Wake v Ng - [2010] SASC 144

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
WAKE v NG & ORS
[2010] SASC 144
Reasons of Judge Burley a Master of the Supreme Court
19 May 2010
PROCEDURE
PRACTICE
Applications by defendants to dismiss proceedings or strike out statement of claim prepared by unrepresented plaintiff - application for partial summary judgment - sufficiency of pleading - whether plaintiff should have additional opportunity to apply to amend - plaintiff willing to obtain legal advice.
Supreme Court Civil Rules 2006 rr 104, 193, 232, referred to.
Danae Investment Trust PLC & Anor v Macintosh Nominees Trust PLC & Anor (1993) 61 SASR 341; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, applied.

WAKE v NG & ORS
[2010] SASC 144

JUDGE BURLEY. The defendants have made various applications which, in broad terms, seek orders dismissing the claims made against each of them by the plaintiff or, alternatively, to strike out the statement of claim of the plaintiff. I shall give brief details of each application in the chronological order in which they were made.
The first application (FDN 9) was filed on 22 January 2010 by the sixth defendant, Mr Robinson. By paragraph 1 he seeks an order pursuant to Rule 193 of the Supreme Court Civil Rules 2006 dismissing the plaintiff’s claim because, he asserts, the statement of claim discloses no reasonable cause of action against the sixth defendant. In the alternative, Mr Robinson seeks an order pursuant to Rule 104 that the statement of claim be struck out insofar as it purports to plead a case against the sixth defendant. The scope of both rules includes a pleading which is said to disclose no reasonable cause of action. The former permits an order dismissing the claim; the latter is confined to striking out the offending pleading.
I mention also r 129 which prohibits the making of an interlocutory application before closure of a settlement conference. No point was taken by the plaintiff that the various applications were made before the closure of a settlement conference but, in any event, I am satisfied that it was appropriate to deal with the applications at this stage in order to avoid prejudice to the defendants. In my opinion this matter, as presently pleaded, could not properly proceed to a settlement conference because of the uncertainty about whether or not the plaintiff has pleaded his case adequately.
The second application (FDN 16) was made by the seventh defendant, Mr Lesicar. He has sought orders dismissing the proceedings against him or, alternatively, an order that the summons and statement of claim be struck out as against him. He relies on rr 193 and 232. The latter permits a summary disposal of proceedings. In that regard reliance was placed on the affidavit of Mr Lesicar sworn on 5 February 2010 (FDN 17).
The third application (FDN 18) was made by the first defendant, Mr Ng. He sought orders dismissing the plaintiff’s claim pursuant to r 193 or, alternatively, striking out the statement of claim pursuant to r 104.
The fourth application (FDN 21) was made by the fourth defendant, Mr Smith. Like the other applications, Mr Smith sought orders dismissing the plaintiff’s claim or, alternatively, striking out the statement of claim. Reliance was placed on rr 193 and 104.
The fifth application (FDN 23) was made by the second and third defendants, Mr P Y Lee and Mr W T Lee. By their application these defendants applied for various orders including dismissal of the action pursuant to r 193 or, alternatively, an order striking out the amended statement of claim. The defendants also asked for summary judgment pursuant to r 232, but that application was not pursued. A stay was sought in the alternative pursuant to r 192, but that application was also not pursued.
The sixth and final application was made by the fifth defendant, Mr Wright. He sought orders dismissing the plaintiff’s claim or, alternatively, striking out the statement of claim. He also sought particulars but that application was not pursued. Reliance was placed on rr 193 and 104. Mr Wright, in addition, invoked r 232, but the application for summary judgment was not pursued.
All of the parties, except for the fourth defendant, filed written submissions. The fourth defendant relied upon the written submissions of the second and third defendants and was represented by Mr Ross-Smith at the hearing, who also appeared for the second and third defendants.
The original statement of claim was filed with the summons on 11 December 2009. This was followed by correspondence from some of the defendants’ solicitors asserting that the pleading was defective. The first three applications were made, respectively on 22 January 2010 and 5 and 16 February 2010. On 18 February 2010 the plaintiff filed an amended statement of claim (FDN 20). The fourth, fifth and sixth defendants’ applications were made in early March 2010.
