Huntingdale Village Pty Ltd (Receivers and Managers Appointed) ATF Huntingdale Village Unit Trust v Perpetual Nominees Ltd
[2013] WASC 352
•26 SEPTEMBER 2013
HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ATF HUNTINGDALE VILLAGE UNIT TRUST -v- PERPETUAL NOMINEES LTD [2013] WASC 352
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 352 | |
| Case No: | COR:223/2009 | 28 AUGUST 2013 | |
| Coram: | LE MIERE J | 26/09/13 | |
| 20 | Judgment Part: | 1 of 1 | |
| Result: | Application to disallow amendments to the statement of claim granted | ||
| B | |||
| PDF Version |
| Parties: | HUNTINGDALE VILLAGE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ATF HUNTINGDALE VILLAGE UNIT TRUST SILKCHIME PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF SILKCHIME UNIT TRUST VANNIN PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF HAY FAMILY TRUST WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF WARWICK ENTERTAINMENT UNIT TRUST PARAGON APARTMENTS LTD (RECEIVERS AND MANAGERS APPOINTED) PERPETUAL NOMINEES LTD MARK ANTHONY KORDA DAVID JOHN WINTERBOTTOM WESTPOINT CORPORATION PTY LTD (IN LIQ) OREN ZOHAR |
Catchwords: | Practice and procedure Application to disallow amendments to the statement of claim Disclose no reasonable cause of action May prejudice, embarrass or delay the fair trial of the proceedings Are otherwise an abuse of process of the court Corporations Act 2001 (Cth) Receivers Application for inquiry under s 423 |
Legislation: | Australian Securities and Investment Commission Act 2001 (Cth), s 12GD, s 12GF Corporations Act 2001 (Cth), s 180, s 181, s 423, s 1317H, s 1324 Federal Court Rules 1979 (Cth), O 62 r 2, O 62 r 12 Rules of the Supreme Court 1971 (WA), O 20 r 2(1), O 20 r 8(1), O 20 r 8(2), O 20 r 11(1), O 20 r 19(1), O 20 r 21 Trade Practices Act 1974 (Cth), s 82, s 87 |
Case References: | Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd [2006] FCA 1493; (2006) 64 ATR 524 Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd [1995] ANZ Conv R 361 Inkhorn Pty Ltd (ACN 009 236 337) (Subject to Deed of Company Arrangement) v Herbert [2000] WASCA 333 Jeogla v ANZ [1999] NSWSC 563 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
SILKCHIME PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF SILKCHIME UNIT TRUST
Second Plaintiff
VANNIN PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF HAY FAMILY TRUST
Third Plaintiff
WARWICK ENTERTAINMENT CENTRE PTY LTD (RECEIVER AND MANAGERS APPOINTED) ATF WARWICK ENTERTAINMENT UNIT TRUST
Fourth Plaintiff
PARAGON APARTMENTS LTD (RECEIVERS AND MANAGERS APPOINTED)
Fifth Plaintiff
AND
PERPETUAL NOMINEES LTD
First Defendant
MARK ANTHONY KORDA
Second Defendant
DAVID JOHN WINTERBOTTOM
Third Defendant
WESTPOINT CORPORATION PTY LTD (IN LIQ)
Fourth Defendant
OREN ZOHAR
Fifth Defendant
Catchwords:
Practice and procedure - Application to disallow amendments to the statement of claim - Disclose no reasonable cause of action - May prejudice, embarrass or delay the fair trial of the proceedings - Are otherwise an abuse of process of the court
Corporations Act 2001 (Cth) - Receivers - Application for inquiry under s 423
Legislation:
Australian Securities and Investment Commission Act 2001 (Cth), s 12GD, s 12GF
Corporations Act 2001 (Cth), s 180, s 181, s 423, s 1317H, s 1324
Federal Court Rules 1979 (Cth), O 62 r 2, O 62 r 12
Rules of the Supreme Court 1971 (WA), O 20 r 2(1), O 20 r 8(1), O 20 r 8(2), O 20 r 11(1), O 20 r 19(1), O 20 r 21
Trade Practices Act 1974 (Cth), s 82, s 87
Result:
Application to disallow amendments to the statement of claim granted
Category: B
Representation:
Counsel:
First Plaintiff : Mr A Metaxas
Second Plaintiff : Mr A Metaxas
Third Plaintiff : Mr A Metaxas
Fourth Plaintiff : Mr A Metaxas
Fifth Plaintiff : Mr A Metaxas
First Defendant : No appearance
Second Defendant : Mr C L Zelestis QC & Mr M J Feutrill
Third Defendant : Mr C L Zelestis QC & Mr M J Feutrill
Fourth Defendant : No appearance
Fifth Defendant : Mr C L Zelestis QC & Mr M J Feutrill
Solicitors:
First Plaintiff : Metaxas & Hager
Second Plaintiff : Metaxas & Hager
Third Plaintiff : Metaxas & Hager
Fourth Plaintiff : Metaxas & Hager
Fifth Plaintiff : Metaxas & Hager
First Defendant : No appearance
Second Defendant : King & Wood Mallesons
Third Defendant : King & Wood Mallesons
Fourth Defendant : No appearance
Fifth Defendant : King & Wood Mallesons
Case(s) referred to in judgment(s):
Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd [2006] FCA 1493; (2006) 64 ATR 524
Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd [1995] ANZ Conv R 361
Inkhorn Pty Ltd (ACN 009 236 337) (Subject to Deed of Company Arrangement) v Herbert [2000] WASCA 333
Jeogla v ANZ [1999] NSWSC 563
Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676
