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- Goldenwater LDL Pty Ltd v Kin Sun Chan[2020] QSC 306
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Goldenwater LDL Pty Ltd v Kin Sun Chan[2020] QSC 306
Goldenwater LDL Pty Ltd v Kin Sun Chan[2020] QSC 306
SUPREME COURT OF QUEENSLAND
CITATION: | Goldenwater LDL Pty Ltd & Ors v Kin Sun Chan & Ors [2020] QSC 306 |
PARTIES: | GOLDENWATER LDL PTY LTD ACN 166 820 711 AS TRUSTEE FOR THE LDL FAMILY FUND TRUST (first plaintiff) YUE LIU (ALSO KNOWN AS LINDA LIU) (second plaintiff) XIANHUI MENG (third plaintiff) v KIN SUN CHAN (ALSO KNOWN AS STANLEY KIN CHAN) (first defendant) LSA613 TERRITORY FUND PTY LTD ACN 165 799 342 IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE LSA613 TERRITORY TRUST (second defendant) IWHL PTY LTD ACN 166 797 146 AS TRUSTEE FOR THE HAPPYLIFE FUND TRUST (third defendant) PROSPER HOLDINGS (SCH) PTY LTD ACN 601 856 491 (fourth defendant) STANDOK CAPITAL HOLDINGS PTY LTD ACN 145 740 521 (fifth defendant) RICHES FOCUS HOLDINGS PTY LTD ACN 600 150 507 (sixth defendant) STANDOAK WINES PTY LTD (seventh defendant) BUBSC PTY LTD (eighth defendant) HUGO GLOBAL PTY LTD (ninth defendant) MAX GAINS PTY LTD ACN 166 575 542 AS TRUSTEE OF THE MAX GAINS TRUST (tenth defendant) PROSPER INVESTMENTS (SCH) PTY LTD ACN 601 856 580 (eleventh defendant) |
FILE NO: | BS No 10409 of 2018 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 6 October 2020 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 1 September 2020 |
JUDGE: | Martin J |
ORDER: |
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CATCHWORDS: | PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – GENERALLY – where the plaintiffs apply for orders striking out certain paragraphs of the Amended Defence pursuant to r 171 Uniform Civil Procedure Rules 1999 – where the plaintiffs argue that the various paragraphs are irrelevant and unnecessary, or fail to give a direct explanation for the pleaded denial – whether the paragraphs should be struck out PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – PROCEDURAL MATTERS – where certain paragraphs of the defendants’ Amended Defence are struck out – where the plaintiffs do not submit that the defendants should not be allowed to replead if necessary – whether the defendants should be given leave to replead Uniform Civil Procedure Rules 1999, rr 149(1), 166, 171 Barr Rock Pty Ltd v Blast Ice Creams Pty Ltd & Ors [2011] QCA 252, cited Cape York Airlines Pty Ltd v QBE Insurance (Australia) Ltd [2009] 1 Qd R 116, applied Davis v Commonwealth (1986) 68 ALR 18, distinguished Dey v Victorian Railway Commissioners (1949) 78 CLR 62, distinguished General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, distinguished Hamilton v Oades (1989) 166 CLR 486, cited Re Morton; ex parte Mitchell Products Pty Ltd (1996) 21 ACSR 497, distinguished |
COUNSEL: | KE Downes QC with PA Ahern for the applicants DD Keane with J Carter for the respondents |
SOLICITORS: | Potts Lawyers for the applicants MH Legal for the respondents |
- [1]The plaintiffs apply for orders striking out some paragraphs of the Amended Defence. In order to understand the arguments it is necessary to provide a brief overview of the case advanced by the plaintiffs.
Nature of the claim
- [2]The relevant parties are:
- (a)Goldenwater LDL Pty Ltd (“Goldenwater”), the first plaintiff, which acted in its capacity as trustee of the LDL Family Fund Trust.
