Teng v Clark
[2020] WASC 92
•18 MARCH 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: TENG -v- CLARK [2020] WASC 92
CORAM: KENNETH MARTIN J
HEARD: 26 FEBRUARY 2020
DELIVERED : 26 FEBRUARY 2020
PUBLISHED : 18 MARCH 2020
FILE NO/S: CIV 1378 of 2019
BETWEEN: TENG TENG
First Plaintiff
CHIN HUI BENEDICT CHIA
Second Plaintiff
AND
BRENDAN PAUL JAMES RICHARD CLARK
First Defendant
ADAM BRAND
Second Defendant
PORTIA SUBISISIWE THANJEKWAYO
Third Defendant
Catchwords:
Practice and procedure - Application for leave to amend writ, join a foreign defendant and serve a foreign defendant outside of jurisdiction - Consideration of threshold of O 10 of the Rules of the Supreme Court 1971 (WA)
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
| First Plaintiff | : | Mr P G McGowan & Mr T Houweling |
| Second Plaintiff | : | Mr P G McGowan & Mr T Houweling |
| First Defendant | : | Mr S Penglis SC |
| Second Defendant | : | Mr S Penglis SC |
| Third Defendant | : | Mr S Penglis SC |
Solicitors:
| First Plaintiff | : | Cornerstone Legal |
| Second Plaintiff | : | Cornerstone Legal |
| First Defendant | : | Bennett + Co |
| Second Defendant | : | Bennett + Co |
| Third Defendant | : | Bennett + Co |
Case(s) referred to in decision(s):
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2
Crawley Investments Pty Ltd v Elman [2014] WASC 233
Ooranya Pty Ltd v ISPT Pty Ltd [No 2] [2019] WASC 453
KENNETH MARTIN J:
(This judgment was delivered extemporaneously on 26 February 2020 and has been edited from the transcript.)
Introduction
I am dealing with the application for leave made by the plaintiffs filed on 4 February 2020 (the plaintiffs' application). By their application the plaintiffs primarily seek leave to amend their writ dated 1 March 2019 to discontinue proceedings against the current second and third defendants and to obtain leave to serve out of the jurisdiction and then add a Zambian corporation as a further defendant. The plaintiffs also seek further orders (including substituted service) to give effect to the change of defendants, should leave be granted.
There have been some missteps along the way preceding the plaintiffs' application. I will turn to this in some more detail later. However, it is sufficient to say at the moment that these missteps culminated in orders that I made by consent to correct the position on 24 January 2020.
In an attempt to regularise the position, the plaintiffs' application was filed. The plaintiffs' application was heard on 26 February 2020. At the conclusion of that hearing, I gave the parties my determination on the plaintiffs' application. I also indicated that I would augment those summary conclusions with more detailed reasons in due course. These are those reasons.
Materials before the court
I have before me the plaintiffs' proposed amended writ and substituted statement of claim (purported to be filed on 17 January 2020). I will refer to this document as the purported SOC. I also have the affidavit of the first plaintiff, Teng Teng, sworn on 17 January 2020; the plaintiffs' submissions in support of leave dated 4 February 2020, the affidavit of Bronwyn Maree Waugh sworn 4 February 2020 and the defendants' submissions in opposition to the plaintiffs' application dated 21 February 2020.
Before I proceed to discuss the plaintiffs' application in further detail, it is necessary to briefly outline the basis of the dispute giving rise to these proceedings.
Background
This proceeding concerns a dispute as to the existence and terms of a purported wholly oral agreement said to be formed between the plaintiffs and the first defendant at a dinner party in Dalkeith on 30 August 2018. By the terms of this purported agreement, the plaintiffs claim they are owed the issuance of 1500 shares (being 10% of the share capital) in the company Australian Mining Company Zambia Limited (AMCZ). This issuance was said to be promised to be procured by the first defendant, a director of AMCZ, in return for the plaintiffs providing financial support for expenses of AMCZ - to date being the advancement of $AUD64,000. The relief sought by the plaintiffs (under the existing pleading being the writ of summons indorsed with a statement of claim dated 1 March 2019) is specific performance of the 'shareholders agreement' - that is that the first, second and third defendants procure for the plaintiff the allotment of 1,500 shares in AMCZ.
AMCZ, a Zambian corporation, has a share capital of 15,000 and to date 10,000 shares have been issued. The current shareholders include the first to third defendants. The first defendant holds 150 shares, the second defendant holds 4,750 shares and the third defendant holds 5,100 shares.
The plaintiffs' application
On 17 January 2020 the purported statement of claim was filed an amended writ and the purported SOC were filed without leave effectively seeking to excise the current second and third defendants and unilaterally add AMCZ as a defendant.
