Federal Court of Australia Chu v Lin, in the matter of Gold Stone Capital Pty Ltd (deregistered) (Strike Out) [2024] FCA 611 File number: NSD 32 of 2022 Judgment of: JACKMAN J Date of judgment: 4 June 2024 Catchwords: PRACTICE AND PROCEDURE – strike out application – where allegation of forgery made for the first time three weeks before trial Legislation: Federal Court Rules 2011 (Cth) r 16.21 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 11 Date of hearing: 4 June 2024 Counsel for the Plaintiffs: Mr DFC Thomas SC and Mr D Meyerowitz-Katz Solicitor for the Plaintiffs: McCabes Lawyers Counsel for the First Defendant: Mr T Bagley and Ms M Mellos Solicitor for the First Defendant: SHL & Associates Lawyers Counsel for the Second Defendant: Mr WR Chan Solicitor for the Second Defendant: MistryFallahi Lawyers & Business Advisors Counsel for the Third and Fourth Defendants: Ms I King Solicitor for the Third and Fourth Defendants: Connor & Co Lawyers Counsel for the Fifth Defendant: Mr V Bedrossian SC and Mr A Brown Solicitor for the Fifth Defendant: Kydon Segal Lawyers ORDERS NSD 32 of 2022 IN THE MATTER OF GOLD STONE CAPITAL PTY LTD (DEREGISTERED) ACN 167 931 026 BETWEEN: HONG CHU First Plaintiff XUEPING XU Second Plaintiff AND: LOUISE CAROL LIN First Defendant HAI ZONG CAI Second Defendant DAVID DARMALI Third Defendant FIDUCIA ASSET MANAGEMENT PTY LTD Fourth Defendant XIAO WU Fifth Defendant JOSEPHINE DARMALI Sixth Defendant order made by: JACKMAN J DATE OF ORDER: 4 JUNE 2024 THE COURT ORDERS THAT: 1. The words, "forged or", in paragraph 4(b) of the plaintiffs' reply to the defence of the first defendant, filed on 15 May 2024, be struck out. 2. The interlocutory application dated 3 June 2024 otherwise be dismissed. 3. Costs of that interlocutory application be cost in the cause. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT Delivered ex tempore, revised from transcript JACKMAN J: 1 The first defendant, by interlocutory application, seeks an order pursuant to r 16.21 of the Federal Court Rules 2011 (Cth) that paragraphs 4 and 5 of the plaintiffs' reply to the defence of first defendant, filed on 15 May 2024, be struck out. Those paragraphs of the plaintiffs' reply are as follows: Reply to Apportionment Defences — Breach of Duty Claims 4. In reply to paragraphs 128(j), 129(j), 132(i) of the Defence, the plaintiffs deny the allegations, save that Part 4 of the Civil Liability Act 2002 (NSW) (CL Act) does not apply to the plaintiffs' claims for equitable relief, and say, alternatively, that, if the legislation does apply, then Lin cannot have the benefit of it because she was an "excluded concurrent wrongdoer" and she fraudulently caused the loss or damage by: a. the conduct alleged in the 2FASOC at paragraphs 145–62, 172, and 174; b. in the event the court finds that Lin forged or was involved in forging the signature of Darmali or Xiao Wu, on any documents (which the plaintiffs do not admit), the conduct by which she is found to have done so. Reply to Apportionment Defences — Misrepresentation Claims 5. In reply to paragraphs 145 and 157 of the Defence, the plaintiffs deny the allegations and say that contributory negligence or apportionment defences are not available to Lin because she acted fraudulently in causing the plaintiffs' loss, for the reasons pleaded at paragraphs 3–4 above and also because Lin: a. knew the Chu Non-Disclosed Matters pleaded at 206(b)–(e) of the 2FASOC; b. knew the Zhou Non-Disclosed Matters pleaded at 221(b)–(g) of the 2FASOC; c. deliberately did not disclose those matters, in circumstances where such non-disclosure was misleading or deceptive. 2 The first defendant, Ms Lin, relies upon an affidavit made by her solicitor, Mr Jonathon Lu, dated 3 June 2024. In that affidavit, Mr Lu says that the reply is the first occasion on which the plaintiffs have made an allegation involving forgery against Ms Lin. Had this allegation been pleaded in the plaintiffs' statement of claim, he would have engaged a handwriting expert to examine Ms Lin's handwriting as against the signatures of David Darmali and Xiao Wu on documents filed in these proceedings. As I have said, the reply was filed on 15 May 2024, a little over two weeks before the beginning of the hearing. 