Blakeley v Cook
[2001] WASCA 208
•23 JULY 2001
BLAKELEY -v- COOK & ORS [2001] WASCA 208
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASCA 208 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:119/2000 | 12 JUNE 2001 | |
| Coram: | MALCOLM CJ OWEN J HASLUCK J | 23/07/01 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Appeals dismissed | ||
| PDF Version |
| Parties: | HAROLD THOMAS JAMES BLAKELEY ROBERT CLAUDE COOK TERENCE CORNELIUS McMANUS ROBERT HENRI DE BUF PATRICIA ANNE DE BUF REGINALD SARSFIELD FINN ELIZABETH ROSE FINN DONALD GEORGE LYSTER LEONE BEATRICE LYSTER JOHN SELSMARK ROGER LLOYD GEORGE RICHARD-COOMBES IDA ELEANOR RICHARD-COOMBES GRAEME CAMPBELL REYNOLDS LESLEY HANNAH REYNOLDS JOSEPH COCI HELEN JOY COCI ERNEST RAMPELLINI JENNIFER ANNE RAMPELLINI PETER JOE CHITTENDEN MICHAEL SKUBA MICHAEL CYRIL HALPIN GEORGE HUGH MARGETTS GWENDOLINE MARY MARGETTS TOLEEN NOMINEES PTY LTD LAVIN NOMINEES PTY LTD TUDOR COURT INVESTMENTS PTY LTD MacDOUGALL PTY LTD OREGON NOMINEES PTY LTD CHARLES ANTHONY CANDLIN FEAR RESI STATEWIDE MORTGAGE CORPORATION LTD |
Catchwords: | Corporations Officers Duties Receiver and manager exercising power of sale Shareholders suing to enforce companies' rights When shareholders have standing Exception to rule Foss v Harbottle |
Legislation: | Nil |
Case References: | Esplanade Developments Ltd v Dinive Holdings Pty Ltd [1980] WAR 151 Foss v Harbottle (1843) 2 Hare 461 Hurley v BGH Nominees Pty Ltd (No 2) (1984) 37 SASR 499 Peskin v Anderson [2000] 2 BCLC 1 Re City Equitable Fire Insurance Co [1925] Ch 407 Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410 Anderson v Morgan (1917) 34 DLRL 728 Bank of Victoria Ltd v Mueller [1925] VLR 642 Black v Wilcox (1976) 90 OR (2d) 102 Blakeley v BPM Pty Ltd [2000] WASC 170 Blomley v Ryan (1954) 99 CLR 362 Bride and Bride v Peat Marwick Mitchell [1986] WAR 383 Brimson v Rocha Concrete Pipes Ltd (1982) 2 NSWLR 937 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Cowell v Taylor [1885] Ch D 34 Dobson v Dobson (1879) 13 SALR 145 Fibrosa Spolka v Fairbain Lawson Combe Barbour Ltd [1943] AC 32 Fry v Lane [1889] 40 Ch D 312 Hedley Byrne & Co Ltd v Heller and Partners Ltd [1964] AC 465 Hurley v BGH Nominees Pty Ltd (No 2) (1984) 2 ACLC 497 Lloyds Bank Ltd v Bundy (1974) 3 WLR 501 Nedville v Snelling [1880] 15 Ch D 679 O'Rorke v Bolingbroke (1877) 2 AC 814 Orr v Lusite Pty Ltd (1987) 72 ALR 617 Roberts v Walter Developments Pty Ltd and Ors (1995) 16 ACSR 544 Robertson v Robertson [1930] QWN 41 Smith v McCusker [2000] WASCA 320 Speil v Commodity Brokers Australia Pty Ltd (In Liq) (1983) 8 CLR 410 Symons v Williams (1875) 1 VLR (Eq) 199 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : BLAKELEY -v- COOK & ORS [2001] WASCA 208 CORAM : MALCOLM CJ
- OWEN J
HASLUCK J
- Appellant
AND
ROBERT CLAUDE COOK
TERENCE CORNELIUS McMANUS
ROBERT HENRI DE BUF
PATRICIA ANNE DE BUF
REGINALD SARSFIELD FINN
ELIZABETH ROSE FINN
DONALD GEORGE LYSTER
LEONE BEATRICE LYSTER
JOHN SELSMARK
ROGER LLOYD GEORGE RICHARD-COOMBES
IDA ELEANOR RICHARD-COOMBES
GRAEME CAMPBELL REYNOLDS
LESLEY HANNAH REYNOLDS
JOSEPH COCI
HELEN JOY COCI
ERNEST RAMPELLINI
JENNIFER ANNE RAMPELLINI
PETER JOE CHITTENDEN
MICHAEL SKUBA
MICHAEL CYRIL HALPIN
(Page 2)
- GEORGE HUGH MARGETTS
GWENDOLINE MARY MARGETTS
TOLEEN NOMINEES PTY LTD
LAVIN NOMINEES PTY LTD
TUDOR COURT INVESTMENTS PTY LTD
MacDOUGALL PTY LTD
