Vasilis Floros Moshos v Kenneth Geoffrey French

[2014] NSWSC 549

Supreme Court

New South Wales

Medium Neutral Citation:	Vasilis Floros Moshos v Kenneth Geoffrey French [2014] NSWSC 549
Hearing dates:	6 May 2014
Decision date:	08 May 2014
Jurisdiction:	Equity Division
Before:	Darke J
Decision:	The order for separate hearing does not require the Court in the initial hearing to determine whether a decree of specific performance should be made.
Catchwords:	PROCEDURE - civil - order for separate questions - separation of liability from balance of proceedings - meaning of "liability" for purpose of order
Legislation Cited:	Competition and Consumer Act 2010 (Cth), Schedule 2 Uniform Civil Procedure Rules 2005 (NSW), r 28.2
Category:	Procedural and other rulings
Parties:	Vasilis Floros Moshos (plaintiff) Kenneth Geoffrey French (first defendant) Local Appliance Rentals Pty Ltd (second defendant)
Representation:	Counsel: Mr T M Jucovic QC (plaintiff) Mr M Cashion SC, Mr J Baird (defendants) Solicitors: Kings Law Group (plaintiff) Kosmin & Associates (defendants)
File Number(s):	2013/290093
Publication restriction:	Nil

Judgment

1. These proceedings were commenced by Statement of Claim filed on 25 September 2013. The defendants filed a Defence on 14 November 2013. In essence, the proceedings concern the question whether the plaintiff and the first defendant reached a binding agreement in 2007 pursuant to which the first defendant became obliged to transfer to the plaintiff 50% of his shares in the second defendant.

1. On 21 January 2014, the plaintiff filed a Notice of Motion which sought, in prayer 1, the following order:

"That there be a separate hearing on liability under r 28.2 of the UCPR".

1. On 28 February 2014, an order was made in those terms by the Applications Judge.

1. On 5 March 2014, the matter was set down for hearing before me on 5 and 6 May 2014. What follows are my reasons for deciding, on 6 May 2014, that the order for separate hearing did not require the Court, in this hearing, to determine whether the plaintiff ought obtain a decree of specific performance in the event that a binding contract is found to exist.

1. On the first day of the hearing, I raised with counsel a concern that, in the context of the relief claimed in the case, there was some ambiguity in the order for separate hearing arising from the use of the term "liability". I said that it might be necessary for the existing order to be varied in order to provide clarity as to what the separate question or questions are. The matter was left with counsel to formulate a suitable variation. Later on that day, Mr Jucovic QC, who appears for the plaintiff, stated that he would provide to the Court a document which would set out what the plaintiff wants determined as part of the hearing on "liability". Such a document was provided to the Court shortly prior to the end of the first day of the hearing.

1. The document provided by Mr Jucovic made reference to the relief as claimed in the Amended Statement of Claim which was filed in Court on the first day of the hearing and contained the following:

"The hearing is concerned with the liability of the first defendant to orders 1, 2, 4, 5 and 11 of the relief claimed in the amended statement of claim.

Orders 3, 6 and 7 are for separate determination.

Paragraph 1 of the relief is amended by deleting 'interlocutory'.

Orders 8, 9 and 10 are not pursued."

1. Order 1, as sought, is an injunction restraining the first defendant from dealing with his shareholding in the second defendant. Orders 2, 4, 5 and 11 are in the nature of orders for specific performance. Orders 3, 6 and 7 are for monetary relief, namely, damages for breach of contract, an account, and equitable damages. Orders 8, 9 and 10 concern a claim which the plaintiff had made for damages or other relief under Schedule 2 of the Competition and Consumer Act 2010 (Cth) ("the Australian Consumer Law") in respect of misleading or deceptive conduct.

1. The matter was then left on the basis that Mr Cashion SC, who appears with Mr Baird of counsel for the defendants, would consider the document and respond on the following day.

1. On the second day of the hearing, Mr Cashion indicated that if the hearing was to be concerned with the question whether the plaintiff should obtain a decree of specific performance, then the defendants wished to amend the Defence to plead that such relief should not be ordered on discretionary grounds. These grounds were identified as:

"(a) the delay between the time the alleged agreement was made and the time the Statement of Claim was filed and/or the date of the hearing and/or the time the order for specific performance would otherwise be made;

(b) the uncertainty as to events that would or might have occurred during those periods;

(c) the change in the business and the worth of the second defendant during those periods through the efforts of the first defendant, Megan Perston and others, but not the plaintiff;

(d) the fact that an order for specific performance is likely to place the plaintiff and the first defendant in a position of conflict and deadlock within the second defendant."

1. Mr Jucovic, after obtaining instructions, opposed the making of the proposed amendments. He submitted that it raised matters which ought to have been specifically pleaded, and indeed raised factual matters which had not been investigated. He stated that the amendments would put in jeopardy the order for separate hearing, and that any postponement of the hearing would be opposed on the basis of the plaintiff's limited financial resources.

1. I proffered a suggestion that the initial hearing be limited to the issues of whether there is a binding agreement and if so on what terms, and whether there is a trust and if so on what terms. It seemed to me that this limitation was appropriate given the ambiguity in the order for separate hearing. Moreover, it would allow all issues concerning specific performance to be fully considered, if necessary, at a later hearing. Mr Jucovic stated that whilst that course had a superficial attraction, there were difficulties associated with it, including a risk of inconsistent findings, and that it would not provide any sense of finality. The submission concerning the risk of inconsistent findings was not further developed, and I cannot see how the suggested limitation would bring about any increase in such risk.

