HPM Pty Ltd v Fear
[2002] WASCA 249
•9 SEPTEMBER 2002
HPM PTY LTD -v- FEAR & ORS [2002] WASCA 249
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASCA 249 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:83/2001 | 2 AUGUST 2002 | |
| Coram: | MALCOLM CJ MURRAY J STEYTLER J | 9/09/02 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| A | |||
| PDF Version |
| Parties: | HPM PTY LTD CHARLES ANTHONY CANDLIN FEAR RESI-STATEWIDE MORTGAGE CORPORATION LTD ROBERT CLAUDE COOK TERENCE CORNELIUS McMANUS ROBERT HENRI DE BUF PATRICIA ANNE DE BUF REGINALD SARSFIELD FINN ELIZABETH ROSE FINN DONALD GEORGE LYSTER LEONE BEATRICE LYSTER JOHN SELSMARK ROGER LLOYD GEORGE RICHARD-COOMBES IDA ELEANOR RICHARD-COOMBES GRAEME CAMPBELL REYNOLDS LESLEY HANNAH REYNOLDS JOSEPH COCI HELEN JOY COCI ERNEST RAMPELLINI JENNIFER ANNE RAMPELLINI PETER JOE CHITTENDEN MICHAEL SKUBA MICHAEL CYRIL HALPIN GEORGE HUGH MARGETTS GWENDOLINE MARY MARGETTS TOLEEN NOMINEES PTY LTD LAVIN NOMINEES PTY LTD TUDOR COURT INVESTMENTS PTY LTD MacDOUGALL PTY LTD OREGON NOMINEES PTY LTD |
Catchwords: | Corporations Appeal Practice and procedure Requirement that a body corporate not bring proceedings otherwise than by a solicitor Corporations Whether s 236 and s 237 of the Corporations Act apply to companies in liquidation Interaction between s 237 of the Corporations Law and O 4 r 3(2) of the Rules of the Supreme Court (WA) |
Legislation: | Corporations Law, s 236, s 237, s 477(6), s 511 Rules of the Supreme Court (WA), O 4 r 3(2) |
Case References: | Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd (2000) 22 WAR 372 Foss v Harbottle (1843) 2 Hare 461; 67 ER 189 Spokes v Grosvenor and West End Railway Terminus Hotel Co Ltd [1897] 2 QB 124 Blakeley v Cook [2001] WASCA 208 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Fibrosa Spolka Akcyjna v Fairbain Lawson Combe Barbour Ltd [1943] AC 32 Frinton & Walton Urban District Council v Walton & District Sand & Mineral Co Ltd [1938] 1 All ER 649 Little v Victoria [1998] 4 VR 596 Lloyds Bank Ltd v Bundy [1974] 3 WLR 501 Spiel v Commodity Brokers Australia Pty Ltd (in liq) (1983) 35 SASR 294 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : HPM PTY LTD -v- FEAR & ORS [2002] WASCA 249 CORAM : MALCOLM CJ
- MURRAY J
STEYTLER J
- Appellant
AND
CHARLES ANTHONY CANDLIN FEAR
First Respondent
RESI-STATEWIDE MORTGAGE CORPORATION LTD
Second Respondent
ROBERT CLAUDE COOK
TERENCE CORNELIUS McMANUS
ROBERT HENRI DE BUF
PATRICIA ANNE DE BUF
REGINALD SARSFIELD FINN
ELIZABETH ROSE FINN
DONALD GEORGE LYSTER
LEONE BEATRICE LYSTER
JOHN SELSMARK
ROGER LLOYD GEORGE RICHARD-COOMBES
IDA ELEANOR RICHARD-COOMBES
GRAEME CAMPBELL REYNOLDS
(Page 2)
- LESLEY HANNAH REYNOLDS
JOSEPH COCI
HELEN JOY COCI
ERNEST RAMPELLINI
JENNIFER ANNE RAMPELLINI
PETER JOE CHITTENDEN
MICHAEL SKUBA
MICHAEL CYRIL HALPIN
GEORGE HUGH MARGETTS
GWENDOLINE MARY MARGETTS
TOLEEN NOMINEES PTY LTD
LAVIN NOMINEES PTY LTD
TUDOR COURT INVESTMENTS PTY LTD
MacDOUGALL PTY LTD
OREGON NOMINEES PTY LTD
Third Respondents
Catchwords:
Corporations - Appeal - Practice and procedure - Requirement that a body corporate not bring proceedings otherwise than by a solicitor
Corporations - Whether s 236 and s 237 of the Corporations Act apply to companies in liquidation - Interaction between s 237 of the Corporations Law and O 4 r 3(2) of the Rules of the Supreme Court (WA)
Legislation:
Corporations Law, s 236, s 237, s 477(6), s 511
Rules of the Supreme Court (WA), O 4 r 3(2)
Result:
Appeal dismissed
(Page 3)
Category: A
Representation:
Counsel:
Appellant : Mr H T J Blakeley
First Respondent : Mr S K Shepherd
Second Respondent : Mr S K Shepherd
Third Respondents : Mr A C McIntosh
Solicitors:
Appellant : In person
First Respondent : Mallesons Stephen Jaques
