Vantage Holdings Group Pty Ltd v Donnelly [No 3]
[2018] WASC 198
•26 JUNE 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: VANTAGE HOLDINGS GROUP PTY LTD -v- DONNELLY [No 3] [2018] WASC 198
CORAM: CHANEY J
HEARD: ON THE PAPERS
DELIVERED : 26 JUNE 2018
FILE NO/S: CIV 1086 of 2016
BETWEEN: VANTAGE HOLDINGS GROUP PTY LTD
First Plaintiff
RELIANCE FRANCHISE PARTNERS PTY LTD
Second Plaintiff
AUSTRALIAN RELIANCE PTY LTD
Third Plaintiff
AUSTRALIAN RELIANCE GROUP PTY LTD
Fourth Plaintiff
AND
ANDREW PAUL DONNELLY
First Defendant
KIMBERLEY JAMES HANSON
Second Defendant
HAWKSTONE GROUP PTY LTD
Third Defendant
INSUBI PTY LTD
Fourth Defendant
PA AUDIT PTY LTD
Fifth Defendant
MARK ANTHONY ENGLISH
Sixth Defendant
DFK PA PARTNERS PTY LTD
Seventh Defendant
Catchwords:
Practice and procedure - Application to strike out paragraphs of defence and counterclaim - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 20 r 19
Result:
Two paragraphs of third defendants' defence and counterclaim struck out
Applications otherwise dismissed
Category: B
Representation:
Counsel:
| First Plaintiff | : | Mr M L Bennett |
| Second Plaintiff | : | No appearance |
| Third Plaintiff | : | Mr M L Bennett |
| Fourth Plaintiff | : | Mr M L Bennett |
| First Defendant | : | Mr N W Kalmund |
| Second Defendant | : | No appearance |
| Third Defendant | : | Mr N W Kalmund |
| Fourth Defendant | : | Mr N W Kalmund |
| Fifth Defendant | : | No appearance |
| Sixth Defendant | : | No appearance |
| Seventh Defendant | : | No appearance |
Solicitors:
| First Plaintiff | : | Bennett + Co |
| Second Plaintiff | : | Bennett + Co |
| Third Plaintiff | : | Bennett + Co |
| Fourth Plaintiff | : | Bennett + Co |
| First Defendant | : | Hotchkin Hanly |
| Second Defendant | : | Lemonis & Tantiprasut Lawyers |
| Third Defendant | : | Hotchkin Hanly |
| Fourth Defendant | : | Hotchkin Hanly |
| Fifth Defendant | : | HWL Ebsworth Lawyers |
| Sixth Defendant | : | HWL Ebsworth Lawyers |
| Seventh Defendant | : | HWL Ebsworth Lawyers |
Case(s) referred to in decision(s):
Nil
CHANEY J:
On 18 January 2018, the plaintiffs applied by minute of proposed orders for orders striking out the third defendant's (Hawkstone) amended defence and counterclaim, or alternatively nominated paragraphs of that pleading, and four paragraphs of the first defendant's (Mr Donnelly) amended defence. Hawkstone's amended defence and counterclaim had been filed on 26 September 2014, and Mr Donnelly's amended defence had been filed on 24 July 2017. Order 20 r 19 of the Rules of the Supreme Court 1971 (WA) (Rules) requires that an application to strike out a pleading must be made within 21 days of service of the pleading. Accordingly, the plaintiffs, in their application of 18 January 2018 also sought an order that the time to bring the applications be extended.
Extension of time
Although this application was made long after the time required by the Rules, the reasons for delay were set out in an affidavit of Clara Elisabeth Hagan sworn 1 February 2018. In summary, the delay was occasioned by ongoing conferral between the parties representatives in relation to this and other aspects of what has become quite complicated litigation. No party contended strongly that an extension should be refused, and the substance of the application was the subject of full and detailed written submissions. In the circumstances, I am prepared to extend the time for commencement of this application to 18 January 2018.
Application in relation to Hawkstone's defence and counterclaim
On 24 January 2018, Hawkstone filed a re‑amended defence and counterclaim which in part responded to the plaintiffs' objections to its earlier pleading. As a result, the plaintiffs amended their application so as to delete the application to strike out the whole of the third defendant's pleading and delete their application to strike out two of the enumerated paragraphs to which objection was taken.
