Westpac v Lee
[2020] VSC 291
•22 May 2020
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT COMMERCIAL LIST – DIGBY J | Not Restricted |
S ECI 2019 5783
| WESTPAC BANKING CORPORATION (ABN 33 007 457 141) | Plaintiff |
| v | |
| ANDI TUAN LEE & ORS | Defendants |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 22 May 2020 |
CASE MAY BE CITED AS: | Westpac v Lee |
MEDIUM NEUTRAL CITATION: | [2020] VSC 291 |
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PRACTICE AND PROCEDURE – Application to strike out Statement of Claim – Plaintiff’s foreshadowed intention to amend its Statement of Claim and application for time to amend – Civil Procedure Act 2010 (Vic), ss 9 ,47 (1), (2), (3) and 48(1) and (2) – Supreme Court (General Civil Procedure) Rules2015 (Vic), r 23.02, r 36.04.
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The papers:
Second, Third and Fourth Defendants’ material
• Summons dated 2 April 2020
• Affidavit of Miranda Ellen Bordignon affirmed 26 March 2020 and exhibit
• Submissions dated 9 April 2020, 27 April 2020 and 11 May 2020
Eighth Defendant’s material
• Summons dated 6 April 2020
• Affidavit of Catherine Chiaw Yee Tan affirmed 3 April 2020 and exhibit
• Submissions dated 9 April 2020, 30 April 2020 and 11 May 2020
Plaintiff’s material
• Submissions dated 24 April 2020 and 8 May 2020
Affidavit of Colin Almond sworn 11 May 2020
HIS HONOUR:
The Applications
By Summons dated 2 April 2020 issued by the second, third and fourth defendants (the Phan defendants) and Summons dated 6 April 2020 issued by the eighth defendant (AJ&J) (collectively, the applicant parties), orders are sought striking out Westpac Banking Corporation’s (the plaintiff) Statement of Claim dated 25 February 2020 (the Statement of Claim) pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules2015 (Vic) (the Rules).
Notified to the defendants by its submissions the plaintiff applies to adjourn the defendants’ strike out applications and the plaintiff also applies for leave to further amend its statement of claim in these proceedings.
Background
It is only necessary to set out the background of this proceeding insofar as it is required to understand the applicant parties’ present applications and the considerations relevant to the preferable interlocutory course at this juncture.
The relevant background facts are in summary as follows:
(a) The plaintiff is a duly incorporated entity trading as Westpac Banking Corporation, St Georges Bank and Bank of Melbourne (BOM).[1]
[1]Affidavit of Rebecca Wong, 18 December 2019 (First Wong Affidavit), [1].
(b) Andi Tuan Lee (the first defendant) was at all material times an employee of the plaintiff, having been employed by the plaintiff since 2 August 2010 including as branch manager at the Bank of Melbourne Westfield Doncaster Shopping Centre branch since 30 May 2013.[2]
[2]Ibid [6].
(c) The Phan defendants consist of:
(i) Nguyen Thuy Doung Phan (the second defendant), married to the first defendant, and sole director, shareholder, and secretary of the third defendant;
(ii) GP.Han Pty Ltd (the third defendant) a duly incorporated entity and owner and operator of a business selling gelato under the name ‘Ca-Rem Gelato Society’; and
(iii) Linh Chi Le (the fourth defendant) sister of the first defendant, employee of the third defendant, past employee of the plaintiff since on or about 27 May 2019, and registered proprietor of the property situate at Unit 301, 8 Hepburn Road, Doncaster (Hepburn Road Property).[3]
[3]Ibid [7]–[14].
(d) The eighth defendant, AJ&J Pty Ltd, is the registered proprietor of the property at 11 Thiele Street, Doncaster (Thiele Street Property).[4]
[4]Ibid [26].
(e) The fifth, sixth, seventh, and ninth defendants have not filed material in response to the applicant parties’ applications, nor sought orders striking out the plaintiff’s Statement of Claim.
(f) The plaintiff alleges that between 2 August 2010 and 5 December 2019, during his employment with the plaintiff the first defendant misappropriated funds from the plaintiff, and distributed the funds to various people and companies associated with him, including the applicant parties,[5] broadly in the following tranches:
[5]Ibid [5].