Second Respondent : Mallesons Stephen Jaques
Third Respondents : Craig McIntosh
Case(s) referred to in judgment(s):
Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd (2000) 22 WAR 372
Foss v Harbottle (1843) 2 Hare 461; 67 ER 189
Spokes v Grosvenor and West End Railway Terminus Hotel Co Ltd [1897] 2 QB 124
Case(s) also cited:
Blakeley v Cook [2001] WASCA 208
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Fibrosa Spolka Akcyjna v Fairbain Lawson Combe Barbour Ltd [1943] AC 32
Frinton & Walton Urban District Council v Walton & District Sand & Mineral Co Ltd [1938] 1 All ER 649
Little v Victoria [1998] 4 VR 596
Lloyds Bank Ltd v Bundy [1974] 3 WLR 501
Spiel v Commodity Brokers Australia Pty Ltd (in liq) (1983) 35 SASR 294
(Page 4)
1 MALCOLM CJ: In my opinion, this appeal should be dismissed for the reasons to be published by Steytler J with which I am in entire agreement.
2 MURRAY J: I agree with Steytler J, for the reasons now published by his Honour, that this appeal is not competent and should be dismissed.
3 STEYTLER J: This is an appeal against the decision of Wheeler J of this Court whereby her Honour dismissed an action brought by the appellant against the respondents upon the ground that it was an abuse of the process of the Court.
4 There is a relatively long history to the action. The events giving rise to it took place in 1990 and 1991. An action in respect of those events was first commenced by the appellant by a Writ issued on 20 December 1994. By that Writ, issued in matter CIV 2236 of 1994, the appellant commenced proceedings against a company known as BPM Pty Ltd, the first respondent, the Bank of Melbourne, and the third respondents. By order made by Acting Master Chapman on 17 October 1995, the second respondent was substituted as a defendant in the action in lieu of the Bank of Melbourne. An amended statement of claim was filed on 18 October 1995. The claim made by the appellant against the first, second and third respondents related to three mortgages which had been executed by the appellant over land owned by it in order to secure loans made to it by the second respondent. The second respondent was said to have unlawfully appointed the first respondent as a receiver and manager of the mortgaged land and the first respondent was said to have breached various duties owed by him, in his capacity as receiver, to the appellant. The statement of claim recites that the first respondent, as receiver, took possession of the mortgaged land and caused it to be sold to the third respondents at a gross undervalue and in circumstances in which he displayed a lack of good faith and a reckless disregard for the interests of the appellant. He was also have said to have been liable to the appellant for loss and damage occasioned by his breaches of duties and an alleged trespass and conversion. The second respondent was said to be liable jointly with the first respondent for all such loss and damage. The third respondents were said to have had knowledge of the defect in the first respondent's appointment and to have become constructive trustees for the appellant and liable to account to it for all of the proceeds of sale.
5 On 14 June 1996 the appellant was ordered, by Master Bredmeyer, to give security for the first and second respondents' costs of the action in the sum of $75,000, with $10,000 to be paid within 30 days of service of the
(Page 5)
order upon the appellant and $65,000 to be paid on entry for trial. An order was also made that, if the appellant should fail to pay either sum by the specified date, all further proceedings against the first and second respondents would be stayed. The appellant failed to pay the security or any part thereof.
