Frigger v Mervyn Jonathon Kitay in His Capacity as Liquidator of Computer Accounting and Tax Pty Ltd (in Liquidation) [No 11]
[2016] WASC 93
•30 MARCH 2016
FRIGGER -v- MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION) [No 11] [2016] WASC 93
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 93 | |
| Case No: | CIV:2765/2010 | ON THE PAPERS | |
| Coram: | ALLANSON J | 30/03/16 | |
| 18 | Judgment Part: | 1 of 1 | |
| Result: | Application granted in part | ||
| B | |||
| PDF Version |
| Parties: | ANGELA CECILIA THERESA FRIGGER ANGELA CECILIA THERESA FRIGGER AND HARTMUT FRIGGER IN THEIR CAPACITIES AS TRUSTEES OF THE FRIGGER SUPERANNUATION FUND HARTMUT HUBERT JOSEF FRIGGER MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION) COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION) |
Catchwords: | Practice and procedure Pleadings Strike out application Whether a pleading may prejudice, embarrass or delay the fair trial of the action Turns on own facts |
Legislation: | Nil |
Case References: | Agar v Hyde [ 2000] HCA 41; (2000) 201 CLR 552 Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 Computer Accounting and Tax Pty Ltd (In liquidation) v Professional Services of Australia Pty Ltd [No 7] [2014] WASC 360 DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 Duke Group Ltd (in liq) v Pilmer (1999) 31 ACSR 213 Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [2013] WASC 229 Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 2] [2013] WASC 394 Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 7] [2014] WASC 441 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641 Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998) Hypec Electronics Pty Limited (in liq) v Mead [2003] NSWSC 934 Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75 Moti v The Queen [2011] HCA 50; (2011) 245 CLR 456 PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384 Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Account and Tax Pty Ltd [No 3] [2010] WASC 93 Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93 Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4 Terravision Pty Ltd v Black Box Control Pty Ltd [No 2] [2015] WASC 66 Waltons Family Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- ANGELA CECILIA THERESA FRIGGER AND HARTMUT FRIGGER IN THEIR CAPACITIES AS TRUSTEES OF THE FRIGGER SUPERANNUATION FUND
HARTMUT HUBERT JOSEF FRIGGER
Plaintiffs
AND
MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)
First Defendant
COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION)
Second Defendant
Catchwords:
Practice and procedure - Pleadings - Strike out application - Whether a pleading may prejudice, embarrass or delay the fair trial of the action - Turns on own facts
Legislation:
Nil
Result:
Application granted in part
Category: B
Representation:
Counsel:
Plaintiffs : No appearance
First Defendant : No appearance
Second Defendant : No appearance
Solicitors:
Plaintiffs : In person
First Defendant : Holborn Lenhoff Massey
Second Defendant : Holborn Lenhoff Massey
Case(s) referred to in judgment(s):
Agar v Hyde [ 2000] HCA 41; (2000) 201 CLR 552
Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256
Computer Accounting and Tax Pty Ltd (In liquidation) v Professional Services of Australia Pty Ltd [No 7] [2014] WASC 360
DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170
Duke Group Ltd (in liq) v Pilmer (1999) 31 ACSR 213
Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [2013] WASC 229
Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 2] [2013] WASC 394
Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 7] [2014] WASC 441
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641
Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998)
Hypec Electronics Pty Limited (in liq) v Mead [2003] NSWSC 934
Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75
Moti v The Queen [2011] HCA 50; (2011) 245 CLR 456
PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384
Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Account and Tax Pty Ltd [No 3] [2010] WASC 93
Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93
Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4
Terravision Pty Ltd v Black Box Control Pty Ltd [No 2] [2015] WASC 66
Waltons Family Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
1 ALLANSON J: In reasons published 25 November 2014 I struck out in part the plaintiffs' substituted reply and defence to counterclaim. The plaintiffs have now filed an amended substituted reply and defence to counterclaim, and the defendants have applied for it to be, in part, struck out on the grounds that it fails to disclose a valid cause of action or defence, may prejudice, embarrass or delay the fair trial of the action, or is otherwise an abuse of process.