The purported SOC effectively proceeded on the basis that the current second and third defendants were thereby removed and that the (in effect, new replacement) second defendant, was AMCZ. At par 3, the purported SOC explicitly stated that AMCZ is a company incorporated in accordance with the provisions of the Companies Act 2017 of Zambia and, as such, is a corporation capable of suing or being sued in its own name.
When the lawyers for the defendants raised objections of principle to those two documents, following conferral, the erroneous position was realised and was corrected under my orders of 24 January 2020, then made by consent. The consequence is that those two documents, namely, the amended writ and the purported SOC have been entirely countermanded. They effectively, as senior counsel for the first defendant put it, have the status of minutes only.
The position of the plaintiffs has been further sought to be regularised under the plaintiffs' present application. But the defendants oppose the present application as, in effect, equally misconceived.
The plaintiffs' position
By par 7 of the purported SOC, the plaintiffs seek to plead:
7.By an agreement made on or about 30 August 2018 at Dalkeith, the First Defendant on behalf of himself and [AMCZ] agreed with the First Plaintiff on behalf of herself and the Second Plaintiff that in return for the Plaintiffs providing financial support for expenses of [AMCZ], the First Defendant would procure the issuance to the Plaintiffs of shares equal to 10% of the share capital of [AMCZ] being 1500 shares. (Shareholding Agreement)
Particulars
7.1In the course of a meeting at the Plaintiffs' residence in Dalkeith, the First Defendant said that neither he nor [AMCZ] had sufficient resources to pay certain financial amounts for the preparation and completion of a JORC (Joint or Reserved Committee)
7.2He asked the First Plaintiff whether she, on behalf of herself and the Second Plaintiff was prepared to pay such expenses in return for a 10% interest in the company being 1500 shares. The First Plaintiff agreed.
The plaintiffs advance their application, at least the leave to amend their writ aspect, essentially on the basis that given how the contract between the parties is (sought to be) pleaded, there is not a sufficient cause of action raised as against the current second and third defendants. In those circumstances, the plaintiffs invoked O 23 r 2(3) of the Rules of the Supreme Court 1971 (WA) (RSC) seeking the leave of the court to discontinue the action against those two defendants. They also accept the adverse correlative cost implications of doing so as regards those defendants.
In relation to adding AMCZ as a replacement defendant, the plaintiffs argue that this Zambian corporation is an appropriate defendant (along with Mr Clark as the continuing first defendant) in all the circumstances and since relief must be sought from that corporation, this will involve joining AMCZ as a party, pursuant to RSC O 18 r 6(2)(b).
The plaintiffs also accept that should leave be granted to join AMCZ as a defendant, they will require leave to serve that company outside of the jurisdiction, in accord with RSC O 5 r 9 and O 10 r 1A(2). If granted leave, the plaintiffs intend to serve AMCZ in accordance with O 10 r 9 - 11, unless the court is persuaded to make an order for substituted service upon the current defendants' lawyers of record (which, I can indicate now, it is not).
The current defendants' position
The current defendants do not oppose the plaintiffs' discontinuance application, as far as a grant of leave to discontinue against the current second and third defendants is asked for. The defendants only seek that the departing current second and third defendants' costs be paid and that leave be conditional on the plaintiffs undertaking to the court that she will not commence further proceedings against the second and third defendants without first obtaining the leave of the court.
However, the defendants strongly oppose leave to join AMCZ to the proceedings as a defendant. Essentially, it is contended that the cause of action seen as sought to be pleaded under the amended writ and purported SOC as against AMCZ fails to disclose any reasonably arguable cause of action whatsoever against AMCZ. Leave in that respect should be refused as the claim is said to be, in effect, hopeless.
Further, the defendants submit that a joinder of AMCZ does not meet the 'necessary' rquirements of RSC O 18 r 6. To that end, the defendants rely on Ooranya Pty Ltd v ISPT Pty Ltd [No 2] [2019] WASC 453.
Senior counsel for the defendants also observed in oral submissions that even if the plaintiffs were successful in obtaining leave to discontinue and then to join AMCZ, there was still a question over whether the plaintiffs should be given leave to proceed by substituted service.
Leave to serve out of the jurisdiction
Before I turn to a consideration of the plaintiffs' application, I should first make some observations about the legal principles underlying a grant of leave to serve outside the jurisdiction of Western Australia under RSC O 10.
When an application is made for leave to serve out of the jurisdiction an entity that does not have a local presence, or which resides outside the jurisdiction, in order for the court to take personal jurisdiction over that person leave to serve them outside Western Australia is first required. Some well established legal principles apply.
RSC O 10 lists the available categories of 'long‑arm' jurisdiction, or 'pigeonholes', as the Court of Appeal recently referred to them in Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2. In reference to the principles concerning the grant of leave to issue a writ and serve it out of Australia, see in particular [12] - [22] of those reasons.
