Capital Options (Aust) Pty Ltd & Anor v Hodges & Ors [2020] QDC 67

DISTRICT COURT OF QUEENSLAND CITATION: Capital Options (Aust) Pty Ltd & Anor v Hodges & Ors [2020] QDC 67 PARTIES: CAPITAL OPTIONS (AUST) PTY LTD AS ASSIGNEE FROM JOHN WILLIAM BOE AND ROBYN BOE AND BOE AUSTRALIA PTY LTD AS TRUSTEE OF THE BOE SUPERANNUATINO FUND (First plaintiff) and JOHN WILLIAM BOE AND ROBYN BOE AND BOE AUSTRALIA PTY LTD AS TRUSTEE FOR THE BOE SUPERANNUATION FUND (Second plaintiff) V NEIL HODGES (First defendant) and GREG MARTOO (Second defendant) and MARIO BABIC (Third defendant) and AMP FINANCIAL PLANNING PTY LTD (Fourth defendant) FILE NO/S: D74/18 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court at Southport DELIVERED ON: 27 April 2020 DELIVERED AT: Brisbane HEARING DATE: 27 March 2020 JUDGE: Kent QC DCJ ORDER: 1. Summary judgment is given in favour of the Fourth Defendant against the First Plaintiff -- 1 of 22 -- 2 pursuant to rule 293 of the Uniform Civil Procedure Rules. 2. The claim to “the sum of $500,000” made by the Second Plaintiff including in the prayer for relief in the Third Further Amended Statement of Claim is struck out pursuant to r 171 of the Uniform Civil Procedure Rules without leave to re-plead. 3. The Second Plaintiff’s claim generally against the Fourth Defendant is struck out, without leave to re-plead. 4. The Second Plaintiff’s allegations of unconscionable conduct, fraud and misleading and deceptive conduct against the Fourth Defendant are struck out, without leave to re-plead. 5. The result is that the following paragraphs of the Third Further Amended Statement of Claim are struck out so far as relates to the Fourth Defendant, subject to any further submissions as to perfection of these orders: 6(f), 11, 12, 13, 16(b), 18 to 21, 33A, 33B, 34-39, and paragraph (a) of the prayer for relief. 6. The Plaintiffs to pay the Fourth Defendant’s costs CATCHWORDS: PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - ENDING PROCEEDINGS EARLY - SUMMARY DISPOSAL - SUMMARY JUDGMENT FOR PLAINTIFF OR APPLICANT - where the plaintiffs allege that the defendants engaged in misleading or deceptive conduct, unconscionable conduct and fraud - where the second plaintiff assigned their chose in action to the first plaintiff - whether the chose in action was capable of assignment - whether the alleged chose in action was constituted by personal and unassignable statutory claims and/or a bare right to litigate - whether the assignee’s claim for damages had any real prospect of success. PERSONAL PROPERTY - TRANSFER - CHOSE IN ACTION - ASSIGNMENTS GENERALLY - WHAT MAY BE ASSIGNED - DAMAGES CLAIMS AND OTHER CAUSES OF ACTION - where the plaintiffs allege that the defendants engaged in misleading or deceptive conduct, unconscionable conduct and fraud - where the second plaintiff assigned their chose in action to the first plaintiff - whether the non-statutory causes of action constituted a bare right to litigate - whether statutory causes of action can only be recovered by the person who suffered the loss - whether the plaintiff had sufficient interest to justify the assignment. -- 2 of 22 -- 3 PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE – where the plaintiffs allege that the defendants engaged in misleading or deceptive conduct, unconscionable conduct and fraud - where the plaintiffs plead that the defendant’s misrepresentations induced them to enter the transaction - where the plaintiffs claim $500,000 in damages as the expected return on its investment - where no material facts are pleaded to support such a claim - where the plaintiffs allege that the fourth defendant is vicariously liable for the acts and conduct of the third defendant in acting as a licensed financial adviser - where the allegation is not supported by any of the material facts - where there is no pleaded basis for unconscionability - where the allegations of fraud are not properly particularised - where the allegations of misleading or deceptive conduct are not properly pleaded and disclose no reasonable cause of action. COUNSEL: P K O’Higgins for the applicant/fourth defendant G Radcliff for the respondent plaintiffs SOLICITORS: McInnes Wilson Lawyers for the applicant/fourth defendant Legacy Legal for the respondent plaintiffs. Background [1] The fourth defendant (AMP) seeks orders for summary judgment as against the first plaintiff, alternatively the whole of the claims made against it be struck out, further or alternatively a number of the paragraphs of the third further amended statement of claim (3FASOC) be struck out. Nature of Action and Application [2] The dispute arises out of an original underlying cause of action on behalf of the second plaintiff (the Boes) which arose from some arrangements in 2012 by which the Boes were involved in a property development “Syndicate” operated by Steven James Fraser (former project manager, who became bankrupt in 2013; has sworn an affidavit relied upon by the plaintiffs; and is not a party to the action although he and his wife were at one stage parties to a counterclaim by the first and second defendants); Mr Hodges (said to be a property developer); Mr Martoo (a town planner) and Mr Babic (a financial adviser). The relevant land is in Miles, a small town in the Western Downs region of Queensland. Alleged misrepresentations are said to have been made to the Boes about the investment. In the proceedings the -- 3 of 22 -- 4 plaintiffs claim $500,000, apparently as the amount that was promised as return on the investment, or $126,300 which is the amount said to have been actually invested. [3] What followed was that the Boes assigned their chose in action, said to be constituted by this claim for damages, to the first plaintiff (“Capital Options”). This is a business which purchases debt and recovers selling from the debtors. As the applicant submits, the business is described as the “debt purchasing and debt assignment division” of the “Options Group” (“Options”) and offers two services to its clients: “purchase of Debt or Ledgers for a discounted amount” or “assignment of debt and recovery of same on conditions.” It represents that it offers “straight forward and easy to access solutions to collection and recovery problems”.1 [4] It seems to be common ground that Options offered these services to the Boes who entered into a deed of assignment of debt dated 18 February 2018, purporting to assign the relevant chose in action. [5] Thus one of the threshold issues attacked by this application is the validity of this assignment. This question forms the basis of the applicants’ summary judgment application as against the first plaintiff. If, as the applicant submits, the assignment is fatally flawed, the first plaintiff should be removed from the action by way of summary judgment. The application then makes further attacks on the case pleaded against the applicant by the remaining plaintiff. History of Proceedings [6] The action has a considerable history, most of which is of peripheral relevance to the present disputes, but provides a context2. The originating process was filed on the 13 th March 2018 (i.e. shortly after the purported assignment). Curiously, the originating process, the claim, does not identify any causes of action, merely stating amounts of money sought to be claimed together with interest pursuant to a (unidentified) agreement, or statute. The statement of claim relates to events taking place between September 2012 and broadly May 2015. 1 Affidavit of Andrew Orr filed 13 March 2020, Exhibit AO-1, p 6. 2 The action has also, co-incidentally, recently been mentioned in unrelated proceedings in Bax v Legal Practitioners Admission Board [2020] QCA 71, particularly at [25] and following; however this has no relevance to or impact on the present decision. -- 4 of 22 -- 5 [7] Early in the proceedings a default judgment was issued against the fourth defendant (the applicant in this matter), which was later set aside. The defence of the fourth defendant was filed in August 2018. Meanwhile the first defendant had filed a defence and counterclaim; this was struck out in November 2018, with leave to re-plead. At the same time the proceedings were amended to add the Boes as second plaintiff. In March 2019 the plaintiffs were ordered to give security for costs in favour of the second and third defendants. The pleadings have been through a number of iterations: an amended statement of claim filed 26 th July 2018; a further amendment 6 th December 2018; a second further amended version 6 th March 2019 and the 3FASOC was filed in October 2019. The defence of the fourth defendant (which pre-dates the 3FASOC) engages a number of issues, including the scope of Babic’s authorisation under the terms of his appointment and a denial that anything he did was as the fourth defendant’s authorised representative; and the validity of the contested assignment is firmly placed in issue. [8] The present application was filed on 13th March 2020. The applicants’ submissions First Issue: Summary Judgment – Lack of valid assignment Principles re: summary judgment [9] The applicant firstly submits that the principles in relation to summary judgment are reasonably well settled. Rule 293 of the UCPR requires the defendant to satisfy the Court that: (a) the plaintiff has no real prospect of succeeding on some or all of the plaintiff’s claim; and (b) there there is no need for a trial of the claim or the part of the claim. [10] This is said to be clear and plain language3. [11] It is submitted that the rules should be applied using their clear and ambiguous language and keeping in mind the purpose of the UCPR to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense, pursuant to r 5.4 The appropriate enquiry is in terms of the rule itself, that is, whether there exists a real, as opposed to fanciful, prospect of success.5 3 LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd [2011] QCA 105 at [30] per White JA. 4 Deputy Commissioner of Taxation v Salcedo [2002] 2 QDR 232 at [2] per McMurdo P. 5 Queensland University of Technology v Project Instructions (AUST) Pty Ltd (in liq) [2003] 1 QDR 259 at [265] per Holmes J. -- 5 of 22 -- 6 [12] There is nevertheless need for caution in granting summary judgment; it is a power to be “exercised with great care” and only where it is “clear that there is no real question to be tried” and where it would be just to dispense with a trial.6 [13] It is incumbent on a respondent/plaintiff, assuming the defendant’s material makes out a case to be answered, to adduce sufficient evidence to demonstrate a “real prospect” of success on all part of its claim and the need for a trial.7 [14] It is also submitted that the Court of Appeal has emphasised that it is important that a judge make use of the rule in appropriate cases so as to save expense, achieve expedition and avoid using up the court’s resources on cases which serve no purpose.8 Nature of the claims assigned [15] The claim is broadly based on written and oral representations said to constitute misleading and deceptive conduct; unconscionable conduct pursuant to s 12 of the ASIC Act and fraud within the meaning of that term in equity or at common law.9 On the application for summary judgment against the first plaintiff, the applicant submits that the claims rely on the effectiveness of the deed of assignment of the chose in action, i.e. the Boes’ cause of action. The consideration for the assignment was stated to be $1.00 plus GST plus further consideration in the event the “debt” was collected. Pursuant to the deed, Capital Options is responsible for all “costs and outlays” relating to legal action to recover the debt and indemnifies the Boes in that respect (cl 20). The assignability of the cause/s of action is thus in issue. Assignability of Statutory Causes of Action [16] The applicant submits that statutory causes of action such as those arising under the former s 82 of the Trade Practices Act are incapable of assignment, as such a claim for damages can only be recovered by the person who suffered the loss.10 [17] The applicant submits that the same reasoning applies to statutory causes of action arising under the Australian Securities and Investments Commission Act 2001 (Cth) 6 Bundaberg Sugar Ltd v Isis Sugar Mill Co Ltd [2006] 56 ACSR 410; [2006] QSC 002 at [20]. 