Frigger v Mervyn Jonathon Kitay in his Capacity as Liquidator of Computer Accounting & Tax Pty Ltd (In Liquidation) [No 2]
[2013] WASC 394
•28 OCTOBER 2013
FRIGGER -v- MERVYN JONATHON KITAY IN HIS CAPACITY AS LIQUIDATOR OF COMPUTER ACCOUNTING & TAX PTY LTD (IN LIQUIDATION) [No 2] [2013] WASC 394
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 394 | |
| Case No: | CIV:2765/2010 | 23 OCTOBER 2013 | |
| Coram: | ALLANSON J | 28/10/13 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application to join Mr Frigger as third plaintiff allowed Application otherwise dismissed | ||
| 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 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 Application to amend originating summons Application to add parties Separate cause of action Case management principles Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 471A, s 1321 Property Law Act 1969 (WA), s 89 Rules of the Supreme Court 1971 (WA), O 1 r 4A, r 4B, O 8 r 6(2)(b) Trustees Act 1962 (WA), s 78 |
Case References: | Frigger v Mervyn John Kitay in his Capacity as Liquidator of Computer Accounting Tax Pty Ltd (In Liquidation) [2013] WASC 229 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
ANGELA CECILIA THERESA FRIGGER AND HARTMUT FRIGGER IN THEIR CAPACITIES AS TRUSTEES OF THE FRIGGER SUPERANNUATION FUND
Second Plaintiff
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 - Application to amend originating summons - Application to add parties - Separate cause of action - Case management principles - Turns on own facts
Legislation:
Corporations Act 2001 (Cth),s 471A, s 1321
Property Law Act 1969 (WA),s 89
Rules of the Supreme Court 1971 (WA), O 1 r 4A, r 4B, O 8 r 6(2)(b)
Trustees Act 1962 (WA), s 78
Result:
Application to join Mr Frigger as third plaintiff allowed
Application otherwise dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Mr A Martin
Second Plaintiff : Mr A Martin
First Defendant : Mr B W Ashdown
Second Defendant : Mr B W Ashdown
Solicitors:
First Plaintiff : Lumlan & Associates
Second Plaintiff : Lumlan & Associates
First Defendant : Holborn Lenhoff Massey
Second Defendant : Holborn Lenhoff Massey
Case(s) referred to in judgment(s):
Frigger v Mervyn John Kitay in his Capacity as Liquidator of Computer Accounting Tax Pty Ltd (In Liquidation) [2013] WASC 229
1 ALLANSON J: On 23 October 2013, I heard applications by the plaintiffs to further amend the originating summons. A minute of the proposed amended substituted originating summons is dated 24 July 2013. The plaintiffs seek orders that:
1. Hartmut Frigger be joined in his personal capacity as second plaintiff;
2. the solicitor for the current defendants, David Abraham Lenhoff, be joined as third defendant;
3. the relief claimed be expanded to include a claim for damages against the first defendant (Mervyn Jonathan Kitay) and the proposed new third defendant (Mr Lenhoff) for losses resulting from "tortious interference by [Mr Lenhoff] in the plaintiffs' legal representation contracts and wilful default and breach of fiduciary duty of [Mr Kitay]'. The damages claimed include exemplary damages.
2 The plaintiffs propose to amend the statement of claim to include allegations reflecting these amendments.
3 I made orders immediately, joining Mr Frigger as third plaintiff (there is already a second plaintiff), but otherwise dismissing the application. I said I would later publish my reasons, and these are the reasons for those orders.
Background
4 I set out a brief history of these proceedings in the introduction to my reasons for decision, delivered 14 June 2013, in Frigger v Mervyn John Kitay in his Capacity as Liquidator of Computer Accounting Tax Pty Ltd (In Liquidation) [2013] WASC 229. I will give only the barest outline now.
5 These proceedings were commenced on 4 November 2010 by an originating summons. Angela Cecilia Theresa Frigger was the sole plaintiff, and Mr Kitay the sole defendant.
6 On 4 January 2011, a substituted summons was filed. The substituted summons included Mrs Frigger and Mr Frigger 'in their capacities as trustees of the Frigger Super Fund' as second plaintiffs, and Computer Accounting & Tax Pty Ltd (in liquidation) as second defendant. Mr Frigger was not named as a party in his personal capacity.
