FRANMARINE Underwater Services Pty Ltd v KAPELI - [2008] WASC 84

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: FRANMARINE UNDERWATER SERVICES PTY LTD -v- KAPELI [2008] WASC 84

CORAM: MASTER SANDERSON

HEARD: 10 APRIL 2008

DELIVERED : 14 MAY 2008

FILE NO/S: CIV 2009 of 2007

BETWEEN: FRANMARINE UNDERWATER SERVICES PTY LTD (ACN 059 653 459)
Plaintiff
AND
DAVID BRIAN TAUFA KAPELI
First Defendant
INA SOPHIA KAPELI
Second Defendant
HARBOROUGH NOMINEES PTY LTD (ACN 008 931 191)
Third Defendant

Catchwords:

Summary judgment - Claim by company against former director - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff:     Mr S K Shepherd
First Defendant              :     Mr A M Prime
Second Defendant         :     Mr A M Prime
Third Defendant            :     No appearance

Solicitors:

Plaintiff:     Durack & Zilko
First Defendant              :     McCallum Donovan Sweeney
Second Defendant         :     McCallum Donovan Sweeney
Third Defendant            :     No appearance

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

Nil

MASTER SANDERSON: This is the plaintiff's application for summary judgment on part of its claim against the defendants. The plaintiff relies upon two affidavits of Roger Wayne Dyhrberg (Mr Dyhrberg), the first sworn 8 February 2008 and the second sworn 31 March 2008. In response, the first and second defendants rely on an affidavit of the first defendant sworn 20 March 2008. The statement of claim was filed on 5 October 2007. Leave was required to bring this application out of time. There being no objection, leave was granted.
The background facts to this application can be shortly stated. The plaintiff is in the business of providing commercial diving and underwater services. Mr Dyhrberg is a director of the plaintiff and has been a director since 17 April 1993. The first defendant was a director of the plaintiff from 12 September 2001 until 30 March 2007. The second defendant is the wife of the first defendant and has had no involvement in managing the affairs of the plaintiff, nor has she been involved in any other capacity. There are 400 shares in the plaintiff on issue. Each of Mr Dyhrberg and the first defendant either own or control half the shares.
During the time the first defendant was a director of the plaintiff, he was responsible for its management. The role of Mr Dyhrberg was to carry out and supervise the diving operations and services provided by the plaintiff and to quote and tender for work. While both Mr Dyhrberg and the first defendant were working for the plaintiff, they were each paid a salary of $80,000 together with a car allowance. In addition, it would appear that the following expenses were paid for by the plaintiff:
1.the home telephone accounts of both Mr Dyhrberg and the first defendant as many of the phone calls made related to the plaintiff's business;
2.motor vehicle expenses for both Mr Dyhrberg and the first defendant as these vehicles were used extensively for carrying out business of the plaintiff;
3.fuel expenses of Mr Dyhrberg and his wife and the first defendant;
4.the home power bills and water rates of Mr Dyhrberg's residential property as recompense for the plaintiff using that property to store a substantial amount of the plaintiff's property.
There are disputes between the parties as to what other, if any, expenses were to be met by the plaintiff on behalf of the first and second defendants. I will deal with these matters in relation to each particular claim.
Mr Dyhrberg says that during the course of 2006, he became concerned about the plaintiff's financial performance. Despite the plaintiff undertaking some large contracts, its overdraft was not reducing and the plaintiff appeared to be performing poorly. As a consequence, Mr Dyhrberg began investigating the plaintiff's financial affairs. He retained an accountant to assist him in that task. On 22 May 2007, he received a preliminary report prepared by the accountant. Some of the matters raised caused him concern. He instructed his solicitors to write to the first defendant. No satisfactory response was received. Eventually, these proceedings were issued.
The statement of claim refers to a series of payments drawn on the cheque accounts operated by the plaintiff. Summary judgment is sought in relation to only 11 of these payments. It was accepted by the plaintiff that in relation to the remaining payments, the first and second defendants had raised an arguable defence. The total amount claimed by the plaintiff on this application is $191,967.38.
