Towercom Pty Ltd v Fahour (No 3)
[2013] VSC 529
•2 October 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
SCI 2011 02146
| TOWERCOM PTY LTD (ACN 074 312 922) | Plaintiff |
| and | |
| MOUSTAFA FAHOUR | First Defendant |
| and | |
| FAHOH PTY LTD (ACN 139 527 709) | Second Defendant |
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JUDGE: | DERHAM AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 April 2013 | |
DATE OF JUDGMENT: | 2 October 2013 | |
CASE MAY BE CITED AS: | Towercom Pty Ltd v Fahour (No 3) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 529 | |
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PRACTICE AND PROCEDURE – Application for summary judgment pursuant to s 62 of the Civil Procedure Act 2010 – Whether real question to be tried – Whether discretion under s 64 Civil Procedure Act 2010 should be exercised – Serious questions to be tried – Summary judgment refused.
EQUITY – Fiduciary duty – Breach of by first defendant – Barnes v Addy – Knowing assistance – Liability for – No benefit to fiduciary – Whether lack of benefit a bar to the claim for breach giving rise to detriment – Whether question to be tried as to benefit to fiduciary – Whether knowing assistance by second defendant open on the pleaded facts.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr Jonathan Evans | Pryles & Co |
| For the Second Defendant | Mr Simon Pitt | Mills Oakley Lawyers |
HIS HONOUR:
Introduction
The second defendant (“Fahoh”) applies by amended summons filed on 26 March 2013 that summary judgment be entered for it either under rule 23.03 of the Supreme Court (General Civil Procedure) Rules 2005 (the “Rules”), on the basis that Fahoh has a good defence to the claims of the plaintiff (“Towercom”) on the merits, or under s 62 of the Civil Procedure Act 2010 on the basis that Towercom’s claim against it has no real prospect of success.
The application was supported by the affidavits of Eng Ching Goh (“Ms Goh”) and Jimmy Lai Huat Goh (“Mr Goh”) both sworn on 8 March 2013. The plaintiff relies on the affidavit of Peter Pryles sworn 22 March 2013, together with an “exhibit book” of about 150 pages. The exhibit book comprises, mainly, discovered documents in the proceeding. The second defendant does not dispute the documents exhibited to Mr Pryles’ affidavit.
Summary of Conclusions
In this application Fahoh attacks Towercom’s Barnes v Addy[1] claim that Fahoh knowingly assisted the first defendant (“Mr Fahour”) in his ‘fraudulent and dishonest design’ in breach of fiduciary duty of inducing Towercom to sell a shop at 74–78 Sydney Road, Brunswick, Victoria to Fahoh at an undervalue.
[1](1874) LR 9 Ch App 244.
This claim has more than a fanciful prospect of success. The particular circumstances of the dealings between Mr Fahour and Mr Goh in the lead up to, and the aftermath of, the entry into the contract raise questions for trial that cannot be summarily determined in reliance on the existing material, and there are too many facts and circumstances in this case that are unclear and need to be clarified before any firm conclusion can be reached as to the viability of the Barnes v Addy[2] claim against Fahoh.
[2](1874) LR 9 Ch App 244.
Background
The proceedings were issued by Towercom against the first defendant (“Mr Fahour”) on 6 May 2011. The claim at the outset was confined to a claim against Mr Fahour for breach of a tortious duty of care in acting and advising Towercom as its agent, and breach of duty as a fiduciary.
The statement of claim underwent several amendments before Fahoh was joined as a party, pursuant to leave, by an amended writ and further amended statement of claim (“FASOC”) filed 19 October 2012. The leave to join Fahoh, on the basis of the claims now in the FASOC, was not opposed by Mr Fahour.[3] Fahoh filed its defence to the FASOC on 12 December 2012. Then followed a request for further and better particulars (15 January 2013) and the provision of those particulars (1 February 2013).
[3]Affidavit of Peter Pryles sworn 22 March 2013 at [6].
Seven versions of the statement of claim have previously been filed. Certain parts of Towercom’s pleadings have been struck out, and causes of action have been abandoned. An application to join Ayse Ilhan, Towercom’s director, as a party was refused by Lansdowne AsJ. There have been a number of subpoenas issued on behalf of Towercom to persons associated with the transaction, including Fahoh, and its solicitors, before the application to join Fahoh was made.
The Claims
It is necessary to understand the claim made against Mr Fahour before considering the claim against Fahoh. That is because the essential basis of the claims against Fahoh is knowing assistance, or participation, in the breach of fiduciary duty alleged against Mr Fahour.
The FASOC alleges that Towercom is the trustee of the Ilhan Property Trust and in that capacity was the registered proprietor of a commercial shop at 74–78 Sydney Road, Brunswick, Victoria, being the land more particularly described in Certificate of Title Volume 10358 Folio 275 (“the Brunswick shop”). Although it is not distinctly pleaded, it is clear that Ayse Ilhan is the director and controller of Towercom and is the sister of the late John Ilhan, who was the driving force behind Crazy John’s stores.
Mr Fahour, it is alleged, has been an investment advisor, having been a senior investment advisor employed at various times between 2008 and 2009 by the National Australia Bank Ltd and Macquarie Private Bank, and by Patricia Ilhan, the wife of the late John Ilhan.
By contracts of sale dated 18 September 2009 and 28 October 2009, respectively, Towercom agreed to sell the Brunswick shop to Fahoh, as trustee of the 74 Sydney Road Unit Trust (“the Sydney Road Trust”) for the sum of $1 million.
It is alleged that before entering into the contract of sale Mr Fahoh undertook to act in the interests of Towercom in –
(a)providing investment advice about the investment of entitlements under the Ilhan Superannuation Fund, including the interest in the Brunswick shop; and
(b)introducing a buyer and negotiating a sale price for the Brunswick shop.
It is unclear from the pleading how the Ilhan Superannuation Fund fits into the picture. But earlier proposed pleadings and an earlier judgment of Lansdowne AsJ given on 23 March 2012,[4] reveal that it was that superannuation fund that owned all the units in the Ilhan Property Trust.
[4]Towercom Pry Ltd v Fahour (No 2), unreported, 23 March 2012.
It is alleged that Towercom had trust and confidence in Mr Fahoh with respect to both the investment advice and the negotiation of the sale price for the Brunswick shop.
