South Sky Investments Pty Ltd (Receivers and Managers appointed) v Hendrik Prins and Sokham Prins
[2011] QSC 175
•21 June 2011
SUPREME COURT OF QUEENSLAND
CITATION:
South Sky Investments Pty Ltd (Receivers and Managers appointed) v Hendrik Prins & Sokham Prins [2011] QSC 175
PARTIES:
SOUTH SKY INVESTMENTS PTY LTD (Receivers and Managers appointed)
(plaintiff)
v
HENDRIK PRINS & SOKHAM PRINS
(defendants)FILE NO/S:
10214/10
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
21 June 2011
DELIVERED AT:
Brisbane
HEARING DATE:
2 June 2011
JUDGE:
Martin J
ORDER:
1. I dismiss the defendants’ application.
2. I give leave to the defendants to file a further amended defence and counterclaim within 14 days of today.
3. I give leave to the plaintiff to file an amended reply, if necessary, within a further 7 days.
4. I order the defendants provide further and better disclosure in accordance with the Uniform Civil Procedure Rules
CATCHWORDS:
PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – PLEADINGS – DEFENCE AND COUNTERCLAIMS – where the plaintiff was the developer of a property and the defendants purchased two units in that development – where the defendants intended to rent the two units out and manage them as off-site agents – where the defendants refused to settle on the contract of sale – where the defendants allege they have suffered prejudice through the plaintiff’s non-disclosure of documents and breaches of the Trade Practices Act – where the matter was listed for trial – where the Court subsequently adjourned the trial and granted leave to the defendants to amend their pleadings without prejudice to the plaintiff’s right to apply to strike out parts of it as the plaintiff might be advised – where the defendants served an amended defence to which the plaintiff subsequently pointed out shortcomings – where the defendants seeks leave to file a third amended defence and counterclaim – where the plaintiff argues the third amended defence is embarrassing - whether leave should be granted to the defendants to file a third amended defence and counterclaim
PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – DISCLOSURE – where the plaintiff was the developer of a property and the defendants purchased two units in that development – where the defendants intended to rent the two units out and manage them as off-site agents – where the defendants refused to settle on the contract of sale – where the defendants allege they have suffered prejudice through the plaintiff’s non-disclosure of documents and breaches of the Trade Practices Act – where the matter was listed for trial – where the Court subsequently adjourned the trial and granted leave to the defendants to amend their pleadings without prejudice to the plaintiff’s right to apply to strike out parts of it as the plaintiff might be advised – where the defendant served an amended defence to which the plaintiff subsequently pointed out shortcomings – where the defendants have not disclosed documents, including advice, relating to the establishment of conduct of their business – whether the defendants should provide further and better disclosure in accordance with the Uniform Civil Procedure Rules
Body Corporate and Community Management Act 1997
Uniform Civil Procedure Rules 1999COUNSEL:
S Doyle SC and D Clothier for the applicant/respondent plaintiff
Applicant/respondent defendants self-representedSOLICITORS:
Allens Arthur Robinson for the applicant/ respondent plaintiff
Applicant/respondent defendants self-represented
Each side in this matter have filed applications relating to the pleadings and disclosure by the defendants.
The plaintiff was the developer of a building at the Gold Coast called “Oracle”. The defendants purchased two units in that development with a view to renting them out and managing them as off-site agents. The defendants have refused to settle on the contract for sale and are defending, in broad terms, on the following bases:
(a) That they have suffered prejudice through the non-disclosure by the plaintiff of a number of matters including the registration of the name “Oracle” as a trademark and an agreement with an onsite agent with respect to the provision of onsite services; and
(b) Breaches of the Trade Practices Act (“TPA”)(as it was then called).
This matter was formerly on the commercial list. On 1 April 2011 P D McMurdo J removed it from the list and adjourned the trial which was to be heard in the following week. He gave leave to the defendants to amend their pleading in accordance with the application they made on that day, but without prejudice to the plaintiff’s right to make such application to strike out parts of it as the plaintiff might be advised.
