Consolidated Securities SA v Cityview Energy Corporation Ltd

[2000] WADC 54

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   CONSOLIDATED SECURITIES SA -v- CITYVIEW ENERGY CORPORATION LTD [2000] WADC 54

CORAM:   REGISTRAR KINGSLEY

HEARD:   20 JANUARY 2000

DELIVERED          :   24 FEBRUARY 2000

FILE NO/S:   CIV 2084 of 1999

BETWEEN:   CONSOLIDATED SECURITIES SA

Plaintiff

AND

CITYVIEW ENERGY CORPORATION LTD (ACN 009 235 634)
Defendant

Catchwords:

Practice - Application for summary judgment.

Legislation:

Rules of the Supreme Court, O14

Result:

Application dismissed.

Representation:

Counsel:

Plaintiff:     Mr L Wilk

Defendant:     Mr C G Colvin

Solicitors:

Plaintiff:     Mallesons Stephen Jaques

Defendant:     Simon Watson

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

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363

Dames & Moore Pty Ltd v Jovista Pty Ltd, unreported; SCt of WA; Library No 980285; 26 May 1998

Eng Mee Ong & Others v Letchumanan (1980) AC 331

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87

Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100

Hazart Pty Ltd v Rademaker (1993) 11 WAR 26

Miller's Great Northern Hotel Pty Ltd v Fingleton (1974) 7 SASR 35

Case(s) also cited:

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332

Banque de Paris et des Pays-Bas (Suisse) SA v Costa de Naray [1984] 1 Lloyd's Rep 21

Cordinup Resorts Pty Ltd & Ors v Terana Holdings Pty Ltd, unreported; FCt SCt of WA; Library No 970739; 23 December 1997

D Galambos & Son Pty Ltd v McIntyre (1975) 5 ACTR 10

Hunt v Knable (No 2) (1992) 8 WAR 96

Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd & Ors [1976] WAR 109

National Westminster Bank PLC v Daniel & Ors [1993] 1 WLR 1453

Pavey v Matthews Pty Ltd v Paul (1987) 162 CLR 221

Scarborough Nominees Pty Ltd v Gardiners & Ors, unreported; DCt of WA; Library No 1399; 4 December 1985

Wallingford v Mutual Society (1880) 5 AC 685

1. REGISTRAR KINGSLEY:  The plaintiff pleads it conducted the business of providing a worldwide advisory and consulting service.  By a written agreement between the plaintiff and defendant ("the Alliance Agreement") the plaintiff agreed to provide the defendant with various consultancy services.  The consideration for the consultancy services was in three parts: firstly, by way of performance based incentive scheme; secondly, expenses were to be paid on a case by case basis, as agreed prior to any expenses being incurred; and thirdly, the payment by the defendant to the plaintiff of ₤10,000 per quarter in advance for the plaintiff to act as the defendant's London representative. 

2. The plaintiff pleads that since 30 June 1998 it has provided consultancy services to the defendant under the Alliance Agreement and has acted as the defendant's London representative.  The plaintiff has rendered invoices totalling ₤40,000 of which ₤10,000 has been paid.

3. During the period 21 September to 16 October 1998 the plaintiff pleads it has incurred expenses totalling ₤9,795.62 on behalf of the defendant.  This sum relates to an oral variation to the Alliance Agreement whereby Mr Kermanshahchi would travel to Singapore from London, meet the Board of the defendant and then travel to Jakarta.  The plaintiff pleads this sum was agreed to be paid by the defendant through its director, Mr Phan.

4. In addition the plaintiff pleads that Mr Phan orally agreed the defendant would pay to the plaintiff ₤1,500 per day for the services mentioned in the oral variation to the Alliance Agreement.  For this aspect the plaintiff pleads it is entitled to ₤39,000 which is also unpaid.

Legal principles

1. The plaintiff's application is pursuant to O14 Rules of the Supreme Court.  The plaintiff must first show that there is a prima facie arguable case.  But once the prima facie right to judgment has been established, the onus falls on the defendant to show there is an issue in dispute - or that for some other reason the matter ought go to trial.  (Dames & Moore Pty Ltd v Jovista Pty Ltd, unreported; SCt of WA; Library No 980285; 26 May 1998).

2. Upon the plaintiff establishing a prima facie case the defendant's obligation is to show there is a triable issue, or that there is real uncertainty to the plaintiff's right to judgment (Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87). To discharge its obligation, the evidence of the defendant must condescend to particulars - a mere assertion is not enough. But the Court is entitled to look critically at the defendant's evidence. The Court can enquire whether there is a fair and reasonable possibility of a defence and whether the evidence of the defendant is inherently incredible. (Eng Mee Ong & Others v Letchumanan (1980) AC 331). As shown in Hazart Pty Ltd v Rademaker (1993) 11 WAR 26 a Court can look critically at defences that are raised by a defendant late in the day to determine if those defences are made bona fide.

