Sondakh v Herliman

1. [1]

   There are two notices of motion before this court. One by the plaintiff and one by the third defendant.

2. [2]

   By the notice of motion filed on 5 May 2021, the third defendant seeks an order that the plaintiff’s statement of claim filed on 16 November 2020 be dismissed, insofar as it relates to the third defendant, pursuant to r 13.4(1) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) or in the alternative, that it be struck out, insofar as it relates to the third defendant, pursuant to UCPR 14.28(1).

3. [3]

   By notice of motion filed 28 July 2021, the plaintiff seeks leave to file a proposed further amended the statement of claim, circulated 17 July 2021.

4. [4]

   The plaintiff is Fanya Sondakh, the first defendant is Vincentius Herliman (the plaintiff’s former husband). The second defendant is Dora Maddock (solicitor), the third defendant is Takouhi Kessegian (accountant), the fourth defendant is Eagle Enterprise Pty Ltd, the fifth defendant is Victor Berger (then a practicing solicitor), the sixth defendant is Tibby Morgenstern (solicitor), the seventh defendant is Stuart McDougall (solicitor) and the eight defendant is Westpac Banking Corporation.

5. [5]

   At the outset of the hearing, Fiona Harris appeared for the Registrar General, the proposed ninth defendant. The Registrar General consents to be joined as the ninth defendant. Hence I make an order that the Registrar General be joined as the ninth defendant.

6. [6]

   Mr T. Rogers appeared for the plaintiff. Mr S. O’Sullivan with Mr N. Simone appeared for the third defendant. The parties relied upon a court book.

7. [7]

   The third defendant seeks to strike out the plaintiff’s pleading in the statement of claim against her. Since then the plaintiff has circulated a proposed further amended statement of claim (“PFASC”). In order to take the plaintiff’s case at its highest, I have considered whether the amendments sought in the PFASC are futile. If that be the case then the statement of claim filed 17 November 2020 will be dismissed or struck out. I will then exercise my discretion as to whether leave should be granted to file a second further amended statement of claim.

Summary judgment/or summary dismissal

1. [8]

   The third defendant seeks that the plaintiff’s claim against her be dismissed pursuant to UCPR 13.4 or struck out pursuant to UCPR 14.28.

2. [9]

   Rules 13.4 and 14.28 of the Uniform Civil Procedures Rules 2005 (NSW) (“UCPR”) read:

3. [10]

   UCPR 14.28 enunciates grounds, upon which a defective pleading may be struck out. UCPR 13.4 focuses on the weakness of a party’s case rather than the defects of a pleading: see Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937.

4. [11]

   The present application needs to be approached upon the basis that a very clear case is required before summary dismissal is granted, and that the power to make such an order should be sparingly employed: see Dey v Victorian Railway Commissioners (1949) 78 CLR 62 (“Victorian Railway”) at 91; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 (“General Steel”) at 129; Webster v Lampard (1993) 177 CLR 598 at 602-603.

5. [12]

   The test to be applied by a court when considering summary dismissal is clear. It has been expressed as a claim being “so obviously untenable that it cannot possibly succeed”, “manifestly groundless”, or “so manifestly faulty that it does not admit of argument”: see General Steel at 128-129. In Victorian Railway at 91 Dixon J observed that before summary intervention can be justified, the case must be a very clear one and there must be no real question of fact or law to be determined.

6. [13]

   By bringing an application for summary dismissal, the defendants undertake the burden of establishing that there is no triable issue: see Wickstead v Browne (1992) 30 NSWLR 1 at 11. The General Steel test remains the primary touchstone for such an application. The mere fact (if it be the case) that a plaintiff’s prospects of success might be characterised as slim would not be enough to strike out a pleading: see Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at [73]; Preston v Star City Pty Ltd [1999] NSWSC 1273 at [31].