2 The matter was dealt with on the papers. I deferred giving judgment awaiting the outcome of an application by the plaintiffs to restrain the solicitors for the defendants from continuing to act.
3 I will not, in these reasons, return to the background material, which is dealt with in the earlier judgments: see, in particular, Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [2013] WASC 229; Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 2] [2013] WASC 394; and Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 7] [2014] WASC 441.
4 In these reasons I will refer to Mr and Mrs Frigger collectively as the plaintiffs - there is no need in the present context to distinguish between their personal capacity and their capacity as trustees of the Frigger Super Fund. I will refer to Computer Accounting & Tax Pty Ltd as the Company. Other persons mentioned in these reasons include Professional Services Australia Pty Ltd (PSA) and Banning Holdings Pty Ltd - both companies involved in earlier litigation and dealings with the Company and Mr and Mrs Frigger. In particular, PSA was one of the defendants to a claim by the Company in CIV 2265 of 2006, and one of the appellants in the resulting appeal in CACV 76 of 2008.
The challenged paragraphs
Paragraphs 23, 24, and 25
5 In par 11 the plaintiffs plead that on 1 September 2003 they entered an enforceable contract with the Company regarding proposed proceedings with respect to the Armadale property. Under that contract, any judgments would be payable to the plaintiffs, and the plaintiffs would pay the Company's legal costs of the action.
6 In July 2008, judgment was entered in favour of the Company against PSA in the principal amount of $967,202.50 with costs: par 14.
7 In June 2009, Banning Holdings paid the Company $1,165,661.54 pursuant to a Deed of Company Arrangement (DOCA) executed on or about March 2009, in part satisfaction of the judgment debt: par 16.
8 In September 2009, the Company and Mr and Mrs Frigger executed a fixed deed of charge to secure past, current and future loans provided by the plaintiffs to the Company to a maximum amount of $2 million: par 17.
9 In par 23, the plaintiffs plead that in the circumstances of the Litigation Contract (that is, the contract pleaded in par 11) 'Mr and Mrs Frigger were equity creditors in the DOCA'.
10 Pursuant to the terms of the DOCA, Mr and Mrs Frigger did not repay and did not cause the Company to repay the reduction in the judgment debt ordered in the judgment of the Court of Appeal on 23 October 2009: par 24. Further, the plaintiffs plead, in particulars to par 24:
(a) by cl 6.3 of the DOCA the Company was entitled to retain any amounts paid to it if the DOCA automatically terminated;
(b) by cl 6.13, the Company had a contractual right of set off of its legal and enforcement costs against any reduction in the judgment sum; and
(c) by cl 6.1.3 if the Company was required to repay part of the judgment sum than the repayment was to be made to Banning Holdings.
11 In par 25, the plaintiffs plead that the circumstances pleaded in par 24 'constituted a genuine dispute in relation to the statutory demand issued by PSA on 16 December 2009 which dispute was required to be, but was not, resolved by this Honourable Court'.
The parties' submissions
12 First, the defendants submit that the reference to Mr and Mrs Frigger as 'equity creditors' is vague and ambiguous, and therefore may prejudice, embarrass or delay the fair trial of the action.
13 In response, the plaintiffs say that the evidence and law upon which the pleading is based will be adduced at trial, and that the term 'equity creditor' is commonly used in relation to chargees and mortgagees.
14 Second, with regard to pars 24 and 25, the defendants say these paragraphs in effect repeat matters struck out in a former pleading and amount to a collateral attack upon earlier judgments of this court including: the order winding up the company; the appeal against a winding up order, which was later abandoned; and the judgment on appeal reducing the damages payable by PSA.
15 The plaintiffs respond that there is no abuse of process in re-pleading matters previously struck out as the two sets of paragraphs are not the same.
