BPH Energy Ltd v Ambrosini - [2017] WASC 252

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BPH ENERGY LTD -v- AMBROSINI [2017] WASC 252

CORAM: MASTER SANDERSON

HEARD: 11 AUGUST 2017

DELIVERED : 11 AUGUST 2017

PUBLISHED : 28 AUGUST 2017

FILE NO/S: COR 83 of 2017

BETWEEN: BPH ENERGY LTD
Plaintiff
AND
DEBORAH LEONIE AMBROSINI
Defendant

FILE NO/S :COR 84 of 2017

BETWEEN :BPH ENERGY LTD
Plaintiff
AND
HOCK GOH
Defendant

FILE NO/S :COR 85 of 2017

BETWEEN :GRANDBRIDGE LTD
Plaintiff
AND
KEVIN GERARD HOLLINGSWORTH
Defendant

Catchwords:

Practice and procedure - Application to strike out certain paragraphs of plaintiffs' affidavits - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)

Result:

Application dismissed

Category: B

Representation:

COR 83 of 2017

Counsel:

Plaintiff: Mr J R B Ley
Defendant: Mr N D Billington

Solicitors:

Plaintiff: Ensign Legal
Defendant: Gibson Lyons

COR 84 of 2017

Counsel:

Plaintiff: Mr J R B Ley
Defendant: Mr N D Billington

Solicitors:

Plaintiff: Ensign Legal
Defendant: Gibson Lyons

COR 85 of 2017

Counsel:

Plaintiff: Mr J R B Ley
Defendant: Mr N D Billington

Solicitors:

Plaintiff: Ensign Legal
Defendant: Gibson Lyons

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

Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2007] VSCA 121; (2007) 63 ACSR 300
Strand Developments Pty Ltd v Maywood Enterprises Pty Ltd (in liq) (Unreported, WASC, Library No 960355, 5 July 1996)

