shipping records identified from sources including documents extracted from computer devices of the respondents and produced on subpoena). They assert that the timely preparation of their evidence was not assisted by incomplete production by respondents, and in some instances, misrepresentations by certain respondents.
On 3 December 2020, the Applicants advised the Court they had substantially served all their lay evidence in chief, including affidavits in response to late and broadening notification of objections to evidence raised by Mr Skelin on 29 October 2020, and by Ms Yang and Mr Yulin Wang on 2 November 2020, and that the Applicants had served expert evidence in relation to disputed authenticity of trap purchases of counterfeit products in issue. I am informed that the evidence includes evidence as to Self Care’s copyright and registered trade marks in issue, in response to Notice of Dispute issued by Mr Skelin. The evidence also includes evidence in relation to investigations of activities in mainland China, served on or about 3 December 2020.
By affidavit of their solicitor, Mr Michael Williams, dated 3 December 2020, the Applicants supplemented their 8 September 2020 notification of affidavits to be relied on at final hearing. On 29 November 2020, the Applicants served an initial list of documents for an “Agreed Bundle” (that is, a tender bundle) for final hearing. In his affidavit Mr Williams informed the Court that the Applicants’ analysis of communications between respondents identified significant gaps in the WeChat records, including in relation to the Green Forest parties, AVP, and representatives of other respondents. Mr Williams identified that further production by AVP was sought. Mr Williams deposed that based on his experience, extensions of the timetable would not preclude the matter proceeding at the March hearing dates.
At the case management hearing on 3 December 2020, I varied certain of the procedural orders made 27 August 2020, extending times. I directed that the Applicants file and serve their expert accounting evidence in chief on their claims by 29 January 2021, and made orders that by 12 February 2021 the respondents (other than the fourth respondent, in liquidation) file and serve their lay evidence in answer, and an initial list of documents to be included in the “Agreed Bundle”. I made orders for the service of any proposed categories of discovery, and facilitating agreement on discovery.
On 5 February 2021, the Applicants served an affidavit from Ms Amoroso, CEO of Self Care, relating to quantum for the purposes of their accounting expert evidence, and on 6 February 2021, they served the confidential expert report of Mr Andrew Ross, their accounting expert (Ross Report), in redacted form. The Applicants, the Green Forest parties (excluding Ms Li), and AVP agreed consequential extensions of time for the filing of remaining evidence in relation to the Applicants’ claims, that is, for the respondents’ evidence, and in reply on Green Forest and Mr Chen’s cross-claim. The Applicants advised my Chambers that they had not received any response from any other respondent (including Mr Skelin). On 15 February 2021, I made orders in Chambers extending time as sought.
Separately, on 15 February 2021, my Chambers informed the parties that for unrelated reasons the final hearing dates in March 2021 would be vacated, and that a new final hearing date would be set at the next case management hearing on 17 February 2021, having regard to, but not necessarily accommodating, all parties’ preferred dates. On 17 February 2021, I listed the proceeding for final hearing commencing on 12 July 2021 (with an estimate of 7 days plus), and on 10 and 11 August 2021 for submissions.
On 16 February 2021, as I have said at [1] above, the Applicants’ filed their application seeking leave to amend the ASOC, and leave to join Ms Li, and obtain certain orders against her (see [9] and [17] above).
FASOC – case management, procedural history and hearings
A number of items were before the Court at the case management hearing on 17 February 2021. Mr Williams appeared for the Applicants. The Green Forest parties (excepting Ms Li, not then joined as a party), Ms Yang and Mr Yulin Wang, and AVP were each represented by their counsel appearing in person, and Mr Skelin, by his solicitor, Mr Gear, appearing by video-conferencing from interstate. No other party appeared on 17 February 2021.
In relation to the application to amend the claim, Mr Williams informed the Court that in substance the Applicants sought leave to amend to expand the existing pleas of common design and joint tortfeasor, and to add a claim of negligent misstatement to the then existing causes of action pleaded in the ASOC.
Mr Williams advised the nature of the first category of amendment proposed is to the claims against both the Green Forest parties and AVP to allege that Green Forest and AVP were not just downstream distributors of EPAQ parties’ supply of Freezeframe products (including alleged counterfeit products), but that by reason of material now disclosed in WeChat communications (in Mandarin), to amend the ASOC to add allegations of common design and participation against them, linking them back to activities of the EPAQ parties, including, inter alia, Mr Skelin.
A second category of amendment sought arises by reason of the Applicants’ calculation of damages carried out in the Ross Report, relevantly, Mr Ross’ calculations of the quantum of the Applicants claim for damages consequent upon the alleged misrepresentation that the Freezeframe products were going to be sold in China, when instead, on the Applicants’ case, they were resold into Australia. On Mr Ross’ calculations that damages claim greatly exceeds the jurisdictional limits imposed on this Court in respect of recoverability of damages sought under ss 82 and 236 of the Australian Consumer Law (ACL), Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCAct), for misleading and deceptive conduct: see ss 86AA and 138A of the CCAct. Whilst the ACL claim is maintained, and the non‑pecuniary relief sought pursuant to that claim is important to them, the Applicants say that the claim is essentially a misrepresentation claim, and they propose to plead an action at common law of negligent misrepresentation: as espoused by the Full Federal Court of Australia in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65, incl. at [573]-[578, [597]-[598], [1106], and see the High Court in Clayton v Bant (2020) 385 ALR 41; [2020] HCA 44, [34], [76].
Mr Williams assured the Court that no additional facts would be brought forward by the Applicants in chief beyond the evidence already filed. The differences in the counts is essentially one that would be the subject of address, noting that in relation to the negligent misrepresentation claim, a higher threshold has to be established by the Applicants under common law.
Relevant to the application to amend, on 17 February 2021, I made the following orders:
3.DIRECTS the Applicants to serve on the Respondents and the proposed Seventeenth Respondent its proposed further amended statement of claim in draft form by 5pm on 22 February 2021.
4.DIRECTS the Respondents and the proposed Seventeenth Respondent0 [sic] to advise by 5pm on 26 February 2021 whether they consent to or oppose the filing and service of the proposed further amended statement of claim and if they oppose, the extent to which they oppose the amendments, and the legal and factual basis on which they oppose each amendment.
5.If any or all of the Respondents and the proposed Seventeenth Respondent oppose the filing of the proposed further amended statement of claim pursuant to order 4, the Court:
(a)ORDERS any opposing party to file and serve any evidence on the Applicants’ Application in a Case dated 16 February 2021 by 3 March 2021.
(b)ORDERS that the Applicants file and serve any evidence in reply on the Application in a Case by 8 March 2021.
(c)LISTS the Applicants’ Application in a Case dated 16 February 2021 for hearing on 10 March 2021 at 10:15am, or such other time as may be advised administratively.
6.LISTS the matter for case management conference and, if required, the hearing of the Applicants’ Application in a Case dated 16 February 2021 on 10 March 2021 at 10:15am, or such other time as may be advised administratively.
Further to the 17 February 2021 orders, the Applicants circulated their proposed further amended statement of claim in draft form by 22 February 2021 (that is, the February FASOC), and by 22 February 2021, each of the Green Forest parties, AVP, and Ms Yang and Mr Wang indicated to the Applicants their position on the draft. AVP raised a number of objections, and sought particulars. Mr Skelin did not respond at all.
At hearing on 10 March 2021, the above mentioned parties were represented by their counsel. Mr Heath confirmed that his clients Ms Yang and Mr Yulin Wang neither consented nor opposed the amendments. Mr Parish of counsel appeared for the Green Forest parties, and did not oppose the amendments. Mr di Francesco of counsel appeared for AVP, which opposed a number of paragraphs of the February FASOC. Mr Sirtes SC and Mr Le Plastrier of counsel appeared for Mr Skelin, further to my invitation to his solicitor Mr Gear on 17 February 2021 that the Court would be assisted by the appearance of counsel (whom Mr Gear had advised on an earlier occasion had been briefed since at least August 2020, succeeding counsel previously briefed). Mr Sirtes SC informed the Court that he wished to make it plain that Mr Skelin opposed the application to amend. He acknowledged that Mr Skelin had failed to advise the Applicants or the Court, for which failure he apologised. He informed the Court that whilst he had recently received correspondence from his solicitors, his attention had not been drawn to the 17 February 2021 orders.
The Applicants moved on the application to amend. Mr Hennessy SC, senior counsel for the Applicants read 3 affidavits sworn by Mr Williams. Mr Skelin required Mr Williams for cross‑examination. I heard argument from counsel for the Applicants, and for AVP. I adjourned the matter to 15 March 2021 for further argument. I required Mr Skelin to notify the Applicants of his objections in writing. On 11 March 2021 he provided the Applicants with a list of the paragraphs to which he took objection, and dot point comments.
At the hearing on 15 March 2021, the Applicants provided to the Court a document dated 12 March 2021 which summarised consolidated particulars of proposed amendments to the February FASOC further to correspondence with Green Forest and AVP. The Applicants provided a separate note dated 12 March 2021 responding to Mr Skelin’s 11 March 2021 objections.
I heard oral argument. I made the 15 March Orders, relevantly as follows
[1]DIRECTS that the Applicants by 4pm AEDT on 17 March 2021 serve on the respondents and provide to the Chambers of Judge Baird, a proposed consolidated further amended statement of claim (proposed claim), such proposed claim to incorporate matters set out in the Applicants’ documents provided to the Court prior to 15 March 2021 and taking into account the objections and submissions made by the Named Respondents, and otherwise as appears from the transcript on 10 and 15 March 2021.
[2]DIRECTS the Named Respondents by 1pm on 19 March 2021 advise the Applicants and the Chambers of Judge Baird whether they maintain any objection to filing and service of the proposed claim, and if they oppose, the extent to which they oppose the amendments, and the legal and factual basis on which they oppose each amendment, and an outline of any submissions, limited to no more than 4 pages, and NOTES that any such objection is not to travel beyond the objections and submissions made on 10 March 2021, and 15 March 2021 by that Named Respondent.
By paragraph 3 of the 15 March Orders I made orders varying and extending the timetable made on 17 February 2021 for the filing of the respondents’ evidence and list of documents for the Agreed Bundle (which in turn extended the times ordered on 15 February 2021). I stood over the application to amend to 23 March 2021 at 11:00am.