Extensive particulars of these allegations are given. The essential elements of those particulars is as follows:
(a)in about July 2009 Mr Fahour telephoned Ayse Ilhan enquiring as to how Ayse Ilhan and her parents were to invest money from the Ilhan Superannuation Fund, and offered to help. He arranged a meeting. At the meeting, amongst other things, Mr Fahour offered to assist Ayse Ilhan along with Ali and Nezaket Ilhan, Ayse Ilhan’s parents and the parents of the late John Ilhan, with how to invest money from the superannuation fund;
(b)in about August 2009 at another meeting Mr Fahour advised Ayse Ilhan to sell one of the shops owned by Towercom;
(c)in a telephone conversation between Mr Fahour and Ayse Ilhan in late August 2009 Mr Fahour offered to speak with clients of his bank who were “into property” about what the Brunswick shop would bring;
(d)in September 2009 Mr Fahour telephoned Ayse Ilhan on a number of occasions about prospective buyers of the Brunswick shop and proffered indicative offers starting at $780,000 and ending finally at $1 million. Mr Fahour advised Ayse Ilhan that the $1 million was the best price that could be obtained;
(e)on 18 September 2009 Mr Fahour “arrived” at Ayse Ilhan’s home and, at the door, asked Ayse Ilhan to sign a one page written contract which was already signed by the purchaser.
There are further facts alleged from which implications are drawn. These are:
(a)that Mr Fahour had been a close friend of John Ilhan, Ayse Ilhan’s brother;
(b)Mr Fahour was a senior investment advisor who had been employed by the National Australia Bank Limited and by Macquarie Bank Limited;
(c)Mr Fahour had been providing business and financial advice to Patricia Ilhan, the widow of John Ilhan.
These facts are alleged to give rise to a relationship of trust and confidence between Towercom and Mr Fahour. This relationship gives rise to fiduciary duties owed by Mr Fahour to Towercom to act in good faith and in the interests of Towercom, and not to allow his interests to conflict with the interests of Towercom in giving investment advice and in conducting the negotiations for the sale of the Brunswick shop.
It is alleged that he breached these duties because, in short, he advised Towercom to sell the Brunswick shop for $1 million, a gross undervalue. The true value is alleged to be between $1.25 million and $1.85 million. One particular of the breach of fiduciary duty is that at the time of the entry into the contract of sale, on 18 September 2009, the shares in Fahoh were 50% owned by Mr Fahour and 50% owned by Mr Goh, who was a close friend of Mr Fahour, and that Fahoh became the trustee of the Trust on 18 September 2009, the day of the incorporation of Fahoh and the day of the signing of the contract at the door of Ayse Ilhan’s home. It is further particularised that it was the intention of Mr Fahour and Mr Goh that Fuli One Investments Pty Ltd (“Fuli”), a company of which Mr Fahour was the sole shareholder, would become the holder of 50% of the units in the Sydney Road Trust.
As a result of the alleged breaches of fiduciary duty by Mr Fahour, Towercom has suffered damage, in that it received a sale price of between $525,000 and $850,000 less than the market value of the property.
There are then claims made against Mr Fahour based upon contraventions of the Fair Trading Act1999 and breach of a tortious duty of care, each essentially based upon the same facts.
The pleaded allegations then raise a claim against Fahoh, as follows:
7AFurther to paragraphs 5 to 7 above, on or about 16 September 2009, the first defendant and Jimmy Goh agreed that:
(1)Jimmy Goh would cause the incorporation of Fahoh, with himself and the first defendant as equal shareholders, to purchase the Brunswick shop from the plaintiff for the sum of $1,000,000;
(2)Jimmy Goh would cause the creation of the 74 Sydney Road Unit Trust, with the units in that trust to be held 50% by the first defendant or his nominee, and 50% by Jimmy Goh and (sic) his nominee;
(3)Jimmy Goh would cause Fahoh to become the trustee of the 74 Sydney Road Unit Trust, and to purchase the Brunswick shop as trustee;
(4)the first defendant would obtain Towercom’s execution of the contract of sale for the Brunswick shop, on behalf of Fahoh, once it was incorporated, and cause Fahoh to pay a deposit of $10,000;
(5)the first defendant or his nominee would contribute 50% of the purchase price for the Brunswick shop, and Jimmy Goh or his nominee would contribute 50% of the purchase price for the Brunswick shop.
7BOn 16 September 2009, the first defendant recommended to the plaintiff that it sell the Brunswick shop for $1 million.
7CFurther, pursuant to the agreement set out in paragraph 7A above, on or about 18 September 2009:
(1)Jimmy Goh caused the incorporation of Fahoh, with himself and the first defendant as equal shareholders;
(2)Jimmy Goh caused the creation of the 74 Sydney Road Unit Trust, and the issue of one unit in that trust to Fuli 1 Investments Pty Ltd, a company of which the first defendant was sole shareholder, and one unit to Beeside Pty Ltd, a company of which Jimmy Goh was sole shareholder;
(3)Jimmy Goh caused Fahoh to become the trustee of the 74 Sydney Road Unit Trust.
7DFurther, pursuant to the agreement set out in paragraph 7A above, on or about 18 September 2009, the first defendant obtained Towercom’s execution of the contract of sale for the Brunswick shop, and caused the payment of the deposit of $10,000 on behalf of Fahoh.
7EThe first defendant intentionally concealed from the plaintiff, at all times between the making of the agreement referred to in paragraph 7A and the settlement of the contract of sale for the Brunswick shop on or about 30 October 2009, that he was intending that Fuli I Investments Pty Ltd, a company of which the first defendant was the sole shareholder, would become the holder of 50% of the units in the 74 Sydney Road Unit Trust, and thus obtain a 50% beneficial interest in the Brunswick shop on settlement of the contract of sale of the Brunswick shop.
7FFurther, pursuant to the agreement set out in paragraph 7A above, on or about 26 October 2009, Fahoh executed a further contract of sale for the Brunswick shop which was executed by the plaintiff on or about 28 October 2009.
7GFurther, pursuant to the agreement set out in paragraph 7A above, on or about 30 October 2009, the first defendant caused the payment of $490,000, on behalf of Fahoh, towards the settlement of the contract of sale for the Brunswick shop.
7HThe doing of the matters referred to in paragraphs 7A, 7B, 7D, 7E and 7G above constituted a dishonest and fraudulent design on the part of the first defendant, in breach of his fiduciary duties with respect to which Fahoh had either actual knowledge or knowledge of the circumstances which would indicate the facts to an honest and reasonable person, and in which Fahoh participated.
Towercom seeks relief in the nature of equitable compensation against Fahoh. Although no amount is specified, it is clear from the alleged undervalue that the damages start at about $525,000.
Fahoh’s Evidence
Fahoh was incorporated for the purposes of purchasing the property the subject of the dispute, the Brunswick shop. Mr Fahour and Mr Goh were the initial shareholders and their respective companies were initially the sole unit holders in the trust of which Fahoh was trustee.[5] I infer that the name ‘Fahoh’ is an amalgam of Fahour and Goh
[5]See Exhibit ECG-2 to the affidavit of Ms Goh.