- (b)Yue Liu, the second plaintiff, is the sole director and shareholder of Goldenwater. She is a Chinese national. It is the plaintiffs’ case that, at all material times, she was unable to read, write or speak English.
- (c)Xianhui Meng, the third plaintiff, is Ms Liu’s husband. He is a Chinese national. It is the plaintiffs’ case that, at all material times, he was unable to read, write or speak English.
- (d)Kin Sun Chan, the first defendant, was a real estate agent in Queensland during the material times. He was, between 2015 and 2017, a director of Goldenwater.
- (e)The second to eleventh defendants are companies which, the plaintiffs say, are controlled by, or associated with Mr Chan or his wife.
- (a)
- [3]Putting it broadly, it is the plaintiffs’ case that Mr Chan purported to assist Ms Liu and Goldenwater to effect certain real estate purchases in Queensland and, in doing so, engaged in fraud and breached his fiduciary duty in his role as their agent.
- [4]In particular, it is said by the plaintiffs that:
- (a)Mr Chan told Ms Liu that the purchase price of a particular property was higher than it actually was, with the result that more money was transferred by Ms Liu, Goldenwater or Mr Meng than was required for the acquisition,
- (b)Mr Chan agreed to assist Ms Liu to purchase a property or an interest in a property in her name, or in Goldenwater’s name, but then acquired that property in the name of one of his related entities.
- (a)
The relevant principles
- [5]Rule 171 of the Uniform Civil Procedure Rules 1999 (“the UCPR”) provides:
“171 Striking out pleadings
- (1)This rule applies if a pleading or part of a pleading—
- (a)discloses no reasonable cause of action or defence; or
- (b)has a tendency to prejudice or delay the fair trial of the proceeding; or
- (c)is unnecessary or scandalous; or
- (d)is frivolous or vexatious; or
- (e)is otherwise an abuse of the process of the court.
- (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.”
- [6]This rule must, of course, be read with the various rules relating to pleading. One such rule which is relevant in this case is r 149(1) which provides:
“149 Statements in pleadings
- (1)Each pleading must—
- (a)be as brief as the nature of the case permits; and
- (b)contain a statement of all the material facts on which the party relies but not the evidence by which the facts are to be proved; and
- (c)state specifically any matter that if not stated specifically may take another party by surprise; and
- (d)subject to rule 156, state specifically any relief the party claims; and
- (e)if a claim or defence under an Act is relied on—identify the specific provision under the Act.”
- [7]Another rule relevant to these pleadings is r 166(4):
“(4) A party’s denial or nonadmission of an allegation of fact must be accompanied by a direct explanation for the party’s belief that the allegation is untrue or can not be admitted.”
- [8]When a pleading will not comply with the relevant rules was considered by Philippides J in Barr Rock Pty Ltd v Blast Ice Creams Pty Ltd & Ors:[1]
“[22] A party confronted with a pleading which does not coherently articulate the case it is required to meet is denied the basic requirement of procedural fairness that a party should have an opportunity of meeting the case against them […]. In such cases, the party is exposed to additional expense and inconvenience in preparing for a trial on the basis of issues which are legally irrelevant, do not assist in the just determination of the true controversy between the parties and may significantly lengthen the duration of trials. That injustice ought not to be lightly dismissed. […] It is opportune to underline the established principles as to the duty of parties to formulate the real issues in dispute by coherent and relevant pleadings.
[…]
[27] […] a pleading will be deficient if the pleader’s case is not ‘advanced in a comprehensible, concise form appropriate for consideration both by the court, and for the purpose of the preparation of a response’[…].