The defendants did serve an amended defence and that precipitated a response from the plaintiff in which shortcomings in the pleading were pointed out. As a result of that, the defendants seek leave to file what is a third amended defence and counterclaim and also seek to have determined disclosure issues which have arisen between the parties. The complaint about disclosure is from the plaintiff only.
The defence and counterclaim
The gist of the plaintiff’s complaint about the proposed third further amended defence and counterclaim (“the third defence”) is that parts of it which are sought to be amended leave the plaintiff in doubt as to what is alleged against it and are vague and ambiguous. They are, it is argued, “embarrassing” in the sense in which that term is used with respect to pleadings.
The defendants make a number of allegations which relate in a number of ways to the Body Corporate and Community Management Act 1997 (“BCCMA”). I will deal with those in turn.
Paragraphs 34.3.2 and 34.3.3
“34.3 the Disclosure Statements describe the Lots as being lots in ‘The Oracle’ apartment building, whereas a disclosure statement if now given would and must state that the Lots would be lots in:
34.3.1 a hotel branded ‘Peppers Broadbeach’; and/or
34.3.2a development in which an onsite letting agent may or was likely to
wouldprovide all the services one would expect to find in a hotel and/or services of a kind provided by hotel operators to guests; and/or
Further particulars
In the context of para. 38 – 47, and para. 51, the Defendants' allegations of a failure by the plaintiff to disclose what an onsite letting agent was likely to or may provide, prior to the Defendants entering into the contracts, are evidenced by or inferred from the plaintiff's assertion in their Reply para. 18 (d) that prior to entering into the contracts, ‘the plaintiff disclosed to the defendants (and it was obvious)’ - both of which the Defendants' deny – ‘that the onsite letting agent was likely to, or alternatively, may, as part of its onsite letting business provide services to guests of a kind which are provided by hotel operators to guests’. [Reply 18(d)(iv)]. And in 18(e): ‘ ... the Defendants knew or ought to have known .. the matters referred to in sub-para. 18(d) above’.
In the context of para. 38 - 47, and para. 51, if it was supposed to be obvious to the Defendants (which they deny), then it must have been obvious to the Plaintiff, and if the Defendants were supposed to have known or ought to have known about the hotel-style services – which the Defendants deny – then by inference the Plaintiff knew or ought to have known; accordingly, the Plaintiff knew or ought to have known or it was obvious (to the plaintiff) that an onsite letting agent was likely to or may provide the hotel style services referred to in 34.3.2 prior to or at the time the contracts were entered into.34.3.3a development in which an onsite letting agent may or was likely to
wouldprovide services of a kind provided by hotels, whichimplicationwasisconfirmedstrengthenedby subsequent events and recent public statements that such services will or may include a mini bar and related hotel-style services.
Particulars:
Statements on Niecon and Mantra websites during June-July 2010 that the development will be managed as a hotel; letter from plaintiff dated 29 Nov. 2010 that The Oracle/Peppers Broadbeach will provide ‘all the facilities and services you'd expect to find in a hotel’; clause 27 of the Letting Agreement attached to PAMD Form 20a sent to purchasers and the Defendants in or about May or June 2010 (or at some other time), about ‘Liquor Licence’.
Further particulars
In the context of para 38 – 47 and para. 51, the Defendants' allegations of a failure by the plaintiff to disclose what an onsite letting agent was likely to or may Provide, prior to the Defendants entering into the contracts are evidenced by or inferred from the plaintiff's assertion in their Reply para. 18 (d) that prior to entering into the contracts, ‘the plaintiff disclosed to the defendants (and it was obvious)’ – both of which the Defendants' deny – ‘that the onsite letting agent was likely to, or alternatively, may, as part of its onsite letting business, provide services to guests of a kind which are provided by hotel operators to guests". [Reply 18(d)(iv)]. And in 18(e): ‘ ... the Defendants knew or ought to have known .. the matters referred to in sub-para. 18(d) above’.
