Chartspike v Chahoud - [2000] NSWSC 625

NEW SOUTH WALES SUPREME COURT

CITATION: CHARTSPIKE v CHAHOUD [2000] NSWSC 625 revised - 27/10/2000

CURRENT JURISDICTION: Common Law Division

FILE NUMBER(S): 20371/97

HEARING DATE{S): 26/06/2000

JUDGMENT DATE: 30/08/2000

PARTIES:
CHARTSPIKE PTY LTD (IN LIQ) & 3 ORS v MICHAEL CHAHOUD

JUDGMENT OF: Master Macready

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:
Mr J.T. Svehla for plaintiff
Mr J.C. Kelly SC with G. Curtin for defendant

SOLICITORS:
Baker & McKenzie for plaintiff
Colin Biggers & Paisley for defendant

CATCHWORDS:
Contracts - Principal and Agent. Proceedings commenced on behalf of a company without authority. First Liquidator declines to ratify solicitor's actions. Second Liquidator adopts proceedings by filing and amended statement of claim. Held solicitor's actions ratified by second Liquidator.
Practice - Application to dismiss proceedings based on Limitations Act defences. Held appropriate in part.
Corporations Law - Whether s 1322(4)(d) of Corportions Law impliedly repeals s 14(1) of the Limitation Act. Held point premature at this stage.

ACTS CITED:

DECISION:
Paras 50 and 51

JUDGMENT:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
MASTER MACREADY
Wednesday 30 August 2000.
20371 of 1997 CHARTSPIKE PTY LTD (IN LIQ) v MICHAEL CHAHOUD
JUDGMENT

MASTER: There are presently before me for hearing two motions and the determination of a separate question. The first motion which is brought by the defendant, Michael Chahoud, was filed on 14 July 1999 and seeks that the proceedings be dismissed for failure to disclose a reasonable cause of action. The second motion is one by the plaintiff, Chartspike Pty Limited ( In Liquidation) filed on 26 June 2000 in which it seeks leave to amend the existing amended statement of claim in a form of the draft annexed to the motion.
The separate question was defined in Orders made by Abadee J on 4 April 2000 and is in the following terms:-
1. Pursuant to Part 31 of the Supreme Court Rules, the following questions shall be separately tried on a final basis before the trial:
(a) Whether this Supreme Court of New South Wales proceeding (the "proceeding") was validly commenced on 1 May 1997 by the Plaintiff through its liquidator or with his authority;
(b)If the answer to question (a) is no, whether the Plaintiff by its liquidator could thereafter ratify the commencement of the proceeding such that the proceeding was, or is taken to have been validly commenced on 1 May 1997;
(c) If the answer to question (b) is no, whether a declaration ought be made pursuant to section 1322(4)(a) of the Corporations Law that the commencement of the proceeding on 1 May 1997 other than by the liquidator of the Plaintiff exercising his powers contained in sections 477(2)(a), (b), (k) and/or (m) of the Corporations Law is not invalid by reason of the contravention of such provisions of the Corporations Law;
2. Pursuant to Part 31 Rule 6 otherwise of the Supreme Court Rules, that the Court shall…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2000] NSWSC 625
Decision Date: 30 August 2000

CaseChat Overview and Summary

In the case of Chartspike v Chahoud, the dispute arose from the actions of a solicitor who commenced proceedings on behalf of a company without authority. The first liquidator declined to ratify these actions, but the second liquidator subsequently adopted the proceedings by filing an amended statement of claim. The central legal issues before the court involved the ratification of the solicitor's actions by the second liquidator and the applicability of limitations defences under the Limitations Act. Additionally, the court was required to determine whether section 1322(4)(d) of the Corporations Law impliedly repealed section 14(1) of the Limitation Act.

The court found that the solicitor's actions were effectively ratified by the second liquidator, allowing the proceedings to continue. Regarding the limitations defences, the court concluded that the appropriate time for assessing the limitation period depended on when the loss or damage occurred. The court noted that the plaintiff contended the loss was sustained when specific contingencies arose, such as the inability to perform funding obligations or the termination of the joint venture. The court referenced Wardley Australia Ltd v The State of Western Australia, which held that the plaintiff suffered no loss until the contingency was fulfilled and the loss became actual. The court decided that the limitations defence in respect of the claim in tort depended on when the loss or damage actually occurred. The court proposed to strike out the existing contract claim except for the continuing claim of breach and to give leave to replead accordingly.

Ultimately, the court struck out all of the existing contract claim except for the continuing claim of breach in paragraph 15(h) and granted leave to replead accordingly. The limitations defence in respect of the claim in tort hinged on the precise timing of when the loss or damage occurred, contingent on the contingencies outlined by the plaintiff. The court declined to express a final view on the Corporations Law point at that stage, leaving it open for future consideration.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In the circumstances, without expressing a final view on the Corporations Law point, I propose to strike out all of the existing contract claim except that comprised within the continuing claim of breach in paragraph 15 (h) and to give leave to replead accordingly. The limitations defence in respect of the claim in tort depends on when loss or damage occurs. The real debate between the parties is whether the loss was sustained on the entry into the agreement or which arose on the happening of a contingency. The contingencies for which the plaintiff contended were:-(a) Chartspike being able to perform its funding obligations throughout the life of the joint venture;(b)the costs of subdividing and developing the joint venture land;(c) the net sale proceeds of the joint venture land once subdivided;(d)the time it would take to subdivide and develop the land and on-sell it;(e) the Taiwanese interests agreeing to Chartspike having a registered second mortgage. It was suggested that the matters which the company now complains of in relation to the defendant’s conduct concern his failure to do things and the advice that he gave or did not give in the circumstances where the plaintiff was unable to continue to fund the joint venture (i.e. the protection of the plaintiff company’s rights on such a happening). It was submitted that at the time of execution of the joint venture agreement and at the time of making the balance of the initial contribution of $1,000,000 on 4 October that these were contingencies. It was submitted that they became actualities on 5 May 1992 when Castle Hill terminated the joint venture. Perhaps an earlier date of 13 March 1992 when the plaintiff company went into liquidation would be more appropriate. There appears to be no dispute that the plaintiff did not meet its obligations to make appropriate payments and it was this which led to the termination of the joint venture agreement with a resulting loss of its investment. There is no suggestion that any default of the defendant caused it to default in its obligations to the joint venture. Reference was made in submissions to Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514. That case concerned the strike out of an amendment to a claim for damages under s 82 of the Trade Practices Act. The respondent had given an indemnity as a result of misleading and deceptive conduct on the part of the appellant. It was held that the indemnifier suffered no loss until the contingency (an obligation to make a payment) was fulfilled. Notable in the court’s reasons were the distinguishing of cases concerning execution of mortgages and its treatment of the English authorities dealing with situations where a plaintiff was induced by negligent representations to enter into a contract or the signature of defective documents brought into existence by solicitors. It declined to follow them, Mason CJ, Dawson J, Gaudron J and McHugh J saying at 532:-“If, contrary to the view which we have just expressed, the English decisions properly understood support the proposition that where, as a result of the defendant's negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract, we do not agree with them. In our opinion, in such a case, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred. A deferred liability may stand in a different position but there is no occasion here to discuss that matter.”