Pursuant to orders made on 11 January 2018 in anticipation of the strike out application being made by the plaintiffs, the parties filed written submissions. The application was subsequently listed for hearing on 30 May 2018. Contemporaneously with filing its submissions, Hawkstone filed a minute of proposed further re‑amended defence and counterclaim pursuant to O 21 r 3 of the Rules. The amendments proposed were designed to meet some of the objections raised by the plaintiffs to Hawkstone's re‑amended defence and counterclaim. When the matter came on for hearing, because the plaintiffs had not filed submissions responding to the proposed further re‑amended defence and counterclaim, and because of the uncertainty as to the status of the second plaintiff (Reliance Partners) which is discussed below, the application did not proceed to hearing. Rather, the plaintiffs were directed to file responding submissions and provide clarification of the second plaintiff's status, and a direction was made that the matter be dealt with on the papers.
In the plaintiffs' responsive submissions, it was confirmed that on 30 May 2018, orders were made in the Supreme Court of Victoria to wind up Reliance Partners. A majority of the paragraphs to which objection was taken relate to a counterclaim made by Hawkstone against Reliance Partners. By reason of s 471B of the Corporations Act 2001 (Cth) proceedings on the counterclaim insofar as it relates to the second plaintiff cannot be continued without leave of the court and is thus presently stayed. It is not yet known whether the liquidators for Reliance Partners will decide to continue the proceedings on behalf of Reliance Partners. That decision may impact on whether an application by the third defendant for leave to proceed with its counterclaim is made, and is likely to be a relevant consideration in relation to whether an application for leave, if made, might be successful.
The plaintiffs other than the second plaintiff submit that, because the liquidators of Reliance Partners may decide to continue the proceedings, there is utility in dealing with their submissions regarding those paragraphs while the court is giving consideration to the remainder of the strike out application. I do not accept that submission. In circumstances as they presently exist it would be inappropriate for the court to make rulings in relation to proceedings which are stayed or to provide, in effect, an advisory opinion on matters in anticipation of some future continuance of the counterclaim against the second defendant.
The paragraphs which relate to the counterclaim made against Reliance Partners which were the subject of objection were par 48, 49, 50, 51(a), 52A and 58 to 61A. In the event that Hawkstone was granted leave to amend in terms of the proposed further re‑amended defence and counterclaim, objections to par 45, 51, 52, 53A(ii) and (iii) and 64 were not pursued.
As noted above, the minute of proposed further re‑amended defence and counterclaim was filed pursuant to O 21 r 3 of the Rules. That rule permits the amendment of pleadings without leave and it is not apparent to me why leave to amend in the terms proposed is required. Both parties appear to have approached the matter on the basis that leave was required. If it were required, I would grant it given that the amendments are designed to accommodate objections to the pleading taken by the plaintiffs. An amendment which accommodates those objections reduces the scope for interlocutory disputes. For convenience I will hereafter refer to the further re‑amended defence and counterclaim simply as the defence and counterclaim.
As a result of the amendment to the defence and counterclaim, and the order for winding up of the second plaintiff, the objections which remain to the defence and counterclaim are as to par 24(d)(i), 25, 26, 35, 36A(ii) and 65A.
Paragraphs 24(d)(i), 25 and 26
Paragraphs 52 to 63 of the statement of claim plead claims for damages, compensation pursuant to s 1317H of the Corporations Act 2001 (Cth), and for an account, against Mr Donnelly, the second defendant Mr Hanson, and Hawkstone arising from matters concerned with a lease of the premises dated 1 June 2012 between Australasian Property Investments Limited as landlord and Hawkstone as tenant. The plaintiffs plead that the lease was signed by Mr Donnelly and Mr Hanson on behalf of Hawkstone. They plead that from 1 June 2012 to about June 2014, the third plaintiff, Australian Reliance, occupied and conducted its business from the premises and paid rent in respect to the lease but did not have any written agreement with Hawkstone. It is pleaded that Australian Reliance vacated the premises in June 2014 but between that time and December 2015, Australian Reliance made further payments in respect to the lease. Mr Donnelly and Mr Hanson are said to have knowledge of the lease and of the fact of Australian Reliance vacating the premises and making further payments in respect of the lease. It is alleged that they caused Australian Reliance to make those payments. That is said to have resulted in Australian Reliance suffering loss and damage and to amount to a breach by Mr Donnelly and Mr Hanson of their duties as directors of Australian Reliance. Hawkstone is said to have knowingly received the benefit of those payments.
