Stuart v Mordialloc Sporting Club Inc (No 2)
[2023] VSC 181
•12 April 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2018 01124
BETWEEN:
| RAYMOND JOHN STUART | Plaintiff |
| v | |
| MORDIALLOC SPORTING CLUB INCORPORATED (ARN A0027737R) & ORS (according to the attached Schedule) | Defendants |
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JUDGE: | Matthews AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 March 2023 |
DATE OF RULING: | 12 April 2023 |
CASE MAY BE CITED AS: | Stuart v Mordialloc Sporting Club Inc & Ors (No 2) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 181 |
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PRACTICE AND PROCEDURE – Application by one defendant to set aside the counterclaim of another defendant – Whether counterclaim complies with rr 10.02 and 10.03 of the Supreme Court (General Civil Procedure) Rules 2015 – Interaction with third party procedure under rr 11.15 and 11.01 - Whether leave should be given to dispense with requirement to comply with rr 10.02 and 10.03 – Alternative application to dismiss counterclaim pursuant to r 23.01 - Alternative application to strike out counterclaim under r 23.02 – Counterclaim does not comply with rr 10.02 and 10.03 but in these circumstances the requirement to comply will be dispensed with – Application to dismiss counterclaim refused – Specified paragraphs of counterclaim struck out with right to re-plead.
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APPEARANCES: | Counsel | Solicitors |
| For the Eighth Defendant | Mr N Frenkel | HWL Ebsworth |
| For the Ninth Defendant | Mr D R J O’Brien | McDonald Slater & Lay |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 2
Factual background...................................................................................................................... 2
The pleadings................................................................................................................................. 3
The VCAT Proceeding and related appeals.............................................................................. 7
JBI’s separate proceeding............................................................................................................. 8
528 Main’s separate proceeding................................................................................................ 11
Application to set aside the Further Amended Counterclaim on the contention that it does not comply with the Rules.............................................................................................................. 13
Relevant provisions of the Rules.............................................................................................. 13
528 Main’s submissions regarding rr 10.02 and 10.03........................................................... 15
JBI’s submissions regarding rr 10.02 and 10.03...................................................................... 16
528 Main’s submissions regarding the use of a third party claim as an alternative to a counterclaim.............................................................................................................................................. 18
JBI’s submissions regarding the use of a third party claim as an alternative to a counterclaim.............................................................................................................................................. 19
Analysis........................................................................................................................................ 20
Application to stay or dismiss the Further Amended Counterclaim under Rule 23.01..... 23
Relevant provisions of the Rules.............................................................................................. 23
528 Main’s submissions.............................................................................................................. 23
JBI’s submissions......................................................................................................................... 26
Analysis........................................................................................................................................ 27
Application to strike out the Further Amended Counterclaim under Rule 23.02............... 29
Relevant provisions of the Rules.............................................................................................. 30
Paragraph 1 of the Further Amended Counterclaim............................................................. 30
Paragraph 3 of the Further Amended Counterclaim............................................................. 31
Paragraph 4 of the Further Amended Counterclaim............................................................. 31
Paragraph 5 of the Further Amended Counterclaim............................................................. 32
Paragraph 7 of the Further Amended Counterclaim............................................................. 32
Paragraph 8 of the Further Amended Counterclaim............................................................. 33
Paragraphs 9-12 of the Further Amended Counterclaim...................................................... 33
Paragraph 14 of the Further Amended Counterclaim........................................................... 34
Paragraph 15 of the Further Amended Counterclaim........................................................... 34
Paragraph 16 of the Further Amended Counterclaim........................................................... 35
Paragraph 17 of the Further Amended Counterclaim........................................................... 35
Paragraphs 19-25 of the Further Amended Counterclaim.................................................... 35
The prayer for relief against MSC............................................................................................. 36
The prayer for relief against 528 Main..................................................................................... 36
Conclusion......................................................................................................................................... 36
HER HONOUR:
Introduction
This is an application made by the eighth defendant, 528 Main Street Mordialloc Pty Ltd (‘528 Main’) by summons filed 27 July 2022 to set aside, or alternatively strike out, the further amended counterclaim filed 7 November 2022 (‘Further Amended Counterclaim’) by the ninth defendant (‘JBI’). The application is made pursuant to r 2.01(2) of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’), alternatively r 23.01 and/or r 23.02 (‘Application’).[1]
[1]When filed, the summons also sought an order that JBI be removed as a party to the proceeding. 528 Main no longer presses that aspect of its application, stating that the version of Stuart’s statement of claim filed after the summons was filed includes a reasonable basis for the joinder of JBI.
528 Main relies on the affidavit of its solicitor, Evan Anthony Stents sworn 25 July 2022.
The relevant parties filed written outlines in respect of the Application: 528 Main on 2 December 2022; and JBI on 16 December 2022.
Towards the end of the hearing on 22 March 2023, I asked the parties about the application and/or suitability of Rule 11 of the Rules, being the rule regarding third party claims, in lieu of a counterclaim by JBI. Neither party had addressed this in their written outlines as referred to above or in their oral submissions. JBI then made an oral application that if the Court does not accept that the Further Amended Counterclaim complies with rr 10.02 and 10.03 (being the relevant rules applicable to counterclaims), then it should be treated as a third party notice and statement of claim (or amended as such) and be permitted to proceed under rr 11.15 and 11.01.
I then made orders permitting 528 Main and JBI to file brief outlines of submissions regarding this question, and both parties filed those outlines on 28 March 2023.
Neither the plaintiff (‘Stuart’) or the first defendant (‘MSC’) wished to participate in the Application and were excused from filing any materials in respect of it or appearing at the hearing.
For the reasons which follow:
(a) the Application to set aside the Further Amended Counterclaim (and earlier iterations of it) for failure to comply with rr 10.02 and 10.03 of the Rules will be dismissed;
(b) the requirement for JBI to comply with rr 10.02 and 10.03 of the Rules will be dispensed with, pursuant to r 2.04 of the Rules;
(c) the application to stay or dismiss the Further Amended Counterclaim pursuant to rr 23.01 will be dismissed; and
(d) the application to strike out the Further Amended Counterclaim pursuant to r 23.02 will be granted, in part, with leave to re-plead.
Background
Factual background
The ruling of Randall AsJ in Stuart v Mordialloc Sporting Club Inc; John Barr Investments Pty Ltd v Mordialloc Sporting Club Inc[2] contains information about this proceeding and the various claims made in it.
[2][2021] VSC 244 (‘2021 Ruling’).
For the purposes of this ruling, I can be relatively brief as to what the proceeding is about.
First, it is necessary to explain who the various parties to this proceeding are:
(a) Stuart is a member and former director of MSC;
(b) MSC operates a sporting club at 524-528 Main Street Mordialloc, Victoria (‘Property’);
(c) JBI is the owner of the freehold of the Property; and
(d) 528 Main is a company intending to develop the Property. I will explain this further below.
Second, the main facts relevant to the Application are as follows:
(a) pursuant to the lease between JBI and MSC (‘Lease’), MSC has an option to purchase the Property;
(b) on 22 December 2016, MSC entered into an on-sale deed with 528 under which MSC agreed to exercise the option to purchase the Property and sell the freehold of the Property to 528 Main (‘On-Sale Deed’); and
(c) on 16 January 2017, MSC exercised the option to purchase the Property (‘Option to Purchase’).
This proceeding was commenced by Stuart against MSC in 2018 and has had a somewhat tortured history, primarily due to the myriad of interlocutory applications and appeals made by the parties (including those who were subsequently joined but are no longer part of the proceeding).
The pleadings
Stuart brings his claims against MSC pursuant to the Associations Incorporation Reform Act 2012 (‘AIR Act’). He alleges that the On-Sale Deed and Option to Purchase are invalid because MSC was without capacity or power to enter into these transactions, as it did not have a validly constituted board of directors at the time it entered into them (‘Want of Authority Claim’). He also alleges that the conduct of MSC in entering into the On-Sale Deed and the Option to Purchase was unfairly prejudicial to or unfairly discriminatory against him, and it was contrary to the interests of the members of MSC as a whole (‘Oppression Claim’). Stuart seeks to impugn other acts of MSC in his second further amended statement of claim dated 10 October 2022 (‘SFASOC’), however it is not necessary for me to detail these.
