Three Corner Group Pty Ltd v Mariacarmina La Rocca

[2024] NSWSC 1329

Supreme Court

New South Wales

Medium Neutral Citation:

Three Corner Group Pty Ltd v Mariacarmina La Rocca [2024] NSWSC 1329

Hearing dates:

11 October 2024

Date of orders:

11 October 2024

Decision date:

11 October 2024

Jurisdiction:

Equity - Applications List

Before:

Kunc J

Decision:

Defendants’ motions dismissed

Catchwords:

CIVIL PROCEDURE — Pleadings — Striking out — No reasonable cause of action or defence — No issue of principle

Legislation Cited:

Corporations Act 2001 (Cth) s 1335(1)

Uniform Civil Procedure Rules 2005 (NSW) r 42.21

Cases Cited:

Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69

Category:

Consequential orders

Parties:

Three Corner Group Pty Ltd (Plaintiff)
Mariacarmina La Rocca (First Defendant)
Matthew Eid (Second Defendant)

Representation:

Counsel:
J Parrish (Plaintiff)

Solicitors:
Aqua Law (Plaintiff)
Twyford Legal (Defendants)

File Number(s):

2024/00151318

EX TEMPORE JUDGMENT - REVISED

Summary

1. The plaintiff, Three Corner Group Pty Ltd, whose controlling mind is Mr P Sergi, sues the defendants Ms La Rocca and Mr Eid.  The pleadings are closed:  a statement of claim filed on 23 April 2024 and defences filed on 27 and 30 May 2024 respectively.  It is of some importance in the present application that those defences do no more than plead the general issue.  In breach of timetabling orders, Three Corner's evidence‑in‑chief, being an affidavit of Mr Sergi sworn on 1 October 2024, has finally been filed and served. 

2. By notices of motion filed on 3 September 2024, each of the defendants seeks to have the proceedings summarily dismissed under UCPR Part 13 r 13.4(1)(a) or (b). In the alternative, they seek security for costs of the proceedings. For the reasons which follow, each of the notices of motion will be dismissed.

3. Mr M Twyford, Solicitor, appeared for the defendants.  Mr J Parrish of Counsel appeared for Three Corner.  The Court has had the advantage of the parties' detailed written submissions, as developed in the course of argument this morning.

The allegations

4. The basic facts of the case may be shortly stated.  Three Corner obtained a $7.2 million loan facility from a private lender.  Three Corner alleges that Mr Eid was its agent for the purposes of arranging the loan.  Approximately $900,000 of the loan funds were paid into a bank account in the name of Ms La Rocca, who is in her 70’s and apparently of limited means.  She had no connection with Three Corner.  The money is no longer in the account.

5. Three Corner sues Mr Eid for breach of fiduciary duty, asserting that as its agent he wrongfully authorised the disbursement of part of the loan funds to Ms La Rocca.  Three Corner sues Ms La Rocca for money had and received, and for receipt of the funds knowing of Mr Eid's alleged breach of his fiduciary duties to Three Corner.

6. Before turning to the specific relief sought in the notices of motion, it is necessary to set out my overall conclusion that the case, both on the pleadings and the evidence such as it is, obviously raises triable issues of fact and law.  These include:

1. Mr Sergi says that he did not authorise the advance to Ms La Rocca.  A document apparently signed by Mr Sergi doing just that has recently been put into evidence by Mr Eid.  Mr Parrish's response on behalf of Three Corner is that the original document will be called for to ascertain its provenance and authenticity.  It may well be alleged to be a forgery.

2. In her sworn defence, Ms La Rocca denies receipt of the funds.  However, this position has moved in her submissions to acceptance that the funds were paid into a bank account in her name.  This begs more questions than it answers, and there has been no suggestion yet that there will be any amendment to her defence to advance some kind of positive answer by way of confession and avoidance.

3. Mr Eid will apparently contend that not only did Mr Sergi authorise the advance to Ms La Rocca, but that he (Mr Eid) has no personal liability, because at all times he was acting in his capacity as a director of Bricklane Advisors Pty Ltd, a company now in external administration.  To the extent he wishes to advance such a positive defence, I note that it is also not pleaded in his current defence.