1 LE MIERE J: The second, third and fifth defendants (the Receivers) have applied to disallow amendments to a large number of the paragraphs of the plaintiffs' re-amended statement of claim of 11 August 2010. The Receivers' submissions in relation to the impugned paragraphs of the statement of claim are to the effect that they disclose no reasonable cause of action, may prejudice, embarrass or delay the fair trial of the proceedings or are otherwise an abuse of the process of the court.
Plaintiffs' contention - no need to establish reasonable cause of action
2 The plaintiffs' primary submission is that the statement of claim does not need to disclose a cause of action. The plaintiffs say that what they must demonstrate by evidence is that there is a sufficient basis for making an order for an inquiry under s 423 of the Corporations Act 2001 (Cth).
3 Section 423(1)(a) of the Corporations Act provides for a process of inquiry by the court where it appears to the court that a controller of property of a corporation has not faithfully performed, or is not faithfully performing, the controller's functions. Section 423(1)(b) allows an inquiry upon a complaint by a person to the court. Either process requires a substantive application: Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd [2006] FCA 1493; (2006) 64 ATR 524 [40].
4 The Receivers are relevantly controllers of property of each of the plaintiff corporations appointed to act under an instrument. The plaintiffs submit that all they need to establish is that there is a sufficient basis for making an order for an inquiry which they may do by establishing that there is something which requires inquiry. The plaintiffs say that if they establish that then it is a matter for the exercise of the court's discretion whether to order an inquiry. The plaintiffs say that they do not need to establish by their statement of claim any reasonable cause of action but merely that there is a sufficient basis for making an order for an inquiry.
5 An applicant for an inquiry must show a sufficient basis for making an order that there is something which requires inquiry. A complaint or an application for an inquiry must be properly particularised before the court will embark upon an inquiry. The plaintiffs make a wide ranging challenge to the Receivers' remuneration and expenses and in particular to the fees paid by the Receivers to Corrs Chambers Westgarth (Corrs), the solicitors engaged by the Receivers to carry out legal services in relation to a range of matters concerning the receiverships. The plaintiffs allege that the Receivers paid themselves excessive and unjustified remuneration and paid excessive and unjustified fees charged by Corrs. The plaintiffs allege that in doing so the Receivers breached duties they owed to the plaintiffs at law, equity and pursuant to s 180 and s 181 of the Corporations Act.
Application is proceeding with pleadings
6 The plaintiffs submitted that the court should not have made an order for pleadings to be delivered and the plaintiffs' application for an inquiry should proceed on the basis of affidavit evidence and not on the basis of the pleadings. I do not accept that submission. The matter was commenced in the Federal Court by originating process. The originating process did not confine the plaintiffs' application to an application for an inquiry under s 423 of the Corporations Act. The originating process stated that the application is principally a complaint about receivers made under s 423, s 434, s 1317H and s 1324 of the Corporations Act and s 12GD and s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth). The originating process stated that the plaintiffs sought the relief there set out on the facts stated in the supporting affidavit. Subsequently the Federal Court ordered that the proceeding be transferred to this court.
7 This court may order the action to be tried without pleadings and may direct the parties to prepare a statement of the issues in dispute: O 20 r 21 of the Rules of the Supreme Court 1971 (WA) (RSC). The plaintiffs did not take that course. On 2 December 2009 I ordered that the plaintiffs should file a statement of claim and the defendants should file a defence. That order was made by the consent of the parties. The plaintiffs subsequently filed a statement of claim and an amended statement of claim. The defendants filed a defence. The plaintiffs have not appealed from the order that they file a statement of claim nor sought any order that they be relieved of the requirement to file a statement of claim or that their application for an inquiry should proceed other than on the basis of the pleadings. That may be because of the obstacles confronting any such applications.
