Frigger v Professional Services of Australia Pty Ltd - [2022] WASC 158

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   FRIGGER -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [2022] WASC 158
CORAM:   MASTER SANDERSON
HEARD:   9 MARCH 2022
DELIVERED          :   6 MAY 2022
PUBLISHED           :   6 MAY 2022
FILE NO/S:   CIV 1309 of 2021
BETWEEN:   ANGELA CECELIA THERESA FRIGGER
First Plaintiff
HARTMUT HUBERT JOSEF FRIGGER
Second Plaintiff
AND
PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD
First Defendant
SANDRA MAY BANNING
Second Defendant
DAVID ABRAHAM LENHOFF
Third Defendant
TIMOTHY RICHARD STEPHENSON
Fourth Defendant
CAMERON VICTOR EASTWOOD
Fifth Defendant

Catchwords:

Practice and procedure - Application by defendant for summary judgment - Turns on own facts

Legislation:

Bankruptcy Act 1966 (Cth)
Corporations Act 2001 (Cth)
Limitations Act 2005 (WA)

Result:

Summary judgment granted

Category: B

Representation:

Counsel:

First Plaintiff	:	In Person
Second Plaintiff	:	In Person
First Defendant	:	G M G McIntyre SC
Second Defendant	:	G M G McIntyre SC
Third Defendant	:	S Vandongen SC
Fourth Defendant	:	S Vandongen SC
Fifth Defendant	:	S Vandongen SC

Solicitors:

First Plaintiff	:	In Person
Second Plaintiff	:	In Person
First Defendant	:	K G Sorensen
Second Defendant	:	K G Sorensen
Third Defendant	:	Jackson McDonald
Fourth Defendant	:	Barry Nilsson Lawyers (WA)
Fifth Defendant	:	Popperwell & Co

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

Kingsfield Holdings Pty Ltd v Sullivan Commercial Pty Ltd [2021] WASC 289
Samootin v Shea [2010] NSWCA 371

MASTER SANDERSON:

This is an application by the five named defendants in the proceedings for summary judgment under O 16 r 1 of the Rules of the Supreme Court (WA). There have been a number of different iterations of the statement of claim but the parties have proceeded on the basis of an amended statement of claim (ASOC) filed 3 June 2021. At the hearing of this application, the first and second defendants on the one hand, and the third, fourth and fifth defendants on the other hand, were represented by Senior Counsel. The plaintiffs appeared in person. It was accepted by counsel for all defendants that although the plaintiffs are very experienced in person litigants, some allowance needs to be made for the fact they are not legally qualified. That cannot justify a pleading which does not disclose a cause of action. But it can mean deficiencies in style can be overlooked.
The principles applying to an application for summary judgment under O 16 r 1 were not in dispute. These principles were recently summarised by Allanson J in Kingsfield Holdings Pty Ltd v Sullivan Commercial Pty Ltd [2021] WASC 289 [65] to [68]. I would incorporate, without repeating, those paragraphs. I would also emphasise two points. First, a plaintiff is confined to causes of action which are found in the statement of claim. A matter which might prospectively be pleaded but which has not been pleaded cannot assist a plaintiff in resisting a summary judgment application. Second, summary judgment is reserved for the clearest of cases where there is no chance the plaintiff's claim will be successful. This last point is, of course, the overriding principle.
Turning then to the ASOC, par 1 identifies the plaintiffs and refers to the plaintiffs being directors and shareholders of Computer Accounting and Tax Pty Ltd (in liquidation) (CAT). It is pleaded CAT was the trustee of the Frigger Superannuation Fund from 1 July 1997 until 20 July 2010. It is further pleaded between 21 January 2010 and 5 May 2010, CAT was in provisional liquidation and that on 6 May 2010, CAT was placed in liquidation.
As to the first defendant, it is pleaded it carried on the business of investment in real estate in Western Australia and between 17 November 2008 and 27 February 2009 was under voluntary administration. Between 27 February 2009 and 30 August 2009 it was subject to a deed of company arrangement (DOCA).
As to the second defendant, it is pleaded she was the owner of one of two shares in the first defendant and was a director of the first defendant from 26 June 1998 until 4 June 2001 and from 10 May 2016 until the present. It is also pleaded she is the sole beneficiary and administrator of the estate of her late husband, Martin Paul Banning.
Each of the third, fourth and fifth defendants are legal practitioners. It is said from time to time they acted for various entities, including the first defendant. It is not alleged that anyone of the third, fourth and fifth defendants acted at any time for the plaintiffs. I mention that fact because it is important to note this is not a claim brought against these defendants for negligence or breach of their retainer. All claims made against them are in relation to actions they took while acting for third parties.
While identification of the parties is straightforward, the remainder of the ASOC is difficult to follow. However, it is instructive to look at the prayer for relief. That reads as follows:
AND THE PLAINTIFFS CLAIM AGAINST THE DEFENDANTS
A. To the extent necessary, pursuant to section 38 alternatively section 39 Limitation Act 2005 the plaintiffs have leave to commence this action.
C. Order for compensation, including:
i. Damages, including exemplary damages, for loss of credit and reputation in the FO Proceeding, the Liquidation Application, CACV23/2014, the Criminal Complaint and the Means Inquiry Summons.
ii. The costs paid by, and ordered to be paid, by the Friggers in the Freezing Order Proceeding and related appeals;
iii. The costs paid by, and ordered to be paid by the Friggers in the provisional liquidation proceeding;
iv. The costs paid by, and ordered to be paid by the Friggers in the winding up of CAT;
v. Costs paid by, and ordered to be paid to, the Friggers’ solicitors Clavey Legal Pty Ltd and Murfett Legal Pty Ltd;
vi. Costs paid by the Friggers, and ordered to be paid by the Friggers, in Federal Court WAD607/2015
vii. Costs paid by the Friggers, and ordered to be paid by the Friggers, in Court of Appeal CACV118/2015;
2) An order that Eastwood repay the Friggers $18,500 paid into Court by the Friggers as security plus interest at 18% p.a. from the date of payment into court;
3) Interest pursuant to statute.
4) Costs.
5) Such other or further order as the Court considers appropriate.
In par 3 of his written submissions, counsel for the first and second defendants summarises what he understood to be the claim pleaded against his clients. The accuracy of what is contained in that paragraph was not disputed by the plaintiffs. The summary which follows is largely drawn from the submissions.
The plaintiffs say the first defendant was required by s 221(1) of the Corporations Act 2001 (Cth) to have two directors and it was in breach of that provision and its constitution from 4 June 2001, when the second defendant resigned as a director. Upon that resignation, Mr Banning remained as a sole director. Donald Campbell‑Smith is recorded in an 'ASIC current and historical extract' as appointed director of the first defendant on 8 September 2008. It is the plaintiffs' position, despite the entry on the register, the appointment of Mr Campbell‑Smith was not effective.