(i) ‘First 2015 Misappropriation’: On 1 April 2015 to 2 April 2015 the first defendant caused $350,000 to be wrongfully transferred from an account held for the benefit of a BOM customer unrelated to the defendants (Customer 1). This was ultimately transferred to an account held by the sixth defendant;
(ii) ‘Second 2015 Misappropriation’: On 19 August 2015 the first defendant caused $500,000 to be wrongfully transferred from an account held in the name of a BOM customer unrelated to the defendants (Customer 2) to an account wrongfully created and controlled by him;
(iii) ‘Third 2015 Misappropriation’: On 19 August 2015 the first defendant caused $500,000 to be wrongly transferred from an account held in the name of Customer 1 to an account held in the name of the fifth defendant;
(iv) ‘2017 Misappropriation’: On 19 August 2015 the first defendant caused $1,500,000 to be wrongfully transferred from a joint account held in the name of a BOM customer unrelated to the defendants (Customer 3) to an account wrongfully created and controlled by him;
(v) ‘2018 Misappropriation’: On 7 June 2018 the first defendant caused $500,000 to be wrongly transferred from an account held in the name of Customer 1 to an account wrongfully created and controlled by him;
(vi) ‘2019 Misappropriation’: On 29 April 2019 the first defendant caused $1,200,000 to be wrongly transferred from an account held in the name of a BOM customer unrelated to the defendants (Customer 4) to an account wrongfully created and controlled by him.
(g) On 2 December 2019 the first defendant was arrested and charged with obtaining financial advantage by deception and dealing with the proceeds of crime in relation to the alleged misappropriation of funds. The first defendant has since been charged with further offences in relation to the alleged conduct.
(h) By its Writ and Indorsement of Claim dated 18 December 2019, the plaintiff initiated proceedings for relief against the first to eighth defendants. By Summons of the same date the plaintiff also sought freezing orders on an ex parte basis against the assets of the first to eighth defendants.
(i) In relation to the present pleading and interlocutory management issues the plaintiff relies upon the urgency with which, in these circumstances, it issued its proceedings and applied to secure any future judgment in these proceedings, by obtaining freezing orders.
(j) Freezing orders were made substantially in terms sought by the plaintiff on 18 December 2019, as varied on 23 December 2019, 24 December 2019, 3 February 2020, 14 February 2020 and 30 March 2020.
The Court has been advised that the first defendant does not intend to defend the present proceedings and consents to judgment being entered against him.[6]
[6]Affidavit of Thomas Li, 20 December 2019, [3]-[6] and Exhibit ‘TFL-1’.
Substantive relief sought by the plaintiff
The plaintiff’s Statement of Claim seeks the following relief against the Phan defendants:
(a) an order for the freezing of the Phan defendants’ property;
(b) an order that the Phan defendants forthwith pay to the plaintiff all the moneys held by them personally or in any bank account with respect to the misappropriated funds;
(c) a declaration that the fourth defendant holds the Hepburn Road Property on trust for the plaintiff;
(d) an order directing the second defendant to pay the plaintiff the sum of $1,700,000, or such other sum as the Court deems fit;
(e) an order directing the third defendant to pay the plaintiff the sum of $1,700,000, or such other sum as the Court deems fit;
(f) an order directing the fourth defendant to pay the plaintiff the sum of $3,550,000, or such other sum as the Court deems fit.
The plaintiff’s Statement of Claim seeks the following relief against AJ&J:
(a) an order for the freezing of AJ&J‘s property;
(b) an order that AJ&J forthwith pay to the plaintiff all the moneys held by it personally or in any bank account with respect to the misappropriated funds;
(c) a declaration that AJ&J holds one third equal share of the Thiele Street Property on trust for the plaintiff; and
(d) an order that AJ&J pay the plaintiff the sum of $140,500, or such other sum as the Court deems fit.