In the context of para. 38 – 47, and para. 51., if it was supposed to be obvious to the Defendants (which they deny), then it must have been obvious to the Plaintiff, and if the Defendants were supposed to have known or ought to have known about the hotel-style services – which the Defendants deny – then by inference the Plaintiff knew or ought to have known; accordingly, the Plaintiff knew or ought to have known or it was obvious (to the plaintiff) that an onsite letting agent was likely to or may provide the hotel style services referred to in 34.3.3 prior to or at the time the contracts were entered into.”
Paragraph 34 of the third defence alleges that disclosure statements provided pursuant to the BCCMA have become inaccurate in certain particulars. It is not alleged that they were always inaccurate. The proposed amendments create a number of difficulties. There does not appear to be any logical connection between the particulars and the allegations of which they profess to be particulars. The defendants allege that something has happened to make the disclosure statement (if it was to be given now) different from the original disclosure statement, but the particulars appear to be focused on establishing the opposite. The form in which they are provided is contrary to the Rules in that they are not an assertion of fact but rather an argument.
These paragraphs are, in the traditional sense, embarrassing and I will not give leave for them to be amended in this way.
Paragraph 34.4
This proposed amendment is similar to those contained in paragraphs 34.3.2 and 34.3.3.
“34.4the disclosure statements did not provide or indicate that
any agent (entity) holdingthe onsite letting agentrights would or maymay apply for a liquor licence over the development and by implication, over Lots under its management.
Further particulars
In the context of para. 38 – 47, and para. 51, the Defendants' allegations of a failure by the Plaintiff to disclose that an onsite letting agent may do the things referred to in para. 34.4 (in the context also of para. 38-47 & para. 51), prior to the Defendants entering into the contracts are evidenced by or inferred from the plaintiff's assertion in their Reply para. 38(iv)(A) where it is stated that ‘the Plaintiff disclosed to the Defendant (and it was obvious)’ – which the Defendants deny – ‘that the onsite letting agent ...... may provide services of the kind referred to in 38(a)(ii) above’, which specifically includes ‘the provision of mini bars in those apartments’.
In the context of para. 38 – 47, and para. 51, if it was supposed to be obvious to the Defendants - which they deny - then it must have been obvious to the Plaintiff, accordingly, the Plaintiff knew or ought to have known or it was obvious (to the plaintiff) that an onsite letting agent may provide the mini bar services referred to in 38(a)(ii) prior to the time the contracts were entered into.
This set of particulars contains a reference to a failure by the plaintiff which is to be inferred from the plaintiff’s assertion in another part of the plaintiff’s pleading. It is not able to be understood.
A further problem with this set of particulars is that it asserts a failure to disclose in the relevant disclosure statement. That goes to the contents of this statement, rather than whether the statement was correct at the time or has become inaccurate.
Paragraph 34.4.1
“34.4.1
require lot owners wishing to appoint the entity (to manage their units) to consent to the entity to apply for a liquor licence in respect of the Property (the Lot) and The Oracle; andIn addition, the disclosure statements did not provide or indicate that the onsite letting agent may:
require lot owners wishing to appoint it (to manage their lots) to consent to it to apply for a liquor licence in respect of their lots; andA.
require or compel or demand in the case of a liquor licence over their lots that ‘the client must not object to any application made by the Agent for a liquor licence in respect of the Property" (i.e. their Lots).B. ”
This is similar to the previous paragraph. It is alleged that the disclosure statement did not provide that the onsite letting agent would require owners who appointed it to consent to a liquor licence. It is contended that “a disclosure statement if now given must disclose these provisions”. No basis for making that assertion is pleaded.