7 Supra at [21]. 8 Bernstrom v National Australia Bank Ltd [2003] 1 QDR 469 at 475-476. 9 3FASOC paras 33A(a) to (c). 10 Park v Allied Mortgage Corporation Ltd [1993] ATPR (Digest) 46-105; Rickard Constructions Pty Ltd v Richard Hails Moretti Pty Ltd [2004] 220 ALR 267 and the cases cited by Jackson J in Lanai Unit Holdings Pty Ltd v Mallesons Stephens Jaques (no 1) [2017] 2 Qd R 456 at 459, [6]-[8] -- 6 of 22 -- 7 (the ASIC Act); see s 12GF, s 12GM. Further, it also applies to a claim under the Competition and Consumer Act 2010 (Cth) (the CAC Act); Aquatic Air Pty Ltd v Siewert & Anor11. [18] Thus the applicant submits that the claims by Capital Options for damages for damages for misleading or deceptive conduct or unconscionable conduct under the CAC Act or the ASIC Act are fatally flawed (the purported assignment being void and of no effect, thus Capital Options has no interest in the action and is not a proper party) and have no reasonable prospects of success. The consequence is that AMP ought not to have to defend such a claim irrespective of whether the Boes continue to pursue their own claims and it is thus an appropriate case for summary judgment under Rule 293. Non-Statutory Causes of Action [19] The same submissions apply to the other non-statutory causes of action. Generally speaking, a bare right to litigate in respect of personal rights, including a cause of action in tort, cannot be assigned.12 The basic problem is that the chose in action under discussion was not capable of assignment to the first plaintiff because it was a bare right to litigate, not supported by a genuine commercial interest in taking the assignment such as a pre-existing interest in the assignment that arose separately from the assignment itself. Reference is made to the general restriction in assigning a cause of action in tort or breach of contract. For example, in Rickard Constructions Pty Ltd v Richard Hails Moretti Pty Ltd13 McDougall J said at para [59]: “… what was required was something beyond a mere personal interest in profiting from the outcome of the proceedings; an interest by the assignee and the assignor or its business affairs or activities which might be protected by the assignment…” [20] Reference is made to the adoption of this principle by the Queensland Court of Appeal in Workcover Queensland v Amaca Pty Ltd.14 As was explained by the President at [7] the historical reasons for this are that to permit such assignments would amount to the common law offence and tort of maintenance and sometimes to the common law offence and tort of champerty, an aggravated form of maintenance 11 [2015] NSW SC 982 at [87] per Brereton J. 12 Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at [51] per French CJ, Crennan and Kiefel JJ; at [79] per Gummow and Bell JJ; and at [156] per Heydon J. 13 supra 14 [2013] 2 Qd R 276. -- 7 of 22 -- 8 by which the consideration for the purported assignment was part of the gains of the litigation or some other profit. There are sound public policy reasons to stop such litigation trafficking or speculating in compensation for improper gain. [21] As noted above, the applicant acknowledges that there is an exception to this rule where the assignee has a pre-existing genuine commercial interest in the cause of action sought to be assigned: Equuscorp at [51] referring to the House of Lords decision in Trendtex Trading Corporation v Credit Suisse15. [22] It is submitted that the assignees’ interest must be pre-existing at the time of the assignment and a commercial interest in seeking to exploit the assigned right would not suffice; Amaca at [65] per Gotterson JA. The interest must be something more than an interest that would be held by a person who is an “intermeddler” (per McMurdo P at [17]) with the disputes of others.16 [23] Thus the applicant submits that Capital Options in this case had no pre-existing genuine commercial interest sufficient to support the assignment of their rights to litigate by the Boes. It is simply a debt collection or factoring agent; the deed shows that the only interest is to seek to recover their “debt” (whereas, as the applicants submit, what existed at the time was a bare right to litigate rather than a debt; there would be no “debt” until a favourable judgment). The Capital Options arrangement was to pay the costs of recovery of the action and in doing so retain 75 per cent of the proceeds; this is said to be precisely the type of intermeddling that the courts do not permit. [24] The applicant further submits that neither Capital Options nor the Boes have adduced any evidence of any pre-existing commercial interest. It is submitted that, on the evidence available, AMP does not, and never had, any commercial or other relationship with Capital Options or indeed with the Boes17 and is not aware of any such interest in the causes of action.18 15 [1982] AC 679 at703 also see Amaca at [10] – [13], [61] – [64]. 16 EWC Payments Pty Ltd v Commonwealth Bank of Australia [2014] VSC 2017 at [76]. 17 Affidavit of Trianta filed 8 June 2018, CFI-35, [7] – [11]. 