The Applicants served the March FASOC on 19 March 2021. In the March FASOC the Applicants propose three categories of amendments. The Applicants identify and explain the categories, and amendments in an outline submission for the Court on 23 March 2021.
Whilst AVP was able to review and respond within the extended time I allowed, both Green Forest and Mr Skelin sought further additional time.
On 23 March 2021, I heard from those parties as to their reasons for seeking further time, the delays, and as to the status of the preparation of the matter, and other timetabling matters. I urged the respondents to be mindful of the objects of the Rules, and reminded counsel that the question on amendment is not whether or not their clients would win or lose on the pleading, but whether they now know the case that the Applicants say and that the respective [respondent] has to meet.
On 23 March 2021, I made orders (relevantly):
[1]EXTENDS the Applicants’ time for compliance with order 1 of the Orders of the Court made 15 March 2021 to 3pm (AEDT) on 19 March 2021, and ALLOWS the draft further amended application and the draft further amended statement of claim each dated 19 March 2021 circulated to the Named Respondents and provided to Chambers of Judge Baird stand as the ‘proposed claim’ referred to in order 1.
[2]NOTES the Ninth, Fourteenth, and Sixteenth Respondents have complied with order 2 of the Orders, within the time for compliance, extended by agreement.
[3] EXTENDS and VARIES order 2 of the Orders:
(a)to 30 March 2021, in the case of the Sixth Respondent, and
(b)7 April 2021, in the case of the First, Second, Fifteenth and Seventeenth Respondents,
and in each case, varies the page limit of any outline of submissions to 8 pages, save with leave of the Court.
[4]DIRECTS the Applicants on or before 13 April 2021 serve and provide to Chambers outline(s) of submissions in reply (reply outline) to objections advised, and outline of submissions (if any) served pursuant to paragraph 3 of these orders, and NOTES the reply outline may comprise separate reply outlines to the outline of submissions of the Sixth Respondent, and the outline of submissions of the First, Second, Fifteenth and Seventeenth Respondents, each reply outline being limited to 8 pages, save with leave of the Court.
I reserved the question and determination of costs thrown away (if any) by the amendments sought in the February FASOC and the March FASOC.
The Applicants’ categories of amendments proposed to be made in the March FASOC
I have had regard to the hearings on 10 and 15 March 2021, inter partes correspondence placed before the Court, and the content of the March FASOC in considering the Applicants’ identification and explanation of the categories of amendments (see [40] above). I accept and adopt it as reasonable and sufficient. The categories of amendments are (emphasis in the original):
[1]First, the Applicants propose amendments in response to the Respondents’ objections concerning the specificity of the common design and joint tortfeasors plea that was proposed to be in paragraphs 50A, 50B and 50C of the [February] FASOC. The Applicants have sought to meet those objections by:
a.Clarifying the detail of the common designs insofar as they concern Green Forest, E-Go, Mr Chen, Ms Li and, separately, AVP in:
i.Paragraph 38A to 39C: which set out the common design concerning Counterfeits between Green Forest, Mr Chen and Ms Li, and, Quanjian, Yilin Trading, Zuren, Ivan Wang, Liao (Sean) Zhiang, Alves, Freezeframe China Co, EPAQ International, Freezeframe HK, Mr Skelin and Emilio Wang.
ii.Paragraph 39D to 39J: which set out the common design concerning Counterfeits between AVP, and, Quanjian, Yilin Trading, Zuren, Ivan Wang, Liao (Sean) Zhiang, Alves, Freezeframe China Co, EPAQ International, Freezeframe HK, Mr Skelin and Emilio Wang.
iii.Paragraph 48A to 49C: which set out the common design concerning freezeframe Products between Green Forest, Mr Chen and Ms Li, and, Quanjian, Yilin Trading, Zuren, Ivan Wang, Liao (Sean) Zhiang, Alves, Freezeframe China Co, EPAQ International, Freezeframe HK, Mr Skelin and Emilio Wang.
iv.Paragraph 49D to 49J: which set out the common design concerning freezeframe Products between AVP, and, Quanjian, Yilin Trading, Zuren, Ivan Wang, Liao (Sean) Zhiang, Alves, Freezeframe China Co, EPAQ International, Freezeframe HK, Mr Skelin and Emilio Wang.
b.Paragraph 75A, 76A, 76B, 82, 84-87: which clarify the conduct of Emilio Wang and Mr Skelin relevant to them being joint tortfeasors for inducing breach of, or interfering with, contracts between Self Care and Epaq International and Freezeframe China Co.
c.Paragraphs 87A and 87B: which clarify the plea (which used to be in paragraph 50C of the previous draft of the FASOC) with regards to Green Forest, E-Go, Mr Chen and/or Ms Li being joint tortfeasors for inducing breach of, or interfering with, contracts between Self Care and Epaq International and Freezeframe China Co.
d.Paragraphs 87C and 87D: which clarify the plea (which used to be in paragraph 50C of the previous draft of the FASOC) with regards to AVP being a joint tortfeasor for inducing breach of, or interfering with, contracts between Self Care and Epaq International and Freezeframe China Co.
e.Paragraphs 110, 115, 118, 143, 147, 153 and 163: which (as previously) cross-reference to relevant paragraphs that plead the common designs and basis for joint tortfeasor liability in respect of Emilio Wang, Mr Skelin, Green Forest, Mr Chen, Ms Li and AVP for trade mark infringement, passing off and copyright infringement.
f.Paragraphs 125 to 139A: which clarify the ACL and negligent misstatement claims, including the direct breaches of duty and, alternatively, joint tortfeasor claims separately made against Emilio Wang, Mr Skelin, Green Forest, Mr Chen, Ms Li and AVP (which used to be in paragraph 50C of the previous draft of the FASOC in summary form).
[2]Second, the Applicants have addressed other objections raised by the Respondents in:
a.Paragraphs 50A, 53 and 61: which clarify the reliance pleas;
b.Paragraph 54: which clarifies the plea regarding amendment to the Agency Agreement;
c.Paragraphs 59 and 60: which clarify the capacity in which representations were made;
d.Paragraphs 89, 91 and 92A: which fix typographical errors and clarify the conduct of Emilio Wang and Mr Skelin relevant to establishing them as joint tortfeasors and having accessorial liability for breaches of fiduciary duty by EPAQ International, Freezeframe China Co and/or Freezeframe HK.
e.Paragraphs 165, 165A, 166 and 167: which adds a particular of and clarifies the pleas against Emilio Wang, Mr Skelin, Yiping Yang and Yulin Wang regarding accessorial liability for breaches of fiduciary duty by EPAQ International, Freezeframe China Co and/or Freezeframe HK.
[3]Third, the Applicants have proposed amendments to the FASOC which add:
a.Paragraph 60A: an additional representation made by Emilio Wang and Mr Skelin to Self Care at all material times since 2017 (defined as the China Sales Representations). This representation flows through to the pleaded ACL and negligent misstatement claims at paragraphs 127 to 139. This additional representation does not broaden the factual scope of the claims made against Emilio Wang, Mr Skelin or their entities (the falsity of these representations is already addressed in paragraph 133b.) and it enables Self Care to more specifically plead the breaches and joint tortfeasor liability alleged against Green Forest, Mr Chen and Ms Li in paragraph 138B and against AVP in paragraph 138C.
b.Paragraphs 167A and 167B: accessorial liability claims for knowing involvement, inducement or procurement by Green Forest, Mr Chen, Ms Li and AVP of breaches of fiduciary duty by Epaq International, Freezeframe HK and Freezeframe China Co. .These claims predominantly arise out of the We Chat messages discovered by the Green Forest parties and AVP. They do not broaden the factual scope of the claims against Green Forest, Mr Chen, Ms Li or AVP.
Mr Skelin and the Green Forest parties object to paragraphs of the March FASOC
As I have said at [3], and further to the 23 March 2021 orders (see [43] above), Mr Skelin and the Green Forest parties have served and provided to Chambers notice of objections they make to paragraphs of the March FASOC, and written submissions. Both have expanded their previous objections (the Green Forest parties initially did not oppose the application for leave to amend: see above [33]-[37]). Mr Skelin has also just exceeded the page limit ordered. It is apparent that in these respondents’ submissions, the Court’s orders have been honoured in the breach.
Mr Skelin’s objections encompasses paragraphs proposed amended in the March FASOC or its earlier iteration, however his objections are not limited to those paragraphs, and include paragraphs to which he has pleaded in his defence. Mr Skelin’s objections include objections to paragraphs that were amended or introduced by the Applicants in the March FASOC in response to, and to address, previous objections ventilated by him, or other of the participating respondents before me including on 10 March, 15 March, and 23 March 2021, or to incorporate clarifications, particulars, and amendments that had been indicated in inter partes correspondence. There are some paragraphs the Applicants seek leave to amend to which he has not raised an objection. Whilst the Green Forest parties have objected to paragraphs introduced by the March and/or February FASOC (paragraphs 38A to 39C, paragraphs 129B and “139B” – by which I assume is intended 138B), and paragraphs to which consequential amendments arising from paragraphs 38A to 39C are sought to be made, being paragraphs 110 and 115, their objections encompass matters to which they have previously pleaded. Other adoptions of Mr Skelin’s objections are also made, which I understand to be adopting Mr Skelin’s objection to the common design pleas being raised on the alternative bases of personal capacity and capacity as a director of a respondent, in paragraphs 38C and 48B, to paragraphs 39A, 138, and 165A, applicable to 167A.
On 8 April 2021 the Applicants served and provided to Chambers reply submissions addressing both Mr Skelin’s and the Green Forest parties’ sets of objections and submissions in one 9 page response.
APPLICATION TO AMEND
Principles and relevant Rules
The principles as to what is required of a pleading in this Court are well established.
First, the Federal Circuit Court Rules 2001, r 1.03 sets out the objects of the Rules. Rule 1.03(4) provides that to assist the Court, the parties must, inter alia: avoid undue delay, expense and technicality ... .