Paragraphs 24, 25 and 26 of the defence and counterclaim respond to that plea.
Paragraph 24 admits the execution of the lease, admits that Hawkstone's directors, Mr Donnelly and Mr Hanson signed the lease on behalf of Hawkstone and pleads that they were also directors of Australian Reliance at the time they did so. The terms of the lease pleaded by the plaintiff are admitted.
Paragraph 24(d)(i) pleads that 'Hawkstone and Australian Reliance's purpose of Hawkstone entering into the Hawkstone lease was to obtain premises for Australian Reliance from which it would conduct its business operations'. The balance of that paragraph pleads that Hawkstone did not occupy or take possession of the premises but Australian Reliance did so.
Paragraph 25 of the defence and counterclaim pleads that Hawkstone entered into the lease on the common understanding between it and Australian Reliance that Australian Reliance was to occupy the premises and would pay the landlord the amounts specified in the lease. Particulars of the common understanding are given as follows:
(i)Hawkstone and Australian Reliance's purpose of Hawkstone entering into the Hawkstone Lease was to obtain premises for Australian Reliance from which it would conduct its business operations;
(ii)the use of the Premises for offices specified in schedule 1 item 7 of the Hawkstone Lease was for the purpose of Australian Reliance occupying the Premises and was not a use required by Hawkstone;
(iii)by Mr Donnelly and Mr Hanson executing the Hawkstone Lease on behalf of Hawkstone and also being directors of Australian Reliance at the time of execution of the Hawkstone Lease; and
(iv)Hawkstone did not occupy or take possession of the Premises.
Paragraph 26 pleads that by reason of the common understanding, there was an implied agreement between Hawkstone and Australian Reliance that Australian Reliance would either meet directly the obligations of Hawkstone under the lease or indemnify Hawkstone in respect of such obligations.
The plaintiffs' objection to these paragraphs of the defence are that Hawkstone is required to, but fails to, plead material facts that could give rise to the asserted implied agreement. They contend that how the 'purpose' pleaded in par 24(d)(i) arose, and why it was Hawkstone and Australian Reliance's intention, are material facts that need to be pleaded.
I do not accept the plaintiffs' objections. The material fact upon which this aspect of the defence turns is the existence of the common understanding. The guiding minds of both Hawkstone and Australian Reliance are said to be Mr Donnelly and Mr Hanson by virtue of their positions as directors of both companies. The existence of a common understanding turns, as the particulars reveal, on Mr Donnelly and Mr Hanson's state of mind in their capacities as directors of each of the two entities. The pleading in par 26 of an implied agreement is said to arise from the existence of the common understanding. Hawkstone submits that the pleading discloses all of the facts on which Hawkstone relies in support of its case that there existed an implied agreement. Clearly that is a reference to the facts pleaded in par 24 and par 25. Whether an implied agreement arises from those facts is a matter to be left for trial. Hawkstone's case is sufficiently clear on the pleading, and the question of whether an implied agreement arises from the facts pleaded cannot be said to be unarguable.
I therefore decline to strike out par 24(d)(i), 25 or 26.
Paragraphs 35 and 36A
Paragraphs 35 to 41 of the counterclaim plead a claim against the first plaintiff, Vantage Holdings Group, in respect to what is referred to as the VHG Loan Agreement. Paragraphs 35 and 36A read as follows:
35.Between in or about 2011 and no later than on or about 15 June 2012, Hawkstone and Vantage Holdings Group entered into a loan Agreement (VHG Loan Agreement) pursuant to which Hawkstone agreed to loan sums to Vantage Holdings Group by way of payment on behalf of Vantage Holdings Group of expenses Vantage Holdings Group incurred in establishing the Vantage Investment Fund.
Particulars
The VHG Loan Agreement was formed by the conduct of the parties pleaded in paragraph 36A below. Further particulars may be provided after discovery and prior to trial.
36A.From time to time between in or about 2011 and on or about June 2012:
(i)Hawkstone paid, on behalf of Vantage Holdings Group expenses of Vantage Holdings Group, particulars of which are contained in Annexure A;
(ii)Vantage Holdings Group;
A.knew that Hawkstone paid expenses on behalf of Vantage Holdings Group as pleaded in paragraph 36A(i) above.
