Amann Aviation Pty Ltd (In liquidation) v Continental Venture Capital Ltd
[2005] NSWCA 154
•10 May 2005
CITATION: Amann Aviation Pty Ltd (In liquidation) & Anor v Continental Venture Capital Ltd & Ors [2005] NSWCA 154
This decision has been amended. Please see the end of the judgment for a list of the amendments.HEARING DATE(S): 21 March 2005
JUDGMENT DATE:
10 May 2005JUDGMENT OF: Handley JA at 1; Beazley JA at 41; Giles JA at 42
DECISION: 1. Summons for leave to appeal extended.; 2. Summons dismissed with costs.
CATCHWORDS: PRACTICE AND PROCEDURE - summary dismissal - default in complying with Court orders - PRACTICE AND PROCEDURE - discovery before particulars - not available without evidence where plaintiff liquidator had the benefit of examinations in the winding up after service of statement of claim - D
CASES CITED: Bell v David Jones Ltd (1948) 49 SR (NSW) 223
House v The King (1936) 55 CLR 499
Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114
Ross v Blakes Motors Ltd [1951] 2 All ER 689
WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175
Zierenberg v Labouchere [1893] 2 QB 183PARTIES: Amann Aviation Pty Ltd (In liquidation) (First Claimant)
Martin Russell Brown in his capacity as liquidator of Amann Aviation Pty Ltd (In liquidation) (Second Claimant)
Continental Venture Capital Ltd (First Opponent)
CVC Investments Pty Ltd (Second Opponent)
Vanda Russell Gould (Third Opponent)
John Scott Leaver (Fourth Opponent)
Joseph Paul Shlegeris (Fifth Opponent)
Nigel Cameron Stokes (Sixth Opponent)
Russell Vanda Gould (Seventh Opponent)
Southsea Developments Pty Ltd (Eighth Opponent)
Wenola Pty Ltd (Ninth Opponent)
Penalton Pty Ltd (Tenth Opponent)FILE NUMBER(S): CA 40609/04
COUNSEL: N Cotman SC/A Bulley (Claimants)
D Jackson QC/D Pritchard (Opponents)SOLICITORS: Nash O'Neill Tomko (Claimants)
Henry Davis York (Opponents)
LOWER COURT JURISDICTION: Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S): SC 1897/96
LOWER COURT JUDICIAL OFFICER: Bryson J
CA 40609/04
10 MAY 2005HANDLEY JA
BEAZLEY JA
GILES JA
AMANN AVIATION PTY LTD (IN LIQUIDATION) & ANOR
v CONTINENTAL VENTURE CAPITAL LTD & ORS
PRACTICE AND PROCEDURE – summary dismissal – default in complying with Court orders
PRACTICE AND PROCEDURE – discovery before particulars – not available without evidence where plaintiff liquidator had the benefit of examinations in the winding up after service of statement of claim
The primary Judge dismissed the proceedings under SCR Pt 33 r 6(2) for default by the plaintiffs in complying with Court orders for further particulars of the statement of claim to be provided. The statement of claim, based on events between 1987 and 1992, alleged that former directors of the plaintiff company had been guilty of breaches of fiduciary duty arising out of transactions in fraud on its creditors. The defendants attempted to obtain further and better particulars of the statement of claim between October 2002 and March 2004 and obtained orders to this effect.
The Judge held that the plaintiffs were in default under the last of these orders and that there was no prospect of obtaining compliance by extending time. In particular the plaintiffs had failed to provide particulars of the existing and anticipated creditors of the company at material times. The liquidator of the first plaintiff, who was the second plaintiff, had conducted examinations before a Registrar of the Federal Court over a five week period in 1998 after the statement of claim had been served.
The plaintiffs had not challenged the last order for particulars and had not made an application for discovery before being required to comply with the order. There was no sworn evidence for the plaintiffs that they could not provide further particulars without the benefit of discovery. The plaintiffs sought leave to appeal from the decision dismissing the proceedings. HELD: (1) The existence of known or anticipated creditors at material times was fundamental to the whole of the plaintiffs’ case; (2) The conditions under the rule entitling the Judge to make the order dismissing the proceedings had been established; (3) The claimants had failed to demonstrate any principled ground for interfering with the Judge’s exercise of his discretion; (4) Leave to appeal should be refused.
