Forbes v Computer Accounting and Tax Pty Ltd [No 2]

[2012] WASC 49

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   FORBES -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 2] [2012] WASC 49

CORAM:   LE MIERE J

HEARD:   2 DECEMBER 2011

DELIVERED          :   17 FEBRUARY 2012

FILE NO/S:   CIV 1216 of 2009

BETWEEN:   STEWART VIVYAN FORBES

Plaintiff

AND

COMPUTER ACCOUNTING AND TAX PTY LTD
Defendant
 

Catchwords:

Practice and procedure - Application to issue chamber summons - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 471A(1), s 471A(1A)(c)
Supreme Court Rules 1971 (WA), O 2 r 1(1), O 4 r 3(2), O 66 r 55(1), O 67 r 5

Result:

Motion to issue chamber summons dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     No appearance

Defendant:     No appearance

Non-party:     Mr D W Thompson

Solicitors:

Plaintiff:     No appearance

Defendant:     No appearance

Non-party:     David Thompson

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

Harkness v Bell's Asbestos & Engineering Ltd [1967] 2 QB 729; [1966] 3 All ER 843

Re Qintex Ltd [No 2] (1990) 2 ACSR 479

Saltwater Studios Pty Ltd v Hathaway [2004] QSC 435

1. LE MIERE J: Angela Frigger has moved the court for an order that a chamber summons dated 9 December 2009 (the Chamber Summons) be issued pursuant to O 67 r 5(1) of the Supreme Court Rules 1971 (WA) (RSC). Before addressing the issues raised by Ms Frigger's motion it is necessary to outline the proceedings in which the Chamber Summons was filed.

2. The plaintiff, Mr Forbes is a solicitor.  He applied by originating summons for an order that he be released from the implied undertaking in respect of the defendant's discovery in Magistrates Court proceedings for the purpose of disclosing to his Honour Justice Simmonds and to Eastwood Law, the solicitors for the defendants in Supreme Court matter CIV 2265 of 2006, Mr Mendelow's account addressed to Bowen Buchbinder Vilensky lawyers dated 16 November 2007.  The defendant company, Computer Accounting and Tax Pty Ltd (CAT), was represented in these proceedings by Chris Stokes and Associates, who filed a memorandum of appearance on 13 February 2009.  On 12 March 2009 I ordered that the plaintiff be released from his implied undertaking and CAT pay the costs of the application including the costs of the plaintiff obtaining advice from senior counsel.  On 26 August 2009 the plaintiff's costs were taxed and allowed in the sum of $15,222.59.  On 26 November 2009 a registrar dismissed objections by CAT to the taxation of costs and signed the costs allocator.  CAT was represented at the taxation and on the hearing of the objections by Chris Stokes of Chris Stokes & Associates.

The Chamber Summons

1. On 9 December 2009 the Chamber Summons was filed by Ms Frigger. It states that it is an application by CAT for an order to review the taxation of the defendant's bill of costs pursuant to O 66 r 55(1) of the RSC. I take the reference to the defendant's bill of costs to be a mistaken reference to the plaintiff's bill of costs. The Chamber Summons states on its face that it was prepared by Chris Stokes & Associates and was filed on behalf of CAT.

2. On 11 December 2009 Chris Stokes wrote to the court stating that his firm did not file the Chamber Summons, that CAT had been placed into liquidation and he had no instructions from the liquidator to continue acting or to file the Chamber Summons.

3. On 4 December 2009 CAT's directors had resolved that CAT should enter into a member's voluntary liquidation and to appoint Mr Tinnick as liquidator.  Mr Tinnick consented to act as liquidator and his appointment took effect on 12 December 2009.

4. On 21 January 2010 Mr Kitay was appointed provisional liquidator by the court.  A winding up order was subsequently made and Mr Kitay was appointed liquidator by the court.

Principal Registrar directs chambers summons not to issue

1. On 16 December 2009 the solicitors for the plaintiff wrote to the Principal Registrar stating that because the Chamber Summons was filed by someone falsely claiming to do so as Chris Stokes & Associates it is an abuse of process and requested that the Principal Registrar, pursuant to O 67 r 5, refuse to issue the application without leave of a judge or master. On 28 July 2011 the Principal Registrar directed that the Chamber Summons was not to issue without the leave of a judge or master. In a letter to the plaintiff the Principal Registrar stated that the Chamber Summons suggested it was filed by Chris Stokes & Associates, that it was not clear who filed the Chamber Summons and it would not issue without leave of a judge.