A meeting of shareholders was held on 17 November 2008. That meeting was attended by Mr Campbell‑Smith and the second defendant. A resolution was passed at the meeting to register Mr Campbell‑Smith, who was at that time the executor of the estate of the late Mr Banning, as holder of the shares of the deceased, and to appoint Mr Campbell‑Smith and the second defendant as directors of the first defendant. It is the plaintiffs' position the resolutions were not validly passed because Mr Campbell‑Smith was not registered as a shareholder and was not validly appointed as a director. The plaintiffs say he voted for his appointment as director but the vote was ineffective. Therefore, the appointment of Mr Campbell‑Smith and the second defendant as directors was not valid and any notification to ASIC was of no moment. The plaintiffs say the first defendant had only one director from 4 June 2001 until 8 September 2008 and no directors from 8 September 2008 until 10 May 2016. They further plead the directors' resolution on 17 November 2008 to enter into voluntary administration and the appointment of an administrator by a resolution of creditors on 27 February 2009 was invalid and of no effect.
On 9 July 2008, CAT was awarded a judgment and costs against the first defendant and the late Mr Banning. It filed and served a bill of costs on 2 June 2009. The plaintiffs plead the first defendant entered into the DOCA around 27 February 2009. That DOCA contained a clause relating to the payment of CAT's costs. The plaintiffs say the DOCA was void ab initio because the company had no validly appointed directors and it contained terms which were uncertain and not agreed to by CAT. Accordingly, it is said the first defendant contravened its statutory obligations to execute a DOCA 21 days after the meeting of creditors. Further, and in the alternative, the plaintiffs say if the DOCA was not void ab initio it terminated on 30 August 2009 because of a breach of cl 5.1.1 which required a payment to the deed administrator to allow payment of CAT's costs.
In the alternative, it is pleaded that if the first defendant entered voluntary administration and the DOCA was not validly executed or automatically terminated then, in the absence of a declaration of insolvency under s 494 of the Corporations Act, it was deemed under s 491 to have passed a special resolution that it would be wound up as a creditors' voluntary winding up. As a further alternative, the plaintiffs plead, if the DOCA terminated, the first defendant entered into liquidation.
As a result, in particular because the first defendant did not have two directors, it was incapable of retaining solicitors. The plaintiffs say they have been denied natural justice because they were misled as to the status of the first defendant and the ability of solicitors to act on its behalf. It follows they were denied an opportunity to make submissions in relation to proceedings in the Supreme Court, in particular in relation to the net amount owing between CAT and the first defendant. Because of the timing of all these events, the plaintiffs seek leave to commence action pursuant to s 38 or s 39 of the Limitation Act 2005 (WA).
The first and second defendants say the plaintiffs' claim must fail for a number of different reasons. Their primary point is that the plaintiffs are simply wrong to assert the first defendant necessarily had to have two directors. That being so, the allegations which flow from the alleged failure to have those two directors cannot stand. The first and second defendants point out s 221 of the Corporations Act does not require a company to have two directors. The Articles of Association of the first defendant provide the company may by resolution, determine the number of directors: Table 'A' cl 57(a). Section 221 is a provision about the requirements of a notice convening a meeting to obtain member approval for a related party benefit in respect of a public company. It can be assumed the plaintiffs intended to refer to s 248F of the Corporations Act. That section provides for a replaceable rule setting a quorum of two directors as comprising a quorum for a directors' meeting. However, s 248B provides for how a decision is to be made by a proprietary company with one director in order to pass a resolution. All that is required is the recording and signing of a record. Section 248F does not apply to a company with a single director because a single director cannot have a meeting.
The ASOC pleads the meeting of 17 November 2008 was a meeting of shareholders not a meeting of directors. Assuming Mr Campbell‑Smith was not a registered shareholder, any vote he cast to appoint himself as a director was not something he had power to do and so his vote was ineffective. But the second defendant was a shareholder - on the plaintiffs' case the only shareholder - and she had power to appoint directors. She made a valid decision as a shareholder to appoint Mr Campbell‑Smith and herself as directors.
It follows the directors' resolution of 17 November 2008 to enter into voluntary administration and consequently the appointment of an administrator by resolution of creditors on 27 February 2009 were each valid. That follows from the fact the directors were validly appointed. It further follows that the entry into the DOCA was valid. Further, the first defendant executed the DOCA within the statutory 21 day period.