The proposed amendments in the PFASC

1. [14]

   The proposed amendments pleaded against the third defendant involve the allegations against the second defendant at [6] and the allegations against the third defendant at [7] to [10]. They fall into two categories, first is what I will refer to as the ‘Power of Attorney allegations’ and the second as the ‘change of password allegations’. The proposed amendments are in bold. The personal bank details of the plaintiff have been anonymised by way of XXX. Paragraph 6 reads:

2. [15]

   The plaintiff’s allegations against the third defendant are as follows:

3. [16]

   An allegation of fraud is required to be pleaded specifically and particularised, including to make clear precisely which aspect of the "fraudulent conduct" is causative of the loss: Nadinic v Drinkwater [2017] NSWCA 114, [45]-[49], [155].

4. [17]

   UCPR 15.3 reads:

5. [18]

   UCPR 14.14 reads:

The relevant evidence so far

1. [19]

   The plaintiff relies upon a statement by the second defendant, a solicitor, dated 30 May 2019, and an email by the first defendant addressed to the third defendant dated 8 July 2014.

2. [20]

   The second defendant has provided a discretionary statement to the Legal Services Commissioner dated 30 May 2019. She says:

3. [21]

   In the voluntary disclosure Ms Maddock expressed remorse for what she described as her "error of judgment".

4. [22]

   The email from the first defendant to the third defendant is dated 8 July 2014. Its subject is “Favor please”, and it is marked as being of high importance. It reads:

5. [23]

   A request for details in relation to the change of password was made to Westpac. An audit by Westpac showed that the password for the account was changed on 8 July 2014, the same date as the email.

6. [24]

   The PFASC alleges that the third defendant made false statements which led to the provision of an unexecuted power of attorney ("Power of Attorney Claim").

7. [25]

   The plaintiff alleges that the power of attorney was fraudulently executed, witnessed and used to carry out fraudulent transactions in the plaintiff's name.

8. [26]

   Even if the false statements were made by the third defendant (which is denied), those statements can be said to have caused, at most, a blank power of attorney to be provided to the first defendant. The existence of the blank power of attorney caused no loss. That document could have been drafted by any solicitor, or obtained from other sources, at any time and with any names identified on them, without a fraud arising.

9. [27]

   It was the false execution, witnessing and use of the document which, if proven, comprises the fraud.

10. [28]

    The plaintiff seeks damages as her remedy as against the third defendant. It is the function of common law causation that the plaintiff must prove that every item of loss for which she claims damages is connected to the third defendant's wrong in the sense that the wrong caused or materially contributed to that loss: Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613, at [43].

11. [29]

    Even if the Power of Attorney Claim was capable of being repleaded (which is denied), further opportunity to the plaintiff to do so is unlikely to render the desired result and is likely to cause the third defendant further prejudice and undue expense.

12. [30]

    In addition to the Power of Attorney Claim leveled against the third defendant by way of the amended statement of claim, the principal amendment of the PFASOC is leveling a new, factually distinct claim against the third defendant relating to the alleged changing of a bank password ("Bank Password Claim"). For abundant clarity, the third defendant denies this claim.

13. [31]

    The plaintiff deposes in paragraphs 11 to 16 of the First Gubbay Affidavit sworn 17 July 2021 that the Bank Password Claim has been added to the pleading primarily in reliance on two newly discovered documents, first, an email discovered by NSW Police as part of an investigation (see annexure J, p 44), and second, a bank cheque (see annexure M, p 49).

14. [32]

    In the first document, NSW Police's representative states: "I just wanted to confirm that we have had the remaining devices analysed. There is a considerable amount of data on these which I am yet to review. Of interest I found this email below on one (sic) the devices."