18 Affidavit of Orr at [31]. -- 8 of 22 -- 9 [25] Thus the applicant submits that the claims against it by Capital Options have no real prospects of success and are amenable to summary dismissal, there being no need for a trial of the claim. First Issue: Plaintiffs’ Response [26] The relevant principles for summary judgment are not in significant dispute. The respondent submits that the remedy is reserved for the clearest of cases (see [11]-[12] above). Thus the respondent submits that the court would not reach the requisite level of satisfaction that the plaintiff has no real prospect of succeeding and that there is no need for a trial of the claim, such that the court’s power to enter summary judgment is not enlivened. It is submitted that there are a large number of disputed facts, particularly in a case where disclosure has not been completed. The principles as to whether the chose in action under discussion was assignable are, so it is submitted, in a state of flux. In any case, any problems in this regard are cured by the joinder of the Boes. First Issue: Discussion and Conclusion [27] In my conclusion firstly the applicant’s arguments in relation to the statutory causes of action should be accepted; for the reasons advanced by the applicant, the position is relatively clear. The causes of action were not assignable, and summary judgment should be granted in favour of the applicant. [28] As to the non-statutory causes of action, the parties’ arguments refer to Equuscorp (supra), as the starting point for the analysis of the assignability of a bare right to litigate, and the respondent submits that the law on the topic is in a state of flux, referring to some passages in the judgment of the plurality, French CJ, Crennan and Kiefel JJ. That was a slightly different kind of case, where what was assigned was loan agreements, pursuant to a tax minimisation scheme relating to blueberry farms. Equuscorp attempted to sue on the loan agreements; they were found to be illegal and unenforceable; thus Equuscorp sued in the alternative in restitution – as money had and received - for the money advanced. Equuscorp was ultimately unsuccessful. -- 9 of 22 -- 10 Although the relevant interest in that case was found to be assignable,19 it was, however, not successfully assigned. There was a discussion of s 199(1) of the Property Law Act 1974 (Qld), as to its impact on the Deed relied upon for the assignment and the assignability of the rights to claim for money had and received. The plurality determined this question against Equuscorp; the rights, had they existed, would not have been transferred to Equuscorp as a legal remedy within s199 (1) (b).20 [29] The nature of the interest purported to be assigned here is different from that in Equuscorp, and in my view is more tenuous; there is an even lesser suggestion of any pre-existing commercial interest such as to support assignability21. Overall I accept the thrust of the submissions set out at [19] to [25] above as to the non-assignability of a bare right to litigate, as well as the statutory causes of action referred to. [30] Thus in my conclusion, this issue must be resolved in favour of the applicant. The facts are, in my conclusion, not in significant dispute as regards the assignment; no such details were advanced by the respondent. The circumstances are exactly the kind of situation which is caught by the principles outlined by the applicant. I do not accept that the law is in a state of flux on this point22. The cause of action which the Boes assert in this proceeding has none of the characteristics which make it assignable to the first plaintiff. In the circumstances the application for summary judgment as against the first plaintiff should be allowed. Other issues raised in the application nevertheless require determination, as follows, because the action continues (presumably) to be prosecuted by the remaining plaintiff. Second Issue: The flawed claim for $500,000 [31] This part of the application attacks part of the prayer for relief. This claims, in terms “The sum of $500,000 together with interest at such rate or in such sum as this honourable court deems meet from 25 December 2012 until judgment.” 19 At [53] 20 At [64] 21 In Equuscorp, it was at least a financier of the group of companies involved in the scheme; [2] 22 See, e.g. Amaca (supra); Bakewell v Anchorage Capital Master Offshore Ltd [2109] NSWCA 199 at [44] -- 10 of 22 -- 11 The applicant submits that no material facts are pleaded in support of such a claim. What is said is that the pleaded facts outline a “no transaction case”23 with respect to the payment of $126,300 to the syndicate had the alleged misrepresentations in paragraph 31(b) of the 3FASOC not been made as set out in paragraph 32, which pleads “Had the assignors been made aware of the true facts, that is to say that the syndicate did not have unconditional finance approval, they would never have agreed to advance any monies to the syndicate.” Thus the applicant submits that there is no pleading, and no evidence of any facts sufficient to support the proposition, that $500,000, that is, the expected return had the investment been successful, is claimable. What the applicant submits on this topic is that this ought also to be the subject of summary judgment or, where it appears in the 3FASOC, be struck out pursuant to Rule 171 as disclosing no reasonable cause of action. Second Issue: The plaintiff’s response [32] In response, the plaintiff points to paragraph 15D (g) of the 3FASOC, where the narrative is that on an occasion in or about September or October 2012, at the Boes’ home, Fraser and Babic made a series of oral representations and statements. On this occasion the relevant representation is pleaded as being: “If the assignors would agree to pay the short-term funding, then the syndicate would pay the assignors $500,000 at the end of the first stage of development.” This is supported by evidence in the affidavit of Steven James Fraser filed 15 th July 2019. At paragraph 60 he deposes to this representation. The balance of the narrative in the affidavit includes the failure of the development; the financier required a large cash deposit (paragraph 113) and the finance offer expired. There is nothing in the affidavit to suggest the first stage of development (whatever that was intended to mean) was ever reached. A guarantee given by Hodges to reassure the Boes was not enforceable; at a 23 That is, as I understand the submissions, the category of cases whereby in the absence of the wrongful representations the transaction would not have been entered into, such as often seen in actions for deceit; see, for example, Jamieson & ors v Westpac [2014] QSC 32 at [107] -- 11 of 22 -- 12 QCAT hearing in June 2017 there was apparently a claim of forgery (paragraphs 116 – 136).24 [33] Paragraph 