The evidence of Mr Goh is that Mr Fahour was initially interested in participating in the purchase of the Brunswick shop because Mr Fahour wished to lease it to a proposed Islamic museum (“the Islamic museum proposal”). No evidence is given by Mr Fahour in support of the application. In so far as the summary judgment application depends on his conduct or intention, the affidavits rely on information and belief – particularly of Mr Goh. At the time of the sale by Towercom of the Brunswick shop, it was leased as a Crazy John’s store. That lease was about to expire. Mr Goh says[6] that he wished to ensure that the Brunswick shop was, and continued to be, leased.
[6]Paragraph 13 of Mr Goh’s affidavit.
Mr Goh swears that on about 29 October 2009 Mr Fahour telephoned him and told him that the Islamic museum was not interested in leasing the Brunswick shop because they thought the space was not big enough for their purposes. Mr Fahour told Mr Goh that because the Islamic museum had pulled out, he was not interested in purchasing a 50% interest in the Brunswick shop. But Mr Goh did not have enough time to find the finance for the other 50% of the purchase price. For this reason he asked Mr Fahour, and Mr Fahour agreed, to contribute $490,000 towards the purchase price on the basis that Fahoh would reimburse him. Mr Fahour had already paid a deposit of $10,000 at the time Ahse Ilhan signed the contract on 18 September 2009, so his contribution was thereby increased to $500,000.
Pursuant to this arrangement, on 29 October 2009, Mr Fahour paid $490,000 towards the purchase of the Brunswick shop, but Mr Fahour’s company, Fuli, transferred its unit in the trust to Ms Goh, Mr Goh’s ex-wife, for $1. Also on 29 October 2009, the second pleaded contract was entered into. It specified the settlement date as the next day, 30 October 2009. It should be noted that the first contract was a one page contract with no detailed terms and conditions, whilst the second contract was in the form prescribed by the regulations made under the Estate Agents Act 1980.
On 30 October 2009, the purchase of the Brunswick shop by Fahoh was completed. By that time, Ms Goh held all of the units in the trust of which Fahoh is the trustee. On 15 December 2009, Mr Fahour transferred his one share in Fahoh to Mr Goh.[7]
[7]Affidavit of Mr Goh at [25].
On 18 January 2010, Fahoh repaid Mr Fahour the money advanced for the purposes of completing the purchase of the Brunswick shop.
Fahoh’s Submissions
Fahoh submitted that these facts showed that at the time of the settlement of the purchase of the Brunswick shop on 30 October 2009, Mr Fahour had no interest in the trust of which Fahoh was trustee. It was also submitted that:
(a)there is no evidence that Mr Fahour obtained any benefit from the purchase of the Brunswick shop by Fahoh;
(b)whatever opportunity Mr Fahour saw in the purchase of the Brunswick shop evaporated on 29 October 2009 when he pulled out of the purchase;
(c)the contribution of $500,000 made by Mr Fahour to the purchase by Fahoh of the Brunswick shop is explained in Mr Goh’s affidavit and that this evidence is unchallenged;
(d)the plaintiff relies, in making its claims, on inferences, speculation and conjecture, particularly in relation to the claim against Fahoh. This is because Towercom’s case against Fahoh is predicated upon there being some beneficial interest received by Mr Fahour in consequence of the purchase of the Brunswick shop: see paragraphs 7E and 7H of the FASOC (above at paragraph 21).
Fahoh submitted that an assumption has to be made in reading the FASOC that the benefit alleged to have been received by Mr Fahour flows from him having purchased a shop at less than market value. But because the facts clearly demonstrate that there has been no benefit received by Mr Fahour, there can be no basis for Towercom’s claim against Fahoh.
Fahoh submitted that the lack of basis for Towercom’s claim against Fahoh is also demonstrated by reading the affidavit of Peter Pryles, sworn in opposition to the application. The affidavit appears to blame inadequate discovery by Fahoh and the failure of Towercom to interrogate Fahoh as being reasons why a summary judgment ought not to be given. But –
(a)no attempt has been made to address the factual matters set out in the affidavit of Mr Goh and Ms Goh; and
(b)Ayse Ilhan has not sworn an affidavit deposing to the factual matters alleged in the FASOC, or addressing any of the matters alleged in the defences of Mr Fahour and Fahoh.
Fahoh submitted that the equitable compensation claimed is not available to Towercom, for the following reasons:
(a)Towercom accepted the sale price for the Brunswick shop of $1 million. There is no allegation in the FASOC, nor is there any evidence, that Ayse Ilhan, on behalf of Towercom, felt that she had no choice but to accept the offer. On the contrary, she appears to have readily accepted it on the day, or the day after, it was made.[8] She made no counter offer;
(b)There is no evidence, and no indication of any claim or allegation, that Ayse Ilhan, on behalf of Towercom, would have acted any differently if she had known that Mr Fahour was a director of the purchaser. There is no evidence from Ayse Ilhan as to this aspect of the matter and, even after seven versions of the statement of claim, no allegation to that effect;
(b)It was Mr Goh who made the offer of $1 million that was accepted by Towercom.[9] The purchase of the Brunswick shop by Mr Goh, through Fahoh, was not conditional upon Mr Fahour participating in the purchase. This, it was submitted, can be readily inferred by the fact that Mr Goh went ahead and purchased the Brunswick shop in the name of Fahoh with Mr Fahour’s participation.[10] Fahoh has repaid Mr Fahour the $500,000 which he contributed to the purchase of the property. Mr Fahour only contributed that sum because Mr Goh was away at the time the payment of the deposit of $10,000 was required and Mr Goh was unable to find the other $490,000 in one day between Mr Fahour pulling out of the deal and settlement taking place;
(c)Fahoh is now owned by Ms Goh, who is also the owner of the units in the Trust of which Fahoh is the trustee. She became the owner of the units in the Trust the day before the settlement occurred (29 October 2009). Therefore, at the time of the purchase, the only beneficial interest was that of Ms Goh. No beneficial interest flowed to Mr Fahour;
(d)Derivative liability requires proof of primary wrongdoing. This is a strict requirement. The Full Court of the Federal Court in News Ltd v Australian Rugby Football League Ltd[11] held that News Limited was not under any liability for “knowingly and dishonestly” inducing clubs to breach their fiduciary duties to the League because the pleaded fiduciary duties were found not to exist.[12]
[8]Towercom’s discovered document number 45.
[9]Affidavit of Mr Goh, paragraphs 9-10.
[10]Affidavit of Mr Goh, paragraph 21.
