Chen v Awap Sgt 26 Investment Ltd

[2010] WASC 230

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   CHEN -v- AWAP SGT 26 INVESTMENT LTD [2010] WASC 230

CORAM:   ACTING MASTER CHAPMAN

HEARD:   26 JULY 2010

DELIVERED          :   3 SEPTEMBER 2010

FILE NO/S:   CIV 1384 of 2010

BETWEEN:   CHOU LI CHEN

First Plaintiff

CN 2000 HOLDINGS LTD
Second Plaintiff

CN (HONG KONG) LTD
Third Plaintiff

AND

AWAP SGT 26 INVESTMENT LTD
Defendant

Catchwords:

Practice and procedure - Summary judgment - Turns on own facts

Legislation:

Nil

Result:

Leave to defend granted

Category:    B

Representation:

Counsel:

First Plaintiff                :     Mr M C Goldblatt

Second Plaintiff            :     Mr M C Goldblatt

Third Plaintiff              :     Mr M C Goldblatt

Defendant:     Mr G J Douglas

Solicitors:

First Plaintiff                :     Holborn Lenhoff Massey

Second Plaintiff            :     Holborn Lenhoff Massey

Third Plaintiff              :     Holborn Lenhoff Massey

Defendant:     Hotchkin Hanly Lawyers

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

Miles v Bull [1969] 1 QB 258

Webster v Lampard (1993) 177 CLR 598

1. ACTING MASTER CHAPMAN:  By chamber summons filed on 19 April 2010 the plaintiffs seek leave to bring an application for summary judgment out of time and that judgment be entered in favour of the plaintiffs.  At the hearing of the special appointment counsel for the plaintiffs indicated that the application for summary judgment only relates to:

   (a)the first plaintiff's claim for a loan of $1,825,000;

   (b)the second plaintiff's claim in relation to a right's issue for $875,000; and

   (c)the third plaintiff's claims for a management fee of $525,111.44, a director's fee of $176,148 and expenses of $20,967.51.

Loan agreement

1. The central issue to this claim is an oral agreement which is referred to by the parties as the December 2006 Agreement.  The defendant does not challenge the existence of the loan agreement between it and the first plaintiff nor the advanced was $1,825,000.  The defendant contends that the December 2006 Agreement negotiated by Richard and Daniel Tan (the Tans) and the first plaintiff was for the sale of the first plaintiff's shareholding in the defendant.  It is said the purchase price would include, amongst other things, the first plaintiff's loan account in the defendant.  Counsel for the plaintiffs contends that the claim by the defendant is inherently incredible and is inconsistent with contemporaneous documents.  I must say there is some force in that submission. 

2. Having said that, the defendant contends that the Tans in the High Court of Singapore obtained a judgment by consent against Mr Chou for specific performance of the December 2006 Agreement.  During those proceedings Mr Chou did not claim an equitable set‑off in relation to the alleged loan of $1,825,000. 

3. Whilst it would seem to me the claim by the first plaintiff has some force, on the evidence before me I am not satisfied that the stance taken by the defendant is inherently incredible.  Where the defendant's affidavit discloses a set of facts which are not inherently incredible, the court must proceed on the basis that these facts would ultimately be accepted if the matter were to proceed to trial in the ordinary course:  see Webster v Lampard (1993) 177 CLR 598, 604.

4. In my view it is not appropriate to grant judgment without giving the defendant an opportunity to resolve the factual dispute by examining the relevant evidence. 

Right's issue

1. In general the facts relating to this issue are not in dispute but the legal consequences of what took place is.  It is accepted that a purported general meeting of the defendant's shareholders was held on 20 September 2007 where a resolution was passed that the defendant would raise a sum of money by the issue of additional shares.  The second plaintiff accepted an allotment of 25 additional shares and paid $875,000 by way of consideration.  The defendant issued the additional shares to the second plaintiff but on 17 December the issue of the 25 additional shares to the second plaintiff was cancelled. 

