Sims v RM Capital Pty Ltd & Anor
[2014] FCCA 2977
•22 December 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SIMS v RM CAPITAL PTY LTD & ANOR | [2014] FCCA 2977 |
| Catchwords: CONSUMER LAW – Allegation of breach of obligation and dishonest act – share transfer – various alleged breaches of legislation. CORPORATIONS – Duties and responsibilities of directors – whether duties owed – whether duties breached. CORPORATIONS – Whether Federal Circuit Court of Australia has jurisdiction under Corporations Act 2001 (Cth) – in civil proceedings – in criminal proceedings. CRIMINAL LAW – Alleged offences – dishonesty – fraudulent misappropriation. CRIMINAL LAW – Whether Federal Circuit Court of Australia has jurisdiction in criminal proceedings. COSTS – Indemnity costs – factors to be considered – whether indemnity costs payable. |
| Legislation: Competition and Consumer Act 2010 (Cth) Crimes Act 1900 (NSW), s.124 |
| Alfaro v Crown Commercial Cleaning Pty Ltd & Anor [2012] FMCA 478 Cass v Kingston Capital Ltd [2010] FMCA 762 Boral Besser Masonry Limited v Australian Competition and Consumer Commission (2003) 215 CLR 374; [2003] HCA 5 Colgate-Palmolive Company & Anor v Cussons Pty Limited (1993) 46 FCR 225 Ejueyitsi v Bond University [2012] FMCA 872 Fortron Automotive Treatments Pty Ltd v Jones (No.2) [2006] FCA 1401 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397 Genovese v BGC Construction Pty Ltd (No.2) [2007] FMCA 601 Miller v Commonwealth Director of Public Prosecutions (2005) 142 FCR 394; [2005] FCA 482 Roy Galvin & Co Pty Ltd v Ives [2013] FCCA 1645 Spencer v The Commonwealthof Australia (2010) 241 CLR 118; [2010] HCA 28 |
| Applicant: | DOUGLAS ARTHUR SIMS |
| First Respondent: | RM CAPITAL PTY LTD |
| Second Respondent: | JAMES BRADLEY RICHARDSON |
| File Number: | PEG 393 of 2013 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 14 March 2014 |
| Date of Last Submission: | 14 March 2014 |
| Delivered at: | Perth |
| Delivered on: | 22 December 2014 |
REPRESENTATION
| for the Applicant: | In person |
| Counsel for the Respondents: | Mr N Ebbs |
| Solicitors for the Respondents: | Bennett & Co |
ORDERS
The application filed 20 December 2013 be struck out pursuant to r.13.10 of the Federal Circuit Court Rules 2001 (Cth).
The applicant have leave to file and serve a further application by 27 January 2015, provided that:
(a)the application has annexed a statement of claim properly particularised; and
(b)the statement of claim must be prepared by a lawyer and include a certificate signed by the lawyer that any factual and legal material available to the lawyer provides a proper basis for each:
(i)allegation in the pleading;
(ii)denial in the pleading; and
(iii)non-admission in the pleading.
The applicant pay the costs of the respondents on an indemnity basis, with the actual quantum, if not agreed, to be assessed by a Registrar of this Court.
There be liberty to apply generally.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 393 of 2013
| DOUGLAS ARTHUR SIMS |
Applicant
And
| RM CAPITAL PTY LTD |
First Respondent
| JAMES BRADLEY RICHARDSON |
Second Respondent
REASONS FOR JUDGMENT
Introduction
RM Capital Pty Ltd and James Bradley Richardson[1] are the first and second respondents to an application[2] by Douglas Arthur Sims.[3] The Respondents have applied to have the Substantive Application summarily dismissed.
[1] “RM Capital” and “Mr Richardson” respectively, collectively “the Respondents”.
[2] “Substantive Application”.
[3] “Mr Sims”.
The Substantive Application
The Substantive Application was filed on 20 December 2013, and is supported by an affidavit of Mr Sims affirmed on the same date.[4] Relevant content from Mr Sims’ December 2013 Affidavit is set out below.[5] Evidentiary objections were taken to portions of Mr Sims’ December 2013 Affidavit, but it has not been necessary to determine those objections for the purposes of the summary dismissal application. The nature of, the grounds for, and the final orders sought in the Substantive Application are as follows:
[4] “Mr Sims’ December 2013 Affidavit”.
[5] See para.7 below.
Type of application
This application is commenced in the Court’s jurisdiction under the (specify Act or Acts): Competition & Consumer Act 2010 alternatively, Trade Practices Act 1974 S 51 and S 52, S 82 and Australian Securities & Corporations Legislation S181 (1) (a) (b), S182 (1) (a), S 184 (1) (a) (b) (d), S184 (2) (a) (b), and S184 (3) (a) (b).
Final orders sought by applicant/s …
1.An Order against the First and Second Respondent’s to pay the Applicant the compensation sought by the Applicant against the First and Second Respondent’s in accordance with the Applicants Claim as set forth in the Applicant Affidavit of support.
Grounds of application …
1.The Dishonest conduct of the Respondents in obstructing the transfer of HC Berlin Pharma AG Shares as instructed within the Share Transfer under Seal of Eastland Medical System Ltd (now trading as Suda Ltd) to the Applicant which dishonesty has prejudiced and harmed the Applicant and has caused the Applicant acute stress, depression and financial loss.[6]
[6] Transcribed from the Substantive Application without amendment.
RM Capital filed a Response opposing the orders sought, on the basis that the Substantive Application:
a)discloses no reasonable cause of action;
b)is frivolous, vexatious and improper;
c)is evasive and ambiguous;
d)has no reasonable prospect of success; and
e)is otherwise an abuse of process of the Court.
The Response was supported by an affidavit of Mr Richardson sworn 29 January 2014,[7] the relevance of which, for present purposes, is that it sets out the reasons why RM Capital and Mr Richardson oppose the orders sought by Mr Sims, and seeks their dismissal with costs on an indemnity basis. The reasons set out in Mr Richardson’s Affidavit are reflected in the “Respondents’ Submissions in Support of Application to Strike Out Application and Action”.[8] The relevant content of the Respondents’ Submissions is set out below.[9]
[7] “Mr Richardson’s Affidavit”.
[8] “Respondents’ Submissions.”
[9] See paras.9-12 below.
Mr Sims filed a further affidavit sworn 19 February 2014,[10] together with “Applicant’s Submissions as Directed by Judge Lucev 3rd February 2014”.[11] The relevant content of Mr Sims’ February 2014 Affidavit is set out below.[12]
[10] “Mr Sims’ February 2014 Affidavit”.
[11] “Mr Sims’ Submissions”.
[12] See para.8 below.
On 19 August 2014 Mr Sims swore a further affidavit.[13] It was filed. The Court having already reserved judgment, and leave not having been sought or given to file any further evidence, the Court has not had regard to Mr Sims’ August 2014 Affidavit.
[13] “Mr Sims’ August 2014 Affidavit”.
Mr Sims’ case on the Substantive Application
Mr Sims’ December 2013 Affidavit says that:
a)RM Capital is a registered Australian company holding an Australian Financial Services Licence and entitled to be sued, and which, as broker, acted as custodian and held HC Berlin Pharma AG[14] shares in a German share trading custody account with Caceis Bank for and on behalf of Eastland Medical Systems Ltd[15] (now Suda Ltd) and other Australian shareholders;[16]
[14] “Berlin Pharma”.
[15] “EMS”.
[16] Mr Sims’ December 2013 Affidavit, paras.3 and 5.
b)Mr Richardson is a director of RM Capital and holder of an Australian Securities Licence;[17]
c)on 8 October 2007 Mr Sims made a proposal in a letter addressed to the “Executive Board” of EMS for a payment for inventions and other intellectual property “vended” to EMS by Mr Sims, and annexes a letter, the relevant terms of which appear to be as follows:
We need to clarify the situation of the vend of my inventive steps into the company and its affiliates as previously discussed.