Pursuant to r 1.05(2), if in a particular case the Rules are insufficient or inappropriate, this Court may apply the Federal Court Rules 2011 (FCR). FCR Part 16 deals with pleadings. In respect of FCR Part 16, by r 1.05(3)(b), and Schedule 3, Part 2, the Rules provide that, without limitation, with necessary changes, the provisions of FCR r 16.01, paragraphs 16.02(1)(a), (b), and (d), subrules 16.02(3) and(5), rules 16.03 to 16.12, 16.21, 16.31 to 16.33, 16.41 to 16.45, of Part 16 of the FCR apply to general law proceedings in this Court.
Division 16.1 FCR provides for the structure and content of pleadings generally, including the requirements the pleading be as brief as the nature of the case permits: FCR r 16.02(1)(b); identify the issues that the party wants the Court to resolve: FCR r. 16.02(1)(c) (noting that this paragraph is not expressly stated to apply in this Court); and state the material facts necessary to give an opposing party fair notice of the case at trial, but not the evidence by which the material facts are to be proved: FCR r 16.02(1)(d).
FCR r 16.02(1), (2) and (3), and 16.03 are as follows:
16.02 Content of pleadings—general
(1) A pleading must:
(a)be divided into consecutively numbered paragraphs, each, as far as practicable, dealing with a separate matter; and
(b)be as brief as the nature of the case permits; and
(c)identify the issues that the party wants the Court to resolve; and
(d)state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial, but not the evidence by which the material facts are to be proved; and
(e)state the provisions of any statute relied on; and
(f)state the specific relief sought or claimed.
(2) A pleading must not:
(a)contain any scandalous material; or
(b)contain any frivolous or vexatious material; or
(c)be evasive or ambiguous; or
(d)be likely to cause prejudice, embarrassment or delay in the proceeding; or
(e)fail to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(f)otherwise be an abuse of the process of the Court.
(3) A pleading may raise a point of law.
…
16.03 Pleading of facts
(1)A party must plead a fact if:
(a)it is necessary to plead it to meet an express denial of the fact pleaded by another party; or
(b)failure to plead the fact may take another party by surprise.
(2)However, a party need not plead a fact if the burden of proving the fact does not lie on that party.
The function of a pleading is, as said by Mason CJ and Gaudron J in Banque Commerciale SA (in Liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11, at [18]:
… to state with sufficient clarity the case that must be met … In this way pleadings serve to ensure the basis requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision.
The modern system of pleading requires only that the material facts on which a party's claim is based be stated; the claim is not expected to be formulated as an elegant model of legal purity and there is now a tendency against taking a pedantic approach to a pleading: see Qualify Me Pty Ltd v Get Qualified Australia Pty Ltd [2016] FCA 192, Markovic J, at [20] (citations omitted).
In Shelton v National Roads and Motorists’ Association and Ors (2004) 51 ACSR 278, [2004] FCA 1393 Tamberlin J at [51] said that:
… The obligation on the part of an applicant is to state its case clearly and precisely. It is not sufficient, for example, to suggest that a respondent must “know” what material facts are relied on by an applicant. … It is presumed that an applicant pleads his best case in the pleading and does not proffer a part of a proper pleading or a step on the way to a final pleading. The claim should specify the applicant’s case on the presently known material.
In Lucantonio v Benscrape Pty Ltd [2020] NSWSC 579 Ward CJ in Eq said at [117], by reference to the Rules of that Court, the UCPR, that what is required is that a statement of claim must state all material facts, those being the facts which are necessary for the purpose of formulating a complete cause of action. A pleading should be as brief as the nature of the case allows; nevertheless it must be clear from the pleading what the cause of action is and the material facts upon which that cause of action is based. See FCR r 16.02(1)(b) and (d).
In Arthur Young v Tieco International (1995) 182 LSJS 367, at 670 (referred to by Ward CJ in Eq in Lucantonio at [119]) Lander J said that a Court ought to approach a consideration of the adequacy of a pleading by seeking to answer the ultimate question whether the pleading gives fair notice of the case to be made against the other party at trial, thus minimising the risk of injustice resulting from surprise.
Whether or not a fact is material will depend upon the nature of the case. A party may include alternative and inconsistent allegations of material facts, so long as the party does so separately and distinctly: see FCR 16.06.
The powers of the Court to allow or direct amendment are broad: r 7.01.
The Court will have regard to the remedial aim of ensuring that any defect in the pleadings is cured. This serves the purpose of ensuring that the real questions in the proceeding are properly agitated and encourages the avoidance of a multiplicity of proceedings: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27, at [14] and [71]. Where an application to amend is brought by a party, they bear the onus of satisfying the Court that grounds exist for exercising the discretion in their favour. The Court’s general approach is that leave to amend should be granted unless the proposed amendment is futile, such that the issue sought to be added is unlikely to succeed or the amendment is likely to be struck out.
Mr Skelin and the Green Forest parties also rely on the Court’s power to strike out pleadings, referencing FCR r16.21, which provides:
16.21 Application to strike out pleadings
(1)A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:
(a)contains scandalous material; or
(b)contains frivolous or vexatious material; or
(c)is evasive or ambiguous; or
(d)is likely to cause prejudice, embarrassment or delay in the proceeding; or
(e)fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(f)is otherwise an abuse of the process of the Court.
In Lucantonio at [118] Ward CJ in Eq said (citations omitted):
It is also well‑established that a pleading is liable to be struck out if it is embarrassing. What is meant by an embarrassing pleading, in the context of an application such as the present, relates to whether the pleading can serve the function of a pleading under the rules; i.e., whether it puts the defendant properly on notice of the real substance of the claim made against it and enables the defendant to know what case it is that the defendant has to meet. A pleading is embarrassing if it is unintelligible, ambiguous or imprecise in its identification of material factual allegations so as to deprive the opposing party of proper notice of the real substance of the claim or defence or if it contains inconsistent, confusing or irrelevant allegations.
The power to strike out pleadings or portions of pleadings is discretionary. It should be employed sparingly, and only in a clear case: see summary of principles in Qualify Me at [21].
Relevant principles - common design, personal liability and negligent misstatement
It suffices for the purposes of determining the objections to amendment to the FASOC to refer to the following in relation to the claims of common design and negligent misstatement sought to be made by the Applicants, and the claims of personal liability of, relevantly, Mr Skelin, and Mr Chen and Ms Li, each of whom are also directors of a number of corporate respondents.
Common design and joint tortfeasor pleas
The circumstances when a director of a company will be found to be jointly liable as a tortfeasor with that company was explained with reference to earlier authorities by the Full Court of the Federal Court of Australia in Hashtag Burgers Pty Ltd v In‑N‑Out Burgers, Inc (2020) 385 ALR 514; [2020] FCAFC 235, relevantly at [136]-[138]. The director’s conduct must go beyond causing the company to take a commercial or business course of action or directing the company’s decision‑making where both steps are the good faith and reasonable expression of the discharge of the duties and obligations of the director, as a director. An additional component of “close personal involvement” in the infringing conduct is required. Inevitably, the quality or degree of that closeness will require careful examination on a case by case basis. In the end it depends, “as all cases do, upon the facts of each particular case”. The Full Court, at [138] concluded:
[138]Plainly enough, to incur personal liability for a tort committed by a company, a director must be acting beyond their proper role as a director. In JR Consulting, the Full Court approved the statement of Besanko J in Keller where at [291] his Honour said that:
…A “close personal involvement” in the infringing acts by the director must be shown before he or she will be held liable. The director’s knowledge will be relevant. In theory, that knowledge may range from knowledge that the relevant acts are infringing acts to knowledge of an applicant’s registered designs to knowledge of acts carried out by others.
In respect of the appeal before them, the Full Court then said, at [140], the combined effect of five matters led them to the conclusion the directors were joint tortfeasors with the company– first, they were the sole directors of the company; secondly, they alone made decisions as to its management; thirdly they alone received the profits derived from it; fourthly, there was no significant difference between the way that the two individuals operated the business before incorporation, and the way in which they operated through the corporate vehicle after it was formed, and finally, the primary judge had concluded that each of the two directors was knowingly involved in the company’s wrongdoing.
The principles concerning accessory liability in tort and common design were considered by the Supreme Court of the United Kingdom in Sea Shepherd UK v Fish &Fish Limited [2015] UKSC 10. Lord Neuberger, President, observed, at [19]‑[20]:
Joint liability in tort may arise in a number of ways. Two or more defendants may act as principal tortfeasors, for example by jointly signing and publishing a defamatory document. A defendant may incur joint liability by procuring the commission of a tort, by inducement, incitement or persuasion. … A defendant may incur vicarious joint liability for a tort committed by an agent or employee. … [Their Lordships were] concerned with a different category, in which the defendant, D, has allegedly assisted the principal tortfeasor, P, in the commission of tortious acts.
and at [21]:
To establish accessory liability in tort it is not enough to show that D did acts which facilitated P’s commission of the tort. D will be jointly liable with P if they combined to do or secure the doing of acts which constituted a tort. This requires proof of two elements. D must have acted in a way which furthered the commission of the tort by P; and D must have done so in pursuance of a common design to do or secure the doing of the acts which constituted the tort. I do not consider it necessary or desirable to gloss the principle further.
Lord Sumption, in dissent on the factual conclusion, but not on the principles of joint liability, on which their Lordships were substantially agreed, set out the elements of liability as a joint tortfeasor at [37]-[44]. At [37], he explained that,
The legal elements of liability as a joint tortfeasor must necessarily be formulated in general terms because it is based on concepts whose exact ambit is sensitive to the facts. ...
At [40], his Lordship recognised that:
In both England and the United States, the principles have been worked out mainly in the context of allegations of accessory liability for the tortious infringement of intellectual property rights. There is, however, nothing in these principles which is peculiar to the infringement of intellectual property rights. The cases depend on ordinary principles of the law of tort. …
Whilst their Lordships in Sea Shepherd were concerned with the common law as developed in the United Kingdom, it is apparent that so far as is relevant to the issues of pleading before me, the principles apply equally here.
