A and K Collins Investments Pty Ltd v Keto Pumps S.a.r.l - [2020] WASC 231

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   A & K COLLINS INVESTMENTS PTY LTD -v- KETO PUMPS S.A.R.L. [2020] WASC 231
CORAM:   MASTER SANDERSON
HEARD:   2 JUNE 2020
DELIVERED          :   2 JULY 2020
PUBLISHED           :   2 JULY 2020
FILE NO/S:   CIV 3153 of 2018
BETWEEN:   A & K COLLINS INVESTMENTS PTY LTD
First Plaintiff
PAAN PTY LTD
Second Plaintiff
TOLWORTH NOMINEES PTY LTD
Third Plaintiff
MANCHESTER MARKETING GROUP LLC
Fourth Plaintiff
CHRISTOPHER GALVIN PTY LTD
Fifth Plaintiff
PAUL GALVIN PTY LTD
Sixth Plaintiff
JOBEHASA PTY LTD
Seventh Plaintiff
PW MENEGHEL KETO PTY LTD
Eighth Plaintiff
SB BETTRIDGE KETO PTY LTD
Ninth Plaintiff
CM GALVIN KETO PTY LTD
Tenth Plaintiff
PJ GALVIN KETO PTY LTD
Eleventh Plaintiff
AND
KETO PUMPS S.A.R.L.
First Defendant
MDP FUND LP
Second Defendant
NAIRN BLACK
Third Defendant
JAMES ALLAN MCCOLL
Fourth Defendant

Catchwords:

Practice and procedure - Application to set aside order for service of writ out of jurisdiction - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Order set aside

Category: B

Representation:

Counsel:

First Plaintiff	:	P Edgar
Second Plaintiff	:	P Edgar
Third Plaintiff	:	P Edgar
Fourth Plaintiff	:	P Edgar
Fifth Plaintiff	:	P Edgar
Sixth Plaintiff	:	P Edgar
Seventh Plaintiff	:	P Edgar
Eighth Plaintiff	:	P Edgar
Ninth Plaintiff	:	P Edgar
Tenth Plaintiff	:	P Edgar
Eleventh Plaintiff	:	P Edgar
First Defendant	:	K de Kerloy
Second Defendant	:	K de Kerloy
Third Defendant	:	K de Kerloy
Fourth Defendant	:	K de Kerloy

Solicitors:

First Plaintiff	:	Douglas Cheveralls Lawyers
Second Plaintiff	:	Douglas Cheveralls Lawyers
Third Plaintiff	:	Douglas Cheveralls Lawyers
Fourth Plaintiff	:	Douglas Cheveralls Lawyers
Fifth Plaintiff	:	Douglas Cheveralls Lawyers
Sixth Plaintiff	:	Douglas Cheveralls Lawyers
Seventh Plaintiff	:	Douglas Cheveralls Lawyers
Eighth Plaintiff	:	Douglas Cheveralls Lawyers
Ninth Plaintiff	:	Douglas Cheveralls Lawyers
Tenth Plaintiff	:	Douglas Cheveralls Lawyers
Eleventh Plaintiff	:	Douglas Cheveralls Lawyers
First Defendant	:	Herbert Smith Freehills
Second Defendant	:	Herbert Smith Freehills
Third Defendant	:	Herbert Smith Freehills
Fourth Defendant	:	Herbert Smith Freehills

Case(s) referred to in decision(s):

Avwest Aircraft Pty Ltd v Bombardier Inc [2018] WASC 139
Parola & Parola [2009] WASC 190

MASTER SANDERSON:

On 17 December 2018 orders were made in CIV 3142 of 2018 granting the plaintiffs in that action leave to issue and serve in Luxemburg, the United Kingdom and Monaco a writ against the defendants.[1] On the same day the plaintiffs issued a writ in this action against the defendants. The plaintiffs and the defendants are the same in both actions.
[1] Orders of the Honourable Justice Tottle 17.12.2018.
When the writ of summons in this action was issued it was generally indorsed. The indorsement read as follows:
1.The Plaintiffs claims against the Defendants arise in connection with a share sale agreement dated 18 December 2012 made between the Plaintiffs and the First Defendant (CBC Keto), and a shareholders agreement dated 18 December 2012 made between the Plaintiffs and the Second Defendant (Clyde Fund) (together, the Agreements).
2.The Plaintiffs entered into the Agreements relying upon, or affected by, the misleading or deceptive conduct of any or all of the Clyde Fund, the Third Defendant (Black), and Fourth Defendant (McColl) as constituted by:
(a)communications received in Australia by the plaintiffs to the effect that the plaintiffs would be able to exercise control over the Business (as defined in the Agreements) (Business Control Statement);
(b)provisions of the Agreements executed in Australia to the effect of the Business Control Statement; and
(c)the failure to make disclosure of the circumstance that the plaintiffs were, after entry into the Agreements, not able to exercise effective control over the Business (as defined in the Agreements) when it was reasonable to expect such disclosure.
3.The ownership of CBC Keto and the running of the business were so arranged that the Business Control Statement was misleading or deceptive conduct in contravention of section 18 of the Australian Consumer Law (Cth).
And the Plaintiffs claim:
(a) a declaration that the Second to Third Defendants contravened section 18 of the Australian Consumer Law;
(b) a declaration that the Agreements are void;
(c) damages;
(d) compensation;
(e) such other order as the Court considers fit;
(f) costs.