1. Summons for leave to appeal extended.
2. Summons dismissed with costs.
CA 40609/04
10 MAY 2005HANDLEY JA
BEAZLEY JA
GILES JA
AMANN AVIATION PTY LTD (IN LIQUIDATION) & ANOR
v CONTINENTAL VENTURE CAPITAL LTD & ORS
1 HANDLEY JA: On 30 March 2004 Bryson J ordered that the subject proceedings be dismissed pursuant to the power conferred by SCR Pt 33 r 6(2) which provides:
- “Where a plaintiff makes default in complying with any order or direction as to the conduct of the proceedings, or does not prosecute the proceedings with due despatch, the Court may, on application by any party … stay or dismiss the proceedings.”
2 The order was made on the application of the defendants by notice of motion of 10 February which, among other relief, sought:
- “That pursuant to Supreme Court Rules Pt 33 r 6(2) and by reason of the default by the plaintiffs in complying with the orders of Registrar Berecry made on 18 November 2003, and, further or alternatively, not prosecuting the proceedings with due dispatch, these proceedings be stayed or, alternatively, dismissed.”
3 The order of Bryson J was interlocutory in form although final in effect and leave to appeal was required. The claimants’ summons for leave to appeal was filed out of time but a notice of appeal without appointment was filed within time. Although the notice of appeal was ineffective without leave the opponents were on notice that the orders of Bryson J would be challenged and the Court should cure the procedural irregularity.
4 The decision of his Honour was made in the exercise of the judicial discretion conferred by the rule. The conditions precedent to an exercise of the discretion were established and this has not been challenged.
5 The claimants’ challenge is to the exercise of the discretion. The principles which govern any review of such an exercise are those stated in House v The King (1936) 55 CLR 499, 505. An appellant must establish that the exercise of discretion has been vitiated by some error and this is not shown merely because the appellate Court would have exercised the discretion differently.
6 Mr Cotman SC, appearing for the claimants, submitted that the Judge had mistaken the facts in three respects but there was no substance in these points and the Court did not require Mr Jackson QC, who appeared for the opponents, to deal with them. The Judge’s reasons do not disclose any error of principle, or that he acted on extraneous or irrelevant considerations, or failed to take into account something material. The only principled basis for this Court’s interference would be that his Honour’s order “was unreasonable or plainly unjust” so that “a substantial wrong has in fact occurred”.
7 The Judge set out the history of the proceedings since they were commenced by statement of claim in April 1996. The statement of claim was not served until April 1998 but the proceedings were then delayed until February 2002 as a result of challenges to the validity of the order of the Federal Court winding up the first claimant. The events which gave rise to the proceedings occurred between 1987 and 1992.
8 The order of Registrar Berecry of 18 November 2003, which the Judge found had not been complied with, required the plaintiffs to provide further and better particulars of the statement of claim. The history of the steps taken by the opponents to obtain further and better particulars of the statement of claim are summarised in paras 7-8 of the Judge’s reasons and there is no need to repeat that history.
9 The first request was made on 15 October 2002 and the first direction was given on 17 October. Further directions were given on 7 February, 7 March, 3 April and 27 May 2003. Particulars were supplied from time to time but the defendants’ solicitors considered that proper answers had not been given to many requests. On 1 September 2003 the defendants filed a notice of motion seeking an order for the provision of further and better particulars. On 9 September they were directed to specify by letter the basis on which it was alleged that requests for particulars had not been properly answered and the basis on which it was alleged that the lack of an adequate answer precluded them filing defences. The defendants’ solicitors did this on 16 September and filed a further notice of motion the following day which was heard by the Registrar in Equity on 13 November.
10 On 18 November Registrar Berecry ordered the plaintiffs to provide by 16 December particulars pursuant to 33 requests and to provide particulars pursuant to a further request after discovery. The plaintiffs supplied further particulars by letters dated 24 December and 30 January 2004. The defendants’ solicitors considered that the information supplied was deficient and the notice of motion to dismiss the proceedings was filed on 10 February and came before the Judge on 24 February.