16 The plaintiffs submit that the new par 25 refers to a chamber summons filed by the Company in CIV 2265 of 2006 on 26 August 2009, seeking orders and declarations in relation to the DOCA. The plaintiffs submit that it is not in the interests of the defendants, PSA/Banning Holdings, and the solicitors for the defendants to have the terms and effect of the DOCA ventilated in these proceedings, but that it is in the interests of the Company and the plaintiffs for that pleading to remain and be argued in the trial.
17 The remainder of the plaintiffs' response regarding these paragraphs consists largely of an attack on the solicitor representing the defendants, and the liquidator.
18 The plaintiffs also seek to rely on written submissions prepared by a barrister in relation to the terms and effects of the DOCA which they have attached to an affidavit sworn by Mrs Frigger. On the face of the document, the submissions were prepared for use in other proceedings (in the District Court). If the plaintiffs wish to rely on submissions prepared by counsel, then counsel should appear as he is responsible for submissions being made to the court under his name. Ultimately, the questions in this application can be resolved without considering the substance of those submissions.
Consideration
19 I will deal first with par 23. The failing may be mine, but I do not understand what the plaintiffs mean by the plea in par 23, and the term 'equity creditor' is not one that I am familiar with or understand. In the context of the overall plea, however, I do not believe that the plea will be embarrassing in the relevant sense. The plea refers to the effect of the DOCA and the Litigation Contract on the rights of the plaintiffs. That will be determined on a proper construction of the agreements that are proved, whatever term is used to describe the plaintiffs' position. Any uncertainty about what is meant by 'equity creditor' is unlikely to affect the proper preparation for the trial or the way in which the trial will proceed.
20 Paragraphs 24 and 25 cannot, however, stand.
21 In Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Accounting and Tax Pty Ltd [No 3] [2010] WASC 93, Master Sanderson ordered that the Company be wound up. In his reasons, he referred to two statutory demands issued by PSA in December 2009. It was 'common ground that both demands were served, and that the company did not pay either debt the subject of the demands (in fact, the amount of the first demand was paid but it was not paid by the company). In neither case was there an application to set aside the demand' [4]. The second demand (the demand which had not been paid) related to the amount to which PSA was entitled consequent upon its successful appeal [5]. The master found that a presumption of insolvency arose as there was no application to set the statutory demands aside, and no compliance with it [13].
22 On its face, par 25 asserts that there was a genuine dispute in relation to the statutory demand issued by PSA on which the master acted in ordering the winding up.
23 In these circumstances, I accept the defendants' submission that the plea in par 25 is an abuse of process. While it is not possible to describe exhaustively what will constitute an abuse of process, there are many authorities stating the principles to be applied in determining whether proceedings are properly described as an abuse: see Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 [9] - [15]; PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384 [3]; Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75 [27] - [28]; Moti v The Queen [2011] HCA 50; (2011) 245 CLR 456.
24 Relevantly, proceedings may be an abuse of process if they would be 'manifestly unfair to a party to litigation ... or would otherwise bring the administration of justice into disrepute among right-thinking people'; or are 'seriously and unfairly burdensome, prejudicial or damaging' or 'productive of serious and unjustified trouble and harassment'. Proceedings which seek to re-litigate questions that, in substance, have been litigated and determined in other proceedings have been held to be an abuse: see Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4.
25 The opportunity for the plaintiffs to raise a genuine dispute in relation to the statutory demand has long passed. For this action to consider and determine whether there were circumstances giving rise to a genuine dispute in relation to the statutory demand would be to re-litigate issues that have been determined. That is what par 25 attempts to do.
26 The plaintiffs have not suggested any basis upon which par 24 is relevant other than as the foundation for the assertion in par 25. Paragraphs 24 and 25 should both be struck out.
