Albion One Pty Ltd v Jones - [2018] WASC 286

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   ALBION ONE PTY LTD -v- JONES [2018] WASC 286
CORAM:   KENNETH MARTIN J
HEARD:   28 AUGUST 2018
DELIVERED          :   28 AUGUST 2018
PUBLISHED           :   12 SEPTEMBER 2018
FILE NO/S:   CIV 2861 of 2017
BETWEEN:   ALBION ONE PTY LTD
Plaintiff

AND

TIM EDMUND JONES
First Defendant

TWIN OCEAN HUDSON PTY LTD
Second Defendant

TIM EDMUND JONES
First plaintiff by counterclaim

TWIN OCEAN HUDSON PTY LTD
Second plaintiff by counterclaim

AND

ALBION ONE PTY LTD
First defendant by counterclaim

BARWON PROPERTY FUNDS MANAGEMENT PTY LTD
Second defendant by counterclaim

PETER CHARLES CONNORS
Third defendant by counterclaim

Catchwords:

Practice and procedure - Summary judgment - Extension of time required - Plaintiff's monies removed from bank account by former director - Receipt by second defendant - Money had and received - No equitable set-off - No basis to stay pending trial of defendants' counterclaim tied to wider commercial dispute - 14 day stay of judgment enforcement

Legislation:

Nil

Result:

Judgment for the plaintiff

Category: B

Representation:

Original Action

Counsel:

Plaintiff	:	Mr W C J Zappia
First Defendant	:	Mr D Sanders
Second Defendant	:	Mr D Sanders

Solicitors:

Plaintiff	:	Gadens Lawyers (Vic)
First Defendant	:	Bennett + Co
Second Defendant	:	Bennett + Co

Counterclaim

Counsel:

First plaintiff by counterclaim	:	Mr D Sanders
Second plaintiff by counterclaim	:	Mr D Sanders
First defendant by counterclaim	:	Mr W C J Zappia
Second defendant by counterclaim	:	Mr W C J Zappia
Third defendant by counterclaim	:	Mr W C J Zappia

Solicitors:

First plaintiff by counterclaim	:	Bennett +Co
Second plaintiff by counterclaim	:	Bennett + Co
First defendant by counterclaim	:	Gadens Lawyers (Vic)
Second defendant by counterclaim	:	Gadens Lawyers (Vic)
Third defendant by counterclaim	:	Gadens Lawyers (Vic)

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

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Palaniappan v Westpac Banking Corporation [2016] WASCA 72
State Bank of Victoria v Parry [1989] WAR 240

KENNETH MARTIN J:

(This judgment was delivered extemporaneously on 28 August 2018 and has been edited from the transcript.)

Overview

I am dealing with two interlocutory applications by the plaintiff, Albion One Pty Ltd (who I will refer to as 'Albion') in these proceedings CIV 2861 of 2017 which I have case managed from inception.
This action came about in urgent circumstances in November 2017. There was an urgent ex parte application brought by the plaintiff, effectively, for a freezing order over funds to the extent of $1,573,617 which had been in the bank account of Albion - but which were caused to be transferred by the first defendant, Mr Timothy Edmond Jones. Mr Jones had used an internet banking transfer authority which he had held at a time in the past - when he had then been a director of Albion. The diverted funds were transferred to the bank account of the second defendant (Twin Ocean).
The evidence is that Mr Jones was appointed as a director of Albion on 15 December 2014. But he clearly resigned that position of directorship on 15 March 2017.
There is an issue in the proceedings about whether Mr Jones had been reappointed a director after that resignation - effectively as a nominee director of Twin Ocean Hudson. It was suggested that Mr Jones had been reappointed director as from about 10 or 11 August 2017 to resume his position as director of Albion. This is disputed by Albion, who says Mr Jones needed to sign a consent to act as director in 2017 and, although requested to do that, had not.
The short response to that is that even if, for the purposes of arguability, Mr Jones was reappointed as a director of Albion, and I think I would evaluate that argument somewhat negatively, but making the assumption anyway, even if he were to have been reappointed, he would still need to show that he then held sole authority to move significant funds of Albion out of Abion's bank account and into his company account, Twin Ocean, rather than act in the best interests of Albion. If one accepts for the purposes of argument that Mr Jones had been reappointed as a director of Albion and unilaterally held authority to electronically deal with the funds, as a director of Albion, he still had to act in the best interests of Albion and not to further the interests of himself or of a third party such as Twin Ocean to Albion's detriment.
In causing significant funds to leave Albion's account, acting unilaterally, Mr Jones was acting in breach of his fiduciary duty as a director of Albion. He ought not to have so acted in circumstances of what was clearly an egregious conflict of interest.

