Starfox Pty Ltd v Alonia Pty Ltd
[2022] WADC 43
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: STARFOX PTY LTD -v- ALONIA PTY LTD [2022] WADC 43
CORAM: DEPUTY REGISTRAR HEWITT
HEARD: 4 MAY 2022
DELIVERED : 19 MAY 2022
FILE NO/S: CIV 1844 of 2021
BETWEEN: STARFOX PTY LTD
Plaintiff
AND
ALONIA PTY LTD
Defendant
Catchwords:
Practice and procedure - Application to strike out portions of defence - Whether the paragraph is supportive of a plea of abuse of process
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Paragraph 8.7 struck out without leave to replead
Balance of the application dismissed
Representation:
Counsel:
| Plaintiff | : | Mr C M Slater |
| Defendant | : | Mr G D Cobby SC & Ms G B A Visscher |
Solicitors:
| Plaintiff | : | Law Central Legal |
| Defendant | : | Resw Pty Ltd |
Case(s) referred to in decision(s):
Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256
DEPUTY REGISTRAR HEWITT:
The application before me for determination is that of the plaintiff seeking to strike out par 8 of the defence and its various subparagraphs pursuant to O 20 r 19(1) of the Rules of the Supreme Court 1971 (WA) on the grounds that those paragraphs disclose no reasonable defence, are frivolous or vexatious, or an abuse of the process of the court, and are irrelevant to the defendant's defence in the proceedings.
The plaintiff's case is based on an allegation that there was an asset sale agreement between the parties in 2007 under the terms of which the plaintiff agreed to sell and the defendant agreed to purchase: shares in a third party, namely European Timbers Pty Ltd (European Timbers); the right to collect a loan from a third party, Mr Leembruggen, and the right to collect a loan from European Timbers. The alleged agreement was an oral agreement apparently not recorded in any written form and there appears to have been no written assignment of the interests said to have been sold nor any payment for those interests, the outcome being that the plaintiff was a trustee of that which was sold and the defendant a debtor to the extent of the agreed sale price. These arrangements were entered between Mr Robin Judd (Judd) who was a director of Starfox and Mr Shozo Kawasaki (Kawasaki), a director of the defendant. At the material time, both men were directors and shareholders of the plaintiff and each held a share in the plaintiff company, that share being held on trust for Mr Isamu Koje by each of Judd and Kawasaki. It is alleged that at a later stage the principal amount owing to the plaintiff would be increased by $25,000, the consideration for which was a payment of that amount to the defendant. All of these arrangements were oral and all were arrangements which were reached between Kawasaki and Judd, Kawasaki being the director of the defendant and both men being directors of the plaintiff. Kawasaki died in 2011 and subsequently the plaintiff alleges that Judd became the sole director of the plaintiff and became the sole shareholder of the plaintiff. How the change in shareholding was achieved is not obvious from the pleading, but since the share was held on trust it may well be that the transfer was effected relying on the terms of a trust, but that is sheer speculation on my part.
It is alleged that the plaintiff has paid the defendant $147,861.27 representing its share of monies paid to it by European Timbers but that the balance remains outstanding. In November 2020 the lawyers for the plaintiff sent a letter of demand to the defendant requiring payment of $237,202.05 by 11 November 2020. The writ further seeks interest pursuant to s 32 of the Supreme Court Act 1935 (WA) on the monies outstanding.
I now turn to the defence, and that portion of the defence which is critical to this application is the defendant's allegation that the plaintiff's claim is an abuse of process, relevant factors being, on my perception, the fact that there is no written record of the terms of the arrangements which were reached between Judd and Kawasaki in regard to these matters, and the fact that no transfers or assignments appear to have been executed, and further, that the delay in this matter is extreme and that by the extensive delay in bringing the action, the defendant has been seriously prejudiced in its capacity to maintain a defence to the claim.
That the court is possessed of a power to intervene to prevent an abuse is undoubted as is illustrated in Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 and is likewise reflected in O 20 r 19(1) of the Rules of the Supreme Court. What is less clear is exactly what constitutes such an abuse. That matter is subject to development and is not capable of precise definition, but in any case, the extreme delay, the fact that the contractual arrangements were not documented, and the fact that the defendant is at a considerable disadvantage because of the death of Kawasaki are capable of supporting the contention that the present action could be, not would be, regarded as an abuse.