Paragraphs 48, 49 and 53
27 The plaintiffs plead as follows:
On 23 January 2010 Mrs Frigger sent an email to the first defendant informing him of the outstanding proceedings and that legal costs had already been paid, and further legal costs would be paid, by Mr and Mrs Frigger. Mrs Frigger requested confirmation that the proceedings were to continue. The first defendant did not reply to the email [48].
28 In particulars, the plaintiffs list five actions, which are referred to as the 'Outstanding Proceedings'.
During the period of his appointment and control of the second defendant from 17 January 2010 and in breach of clause 9 of the Charge the defendants refused to give written consent to Mr and Mrs Frigger to resolve the Outstanding Proceedings and failed to resolve the Outstanding Proceedings [49].
…
In breach of clause 9 of the Charge the defendants opposed Mr and Mrs Frigger's application in paragraph 52(b) (an application to become parties in CIV 2265/2006 'in order to resolve the Costs Orders') [53].
The parties' submissions
29 The defendants submit that:
1. the matters pleaded at pars 48 and 49 are not relevant to any pleaded cause of action or defence;
2. the plea in pars 49 and 53, alleging a breach of cl 9 of the Charge, is inconsistent with the terms of cl 9 that are pleaded in the particulars to par 17;
3. that par 53 is also a collateral attack on a decision of Simmonds J in Computer Accounting and Tax Pty Ltd (In liquidation) v Professional Services of Australia Pty Ltd [No 7] [2014] WASC 360; and
4. the pleas in pars 48 to 53 are relied on to deny pleas in the counterclaim relating to whether the Company was insolvent in 2009. Matters in January 2010 and 2014 are irrelevant to the question of earlier solvency and may prejudice, embarrass or delay the fair trial of the action.
30 The defendants have not, however, challenged par 50, which relies on pars 48 and 49 as circumstances under which the plaintiffs gave the Company notice of seizure of assets under the Charge.
31 As I understand the plaintiffs' submission, they claim that the assets mortgaged by the Charge included (as book debts): judgment sums, interest and costs, and further costs order that may be made, in CIV 2265 of 2006; costs awarded to the Company in CACV 76 of 2008 (an appeal from CIV 2265 of 2006); costs paid to the firm of Bowen Buchbinder Vilensky being LPA 36 of 2008; a claim against the firm Vogt Graham, GCLM 7493 of 2009; and costs paid to another practitioner, Stewart Forbes in CIV 1216 of 2009: par 17. Those actions are referred to as the 'Outstanding Proceedings' and are listed in the particulars in par 48.
32 The plaintiffs say that the Company and the liquidator had no rights in relation to the assets covered by the Charge from 12 December 2009, when there was an event of default under the Charge. They submit that the challenged paragraphs are 'relevant to the enforcement, repossession and retention of collateral in the assets secured by the Fixed Charge'. They further submit that where the liquidator is asserting a right of indemnity and exoneration over expenses and debts of the Company, it is relevant for the plaintiffs to claim that those alleged expenses and debts have either fallen away, or are now subject to a set-off in choses in action which have been assigned in equity to the plaintiffs. On that basis, they submit, 'the relevance of paragraphs 48, 49 and 53 will be argued at the trial and should not be struck out'.
33 The plaintiffs submit that par 53 is not a challenge to the decision of Simmonds J, because of the basis on which his Honour made that order.
34 In their written submissions, the plaintiffs also allege that the first defendant's opposition to the joinder shows a motive to reduce the Company's true entitlement to legal and enforcement costs which 'would make [his] appointment as liquidator to a solvent company, highly questionable and subject to the scrutiny of both this court and ASIC' (written submissions, [15]). The plaintiffs submit that the 'enforcement, repossession and retention of collateral in assets secured by the Fixed Charge is conduct by the plaintiffs upon which it will be proved that [the Company] was not insolvent in 2009'. The plaintiffs plead the matters in pars 3 to 53 in their denial of par 111 of the Counterclaim. In par 111, the defendants plead that the Company was insolvent, nearly insolvent or of doubtful solvency in 2009, as the foundation for the plea that certain transactions are voidable under the Corporations Act 2001 (Cth) or the Property Law Act 1969 (WA).