[28] […] a pleading may be liable to be struck out where it includes irrelevant allegations which, by their nature, will affect the expeditious determination of the proceeding […].” (emphasis added, citations omitted)
- [9]The requirement in r 166 that there be a direct explanation for the belief that an allegation is untrue was considered by Daubney J in Cape York Airlines Pty Ltd v QBE Insurance (Australia) Limited.[2] I adopt what his Honour said:
“[27] A ‘direct explanation for a party’s belief that an allegation is untrue’ is precisely what it says – a direct explanation for the belief. At first blush, it might be thought curious that the rule requires such an exposition of an essentially subjective matter – a party’s belief as to matters is generally neither here nor there so far as the Court is concerned. There is a significant body of principle and statute devoted to the primary evidentiary rule that witnesses should state facts not opinions and the exceptions to that rule. But the requirement that a party provide a direct explanation for its belief that an allegation is untrue fulfils two important functions:
- it compels the responding party to expose, at an early stage of the proceeding, its rationale for a joinder of issue on a particular allegation;
- it necessarily compels the responding party to formulate that rationale. In other words, the party must ask itself, and be able to answer the question, ‘Why am I denying this fact?’” (emphasis in original)
- [10]The defendants sought to rely upon statements of principle in Dey v Victorian Railway Commissioners[3] and General Steel Industries Inc v Commissioner for Railways (NSW).[4] Neither of those decisions assist the defendants. Rather, both of them concern the inherent power of a court to strike out an action because it is frivolous or vexatious or, similarly, because the pleading does not disclose a cause of action. This application does not seek to summarily terminate the Amended Defence.
- [11]The defendants submit that the strike out power will be exercised in a “plain and obvious case”[5] and is to be exercised with “exceptional caution”.[6] The authorities on which they rely, though, concentrate on the consequence that the action would be struck out. That is not the case here. The plaintiffs do not submit that the defendants should not be allowed to replead if necessary.
The paragraphs under attack
Paragraph 250(b)
4ASOC | Amended Defence |
“250. Prior to the transfer of the second Carrara Funds, Standoak Wines (by its sole director, Shum) had no prior dealings with Liu or with Goldenwater LDL as trustee for the LDL Trust in relation to the transfer of the second Carrara Funds into its account.” | “250. With respect to paragraph 250 of the 4ASOC, the defendants:
|
- [12]Paragraph 250 of the Fourth Amended Statement of Claim (“4ASOC”) is to be read in the context of paragraphs 247-253. Those paragraphs relate to the acquisition of a property at Carrara.
- [13]It is alleged that:
- (a)Mr Chan told Ms Liu that the purchase price of the property was $8.6 million and that certain renovations would cost approximately $400,000. On the basis of Mr Chan’s advice, Ms Liu agreed that the property would be bought in Mr Chan’s name, rather than by Goldenwater, until Ms Liu’s permanent residency in Australia was approved. At that time, the property would be transferred to Goldenwater.
- (b)The $9 million was transferred in two parts:
- Mr Chan caused $2 million to be transferred from Ms Liu’s bank account transferred to the sixth defendant (Riches Focus Holdings Pty Ltd) (the “first Carrara Funds”); and
- Goldenwater caused $7 million to be transferred to the seventh defendant (Standoak Wines Pty Ltd) pursuant to a direction given by Mr Chan (the “second Carrara Funds”).
- (a)
- [14]On the matters alleged in paragraphs 247-253 of the 4ASOC, it is pleaded that Standoak Wines holds the second Carrara Funds on constructive trust for Goldenwater, or that Standoak Wines is liable to pay equitable compensation to Goldenwater.
- [15]The plaintiffs submit that paragraph 250(b) of the Amended Defence does not give a direct explanation for the denial of the allegation in paragraph 250 of the 4ASOC. Specifically, paragraph 250(b) is not relevant to the assertion that there had been no prior dealings relevant to the transfer.
- [16]The plaintiffs ask, rhetorically, whether proof of the facts pleaded in paragraph 250(b) of the Amended Defence would tend to prove or disprove that there were no prior dealings of the kind alleged in paragraph 250 of the 4ASOC.
- [17]The defendants submit that this paragraph, while not directly related to the “reliance element” of the tort of deceit, is relevant to the association between Ms Liu and the defendants.