On 18 November 2019 the indorsement was amended pursuant to O 21 r 1 of the Rules of the Supreme Court 1971 (WA). The amendment is of no significance. On 27 November 2019 the plaintiffs issued a motion for extension of the validity of the writ. That motion was supported by an affidavit of Andrew Phillip John Collins sworn 27 November 2019 (first Collins affidavit). On 29 November 2019 Registrar McDonald extended the validity of the writ. The order indicates there was no appearance by the plaintiffs' solicitors and orders were made on the papers. Each of the defendants filed a conditional appearance. The defendants then issued this application.
The defendants' application is made broadly speaking on two grounds. First, the plaintiffs' claims have such poor prospects of success that the order for leave should be set aside.[2] Second, the defendants say the plaintiffs did not make full and frank disclosure to the court when applying for leave to serve out of the jurisdiction. The defendants say that on either one of these two grounds the order granting leave can be set aside.[3] Taken together, they say the application is irresistible.
[2] Defendants' outline of submissions in support filed 10.04.2020 [32(b)]
[3] Defendants' outline of submissions in support filed 10.04.2020 [32(b)].
The application for leave to issue the writ came on before Tottle J. The motion was filed on 13 December 2018 and a certificate of urgency was filed the following day. His Honour's order was made on 17 December 2018. The application was supported by an affidavit of Mr Collins which ran to 436 pages. A further affidavit of Mr Collins, which only ran to seven pages, was also filed by the plaintiffs. Counsel for the plaintiffs, in his written submissions, conceded 'that there were inaccuracies in the first Collins affidavit'.[4] Counsel attached to his submissions alterations to Mr Collins' evidence consequent upon matters deposed to in what is referred to as the third Collins' affidavit which was sworn 19 May 2020 and filed in these proceedings. The annexure reads as follows:
[4] Plaintiffs' outline of submissions in opposition filed 20.05.2020 [5].
ANNEXURE A
45. When the directors of the other plaintiffs and I transferred the KPA shares to CBC KETO LUX, I was not aware, and to my knowledge, the other directors, were not aware that the shares of KPA would immediately be transferred to CBC KETO UK. I only received a copy of AC 12 in 2018. This happened when Down sent me a copy after his lawyer contacted CBC when he saw on a company search the shares were held by CBC KETO UK. The group solicitor of CBC sent Down’s lawyer a copy of the resolution of 7 January 2013.
46. I agreed to transfer the shares in APC to CBC KETO LUX in terms of the SSA relying on the representations made by the defendants that when I transferred the shares:
a.The former shareholders in KPA would receive 25% and the former shareholders in FAP would receive 15% of the shares in the new company ~~that would hold the shares of KPA and FAP~~.
b. CBC KETO LUX was the relevant entity to operate and grow the business of KPA and FAP.
c. Down, Manderson and I would become executive directors of CBC KETO LUX and be able to direct the growth and focus of the new company.
48. The representations made by the defendants were false. ~~CBC KETO LUX did not hold the shares the plaintiffs sold, and the plaintiffs were not informed that the shares were immediately transferred to CBC KETO UK~~.
51.I was unaware, as the other plaintiffs’ directors, that what happened on 8 January 2013 was that the businesses of KPA and FAP came to be ~~owned and~~ controlled by CBC KETO UK, which held all their issued shares.
52.A & K and the other plaintiffs as minority shareholders of CBC KETO LUX had no shares ~~or board representation~~ in CBC KETO UK and had no influence or say in the management of CB KETO UK.
In the course of his oral submissions counsel for the plaintiffs conceded – and properly conceded – there had been material non‑disclosure in relation to the application before Tottle J. It was the plaintiffs' position that even allowing for the material non‑disclosure, I should exercise my discretion and not set the issue of the writ aside on that ground. Both parties agreed that when there has been material non‑disclosure on an ex parte application the court still has a discretion as to whether or not to set aside the order. The principles were summarised by Beech J in Parola & Parola [2009] WASC 190 [45].
It is a principle of long standing that when an order is sought ex parte the party moving for the order must make full disclosure of all matters relevant to the exercise of discretion. It is not difficult to understand the rationale for such a rule. Ours is an adversarial system which has, at its cornerstone, the right of a party to be heard before orders are made which adversely affect that party's interests. Courts recognise that there are certain situations where the urgency is such that orders have to be made ex parte. When such situations arise, it is incumbent upon the parties seeking the order, to draw to the attention of the judge everything which is material to the making of the order – not only matters which support the making of the order, but those matters which stand against the making of the order. It is not enough simply to present all of the relevant material and ask for the order. It is incumbent upon counsel to identify the relevant evidence and draw that specifically to the attention of the judge.
Applications for leave to serve a writ of summons out of the jurisdiction fall into one of three categories. First, those cases where a party has borrowed money to purchase a property in this jurisdiction and has defaulted under the terms of the loan agreement. These are by far the most common application and the most straightforward. Orders can be made on the papers. The prospective plaintiff will often, at the same time they seek leave to serve out of the jurisdiction, seek leave for substituted service. Increasingly, service is effected by one of the social media platforms – Facebook or the like. These applications present no difficulty.