The motion

1. On 23 August 2011 David Thompson, solicitor, filed a notice of motion on behalf of Ms Frigger seeking an order that the Chamber Summons issue pursuant to O 67 r 5(1). Ms Frigger submits that the Chamber Summons was filed by CAT before it had entered liquidation, it was filed by a person entitled to do so, the difficulty identified by the Principal Registrar has been resolved and leave should be granted to issue the Chamber Summons.

2. Ms Frigger's motion was supported by an affidavit sworn by her on 22 August 2011.  On the hearing of the motion counsel for Ms Frigger read that affidavit together with a further affidavit sworn by Ms Frigger on 6 December 2011 and an affidavit sworn by Mr Thompson on 30 November 2011.  After the hearing of the motion Ms Frigger sought leave to file and rely on a further affidavit sworn by Ms Frigger on 6 December 2011.  That affidavit contains evidence to support Ms Frigger's contention that she had authority to file the Chamber Summons on behalf of CAT.  I granted leave to file and rely upon the affidavit.  Before considering the other issues raised by Ms Frigger's motion I will consider whether she had authority to file the Chamber Summons on behalf of CAT.

Ms Frigger had authority to file the Chamber Summons

1. CAT is a proprietary company.  On 9 December 2009 the directors were Ms Frigger and her husband.  Ms Frigger was the secretary.  Ms Frigger and her husband each held one share in the company.  The position of a director does not carry with it any authority to act on behalf of the company.  Directors can only act collectively as a board and the function of an individual director is to participate in decisions of the board.

2. Clause 80(1) of the company's constitution provides that the directors may appoint one of them to the office of managing director.  There is no resolution of the directors appointing Ms Frigger managing director in evidence.  However, at a meeting of the directors on 1 October 2008, it was resolved that the remuneration of managing director Angela Frigger be ratified in the amount stated.  I infer that Ms Frigger was appointed managing director of the company.

3. The managing director has implied authority to do all such things that fall within the usual scope of that office and includes the day to day management of the company:  Saltwater Studios Pty Ltd v Hathaway [2004] QSC 435 [42] (Atkinson J). The powers of a managing director are not unlimited. The office of managing director does not necessarily carry with it the power to commence or carry on legal proceedings on behalf of the company. In Re Qintex Ltd [No 2] (1990) 2 ACSR 479, Underwood J held that in the absence of evidence of the grant of express authority or evidence from which an inference of the grant of authority could be drawn, it could not be said that the appointment to the office of managing director carried with it the authority to make critical decisions following the presentation of a petition to wind the company up including the decision to appoint solicitors with instructions to oppose the petition.

4. There is some evidence from which an inference of the grant of authority can be drawn.  In her affidavit sworn 2 November 2011 Ms Frigger swears:

   At all times relevant to the subject matter of this Application until CAT entered liquidation I had conduct of all legal matters on behalf of CAT in my capacity as one of its directors.

   In her affidavit sworn 6 December 2011 Ms Frigger swears:

   My role as managing director involved running the day to day business of the company, which included managing the company's finances and investments, and in 2003, when it became involved in protracted litigation, to run the litigation.

   I infer that Ms Frigger, as managing director, was granted authority to conduct the proceedings brought against the company by Mr Forbes in this action and that the authority extended to filing the Chamber Summons.

Motion should be dismissed

1. Notwithstanding that Ms Frigger had authority to file the Chamber Summons, I find that the motion should be dismissed for a number of reasons.  The primary reason is that I am not satisfied that Ms Frigger has authority to move the court on behalf of the company for leave to issue the Chamber Summons.

Corporations Act s 471A

1. Corporations Act 2001 (Cth) s 471A(1) provides that, while a company is being wound up in insolvency or by the court, a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company. Section 471A(1A)(c), in effect, provides that a director may perform a function or exercise a power with the liquidator's written approval.