[11](1996) 139 ALR 193, 327-8.
[12]See also Glover, J, Equity, Restitution and Fraud (2004) para [8.6], p 455.
There is nothing, Fahoh submitted, against which equity should or would grant relief to Towercom against Fahoh in the present case.
In his affidavit in support of the application to join Fahoh as a defendant in the proceeding, Mr Pryles deposed:[13]
[13]In his affidavit of 19 September 2012, paragraphs 6 and 7.
(a) that the essential basis of the claim against Fahoh was Fahoh’s knowing participation in the breach of fiduciary duty committed by Mr Fahour;
(b) Mr Fahour’s discovered documents, and documents subpoenaed, show that each of the matters alleged in paragraphs 7C to 7E of the FASOC in fact occurred. From the fact that Mr Fahour -
(i)paid half of the purchase price for the Brunswick shop (including the initial $10,000 deposit); and
(ii)procured the execution of the contract by Towercom as vendor,
it is reasonable to infer that he and Mr Goh agreed, on about 16 September 2009, that Fahoh would be incorporated as a joint venture vehicle between Mr Fahour and Mr Goh to purchase the Brunswick shop, and that Fahoh, by virtue of Mr Fahour’s -
(iii)involvement in the creation of Fahoh and the establishment of the Trust; and
(iv)involvement in procuring the contract to buy the Brunswick shop at a time when he was taking or intending to take a half interest in the Trust (through Fuli 1)
Fahoh was a knowing participant in Mr Fahour’s breach of fiduciary duty and therefore liable to Towercom under the second limb in Barnes v Addy.[14]
[14](1874) LR 9 Ch App 244.
Fahoh submitted that a claim under the second limb in Barnes v Addy would involve showing that Fahoh knowingly provided assistance to a person to enable that person to commit a breach of fiduciary duty. In Barnes v Addy, Lord Selborne LC said:[15]
Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.
[15](1874) LR 9 Ch App 244, 251-252.
In Farah Constructions Pty Ltd v Say Dee Pty Ltd,[16] the High Court, after reviewing the authorities in relation to the requirement of knowledge in the second limb of Barnes v Addy, concluded:
The result is that Consul[17] supports the proposition that circumstances falling within any of the first four categories of Baden[18] are sufficient to answer the requirement of knowledge in the second limb of Barnes v Addy, but does not travel fully into the field of constructive notice by adopting the fifth category. In this way, there is accommodated, through acceptance of the fourth category, the proposition that the morally obtuse cannot escape by failure to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons.
[16](2007) 230 CLR 89, 163 [177].
[17]Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373.
[18]Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l’Industrie en France SA [1993] 1 WLR 509, 575-576.
The first four categories in Baden are:
(a)actual knowledge;
(b)wilfully shutting one’s eyes to the obvious;
(c)wilfully and recklessly failing to make such enquiries as an honest and reasonable man would make;
(d)knowledge of circumstances which would indicate the facts to an honest and reasonable man.
Fahoh submitted that the allegation of knowing assistance (or knowing participation as Towercom describes it) is an allegation the seriousness of which means that it ought to be pleaded and particularised and the assessment required by Briginshaw v Briginshaw kept in mind.[19] Fahoh submitted that paragraph 7H of the FASOC attempts to fit the case within the second limb of Barnes v Addy.[20] Fahoh complains that the particulars to paragraph 7H do not do so. Those particulars are:
Particulars of the breach of fiduciary duty are set out in paragraph 6.
The first defendant’s dishonest and fraudulent design consisted of matters referred to in paragraphs 7A, 7B, 7D, 7E and 7G above, in the circumstances alleged in the particulars to paragraph 4.
The first defendant’s knowledge of his dishonest and fraudulent design is to be imputed to Fahoh because, by the matters pleaded in paragraph 7C, 7D, 7F and 7G, Fahoh was the vehicle by which the first defendant obtained his benefit from his breach of fiduciary duty.
[19]Farah Constructions at [170].
[20](1874) LR 9 Ch App 244.
Fahoh submitted that the affidavit material of Mr Goh and Ms Goh provided a benign explanation for the allegedly fraudulent conduct. It was submitted that the facts deposed to, and the objective evidence, are consistent with a lack of dishonesty, in particular:
(a)it does not appear to be in dispute that Towercom was looking to sell the Brunswick shop quickly and confidentially. This apparently appears from the plaintiff’s discovered document 45. The Brunswick shop was not listed for auction and was not advertised publicly;
(b)Fahour did not have to provide any buyers; he was merely asked whether he would do so to assist Ayse Ilhan. He had a discretion to do so. Ayse Ilhan was not under Mr Fahour’s dominion or control at all;
(c)on 16 September 2009, Ayse Ilhan emailed someone called Meliha Abla (presumably at Meadow Heights Conveyancing Service) notifying that person that the Brunswick shop had been sold and asking that a contract of sale be prepared with a 10% deposit payable today and a balance within 30 days. She states “I know this goes without saying, but let’s please keep this confidential”);[21]
(d)the preparation and signing of the one page agreement on 18 September 2009 (the day after Mr Goh made the offer of $1 million on 17 September 2009) is consistent with Ayse Ilhan wanting to get someone “on the hook” for the sale quickly; as is the acceptance of 1% ($10,000) deposit as opposed to the usual 10%;
(e)Ayse Ilhan did not engage a valuer or seek the advice of a valuer or a real estate agent to ascertain the value of the Brunswick shop before selling it. There is no evidence that Mr Fahour has any qualifications as a real estate agent or valuer, nor that he held himself out as such;
(f)Ayse Ilhan did not return with a counter offer in respect of the Brunswick shop;
(g)Ayse Ilhan had the presence of mind to reject Mr Goh’s offer of $350,000 for the Mitcham shop,[22] but to accept the first offer of $1 million for the Brunswick shop. This is evidence, it was submitted, that Ayse Ilhan had some knowledge of the value of the shops; she was not prepared to part with the Mitcham shop for $350,000.
[21]Plaintiff discovered document 45.
[22]Affidavit of Mr Goh, paragraph [10].
In conclusion, in relation to the claims based upon Barnes v Addy,[23] Fahoh contended that the FASOC contains wild extrapolations from the facts and sinister characterisations of the evidence which the objective evidence does not sustain.
[23](1874) LR 9 Ch App 244.
Fahoh also made submissions that in contravention of s 18 of the Civil Procedure Act, Towercom did not have a proper basis for making the allegations of liability based upon the second limb of Barnes v Addy.[24] They referred to the observations of Judd J in Environinvest Ltd v Pescott.[25]
Allegations should only be made in a proceeding where there is a factual foundation. Section 18 [of the Civil Procedure Act] does not introduce a novel constraint. There are, of course, additional obligations imposed on solicitors and counsel when drafting pleadings, and commencing a proceeding on behalf of a litigant.