The applications were set down for hearing on 4 May 2010. On 3 May 2010 the plaintiff filed written submissions (FDN 33) to which was attached a draft second amended statement of claim. I shall refer to FDN 20 as the “first ASOC” and to the draft further amended statement of claim as the “second ASOC”.
The first three applications were directed to the original statement of claim. The other three applications were directed to the first ASOC. By the time written submissions were filed by the defendants, the first ASOC had been filed and consequently, all of the written submissions were directed towards the first ASOC.
When the matter was called on for hearing on 4 May 2010, I suggested to the parties that, insofar as the applications dealt with the first ASOC, submissions be confined to the written submissions. In addition, I suggested that, because the plaintiff wished to obtain leave to file the second ASOC, I should entertain an oral application to that effect and deal with it in conjunction with the six applications before me. To that extent, I would hear the oral submissions of each of the defendants as to the sufficiency of the second ASOC to be followed by the plaintiff’s submissions in support of his application for permission to file that document. If necessary, further submissions in reply from the defendants could be put. The parties agreed to proceed on that basis. This meant that the plaintiff would not resist an order striking out the first ASOC because, by seeking permission to file a second ASOC, he must be taken to have conceded the insufficiency of the first ASOC. However, he resisted an order dismissing the proceedings against the defendants pursuant to r 193. Thus, on the applications of the first to sixth defendants the only matter for determination is whether or not the Court should proceed to an order dismissing the proceedings against those defendants instead of limiting the order to one by which the first ASOC was struck out. As to Mr Lesicar’s application, the matters falling for determination consisted of his application pursuant to r 232 for summary disposal of part of the plaintiff’s claim against him and, in relation to the balance of the claim, whether or not there should be an order for dismissal of the balance of the proceedings pursuant to r 193 or an order striking out the balance of the proceedings pursuant to r 104. In order to make it clear, in the event that I decline to make an order pursuant to r 232, what remains to be determined on Mr Lesicar’s application is the same as for the other five applications.
As to the determination of the oral application by the plaintiff for leave to file a second ASOC, that application must be determined before the defendants’ applications because, if I permitted the plaintiff to amend yet again, I could not proceed to a dismissal of the proceedings other than the partial dismissal sought by Mr Lesicar pursuant to r 232.
It is also necessary to deal with Mr Lesicar’s application pursuant to r 232 first because it has been made irrespective of the alleged insufficiency of the first ASOC. Put another way, if I proceeded to strike out the first ASOC there would be no pleading by reference to which a partial summary judgment could be granted. In addition, even if I dealt with Mr Lesicar’s application pursuant to r 232 by reference to a second ASOC (assuming that I gave permission to file the same), the result of the summary judgment application would not be affected by the change in the pleading because the matters the subject of the summary judgment application are essentially the same in both forms of the pleading.
I turn now to the first and second ASOC bearing in mind that the sufficiency of a pleading is to be determined by reference to the pleading and not by reference to extrinsic evidence[1] . The plaintiff contends that he was the sole inventor and owner of a number of inventions which became the subject of patent applications. He asserts that he was a shareholder and director of the company called Vinsonics Pty Ltd and an unpaid consultant to a company called Soniclean Pty Ltd. The first, second and third defendants were directors and shareholders of Soniclean but not of Vinsonics. The fifth defendant was a director and shareholder with the plaintiff in Vinsonics. The sixth defendant is described as having been an adviser to the first defendant and to Soniclean. The seventh defendant was a patent attorney who prepared and lodged patent applications in respect of the inventions of which the plaintiff claims he is the sole owner. The plaintiff says that the seventh defendant failed to name him as the sole inventor in the applications. In broad terms, the plaintiff asserts that the first to fifth defendants conspired to give an instruction to the seventh defendant to omit any reference to the plaintiff as an inventor in order to defeat the plaintiff’s claims to the inventions. This aspect of the claim may conveniently be called the “conspiracy claim”.
[1] See cases referred to at paragraph [6R 104.55] of Civil Procedure South Australia.
In addition the plaintiff has asserted that the first to third defendants resolved to remove him as a director of Vinsonics and to transfer his shares in Vinsonics to Soniclean and to themselves. It is alleged that they wrongfully issued further shares in Vinsonics to Soniclean and themselves and that they wrongly appointed themselves as directors of Vinsonics. This may be conveniently referred to as the “resolutions claim”.