The plaintiff’s pleaded cause of action
In its Statement of Claim, the plaintiff relies on the following causes of action in its substantive claim for relief against the applicant parties:
Money had a received claim
(a) From about 12 April 2017, the plaintiff alleges that each of the first to ninth defendants, including the applicant parties, have ‘had and received’ part of the misappropriated funds. The receipt is alleged to have been ‘made under a mistake of fact’, namely:
(vii) ‘they were transfers that were authorised by Customer 1, Customer 2, Customer 3 and Customer 3’ (sic); and
(viii) ‘they were funds to which the defendants as transferor and/or transferee were entitled’.
Knowing involvement claim
(b) Each of the second to ninth defendants, including the applicant parties, is said to have been ‘involved’ in the breach by the first defendant of his statutory and common law duties owed to the plaintiff as an employee of the plaintiff.
Knowing receipt claim
(c) Each of the second to ninth defendants, including the applicant parties, is said to have knowingly received the ‘Plaintiff’s Trust Property’, being the misappropriated funds, and to be liable under the first limb of Barnes v Addy,[7] and hold the traceable proceeds on constructive trust for the plaintiff.
Assistance in breach of fiduciary duties
(d) Each of the Phan defendants is said to have knowingly assisted the first defendant in breach by him of the fiduciary duties he owed to the plaintiff, and therefore is liable to pay equitable compensation to the plaintiff in respect of any traceable proceeds.
[7](1874) LR 9 Ch App 244.
The present Applications
At the last return of the plaintiff’s freezing order application on 14 February 2020, the plaintiff sought leave to file and serve a statement of claim dated 11 February 2020. The Phan defendants opposed that course on bases including that the proposed statement of claim was materially deficient and did not disclose the case the defendants were required to answer.
Orders were made on 14 February 2020 requiring the plaintiff to file and serve an Amended Writ and Statement of Claim by 20 February 2020, extended nunc pro tunc to 26 February 2020. The plaintiff filed and served its Statement of Claim on 25 February 2020.
On 28 February 2020, the Phan defendants communicated with the plaintiff setting out their concerns in relation to the Statement of Claim, and inviting the plaintiff to proffer a form of proposed Amended Statement of Claim by 13 March 2020 which addressed their concerns.[8] AJ&J also communicated with the plaintiff in similar terms on 12 March 2020, asserting that the Statement of Claim in its current form is embarrassing, lacks particulars, and does not disclose a cause of action against AJ&J.[9]
[8]Affidavit of Miranda Bordignon, 26 March 2020 (Bordignon Affidavit), [6], Exhibit ’MEB-4’.
[9]Affidavit of Catherine Tan, 3 April 2020 (Tan Affidavit), [6], Exhibit ‘CT-1’.
Of particular concern to the applicant parties is that the plaintiff’s pleaded case against them should incorporate precise details which identify in respect of each relevant defendant the amount of, and the means by which, misappropriated sums were received by them.
On 20 March 2020 the plaintiff replied to the Phan defendants in substance stating that there were no proper grounds on which the Phan defendants could bring a strike out application in regards to the Statement of Claim.[10] The plaintiff also responded to AJ&J on this date in substance denying any deficiencies with the Statement of Claim and rejecting that there was any basis for the request that it agree to dismiss its claim against AJ&J.[11]
[10]Bordignon Affidavit, [7], Exhibit ‘MEB-5’.
[11]Tan Affidavit, [7], Exhibit ‘CT-2’.
On 25 March 2020 the Phan defendants replied to the plaintiff advising their position that the plaintiff had failed to adequately respond to the alleged deficiencies in the Statement of Claim, and notified the plaintiff that the Phan defendants would seek orders that the Statement of Claim be struck out.[12] On 27 March 2020 AJ&J also replied to the plaintiff reserving its right to make an application to strike out the Statement of Claim.[13]
[12]Bordignon Affidavit), [8], Exhibit ‘MEB-6’.
[13]Tan Affidavit, [8]–[9], Exhibit ‘CT-3’.
By Summonses dated 2 April 2020 (the Phan defendants) and 6 April 2020 (AJ&J) the applicant parties applied to strike out the plaintiff’s Statement of Claim.