Statement of claim pleads causes of action
8 The plaintiffs' statement of claim must comply with the RSC unless some Act or order of the court requires or permits otherwise. A statement of claim must state specifically the relief or remedy which the plaintiff claims: O 20 r 2(1) RSC. A statement of claim must contain a statement in summary form of the material facts on which the party pleading relies for his claim: O 20 r 8(1) RSC. A plaintiff shall not in its statement of claim make any allegation of fact or raise any new ground of claim inconsistent with a previous pleading of his: O 20 r 11(1) RSC. Order 20 r 19(1) provides that the court may order to be struck out or amended any pleading or anything in any pleading on the ground that it discloses no reasonable cause of action, or it may prejudice, embarrass or delay the fair trial of the action, or it is otherwise an abuse of the process of the court. The court may disallow any amendment to a statement of claim on any ground on which a statement of claim may be struck out.
9 The plaintiffs' statement of claim is not confined to a claim for an inquiry under s 423 of the Corporations Act. The relief claimed by the plaintiffs against the Receivers includes orders pursuant to s 1324 of the Corporations Act, alternatively s 87 of the Trade Practices Act 1974 (Cth), alternatively s 12GD of the Australian Securities and Investment Commission Act, that the second and third defendants be removed as receivers of each plaintiff and that they give up possession and control of the property of each plaintiff. Those orders are not sought as orders to be made in the course of, or as a result of, an inquiry under s 423 of the Corporations Act. The power to make orders under s 1324 of the Corporations Act, s 87 of the Trade Practices Act and s 12GD of the Australian Securities and Investment Commission Act are effectively conditioned by establishing a contravention of the provisions of the relevant Act. The plaintiffs seek alternatively orders that the Receivers certify the amount remaining due to the first defendant under the Charges and pay to the first defendant the amounts certified to be due under the Charges, and upon such payment they be removed as receivers and give up possession and control of the property of the plaintiffs. The plaintiffs also seek an order that the Receivers pay to the Borrowers and the Guarantors or each plaintiff all remuneration and expenses charged in respect of the relevant receivership for the period commencing 23 January 2008 or such other date as the court deems appropriate, and an order that the Receivers account to the Borrowers and the Guarantors for the plaintiffs and the fourth defendant (Westpoint Corporation Pty Ltd) for any remuneration unreasonably charged or expenses unreasonably incurred during the course of the relevant receivership. None of those orders are expressed to be orders sought in the course of, or as a result of, an inquiry under s 423 of the Corporations Act. The plaintiffs claim damages at law and pursuant to s 82 of the Trade Practices Act and s 12GF of the Australian Securities and Investment Commission Act. Those appear to be claims independent of any claim for an inquiry under s 423 of the Corporations Act. The plaintiffs claim an order pursuant to s 1317H of the Corporations Act that the Receivers compensate the Borrowers and the Guarantors or the plaintiffs for the damage suffered by them as a result of the Receivers' contraventions of s 180 and s 181 of the Corporations Act.
10 In its terms the statement of claim does not plead that there are grounds for an inquiry under s 423 of the Corporations Act or that there is sufficient basis for an inquiry. Rather, the statement of claim purports to plead causes of action. The statement of claim also includes claims against the first defendant, Perpetual Nominees Ltd (Perpetual), which are separate from any claim for an inquiry under s 423 of the Corporations Act.
Structure of statement of claim
11 Part B of the statement of claim pleads the loan agreement between Perpetual and the first four plaintiffs (Huntingdale Village Pty Ltd (Huntingdale), Silkchime Pty Ltd (Silkchime), Vannin Pty Ltd (Vannin) and Warwick Entertainment Centre Pty Ltd (Warwick Entertainment)) and the fourth defendant, Westpoint Corporations Pty Ltd (WPC), (together the Borrowers), a guarantee provided by the fifth plaintiff (Paragon Apartments Ltd (Paragon)), Bayview Port Melbourne Ltd (Bayview) and Westpoint Management Ltd (WML) and charges provided by each Borrower and Guarantor in favour of Perpetual. Part C pleads that Perpetual appointed the Receivers as joint receivers and managers of the plaintiffs, WPC, Bayview, Paragon and WML.