Procedural history

I need to recite some further narrative towards the overall context of the applications. There is, first, the chamber summons of Albion filed on 27 February 2018, at that time seeking to strike out the counterclaim of the defendants as an abuse of process. That application was advanced on the basis that the counterclaim replicated pre‑existing proceedings already running in the Supreme Court of Queensland commenced by Twin Ocean and Mr Jones on 31 May 2017 in that forum as effectively overlapping relief. That overlap was reflected in the defence and counterclaim subsequently filed in this court.
I programmed a hearing of Albion's chamber summons by a timetable for an exchange of affidavit material and written submissions. I set 3 August 2018 for hearing that application. At that time, however, Albion filed a second application by chamber summons on 25 July 2018, under which it was seeking further relief. Albion sought to strike out the pleaded defence on the basis that it failed to disclose a reasonably arguable defence, pursuant to Rules of the Supreme Court 1971 (WA) (RSC) O 20 r 19, or, alternatively, that they be granted leave to apply out of time for judgment on its claim under RSC O 14 r 1.
As matters have transpired, Mr Sanders, who appeared on 3 August 2018 for Mr Jones and for Twin Ocean, objected to the late filing of the summary judgment application but did not really seek to challenge the overlapping complaint. That caused me to do two things. First, I granted a temporary stay in regard to the West Australian counterclaim - on the basis that I then was persuaded and remain persuaded that it did, effectively, overlap with and replicate the subsisting Queensland litigation. The defendants were, in effect, running the same alleged cause of action in two different State Supreme Courts. To do so is a paradigm example of an abuse of process.
Second, I thought it fair to Twin Ocean and Mr Jones to allow them some time to put on affidavit material in response to the summary judgment leave application, should they so desire. I then set today's special appointment and made some programming directions for further materials to be filed. That has, in fact, led to the filing of a resisting affidavit sworn by Mr Jones against summary judgment. It was sworn on 17 August 2018, and Mr Jones now articulates certain matters he contends constitute an arguable defence to the primary claim of Albion which is simply for the return of its money.
I should record here that under previous orders I made on 11 January 2018, I had also ordered that the funds, the subject of the late August transfer out of the National Australia Bank account of Albion to the account of Twin Ocean be paid into court. I made that order since I thought, first, that there was overwhelming merit in the plaintiff's claim to those funds and, second, that there was some risk as to their future security if they were not paid into court. Hence, I issued, by court order, that extraordinary payment into court, on that day.
On 16 January 2018 Twin Ocean did pay most of the funds into court. But it had by then consumed about $4,500 or so of the funds. It was not in a position to repay the further $4,500. Hence, the court only received $1,569,054.34 on 16 January 2018.
Subsequently, I issued some further programming directions, first, in anticipation of there being an application then foreshadowed by the defendants to cross-vest this West Australian action to Queensland to be dealt with by the Supreme Court of Queensland. Albion said that any such cross-vesting application by Twin Ocean Hudson and Mr Jones would be strongly resisted. Hence, I made some programming orders to the end of determining such an application to cross-vest.
I also made some programming orders for the filing of the defence and counterclaim. That all took some time to unfold. But in the end, there was no application made to cross-vest by the defendants. That was explained to me by Mr Sanders, effectively, as being counter-productive. But it left the two proceedings on foot in Queensland and Western Australia. Today I was provided by Mr Sanders with a notice of discontinuance in respect of the Queensland proceedings. It was filed a week ago in the Supreme Court of Queensland (on 21 August 2018) by Twin Ocean against the defendant to that Queensland litigation, Barwon Property Funds Management Pty Ltd (Barwon).
Hence, my prior concerns about abuse of process by duplication of the same issues in two actions running the same substantive defence or, in the case of Twin Oceans in Brisbane, running that issue as its affirmative case, no longer present as a problem. That being so, the first chamber summons by the plaintiff, effectively to dismiss the counterclaim as an abuse of process, is now overtaken by that discontinuance event in Queensland. The temporary stay that I granted on 3 August 2018 as regards the defendants' counterclaim in this court, as a prima facie abuse of process, lapsed at 4.00 pm today and is no longer in force. The defendants' counterclaim in this court thus stands to be dealt with on its merits.