Paragraphs 35.2.2 and 35.2.3
“35.2the defendants are deprived of the ability (or such ability is limited or restricted), in practical terms,
35.2.1to use an off-site letting agent to let the Lots and/or to let the Lots privately or through the Letting Business; and/or
35.2.2to compete effectively or at all with an onsite letting agent because of the implications of para. 34.3.2 and/or 34.3.3, that is because potential guests may or will or are likely to think,
or are encouraged to think, (and that this could be the purpose of the onsite letting agent),that all the apartments in the development are managed by the onsite letting agent, and this was subsequently confirmed by recent events and statements that the development will be operated with all the services one would expect from a hotel.
Particulars
‘Hotel’ implies exclusivity, and/or a listing of a range of hotel-like services implies a hotel, and referring to ‘suites’ ‘rooms’ implies a hotel, as does ‘mini bar’, all or most of which imply exclusivity, and create or may or is likely to create, or promote or encourage, a perception in the minds of potential guests, that all the apartments (suites) in the development are managed by the (or an) onsite letting agent.
Further particulars
In the context of para. 38 - 47, and para. 51, allegations that the Plaintiff knew or was aware of the matters pleaded in para. 34.3.2 & 34.3.3 at the time or prior to the time the contracts were entered into, have been provided in the Further Particulars for those two paragraphs.
35.2.3to compete effectively or at all with an onsite letting agent because of the consequences of para. 34.4, as their Letting Business (for their own Lots),
or any offsite letting agent (for Lots managed by them), or not obtain a liquor licence overthetheir Lots because they (or any offsite letting agent) are not conducting a business on the premises, and because the premises can only be subject to one liquor licence, therefore, could not compete effectively or at all with the onsite letting agent as they or any offsite letting agent, could not offer their guests the facility of a mini bar in their Lots, and this was subsequently confirmed by recent events, in particular that a liquor licence was obtained over the development, with mini bars in Lots managed by the onsite letting agent;
Particulars
South Sky Assets Pty Ltd (an associate of the plaintiff) is the licensee for the premises: ‘Peppers Broadbeach, The Oracle’ (liquor licence 121756), type: Commercial Other - Subsidiary On Premises. Sec. 67 of the Liquor Act of 1992 provides that under this licence, the authority to sell liquor only applies if the principal activity of the licensee is the provision of accommodation on the licensed premises; and section 58.2 provides that only 1 licence may be granted for a premise(s).
Further particulars
In the context of para. 38 - 47, and para. 51 allegations that the Plaintiff knew or was aware of the matters pleaded in para. 34.4 at the time or prior to the time the contracts were entered into, have been provided in the Further Particulars for that paragraph.”
These paragraphs repeat allegations that the defendants have been deprived of the ability to do certain things “and this was subsequently confirmed by recent events and statements that the development will be operated with all the services one would expect from a hotel”. No particulars in a form which complies with the Rules have been given. The particulars which have been given do not relate to allegations of prejudice but rather appear to raise another case about the plaintiff being in possession of knowledge and not disclosing that knowledge from the outset.