By submissions dated 8 May 2020 the plaintiff in substance seeks an adjournment of the applicant parties’ Summonses of 2 April 2020 and 6 April 2020 to allow the plaintiff time to amend its Statement of Claim including by drawing on details from the expert forensic accountant’s report it has commissioned, including details as to how and where the misappropriated funds, the subject of its present Statement of Claim, were channelled to the relevant defendants. The circumstances of his retainer, and an outline of the scope and likely content of the plaintiff’s expert forensic accountant report, are addressed in the Affidavit of Colin Almond sworn 11 May 2020 (the Almond Affidavit), filed by the plaintiff.
Submissions of the applicant parties
The applicant parties submit defects in the Statement of Claim as follows:
Rolled up recipient defects
(a) material allegations of fact against multiple defendants are rolled up in such a way which does not permit the disentanglement of which relevant funds are alleged to have been received by each person referred to in the plaintiff’s pleading;[14]
[14]Phan defendants’ Submissions, 9 April 2020, [4], referencing [14], [24], [33], [34], [38], [43], [45], [50], [55], [56], [58], [60], [63] of Statement of Claim; AJ&J Submissions, 9 April 2020, [7]–[9] referencing [34], [44], [45], [46] of Statement of Claim.
Liability defects
(b) The existence of liability is pleaded in a conclusionary manner, and the legal basis for the obligation of the plaintiff to indemnify its customers should be fully pleaded;[15]
[15]Ibid referencing [23], [28], [29], [36], [41], [42], [51] of Statement of Claim.
Money had and received defects
(c) The plaintiff has failed to identify who, acting on its behalf, was mistaken as to the alleged authorisation of the transactions;[16]
[16]Ibid referencing [44] of Statement of Claim.
(d) The defendants cannot be liable to the plaintiff for money had and received, arising from the plaintiff’s mistake of fact, where it was not the plaintiff’s money that was misappropriated;[17]
[17]Ibid referencing [46], [56] of Statement of Claim.
(e) For relief to be available, the funds must have been transferred ‘under a mistake of fact’ and it is unclear how the plaintiff was relevantly mistaken;[18]
[18]AJ&J Submissions, 9 April 2020, [10] referencing [44], [45] of Statement of Claim.
Breach of duty defects
(f) The plaintiff has failed to identify the precise scope of the fiduciary duty owed by the first plaintiff which it seeks to rely upon;[19]
[19]Phan defendants’ Submissions, 9 April 2020, [4], referencing [48] of Statement of Claim.
(g) The allegations of breach of statutory duty under s 182(1) of the Corporations Act 2001 (Cth) and the ‘unspecified’ fiduciary duty have been rolled up in such a way that they do not identify the acts sought to be relied on to establish involvement in respect of each defendant for the purposes of the statutory duty, and whether this is to support a pleaded case of ‘knowing assistance’ under Barnes v Addy, or some other cause of action;[20]
[20]Ibid referencing [53], [55] of Statement of Claim; AJ&J Submissions, 9 April 2020, [11] referencing [53] of Statement of Claim.
(h) Furthermore, the plaintiff claims ‘loss and damage’ in respect of breach of fiduciary duty (or any involvement in such conduct) where only equitable remedies can be granted;[21]
[21]Ibid referencing [54] of Statement of Claim; AJ&J Submissions, 9 April 2020, [13] referencing [54] of Statement of Claim.
Knowing receipt defects
(i) The plaintiff has failed to particularise the source or the scope of the alleged fiduciary duties owed by the defendants to the plaintiff in respect of the ‘Plaintiff’s Trust Property’;[22]
(j) The plaintiff has failed to particularise the basis of its allegations that the defendants had the requisite ‘knowledge’ that either the property received was ‘trust property’ and, or in the alternative, that circumstances attendant on the transfer of that property made the transfer a breach of trust or fiduciary duty;[23]
[22]AJ&J Submissions, 9 April 2020, [16] referencing [56] of Statement of Claim.
[23]Phan defendants’ Submissions, 9 April 2020, [4], referencing [57], [58], [59], [60], [61], [64]–[68] of Statement of Claim; AJ&J Submissions, 9 April 2020, [18] referencing [57] of Statement of Claim.