[24](1874) LR 9 Ch App 244.
[25][2011] VSC 325 at [26].
Fahoh submitted there was no objective evidence to sustain the plaintiff’s allegations in paragraph 7H of the FASOC and, in particular, there was nothing to sustain the proposition that Towercom could have sold the Brunswick shop for more than $1 million. Indeed the available evidence points the other way.
In conclusion, Fahoh submitted that:
(a)Towercom does not have a proper basis for bringing its claim against Fahoh, in breach of s 18 of the Civil Procedure Act;
(b)the plaintiff’s material does not presently show a case which has a real prospect of winning: see Spencer v Commonwealth.[26] Accordingly, summary judgment should be ordered for Fahoh pursuant to s 62 of the Civil Procedure Act;
(c)the Court should not exercise its discretion pursuant to s 64 of the Civil Procedure Act because of the flaws in Towercom’s case identified by Fahoh;
(d)alternatively, Fahoh has a good defence on the merits to Towercom’s claim against it and summary judgment should be ordered in favour of Fahoh pursuant to Rule 23.03.
[26](2010) 241 CLR 118 at 139 [54].
Towercom’s submissions
Towercom submited that this is a case which would ordinarily be allowed to proceed to trial so that the documentary and oral evidence could be tested through the process of cross‑examination. It submits that Fahoh wrongly identifies various matters which are the subject of evidence in the affidavits of Ms Goh and Mr Goh in the present application as undisputed evidence or established facts. It submits that they are not of that character. Towercom’s position is that the evidence as put forward by Ms Goh and Mr Goh on affidavit should and will be tested at trial, both by reference to other oral evidence and as a result of cross‑examination on the documents and at large.
Towercom submits that the ordinary interlocutory processes which Towercom is either entitled to exercise as of right (interrogation) or by way application (third party discovery from Mr Goh) and which it presently intends to avail itself of, are not yet complete. Moreover, Mr Fahour has not yet made discovery of any documents relating to the matters raised by the defence for Fahoh. He made his affidavit of documents in the proceeding before the joinder of Fahoh and the continuing discovery obligation under Rule 29.15 does not strictly apply to documents which he had in his possession at the time he made discovery and only became discoverable upon the joinder of Fahoh.
Towercom submits that it is apparent from the discovery of Fahoh that he should have (or have had) in his possession, custody or power at least:
(a)mobile phone records relating to his discussions with Mr Goh in September and October 2009;
(b)emails as to his dealings with Mr Goh and Fahoh in September 2009 to January 2010;
(c)other documents, including documents signed by him to transfer away his shareholding in Fahoh and the unit holding of Fuli in the Trust, and documents evidencing communications in respect of those documents.
Notwithstanding correspondence between the solicitors for Towercom and Fahoh before Fahoh made discovery, and despite Mr Goh’s obvious continued involvement in the matter in circumstances where he is not a director or shareholder of Fahoh, evidenced by his swearing an affidavit in support of the application, Fahoh has taken a strict line in the discovery of documents maintaining that some documents sought were personal to Mr Goh.
Towercom submits that on the pleadings between it and Fahoh at present, Fahoh must be taken to have admitted paragraphs 4 and 5 of the FASOC on the basis that they purport to have not pleaded to it “as it contains no allegations against it”. Those paragraphs contain the pith of the allegations made against Mr Fahour giving rise to the fiduciary relationship and duties. The same may be said about the substance of the allegations in paragraph 6, which concerns the alleged breaches of the duties.
Towercom does not accept the evidence given by Mr Goh that the discussions that took place between Mr Fahour and Mr Goh regarding the acquisition of the Brunswick shop were not directed to Mr Fahour making a profit from the interest in Fahoh and the Sydney Road Trust to be taken by the investment made by the company of which he was the sole shareholder, Fuli. They instance an email dated 17 September 2009 from Mr Fahour to Mr Goh where Mr Fahour stated:
I’m happy with whatever bro … I prefer to talk about how much money we can make, fuk the name! LOL…[27]
[27]Affidvait of Peter Pryles sworn 22 March 2013 at EB-124.
The plaintiff further submits that there is a basis for saying that Mr Fahour did not cease to have an interest in the Sydney Road Trust on 29 October 2009, as asserted by Fahoh. They instance the following matters:
(a)according to Mr Goh’s affidavit, he was first told of the lack of interest of Mr Fahour in the Islamic museum proposal on 29 October 2009.[28] Yet Mr Goh was writing emails regarding long term commercial leases of the Brunswick shop by Towercom to Mobile World Communications on 26 October 2009, three days before he was told of this.[29] In the email of 26 October 2009 from Mr Goh to Crazy John’s (Mobile World Communications) Mr Goh opened the email with this sentence:
[28]Affidavit of Mr Goh at [21].
[29]Affidvait of Peter Pryles sworn 22 March 2013 at EB-131.
My name is Jimmy Goh and my company recently purchased the property situated at 74-78 Sydney Road Brunswick.
(b)there is no explanation for why the transfer of a share in Fahoh from Mr Fahour to Mr Goh was not prepared until 15 December 2009, while the transfer of a unit in the trust occurred on 29 October 2009. Mr Lenny, Mr Goh’s in‑house accountant, appears to have prepared both sets of documents.[30] Towercom submits that “of course” the transfer of units in the trust could have been backdated whilst the share transfer having to be lodged with ASIC could not easily be backdated;
(c)the transfer of the units in the trust may have been backdated to avoid stamp duty. If a transfer of the units had occurred after settlement of the purchase of the Brunswick shop, they would attract stamp duty. Stamp duty on the land transfer was not paid until 19 January 2010;[31]
(d)in an email dated 23 November 2009 to Eu Ming Lim, one of Mr Goh’s lawyers, Mr Goh stated in respect of his investment in the Brunswick shop: “Shared this with a friend.” If that was no longer the case, by 23 November 2009, there would have been no reason to make that statement in the email;
(e)it is clear from Mr Goh’s affidavit that Mr Fahour contributed half the purchase price of $500,000 at settlement. Mr Goh’s explanation is that he did not have access to the money himself at short notice. That raises a number of questions which, it was submitted, cannot be adequately considered and addressed by the Court on a summary application. These questions are:
(i)Mr Goh has sworn that he owns several neighbourhood shopping centres in Victoria.[32] It appears, and he seeks to represent himself as, a man of considerable wealth. However, attempts by Towercom to obtain documents by discovery as to Mr Goh’s ability to raise $500,000 quickly, no discovery has been forthcoming;
(ii)the sale and purchase of the Brunswick shop is described by Towercom as a “friendly transaction”. Settlement of the contract of sale could in all probability have been delayed a few days without penalty in which case Mr Fahour would not have needed to paid over $500,000 if he no longer intended to take an interest in the Brunswick shop.