3 Mr Bagley, who appears for the first defendant, says that the apportionment issue has been pleaded since December 2022 and it is now too late for the plaintiffs to introduce allegations in reply to the effect of paragraphs 4 and 5. Mr Bagley acknowledges that the report of a handwriting expert, Ms Holt, was filed on or about 23 August 2023 but says, and I accept, that that report did not identify Ms Lin as having forged or been involved in the forgery of signatures. 4 Mr Thomas, who appears for the plaintiffs, refers to the defence of the fifth defendant, Mr Wu, filed on 5 September 2022, which contained denials that Mr Wu had signed the first MVDA loan agreement and a positive statement that his purported signature on that document is a forgery, in that it was placed on the document without his knowledge or approval. However, as Mr Bagley submits, that pleading did not identify Ms Lin as having forged or been involved in the forgery of the signature. 5 In my view, Mr Lu has established in his affidavit an irremediable prejudice to Ms Lin associated with the specific allegation that Ms Lin forged the signature of Mr Darmali or Mr Wu on any documents. Ms Lin could not realistically have engaged a handwriting expert to compare her handwriting with the alleged forgeries in the two to three weeks since the plaintiffs served their reply and, accordingly, I will strike out the words, "forged or" in paragraph 4 of the plaintiffs' reply. 6 While I accept that the other aspects of paragraphs 4 and 5 of the reply are made very late and involve serious allegations of fraud, I do not see that there is any prejudice to Ms Lin arising out of the lateness of those matters. Paragraph 4(a) relies only on matters which had already been pleaded in the second further amended statement of claim, together with a conclusion of fraudulent conduct arising out of those matters. Any additional evidence which Ms Lin seeks to call to deal with the allegation as to the element of fraud in relation to those matters seems to me a matter which could be readily attended to by way of short oral evidence in chief by Ms Lin. 7 As to the allegation or suggestion that Ms Lin may have been involved in forging the signature of Mr Darmali or Mr Wu, I do not regard Ms Lin as having been prejudiced by the lateness with which that matter is raised in the reply. In the ordinary course of events, I would have expected that Ms Lin would have given consideration to whether or not she had had any involvement in alleged forgeries of signatures since the fifth defendant first raised the point on 5 September 2022. 8 Further, the service of Ms Holt's report would again have prompted Ms Lin, in the ordinary course of events, to have considered whether or not she had any involvement in the forgery or alleged forgery of signatures of Mr Darmali or Mr Wu. 9 To the extent that Ms Lin wishes to give evidence concerning whether she had any involvement in any forgery of Mr Darmali or Mr Wu's signatures, then I grant leave to Ms Lin to give that evidence orally in chief. I expect that Ms Lin has, in recent days, given careful consideration to this issue since the written submissions of the fifth defendant were filed on or about 27 May 2024, which was supplemented in detail yesterday by the fifth defendant's oral opening. 10 I expect that any documentary evidence that Ms Lin may wish to deploy in relation to the question whether she had any involvement in any forgery of signatures of Mr Darmali or Mr Wu can be readily attended to if it has not already been investigated in the preparation of the case. 11 Accordingly, I order that the words, "forged or", in paragraph 4(b) of the reply be struck out, and I otherwise dismiss the interlocutory application dated 3 June 2024. I order that costs of that interlocutory application be cost in the cause. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman. Associate: Dated: 11 June 2024