The plaintiffs' plea the DOCA was void for uncertainty cannot succeed. There is no allegation the DOCA does not comply with the obligation as to matters to be specified in the terms of the deed as required by s 444A of the Corporations Act. Nor can the plea the DOCA was void for failing to comply with cl 5.1.1 succeed. A meeting of creditors on 24 June 2009 resolved to vary the DOCA pursuant to the power of s 445A. The date for payment was varied to 30 August 2009 and a further meeting of creditors on 28 August 2009 varied the date to 31 October 2009. The failure to comply with the original form of cl 5.1.1 was insufficient to invalidate the DOCA and lack of compliance was lawfully rectified by exercise of the power of variation under the Corporations Act.
Section 491 of the Corporations Act empowers a company to voluntarily wind up by passing a special resolution. A special resolution was validly passed to voluntarily wind up the company and so there was no issue of deeming that to have occurred pursuant to s 446A(2).
Consequent upon all of this, the first defendant at all relevant times, had the power to appoint and retain solicitors. The plaintiffs were not misled as to the status of the first defendant or the ability of persons to act on behalf of the first defendant.
The ASOC does not disclose any cause of action by way of 'denial of natural justice'. Insofar as the plaintiffs claim an entitlement to damages for loss of credit or reputation, this would appear to be a claim in defamation and is not made out in the ASOC. All defendants are entitled to summary judgment.
All of the events about which the plaintiffs claim, occurred between 2008 and 2010. The obvious limitation problem are the reasons why the plaintiffs reference s 38 and s 39 of the Limitation Act. Section 38 permits the court to extend time to commence action in the cases of fraud or improper conduct. Section 39 allows an extension of time to commence actions for personal injury or under the Fatal Accidents Act 1959 (WA). The only section which is possibly relevant is s 38(2) of the Limitations Act. In that section the court is empowered to extend time if there is fraud or 'other improper conduct'. There is nothing pleaded in the ASOC which could in any way amount to improper conduct. Quite the reverse. Accordingly, the plaintiffs' claim is clearly statute barred.
It is generally the case limitation questions will not ground an application for summary judgment. But this case is somewhat different. The limitation point here has been raised by the plaintiffs. As a general rule limitation is raised by a defendant in their defence. The plaintiffs here admit, at least by implication, their claims are statute barred. That being so, it is for them to plead material facts which arguably will lead to the grant of an extension of time under s 38 or s 39. The very facts pleaded by the plaintiffs in this case make it plain no extension of time would be granted and that accordingly the claim must fail. That is an additional reason why the defendants are entitled to summary judgment.
Although I have been dealing with claims against the first and second defendants, the conclusion that I have reached effectively means the claims against the third, fourth and fifth defendants cannot succeed. However, there is a further impediment to the plaintiffs proceeding against the second, third and fourth defendants. This relates to the bankruptcy of the plaintiffs.
On 20 July 2018 the plaintiffs were declared bankrupt. They were discharged from bankruptcy with effect from 26 July 2021. The writ of summons commencing this action was filed after that date. By operation of s 58 of the Bankruptcy Act 1966 (Cth) when a person becomes a bankrupt the 'property of the bankrupt' vests in the trustee in bankruptcy. The meaning of 'the property of the bankrupt' in s 5 of the Bankruptcy Act is the property divisible among the bankrupt's creditors. The definition of 'property' is sufficiently broad to extend to and include causes of action.
As a result, any cause of action the plaintiffs may have had against the third, fourth and fifth defendants (and probably the first and second defendants) have vested in the trustee in bankruptcy. The plaintiffs lack standing to bring proceedings in relation to those causes of action.
It is the case that s 116 of the Bankruptcy Act identifies various forms of property that are not divisible among creditors of the bankrupt. Under s 116(2)(g)(i), any right of a bankrupt to recover damages for personal injury or wrong done to the bankrupt is not included in the divisible property. It seems clear the plaintiffs have attempted to plead their case so as to bring themselves within that exception. The test of whether a cause of action seeks damage for personal injury or wrong has been held to be, '… whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character without reference to his property rights': see Samootin v Shea [2010] NSWCA 371 [79]. This is not such a case. There is no question of a cause of action in the nature of personal injuries and insofar as there has been an attempt to plead such a cause of action, it cannot succeed.
In summary then, the plaintiffs' case is in all respects hopeless. Each of the defendants are entitled to summary judgment and an order for costs. On publication of these reasons each of the parties should file a minute of orders they seek.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AH
Associate to Master Sanderson
6 MAY 2022