Yuanda Australia Pty Limited v Dawson

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FEDERAL COURT OF AUSTRALIA

Yuanda Australia Pty Limited v Dawson [2023] FCA 551  

File number: NSD 617 of 2022
Judgment of: CHEESEMAN J
Date of judgment: 31 May 2023
Catchwords: PRACTICE AND PROCEDURE — application to strike out statement of claim with leave to re-plead — when allegations of a serious nature are made  — whether pleading is evasive or ambiguous — whether pleading is likely to cause prejudice or embarrassment — Held: application granted.   
Legislation:

Federal Court of Australia Act 1976 (Cth), ss 37M, 37N

Federal Court Rules 2011 (Cth), rr 16.02, 16.21
Cases cited:

Australian Securities and Investments Commission v Daly (Liability Hearing) [2023] FCA 290

Banque Commerciale S.A., en liquidation v Akhil Holdings Ltd [1990] HCA 11; 169 CLR 279

Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2016] FCA 987

Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50

J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Ltd [2014] FCA 581

1           KTC v David [2022] FCAFC 60

Lock v Australian Securities and Investments Commission [2016] FCA 31

PNJ v The Queen [2009] HCA 6; 252 ALR 612

Reilly v Australia and New Zealand Banking Group Limited (No 2) [2020] FCA 1502

Sadie Ville Pty Ltd v Deloitte Touche Tohmatsu (A Firm) [2017] FCA 1202

Trade Practices Commission v Australian Iron & Steel Pty Ltd (1990) 22 FCR 305
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 56
Date of hearing: 9 May 2023
Counsel for Applicants: Mr M Seck and Mr M Watts
Solicitor for Applicants: Fusion Legal
Counsel for Respondents:  Ms R Mansted
Solicitor for Respondents:  Corrs Chambers Westgarth

ORDERS

NSD 617 of 2022
BETWEEN:

YUANDA AUSTRALIA PTY LIMITED ACN 121 594 858

First Applicant

YUANDA QUEENSLAND PTY LIMITED ACN 154 468 863

Second Applicant

YUANDA VIC PTY LIMITED ACN 166 473 089

Third Applicant
AND:

PAUL DAWSON

First Respondent

SRG (GLOBAL FACADES (QLD) PTY LIMITED ACN 602 258 257

Second Respondent

SRG (GLOBAL FACADES (VIC) PTY LIMITED ACN 608 869 014

Third Respondent

ORDER MADE BY:

CHEESEMAN J

DATE OF ORDER:

31 MAY 2023

THE COURT ORDERS THAT:

1.By 4:00 pm, 31 May 2023, the parties are to confer and provide proposed short minutes by email to the Associate to Cheeseman J to give effect to these Reasons.

2.In the absence of agreement as to the proposed short minutes the subject of Order 1, the proceedings are to be listed at 11.15 am on 1 June 2023.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

CHEESEMAN J:

INTRODUCTION

  1. These reasons address an interlocutory application by the respondents in the substantive proceedings seeking to strike out the Statement of Claim (SOC), or alternatively particular parts of it. The respondents are Paul Dawson, SRG Global Facades (Qld) Pty Limited (SRG Qld

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Details
Case
[2023] FCA 551
Decision Date

CaseChat Overview and Summary

Yuanda Australia Pty Limited and others initiated legal proceedings against Dawson and other respondents, alleging that Mr Dawson, a former employee and director, had diverted commercial opportunities from the applicants to the respondents while he was employed by the applicants. The applicants brought the proceeding by way of an amended originating application and a statement of claim, which were filed after the initial concise statement was struck out. The respondents applied to strike out the statement of claim, arguing that the allegations were conclusory and not substantiated by the material facts alleged. The respondents also sought leave to re-plead. The applicants opposed the application, arguing that the respondents were aware of the case they had to meet. The court was required to decide whether the statement of claim was evasive or ambiguous, likely to cause prejudice or embarrassment, failed to disclose a reasonable cause of action, or was otherwise an abuse of process of the Court. The court was also required to decide whether the applicants should be given leave to re-plead.

The court found that the statement of claim was evasive or ambiguous, likely to cause prejudice or embarrassment, and failed to disclose a reasonable cause of action. The court found that the applicants had not pleaded sufficient facts to support their allegations and that the pleadings were conclusory. The court noted that the respondents had provided comprehensive written submissions identifying the problems in the pleadings and had brought the application on the basis that the applicants should be given leave to re-plead. The court rejected the applicants' suggestion that any defect in the pleading could be cured by the respondents denying and thereafter pleading a fulsome positive defence or embarking on a particulars campaign. The court held that the applicants had an obligation to plead in accordance with the rules. The court held that the deficiencies in the pleading warranted the entire statement of claim being struck out, but that the applicants should be given leave to re-plead. The court held that, in the usual course, costs should follow the event.

