HPM Pty Ltd v Fear

[2002] FCA 202

FEDERAL COURT OF AUSTRALIA

HPM Pty Ltd v Fear [2002] FCA 202

PRACTICE AND PROCEDURE - abuse of process - proceedings commenced in name of liquidated company in Federal Court - replicating previous proceedings in Supreme Court - orders for security for costs in Supreme Court unmet - previous proceedings in Supreme Court discontinued or struck out - proceedings in Federal Court an attempt to circumvent or avoid the effect of Supreme Court decisions - abuse of process - leave to proceed in name of company discharged by institution of proceedings in Supreme Court.

HPM PTY LTD (ACN 008 679 481) v CHARLES ANTHONY CANDLIN FEAR, RESI STATEWIDE MORTGAGE CORPORATION (ACN 005 083 394), 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 and OREGON NOMINEES PTY LTD
W3001 of 2001

FRENCH J
6 MARCH 2002
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W3001 OF 2001

BETWEEN:

HPM PTY LTD (ACN 008 679 481)
APPLICANT

AND:

CHARLES ANTHONY CANDLIN FEAR
FIRST RESPONDENT

RESI STATEWIDE MORTGAGE CORPORATION
 (ACN 005 083 394)
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, 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 and OREGON NOMINEES PTY LTD
THIRD RESPONDENT

JUDGE:

FRENCH J

DATE OF ORDER:

6 MARCH 2002

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.        The application be dismissed.

2.        Harold Blakeley is to pay the First and Second Respondents' costs of the application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W3001 OF 2001

BETWEEN:

HPM PTY LTD (ACN 008 679 481)
APPLICANT

AND:

CHARLES ANTHONY CANDLIN FEAR
FIRST RESPONDENT

RESI STATEWIDE MORTGAGE CORPORATION
(ACN 005 083 394)
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, 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 and OREGON NOMINEES PTY LTD
THIRD RESPONDENTS

JUDGE:	FRENCH J
DATE:	6 MARCH 2002
PLACE:	PERTH

REASONS FOR JUDGMENT

Introduction

1. This is a motion to strike out or stay proceedings commenced in this Court in the name of a company in liquidation.  The proceedings are brought in the name of the company by its former director.  Like proceedings against the same respondents in the Supreme Court have been discontinued or dismissed.  The respondents are of the view that the proceedings in this Court are an abuse of process calculated to circumvent or avoid the effect of decisions in the Supreme Court of Western Australia.  They contend also that leave granted in the Supreme Court to the former director to bring proceedings in the name of the company was discharged by the institution of proceedings in that Court and does not authorise the commencement of the proceedings in this Court. 

   Background to these Proceedings

2. On 23 November 2001, proceedings were instituted in this Court by Harold Blakeley in the name of a company in liquidation, HPM Pty Ltd ("HPM"), against Charles Fear ("Fear"), Resi Statewide Mortgage Corporation ("Resi") and a number of other persons named as third respondents.  Blakeley was a director of HPM before its liquidation.  Fear is a chartered accountant who was appointed, on 14 September 1990, as receiver and manager of HPM.  There was an issue as to the scope of the appointment but that does not affect the outcome of this case.  The appointment was made under the terms of a mortgage and charge held by Resi over HPM's property.  The third respondents (the hotel purchasers) were the purchasers from Fear of HPM's property, The Hotel Peninsula at Mandurah.  HPM alleges in its statement of claim that the appointments of Fear as receiver and manager were invalid as it was not in default under the terms of either security when the appointments were made.  The bases for that contention are:

   1.Notices of demand issued by Resi did not specify the amounts owing to Resi under the relevant securities.

   2.The notices of demand issued by Resi were "nullified" by an agreement between HPM and Resi made on 23 August 1990.  The substance of that agreement was that HPM would continue to trade on certain conditions. 

3. Fear is said to have failed to make certain of the validity of his appointment, to have acted without power, to have failed to deliver up HPM's property, to have failed to apply to the Court for permission to deal in HPM's property over a prior charge of the National Australia Bank.  He is also said to have owed a duty of care to HPM and a duty to act in good faith in exercising his power of sale and not to disregard the interests of HPM.  He was said to have owed a statutory duty to HPM pursuant to s 229(2) of the Companies (Western Australia) Code to exercise a reasonable degree of care and diligence in exercising his power of sale.  He was allegedly negligent and in breach of his duties in failing to take reasonable care to obtain either a proper price or the true market value of the hotel and property to be sold under the relevant mortgage.  He was said to have allowed HPM's hotel business to degenerate through lack of proper management, care and maintenance thereby reducing its saleability and value.  He was also said to have failed to advertise and present the property in a proper and equitable manner prior to public auction.  There are a number of other respects in which he was said to have failed to discharge his duty of care.

