Ruxton v Mattner[2003] QDC 570

DISTRICT COURT OF QUEENSLAND

1. [1]
   The first defendant makes application for the following orders:

1. That summary judgment be entered in favour of the first defendant as against the plaintiff pursuant to rule 293 of the Uniform Civil Procedure Rules 1999.
2. Further, or in the alternative, that the plaintiff’s claim as against the first defendant be struck out pursuant to rule 171 of the Uniform Civil Procedure Rules 1999.
3. That the plaintiff pay the costs of the first defendant of this application and of the whole matter on an indemnity basis; or in the alternative, in an amount to be agreed or assessed.

Leave was granted to amend the application by including an application for further and better particulars. However, it was conceded by counsel for the applicant first defendant that should the plaintiff be ordered to replead paragraph 9 of his amended statement of claim it would be unnecessary to deal with this part of the application.

2. [2]
   The plaintiff’s claim is in respect of alleged misleading conduct in contravention of s 995(2) of the Corporations Act arising from certain representations pleaded in paragraph 2 of the amended statement of claim as follows:

“2.In September 1996, the second defendant, on behalf of the first defendant, represented to the plaintiff that:

1. (a)
   the net profit made by Opal Shed Pty Ltd for the period 1 July 1995 to 31 March 1996 was $420,651;
2. (b)
   Opal Shed Pty Ltd had current arrangements with about twenty bus companies for the delivery of tourists to its retail business;
3. (c)
   a company that was being formed to acquire Opal Shed Pty Ltd’s retail business was expected to make a net profit of $675,232 during its first 12 months of trading.”

3. [3]
   At paragraph 9 of the amended statement of claim the plaintiff pleads as follows:

“9.By reason of that conduct, on 9 October 1996, the plaintiff paid $60,000 for the allotment of a share in Syndicate 13 Pty Ltd, being the company formed to acquire Opal Shed Pty Ltd’s retail business.”

4. [4]
   On 12 April 2002 the first defendant obtained leave to join Mr Mathers as a third party to the proceeding and on 15 April 2002 issued a third party notice against him. Mr Mathers filed a notice of intention to defend the third party notice on 4 July 2002.

5. [5]
   The first defendant has, with respect to paragraph 9 of the amended statement of claim, denied that the plaintiff paid $60,000 for the allotment of a share in Syndicate 13 Pty Ltd and claimed that the plaintiff instead paid $1 for the allotment of his share in that company. The first defendant admits that on 9 October 1996 the plaintiff paid $60,000 to Syndicate 13 Pty Ltd but claims that $59,999 of this was by way of a loan to assist Syndicate 13 Pty Ltd in its purchase from Opal Shed Pty Ltd of the retail business of Opal Shed Pty Ltd.

6. [6]
   In support of his allegation the first defendant points to certain documents which appear to confirm his position. Thus, a share certificate issued to the plaintiff in Syndicate 13 Pty Ltd indicates that Mr Ruxton is the registered holder of one “A” Class Ordinary Share and that the sum of $1 was paid for that share. Furthermore, an Australian Securities Commission form 207 relating to the notification of allotment of shares indicates that only 12 “A” Class Ordinary Shares were allotted and that the nominal value per share was $1. The balance sheet of Syndicate 13 Pty Ltd as at 31 October 1996 indicates that its issued capital comprises 13 issued shares with a value of $13 and that its current liabilities include a shareholder’s loan in the name of I Ruxton in the amount of $59,999.

7. [7]
   The plaintiff in his affidavit filed on 3 February 2003 states that in September 1996 he telephoned the office of Mattners Accountants and made an appointment to see the second defendant (Mr Mathers) who he understood to be an employee of the firm. At the appointed meeting the second defendant spoke to the plaintiff of a proposal to form a company to acquire the retail business of Opal Shed Pty Ltd. The second defendant, either on that or a later occasion, told the plaintiff that a syndicate was to be established with up to 13 investors each contributing $60,000 per share. The plaintiff was given various documents concerning the proposal. Included in these was a document headed “Opal Shed Syndication” which indicated that “the syndicate shall be made up of 13 shares of which three shares shall be retained by Gordon and Sandra Keppie. The other 10 shares shall be divided in the following manner:

Opal Shed Accountant  1 share

Australian Businessman and Wife  1 share

Australian Businessman and Wife  1 share

Australian Businessman  1 share

Korean Businessman  1 share

Sandra and Gordon Keppie  6 shares

Korean Inbound Companies by negotiation  2 shares

TOTAL 13 shares

       Cost of Share AUD $60,000.00”

8. [8]
   A further document entitled “Proposal to Sell the Retail Operation of Opal Shed Pty Ltd” sets out the following proposal:

“It is proposed to sell the retail operation of Opal Shed Pty Ltd (Opal) to a newly formed company, comprising of between 6-12 shareholders/members.

