Supreme Court New South Wales Medium Neutral Citation: Raphael Ahn v Toppro Pty Ltd [2015] NSWSC 641 Hearing dates: 16 February 2015 Date of orders: 16 February 2015 Decision date: 16 February 2015 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Amended statement of claim struck out with leave to replead. Catchwords: PROCEDURE – pleadings – statements of claim – application for striking out of statement of claim – where statement of claim pertains to tort of deceit – failure of statement of claim to particularise conduct amounting to tort of deceit – availability of alternative causes of action not pleaded – held, statement of claim struck out Cases Cited: Pigot's Case (1614) 1 CoRep 26b; 77 ER 1177 Texts Cited: Balkin and Davis, Law of Torts, (2004, 3rd ed) Halsbury's Laws of Australia Category: Procedural and other rulings Parties: Raphael Ahn (first plaintiff) Il Nam Yoo (second plaintiff) Toppro Pty Ltd (first defendant) Ok Ja Joo (second defendant) Jae Joo Kim (third defendant) Wealth Wisdom Investments Limited (fourth defendant) Representation: Counsel: T O Bland (plaintiff) S O'Brien (first, second, third and fourth defendants) Solicitors: Strathfield Law (plaintiff) Alpha Lawyers (first to third defendants) File Number(s): 2014/186025 Judgment (ex tempore) 1. HIS HONOUR: On 28 November 2014, I delivered a judgment [2014] NSWSC 1699 pursuant to which, inter alia, the Court ordered that the amended statement of claim be struck out and that the plaintiff have leave to file and serve any further amended statement of claim by 15 December 2014. In the course of that judgment, I observed at paragraph 2 that the action on which the plaintiffs wished to rely seemed to be a relatively simple one and involved the propositions, first, that, as alleged in paragraph 1 of the then pleading, on or about 30 April 12 the second plaintiff acquired all of the shares in the first defendant company Toppro; secondly, as alleged in paragraph 13, that in or about May 2013 the second plaintiff, relying on certain representations made to him by one Joon Won Choi, who was not a party, executed a share transfer on the basis that it would be returned duly signed by the transferee with a payment of $US12,000; thirdly, as alleged in paragraph 20, that the transfer was not completed within a reasonable time or at all, and the second plaintiff formed the view that no sale was to proceed and thereafter in about December 2013 appointed the first plaintiff as a director; and fourthly, that subsequently the second defendant, who it seems now controls the proposed transferee Wealth Wisdom Investments Ltd, which is now the fourth defendant, altered the identity of the transferee on the transfer and caused particulars of the transfer to be recorded by ASIC and subsequently sought to change the directors and take control of Toppro. The plaintiff contends that the transfer is null and void. 2. As I understand the defendants' case, they say that they received the transfer executed by the plaintiffs partly in blank, which they completed as expressly or implicitly authorised, and have now tendered the payment provided for in it, and that as a result, one or other of Ok Ja Joo or Wealth Wisdom is entitled to be registered as a shareholder. 3. Originally, the first plaintiff also claimed that he was employed by the first defendant, and that the first defendant repudiated that contract by wrongfully dismissing him, for which he claimed damages. That claim is to be discontinued pursuant to leave granted today. 4. In paragraph 5 of the earlier judgment, I said: I have sought to summarise what I understand to be the complaint because as it seems to me, the statement of claim presently contains many matters which are not material facts in the cause of action. 1. I also referred to other defects in the pleading. 2. On 15 December, the plaintiffs filed a further amended statement of claim, though it was entitled "Amended Statement of Claim". The front page describes the type of claim as "Tort of deceit, aiding and abetting misleading and deceptive conduct in the course of trade and commerce". By interlocutory process filed on 30 December 2014, the defendants apply to have paragraphs 31, 32, 34, 35, 36, 37, 38, 39; the second sentence of paragraph 40, 41, 42, 43, 44; the second sentence of paragraphs 45, 46, 47, 48, 49, 55, 56, 57, 58, 59, the second sentence of paragraph 60, 61, 62, 63, 67, 68, 73, the second sentence of 75, 77, 78, 79 and 80 struck out. In response, the plaintiff has indicated that a significant number of the paragraphs impugned are not pressed. In particular, the plaintiff does not press paragraphs 34, 35, 37, 38, 39, 40, 41, 42, 43, 47 and 55. 