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O'Connor v CWC Investors Pty Ltd[2017] QSC 279

O'Connor v CWC Investors Pty Ltd[2017] QSC 279

SUPREME COURT OF QUEENSLAND

CITATION:

O'Connor & ors v CWC Investors Pty Ltd & ors [2017] QSC 279

PARTIES:

KEITH O'CONNOR

(first plaintiff)

SUSAN MAREE O'CONNOR

(second plaintiff)

COMSTON PTY LTD

ACN 010 212 316

(third plaintiff)

v

CWC INVESTORS PTY LTD AS TRUSTEE FOR THE CWC INVESTMENT UNIT TRUST

ACN 113 607 748

(first defendant)

CWC COFA PTY LTD AS TRUSTEE FOR THE CWC CORPORATE OPPORTUNITY 1A TRUST

ACN 113 611 911

(second defendant)

CWC COFB PTY LTD AS TRUSTEE FOR THE CWC CORPORATE OPPORTUNITY 1B TRUST

ACN 114 881 113

(third defendant)

TANARRA CAPITAL AUSTRALIA PTY LTD

ACN 114 164 331

(fourth defendant)

BETTYAL PTY LTD

ACN 074 216 247

(fifth defendant)

BRENDAN MADDEN

(sixth defendant)

LINDSAY PHILLIPS

(seventh defendant)

DAVID BLOWER

(eighth defendant)

JOHN LOCKETT

(ninth defendant)

ROBERT GREGG

(tenth defendant)

ALEC BRENNAN AM

(eleventh defendant)

FILE NO/S:

SC No 2496 of 2017

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

24 November 2017

DELIVERED AT:

Brisbane

HEARING DATE:

20 November 2017

JUDGE:

Bond J

ORDER:

The orders of the Court are that:

  1. [1]
    There be judgment for the defendants against the plaintiffs in relation to the plaintiffs’ claim that the defendants refund to the plaintiffs the amount of $894,316 incurred in preparing their defence and counterclaim in the previous proceeding plus interest.
  2. [2]
    Subject to [3], the plaintiffs’ statement of claim must be struck out in its entirety, with no leave to replead.
  3. [3]
    The plaintiffs must file and serve a statement of claim which pleads:
    1. (a)
      all their claims for relief deriving from the allegation that the plaintiffs were induced to enter into the Settlement Deed by the CWC parties’ fraudulent misrepresentation that they had no knowledge of the dealing between CopperCo and PPI in late August and early September 2008 in which CopperCo placed large orders for PVC pipe with PPI; and, in particular,
    2. (b)
      the material facts relied on to establish the causal link between the alleged fraudulent representation and the plaintiffs entering into the Settlement Deed.
  4. [4]
    The plaintiffs must deliver the affidavit evidence on which they would rely to establish the causal link between the alleged fraudulent representation and the plaintiffs entering into the Settlement Deed.
  5. [5]
    The question of whether the defendants should have summary judgment in relation to the plaintiffs’ claim as pleaded by the statement of claim referred to in [3] will be set down for hearing before me.
  6. [6]
    The plaintiffs must pay the defendants’ costs of and incidental to the defendants’ application filed 17 July 2017 on the indemnity basis.
  7. [7]
    I will hear the parties on the questions of:
    1. (a)
      the date by which the statement of claim referred to in [3] and the evidence referred to in [4] should be filed and served;
    2. (b)
      the date on which the hearing referred to in [5] should occur;
    3. (c)
      what ancillary orders should be made to facilitate the expeditious determination of that question; and
    4. (d)
      whether the costs referred to in [6] should be fixed by me or assessed in the usual way.
  8. [8]
    The parties will have liberty to apply.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – GENERALLY – where the plaintiffs allege that a deed settling a previous proceeding should be set aside – where the statement of claim is a prolix narrative comprised of a collection of pleas of evidence rather than material facts – whether the statement of claim should be struck out

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – GENERALLY – where the plaintiffs allege that a deed settling a previous proceeding should be set aside – where the plaintiffs rely on an alleged fraudulent misrepresentation or alleged unconscionable conduct on behalf of the defendants – whether the plaintiffs have no real prospect of success

Uniform Civil Procedure Rules 1999 (Qld)

Aklia Holdings Pty Ltd v The Carter Group Pty Ltd (in liq) [2017] QSC 75, cited

Alati v Kruger (1955) 94 CLR 216, cited

Australian Steel & Mining Corporation Pty Ltd v Corben (1974) 2 NSWLR 202, cited

Commonwealth Bank of Australia v Quade (1991) 178 CLR 134, cited

Nicholas v Thompson [1924] VLR 554, cited

Thorne v Kennedy [2017] HCA 49, cited

COUNSEL:

A T Schlicht for the plaintiffs

J D McKenna QC, with D Fuller, for the defendants

SOLICITORS:

The first plaintiff appeared on his own behalf and on behalf of the second and third plaintiffs

Minter Ellison for the defendants

Introduction

  1. [1]
    Proceeding 2496 of 2017 is being managed by me on the Commercial List. It is convenient to refer to it as the present proceeding.
  1. [2]
    The principal claim for relief in the present proceeding is that the Court make an order setting aside a settlement deed.
  2. [3]
    Before me is an application by the defendants for summary judgment, or alternatively that the plaintiffs’ statement of claim be struck out, together with ancillary orders.

The previous proceeding

  1. [4]
    Some of the parties to the present proceeding were previously parties to Supreme Court proceeding 2005 of 2010. It is convenient to refer to that proceeding as the previous proceeding. The previous proceeding was also on the Commercial List.
  2. [5]
    It is appropriate to provide further detail about the previous proceeding because it forms important background to the present proceeding and the application which is advanced in it. The deed impugned in the present proceeding was the deed by which the previous proceeding was settled.
  3. [6]
    The table below sets out the relevant dramatis personae, and identifies their role in the previous proceeding and in the present proceeding:

Defined term 

Details

Role in previous proceeding

Role in present proceeding

PPI

PPI Corporation Holdings Pty Ltd

Not a party to the proceeding. Parent company to PPI Operations.

Not a party to the proceeding. PPI has been deregistered and wound-up.

PPI Operations

PPI Corporation Pty Ltd

Not a party to the proceeding. PPI Operations was involved in the polyethylene pipe manufacturing business.

Not a party to the proceeding. PPI Operations is under external administration.

CWC parties

CWC Investors Pty Ltd as trustee for the CWC Investment Unit Trust, CWC COFA Pty Ltd as trustee for the CWC Corporate Opportunity 1A Trust, and CWC COFB Pty Ltd as trustee for the CWC Corporate Opportunity 1B Trust

First, second and third plaintiffs. The CWC parties ultimately held a substantial majority of the shares in PPI.

First, second and third defendants.

Mr O'Connor

Keith O'Connor

First defendant. Mr O'Connor was a shareholder of PPI, a former director of PPI and PPI Operations, and former Chief Financial Officer of PPI Operations.

First plaintiff.

Comston

Comston Pty Ltd as trustee for Susan Maree O'Connor

Third defendant. Comston was also a shareholder of PPI.

Third plaintiff.

O'Connor parties

Keith O'Connor, Comston and Okbury Pty Ltd.

First, second and third defendants. Okbury Pty Ltd was an entity associated with Mr O'Connor.

Mr O'Connor and Comston were the first and third plaintiffs.

Mrs O'Connor

Susan O'Connor, wife of Mr O'Connor.

Not a party to the proceeding.

Second plaintiff.

CopperCo

CopperCo Ltd

Not a party to the proceeding. CopperCo was a customer of PPI which operated through a wholly owned subsidiary, Lady Annie Operations Pty Ltd. It owed a substantial amount of money to PPI.

Not a party to the proceeding.