Consideration
35 If I have properly understood the plaintiffs' plea and the submissions regarding the Charge and its effect on the property described as 'Book Debts' in par 17, the pleas in pars 48, 49, are relevant to the plea in par 50. The answer appears to lie in the terms of the Charge, and in particular the powers of the Grantee and a receiver under cl 11 and cl 13 of that instrument. I am not satisfied that the pleas are irrelevant as the defendants submit, or that the issue of action on the Charge should be disallowed summarily.
36 Paragraph 53 is concerned with a procedural matter - the opposition by the liquidator to an application by Mr and Mrs Frigger to become parties in the proceedings before Simmonds J. Simmonds J refused an application by the plaintiffs for leave pursuant either to the Rules of the Supreme Court 1971 (WA) O 18 r 7(2) or O 18 r 6(2), to be joined as parties to the proceedings in CIV 2265 of 2006. Questions of costs were the only matters still to be dealt with in those proceedings. His Honour dismissed the application, holding that, as a practical matter, the plaintiffs' interest in proper costs orders being made in CIV 2265 of 2006 was one which their appointment of and power to instruct a legal representative for the Company was capable of addressing. Simmonds J referred also to the application being at a very late stage in the proceedings, so that he refused joinder even though some of the costs orders sought fell outside the proceedings in which the plaintiffs could instruct solicitors for the Company: [57] - [61].
37 It is unnecessary to go into the nature of the proceedings before Simmonds J. Whether the defendants opposed a joinder application in June 2014 is not relevant to any cause of action the plaintiffs may have, or to any defence to the counterclaim. Nor does it have any apparent relevance to the plea in pars 48 to 52, as the plaintiffs plead that, by 24 June 2014, they had already given notice of seizure of assets and the proposal to retain collateral.
38 I will briefly comment on one part of the plaintiffs' submissions. They submit that the first defendant's opposition to the joinder shows a motive to reduce the Company's true entitlement to costs, 'which true entitlement, if it is ever quantified, would make [the first defendant's] appointment as liquidator to a solvent company, highly questionable …'. There are difficulties with this submission. It will be necessary in this action to determine when the Company was insolvent, near insolvent, or of doubtful solvency. But it was found to be insolvent at the time it was wound up by order of the master. There was no appeal from that decision. If this submission foreshadows the plaintiffs' intention to challenge whether the Company was insolvent when wound up, they should reconsider their position. That, however, is a digression.
39 The matters raised in par 53 have no apparent relevance to any claim or defence by the plaintiffs, and I will strike it out.
Paragraphs 79 to 90 (alternatively pars 83 - 89)
40 The plaintiffs plead an equitable estoppel based upon the company's usual mode of business operations during the period 1 July 1997 to 12 December 2009: par 79. During that period, the plaintiffs controlled the operation of the Company's business and investments.
41 They plead in par 80(d) to (g), that they assumed and expected that:
(d) the Company's usual mode of business operations would continue after they placed the Company in members' voluntary liquidation;
(e) the Company would resolve the Outstanding Proceedings under the litigation contract;
(f) the Company would not act to its detriment or to the detriment of the plaintiffs pursuant to its rights and obligations in the DOCA; and
(g) the Company would take all steps necessary to prevent any detriment to its rights and to the plaintiffs' rights in the Outstanding Proceedings.
42 Paragraph 81 pleads the Company's knowledge and acceptance of the Usual Mode of Business Operations.
43 Paragraph 82 pleads the Company accepted and was bound by the Litigation Contract.
44 At par 83, the plaintiffs plead that the Company 'agreed and accepted its fiduciary role as an implied trustee under Quistclose Primary Trusts over [the Perth and Armadale] properties'.