3. The paragraphs that remain in issue pertain for the most part to what is said to be a cause of action in deceit. It seems necessary to restate what is involved in the tort of deceit. In Balkin and Davis, Law of Torts (2004, 3rd ed), the tort is defined at paragraph 23.17 in the following terms: Deceit may be defined as a false representation made by the defendant with knowledge of its falsity or recklessness to its truth or falsity with the intention that the plaintiff should act in reliance on the representation which causes damage to the plaintiff in consequence of the latter's reliance on it. 1. In Halsbury's Laws of Australia, the tort of deceit is defined at paragraph 415-1625 in the following terms: The tort of deceit is committed when a defendant makes a false representation to the plaintiff orally, in writing or by conduct, knowingly or without belief in its truth, or recklessly, not caring whether it be true or false, with the intention that the plaintiff should believe and act on the false representation. The false representation must be a fact, and as the state of the person's mind may be a fact, a false statement of opinion, intention or law can form the basis of the action. To be actionable, the plaintiff's reliance on the false representation must result in damage to the plaintiff. 1. Although the amended statement of claim is replete with terms such as, "the first act of deceit", "the second act of deceit", "the third act of deceit" and so on, and such matter as, "such act of deceit was designed to or had the effect of assisting Joo to alienate the shares in Toppro from their lawful owner", nowhere does the pleading contain any allegation of a statement or representation made or conveyed expressly, or implicitly by conduct, by any defendant to the plaintiff, and relied on by the plaintiff as would be necessary to found a cause of action in deceit. 2. Next the alleged "acts of deceit" postdate the plaintiff's execution of the share transfer and delivery of it to Choi, and thereafter, it would seem, to one or other of the defendants. Thus, it is not possible to see how, in executing the transfer and handing it over, which appears to be relied upon as the making of any relevant agreement, any of the alleged acts of deceit could be relevant operative misrepresentations. They had not occurred at that time, and did not occur until later. 3. In the course of argument, it was suggested that the deceit was practised on ASIC by deceiving it into registering a transfer, but not only does that misunderstand ASIC's purely administrative role – in that the registration of a change of particulars concerning a company does not involve giving it any legal effect – unlike, for example, the registration of a transfer in the Real Property register; but also, even if ASIC was deceived, that would not give the plaintiff a cause of action in deceit. 4. It was also suggested that the plaintiff was deceived into resuming and carrying on the business of the company, but it is not apparent how anything that the defendants did conveyed a representation to the plaintiff that the alleged agreement was at an end. No such representation is pleaded, and insofar as it was sought to extract such a representation from paragraphs 24 and 25 of the pleading, there is nothing in those paragraphs which alleges any representation made by or on behalf of any defendant. 5. For those reasons - there may be others, but those are sufficient - all the pleadings of deceit are misconceived. 6. Paragraphs 75 through 77 contain a somewhat bemusing allegation of trust. They are as follows: [75] Since 20 June 2014, the second and third defendants have been in control of Toppro to the exclusion of Il Nam Yoo. Yoo says that Joo holds the shareholding in a resulting trust for him pending the outcome of these proceedings. [76] On or about 20 June 2014, the shareholder Toppro was transferred by ASIC to Joo, and she holds the actual and beneficial title. [77] By reason of these proceedings, Yoo asserts that Joo holds the shares in a trust, attempts to transfer the shares on through September 2014, was a breach of the resulting trust in that it was an attempt to further alienate the beneficiary of the resulting trust from the subject of the trust being the shareholding; the first act of deceit by Wealth Wisdom Investments and the further act of deceit by Joo. 1. First, it is incomprehensible how, on the one hand, it could be alleged in paragraph 75 that there was a resulting trust from 20 June, and on the other hand that it could be pleaded in paragraph 76 that Joo holds beneficial as well as actual title, which is the antithesis of a trust. One can understand how it might be argued that there was some sort of trust attaching to the transfer if it was delivered in escrow upon certain terms, but if so, that would arise as the result of the terms of the escrow and not as a result of the proceedings as is alleged in paragraph 77. It seems to me that the material facts to sustain an allegation that the shares that are held in trust are not pleaded in paragraphs 75 through 77. 