  1. [7]
    The previous proceeding involved disputes about the ownership and management of PPI Operations and its parent company PPI and whether a relevant shareholders agreement had been validly terminated and, if so, by whom.
  2. [8]
    The CWC parties commenced the previous proceeding. They alleged, among other things, that Mr O'Connor (for himself and on behalf of the other O'Connor parties):
    1. (a)
      made unfounded allegations of criminal behaviour, fraud, dishonesty and misleading conduct against the CWC parties and others, including that those parties had wrongfully concealed an alleged relationship between CopperCo and the board of PPI;
    2. (b)
      improperly disclosed PPI’s confidential information to third parties;
    3. (c)
      issued ‘notices of default’ and a ‘termination notice’ under the shareholders agreement without any legal basis;
    4. (d)
      improperly recorded PPI Board meetings and personal meetings with PPI and PPI Operations officers and staff;
    5. (e)
      improperly attended PPI’s offices and accessed its documents;
    6. (f)
      refused to participate in PPI Board business; and
    7. (g)
      obstructed negotiations for the sale of PPI Operations.
  3. [9]
    The CWC parties also alleged that other defendants had also improperly issued termination notices under the Shareholders Agreement.
  4. [10]
    The CWC parties said that they had validly terminated the shareholders agreement.
  5. [11]
    The relief sought by the CWC parties included:
    1. (a)
      injunctions against the O'Connor parties restraining them from continuing to make allegations of fraud or criminal behaviour against anyone involved in PPI or PPI Operations;
    2. (b)
      injunctions against all of the defendants restraining them from relying on the ‘notices of default’ and the ‘termination notice’ under the shareholders agreement to prevent the CWC parties from voting at PPI meetings, receiving or participating in any PPI distributions or transferring shares in PPI or receiving information about PPI or PPI Operations; and
    3. (c)
      declarations as to the valid termination of the shareholders agreement by them.
  6. [12]
    Mr O'Connor and Comston (and another defendant) contended they were justified in doing what they had done. They counterclaimed for declarations that they were entitled to do most of the things that the plaintiffs had sought to restrain them from doing. They contended that they had validly terminated the shareholders agreement and sought a declaration to that effect. They sought an injunction restraining any sale of the assets of PPI or PPI Operations without their consent.
  7. [13]
    The previous proceeding was set down for a two-week trial before McMurdo J beginning on 27 April 2011.
  8. [14]
    By order made on 11 March 2011, McMurdo J set a timetable for the delivery of summaries of the evidence to be adduced from the parties’ witnesses at trial. He also set a timetable which permitted the CWC parties to deliver affidavits from witnesses whose summaries of evidence had been delivered and which the CWC parties regarded as potentially uncontroversial.
  9. [15]
    In compliance with the timetable set by the order:
    1. (a)
      on 18 March 2011, the CWC parties delivered summaries of the evidence which they intended to adduce from their witnesses; and
    2. (b)
      on 13 April 2011, the CWC parties delivered affidavits from the following witnesses: Phillips, Brennan, Carnegie, Birkbeck and Gregg.
  10. [16]
    On 15 April 2011, the CWC parties delivered affidavits from two further witnesses, namely Lockett and Blower. This was two days later than the timetable set by McMurdo J.
  11. [17]
    On 20 April 2011, the O'Connor parties advised that Birkbeck and Ly were not required for cross-examination.
  12. [18]
    The trial commenced before McMurdo J on 27 April 2011. Both sides were represented by law firms and experienced senior counsel.
  13. [19]
    The parties settled on the morning of the second day of the trial part-way through the plaintiffs’ opening, settlement negotiations having been started the night before the trial.
  14. [20]
    The parties to the previous proceeding formalised that settlement by entering into a Deed of Settlement and Release (the Settlement Deed). All of the parties to the present proceeding were parties to the Settlement Deed.
  15. [21]
    Under the Settlement Deed, among other things:
    1. (a)
      Mr O'Connor and Comston agreed to pay the CWC parties $315,000, $200,000 of it as distributions by PPI from the proceeds of a sale of its assets, and also agreed to give the CWC parties a share mortgage over their shares in PPI to secure those obligations;
    2. (b)
      the parties agreed to release one another from all claims in the previous proceeding and in relation to the shareholders agreement and the affairs of PPI and PPI Operations;
    3. (c)
      Mr O'Connor and Comston agreed to withdraw their allegations of criminal behaviour, fraud and similar matters and release the CWC parties and officers from any claims relating to those allegations and any claims relating to the sale of PPI and PPI Operations;
    4. (d)
      these releases were an absolute bar and defence to any claim agreed to be released;
    5. (e)
      the parties agreed to discontinue the previous proceeding;
    6. (f)
      the O'Connor parties agreed that selling the assets of PPI and PPI Corporation was in the shareholders’ best interests and agreed not to obstruct that sale;
    7. (g)
      the parties agreed to bear their own costs associated with the Settlement Deed and the previous proceeding; and
    8. (h)
      clause 16.5 of the Settlement Deed provided:

Each party agrees and acknowledges that:

  1. (a)
    this Deed is intended to be legally binding;
  1. (b)
    it has freely entered into this Deed after having the opportunity to carefully consider its contents and to obtain legal or other professional advice on the matters in this Deed (including the terms of clauses 4, 5, 6, 7, 8 and 9); and
  1. (c)
    it would not have entered into this Deed without the other parties providing this representation.

Each party acknowledges that it understands the content of, and consequences of entering into, this Deed.