2. Counsel for Ms Frigger submitted that the liquidator has given written approval to Ms Frigger to move the court on behalf of the company for leave to issue the Chamber Summons and to prosecute an application on behalf of the company for review of the taxation.  Counsel submits that the approval is to be found in correspondence between the liquidator's solicitors and Ms Frigger's solicitor.

3. On 19 October 2011 Ms Frigger's solicitor wrote to the liquidator's solicitors regarding the Chamber Summons. By letter of 27 October 2011 the liquidator's solicitor said that Ms Frigger's solicitor appeared to have raised the issue 'as to the terms upon which our client would be prepared to consent to Mrs Frigger pursuing the review, on behalf of [CAT], of the disallowance by Registrar Powell of the objections to the taxation of Mr Forbes' bill of costs'. It is apparent from that letter that the liquidator knew that the Chamber Summons had not issued and that Ms Frigger had applied under O 67 r 5 for leave to issue the Chamber Summons.

4. The liquidator said that he was prepared to consent to Ms Frigger pursuing the review on behalf of CAT on certain conditions.  The conditions were that Ms Frigger and Mr Thompson provide certain undertakings and pay an amount to be held in Mr Thompson's trust account to satisfy any costs order.  On 1 November 2011 the liquidator's solicitor wrote to Ms Frigger's solicitor enclosing drafts of the proposed undertakings.  Ms Frigger and Mr Thompson subsequently executed undertakings in the form required by the liquidator's solicitor.  In an email of 3 November the liquidator's solicitor stated that in relation to the payment of funds into Mr Thompson's trust account:

   [T]he only solution which is acceptable to our client (ie other than making the consent conditional) is for the fund to be set at $10,000 (ie to allow for all possibilities).  I confirm that if the fund were agreed at such a quantum (or in any event), my client would be satisfied, for the funds to be placed in an interest bearing account in your name (ie a 'controlled monies' account).

   In his affidavit sworn 30 November 2011 Mr Thompson says that his client, Ms Frigger, is yet to pay any funds into his trust account but he is instructed that she will do so if the court grants the leave sought in this application.

5. I am not satisfied that the liquidator has given his written approval for Ms Frigger to bring her motion on behalf of CAT or to commence and carry on the application for review of taxation of costs on behalf of CAT. The conditional approval does not satisfy s 471A(1A)(c).

6. At best for Ms Frigger, the liquidator has given his approval conditional upon, amongst other things, the funds being paid into Mr Thompson's trust account.  There is no effective approval unless and until that condition is met.  Ms Frigger may not perform or exercise any function or power as an officer of the company until the liquidator's approval has taken effect.  The liquidator's approval has not yet taken effect and hence Ms Frigger must not perform or exercise any function or power as an officer of the company.  Accordingly, Ms Frigger has no standing to move the court to issue the Chamber Summons on behalf of the company or to pursue the application made by the Chamber Summons.

7. Furthermore, the approval required by s 471A(1A)(c) must be certain and unequivocal. It is not satisfied by communications which require an exercise of construction or evidence that a condition of approval has been satisfied. The purpose of requiring that the liquidator's approval be written is to ensure that the court and others can ascertain with certainty whether or not the liquidator has given his approval. That purpose would be defeated if s 471A(1A)(c) may be satisfied by a string of correspondence and evidence from a person other than the liquidator that a condition of the approval has been met.

8. I am doubtful that a letter or letters from the liquidator's solicitors, rather than from the liquidator himself, may satisfy s 471A(1A)(c) but it is not necessary to decide that point.

9. There are further reasons why the motion should be dismissed.

Chamber summons not filed by a solicitor

1. Order 4 r 3(2) of the RSC provides that, except as expressly provided by or under any Act a body corporate may not begin or carry on any such proceedings otherwise than by a solicitor. The Chamber Summons was filed by Ms Frigger not by a solicitor. Counsel for Ms Frigger submits that that is an irregularity which may be cured under O 2 r 1(1). The court has a discretion to validate an irregularity. In general the court should exercise its powers to cure an irregularity so long as it can do so without injustice: Harkness v Bell's Asbestos & Engineering Ltd [1967] 2 QB 729; [1966] 3 All ER 843, 736 (Lord Denning MR). One of the matters the court should take into account in considering whether to exercise its discretion to validate the irregularity is any prejudice that would be caused to the plaintiff. I will consider those matters in considering the exercise of discretion generally.

