In the matter of Classic Corporation Limited [2015] NSWSC 2149 (5 November 2015)

Last Updated: 22 September 2017

Supreme Court New South Wales

Case Name:	In the matter of Classic Corporation Limited
Medium Neutral Citation:	[2015] NSWSC 2149
Hearing Date(s):	5 November 2015
Date of Orders:	5 November 2015
Decision Date:	5 November 2015
Jurisdiction:	Equity - Corporations List
Before:	Brereton J
Decision:	Notice of motion dismissed.
Catchwords:	PROCEDURE – pleadings – allegations of fraud – particularisation of fraud as material fact.
Category:	Procedural and other rulings
Parties:	IJG Group 2 Pty Limited ACN 147 112 543 (first plaintiff) Architectural Aluminium Systems Pty Limited ACN 153 656 538 (second plaintiff) Classic Corporation Pty Limited (in liq) ACN 157 681 055 (first defendant) David Solomons and Riad Tayeh as joint and several liquidators of Classic Corporation Pty Limited (second and third defendants) Cinzia Hanna (fourth defendant) Lillian Hanna (fifth defendant)
Representation:	Counsel: C Alexander (plaintiffs) A Spencer (first and second defendants) R E Dubler SC (fourth and fifth defendants) Solicitors: Johnston Vaughan Solicitors (plaintiffs) Dora Jabbour (first, second and third defendants) Hall Partners (fourth and fifth defendants)
File Number(s):	2015/164680

JUDGMENT (EX TEMPORE)

1. HIS HONOUR: Paragraph 44 of the statement of claim pleads, “There are no money owing by Classic, Cinzia Hannah or Vivienne Hannah under the registered mortgage”, and then provides several enumerated particulars of that allegation of material fact. Obviously, those particulars are but particulars and do not amount themselves to allegations of material facts; thus they do not require to be pleaded to, and cannot give rise to deemed admissions from a failure to traverse them.
2. That said, at first sight, it is difficult to see how some of the particulars contribute to or support the material fact to which they are said to relate. For example, it is difficult to see how the fact that the mortgagees took no active part in the management of the mortgagor, as asserted in particulars 1 and 2, would if established contribute to or found the allegation that there are no money owed by the mortgager to them as mortgagees.
3. Particular 6 is as follows:

In so far as the registered mortgage purports to secure borrowings pursuant to the unexecuted copies of loan agreements provided by them to the liquidators on or about 23 July 2015, those unexecuted loan agreements are a sham.

4. Particular 7 is:

At all material times, Danny Hannah, Cinzia Hannah and Emile Hannah and Vivienne Hanna knew that the loan agreements were a sham.

5. The fourth and fifth defendants rightly submit that such allegations, and most particularly the allegation in particular 7, are in the nature of or at least akin analogous to, an allegation of fraud. However, at this stage they are not pleaded as allegations of material fact.
6. The pleading of material fact in paragraph 44 calls for an answer – whether by way of admission, denial or non-admission – although it is difficult to see how these defendants, who are the mortgagees, could properly plead by way of non-admission. A denial by them of paragraph 44 would be a "pregnant negative" in respect of which they would be obliged to give particulars of the moneys said to be owing and how those moneys came to be owing under the terms of the mortgage. It would then be material for the plaintiff to plead, in reply to such a defence, that the loan agreements relied on (as the Court is informed that they are to be relied on) are shams.
7. A pleading of a sham as a material fact would, it seems to me, have to be particularised in at least one of various ways. One way would be to assert what was the true agreement between the parties said to render the apparent agreement a sham.
8. It is normally not necessary for a party to plead or particularise evidence from which the Court is asked to draw a conclusion, and although one not infrequently sees requests for particulars in the nature of the "facts, matters and circumstances" relied on for a particular allegation, that is usually a misconceived request for evidence and not for particulars. But where, for example, the Court is asked to make a finding of constructive knowledge, it is necessary to particularise the matters from which it is contended that the relevant parties should have had the relevant knowledge or drawn the relevant inference.
9. It may be premature to reach a final conclusion on this question, but as it presently seems to me, a mere assertion in the reply that the unexecuted loan agreements were shams would be deficient, and the defendants would probably be entitled to particulars either of what the true agreement was said to be, and/or of the matters from which it was contended that the inference of sham should be drawn or both. However, the time for provision of those particulars, it seems to me, and for deciding just what if any particulars the defendants would be entitled to be given, will arise only once the reply is pleaded and not now.
10. It seems to me that particulars 6 and 7 serve little function in the current pleading, because they do not have to be pleaded to and cannot give rise to deemed admissions, save that they do serve the purpose of informing the defendant of what is coming, in the sense of identifying an allegation which might otherwise take the defendant by surprise. But they do not renew the paragraph in the pleading demurrer.
11. The Court has been informed that the balance of the relief claimed in the fourth and fifth defendants' notice of motion of 3 September 2015 is not pressed. Accordingly, that notice of motion is dismissed.

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