Forrest v Cosmetic Co Pty Ltd - [2008] SASC 152

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
FORREST v COSMETIC CO PTY LTD & ANOR
[2008] SASC 152
Judgment of The Honourable Justice White
13 June 2008
CORPORATIONS - LEGAL CAPACITY AND RELATIONS WITH OUTSIDERS - EXECUTION OF DOCUMENTS
The plaintiff was the sole director of the first defendant ("Cosmetic Co") at the time of its incorporation. ASIC documents and company records apparently signed by the plaintiff indicate that she later appointed the second defendant as a director of Cosmetic Co and resigned her own directorship - the plaintiff acknowledged that she had signed all but one of the documents - finding that the plaintiff had also signed the remaining document - whether it was necessary for the plaintiff to intend subjectively to effect the appointment of the second defendant and her own resignation when signing the respective documents - whether evidence of the plaintiff's subjective intention was admissible.
Held: absent claims such as non est factum, mistake, misrepresentation or duress, evidence of the plaintiff's subjective intention was not required nor admissible before effect could be given to the documents she signed - in any event, the plaintiff did intend, when signing the documents, to appoint the second defendant as a director and to resign her own directorship - accordingly, the plaintiff is no longer a director of Cosmetic Co - the second defendant is a director of Cosmetic Co.
Corporations Act 2001 (Cth) s 201A, s 205B, s 1274, s 1274B, referred to.
Commissioner of Stamp Duties (Queensland) v Jolliffe (1920) 28 CLR 178; Frederick v State of South Australia [2006] SASC 165; (2006) 94 SASR 545; Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72; Jones v Dunkel (1959) 101 CLR 298; Owens v Lofthouse [2007] FCA 1968; Wilton v Farnworth (1948) 76 CLR 646, applied.
B & M Property Enterprises Pty Ltd (In Liq) v Pettingill [2001] SASC 75; Poliwka v Heven Holdings Pty Ltd (1992) 8 ACSR 747; Starr v Starr [1935] SASR 263; Wood v Smith [1993] Ch 90, distinguished.
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165; Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265; Turner v Wyndever [2003] NSWSC 1147, discussed.
Marks v The Commonwealth (1964) 111 CLR 549, considered.

FORREST v COSMETIC CO PTY LTD & ANOR
[2008] SASC 152
Civil

WHITE J The plaintiff and the second defendant (Mr Viscariello) are in dispute about the directorship of the first defendant (Cosmetic Co).
The plaintiff seeks a declaration that she is and has, at all material times, been a director of Cosmetic Co. She seeks a further declaration that Mr Viscariello has never been appointed a director of Cosmetic Co.
Mr Viscariello contends that he became a director of Cosmetic Co on…

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: [2008] SASC 152
Decision Date: 13 June 2008

CaseChat Overview and Summary

In Forrest v Cosmetic Co Pty Ltd, the plaintiff, who was the sole director of Cosmetic Co, disputed her resignation from the company and the appointment of the second defendant as a director. The plaintiff admitted to signing the documents related to these changes but argued that she did not intend to resign or appoint the second defendant. The court had to decide whether the plaintiff's subjective intention was necessary for the execution of the documents to be valid and whether evidence of her subjective intention was admissible. The court held that in the absence of claims such as non est factum, mistake, misrepresentation, or duress, the plaintiff's subjective intention was neither necessary nor admissible for the documents to have effect. The court found that the plaintiff did intend to appoint the second defendant as a director and resign herself when she signed the documents. Therefore, the plaintiff was no longer a director of Cosmetic Co, and the second defendant was a director.

The court examined the evidence, including the plaintiff's background and experience in running companies, the circumstances surrounding the incorporation of Cosmetic Co, and the testimonies of the witnesses. The court found that the plaintiff had a reasonable amount of experience in operating a proprietary company and was accustomed to signing documents related to the conduct of a company. The court also found that the plaintiff and the defendants had agreed to go into business together to distribute a laser for use in beauty salons, with the defendants assisting in the accounting and legal aspects of the business. The court considered the evidence of the witnesses, including the plaintiff's retrospective rationalisation of events and the potential influence of her friendship with one of the defendants on her actions. Ultimately, the court concluded that the plaintiff did intend to appoint the second defendant as a director and resign herself as a director when she signed the documents. The plaintiff's claim was dismissed, and the court proceeded to hear from the parties on arrangements for the hearing of the first defendant's counterclaim.

