Angas Securities Limited v Horizon Lifestyle Developments Pty Ltd - [2012] SASC 26

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ANGAS SECURITIES LIMITED & ANOR v HORIZON LIFESTYLE DEVELOPMENTS PTY LTD
[2012] SASC 26
Reasons of Judge Withers a Master of the Supreme Court
9 March 2012
PROCEDURE
Representation of company by director.
Supreme Court Civil Rules 2006 r 27, referred to.
Essential Beauty Franchising WA Pty Ltd & Anor v Pilton Holdings Pty Ltd & Ors [2011] SASC 126, considered.

ANGAS SECURITIES LIMITED & ANOR v HORIZON LIFESTYLE DEVELOPMENTS PTY LTD
[2012] SASC 26

JUDGE WITHERS. This action started on 4 March 2010 when the plaintiffs issued proceedings seeking that the defendant show cause why a caveat should not be removed from a Certificate of Title. That application was supported by an affidavit of a director of the first and second plaintiffs. The defendant then sought permission to amend or vary the caveat. That application was supported by an affidavit of Mr Labozzetta as the sole director of the defendant. Mr Labozzetta’s affidavit was also in opposition to the application by the plaintiffs. Further affidavits were filed including several further affidavits of Mr Labozzetta. On 20 April 2010 in reasons delivered that day the Court granted permission to the defendant to amend the caveat and refused the plaintiffs’ application for an order that it be removed.
Pursuant to further directions the plaintiffs filed a statement of claim on 26 May 2010 in which it is asserted that they had loaned monies to the defendant for a six month term secured by a mortgage over certain property. The term had been varied but in an alleged breach of the loan the monies had not been repaid. The plaintiffs asserted a right to exercise a power of sale as mortgagees and sought a declaration that the caveat on the title had been lodged inappropriately, an order for its removal, and compensation for its incorrect lodging.
A defence and counterclaim was lodged on 2 August 2010. The defendant asserted that the plaintiffs were not entitled to the orders that they sought and by way of counterclaim alleged that the plaintiffs had engaged in unconscionable conduct contrary to the common law and contrary to the provisions of the ASIC Act, the Trade Practices Act and the Fair Trading Act. It was alleged that the plaintiffs had made representations knowing that they would not abide by them and that this had caused the defendant to suffer loss and damage. The defendant sought various declarations and damages for trespass, conversion, compensation for unconscionable conduct, damages for contravention of s 52 and s 82 of the Trade Practices Act, and s 56 of the Fair Trading Act, and various other relief.
A defence to the counterclaim was promptly filed and the plaintiffs filed their list of documents at the end of September 2010. Delay occurred in the defendant filing a list of documents, until on 5 April 2011 the plaintiffs applied for an order striking out the defence and counterclaim based on that failure or delay. Subsequent to the filing of that application the defendant filed a list of documents on 29 April 2011.
An affidavit of the plaintiffs’ solicitor of 26 May 2011 disclosed that the subject property had been sold in September 2010. In a decision delivered on 8 July 2011 the Court noted that the plaintiffs’ counsel had indicated that if the defendant’s cross-action were to be dismissed then the plaintiffs would take no objection to their summons being dismissed as well. However, the Court found that a considerable amount of work had been already undertaken in the presentation of the cross-action and there was no particular prejudice to the plaintiffs in allowing the matter to proceed.
Subsequent to that finding, on 24 November 2011 the defendant applied for directions that leave be granted for it to be represented by its director, Joseph Anthony Labozzetta. That application was supported by an affidavit of Mr Labozzetta to the effect that he was the sole director of the defendant company and that he sought permission pursuant to Rule 27(1) of the Supreme Court Rules. A short subsequent affidavit exhibited a resolution of the company authorising him to make that application. The application was opposed and was argued on 20 February 2012.
In support of his application Mr Labozzetta asserted that he was the sole director of the company. He said that he had read an outline of submissions filed by the plaintiffs in opposition to the application. He had sent a copy to his former solicitors but had not received a reply. It should be noted that the former solicitors remain the solicitors of the record in this matter, there having been no application that they cease to act and no notice of address for service having been filed by any other body.
In response to questions from the Court, Mr Labozzetta advised that there were two other shareholders in the company who could possibly become directors and seek to represent the company. He asserted that the company was not able to pay for a solicitor. There is no filed evidence to that effect. He asserted that the company was subject to a controller appointed by the plaintiffs until October 2011, notwithstanding that the property in dispute had been sold with settlement on 10 September 2010. He asserted that this had held up the company’s progress. The company had exhausted its funds. He had approached an accountant with a view to obtaining an expert report to support the counterclaim but the company was not in a position to provide the funds to have that report prepared. He accepted that he did not have the expertise to conduct the matter at trial and was not experienced at all in conducting litigation, particularly this type of litigation which is complex. The company’s legal file in this matter remains in the possession of its solicitors.