Today's application by Albion for summary judgment

Effectively, therefore, I am only dealing with Albion's second chamber summons of 25 July which, as I have indicated, seeks to extend time to apply to strike out the defence on a basis that it does not raise any arguable defence and, further, seeks leave out of time to bring a summary judgment application.
I should say, in terms of the time limits that apply under the rules of the court of 21 days for strike-out application to be brought under RSC O 20 r 19, and a similar 21-day time limit by RSC O 14 r 1, to bring an application for summary judgment, that it is correct, as Mr Sanders submitted, that those 21‑day time limits were not observed by Albion. Leave is required for both those applications to be brought out of time. Nevertheless, I would grant leave to enable that, as I will explain.
Mr Sanders rightly points out, that on the authorities, ordinarily a court expects some level of explanation to be provided in relation to failures to comply with those timelines. Here, however, I am satisfied, given the procedural history that I have recounted, that I should grant leave to Albion primarily in respect of its intended summary judgment application. My observations in respect of extending time to permit the summary judgment will, effectively, encompass why also, if it were not appropriate to grant a summary judgment to the plaintiff there would certainly still present a basis to strike out the defence as not being an arguable or reasonable defence under RSC O 20 r 19.
Whether a court grants leave or not, for a party to apply for a summary judgment beyond the 21‑day period, involves an individual evaluation of each case. First, there is the need for an explanation for the delay. Here, as CMC case manager, I have overseen these proceedings effectively from day one, from the time the ex parte freezing order interlocutory injunction was urgently sought by the plaintiff. I granted that relief. I have since made many timetabling directions in relation to programming of the matter, initially in anticipation of a cross‑vesting application by the defendants that was, in the end, never brought. Then I timetabled a filing of its defence and counterclaim, next the strike-out application, followed by the ensuing application by the first chamber summons of Albion to dismiss the counterclaim on the basis it was an abuse of process by replicating the Queensland proceedings.
In order to deal with all that, I had fixed the appointment date of 3 August which, at the time, was the earliest I could mutually accommodate a special appointment.
In the circumstances, any delay that has ensued in regard to a bringing of Albion's summary judgment and strike-out applications is explicable, by reference to the time understandably consumed by those other interlocutory pursuits. As we have seen today, ultimately I think, Albion's abuse of process grievance has been vindicated, as regards it challenging a dual running of the Queensland action at the same time as the West Australian counterclaim.
On 3 August 2018 an abuse of process, the dual proceedings controversy was not actively challenged by counsel for Twin Ocean and Mr Jones - as regards the impermissibility of two actions running together on the same underlying causes of actions. As now seen, it has taken time to correct that position. It has only just been corrected by the discontinuance of the Queensland action on 21 August 2018.
Mr Zappia has also been frank with the court by indicating that from the time he was newly briefed for the abuse of process application his preparations led him to the view that it was proper, in the circumstances, to combine that application with a summary judgment application and the strike-out application.
Essentially then, delay by Albion beyond the 21-day limits is now explained.
Second, within my evaluation over whether or not leave should be given, the actual merits of a potential application weigh heavily in that context in terms of whether leave will be granted or not.
Third, case management principles in terms of avoiding an unnecessary waste of a court's resources by a drawn out pursuit of a hopeless defence or a hopeless counterclaim, must factor as well in the evaluation. If it is obvious there is no real defence or that the counterclaim is of no likely merit, then to allow that state of affairs to drag on and exacerbate an incurring of avoidable legal costs over time is an unsatisfactory situation, to be avoided if possible by whatever processes are fairly open.
Needless to say, the case authorities on summary judgments are well-known. The onus to be confronted by someone who argues that there should be summary judgment in their favour is set at a high threshold. Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 is frequently cited to mark the great caution a court needs to exhibit before depriving a party of their right to a trial.