2. In addition the pleading continues to contain a large number of allegations that appear completely irrelevant to the essential causes of action on which the plaintiff might rely. For example, paragraph 5 (that at the time of purchase, Il Nam Yoo was unaware of restrictions on the purchase) and paragraph 6 (that he believed he was purchasing a shareholding that was unfettered, and so on). I should not be taken by these limited references to indicate that other aspects are not equally as objectionable. 3. I had rather hoped that the observations I made on the last occasion would result not merely in the addition of some additional and, as it turns out, misconceived paragraphs to that statement of claim, but a wholesale repleading of it in a form more familiar to lawyers than the document presently is. Regrettably that has not happened. 4. As it seems to me, and as I understand what the plaintiff really wants to say, it may have a number of causes of action. It may allege that the alterations to the share transfer were unauthorised so as to invalidate it under the rule in Pigot's Case (1614) 1 CoRep 26b; 77 ER 1177. It may well be that the answer to that is that the completion of the transfer was explicitly or implicitly authorised by the handing over of a blank transfer, but at least that is a cause of action which is conceivably available to the plaintiff. It may be that the plaintiff alleges that it terminated any agreement for failure to complete it in a timely manner, although that has never been pleaded, and no notice to complete has been pleaded, and indeed it is difficult, despite the observations I made on the last occasion, to ascertain from the pleading precisely what was the alleged agreement – an instrument of transfer is not, of itself an agreement . Paragraph 18 pleads an "approach", and then turns to the share transfer without pleading any offer, acceptance, agreement or terms. As I say, it may be that it could be pleaded that there was an agreement, and that that agreement was terminated for failure to complete in a timely manner, but that certainly is not discernible on the present pleading. 5. Finally, the paragraphs to which I have referred on the question of trust (at 75 through 77) perhaps contain the germ of the concept that the transfer was handed over upon certain terms - which terms are not pleaded, at least with any clarity, although one of them might be that it be completed within three months - and that when those terms or conditions were not satisfied, the consequence was that the transfer was held subject to a trust or other obligation to return it to the transferor. That might found some sort of allegation of a trust or at least a want of authority to proceed with the transfer, but one would struggle to extract that from the current pleading. 6. The current pleading is vexatious, embarrassing, fails to disclose a viable cause of action, and is calculated to waste time and cause trouble. It is the third attempt that the plaintiff has had at preparing an appropriate pleading. It is the third unsuccessful attempt. With considerable misgivings, I will allow the plaintiff one last opportunity to get its pleadings in order. That opportunity will not be satisfied by minor amendments to the present document, but requires a wholesale re-appraisal of the pleading of the matter. 7. The Court orders that: 1. The amended statement of claim filed on 17 December 2014 be struck out, with leave to replead. 2. The plaintiff pay the defendants' costs of the interlocutory process on an indemnity basis. 3. The plaintiff have leave to file and serve a further amended statement of claim by 16 March 2015. 4. The proceedings be adjourned to 13 April 2015 at 10am in the Corporations Judge Directions List. 5. Any notice of motion concerning the amended pleading may be made returnable on 13 April 2015. 6. If no such motion is filed, the defendant is to file a defence to the amended statement of claim by 7 April 2015. 7. Time for the cross-defendants to file defences to the cross-claim is extended until further order. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 June 2015