…
My valuation and proposal as set forth below needs to be clarified on the understanding that it will not be invoiced to the EMS until there is clarification from the required trail on the treatment of children that the malaria treatment works in attacking malaria. … any positive result will obligate EMS on full & immediate settlement of these vends, already acknowledged and confirmed by EMS as my inventive steps. …
The Invoice will be as follows:
… [there follows proposals for payment, the issuance of shares and tradable options in EMS for what appear to be three trademarked inventions, and a payment and the issue of tradable shares in StarMedical (Botswana) Limited, seemingly in relation to an invention and copyright]
5.Berlin Pharma AG (The Copyright, invention & corporate structure & plan of Doug Sims) Au$50,000 Plus the issue of 1.5 Million Tradable Options convertible @ 0.25 cents by end 2011 & a transfer of 245,000 … [Berlin Pharma] Shares at the direction of D Sims on completion of the listing of the Shares on the Frankfurt Stock Exchange.[18]
[17] Mr Sims’ December 2013 Affidavit, para.4.
[18] Mr Sims’ December 2013 Affidavit, Exhibit DAS (2).
d)on 12 November 2007 EMS accepted the proposal with a promise to pay, said to be evidenced by a letter addressed to Mr Sims signed by the Chief Executive Officer and Chief Financial Officer of EMS dated 12 November 2007 and relevantly in the following terms:
Subject: IP Vend
…
[EMS] confirm your following inventions vested by you into the company and its associated vehicles;
…
4. The company name “Berlin Pharma AG”
…
[EMS] acknowledge that despite these inventions being outside your scope of engagement and a product of your inventive mind, [EMS] have never settled the reward and compensation for these vends and now valuable assets of [EMS] as intended.
It is this company’s intention to do so in the near future. [EMS] consider your proposal to be fair and equitable.[19]
[19] Mr Sims’ December 2013 Affidavit, Exhibit DAS (3).
e)on 22 February 2009 EMS part-performed the promise by signing the transfer of 245,000 Berlin Pharma shares to Mr Sims;[20]
[20] “Share Transfer”; Mr Sims’ December 2013 Affidavit, para.13 and Exhibit DAS (4).
f)in July 2009 Mr Sims via HypoVereinsbank Germany[21] lodged the Share Transfer with RM Capital’s bank, Caceis Bank, and sought to have the shares transferred to Mr Sims’ Share Trading Account with HypoVereinsbank;[22]
[21] “HypoVereinsbank”.
[22] Mr Sims’ December 2013 Affidavit, paras.8 and 14.
g)as at July 2009 the 245,000 Berlin Pharma shares were valued at EUR245,000 or AU$435,000;[23]
h)on presentation of the Share Transfer to Caceis Bank in July 2009 Mr Richardson instructed Caceis Bank to refuse the transfer of the shares in breach of the Share Transfer;[24]
i)the 245,000 Berlin Pharma shares are now worthless;[25]
j)the directions of RM Capital and Mr Richardson have injured and prejudiced Mr Sims causing “acute stress and financial loss arising from their dishonest Act”;[26]
k)the alleged dishonest act by RM Capital and Mr Richardson continues to harm Mr Sims, and RM Capital and Mr Richardson continue to refuse to reimburse Mr Sims the value of this shares and accumulated interest on that loss;[27]
l)
In the circumstances as set out above [RM Capital] has breached the obligations owed to [Mr Sims] and [Mr Richardson] has contravened the terms and conditions of his Australian Securities Finance Brokers License, The Competition and Consumer Act 2010, alternatively The Trade Practices Act 1974 S51, S52 and S82, and Australian Corporations & Securities legislation S181 (1) (a) (b), S182 (1) (a), S184 (1) (a) (b) (d), S184 (2) (a) (b) and S184 (3) (a) (b), and possibly the Australian Crimes Act citing dishonesty and conspiracy to prejudice and steal.[28]
m)Mr Sims claims against RM Capital and Mr Richardson the sum of $440,000 plus interest commencing 1 August 2009 until judgment, and against Mr Richardson $250,000 for “undue Stress, deprivation of enjoyment, losses of assets arising from the failure to pay”, an apology and costs.[29]
[23] Mr Sims’ December 2013 Affidavit, para.8.
[24] Mr Sims’ December 2013 Affidavit, para.9.
[25] Mr Sims’ December 2013 Affidavit, para.10.
[26] Mr Sims’ December 2013 Affidavit, para.16.
[27] Mr Sims’ December 2013 Affidavit, para.17.
[28] Mr Sims’ December 2013 Affidavit, para.18.
[29] Mr Sims’ December 2013 Affidavit, para.19.
Mr Sims’ February 2014 Affidavit deals with many matters, most of them wholly irrelevant to the Share Transfer claim. Relevantly, however, Mr Sims’ February 2014 Affidavit says that:
a)he is “fully aware [of] the instructions given to Caceis Bank” by Mr Richardson “as the HypoVereinsbank informed me that Caceis Bank had explained to them the reason why they could not transfer the Shares to the Applicant’s HypoVereinsbank Account”;[30] and
b)he claims that in other actions against RM Capital to secure the transfer of Berlin Pharma shares “held in the same Custodian Account” by RM Capital, Mr Richardson has claimed that “Michael Robert Stewart representing Suda Ltd had told him not to transfer the said shares.”[31]
The Respondents’ application in a case for dismissal of the Substantive Application
[30] Mr Sims’ February 2014 Affidavit, second paragraph at unnumbered first page.
[31] Mr Sims’ February 2014 Affidavit, fourth paragraph at unnumbered fifth page.
The Respondents’ Submissions
The Respondents’ Submissions assert that:
a)the Substantive Application has:
i)no reasonable prospect of success; and
ii)that the proceeding or claim for relief is frivolous, vexatious or an abuse of process;
b)no leave to amend ought to be granted to amend the Substantive Application; and
c)costs ought to be awarded to the Respondents on an indemnity basis.
With respect to the Substantive Application having no reasonable prospect of success the Respondents say as follows:
a)the Substantive Application alleges “dishonesty”, apparently by an alleged “obstruction” of the Share Transfer, but it is not clear what the alleged “dishonesty” is said to be, nor how it might contravene any particular law;
b)Mr Sims December 2013 Affidavit, particularly at paragraph 18, obfuscates rather than clarifies the matter, and has the effect of alleging that the Respondents alleged conduct was:
i)dishonest, but no further details are provided as to why that is the case or what specifically is alleged to have been dishonest;
ii)in breach of unspecified obligations owed by RM Capital to Mr Sims;
iii)a contravention of the terms of the Australian Securities Finance Brokers Licence, presumably a reference to an Australian Financial Services Licence, allegedly held by Mr Richardson;
iv)a contravention by Mr Richardson of the Competition and Consumer Act 2010 (Cth),[32] though no particular provision is stated, and that, in any event, the conduct complained of occurred prior to the coming into force of the CC Act, that is in July 2009;[33]
v)a contravention by Mr Richardson of ss.51, 52 and 82 of the Trade Practices Act 1974 (Cth),[34] despite that these provisions, and the TP Act generally, apply to corporations, which Mr Richardson is not, and it seems that the reference to a contravention of s.82 of the TP Act is a reference to an action for damages;
vi)a contravention by Mr Richardson of ss.181(1)(a), 184(1)(a), (b) and (d) and 184(3)(a) and (b) of the Australian Corporations & Securities Legislation, which is presumably a reference to the Corporations Act 2001 (Cth),[35] despite those provisions relating to the obligations of employees and officers of a company to that company, and therefore providing Mr Sims with no apparent, or specified, standing to sue; and
vii)a contravention “possibly [of] the Australian Crimes Act citing dishonesty and conspiracy to prejudice and steal”, which is presumably intended to be a reference to the Crimes Act 1914 (Cth). It is inappropriate to allege a possible contravention of law, and a bare allegation of dishonesty does not disclose a cause of action. Further, if it is intended to rely upon the Crimes Act 1914 (Cth), then these are matters of a criminal nature not properly connected, nor specified to be so connected, with the jurisdiction of this Court;
c)the alleged breaches and contraventions are said to cause or give rise to “harm”,[36] loss of the value of the shares with interest,[37] and “stress, deprivation of enjoyment and losses of assets”.[38] The claims are described as being in respect of “dishonesty which has prejudiced and harmed [Mr Sims] and has caused … acute stress, depression and financial loss”. It is difficult to contemplate the recovery of compensation in this Court for the relief claimed, other than the lost value of shares. Mr Sims has conceded that his claim for the ordering of an apology cannot be made;[39]
d)to the extent that the allegations are made with respect to contraventions of the TP Act, and notwithstanding that there is no sufficient or legal basis for the bringing of any claim under the TP Act, the terms of s.82(2) of the TP Act provide that any claim for damages for a contravention of Parts IV or V of the TP Act must be commenced within three years after the date on which the cause of action accrued, and therefore Mr Sims’ ability to claim under s.82(2) of the TP Act would now be time barred;
e)Mr Sims’ case is fanciful. Even making a number of assumptions as to the meaning and possibly correct references to legislation, there is a complete absence of factual foundation for each of the claims, no legal basis for prosecuting any of them, and no recognisable cause of action inherent in the words of the Substantive Application supported by Mr Sims’ December 2013 Affidavit. The comments of the Western Australian Supreme Court, Court of Appeal[40] in Sims v Jooste QC[41] are directly applicable to Mr Sims’ case.[42]
[32] “CC Act”.