OREGON NOMINEES PTY LTD
Respondents
- Appellant
AND
CHARLES ANTHONY CANDLIN FEAR
First Respondent
RESI STATEWIDE MORTGAGE CORPORATION LTD
Second Respondent
ROBERT CLAUDE COOK
TERENCE CORNELIUS McMANUS
ROBERT HENRI DE BUF
PATRICIA ANNE DE BUF
REGINALD SARSFIELD FINN
ELIZABETH ROSE FINN
DONALD GEORGE LYSTER
LEONE BEATRICE LYSTER
JOHN SELSMARK
ROGER LLOYD GEORGE RICHARD-COOMBES
IDA ELEANOR RICHARD-COOMBES
GRAEME CAMPBELL REYNOLDS
LESLEY HANNAH REYNOLDS
JOSEPH COCI
HELEN JOY COCI
ERNEST RAMPELLINI
JENNIFER ANNE RAMPELLINI
PETER JOE CHITTENDEN
MICHAEL SKUBA
(Page 3)
- MICHAEL CYRIL HALPIN
GEORGE HUGH MARGETTS
GWENDOLINE MARY MARGETTS
TOLEEN NOMINEES PTY LTD
LAVIN NOMINEES PTY LTD
TUDOR COURT INVESTMENTS PTY LTD
MacDOUGALL PTY LTD
OREGON NOMINEES PTY LTD
Third Respondents
Catchwords:
Corporations - Officers - Duties - Receiver and manager exercising power of sale - Shareholders suing to enforce companies' rights - When shareholders have standing - Exception to rule - Foss v Harbottle
Legislation:
Nil
Result:
Appeals dismissed
Representation:
FUL 119 of 2000
Counsel:
Appellant : In person
Respondents : Mr A C McIntosh
Solicitors:
Appellant : In person
Respondents : Murie & Edward
(Page 4)
FUL 13 of 2001
Counsel:
Appellant : In person
First Respondent : Mr S K Shepherd
Second Respondent : Mr S K Shepherd
Third Respondents : Mr A C McIntosh
Solicitors:
Appellant : In person
First Respondent : Mallesons Stephen Jaques
Second Respondent : Mallesons Stephen Jaques
Third Respondents : Murie & Edward
Case(s) referred to in judgment(s):
Esplanade Developments Ltd v Dinive Holdings Pty Ltd [1980] WAR 151
Foss v Harbottle (1843) 2 Hare 461
Hurley v BGH Nominees Pty Ltd (No 2) (1984) 37 SASR 499
Peskin v Anderson [2000] 2 BCLC 1
Re City Equitable Fire Insurance Co [1925] Ch 407
Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410
Case(s) also cited:
Anderson v Morgan (1917) 34 DLRL 728
Bank of Victoria Ltd v Mueller [1925] VLR 642
Black v Wilcox (1976) 90 OR (2d) 102
Blakeley v BPM Pty Ltd [2000] WASC 170
Blomley v Ryan (1954) 99 CLR 362
Bride and Bride v Peat Marwick Mitchell [1986] WAR 383
Brimson v Rocha Concrete Pipes Ltd (1982) 2 NSWLR 937
Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Cowell v Taylor [1885] Ch D 34
Dobson v Dobson (1879) 13 SALR 145
Fibrosa Spolka v Fairbain Lawson Combe Barbour Ltd [1943] AC 32
Fry v Lane [1889] 40 Ch D 312
(Page 5)
Hedley Byrne & Co Ltd v Heller and Partners Ltd [1964] AC 465
Hurley v BGH Nominees Pty Ltd (No 2) (1984) 2 ACLC 497
Lloyds Bank Ltd v Bundy (1974) 3 WLR 501
Nedville v Snelling [1880] 15 Ch D 679
O'Rorke v Bolingbroke (1877) 2 AC 814
Orr v Lusite Pty Ltd (1987) 72 ALR 617
Roberts v Walter Developments Pty Ltd and Ors (1995) 16 ACSR 544
Robertson v Robertson [1930] QWN 41
Smith v McCusker [2000] WASCA 320
Speil v Commodity Brokers Australia Pty Ltd (In Liq) (1983) 8 CLR 410
Symons v Williams (1875) 1 VLR (Eq) 199
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
(Page 6)
1 JUDGMENT OF THE COURT: These are appeals in two related matters. In FUL 119 of 2000 the appeal is against the order of a Master striking out the appellant's statement of claim and dismissing the action against the respondents in CIV 1314 of 1996. In FUL 13 of 2001 the appeal is against the order of a Judge striking out the appellant's statement of claim and dismissing the action against the respondents in CIV 1985 of 2000.