[30]Affidavit of Mr Goh at [23] and affidavit of Peter Pryles sworn 22 March 2013 at EB-141.
[31]Affidavit of Peter Pryles sworn 22 March 2013 at EB-147.
[32]Affidavit of Mr Goh at [6].
Towercom submits, in any event, that even if Mr Fahour did cease to have an interest in the trust on 29 October 2009, its cause of action against Fahoh was nonetheless complete on 28 October 2009 when Towercom executed a standard contract of sale that had already been executed by Fahoh on 26 October 2009.[33] As at that date, Fahoh could have sought specific performance of the contract of sale and thus had an equitable interest in the Brunswick shop, which was held on trust for it by Towercom, subject to payment of the purchase price. It would also be correct to say that Mr Fahour had an interest in the Brunswick shop immediately upon execution of the contract of 18 September 2009.
[33]Affidavit of Mr Goh and exhibit “JG-2”.
Mr Evans, who appeared for Towercom, submitted that put, at its simplest, the case against Fahoh is one of exploitation by Mr Fahour, a person whom Towercom’s director, Ayse Ilhan, trusted to act in the best interests of Towercom, and that has been to its detriment.
Summary Judgment test
Rule 23.03 provides:
On application by a defendant who has filed an appearance, the Court at any time may give judgment for that defendant against the plaintiff if the defendant has a good defence on the merits.
Although the application was made under both rule 23.03 and s 62 of the Civil Procedure Act 2010, it is clear that it is the latter provision that is relied on in this application. It provides:
A defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff's claim or part of that claim has no real prospect of success.
Although s 62 is specific to an application of this kind, it is just one section of a suite of sections in Part 4.4 of the Civil Procedure Act 2010, which set out the test for summary judgment: a court may give summary judgment if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, has no real prospect of success (s 63(1)).
These sections liberalise the rules governing summary judgment in Victoria, so that it is easier to dispose of unmeritorious claims or defences summarily. The Court of Appeal has stated that the test:
[S]hould be construed as one of whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success; that the ‘real chance of success’ test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test; and that, as the law is at present understood, the real chance of success test permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent’s case is not ‘hopeless’ or ‘bound to fail’, it does not have a real prospect of succeeding.[34]
[34]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 at [29] per Warren CJ and Nettle JA (Neave JA agreeing).
The test must be applied according to its own terms and not according to considerations of whether the proceeding is ‘hopeless’ or ‘bound to fail’. To adopt ‘an unduly constrained, historical approach to the construction of s 63’ would ‘subvert the purpose of the provision’.[35]
[35]Ibid, at [25] per Warren CJ and Nettle JA (Neave JA agreeing).
Courts must, however, continue to exercise the power to terminate proceedings summarily with caution. Courts should therefore only exercise the power if it is clear that there is no real question to be tried. This is so irrespective of whether an application for summary judgment is made on the basis that: the pleadings do not disclose a reasonable cause of action, and no amendment could cure this error; or the action is frivolous, vexatious or an abuse of process; or the application for summary judgment is supported by evidence.[36]
[36]Ibid, at [35] per Warren CJ and Nettle JA (Neave JA agreeing).
The power to give summary judgment must be exercised in accordance with the overarching purpose of the Act and taking into account the fact that, if granted, a party will be deprived of the chance to pursue its claim or defence.[37]
[37]Ibid, at [42] per Neave JA).
In Wheelahan v City of Casey (No 3),[38] it was accepted that the ‘no real prospect of success’ test may in some circumstances extend to cases not regarded as sufficiently hopeless to warrant striking out under the Supreme Court (General Civil Procedure) Rules 2005.
[38][2011] VSC 15 at [8].
To that end, the test expands the basis for giving summary judgment compared with the test in the Court’s rules. However, in most instances, the new test will not differ from the old test in its practical application (National Australia Bank Ltd v Norman [2012] VSC 14 at [12]).
If there is no real prospect of success, a court may nevertheless allow a matter to proceed to trial if:
(a)it is not in the interests of justice to summarily dispose of the proceeding (s 64(a)); or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate (s 64(b)).
Whether a proceeding should be allowed to go to a full hearing on the merits must be determined according to the circumstances of each case: Barber v State of Victoria.[39]
[39][2012] VSC 554 at [15].
When summary judgment for a defendant is sought, the question is whether justice dictates that the claims attacked are such that they ought to lead forthwith to dismissal as sought. If the judge is satisfied that the claim the subject of the application must fail, it will ordinarily be appropriate that summary judgment follow. But it is otherwise if the judge fails to reach that state of satisfaction. If, whether the argument is brief or long, the judge apprehends that there is, at least arguably, a weakness in the defendant’s argument in answer to the claim against it, which means that it may not in the end succeed, the appropriate course is to allow the matter to go to trial on the basis that there is a triable issue of law or of fact, or both.[40]
[40]See the observations of Phillips JA in Southern Region Pty Ltd v Minister for Police and Emergency Services, [2003] VSCA 105, [14], from which this paragraph is adapted.
Reasoning and decision
In my view, the submissions of the plaintiff are to be preferred. This is a case where there is a real question to be tried as between the Towercom and Fahoh. The circumstances in which Towercom, through Ayse Ilhan, was induced to enter into the contract to sell the Brunswick shop on 18 September 2009, as pleaded and particularised, reveals potential for a finding by the Court –
(a)that Mr Fahour breached the ‘no conflict’ fiduciary duty as well as the ‘good faith’ duty by recommending to Towercom that it sell the property for $1 million;
(b)that Fahoh, incorporated on 18 September 2009, the day the first contract was signed, knowingly assisted Fahour in that dishonest and fraudulent design.
Central to these allegations is that the property was sold at an undervalue, and a considerable undervalue. There is no evidence lead by Fahoh in relation to the allegation of a sale at an undervalue.
There is also evidence in the exhibits to the affidavit of Peter Pryles that at the time of the entry into that contract (on 18 September 2009) Mr Fahour intended to take a benefit. In the email of 17 September 2009 between Mr Fahour and Mr Goh, when Mr Goh was seeking from Mr Fahour his full name and address, occupation, date and place of birth for the purposes of the establishment of Fahoh, and seeking to establish what name the company would have, Mr Fahour responded to Mr Goh “FOG is good. MJ Holdings, I’m happy with whatever bro … I prefer to talk about how much money we can make, fuk the name! LOL”.[41]
[41]Affidvait of Peter Pryles sworn 22 March 2013 at EB-124.