The Settlement Deed is performed

  1. [22]
    Material touching upon the developments after the Settlement Deed was executed is scant at the present time. At least some of the terms of the Settlement Deed must have been performed, because the previous proceeding did not continue.
  2. [23]
    PPI Operations was placed into administration on 15 January 2013 and became the subject of a creditors’ voluntary winding up on 13 August 2013. It still continues under that external administration.
  3. [24]
    PPI was placed into administration on 15 January 2013 and became the subject of a creditors’ voluntary winding up on 20 August 2013. After completion of the winding up it was deregistered on 26 October 2014.

The present proceeding

  1. [25]
    I turn now to discuss the plaintiffs’ case in the present proceeding, which was commenced on 10 March 2017, almost 6 years after the previous proceeding was settled.
  2. [26]
    The statement of claim suggests that the present proceeding suggests that some or all of the plaintiffs (possibly via their legal advisers) were misled into the execution of the Settlement Deed.
  3. [27]
    How that happened is entirely unclear on the face of the statement of claim, which is a prolix narrative comprised of a collection of pleas of evidence rather than material facts, many of which pleas do not seem to have any pleaded connection with any relief sought.
  4. [28]
    Amongst other things, the statement of claim:
    1. (a)
      suggests that there were defects in disclosure by the plaintiffs before trial in the previous proceeding;
    2. (b)
      seeks to impugn affidavit evidence which was filed by the plaintiffs before the trial on the basis that some of it was “incorrect”, “untruthful” or “false”; and
    3. (c)
      seeks to identify various threats made, to which the plaintiffs attribute some significance.
  5. [29]
    The plaintiffs contend that at least part of Mr O'Connor’s motivation for entering into the Settlement Deed was the realization that his side of the previous proceeding may not have had sufficient evidence to succeed.
  6. [30]
    Having regard to the statement of claim, one would speculate that it was some part or some combination of parts of the multiplicity of complaints about the defendants’ conduct which had something to do with the plaintiffs “being misled” into executing the Settlement Deed.  But there are no clearly articulated and confined representations pleaded. There no proper plea of the material facts which establish the causal link between particular representation(s) and the entry into the Settlement Deed. Moreover , the nature of the cause of action on which the plaintiffs rely is hopelessly obscure. Whether the case was based on misleading and deceptive conduct in contravention of a statutory norm, or fraudulent or innocent misrepresentation, duress or unconscionable conduct was a mystery.
  7. [31]
    The plaintiffs claimed two substantive orders.
  8. [32]
    First, they claimed:

The Plaintiffs are relieved of their obligations to the Defendants under the terms of the 'Deed of Settlement and Release' signed by them in around April 2011, and this Deed be Set Aside.

  1. [33]
    Second, they claimed:

The Defendants refund the amount of $894,316 plus interest to the Plaintiffs.

  1. [34]
    The second claim was apparently related to the assertion in the body of the statement of claim that the plaintiffs had incurred costs totalling $894,316 in preparing their defence and counterclaim in the previous proceeding. There was, however, no indication in the pleading why such an order should be made if the Settlement Deed was set aside. And if the Settlement Deed was not set aside, then the terms of the Settlement Deed would have stood as an insuperable obstacle to the claim.

The present application

  1. [35]
    The defendants bring an application for summary judgment on the grounds that the plaintiffs’ claims have no real prospect of success.
  2. [36]
    Alternatively, the defendants seek an order that the statement of claim be struck out either:
    1. (a)
      on the basis that it fails to disclose any reasonable cause of action; or alternatively
    2. (b)
      on the basis that it is embarrassing and otherwise breaches the Uniform Civil Procedure Rules 1999 (Qld).
  3. [37]
    The principles which I will apply to the resolution of the defendants’ application are those which I set out in Aklia Holdings Pty Ltd v The Carter Group Pty Ltd (in liq) [2017] QSC 75 at [17] and [18]:

The approach which should be taken in relation to a defendant’s application for summary judgment (which also applies to an application advanced by a person in the position of defendant to a counterclaim) was concisely summarised by Mullins J in Edington v Board of Trustees of the State Public Sector Superannuation Scheme [2012] QSC 211 at [54] in these terms:

Under r 293(2) of the UCPR, the two conditions of which the court must be satisfied before it can give judgment for a defendant is that the plaintiff has no real prospect of succeeding on its claim and there is no need for a trial of the claim. Although r 293 (and its counterpart r 292) are modern procedural rules for applying for summary judgment in the context of the philosophy of the UCPR found in r 5, authoritative statements about exercising caution in terminating a proceeding summarily remain applicable: Spencer v Commonwealth (2010) 241 CLR 118 at [24] and [60], LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd  [2011] QCA 105 at [29], and Neumann Contractors Pty Ltd v Traspunt No 5 Pty Ltd [2011] 2 Qd R 114 at [80]–[81]. Although the provision considered in Spencer was that applying in the Federal Court where the test for summary judgment is “no reasonable prospect,” rather than “no real prospect,” the comments in the judgments in Spencer about the exercise of caution in dismissing an action summarily were intended to apply generally in respect of the procedure of summary judgment.