Background
2 The appellant was the major shareholder and managing director of HPM Pty Ltd ("HPM"), which was the owner of the Peninsula Hotel, Mandurah. The land and the Hotel had been in the Blakeley family for many years. In May 1990 the Hotel was in financial difficulties. At that time its main financier (and the holder of registered mortgages over the land) was (or became) Resi Statewide Mortgage Corporation Ltd ("the Mortgagee"). HPM, through the appellant, sought advice from BPM Pty Ltd, a firm of accountants trading as Bird Cameron ("BPM"), on how best to manage the land, hotel business and assets. BPM advised that it should be appointed as the business manager of the hotel for six months to undertake the day-to-day running of the hotel. HPM accepted that advice and entered into a written management agreement with BPM. The appellant alleges that the accountants made misrepresentations, managed the business negligently and breached their management agreement in a number of ways. For example, the appellant says that the accountants failed to minimise the operating costs of the hotel.
3 In July and August 1990 the Mortgagee served notices of demand on HPM, calling up the moneys it said due under the mortgages. On 14 December 1990 the Mortgagee appointed Charles Fear (to whom we will refer as "the Receiver") as receiver and manager. In the course of the receivership the Receiver sold the land and the Hotel business to the persons named as fourth respondents in FUL 119 of 2000 and as third respondents in FUL 13 of 2001. We will refer to those persons as "the Owners". The sale was effected around June 1991.
4 The appellant contends that the appointment of the Receiver as receiver and manager is invalid because, among other things, there was no event of default. Accordingly, the Receiver had no power to sell the assets. The appellant also contends that the Receiver owed a duty to HPM and to the appellant to act in good faith and not to disregard the interests of HPM and of the appellant when exercising the power of sale. He says that the Receiver breached those duties in that he failed to take reasonable
(Page 7)
- care to obtain a proper price or the true market value of the assets. It is also alleged that the Receiver allowed the hotel business to degenerate through lack of proper management, thereby reducing its saleability and value. We do not need to go into detail concerning these allegations. According to the appellant both HPM and the appellant have suffered loss and damage as a result of those breaches of duty. It is also part of the appellant's case that the exercise of the power of sale by the Receiver was part of a dishonest scheme to deprive the appellant of his interest in the assets. He says that the Owners knowingly participated in the Receiver's dishonest scheme and therefore hold the assets as constructive trustee for HPM.
5 In 1994 HPM commenced an action (CIV 2236 of 1994) against BPM, the Receiver and the Owners pleading substantially the causes of action that we have just described. HPM was placed in liquidation on 21 December 1995 at the behest of the Bank of Melbourne, which controls the Mortgagee. This is something about which the appellant complains. He says that it was a deliberate act to stifle CIV 2236 of 1994. When the liquidator ran into funding problems for the action the appellant commenced CIV 1314 of 1996 in his own name. The chose in action the subject of CIV 2236 of 1994 was assigned by the liquidator to the appellant. However, security for costs orders were made which delayed the action once again. At the risk of oversimplifying the position, the appellant entered into a litigation funding arrangement with the McLernon Group. But it was on the basis that the action proceed only against BPM. The appellant says that on the insistence of the McLernon Group he discontinued CIV 2236 of 1994 as against the other parties. A little later the McLernon Group withdrew from the funding arrangement. Eventually CIV 2236 of 1994 was finalised when it was dismissed as against BPM (the remaining defendant) by mutual consent under an arrangement reached between BPM, the liquidator and the McLernon Group. The appellant was required to re-assign the chose in action to the liquidator, which he did.
6 The action numbered CIV 1314 of 1996 was discontinued as against BPM, the Receiver and the Mortgagee on 8 July 1996, leaving it on foot only against the Owners.
7 The action numbered CIV 1985 of 2000 was commenced by the appellant after CIV 2236 of 1994 had been finalised. Save for BPM it was against the same defendants and it raised almost identical causes of action. In CIV 2236 of 1994 the defendants had obtained orders for
(Page 8)
- security for their costs. This orders had not been satisfied at the time the action was finalised.