Stuart seeks various declarations, including that:
(a) MSC engaged in oppressive conduct;
(b) the On-Sale Deed is void and of no effect;
(c) the Option to Purchase was not validly exercised by MSC; and
(d) MSC did not have a properly constituted board of directors from 2 December 2016 to 18 March 2019, and MSC had no power to enter any agreements in that period.
Stuart joined 528 Main and JBI to the proceeding due to s 36(2) of the AIR Act, which permits the court, amongst other things, to set aside and restrain the performance of the contract which the plaintiff is seeking to impugn if all parties to the contract are parties to the proceeding.
In its defence dated 10 June 2022 (‘MSC Defence’), MSC essentially admits that it did not have a properly constituted board of directors and that the On-Sale Deed and the Option to Purchase were entered into without authority. It denies the Oppression Claim.
In its further amended defence dated 7 November 2022 (‘JBI Defence’),[3] JBI admits the Lease and that it contains an option to purchase; admits that MSC did not have a validly constituted board of directors at the relevant times, says that it was not aware of the On-Sale Deed, and says that MSC was not entitled to exercise the option to purchase as it was in breach of the Lease at the time and it did not have a validly constituted board of directors.
[3]In accordance with the Rules, the further amended defence and counterclaim is contained within the one document. I have referred to these separately here, as the Application concerns only the counterclaim, and not the defence.
On 15 June 2022, JBI filed its defence and counterclaim. At that time, the counterclaim was made against MSC (as first defendant by counterclaim) and 528 Main (as second defendant by counterclaim). JBI alleges that the option to purchase contained in the Lease was conditional upon fulfilment by MSC of certain conditions, including that it not be in default of the Lease and that the rights granted to MSC are personal to it and shall not be transferred or assigned to any third party. It alleges that the entry into what is defined in the SFASOC as the Confidential Acquisition Partnership whereby Aus Finance Group Pty Ltd (‘AFG’) or its nominee 528 Main would purchase the Property without the knowledge or prior written consent of JBI was a breach of the Lease. It also alleges that MSC was in breach of other terms of the Lease, including matters to do with a building notice, the improperly constituted board of directors, alleged contraventions of the Gambling Regulation Act 2003, which were not disclosed to JBI. By virtue of these matters, JBI says that MSC was not entitled to exercise the Option to Purchase and its exercise was invalid. As against 528 Main, JBI alleges that 528 Main by its entry into the On-Sale Deed, induced MSC to enter into an agreement, arrangement or understanding being the Confidential Acquisition Partnership to cause certain breaches of the Lease and that in furtherance of such, 528 Main knowingly interfered with the contractional relationship between JBI and MSC under the Lease without sufficient justification. JBI says it has suffered loss and damage as a result. As against MSC, JBI seeks declarations that the Option to Purchase was not validly exercised; that by entry into the Confidential Acquisition Partnership and the On-Sale Deed, MSC engaged in conduct which was an attempt to contravene s 33(1) of the AIR Act; that the On-Sale Deed insofar as it relates to any right or entitlement to purchase the Property does not bind MSC or JBI and are invalid and of no effect; that MSC has no legal or equitable interest in the acquisition of the Property; and that MSC is not entitled to seek specific performance of the Option to Purchase. As against 528 Main, JBI seeks declarations that 528 Main has no legal or equitable interest in the Property; that on and after 22 December 2016, 528 Main sought to induce MSC to breach the Lease by entering into the On-Sale Deed without obtaining JBI’s prior written consent; and that 528 Main is not entitled to seek specific performance of the Option to Purchase and/or the Confidential Acquisition Partnership. JBI also seeks damages against both MSC and 528 Main.
On 29 June 2022, 528 Main’s solicitors sent a letter to JBI’s solicitors in which, amongst other things, it was stated that JBI could not bring a counterclaim against 528 Main in circumstances where it has no counterclaim against Stuart, by virtue of r 10.02 and r 10.03; that the counterclaim is otherwise embarrassing, hopeless and liable to be struck out; and if JBI did not withdraw the counterclaim, 528 Main would make an application for it to be struck out or dismissed.
On 15 July 2022, JBI filed an amended counterclaim. The only changes from the counterclaim dated 15 June 2022 were:
(a) to add Stuart as the third defendant by counterclaim;
(b) the addition of the words ‘plaintiff and’ in the heading to the amended counterclaim;
(c) the addition of the words ‘plaintiff and the’ to the heading in the prayer for relief against MSC; and
(d) the addition of the words ‘plaintiff and the’ to the heading in the prayer for relief against 528 Main.
As noted above, JBI filed the further amended defence and counterclaim on 7 November 2022. This is the current version of its pleading, its defence having been further amended in response to amendments made by Stuart to his pleading. The only changes to the Further Amended Counterclaim from the amended counterclaim referred to in the preceding paragraph were:
(a) to change the references to ‘the plaintiff’ in the heading to the counterclaim and the prayers for relief against MSC and against JBI to ‘third defendant by counterclaim’;
(b) to seek additional declarations against MSC (and Stuart) that MSC did not have a properly constituted board of directors, that it had no power to enter into any agreements on and from 2 December 2016 and that any agreement it did enter into was ultra vires; and
(c) to seek additional declarations against 528 Main (and Stuart) that 528 Main was aware that MSC did not have a properly constituted board of directors and that it had no power to enter into any agreements on and from 2 December 2016.
I will go into more detail about the Further Amended Counterclaim later in these reasons.
The VCAT Proceeding and related appeals
After MSC exercised the Option to Purchase, JBI denied that it had been validly exercised. On 12 April 2017, MSC commenced a proceeding in the Victorian Civil and Administrative Tribunal (‘VCAT’) in proceeding BP647/2017 (‘VCAT Proceeding’) seeking, amongst other things, a declaration that it had validly exercised the Option to Purchase. JBI was the respondent to the VCAT Proceeding.
On 18 December 2017, VCAT made an order by consent (‘VCAT Consent Order’) as follows:
It is declared that [MSC] has validly exercised the option of purchasing all [JBI’s] right title and interest in the freehold of the [Property] pursuant to clause 46 of the [Lease] between the parties by notice from [MSC] to [JBI] dated 16 January 2017.
On 7 September 2018, JBI filed a notice of appeal in this court pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (‘VCAT Act’) in which it applied for leave to appeal the VCAT Consent Order (‘Appeal Proceeding’),[4] to which 528 Main was subsequently joined as second respondent. In its second further notice of appeal filed 12 September 2019 in the Appeal Proceeding, JBI made similar allegations against MSC as are made by Stuart in this proceeding, including that MSC did not have power to enter into the On-Sale Deed and exercise the Option to Purchase, and that MSC did not have power to give its consent to the VCAT Consent Order. In the Appeal Proceeding, JBI sought declarations that the VCAT Consent Order be vacated and set aside and that the Option to Purchase was not validly exercised because, among other things, the board of directors of MSC was not properly constituted between 2 December 2016 and 19 March 2019.
[4]The Appeal Proceeding is proceeding no. S ECI 2018 01223.
On 4 March 2022, Croft J published his reasons for refusing JBI’s application for leave to appeal the VCAT Consent Order in the Appeal Proceeding.[5] Leave to appeal or an appeal under s 148 of the VCAT Act requires that the appeal be on a question of law. Essentially, his Honour held that VCAT made no error of law in the exercise of its powers under s 93 of the VCAT Act for the purposes of making the Consent Order.
[5]John Barr Investments Pty Ltd v Mordialloc Sporting Club Inc & Anor [2022] VSC 100.
JBI subsequently sought leave to appeal that decision from the Court of Appeal, which was heard and refused on 27 February 2023.