Alliance Agreement

1. The Alliance Agreement at clause 3B provides that the plaintiff act as the London representative office.  It is the defendant's counsel's contention that there is an implied term in that agreement that the plaintiff would introduce acquisitions and proposals to the defendant that were bona fide and of commercial merit.  In the affidavit of Peter Mark Smyth sworn 22 July 1999, Mr Smyth deposes that Mr Kermanshahchi for the plaintiff represented that he had business connections and the capacity to raise capital on behalf of the defendant to finance acquisitions and the development of projects.  Mr Smyth then outlines a number of proposals introduced by the plaintiff for consideration by the defendant.  Mr Smyth says those projects were of no commercial worth.  In analysing the worth of the projects introduced by the plaintiff, Mr Smyth says that the defendant has expended money and therefore has a counterclaim, or set off, that exceeds the value of the plaintiff's claim.

2. For terms to be implied into a contract certain conditions (which may overlap) must be satisfied: the implied term must be reasonable and equitable; it must give business efficacy to the contract; it must go without saying, though it must also be of clear expression; and must not contradict any express written term (BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363 and the authorities that followed). In the Alliance Agreement Operative Provision 1(a) states:

   "Consolidated shall coordinate with Cityview to identify and acquire oil and gas assets and potential corporate acquisitions (Acquisitions) for purchase by Cityview with particular emphasis on the Caspian Sea region."

3. In light of the avowed purpose of the agreement, it is arguable that terms be implied as to the commercial worth of the projects introduced by the plaintiff.

4. Mr Smyth deposes that the defendant expended money in analysing the projects.  As a matter of commercial reality the defendant would conduct its own analysis of projects to determine the merit of investing, or purchase of the project.  In my opinion there is a bare argument on this issue.

Oral agreement for fees and expenses

1. The plaintiff through Mr Kermanshahchi says that in a meeting between him and the directors of the defendant in September 1998, Mr Menudin for the defendant stated that a reasonable fee would be paid for travel to Singapore and Jakarta to formulate strategy and conduct a review of the defendant's Jakarta office.  Mr Kermanshahchi states he performed this additional work and that at a meeting in October 1998 Mr Phan for the defendant agreed that the defendant would pay ₤1,500 per day - to be paid by ₤1,000 and ₤500 in the defendant's shares - and the defendant would pay the plaintiff's expenses.  Mr Phan in an affidavit sworn 15 November 1999 denies that any amount was settled and states that the rate sought by Mr Kermanshahchi was too high.  Whilst this does amount to a bare denial, there is a clear conflict on the evidence between Mr Kermanshahchi and Mr Phan such that it is inappropriate that the matter be disposed by way of summary judgment.

Directors' admissions

1. Mr Kermanshahchi contends that Mr Smyth for the defendant has admitted the defendant owes the plaintiff at least ₤20,000.  Mr Kermanshahchi refers to a series of facsimiles from Mr Smyth (in particular a facsimile dated 16 December 1998) wherein Mr Smyth states to one Stephen Hopkins of the plaintiff that "a portion of the outstanding accounts will be paid from the sales of the management company".  In support the plaintiff's counsel relied on two authorities, Miller's Great Northern Hotel Pty Ltd v Fingleton (1974) 7 SASR 35 and Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100. The Fingleton case is quite distinguishable in that the action arose out of a prosecution under the Prohibition of Discrimination Act 1966-1970 (SA) and the issue was whether the knowledge of an employee who performs an act is attributable to the employer.  The Fraser Henleins' case is more to the point in that whilst the action arose out of a prosecution under the Black Marketing Act 1947 (Cth) Latham J states:

   "If (a manager) could not bind the company by admission, no-one could do so.  It has never been held that only a formal act by the board of a company can bind the company by way of admission".

2. Whilst Mr Smyth does explain the circumstances of the facsimiles, the real issue is that nowhere in the facsimiles is there an unequivocal admission that the moneys are owing.  Without that unequivocal admission, it would be wrong to deny the defendant the right to deal with that issue at trial.

Delay in raising a defence

1. The issue raised by Mr Smyth appears for the first time in his affidavit.  Mr Smyth by his own admissions has raised the issue of invoices with the directors - see p51 and 53 Smyth affidavit.  Both Mr Menudin and Mr Phan make no mention of disputing the invoices in their evidence.  That raises some doubt in my mind as to the bona fides of the defences.  Having considered the matter I am of the opinion that the interests of the plaintiff are best served by this matter being brought to trial quickly.

Conclusion

1. The plaintiff's application will be dismissed.  As I want to make orders to bring this matter to an early trial I will hear counsel on the orders I propose.