[33] Mr Sims’ December 2013 Affidavit, paras.9 and 14.
[34] “TP Act”.
[35] “Corporations Act”.
[36] Mr Sims’ December 2013 Affidavit, para.17.
[37] Mr Sims’ December 2013 Affidavit, paras.17 and 19(a) and (b).
[38] Mr Sims’ December 2013 Affidavit, para.19(c).
[39] Mr Sims’ December 2013 Affidavit, para.19(c).
[40] “Western Australian Court of Appeal”.
[41] [2013] WASCA 245 (“Jooste QC”).
[42] Citing Jooste QC at para.4 per Pullin and Newnes JJA.
In relation to the proceeding or claim being frivolous, vexatious or an abuse of process, the Respondents say that:
a)by reference to a letter from Mr Sims to the Respondents lawyers which contains the following sentence:
I’m not able to bring the charge [presumably a reference to a criminal offence under the Crimes Act 1914 (Cth)] and have moved to seek the engagement of the Federal Police, so I stand before the Judge and test my case.[43]
that Mr Sims is seeking to use the Court’s processes to gather evidence in order to provide the same to the Federal Police, and that that evinces a lack of bona fides, or a flagrant abuse of process; and
b)in any event, Mr Sims’ case is fanciful and misconceived and will cause unnecessary anxiety, trouble and expense in having to defend it, particularly in circumstances where allegations of a criminal nature, without specific connection to the Court’s jurisdiction, appear to lie at the heart of Mr Sims’ claim.
[43] Mr Richardson’s Affidavit, Annexure JBR 2.
In relation to leave to amend the Respondents say that Mr Sims’ case is not of an appropriate character to warrant leave to amend as it is so misconceived that no reasonable amendment could cure the numerous defects.
The issue of costs is dealt with separately below.
Mr Sims’ Submissions
Mr Sims’ Submissions were relatively short, and it is convenient to set them out in full, as follows:
The Plaintiff submits to the court that:
The Defendant had no right to deny the Plaintiff the Shares the subject of the Eastland Medical Systems Ltd (now Suda Ltd) Share transfer 22nd February 2009 for 245,000 HC Berlin Pharma AG (HCBPAG) Shares which transfer was submitted to the First Respondents controlled Custodian Cacies Bank Account by the Plaintiff’s Bankers HypoVereinsbank Germany in August 2009.
The refusal of the First Respondent to transfer the said Shares in accordance with the Shareholders transfer was at the direction of the Second Respondent.
The refusal of the Respondents to transfer the said shares to the Applicant constitutes an indictable offence under Sect 8 of the Criminal Code, alternatively
Contravention of Corporations legislation, alternatively
Contravention of the Competition and Consumer Act 2010, alternatively
Trade Practices Act 1974, and
Breach of Sect 124 of the Crimes Act 1900 “Fraudulent Misappropriation”.
At no time has or did the Defendants have any right to deny the Plaintiff his property the subject of the Share Transfer.
The Plaintiff seeks Orders that:
a)The Defendants pay the Applicant Au$440,000.00;
b)Interest accruing @ 42.20 P/Day commencing August 2009 to judgement;
c)Against the Second Respondent $250,000.00 for undue stress, deprivation of enjoyment, losses of assets arising from the failure to pay;
d)Cost.[44]
Consideration
[44] Transcribed from Mr Sims’ Submissions without amendment.
Principles
In considering the issues raised in these proceedings the Court must have regard to s.17A of the Federal Circuit Court of Australia Act 1999 (Cth)[45] and r.13.10 of the Federal Circuit Court Rules 2001 (Cth),[46] which are set out hereunder, and the principles established in relation to those, and similar, legislative provisions.
[45] “FCCA Act”.
[46] “FCC Rules”.
Section 17A of the FCCA Act provides that:
(2) The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
Rule 13.10 of the FCC Rules provides that:
The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
a) the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
b) the proceeding or claim for relief is frivolous or vexatious; or
c) the proceeding or claim for relief is an abuse of the process of the Court.
The power to give summary judgment under s.17A of the FCCA Act can probably be exercised on wider grounds than the power under r.13.10 of the FCC Rules, since the latter is not qualified by the statement that a proceeding need not be hopeless or bound to fail for it to have no reasonable prospect of success.[47] It has been suggested that s.17A of the FCCA Act provides for judgment or nothing, and is not brought into play by mere deficiencies in pleadings.[48]
[47] Rowe v Emmanuel College [2013] FCA 939 at para.12 per Rangiah J.
[48] Fortron Automotive Treatments Pty Ltd v Jones (No. 2) [2006] FCA 1401 at para.21 per French J; Butorac v Win Corporation Pty Ltd [2009] FCA 1503 at para.9 per Buchanan J.
The words of s.17A of the FCCA Act mean what they say and there is little point in attempting to formulate other phrases to encapsulate their meaning.[49] The Court must embark upon a “practical judgment … as to whether the applicant has more than a ‘fanciful’ prospect of success”.[50] The task was described in Spencer as follows:
… The … Court may exercise power … if, and only if, satisfied that there is “no reasonable prospect” of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to “no reasonable prospect” can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase “just and equitable” when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.[51]
Albeit that s.17A of the FCCA Act and r.13.10(a) of the FCC Rules might afford slightly different means of summary relief, the High Court’s observations in Spencer can nevertheless be applied to the “no reasonable prospect” provisions in r.13.10(a) of the FCC Rules.
[49] Spencer v The Commonwealthof Australia (2010) 241 CLR 118 at 141 per Hayne, Crennan, Kiefel and Bell J; [2010] HCA 28 at paras.58-59 per Hayne, Crennan, Kiefel and Bell JJ (“Spencer”); Ejueyitsi v Bond University [2012] FMCA 872 at para.25 per Jarrett FM.
[50] Spencer CLR at 132 per French CJ and Gummow J; HCA at para.25 per French CJ and Gummow J.
[51] Spencer CLR at 141 per Hayne, Crennan, Kiefel and Bell JJ; HCA at para.60 per Hayne, Crennan, Kiefel and Bell JJ.