In Baxter v Obacelo Pty Ltd (2001) 2005 CLR 635; [2001] HCA 66, Gleeson CJ and Callinan J said at [18] (citations omitted):
… Concurrent tortfeasors are persons whose acts concur to produce the same damage. Joint tortfeasors are responsible for the same wrongful act leading to single damage. Such joint responsibility may arise from vicarious responsibility of one for another, or from the non‑performance of a joint duty, or from concerted action. Several concurrent tortfeasors are independent tortfeasors whose separate acts combine to produce damage. In their case, “concurrence is exclusively in the realm of causation.” …
“The difference between joint tortfeasors and several tortfeasors is that the former are responsible for the same tort whereas the latter are responsible only for the same damage. As was said in The ‘Koursk’, for there to be joint tortfeasors ‘there must be a concurrence in the act or acts causing damage, not merely a coincidence of separate acts which by their conjoined effect cause damage’. … Persons who breach a joint duty may also be joint tortfeasors. Otherwise, to constitute joint tortfeasors two or more persons must act in concert in committing the tort.”
Accessorial liability for breach of fiduciary duty
In Pittmore Pty Ltd v Chan; Chan v Tan [2020] NSWCA 344, Leeming JA (Bell P and Brereton JA agreeing) engaged in a detailed discussion of the relevant principles, see at [152] – [196]. I refer to and adopt what his Honour there said.
At [152] – [153] Leeming JA said (citations omitted):
What does “dishonesty” mean in this context?
[152]It is trite that, following Farah Constructions, a third party who assists a breach of trust or a breach of fiduciary duty may only be made liable as an accessory pursuant to the “second limb” in Barnes v Addy if the breach by the fiduciary amounts to a “dishonest and fraudulent design”. Not so a third party who procures or induces a breach of trust or breach of fiduciary duty. In Grimaldi v Chameleon Mining NL (No 2) the Full Court confirmed that “it is not necessary to show any dishonest or fraudulent design here”. … That prompts a question: what does a requirement of “dishonesty” mean in this context? … What does it mean if, as Pittmore submits, “dishonesty” is necessary before a third party be held liable for procuring or inducing a breach of trust or breach of fiduciary duty, in circumstances where the breach need not itself be dishonest?
[153]Before turning to that question, I wish to deal with three preliminary points. The first concerns terminology. I shall refer to “breach of trust or breach of fiduciary duty” although I think the same principles govern the liability of third parties who procure or induce breaches of trust or breaches of fiduciary duty. The second addresses whether there is a distinction between “inducing” and “procuring” a breach of trust; I conclude that there is not. The third concerns a reservation I have with the submissions on appeal, insofar as they apply to company directors. After elaborating those preliminary points, I shall return to the meaning of “dishonesty”.
I note at [186] his Honour said:
A third party’s liability for inducing or procuring a breach of trust or fiduciary duty has two elements. The first is the intentional conduct which causes, and is intended to cause, the breach of trust or fiduciary duty. The second is that the third party knew that he or she was bringing about a breach of trust or fiduciary duty. …
He continued at [189]:
[189] But however scrupulous or casual trustees or fiduciaries be in adhering to their duty, the third party will in all cases know that the result intended to be brought about, which is in fact brought about, is something which would reasonably be regarded as a breach of trust or fiduciary obligation. I see no difficulty in describing the third party’s conduct in those circumstances as “dishonest”. However, the essential aspect of the third party’s liability is not so much the conclusion that the conduct is dishonest. Rather, it is the knowledge that the third party has procured a breach of duty by the trustee or fiduciary.
His Honour concluded his consideration at [195] – [196], as follows:
[195] The foregoing also sits harmoniously with other areas of ancillary liability less closely connected to procuring or inducing a breach of trust or fiduciary duty than liability for knowing assistance. Essentially, what is required is knowledge of the essential matters which go to make up the breach of trust or breach of fiduciary duty, even if the procurer or inducer does not know that those matters amount to a breach of trust or breach of fiduciary duty. … That accords with the provisions … regulating ancillary liability under the Trade Practices Act considered in Yorke v Lucas …
[196] I think one can fairly describe a third party who procures or induces a trustee or fiduciary to do something which a reasonable person in the position of the third party would apprehend to be a breach of trust or a breach of fiduciary duty to be acting “dishonestly”. However, I do not regard “dishonesty” as an element of the test for liability. I respectfully agree with Lord Millett that “dishonesty” is an unnecessary distraction: Twinsectra Ltd v Yardley at [134].
Torts of inducing breach of contract, or interfering with contractual relations, and of negligent misstatement
The causes of action pleaded by the Applicants in the March FASOC encompass allegations of inducing breach of contract, or interfering with contractual relations, and the tort of negligent misstatement.
With regards to liability for inducing breach of contract or interfering with contractual relations, I refer to and adopt Beach J’s statements in State Street Global Advisors Trust Company v Maurice Blackburn Pty Ltd (No. 2) [2021] FCA 137, see at [430]-[431]:
… [Lord Hoffman] … considered that blending indirect and direct interference into the one tort was inappropriately blending primary and accessorial liability. Now whether that is so does not affect the approach I am required to take. But this primary and accessorial liability distinction may not be all that clear or clean. Accepting that indirect interference involves a tort of primary liability, so too may be the case with direct interference. Direct interference may involve, in some cases not inducing a breach as such. It may involve preventing or hindering a contracting party’s performance with does not involve or produce a breach. In such a case, such conduct of the respondent would not amount to accessorial liability, for there would be no “primary wrongful act of the contracting party” [my emphasis]. In such a situation of direct interference the respondent would have primary liability.
In my view, the tort of indirect interference with contractual relations is available under Australian law. But both the relevant` intention as well as the separate unlawful conduct or means must be established as being involved in the interference. But much depends on the context of the particular economic tory being discussed. To describe it as the infringement of some right may be useful, but not sufficient. …
With respect to negligent misstatement, it suffices to refer to and adopt Bryson AJ’s summary in Chandra v Perpetual Trustees Victoria [2007] NSWSC 694, at [76]-[99], of the factors relevant to identifying when a duty of care arises in respect of negligent misstatement, including by reference to High Court authority.
OVERVIEW - PARTIES’ POSITIONS AND THE COURT’S GENERAL APPROACH
Mr Skelin’s submission is that the Applicants ought not be granted leave to file the March FASOC because the amendments in the March FASOC are liable to be struck out. For completeness, I record here that Mr Skelin has also filed an application in the case served 12 March 2021 which, inter alia, seeks to strike out 34 paragraphs of the ASOC, many of which are analogous paragraphs to those included his objection to 54 paragraphs in the March FASOC, although there is not a complete overlap.
Mr Skelin’s objections and submissions are comprised in a 1 plus page overarching submission, and a 10 page table marked “Annexure A”. In sum, he contends that the amendments are liable to be struck out as embarrassing: “[In large part it is unintelligible, ambiguous, vague or too general with the result that [Mr] Skelin does not know what is alleged against him other than at the highest level of generality – ‘you were involved in the sale of counterfeit goods so you are personally liable’.”. It is, he contends, “often ambiguous, and contains alternatives that are confusingly intermixed, along with irrelevant allegations”. The March FASOC remains embarrassing he says, whilst conceding that it “may contain allegations of material facts sufficient to constitute a cause of action, because material facts alleged are couched in expressions which leave difficulties of doubts about recognising or piercing together what is referred to”.
He contends that in many instances the document fails to disclose a reasonable cause of action, and warns that it “is likely to delay the proceeding in that, without widespread effective amendments, there are likely to be ongoing debates about the true nature of the case brought against [Mr] Skelin”.
Mr Skelin submits the March FASOC is the opposite of a clear and precise statement of the Applicants’ case; it is unclear and imprecise. A vague understanding is not the test. Mr Skelin is entitled to have a clear and precise understanding (emphasis in the submission).
Mr Skelin’s annexure table then groups objections to 54 paragraphs into 27 groups of objections and submissions (see Table 1). To all but one of those groups of objections Mr Skelin concludes his submission with the repeated points that the paragraphs are “Contraventions of FCR 16.02(1)(d); 16.03 [and] Liable to be struck-out pursuant to FCR 16.21(1)(b), (c), (d), (e), and (f).” This objection should be taken as made each time in the consideration that follows. I will not, generally, repeat it.
The Green Forest parties’ objections overlap in part with Mr Skelin’s objections, generating a total count of some 60 paragraphs to which either or all those respondents object.
In reply, the Applicants propose a way of disposing of the objections and the remaining issues concerning the pleading made by Mr Skelin and the Green Forest parties. They group these respondents’ objections, including having regard to the three categories of amendments identified in [45] above.
CONSIDERATION
I propose to approach the matter having regard to the approach proposed by the Applicants, and to the groupings of objections to paragraphs made by Mr Skelin, and the Green Forest parties.
Annexed to these reasons is a first table cross-referencing the paragraph of the March FASOC objected to by Mr Skelin and/or the Green Forest parties, cross-referenced to Mr Skelin’s groupings of his objections (to which I have assigned a consecutive Roman numeral, according to the order of his grouped objection), and then the Applicants’ categories and sub-categories, as set out in [45] above. For ease of reading, in the table, and in these reasons I have transcribed sub‑paragraphs of the March FASOC listed as “a.”, “b.” etc., as (a), (b), and so on.
Paragraphs objected to – where amendments are proposed
First, I address a number of the objections in response to which the Applicants in reply propose amendments, namely to paragraphs 62, 82, 129B and 138B, 138, 139, 165A, 166(b) (by proposing an amendment to 166(a)), and 172.
The Applicants say that they have identified these paragraphs as the only matters in respect of which there may be a genuine issue, and point out that these are matters that could have been addressed inter-partes had they been so raised. In general terms I accept that second submission. Having regard to the matters raised by the respondents, and the Applicants’ proposed amendments, I observe that had the objects of the Rules been adhered to, it should have been unnecessary for the Court to consider and rule on many of these matters.
Paragraph 62
The objection to this paragraph illustrates the above observations. The March FASOC amended paragraph 62a and 62b of the ASOC by replacing references to representations pleaded in sub-paragraphs numbered 59a, b, c and e, with ‘53a, 53b, 53c, and 53f’. Mr Skelin’s objection is:
This plea only makes sense if sub-paragraphs (a)-(b) are taken to be referring to paragraph 59, not 53. If that reading is not correct then sub-paragraphs (a) and (b) are self-evidently incoherent.