But here, as I evaluate the defence now filed on the part of Twin Ocean and Mr Jones, to try and defend what has occurred with Albion's money, by the funds unilaterally leaving the account of Albion back in late October/early November 2017, to reaching Twin Ocean's account instead, their position is wholly indefensible.
Even making the most favourable of assumptions about a possible reappointment of Mr Jones as an Albion director, that would still not sanction his conduct by acting effectively in the interests of Twin Ocean and not Albion. It is clear that, in all the circumstances, Mr Jones manipulated his residual internet banking access for Albion to cause Albion's funds to leave its account and for those funds to be diverted to reach Twin Ocean's bank account. There is no arguable defence I can identify against that conduct.
It was pointed out that the court can always refuse a summary judgment for 'any other reason', under a residual power. But, for the present circumstances, what I evaluate from the defence and counterclaim is only a series of arguments based upon the business relationship and dealings between these parties and Barwon, attempting to raise arguments about how, in the course of a joint venture relationship there may be grievances by Twin Ocean for, in effect, statutory oppression, or possibly styled as unconscionable conduct or even as misleading or deceptive conduct arising within the activities of that joint venture relationship.
The facts disclose that Albion is a joint venture property development vehicle operating substantially in Queensland. Its issued shareholding is divided almost equally, as to 501 shares held by Twin Ocean and 499 shares held by Barwon, a New South Wales corporation. Both Barwon and Twin Oceans made substantial loans to Albion - to be their joint venture vehicle, on a basis that Albion would develop or build units and then (hopefully) sell them for profit in Queensland. That joint venture relationship started back in 2014, or thereabouts. At the time the participants entered elaborate documents, including shareholders' deeds, deeds of priority, deeds of acknowledgement, to regulate their relationship.
Within the relationship there arise arguments by Twin Ocean to the effect that the interests of Barwon, for whom a Mr Connors is also a director, have been preferred to the interests of the other shareholder, Twin Ocean, which is, effectively, Mr Jones' company. Essentially then, Mr Jones for Twin Ocean and Mr Connors for Barwon are the rival joint venture protagonists. Upon the resignation of Mr Jones as a director from Albion at March 2017, in circumstances which he explains in his affidavit, he was no longer a director of Albion.
Mr Jones' argument is that within this joint venture and its development vehicle, Albion, he could still be reappointed a director at the behest of Twin Ocean and that was sought to be achieved on 10 or 11 August 2017. The argument that Mr Jones had not provided his consent was answered by him saying that he gave consent to act back in 2014 when he was first appointed. Alternatively, he says, one could imply from the fact that he signed the 2017 request to reappoint him on behalf of Twin Ocean, that there was an implied consent on his behalf. But that argument is hard to reconcile with his subsequent resignation as a director.
But as I have said, even if one makes director reappointment assumptions in his favour, it does not legitimise Mr Jones' self-held remedy conduct executed by himself, as regards one and a half million dollars or thereabouts of the funds of Albion - the company in respect of whom he says he had been reappointed as a director and would owe duties of fidelity and loyalty.
The next question is whether there is an equitable set-off. That concept is explained in the reasons for decision of Buss JA in Palaniappan v Westpac Banking Corporation [2016] WASCA 72 delivered on 29 April 2016.
I incorporate by reference what his Honour said at [50]:
An equitable set-off is available where the party claiming the set-off can establish a recognised equitable ground for being protected, to the relevant extent, from the other party's demand. The set-off must essentially be bound up with and go to the root of, challenge, call in question or impeach the title of the other party. The mere existence of a cross-claim or cross-demand is not sufficient to establish an equitable set-off. There must be a recognised ground for equitable intervention (beyond the mere existence of a cross-claim or cross-demand) so that the equity of the party claiming the set-off impeaches the title of the other party to the legal demand which it is seeking to enforce. See J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 61 FLR 108, 127 (Blackburn, Deane & Ellicott JJ); James v Commonwealth Bank of Australia (1992) 37 FCR 445, 457 - 462 (Gummow J); Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62, 67 - 68 (Kennedy J, Malcolm CJ & Murray J agreeing); HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 479; (2013) 306 ALR 53 [136] (Emmett JA, Beazley P relevantly agreeing & Meagher JA agreeing); Hawes v Dean [2014] NSWCA 380 [59] - [65] (Barrett JA, Bathurst CJ & McColl JA agreeing).