The court ordered that the parties were to confer and provide proposed short minutes by email to the Associate to Cheeseman J to give effect to these Reasons. In the absence of agreement as to the proposed short minutes, the proceedings were to be listed at 11.15 am on 1 June 2023.

Orders

Orders of the court

1. By 4:00 pm, 31 May 2023, the parties are to confer and provide proposed short minutes by email to the Associate to Cheeseman J to give effect to these Reasons.

2. In the absence of agreement as to the proposed short minutes the subject of Order 1, the proceedings are to be listed at 11.15 am on 1 June 2023.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

This proceeding was originally commenced by way of an Originating Application and Concise Statement. An Amended Originating Application (AOP) and SOC were filed after the Concise Statement was struck out and the matter was ordered to proceed on pleadings. The matter was ordered to proceed by pleadings in the context of the serious nature of the allegations made by the applicants against the respondents, which include allegations that, if proven, may give rise to liability for a civil penalty. The present application to strike out the SOC was initiated before the respondents put on their defences. The application is made on the express basis that if successful, the applicants should be given leave to re-plead. BACKGROUND The following outline is based on the allegations made in the AOP and SOC. The applicant and respondent companies are competitors in specialist asset services, mining services and construction. Mr Dawson was an employee and director of Yuanda Australia during the period between 2007 and 2016 and was at various times a director of Yuanda Queensland and Yuanda Vic. In essence, the applicants allege that Mr Dawson covertly diverted commercial opportunities from the applicants toward both SRG Qld and SRG Vic, in circumstances where he owed statutory and fiduciary duties to each of the applicants, as well as duties under his employment contract with Yuanda Australia. While employed by Yuanda Australia between July and November 2015, Mr Dawson was a director of SRG Vic, then named Yuanda Residential Pty Ltd. Despite the use of the name “Yuanda”, SRG Vic is not a company that is, or ever has been, associated with the Yuanda group of companies. Mr Dawson was appointed as a director of SRG Vic about 12 days after it was incorporated. Mr Dawson resigned from his employment with Yuanda Australia on 17 August 2016, after having resigned as a director of Yuanda Australia in June 2016. Following Mr Dawson’s resignation as a director in June 2016, he commenced employment with Global Construction Services Limited (GCS). SRG Qld and SRG Vic became part of the SRG Global group of companies in 2018 as part of a merger between SRG Limited and GCS. The two respondent companies were majority owned by GCS from October 2016 up until the time of the merger. Following the merger, Mr Dawson has been an employee of SRG Vic. The allegations in the SOC centre on a series of guarantees alleged to have been entered into in respect of subcontracts on four construction projects: the 1 William Street Project, the Novartis Project, the Collins Street Project, and The Yards Project (collectively, the Projects). The operative allegations in the SOC are similar in respect of each of the Projects in that the headline allegation is, in substance, that commercial opportunities in respect of each of these Projects were diverted away from the applicants to the benefit of the respondents. The respondents’ complaint is that the allegations concerning the Projects and the claims for relief are built upon a foundation of conclusory pleadings which are not substantiated by the material facts alleged. The respondents contend that the gaps in reasoning between the pleaded allegations and the material facts said to support them result in a pleading that is liable to be struck out and that it is appropriate for the applicants to re-plead.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Each of paragraphs 107 to 116 are premised on one or more paragraphs which have been addressed above. The respondents included in their submissions a table indicating the relevant paragraph, with the impugned paragraphs on which it is premised. It is not necessary to reproduce that table here. Suffice to say that to the extent the paragraphs which underpin the claims for relief are predicated on the paragraphs which are to be re-pleaded, leave is granted to amend those paragraphs to the extent it is necessary to do so. CONCLUSION For these reasons, I am satisfied that the respondents should succeed on their application to strike out the paragraphs I have identified and that the applicants should have leave to re-plead. Given the centrality of the impugned paragraphs, I will hear from the applicants as to whether the most efficient and cost effective course would be to strike out the entirety of the SOC and grant leave to re-plead in full. In the usual course, costs should follow the event. If any party seeks a different costs order, they are to notify my Associate by email copied to all parties’ representatives by 5.00 pm on 31 May 2023.