Contraventions of FCR 16.02(1)(d); 16.03.
Liable to be struck-out pursuant to FCR 16.21(1)(b), (c), (d), (e), and (f).
(Note my approach hereafter as outlined in [85] above to these last 2 points).
That is, Mr Skelin understood that the representations were those pleaded at sub-paragraphs of 59, not 53, but took the pedantic, tendentious and technically formalistic course of objecting rather than complying in good faith with r.1.03(4), and either acting on that reasonable understanding, and pleading accordingly, or inter partes inviting the Applicants to correct the error.
The Applicants accept that in paragraph 62 of the March FASOC the cross-references to paragraph 53 ought to be changed to paragraph 59, and have stated they will make this correction before filing (if leave is granted to amend). Reading the paragraph so corrected, I consider the paragraph properly puts Mr Skelin on notice of the real substance of the claim made against him, is clear and precise, and enables Mr Skelin to know what case he has to answer, and has the opportunity to meet it.
Mr Skelin’s objections that paragraph 62 contravenes FCR 16.02(1)(d) and 16.03, and that the paragraph is liable to be struck out pursuant to FCR 16.21(1)(b)-(f) do not withstand a fair reading of the paragraph, so corrected, or the substance of the pleading, uncorrected. The objections are without merit.
I grant leave accordingly.
Paragraph 82
Mr Skelin says there are 3 problems with paragraph 82. Problems 1 and 2 repeat complaints made with other paragraphs concerning his personal liability, and for the reasons I there set out, are not made out.
The third point Mr Skelin makes in respect of paragraph 82 is that no tort is alleged either at all, or any rate, for which Skelin is primarily liable. Mr Skelin says he cannot be a joint tortfeasor in relation to breaches of contract. He identifies the wrong identified in paragraph 82 is a breach of contract in paragraphs 79 and 81. Whilst the objection does not relate to any amendment to paragraph 82 proposed in the March FASOC, and whilst the reference to 81 is incorrect (I assume he intends paragraph 80), it is correct to identify that the wrong identified in paragraph 79 is a breach of contract, and no tort is identified.
The Applicants propose to delete the words in paragraph 82 “entered into a common design with or participated with, or were joint tortfeasors in”. This leaves the allegation that by reason of the cross-referenced paragraphs “Emilio Wang and Mr Skelin induced or procured [deletion] the breaches of EPAQ International referred to in paragraph 79 above and the breaches of Freezeframe China Co referred to in paragraph 80 above”. I am satisfied that the deletion addresses the substance of Mr Skelin’s objection. With the deletion, paragraph 82 is not a nonsense. The allegation is stated with sufficient clarity, Mr Skelin is given fair notice of the real substance of the claim made against him, and is able to know the case he has to answer. The other complaints to paragraph 82 fall away. I allow paragraph 82, so amended.
Paragraphs 129B and 138B
With respect to paragraphs 129B and 138B (correcting their typographical error from “139B”), the Green Forest parties object that it is not clear to whom the duty is owed, how it was breached and how they are liable.
They contend that the cause of action of liability in their own right, or as joint tortfeasors for negligent misstatement is embarrassing. They contend that any allegation is omitted that could possibly ground the liability of Mr Chen and Ms Li, and why, if any such representations were made and a concomitant duty attached, it extends to the directors in a personal capacity, or how they as directors made the representations in their own right. They contend that paragraph 138B does not disclose in what way the Green Forest parties (and each of Mr Chen and Ms Li) are joint tortfeasors: are they jointly liable having committed the same tort, or was there a common design to remain silent as to each of the representations that can be traced back through reference to paragraph 138A? They say it is conceptually difficult in any event to understand how there could be a concerted action to negligently not make a statement.
Having regard to paragraph 138B, read fairly, as a matter of pleading, and not a-contextually, and in the light of the authorities to which I have referred above (see Baxter v Obacelo Pty Ltd (2001) 2005 CLR 635; [2001] HCA 66), the conceptual difficulty the Green Forest parties express does not arise. In paragraph 138B(a) the Applicants identify primary liability, and in paragraph 138B(b), the Applicants identify joint tortfeasor as the basis of liability. The Green Forest parties’ submission acknowledges that the duty was to inform Self Care, their silence and failure to inform Self Care of the matters alleged is the alleged tortious act, and that it is an allegation of responsibility for the same tort by acting in concert.
As to how they are liable, the Green Forest parties’ objections do not engage with Baxter, above, nor the principles stated in Hashtag at [136]-[138], that a director may be personally liable due to their close personal involvement in the acts of a company, in the case of Mr Chen and Ms Li, Green Forest. The same applies to Mr Skelin’s objections on this point.
In response, the Applicants propose to insert into paragraph 129B that:
(i)the duty was owed to the Applicants; and
(ii)as set out in paragraph 138B [correcting the typographical error repeated from Green Forest parties’ error], the duty was to inform Self Care that Emilio Wang, [Mr] Skelin, EPAQ International, Freezeframe China Co and Freezeframe HK were selling freezeframe Products in Australia.
I consider that with the proposed further amendments, the duty of care in paragraph 129B is sufficiently and clearly articulated. The pleaded material facts referred to and in paragraph 138B are clear and sufficient to ground the individual respondents’ close personal involvement in the entities with which they are alleged to have acted in concert in breach of the duty now identified. The pleading puts the respondents properly on notice of the real substance of the claim made against them, and enables them to know what the case is they have to meet.
Mr Skelin objects to both paragraphs 138B(b) (per Green Forest, Mr Chen and Ms Li) and 138C(b) (per AVP), as being both bad in law, because “neither” committed the tort in paragraph 138A. This objection is a-contextual. Impermissibly, it ignores the identified paragraphs, and the principles explained in Baxter above. The pleas of joint tortfeasorship expanded from 138A by 138B and 138C are stated with clarity and precision. The pleading gives fair notice of the case to be made against each of them. Mr Skelin’s objection fails.
I allow paragraphs 129B and 138B, so amended. I allow paragraph 138C, including 138C(b).
Paragraph 138
Mr Skelin objects, and the Green Forest parties’ adopt his objections.
Paragraph 138 is a plea of knowing involvement by the Green Forest parties, Mr Skelin, Emilio Wang and other individuals in the breaches of the ACL by the making of certain representations (earlier set out) pleaded in paragraphs 135 to 137 against Mr Skelin, Emilio Wang and EPAQ International, Freezeframe China Co, Freezeframe HK, Quanjian and Zuren (as applicable). Mr Skelin was named in paragraph 138 as it appeared in the ASOC, and Mr Skelin pleaded to it in his defence. The amendments sought add (by reference to paragraphs 135 to 137), knowing involvement in the “China Sales Representations”, and otherwise add claims of knowing involvement by reason of cross referenced matters by the Green Forest parties, and AVP.
Mr Skelin asserts the plea against him in paragraph 138 is bad in law for three reasons – first, failure to identify the conduct, and is a nonsense because it appears to allege he was knowingly involved in his own contravention of the ACL, secondly, the allegation is a serious one akin to dishonesty, and it appears he also says it refers to too many paragraphs, when it should be pleaded out in separate paragraphs, and thirdly, the pleading requires intentional participation in and actual knowledge of the essential elements of the contravention. That requires a plea that Mr Skelin had actual knowledge of, or was wilfully blind to, the falsity of the representations.
The first point strains to find a problem, where an objective reading of the plea with an eye to substance would not find one. To take the matter to the point of pedantry, however, I would give leave to the Applicants in respect of paragraph 138 to expressly qualify Mr Skelin and Emilio Wang’s knowing involvements in the conduct as involvement in the conduct of the corporate entities named in the preceding paragraphs, and therefore, in respect of that conduct, having accessorial liability, as discussed in the authorities to which I have referred above. The pleas in the preceding paragraphs of the primary liability of each of the named companies, Mr Skelin and Emilio Wang (as applicable) remain.
The identification in the second point of the seriousness of the allegation – akin to dishonesty, is subsumed in the third point, and otherwise does not arise. The third point has merit.
In reply, the Applicants propose to meet the third point made by Mr Skelin (which is adopted by the Green Forest parties) by pleading actual knowledge or wilful blindness by reference to the matters pleaded in the paragraphs referred to in paragraph 138.
Mr Skelin has proposed the solution; the Applicants have accepted that solution. I consider that the solution proposed overcomes any reasonable objection that Mr Skelin and the Green Parties make.
I allow paragraph 138, further amended as proposed by the Applicants.
Paragraph 139
Mr Skelin objects to the amendments to paragraph 139, identifying that the pleading he is a joint tortfeasor in relation to ACL contraventions in paragraphs 135, 136, and 137 is not a plea known to law. In reply, the Applicants propose to delete the proposed references to paragraphs 135, 135 and 137 (eliminating the joint tortfeasor claim in respect of breaches of the ACL). This deletion should be made.
This leaves paragraph 139 as a further or alternative pleading each of Mr Skelin (and other individual respondents) are liable as joint tortfeasors for the breaches of the duty of care referred to in paragraph 138A. As an alternative plea, it excises from paragraph 138A any plea that Mr Skelin is a joint tortfeasor with himself, whilst “each of” makes clear the relationship with each of the other individuals named.
With the deletion proposed by the Applicants, I allow paragraph 139.
Paragraphs 165A and 167A
Paragraph 165A introduces a further or alternative plea that “when engaging in the acts in breach of fiduciary duty pleaded in paragraph 165 above, EPAQ International, Freezeframe China Co, Freezeframe HK, Emilio Wang and/or [Mr] Skelin engaged in a dishonest or fraudulent design in that they engaged in the conduct referred to in paragraphs 38A to 39J and 48A to 49J above (insofar as that conduct concerned them) and they:” [did, or failed to do, certain things then separately specified in 13 sub‑paragraphs (a) to (m)].
Mr Skelin says this paragraph fails to plead a dishonest and fraudulent design by the fiduciary in a way that this Court should allow to stand. It is an allegation the seriousness of which means it ought to be pleaded and particularised. He says it is necessary “to plead and prove” that Mr Skelin engaged in that dishonest and fraudulent design, but the paragraph lacks specificity, some sub-paragraphs do not appear to relate to him, and some sub‑paragraphs raise new allegations which should be pleaded separately.