Share Transfer – alleged breach of obligations and dishonest act
Mr Sims asserts that RM Capital has breached the obligations owed to him in circumstances where the Share Transfer did not occur, seemingly allegedly because of directions given by RM Capital and Mr Richardson. It appears that the direction is alleged to be a “dishonest” act by RM Capital and Mr Richardson. But the plea of breach of obligation is only in relation to RM Capital. What the obligation is, is not spelled out. Even if an obligation were spelled out, the nature of the dishonesty, is not particularised.
In Jooste QC the Supreme Court of Western Australia, Court of Appeal[52] observed that:
The indorsement was also deficient in another way. Allegations of dishonesty or impropriety may have a serious impact on a litigant. It is well established that such allegations should not be made unless there is a proper factual basis for them, and where such allegations are made, they must be clearly and distinctly alleged. A party should not be obliged to defend any legal proceedings for any period based on generalised allegations of dishonesty or impropriety. It is improper for a party to make generalised allegations of fraud: Glew v Frank Jasper Pty Ltd [2010] WASCA 87 [24]. It is true that an indorsement on a writ is not the place for full particularisation, but an allegation of fraud must not be alleged in such generalised terms that it is impossible to ascertain from the indorsement the nature of the allegation.[53]
[52] “WA Court of Appeal”.
[53] Jooste QC at para.12 per Pullin and Newnes JJA.
The Supreme Court of Western Australia, Court of Appeal further observed in Jooste QC that:
[Mr Sims] did not seem to appreciate that justice required a disclosure of the legal basis for a claim put in a form that the respondent and court could understand in order to adjudicate fairly between the parties.[54]
[54] Jooste QC at para.17 per Pullin and Newnes JJA.
The obligation alleged to be owed by RM Capital to Mr Sims is neither specified nor particularised. Likewise, the alleged dishonesty, or “dishonest Act” as it appears in Mr Sims’ December 2013 Affidavit, is not specified, nor is it particularised, beyond the general allegation that it arises from directions allegedly given in relation to the Share Transfer. The allegations made are general, and it is not possible to ascertain from them either the nature of the obligation said to have been breached or the nature of the dishonesty alleged. In those circumstances, the application against RM Capital has no reasonable prospect of succeeding and ought to be struck out or dismissed.
The manner in which Mr Sims has set out the allegations against RM Capital and Mr Richardson means that read literally the breach of obligation alleged against RM Capital is discrete from the contraventions of various legislation alleged against Mr Richardson. Even if this not be the case, however, and it be alleged that Mr Richardson has breached alleged obligations owed to Mr Sims by reason of a dishonest act in relation to the share transfer, that allegation has no reasonable prospect of success against Mr Richardson for precisely the same reasons as it has no reasonable prospect of success against RM Capital.
Contraventions alleged against Mr Richardson
The contraventions alleged against Mr Richardson are set out, without particularisation, as follows:
… [Mr Richardson] has contravened the terms and conditions of his Australian Securities Finance Brokers License, The Competition and Consumer Act 2010, alternatively The Trade Practices Act 1974 S51, S52 and S82, and Australian Corporations & Securities legislation S181 (1) (a) (b), S182 (1) (a), S184 (1) (a) (b) (d), S184 (2) (a) (b) and S184 (3) (a) (b), and possibly the Australian Crimes Act citing dishonesty and conspiracy to prejudice and steal.[55]
Not dissimilar allegations are made in the Respondents’ Submissions.[56]
[55] Mr Sims’ December 2013 Affidavit, para.18.
[56] See para.14 above.
Each of the alleged contraventions is dealt with separately below.
Contravention of licence
It is relevant to note that Mr Sims alleges that Mr Richardson is the “holder of an Australian Securities Licence”.[57] It is however alleged that he has contravened the terms and conditions of his “Australian Securities Finance Brokers Licence”.[58]
[57] Mr Sims’ December 2013 Affidavit, para.4.
[58] Mr Sims’ December 2013 Affidavit, para.18.
There are no licences called either the “Australian Securities Licence” or the “Australian Securities Finance Brokers Licence”. If a person is dealing in securities they must hold an “Australian financial services licence”.[59] It is not apparent on the materials why Mr Richardson would have required any other form of licence.
[59] Corporations Act, s.911A, see also ss.764A(1)(a) and 766A(1)(b).
A more fundamental difficulty arises with respect to any alleged breach of a licence: relevant terms and conditions of any licence are not alleged, nor is any contravention of any relevant alleged term or condition specified or particularised. Without a contravention being alleged in terms, or particularised in any way, neither Mr Richardson nor this Court can discern the nature of the allegations made by Mr Sims against Mr Richardson in respect of whatever licence or licences he is alleged to have contravened, or their specific statutory basis. In the circumstances, the allegation in the Substantive Application of a contravention of some form of security or finance broker’s licence has no reasonable prospect of success because the alleged contravention is not specified or particularised, either generally or at all.
CC Act
Mr Sims alleges that Mr Richardson has contravened the terms and conditions of the CC Act. The allegation is a bare one, and no section of the CC Act is specified, and no alleged term or condition of the CC Act is particularised as having been contravened. Without an allegation of a contravention of a specific section of the CC Act, neither Mr Richardson nor this Court will be able to discern what is alleged against Mr Richardson by Mr Sims. In these circumstances, the Substantive Application as it relates to the CC Act has no reasonable prospect of success.
The above conclusion makes it unnecessary to deal with the assertion that the CC Act came into effect on a date subsequent to the alleged contraventions, whenever they might have been.
TP Act
Section 51 of the TP Act appeared in Part IV of the TP Act and provided grounds of exemption from provisions relating to restricted trade practices under Part IV of the TP Act. Part IV of the TP Act contained substantive provisions protecting and enhancing competition and containing prohibitions against:
a)anti-competitive contracts, arrangements and understanding;
b)price fixing and other cartels;
c)monopolisation and misuse of market power;
d)anti-competitive mergers;
e)resale price maintenance; and
f)secondary boycotts affecting competition.
These provisions relate to conduct directed against one of the objects of the TP Act, namely the object of promoting competition.[60] The exemptions are exemptions from provisions of the TP Act which otherwise make certain conduct by corporations anti-competitive.
[60] Boral Besser Masonry Limited v Australian Competition and Consumer Commission (2003) 215 CLR 374; [2003] HCA 5.
What seems to be asserted by Mr Sims is a contravention of an exemption from anti-competitive conduct by corporations, but in respect of an individual, namely, Mr Richardson, and at its broadest, in respect of an alleged failure to direct the transfer of shares in accordance with the Share Transfer to Mr Sims. To the extent that Ms Sims’ claim is specified or particularised it does not relate to anti-competitive conduct by a corporation. Furthermore, it is difficult to understand how, if at all, an exemption provision might be contravened. Any action based upon s.51 of the TP Act therefore has no reasonable prospect of success in these proceedings.
Section 52 of the TP Act applies to corporations, save where s.6 of the TP Act operates so as to apply its provisions to individuals. There is nothing contained in the material relied upon by Mr Sims which would bring the matter within any extended application of s.52 of the TP Act under s.6 of the TP Act, and no claim to that effect by Mr Sims. As the Substantive Application therefore seeks to apply s.52 to an individual, and not a corporation, that part of the Substantive Application which relies upon s.52 of the TP Act has no reasonable prospect of success because it is an action against Mr Richardson, an individual, and not against a corporation.
Section 82(1) of the TP Act provided as follows:
(1) A person who suffers loss or damage by an act of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person.
By reason of the fact that there is no reasonable prospect of success in relation to the allegations of contravention of ss.51 (in Part IV) and 52 (in Part V) of the TP Act, there is also no reasonable prospect of success in an action for damages under s.82(1) of the TP Act to recover loss or damage. In the circumstances it is unnecessary to deal with the limitation period issues raised by the Respondents’ Submissions.