Ratio Decidendi

Legal Principle Established

The respondents seek an order that the SOC be struck out because it is evasive or ambiguous; likely to cause prejudice or embarrassment in the proceeding; fails to disclose a reasonable cause of action; and / or is otherwise an abuse of process of the Court: r 16.21(1)(c), (d), (e) and / or (f) of the Rules. Alternatively, the respondents seek an order that paragraphs 31, 32, 34 to 37, 52 to 56, 70 to 72, 94 to 98 and 102 to 116 of the SOC be struck out on the same grounds. The respondents further seek orders that the applicants be given leave to re-plead and that the applicants pay their costs of and incidental to the application.CONSIDERATION It is convenient to first address the particular paragraphs of the SOC about which the respondents complain, before considering whether such deficiencies as are established warrant the entire pleading being struck out. By way of preface, I note that the applicants, in seeking to resist the strike out, repeatedly submitted that the respondents know the case they have to meet because of what has passed between the parties in various communications about the pleadings and that, if the respondents do not know the case put against them, it is open to the respondents to request particulars. I am not persuaded, in the context of the serious allegations made in this case, that there is any merit in the applicants’ approach. To accede to it would undermine one of the core purposes that pleadings are intended to serve — namely, the identification and delineation of the real issues for determination. It would likely cause delay, prolong the hearing time, increase the prospect of arid pleading debates, and waste costs. The respondents have, consistently with their duty to the Court, resisted the temptation to put on a defence comprised of a series of bare denials to improperly pleaded allegations. Instead, by bringing this application, they have delivered, in effect, an advice on pleading to the applicants. The written submissions provided by the respondents are comprehensive in identifying the problems in the pleadings. The respondents expressly bring the application on the basis that the applicants should be given leave to re-plead. In circumstances where a consent position was not able to be reached, the respondents’ approach is to be commended. I reject the applicants’ repeated suggestion that any defect in the pleading, which they do not concede, may be cured by the respondents denying and thereafter pleading a fulsome positive defence on the basis of what the respondents suspect to be the allegations against them based on inter partes communications, which refer to matters not pleaded, or alternatively, by embarking on a particulars campaign. Such an approach would reverse the obligation imposed on the applicants to plead in accordance with r 16.02. Bank Guarantee Summary Document (paragraphs 32, 34 to 37) The first relevant section of the pleading on the strike out application relates to a Bank Guarantee Summary Document. The relevant pleading is as follows (emphasis in original): 31.On 12 May 2016, the First Respondent sent an email from his Yuanda email account to his own personal email account, enclosing a document entitled ‘summary of bank guarantees’ (Bank Guarantee Summary Document).Particulars Email from Paul Dawson’s work email address [*] to his personal email address [*] dated 12 May 2016. The content of the document is set out below. 32. The Bank Guarantee Summary Document stated that:(a)specified deposits had been paid to specified ‘builders’ for specified ‘jobs’ and for specified amounts with respect to 'Podium Glazing' entities and Yuanda Residential (Gallery Facades Pty Ltd), as referred to at paragraphs 21 to 24 and 30 above; and(b)specified amounts had been paid to specified builders which were retained by the builders as security for specified ‘jobs’ with respect to ‘Podium Glazing’ entities and Yuanda Residential (Gallery Facades Pty Ltd), as referred to at paragraphs 21 to 24 and 30 above. 33. The Bank Guarantee Summary Document did not state the entity that had supplied the deposits or amounts retained as security. 34.By virtue of the First Respondent sending the Bank Guarantee Summary Document from his work email account to his personal email address on 12 May 2016, his position as General Manager of the First Applicant, and his position as director of each of the Applicants at the times pleaded in paragraph 11 above, it is to be inferred that:(a)the First Respondent was aware of the contents of the Bank Guarantee Summary Document;(b) one of the Applicants had given bank guarantees in the amounts specified in the Bank Guarantee Summary Document on behalf of each of the ‘Podium Glazing’ and Yuanda Residential (Gallery Facades Pty Ltd) entities to secure the performance of each of those entities’ obligations to each builder to assure performance of construction and defects obligations with respect to each specified ‘job’ (the Bank Guarantees);(c) the First Respondent was involved in and/or executed the Bank Guarantees. Particulars The Applicants do not have a copy of all the Bank Guarantees other than bank guarantees provided to Novartis and 889 Collins, as set out later in the pleading. Further particulars will be provided after discovery and issuing subpoenas and notices to produce. 35. At all material times, the First Respondent did not inform Yuanda China:(a) about the Bank Guarantee Summary Document; or(b) that any of the Applicants had provided any Bank Guarantees.36. At all material times, Yuanda China was not aware of:(a) the Bank Guarantee Summary Document; or (b) the fact of any of the Applicants providing any Bank Guarantees. 37.The First Respondent did not seek or obtain approval from, and was not otherwise authorised by, Yuanda China to provide the Bank Guarantees on behalf of any of the Applicants.