The statement of claim alleges that in making the payments that he did the first defendant breached his fiduciary duties owed to the plaintiff as a director and breached certain statutory duties. Particularly in relation to the alleged breach of fiduciary duty, any grant of summary judgment requires a finding that the first defendant was fraudulent. The issue can be nuanced in various ways but, in the end, that would be the effect of granting judgment. That being so, counsel for the first and second defendants submitted that this was not an appropriate case for the grant of summary judgment. He submitted that if findings were to be made that the first defendant had indulged in fraudulent conduct, it should be made in the context of a trial of all the issues between the parties. To grant summary judgment on part of the claim and to necessarily find that the first defendant acted fraudulently might prejudice the first defendant's position at the trial of the remainder of the action.
There is some force in that submission. However, summary judgment will only run in circumstances where there is no possible defence to the claim made by the plaintiff. The authorities are replete with warnings that the existence of any doubt should lead to the grant of leave to defend. That being so, it seems to me that if there is no possible doubt raised by the evidence, then the plaintiff ought to have summary judgment irrespective of the consequences for the first and second defendants. But I should emphasise that it is only when there is no reasonable explanation for what has occurred that judgment ought be entered.
The most convenient way to deal with this application is by referring to each of the 11 claims made by the plaintiff. The first of these relates to par 6.2 of the statement of claim. The cheque in question was drawn on 30 March 2006 in favour of the second defendant. It was for an amount of $1,100. It was deposited in the second defendant's account on 5 April 2006. The entry on the cheque butt records payment to the third defendant. Mr Dyhrberg says that he recognises the handwriting on both the cheque and the cheque butt as being that of the first defendant. The plaintiff's accounts show that the payment has been posted in the debit ledger as being for 'contractor services'.
The first defendant deals with this matter in par 18 and par 19 of his affidavit. I will quote these paragraphs in full:
18.This cheque ($1,100) was reimbursement to me for cash paid by me to Harborough Nominees Pty Ltd in respect of work performed by Harborough for the company in respect of, as I recall, a project known as the Tennix Project that the company was undertaking. This was a pile wrapping job. Harborough was a contractor that the company used from time to time.
19.Harborough was a company that I purchased when I sold the security company in about 1999. The company did contracting work within the construction industry generally. I sold the company to Jack Winterburn, a man who I met through Dyhrberg and his brother, in about 2001 or 2002. Harborough performed work from time to time for the company including the supply of extra labour when needed.
It must be said that this explanation is not entirely satisfactory. If the cheque was reimbursement for cash paid out by the first defendant, why did he not simply make that entry on the cheque butt? Why should the cheque have been made out to the second defendant when it was reimbursement for the first defendant? Having said that, it does seem to me arguable that whatever the cheque butts and debit ledger may show, this was a proper payment to which the first defendant was entitled. I would therefore not grant summary judgment in respect of this claim.
The position with respect to par 6.3 is similar. The cheque butt was completed by the first defendant and the cheque was drawn in favour of the second defendant. The cheque butt records that the payment was made to the third defendant and the debit ledger entry is again 'contractor services'. In response, the first defendant says that this too was a payment which was reimbursement of cash given by him to the third defendant. Again, the position is arguable and again there should be leave to defend in relation to this matter.
Paragraph 6.4 of the statement of claim deals with an amount of $8,000. The cheque was made payable to the third defendant. A tax invoice located among the plaintiff's records refers to the cheque and is endorsed with the words 'Tennix job 9th April ‑ 30 April'. Mr Dyhrberg in his affidavit acknowledges that Tennix did certain work between February and the first week of April 2006 for the plaintiff. He says that the third defendant would not have done work between 9 April and 30 April 2006 which could justify an account of $8,000.
The first defendant deals with this matter in par 22 of his affidavit. He says:
This cheque ($8,000) represented a loan of $8,000 that the company made to Harborough Nominees Pty Ltd. This loan was repaid by Harborough Nominees to the company by cheque on 22 May 2006. However, that cheque was dishonoured. As a result there was a direct debit by Harborough Nominees to the company's account on 16 June 2006. This would appear in the company's financial statements.
In his second affidavit, Mr Dyhrberg deals with this issue (see par 12). He provides a copy of the plaintiff's cheque account statements for the period between 13 March 2006 and 14 July 2006. It is clear that no deposit of $8,000 was made on 16 June 2006. Despite this evidence, no explanation is provided by the first defendant as to why he was mistaken in his understanding that the money was repaid to the plaintiff.
The question at issue here is whether or not the first defendant was authorised by the plaintiff to make the loan to the third defendant. After all, if the loan was made, it is the third defendant who is primarily responsible for its repayment. It is only if the first defendant acted in some unauthorised fashion that he would be personally liable for any money not repaid. Once again, the paperwork gives cause for concern - if the money was a loan, why was it not recorded in the books as such and why was the tax invoice raised? Nonetheless, it would seem to me that the position is arguable. The first defendant may have had authority to make a loan such as this - at the moment, there is no evidence on that question one way or the other. As the position is arguable, I am not satisfied there ought be summary judgment on this issue.
Paragraphs 6.5 and 6.6 of the statement of claim deal with amounts of $8,800 and $12,100. The cheque butt records 'Harborough Invoice #06', but the cheque is payable to the second defendant.
The first defendant explains this payment and the one that follows in par 23 of his affidavit. He says:
These two cheques ($8,800 and $12,100) were drawn so as to reimburse me for cash wages which I paid to staff, including Dyhrberg, who had worked on a job known as the Thiess job for the company. The relevant other staff members in question were John Pitcher, Jay Hayes, Steve Wheeler and Bo Jeromson.
Mr Dyhrberg has located among the plaintiff's papers a tax invoice from the third defendant in relation to what is said to be the Thiess job. Mr Dyhrberg says that he is unaware of the second or third defendants having provided any services to the plaintiff in relation to that job in or about May 2006. Once again, the debit ledger shows the entry being for 'contractor services'.
The first defendant goes on to annex copies of cheque stubs which he says show payment of wages by him direct to the individuals mentioned. While the first defendant's records are somewhat unconvincing, being as they are handwritten notes, I am satisfied the position is arguable. That being so, there will be leave to defend in relation to par 6.5 and par 6.6 of the statement of claim.
The position with respect to par 6.7 of the statement of claim is very similar. The cheque is for an amount of $2,200. The cheque butt records a payment to the third defendant, but the cheque is drawn in favour of the second defendant. The plaintiff's records contain a tax invoice from the third defendant for work which Mr Dyhrberg said was never undertaken on behalf of the plaintiff. The first defendant again says that the cheque was reimbursement for wages he paid to two individuals who carried out work for the plaintiff. Again, the position is arguable and again there ought be leave to defend.
Paragraphs 15.1 and 15.2 of the statement of claim deal with amounts of $16,892.17 and $37,312.21. The first cheque is drawn in favour of the first defendant, but the cheque butt refers to 'Denso Inv #224266'. Among the plaintiff's records is a tax invoice from Denso (Australia) Pty Ltd. Details next to the words 'Tax Invoice' and 'Date' on the original invoice have been blanked out with liquid paper and the number 224266 and the date '09/05/06' have been written over the liquid paper. Mr Dyhrberg made enquiries with Denso. He was advised that an invoice in an amount of $16,892.17 was rendered but was dated 9 March 2006. It bore the number 224273. Mr Dyhrberg says that this invoice, together with another invoice rendered on 17 April 2006, was paid by the plaintiff to Denso by a verified cheque. Mr Dyhrberg says that there were no other invoices for an amount of $16,892.17 from Denso and he is of the opinion that the invoice with the liquid paper changes is the invoice numbered 224273 rendered on 9 March 2006.
The first defendant admits receiving this cheque. He says that it was paid to him with Mr Dyhrberg's full knowledge. He says that on 18 June 2006, he paid the sum of $34,000 back to the plaintiff's account. Presumably he says that if there was any unauthorised payment to him, it has been repaid.