11 The plaintiffs are the company and its liquidator who was originally appointed by order of the Federal Court on 30 November 1992. The defendants are five natural persons who were directors of the company at various times between 1987 and February 1992. There are also six corporate defendants three of whom, including the first two defendants, are alleged to have been shadow directors of the company at all material times after June 1987. The first two defendants are alleged to have had fixed and floating charges over the assets of the company.
12 The statement of claim seeks to make the defendants liable for one or more transactions undertaken by the company in 1989, 1990 and 1992. On 22 May 1989 the first two defendants guaranteed payment to the company of debts owed to it by Amann Holdings Pty Ltd of $1,967,086.14 and by Amann Industries Pty Ltd of $285,334.25. On 4 August that year at a time when the company was allegedly insolvent it released the guarantors (S/C paras 45-8). The directors’ decision to release the guarantees was alleged to be a breach of their duties to the company and a fraud on its creditors (S/C paras 49-50).
13 The company had issued four “A” class redeemable preference shares of $1 each at a premium of $1,244,849 each (S/C para 43). It was alleged to have redeemed these shares on 14 February 1990 using the credit balance in its share premium account for that purpose creating a debt in favour of the second defendant of $4,979,400 (S/C paras 52-3). The directors’ decision to redeem these shares was alleged to be a breach of their duties to the company and a fraud on its creditors (S/C paras 54-5).
14 On 5 March 1990 the Full Federal Court allowed the company’s appeal in its damages action against the Commonwealth and awarded damages in excess of $6,600,000. On 19 April the directors resolved to pay $4,000,000 from the proceeds of this judgment to a company in England and the balance to the first defendant. At a further meeting a few minutes later the directors resolved to assign the judgment moneys to the first two defendants. The Commonwealth made a substantial part payment to the company shortly afterwards which was disbursed as authorised by the earlier resolution (S/C paras 58-9).
15 On 8 January 1992, following the decision of the High Court dismissing the Commonwealth’s appeal a further $4,668,829 was paid to the company. This was disbursed to the first defendant and other companies the same month. In February the Commonwealth made payments to the company totalling $872,568.50 for legal costs which the company paid to the first defendant (S/C paras 77-9). The directors’ decisions to assign the proceeds of the action to the first two defendants and to make these payments were said to be breaches of their duties to the company and frauds on its creditors (S/C paras 64-6, 80-1).
16 The liquidator has in his possession 127 boxes of the company’s documents (letter plaintiffs’ solicitors to defendants’ solicitors 16 April 2003 p 2), although the defendants’ solicitor acknowledged in his affidavit (16 February 2004 para 59) that they may not be complete or in a properly ordered state. The liquidator also conducted examinations before a Federal Court Registrar over a five week period in October and November 1998 after the statement of claim had been served and presumably obtained oral and documentary evidence relevant to his case as pleaded (appellants’ chronology).
17 The events giving rise to the plaintiffs’ claim occurred while some or all of the individual defendants controlled the affairs of the company and the transactions and payments involved the companies which were the first two defendants.
18 The allegations in the statement of claim of fraud against the company’s creditors, present, future, and contingent at different times between 1989 and 1992 were not supported by particulars which identified any particular creditor at any particular time for any particular amount in any of these classes. In the course of his reasons the Judge reviewed a document produced by counsel for the defendants which collected the requests for particulars which remained in issue with the replies said to be unsatisfactory or incomplete (judgment paras 24-34).
19 The Judge concluded that the plaintiffs had made default in complying with orders for the conduct of the proceedings, most significantly with the Registrar’s order of 18 November 2003 and there was no prospect of obtaining compliance by further extending time. The plaintiffs contended that delivery of further particulars at that stage was not appropriate and would not be appropriate until after discovery and inspection (para 45).
20 On particular issues he concluded that the plaintiffs could not give proper particulars and their case would depend on the information they could obtain through discovery, inspection, and interrogatories (para 34), that the defendants had been told next to nothing about the claims of fraud (para 35), and that the plaintiffs can and will give no further particulars (para 43). He said that the submissions of counsel for the plaintiffs came close to assuming that they were “entitled to fish about for a case in the interlocutory proceedings before formulating what their case was” (para 44).