7 The plaintiffs sought:
1. an order pursuant to s 78 of the Trustees Act 1962 (WA) that land situated at 140 Edward Street (the Perth property) and land situated at 269 South Western Highway Armadale (the Armadale property) vest in Mr Frigger and Mrs Frigger in their capacity as trustees of the Frigger Super Fund;
2. a declaration pursuant to s 1321 of the Corporations Act 2001 (Cth) that the defendants have no right, title or interest in a term deposit at St George Bank, or in interest in respect of it, and orders consequential on that declaration; and
3. orders pursuant to s 1321 of the Corporations Act regarding the plaintiffs' entitlement to repayment of a taxing fee paid in other proceedings.
8 The continuation of the proceedings in chambers and on affidavit evidence was clearly inappropriate. There are many contested issues of fact. On 21 January 2011, a registrar ordered that the matter proceed as if commenced by writ of summons, and ordered pleadings.
9 The plaintiffs filed a statement of claim on 11 March 2011. The substance of the relief sought was unchanged.
10 The statement of claim was amended in May 2011. Materially, the allegations regarding the purchase of the Perth and Armadale properties were amended. The plaintiffs now alleged that Computer Accounting & Tax and Mr Frigger and Mrs Frigger were parties to an enforceable agreement under which Mr Frigger and Mrs Frigger advanced the funds for the purchase of the two properties. The plaintiffs still alleged that the funds were advanced to Computer Accounting & Tax as loans. The plaintiffs added a claim for interest, but otherwise the relief sought was unchanged.
11 The defendants filed a defence and counterclaim in May 2011, and an amended defence and counterclaim in March 2012. It is not necessary in these reasons to set out the plea in any detail. Relevantly, for the present application, the substance of the defence is that Computer Accounting & Tax owns the Perth property and the Armadale property in its own right, and the term deposit is an asset of the company. Mrs Frigger is an unsecured creditor of the company in the liquidation.
12 By the counterclaim, Mr Kitay and Computer Accounting & Tax allege that there was a loan account with the company, and that Mr Frigger and Mrs Frigger owe the company a substantial sum. The defendants plead that purported transfers of the Perth property and the Armadale property are not binding on the company, as they were made in breach of s 471A of the Corporations Act. The defendants further allege that Computer Accounting & Tax was insolvent, nearly insolvent or of doubtful solvency in 2009 (three alternative dates between January 2009 and October 2009 are pleaded), and that certain transactions, including transfers out of the loan account, are voidable under the Corporations Act as unfair preferences or insolvent transactions, or are voidable under s 89 of the Property Law Act1969 (WA) as transactions to defraud creditors.
13 On 25 October 2012, the plaintiffs filed a re-amended statement of claim, in which they alleged that Mr Frigger and Mrs Frigger paid the purchase price for each of the Perth property and the Armadale property on a mutual understanding with Computer Accounting & Tax that the company would hold the beneficial interest in each property for the benefit of Mr Frigger and Mrs Frigger (that is, on an express trust). The relief sought was otherwise unchanged.
14 On 6 December 2012 the defendants filed a substituted defence and counterclaim. On 9 April 2013, the defendants filed an amended substituted defence and counterclaim.
15 In the course of earlier applications, the defendants raised the failure of the plaintiffs to join Mr Frigger in his personal capacity as a defect in the formulation of their case. From January 2013 the plaintiffs included Mr Frigger as the second plaintiff in the heading of documents filed in the court. A minute of proposed orders to join Mr Frigger was filed on 11 December 2012, but orders were not made on it. In my reasons in the earlier application, I said that if the plaintiffs intend to join Mr Frigger as a party, it must be formally done.
The addition of Mr Frigger as third plaintiff
16 The defendants opposed the application. They accepted that, under the pleadings that have been in place since May 2011, Mr Frigger should have been a party, and that they had raised on previous occasions the absence of Mr Frigger as a defect in the proceedings. The defendants did not challenge that the addition of Mr Frigger comes within the terms of O 8 r 6(2)(b) of the Rules of the Supreme Court 1971 (WA). But they submitted that the power to add a party under that rule is discretionary. They submitted that before Mr Frigger is permitted to be joined and advance his personal claims, he should be required to provide an explanation on oath as to the basis of his claim. That explanation should be required to address perceived inconsistencies between his claim and evidence filed in other proceedings, and findings made in proceedings between Computer Accounting & Tax and Professional Services of Australia Pty Ltd.