MASTER SANDERSON: In each of these three matters the plaintiff has applied to set aside a statutory demand. In each case the application is supported by an affidavit of David Leslie Breeze sworn 24 April 2017. In each case the plaintiff has filed a further affidavit of Mr Breeze. In COR 83 of 2017 that affidavit was sworn 15 June 2017. In each of the other two cases the affidavit was sworn 14 June 2017. By interlocutory process lodged 22 June 2017 the defendant in each of the three actions has applied to strike out certain paragraphs of Mr Breeze's affidavits. At the conclusion of the special appointment on 11 August 2017 I ordered all paragraphs objected to would stand and I would publish reasons. These are those reasons.
A party who takes objection to parts of an affidavit in corporations law proceedings, or indeed in any other proceedings determined on affidavit evidence, faces a dilemma. They can wait until the hearing, refer to the objections to the affidavit material in the submissions filed in relation to the hearing and have those objections dealt with prior to the substantive issue being considered. The alternative is to issue a separate interlocutory application and have objections to evidence dealt with as a preliminary matter. In Master's Chambers the former course of action is by far the most common. But in appropriate cases where the objections to evidence are lengthy, or where the upholding of those objections might lead to leave being granted to file further affidavit material, the latter course is preferable. In this case it was entirely appropriate for the defendant to issue the interlocutory process. To have attempted to deal with the extensive objections to evidence prior to the hearing would have been cumbersome to the point of being unworkable. To that extent at least this is an example of counsel adopting a sensible approach to the efficient disposal of the matter.
Although there are three separate applications there is a large measure of similarity between each. Counsel for the defendant in each matter dealt primarily with COR 83 of 2017. He cross‑referenced the affidavits in that matter with the affidavits in the other two matters. It was common ground that although there may have been minor differences in the affidavits the same points arose with respect to each. Again that was a very sensible approach. There were one or two objections specific to one or other of the actions and I will deal with those below. However, for present purposes I will refer particularly to COR 83 of 2017. A copy of the statutory demand appears as attachment DLB1 to Mr Breeze's first affidavit. In the schedule to the demand under the heading 'Description of the debt' there appears the following:
Director's fees payable pursuant to a services agreement entered into between the Company and the Creditor effective as of 27 August 2009.
In his affidavit Mr Breeze says that he is the managing director of the plaintiff. The plaintiff is publicly listed on the Australian Stock Exchange. By virtue of its shareholdings there is an inter‑relationship between the plaintiff and Grandbridge Ltd which is also a publicly listed company.
It is alleged by the plaintiff and not disputed by the defendant that the defendant was a director of the plaintiff from 27 August 2009 until 2 February 2015 when she resigned. It is also not in dispute the defendant provided services as a director pursuant to a 'Board of Directors Services Agreement' between the plaintiff and the defendant which was entered into on 27 August 2009. Pursuant to cl 2 of the agreement the plaintiff was to pay the defendant a fee at a rate of $25,000 per year by way of directors' fees. The plaintiff accepts the sum of $117,481 has been accrued by the defendant as directors' fees pursuant to the agreement. However, it is the plaintiff's position that amount is not yet due and owing. Essentially what is alleged by the plaintiff is that there was an agreement between the plaintiff and the defendant that no directors' fees would actually be paid until the plaintiff was in a financial position to allow such payment to be made.
At present I am not concerned with whether or not the plaintiff can make out that alleged agreement - at least to the standard of establishing there was a serious question to be tried. The point of this interlocutory application was to determine which of any paragraphs of the affidavit material ought be struck out. Nothing in these reasons should be taken to suggest I have reached a conclusion as to the merits of the application as a whole.
The most frequent objection to affidavits in applications to set aside a statutory demand is that the affidavit contains hearsay material. The argument generally raised is that the application is final and therefore hearsay material is not available. There is conflicting judicial authority on this question. However, the balance at present seems to favour the view that the application is interlocutory. That was the view endorsed by the Victorian Court of Appeal in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Ltd [2007] VSCA 121; (2007) 63 ACSR 300. That is the approach I adopt. In this case, although the issue was raised in a peripheral way in written submissions filed on behalf of the defendant, it appears the defendant accepted that the decision was interlocutory and the affidavit evidence should be viewed in that light. The defendant did not base its argument on striking out the affidavit material because it contained hearsay.
The flavour of the defendant's objections can be illustrated by quoting par 23 of the affidavit of Mr Breeze sworn 24 April 2017 and filed in COR 83 of 2017:
During 2008, the Global Financial Crisis arose creating challenging operating conditions for the Plaintiff and the Companies. From 2008 to 2009, in recognition of the challenging economic circumstances the directors of the Plaintiff and the Companies voluntarily agreed to defer receipt of director's fees. The deferral was agreed to by all directors in recognition of the fact that the directors held shares and options in the Plaintiff and/or Companies and in anticipation of receiving financial benefit through their respective shareholdings and options. Further, the directors considered this measure necessary to ensure that the Plaintiff and the Companies could develop their projects to a commercial status.
The defendant maintained that what Mr Breeze was doing was reaching a conclusion of law - that is to say that an agreement was reached - and not providing evidence which would lead to the conclusion it was arguable an agreement had been reached. This complaint frequently arises in applications of this sort. It was addressed by Parker J in Strand Developments Pty Ltd v Maywood Enterprises Pty Ltd (in liq) (Unreported, WASC, Library No 960355, 5 July 1996). His Honour faced with an application to strike out certain paragraphs of an affidavit by a Mrs Romanas said:
The use of the word 'agreed' can be indicative of a conclusion of law. The word 'agreed', however, can also be used to describe facts within a person's own knowledge. In the context of para 20 of Mrs Romanas's affidavit her use of the word 'agreed' may perhaps more readily be seen as an instance of this latter use; it can be taken that she was merely describing what she observed. Mrs Romanas's use of the adverb 'unanimously' to modify 'agreed' is consistent with this view. To say that there was an 'unanimous agreement' is more indicative of factual matters and is hardly a legal conclusion
Of course Mrs Romanas's evidence of what she observed may be attacked for lack of completeness and specificity, but that is not relevant to the question of admissibility. It goes to credibility and weight.
For those reasons para 20 of Mrs Romanas's affidavit should not be struck out as inadmissible (9).
There is nothing I would add to that statement of principle. Paragraph 23 of Mr Breeze's affidavit does not really advance the plaintiff's case very far. He says an agreement was reached about the deferral of directors' fees. But there is nothing in the paragraph which details how the agreement was reached. It lacks specificity. It is incomplete because no facts are given about when a meeting took place at which these matters were 'agreed', what words were used by the parties and so on. But as Parker J said it is open to attack Mr Breeze's evidence for a lack of completeness and specificity. But it does not mean the evidence is not admissible.
The position can be further illustrated by referring to pars 45 ‑ 47 of Mr Breeze's affidavit. They read as follows:
Since at least 2008 or 2009, there was an agreement between the Plaintiff and all of its past or current directors and the Companies and all of their past or current directors to the effect that there would be a deferral of fees for at least 12 months or until the company has sufficient cash resources to pay the deferred fees.
As a director throughout this period of time to the present, the agreement was annually confirmed by confirmations provided by the directors to the auditors regarding the deferral of directors' fees.
I was of the view, and remain of the view, that the agreement was evidenced by a continuity of conduct by all current and past directors of the Plaintiff and the Companies evidenced by the statements made in the Annual Reports and based on the written communications passing between the Plaintiff and its directors acknowledging and confirming the agreement.
These three paragraphs fall into the same category as par 23. Moreover they are repetitive and really do little to advance the plaintiff's case. But they are in my view admissible and doubtless will be attacked at the final hearing of the matter.
The other broad area of complaint had to do with Mr Breeze's interpretation of documents which the defendant maintained speak for themselves. This can be illustrated by reference to par 56 of Mr Breeze's affidavit. It reads as follows:
Soon after the above email was received, the Defendant sent an email to the directors of the Plaintiff stating inter alia that 'As in the past the auditors have asked for confirmation that the cash payment of our deferred fees will not occur for a period of 12 months from signing of the financial report or until the company has sufficient cash resources to make these payments'. The use of the word 'our' is important as the Defendant was also correctly referring to herself. This being consistent with the agreement made by past and present directors and was also consistent with the requirement of the Auditor who required confirmation from past and present directors. Attached and marked DLB27 is copy of the email. (original emphasis)
It was the second sentence to which objection was taken. It was the defendant's submission the document spoke for itself and any running commentary provided by Mr Breeze was inadmissible.
There are two problems which often arise in relation to evidence in s 459 applications. First, there is the problem identified by the defendant here - the deponent seeks to comment on or interpret documents appearing as attachments to the affidavit. The second problem is affidavits frequently contain what really are submissions - the defendant expressing the view there is a genuine dispute rather than allowing the evidence to speak for itself.
There is justification in the complaints made by the defendant in this case; a document can speak for itself. From time to time it may be necessary for a deponent to an affidavit to put the document in context or explain a term the meaning of which is not readily apparent but there is no warrant for a deponent to put his or her spin on the document itself. Neither is it helpful to have submissions contained in the affidavit. It may be that as a final concluding paragraph a deponent can swear to a belief there is a genuine dispute. While such a catch‑all phrase is not helpful and does not really advance the evidentiary position it is perhaps evidence of a genuinely held belief.
Having said that the inclusion of such material is not so offensive as to warrant it being struck out. What is important in applications under s 459 is that the essential question be borne in mind - is there a genuine dispute or is there an off‑setting claim which is greater than the amount in the demand. In no sense is a s 459 application a trial of the issues between the parties. It has much in common with a summary judgment application. While there may be material in affidavits which strictly speaking should not be there, to spend hours striking out particular words and paragraphs is a pointless waste of judicial resources. If counsel highlight what they see as problems with the affidavit material in written submissions then if the paragraphs complained of are central to a determination of the ultimate question I can deal with the objections in that context. But as with endless disputes over pleadings, there has to be a balance struck and a recognition that the world is not perfect.
Certain concessions were made by the plaintiff as to a limited number of paragraphs in the affidavit and these were struck out. But generally for these reasons I was prepared to allow the affidavits in their present form to form the basis of the plaintiff's claim to have the statutory demand set aside.
The question of costs will be reserved to the ultimate hearing of the application.