Both Croft J and the Court of Appeal noted that other avenues for setting aside a consent order are available to a party and that an appeal of the consent order is generally not the appropriate vehicle. As Croft J noted:
it is quite clear that separate proceedings by way of a fresh action to challenge this settlement and the application of those orders could have been taken. Indeed, this is not a novel proposition and is one which has generally been accepted from the mid-19th Century at least.[6]
[6]John Barr Investments Pty Ltd v Mordialloc Sporting Club Inc & Anor [2022] VSC 100, [23].
JBI’s separate proceeding
On 19 August 2022, JBI filed a separate proceeding in this court against MSC, 528 Main, AFG, Kevin Said and Nick Mazzeo (‘JBI Proceeding’).[7] Attached to the writ commencing the JBI Proceeding was a general indorsement. Even though it is a general indorsement, it is a reasonably detailed pleading (running to almost 50 pages).
[7]This is proceeding no. S ECI 2022 03193.
As at 27 February 2023, the JBI Proceeding had not been served on any of the named defendants. As I apprehend it, the JBI Proceeding was served on 528 Main on 17 March 2023 and on some of the other named defendants around the same time. It is therefore at the very early stages of its progression through the court.
In the JBI Proceeding, JBI alleges, amongst other things, that:
(a) AFG was engaged by MSC in about June 2016 to provide services to MSC to conduct due diligence about the possibility of MSC purchasing the Property pursuant to the option to purchase under the Lease;
(b) the rights under the option to purchase were personal to MSC and could not be transferred or assigned to any third party;
(c) between July 2016 and 8 August 2016, three directors of MSC for and on behalf of MSC had confidential negotiations with Said, Mazzeo and AFG about a potential partnership between MSC and AFG to enable the purchase of the Property for the primary benefit of AFG or its nominee (being 528 Main), by using an exercise of the option to purchase under the Lease;[8]
[8]In substance, this is what is alleged in the SFASOC to be the Confidential Acquisition Partnership.
(d) amongst other things, it was a term of the Confidential Acquisition Proposal that it would be strictly confidential and not be disclosed to JBI or the members of MSC;
(e) the exercise of the Option to Purchase was done by its then directors Draper, Warren, Wise, Knipe, Said and Mazzeo when they knew or ought to have known they had no right to do so;
(f) MSC breached the Lease by entering into the Confidential Acquisition Partnership without obtaining JBI’s prior written consent, such that the Option to Purchase was not validly exercised;
(g) by orders made on 29 June 2017 in the VCAT Proceeding, MSC was obliged to make discovery. As part of its discovery in the VCAT Proceeding, MSC did not discover the Confidential Acquisition Partnership or the On-Sale Deed, documents concerning its breaches of the Lease at the time of the Option to Purchase (being the failure to have a properly constituted board of directors, the failure of certain directors to obtain prior written approval of the Victorian Commission for Gaming and Liquor Licensing prior to being appointed as directors, and matters concerning a building notice – referred to as Undisclosed Breaches);
(h) by reason of the Undisclosed Breaches, MSC was unable to fulfil the conditions associated with exercising the option to purchase and therefore unable to exercise it;
(i) at all relevant times, the defendants knew that the Confidential Acquisition Partnership, the On-Sale Deed and the Undisclosed Breaches might have been relevant to the question of whether or not the Option to Purchase had been validly exercised;
(j) by commencing the VCAT Proceeding, making discovery and agreeing to the VCAT Consent Order, MSC and 528 Main and by its purported directors, Said and Mazzeo negotiating a compromise of the VCAT Proceeding, MSC, alternatively Said and Mazzeo, represented to JBI that MSC had an honest belief that the Option to Purchase had been validly exercised;
(k) in reliance on those representations, JBI was induced to compromise is claim[9] by submitting the draft consent orders to VCAT consenting to VCAT making the VAT Consent Order;
[9]JBI had counterclaimed in the VCAT Proceeding, which was dismissed as part of the VCAT Consent Order.
(l) had JBI known about the Confidential Acquisition Partnership or the other documents which should have been discovered, it would not have signed the VCAT Consent Order;
(m) by reason of the non-disclosures and the discovery breaches, MSC fraudulently or intentionally concealed matters from VCAT, thereby engaging in conduct that was in contempt of VCAT amounting to an abuse of process fraud on VCAT;
(n) VCAT’s jurisdiction to make declaratory orders by consent failed, miscarried, or was vitiated by MSC’s failure to give full and frank disclosure and discovery of all relevant documents; and
(o) JBI has suffered loss and damage as a result.
In the JBI Proceeding, JBI claims as against all defendants:
(a) declarations that:
(i) the Option to Purchase was not validly exercised;
(ii) the VCAT Consent Order is void, invalid and of no effect;
(iii) neither MSC or 528 Main and/or AFG have any legal or equitable interest in the Property save for the interest of MSC as lessee on an overholding under the Lease; and
(iv) neither MSC or 528 Main and/or AFG are entitled to seek specific performance of the Lease based upon the exercise of the Option to Purchase by MSC; and
(b) damages and/or equitable compensation.
528 Main’s separate proceeding
While not strictly relevant to the Application, for the sake of completeness I note here that 528 Main commenced its own proceeding in this court on 14 December 2022 (‘528 Main Proceeding’).[10] That proceeding is against MSC and JBI, and was served in December 2022.
[10]The 528 Main Proceeding is proceeding no. S ECI 2022 05139.
In the 528 Main Proceeding, among other things 528 Main alleges that:
(a) it entered into the On-Sale Deed;
(b) it entered into other agreements with MSC, including one whereby it would reimburse MSC for its legal costs and disbursements associated with enforcing the sale of the Property to MSC by JBI (including JBI’s denial of the Option to Purchase) (‘Reimbursement Deed’);
(c) on about 15 February 2018, JBI purportedly entered into a contract of sale to sell the Property to a related company, whom it procured to offer a new lease of the Property to MSC;
(d) in March 2018, JBI offered a new lease of the Property to MSC;
(e) on 31 August 2018, JBI alleged that the Option to Purchase had not been validly exercised;
(f) JBI paid a significant portion of Stuart’s costs in prosecuting this proceeding;
(g) at the annual general meeting of MSC on 22 March 2019 there was a change in the composition of its board of directors, after which MSC aligned itself with JBI, provided no opposition to JBI in the Appeal Proceeding and no opposition to Stuart in this proceeding, and accepted JBI funding its costs of both those proceedings to advance JBI’s interests contrary to those of 528 Main;
(h) MSC has breached its obligations under the On-Sale Deed and the Reimbursement Deed;
(i) MSC has engaged in misleading or deceptive conduct;
(j) JBI was aware of the On-Sale Deed or a document to similar effect by 4 May 2017, alternatively 7 March 2018;
(k) JBI was aware of the Reimbursement Deed or a document to similar effect by 26 September 2019;
(l) JBI has induced MSC to breach the On-Sale Deed and the Reimbursement Deed; and
(m) it has suffered loss and damage.
In the 528 Main Proceeding, 528 Main seeks relief including:
(a) orders that MSC specifically perform and carry into execution its obligations to 528 Main under the On-Sale Deed by enforcing its Option to Purchase and that MSC specifically perform its obligations under the Reimbursement Deed; and
(b) damages.
Application to set aside the Further Amended Counterclaim on the contention that it does not comply with the Rules
Relevant provisions of the Rules
Order 2 of the Rules deals with non-compliance with the Rules, relevantly as follows:
2.01 Effect of non-compliance
(1) A failure to comply with these Rules is an irregularity and does not render a proceeding or any step taken, or any document, judgment or order in the proceeding, a nullity.
(2) Subject to Rules 2.02 and 2.03, where there has been a failure to comply with these Rules, the Court may—
(a) set aside the proceeding, either wholly or in part;
(b) set aside any step taken in the proceeding, or any document, judgment or order in the proceeding;
(c) exercise its powers under these Rules to allow amendments and to make orders dealing with the proceeding generally.