17 of the 3FASOC continues that in reliance on the representations, the assignors participated in the venture, lending monies to the syndicate and paying the total of $126,300. [34] Thus the plaintiffs simply point to the matters outlined above in the pleadings; paragraph 15D (g) and the prayer for relief. Given the pleadings, including the pleading of reliance, the claim is sustainable, so it is argued. Second Issue: Discussion and Conclusion [35] As I understand the applicants’ submissions, the plaintiffs’ claim in this regard is best understood as a pleading of the tort of deceit (it is not completely clear, but fraud is pleaded in paragraph 33 A (c)) as well as the statutory remedies pursuant to the ASIC Act and the CAC Act, that is, the false representation induced the injured party to enter into the transaction, which it would not otherwise have done; see paragraphs 17 and 32. In this context, the damages available are designed to return the injured party to the position that it would have been in had the tort, or wrongful representations, not occurred, that is, in the present case, the Boes simply would not have invested the $126,300. Thus the measure of damages would not exceed that amount, on the present pleadings, and there is no basis for the claimed $500,000. For example, as I understand the applicant’s argument, if there was a contract between the parties, the condition for the payment of $500,000 was never satisfied (not that contractual remedies are pleaded); and there is nothing else in the factual narrative or pleaded causes of action giving rise to such a remedy. [36] The measure of damages in such cases has as its starting point the so called rule in Potts v Miller25 that is, the difference between the price paid and the value of what was acquired at the time of entering into the investment, that is, in a case where the plaintiff has parted with their money in exchange for the asset purchased, the amount of the loss is measured between the price paid and the true or fair value of the asset 24 It is a somewhat curious aspect of this case that none of this is sworn to by the Boes, who have not sworn any affidavit material, despite being present for, and the recipients of, the alleged representations 25 [1940] 64 CLR 282. -- 12 of 22 -- 13 acquired.26 That said, it was noted by the High Court in HTW Valuers Pty Ltd v Astonland Pty Ltd27 that the measure applied in Potts v Miller does not apply in all cases. In any case, in the present set of circumstances as delineated by the pleadings, the applicant’s position is that there is simply nothing pleaded to take the case beyond the general propositions of the measure of damages in Potts v Miller, i.e. the investment having proved valueless, the Boes’ money should be returned, if their case is made out including as against the Fourth Defendant. The application is thus that the relevant pleading be struck out pursuant to r 171 as disclosing no reasonable cause of action. [37] My conclusion on this issue is, again, that the applicants’ position must be accepted. If the matter is to be assessed on some other basis than the general “no transaction” or a Potts v Miller approach, relevant circumstances need to be pleaded to establish those propositions, which, as the applicant submits, they simply are not. In the circumstances, this portion of the application should also be successful, that is, that the relevant part of the 3FASOC should be struck out pursuant to r 171 as disclosing no reasonable cause of action. As to leave to re-plead, the applicant argues that where – This particular problem with the claim was identified in correspondence of 14 January 2019; - The statement of claim has been amended twice since then, without addressing the problem; - Many of the problems were canvassed by the second defendant in an application filed 6 March 2019 (sic – this may refer to an application filed 29 May 2019), following which the 3FASOC did not address them; and - The statement of claim is now in its fourth iteration; It is in truth a case where the inability to formulate the plaintiff’s case with sufficient clarity and particularity is a good indication that no such cause of action exists.28 In this case, so it is argued, the facts are so deficient, and it is so unlikely they could be 26 See, for example, Jamieson & ors v Westpac (supra) at [127]-[129]. 27 [2004] 217 CLR 640, 656-7 [35]. 28 See Trau v University of Sydney (1989) 34 IR 466 at 475 per Gleeson CJ, as referred to in Di Palma v Chimalee [2019] NSWSC 864 per Ward CJ in Eq at [15] -- 13 of 22 -- 14 better set out or proved, that leave to re-plead should be refused; the necessary factual stratum is absent.29 I accept these submissions and refuse leave to re-plead. Third Issue: The flawed claim against AMP generally [38] The applicant next submits that the pleading of the claim generally against AMP discloses no reasonable cause of action and ought to be struck out; broadly, that the pleadings do not establish any basis on which the applicant could be regarded as responsible for Babic’s actions. Although, again, if the applicant is successful on this issue it may render other parts of the application otiose, it is necessary to reach separate conclusions as to all matters, as I understand the way in which the application is pursued, and for clarity I should do so. [39] The pleadings allege that AMP was vicariously liable for the acts and conduct of the third defendant, Babic, in acting as a licensed financial adviser30; further that statements were made by Babic as a financial adviser and “in his capacity as an authorised representative” of AMP and they were “understood by Mr Boe to be made in the capacity of a financial adviser”31; further it is pleaded that the representation and statements by Babic were partly oral and partly in two documents32; the oral and written representations were made by Babic “in his capacity as an authorised agent” of AMP “in providing financial services”33; further that AMP was responsible for the acts and conduct of Babic by virtue of his acting as an authorised representative of AMP34. As noted earlier, the fourth defendant’s pleadings specifically engage these propositions. [40] It is submitted that these broad allegations are not supported by any or any sufficient material facts or proper particulars or any fact by which such matters could be inferred. The brief particulars do not support the allegations concerning Babic’s 29 See Haggarty v Wood (No.2) [2015] QSC 244 at [81]-[82]; Chan & Ors v MacArthur Minerals Ltd & Ors [2019] QSC 143 at [74]-[75] 30 3 FASOC, para 6 (f). 