4. Fear is said to have entered on HPM lands and to have taken possession of property of HPM and caused it to be sold thereby converting it to his own use or that of Resi.  So it is alleged he committed acts of trespass and conversion.  HPM claims to have suffered loss and damage as a result. 

5. Resi is said to be liable jointly with Fear for all loss and damage occasioned by his "oppression, negligence, recklessness, breaches of his duties, trespass and conversion…".  Both Fear and Resi were said to have knowledge of the defect in his appointment and thereby to have become constructive trustees for HPM and its officers and liable to account to HPM for all the proceeds of sale.  All respondents are said to have used financial oppression or unconscientious dealing to nullify an action brought by HPM in the Supreme Court of Western Australia, being Action No CIV 2236 of 1994.  It is alleged that Fear acted fraudulently in effecting a power of sale of HPM's assets.  This in turn is based upon an allegation of his collusion with the hotel purchasers pursuant to which he conspired to sell the hotel to them at a grossly undervalued price. 

6. There is a variety of orders sought including declarations as to the invalidity of the appointment of Fear as receiver and manager of the assets of HPM and exemplary damages against him, Resi and the hotel purchasers.

7. On 30 January, the solicitors for Fear and Resi filed a motion for summary dismissal of the application under O 20 as disclosing no reasonable cause of action, as frivolous or vexatious or as an abuse of process.  Alternatively orders were sought for the statement of claim to be struck out under O 11 or for the application to be stayed generally until solicitors are appointed by the applicant.  At this time the hotel purchasers have not been served.

8. As the affidavit filed for Fear and Resi and the submissions made on their behalf indicate, this application comes with a considerable prior history largely in the Supreme Court of Western Australia.  In substance it seeks to agitate in this Court matters which have been the subject of multiple proceedings in the Supreme Court.

   History of Proceedings in the Supreme Court

9. On 20 December 1994, HPM commenced proceedings in the Supreme Court of Western Australia in Action No CIV 2236 of 1994 against BPM Pty Ltd trading as Bird Cameron, accountants.  Fear, the Bank of Melbourne and the hotel purchasers were also named as defendants.  On 17 October 1995, Resi was substituted for the Bank of Melbourne by order of a Master and an amended statement of claim was filed dated 18 October.  The claims made in Action CIV 2236 of 1994 against Fear, Resi and the hotel purchasers are, in substance, the claims made against them in the present proceedings.  The claim against BPM related to its alleged failure to act carefully and diligently in the provision of advice to HPM pursuant to an oral agreement said to have been made between it and Blakeley. 

10. On 14 June 1996, an order was made by a Master that $75,000 be paid by HPM as security for costs in relation to its claim against Fear and Resi.  $10,000 was to be paid within thirty days of service of the order upon HPM and the balance upon entry for trial.  The action was to be stayed if HPM failed to pay either sum by the specified date.  HPM provided no money. 

11. On 21 December 1995, HPM was wound up by order of District Registrar Jan in this Court.  Gary John Trevor of Ferrier Hodgson & Co was appointed liquidator.  On 14 March 1997, the liquidator entered into a deed with Blakeley by which he assigned to Blakeley all of HPM's rights in the action in the Supreme Court.  This was done pursuant to a resolution of the meeting of creditors held on 5 September 1996 and a direction given by Lee J in this Court on 25 February 1997.   On 3 June 1997, Blakeley was substituted for HPM as plaintiff in Action CIV 2236 of 1994 by order of a Master in the Supreme Court.  He applied for a variation of the orders for security for costs previously made, but his application was dismissed by Wheeler J on 2 February 1998.  On 25 September 1998, Blakeley obtained leave to discontinue the proceedings against Fear and Resi and was ordered to pay their costs of the action.  On 10 November 1998, Blakeley filed a Chamber Summons in the discontinued proceedings seeking to reinstate them against Fear and Resi.  That application was dismissed by Wheeler J on 18 November 1999. 