- [18]The defendants submit that the pleading complies with r 166(4), r 149(1)(c) and r 5(3) UCPR.
- [19]It does none of those things. The grounds advanced have no logical connection with the pleading that “Standoak Wines (by its sole director, Shum) had no prior dealings with Liu or with Goldenwater … in relation to the transfer of the second Carrara Funds.” They cannot constitute a “direct explanation” for the belief.
- [20]Paragraph 150(b) of the Amended Defence will be struck out.
Paragraphs 329 and 330
- [21]These paragraphs plead that Ms Liu and Mr Meng hold certain qualifications and have certain professional experience, and that Ms Liu formerly held a different type of visa to the one she currently holds.
- [22]Those allegations, if proved, are not relevant to anything else pleaded in the Amended Defence or Amended Counterclaim. The plaintiffs submit that the court should not be required to decide whether the facts are correct, nor should the plaintiffs expend time and money meeting the allegations. The plaintiffs argue that there is an ulterior motive to these paragraphs. They submit that this part of the pleadings is designed to put pressure on Ms Liu and to improperly expand the scope of the facts that a trial judge will need to decide.
- [23]The defendants argue that these matters are relevant because they contextualise the extent to which Ms Liu and Mr Meng relied upon the judgments and statements made by Mr Chan, rather than on their own independent and informed judgments as “sophisticated and successful businesspeople and investors”.
- [24]The problem with the defendants’ submission is that these matters are not pleaded in a way to demonstrate that they constitute a relevant context in which issues elsewhere in the pleadings must be decided. Further, they do not respond to any allegation pleaded against the defendants or to any other matter pleaded in the Amended Defence or Amended Counterclaim. No other paragraph relies upon them. There is no other reference to the facts alleged in these paragraphs.
- [25]These paragraphs are irrelevant and would, if the assertions had to be resolved, prejudice or delay the fair trial of the proceeding.
- [26]Paragraphs 329 and 330 of the Amended Defence will be struck out.
Paragraphs 331-356, 428
- [27]A brief description of the matters pleaded in these paragraphs will suffice.
Amended Defence | |
[331], [334], [337] | Relates to Hainan Sihuan Pharmaceutical Co Ltd, a company incorporated under the laws of the People’s Republic of China, including an allegation that Mr Meng acquired shares in the company. |
[332], [333], [342(a)], [344(b)] | Relates to Plenty Gold Enterprises Ltd, a company incorporated in the British Virgin Islands, including an allegation that Mr Meng was a director and 11% shareholder of the company. |
[335]-[338], [341] | Relates to Sihuan Pharmaceutical Holdings Group Ltd, a company incorporated under the laws of Bermuda, including an allegation that Mr Meng was appointed as an executive director and general deputy manager of the company. |
[339], [340] | Relates to China Pharma Limited, a company incorporated in Bermuda and MSPEA Pharma BV, a company incorporated under the laws of the Netherlands. |
[334] | Relates to transactions occurring between 2002 and 2005. |
[337] | Relates to transactions occurring in 2006. |
[343] | Relates to transactions occurring in 2009. |
[344], [345] | Relates to transactions occurring in 2010. |
[338], [341], [345(b)], [347], [354] | Relates to Sihuan Pharmaceutical’s listing on the Singapore Exchange and the Stock Exchange of Hong Kong. |
[346] | “In or about April 2014, allegations were made in relation to Sihuan Pharmaceutical about inflated selling prices, payments made to distributors, and commercial bribery by distributors with respect to matters occurring between 2011 and 2013”. |
[348] | Relates to the auditors of Sihuan Pharmaceutical disclaiming an audit opinion. |
[349]-[356] | Relates to facts and events which occurred after the last transaction pleaded in the 4ASOC or which occurred after the last of the events pleaded in the Amended Defence. |
- [28]None of these paragraphs respond to any allegation pleaded in the 4ASOC. The plaintiffs submit that these are pleaded as bare facts and that the paragraphs are vexatious, in the sense that they are “productive of serious and unjustified trouble and harassment”[7] and would, if not struck out, facilitate a fishing exercise for the defendants.