6 Then, on 14 March 1997, by which date the appellant had gone into liquidation, the liquidator (who had been appointed on 21 December 1995) assigned the appellant's causes of action in the proceedings to Mr Harold Blakeley, who had been the managing director and principal shareholder of the appellant. On 3 June 1997, an order was made by Master Chapman substituting Mr Blakeley as the plaintiff in lieu of the appellant.
7 On 25 September 1998, Mr Blakeley obtained leave to discontinue the action against the first and second respondents. In the following month he filed and served a notice of discontinuance accordingly. Then, in about October 1999 Mr Blakeley filed and served a chamber summons seeking to reinstate the action against the first and second respondents. The application was dismissed.
8 In the interim, on 2 April 1996, Mr Blakeley had instituted a second action against BPM Pty Ltd and the first, second and third respondents, in matter number CIV 1314 of 1996. The statement of claim which was filed in that action ("the second action") was substantially the same as that which had been filed in the earlier proceedings, so far as the claims against the first, second and third respondents were concerned.
9 The defendants in the second action applied for summary judgment but the proceedings were discontinued before their applications could be heard. The notice of discontinuance is dated 8 July 1996.
10 On 24 July 2000 Mr Blakeley commenced a further action, CIV 1985 of 2000 ("the third action"). This action was commenced against the first, second and third respondents. In it, Mr Blakeley made substantially the same claims against those respondents as had previously been made, save that he contended that the various duties which had been breached were duties which were owed to him, as well as to the appellant, as a result of which, he alleged, he was himself entitled to damages. The respondents applied to strike out the statement of claim and to have the action dismissed. They contended that Mr Blakeley had no cause of action, that his cause of action was in any event time barred and that the statement of claim constituted an abuse of the process of the Court. Templeman J, who
(Page 6)
- heard the application, upheld each of those submissions. As regards the last of them, his Honour concluded that the action was designed to circumvent the order for security for costs which had previously been made and that it was, for that reason, an abuse of the process of the Court.
11 Mr Blakeley appealed to the Full Court. That Court agreed with Templeman J that the third action failed to disclose a cause of action and dismissed the appeal. Mr Blakeley has since sought special leave to appeal to the High Court, but that application has yet to be heard.
12 Then, in February 2001, in matter number CIV 1177 of 2001 (to which I shall refer as "the leave application"), Mr Blakeley applied to a Master of this Court, under s 236 and s 237 of the Corporations Law, for an order giving him leave to bring proceedings on behalf of the appellant. While he had given notice to the liquidator of the appellant of his intention to bring the leave application (albeit, it seems, not of the date or time of hearing of the application), no notice thereof was given to any of the respondents. The leave application was supported by an affidavit sworn by Mr Blakeley on 29 January 2001. That affidavit is very brief. It recites only that Mr Blakeley was a major shareholder and the managing director of the appellant, that the appellant was then in liquidation, that the liquidator had no intention of proceeding with litigation as he had no funds to do so, that Mr Blakeley was acting in good faith, that it was in the interests of the company and the creditors that he be given leave to "pursue this avenue", that Templeman J had acknowledged that the cause of action which he had earlier pursued was not frivolous and that the "liquidator's cause was nullified by financial oppression/unconscientious dealing …".
13 Exhibited to the affidavit was a report, provided by the appellant's liquidator, reporting on the affairs of the company and the attitude of its creditors and contributories. The report discloses that creditors had declined to provide funding for the litigation which Mr Blakeley had sought to pursue and that attempts to obtain funding from "several litigation insurance financiers" had been unsuccessful. The liquidator also there mentions the fact of the assignment of the causes of action to Mr Blakeley and that the causes of action had later been re-assigned to the company. The report goes on to record that the liquidator had had discussions with the McLernon Group Ltd ("MGL"), in the course of which MGL indicated that it might be prepared to fund legal proceedings if they showed merit. However, he said, the attempts to obtain funding eventually came to naught because MGL considered that there was too high a risk in pursuing the action. The liquidator went on to say:
(Page 7)
- "As a result of MGL's decision the action remained without funding and steps were therefore taken to discontinue all matters that had not been discontinued, dismissed or struck [sic] at that time. However, prior to discontinuing the main action Mr Blakeley was given the opportunity to seek alternative funding arrangements. I wrote to Mr Blakeley on 25 February 1999 and advised him of this position. He telephoned Mr Darren Weaver of my office on 26 February 1999 and confirmed that he was not aware of other funding sources. I further advised Mr Blakeley of my planned discontinuance of the litigation by my letter dated 9 March 1999. … To continue the litigation without funding exposed me, as Liquidator, to personal cost orders which was not acceptable to me. I therefore considered the litigation to be at an end."