The Trade Practices Act allegations
Paragraph 39
This paragraph sets out:
“39.In the premises of the matters pleaded at paragraphs 4.1, 4.2, 4.8, 9.4, 12, 16.3, 16.4, and 17 and/or 20.3 and 27 herein, and 34.3.2 and/or 34.3.3, and/or 34.4 (but not in this context to 34.4.1) and 35.2.2 and/or 35.2.3 herein, and in particular, the failure of the plaintiff to disclose the Intention of Niecon, an associate of the plaintiff,
or any other associate, as relevant, to apply for the trademarks trademarks referred to in para. 18, and/or the failure of the plaintiff to disclose the matters pleaded in para. 34.3.2 and/or 34.3.3 and/or 34.4 (but not in this context to 34.4.1) to the defendants at or prior to the entering into of the Lot 3604 contract on 12 January 2006 and the Lot 4003 Contract on 26 October 2006, constituted:39.1conduct that was misleading or deceptive or was likely to mislead or deceive the defendants due to non disclosures by the plaintiff; and/or
39.2with respect to the matters pleaded in para. 25 (trademark restrictions); and 34.3.2 and 34.3.3 (number of Lots managed by an onsite letting agent and hotel services); and 34.4 (mini bar), a series of misrepresentations that are, or a pattern of conduct that is, misleading or deceptive or was likely to mislead or deceive the defendants; and/or
39.3conduct that was misleading or deceptive or was likely to mislead or deceive the defendants, which conduct was specifically constituted by the silence of the plaintiff in the context of what was not, but should have been, disclosed to prospective investors like the defendants; and/or
39.4 representations by silence and/or;
39.5through silence, conduct that was misleading or deceptive, or that was likely to mislead or deceive the defendants in the context of their circumstances, as they, and some or many other investors or purchasers, had a reasonable expectation that the plaintiff would have disclosed the matters pleaded in para. 18, and/or 34.3.2 and/or 34.3.3 and/or 34.4.”
It refers to other allegations in the pleading that the disclosure statement “have become” inaccurate. It is not explained why that is material to a contention that s 52 of the TPA has been breached. The allegation relating to the number of lots and the mini-bar is embarrassing as is the reference to “silence”. There is internal inconsistency in paragraph 39.5. The factual matters pleaded consist of a failure to disclose matters “but not in this context to 34.4.1”. That is inconsistent with the balance of the defendants’ case on this point.
Paragraph 41
“41.Alternatively, by reason of the matters pleaded at paragraphs 4.1, 4.8, 9.4, 16.3 and 16.4 above, and para. 18 (with the Restrictions pleaded in para. 25), and/or para. 20.3, and/or 34.3.2, and/or 34.3.3 and/or 34.4 and with the restrictions and/or limitations pleaded in para. 35.2.2 and 35.2.3:
41.1 the defendants, in their particular circumstances, both as investors and offsite agents, and/or
41.2the defendants, in the context of their circumstances, and some or many other purchasers or investors, had the reasonable expectation that the plaintiff would disclose the matters referred to in paras. 41, and therefore, and/or
41.3some, many or most purchasers who may or will be investors (because of the choice given to use onsite or offsite agents), and/or
41.4because the plaintiff could not know at the time the Lots were being sold which purchasers would be investors, and which purchasers may want to use offsite agents, all purchasers;
relied on the plaintiff to be strictly responsible to ensure that the plaintiff did not mislead or deceive purchasers, and therefore including the defendants, all of whom constituted their customers.
;and/or”
The amendment seeks to plead “the restrictions and/or limitations pleaded in para. 35.2.2 and 35.2.3”. Those paragraphs do not identify “restrictions and/or limitations”.
Paragraph 51.3 and 42.2
Paragraphs 51.3 and 42.2 provide:
“51.3 The defendants allege that:
51.3.1 such conduct might affect their business interests, in their capacity as offsite rental agents operating their Letting Business, and
51.3.2 the plaintiff should have foreseen that such conduct would not have been apparent to the defendants, both business consumers, when they purchased the units in 2006.
51.3.3 business consumers like the defendants are in a substantially weaker bargaining position than the plaintiff, in its capacity in this context as a supplier and/or corporation.
51.3.4 in addition or alternatively, the plaintiff has engaged in a pattern of unconscionable conduct as alleged and pleaded in para. 42.2.”
“42.2plead that the cumulative actions, or individual actions taken together,
ofbysome, any or all of the, or an, onsite letting agent, and/or in association withNiecon and/or the plaintiff,and/or any of their associated companies, and/or South Sky Assets (an associate of the plaintiff and Niecon),established a pattern of conduct, and/or had the intention or the purpose to, or may or was likely to, limit or reduce or eliminate competition forthe, or any, an onsite letting agent, from offsite letting agents like the defendants.Particulars:
Matters pleaded in:
i. para. 25 re restrictions and limitations concerning the trademark applications; and/or
ii. para. 34.3.2, 34.3.3, and 35.2.2 concerning implications or representations regarding the number of apartments being managed by the, or an, onsite letting agent for short term of holiday rental; and/or
iii. para. 34.4 and 35.2.3, regarding exclusivity re the mini bar and liquor licence.”