The motions

7. Turning to the relief sought today by the defendants, Mr Twyford candidly submitted that he was seeking to meet the very high hurdle set out in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 that the Court would be satisfied that this is a case which cannot succeed.

8. His first attack was on the adequacy of the pleading of the case against Ms La Rocca for money had and received.  Putting it in general terms, the pleading asserts that the funds advanced to Ms La Rocca were moneys in which Three Corner had an interest, that she had received the money and that she had not given any consideration for it such that she could not in good conscience retain it, demand having been made by Three Corner for its return.

9. When I considered the pleading before the commencement of today's hearing, I was unable to detect any deficiency in the adequacy of its pleading of a claim in money had and received or what might today be termed restitution. The nub of Mr Twyford's submission, which he carefully developed during the course of his oral submissions, was that the pleading was deficient because it failed to plead how it was said that the money had been had and received by Ms La Rocca “to the use of Three Corner", noting that phrase was not used in the statement of claim.  His submission, as it ultimately came to be formulated, was that the cause of action, expressed in the traditional form of “money had and received for the use of the plaintiff” required Three Corner to plead, and then establish, that it was going to use the money.  I do not accept that submission.

10. The cause of action for money had and received, or for restitution, rests, as the High Court has said in cases such as David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379; [1992] HCA 48, (a case dealing with mistake) in the establishment of “a qualifying or vitiating factor such as mistake, duress or illegality” which gives rise to a prima facie obligation to make restitution, a defendant then being entitled to plead a defence which displaces that prima facie obligation. In this case, the qualifying or vitiating factor is that it is alleged that Ms La Rocca received the funds to which she was not entitled, for which she had not provided consideration and which in fact belong to Three Corner.

11. The full exposition of the history of the pleading “to the use of the plaintiff" would require more time than I have had over the luncheon adjournment to research. As is well known, the history of the cause of action goes back hundreds of years to the old action of indebitatus assumpsit, itself a development of the even older action of assumpsit.  Putting the matter shortly, it seems to me that the words "to the use of the plaintiff" is a vestige of an old form of pleading which, translated into the language of today, would mean no more or less than "to which the plaintiff was entitled", or "belonging to the plaintiff".

12. I am therefore unable to accept Mr Twyford's submission that the pleading is deficient.  In my respectful opinion, it pleads the material facts which, if established, would give rise to an entitlement in Three Corner to an order for repayment of the funds.

13. Insofar as the pleading against Mr Eid was concerned, Mr Twyford contended for the inadequacy of the particulars (comprising 11 subparagraphs) of facts said to support the allegation in paragraph 13 of the statement of claim that, "Mr Eid directed the lender or its representatives to make payment of the moneys advanced by way of the Second Advance [this including the moneys apparently received by Ms La Rocca] to the recipients of those moneys".  Mr Twyford submitted that the particulars could not support the fact it was said would be inferred from them.

14. I do not agree.  It seems to me at least properly arguable that if all those facts were established, the Court could infer that it was Mr Eid who had given the relevant direction. 

15. An important matter for present purposes is that the particulars also refer to the fact that Three Corner would provide further particulars following discovery.  As should be apparent from the brief description that I have given of the nature of the case (see [5] and [6] above), these proceedings are of a kind which will naturally require discovery because there may well be matters which are known only to the defendants that could only be exposed for the purposes of the litigation through the interlocutory processes of the Court.

16. For these reasons, I do not accept that the case against Mr Eid has been inadequately pleaded. 

17. Mr Twyford then widened his field of criticism to address the evidence such as it was.  He submitted that if a trial were to be had today and the only evidence was that of Mr Sergi, Three Corner would fail.  That, with respect, is not the correct test.  The pleadings disclose triable issues.  Mr Sergi has now put on his evidence, but among other things, it has been signalled through Three Corner’s pleading and its counsel that there will be further interlocutory processes invoked.