31 3 FASOC, para 12. 32 3 FASOC, para 13. 33 3 FASOC, para 16 (b). 34 3 FASOC, para 33B. -- 14 of 22 -- 15 actions or capacity. Moreover, even if the statements set out in paragraph 12 of 3FASOC were made, they were uttered in March 2012 at a social function and in no way relate to the operative statements or representations alleged to have been made some months later, in September/October 2012, by Babic; paragraph 15C, D & E. [41] It is also submitted that none of the documents identified or statements attributed to Babic could be described as either financial advice or any way attributable to AMP. There is nothing more than Babic possibly saying that his part in the syndicate was to arrange finance; that does not establish a connection to AMP. [42] Overall the applicant submits that there is nothing in the pleadings to support the idea that AMP is responsible for the pleaded conduct of Babic; thus the matters relating to AMP ought to be struck out pursuant to r 171 as failing to disclose a reasonable cause of action or otherwise having a tendency to prejudice or delay the fair trial of the proceedings. [43] I note that, to the extent it is relevant, Babic’s filed defence is consistent with AMP’s position on this; it denies that any statements made by him were made in his capacity as an authorised representative of the fourth defendant. This is not, of course, evidence; but it is indicative of Babic’s position and the evidence he might give on the topic. Third Issue: Plaintiffs’ response [44] The plaintiff submits that it is contended that Babic as an AMP representative made the representations to the Boes set out in paragraph 15D(a)-(g) of the 3 FASOC. In paragraph 12 of the pleading it is said that statements made by Babic were made by him as a financial advisor and in his capacity as an authorised representative of AMP and understood by Boe to be made in a capacity of a financial adviser. In paragraph 12B it is pleaded that Babic stated he was an accredited financial planner with AMP, and in 12C it is said that he presented his AMP business card. Sub paragraph 12E pleads “Babic said words to the effect that because he was an accredited AMP financial planner and agent people had the security of knowing that he could be relied upon to give unbiased and sound financial advice.” [45] The plaintiff submits that the pleading is not so demonstrably insufficient as to afford AMP with the remedy of a strike out, and the relief should be refused. -- 15 of 22 -- 16 Third Issue: Discussion and Conclusion [46] In my view, this issue should be resolved in favour of the applicant. The narrative in paragraph 12 of the 3FASOC does not, in my view, amount to facts or matters and circumstances that amount to Babic being an agent, or, as it is put, an authorised representative (for relevant purposes), of the fourth defendant at the time when the operative statements were being made, months later. None of the pleaded details go that far. Nor does anything in paragraphs 44 onwards of the Fraser affidavit explicitly purport to involve the fourth defendant at all. Merely stating that he was an accredited financial planner with AMP is insufficient, where it is not said that Babic stated that he was acting in his capacity as an AMP agent or employee in the course of the discussions35. Presenting the Boes with his AMP business card is not, in my conclusion, sufficient on its own where, as the fourth defendant submits, that it is equally consistent with simply passing on his contact details. Stating that because he was an accredited AMP financial planner he could be relied upon to give unbiased and sound financial advice still, in my conclusion does not amount to an assertion that he was acting on behalf of AMP in the course of the relevant discussions; it is equally consistent with simply an attempt to enhance his own credibility. Again, it is relevant that the operative statements were made months later in a different context; to conclude that on the latter occasion Babic was acting in his capacity as an authorised agent of the fourth defendant, in reliance on broad discussions at a social function months earlier, is too tenuous. [47] It is extremely unlikely, given the attention which has been given to this matter, that there are other further acts, matters or circumstances that would give rise to the required conclusion; or that evidence could be advanced to further assist the respondents on this issue. Apart from the indication, referred to above, given by Babic’s pleading, the affidavit of Ms Trianta36 deposes to the proposition that an investment in the Syndicate of the type referred to was not an approved product or service within the Authorised Representative Agreement relating to Mr Babic; see paragraphs 19 – 22 and the Deed exhibited. Nor had AMP received any complaint as to these matters from the Boes prior to issue of the proceedings; paragraphs 7-11. 