And, in relation to the power to strike out, I observed in Lee v Abedian [2016] QSC 92 at [38] – [39] that (footnotes inserted) –

… the power to strike out is to be used sparingly and only in clear cases: General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 129 to 130. The power cannot be exercised “once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it”: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J.

However … the Court will not shrink from striking out a pleading which is defective because it does not disclose a reasonable cause of action, has a tendency to prejudice or delay a fair trial, contains allegations which are unnecessary [A v Ipec Australia Ltd [1973] VR 39 at 43 per Menhennitt J; Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd [2014] QSC 205 at [27] to [30] per Jackson J.],  scandalous, vexatious or embarrassing [Robert Bax & Associates v Cavenham Pty Ltd [2011] QCA 53 at [16] per White JA (with whom McMurdo P and Fraser JA agreed)], or which is otherwise an abuse of the processes of the Court [See, generally, Radisich v McDonald (2010) 198 IR 244 at 251; [2010] FCA 762 at [20] and AED Oil Ltd v Back [2009] VSC 158 at [7] to [9] per Judd J.].

Discussion

  1. [38]
    Two points may be made at the outset.
  2. [39]
    First, the plaintiffs’ statement of claim does not comply with the rules of pleading. If the proceeding were to continue, the statement of claim would have to be struck out. Counsel for the plaintiffs did not contend to the contrary.
  3. [40]
    Second, counsel for the plaintiffs did not seek to support the proposition that there was an arguable case (let alone a case with a real prospect of success) in respect of the claim for refund of the costs of the defence and counterclaim in the previous proceeding. The defendants should have summary judgment in respect of the plaintiffs’ second claim.
  4. [41]
    That leaves the question of whether the defendants should have summary judgment in respect of the plaintiffs’ first claim.
  5. [42]
    In the course of oral argument, counsel for the plaintiffs identified the only bases on which the plaintiffs sought to resist summary judgment in respect of that claim. I had earlier cautioned him that the plaintiffs would be bound by his conduct of the case before me.
  6. [43]
    The bases on which the plaintiffs relied were:
    1. (a)
      that the Settlement Deed should be set aside on the grounds that the plaintiffs were induced to enter into the Settlement Deed by a particular fraudulent misrepresentation made by the defendants; or
    2. (b)
      alternatively, that the Settlement Deed should be set aside on the grounds of alleged unconscionable conduct by the defendants.
  7. [44]
    The second basis may be dealt with first.

Unconscionable conduct

  1. [45]
    The essential elements of this cause of action were recently restated by the High Court in Thorne v Kennedy [2017] HCA 49 at [38] where Kiefel CJ, Bell, Gageler, Keane and Edelman JJ stated (citations omitted):

A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring “victimisation”, “unconscientious conduct”, or “exploitation”. Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage.