45 Paragraph 84 pleads that in the circumstances and pursuant to the matters in pars 79 to 83, the plaintiffs were induced to rely on the Company's conduct and acted in reliance on it. Particulars (a) to (n) set out acts by the plaintiffs in reliance.
46 Paragraph 85 pleads that during the period of the first defendant's conduct of the liquidation of the Company, since 17 January 2010, the defendants have failed to avoid preventable harm to the Company and to the plaintiffs. The acts causing detriment are set out in particulars, and includes incurring fees in the liquidation (c); supporting PSA/Banning Holdings in the application for winding up in insolvency (d); failing to provide true and accurate evidence of the Company's ability to pay its debts as and when they fell due in the winding up application (e); and failure to progress an application in relation to the interpretation and effect of the DOCA (i).
47 The plaintiffs then plead that the defendants have failed in their duty not to cause preventable harm to the Company and the plaintiffs (par 86); and that the Company and the plaintiffs have suffered substantial detriment (par 87).
48 Paragraph 88 pleads:
If, contrary to the denials and non-admissions of Mr & Mrs Frigger in this document, the defendants' failure to avoid preventable harm in paragraphs 79 to 87 in this document and claims in these proceedings will cause further substantial detriment to Mr & Mrs Frigger.
49 The plaintiffs claim that the defendants have caused and will cause preventable harm and detriment to Mr and Mrs Frigger: par 89. And in par 90, they claim the defendants are not entitled to recover and are estopped from claiming
(a) any right of exoneration or indemnification against the Perth Property and the Armadale Property and or the assets of the Frigger Super Fund;
(b) Perth Property;
(c) Armadale Property;
(d) ING term deposit;
(e) St George term deposit;
(f) Filing Fee in CIV 2265/2006;
(g) $1,165,665 paid pursuant to the DOCA;
(h) BP-branded service station business; and
(i) Rent paid by Mr & Mrs Frigger to the Frigger Super Fund.
The parties submissions - attribution of knowledge
50 The defendants' challenge to the plea of equitable estoppel is in two parts: first, they make submissions regarding particular defects in the plea, including claims that it lacks clarity and is repetitive of matters pleaded elsewhere; second, and more fundamentally, the defendants raise the issue of attribution to a company of knowledge and acts of the company's directors or agents when the attribution is for the purpose of assessing the rights, liabilities and obligations of the company in connection with the directors or agents themselves. The defendants' position, in short, is that the plaintiffs cannot establish, on the plea, any knowledge or act of the Company so as to create an estoppel by conduct where they rely on their own knowledge and conduct as directors.
51 The plaintiffs submit that this is a matter for determination at trial.
Consideration
52 It is well settled that the court must exercise a power to summarily determine proceedings with caution: see General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 129 - 130; Agar v Hyde [ 2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [46]. The question of attribution, and whether the Company may rely on the knowledge and acts of its directors in the estoppel claim, is clearly going to be an important issue at trial. As I understand the authorities to which the defendants referred, including those discussed in Duke Group Ltd (in liq) v Pilmer (1999) 31 ACSR 213 [617] - [639], the issue will require close examination of the facts, and may require consideration of whether particular conduct of the plaintiffs, as directors, was wrongful or fraudulent. The conduct to be considered may go back several years. It is not, in my opinion, suitable to be determined on a strike out application.
The parties submissions - particular issues
53 The defendants also submit that the plea of estoppel fails to disclose a valid cause of action or defence, or is a plea that is likely to prejudice, embarrass or delay the fair trial of the action. They raise many discrete points, some of which overlap with the general issue of attribution of knowledge and acts to the company.
54 The plaintiffs' submissions in response, in very general terms, argue that the plea sets out the necessary elements of an estoppel.
Consideration
55 The essence of the claim in estoppel is protecting the plaintiffs' position from the detriment that would flow to them from their change in position if the assumptions on which they acted, induced by the defendants, are now departed from: Waltons Family Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, 418 - 419; Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641.