The plaintiff says that the first to third defendants passed the resolutions on the advice of the fourth to seventh defendants in the knowledge that the plaintiff was a sole inventor and owner of the inventions, the subject of the patent applications, and in the knowledge that the plaintiff had not agreed to resign as a director of Vinsonics or transfer his shares in Vinsonics to anyone else.
It is alleged that after these events the first to third defendants permitted the original patent applications to lapse. Next, allegedly on the advice of the fourth, fifth and seventh defendants, fresh patent applications were lodged in respect of the same inventions naming them as the inventors notwithstanding that they knew that the plaintiff was the sole inventor.
There are thus three aspects to the plaintiff’s claim: first, the lodgement of the original patent applications without noting the plaintiff’s interest as sole inventor; second, his removal as a director and shareholder of Vinsonics; and, third, the subsequent patent applications naming persons other than the plaintiff as inventors.
The plaintiff alleges that the first to fifth defendants contravened s 181, s 182(1), and s 183(1) of the Corporations Act 2001. He also alleges that all of the defendants were persons involved in contraventions of those sections because they aided, abetted, counselled or procured or were directly or indirectly knowingly concerned in the contraventions by the first to fifth defendants.
Finally, the plaintiff asserts that the defendants committed fraud or equitable fraud against the plaintiff.
I turn now to Mr Lesicar’s application for judgment pursuant to r 232. The order sought was detailed by Mr Doyle during the course of his submissions. He said[2] that the judgment would be:
… that the plaintiff’s claims for relief, either pursuant to knowing involvement in a breach of ss 181 through 183 of the Corporations Act insofar as they relate to the resolutions referred to in para 9I or the lodgement of documents referred to in 9J, together with the claims against the seventh defendant, the subject of paras 30 and 31 of the second amended statement of claim be dismissed with costs.
[2] T 69/17.
In explanation Mr Doyle said[3]:
[The order] picks up the common law and equitable causes of action in their entirety and the director’s duties and actions, insofar as they relate back to the resolutions or the lodgement of documents.
[3] T 69/26.
I take that to mean that the judgment is confined to the cause of action alleged against the seventh defendant based on his involvement with “the resolutions” aspect of the plaintiff’s claim.
In support of the application for summary judgment, Mr Doyle referred to his client’s affidavit (FDN 17) sworn on 5 February 2010. It is to the effect that his speciality is as a patent and trade mark attorney. He does not give corporate advice to corporations. In particular he has never advised Soniclean in relation to its corporate structure or ownership or otherwise. He has never acted for or been an adviser to Vinsonics although, on the instructions of Soniclean, he filed a trade mark and provisional applications in the name of Vinsonics and, again on instructions from Soniclean, he filed a trade mark in the name of Vinsonics. He has never been an adviser to the directors of either Vinsonics or Soniclean nor has he given Vinsonics or its directors or Soniclean advice about the corporate structure and ownership in relation to those companies or otherwise.
In relation to the pivotal allegation in the statement of claim about lodgement of documents with ASIC[4], Mr Lesicar stated that he had no knowledge of the creation or lodgement of documents with ASIC relating to the change in structure of Vinsonics.
[4] See para 9I to para 10 first ASOC.
The plaintiff has not filed affidavit material in opposition to Mr Lesicar’s application for summary judgment. Mr Doyle submitted that, in the absence of such material, it was open to me to decide the point summarily and to enter partial judgment as sought. I asked the plaintiff whether he wished to file affidavit material in opposition to Mr Lesicar’s application, having explained to the plaintiff that if he did not adduce, by way of affidavit, evidence challenging the statements made by Mr Lesicar in his affidavit, he ran the risk of having a partial summary judgment entered against him. I gave the plaintiff the opportunity to consider his position. When he had done so he informed me that he wished to adduce such evidence. It would comprise an affidavit of his own together with an affidavit of a Mr Mark Lomman.