14 Later in the report, the liquidator said the following:
"3.9 Whilst I am sympathetic to Mr Blakeley's desire to continue with the company's litigation, I am concerned that a stay of the winding up, if successful:
(a) will return control of an insolvent company to its directors;
(b) may result in the statutory priorities set out by Section 556 of the Law being ignored, should a successful recovery be made in the liquidation (if any); and
(c) may lead to litigation continuing when there is no advice, from Senior Counsel or otherwise, that there are sound prospects of success.
3.10 Further, I note that Mr Blakeley had the opportunity to prosecute [sic] with the litigation at his own discretion when the causes of action were first assigned to him on 14 March 1997 … but failed due to a lack of funding which resulted in the causes of action being reassigned to … [the appellant]. I am not aware of Mr Blakeley's financial capacity at this time to fund these matters.
3.11 Notwithstanding the above factors, my main concern is that I no longer be exposed to continuing costs and
(Page 8)
- potential adverse cost orders should the matter proceed further."
15 Also attached to Mr Blakeley's affidavit was a letter from the liquidator dated 19 January 2001 in which he recorded his intention to take the necessary steps to retire as Official Liquidator. Mr Blakeley appears to have responded to that letter by a letter dated 24 January 2001 (also attached to his affidavit) in which he invited the liquidator to respond to him, in a letter, stating that he had "no problems with my making an application to the Supreme Court, pursuant to Australian Securities Legislation 2000 Sections 236 and 237, which gives the right of a person to intervene in a company's action". No response appears to have been received to that letter.
16 The applicant was given leave to bring proceedings on behalf of the appellant by order dated 29 November 2001. No written reasons for the making of that order have been made available. The order is very brief. It reads as follows:
"The applicant be given leave to bring proceedings on behalf of HPM Pty Ltd pursuant to 236 [sic] of the Australian Corporations and Securities Legislation 2000."
17 The proceedings the subject of the order are not identified in the order and, indeed, Mr Blakeley told us that he did not then know precisely what form the proceedings would take or even against whom they would be brought.
18 Putting this problem, and others, to one side, there is, in my respectful opinion, a real question whether s 236 and s 237 of the Corporations Law (now the Corporations Act 2001) have any application to a company in liquidation. Those sections provide as follows:
"236 Bringing, or intervening in, proceedings on behalf of a company
(1) [Person may bring proceedings on behalf of company] A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:
(Page 9)
- (a) the person is:
(i) a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or
(ii) an officer or former officer of the company; and
- (b) the person is acting with leave granted under section 237.
(2) [In company's name] Proceedings brought on behalf of a company must be brought in the company's name.
(3) [Right at general law is abolished] The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.
- 237 Applying for and granting leave
(1) [Person may apply to Court] A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.
(2) [Court must grant application] The Court must grant the application if it is satisfied that:
(a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and
(b) the applicant is acting in good faith; and
(c) it is in the best interests of the company that the applicant be granted leave; and
(d) if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and
(e) either:
(Page 10)
- (i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or
(ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.
- (3) [Rebuttable presumption arises] A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:
(a) the proceedings are:
(i) by the company against a third party; or
(ii) by a third party against the company; and
(b) the company has decided:
- (i) not to bring the proceedings; or
(ii) not to defend the proceedings; or
(iii) to discontinue, settle or compromise the proceedings; and
- (c) all of the directors who participated in that decision:
(i) acted in good faith for a proper purpose; and
(ii) did not have a material personal interest in the decision; and
(iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and
(Page 11)
- (iv) rationally believed that the decision was in the best interests of the company.
- The directors belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.