In all of the above circumstances, the Substantive Application as it relates to the TP Act has no reasonable prospect of success.
Corporations Act
Mr Sims alleges Mr Richardson breached various provisions under ss.181, 182 and 184 of the Corporations Act. There is no dispute that Mr Richardson is a director of RM Capital, and in that respect was bound by ss.181, 182 and 184 of the Corporations Act.
Section 181 of the Corporations Act, which is a civil penalty provision,[61] provides as follows:
[61] Corporations Act, s.1317E.
(1) A director or other officer of a corporation must exercise their powers and discharge their duties:
(a) in good faith in the best interests of the corporation; and
(b) for a proper purpose.
(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.
Section 182 of the Corporations Act, which is a civil penalty provision,[62] provides as follows:
[62] Corporations Act, s.1317E.
Use of position--directors, other officers and employees
(1) A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a) gain an advantage for themselves or someone else; or
(b) cause detriment to the corporation.
(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.
Section 184 of the Corporations Act, which is an offence provision, provides as follows:
Good faith--directors and other officers
(1) A director or other officer of a corporation commits an offence if they:
(a) are reckless; or
(b) are intentionally dishonest;
and fail to exercise their powers and discharge their duties:
(c) in good faith in the best interests of the corporation; or
(d) for a proper purpose.
Use of position--directors, other officers and employees
(2) A director, other officer or employee of a corporation commits an offence if they use their position dishonestly:
(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or
(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.
Use of information--directors, other officers and employees
(3) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly:
(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or
(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.
Section 1317J of the Corporations Act provides as follows:
Application by ASIC
(1) ASIC may apply for a declaration of contravention, a pecuniary penalty order or a compensation order.
Application by corporation
(2) The corporation, or the responsible entity for the registered scheme, may apply for a compensation order.
(3) The corporation, or the responsible entity for the registered scheme, may intervene in an application for a declaration of contravention or a pecuniary penalty order in relation to the corporation or scheme. The corporation or responsible entity is entitled to be heard on all matters other than whether the declaration or order should be made.
Compensation order relating to financial services civil penalty provision--any other person who suffers damage may apply
(3A) Any other person who suffers damage in relation to a contravention, or alleged contravention, of a financial services civil penalty provision may apply for a compensation order under section 1317HA.
(3B) Subsections (2) and (3) do not apply in relation to a contravention of:
(a) section 901E (complying with derivative transaction rules); or
(b) section 903D (complying with derivative trade repository rules).
No one else may apply
(4) No person may apply for a declaration of contravention, a pecuniary penalty order or a compensation order unless permitted by this section.
(5) Subsection (4) does not exclude the operation of the Director of Public Prosecutions Act 1983.
Sections 1337B, 1337C and 1337E of the Corporations Act provide as follows:
SECT 1337B
Jurisdiction of Federal Court and State and Territory Supreme Courts
(1) Jurisdiction is conferred on the FederalCourt of Australia with respect to civil matters arising under the Corporationslegislation.
(2) Subject to section 9 of the Administrative Decisions (Judicial Review) Act 1977 , jurisdiction is conferred on the Supreme Court of:
(a) each State; and
(b) the Capital Territory; and
(c) the Northern Territory;
with respect to civil matters arising under the Corporations legislation.
(3) Despite section 9 of the Administrative Decisions (Judicial Review) Act 1977 , jurisdiction is conferred on the Supreme Court of:
(a) each State; and
(b) the Capital Territory; and
(c) the Northern Territory;
with respect to matters arising under that Act involving or related to decisionsmade, or proposed or required to be made, under the Corporations legislation by a Commonwealth authority or an officer of theCommonwealth.
(4) Subsection (3) applies to a decisionmade, or proposed or required to be made:
(a) whether or not in the exercise of a discretion; and
(b) whether before or after that subsection commences.
(5) The jurisdiction conferred on a Supreme Court by subsection (2) or (3) is not limited by any limits to which any other jurisdiction of that Supreme Court may be subject.
(6) This section has effect subject to section 1337D.
SECT 1337C
Jurisdiction of Family Court and State Family Courts
(1) Jurisdiction is conferred on the FamilyCourt with respect to civil matters arising under the Corporations legislation.
(2) Subject to section 9 of the Administrative Decisions (Judicial Review) Act 1977 , jurisdiction is conferred on each State Family Court with respect to civil matters arising under the Corporationslegislation.
(3) The jurisdiction conferred on a StateFamily Court by subsection (2) is not limited by any limits to which any other jurisdiction of the State Family Court may be subject.
(4) This section has effect subject to section 1337D.
SECT 1337E
Jurisdiction of lower courts
(1) Subject to section 9 of the Administrative Decisions (Judicial Review) Act 1977 , jurisdiction is conferred on the lower courts of:
(a) each State; and
(b) the Capital Territory; and
(c) the Northern Territory;
with respect to civil matters (other than superior court matters) arising under the Corporations legislation.
(2) The jurisdiction conferred on a lowercourt by subsection (1):
(a) is subject to the court's general jurisdictional limits, so far as they relate to:
(i) the amounts; or
(ii) the value of property;
with which the court may deal; but
(b) is not subject to the court's other jurisdictional limits.
The Court notes that s.1337D of the Corporations Act, to which ss.1337B, 1337C and 1337E are subject, is not relevant for present purposes.
In Alfaro v Crown Commercial Cleaning Pty Ltd & Anor[63] the then Federal Magistrates Court observed that:
The claim, insofar as it arises under the Corporations Act, may be dealt with briefly. Sections 1337B, 1337C and 1337E confer jurisdiction on the Federal Court and State and Territory Supreme Courts, on the Family Court of Australia and State Family Courts and on the lower courts of the States and Territories in relation to civil proceedings arising under the Corporations Act. No jurisdiction is conferred upon this Court. That may be seen as an oversight by Parliament but the consequence is that this Court has no jurisdiction to entertain Mr Alfaro's proceedings to the extent they depend upon the Corporations Act.[64]
[63] [2012] FMCA 478 (“Alfaro”).
[64] Alfaro at para.6 per Driver FM.
Although the Federal Magistrates Court was held to have associated jurisdiction in Corporations Act matters in Cass v Kingston Capital Ltd,[65] in that case there was a concession with respect to jurisdiction under different provisions of the Corporations Act, and again with respect to a different provision of the Corporations Act, it held that it was arguable that the then Federal Magistrates Court had jurisdiction. Significantly, in Kingston Capital, the provisions of ss.1337B, 1337C and 1337E of the Corporations Act were not raised for consideration by the Court. In Welsh v Allblend Holdings Pty Ltd[66] the then Federal Magistrates Court also determined that a cross-claim seeking a compensation order under s.1317H of the Corporations Act was within the associated jurisdiction of the Federal Magistrates Court by reason of a claim having been made (which was not disputed) in the response that the relevant employee had breached her duties under ss.180, 181 and 182 of the Corporations Act. Again, ss.1337B, 1337C and 1337E of the Corporations Act were not raised with the Federal Magistrates Court for consideration.
[65] [2010] FMCA 762 (“Kingston Capital”).
[66] [2010] FMCA 281 (“Allblend Holdings”).
In Fortron Automotive Treatments Pty Ltd v Jones & Ors (No.3)[67] the Federal Magistrates Court made findings concerning a breach of duty under s.182(1) of the Corporations Act.[68] That matter was however one transferred to the Federal Magistrates Court under s.32AB of the Federal Court of Australia Act 1976 (Cth),[69] and the Federal Magistrates Court obtained jurisdiction under s.32AB(8)(b) of the FC Act which provided for the Federal Magistrates Court to have jurisdiction in a matter transferred, where it would not have jurisdiction apart from s.32AB(8) of the FC Act.
[67] [2011] FMCA 467 (“Fortron (No. 3)”).
[68] Fortron (No. 3) at para.179(b) per Lucev FM.