56 The plaintiffs plead that they held assumptions and expectations and on what they based those assumptions: par 80. They plead that they were induced to and did rely on the Company's conduct: par 84. The acts of reliance pleaded in par 84 include acts by which the plaintiffs changed their position, or acquired and held property on a particular basis, on the assumption or expectation that the Usual Mode of Business Operations of the Company would continue and the Litigation Contract would be given effect.
57 The defendants submit that the plaintiffs have not pleaded any basis for the assumption or expectation asserted in par 80, as it must have its genesis in an act or omission by the Company. The defendants also submit that par 81 does not separately plead a basis for attribution of knowledge or a basis for acceptance of and agreement to the Usual Mode of Business Operations.
58 These paragraphs do not contain a plea which can be considered in isolation, as the defendants have done. It is sufficiently clear what is alleged, and on what basis the plaintiffs say the Company knew of relevant matters and on what basis the Company 'accepted' the Usual Mode of Business Operations which the plaintiffs say was followed from 1997 until the Company's liquidation in 2009.
59 The defendants' challenge to par 82 is that it is repetitive of matters pleaded earlier regarding the Litigation Contract. That is no ground to strike it out, or to assume that something more, and undisclosed, is intended to be conveyed by the repetition.
60 The defendants also challenge the plea, in par 82, of 'payment of legal costs by Mrs Frigger'. They submit that, if the plaintiffs allege actual payment of the costs, amounting to performance of the agreement, this should be clearly and separately pleaded. Further, the plaintiffs must give full particulars of each payment of legal costs, including date of payment, amount, identity of payee, and source of payment, or the plea may prejudice, embarrass or delay the fair trial of the action.
61 On a reasonable reading of the paragraph, it alleges actual payment. But whether it does or does not, the issue will be made clear on the witness statements and documents. It is not an appropriate question for a strike out application.
62 The defendants submit that par 83 is vague and uncertain - if an agreement exists on which the 'Quistclose Primary Trusts' are based, it should be pleaded along with its material terms. The plaintiffs, however, plead the creation of a 'Quistclose resulting trust' in the statement of claim. I have some doubt that the type of trust the plaintiffs rely on would be properly described as a Quistclose trust, but that is immaterial. The question will be whether, on a close analysis of the facts, the Perth and Armadale land was held by the Company beneficially, or whether the Company held the legal title only. The defendants' present complaint is based on reading par 83 without reference to the plea in the statement of claim. When read together, it is sufficiently clear what the plaintiffs are alleging.
63 The challenge to par 84 turns, in part, on the issue of attribution of knowledge and acts which I have considered above. Whether the plaintiffs can rely on the manner in which the Company carried on business before they lost control of it is, in my opinion, a matter for trial. I am aware of cases where estoppel has been pleaded against a liquidator by previous owners of a company, but based on the conduct of the liquidator, rather than the conduct of the company before it went into liquidation: see Hypec Electronics Pty Limited (in liq) v Mead [2003] NSWSC 934. The estoppel claim based on the conduct of the company before liquidation may be novel - neither party referred me to a comparable case. It will require a close consideration of the facts that are proved at trial. It is not suitable to be determined summarily at this stage.
64 A fundamental difficulty, however, occurs when pars 85 to 90 are considered together.
65 First, pars 85 and 86 are based on an allegation that the defendants had a duty not to cause preventable harm to Mr and Mrs Frigger. The plaintiffs plead failure in such a duty in par 86 'in the premises of the matters in paragraph 85', but plead no foundation for such a duty.
66 Second, the allegations that the defendants have failed in their duty to avoid detriment to the Company and to Mr and Mrs Frigger (par 85), and that the Company and Mr and Mrs Frigger have suffered the detriment set out in par 87, are not material to the claim in estoppel.