17 The inconsistencies referred to by the defendants are there. They may or may not be explicable. In my opinion, this is not the occasion to delve into them. First, both on the plaintiffs' pleaded case, and on the counterclaim of the defendants, Mr Frigger is a necessary party to these proceedings. Second, I am not sure what the consequence would be of requiring Mr Frigger to address these matters on oath. It is not appropriate for the court to make a summary determination, refusing to allow him to bring his claim. If his claim is fragile, the procedures for summary judgment could be followed, and would result in a final determination of the issue. To simply not permit him to be joined as a party to these proceedings would result in no determination. Third, the matters raised by the defendants apply equally to the claim of Mrs Frigger, and she has been a party in her personal capacity from the commencement of the proceedings. I can see no proper reason to distinguish between the two cases.
18 Mr Frigger gives his written consent to being joined.
19 For these reasons, the originating summons should be amended to join Mr Frigger as the third plaintiff.
The addition of Mr Lenhoff as third defendant
20 As I set out above, the plaintiffs' claim relates to their entitlement to specified property held by Mr Kitay as liquidator of Computer Accounting & Tax. The matters raised by defence and counterclaim relate to transactions carried out by Mr Frigger and Mrs Frigger as directors of the company, and by the company.
21 The plaintiffs' dispute with Mr Lenhoff is a separate cause of action, founded in allegations that between 2006 and 2012 he tortiously interfered in the contracts of retainer with various of the plaintiffs' solicitors in other proceedings in this court and in the Magistrates Court. The plaintiffs propose to plead a connection between the claim against Mr Lenhoff and the current action: the draft statement of claim pleads that those other proceedings were the subject of an express trust created in September 2003, pursuant to which Computer Accounting & Tax held those proceedings on trust for Mr Frigger and Mrs Frigger.
22 In affidavits in support of the present application, both Mrs Frigger and Mr Lenhoff have gone to the merits of the proposed claim. It is unnecessary to determine factual matters on the present application.
23 Mr Lenhoff is a proper party only if the court permits the plaintiffs to add the new cause of action alleging tortious interference with contractual relations. The proposed cause falls outside the scope of the dispute as formulated in the substituted originating summons and the first statement of claim. One of the allegations is of conduct in March 2012, after the present proceedings were commenced.
24 I do not think it is necessary to decide whether the court could permit amendment of the originating summons to add a new party and cause of action. I am satisfied that it is a course of action that should not be permitted on case management principles.
25 To add the claim against Mr Lenhoff to the present dispute can only protract what is already a protracted liquidation. The conduct of Mr Lenhoff cannot affect whether the plaintiffs are entitled to either the Perth property or the Armadale property, or the term deposit, on the basis they assert. Nor does it affect any of the issues raised in the counterclaim.
26 Counsel for the plaintiffs submitted it would be in the interests of justice to permit the claim against Mr Lenhoff to be joined. In particular, he submitted that the conduct of Mr Lenhoff is directly causally related to the present proceedings because, but for his conduct, the application to wind up Computer Accounting & Tax in insolvency would have been dismissed or adjourned. But whether Computer Accounting & Tax should not have been placed into liquidation and would not have been wound up but for Mr Lenhoff's conduct is not an issue in the current proceedings. The submission that he would not be bound by findings in the current action is of no consequence when the issues are so different.
27 Next, the plaintiffs submitted that a decision to not permit Mr Lenhoff to be joined will cause them additional delays and costs. There is, however, no basis for a finding that the current proceedings will be delayed or made more costly. I suspect the opposite. Nor is it necessarily more efficient to try two quite separate issues together.
28 The other submissions on behalf of the plaintiffs were difficult to follow. In written submissions, it was submitted that 'the issues to be tried against Mr Lenhoff … may ultimately come to light in this litigation'. And 'there is a high probability that the end result and the relief sought by the plaintiff will be similar to the current matter'. I am not sure what either submission means. The plaintiffs did not expand on them orally.
29 It was generally submitted that if Mr Lenhoff is not joined 'it will immensely prejudice Mr and Mrs Frigger'. The mere assertion of prejudice does not establish that there will be any. None was shown.
30 The plaintiffs' claim is for damages in tort. To add issues of that nature into this claim would be contrary to the objects set out in O 1 r 4A and r 4B of the Rules of the Supreme Court. In my opinion, the resolution of matters relating to the property of the company that might be available for distribution to its creditors should not be held up by issues relating to the plaintiffs' claim for damages.
31 I will not attempt to anticipate the decision that would be made should the plaintiffs commence separate proceedings against Mr Lenhoff and apply to consolidate the actions under O 83, or otherwise have them managed or tried together.