….
2.03 Application to set aside for irregularity
The Court shall not set aside any proceeding or any step taken in any proceeding or any document, judgment or order in any proceeding on the ground of a failure to which Rule 2.01 applies on the application of any party unless the application is made within a reasonable time and before the applicant has taken any fresh step after becoming aware of the irregularity.
2.04 Dispensing with compliance
(1) The Court may dispense with compliance with any of the requirements of these Rules, either before or after the occasion for compliance arises.
…
Order 10 of the Rules deals with counterclaims. The relevant provisions are as follows:
10.02 When counterclaim allowed
(1) A defendant who has a claim against the plaintiff may counterclaim in the proceeding.
(2) Rule 9.01 applies to a counterclaim as if the plaintiff were the defendant and the defendant were the plaintiff.
(3) A defendant who counterclaims shall plead the defendant's defence and the counterclaim in one document called a defence and counterclaim.
10.03 Counterclaim against plaintiff and another person
A defendant may join with the plaintiff as defendant to the counterclaim any other person, whether a party to the proceeding or not, who, if the defendant were to bring a separate proceeding, could be properly joined with the plaintiff as a party in accordance with Rule 9.02.
Order 11 of the Rules deals with third party claims. The relevant provision is as follows:
11.15 Claim against another party
(1) Where a party claims as against another party to the proceeding any relief of the kind described in Rule 11.01, the party may make the claim against the other party by filing and serving a notice in accordance with this Rule—
(a) within 60 days after the service on the party of the document in the proceeding by which the claim in respect of which the notice is served was made; or
(b) if when the document was served the other party was not a party, then within 60 days after the party became a party.
(2) Paragraph (1) does not apply where the claim could be made by counterclaim in the proceeding.
…
Rule 11.15 refers to r 11.01. Rule 11.01 relevantly provides as follows:
11.01 Claim by third party notice
Where a defendant claims as against a person not already a party to the proceeding (in this Order called the third party)—
(a) any contribution or indemnity;
(b) any relief or remedy relating to or connected with the original subject matter of the proceeding and substantially the same as some relief or remedy claimed by the plaintiff; or
(c) that any question relating to or connected with the original subject matter of the proceeding should be determined not only as between the plaintiff and the defendant but also as between either or both of them and the third party—
the defendant may join the third party as a party to the proceeding and make the claim against that third party by filing and serving a third party notice.
528 Main’s submissions regarding rr 10.02 and 10.03
528 Main’s submissions in respect of whether the Further Amended Counterclaim should be set aside for failure to comply with the Rules are set out below.
JBI’s counterclaim was plainly defective because it brought no counterclaim against Stuart, contrary to rr 10.02 and 10.03.
JBI’s amended counterclaim did not improve the situation for JBI. In the amended counterclaim, JBI purported to counterclaim against Stuart but:
(a) no claim was pleaded by JBI against Stuart; and
(b) notwithstanding the introductory words to the prayers for relief, no relief was sought by JBI against Stuart.
Equally, the Further Amended Counterclaim is fundamentally defective because, notwithstanding that Stuart is named as the third defendant by counterclaim:
(a) no claim is pleaded by JBI against Stuart; and
(b) no relief is sought by JBI against Stuart.
Plainly, JBI does not have ‘… a claim against the plaintiff …’ as per r 10.02(1). Moreover, JBI does not have a ‘… counterclaim in the proceeding …’ as per r 10.02(1). The rule could not have been intended to permit a counterclaim in circumstances where the plaintiff by counterclaim has no cause of action against the plaintiff, nor any other proper basis for counterclaiming against them, nor seeks any relief against them. A counterclaim is a pleading and must comply with the rules of pleadings. For example, it plainly discloses no cause of action against Stuart. The Further Amended Counterclaim is impermissible and ought be set aside pursuant to r 2.01(2).
If, however, it is considered that the naming of Stuart as a defendant by counterclaim - without any claim or relief being pleaded against him - satisfies the requirements of r 10.02(1), then the Further Amended Counterclaim should be set aside or struck out as an abuse of process. JBI has only named Stuart as a defendant to counterclaim in order to seek to avoid the requirements of rr 10.02 and 10.03. JBI has no bona fide claim against Stuart.
Any claim that JBI wishes to pursue against 528 Main must be brought by way of a fresh proceeding.
Having said that, JBI’s ability to bring any claim against the Club is circumscribed because it is impermissible by reason of res judicata and is an abuse of process for it to bring a claim that overlaps with the determination made by consent by VCAT (in the form of the VCAT Consent Order) as to the validity of the exercise of the Option to Purchase and the decision by Croft J to dismiss JBI’s application for leave to appeal against that determination in the Appeal Proceeding. Moreover, VCAT had exclusive jurisdiction over any such claim by reason of 89 of the Retail Leases Act 2003 (Vic).
The Further Amended Counterclaim ought be set aside pursuant to rule 2.01(2), as should the earlier iterations of it.
JBI’s submissions regarding rr 10.02 and 10.03
JBI’s submissions in respect of whether the Further Amended Counterclaim should be set aside for failure to comply with the Rules are set out below.
Some time ago, JBI initially proposed to be joined to this proceeding as a second plaintiff. It was Randall AsJ who directed that JBI was to be joined as a defendant.[11]
[11]2021 Ruling, [32].
The Further Amended Counterclaim, like Stuart’s claim, seeks a number of declarations which, pursuant to r 23.05, are appropriate orders to seek as it affects the interests and claims of all parties, including Stuart, and does not breach r 10.02 and r 10.03.
528 Main’s submissions entirely miss the fundamental point concerning the basis of declaratory relief. In this regard, JBI relies on r 23.05 which provides as follows:
No proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether or not any consequential relief is or could be claimed.
The Court clearly has power to determine declaratory proceedings, as provided by s 36 Supreme Court Act 1986 and r 23.05.[12] Such declaratory relief is by its nature a claim involving all the interests of the parties including Stuart, MSC and 528 Main. Stuart seeks declarations which are made against all parties.
[12]Relying on DPP v Federico [2006] VSC 24, [13].
JBI is a necessary party to the proceeding and is entitled to ventilate claims and seek relief like any other party to a proceeding. The Further Amended Counterclaim seeking additional declarations on the common set of issues between all parties, including Stuart, is properly issued under the Rules and ought to be permitted to run to trial at the same time as Stuart’s claim. Further, r 9.06 permits the joinder of parties and claims when convenient to hear all claims at the same time. The Court should not deprive a party of agitating a claim that has more than a reasonable prospect of success, especially where such success is underscored by the significant admissions made by MSC in the MSC Defence.
Accordingly, the Further Amended Counterclaim should not be set aside as it does comply with rr 10.02 and 10.03 and, if it does not, then the Court should utilise r 2.04 to dispense with the requirement that it comply with those rules, as the interests of justice support all these claims being heard and determined at the same time.
528 Main’s submissions regarding the use of a third party claim as an alternative to a counterclaim
528 Main’s submissions on this issue are set out below.
If the Court is disposed to set the Further Amended Counterclaim under r 2.01(2) on the basis that it is impermissible by reason of rr 10.02 and 10.03, the Court ought make no order in relation to rule 11.15.
Notwithstanding 528 Main’s letter to JBI dated 29 June 2022 about the counterclaim being non-compliant and its filing of the Summons around a month later, JBI did not raise r 11.15 in its submissions in opposition to the Application and did not file an application for an extension of time under r 11.15 to file a third party notice.
Were JBI to seek an extension of time to file a notice under rule 11.15, 528 Main will oppose it because:
(a) JBI can pursue whatever claims it wishes to pursue against MSC and 528 Main as are appropriate and within the Court’s jurisdiction in the JBI Proceeding;
(b) it would be contrary to the overarching purpose of the Civil Procedure Act 2010 (Vic) (‘CPA’) ‘… to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute …’, vexatious and an abuse of process for JBI to run the same or similar claims, arising from the same or similar subject matter, seeking the same or similar relief, against the same parties (MSC and 528 Main) in two separate proceedings; and
(c) it is inappropriate for JBI to utilise this proceeding under the AIR Act to make its claims.