  1. [46]
    No attempt had been made to plead material facts which might establish unconscionable conduct which might justify the claimed relief in a way which accorded with the foregoing conception of the elements of the cause of action.
  2. [47]
    But quite apart from the defective pleading, there is no real prospect of the plaintiff succeeding in this claim for at least the following reasons.
  3. [48]
    First, the only basis on which counsel for the plaintiffs submitted that the plaintiffs were at a special disadvantage was that Mr O'Connor was stressed by reason of his health and the threats which had been made to him. As to this:
    1. (a)
      An affidavit filed by Mr O'Connor in the previous proceeding and sworn on 7 October 2010 deposed (at [293]-[309]) to what he characterized as a pattern of regular bullying and humiliation in 2009 which caused him to lose weight and suffer a suspected stress induced heart attack. He said he developed concerns about his physical safety.
    2. (b)
      The statement of claim in the present proceeding at [30]-[45] refers to some incidents which occurred in 2009 to 2010, which caused Mr O'Connor to complain to police that a pattern of behavior had occurred, which he attributed to the defendants, and which had caused him “to feel uneasy about [his] continuing safety & that of [his] family” in continuing with the legal fight constituted by the previous proceeding and which he felt could be aimed at preventing him from testifying at the trial in April 2011.
    3. (c)
      The statement of claim at [49]-[51] asserted that during the trial Mr O'Connor formed the view that the plaintiffs’ case would not finish before the end of the first week, which distressed him because he “began to realize” that the trial would not finish within the time allocated to it and he would not get his chance to give evidence, the trial would have to be stood over, and he would have to spend more time living in fear about his and his family’s safety.
    4. (d)
      In an affidavit sworn by Mr O'Connor in the present proceeding for the purpose of objecting to the proceeding being placed on the Commercial List, Mr O'Connor expressed the opinion that the fact that the defendants had placed the previous proceeding on the commercial list had placed “enormous emotional and financial pressure” on him and his wife. Essentially, he thought that the defendants taking the same approach in the present proceeding could be characterized as an “attempt to inflict financial and emotional stress” again.
    5. (e)
      A second affidavit by Mr O'Connor in the present proceeding further addressed the threats and intimidatory behavior complained of in the statement of claim.
    6. (f)
      The reliability of this material is challenged by the defendants.
    7. (g)
      But the critical flaw in the posited case is that there is neither pleading nor evidence which suggests that:
    8. (i)
      Mr O'Connor had suffered any particular diminution in his ability to make judgments as to his own best interests as at the time the Settlement Deed was executed; or
    9. (ii)
      any other decision-maker for the plaintiffs was so affected as at that time.
  4. (h)
    Accordingly, there is no real prospect that the plaintiffs can establish the type of special disadvantage contemplated by the law.
  • [49]
    Second, the Settlement Deed was entered into in circumstances in which the plaintiffs  were, to the knowledge of the other parties, separately advised by independent solicitors and senior counsel. Those facts are antithetical to the prospect that the plaintiffs might establish the other elements of unconscionable conduct. Counsel for the plaintiffs was not able to articulate any answer to this difficulty.
  • [50]
    Third, a further insuperable obstacle to the plaintiffs obtaining an order that the Settlement Deed would be set aside was the impossibility of restitutio in integrum. As to this:
    1. (a)
      In equity, substantial restitutio in integrum is required, in that the court must be able, “by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to allowances proper to be made for deterioration”, to do that which is “practically just between the parties, and by so doing restore them substantially to the status quo”: Alati v Kruger (1955) 94 CLR 216 at 223-224. If the court cannot do so, rescission will be barred.
    2. (b)
      At the time the Settlement Deed was entered into, the status quo involved the parties litigating about their rights in relation to the ownership and management of PPI Operations and its parent company PPI and whether a relevant shareholders agreement had been terminated and, if so, by whom.
    3. (c)
      Since the Settlement Deed was entered into more than 6 years has passed during which timethe Settlement Deed must have been performed to at least some extent, but, more significantly, the companies about which the parties were litigating have been wound up.
    4. (d)
      The defendants submitted that a further insuperable obstacle to the plaintiffs obtaining an order that the Settlement Deed would be set aside was the impossibility of restitutio in integrum. The plaintiffs advanced neither pleading, nor evidence nor submission, gainsaying that proposition.
  • [51]
    The result is that the plaintiffs have no real prospect of establishing that the Settlement Deed should be set aside on the grounds of unconscionable conduct by the defendants’, as alleged by their counsel.

