Crouch v Graham - [2007] WADC 40

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: CROUCH & ORS -v- GRAHAM & ANOR [2007] WADC 40

CORAM: DEPUTY REGISTRAR HEWITT

HEARD: 8 MARCH 2007

DELIVERED : 5 APRIL 2007

FILE NO/S: CIV 361 of 2006

BETWEEN: DARRELL JOHN CROUCH
Plaintiff
SPECTO PTY LTD (ACN 104 522 036)
Second Plaintiff
LYDIA HELENE MITTON
Third Plaintiff
SHAUN SAYERS
Fourth Plaintiff
AND
KELLY GRAHAM
First Defendant
WILLIAM MASON
Second Defendant

Catchwords:

Practice and Procedure - Application to set aside judgment - Principles in Palmer v Prince applied

Legislation:

Nil

Result:

Application dismissed

Representation:

Counsel:

Plaintiff:     Mr I Tait
Second Plaintiff             :     Mr I Tait
Third Plaintiff                :     Mr I Tait
Fourth Plaintiff              :     Mr I Tait
First Defendant              :     No appearance
Second Defendant         :     Mr R Douglas

Solicitors:

Plaintiff:     Tait & Co
Second Plaintiff             :     Tait & Co
Third Plaintiff                :     Tait & Co
Fourth Plaintiff              :     Tait & Co
First Defendant              :     Salter Power
Second Defendant         :     GG Legal