67 Third, par 85 has an internal difficulty in alleging that the defendants 'have failed to avoid detriment to the Company and Mr & Mrs Frigger'. Literally, the plea includes the allegation that the Company has failed to avoid detriment to itself, including by incurring liquidation fees and expenses. This may be a problem in expression, or it may be what was intended.
68 Fourth, the plaintiffs allege in par 87 that they and the Company have suffered substantial detriment, primarily related to legal costs in various proceedings, but also 'the correct interpretation and effect of the terms of the DOCA have not been resolved by this Honourable Court'. The defendants submit that the plea fails to separate out those matters relating to the Company and those relating to the plaintiffs, and also that they have no correlation to the matters which the plaintiffs assert are estopped. In their submissions in response, the plaintiffs do not address the complaint made by the defendants, but assert that par 87 pleads the losses that could have been avoided if the first defendant had not lied to the master on 17 February 2010 in relation to the credit available to the Company. That allegation of lying to the master is pleaded in greater detail in pars 28 and 29 of the plaintiffs' reply and defence to counterclaim, where the plaintiffs plead allegations regarding the liquidator's report as to the solvency of the Company. There are serious problems with these pleas. The master dealt specifically with whether the plaintiffs would meet the debts of the Company, as and when they fell due, and found that they would give no such undertaking: see Professional Services of Australia Pty Ltd (Administrator Appointed) v Computer Account and Tax Pty Ltd [No 3] [2010] WASC 93 [19]. That finding was based on the failure of the plaintiffs in their affidavits to give such an undertaking. The effect of the plea in par 87, as explained in the plaintiffs' submissions, is to further a collateral challenge to the decision of the master that the Company was insolvent. There is no other way that the liquidator's report could have caused the detriment alleged. Any attempt to establish detriment in this way will be an abuse of process.
69 Paragraphs 88 and 90 plead the harm that will be caused to the plaintiffs if the defendants' claims in these proceedings are upheld. There is not a neat or complete fit between the particulars to par 84 and those to pars 88 and 90. But there is a sufficient correlation in the acts of reliance pleaded in par 84(b) to (f) and 88(a) and (b) and 90(a), (b), (c), (h) and (i), to discern a case that the plaintiffs will be caused detriment, as a result of the acts pleaded in par 84, if the defendants are now permitted to depart from the assumptions and expectations based on the Usual Mode of Business Operations and the Litigation Contract. And par 88(d) does relate to matters otherwise pleaded regarding conduct based on the litigation contract: see par 15.
70 Otherwise, I cannot understand how, on the way the matter is now pleaded, the detriments pleaded in pars 88 and 90 are relevant to the claim in estoppel. It is not sufficient simply to plead that the plaintiffs acted on an assumption or expectation and will suffer detriment. The detriment or prejudice must be shown to be the consequence of the plaintiffs' action or inaction, or change of position, based on the relevant assumption: see, for example, Grundt v Great Boulder Pty Gold Mines Ltd (674 - 675). That is not the way in which par 88 and par 90 are now pleaded.
71 Pleadings may be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action 'because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general': Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998) 8 - 9; DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 [34]; Terravision Pty Ltd v Black Box Control Pty Ltd [No 2] [2015] WASC 66 [16]. The plea in equitable estoppel in pars 79 to 90, as currently formulated is, embarrassing in this sense. In particular, in the plaintiffs tie the plea in estoppel to the allegations in pars 79 to 88 which include matters which cannot be advanced as a result of earlier decisions of this court.
72 I will strike out pars 85 to 90.
Conclusion
73 The pleas in the following paragraphs of the amended substituted reply and defence to counterclaim will be struck out: pars 24, 25, 53, and 85 to 90. If the plaintiffs intend to re-plead the allegations regarding equitable estoppel they will be required to bring in a minute of the proposed amended plea within a time to be fixed. Those pleas which I have held to be an abuse of process or irrelevant should not be re-pleaded.
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