Further, it will plainly embarrass the fair and orderly trial of the proceeding if JBI is permitted to pursue:
(a) the claims it in the JBI Proceeding against the Club, 528 Main and others; and
(b) the counterclaim he seeks to pursue in this proceeding against MSC and 528 Main.
There is considerable overlap between the two claims and to the extent that they differ, there is no good reason why they have not been brought in the one proceeding. For example, in both the JBI Proceeding and in the Further Amended Counterclaim, JBI seeks a declaration that the Option to Purchase was not validly exercised; in both proceedings, JBI seeks a declaration that 528 Main has no legal or equitable interest in the Property; in both proceedings, JBI seeks damages from MSC and 528 Main. Putting aside the question of whether those claims are sustainable, there is no good reason why JBI ought not be required to pursue all of the claims it wishes to pursue against the Club and 528 Main in the JBI Proceeding, subject to the Court having jurisdiction to hear those matters.
At the conclusion of the hearing on 22 March 2023, the Court asked Counsel for JBI, Mr O’Brien, why his client could not pursue all of the claims it wishes to pursue against MSC and 528 Main in the JBI Proceeding. Mr O’Brien did not answer the question. There is no such reason.
JBI’s submissions regarding the use of a third party claim as an alternative to a counterclaim
JBI’s submissions on this issue are set out below.
In a proceeding for declaratory relief, such a proceeding affects the interests of all other parties and is accordingly for the purposes of rr 10.02 and 10.03 a ‘claim’ against the interests of JBI. JBI’s primary submission is that its counterclaim is valid and ought to be permitted to proceed. In that instance, rr 11.15 would have no application.
If the Court does not accept this, or that the requirements under rr 10.02 and 10.03 should in this instance be dispensed with under r 2.04, then JBI should be permitted to have the Further Amended Counterclaim treated as a third party notice and claim within the procedure identified in r 11.15 so that this proceeding can be expeditiously managed to a concluded hearing.
The interaction between rr 10.02, 10.03, 11.01 and 11.15 supports JBI’s proposition that the Rules of the Supreme Court must always serve the interests of justice and not be utilised to delay or avoid the determination of the real issues in dispute. To the extent that the Court considers there might be a problem under rr 10.02 and 10.03 and/or rr 11.15 and 11.01, then there is also importantly r 2.04, which gives the Court wide discretion to dispense with rules where appropriate.[13]
[13]Relying on Ilford Tower Pty Ltd & Anor v Equity One Mortgage Ltd [2014] VSCA, [11]; Victoria Teachers Credit Union Ltd v KPMG (a firm) & Anor [2000] VSCA 23, [27].
The form and title of the pleading is a matter easily dealt with by renaming the headings and perhaps a few amendments to the body content, along with any other amendments required or conceded. As the pleading requirements for a third party notice are not necessarily the same as for a claim or counterclaim, if possible, JBI’s preference is for the counterclaim to be accepted so that 528 Main and the other defendants to the counterclaim can make responsive pleadings as the case may be. It is not a basis to strike out JBI’s amended counterclaim pleading or to prevent JBI from ventilating claims in this proceeding by way of pleading in the Court’s preferred form via a third party notice (if that is the Court’s determination).
528 Main’s res judicata, Retail Lease jurisdiction and Hall v Busst points[14] took up the majority of hearing time on 22 March 2023 and ultimately ought to be matters for trial (after a properly pleaded defence if they have any merit at all).
[14]These will be explained further below. I have included this aspect of JBI’s supplementary submission as 528 Main raised the res judicata issue in its supplementary submission.
The related question of whether or not the JBI proceeding and the 528 Main Proceeding can or should be consolidated or heard together can be dealt with at the next directions hearing; these other proceedings are not a valid basis for striking out JBI’s counterclaim. This is particularly so given the latent standing and res judicata issues that 528 Main raise in their submissions, which ought to be raised in a proper substantive defence by 528 Main rather than at a pleading summons.
Analysis
JBI’s contention that Randall AsJ directed that JBI be joined to the proceeding as a defendant is not strictly correct. Rather, what his Honour said was that JBI ought to be joined as a defendant rather than as a second plaintiff.[15] In other words, if JBI was to be joined, it ought be in the former capacity rather than the latter. That being said, it was unclear to me what use JBI sought to make of this in its submissions.
[15]2021 Ruling, [32].
In my view, the genesis of JBI’s counterclaim is telling: it reveals that JBI did not initially make a counterclaim against Stuart, and only added him to the amended counterclaim after the issue had been raised by 528 Main. This also reveals that at no point when adding Stuart to the amended counterclaim and then the Further Amended Counterclaim did JBI make amendments to the pleading to include any claims against Stuart or prayer for relief against him specifically. The genesis of the changes really does illustrate that Stuart was added to the counterclaim as a means of attempting to have JBI’s counterclaim comply with the requirements of r 10.02 and r 10.03.
It is difficult to accept JBI’s submission that because it seeks declaratory relief against all parties, that this somehow means that by its counterclaim it has a claim against Stuart when the declarations it seeks are either the same (or substantially the same) or complementary to those declarations sought by Stuart. How can seeking the same declaratory relief as the plaintiff mean that the defendant has a claim against that plaintiff which can be pursued by way of counterclaim?
Therefore, I do not accept that the Further Amended Counterclaim or (the amended counterclaim, for that matter) complies with rr 10.02 and 10.03.
However, that is not the end of the matter. The next question is whether the requirement for JBI to comply with rr 10.02 and 10.03 in respect of the Further Amended Counterclaim should be dispensed with and, if not, whether JBI ought be permitted to have it go ahead using the third party procedure.
In my view, rr 11.15 and 11.01 have the effect that JBI could have issued a third party notice and statement of claim instead of issuing its counterclaim, in which case the issue of the required form would not have arisen. It is a pity that JBI did not recognise this at the time of filing the counterclaim, and more particularly so after 528 Main raised the issue on 29 June 2022. A great deal of time and effort may have been able to be avoided if it had. In fact, the third party procedure was raised by the Court at the hearing, as described earlier in these reasons.
In circumstances where the Rules do provide for a procedure for a defendant to make a claim against another party to the proceeding, where they do not have a claim against the plaintiff, it seems to me that setting aside a counterclaim on the basis of a failure to comply with rr 10.02 and 10.03 is not a just outcome. In this regard, I accept JBI’s submission set out at paragraph 66 above, although I do not consider the authorities relied upon by JBI therein to be apposite to the point.
That leaves the question of whether JBI should be required to re-work the Further Amended Counterclaim into the form of a third party notice and statement of claim, or whether r 2.04 should be utilised to allow JBI’s claims to be pursued as a counterclaim.
I do not consider it to be consistent with the overarching purpose set out in the CPA to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute, which s 7 of the CPA makes clear is also the overarching purpose of the Rules, to require such a re-working of the Further Amended Counterclaim. Rather, I consider that this is an instance where it is appropriate to utilise r 2.04 to dispense with the requirements of rr 10.02 and 10.03 in respect of JBI’s counterclaim.
Consequently, 528 Main’s submission that JBI would require an extension of time to bring a third party proceeding and such extension should not be given does not arise for determination.
528 Main’s submissions that the Further Amended Counterclaim ought be set aside due to res judicata, as part of its argument about the pleading not complying with Rule 10, is also a submission made by 528 Main in its alternative application to strike out the Further Amended Counterclaim under r 23.01. I consider that this submission is more appropriately dealt with when considering the application under r 23.01, which I will do in the next section of these reasons.
Nor do I consider that 528 Main’s other submissions about the overlap with the JBI Proceeding are a basis for setting aside the Further Amended Counterclaim on the grounds of non-compliance with rr 10.02 and 10.03. Those submissions are more properly considered when considering the balance of the Application.