A further issue is the allegation that the director of the plaintiff, Judd has taken possession of a large number of Kawasaki's documents following his death and that further prejudices the defendant's ability to understand the purpose and structure of any arrangements that had been entered between Judd and Kawasaki and to determine whether there was in truth a debt between these parties as is alleged by the plaintiff. The prejudice which might be caused by the delay is obvious. It is some 13 years prior to the institution of proceedings that these oral agreements were reached between the men concerned and nine years since the death of Kawasaki. The capacity of the defendant to conduct a defence is alleged to have been compromised by such delay. It is also further alleged that the fact that Judd has taken possession of Kawasaki's personal financial documents has again prejudiced their capacity to conduct a defence. Paragraphs 8.1 - 8.6 of the defence lodged on 22 August 2021 deal with these issues and those paragraphs are reproduced below:
8.1Mr Judd was engaged as Shozo Kawasaki's financial advisor for some years prior to Shozo Kawasaki's death;
8.2.Mr Judd and Shozo Kawasaki were engaged in a business relationship for some years prior to Shozo Kawasaki's death;
8.3Mr Judd has claimed in the past that relationship was conducted, at least in part, through various companies;
8.4in or about late 2011, shortly after Shozo Kawasaki's death, Mr Judd offered to detail the financial affairs of Shozo Kawasaki and Shozo Kawasaki's related entities and transfer the control of Shozo Kawasaki's assets and Shozo Kawasaki's related entities to Yaeko Kawasaki;
8.5shortly after Shozo Kawasaki's death, Mr Judd took possession of Shozo Kawasaki's business records and, to the best of the Defendant's knowledge, has retained them at all material times thereafter;
Particulars
(a)On or about 21 November 2011, Mr Judd sent an email to Yutaka Kawasaki requesting Shozo Kawasaki's investments file.
(b)In or about mid-January 2012, Mr Judd attended at the apartment of Shozo and Yaeko Kawasaki on Terrace Road, East Perth and collected Shozo Kawasaki's business records.
8.6to date, Mr Judd has failed to comply with requests that he provide documents evidencing the extent and nature of the business dealings of Shozo Kawasaki and Shozo Kawasaki's related entities, including dealings with Mr Judd and Mr Judd's related entities to the Defendant and Yaeko Kawasaki;
It is to be noted that Judd has resisted requests to produce the relevant documentation. It is argued by the plaintiff that the pleading only refers to Kawasaki's business records and are therefore irrelevant to the issues which are before the court. It appears that probate or letters of administration have not been taken out by any person following Kawasaki's death and there is no person who would be in a position to force Judd to deliver up the documents. Given the rather strange manner in which the financial arrangements of the plaintiff and the defendant were reached without any formal documentation, I think it is quite reasonable to suppose that there may be something in Kawasaki's personal records which might shed light on matters of some relevance to this action and the fact that the director of the plaintiff has declined to produce those documents creates a suspicion that that may well be the case.
For those reasons I am of a view that the pleading in pars 8.1 - 8.6 should not be disturbed.
The next part of the defence, namely par 8.7, is however, rather different. That allegation is that Judd represented to the defendant that it was the subject of an Australian Taxation Office investigation and thereafter an Australian Crime Commission investigation looking into the affairs of Kawasaki, and that Judd and a firm called William Buck (WA) Pty Ltd would do their best to protect the defendant in its capacity as trustee of the Kawasaki Family Trust and the beneficiaries of that trust from the consequences of that investigation. It is alleged that relying on that representation, the defendant did engage William Buck (WA) Pty Ltd and paid it the sum of $321,000 for its efforts in that behalf. It is alleged that in fact the investigations were concerning the behaviour of Judd, not Kawasaki and that the defendant was misled in that regard. I am unable to see how that can possibly be relevant to the case which is before me or any defence to that action. These matters occurred from June 2012. At best they may support an action naming Judd as defendant, but I am unable to see how they can have any connection to the defendant's claim that it faces an abuse of process.
I therefore conclude that par 8.7 should be struck out and the defendant denied leave to replead that paragraph. The balance of the application should be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
FN
Associate
18 MAY 2022
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