Having heard what the plaintiff has said in relation to the evidence that he would like to adduce[5], I have had to consider whether it is appropriate for me to entertain and deal with the summary judgment application forming part of the seventh defendant’s application. Although I did not specifically cover with the plaintiff this point, I am quite sure that, prior to the hearing, he did not realize that he would have to answer the summary judgment application by calling evidence to support the relevant contentions in his pleading, whatever form it took. In those circumstances, I think it would be unfair to deal with the summary judgment application of the seventh defendant given that it has been included within six other applications by seven defendants for orders for dismissal of the claim or striking out of the pleading. I have arrived at this conclusion even though I am far from satisfied that the plaintiff would be able to adduce evidence sufficient to rebut the seventh defendant’s contention that he is entitled to partial summary judgment. In declining to deal with the application now, I make it plain that, if the plaintiff’s claim against the seventh defendant is not otherwise dismissed, it is open to the seventh defendant to make such an application, provided that the order sought is clearly set out and the nature and extent of the evidence relied upon by the seventh defendant is made known to the plaintiff. It follows from this decision that I will only deal with the seventh defendant’s application to the extent that he relies upon rr 104 and 193.
[5] See T 89-90.
I turn now to the six applications which seek either a dismissal of the proceedings against the individual defendants or an order that the first amended statement of claim be struck out. As mentioned earlier, I have to bear in mind the interrelationship between these applications and the application for leave to amend. Even though it is clear that the first ASOC must be struck out, there still falls for decision whether I should proceed to a dismissal of the proceedings against each of the defendants or whether I should permit the plaintiff to file the second ASOC. In addition, even if I were to refuse such permission, the question arises as to whether or not I should give the plaintiff yet another opportunity to apply for permission to amend instead of proceeding to a dismissal of the proceedings.
In setting out my views as to the sufficiency of the first and second ASOC, it is not necessary to descend into detail. It is clear to me that the first ASOC remains a fundamentally flawed pleading. The defects of which are not cured by the second ASOC. In each, the reliance upon s 181, s 182 and s 183 of the Corporations Act is misplaced. Those sections refer to duties which are owed to the company and not to the parties.[6]
[6] See ASIC v Maxwell (2006) 59 ACSR 373 at [104] and Spies v The Queen (2000) 201 CLR 603.
Secondly, the majority of the statement of claim makes allegations in relation to the defendants or some of them without attempting in any way to attribute (or provide material facts of) the behaviour of individuals in relation to the various causes of action relied upon.
Thirdly, when it comes to linking the previous allegations with various causes of action and the sustaining of damages, the first and second ASOC each make the general assertion that fraud at common law and in equity has been perpetrated, the consequences of which has given rise to damages, but the causation and details of which are completely unspecified.
These are fundamental defects common to the first and second ASOC. As such, the former should be struck out and the latter should not be permitted to be filed.
In light of that conclusion, I must next decide whether the proceedings should be dismissed against each of the defendants or whether the plaintiff should be given a further opportunity to apply to amend. The Court has a discretion to permit such an application to be made[7].
[7] See Danae Investment Trust PLC & Anor v Macintosh Nominees Trust PLC & Anor (1993) 61 SASR 341; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
During the course of submissions I asked the plaintiff whether, if his current application for permission to amend were refused, he would seek a further opportunity to make an application for permission to amend and, if so, whether he would retain the services of a solicitor to advise him. He answered ‘yes’ to both of those questions. Although he was not asked to provide, nor did he give, an undertaking to do these things, I expect that he would seek legal advice as to whether or not he has available to him causes of action against one or more of the defendants in respect of which the available proof may be sufficient to justify the continuance of these proceedings in an amended form.

As against that, I need to consider the interests of the defendants who, to date, have been joined in the proceedings where the allegations made against them are by no means clear. Should they be subjected to further inconvenience and expense in relation to yet another application for permission to amend the statement of claim? In my opinion, subject to a condition to which I will shortly refer, I think the proper balance is struck by giving the plaintiff, if he is prepared to comply with the condition which I intend to set, the further opportunity to apply for permission to amend his statement of claim.
The condition I have in mind is that the plaintiff first pay the respective defendants’ costs of and incidental to these proceedings to date (on a party/party basis) within a specified time. Those costs would include any costs thrown away incurred by the defendants in relation to the defective statements of claim that have been filed or (in the case of the second ASOC) proffered. The quantum of the costs should be agreed but if not agreed, adjudicated upon by the Court. This course seems an appropriate course to take instead of dismissing the proceedings with costs.
The plaintiff is under no obligation to accept the condition imposed, but if it is not accepted, or, if accepted, it is not complied with, I will proceed to a dismissal of the proceedings against the defendants pursuant to r 193.
On the adjourned occasion I will hear the plaintiff as to whether or not he is able to and prepared to accept the condition referred to by me.