- [29]In relation to paragraph 346 of the Amended Defence, the plaintiffs submit that the pleading is inadequate because the defendants have not pleaded proper material facts concerning the “very serious allegations” and that this paragraph “has the appearance of an unsubstantiated smear”.
- [30]In relation to paragraphs 349 and 352 of the Amended Defence, the plaintiffs submit that all that is pleaded are the bare facts of Dr Zhang’s arrest and release without charge, and that the defendants do not allege that these events are connected in any way, directly or indirectly, to this proceeding.
- [31]The plaintiffs submit that the only possible relevance of paragraphs 331 to 356 of the Amended Defence is set out in paragraph 428 of the Amended Defence, which pleads:
“428. In the premises of this Defence, it may be inferred that:
- (a)Meng, by reason of his interest and position in Sihuan Pharmaceutical, had knowledge, acquired during the period of 2011 to 2013, some or all of the matters that were later the subject of the allegations made against Sihuan Pharmaceutical in April 2014;
- (b)Meng directed or instructed Liu to cause the purchase of the real property mentioned in the 4ASOC during the periods under which:
- (i)the matters that were later the subject of the allegations made against Sihuan Pharmaceutical were occurring;
- (ii)a director of Sihuan Pharmaceutical had been detained in Hong Kong;
- (iii)the matters that were later the subject of the allegations against Sihuan Pharmaceutical (and its directors) were, it may be inferred, under apparent investigation by authorities;
- (c)Meng’s motivation in causing the payment of moneys to which he was entitled beneficially into Australia including by way of investment in the real property mentioned in the 4ASOC, was to put those moneys beyond the reach of investigatory and prosecutorial authorities;
- (d)that motivation was effected, and was to be effected, by the real property mentioned in the 4ASOC being purchased in the names of Liu and/or Chan and/or corporate entities in which persons other than Meng had a controlling interest.”
- [32]However, the plaintiffs say, paragraph 428 of the Amended Defence is legally irrelevant to the claims in the 4ASOC and the Amended Defence. Further, the plaintiffs submit that there is no proper basis for the allegations in paragraph 428 of the Amended Defence.
- [33]The defendants submit that these paragraphs demonstrate that the plaintiffs did not rely on Mr Chan’s statements because they were motivated to invest their money in Australia for the pleaded reasons.
- [34]It may be that some portions of these paragraphs might have some relevance. But a party should not be required (nor should the Court) to fish around for those parts which might be relevant. The paragraphs complained of in this part of the application concerned transactions and events which occurred outside the time material to these pleadings. Nothing is pleaded which demonstrates how these transactions and events have any application. Further, the various transactions, which are pleaded to have occurred, are not rendered relevant by any connection elsewhere in the pleading to the knowledge of various matters that Mr Meng might or might not have held.
- [35]Paragraphs 331-356 and 428 will be struck out.
Paragraphs 357-360
- [36]These paragraphs plead events occurring as long ago as 1995 when Mr Chan and Ms Shum lived in Hong Kong. They plead that Mr Chan obtained a real estate licence in 2003 and refer to work in China between 2004 and 2012.
- [37]They have no relevance to any material fact pleaded in the Amended Defence or Amended Counterclaim and are unnecessary.
- [38]Paragraphs 357-360 of the Amended Defence will be struck out.