The Green Forest parties say that the same problems identified by Mr Skelin’s objections apply to paragraph 167A as against them.
The Applicants reply that Mr Skelin’s objections (adopted by Green Forest parties in respect of paragraph 167A) are pedantic. The Applicants propose however to resolve the issue by inserting ‘and/or’ to connect the matters pleaded in sub‑paragraphs (a) to (m).
A pleading of a dishonest and fraudulent design is a serious allegation, and it is necessary that the allegation be pleaded and particularised. Having regard to the qualifying prefatory words of paragraph 165A, and the express qualification made in the paragraph to the conduct the there named respondents are said to have engaged in - “(insofar as that conduct concerned them)”, I consider that the insertions proposed by the Applicants are sufficient for the paragraph to plead and particularise the allegation as required by the seriousness of the allegation, that the paragraph provides the necessary specificity of the material facts relied on, the extent to which it is a material fact “germane” to the allegation against Mr Skelin, and that separate allegations are separately pleaded. The paragraph properly puts, relevantly, Mr Skelin on notice of the real substance of the claim there made against him, is sufficiently clear and precise as to the allegations and material facts concerning him, enables him to know what case he has to answer, and gives him the opportunity to meet it.
Mr Skelin’s remaining criticisms are in substance not matters of pleading. They may be matters for his defence; they are requests that the full evidentiary landscape be set out in the pleading. That is not the purpose or function of a pleading, and to require it be done would be inconsistent with the Rules.
I allow paragraph 165A, with the further amendments proposed by the Applicants.
In respect of paragraph 167A, I do not apprehend that the Green Forest parties’ objections raise any issue over and above my determination in relation to paragraph 165A. For the same reasons, with corresponding amendments, I allow paragraph 167A.
Paragraph 166(b)
Mr Skelin says the plea is bad in law. He submits that the gravamen of Barnes v Addy liability is knowledge of a dishonest and fraudulent design on the part of the fiduciary, but whilst paragraph 166(b) alleges knowledge of a breach of fiduciary duties, the particulars to the sub‑paragraph allege knowledge of fiduciary duties. (I observe however that Mr Skelin here fails to read the particulars as a whole). He points out that this plea is otiose anyway because paragraph 166(a) pleads actual knowledge of the fact of the fiduciary duties said to be alleged in paragraph 164.
The prefatory words to paragraph 166 make clear that it is an alternate pleading to address the circumstance that Emilio Wang and/or Mr Skelin did not themselves breach any of the fiduciary duties referred to in paragraph 164. The plea in paragraph 165A makes clear that it is alleged that Mr Skelin (and Emilio Wang) knew of the fraudulent design pleaded.
In response to Mr Skelin’s objections, the Applicants propose, for clarity, to insert a reference to paragraphs 165 and 165A next to the reference to paragraph 164 in sub-paragraph 166(a). It follows that the existing incorporation in sub-paragraph 166(b) of the matters set out in sub‑paragraph 166(a) addresses the Barnes v Addy objection, and overcomes Mr Skelin’s perceived difficulty. See also, Pittmore, per Leeming JA, esp. at [189]-[196].
I accept the Applicants proposal addresses the objection. I allow paragraph 166 so amended.
Paragraph 172
Paragraph 172 is not sought to be amended in the FASOC, nor have the paragraphs to which 172 refers - 168 (or 5, 63, and 64), 7, 8, or 88 to 91 (save for a narrowing amendment I expressed the view in Court should be made in respect of paragraph 89). Paragraph 172 is a plea of knowing involvement in breach of duties of confidence, to the extent that the named respondent did not themselves breach their duty. It is the last paragraph under the topic heading ‘Breach of confidence’, encompassing paragraphs 168 to 172 (none of which are sought to be amended).
Mr Skelin submits: “This plea is bad in law. A plea of knowing assistance in a breach of confidence requires a plea of a dishonest and fraudulent design with respect to the breach”.
The Applicants submit in response that Mr Skelin’s complaint seems to be that knowledge of the breaches of confidence are not sufficiently identified in paragraph 172. The knowledge of [Mr] Skelin and [Emilio] Wang clearly arises from paragraphs 168 to 171. They submit, as such, while it appears to be unnecessary, the Applicants are willing to cross-reference those paragraphs in paragraph 172, and to make particular (i) to paragraph 172 part of paragraph 172.
It is unnecessary to decide whether Mr Skelin’s pithy statement fully encompasses the position with respect to a plea of being knowingly involved in, or providing knowing assistance in relation to breaches of confidence: see, Lifeplan Australia Friendly Society Ltd v Woff [2016] FCA 248, Besanko J at [332]-[335]; City of Sydney v Streetscape Projects (Australia) Pty Ltd (2011) 94 IPR 35; [2011] NSWSC 1214, Einstein J at [485]-[491]. It suffices the cross-referencing of the paragraphs, and the bringing of particular (i) into the pleading in paragraph 172 addresses the substance of the objection. I reject the submission that the plea is bad in law.
Next, he says that “insofar as the plea is ‘by reason of’ paragraph 92A, it is circular”. He says, by way of example, that paragraph 92A says because Skelin caused EPAQ International to purchase Counterfeits (which he says is the act pleaded in 38A(b) – although it is not), Skelin seeks or sought to hide behind [EPAQ International’s] corporate veil. He says it follows that paragraph 39C insofar as it relates to the act pleaded in 38A(b) alleges that “by reason of” the fact that Skelin caused EPAQ international to purchase Counterfeits and thus sought to hide behind its corporate veil (being he says, the plea in 92A, in respect of the conduct in 38A(b)), when Skelin caused EPAQ International to purchase Counterfeits, Skelin sought to hide behind its corporate veil.
I have great difficulty in reading the paragraphs with the circularity and lack of comprehension that Mr Skelin asserts. To read the paragraphs as Mr Skelin urges requires maintaining a myopic focus on an individual paragraph, an unwavering resistance to viewing any paragraph in the context of the causes of action and relationships identified by the subheadings, surrounding, and referenced paragraphs, and ignoring any statement that a plea is an alternative plea. Such an approach is to be rejected.
EPAQ International is not defined in paragraph 88 as a “Corporate Associate” (c.f., Mr Skelin’s assertion). Leaving that confusion aside, paragraph 39C reading on paragraph 38A(b) pleads that in causing [the Corporate Associate] to engage in the act of supply of Counterfeits Mr Skelin did so, inter alia, in bad faith, and seeking to hide behind its corporate veil. Paragraph 92A alleges relevantly that Mr Skelin caused [a Corporate Associate] to supply Counterfeits to Green Forest; in causing [the Corporate Associate] to engage in that act (of supply), Skelin did so in bad faith, and sought to hide behind the corporate veil of [the Corporate Associate], and so on. I accept that, as an elegant model of legal purity (which is not the test), there is a potential for repetition, however read in the context of the subject headings and surrounding paragraphs, that potential is minimised to the extent that to maintain such a reading is fanciful. In context, repetition here does not make the pleas bad. The pleas here answer the previous objections made by Mr Skelin to the paragraph that he did not understand how it was that he was personally involved. That objection is answered by the March FASOC amendments.
Mr Skelin next says that paragraph 92A is illogical. He asserts that the acts alleged in paragraph 92A were personal to Skelin, but the premises for that allegation is that Mr Skelin was alleged to be a de facto or shadow director (in paragraph 91). The objection does not withstand scrutiny. Mr Skelin overlooks the clear allegation in paragraph 92A that in doing the acts there alleged whilst such a director, Mr Skelin did so in bad faith and in the absence of, and outside the scope of any reasonable discharge of his duties as, such director. The objection fails.
Fourthly, Mr Skelin takes objection to words used in paragraphs 88 to 92. He professes an inability to comprehend the use of words “through” and “via”, says that there is no legal content to the word “affiliated” or to the phrases “de-facto corporate group” because it is not a concept understood by Corporations Law and so therefore must be embarrassing, nor to the phrases and words “operated the business”, “managed”, “operated”, “individual associate” (in respect of Mr Skelin), or how it is that Mr Skelin exercises “influence and control”. His complaint that the particulars to paragraph 88 do not support paragraph 90 overlooks FCR r 16.02(1)(d).
His objections, again, reveal the extremely narrow, and artificial lens through which Mr Skelin seeks to read the March FASOC. A pleading, and specifically, the paragraphs to which this objection is made, is to be read as a matter of substance. The normal English meaning of words is assumed, unless a specialised or defined meaning is stated (as in paragraph 91, in respect of director). It does not follow that a concept may not be known to Corporations Law, it is devoid of ordinary meaning or factual content. Again, Mr Skelin confuses his desire for complete evidentiary proof of the material facts stated with the function of the pleading. His claim that the paragraphs “use a bunch of meaningless jargon which the law does not recognise as having relevance or meaning is embarrassing, frivolous, evasive and ambiguous” is hyperbole, and to grossly mischaracterise the paragraphs. The contention that the pleading with the words and phrases he takes issue with is without relevance or meaning, is unfounded.
The paragraphs to which Mr Skelin here takes objection state the material facts with sufficient clarity to put Mr Skelin on proper notice of the real substance of the claim against him, and enable him to know, as a matter of ordinary English usage, what case it is he has to meet. I allow the paragraphs.
Paragraphs 39C(c), 39j(c) and 49C(c)
Mr Skelin’s objections are that in these paragraphs he is alleged to be the alter ego of seven companies, when he was not. In saying the concept is “almost invariably confined to single director/sole shareholder companies”, he acknowledges that it is not, as a matter of necessity, so confined.
Mr Skelin’s complaint is a matter for evidence, not pleading. He desires to know the full evidentiary proof of the allegation. The objection fails.
Paragraph 50A
In response to objections raised by the objecting respondents in Court in March 2021 as to the reliance placed on their representations, in the March FASOC, the Applicants introduced a new paragraph 50A, to clarify the reliance pleas, separating that previously extant in a summary form in paragraph 53A. The plea is that Ms Amoroso and Self Care relied on representations made by Mr Skelin and Emilio Wang, including those defined in paragraphs 50, 59, and 60 (I interpose that the pleading makes clear that paragraph 60A should be added as a cross-reference), that such reliance was reasonable in circumstances then set out, and that such reliance was known or ought to have been known by Mr Skelin and/ or Emilio Wang by reason of matters then set out.