Counsel for the plaintiffs relied on the outline of submissions filed. He noted that it was an application by the company rather than by a director and as such did not fall within the ambit of SCR 27. To the extent to which it is necessary I granted leave to amend the application to make it an application of Mr Labozzetta rather than Horizon Lifestyle Developments Pty Ltd.
Counsel referred to the decision of his Honour Judge Burley in Essential Beauty Franchising WA Pty Ltd & Anor v Pilton Holdings Pty Ltd & Ors [2011] SASC 126. He relied on his Honour’s approach in that matter and asserted that the factual situation here was very much the same as in the Essential Beauty case.
In that case at [8], his Honour cited with approval factors identified by Weinberg JA in the Worldwide Enterprises case as being relevant to a Court considering whether or not to grant an applicant/director permission to represent a corporate party. Judge Burley said:
[8] …Weinberg JA set out the various factors to be taken into account. They are:
(i)the manner in which the case has progressed at the time that the application is made;
(ii)the manner in which the case can proceed in the future without a solicitor;
(iii)the complexity of the issues involved in the case;
(iv)whether the lack of disciplinary measures in relation to the person seeking to represent the company will affect the administration of justice;
(v)whether the case can be conducted in an orderly and responsible fashion without a solicitor;
(vi)whether there are financial considerations which would inhibit a company from obtaining legal representation;
(vii)the stage which the case has reached;
(viii)whether the defendant is likely to expend more funds in defending the claim absent a solicitor acting for the company; and
(ix)what effect, if any, permitting a company to appear without a solicitor will have on Court resources and, particularly, the effect upon other litigants in the Court List.[1]
[1] Worldwide Enterprises Pty Ltd v Silberman [2009] VSC 165 at [20].
In my view there are a number of these criteria that are relevant to this particular matter:
(1)In the present case the action has proceeded to an advanced stage and now by reason of the sale of the property is in a situation where the defendant company in essence has the only remaining claim, namely its counterclaim. It will therefore have the conduct of the litigation.
(2)It is difficult to see how the case can proceed effectively and efficiently in the absence of the company being represented by a solicitor. The issues are complex and the action has reached a stage where final preparation for trial is required before the matter is referred for trial. It is unlikely that Mr Labozzetta, or any other legally unqualified director of a company, would be capable of properly managing that process.
(3)It is unlikely that the prompt processing of the defendant company’s cross-action can be conducted in an orderly and responsible fashion without a solicitor.
(4)The case has reached a stage where the plaintiffs as defendants to the cross-action are entitled to expect that the defendant as plaintiff in the cross-action proceed expeditiously with the cross-claim and failure to do so will result in unnecessary costs being incurred by the plaintiffs.
As his Honour Judge Burley said in [15] of the Essential Beauty case:
… It is not clear that under Rule 27 these factors [referring to the Weinberg JA factors] are material. It is to be noted that sub-rule (2) [of Rule 27] only refers to the question of authority. There is no mention of any other requirements which must be satisfied. However, sub-rule (1) creates a discretion to be exercised by the Court and it would be surprising if that discretion were governed solely by the requirements of sub-rule (2). I am of the view that the various matters referred to in Worldwide Enterprises Pty Ltd v Silberman are relevant. I should also mention another factor, namely, the fact that Mr Forrest [the director in Essential Beauty] would be in a position of being both advocate and witness. This was referred to by Drummond J in Pacific Air Freighters (Qld) Pty Ltd. Like him, I do not “set a great deal of store on [that] fact”.
In this case Mr Labozzetta would undoubtedly be a witness in the action and that is undesirable for somebody who is also to be the advocate. However, I do not regard that as having great weight.
In all the circumstances it is inappropriate to grant permission to Mr Labozzetta to represent the company. Counsel for the plaintiffs submitted that if the Court were not to grant permission then it would be appropriate to stay the action such that the defendant company could apply to reinstate the action if and when it reached a position where it could properly instruct solicitors to proceed expeditiously with the cross-action.
With the consent of the parties this decision is being delivered by email – see 6R 226.
I make the following orders:
1.Permission to Mr Labozzetta as director of the defendant to represent the company pursuant to Rule 27 of the Supreme Court Rules is refused.
2.Action stayed.
3.The costs of the application to be the plaintiffs in any event.
4.Liberty to apply.