The proposed amendment to paragraph 51.3.4 alleges that the plaintiff engaged in unconscionable conduct as set out in paragraph 42.2. Paragraph 42.2 is a difficult paragraph to understand. It pleads that “cumulative actions, or individual actions taken together by Niecon and/or the plaintiff, established a pattern of conduct …”. It does not appear to be alleged that there were circumstances in existence which would render the plaintiff liable for anything done by Niecon.
Disclosure
It became clear during argument that the defendants do not have a comprehensive understanding of the obligations required under the Rules for disclosure. They have not disclosed documents, including advice, relating to the establishment of conduct of their business. They make allegations that their business was conducted in a particular way, yet do not disclose documents relating to the manner in which their business was conducted. Issues which can be identified on the pleading include:
(a) The manner in which the defendants conducted their business;
(b) The capacity of the defendants to protect their own interests in connection with that business; and
(c) The manner in which the defendants relied on the plaintiff in connection with the protection of those interests.
It is known to the parties that the defendants obtained professional advice and assistance in connection with their business. They have declined to disclose those documents. Mr Prins, in one of his affidavits, said:
“Information about our business was only given to show we have a business. Evidence we provided about our business is what we are relying on.”
It was submitted by the plaintiff that this response demonstrated the misconception under which the defendants had been suffering with respect to their obligations to disclose. I accept that that submission is correct. It was clear that the defendants do have documents which are relevant to the matters in issue. They allege conduct on the part of the plaintiff and the effect that that has had on them. They have admitted holding documents relating to those matters but they have only disclosed those documents upon which they wish to rely.
Further, in paragraph 24 of the defence, the defendants specifically plead reference to actions taken by Mantra in relation to the Q1 Building at Surfers Paradise. The defendants were involved in a dispute in relation to trademark issues for Q1 which led to dealings between them and the solicitors for Mantra. Some of the documents about those dealings have been disclosed but there are other documents which the defendants must have and which are set out in the affidavit of Tracy Harrip. The existence of those documents is not disputed but the defendants say they are not directly relevant. On the pleadings as they currently stand, those documents appear to me to fall within that category which should be disclosed.
The plaintiff seeks an order for disclosure of business accounting records, both as to expenses and income. Only limited disclosure of those records has been given; for example, of a set of tax returns provided, only one page of each return has been disclosed.
Other matters which arise with respect to disclosure include relevant information relating to the business of the defendants. The defendant, Mr Prins, maintained that one set of documents was not available to him. They related to “hits” on a website he controlled which related to a business under which people could book units on line. He said that these results were emailed to him, he read them and then he discarded them. He said that it was not possible to obtain these documents. That was inconsistent with another document which he has disclosed which demonstrates that he was able to recover and produce documents of that nature. It is clear that the disclosure by the defendants has been very selective on this point. They appear to have only provided what they have printed out. They have an obligation to disclose electronic information and, on the material put before me, I am satisfied that they are able to access those documents relating to “hits” on the defendants’ websites, and that they are relevant and should be disclosed.
Conclusion
The amendments proposed by the defendants are vague, uncertain and embarrassing. They are, in some cases, inconsistent with other parts of the pleading. I refuse leave to the defendants to file the amended defence and counterclaim in the form considered on this application. I give leave to the defendants to file a further amended defence and counterclaim within 14 days of today. I give leave to the plaintiff to file an amended reply, if necessary, within a further 7 days.
I order the defendants to provide further and better disclosure in accordance with the Uniform Civil Procedure Rules.
I will hear the parties on costs.
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