Paragraphs 391-395
- [39]These paragraphs are given some context by the following pleadings:
4ASOC | |
[192]-[201] | In the course of the transaction in which Ms Liu acquired a property at Clear Island Waters, Mr Chan made a fraudulent misrepresentation to Mr Meng, which resulted in Mr Meng paying $520,000 to a Hong Kong bank account in August 2014. Mr Meng seeks damages for fraud. |
[202]-[207] | Ms Liu became the registered proprietor of the property at Clear Island Waters on or about 16 September 2014. Mr Chan offered to assist Ms Liu to rent out the property, told Ms Liu that the property had been rented, but never accounted the rent received. Ms Liu seeks an account of the rental payments |
[208]-[212] | Ms Liu sold the property at Clear Island Waters on 10 October 2018 and, pursuant to a court order, paid the balance sale proceeds into her solicitors’ trust account. Ms Liu pleads that she is the lawful owner of, and entitled to, the sale proceeds. |
- [40]In paragraphs 391-395, the defendants plead:
- (a)Ms Liu inspected the property at Clear Island Waters in July 2014 with a real estate agent,
- (b)the real estate agent recommended a solicitor to Ms Liu, who she engaged,
- (c)Mr Chan provided some of the instructions to the solicitor at the direction of, or on behalf of, Ms Liu, and
- (d)Mr Chan did not receive any benefit from the real estate agent in relation to the transaction.
- (a)
- [41]The plaintiffs submit that the allegations contained in paragraphs 391-395 of the Amended Defence are irrelevant and unnecessary. In oral submissions, the plaintiffs equated these pleadings to “aspects of a witness statement [being] replicated in the pleading”.
- [42]The defendants argued that these paragraphs plead Mr Chan’s limited involvement in the acquisition of the Clear Island Waters property and demonstrate that there should be no inference drawn that the plaintiffs relied upon any representation made by Mr Chan in relation to the acquisition.
- [43]These paragraphs do not provide the basis for an argument sought to be advanced by the defendants. If the defendants seek to argue that an inference should not be drawn because of these alleged facts, then that should be pleaded clearly. It is not.
- [44]Paragraphs 391-395 of the Amended Defence will be struck out.
Paragraphs 408-412, 416
4ASOC | Amended Defence | ||
[281]-[326] | In relation to the acquisition by Goldenwater of a shopping centre called Coco’s in 2015, Mr Chan deceived Goldenwater (by Ms Liu), resulting in the transfer of two tranches of $5 million into the bank accounts of two of Mr Chan’s companies. | [408]-[412], [416] | Between May 2014 and June 2015, Mr Chan was engaged in negotiations concerning the potential acquisition of Coco’s by Chan or one of his nominated corporate entities. |
- [45]The plaintiffs submit that these paragraphs are not relevant to either the plaintiffs’ claims, or to any of the defendants’ other allegations about a joint undertaking to purchase Coco’s. The plaintiffs submit that if these paragraphs remain in the Amened Defence, the plaintiffs would be obliged to call witnesses about facts that do not matter.
- [46]The defendants contend that these paragraphs contextualise the dealings in relation to Coco’s by highlighting that it was the plaintiffs’ independent judgment, rather than Mr Chan’s representations, that caused the plaintiffs to invest in Coco’s in and for themselves to the exclusion of Mr Chan.
- [47]The problem with these paragraphs is that they are not relevant to the plaintiffs’ claim that they made two payments of $5 million nor are they relevant to other allegations made by the defendants that there was some form of joint undertaking between the parties to purchase Coco’s.
- [48]Paragraphs 408-412 and 416 of the Amended Defence will be struck out.
Orders
- [49]I will make orders striking out the paragraphs the subject of the application. The defendants will have leave to replead.
- [50]I will hear the parties on costs.
Footnotes
[1][2011] QCA 252 (with whom Chesterman JA and North J agreed).
[2][2009] 1 Qd R 116.
[3](1949) 78 CLR 62.
[4](1964) 112 CLR 125.
[5]Davis v Commonwealth (1986) 68 ALR 18 at 23 per Gibbs CJ.
[6]Re Morton; ex parte Mitchell Products Pty Ltd (1996) 21 ACSR 497 at 513 per Sackville J.
[7]See Hamilton v Oades (1989) 166 CLR 486 at 502 per Deane and Gaudron JJ.