Fraudulent misrepresentation

  1. [52]
    The plaintiffs’ statement of claim had not pleaded that the Settlement Deed should be set aside on the grounds that the plaintiffs were induced to enter into the Settlement Deed by the defendants’ fraudulent misrepresentation.
  2. [53]
    No such contention was advanced by the plaintiffs’ in their written submissions in response to the defendants’ application.
  3. [54]
    At the outset of the hearing of the application, I asked the plaintiffs’ counsel to identify the plaintiffs’ cause of action and was informed that the plaintiffs relied on unconscionable conduct, negligent misrepresentation, and an argument based on drawing an analogy with Commonwealth Bank of Australia v Quade (1991) 178 CLR 134.
  4. [55]
    The proposition that the plaintiffs’ case was founded solely on fraudulent misrepresentation or alternatively unconscionable conduct was expressed for the first time by the plaintiffs’ counsel orally after the luncheon adjournment on the day of the hearing before me.
  5. [56]
    Counsel for the plaintiffs submitted that the fraudulent misrepresentation case had the following elements.
  6. [57]
    First, the CWC parties had represented that they had no knowledge of a dealing between CopperCo and PPI in late August and early September 2008 in which CopperCo placed large orders for PVC pipe with PPI. The representation was made by:
    1. (a)
      providing the affidavits of Birkbeck and Carnegie to the O'Connor parties on 13 April 2011; and
    2. (b)
      the omission from disclosure of some evidence which would have contradicted the affidavits.
  7. [58]
    Second, that representation was false when made.
  8. [59]
    Third, at the time the representation was made, the CWC parties knew the representation was false.
  9. [60]
    Fourth, the representation induced the plaintiffs to enter into the Settlement Deed because of the impact it had on Mr O'Connor’s decision-making. (I observe that there is shadowy support for the plaintiffs’ inducement proposition, in that there was some indication in the pleading (see statement of claim at [65], [68], [71] and [72]) and in Mr O'Connor’s affidavit (see affidavit sworn 8 August 2017 at [29] and [30]), which, though not expressed directly in relation to the representational case as formulated orally before me, did support the notion that the Birkbeck affidavit had significance to the plaintiffs’ decision to enter into the Settlement Deed.)
  10. [61]
    The defendants responded to the late-breaking news that the plaintiffs’ case was one of fraudulent misrepresentation as described by counsel by submitting that:
    1. (a)
      there were difficulties with the notion that the provision of affidavits could be regarded as supporting the alleged representation;
    2. (b)
      there were difficulties with the inducement proposition, given that:
    3. (i)
      Mr O'Connor had sworn to the fact that he had not read either the Carnegie or the Birbeck affidavits and had left that to his legal team (see his affidavit sworn 8 August 2017 at [16]-[19], however see also at [29] and [30] which suggest to the contrary in relation to Birbeck);
    4. (ii)
      the plaintiffs’ counsel had not contended that the alleged representation had any causal impact on the plaintiffs legal advisers at trial or the advice which they gave the plaintiffs in relation to the settlement;
    5. (iii)
      the alleged representation could not be regarded as material,[1]in the sense of having the tendency to induce, or the natural and probable result of inducing, the plaintiffs to enter into the Settlement Deed; and
  11. (c)
    the impossibility of restitutio in integrum still stood in the way of the claimed relief.
  • [62]
    Counsel for the plaintiffs still could advance no submission gainsaying the defendants’ submission concerning the impossibility of restitutio in integrum, but suggested that it might be possible for the plaintiffs to advance a damages claim.
  • [63]
    Given the caution which the law requires me to exercise in relation to summary judgment applications, I am not satisfied that it would be appropriate to form a view on the question of whether the alleged fraudulent misrepresentation case has any real prospect of success, without first seeing a considered pleading which seeks to articulate that case, and hearing from the defendants in relation to that case, after they have had a proper opportunity to consider it. Accordingly, I have determined that I should give the plaintiffs an opportunity to plead the case outlined orally by their counsel, that case being the sole remaining basis on which the plaintiffs resist summary judgment. But part of the price which I will require the plaintiffs to pay for getting that opportunity is that they put forward their evidence now in support of the proposition that the alleged fraudulent misrepresentation operated to induce them to enter into the Settlement Deed.
  • [64]
    I propose that in the light of such a pleading and the plaintiffs’ evidence on that question, I should make a determination on whether the defendants should have summary judgement on the plaintiffs’ claim (assuming, having received the pleading and evidence, the defendants still wish to pursue that course).
  • [65]
    To that end, I will make the following orders:
    1. (a)
      The plaintiffs must file and serve a statement of claim which pleads:
    2. (i)
      all their claims for relief deriving from the allegation that the plaintiffs were induced to enter into the Settlement Deed by the CWC parties’ fraudulent misrepresentation that they had no knowledge of the dealing between CopperCo and PPI in late August and early September 2008 in which CopperCo placed large orders for PVC pipe with PPI; and, in particular,
    3. (ii)
      the material facts relied on to establish the causal link between the alleged fraudulent representation and the plaintiffs entering into the Settlement Deed.
  • (b)
    At the same time, the plaintiffs must file and serve the affidavit evidence on which they would rely to establish the causal link between the alleged fraudulent representation and the plaintiffs entering into the Settlement Deed.
  • (c)
    The question of whether the defendants should have summary judgment in relation to the case so pleaded will be set down for hearing before me.
  • [66]
    I will hear the parties on the question of the date by which the proposed pleading should be delivered, the date on which the hearing should occur, and what ancillary orders should be made to facilitate the expeditious determination of that question.