Then, the document signed on 18 September 2009 itself bespeaks haste and, possibly, deception. I will set it out in full:
Purchase agreement of 74 – 78 Sydney Road, Brunswick Property 18/09/2009
FAHOH PTY LTD
ATF 74 SYDNEY RD UNIT TRUST
SUITE 1, LEVEL 1, 285 SWANSTON ST
RICHMOND, VIC, 3121ENTER INTO AGREEMENT WITH
TOWERCOM PTY LTD
CAN 074312922
LV 2, 112 WELLINGTON PARADE
EAST MELBOURNEFor the purchase of the property 74-78 Sydney Rd, Brunswick, 3056, Area 386m2 for the total price of $1,000,000.00 FROM Towercom Pty Ltd.
Attached 1% deposit ($10,000.00) is paid with this agreement, by the time sale contracts are prepared for the property by the vendor, then once contracts a (sic) ready a further remainder 9% is paid as deposit and balance in full (settlement) on the 30th October 2009. This is for the full purchase of the property and this agreement is legally binding.
During this time all lease negotiations and exclusivity of the property is given to FAHOH PTY LTD, ATF 74 SYDNEY RD TRUST. No other negotiations or discussion with other parties may exist or exit out of this sale.
……………………… ………………….
FAHOH PTY LTD TOWERCOM PTY LTDDirector Director
It appears that the signature above Fahaoh Pty Ltd is “J Goh”, or something very like that. Mr Goh says that he thinks he was not in Melbourne at the time and he instructed a member of his staff to sign on his behalf.[42] Ayse Ilhan signed on behalf of Towercom.
[42]Affidavit of Mr Goh at [11].
There is no evidence by Fahoh to dispel the allegation made by Towercom that it did not know, and was not informed, that Mr Fahour had an interest in Fahoh (and in the trust of which it is trustee) at the time of the signing of the contract on 18 September 2009.. If that is the fact, and it is certainly the allegation, there is a reasonable basis for an allegation that Fahoh knowingly assisted Mr Fahour in a breach of his fiduciary duty.
In addition to the general allegation that there is an innocent explanation for the allegedly fraudulent conduct on the part of Mr Fahour, the submissions made by Fahoh seek to have the claim against it dismissed summarily because the facts deposed to by Mr and Mrs Goh, and the objective evidence, are “consistent” with a lack of dishonesty. This is not a sufficient basis upon which to dismiss a claim in a case of this kind. Indeed, in the context of the claim within the second limb of Barnes v Addy,[43] the fraudulent and dishonest design pleaded follows a somewhat formulaic adoption of what Lord Selborne LC said, as quoted above. But it is not fraud on the part of Fahoh that is the touchstone in this case, nor is it dishonesty in the ordinary sense. It is knowledge by Fahoh of that so‑called dishonest and fraudulent design on the part of Fahour.
[43](1874) LR 9 Ch App 244.
The facts set out above at paragraph 39, upon which Fahoh relies to submit that the transaction in question was not known by Fahoh to be in breach of any fiduciary duty, although arguably consistent with no knowledge of any breach, are equally not inconsistent with it, and, in at least one material respect, provides ammunition to the plaintiff in support of the claim of knowing assistance within the second limb of Barnes v Addy.[44]
[44](1874) LR 9 Ch App 244.
That one material respect is that the assertion that the preparation and signing of the contract of 18 September 2009 is consistent with Ayse Ilhan wanting to get someone “on the hook” for the sale quickly, as is the acceptance of a 1% deposit as opposed to the usual 10%. The preparation and signing of that contract, and the payment of the 1% deposit, is equally consistent with the argument for the plaintiff that the purchase was particularly beneficial to the purchaser and it was desirable for the purchaser to establish its contractual right promptly before any further enquiries might have revealed that the price was an undervalue.
It is no doubt true that the allegation of knowing assistance within the second limb of Barnes v Addy[45] means that the allegations should be pleaded and particularised properly and fully. But reliance on what the High Court said in Farah ConstructionsPty Ltdv Say-Dee Pty Ltd,[46] misunderstands the context in which the High Court was referring to the requirements of Briginshaw v Briginshaw. That was not in relation to the pleading or particularisation of the claims, but in the assessment of them according to the evidence.
[45](1874) LR 9 Ch App 244.
[46](2007) 230 CLR 89 at [170].
In this case, the particulars relied upon in support of the Barnes v Addy claim, by referring back to the pleadings in paragraphs 7A to 7G, bring to account all of the facts referred to in those paragraphs and the particulars given in support of them, in a way which show that reliance is placed upon the knowledge of Fahour as a director of Fahoh and as one of the two driving Fahoh’s entry into the purchase. It may be sufficient for present purposes that one of the two directors of that company clearly had the requisite knowledge of the alleged breach of fiduciary duty by Fahour. But it is also apparent from the pleading that Mr Goh must have had, as a matter of inference, knowledge of the facts giving rise to the claim under the second limb of Barnes v Addy.[47]
[47](1874) LR 9 Ch App 244.
Participatory liability arising from the concepts analysed in Barnes v Addy is not based upon any inflexible formulae.[48] Just as the principles applicable to knowing assistance should not be applied inflexibly, so too the identification of what amounts to ‘knowledge’ must not be treated as if it were a formula as well. The fourfold classification of knowledge identified above at paragraph 37 tends to invite the use of formula to solve the problem. But judges have cautioned against treating each category as an exclusive and rigid one.[49]
[48]See Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [247] (“Grimaldi”).
[49]Grimaldi at [260].
The facts relevant to establishing the liability of Mr Fahour as a fiduciary and for breach of fiduciary duty, as well as the facts relevant to whether Fahoh had the requisite knowledge, are inevitably circumstantial, at least in part. Those facts include some ‘skeletal’ elements:
(a) The circumstances giving rise to the alleged fiduciary relationship and duties;
(b) That the simple contract was entered into on 18 September 2009 with completion fixed for 30 October 2009, and the fuller contract was entered into on 29 October – one day before completion;
(c) that Fahoh was incorporated and the Sydney Road Trust was established (on 18 September 2009) at the request of Mr Goh very shortly before the simple contract was signed;
(d) the price at which the purchase was made;
(e) the text of the simple contract;
(f) the fact that the simple contract was presented to Ayse Ilhan by Mr Fahour for signature at the door of her house;
(g) that the simple contract was signed by or on behalf of Mr Goh and not by Mr Fahour (at a time when Mr Fahour plainly intended to take an interest in the acquisition, albeit one purportedly for the benefit of the Islamic Museum);
(h) that according to the pleadings, Mr Fahour did not disclose to Ayse Ilhan (Towercom) that he had such an interest in the acquisition;
No case was made by Fahoh that the pleaded duties were not duties available to Towercom in the circumstances of this case. I am thus relieved from considering whether or not the fiduciary duties available in this case are limited to proscriptive ones.[50]
[50]As to which see Breen v Williams (1966) 186 CLR 71 at 111 and Westpac Banking Corporation v The Bell Group Ltd (In Liq) (No 3) [2012] WASCA 157 at [1957] – [1978].