15. [33]

    Evidently, NSW Police's investigation is at a preliminary stage. The email uncovered by NSW Police is provided by way of 'interest' only. The email notes "a considerable amount of data" which has not been reviewed. The email provides no commentary or findings around the email uncovered. Aside from the email address bearing the third defendant's name (a feature not determinative of ownership of the email account - as the PFASOC itself identifies at [8AC]), NSW Police does not identify it to be an email account owned by the third defendant. There is no direct evidence of the serious fraud alleged in paragraph 8AB of the PFASOC, that the third defendant fraudulently impersonated the plaintiff to procure the change of the plaintiff's bank account password. To the contrary, the bank's solicitors have indicated that: "Our client's audit logs suggest that the password for the Account was changed on 8 July 2014. We are instructed that our client is unable to retrieve any further information from the audit logs regarding the password change, including who requested or performed it": (see annexure L, p 48 of the First Gubbay Affidavit).

16. [34]

    The second document appears to be a screenshot of a bank cheque which is largely illegible, the circumstances surrounding which are unclear and are not pleaded or particularised in the PFASOC.

17. [35]

    The Bank Password Claim is prematurely brought and incompletely pleaded.

18. [36]

    The third defendant, a natural person, submitted that she has already incurred costs of approximately $37,000 in responding to a claim which is yet to be properly particularised with any certainty or finality: lacono Affidavit 11 August 2021, [8]. Those costs have been thrown away and, unless otherwise ordered, will not be payable until the conclusion of the proceedings pursuant to Uniform Civil Procedure Rules 2005 ("UCPR") r 42.7(2),

19. [37]

    The changes in paragraphs 7 and 10 are wholly cosmetic being simple changes to the descriptions of the defendants from their "defendant number" to their respective names.

20. [38]

    Changes in paragraphs 8 and 8A of the PFASOC

21. [39]

    The changes in paragraph 8 of the PFASOC are insubstantial.

22. [40]

    The changes in paragraph 8A are partly in the nature of clarification but make some changes of substance.

23. [41]

    The current pleading in paragraph 8 is that "in about 2012 the third defendant falsely represented" certain things to the second defendant i.e. Dora Maddock), those things being that:

    1. (1)

       Kessegian was the accountant for the plaintiff; and

    2. (2)

       that the plaintiff required that Maddock provide the first defendant (Mr Herliman) with an unexecuted power of attorney which, when executed, would give the first defendant power of attorney on behalf of the plaintiff.

24. [42]

    The proposed pleading in the PFASOC changes the prefatory words quoted in paragraph 5.6 by addition of the words "in fraud upon the Plaintiff” so that the paragraph will read:

25. [43]

    It is submitted that the previous use of the word "falsely" was sufficient to allege fraud, but the additional words put that matter beyond question (if there was ever any genuine doubt).

26. [44]

    The same applies to the addition of the words "and fraudulent" in paragraph 8A of the PFASOC.

27. [45]

    The same also applies to certain of the other changes to paragraph 8A being:

    1. (1)

       the proposed pleading that the third defendant knew that she was not the accountant for the Plaintiff (which would seem to be axiomatic but, is now articulated expressly);

    2. (2)

       the proposed alternative particular that the third defendant was recklessly indifferent to the fact that the plaintiff did not seek the provision of a form of power of attorney.

28. [46]

    On the case to be prosecuted by the plaintiff the third defendant played a significant role in that loss.

29. [47]

    The matters sought to be added by paragraphs 8AA, 8AB, 8AC, 8AD and 8AE of the PFASOC arise as a result of new information coming into the hands of the plaintiff in July 2021.

30. [48]

    Mr Gubbay's Fourth Affidavit sworn on 17 July 2021 discloses the following:

    1. (1)

       On 8 July 2014 the first defendant forwarded an email to the third defendant requesting that the third defendant impersonate the plaintiff for the purpose of changing the plaintiff’s password on the plaintiff’s bank account (Annexure J, page 44).

    2. (2)

       On that date, 8 July 2014, the plaintiff’s password on her bank account was changed (Annexure L, page 48).

    3. (3)

       On 11 July 2014 a forged cheque in favour of the third defendant, about which the plaintiff had no knowledge until the current proceedings, in the sum of $23,100, was drawn on the plaintiff’s bank account (Annexure M, page 49).