12. In the meantime, on 2 April 1996, Blakeley had commenced proceedings in the Supreme Court in his own name against BPM, Fear, Resi and the hotel purchasers.  This action was CIV 1314 of 1996.  BPM, Fear, Resi and the hotel purchasers applied for summary disposition of the proceedings or for the statement of claim to be struck out.  The application was never heard.  In the event the action was discontinued as against BPM, Fear and Resi on 8 July 1996.

13. On 27 July 2000, Blakeley commenced new proceedings in the Supreme Court against Fear, Resi and the hotel purchasers.  This was action CIV 1985 of 2000.  On 12 January 2001, Templeman J ordered that the statement of claim be struck out and the action dismissed.  Blakeley was to pay the costs of Fear, Resi and the hotel purchasers on a solicitor/client basis.  He was refused leave to appeal the order.  Nevertheless, a notice of appeal was filed against the orders of Templeman J and the appeal was heard on 12 June 2001.  It was dismissed on 23 July 2001 by the Full Court of the Supreme Court of Western Australia.  An application to the High Court for special leave to appeal against the judgment of the Full Court was filed on 10 August 2001, but has not yet been heard.

14. On 16 February 2001, on Blakeley's application, he was granted leave by a Master to commence proceedings on behalf of HPM under s 236 of the Australian Corporations and Securities Legislation 2000.  It may be noted that one of the bases upon which he failed in CIV 1985 of 2000 was that Fear, as receiver and manager, owed no duty to Blakeley but rather to the company.  Following the grant of leave Blakeley commenced fresh proceedings in the name of HPM in action CIV 1256 of 2001.  The writ named HPM as plaintiff and Fear, Resi and the hotel purchasers as defendants.  The statement of claim pleaded in its first paragraph the leave granted to Blakeley to bring the proceedings. 

15. On 7 May 2001, Wheeler J ordered that the statement of claim be struck out and the action dismissed.  Blakeley was to pay the costs of Fear, Resi and the hotel purchasers.  Her Honour held that the statement of claim and the action were an abuse of the process of the Court having regard to the previous proceedings.  Its aim, she said, was:

    "…to avoid previous decisions of this Court in respect of identical matters by bringing a fresh action without the need to challenge the correctness of those previous decisions by way of appeal."

    A notice of appeal to the Full Court was filed on 25 May 2001 but at this stage the appeal has not been heard. 

    Whether the Application Should be Dismissed or Stayed

16. The preceding history speaks for itself.  The present proceedings are nothing less than an attempt to reopen in this Court proceedings which have been instituted and have thus far failed in the Supreme Court of Western Australia.

17. Blakeley appeared by leave on behalf of HPM in the present proceedings.  He seeks to avoid, by proceeding in this Court, the effect of the adverse decisions of the Supreme Court of Western Australia.  That is apparent from his written submissions which state, inter alia, that the Supreme Court of Western Australia has for the past seven years supported the respondents' applications to deny to HPM and himself their constitutional rights of access to justice.  He endeavoured to argue, by misconceived application of the authorities, that the imposition of the security of costs order was unconscionable conduct. 

18. Mr Blakeley also submitted that the action in this Court is the only action by HPM now progressing as his appeal to the Full Court of the Supreme Court against the order of Wheeler J:

    "…has been stultified by the new, and in my opinion, unreasonable increase by 500% in Supreme Court Costs."

19. In my opinion the application invokes the jurisdiction of this Court in order to circumvent or avoid the effect of decisions of the Supreme Court of Western Australia.  As I explained to Mr Blakeley at the hearing of the motion to dismiss this application, the Court and the Supreme Court are both superior courts of co-ordinate jurisdiction.  It is no part of the function of either Court to review, expressly or by implication, decisions of the other in matters of which the other Court is seized.  The history of the proceedings in the Supreme Court make it plain that the present application is an abuse of the process of this Court.  In so finding, I make no determination on the question whether the proceedings are time barred as contended by the respondents.  I have no doubt, in any event, that the leave granted in the

    Supreme Court does not cover this action.  In my opinion the application should be dismissed as an abuse of process.  Mr Blakeley should pay the respondents' costs of the application.

I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French .

Associate:

Dated:             March 2002

Mr H Blakeley appeared on behalf of the applicant.
Counsel for the  First and Second Respondents:	Mr SK Shepherd
Solicitor for the First and Second Respondents:	Mallesons Stephen Jaques
Date of Hearing:	19 February 2002
Date of Judgment:	6 March 2002