12 Part D consists of [19] which pleads that by reason of their appointment as joint receivers of the plaintiffs the Receivers owe to each plaintiff, Bayview, WML and WPC the duties enumerated in that paragraph. Particulars to the paragraph say that the duties arise at law or in equity and in relation to two of the duties also arise pursuant to s 180 and s 181 of the Corporations Act.
13 Part E pleads that the Receivers realised assets of the Borrowers and the Guarantors and as from 23 January 2008 the Secured Money has been completely paid. The Secured Money is the amount in which the Borrowers and the Guarantors were liable to Perpetual at the appointment of the Receivers. Paragraph 24 pleads that since at least 23 January 2008, wrongfully and in breach of the relevant Charge, Perpetual has failed and refused to discharge the relevant security interest and remove the Receivers. Part F pleads that from 24 January 2006 to December 2009 the Receivers charged remuneration totalling $6,840,783, legal fees totalling $5,864,335 to Corrs and other expenses totalling $444,656. Part G deals with the engagement of Corrs by the Receivers. At [34] the plaintiffs plead that after 24 January 2006 the Receivers as agents for the Borrowers and the Guarantors instructed Corrs from time to time to provide legal services to the Receivers in respect of the matters pleaded in parts I to P of the statement of claim. The plaintiffs plead that in February 2006 the Receivers, as agents for each of the Borrowers and the Guarantors, executed costs agreements with Corrs (CCW Costs Agreements). The plaintiffs plead that each of the CCW Costs Agreements specified the scope of legal services to be provided as 'general advice'. Paragraph 35 pleads that none of the Receivers' instructions to Corrs were for the provision of general advice by Corrs.
14 Part H pleads that the Receivers arranged at the cost of the Borrowers and the Guarantors for Mr Clohessy, the manager of real estate for Korda Mentha (the firm of which the Receivers were partners) to travel to Perth to meet with Mr Carey to discuss the sale of real estate secured by the Charges. The plaintiffs plead that in doing so the Receivers breached the duties pleaded in [19] and paid themselves unreasonably incurred fees and expenses.
15 Parts I to P relate to the receivership of Huntingdale, Silkchime, Vannin, Warwick, Paragon, Bayview, WPC, and WML respectively. Part Q deals with the receiverships generally. Part R is to the effect that the receivers' conduct in continuing the receiverships after the Secured Money had been repaid was a trespass to the property of the plaintiffs and the defendants have forfeited all rights of indemnity from the plaintiffs in respect of the receiverships from at least 24 January 2008. Parts S and T deal with rights of subrogation of Paragon, Huntingdale, Silkchime, Vannin and Warwick which entitle them to obtain from WPC indemnity for the excess of funds paid.
16 Part V is the prayer for relief. The plaintiffs claim relief against Perpetual for an order that Perpetual discharge the charges, an order that Perpetual assign the charges and other securities held by it in respect of the Loan Agreement to Paragon, alternatively to each plaintiff jointly, and orders that Perpetual cause the Receivers to do things claimed in the relief against the Receivers. I have already referred to the relief claimed against the Receivers. As I have said, it goes beyond a claim for an inquiry under s 423 of the Corporations Act.
SOC [9]
17 The Receivers submit that [9] of the statement of claim is embarrassing because the pleaded amounts do not add up to the amount referred to in the email referred to in the particulars. The plaintiffs say that the difference is about $20,000. The difference is not one which may prejudice, embarrass or delay the fair trial of the action.
SOC [19(g)] - duty to deal fairly
18 Paragraph 19(g) of the statement of claim pleads that by reason of their appointment as joint receivers of the plaintiff, the Receivers owe, and since 24 January 2006 have owed, each plaintiff, Bayview, WML and WPC a duty in respect of the relevant receivership to deal fairly in the interests of the relevant company. Particulars state that the duty arises at law or in equity. The defendants say that there is no such duty known to the law and any such duty would be inconsistent with the fundamental role of a receiver, the purposes for which a receiver is appointed and the powers conferred on a receiver.
19 The primary duty of receivers is to the chargee under the charge in respect of which they were appointed: Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd [39]. Receivers are bound to comply strictly with the terms of their appointment and must not act beyond their powers. They should exercise their powers bona fide to serve the purposes for which they were appointed: O'Donovan J 'Company Receivers and Administrators' [11.50] and the cases cited at footnotes 4 and 5. Receivers and managers owe a general duty to the chargor to act in good faith and to use their powers for the sole purpose of securing repayment of the monies owing to the chargee: Company Receivers and Administrators [11.70].