An equitable set-off must impeach or go to the root of undermining the title of the party. Here, the claim of Albion is a claim for money had and received, or for unjust enrichment. Albion just wants its money back from the party (Twin Oceans) who should not have received it in the first place. Relationship grievances over how a joint venture vehicle has gone about conducting its business in Queensland as regards the sales of units, lower than expected prices, and how the relationship has unfolded between it and its co-venture partner, Barwon, are simply not to the point as regards the loss by Albion of its funds.
The so-called equitable set-off does not impeach, relevantly, Albion's entitlement to received its money back. As such, these matters are not even arguably an equitable set-off, as that concept is correctly understood.
Consequently, there is no defence that is arguable and there also is no equitable set-off which is arguable to impeach the entitlement of Albion to its moneys and the making of an order for judgment in its favour for its money.
Leave should be given for a summary judgment application to be brought and for judgment in the amount claimed for Albion. That judgment renders the further application to strike out the pleaded defences unnecessary.
The only residual question is whether I should stay the enforcement of this judgment, effectively as Malcolm CJ did in State Bank of Victoria v Parry [1989] WAR 240, on a basis that there still remains to be tried in this court the counterclaim by Twin Ocean and Mr Jones against Barwon, Mr Connors and Albion, arising out of claims made for alleged misleading and deceptive conduct, for statutory oppression and for unconscionable conduct arising out of their joint venture relationship.
I would, given the conclusions I reach, only stay and, in effect, inhibit enforcement of an order that I will make for a payment out of court of those funds to Albion, for a period of 14 days only. That is sufficient time to allow Twin Ocean and Mr Jones time to consider their positions and time for them to proceed with any application to appeal these orders, if that were thought to be the appropriate course. Hence, the moneys will remain in court for a period of 14 days and are preserved for that period. After that, they will be paid out to the plaintiff.
I would not grant a stay until trial of the residual counterclaim. It is apparent that events have not proceeded quickly in the Supreme Court of Queensland. It now lies at the behest of Twin Ocean to pursue in this court the residue of its counterclaim. I am not persuaded that anything beyond a brief 14-day stay is appropriate, in all the circumstances. Many factors lead me to that conclusion.
First of all, the circumstances in which Albion lost its money seem to me to be less than desirable and need to be corrected. Secondly, the funds should be available to Albion as it goes about its business. Third, there is no evidence before me to suggest those funds would be at risk if returned to the hands of Albion. There were some expressions of potential concern by Mr Jones but they do not rise to a level of providing factual evidence to suggest risk in the hands of Albion.
Finally, there is the way in which this litigation has unfolded slowly from November 2017 through to August in the circumstances of costly litigation across two States. Too much time has elapsed to get to this point - which is basically to restore the status quo back to where it was at the end of August 2017. That should happen in 14 days, unless further orders are made in the context of an appeal brought against these orders.
So, for all those reasons, there will be judgment in favour of Albion for $1,573,617.00, plus interest and costs. That judgment is stayed for 14 days, after which the funds paid into court in the amount of $1,569,054.34 should be paid out to Albion.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SDL
ASSOCIATE TO THE HONOURABLE JUSTICES K MARTIN AND CORBOY
12 SEPTEMBER 2018