Mr Skelin says there are “at least” four problems with paragraph 50A. He says first, that there is no plea to support the contention that he personally, as opposed to as a director made representations in paragraphs 59 and 60. Secondly, that the representation pleaded in paragraph 50 is not expressed to be one made by him “on his own behalf”, positing that the inference being that the representation was allegedly made by him in his capacity as director, inconsistently with the plea in paragraph 50A that he personally made the representation (all emphases Mr Skelin’s). Thirdly, he says there is no explanation why Ms Amoroso’s reliance is relevant to any other issue in the FASOC, noting the significance of paragraph 50 is made express in paragraph 129A. Fourthly, he says that paragraph 50A lacks context, because he says it bears no relationship to the heading of the part, or to the preceding or succeeding paragraphs.
The first and second objections are tendentious, and without merit. It is clear on their face that the representations he is alleged to have made are pleaded in such a way it is open to find that he made them on his own behalf or in his capacity as a director. Mr Skelin is on clear and sufficient notice. His objections show he understands the point. The third objection suffers the same lack of merit. It ignores the pleaded fact that Ms Amoroso is the CEO. It ignores the material facts pleaded that she met and communicated with Mr Skelin. It ignores his recognition of the matters stated in his defence (see [12] above). It ignores the references throughout the pleading to affidavits of Ms Amoroso. The Applicants submit Mr Skelin’s objection ignores the evidence that Ms Amoroso is the sole director, and effective sole owner of Self Care, and that her reliance is relevant to Self Care’s reliance for the purpose of the ACL and negligent misstatement claims. Mr Skelin’s objection to paragraph 53 makes it clear he understands the point. I accept the Applicants submissions. The paragraph fulfils its required function as a pleading.
The last objection is, as a matter of substance, without merit. The heading above paragraph 50 is “Non‑exclusive agency in China – Third to Seventh Respondents”. Whilst, as a matter of pedantry, I accept the heading could be broadened, it need not be. The heading on its face encompasses the subject matter of paragraph 50A, the persons named in paragraph 50 – Mr Skelin and Emilio Wang – their introduction to Ms Amoroso, CEO of Self Care, and representations there pleaded. The subsequent paragraphs define and set out other representations referenced in paragraph 50A.
Mr Skelin’s objections fail. I allow the paragraph. I allow the Applicants leave to incorporate additional cross-referencing.
Paragraph 53
Paragraph 53 pleads “In furtherance of the Agency Agreement [pleaded in paragraph 52] and in reliance on [enumerated defined representations], Self Care: (a) authorised EPAQ International [to do certain things]; [in specified periods] at the request of Emilio Wang and Mr Skelin, (b) supplied [product at prices and for purposes set out]; (c) supplied [product on terms there set out]; and (d) permitted the conduct particularised in paragraph 164 below” (thereby bringing that conduct into the pleading).
Mr Skelin identifies the paragraph as a plea of reliance in the context of both the negligent misstatement case and the misleading/false conduct case. In so identifying the paragraph he demonstrates that he is on clear notice of those cases he is to meet. He says that ““in furtherance of the Agency Agreement” is vague and meaningless”, that once that Agreement was formed it became the source of the obligations to do the things set out in (a) to (d), not the representations, and that several of the pleaded representations are pleaded in time periods that post-date “much of the time period” pleaded in (a) and (b). He says he should not be left to guess which representations were in fact relied on.
Mr Skelin fails to read the paragraph as a whole. On its face the pleading “In furtherance of” is not limited as he asserts. His assertion the Agreement upon entry thereby excludes any reliance thereafter on any of the representations is not what is pleaded. That a representation was made at a later time than continuing conduct first commenced, does not preclude subsequent reliance on the representation upon or after it was made. His objections (if factually correct), are matters for evidence, they do not demonstrate any want of specificity, clarity or lack of proper notice of the case asserted against him, or that he is not able to plead to it.
I allow the paragraph.
Paragraphs 59, 60, 60A
In these paragraphs the Applicants plead that Mr Skelin and Emilio Wang made certain representations to Self Care (underling and striking through indicating amendments proposed):
[59]‘At all material times below, in connection with the supply or possible [supply] of freezeframe Products to EPAQ International and Freezeframe China Co under the Agency Agreement,
MrSkelin andMrEmilio Wang made representations to Self Care (on their own behalf and on behalf of EPAQ International and/or Freezeframe China Co) to the following effect (the China Representations)’: [representations are then set out in sub‑paragraphs (a) – (f)][60]‘In and from around mid-2017, Emilio Wang and Skelin made representations to Self Care, on their own behalf and /or on behalf of EPAQ International, Freezeframe China Co and/or Freezeframe HK to the following effect (the China Platform Representations)’: [representations are then set out in sub paragraphs (a) – (c)]
[60A]‘At all material times from at least 2017, Emilio Wang and Skelin made representations to Self Care, on their own behalf and/or on behalf of EPAQ International and/or Freezeframe China Co, to the following effect (the China Sales Representations)’ [representations are then set out in sub paragraphs (a) – (c)].
Mr Skelin’s objection to paragraphs 59, 60, 60A is “The plea that representations are made on their own behalf is conclusory. It does not plead the material facts necessary to attribute personal liability in accordance with Hashtag”.
Mr Skelin’s earlier objections ventilated at hearing on 15 March 2021 were that he could not understand in what capacity he was alleged to have made representations. The paragraphs now make clear he is alleged to have done so on his own behalf, and or on behalf of the named companies. The representations are identified. More is not required for this pleading. The March FASOC states the material facts necessary to give Mr Skelin fair notice of the case to be made against him at trial, identifies the issues, and is as brief as the nature of the case permits. It accords with the principles stated in Hashtag. Mr Skelin’s objection is that the full evidentiary landscape be laid out before him in the pleading. His objections fail.
I allow the paragraphs.
Paragraph 76B
Paragraph 76B states:
EPAQ International, Freezeframe China Co, Freezeframe HK, Quanjian, Yilin Trading, Zuren, [Mr] Skelin, Emilio Wang and Ivan Wang took steps to conceal the conduct referred to in paragraph 76 above, particularly from Self Care.
Paragraph 76 pleads that the named companies offered for sale, sold, supplied and otherwise distributed freezeframe Products in Australia and in Hong Kong and China [to a range of persons], that had been supplied by Self Care to EPAQ International and Freezeframe China Co pursuant to the Agency Agreement for [a specified purpose].
The Applicants submit that paragraph 76B was introduced into the March FASOC in response to Mr Skelin’s objections argued in Court on 15 March 2021 as to a lack of clarity of the inducing breach of, or interfering with, contract claims. So much is clear. The paragraph addresses the previous objection.
Mr Skelin now says the paragraph makes a serious allegation but omits to identify what the steps were, nor why they are said to be taken personally by him. He says the pleading is conclusionary, and does not plead the material facts necessary to attribute personal liability in accordance with Hashtag.
Mr Skelin seeks evidence. It does not follow from the principles in Hashtag, that the plea must set out the evidence relied upon to prove the allegations. I allow the paragraph.
Paragraph 84
The plea in this paragraph is “Further, by reason of the matters referred to in paragraphs [listed], by dealing in Counterfeits and engaging in the other conduct referred to in paragraphs [listed] each of Emilio Wang, [Mr] Skelin, [certain named corporate respondents] engaged in conduct that was inconsistent with the material terms and limitations of the NDA and the Agency Agreement.”
The amendments proposed by this paragraph, together with other paragraphs the Applicants identify are identified and explained by the Applicants as I have set out at [45] above.
Mr Skelin objects on the basis that the paragraph overlooks the privity doctrine in contract. He submits that an allegation that he acted inconsistently with material terms and limitations of a contract to which he is not a party is a nonsense.
Whilst superficially Mr Skelin’s objection has some attraction, it misreads the plea. Certain conduct is alleged, and its inconsistency with a contract. The plea says nothing about whether he is or is not a party to those contracts, and does not purport to do so. Read in the context of the Applicants’ claims of joint tortfeasorship for inducing breach of, or interfering in the contracts identified, it fulfils the function of clarifying, relevantly, his conduct. It is not a nonsense. I allow the paragraph.
Paragraph 85
This paragraph falls within the Applicants first category of amendments (category 1.b.). Mr Skelin’s objections with this paragraph repeat his objections concerning establishing personal liability which have been made in respect of other paragraphs, and rejected for the reasons earlier stated. His reliance on Pittmore, extracted a‑contextually from [163], is partial, and disingenuous. I allow the paragraph.
Paragraphs 86 and 87
The amendments proposed by these paragraphs also fall within the Applicants category 1.b. Mr Skelin’s objection posits a hypothetical, and as I apprehend misreads the acts in paragraph 85, and the conduct of each party that did engage in the acts. It is not clear to me that his characterisation is correct. However, I am concerned that the pleas in this paragraph could be stated more specifically for each alternative, accepting that this will lead to a longer pleading, to ensure that Mr Skelin’s characterisation does not arise (whether or not the characterisation is correct).
Mr Skelin’s further objection is a catch‑all objection that each of the paragraphs is defective insofar as it relies on referenced paragraphs to establish personal liability, which he says the paragraphs do not do, “for the reasons identified in theses submissions”. This objection fails, for the reasons already given.
I give leave to the Applicants further amend paragraphs 86 and 87 to take into account Mr Skelin’s characterisation, and to address my concerns set out above.
Paragraphs 115 and 118
Mr Skelin’s objection to each paragraph is broadly stated in the same terms as his catch-all objection above. For the same reasons, the objection fails.
Paragraph 129A
Mr Skelin objects that this paragraph perpetuates the problems identified … “in relation to paragraphs 50A, 53, 60, 60A, and 61.”
It follows from my rulings on the objections to those paragraphs, and in respect of paragraphs 129B and 138B, that Mr Skelin’s objection fails.