35 Indeed there are pleaded facts to the contrary; at paragraph 20 of the 3FASOC it is said Babic provided a receipt for moneys paid to CC Capital Mortgage Trust (i.e. not AMP) 36 Court file document 35 -- 16 of 22 -- 17 This evidence is uncontroversial, and the respondents have been on notice of it since the affidavit was filed on 8 June 2018. [48] In my view this part of the application should also be allowed; the relevant portions of the pleading should be struck out pursuant to r 171 without leave to re-plead. The facts are so deficient, and it is so unlikely they could be better set out or proved, that leave to re-plead should be refused; the necessary factual stratum is absent.37 Fourth Issue: The flawed allegations of unconscionable conduct Applicant’s submissions [49] The applicant submits that the allegations of unconscionable conduct, contrary to statute or in equity, in paragraph 33A (b) of the 3FASOC are misconceived. In essence it is submitted that the plaintiffs do not plead any facts which would demonstrate any connection with the supply or acquisition of the defined financial services, referring to some misidentified sections of the ASIC Act. Further it is said that no facts are pleaded to support a claim for unconscionable conduct within the CAC Act or in equity. It is argued that such a claim requires proper pleading of facts to support allegations that: (a) The plaintiffs (the Boes) were at a special disadvantage to AMP (b) That disadvantage affected their ability to make a judgement in their own best interests (c) AMP exploited that disadvantage38 The applicant submits that none of those matters are pleaded nor are there any facts from which they could be inferred. There is no identification, to coin the phrase, of any relevant “predatory statement mind”: Kakavas v Crown Melbourne Ltd39 and no identification of any “real and substantial ground based on conscience for preventing a person from relying on what are, in terms of the general law, that person’s legal rights”.40 The applicant submits, on this as the other pleading points, that there should 37 See Haggarty v Wood (No.2) [2015] QSC 244 at [81]-[82]; Chan & Ors v MacArthur Minerals Ltd & Ors [2019] QSC 143 at [74]-[75], referred to at footnote 24 above 38 Mineral Resources Engineering Services Pty Ltd v Commonwealth Bank of Australia; Hay v Commonwealth Bank of Australia (No. 3) [2016] QSC 232 at [5] per Bond J. 39 (2013) 250 CLR 392. 40 Australian Securities and Investments Commission v Kobelt [2019] 93 ALJR 743 at [88] per Gagler J. -- 17 of 22 -- 18 be no leave to re-plead; it argues, inter alia, as outlined above, that the present pleading is the fourth iteration of the plaintiff’s attempt to identify its case. Fourth Issue: The plaintiff’s response [50] The plaintiff responds that this complaint is without foundation and that the “totality” of the case as pleaded does in truth set out a case for unconscionability. Fourth Issue: Discussion and Conclusion [51] In my view this part of the application should also be determined in favour of the applicant. There is no pleaded basis for unconscionability vis a vis the fourth defendant; indeed, there is no pleaded interaction between the plaintiff and the fourth defendant (other than via the third defendant, which, as set out above, is struck out). There is no suggestion of a special disadvantage or exploitation thereof by AMP. The response that the totality of the case as pleaded is sufficient, is unsatisfactory. As was set out by Jackson J in Mio Art Pty Ltd v Macequest Pty Ltd & Ors41: “[62] But where a pleading alleges a lengthy historical account of facts that occurred over an extensive period of a commercial relationship, then particular specific causes of action are pleaded on the basis that the reader is invited to find the relevant material facts for any cause of action in all that has gone before, the price for the death of that hero, brevity, is not paid in the valuable coin of precision. Instead, the reader is invited on a would-be treasure hunt, with the unlikely satisfaction that after looking in every nook and cranny, and trying every combination possible, there will be an Archimedian “Eureka” moment. [63] Where a pleader has fallen into this error, there is a remedy. It is to require that the pleading identify the material facts for each cause of action. That will exclude those facts which go to another cause of action, as well as any “narrative” non- material facts. A direction can be made, for example, that the pleader separately plead the material facts for each cause of action alleged. But that is not often a remedy which will lead to expedition or a minimum of expense, and so must be used in sparing measure.” In my conclusion this is not a case for further directions as to pleading material facts. The relevant pleadings should be struck out. In this case the facts are so deficient, and 41 [2013] QSC 211 -- 18 of 22 -- 19 it is so unlikely they could be better set out or proved, that leave to re-plead should be refused; the necessary factual stratum is absent.42 Fifth Issue: The allegations of fraud – applicant’s submissions [52] The applicant submits that a serious allegation such as fraud should be specifically and fully particularised. This is somewhat trite law; Banque Commerciale SA v Akhil Holdings Ltd.43 The applicant simply submits that there is no proper pleading of fraud at all and that, despite numerous opportunities the plaintiffs have not properly pleaded or particularised such a serious allegation. Thus paragraph 33A(c) should be struck out. Fifth Issue: The plaintiff’s response [53] Broadly, it is said again that, on the totality of the conduct pleaded, a cause of action can be established. This is unsatisfactory, as outlined in [51] above. There is also a somewhat faint indication that disclosure should be completed, at which stage the cause of action complained of may be inappropriate and may be voluntarily withdrawn. This does, with respect, seem to suggest something of a fishing expedition. Moreover, as outlined above, the respondents have had at least the document setting out the relationship between Mr Babic and the fourth defendant since June 2018. Disclosure seems unlikely to further assist. Fifth Issue: Discussion and Conclusion [54] In my conclusion the applicant’s submissions on this point should be accepted and the relevant sub-paragraph should be struck out. The propositions referred to by the applicant are well-known and it is important that allegations of fraud should be specific and fully particularised. They are serious allegations to make without a proper basis. Again, the relevant factual basis, as against the