Orders

Orders of the court

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Background

Background to the litigation

Although, as will be seen, I do not accept the plaintiff’s evidence on significant matters, that does not mean that I consider her to have given false evidence deliberately. I detected a degree of retrospective rationalisation in her evidence. I have the impression that after a falling out with Ms Viscariello, the plaintiff came to a realisation of the vulnerability of her position in Cosmetic Co. Rightly or wrongly, she considered that advantage had been taken of her by the Viscariellos. The plaintiff came to regret the circumstances in which she had allowed that to occur and has since rationalised, unconsciously, those circumstances in her own mind. On that assessment of the respective witnesses, I make the following findings of fact.The Plaintiff’s Background In 2005, the plaintiff conducted her own beauty salon under the name “Essential Beauty”. The salon was operated as a franchise. It was one of 18 franchises operating under the name “Essential Beauty”. A company owned by the plaintiff and her husband, A & J Forrest Agencies Pty Ltd, operated the salon. Prior to 2005, the plaintiff had had significant involvement in other proprietary companies and in businesses conducted using a business name. She has previously been a shareholder and a director in two companies engaged as wholesale distributors of fashion clothing. From time to time, the plaintiff has been a shareholder in and director of two other companies involved in the retail sale of clothing. The plaintiff has also been a shareholder and director of a company called Safe Sleeper Pty Ltd, a company established to distribute a device designed by her to prevent cot deaths. She has also conducted a business under the trading name of Stage One Fashions. The plaintiff obtained a real estate salesperson’s licence in 2003. At about the same time she became a director of System Real Estate Pty Ltd with the intention of working in the real estate industry. For a period of about 18 months before then, the plaintiff worked in a real estate agency. I am satisfied that in 2005, the plaintiff had a reasonable amount of experience in the operation of a proprietary company and, in particular, was well accustomed to signing documents prepared by an accountant in relation to the conduct of a company such as annual returns, taxation returns, minutes of meetings and other formal documents for lodgement with ASIC.The Establishment of Cosmetic Co During 2005, the plaintiff came to know Ms Viscariello. They formed a strong friendship. A company controlled by Mr and Ms Viscariello, K.O.C. Pty Ltd, conducted a beauty salon under the name “Cosmetic Solutions”. In the first half of 2005, discussions took place between Ms Viscariello and the plaintiff during which they agreed to go into business together to distribute a laser for use in beauty salons. Cosmetic Co was incorporated to be the vehicle by which they would conduct this business. Mr Viscariello, who is a legal practitioner, was involved in the discussions preceding the incorporation of Cosmetic Co. I am satisfied that there was agreement of a general kind that the laser distribution business would be conducted by Ms Viscariello and the plaintiff and that Mr Viscariello would assist by overseeing the accounting and legal aspects of the business.

Evidence

Evidence Before The Court

In case I am wrong about the admissibility of the evidence, I will address the evidence and submissions of the parties concerning the plaintiff’s appointment of Mr Viscariello and of her own resignation.The Oral Evidence at Trial At the trial I heard oral evidence from three witnesses. The plaintiff gave evidence herself and the defendants led evidence from Mr Nicolaou and from Mr Talbot-Wilson. Mr Viscariello did not give evidence and nor did his de facto wife Ms Viscariello. The plaintiff conducted a searching cross-examination of Mr Nicolaou. It was suggested to him that in material respects he had lied in his evidence for the purpose of supporting his friend Mr Viscariello in his litigation with the plaintiff. I have considered Mr Nicolaou’s evidence carefully. I consider that it is probable that in 2005 Mr Nicolaou did allow his friendship with Mr Viscariello to influence his actions in relation to Cosmetic Co. This explains Luestner & Associates lodging notices of changes in Cosmetic Co’s details with ASIC even before it had received signed documents confirming the changes in question. It also explains Luestner & Associates lodging the notice of appointment of Mr Viscariello as director without having spoken to the plaintiff, who was then the sole director of Cosmetic Co. I have also taken account of the fact that neither Mr nor Ms Viscariello has given evidence. They could have given evidence on topics which corroborated Mr Nicolaou. The fact that Mr Viscariello chose to remain in the well of the Court is a matter to be taken into account. The inference can be drawn that the evidence of Mr and Ms Viscariello would not have assisted the defendants’ case.[27] But it does not mean that an inference can be drawn that if they had given evidence, facts unfavourable to the defendants’ case would have been exposed.[28][27] Jones v Dunkel (1959) 101 CLR 298; Frederick v State of South Australia [2006] SASC 165 at [36]-[43]; (2006) 94 SASR 545 at 555-57.[28] Ibid. However, even having regard to those matters, I do regard Mr Nicolaou’s evidence as being generally reliable. It is supported by contemporaneous documents and, in part, by the plaintiff’s own evidence. Having regard to the attack made on his evidence by the plaintiff, it is appropriate that I record my satisfaction that Mr Nicolaou has not engaged in a course of sustained perjury. Except where specifically indicated, I regard his evidence generally as providing a reliable basis for findings of fact. Although, as will be seen, I do not accept the plaintiff’s evidence on significant matters, that does not mean that I consider her to have given false evidence deliberately. I detected a degree of retrospective rationalisation in her evidence. I have the impression that after a falling out with Ms Viscariello, the plaintiff came to a realisation of the vulnerability of her position in Cosmetic Co. Rightly or wrongly, she considered that advantage had been taken of her by the Viscariellos. The plaintiff came to regret the circumstances in which she had allowed that to occur and has since rationalised, unconsciously, those circumstances in her own mind. On that assessment of the respective witnesses, I make the following findings of fact.The Plaintiff’s Background

Decision

Reasons for decision

WHITE J

In relation to the plaintiff’s appointment of Mr Viscariello as a director, again I attach significance to the plaintiff’s experience in the conduct of proprietary companies. The plaintiff agreed that when she signed the original of the Notice of Change to Company Details (ASIC Form 484) concerning Mr Viscariello’s appointment as a director she knew that the document would be submitted to ASIC but claimed that she was not aware of the contents on the reverse side. I do not accept the latter statement. On my assessment, the plaintiff understood that the effect of the document was to notify ASIC of Mr Viscariello’s appointment and she signed it with that intention in mind.Conclusion Even if regard is had to the oral evidence bearing upon the plaintiff’s subjective state of mind, I am satisfied that she did intend both to appoint Mr Viscariello as a director on 18 August 2005 and later, to resign herself as a director. Accordingly the plaintiff’s claim is dismissed. I will now hear from the parties on arrangements for the hearing of the first defendant’s counterclaim.

Ratio Decidendi

Legal Principle Established

Established by: WHITE J

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