Paragraph 147
This paragraph was not amended in the FASOC. Mr Skelin says the plea is bad in law. Mr Skelin’s submission does not withstand scrutiny, having regard to the authorities I have referred to above, and to the cross-referencing expressly stated in paragraph 147. In the context of the pleading, that Mr Skelin is alleged to be a joint tortfeasor gives clear notice that he is alleged by the matters identified in the cross-referenced paragraphs, to have committed the tort, as explained in the authorities to which I have referred above. I allow the paragraph.
Paragraph 164 and paragraph 165
The problems Mr Skelin submits exist with paragraph 164, he says paragraph 165 perpetuates.
He says not a single proscriptive fiduciary duty is pleaded. He says that there are no material facts pleaded to support the allegations that he personally at various times of the named companies owed fiduciary duties to Self Care.
In respect of paragraph 165, he also says that it is insufficient that he is alleged to have “otherwise acted unconscionably”.
As to the first submission, having regard to the authorities referred to above, and to the surrounding context of the pleading, the submission fails.
As to the additional objection to paragraph 165, I accept that it is insufficient to so allege. I consider that the allegation can be supported by material facts, and I grant leave to the Applicants to do so.
Mr Skelin’s objections that the pleading contravenes the Rules and FCR, and should be struck out
In my consideration and determination in these reasons of the objections, I have not, in each instance expressly ruled on Mr Skelin’s overarching submission. It should be apparent that, having undertaken the task of ruling on each objection set out in the foregoing, that Mr Skelin’s overarching submission, and its application to any particular paragraph to which he has made objection must be rejected. Mr Skelin’s claim that the March FASOC is embarrassing, expressed at the highest level of generality, which generality is expressed very narrowly - “you were involved in the sale of counterfeit goods so you are personally liable” – cannot be accepted. It grossly misstates and inaccurately describes what is clear, and plainly stated in the March FASOC, in the February draft FASOC, in the ASOC, and before that, in the statement of claim. For the reasons stated in the foregoing, Mr Skelin’s objections on these additional grounds fail.
Other matters raised by the Applicants
It is clear from the course of the respondents’ objections to the February FASOC, and the 15 March Orders, that the March FASOC was to plead in greater detail the pleas of common design and joint tortfeasor, and to incorporate proposed amendments foreshadowed in Court. Having undertaken the above consideration and determination of objections to the March FASOC, it is apparent that in many respects Mr Skelin has objected to the detail, the lack of which respondents earlier decried. I have reached the conclusion, as stated above, that in large part, those objections are in truth requests for evidence.
In their reply submission the Applicants submitted as follows (most transcript references omitted):
7.Other than the matters addressed in paragraph 6 above, both Mr Skelin and the Green Forest parties have failed to adhere to the matters that the Court directed them to focus their remaining objections on (and in Mr Skelin’s case, he breached the 8-page limit when doing so).
8.In particular, as is clear from the exchange with Senior Counsel for Mr Skelin on 23 March 2021, the Court indicated that:
a.The amendments proposed in the FASOC have been well and truly articulated such that the Court would need to understand very clearly that there was a genuine objection;
b.Mr Skelin and the Green Forest parties should therefore not make pleading points without substance;
c.If there is complexity in the cross-referencing in the pleading, that is something that the legal representatives for Mr Skelin and the Green Forest parties ought to be able to overcome;
d.If Mr Skelin or the Green Forest parties have concerns about the pleading that can be clarified inter partes (such as occurred between Self Care and AVP), that is the course that they should pursue;
e.Otherwise, Mr Skelin and the Green Forest parties’ submissions made on previous occasions about the proposed amendments should not be replicated in any further objections taken by them to the pleading; and
f.Any remaining objections should only be focused on matters that take Mr Skelin or the Green Forest parties by surprise or that they do not understand, following genuine consideration.
9.Failure to comply with those directions is apparent when regard is had to the three categories of proposed amendments in the FASOC set out in Self Care’s aide memoire dated 22 March 2021.
and at [29] – [31]:
29.This is Mr Skelin’s third attempt at having the Court refuse the amendments proposed by Self Care (the prior attempts being on 10 and 23 March 2021, in circumstances where the Court had ordered on 17 February 2021 that each respondent was to notify Self Care of any objections to the amendments and the basis for them by 26 February 2021). In the case of the Green Forest parties, it is a continuation of the approach adopted at the hearing on 23 March 2021 of raising largely opportunistic objections, having consented to the filing of the previous version of the FASOC on 26 February 2021. Each time, the complaints of both Skelin and the Green Forest parties increase in number, as is evident from this latest set of objections which have not been confined as was directed by the Court.
30.It is apparent from the detail of Mr Skelin’s and the Green Forest parties’ objections that each of them understand the case they are required to meet. In this regard, Mr Skelin’s Senior Counsel indicated on 23 March 2021 at T37.46 – T 38.3 that he will not pursue strike out of paragraphs of the FASOC allowed by the Court. The difficulty is that Mr Skelin and the Green Forest parties do not want to meet the case made against them. Rather than facilitating the efficient conduct of the proceedings, the approach taken by them merely causes delay and inconvenience to the Applicants, the Court and the other respondents.
31.As previously submitted by the Applicants in respect of Mr Skelin, the wholesale attempt to resist the amendments (and strike out many paragraphs of the ASOC) is an abuse of process when regard is had to a number of circumstances relating to the case, including the following (see principles in Batistatos v Roads and Traffic Authority (2006) 226 CLR 256; [2006] HCA 27 at [15]: “the failure to take, as well as the taking of, procedural steps and other delay in the conduct of proceedings are capable of constituting an abuse of the process of the court”). The Skelin Objections further this abuse of process, and the joining in those objections by the Green Forest parties implicates them.
I consider that there is some force in the Applicants’ concluding submission that other than the matters addressed at [90] - [135] above, the issues raised by Mr Skelin, and to a lesser extent, the Green Forest partes, are unnecessarily pedantic pleading points, inconsistent with the objects of the Court (and I interpose, the statutory provisions applicable to matters in the Federal Court). It is apparent that to a considerable degree, the objections have ignored the broader context of the context in the pleading.
I consider that it is not necessary, on this application, to say anything more on the matter.
Subject to the further amendments I have ruled on in these reasons, and noting the amendments agreed between the Applicants and AVP, I accept that the amendments sought in the March FASOC are necessary to ensure the real questions in controversy between the parties are decided. I will allow them.
DISPOSITION
For the foregoing reasons, I grant the Applicants leave to amend the Amended Statement of Claim dated 24 July 2020, and to file and serve a pleading substantially in the form of the draft Further Amended Statement of Claim dated 19 March 2021, incorporating the further amendments allowed and those foreshadowed by the Court in these reasons, and as may otherwise be agreed between the Applicants and the Sixteenth Respondent.
I grant leave to the Applicants to file and serve a further amended Application to the extent necessary to bring the prayers for relief into conformity with the Further Amended Statement of Claim, so allowed.
At an appropriate time I will hear the parties as to costs.
Provision of a glossary
The Court would be assisted in due course, and I assume the parties would be as well, if the Applicants were to prepare and provide to the Court and the participating respondents, a glossary of defined terms in the pleadings, cross referencing the term to the paragraph where the term is first defined.
I certify that the preceding two hundred and thirty-six (236) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Baird. Associate:
Dated: 12 May 2021
SCHEDULE OF PARTIES
SYG 2771 of 2019 Respondents
Fourth Respondent:
FREEZEFRAME CHINA CO PTY LTD ACN 621 016 975
Fifth Respondent:
KEFEI (EMILIO) WANG
Sixth Respondent:
PASCAL SKELIN
Seventh Respondent:
EPAQ INTERNATIONAL PTY LTD ACN 608 870 588
Eighth Respondent:
QUANJIAN PTY LTD
Ninth Respondent:
YIPING YANG
Tenth Respondent:
TAOYU PAN
Eleventh Respondent:
KEFEI (IVAN) WANG
Twelfth Respondent:
ZUREN INTERNATIONAL PTY LTD
Thirteenth Respondent:
SIQI HUO
Fourteenth Respondent:
YULIN WANG
Fifteenth Respondent:
E-GO CHANNEL PTY LTD
Sixteenth Respondent:
AUSTRALIAN VITAMIN PLUS PTY LTD
Seventeenth Respondent:
YAN (CYNTHIA) LI
TABLE 1
No Skelin Objections Green Forest (GF) Objections Skelin Grouping Apps Category 1 38A 38A I 1.a.i. 2 38B 38B III 1.a.i. 3 38C (and para 17 GF Subs) 1.a.i. 4 38D 1.a.i. 5 38E 38E II 1.a.i. 6 39 1.a.i. 7 39A 1.a.i. 8 39B 39B IV 1.a.i. 9 39C 39C V 1.a.i. 10 39C(c) VI 1.a.ii 11 39E III 1.a.ii 12 39H II 1.a.ii 13 39I IV 1.a.ii 14 39J V 1.a.ii 15 39J(c) VI 1.a.ii 16 41A III 17 48B (and para 17 GF Subs) 18 48D II 1.a.iii 19 49B IV 1.a.iii 20 49C V 1.a.iii 21 49C(c) VI 1.a.iii 22 49I IV 1.a.iv 23 49J V 1.a.iv 24 50A VII 2.a 25 53 VIII 2.a 26 59 IX 2.c 27 60 IX 2.c 28 60A IX 3.a 29 62 X 30 75 IV 31 75A V 1.b 32 76A V 1.b 33 76B XI 1.b 34 82 XII 1.b 35 84 XIII 1.b 36 85 XIV 1.b 37 86 XV 1.b 38 87 XV 1.b 39 88 V 40 89 V 2.d 41 90 V 42 91 V 2.d 43 92 V 44 92A V 2.d 45 110 1.e 46 115 115 XVI 1.e 47 118 XVI 1.e 48 129A XVII 1.f 49 129B 1.f 50 138 138 (and para 19 GF Subs) XVIII 1.f 51 138B(b) 138B (“139B”) XIX 1.f 52 138C(b) XIX 1.f 53 139 XX 1.f 54 147 XXI 55 164 XXII 56 165 XXIII 2.e 57 165A XXIV 2.e 58 166(b) XXV 2.e 59 167A (and para 20 GF Subs) 3.b 60 172 XXVI
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