(4) [Definition] For the purposes of subsection (3):
(a) a person is a third party if:
(i) the company is a public company and the person is not a related party of the company; or
(ii) the company is not a public company and the person would not be a related party of the company if the company were a public company; and
- (b) proceedings by or against the company include any appeal from a decision made in proceedings by or against the company."
(Page 12)
- Court to determine any question arising in the winding up of a company (cf, in this respect, "Ford's Principles of Corporations Law", 10th ed, par 11.270 and "Australian Corporations Law: Principles and Practice", pars 3.2.0482 and 5.4.0560).
20 However, whatever may be the preferable construction of these provisions, and regardless of other problems which seem to me to attend the making of the order, the fact remains that the order made by the Master subsists and no steps have been taken by the liquidator, or any of the respondents, to have it set aside. Consequently, as matters stand, Mr Blakeley has leave to bring "proceedings" on behalf of the appellant and it can only be assumed, at least for present purposes, that the "proceedings" the subject of that leave are those (to which I shall refer as "the fourth action") which have been commenced under action number CIV 1256 of 2001 and which were the subject of the decision of Wheeler J.
21 The fourth action is, as Wheeler J has pointed out, substantially identical to the third action, which had, as I have said, earlier been struck out by Templeman J. It was that fact, amongst others, which led the respondents to apply to Wheeler J to have the fourth action, too, dismissed upon the grounds, inter alia, that it was vexatious and an abuse of the process of the Court. That submission found favour with Wheeler J, who concluded that, on the strength of what had been said by Mr Blakeley in an affidavit sworn by him on 30 April 2001, the aim of the proceedings was that of avoiding previous decisions of the Court in respect of identical matters, with the result that they were an abuse of the process of the Court. She consequently dismissed the fourth action. It is that decision which is sought to be appealed to this Court.
22 At the commencement of the hearing of the appeal we raised with Mr Blakeley, who proposed to appear on behalf of the appellant, the provisions of O 4 r 3(2) of the Rules of the Supreme Court (WA) which are to the effect that, except as expressly provided by or under any Act, a body corporate may not begin or carry on any proceeding in the Supreme Court otherwise than by a solicitor. The writ and statement of claim in the fourth action had been prepared and filed by Mr Blakeley without legal assistance and it was he who had appeared before Wheeler J and who had personally lodged the notice of appeal from her Honour's decision. At no time during the currency of the fourth action has the appellant been represented by a solicitor.
(Page 13)
23 Mr Blakeley, being aware of the difficulty presented by the Rules (the issue having been raised before Wheeler J but her Honour having found it unnecessary to make any decision with respect to it), sought to overcome it by contending that the leave which had been given to him under s 237 of the Corporations Law amounted to a grant of leave for him to carry on the proceedings on behalf of the appellant without the aid of a solicitor. I do not consider that that contention can be right.
24 Section 236(2) requires proceedings which are brought on behalf of a company to be brought in the company's name. Moreover, if the proceedings ultimately succeed, judgment will be given in favour of the company: cf Spokes v Grosvenor and West End Railway Terminus Hotel Co Ltd [1897] 2 QB 124. The proceedings are consequently those of the company. They are merely brought on its behalf by the person to whom leave is given. That being so, it seems to me, O 4 r 3(2) has the effect that they cannot be commenced or carried on otherwise than by a solicitor.
25 It has been held by a Judge of this Court (Hasluck J) that the Court lacks the power to dispense with the requirement of the rule: see Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd (2000) 22 WAR 372. Even if it was possible for the Court to dispense with the requirement, it has not, in fact, done so and nor, in my opinion, has any basis been shown for doing so. We were told by Mr Blakeley that he is now in a position to fund the appellant's action and that his failure to obtain legal representation is attributable to the fact that he has been unable to find a solicitor who is prepared to represent the appellant. However, there is nothing on oath to that effect and Mr Blakeley, in the course of his oral submissions, identified only two firms which have been approached by him, although he did say that there had been others. In those circumstances, and given what has been said by the liquidator in the report to which I have earlier referred, I would not have considered it appropriate to waive the requirement in this case, even if that was possible.
26 It follows, in my opinion, that the proceedings have been irregularly commenced and continued and that the appeal itself is incompetent. On that ground alone I would dismiss it.
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