[69] “FC Act”.
Having regard to the provisions of ss.1337B, 1337C and 1337E of the Corporations Act, and following the rationale in Alfaro, it is clear that this Court does not have jurisdiction conferred on it in civil proceedings under the Corporations Act. Alfaro is to be preferred to Kingston Capital and Allblend Holdings, both of which are distinguishable, and may even be wrongly decided.
For the above reasons, the Court is of the view that it does not have jurisdiction to hear the contraventions which Mr Sims alleges in the Substantive Application of ss.181 and 182 of the Corporations Act.
There are further obstacles in Mr Sims’ path with respect to the alleged contraventions of ss.181 and 182 of the Corporations Act. As prescribed by s.1317J(1) and (2) of the Corporations Act the only circumstances in which a person other than ASIC, the corporation or a responsible entity for a registered scheme may apply for a declaration of contravention, pecuniary penalty order or compensation order is where another person who suffers damage in relation to a contravention or alleged contravention of a financial services civil penalty provision may apply for a compensation order under s.1317HA of the Corporations Act.[70]
[70] Corporations Act, s.1317J(3A) and (4).
A “financial services civil penalty provision” is defined in s.9 of the Corporations Act to have the meaning given by s.1317DA of the Corporations Act which defines “financial services civil penalty provision” as follows:
In this Act:
…
“financial services civil penalty provision” means a provision specified in column 1 of any of the following items of the table in subsection 1317E(1):
(a) item 14;
(b) items 23 to 45.
The provisions of s.1317E(1) of the Corporations Act referred to in the definition of “financial services civil penalty provision” do not include the provisions of ss.181 and 182 of the Corporations Act, those provisions appearing in item 1 of s.1317E(1) of the Corporations Act. It follows therefore that only ASIC or the corporation, in this case RM Capital, can make an application for a declaration of contravention, a pecuniary penalty order or a compensation order in relation to an alleged contravention of ss.181 and 182 of the Corporations Act which affects RM Capital. Mr Sims has no standing to sue under those provisions. Even if he did, the lack of particularisation of the alleged contravening conduct as between Mr Richardson as a director of RM Capital, and RM Capital, would preclude any reasonable prospect of success under ss.181 and 182 of the Corporations Act.
In all of the above circumstances, the Substantive Application as it relates to ss.181 and 182 of the Corporations Act has no reasonable prospect of success.
Section 1315 of the Corporations Act provides as follows:
(1) Subject to this Act, in any proceedings for an offence against this Act, any information, charge, complaint or application may be laid or made by:
(a) ASIC; or
(b) a Commission delegate; or
(c) another person authorised in writing by the Minister to institute the proceedings.
(2) A delegation for the purposes of paragraph (1)(b), or an authorisation for the purposes of paragraph (1)(c), may relate to all offences, or to specified offences, against this Act.
(3) Nothing in this section affects the operation of the Director of Public Prosecutions Act 1983.
Subject therefore to anything appearing in the Director of Public Prosecutions Act 1983 (Cth),[71] Mr Sims is not in a position to bring proceedings concerning any allegation of an offence contrary to s.184 of the Corporations Act as he is not a person prescribed by s.1315(1) of the Corporations Act as a person who may lay or make any information, charge, complaint or application in any proceedings for an offence against the Corporations Act.
[71] “DPP Act”.
In Silbermann & Ors v CGU Insurance Ltd[72] the New South Wales Supreme Court observed that:
The heading to section 184 refers to “criminal offences”. Division 2 of Part 9.4 deals with “Offences Generally” including the manner in which “criminal proceedings” may be commenced. “Criminal proceedings” are not defined in this Division but the manner in which proceedings of this nature may be commenced are, it seems, limited to them being brought by ASIC, a Commission delegate or another person authorised in writing by the Minister to institute the proceedings (s 1315).[73]
[72] [2003] NSWSC 795 (“Silbermann”).
[73] Silbermann at para.31 per Bergin J.
In Australian Securities and Investments Commission v Neolido Holdings Pty Ltd & Ors[74] a member of the Queensland Court of Appeal observed that generally it was ASIC which brought proceedings for offences against the Corporations Act, and noted that with an exception (irrelevant to these proceedings) company liquidators had no ability to bring proceedings for an offence against the Corporations Act or to seek a declaration of contravention or a pecuniary penalty order.[75] In neither Silbermann nor Neolido Holdings did the New South Wales Supreme Court or the Queensland Court of Appeal respectively have need to address what was meant by the terms of s.1315(3) of the Corporations Act, whereby nothing in s.1315 of the Corporations Act affects the operation of the DPP Act.
[74] [2006] QCA 266 (“Neolido Holdings”).
[75] NeolidoHoldings at para.43 per Keane JA.
Section 9(1) of the DPP Act provides that the Commonwealth Director of Public Prosecutions[76] may prosecute by indictment or otherwise an offence against a law of the Commonwealth. Under the DPP Act, however, a private prosecution may be brought by a person other than the Commonwealth DPP.[77] This can be inferred because the Commonwealth DPP is entitled under s.9(5) of the DPP Act to take over and carry on, or discontinue, a prosecution instituted, or being carried on by, a person other than the Commonwealth DPP.[78] In these circumstances, the Court is not prepared to find that Mr Sims could not allege, and seek to privately prosecute, an offence under the Corporations Act, and in particular s.184 of the Corporations Act.
[76] “Commonwealth DPP”.
[77] Miller v Commonwealth Director of Public Prosecutions (2005) 142 FCR 394; [2005] FCA 482 (“Miller”); R v Drainer & Ors; Ex parte Pullen (unreported, Supreme Court of the Australian Capital Territory, SC 82 of 1988, 19 February 1988); Suda Ltd v Sims [2013] FCCA 1833 at para.56 and fn.79 per Judge Lucev (“Suda Ltd”).
[78] Miller; Suda Ltd at para.56 and fn.79 per Judge Lucev.
Section 1338B of the Corporations Act provides as follows:
Jurisdiction of courts
(1) Subject to this section, the several courts of each State, the Capital Territory and the Northern Territory exercising jurisdiction:
(a) with respect to:
(i) the summary conviction; or
(ii) the examination and commitment for trial on indictment; or
(iii) the trial and conviction on indictment;
of offenders or personscharged with offences against the laws of the State, the Capital Territory or the Northern Territory, and with respect to:
(iv) their sentencing, punishment and release; or
(v) their liability to make reparation in connection with their offences; or
(vi) the forfeiture of property in connection with their offences; or
(vii) the proceeds of their crimes; and
(b) with respect to the hearing and determination of:
(i) proceedings connected with; or
(ii) appeals arising out of; or
(iii) appeals arising out of proceedings connected with;
anysuch trial or conviction or any matter of a kind referred to in subparagraph (a)(iv), (v), (vi) or (vii);
have the equivalent jurisdiction with respect to offenders or personscharged with offences against the Corporations legislation.
(2) The jurisdiction conferred by subsection (1) is not to be exercised with respect to the summary conviction, or examination and commitment for trial, of any person except by a magistrate.
(3) The jurisdiction conferred by subsection (1) includes jurisdiction in accordance with provisions of a relevant law of a State, the Capital Territory or the Northern Territory, and:
(a) the reference in paragraph (1)(b) to " any such trial or conviction" includes a reference to any conviction or sentencing in accordance with the provisions of a relevant law; and
(b) unless the contrary intention appears, a reference to jurisdiction conferred by subsection (1) includes a reference to such included jurisdiction.
(4) A person may be dealt with in accordance with a relevant law even if, apart from this section, the offence concerned:
(a) would be required to be prosecuted on indictment; or
(b) would be required to be prosecuted either summarily or on indictment.