8 During the argument on the appeal the appellant mentioned that earlier this year (2001) he obtained from a Master leave under Pt 2.1F of the Corporations Law to proceed on behalf of HPM. This caused the solicitor for the Owners to tell the Court that this had nothing to do with the subject matter of the appeal. The appellant did not challenge that statement and we were told no more about leave under Pt 2.1F.
The Appeal in FUL 119 of 2000
9 The appellant, in his personal capacity (as "major shareholder and managing director of [HPM]") is the plaintiff in CIV 1314 of 1996. However, the duties on which the causes of action are said to be based are all duties that are owed to the company: see, for example, pars 13, 19, 30, 32 and 33 of the amended statement of claim. The asset the subject of the alleged constructive trust are all assets which were owned by HPM, not by the appellant. In the prayer for relief the appellant claims damages for breach of the contract (that is, the contract entered into between BPM and HPM) and breach of duty against BPM and the Receiver. However, they are no longer parties to the action. The action was discontinued as against BPM, the Receiver and the Mortgagee on 8 July 1996. As against the Owners, the primary relief is a declaration that the sale of HPM's assets be set aside and orders "giving effect to the reversion" (presumably to HPM) of the property. There is also a claim for damages.
10 In other words, it is patently clear that the true plaintiff in the action is HPM, not the appellant. The company is in liquidation. The liquidator has not consented to an action being brought in the name of the company. The appellant has not obtained leave to bring or intervene in these proceedings on behalf of the company under Pt 2.1F of the Corporations Law (the so-called statutory derivative action). On the face of it the appellant has no standing to bring the action.
11 The appellant submitted that as this action was commenced in 1996 the question of standing fell to be decided under the law as it applied at that time, rather than under Pt 2.1F of the Corporations Law, those provisions having come into operation on 13 March 1999. In other words, the appellant contends that he would have standing to bring the action on behalf of HPM under one of the exceptions to the Rule in Foss v Harbottle (1843) 2 Hare 461. The rule is a simple one: subject to certain exceptions the company is the proper plaintiff to bring an action in respect
(Page 9)
- of a wrong done to it. It is not entirely clear which of the exceptions would apply to the appellant's case but, in the circumstances of this case, it seems to us not to matter.
12 The insurmountable hurdle for the appellant is that HPM is in liquidation. Leaving to one side the issue of leave under Pt 2.1F of the Corporations Law, it is for the liquidator, not a shareholder or former director, to take action on behalf of a company in liquidation. It is not in dispute that the liquidator has specifically declined to take or authorise the action which the appellant has commenced. There are mechanisms within the Corporations Law, for example s 1321, for a person aggrieved by a decision of a liquidator to appeal to the Court against the decision. But this has nothing to say about the circumstances of this case.
13 In our view the Master was correct in his conclusion that the appellant's action against the Owners was an abuse of process because he lacked standing to bring it. The action against the Owners was rightly dismissed and this appeal must fail.
The Appeal in FUL 13 of 2001
14 The action in CIV 1985 of 2000 proceeds on a very similar footing. It asserts the invalidity of the appointment of the Receiver. In pars 13 and 14 the appellant pleads that the Receiver owed duties to HPM and to him to act in good faith, not to disregard the interests of HPM and of him and to exercise reasonable care in carrying out the power of sale. In par 20 the appellant alleges that the Receiver, the Mortgagee and the Owners acted oppressively to nullify HPM 's action in CIV 2236 of 1994. In par 21 it is said that the Receiver acted fraudulently in effecting the power of sale of HPM's assets. Paragraph 22 alleges that the Owners knowingly participated in the Receiver's dishonest scheme. In the prayer for relief the appellant seeks damages against the Receiver for breach of the various duties said to have been owed to HPM and to him. Somewhat curiously, it also claims damages against the Owners for "breaches of [their] duties to [HPM and him]" although nowhere in the body of the statement of claim is the nature and extent of those duties pleaded. There is a claim for a declaration that the sale of HPM's assets be set aside and that "these assets revert and be restored to their rightful owner" (again, presumably HPM).
15 To the extent that the action seeks to assert claims for or on behalf of HPM what we have said in relation to CIV 1314 of 1996 applies with equal force here. The appellant has no standing to bring an action on
(Page 10)
- behalf of HPM to recover damages (or property) in relation to assets of which it was wrongly deprived. But the gravamen of the appellant's submissions on appeal relate to his own position. The question is whether he, not the company, can assert a cause of action in relation to the wrongs alleged in these proceedings.