Application to stay or dismiss the Further Amended Counterclaim under Rule 23.01
Relevant provisions of the Rules
Rule 23.01 relevantly provides as follows:
(1) Where a proceeding generally or any claim in a proceeding—
(a) is scandalous, frivolous or vexatious; or
(b) is an abuse of the process of the Court—
the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim.
(2) Where the defence to any claim in a proceeding is scandalous, frivolous or vexatious, the Court may give judgment in the proceeding generally or in relation to any claim.
(3) In this Rule—
(a) a claim in a proceeding includes a claim by counterclaim and a claim by third party notice; and
(b) a defence includes a defence to a counterclaim and a defence to a claim by third party notice.
528 Main’s submissions
528 Main’s submissions in support of its application to stay or dismiss the Further Amended Counterclaim pursuant to r 23.01 are set out below.
JBI’s claims put in the Further Amended Counterclaim are an abuse of process and hopeless, and ought be dismissed or struck out.
MSC, which had the benefit of advice from solicitors, entered into the On-Sale Deed for the transfer of the Property to 528 Main after it was purchased by MSC. That transaction has nothing to do with the Lease between JBI and MSC and any associated restriction in the Lease on the on-sale of the land by MSC would fall foul of the well-known principle in Hall v Busst.[16] JBI’s position in this regard is a ‘legal heresy’. It has never been explained how it is said that a landlord could purport to restrict any dealings by a purchaser pursuant to an option to purchase. To assert that the entry into the On-Sale Deed was a breach of the Lease is without any foundation. This defect cannot be remedied.
[16](1960) 104 CLR 206 at 218, 222-223, 235-236.
JBI’s attempt to raise claims in this proceeding which overlap with the determinations made by VCAT by consent and by Justice Croft in the Appeal Proceeding is impermissible by reason of res judicata4 and is an abuse of process. Moreover, VCAT had exclusive jurisdiction over any such claim by reason of s 89 of the Retail Leases Act 2003 (Vic), as evidenced by the fact that the validity of the Option to Purchase was the subject of the VCAT Proceeding.
In the VCAT Proceeding:
(a) JBI, through its current solicitors, had proposed to MSC to resolve the claim at VCAT by consent on the basis that MSC had validly exercised the Option to Purchase and each party pay their own costs; and
(b) VCAT determined, by consent of MSC and JBI, that the Option to Purchase had been validly exercised.
In the Appeal Proceeding:
(a) in JBI’s Second Further Amended Notice of Appeal, it sought leave to appeal against the VCAT Consent Order on the basis that the Option to Purchase was not validly exercised because MSC was in breach of the Lease when it exercised the option by:
(v) purporting to enter into the On-Sale Deed and exercise the Option to Purchase when it had no power to do so because its board did not have sufficient directors;
(vi) failing to obtain the prior approval of the Victorian Commission for Liquor and Gambling Regulation for directors as required under the Gambling Regulation Act 2003;
(vii) purporting to appoint directors to the board notwithstanding their conflict of interest;
(viii) purporting to enter into a partnership with AFG for it to purchase the Property without JBI’s consent;
(ix)purporting to enter into the On-Sale Deed and related agreements; and
(x) failing to notify JBI of a building notice and carrying out work to remedy the subject matter of the building notice without JBI’s consent;
(b) Justice Croft dismissed JBI’s application for leave to appeal.
The Further Amended Counterclaim impermissibly seeks to agitate the same issues determined between the same parties in the VCAT Proceeding and the Appeal Proceeding. Any new claim covering the same issues would need to prove actual fraud. JBI does not allege fraud in the Further Amended Counterclaim and no such claim is open to it. This defect cannot be remedied.
JBI’s pleading does not allege a reasonably arguable case that 528 Main induced a breach of contract by the Club in accordance with the established principles summarised in Daebo Shipping Co Ltd v The Ship Go Star.[17] It appears that this defect cannot be remedied.
[17][2012] FCAFC 156 at [88].
JBI’s pleading is unclear and embarrassing. For example, the manner in which the Further Amended Counterclaim seeks to rely on large parts of the SFASOC, and earlier allegations in JBI’s Amended Defence, is vague and embarrassing and indicative of why the proper process for any such claim is by way of a separate, self-contained pleading.
Further, it is an abuse of process for JBI to agitate the same claims against essentially the same parties in two different proceedings in this court, being this proceeding and the JBI Proceeding.
JBI’s submissions
JBI’s submissions in opposition to 528 Main’s application to stay or dismiss the Further Amended Counterclaim pursuant to r 23.01 are set out below.
In its written outline, JBI contended that the Appeal Proceeding was determined on a threshold preliminary issue by Justice Croft without any consideration of the issues concerning the validity of the Option to Purchase. JBI says that Justice Croft declined to exercise any jurisdiction to consider the appeal under s 148 of the VCAT Act, partly on the basis that his Honour was of the view that JBI’s allegations were required to be pursued in an alternative jurisdiction, including the present proceeding or a new writ proceeding. This aspect is said to be part of JBI’s application to the Court of Appeal for leave to appeal Justice Croft’s decision.
There is no abuse of process to seek the declaration sought in the present proceeding when this issue was not considered, let alone determined, in the Appeal Proceeding.
In between filing its written outline and the hearing, JBI’s application to the Court of Appeal was dismissed. Nonetheless, JBI did not appear to resile from the position it had articulated in its written outline. Indeed, JBI characterised the outcome of the Court of Appeal hearing to be one where the application was withdrawn as the Bench had made it clear it thought the issues ought be agitated in a separate proceeding as it would require the Court of Appeal to engage in a fact finding exercise.
528 Main’s res judicata argument ought not be accepted as a basis to stay or dismiss the Further Amended Counterclaim. Rather, if 528 Main wishes to rely on that, it should plead it in its defence to counterclaim and then JBI will have the opportunity to reply to that.
Insofar as 528 Main’s contention that the Further Amended Claim contains a ‘legal heresy’ due to the principle in Hall v Busst, there is no such legal heresy in JBI’s position.
528 Main has confused and conflated, on the first hand, the position that might occur after a transfer of land has been registered under the completion of a contract of sale entered into pursuant to an option with, on the second hand, the compliance with the pre-conditions for the valid exercise of an option. The decision in Hall v Busst does not establish an absolute rule that a condition cannot be validly placed on an option to purchase contained in a lease such as that contained in the Lease.
In any event, this is a matter that requires a valid defence to counterclaim to be pleaded and is not appropriate for a strike out application. 528 Main well understands the case it has to meet and clearly takes a different view of the legal consequences of the factual allegations. If it considers that JBI has committed “legal heresy” in its pleadings, then 528 Main ought to be able to readily provide a pleading in response.
It is clear that 528 Main understands the case it has to meet. It simply (and impermissibly) wishes to assert in a strike out application that its legal construction should prevail over that of JBI’s. At its highest, this is a question for trial and not appropriate for summary disposition.
Insofar as 528 Main contends that the Further Amended Counterclaim is an abuse of process because of the overlap with the JBI Proceeding, JBI says that this can be dealt with through case management and the proceedings being dealt with together.
Analysis
I do not necessarily accept JBI’s characterisation of the decision by Justice Croft in the Appeal Proceeding or its characterisation of the outcome of the Court of Appeal hearing. However, I do not consider that a great deal turns on that for the purpose of the Application, due to the view I have come to about how to treat 528 Main’s arguments that the Further Amended Counterclaim is an abuse of process on the grounds of res judicata.
I do not accept 528 Main’s submission that the whole of the Further Amended Counterclaim should be dismissed as an abuse of process due to res judicata.
Aspects of 528 Main’s arguments have much to commend them. In particular, I accept that until and unless the VCAT Consent Order is set aside on the usual basis for setting aside consent orders, being that the agreement to the consent orders is able to be vitiated on the usual principles for avoiding a contract, the declaration (by consent) by VCAT that the Option to Purchase was validly exercised is not able to be impugned.