The arguments put on behalf of Fahoh rely extensively upon the fact, if it is a fact, that from 29 October 2009 Mr Fahour had no beneficial interest, directly or indirectly, in Fahoh and thus could not be said to have obtained any benefit from his breach of the “no conflict rule”. This provides no answer, at the stage of considering summary termination of the claim, to the claims of detriment to Towercom flowing from breach of fiduciary duty by Mr Fahour, and the knowing participation alleged against Fahoh in that breach.
Even if Mr Fahour had no beneficial interest in the purchaser at the time of completion of the contract on 30 Octoebr 2009 (and Towercom points rightly to the fact that at the date of the contract on 18 September 2009, Fahour did have an indirect interest through the unit holding of Fuli, and at the date of the contract of 30 October 2009 he held a share in Fahoh) nevertheless that is not an answer to the claim made by Towercom against Fahoh.
Although there was no detailed argument or submissions made by either party as to the authorities relevant to the availability of compensation for breach of fiduciary duty where the wrongdoer has received no benefit, it appears arguable that Towercom may be entitled to equitable compensation.[51] A defaulting fiduciary will be liable, at the beneficiary’s election, to pay equitable compensation to a beneficiary who has suffered loss by the breach of duty by the fiduciary, the object of the remedy being to restore the beneficiary to the position in which he or she would have been had there been no breach of fiduciary duty: see O’Halloran v RT Thomas & Family Pty Ltd,[52] Grimaldi v Chameleon NL (No 2).[53]
[51]Grimaldi at [187].
[52](1998) 45 NSWLR 262 at 272-279.
[53](2012) 200 FCR 296 at 348 [187].
Fahoh seeks to have the case against it terminated without a hearing. It is clear that the Court must approach an application to summarily terminate a claim with great care. It is necessary in arriving at a conclusion that the claims against Fahoh have no real prospect of success that the Court feels confident that an assessment can be properly made on the material before it.[54]
[54]Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222 at [18].
The evidence of Mr and Mrs Goh, although unanswered by affidavit material from Towercom, is not accepted as establishing undisputed facts. Indeed, it raises a range of questions that remain unanswered.
One of the most significant matters advanced by Towercom, and which is unanswered and unexplained in the affidavits filed on behalf of Fahoh, is the statement in the email dated 17 September 2009 from Mr Fahour to Mr Goh where Mr Fahour stated:
I’m happy with whatever bro … I prefer to talk about how much money we can make, fuk the name! LOL…[55]
[55]Affidvait of Peter Pryles sworn 22 March 2013 at EB-124.
Whatever might have happened subsequently, this, if finally proved in evidence at trial and not explained, is damning evidence that the object of the acquisition at the outset was to make money out of the transaction for the individuals concerned. It alone warrants the claim going to trial. But there is more.
Although there is no evidence to support the allegation of a sale at an undervalue, it is an allegation in the FASOC that remains entirely unanswered by the affidavits in support of the application. It is a central and vital key to unfolding the claims. If it is true, it might explain the speed with which Fahoh was incorporated, the Sydney Road Trust was established, and the simple contract that was entered into on 18 September 2009 after Mr Goh claims he was approached by Mr Fahour (the approach was on about 16 or 17 September 2009, Fahoh incorporated and the Trust established on 18 September 2009).[56]
[56]Affidavit of Mr Goh at [6]-[11].
The particular circumstances of the dealings between Mr Fahour and Mr Goh in the lead up to, and the aftermath of, the entry into the simple contract raise questions for trial that cannot be summarily determined in reliance on the existing material. Some of those questions are identified in the submissions of Towercom reproduced above at paragraph 50.
Fahoh has mounted its attack on the Barnes v Addy[57] claim on the footing, in part, that the substratum, the liability of Mr Fahour, is not established. That is, it is an essential basis for the claim against Fahoh that it knowingly participated in Mr Fahour’s breach of fiduciary duty. Fahoh does not plead, however, to the paragraphs of the FASOC that allege these primary drivers of the claim against it. Towercom submitted that in these circumstances, Fahoh must be taken to have admitted these allegations.[58] Strictly speaking, this is correct. Fahoh cannot proceed on the footing that no allegation is made against it in the paragraphs alleging the fiduciary duty and the breach against Mr Fahour, whilst at the same time contend that there is no case against it because there is no, or no sufficient, basis for those claims against Mr Fahour. This is another, although not critical, reason against acceding to Fahoh’s application.
[57](1874) LR 9 Ch App 244.
[58]See paragraph 48 above and r 13.12 of the Rules.
Section 64 of the Civil Procedure Act affirms the court's broad discretion, exercised judicially, whether to summarily dismiss a proceeding or a claim. The circumstances in which the court might consider a dispute to be of such a nature that only a full hearing on the merits is appropriate, is wide in its compass and plainly to be considered in the circumstances of each case.[59] The oft quoted observations of Kirby P (as he then was) in Wickstead v Browne,[60] are apt to this case:
Common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle. That is why leave is usually required for an appeal from interlocutory orders. Appellate courts, including this Court, will usually require evidence to be adduced and a trial concluded before considering the application of the law to that evidence. Out of the detail of the evidence ultimately proved, affecting the relationship of the respondent and the appellant, may arise a finding of a duty of care which the common law of negligence would uphold.
[59]Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222 at [12].
[60](1992) 30 NSWLR 1 at 5-6; approved in Victoria v Richards (2010) 27 VR 343 at [8].
There are too many facts and circumstances in this case that are unclear and need to be clarified, and a number or factual and legal issues that must be tried with the benefit of evidence at trial, before any firm conclusion can be reached as to the viability of the Barnes v Addy[61] claim against Fahoh. I have mentioned some of the factual and legal issues. No doubt there are others that I have not expressly identified.
[61](1874) LR 9 Ch App 244.
This is a case where the plaintiff has more than a fanciful prospect of success in its claim that Fahoh knowingly assisted Fahour in his breach of fiduciary duties. The second defendant’s summons for summary judgment will therefore be dismissed. I will hear the parties as to the appropriate orders in consequence of this decision.
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