The claims against Mr Kitay for wilful default
32 The proposed claims against Mr Kitay arise generally out of the liquidation of Computer Accounting & Tax, and the litigation related to that liquidation. The allegations in the proposed statement of claim are:
1. Computer Accounting & Tax, in 2003, became the trustee of an express trust of a chose in action, to be held for the benefit of Mr Frigger and Mrs Frigger. This is referred to in the statement of claim as the Express Trust.
2. In 2003, Mr Frigger and Mrs Frigger commenced proceedings in the Local Court against the vendor of the Armadale property. Those proceedings were eventually transferred to the Supreme Court (CIV 2265 of 2006).
3. Several other proceedings 'ensued' in the Magistrates Court, and the Supreme Court. Six proceedings are identified. The capitalised term 'the Proceedings' is used - I assume to refer to all of them - although the use of the capitalised term is inconsistent.
4. The Proceedings became assets of the Express Trust.
5. On or about 21 January 2010, Mr Kitay was appointed as the provisional liquidator of Computer Accounting & Tax, and the assets of the Express Trust vested in him. As a consequence, he owed duties to Mr Frigger and Mrs Frigger as beneficiaries of the Express Trust, including 'express contractual duties to resolve the proceedings'.
6. In January 2012, the liquidator 'pursuant to his and [Mr Lenhoff's] plan to bring a counterclaim in these proceedings' applied to the court for permission to enter into a Litigation Funding Agreement and an Indemnity Agreement. The court gave permission, but would not have had the liquidator given 'full and honest disclosure' of certain matters.
7. The liquidator has wilfully defaulted in his duty to bring in the assets of the Express Trust, including by failing to resolve the proceedings and by refusing to consent to Mr and Mrs Frigger taking control of and resolving the proceedings.
33 The plaintiffs make a series of general allegations that Mr Kitay acted in combination with Mr Lenhoff, and claim that they are concurrent wrongdoers for losses incurred by Mr and Mrs Frigger in the Express Trust. The losses are identified as incurred in seven proceedings - three in the Local Court or Magistrates Court, three in the Supreme Court, and one in the Court of Appeal. The losses include legal costs in those proceedings.
34 A separate allegation is made that Mr Kitay, as liquidator, refused to consent to the sale of the Armadale property, and the business conducted on it, in April 2013.
35 It is not necessary, in this application, to consider whether all or some of these allegations are capable of founding a cause of action, or whether the claims are inconsistent with matters asserted by the plaintiffs in other proceedings. If Mr and Mrs Frigger have a claim against Mr Kitay personally, it is a quite separate matter from their claim that certain property is not owned beneficially by Computer Accounting & Tax and available for distribution to the creditors of the company in the liquidation. Case management considerations, in my opinion, call for the existing matters to proceed to determination. The plaintiffs' personal claims against Mr Kitay, if they are to proceed, can be the subject of a separate claim commenced by writ.
36 Second, at least some of the matters alleged against Mr Kitay occurred after the proceedings were commenced. Specifically, the plaintiffs seek to rely on an application to the court made by the liquidator in January 2012 under s 477(2B) of the Corporations Act; and to conduct between February and April 2013.
37 Third, the plaintiffs claim a direct connection between their claim against Mr Kitay, and a recent amendment to the defence and counterclaim. By that amendment, the defendants claim that if Computer Accounting & Tax is trustee of the Perth property and the Armadale property, it has a right to be indemnified out of the trust property. I commented briefly on this plea in my reasons in Frigger v Mervyn John Kitay in his Capacity as Liquidator of Computer Accounting Tax Pty Ltd (In Liquidation) [2013] WASC 229. For present purposes, the plaintiffs submit that 'it would be prejudicial for the beneficiaries' claim against the trustee in relation to a trust not be heard at the same time as the trustee's claim for right of indemnity' as the trustee's right of indemnity is diminished by the beneficiaries' claim. The submission overlooks that the claim for indemnity is by Computer Accounting & Tax as trustee. And although the plaintiffs plead that the company was trustee of the Express Trust, their proposed claim for damages is not against the company but against Mr Kitay personally.
38 It was for these reasons that I dismissed the application to allow the originating summons to be amended to include the claims against Mr Kitay.
39 The proposed amendments to the statement of claim to plead the matters against Mr Lenhoff and Mr Kitay will not be permitted. It is not necessary to strike out an amended statement of claim because the plaintiffs have not filed one.
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