The second category of case is the relatively straightforward commercial transaction. An example of this arrangement is where an overseas resident has purchased goods from a resident of Western Australia and has agreed to make payment in this State and to have any disputes which arise determine in the courts of Western Australia. In other words, simple cases where there can be no doubt about the jurisdiction of the courts of this State and no doubt about the intention of the parties involved. While such applications are not generally determined on the papers without the need for an appearance by counsel, such applications are generally straightforward and rarely give rise to any disputes.
The third case is the complex commercial dispute where there is doubt about the jurisdiction of the courts of this State or where there are matters which might preclude the making of an order. An example of this complex commercial dispute is provided by Avwest Aircraft Pty Ltd v Bombardier Inc [2018] WASC 139. This case also provides another example – as counsel for the defendants said during the course of his submissions, the facts in this case are very complex. The fact the affidavit sworn by Mr Collins in support of the application for leave is so extensive, supports that view. It is this class of case where the difficulties arise.
There is much to be said in cases such as this where the application is made ex parte for the party seeking the order to file written submissions. The submissions need not be extensive. But they provide an opportunity to the party seeking the order to bring to the attention of the judge all relevant matters. This written record is important. It is rare indeed for reasons to be published setting out the basis upon which leave was granted. A party who seeks to set aside an order cannot be entirely sure of what matters were drawn to the judge's attention; or indeed, what matters the judge took into account having considered the papers. When an administrator is applying for an extension of time to hold a second creditors' meeting, submissions are routinely filed. The applications are in the main straightforward and the principles of law are well settled. But the material supporting the application is often voluminous and submissions help focus on the evidence which is most relevant. Parties applying for ex parte orders would do well to carefully consider whether or not short written submissions ought be filed with the application.
In opposition to the defendants' application the plaintiffs relied on an affidavit of Josias Eduard Ferreira sworn 25 May 2020. Without going through the affidavit in detail, Mr Ferreira sets out how it was the first affidavit sworn by Mr Collins came to be misleading. As counsel for the defendants said in his supplementary submissions:
The Ferreira Affidavit also shows that a deliberate decision was made not to put these material relevant facts before the Court. The defendants do not suggest that the plaintiffs or their solicitors had any malign intent. Nevertheless, the Ferreira Affidavit puts beyond doubt any suggestion the disclosure was inadvertent.[5]
With respect that is a fair summary of the position.
[5] Defendants' outline of submissions in reply filed 27.05.2020 [29(a)].
The cases which deal with non‑disclosure on application for ex parte relief, do not draw a distinction based upon the different types of relief being sought. For instance, if an ex parte injunction is sought, the defendant may well be prevented from taking some action. The imposition of the restraint may have significant consequences, even if the restraint is only for a short period. That is a different situation to this case. A party who is served with process out of the jurisdiction can enter a conditional appearance and challenge the jurisdiction of the court. The party served can apply for summary judgment or, if appropriate, argue forum non conveniens. While a defendant may be put to the cost and expense of acting within the jurisdiction to avail themselves of various remedies, no rights are impinged because all that has happened is process has been served. That is a matter which can be taken into account in the exercise of discretion.
There is no doubt that the plaintiffs' application was prepared in haste. Mr Ferreira's affidavit makes that plain. It may be that is an explanation for the omission of the evidence from the affidavit. But if that is the case it does not explain why, when the writ was renewed, Mr Collins did not correct the position. By then the plaintiffs' solicitors had been in possession of all relevant files for over 12 months. When an approach was made to the court to renew the writ the position should have been corrected. It is difficult to explain why that did not occur. Taken together with the material non‑disclosure, I am satisfied there is a sound basis for setting aside the writ.
Having reached that conclusion it is not strictly speaking necessary for me to deal with the merits of the application. The defendants maintain the plaintiffs' claim is weak. Given the complicated nature of the transaction it is difficult to see how, given the low threshold, the defendants could establish the plaintiffs' claim is bound to fail. But there is one aspect of the defendants' argument that carries considerable weight.
As part of the transaction, the parties entered into a shareholders agreement (SHA).[6] A copy of the SHA appears as attachment AC11 to the first Collins affidavit. All of the plaintiffs are the parties to that agreement. So are the first and second defendants. The third and fourth defendants are not parties to the agreement. By cl 15(j) of the SHA the parties entered into an expert determination agreement. That is to say the SHA provided that before proceedings could be issued the parties had to appoint an expert to determine the dispute. That means at least sofar as the first and second defendant are concerned, there was a bar to issuing proceedings because no expert determination had been sought. Given that the third and fourth defendants are natural persons who it seems made representations on behalf of the first and second defendants, if actions could not proceed against the first and second defendants it seems unlikely action could have proceeded against the third and fourth defendants. There is nothing on the file to indicate this provision was drawn to his Honour's attention at the time the order was made. It certainly was not referred to on the application to extend to validity of the writ.
[6] First Collins affidavit [38]; Annexure AC11.
In all the circumstances, the order giving leave to issue proceedings will be set aside. I will hear the parties as to the precise form of orders and as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
2 JULY 2020