2. The defendant contends the general meeting was not validly called and thus was void.  Although it is accepted by the defendant the $875,000 was paid into an account at BankWest in the name of the defendant, it is argued the amount should not have been paid into the account as there was an agreement with the Bendigo Bank the defendant would only operate one account and that was with their bank.

3. It is said that Mr Chou is a director and corporate representative of both the second and third plaintiffs and the purported share issue giving rise to the payment of the $875,000 was a transaction entirely controlled by him.  In effect the transfer of the $875,000 was from one legal entity controlled by him to another into a bank account controlled by him rather than into a bank account with the Bendigo Bank as agreed.  It is further said these transactions occurred without the knowledge of the Tans and funds were expended from the BankWest account without the approval of the Tans.  The defendant contends that each element of this transaction is tainted. 

4. On 28 September 2007 the Federal Court of Australia made an order placing certain restraint on the activity of the defendant and its officers, servants and agents.  The defendant contends that some of the payments out of the BankWest account may be in breach of that order.  That of course may depend upon the timing of those transactions which would need to be established through appropriate evidence. 

5. Counsel for the defendant referred me to the decision of Miles v Bull [1969] 1 QB 258, 265 ‑ 266, McGarry J said:

   Under rules 3 and 4 of the present Order 14, the defendant can obtain leave to defend if (and I read from rule 3(1)) the defendant satisfies the court 'that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial'.  These last words seem to me to be very wide.  They also seem to me to have special significance where (as here) most or all of the relevant facts are under the control of the plaintiff, and the defendant would have to seek to elicit by discovery, interrogatories and cross-examination those which will aid her.  If the defendant cannot point to a specific issue which ought to be tried, but nevertheless satisfies the court that there are circumstances that ought to be investigated, then I think those concluding words are invoked.  There are cases when the plaintiff ought to be put to strict proof of his claim, and exposed to the full investigation possible at a trial; and in such cases it would, in my judgment, be wrong to enter summary judgment for the plaintiff.  In the present case the plaintiff's evidence initially consisted of a single affidavit in which brevity could scarcely be carried further.

6. I consider this claim falls into that category and would grant the defendant leave to defend this part of the claim.

Fees and expenses

1. The statement of claim pleads the third plaintiff was appointed a director of the defendant and acted as a director from 28 January 1997 at a remuneration of $108 per day.  Neither of those facts are in dispute.  As to the claim the defendant submits to the extent the third plaintiff was owed any monies for director's fees these were included in the price Mr Chou paid pursuant to the December 2006 Agreement.  To that counsel for the plaintiffs contends the third plaintiff was an independent company who had nothing to do with the December 2006 Agreement.  That has some force. 

2. In any event the defendant contends the third plaintiff was removed from office on 14 September 2007 and from 27 September 2007 no action was to be taken by the defendant without the consent of the Tans pursuant to the order of the Federal Court.  The defendant further contends the third plaintiff only remained in control of the defendant after December 2006 by virtue of Mr Chou's admitted breach of the December 2006 Agreement.  The defendant submits Mr Chou ought not benefit from his own breach of the contract and any invoice for fees or services after December 2006 is unenforceable. 

3. Counsel for the defendant submits that on 19 January Mr Chou sent an email attaching all invoices which support the claims for director's fees, management fees and expenses.  That email is annexure A to the affidavit of Craig John Dawson sworn on 24 May 2010.  Counsel for the defendant suggests in view of the wording of the email the origin of the invoices presented to the defendant warrants further investigation and cross‑examination under oath.  Whilst I accept that the wording of the email is somewhat curious I am not prepared to draw the inference suggested by counsel for the defendant. 

4. However, having said that, this part of the claim, in my view, is also surrounded by a degree of uncertainty which warrants further investigation to be tested by the appropriate evidence and for that reason I would not grant summary judgment in relation to it. 

Conclusion

1. For the reasons given I do not consider judgment should be entered in respect of any part of the claim and would grant the defendant leave to defend the action.