(5) For the purposes of the application of a relevant law as provided by subsection (3):
(a) a reference in that law to an indictable offence is taken to include a reference to an offence that may be prosecuted on indictment; and
(b) in order to determine the sentence that may be imposed on a person by a court pursuant to the relevant law, the person is taken to have been prosecuted and convicted on indictment in that court.
(6) Subject to subsection (8), the jurisdiction conferred on a State or Territory court by subsection (1) is conferred despite any limits as to locality of the jurisdiction of that court under the law of that State or Territory.
(7) If:
(a) jurisdiction is conferred on a State or Territory court in relation to the summary conviction of personscharged with offences against the Corporations legislation by subsection (1); and
(b) thecourt is satisfied that it is appropriate to do so, having regard to all the circumstances including the public interest;
the court may decline to exercise that jurisdiction in relation to an offence committed in another State or Territory.
(8) The jurisdiction conferred on a court of a State, the Capital Territory or the Northern Territory by subsection (1) in relation to:
(a) the examination and commitment for trial on indictment; and
(b) the trial and conviction on indictment;
of offenders or personscharged with offences against the Corporations legislation is conferred only in relation to:
(c) offences committed outside Australia; and
(d) offences committed, begun or completed in the State or the Territory concerned.
(9) In this section:
" appeal" includes an application for a new trial and a proceeding to review or call in question the proceedings, decision or jurisdiction of a court or judge.
" Australia" does not include the coastal sea.
" relevant law" means a law providing that where, in proceedings before a court, a person pleads guilty to a charge for which he or she could be prosecuted on indictment, the person may be committed, to a court having jurisdiction to try offences on indictment, to be sentenced or otherwise dealt with without being tried in that last-mentioned court.
Section 1338B of the Corporations Act makes it clear that jurisdiction in respect of criminal matters under the Corporations Act is vested in state courts to the exclusion of federal courts. The exclusion of the federal courts from jurisdiction in criminal proceedings under the Corporations Act can be confirmed by examining the provisions of s.1338B of the Corporations Act which, unlike the provisions of ss.1337B and 1337C of the Corporations Act, do not refer to the superior federal courts, namely the Federal Court and the Family Court. In any event, what is abundantly clear is that no jurisdiction in criminal proceedings under the Corporations Act is vested in this Court. This Court cannot therefore hear Mr Sims’ claim in the Substantive Application of an offence by Mr Richardson under s.184 of the Corporations Act.
In all of the above circumstances, the Substantive Application as it relates to s.184 of the Corporations Act has no reasonable prospect of success.
Crimes Act
Mr Sims alleges that Mr Richardson “possibly” contravened the “Australian Crimes Act citing dishonesty and conspiracy to prejudice and steal”. No, or no sufficient, particulars of the dishonesty are provided, and for the reasons cited in Jooste QC cited above,[79] an action based on dishonesty cannot be sustained where particulars of dishonesty are not given. A conspiracy requires an agreement between two or more persons to create an unlawful situation either by agreeing to perform an unlawful act or to perform a lawful act by unlawful means,[80] and again must be sufficiently particularised. Particulars of conspiracy are not given by Mr Sims and no specific sections of the “Australian Crimes Act” are alleged to have been breached. Further, a conspiracy must involve at least two natural persons, and only one natural person, Mr Richardson, is cited in the materials relied upon by Mr Sims. There is no plea, as there might have been, of conspiracy with a person or persons unknown.[81] There cannot be a conspiracy of one. The claims of dishonesty and conspiracy against Mr Richardson cannot therefore be sustained on the material in the Substantive Application.
[79] See paras.21-22 above.
[80] Nirta & Ors v R (1983) 51 ALR 53.
[81] Gerakiteys v The Queen (1984) 153 CLR 317.
A further matter which stands in the way of any action in relation to the “Australian Crimes Act” is that this is a Court which has not been vested by the Parliament with criminal jurisdiction, or the capacity to have a trial by jury with respect to indictable offences, or at all.[82] The claims could not therefore succeed because the Court lacks jurisdiction to hear a criminal matter, save for contempt of the Court.[83]
[82] FCCA Act, ss.10 and 53.
[83] FCCA Act, s.17.
In relation to the submission which asserts breach of s.124 of the “Crimes Act 1900”, alleging “fraudulent misappropriation”, this appears to be a reference to s.124 of the Crimes Act 1900 (NSW).[84] It is not apparent what connection any relevant matter in these proceedings has with New South Wales sufficient to invoke New South Wales criminal jurisdiction, but in any event, for reasons set out above, the Court has no jurisdiction to deal with criminal proceedings, including any contravention of s.124 (or any other provision) of the NSW Crimes Act.[85]
[84] “NSW Crimes Act”.
[85] Suda Ltd v Sims (No. 3) [2014] FCCA 2127 at para.76 per Judge Lucev.
The assertion that the refusal of the Respondents to give effect to the Share Transfer constitutes an indictable offence under s.8 of the Criminal Code, would appear to be a reference to s.8 of the Criminal Code 1913 (WA) which provides in s.8(1) that:
When 2 or more persons form a common intention to prosecute an unlawful purpose in conjunction with one another, and in the prosecution of such purpose an offence is committed of such a nature that its commission was a probable consequence of the prosecution of such purpose, each of them is deemed to have committed the offence.
There are, however, no particulars of a common intention, and no evidence of two or more natural persons being involved to form a common intention, Mr Richardson being the only person to whom Mr Sims’ materials make reference. In circumstances where the materials only make reference to one person, it is impossible for the common intention referred to in s.8 to be formed. For these reasons, the elements, or some of them, of s.8 of the Criminal Code are not made out. Further, as indicated above, this Court does not have criminal jurisdiction in any event, so even if there were an offence, it could not be prosecuted in this Court (assuming, without deciding, that Mr Sims had standing to do so).
In the above circumstances, there is no reasonable prospect of Mr Sims succeeding on any contravention, as alleged, of the criminal law on the material in the Substantive Application, or at all in this Court because of a lack of jurisdiction to hear criminal matters.
Whether frivolous, vexatious or abuse of process
The Substantive Application is, for reasons set out above, obviously unsustainable. It is unsustainable in circumstances where the evidence discloses that very early in the history of the litigation, less than a month after the Substantive Application was filed, the Respondents’ lawyers wrote to Mr Sims and indicated why the Substantive Application had no reasonable prospect of success or did not disclose a reasonable cause of action, and was frivolous, vexatious or an abuse of process.[86] Having regard to the Reasons for Judgment set out above, there is no doubt that the matters put in the Respondents’ lawyers 17 January 2014 Letter to Mr Sims with respect to the Substantive Application disclosing no reasonable cause of action or otherwise having no reasonable prospect of success were largely correct. In short, the Substantive Application was obviously unsustainable from the outset, and Mr Sims was made aware of this, and invited to consent to orders dismissing the Substantive Application on the basis that he pay the Respondents’ costs on an indemnity basis. Mr Sims did not agree to do so, and the Substantive Application proceeded in the manner outlined above. In the circumstances, it ought to have been obvious to Mr Sims that the Substantive Application was likely to be held to have no reasonable prospect of success. Mr Sims has evidently not taken seriously the admonitions from the WA Court of Appeal in Jooste QC, reiterated by this Court in Suda Ltd, that if causes of action were to emerge from proceedings taken by Mr Sims it would appear that he needed the assistance of a lawyer to properly frame his claims or applications.[87] The result is evident in the Substantive Application which, for reasons set out above, has no reasonable prospect of success. Whilst the materials composing the Substantive Application are, at least in part, unintelligible, they are not overly lengthy. They do however seem to suggest that, in part, they are brought in order to test a case which Mr Sims considers to be criminal, but which has not resulted in criminal charges. Further, a remedy was originally sought, namely an apology, which the Court clearly has no power to grant, a position which was ultimately conceded by Mr Sims.[88]
[86] Mr Richardson’s Affidavit, Annexure JBR 1 (“17 January 2014 Letter”).