16 The critical question is whether a receiver owes a duty to the shareholders and directors of the company. Save for the validity of the appointment, the action against the Receiver depends entirely on the existence of those duties. The claim against the Mortgagee depends on it having knowledge of the defect in the Receiver's appointment. The Owners could only be liable (as knowing participants in the Receiver's dishonest scheme) if the Receiver owed duties to the appellant. In other words, save for the proviso, unless there is an arguable case that the Receiver owes duties to the appellant as a shareholder and director of the company, the action must fail.
17 In relation to the alleged defect in the appointment of the receiver and manager, this is clearly a matter solely between HPM and the Receiver and the Mortgagee. The cause of action lies solely with the company. What we have said in relation to CIV 1314 of 1996 applies with equal force here.
18 The appeal book does not contain a copy of the security documents under which the Receiver was appointed. However, we will assume (as the trial Judge did) that they follow the usual form under which a receiver, once appointed, is the agent of the company. It is a limited form of agency but one of its consequences is that, generally speaking, the receiver's duties are owed to the company. There is a line of authority that suggests that the category of persons or interests to whom particular duties are owed may extend beyond the company. In Standard Chartered Bank Ltd v Walker [1982] 1 WLR 1410 it was held that a receiver exercising a power of sale owed a duty of care to a guarantor of the secured debt. However, the application of the principle expounded in Walker is not entirely without doubt: see the cases referred to in O'Donovan, Company Receivers and Managers, par 11.10. Whatever may be the answer to that question we know of no authority for the proposition that in the circumstances of this case a receiver owes a duty to the shareholders or former directors of the company in their capacity as such.
19 The appellant placed reliance on two cases. They both relate to the duties of directors. Nonetheless, we accept that a receiver and manager, like a director, is an officer of the company (Corporations Law s 9) and
(Page 11)
- we will, assume (without deciding) that the principles arising from these cases might apply to a receiver. In Re City Equitable Fire Insurance Co [1925] Ch 407 the managing director had exceeded his powers and had exercised functions that had not been delegated to him. The other directors were held to have fallen short of the standard of care expected of them in supervising the managing director. However, they were protected by an article which excused them from liability except for wilful default. We do not think the case assists the appellant. There, the liquidator was seeking to recover against the directors for the loss caused to the company by the alleged breaches of duty by the directors. That is conventional fare. The court held that the directors owed duties to the company as a whole. However, this has nothing to say about the right of a director or shareholder of a company to assert a cause of action against a receiver on the basis of duties said to be owed to the director or shareholder in that capacity. We think the relevant point is that, in carrying out their duties to the company as a whole, the directors must take into account the interests of the shareholders as a body. However, this does not mean that the individual shareholders have a right of action for wrongs done primarily to the company.
20 The second case upon which the appellant relies is Hurley v BGH Nominees Pty Ltd (No 2) (1984) 37 SASR 499. That case is properly to be understood as an application of the rules relating to derivative actions. There, the shareholders were permitted to bring an action under one of the exceptions to the Rule in Foss v Harbottle. The wrong had been done to the company and the action was brought on behalf of the company. It was also, primarily, about the obligations of directors to take into account the interests of beneficiaries of a trading trust rather than the interests of shareholders. Nonetheless, it has to be acknowledged that Walters J said, at 510 that he was "far from persuaded that the directors of a company are entitled … to act as though they owed no duty to the individual shareholders". This was not necessary for the decision in the case. We think that what is described in Ford, Austin and Ramsay, Ford's Principles of Corporations Law, 8th ed, par 8.110 as "the orthodox view", namely that directors as such owe their duties to the corporate entity rather than the members, is the more appropriate approach: Esplanade Developments Ltd v Dinive Holdings Pty Ltd [1980] WAR 151 per Brinsden J at 157.
21 What we have said is not to decry the proposition that because of particular circumstances a fiduciary relationship may arise as between an officer of a company (including a receiver) and members of the company. In such a case duties of a fiduciary nature may be owed to the
(Page 12)
- shareholders. But this is because of the particular circumstances and not merely from the position which the officer holds vis-a-vis the company or the members: see the discussion in Ford, Austin and Ramsay at par 9.050; see also Peskin v Anderson [2000] 2 BCLC 1 at 11 - 15. In our view the case which the appellant wishes to mount does not come within any of the accepted principles.
22 We believe that the trial Judge was correct in his conclusion that the appellant has no cause of action of the type which is envisaged in the writ and statement of claim in CIV 1985 of 2000. Accordingly, the order striking out the statement of claim and dismissing the action should stand.
Conclusion
23 The respondents to the appeals also argued that the causes of action were statute barred and that they were vexatious. We do not need to deal with those matters. In our view the appellant does not have an arguable cause of action in his own right. Both appeals must be dismissed.
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