But that is not the end of it. True it is that the Further Amended Counterclaim does not plead this: rather, that is now pleaded by JBI in the JBI Proceeding. However, JBI may have been able to plead an allegation in the Further Amended Counterclaim that the VCAT Consent Order ought be set aside and then the various allegations which it does make in the Further Amended Counterclaim that rely on that outcome may have been able to be expressed as being contingent on that finding being made. Now I realise that JBI did not do this, but an amendment to the Further Amendment Counterclaim to incorporate the relevant allegations in the JBI Proceeding may possibly deal with this.
In my view, in the circumstances of this case this is a matter that should be dealt with at trial or, possibly, in a summary judgment application after a properly pleaded defence to counterclaim which expressly sets out the grounds relied upon for such an estoppel are pleaded.
I do not accept that the principle in Hall v Busst means that the Further Amended Counterclaim should be dismissed. Again, this is a matter for a properly pleaded defence to counterclaim and is not a basis to dismiss the counterclaim in this Application.
I do not accept that the Further Amended Counterclaim should be stayed or dismissed as an abuse of process on the grounds of duplication or overlap with the JBI Proceeding. In my view, this can and should be dealt with in a case management hearing regarding the (now) three remaining proceedings. I have already listed each of the three proceedings for a directions hearing so that these matters can be canvassed. How this is to be dealt with going forward is best done via that mechanism, rather than by considering this proceeding in isolation.
Application to strike out the Further Amended Counterclaim under Rule 23.02
A substantial amount of time at the hearing was spent on submissions regarding specific paragraphs of the Further Amended Counterclaim and whether they should, or should not, be struck out pursuant to r 23.02.
On 21 September 2022, I made orders in this proceeding after hearing 528 Main’s application to strike out Stuart’s further amended statement of claim dated 1 April 2022 (‘Strike Out Orders’). The ruling leading to those orders was delivered ex tempore on 21 September 2022 and is recorded in the transcript. In the Strike Out Orders, I struck out certain paragraphs of the further amended statement of claim, giving leave to re-plead in respect of most (but not all) of those paragraphs, and set out in Annexure A to the orders a table containing the outcome and short reasons for the ruling regarding each paragraph of the further amended statement of claim complained of.
At the hearing on 22 March 2023, I indicated that it seemed to me that some of the matters complained of in the Further Amended Counterclaim were substantially the same as the matters I had dealt with in the Strike Out Orders. I stated that where appropriate, the same approach ought be taken to the Further Amended Counterclaim as that which I had found when making the Strike Out Orders. Where necessary, I refer to this below.
I do not propose to set out all of the parties’ submissions in respect of the 20 paragraphs of the Further Amended Counterclaim plus the prayers for relief which are complained of. These are lengthy and adequately canvassed in the parties’ written and oral submissions. Rather, I will refer to each of the paragraphs complained of and express my ruling in respect of them. I will, however, state here that I do not accept 528 Main’s primary position that the deficiencies in respect of the particular paragraphs complained of are fundamental to the counterclaim and not capable of remediation. The reasons for this view will be exposed in the discussion below.
Relevant provisions of the Rules
Rule 23.02 of the Rules relevantly provides as follows:
Where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading—
(a) does not disclose a cause of action or defence;
(b) is scandalous, frivolous or vexatious;
(c) may prejudice, embarrass or delay the fair trial of the proceeding; or
(d) is otherwise an abuse of the process of the Court—
the Court may order that the whole or part of the indorsement or pleading be struck out or amended.
Paragraph 1 of the Further Amended Counterclaim
I do not accept 528 Main’s submission that paragraph 1 of the Further Amended Counterclaim is embarrassing and impermissible because it rolls up pages and pages of allegations by Stuart in the SFASOC and by JBI in the JBI Defence, such that 528 Main cannot plead to it.
I accept JBI’s submission that insofar as paragraphs of the SFASOC are cross-referred to in paragraph 1, 528 Main can simply refer to and repeat its corresponding paragraphs in its defence filed 7 November 2022 to the FASOC (‘528 Main Defence to FASOC’). Further, insofar as paragraphs of JBI’s Defence are cross-referred to in paragraph 1, 528 Main can simply refer to and repeat its corresponding paragraphs in its defence to counterclaim, once it files a responsive pleading in that regard.[18]
[18]528 Main has filed what can only be described as ‘holding defences’ to the various iterations of JBI’s counterclaim, on the basis that it says it should not have to plead to it until its concerns with JBI’s pleadings have been dealt with. 528 Main says it filed holding defences as JBI refused to confirm that it would not snap on a judgment on the counterclaim in default of defence if 528 Main did not file a defence to counterclaim. 528 Main’s defence to counterclaim is the subject of a separate application by JBI to strike it out, which application is to be heard and determined following the outcome of this application.
Paragraph 1 of the Further Amended Counterclaim will not be struck out.
Paragraph 3 of the Further Amended Counterclaim
I accept that the chapeau to paragraph 3 of the Further Amended Counterclaim is embarrassing, however I do not accept that the balance of paragraph 3 suffers from that vice.
528 Main complains that paragraph 3(c) overlaps with the VCAT Consent Order and the outcome of the Appeal Proceeding, so should be struck out by reason of res judicata or abuse of process (‘Specific Pleading Abuse Argument’). I do not accept this submission: it merely goes to the alleged want of authority of Said and Mazzeo and the MSC board at the relevant time. Even if I am wrong in this regard, I would not strike it out on this ground on the basis set out at paragraph 107 above.
Accordingly, paragraph 3 will be struck out with leave to re-plead so as to amend the chapeau to that paragraph.
Paragraph 4 of the Further Amended Counterclaim
Paragraph 4 of the Further Amended Counterclaim is said to be embarrassing as it cross-refers to paragraph 9 of the FASOC which itself contains a number of allegations, and then paragraph 4 goes on to make additional allegations.
I do not accept 528 Main’s complaint in this regard. It can simply cross-refer to the relevant paragraph/s of the 528 Main Defence to FASOC and then plead to the additional allegations.
Paragraph 4 of the Further Amended Counterclaim will not be struck out.
Paragraph 5 of the Further Amended Counterclaim
Paragraph 5 is said to suffer from the same vice as that contended for regarding paragraph 4. The same result obtains.
Paragraph 5 is also said to be embarrassing as sub-paragraphs (c) to (e) of the particulars allege material facts and are not particulars of the allegations in paragraph 5. This complaint is valid.
Paragraph 5 of the Further Amended Counterclaim will be struck out with leave to re-plead so that sub-paragraphs (c) to (e) of the particulars are pleaded as material facts and not as particulars.
Paragraph 7 of the Further Amended Counterclaim
Paragraph 7 of the Further Amended Counterclaim is said to be embarrassing because it alleges a breach of the Lease without specifying which term; and it incorporates by reference to paragraph 41 of the JBI Defence the alleged ‘Described Confidential Acquisition Partnership’ and this is confusing, such that what it is JBI is pleading as to the alleged partnership and its terms is confusing.
JBI suggested that the latter complaint could be cured by deleting the word Described from the defined term. I do not think that this makes it any clearer.
Which term/s of the Lease MSC is said to be in breach of by entering into the Described Confidential Acquisition Partnership’ should be pleaded.
528 Main also makes the Specific Pleading Abuse Argument in respect of paragraph 7. It pleads a breach of the Lease and 528 Main says that this goes to whether the Option to Purchase was validly exercised. I do not accept this. Even if I am wrong in this regard, I would not strike it out on this ground on the basis set out at paragraph 107 above.
Accordingly, paragraph 7 will be struck out with leave to re-plead, so that the matters referred to in paragraphs 127 and 129 above can be addressed. Other paragraphs in the Further Amended Counterclaim which use the term ‘Described Confidential Acquisition Partnership’ will need to be amended so as to be consistent with the re-pleaded paragraph 7. JBI will need to check its pleading to make sure that these are picked up.
Paragraph 8 of the Further Amended Counterclaim
I do not accept 528 Main’s complaint as to the use of the phrase ‘agreement, arrangement or understanding’ in paragraph 8(a).