Proposal Purchase Price $680,000 for the Goodwill of Opal (retail only) plus $40,000 working capital

1. (1)
   6 shareholders @ $120,000 each

or

2. (2)
   12 shareholders @ $60,000 each

or

(3)  Combination of the above

The issued shares would be allocated as follows:

1. (a)
   1 share to $60,000 members
2. (b)
   2 shares to $120,000 members

TOTAL SHARES ISSUED :  12

…

Interested investors to date:

Mr & Mrs Keppie 1 share

Mr Thomas Lee 1 share

Mr Geoff Mathers 1 share

Dr G Yakimoff 1 share

Mr S Sheppeard 1 share

…”

9. [9]
   There is clearly an important conflict between the plaintiff and first defendant as to whether the consideration paid in respect of the share allotted to the plaintiff was $1 or $60,000. The plaintiff claims that at no time did he agree that any part of the consideration paid by him should be treated as a loan, and further states that at no time was he consulted with respect to the manner in which the documents relied upon by the first defendant were prepared.

10. [10]
    In an application of this nature the first defendant must demonstrate that the plaintiff has no real prospect of succeeding. A clear and careful consideration must be undertaken to determine whether the plaintiff has realistic as opposed to fanciful prospects of success (Foodco Management Pty Ltd v Go My Travel [2001] QSC 291 at para 8; Bernstrom v National Australia Bank [2002] QCA 231 at paras 235-40). The test to be applied was described in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 by Barwick CJ as “so obviously untenable that it cannot succeed” and where it would be “manifest that to allow [the pleadings] to stand would involve useless expense”.

11. [11]
    The first defendant submits that the plaintiff’s claim must fail to the extent of $59,999 which does not constitute any payment for a share but which is to be characterised as a loan to Syndicate 13 Pty Ltd. Alternatively, it is submitted that no cause of action is disclosed by the case pleaded on behalf of the plaintiff as no allegation of reliance on the representations is pleaded to the extent of $59,999. The first defendant, correctly in my opinion, submits that reliance is a critical element to any recovery pursuant to the relevant provisions of the Corporations Act which is drafted in identical terms to those of the Trade Practices Act 1994 (Cth) and, consequently, similar considerations apply. Accordingly, it is submitted, there should be summary judgment for the first defendant in respect of the plaintiff’s claim to the extent of the $59,999 which constituted the loan.

12. [12]
    Summary judgment for a defendant may be given under the provisions of rule 293 of the Uniform Civil Procedure Rules which states:

“293(1)A defendant may, at any time after filing a notice of intention to defend, apply to the Court under this part for judgment against a plaintiff.

       (2)If the Court is satisfied -

1. (a)
   the plaintiff has no real prospect of succeeding on all or a part of the plaintiff’s claim; and
2. (b)
   there is no need for a trial of the claim or the part of the claim;

the Court may give judgment for the defendant against the plaintiff for all or the part of the plaintiff’s claim and may make any other order the Court considers appropriate.”

13. [13]
    In my view there is clearly a triable issue of law in this matter relating to the authority of the second defendant/third party to bind the first defendant in relation to the promotion of the company Opal Shed Pty Ltd. This issue can, in my opinion, be properly determined only after a trial of the action and it is inappropriate to give summary judgment for the defendant in these circumstances. I cannot, at this stage, conclude that the plaintiff has no real prospect of success in his action nor can I conclude that the plaintiff’s case is so obviously untenable that it cannot succeed. The circumstances surrounding the creation of the documents relied on by both the plaintiff and the first defendant which bear upon the reason for the payment of $60,000 will become clear after the relevant witnesses have given their evidence. At this stage no conclusions may properly be drawn as to those circumstances.

14. [14]
    Rule 171 of the Uniform Civil Procedure Rules provides as follows:

“Striking out Pleadings

171(1)This rule applies if a pleading or part of a pleading –

1. (a)
   discloses no reasonable cause of action or defence; or
2. (b)
   has a tendency to prejudice or delay the fair trial of the proceeding; or
3. (c)
   is unnecessarily or scandalous; or
4. (d)
   is frivolous or vexatious; or
5. (e)
   is otherwise an abuse of the process of the Court.

3. (2)
   The Court, at any stage of the proceeding, may strike out all or part of the pleading and order the costs of the application to be paid by a party calculated on the indemnity basis.

(3) On the hearing of an application under subrule (2), the Court is not limited to receiving evidence about the pleading.”

15. [15]
    The first defendant submits, in the alternative, pursuant to rule 171, that I should strike out paragraph 9 and order the plaintiff to replead what it alleges it did in reliance upon the alleged representations. In support of this submission the first defendant points to the provisions of rule 157 of the Uniform Civil Procedure Rules which requires a party to include in a pleading particulars necessary to:

1. (a)
   define the issues for, and prevent surprise at, the trial; and
2. (b)
   enable the opposite party to plead; and
3. (c)
   support a matter specifically pleaded under rule 150.

16. [16]
    It seems clear enough that the terms of the agreement pursuant to which the payment of $60,000 was made remain critical. I am not satisfied that paragraph 9 of the amended statement of claim states the plaintiff’s case clearly enough for the first defendant to understand the terms upon which it is alleged the payment was made. The circumstances in which that payment was made are clearly material and have been inadequately identified in paragraph 9 as it currently stands.

17. [17]
    In the result, then, I decline to order that summary judgment be entered in favour of the first defendant. I further decline to order that the plaintiff’s claim as against the first defendant be struck out. However, I do order that paragraph 9 of the amended statement of claim be struck out and that the plaintiff replead that paragraph in terms that clearly identify the circumstances in which it is alleged that the payment of $60,000 was made. I further order that the costs of and incidental to this application are to be reserved.