Chamber Summons is misleading

1. The Chamber Summons states on its face that it was prepared by Chris Stokes & Associates, solicitors.  The filing or service of the Chamber Summons impliedly represents that it was filed by Chris Stokes & Associates.  Chris Stokes has written to the court stating that his firm did not file the Chamber Summons.  It is implicit in that statement that his firm did not authorise Ms Frigger to file the Chamber Summons which states that it was prepared by Chris Stokes & Associates.  In her affidavits Ms Frigger makes statements that give rise to a question whether Chris Stokes & Associates authorised her to file the Chamber Summons in the form she did but she stops short of saying that is the case or providing evidence from which that should be inferred.  The court should not give leave to issue the Chamber Summons in that form.

2. Mr Thompson submits that the matter could be overcome by amending the Chamber Summons to state that it was filed by David Thompson, Ms Frigger's current solicitor. I do not think that is appropriate. To grant leave under O 67 r 5 the court would, at least, have to exercise its discretion to cure the irregularity of the Chamber Summons having been filed by a person other than a solicitor and amend the Chamber Summons to provide that it was prepared or filed by David Thompson. It is more appropriate that Ms Frigger, if she has the authority to do so, should instruct David Thompson to file a new chamber summons seeking a review of the taxation of costs. Of course, that application would be out of time and Ms Frigger, on behalf of CAT, would have to seek an extension of time. In the circumstances of this case it would not be appropriate to avoid that consequence by curing the irregularity of the Chamber Summons having been filed by a person other than a solicitor and erroneously stating that it was prepared by a firm of solicitors. I will now turn to matters of discretion.

Discretion

1. Mr Forbes' bill of costs was taxed on 26 August 2009.  CAT lodged objections to the taxation.  Those objections were heard and disallowed in or around October 2009.  The taxed costs have been paid.  It is now more than two years since the objections to taxation were dismissed.  In considering whether the court should exercise its discretion to give leave for the issue of the Chamber Summons the court should take into consideration the explanation for the delay.  Similarly, if CAT was to seek an extension of time in which to apply for a review of the dismissal of the objections to taxation of costs the court should consider the reasons for the delay.

2. Ms Frigger says that on 25 January 2010 she used her own funds to pay Mr Forbes the full amount of his taxed costs after a conversation with the liquidator, Mr Kitay, in which she stated that she was only going to pay the costs if Mr Kitay agreed to pursue the review application.  After paying the bill Ms Frigger contacted Mr Kitay on numerous occasions questioning why he was not progressing the review application.  On different occasions Mr Kitay made different statements to Ms Frigger.  Ms Frigger says that on 11 July 2011 she spoke with Mr Kitay about progressing the review application.  Ms Frigger has produced email communications between herself and Mr Kitay commencing on 12 July 2011.

3. On 16 December 2009 Mr Forbes' solicitors wrote to the Principal Registrar stating that it had come to their notice that on 9 December 2009 the Chamber Summons was purportedly filed by CAT's solicitors, Chris Stokes & Associates.  They further stated that they had been informed by Mr Stokes that his firm did not file the Chamber Summons and that only the liquidator was authorised to instruct solicitors on behalf of CAT.  The solicitors concluded by stating their opinion that because the Chamber Summons was filed by someone falsely claiming to do so as Chris Stokes & Associates it was an abuse of process and they requested that the Principal Registrar refuse to issue the application without the leave of a judge or master.  On 14 July 2011 Ms Frigger sent an email to Mr Forbes' solicitor stating that the liquidator was not averse to giving her authority to pursue the Chamber Summons.  Mr Forbes then wrote himself to the liquidator stating, amongst other things, that in his view there were no valid proceedings on foot and the matter was finalised.

4. Ms Frigger has provided no explanation, or no proper explanation, of the delay in prosecuting the review of the objections to taxation between 9 December 2009 and 14 January 2011, a period of more than 18 months.  During that period Ms Frigger caused the taxed costs to be paid to Mr Forbes.

5. In addition to the reasons I have already stated, I would refuse leave to issue the Chamber Summons because of the delay in prosecuting the review.