I accept 528 Main’s complaint that paragraph 8(c) of paragraph 8 of the Further Amended Counterclaim is a serious allegation that has not been properly particularised. Particulars must be provided for this allegation, however it does not necessitate paragraph 8(c) being struck out.
I do not accept 528 Main’s Specific Pleading Abuse Argument in respect of paragraph 8. Even if I am wrong in this regard, I would not strike it out on this ground on the basis set out at paragraph 107 above.
528 Main says that paragraph 8 should be struck out by reason of its argument regarding legal heresy and Hall v Busst. As set out earlier, I do not consider that this paragraph should be struck out on this basis.
Accordingly, paragraph 8 will not be struck out but proper particulars of paragraph 8(c) must be given, which can conveniently be included with the revised counterclaim consequent upon this ruling.
Paragraphs 9-12 of the Further Amended Counterclaim
I do not accept 528 Main’s complaints about paragraphs 9 to 12 of the Further Amended Counterclaim. Its complaints about paragraph 12 are similar to complaints it made about aspects of the FASOC, which aspects I rejected in the Strike Out Orders.
I do not accept 528 Main’s Specific Pleading Abuse Argument in respect of paragraphs 9 to 12. Even if I am wrong in this regard, I would not strike them out on this ground on the basis set out at paragraph 107 above.
Accordingly, paragraphs 9 to 12 of the Further Amended Counterclaim will not be struck out.
Paragraph 14 of the Further Amended Counterclaim
528 Main says that paragraph 14 should be struck out by reason of its argument regarding legal heresy and Hall v Busst. As set out earlier, I do not consider that this paragraph should be struck out on this basis.
528 Main complains that no particulars have been provided for this paragraph, particularly particulars of knowledge which must be given. I agree with this complaint.
Accordingly, paragraph 14 will not be struck out but proper particulars of each sub-paragraph must be given, which can conveniently be included with the revised counterclaim consequent upon this ruling.
Paragraph 15 of the Further Amended Counterclaim
528 Main complains that paragraph 15 does not allege a reasonably arguable case that it induced a breach of contract by MSC. In my view, this is a matter for 528 Main to deal with in a responsive defence to counterclaim.
In this paragraph, JBI alleges that by entering into the On-Sale Deed, 528 Main induced MSC to enter into the Described Confidential Acquisition Partnership, to cause breaches of the Lease, and in furtherance of such did knowingly interfere with the contractual relationship existing between JBI and MSC under the Lease without sufficient justification.
I accept 528 Main’s complaint that this paragraph does not make sense, as it relies on the entry into the On-Sale Deed (which was entered into on 22 December 2016) as the inducement for MSC to enter into the Described Confidential Acquisition Partnership (which was in August 2016). 528 Main asks how can entry into something in December 2016 have induced something in August 2016.
Accordingly, paragraph 15 of the Further Amended Counterclaim will be struck out with leave to re-plead, so as to address the matters referred to in paragraph 145 above.
Paragraph 16 of the Further Amended Counterclaim
Insofar as 528 Main contends that this paragraph is embarrassing by reason of its cross-references to paragraphs of the FASOC, my view here is the same as that expressed in paragraph 122 above.
I do not accept 528 Main’s complaint as to the wording of “MSC was in breach of the Lease and in default of clauses 46B and 4M of the Lease”, and as to the use of the word “including” in the third line.
I do not accept 528 Main’s complaint about the particulars to this paragraph.
As for the reliance on the Specific Pleading Abuse Argument in respect of paragraph 16, I will not strike it out for the reasons expressed in paragraph 107 above.
Accordingly, paragraph 16 of the Further Amended Counterclaim will not be struck out.
Paragraph 17 of the Further Amended Counterclaim
Paragraph 17 of the Further Amended Counterclaim alleges that by reason of the undisclosed breaches of the Lease (which are pleaded in paragraph 16) MSC failed to fulfil the conditions attached to the exercise of the option and had no right to exercise the Option to Purchase.
528 Main relies on the Specific Pleading Abuse Argument in respect of paragraph 17, however I will not strike it out for the reasons expressed in paragraph 107 above.
Paragraphs 19-25 of the Further Amended Counterclaim
528 Main groups its complaints regarding paragraphs 19 to 25 of the Further Amended Counterclaim together. It relies on the Specific Pleading Abuse Argument, however I will not strike them out for the reasons expressed in paragraph 107 above.
In paragraph 22 of the Further Amended Counterclaim, JBI alleges that by reason of the matters alleged in sub-paragraphs (a) to (e) of that paragraph, “MSC is now estopped in equity from seeking any performance of the Option to Purchase”.
528 Main complains that it is unclear whether JBI is alleging promissory estoppel or some other type of equitable estoppel, and that in any event, the necessary elements of any such claim are not set out, particularly detrimental reliance. I agree with this complaint: the elements of an estoppel claim need to be clearly pleaded.
Accordingly, paragraph 22 of the Further Amended Counterclaim will be struck out with leave to re-plead so as to deal with the matters referred to in paragraphs 155 and 156 above.
The prayer for relief against MSC
528 Main makes a number of complaints about the prayer for relief against MSC, most of which are similar to the complaints as to the pleading. I would not strike out the prayer for relief, however I accept the complaint about paragraph B of the prayer for relief, that it does not connect to any pleaded cause of action. This must be rectified.
Accordingly, paragraph B of the prayer for relief against MSC will be struck out with a right to re-plead so as to deal with the matter referred to in the previous paragraph.
The prayer for relief against 528 Main
Whether or not JBI can seek the relief it does against 528 Main or there is utility in seeking some/all of that relief is a matter for trial and not a basis for striking out this prayer for relief.
Conclusion
For the above reasons:
(a) the Application to set aside the Further Amended Counterclaim (and earlier iterations of it) for failure to comply with rr 10.02 and 10.03 of the Rules will be dismissed;
(b) the requirement for JBI to comply with rr 10.02 and 10.03 of the Rules in respect of its counterclaim (whichever iteration of it) will be dispensed with, pursuant to r 2.04 of the Rules;
(c) the application to stay or dismiss the Further Amended Counterclaim (and earlier iterations of it) pursuant to rr 23.01 will be dismissed; and
(d) the application to strike out the Further Amended Counterclaim pursuant to r 23.02 will be granted, in part, with leave to re-plead. The paragraphs to be struck out with leave to re-plead are paragraphs 3, 5, 7, 15 and 22 of the Further Amended Counterclaim, and paragraph B of the prayer for relief against MSC. In addition, JBI will need to include in its revised pleading the particulars that I have stated above are required.
The proceeding is listed for directions on 13 April 2023 before me. Amongst other things, at that time I intend to make orders to give effect to this ruling and as to costs. The parties should confer in that respect prior to the hearing.
SCHEDULE OF PARTIES
| S ECI 2018 01124 | |
| BETWEEN: | |
| RAYMOND JOHN STUART | Plaintiff |
| - v - | |
| MORDIALLOC SPORTING CLUB INC. (ARN A0027737R) | First Defendant |
| | |
| | |
| | |
| | |
| | |
| | |
| 528 MAIN STREET MORDIALLOC PTY LTD (AS TRUSTEE FOR THE 528 MAIN STREET MORDIALLOC UNIT TRUST) | Eighth Defendant |
| JOHN BARR INVESTMENTS PTY LTD (ACN 005 225 274) | Ninth Defendant |
| - and - | |
| JOHN BARR INVESTMENTS PTY LTD (ACN 005 225 274) | Plaintiff by Counterclaim |
| - v - | |
| MORDIALLOC SPORTING CLUB INC. (ARN A0027737R) | First Defendant by Counterclaim |
| 528 MAIN STREET MORDIALLOC PTY LTD (AS TRUSTEE FOR THE 528 MAIN STREET MORDIALLOC UNIT TRUST) | Second Defendant by Counterclaim |
| RAYMOND JOHN STUART | Third Defendant by Counterclaim |
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