21 Before this Court counsel for the claimants disclaimed any such assertion but maintained the contention that the order of the Registrar had been sufficiently complied with and the defendants should be required to file their defences and that discovery, inspection, and interrogatories should be permitted. He again relied on the presumed knowledge and means of knowledge of the defendants of the events in question. However, as the Judge correctly observed (para 39):
- “These defendants’ means of knowledge of the underlying events will not give them any information about the terms of the allegations made against them.”
22 The orders of the Registrar in Equity of 18 November 2003 were made after argument, and after the defendants had provided, as ordered, particulars of the bases for their arguments that the plaintiffs’ answers were insufficient and they needed better answers before filing their defences. The plaintiffs could have sought a review of the Registrar’s orders (SCR Pt 61 r 3). A notice of motion for this purpose should be filed within 28 days but time can be extended (sub-r (3), (4), (5)). No such application has been made and the Registrar’s reasons are not before this Court. The order must be presumed to be correct and this is confirmed by the absence of any direct challenge to it.
23 The plaintiffs might have sought leave to amend their statement of claim by abandoning those parts which they could not properly particularise or at least foreshadowed such amendments. The allegations of fraud on the company’s creditors could for example have been confined to allegations of fraud on the Deputy Commissioner of Taxation. This was not done or attempted.
24 The plaintiff might have filed a notice of motion seeking limited discovery before providing further particulars and a stay of the order of the Registrar in the meantime. This would have required them to file evidence that they could not provide any further particulars without such discovery and it would have required them to demonstrate that there was sufficient before the Court by pleading, particulars or evidence to warrant this course. This is often permitted where there is a fiduciary relationship between the parties and the facts are peculiarly within the knowledge of the defendant. See Zierenberg v Labouchere [1893] 2 QB 183 CA, 188, 189-90; Ross v Blakes Motors Ltd [1951] 2 All ER 689 CA, 694-5; Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114, 126-130. In the latter case at 129 Fitzgerald J said:
- “The ability of a plaintiff in a fraud action to provide one or more specific instances seems to have been accepted as sufficient to enable him to have discovery before being required to particularize further examples of the defendant’s misconduct of which he is not and could not be aware.”
25 Similarly in WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175, 181 Brennan J said:
- “Some assistance was sought to be derived from cases where discovery had been given to a party before he was required to give particulars of his claim … but in cases of that kind there is either an anterior relationship between the parties which entitles one to obtain information from the other, or sufficient is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery.”
26 The assertions from the bar table before Bryson J in this Court that the plaintiffs were unable to provide further particulars were not supported by sworn evidence.
27 The Court does not know what records are available to the liquidator and his solicitors, and in what order, in the 127 boxes that have been referred to. The Court does not know what attempts have been made, if any, and with what success to sort and index this material, to identify records which would enable further particulars to be provided.
28 The Court does not know whether the liquidator obtained any and if so what documents as a result of his examinations in October and November 1998 nor does it know what oral evidence was obtained, or from what witnesses. The Court is entitled to infer that the examinations and any orders for the production of documents were focussed on the issues in these proceedings. Thus it appears that the liquidator already has the benefit of five weeks of discovery, inspection, and oral interrogatories directed to those issues.
29 The solicitors for the defendants have asserted in correspondence that because the examinations were conducted pursuant to a void winding up order before it was validated by State law the liquidator is not entitled to make any use of the transcript and documents obtained during the examinations. This claim is not self evidently correct. It is not clear that the transcript would be inadmissible in civil proceedings, and prima facie the liquidator is entitled to use copies of documents he obtained in the examination and still has in his possession. Compare Bell v David Jones Ltd (1948) 49 SR (NSW) 223, 227-8.
30 In any event, even if the transcript and copied documents are inadmissible there is no apparent reason why the liquidator and his solicitors should not use information from these sources to provide further particulars. This could have been done in the expectation that, in due course, discovery and interrogatories in these proceedings would provide admissible evidence to support them.