Prayer for relief defects
(k) The amount which the plaintiff seeks from the relevant defendants bears no relationship to the amounts which appear to have been received by them.[24]
[24]Ibid referencing [G], [H], and [I] of Prayer for Relief, Statement of Claim.
I note that although accompanied by numerous additional attacks on the plaintiff’s Statement of Claim, as summarised above, it appears that the foremost and primary component of the Phan defendants, adopted by AJ&J, is the first of the Phan defendants’ pleading criticisms, namely that material allegations of fact against multiple defendants are rolled up in such a way which does not permit the disentanglement of which relevant funds are alleged to have been received by each person referred to in the plaintiff’s pleading.[25]
[25]Ibid referencing [14], [24], [33], [34], [38], [43], [45], [50], [55], [56], [58], [60], [63] of Statement of Claim; AJ&J Submissions, 9 April 2020, [7]–[9] referencing [34], [44], [45], [46] of Statement of Claim.
The plaintiff’s proposed course
In submissions filed 24 April 2020 the plaintiff has not substantially engaged with the applicant parties’ criticisms of its Statement of Claim but rather submitted that in order to appropriately amend its pleading it requires approximately a month from about four weeks from 11 May 2020[26] for the assistance of an independent expert report from a forensic accountant to further amend its Statement of Claim, including to plead the amount of, and the means by which, misappropriated sums were received by each of the defendants.[27] In such circumstances the plaintiff proposed the following course:
[26]Almond Affidavit, [23].
[27]Plaintiff’s Submissions, 24 April 2020, [2].
(a) given that pleadings have not yet closed, the plaintiff have leave to file an Amended Statement of Claim by 19 June 2020 pursuant to r 36.04 of the Rules following receipt by the plaintiff of the expert report from the forensic accountant;[28]
[28]Ibid [3].
(b) the applicant parties’ strike out application be adjourned for further directions until after the plaintiff has filed its foreshadowed Amended Statement of Claim;
(c) the forthcoming directions hearing on 15 May 2020 be vacated and refixed after 26 June 2020; and
(d) costs be reserved.
The applicant parties’ response to the plaintiff’s proposed course
The Phan defendants oppose the plaintiff’s proposed course and submit in substance that the plaintiff has now effectively abandoned its Statement of Claim. The Phan defendants further submit that the plaintiff has been on notice of the defects in the Statement of Claim since at least 28 February 2020, became the Phan defendants foreshadowed strike out application on this date. They also submit that the plaintiff was aware of the present pleading deficiencies before filing the Statement of Claim because the plaintiff was provided with the Phan defendants’ submissions prior to the inter partes freezing order hearing on 14 February 2020. The Phan defendants also note that on the return of the freezing order application on that day the Court suggested that the plaintiff pay attention to the applicant parties’ criticisms of its pleadings.[29] The Phan defendants also note that they have incurred significant costs in making the strike out application to date.[30]
[29]Phan defendants’ Submissions, 27 April 2020, [4].
[30]Ibid [3].
In these circumstances the Phan defendants submit that the plaintiff should not be permitted to prosecute its claims where its material allegations of fact are not appropriately pleaded, and it appears that the plaintiff is not in possession of evidence providing a proper basis for its material allegations of fact.[31]
[31]Ibid [3].
The Phan defendants submit that if the Court accepts that the plaintiff’s present Statement of Claim is deficient, that pleading should be struck out, and the Phan defendants should obtain an order that costs be taxed immediately.
The Phan defendants also submit that the plaintiff should be afforded an opportunity to provide its foreshadowed further Amended Statement of Claim, but on condition that prior to leave being granted the defendants should be given the opportunity to notify whether they object to the plaintiff’s further proposed Amended Statement of Claim by filing an Objection Notice, and if any defendant files such Objection Notice, the plaintiff should be required to make an application by Summons, with supporting affidavit and submissions, to file any further Amended Statement of Claim.
AJ&J opposes the adjournment of the applicant parties’ applications and submit that the plaintiff, by failing in any detailed way to resist the applicant parties’ pleading attack, has conceded that its Statement of Claim is defective. AJ&J add that this concession raises doubts as to whether the plaintiff’s present claim against AJ&J has a proper basis upon which it can be pleaded.[32]
[32]AJ&J’s Submissions, 30 April 2020, [3].