Costs

  1. [67]
    The plaintiffs must pay the defendants costs of and incidental to the defendants’ application.
  2. [68]
    The defendants sought an order that the plaintiffs pay their costs assessed on the indemnity basis.
  3. [69]
    In light of:
    1. (a)
      the gross deficiencies in the statement of claim;
    2. (b)
      the groundless claim for refund of the costs spent on the defence and counterclaim in the previous proceeding; and
    3. (c)
      the fact that the plaintiffs’ true case emerged for the first time only in the oral submissions in response to the summary judgment application,

I conclude that thus far the plaintiffs have been guilty of undue prolongation of this proceeding by making groundless and irrelevant contentions which should never have been advanced.

  1. [70]
    I agree that the plaintiffs should pay the defendants’ costs of its application on the indemnity basis.
  2. [71]
    The defendants had also flagged their intention to seek orders aimed at having costs fixed by me rather than assessed. I will hear the parties on this question.
  3. [72]
    For completeness, I observe that the defendants had sought an order that, if the proceeding continued, it be stayed until the plaintiffs had discharged their obligations in relation to costs. In light of the approach I have taken, I would not make such an order now, but would reconsider the question once I have considered whether the plaintiffs have a real prospect of success in relation to the claim advanced in the further statement of claim.

Conclusion

  1. [73]
    I make the following orders:
  1. [1]
    There be judgment for the defendants against the plaintiffs in relation to the plaintiffs’ claim that the defendants refund to the plaintiffs the amount of $894,316 incurred in preparing their defence and counterclaim in the previous proceeding plus interest.
  1. [2]
    Subject to [3], the plaintiffs’ statement of claim must be struck out in its entirety, with no leave to replead.
  2. [3]
    The plaintiffs must file and serve a statement of claim which pleads:
    1. (a)
      all their claims for relief deriving from the allegation that the plaintiffs were induced to enter into the Settlement Deed by the CWC parties’ fraudulent misrepresentation that they had no knowledge of the dealing between CopperCo and PPI in late August and early September 2008 in which CopperCo placed large orders for PVC pipe with PPI; and, in particular,
    2. (b)
      the material facts relied on to establish the causal link between the alleged fraudulent representation and the plaintiffs entering into the Settlement Deed.
  3. [4]
    The plaintiffs must deliver the affidavit evidence on which they would rely to establish the causal link between the alleged fraudulent representation and the plaintiffs entering into the Settlement Deed.
  4. [5]
    The question of whether the defendants should have summary judgment in relation to the plaintiffs’ claim as pleaded by the statement of claim referred to in [3] will be set down for hearing before me.
  5. [6]
    The plaintiffs must pay the defendants’ costs of and incidental to the defendants’ application filed 17 July 2017 on the indemnity basis.
  6. [7]
    I will hear the parties on the questions of:
    1. (a)
      the date by which the statement of claim referred to in [3] and the evidence referred to in [4] should be filed and served;
    2. (b)
      the date on which the hearing referred to in [5] should occur;
    3. (c)
      what ancillary orders should be made to facilitate the expeditious determination of that question; and
    4. (d)
      whether the costs referred to in [6] should be fixed by me or assessed in the usual way.
  7. [8]
    The parties will have liberty to apply.

Footnotes

[1] The proposition concerning materiality has support in the innocent misrepresentation cases, but counsel for the defendants did not address me in relation to the cases which suggest a different position in relation to fraudulent misrepresentation: see Nicholas v Thompson [1924] VLR 554  per Cussen ACJ at 564-566 and per McArthur J at 577; Australian Steel & Mining Corporation Pty Ltd v Corben (1974) 2 NSWLR 202 per Hutley JA at 207-8.

Close

Editorial Notes

  • Published Case Name:

    O'Connor & Ors v CWC Investors Pty Ltd & Ors

  • Shortened Case Name:

    O'Connor v CWC Investors Pty Ltd

  • MNC:

    [2017] QSC 279

  • Court:

    QSC

  • Judge(s):

    Bond J

  • Date:

    24 Nov 2017

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2017] QSC 27924 Nov 2017Defendants' application for summary judgment granted in part; plaintiffs' statement of claim struck out with leave to replead (in part) and other ancillary orders; plaintiff's pay the defendants' costs on the indemnity basis: Bond J.
Primary Judgment[2019] QSC 13807 Jun 2019Plaintiffs' application to stay enforcement of a costs order made 11 October 2018 (arising out of the indemnity costs order of Bond J in [2017] QSC 279) dismissed: Flanagan J.

Appeal Status

No Status

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