Particulars
Vantage Holdings Group's directors, Mr Hanson and Mr Donnelly, knew that Hawkstone had paid and was paying expenses on its behalf.
B.by reason of its knowledge as pleaded in paragraph 36A(ii)A above, knowingly accepted the benefit of Hawkstone's payment of expenses on behalf of Vantage Holdings Group as pleaded in paragraph 36A(i) above;
C.by its directors at the relevant times stated in the particulars to paragraph 36A(ii)A above, knew that Hawkstone recorded the payments of expenses on behalf of Vantage Holdings Group as a loan as pleaded in paragraph 36A(iii) below; and
D.by its directors at the relevant times stated in the particulars to paragraph 36A(ii)A above, intended that the payments made by Hawkstone of expenses on its behalf were a loan from Hawkstone to Vantage Holdings Group which Vantage Holdings Group would be required to repay to Hawkstone.
(iii)Hawkstone recorded its payment of expenses on behalf of Vantage Holdings Group as a loan to Vantage Holdings Group of the amounts paid from time to time and, by its directors at the time, Mr Hanson and Mr Donnelly, intended that those payments were a loan to Vantage Holdings Group which Vantage Holdings Group would be required to repay Hawkstone.
Paragraphs 36 to 41 plead an implied obligation to repay the loan on demand and plead the amount said to be due by Vantage Holdings Group to Hawkstone. Annexure A, which is referred to in par 36A(i) comprises what appears to be a general ledger in relation to an account entitled 'Loan – Vantage Holdings.' It shows a series of debits and credits to that account identifying to whom payments were made but otherwise not identifying the nature and purpose of the payments.
The plaintiffs submit that the pleading that a loan agreement was entered into at some unspecified time in a three and a half year period is embarrassing and should not be permitted. Further, they submit that the payments pleaded in par 36A identify payments made over the same three and a half year period and that those payments are said to constitute conduct that formed the loan agreement. It is noted that there is no pleading that each payment was the subject of a separate loan. The plaintiffs complain that they do not know what point in time the loan agreement is alleged to have been formed, with the possibilities being that it was formed on the first payment, not formed until the last payment, or was formed at some time in between. Furthermore, the plaintiffs submit that the pleading in par 36A does no more than plead Vantage Holdings Group acquiesced in the payments by Hawkstone, but that that is insufficient to amount to the formation of a loan contract.
In response, Hawkstone submits that whether the conduct of the parties relied on by Hawkstone formed a concluded agreement is a matter to be determined at trial and that 'it is for the court to decide, based on the facts proven at trial, whether an agreement was formed and when.'
In my view, there is merit in the objections raised by the plaintiffs in relation to par 35 and 36A. The plaintiffs are entitled to know the case that Hawkstone makes. The court should not be invited simply to hear evidence as to the relevant facts and form its own view of whether and when an agreement was formed without the contentions of the parties being clear on the pleadings.
The amendments introduced by Hawkstone in its further re‑amended defence and counterclaim added the particulars C and D to par 36A and expanded the particulars in par 36A(iii). Those particulars plead that Mr Hanson and Mr Donnelly in their capacity as directors of each of Vantage Holdings Group and Hawkstone intended the payments made from time to time to be 'a loan' from Hawkstone to Vantage Holdings Group. In their submissions opposing the application to strike out, Hawkstone referred to its intention to plead by those amendments that 'both Vantage Holdings Group and Hawkstone intended the payments it made to be loans by Hawkstone to the Vantage Holdings Group' (emphasis added). That is not what the amendments do. The particulars relate to the loan agreement pleaded in par 35, and not to a series of loan agreements made at the time of each payment. Hawkstone's case in relation to the VHG Loan agreement is unclear and may lead to delay and uncertainty at trial. In its present state the plea is embarrassing and should be struck out with leave to re‑plead those paragraphs. If, as the third defendant's submissions suggest, that what is intended to be pleaded is that from time to time between about 2011 and no later than in or about 15 June 2012 the companies entered into a number of loan agreements relating to the sums paid to meet expenses, I would be satisfied that the particulars in s 36A would be capable of supporting that plea. Amendment would then only be required to par 35 of the defence and counterclaim.