AJ&J however submit that it does not oppose the plaintiff having an opportunity to serve its foreshadowed Amended Statement of Claim, but in the interim submit that the plaintiff’s Statement of Claim should be struck out, and the plaintiff ordered to pay AJ&J’s costs of and incidental to the strike out application. AJ&J also submit for an order that its costs be permitted to be taxed immediately.[33] Finally, AJ&J submit that there be an order that the plaintiff pay its costs in connection with preparing, filing and serving its Defence in the proceeding on a ‘reservation of rights’ basis.
[33]Ibid [6].
Plaintiff’s further submissions dated 8 May 2020
The plaintiff submits that it requires the assistance of a forensic expert to be able to plead with precision how, where and to which of the relevant defendants the misappropriated funds were channelled. It has now retained Deloitte to provide this expert report and provide this assistance relevant to the progress of the Statement of Claim.[34]
[34]Almond Affidavit, [17]–[23].
The plaintiff says further that the applicant parties have had the benefit of the evidence of Ms Wong (including the First Wong Affidavit), and the applicant parties have not sought to rebut this evidence. The plaintiff also observes in its submissions that the applicant parties are able to further inform themselves from evidence and information known only to them as to the amount out of each misappropriation received by them. The plaintiff also submits that AJ&J denies receiving $140,500 from the 2017 Misappropriation for the deposit of the Thiele Street Property, yet fails to plead the source of these funds. The plaintiff further submits that as a result of logistical difficulties arising from the current COVID-19 restrictions, its personnel have been hampered and delayed in advancing the planned amendment of its pleadings and submits that its counsel have been unable to meet in conference with their instructors, or the forensic experts.
The plaintiff submits that in the circumstances it is appropriate that the court adjourn the applicant parties’ strike out Summonses until the plaintiff’s expert report is obtained, and the plaintiff has an opportunity to amend its statement of claim with the assistance of that report. The plaintiff submits that there is little utility in the Court determining the application, by striking out parts of the Statement of Claim under attack when this will result in the plaintiff seeking to file and serve the further pleading it has foreshadowed and a further summons being filed. Such an approach, the plaintiff submits, is inconsistent with the provisions of the Civil Procedure Act 2010 (Vic) and, in particular, s 9.
The plaintiff submits that the applicant parties’ claim that an order for costs be made at this juncture, and more particularly that such costs be taxed immediately, lacks merit.
Phan defendants’ further submissions dated 11 May 2020
The Phan defendants contend that the plaintiff’s further submissions merely explain the need to engage the forensic expert, and that it is not disputed that this analysis ought to assist the proper particularisation of the plaintiff’s claim;[35] however, the submissions do not address its criticisms concerning the pleading of material allegations of fact in the Statement of Claim and in particular paragraphs [23], [28], [29], [44], [46], [48], [51], [53], [54], [57], [58], [59] and [60].
[35]Phan defendants’ Submissions, 11 May 2020, [3].
The Phan defendants submit that here the plaintiff has rejected the opportunity to provide further particulars by its letter dated 20 March 2020,[36] and in the result the Phan defendants have been required to incur substantial costs in issuing the subject Summons.
[36]Bordignon Affidavit, [7], Exhibit ‘MEB-5’.
AJ&J’s further submissions dated 11 May 2020
AJ&J point out that the reasons for the plaintiff’s delay in engaging a forensic accountant, as outlined in its Submissions dated 8 May 2020, are not responsive to the deficiencies in the Statement of Claim, nor are references to COVID-19 restrictions. AJ&J submit further that the plaintiff has not provided a proposed revised form of pleading, and AJ&J submit that this raises issues as to whether there is a proper basis for the plaintiff’s claim against AJ&J.