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

Palmer v Prince [1980] WAR 61
Parker v Transfield Pty Ltd [2000] WASCA 382

DEPUTY REGISTRAR HEWITT: On 1 August 2006 the defendant was ordered to give discovery within 28 days of service of that order. The defendant made default, consequently a springing order was made on 1 August 2006 requiring compliance within 14 days of service, failing which judgment would be entered. The defendants' default continued, notwithstanding service of the order and as a consequence on 28 November a judgment was entered against her. The first defendant now applies to set aside that judgment.
As I understand the law on the issue the applicant first defendant is required to, firstly, explain her failure to comply with the orders and, secondly, demonstrate a defence which has a real prospect of success at the trial of the action. Palmer v Prince [1980] WAR 61; Parker v Transfield Pty Ltd [2000] WASCA 382.
As to the first of the matters upon which the first defendant carries an onus, her explanation as to her failure to comply with the first order is not clear to me. It may be that she alleges that she did not receive the first order but that is not readily apparent from the terms of her affidavit. The first defendant mentions and the Court file bears out that the solicitors first representing the first defendant ceased to do so in about May 2006 and that might perhaps offer some explanation for the failure to comply with the original order but that is certainly not articulated within the affidavit. As to the springing order the first defendant acknowledges the receipt of that order but states that she was preoccupied with business commitments and failed to appreciate the significance of the order and the consequences of not complying with them.
I regard that explanation as being fairly thin because the order is clearly expressed and I would have thought a person with no experience of the law would nonetheless comprehend that the words:
"Unless within 14 days of the date of service of this order on the first defendant, the first defendant do comply with par 3 of the order of Deputy Registrar Hewitt made in chambers on 1 August 2006. The first defendant’s defence be struck out and judgment entered against the first defendant with costs of the action to be taxed."
There may have been some difficulty in the first defendant comprehending precisely what was required to be done to avoid the order having effect, but I would have thought there could be no argument by anybody having read the order that she, the first defendant, was required to take urgent steps in regard to the action.
I therefore regard the reasons advanced by the first defendant for her failure to respect the order as being, as I have put it, somewhat thin but nonetheless the application to set aside the judgment was brought soon after it was entered, and throwing that fact into the balance, by the narrowest of margins, I consider that the first defendant has explained her failure to comply with the terms of the order sufficiently and I therefore turn to the case and whether on the materials which had been advanced before me the first defendant had established that she has a real prospect of success in her defence of this case. I commence that analysis by an examination of the statement of claim. The allegation is that the first defendant made representations to each of the plaintiffs that:
(a)She was a director of a company called Rosemount Holdings Pty Ltd;
(b)That if the plaintiffs paid her the purchase price for certain shares in the company, they would receive shares in that company;
(c)That the purchase price for the shares would be held in trust pending the issue of the shares to the plaintiffs; and
(d)That the company was solvent and would continue to remain so for the foreseeable future.
As to the first of the representations the defendant states in par 29 of her affidavit sworn 17 January 2007:
"I do not recall stating to any plaintiff that I was a director of Rosemount whether in July or August 2004 or at any time prior to August 2004."
That proposition has to be set against the background of facts as they emerge from the material before me and the testimony of each of the plaintiffs as to the truth of that proposition.
According to the first defendant, she assisted Rosemount Holdings Pty Ltd to purchase a business known as Vulcanoes which operated at the Hillarys Boat Harbour. It would appear that the first defendant is being altogether too modest as to the degree of her involvement in that purchase because in fact a copy of the purchase agreement indicates that it was entered into in the name of the first defendant and/or a nominee company, that nominee being ultimately Rosemount Holdings Pty Ltd. Whilst the first defendant has not explained her level of connection with Rosemount Holdings Pty Ltd, it seems to me that since she executed an unconditional offer for sale for a gross purchase price of $170,000 in her own name, it is reasonable to conclude that her connection with Rosemount Holdings Pty Ltd was reasonably intimate and that she held some level of sway over the operations of that company.
Additionally, there have been a number of documents which have been executed by the various parties to these proceedings, in particular there has been a document called Agreement for the Sale of a Business as a Going Concern executed by the first defendant and each of the plaintiffs. In each of those documents, in particular in par (A) and (B) of the schedule within the documents, Blue Jacks Hillarys Pty Ltd is described as being the new name adopted by the company known as Rosemount Holdings Pty Ltd. Each of those documents has been executed on behalf of a company described as Bluejacs Hillarys Pty Ltd and signed by the first defendant.
Likewise, a mandate to sell a business purportedly authorising Darrell Crouch & Associates on behalf of Bluejacs Hillarys Pty Ltd to sell part of the business was executed by the first defendant. There are additional documents exhibited to the affidavits described as shareholders agreements, a copy of each being executed by each plaintiff and the defendant, all of which were executed by the first defendant presumably on behalf of the contracting party Bluejacs Hillarys Pty Ltd.
The first defendant by her own affidavit concedes the fact that Bluejacs Hillarys Pty Ltd did not exist until May 2005. All of the documents to which I have referred predate the date of incorporation of the company. In my view the irresistible inference to be drawn from these documents is that it was represented to the plaintiffs that Bluejacs Hillarys Pty Ltd was or was to be the new name for Rosemount Holdings Pty Ltd and that she was a director of that company, authorised to enter agreements on its behalf.
One matter which was aired in argument before me concerned the author of the various share sale agreements. It appears to me probable that some of what was written on those agreements was written by the first plaintiff, Darrell John Crouch.
Again it seems to me that the irresistible inference to be drawn, were that to be demonstrated to be the case, is that Mr Crouch filled into the document information with which he had been provided by the first defendant.
Mr Crouch himself invested $66,000 into the project (which has disappeared, together with all other investments) and it is scarcely likely that he would have deliberately duped himself into investing so unwisely.
I therefore conclude that the evidence which is before me demonstrates that the first defendant did in fact represent herself to be a director of Rosemount Holdings Pty Ltd.
The next representation which is alleged by the plaintiff is that the purchase price paid by the various plaintiffs would be held in trust pending the issue of their shares. Again each plaintiff has testified in support of that proposition.
There is an oddity concerning the payment of the monies because those monies were paid to another company, of which the first defendant was a director, into an account within that company labelled Share Application Account.
It is notable that the monies when they were paid into that account were almost immediately withdrawn. It is also to be noted that the first defendant was a director of that company but disclaimed any knowledge of the final destination of those monies, nor who withdrew those deposits. All the defendant has to say regarding the allegation she represented that the money were to be held in trust pending the issue of shares, is that she does not recall making any such representation. I would have thought that the creation of the account in the style in which it was created is strongly suggestive that the monies were to be isolated from the general day-to-day running of Blue Jack Pty Ltd which inferentially supports the proposition that they were to be held on trust until the entitlement to those monies had been perfected. As to whether or not there was a written representation to that effect to the extent that I am able to discern it is constituted by the very style and nature of the account to which the monies were paid.
The account was called a Share Application Account and it seems to me axiomatic that the monies so deposited would be held until the application to which the payment referred had been approved and the shares issued. It is patently obvious that did not happen.
The next matter which is relevant is the allegation that there was a representation the company was solvent and would continue to remain so. On that score I find there is some level of controversy. I think it clear that the purpose of the arrangements entered between the parties was to capitalise the proposed development of the restaurant. To that end various projections were produced but it seems to me that those were merely indications of the business which might be achieved by the restaurant in its modified form. In my view there is sufficient doubt as to that aspect of the matter to resolve it in favour of the first defendant.
It is abundantly clear on the papers which are before me that a substantial fraud has occurred in this case. Something approaching one‑quarter million dollars has been paid, and has been taken, by whom and for what purpose is not clear. What is clear is that the company to whom the money was paid was never in a position to issue any shares to the plaintiffs in Rosemount Holdings Pty Ltd or Bluejacs Hillarys Pty Ltd since the latter company did not exist and even when it did exist, was not controlled by Bluejacs nor did it have any proprietary interest in the restaurant which was the very basis of the transaction between the parties. Even though I consider that there is a triable issue as to whether the last of the alleged representations was made, in my view the first three alleged misrepresentations would be sufficient to found a right to judgment.
Clearly those misrepresentations were breached and in my view the first defendant has failed to discharge the onus upon her to show that there is a real issue to be tried in relation to those matters. Accordingly, insofar as she seeks to set aside the judgments entered in favour of the second, third and fourth plaintiffs I consider those judgments should remain intact. There is, however, a different consideration to be brought into play when considering the judgment entered in favour of the first plaintiff. The issue which has been raised by the first defendant is that the first plaintiff received a commission for the introduction of the various investors into Bluejacs Hillarys Pty Ltd. That figure amounted to over $13,000 and the first defendant says those monies should be deducted from the judgment sum. Whilst at first blush that proposition has some attraction, it is to be noted that the party which received the commission was Darrell Crouch & Associates Pty Ltd and that commission was some $13,860. I take the view that that commission was received by a company not the first plaintiff and it is not appropriate to offset that commission against the first plaintiff's claim for damages.
There is one final matter to consider in this case raised by the first defendant and that is the degree of reliance by each of the plaintiffs on the alleged misrepresentations attributed to her.
As I have earlier indicated I consider the first three of the misrepresentations were made. Those are misrepresentations of such fundamental character that in my view it is axiomatic that reliance was placed upon them. Each of the plaintiffs paid money to a company other than that in which they were to invest shares and in my view clearly relied on the representations, which I found to have been made by the first defendant, that they would be issued the shares that they had agreed to purchase. I also find it axiomatic the plaintiffs relied on the fact that the monies, which they had paid to a company other than the holder of the shares, would not be dispersed until the contracts had been honoured. Whilst there have been a number of aspects to the attack on the credibility of the plaintiffs, in my view those matters are sufficient to dispose of them and I therefore conclude that the first defendant has not shown a real prospect of success in the event this matter were to be tried and as a consequence I dismiss her application to set aside the judgment.