In the course of those observations, the Court of Appeal refers, with approval, to a decision of Edelman J in Crawley Investments Pty Ltd v Elman [2014] WASC 233, in particular to his Honour's observations at [45(2)]. In turn, I would also respectfully refer to Edelman J's observations at [45].
In Bombardier v Avwest at [15], the Court of Appeal was dealing with reliance upon O 10 r 1(e), in relation to actions concerning contracts perfected within the State of Western Australia or in respect of which relief was sought to:
enforce, rescind, dissolve, annul, or otherwise affect a contract, or to recover damages or obtain other relief
by reference to such a contract on the basis that it is made within the jurisdiction under subrule (i).
In the present case, the same RSC O 10 r 1(e) category of long‑arm jurisdiction is invoked by the plaintiffs. But the plaintiffs also argue the Zambian corporation, AMCZ, is a proper party, in accordance with O 10 r 1(1)(h) of the long-arm categories.
The test for obtaining leave under RSC O 10 is well known and understood. It was encapsulated by Edelman J in Crawley v Elman at [45]. First, the person to be served needs to meet, arguably, one of the heads of the long-arm jurisdictional categories of the common law. But then the applicant for leave must also demonstrate that the court should exercise its discretion and grant leave to serve out of the jurisdiction upon the foreign defendant. A good arguable case must be shown for leave. Edelman J identified the onus by reference to a decision of the High Court in Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552, 576 at [60], where Gaudron, McHugh, Gummow and Hayne JJ said:
[T]he same test should be applied in deciding whether originating process served outside Australia makes claims which have such poor prospects of success that the proceeding should not go to trial as is applied in an application for summary judgment by a defendant served locally.
That test was applied in Crawley v Elman and subsequently was endorsed by the Court of Appeal in Bombardier v Avwest.
Should the court exercise its RSC O 10 discretion to grant leave to serve AMCZ out of the jurisdiction?
As regards the substantive issue concerning whether leave should be granted to the plaintiffs' application, a number of difficulties were canvassed at the hearing before me. One such issue was the asserted weakness of the cause of action sought to be relied upon in contract as against AMCZ, under the purported SOC. To date this action has proceeded on the basis of a somewhat different alleged oral contract, contended to be made only with the existing defendants, in particular with the first defendant (seen under the current writ and statement of claim).
As I envisage the basis upon which leave is now sought by reference to the purported SOC, the contention would make AMCZ the second defendant to the existing action against the first defendant - on the basis that both the first defendant and AMCZ were the parties to a wholly oral agreement made with the first plaintiff at her home at Dalkeith on 10 August 2018 and in terms seen pleaded under par 7 of the purported SOC.
Uncertainty
As particularised under 7.1 and 7.2 of the purported SOC, there are a number of conceptual difficulties with the plaintiffs' formulation of an agreement in terms of how it is that AMCZ incurs any contractual obligation to the plaintiff. Not the least of those difficulties is the one that I raised with counsel for the plaintiffs in terms of the financial commitment, on its face, appearing to be an open ended as to the quantum of promised financial assistance, as phrased by the plea:
That in return for the plaintiffs providing financial support for expenses of the second defendant, the first defendant would procure the issuance to the plaintiffs of shares equal to 10 per cent of the share capital of the second defendant, being 1500 shares.
The plaintiffs' application is supported by an affidavit of the first plaintiff. As formulated by that affidavit at pars 13 and 14 the first plaintiff deposes to these circumstances as to the making of the alleged 'agreement':
13.On 30 August 2018, the First Defendant was having dinner at my house in Dalkeith, Western Australian when he informed me that he was experiencing financial difficulty both personally and in relation to his business endeavours including AMCZ.
14.During the discussion between myself and the First Defendant on 30 August 2018, the First Defendant confirmed he would transfer to me a 10% share in AMCZ, which owned TD52, in return for my financial support in the company AMCZ. He also told me that AMCZ was in the process of negotiating the sale of TD52. I accepted the [First] Defendant's offer and proceeded to provide him with financial support.
That formulation is somewhat different to that as particularised in 7.1 and 7.2, in reference to the agreement, being an agreement perfected then, primarily with the first defendant.
In my view, there is manifest uncertainty to an unacceptable level in relation to how it is that AMCZ itself incurs any issuance commitment for 10% of its shares. There is as well the unacceptable uncertainty in regard to the level of the financial assistance promise said to be made by the plaintiff in order to create a binding and certain verbal agreement of a kind, which is 'for my financial support in the company'.
There are also some conflicting references in the particulars to the difficulties being encountered with funding the valuation of a Zambian asset at a sophisticated level, referred to as a JORC, with being financial difficulties experienced personally by the first defendant and in relation to his business endeavours.