In Mr Dyhrberg's second affidavit, he does not take issue with the allegation that the money paid to the first defendant was paid with his at least tacit consent. He does say that the $34,000 which was paid to the plaintiff was credited to the first defendant's loan account, suggesting perhaps that the money received by the first defendant had not been properly repaid. But it is not clear that there was any obligation to repay the money. This is an issue for trial and there should be leave to defend.
The claim with respect to par 15.2 is for an amount of $37,312.21. The facts are very similar and the explanation given by the first defendant is identical to that offered in relation to par 15.1. I need not deal separately with this claim. There should be leave to defend in relation to par 15.2.
Paragraphs 29 and 34 of the statement of claim refer to eight cheques totalling $38,875. The first cheque in question was written and signed by the first defendant. The cheque butt records the payments as being 'rent'. The payee of the cheque is the 'Mike Edwards Trust Fund'. Mr Dyhrberg says that so far as he was aware, the plaintiff was not renting any premises in or about 2002 or at any other time. It was operating from premises it owned at 13 Possner Way, Henderson.
The first defendant says that this payment was for rent. He says that the business premises in Henderson were owned by he and Mr Dyhrberg in their own names. The payment represented a theoretical seven months' rental plus GST. He admits that he was the recipient of the full benefit of that cheque.
In his second affidavit, Mr Dyhrberg corrects an earlier error. He acknowledges that the Henderson Way property was owned by him and the first defendant. He says that there was never any agreement as to the payment of rent. There is clearly an issue between the parties which is dependent on the credibility of the various witnesses. Accordingly, there should be leave to defend.
The same reasoning applies to the remaining cheques. In each case there is a dispute of fact and summary judgment ought not be granted.
Paragraphs 38 and 41 of the statement of claim relate to an amount of $50,563. They refer to a series of eight cheques drawn between 22 June 2006 and 30 November 2006 and payable to various parties. For instance, on 22 June 2006, a cheque was drawn in favour of 'A‑Cut Tree Service'. Enquiries revealed that a firm known as A‑Cut Tree Service performed work for the first defendant on his residential property. On behalf of the plaintiff it is said that this was personal expenditure which had nothing to do with the plaintiff's business and was unauthorised. The same claim is made in respect of all eight payments listed in par 38 of the statement of claim.
In his affidavit, the first defendant admits that each of these cheques were for personal expenditure. He alleges that it was agreed that the plaintiff would meet both his and Mr Dyhrberg's personal expenses. He then goes on to say that he believes that his loan account ought be adjusted to reflect these payments to him. Whether or not there was any agreement as alleged is a matter for trial and there should be leave to defend in relation to this matter.
Finally, there is a claim with respect to par 45 and par 47 of the statement of claim. This is for an amount of $13,925. There are three cheques involved. The payees are respectively 'A J Boulter', 'Cheap‑A‑Travel' and 'Auto Classic'. With respect to the first of these, Mr Dyhrberg says that the plaintiff's financial accounts show the payment as being to 'MTU Detroit'. The debit ledger records the payment as being 'repairs and maintenance'. Mr Dyhrberg has been unable to locate any relevant invoice. In response, the first defendant says he has no idea what the cheque relates to. Given that he does not have access to the plaintiff's records, there may be an explanation for this cheque and that requires further investigation. Summary judgment ought not run.
Nor should summary judgment be granted in relation to the other two cheques. As to the travel, the first defendant says that it relates to travel undertaken by him and paid for by the plaintiff. That may or may not be correct and will have to be explored at trial. The remaining cheque was for car expenses which the first defendant says were to be paid by the plaintiff on behalf of the directors. Again, this position is arguable.
In the circumstances, then, I am not satisfied that there should be summary judgment for any part of the plaintiff's claim. The application ought be dismissed and the costs of the application, including reserved costs, ought be costs in the cause.