Considerations
In my view at this stage of these proceedings, the key factors and considerations arising from the parties’ above materials and submissions concerning the applicant parties’ applications by Summons and the plaintiff’s application, notified by its submissions, for a short adjournment of those Summons and for leave to file an Amended Statement of Claim, are as follows:
(a) Although the applicant parties persist in seeking to have the plaintiff’s present Statement of Claim struck out:
(ix)the Phan defendants submit that the plaintiff should be given an opportunity to file an Amended Statement of Claim after such pleading has been provided to the defendants for the purpose of the defendants raising any objections to the proposed Amended Statement of Claim, and subject to the plaintiff having to apply by summons, supported by affidavit and submissions, to file and serve its proposed amended pleading;
(x) AJ&J does not oppose the plaintiff serving its foreshadowed Amended Statement of Claim, but seeks to have the plaintiff’s present pleading struck out immediately.
(b) The plaintiff has, by the Almond Affidavit, sufficiently established that substantially as a result of the urgency surrounding the preparation and filing of the plaintiff’s initial pleading, and the plaintiff’s ex parte application for freezing orders, the plaintiff was not in a position to include its analysis of certain factual matters, including the exact amount of misappropriated moneys which were transferred from the first defendant to other relevant defendants. The detail of these transfers are at the heart of the plaintiff’s claims that each of the relevant defendants received funds misappropriated by the first defendant.
(c) The Almond Affidavit also deposes to the plaintiff having insufficient time to engage the assistance of a forensic accountant to complete a full financial analysis of relevant transactions and that it will not be until approximately the second week of June 2020 that Deloitte, the forensic accountant retained by the plaintiff, will be in a position to report in this matter so as to enable the plaintiff to amend its present Statement of Claim at least in the manner earlier outlined.
(d) The Almond Affidavit also establishes that the circumstances created by the present COVID-19 public health crisis has affected the plaintiff’s ability to provide timely instructions in this matter. Those same difficulties have also rendered it impractical for counsel for the plaintiff to meet in conference with instructors or the plaintiff’s forensic expert to discuss either the applicant parties’ strike out summonses or the expert report under development.
(e) The plaintiff has not substantially responded in any specific way to the various bases upon which the applicant parties seek to strike out the plaintiff’s present pleading. However, that the plaintiff’s submissions and the Almond Affidavit:
(i) explain the plaintiff’s part difficulties in relation to it being able to plead in detail in relation to the quantum of funds transferred between defendants which have their genesis in the funds misappropriated by the first defendant, or specify the net amount each defendant has received in respect of such misappropriated funds and when those funds were received;
(ii) note that the expert report from Deloitte which is being developed is focused on detailing transfer of funds referred to in (i) above which will in turn enable the plaintiff’s foreshadowed amended pleading to address the Phan defendants’ first identified and primary pleading criticism namely, that the plaintiff has rolled up material allegations of fact in such a way that it is not possible to disentangle which relevant funds are alleged to have been received by which defendant.
(f) Given the subsisting freezing orders, the drastic nature of such orders and their effect on the defendants’ rights in relation to dealing with their assets, there should be as expeditious a resolution as is practical in the circumstances of whether such freezing orders should continue or should be discharged.
(g) The plaintiff asserts its right in the present circumstances, where pleadings have not yet closed, to file an Amended Statement of Claim pursuant to r 36.04 of the Rules, and to do so following receipt of the expert report from the forensic accountant.
Decision
I accept the plaintiff’s submission that a combination of factors, namely:
(a) the inherent urgency of its application at the outset for freezing orders, given the nature of the facts and circumstances presently relied upon by the plaintiff in this proceeding;
(b) that the facts and circumstances in (a) above in turn required the urgent issue of proceedings necessitating a very expeditiously prepared Indorsement of Claim;
(c) the extent and complexity of investigations by the plaintiff which retarded the plaintiff’s instruction of Deloitte;
(d) the voluminous data required to be assimilated in the process of Deloitte producing the forensic report which the plaintiff requires to enable it to properly plead the key transaction related allegations presently sought to be struck out by the applicant parties;
(e) the delaying effect of the present public health crisis in Australia on the plaintiff’s ability to analysis its own material and provide instructions and for its legal team to advance the plaintiff’s responses to the applicant parties’ strike out applications and the finalisation of the expert forensic accountants report; and
(f) the period of time which the plaintiff’s affidavit material deposes is estimated to be required for Deloitte to produce its report, namely approximately four weeks from 11 May 2020,
explain the difficulties the plaintiff has laboured under in producing its Writ and Indorsement of Claim dated 18 December 2019 and the Statement of Claim dated 25 February 2020, and also in my view justify further time being allowed to the plaintiff, until about mid-June 2020, to file and serve an Amended Statement of Claim in this proceeding.