31 There was some material before the Court relating to the company’s taxation liabilities, but no evidence to support the existence of other creditors. There are references in the particulars to BP Australia Ltd, the creditor that obtained the winding up order, but no details of the amount of its debt or how and when it was incurred. There are also suggestions that Air Services Australia and the Northern Territory are creditors and that there may be others.
32 The liquidator has not called for proofs of debt (affidavit of Stephen O’Gorman 16/2/04 para 45). There has been nothing to stop him from doing this or from seeking information from known or suspected creditors and obtaining copies of relevant invoices, assuming they are still available. Unless the suggested creditors can produce documentary evidence to support their claims the plaintiffs will not be able to prove that they were creditors in any particular amount at any particular time. BP Australia Ltd was a creditor for a known amount at the date of the summons for winding up but that without more would not assist the plaintiffs. There is no apparent reason why the defendants should have copies of such documents or why the individual defendants should be able to recall this information so many years after they ceased to be directors and the company went into liquidation.
33 Notices of assessment for the 1990 and 1992 tax years dated 13 January 1995 with their adjustment sheets were before Bryson J in an exhibit to the affidavit of Stephen O’Gorman (paras 47-50). It does not appear that these documents were supplied by the plaintiffs as part of their particulars. Their stock answer to requests for particulars of the debt due to the Commissioner of Taxation was:
- “The plaintiffs at this stage say that the Deputy Commissioner of Taxation was a future or contingent creditor at the relevant time. The amount owing at that time will be the subject of expert opinion in due course.”
34 There is no reason for thinking that discovery, inspection and interrogatories in these proceedings will help the plaintiffs provide particulars of the future or contingent claims of the Deputy Commissioner at any time relevant to these proceedings.
35 There was no explanation in evidence for the assessments and adjustment sheets when the notice of motion was heard. After the Judge reserved his decision an explanation was proffered in a letter from the claimants’ solicitors of 12 March 2004. This was not supported by sworn evidence, copies of the company’s returns, or copies of the returns of the other taxpayers referred to on which it may have been based.
36 The plaintiffs’ case that the transactions and payments were breaches of the directors’ duties, and frauds on the company’s creditors has to be based on proof of the existence at the relevant time of known or anticipated creditors present or future for known or foreseeable amounts, who have been damnified. The plaintiffs would almost certainly have to prove their case of fraud by circumstantial evidence based on the known or anticipated existence of such creditors and the likely effect of the transactions on them. This would have to be considered in the context of the fixed and floating charges held by the first two defendants from 1987 onwards. The existence of other known or anticipated creditors at relevant times was therefore crucial to the whole of the plaintiffs’ case.
37 A motion for limited discovery before further particulars, supported by sworn evidence from the liquidator and his solicitor, and if thought necessary an application for leave to use the transcript and copied documents obtained during the liquidator’s examinations, would have crystallised the issues and enabled them to be decided after full argument on proper evidence. It is not self evident that the plaintiffs would have obtained from a Judge an order staying the Registrar’s order until such discovery.
38 The individual defendants were directors of the company at various times and owed it fiduciary duties. However the liquidator has possession of a large quantity of the company’s records and there is no reason to suppose that the defendants, individual or corporate, retain any records of the company or have had access to them since they ceased to be concerned in its affairs at the latest by the end of February 1992. The liquidator has also had the benefit of five weeks of discovery, inspection and oral interrogatories presumptively directed to the issues in this case.
39 A court squarely faced with the issue on such a motion may well have concluded that the cases where discovery before particulars have been ordered against fiduciaries were not applicable where the plaintiffs have had the benefit of such examinations. However as it is the claimants’ assertions that they cannot provide further particulars, and should be permitted to proceed to discovery, inspection and interrogatories before being compelled to do so has only been supported by statements by counsel from the bar table and by solicitors in correspondence. The Judge was not bound to act on such statements nor is this Court. In my judgment the claimants have not established that the Judge’s order was unreasonable or plainly unjust.
40 The time for filing the summons for leave to appeal should be extended but the summons should be dismissed with costs.
41 BEAZLEY JA: I agree with Handley JA.
42 GILES JA: I agree with Handley JA.
06/06/2005 - "Henry Davis York" was substituted for "PricewaterhouseCoopers Legal" under heading of Solicitors - Paragraph(s) Solicitors
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