1. Mr Cashion submitted that the order for separate hearing seemed to confine the initial hearing to questions of contract and breach, and trust and breach, leaving all questions of remedy for another day. He submitted that the appropriate course was to limit the scope of the initial hearing as I suggested (with the qualification that the questions of whether any breach of contract or trust has occurred should also be included). Mr Cashion submitted that there was never going to be any finality achieved by the order for separate hearing unless, of course, his clients were successful. Mr Cashion also stated a compromise position, namely, that if the scope of the hearing extended to the question whether specific performance should be ordered, then it might be possible for that to proceed with only some of the proposed amendments being allowed. He accepted that it was necessary for the defendants to specifically plead the matters they relied upon as discretionary factors against a decree of specific performance.

1. Mr Jucovic submitted in reply that the word "liability" in the order for separate hearing should be given its ordinary meaning, and that it meant liability for the relief claimed as set out in the document which he had provided to the Court. Accordingly, he submitted that the Court could determine the question of specific performance in this hearing, but any questions of quantification would be dealt with on another day. On that basis, if the plaintiff was successful, there would be finality apart from issues of quantification. The Court was urged not to reshape the order for separate hearing, but to construe it in its context and give effect to it.

1. That submission led to a discussion concerning the circumstances in which the order was made. The order was sought by the plaintiff in a Notice of Motion filed on 21 January 2014 which was supported by the plaintiff's affidavit sworn on 26 December 2013. It is undoubtedly the case that the affidavit reveals a concern on the plaintiff's part to separate any hearing on damages from any hearing on liability. However, the affidavit is silent as to the claim for specific performance, and in paragraph 11 it is deposed:

"... I believe that a hearing on liability of the defendants would consume one (1) to two (2) days of hearing before the court. The evidence would be limited to conversations, meetings and documents associated with a discrete period from late 2007 to mid-2008."

1. It is true, as Mr Jucovic stated, that by that stage the pleadings had closed, and there was no specific defence raising discretionary bars to an order for specific performance. However, written submissions of counsel then appearing for the plaintiff included the following at paragraphs 2 and 3:

"2 The question of liability in these proceedings can be formulated, relatively simply, as follows:

i Is the First and/or Second Defendant in breach of the terms of any contract with the Plaintiff? In the alternative,

ii Is the First and/or Second Defendant in breach of the terms of any trust with the Plaintiff? In the alternative,

iii Has the First and/or Second Defendant engaged in conduct that is misleading or deceptive with respect to the Plaintiff within the meaning of s 18 of the Australian Consumer Law?

3 The determination of these questions will enable the Court to determine what relief is to be consequently ordered (if any). If liability is established on the part of the Defendant(s), the Plaintiff seeks damages accordingly, in addition to any other applicable relief."

1. Reference should also be made to paragraphs 26 and 27 of the written submissions which are in these terms:

"26 Liability and quantum in this case are wholly distinct questions in the sense that the evidence in relation to liability and that in relation to quantum will come from entirely different sources. That is, whereas evidence in relation to quantum will likely come from financial documentation (tax records etc) and financial experts, evidence in relation to liability will likely come from natural persons and non-financial documentation (emails etc).

27 It is submitted that there will not be any overlap, let alone significant overlap as referred to in Southwell at [15(o)], between the evidence to be adduced on the hearing of the separate question of liability (arising from breach of any contract found to exist, breach of any trust found to exist and/or misleading or deceptive conduct found to have taken place), and the evidence at a subsequent hearing, if any, in relation to the question of quantum of loss arising from any such breach or contravention."

1. It seems to me that, as the matter was presented to the Court on 28 February 2014, the notion of "liability" was confined to the issues identified in paragraphs 2 and 3 of the plaintiff's written submissions. There was then no specific defence directed to the claim for specific performance, but the first defendant had sworn an affidavit in which it was pointed out that since the time of the making of the alleged agreement, more than five years had passed without any contact from the plaintiff.

1. In my view, the word "liability" in the order for separate hearing should be construed as including all issues going to whether the plaintiff has established conduct on the part of the first defendant (viz breach of or failure to perform any contract, breach of or failure to perform any trust, or engaging in misleading or deceptive conduct) for which the first defendant may be liable, whether in damages or otherwise.

1. In circumstances where the claimed relief extended beyond damages to specific performance, account, and other relief under the Australian Consumer Law, "liability" should be read in contradistinction to questions of relief generally, not merely to questions of damages or quantification. That construction is supported by the manner in which the application for the order was presented to the Court by the plaintiff.

1. Accordingly, I take the word "liability" in the order for separate hearing as including the following issues:

(a)   whether the plaintiff and the first defendant entered into a binding contract as alleged, and if so, on what terms;

(b)   whether the first defendant is in breach of any such contract;

(c)   whether any trust was created in respect of the first defendant's shares in the second defendant as alleged, and if so, on what terms; and

(d)   whether the first defendant is in breach of any such trust.

1. It is for those reasons that on 6 May 2014, I decided that, on the proper construction of the order for separate hearing, the Court is not required, in this initial hearing, to determine whether the plaintiff ought obtain a decree of specific performance in the event that a binding contract is found to exist.

1. In those circumstances, it is not necessary that the defendants' application for leave to amend be dealt with immediately. The defendants may, however, renew their application at a convenient time. As presently advised, there seems no reason why the defendants should not have leave to amend the Defence to raise discretionary defences to the claim for specific performance. It is clear, given the considerable delay between the assertion of the contract by the plaintiff and the institution of the proceedings, that such defences are at least arguable. These are, of course, only preliminary views, and I will hear full argument on the question if the grant of leave to amend is opposed.

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Decision last updated: 08 May 2014