Further, insofar as there are elements of the applicant parties’ strike out arguments which do not relate to their first and primary complaint concerning the plaintiff rolling up material allegations of fact in a way which does not permit the defendants to disentangle which of the misappropriated funds are alleged to have been received by which of the defendants, it would in my view be inefficient and productive of delay and unnecessary legal costs to immediately address such complaints. This is because to do so would probably result in a bifurcation of the applicant parties’ strike out applications between those parts of the plaintiff’s present Statement of Claim and the many parts which are criticised for rolling up the factual allegations as to transfer and receipt of misappropriated funds, which the plaintiff has persuasively submitted it is entitled to more time to plead. The concomitant further undesirable consequence of preceding now to address only parts of the defendants’ strike out applications is that the plaintiff may well have to address future amendments to its pleading in a piecemeal fashion.
Further, to accede to the Phan defendants’ submission to permit the plaintiff to put forward a proposed amended pleading which would then be the subject of a Phan defendants’ (and AJ&J) further Objections Notice and thereafter application by the plaintiff (by summons) for leave to plead, file and serve that pleading, supported by affidavit and submissions, as the Phan defendants submit should occur, would be in my view an interlocutory course which would be likely to be more significantly productive of delay, increased costs to the parties and the absorption of more judicial time than necessary.
In my view it would be more likely to be expeditious and less likely to be productive of legal costs and it would also be more efficient in terms of judicial resources for the plaintiff to be permitted to develop its proposed Amended Statement of Claim with the assistance of the expert forensic report of Deloitte, and file and serve that claim in about mid-June 2020. This course is also consistent with the plaintiff’s subsisting right to amend its pleadings pursuant to r 36.04 of the Rules, while preserving the defendants’ entitlement pursuant to r 36.04(2), to seek to have such pleading disallowed.
The interlocutory course preferable is I consider likely to be equally just and more efficient, timely and cost effective, in the circumstances and also consistent with ss 9, 47(1), (2), (3) and 48(1) and (2) of the Civil Procedure Act 2010 (Vic), is reflected in the orders set out below.
Further, I consider that the preferable interlocutory course outlined above will obviate any prejudice to the plaintiff resulting in it not being allowed adequate time to endeavour to amend its statement of claim and will not prejudice the defendant parties because they will remain entitled to raise appropriate complaints in relation to the plaintiff’s Amended Statement of Claim in due course and have that pleading or parts of it struck out or otherwise appropriately dealt with by court orders, in the relatively near future.
In addition the defendants will be entitled to make such application as to costs as they consider justified and those costs claims, including the costs associated with their present strike out summonses, the adjourned directions hearing of 15 May 2020, costs thrown away and the defendants’ costs in relation to any future strike out applications, will be able to be addressed and determined in the near future.
Accordingly, I do not consider it to be efficient or cost effective to deal further with only parts of the defendants’ likely costs associated with the plaintiff’s amendments to its pleadings at this point. Further, it is likely that if issues as to costs are deferred to be decided at the conclusion of the plaintiff’s amendment of its statement of claim, or attempts to amend that pleading, the Court will be better able to evaluate where costs should lie in relation to the present pleading disputes and associated applications.
Orders
For the above reasons I order as follows:
(a) The plaintiff has leave to file and serve an Amended Statement of Claim by 4:00pm on Friday 12 June 2020.
(b) The Summonses of 2 April 2020 (Phan defendants) and 6 April 2020 (AJ&J) are adjourned to Friday 19 June 2020;
(c) The directions hearing is adjourned to Friday 19 June 2020.
(d) The costs of and associated with the Summonses dated 2 April 2020 and 6 April 2020 and the directions hearing of 15 May 2020 are reserved.
(e) The parties have liberty to apply.
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