[87] Jooste QC at para.19 per Pullin and Newnes JJA; Suda Ltd at para.73 per Judge Lucev.
[88] Mr Richardson’s Affidavit, Annexure JBR 2.
The Court does not consider, however, that Mr Sims has used the Court’s processes for a purpose which is ulterior or improper. The evidence makes it clear that the Share Transfer was executed by EMS, that Mr Sims did request that the Share Transfer be given effect, but no Share Transfer took place. The precise reasons for the latter step, and whether the reasons for it might give rise to a cause of action, are where the Substantive Application breaks down. It may be that Mr Sims has a cause of action, but, if he has, it does not emerge from the Substantive Application. The Court has no doubt that Mr Sims is genuinely aggrieved by the failure to put into effect the Share Transfer as requested by him. In those circumstances, the Court is not prepared to make a finding of ulterior or improper purpose in making the Substantive Application by Mr Sims.
It nevertheless remains the case that the Substantive Application was hopeless from the outset, and does not have a reasonable prospect of success, primarily because it does not disclose causes of action, or where there might be causes of action they are not sustainable on the materials in the Substantive Application. That was early brought to Mr Sims’ attention, and notwithstanding that, he has maintained the Substantive Application. In those circumstances, and bearing in mind that abuse of process is a broad concept, and that a matter may be vexatious where it is hopeless, and in those circumstances causes the opponent unnecessary anxiety, trouble and expense, the Court is of the view that the Substantive Application is vexatious and an abuse of process.
Leave to replead
The Substantive Application as presently framed is clearly hopeless, and has no prospect of success. The Court notes that this is the first occasion on which Mr Sims has endeavoured to make an application to this Court dealing with these particular issues. As a self-represented litigant he has obviously found that very difficult, and the claims themselves reflect an unfocussed “shotgun” approach to litigation. The Court observes that on more than one occasion Mr Sims has been told that if he has genuine causes of action then it appears that he requires the assistance of a lawyer before they will emerge.[89] In the above circumstances, it would not be untoward for the Court to dismiss the Substantive Application.
[89] Jooste QC at para.19 per Pullin and Newnes JJA; Suda Ltd at para.73 per Judge Lucev.
The Court does however note that Mr Sims did have a signed Share Transfer, that he did seek the transfer of the shares in the Share Transfer, and that the Share Transfer was not effected. Whilst nothing has been put to date in these proceedings giving rise to a cause of action with respect to that matter, it may be that Mr Sims can craft a proper cause of action (if one exists) with the assistance of an experienced commercial litigator, or receive advice that he has no proper cause of action at all. This may depend upon the circumstances of the case which have not been put in any coherent or intelligible form in the Substantive Application. Bearing in mind that this is Mr Sims first attempt to deal with these issues in this Court, and bearing in mind that properly advised he may be able to determine whether or not he has a proper cause of action on whatever the true facts of this particular situation are, the Court will strike out the Substantive Application under r.13.10 of the FCC Rules, and by leave will allow until 27 January 2015 for Mr Sims to replead. That leave will be conditional upon an amended application being filed, together with a statement of claim, with that statement of claim being certified in the manner prescribed in r.16.01 of the Federal Court Rules 2011 (Cth).[90] There will be liberty to apply.
[90] “FC Rules”.
Indemnity costs
The Court has jurisdiction to grant indemnity costs.[91] The law as to when it is appropriate for the Court to award costs on an indemnity basis is well established, and the principles applicable to indemnity costs orders are found in Colgate-Palmolive Company & Anor v Cussons Pty Limited.[92]
[91] FCCA Act, s.79(2) and (3); Genovese v BGC Construction Pty Ltd (No. 2) [2007] FMCA 601 at paras.38-46 per Lucev FM (“Genovese (No. 2)”).
[92] (1993) 46 FCR 225 (“Colgate-Palmolive”).
In determining whether to award indemnity costs the Court has a very wide discretion, to be exercised judicially. The normal practice, not to be lightly departed from, is to provide for costs on a party-party basis. Nevertheless, there are certain issues to which the Court will give consideration, and have to weigh, when determining whether to make, and the extent of, an indemnity costs order. An indemnity costs order should only be made where the issues establish special or unusual circumstances warranting an indemnity costs order. The issues to be considered include:
a)whether a party should have known that there was no prospect of success in the case;
b)where a party alleges fraud or forgery, knowing the accusation to be false, or irrelevant to the issues;
c)where a party precipitately punctuates proceedings by resiling from a previously adhered to view;
d)where a party acts in a high handed manner;
e)whether the party against whom indemnity costs is sought is a self-represented litigant, and whether the self-represented litigant ought to escape the consequences of indemnity costs;
f)where a party proceeds “vexatiously” that is “without sufficient grounds for the purpose of causing trouble or annoyance”;
g)where a party proceeds for no good purpose at all due to inertia and carelessness;
h)where a party persists in the making of allegations which ought not to have been made, or in undue prolongation of groundless contentions;
i)where a party’s conduct causes loss of time to the Court, and to other parties;
j)where a party imprudently refuses an offer to compromise;
k)whether the award of indemnity costs is sought against a contemnor; and
l)the objects of:
i)encouraging the saving of private costs and avoidance of inherent risks, delays and uncertainties of litigation;
ii)saving public cost necessarily incurred in litigation which events demonstrate to have been unnecessary; and
iii)indemnifying one party where the real cause and occasion of the litigation is the attitude adopted by the other party.[93]
[93] Colgate-Palmolive at 233-234 per Sheppard J; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397 at 400-401 per Woodward J; Roy Galvin & Co Pty Ltd v Ives [2013] FCCA 1645 at para.60 per Judge Lucev.
The discretion is not so circumscribed that an indemnity costs order may only be made against an ethically or morally delinquent party. The discretionary categories are not closed, and other elements of litigious misconduct may be relevant.[94]
[94] Genovese (No. 2) at para.48 per Lucev FM.
Indemnity costs are not the norm. In this case, however, the Court has found that there was no reasonable prospect of success on the Substantive Application. That was early brought to Mr Sims’ attention by the Respondents’ lawyers. Had Mr Sims followed the earlier admonitions of both the WA Court of Appeal and this Court, and sought and obtained a lawyer’s advice,[95] it may be that the Substantive Application might have been properly framed at the outset, or amended to put it into a proper form, or withdrawn on the basis of advice received. That did not happen, and as a consequence the Respondents have had to deal with the Substantive Application which the Court has found to have no reasonable prospect of success, and to be vexatious and an abuse of process. In those circumstances, Mr Sims has persisted in the making of allegations which ought not to have been made in their present form, and has unduly prolonged what are groundless contentions. The Court bears in mind that Mr Sims is a self-represented litigant, but clearly an experienced one, and one who has not sought to heed the admonitions of the WA Court of Appeal or this Court in Jooste QC and Suda Ltd respectively. The Court also bears in mind what it has said above in relation to the possibility that there may be a cause of action which may emerge (or not as the case may be) if Mr Sims is properly advised, and which has caused the Court to grant leave to replead, on conditions. All of that notwithstanding the Court is of the view that, on balance, this is a proper case for an award of indemnity costs against Mr Sims.
[95] Jooste QC at para.19 per Pullin and Newnes JJA; Suda Ltd at para.73 per Judge Lucev.
Conclusions and orders
For the reasons set out above, the Court has concluded that:
a)the Substantive Application has no reasonable prospect of success and is vexatious and an abuse of process;
b)Mr Sims ought to be given leave to replead the Substantive Application by filing an amended application and statement of claim by 27 January 2015, with the statement of claim to be certified in the manner prescribed by r.16.01 of the FC Rules;
c)Mr Sims ought to pay the Respondents’ costs on an indemnity basis, which if not agreed, are to be assessed by a Registrar of this Court; and
d)there be liberty to apply generally.
I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Associate:
Date: 22 December 2014
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