Paragraphs 43 to 44
These paragraphs plead an alternative claim in relation to the payments pleaded in par 35 and 36A. They plead a claim for restitution of the amount of the expenses paid by Hawkstone on behalf of Vantage Holdings Group on the basis that the payments were made for the benefit of Vantage Holdings Group in the circumstances pleaded in par 36A(ii) and 36A(iii) and that there had been a total failure of consideration in respect of those payments such that Hawkstone is entitled to restitution of that amount.
The plaintiffs submit that there are inadequate particulars as to the alleged benefit to Vantage Holdings Group because of the limited information in Annexure A.[1] Even if further particulars might be called for, that is not a reason to strike out these paragraphs of the pleadings.
[1] See [20] above.
The plaintiffs also contend that no sufficient basis for the pleadings of a failure of consideration is disclosed in the pleading.
In response Hawkstone submits that a remedy is available in cases where money is paid in circumstances where it is unjust for the defendant to retain it, including where there has been a failure of consideration. In essence, par 42 to 44 of the counterclaim plead that identified payments were made by Hawkstone on behalf of Vantage Holdings Group in circumstances where both parties contemplated that the funds would be repayable as a loan, and if no loan agreement is established on the evidence, then the third defendant is entitled to restitution. That the payments were understood to be a loan is incorporated in the pleading by the additional words added to par 43 by the most recent amendments. The pleading discloses an arguable case which is sufficiently clear. The application to strike out par 43 to 44 should be dismissed.
Paragraph 65A
Paragraph 65A was added to the defence and counterclaim in the further re‑amended defence and counterclaim. It was therefore not initially the subject of the application to strike out, but objection is taken to it in the plaintiffs reply submissions. It is convenient to deal with it as an application to disallow amendment made pursuant to O 20 r 3.
Paragraph 65A arises in the context of a plea in the counterclaim of the existence of a management and services agreement between Hawkstone and the fourth plaintiff, Australian Reliance Group, pursuant to which Hawkstone agreed to provide management and administration services to Australian Reliance Group.
Paragraph 64 of the counterclaim pleads charges raised by Hawkstone for services provided under that agreement and payments by Australian Reliance Group of a portion of those charges. The pleading as it stood before the latest amendment sought payment of the balance due. Paragraph 65A reads as follows:
The amount Hawkstone charged for the Services as pleaded in paragraph 64 above is less than the amount it is entitled to be paid for the Services pursuant to the term of the Management and Services Agreement pleaded in paragraph 62(b) above.
Objection is taken to this paragraph on the basis that it pleads the conclusion that the amount charged for services was less than the amount that the third defendant was entitled to be paid. But no facts are pleaded in support of the conclusion and no detail is provided as to the amount Hawkstone alleges it was entitled to be paid. They are matters of particulars which the pleading foreshadows will be provided after discovery. There is nothing objectionable about the plea, and there is no reason why par 65A of the pleading should not be permitted to stand.
Conclusion
Paragraphs 35 and 36A should be struck out with leave to re‑plead those paragraphs. The application to strike out the further re‑amended defence and counterclaim should otherwise be dismissed.
Application in relation to Mr Donnelly's defence
The plaintiffs applied to strike out par 13(f), 13(g) and 13(i) and par 49(b)(i) of Mr Donnelly's defence. On 18 April 2018, Mr Donnelly's solicitors filed a minute of proposed first defendant's re‑amended defence. That document, which I take to have been filed pursuant to O 20 r 3 of the Rules, amended Mr Donnelly's defence by striking out par 13(f), 13(g) and 13(i). The plaintiffs' application in relation to those paragraphs therefore falls away.
Like par 24, 25 and 26 of Hawkstone's defence and counterclaim, par 49 of Mr Donnelly's defence responds to par 52 to 63 of the statement of claim. Paragraph 49(b)(i) pleads the understanding under which the lease was executed. Paragraph 49(b)(ii) pleads that by reason of that understanding, an implied agreement between Hawkstone and Australian Reliance existed. The plaintiffs' objection to par 49(b)(i) essentially reflects the objections taken to the corresponding paragraphs of Hawkstone's defence which I have rejected above. For the same reasons, par 49(b)(i) of Mr Donnelly's defence should not be struck out.
The application to strike out paragraphs of the first defendant's defence should be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TS
ASSOCIATE TO THE HONOURABLE JUSTICE CHANEY27 JUNE 2018
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