I mention all that on the basis that leave under RSC O 10 is sought out on the basis of a wholly oral contract made at Dalkeith and made then with not only the first defendant, but also with AMCZ, on 30 August 2018. So formulated, that agreement claim seems to be highly vulnerable to a summary dismissal on the basis not only because of the uncertainty as regards to provider of the promised 10% shareholding but also, in particular, as to the unstated and open ended level of the financial assistance which is said to have been promised by the plaintiff. This is not a contract partly oral and partly by conduct, or completed by subsequent conduct in regard to an advancing of certain amounts of money.
Seen formulated by par 7 of the purported SOC, the wholly oral contract was fully completed on 30 August 2018 and then with both the first defendant and with AMCZ. This is inconsistent with how it is expressed at pars 13 and 14 by the first plaintiff in her affidavit, on the basis of a full completion at that time in regard to 'financial support' for the expenses of AMCZ.
Under that affidavit, the alleged agreement is unquantified in terms of the level of future financial support. The fact that subsequent moneys as a matter of evidence were advanced does not assist in terms of providing certainty over what the contractual commitment exactly was by the plaintiff at 30 August 2018. I emphasise those points because, by reference to the discretionary aspects of the present evaluation I am to make, as regards the punitive defendant Zambian corporation, the case needs to be respectably formulated on a basis it would survive a summary dismissal challenge.
As currently formulated, and with all due respect to the plaintiff, I do not see the proposed pleading surviving any such challenge vis-à-vis AMCZ's as the second defendant. Even evaluated at its highest by reference to a perfected wholly oral contract of 30 August 2018 at Dalkeith, the plea is simply too weak and would not, I assess, survive a summary (dismissed) judgment application in due course, were such application brought.
Leave to serve a foreign defendant outside of the jurisdiction
Some subsidiary points were made in argument over seeking leave to effect a substituted service upon the current defendants' lawyers of record, who are relatively fresh to the proceedings. But I do not think that any granting of leave is at all appropriate. On that basis, service becomes irrelevant. This is in circumstances where the long-arm jurisdiction of this court is predicated upon the jurisdictional categories, by reference to a contract. The effecting of service out of the jurisdiction must respect the sovereignty of other countries and the comity which exists between nations and the mutual respect for each other's judicial systems. This is part of the underlying rationale for 150 years of law, the antecedent cases presents for the equivalent English rule.
Is AMCZ a 'necessary' party?
I have not touched yet upon the question of necessary party. I should say in passing that, again, by reference to the summary dismissal criteria, I would not assess that AMCZ, even if it was a jurisdictionally amenable company in Western Australia, would meet RSC O 18 r 6 in terms of it, at this time, being a 'necessary' party for the purpose of leave to join it in an action against the existing first defendant, Mr Clark.
I recently canvassed the RSC O 18 r 6 law in this area in Ooranya. There is no need to re-traverse all that law. The bottom line is that 'necessary' does not mean convenient. 'Necessary' does not mean whatever might be convenient when proceedings are issued afresh. Where there are proceedings on foot in the jurisdiction and a plaintiff seeks to add a defendant, by making them an extra party, the necessary threshold means just that. Here, I do not assess it as surmounted on the material before me, for the reasons effectively canvassed in any discussion with counsel today. That position is reached, effectively, evaluating the case for the plaintiffs at its highest.
I also factor into the overall considerations, where leave is discretionary, that the amount of money at issue seen by reference to par 10 of the purported SOC looks to me to be in the region of about $64,000. I acknowledge that the plaintiffs' contention is that that outlay generates a 10% shareholding commitment in AMCZ, which is said to own a valuable asset in Zambia that might be worth more than $64,000. However, on the face of things, from an economic perspective, the economics of the present litigation look somewhat underwhelming. That is another consideration I will weigh as an exercise of discretion.
I also weigh the fact that it was permissible for the plaintiff to apply for leave to serve out as against the putative company, AMCZ, as a defendant in a fresh action in its own right. Assuming it could show a good arguable cause of action based on an RSC O 10 category of long‑arm jurisdiction, it could proceed then to effect service, once leave was obtained. Then if it serves and can hold AMCZ to this jurisdiction, the plaintiffs could apply, if it is still appropriate, to consolidate, or have the separate actions heard together.
Conclusion and orders
At the end, I am not minded to grant leave to amend and to serve out upon AMCZ, under the plaintiffs' application. Counsel for the plaintiffs, Mr McGowan, made plain the orders sought were a package deal. So the leave to discontinue would not be pressed for. Hence, I will not grant leave in terms of discontinuance. I will also not grant any other relief sought. The application is wholly refused.
By reference to the outcome of the plaintiffs' application, which I have identified, I will issue the following orders:
1.The application is refused.
2.The plaintiffs are to pay the defendants' costs of the application, to be taxed if not agreed.
3.The plaintiffs are to pay the defendants' costs of the memorandum of consent orders of 23 January 2020.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DW
Associate to the Honourable Justice Martin19 MARCH 2020
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