31. [49]

    The above circumstances are more than sufficient to plead the claim now sought to be prosecuted against the third defendant in respect of paragraphs 8AA to 8AE.

32. [50]

    So far as the defendant’s submissions in relation to the claim being statute barred, the plaintiff submitted: firstly, the onus for establishing the expiry of limitation periods falls upon the party alleging the expiry of the limitation period; and secondly, the time limits in respect of allegations of fraud run from the time that the fraud is discovered or ought to have been discovered, not from the date of the fraud and not even necessarily from the date of damage (see Limitation Act 1969 (NSW), s 55).

Resolution:

1. [51]

   The third defendant has actual knowledge of what occurred in relation to the meeting with the second defendant as she approached the second defendant with a view to have an Enduring Power of Attorney being executed by the plaintiff in favour of her then husband. The first defendant was also present at that meeting.

2. [52]

   The second defendant says she met with the third defendant and the first defendant in relation to the preparation of the Enduring Power of Attorney and said that she would require the plaintiff to attend so that she could explain to her the nature and operation of the document which she had written out by way of completion of the printed form. She says that the first defendant advised her, in the presence of the third defendant, that the plaintiff was suffering from severe migraines and was unable to attend the meeting. The first defendant requested that the second defendant make the document available to him and he would have his wife, the plaintiff, sign the document. The second defendant says that after much pressure from both the third defendant and the first defendant, she agreed to this course.

3. [53]

   My view accords with the decision of Brereton JA in Banks v Alphatise Pty Ltd [2014] NSWSC 1437 (“Alphatise”) on the basis that actual knowledge, or the state of the defendant’s mind, is something that is primarily in the knowledge of the defendant. Therefore I reject the defendant’s submission that the plaintiff has not properly pleaded knowledge. A defendant does not require particulars in relation to an allegation where they are said to have actual knowledge in order to know whether or not to admit that knowledge. Their knowledge, or lack thereof as it may be, is contained within their own mind. It might ultimately be proven by documents elicited in the course of discovery or by admissions in cross examination. It might be inferred by other matters but they are all matters of evidence which inform the material fact of actual knowledge.

4. [54]

   Further, if the third defendant is alleging that the plaintiff’s claim is statute barred, firstly, the onus for establishing the expiry of limitation periods falls upon the party alleging the expiry of the limitation period; and secondly, the time limits in respect of allegations of fraud run from the time that the fraud is discovered or ought to have been discovered, not from the date of the fraud, and not even necessarily from the date of damage (see Limitation Act 1969, s 55).

5. [55]

   In my mind, the serious allegations as to what occurred in both the first and third defendant’s procuring the plaintiff’s signature in relation to the Enduring Power of Attorney are properly pleaded. The allegations of fraud are not hopeless.

6. [56]

   As to the password change, there is evidence that the first defendant emailed the third defendant on 8 July 2014 to ask for a “favour” which was to change the plaintiff’s password. The first defendant set out the specific steps and information to enable the third defendant to do so. There is evidence that the password was in fact changed on 8 July 2014. Once again the third defendant will have actual knowledge as to what she did as a response to the email. For the pleading of actual knowledge: see Alphatise per Brereton at [7], [17-20]. The pleading of the password allegations are not premature and are properly pleaded.

7. [57]

   It is my view that the amendments in the PFASC go to the real issues in dispute. They certainly are not hopeless. The third defendant is aware of the case she has to meet. In these circumstances, the plaintiff should be permitted to file and serve the PFASC within 14 days. Hence, the third defendant’s notice of motion filed 5 February 2021 is dismissed.

8. [58]

   Costs of both notices of motion are reserved.

   1. (1)

      The Registrar General be joined as the ninth defendant.

   2. (2)

      The plaintiff is to file and serve the PFASC (circulated 17 July 2021) within 14 days.

   3. (3)

      The third defendant’s notice of notion filed 5 May 2021 is dismissed.

   4. (4)

      Costs of both notices of motion are reserved.