18. Unsurprisingly, when I asked Mr Twyford whether if the case proceeded to a hearing his clients intended to go into evidence, his response (at least as currently instructed) was that they would.  I accept Mr Parrish's submission that the present case is on all fours with the High Court’s warning that, "Ordinarily, a party should only be denied the opportunity to place his or her case before the Court in the ordinary way and after taking advantage of the usual interlocutory processes" such that a matter will only be dealt with summarily “where there is a high degree of certainty about the ultimate outcome of the proceeding if the proceedings were to go to trial in the ordinary way”: Agar v Hyde (2000) 201 CLR 552 at 575 – 576; [2000] HCA 41 (emphases added).

19. As I have sought to explain in the summary in [4] and [5] above, it is apparent from the pleadings and the evidence filed so far that there are triable questions to be determined.  This is plainly a case where interlocutory processes will be engaged to ascertain further facts that may be of assistance to either party.  Assuming Mr Sergi is required for cross‑examination and the other protagonists give evidence, there is likely to be intense cross‑examination as to credit. I am, with respect, quite unable to see how at this stage of the proceedings the Court could have the requisite high degree of confidence that Three Corner will fail as would warrant the summary termination of the proceedings. 

20. Before leaving this topic, I should note two other submissions that Mr Twyford made. 

21. First, he submitted that Three Corner was to be criticised for not putting on any evidence in answer to the present application setting out what further steps it proposed to take to advance the preparation of its case. In my respectful view, such evidence was not required.  As I have already noted, the statement of claim, in at least one critical respect, makes clear that discovery will be sought. 

22. Related to this criticism was a further submission to the effect that the Court could draw something in the nature of a Jones v Dunkel inference against Three Corner.  I have a real doubt whether the principle in Jones v Dunkel could have any application to an interlocutory application of the kind presently before the Court, save in relation to the evidence of a specific witness who it was to be expected Three Corner would have called on an issue immediately relevant to the interlocutory questions at hand.

23. Mr Twyford somewhat narrowed his submission by saying that he would have expected Three Corner to have indicated whether it was going to call two solicitors who were engaged in various ways in the drawdown of the funds.  One of them was a solicitor who apparently effected the PEXA transaction that transferred the funds.  The other was a solicitor who apparently acted for Three Corner in relation to the transaction.

24. As Mr Parrish submitted, there is a real question as to for whom the first solicitor was acting, and there is nothing on the present state of the evidence that would suggest that it would be more likely that Three Corner would call that solicitor rather than the defendants, or anyone at all.

25. Insofar as whether or not Three Corner calls the solicitor who was apparently acting for it in relation to the transaction, there are real limitations on the extent to which at trial Jones v Dunkel inferences can be drawn when a solicitor acting for a party is not called.  At this stage, I cannot foreclose the possibility, for example, that Three Corner may call that solicitor in reply, depending on the nature of the evidence and the defences that will apparently be advanced by the defendants, notwithstanding the opaque nature of their pleadings at the moment.  However that might turn out, I do not accept the submission that evidence should have been brought in response to the present application by Three Corner giving some indication as to who else, at this stage, Three Corner might call, whether by supplementary evidence in chief if leave is granted, or in reply.

26. Finally, I can deal with the security for costs application relatively briefly. I accept Mr Parrish's submission that the defendants have failed to prove facts which would engage the Court's jurisdiction to order security, whether under UCPR Part 42.21(1)(d) (“it appears to the court…that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so”) or s 1335(1) of the Corporations Act 2001 (Cth) (“…if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given”). 

27. Mr Twyford wrote to Three Corner's solicitor making assertions about Three Corner’s finances and demanding that Three Corners provide security for costs, but did not in that letter seek any information about Three Corner's financial position.  There was no response to the letter.  No notice to produce for that information was issued in support of the present motions. 

28. Mr Twyford could only point to two pieces of evidence in support of the application for security.

29. First, there was a “(Creditor)Watch Credit Report”, which described some aspects of Three Corner's affairs as "high risk".  Second, there was evidence that Three Corner had had receivers and managers appointed, who had retired in April of this year. 

30. Beyond those two facts, nothing more could be said.  Those two matters fall far short of evidence that would enliven the Court’s jurisdiction to order security for costs on either of the bases referred to in [26] above.

Conclusions

31. Each of the defendant’s motions will be dismissed. I will hear the parties as to costs and what orders the Court should make to progress the proceedings.

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Decision last updated: 22 October 2024