fourth defendant, is so absent that there should not be leave to re-plead. Sixth Issue: The flawed allegations of misleading or deceptive conduct Applicant’s submissions 42 See Haggarty v Wood (No.2) [2015] QSC 244 at [81]-[82]; Chan & Ors v MacArthur Minerals Ltd & Ors [2019] QSC 143 at [74]-[75] 43 (1990) 169 CLR 279 at 285. -- 19 of 22 -- 20 [55] The applicant next submits that apart from the difficulties already outlined, the facts pleaded in the current statement of claim do not support the idea of misleading or deceptive conduct (paragraph 33A(a), which does not refer to a statutory remedy), however styled. It argues that it is not clear what the plaintiffs intend to convey by their own understanding of the facts and circumstances. The applicant referred to an observation by Justice White in Thiess Pty Ltd v FE Minerals Australia Pty Ltd44 as follows: “Purpose of pleadings More generally, the purpose of pleadings is to inform the opposite party of the case it has to meet and to permit, in a responsive pleading the issues to be narrowed. Furthermore, the defendant cannot be expected to intuit what the plaintiff intends to convey in its pleadings by its own understandings of the facts and circumstances giving rise to the litigation. That would be a certain path to disaster.” [56] Thus the applicant submits that the pleading of the “representations” is difficult to follow as it contains numerous conflated allegations as to who was involved in the alleged conversations, when they took place and where they took place. Many pleaded conversations post-date the alleged payments (and therefore, of course, reliance thereon could not be established)45. It is further submitted that the substance of what was alleged to have been said has not been pleaded with any specificity or consistency. It is argued that the lengthy narrative is unhelpful at least and combined with confused drafting has a tendency to prejudice or delay a fair trial. [57] The applicant acknowledges, however, that it is apparent that the plaintiffs’ case is built solely on reliance on two representations that were or “came to be” false, namely that certain deposit money (i.e. part of the amount paid by the Boes) was not retained in a solicitor’s trust account, and that money advanced by the Boes was done so “at a time when, and in circumstances where, the syndicate did not have unconditional finance approval”46 thus the plaintiffs plead that if they had been made aware of the true facts that the syndicate did not have unconditional finance approval they would not have agreed to advance the monies. 44 [2007] QSC 209 at [38]. 45 3 FASOC, 22, 23, 24, 25. 46 3 FASOC, 31(a), (b). -- 20 of 22 -- 21 [58] The applicant makes the point, however, that the plaintiffs do not allege that it was actually represented to the Boes at any stage that the syndicate had unconditional finance approval. Rather there were numerous representations of an offer of finance that was subject to a number of conditions, including valuation and payment of various fees: see 3 FASOC, paragraphs 15B(d) and 15D(a), 15D(c) and 15E(e), 15E(f), 15E(g) and 18. [59] Further the only allegation about the acceptance of a finance offer was alleged to have been made by Fraser in May 2013, well after the monies were said to have been paid.47 The pleaded facts are inconsistent with an allegation of such a misrepresentation. The failure to plead material facts supporting such an allegation demonstrates a failure to disclose any reasonable cause of action. Sixth Issue: The Plaintiffs’ response [60] In response it is argued that there was a representation of an unconditional offer which was, as the pleading indicates, conditional on a satisfactory valuation which was in turn conditional on the need to pay for the valuation. As the applicant submits, however, this is not in its terms a pleading of the receipt of an unconditional offer. Sixth Issue: Discussion and Conclusion [61] In my conclusion the applicant’s submissions on this issue should also be accepted. The applicant’s arguments as to the lack of substance of the pleadings about misrepresentation are correct – particularly where the connection between Babic and the fourth defendant is lacking - and again the allegations complained of disclose no reasonable cause of action or otherwise have a tendency to prejudice or delay a fair trial and ought to be struck out pursuant to Rule 171. Again the relevant factual stratum is absent and there should be no leave to re-plead. Leave to re-plead [62] As outlined above, for the reasons outlined in my view there should be no leave to re- plead. This is a serious step, not taken lightly, but in the context of this somewhat tortuous case, taking into account the features referred to by the applicant, as set out, inter alia, at paragraph [37] above, together with the fact that, despite being on 47 3 FASOC, 23(a). -- 21 of 22 -- 22 particular notice of the problems - as ventilated in this application and identified in Mr Orr’s letter of 18 December 201948 - the respondents’ case is nevertheless lacking in a pleading and evidentiary sense as set out above, it is, in my conclusion, the appropriate one. The case falls into that category discussed by Justice Flanagan in Chan & Ors v Macarthur Minerals Ltd & Ors (supra).49 [63] I will hear the parties, if necessary, as to perfection of the relevant orders as to individual paragraphs; I have done my best to tease out the proper details, following the form of the application, but may be assisted if further refinement is required. Costs [64] Costs should follow the event, such that there will be an order that the plaintiffs pay the applicant’s costs, unless another order is sought. If this is to be contested, the party advancing the contest should file and serve a written outline on the issue, not exceeding two pages, within 7 days of delivery of the judgment, with the opposing party to have seven days to respond. 48 Exhibit “AO-1” to Mr Orr’s affidavit filed 12 March 2020, Court file document 99, at pp 36-41 49 At [74]-[75] -- 22 of 22 --