20 In Inkhorn Pty Ltd (ACN 009 236 337) (Subject to Deed of Company Arrangement) v Herbert [2000] WASCA 333 Miller J held that in determining the duties of receivers at general law the appropriate authority is the High Court decision in Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 that the relevant duty is one to act in good faith: that is, without fraud and without wilfully or recklessly sacrificing the interests of the mortgagor, but stopping short of exposing the mortgagee to liability for mere negligence or carelessness: Miller J [15].
21 The plaintiffs rely upon dicta of Einstein J in Jeogla v ANZ [1999] NSWSC 563 where his Honour said that notwithstanding a receiver's primary purpose, which is to gather in and realise the charged assets of the company to which he has been appointed and to apply the proceeds of sale to the satisfaction of the claims of the appointing mortgagee, a receiver is obliged 'also to have regard to the interests of the company'. In their written submissions the plaintiffs say that the pleaded duty is 'akin to a plea that the receivers were obliged to act in good faith as regards the interests of the plaintiffs which seems unexceptional'.
22 The phrase used by Einstein J must be seen in its context and not construed and applied as if it was a legislative provision. In Jeogla the bank was the mortgagee under mortgages over cattle and land on which cattle operations were conducted. Defaults under the securities led the bank to appoint a receiver and manager of all of the assets and undertakings of the corporate plaintiffs, including properties and cattle. The plaintiffs challenged the receivers' conduct in selling a property and the cattle on it. Einstein J found that the receivers had contravened the duty imposed on them by s 420A of the Corporations Act on the basis that the cattle had a market value and the receiver had failed to take reasonable care to sell the cattle for not less than the market value. Einstein J discussed the general law as an introduction to a consideration of the duties imposed by s 420A of the Corporations Act. In the course of that consideration Einstein J said that a receiver appointed to enforce a security is primarily responsible to the appointing security holder and that the receivers' primary purpose is to gather in and realise the charged assets of the company and to apply the proceeds of sale to the satisfaction of the claims of the appointing mortgagee. His Honour said that notwithstanding this primary consideration 'a receiver is obliged also to have regard to the interests of the company'. Einstein J referred with apparent approval to the statement of McLelland J in Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd [1995] ANZ Conv R 361 that:
the extent and scope of the relevant equitable obligations were considered by the High Court in Pendlebury. That case is authority for the proposition that in exercising its power of sale, a mortgagee must act in good faith, which involves an obligation to deal fairly with the interests of the mortgagor, which in turn involves an obligation to refrain from acting in wilful or reckless disregard of those interests.
23 Paragraph 19(g) appears to be an attempt by the plaintiff to cast the duty owed by a receiver to the chargor company as a duty which is proscriptive rather than prescriptive in nature. The pleading formulates the Receivers' duty as a positive duty to act in the interests of the companies. Such a formulation of a receiver's duty goes beyond a duty to act in good faith, without fraud and without wilfully or recklessly sacrificing the interests of the company and is not a duty recognised by the general law. Jeogla is not authority for the proposition that a receiver owes a positive duty to act in the interests of the companies. The pleading that the Receivers owe a duty to 'deal fairly in the interests of the relevant company' goes beyond the duty of receivers at general law to act in good faith; that is, without fraud and without wilfully or recklessly sacrificing the interests of the chargor company. A receiver does not owe a positive duty to 'deal fairly in the interests of the relevant company'. Paragraph 19(g) will be struck out as disclosing no reasonable cause of action or prejudicing, embarrassing or delaying the fair trial of the action.
SOC [28]
24 Paragraph 28 of the statement of claim pleads that on 24 January 2006 the Receivers, as agents for each of the Borrowers and the Guarantors, verbally agreed with Corrs represented by Dominic Emmett, that Corrs would provide 'general advice' to the Receivers. The Receivers object that the pleading should state the purport of the conversation as required by O 20 r 8(2). The pleading is defective insofar as it fails to state the substance of what was said and who said it. Those are material facts and should be pleaded.
SOC part G
25 Part G consists of [28] to [42]. The plaintiffs plead that the Receivers, as agents for each of the Borrowers and the Guarantors, entered into the CCW Costs Agreements with Corrs and plead the terms of those agreements, including the hourly rates to be charged by solicitors which were in excess of the hourly rates that could be charged pursuant to the relevant Legal Practitioners (Supreme Court) (Contentious Business) Determination. The scope of legal services to be provided under the CCW Costs Agreements is pleaded to be 'general advice'. The plaintiffs then plead that subsequently from time to time the Receivers, as agents for the Borrowers and the Guarantors, instructed Corrs to provide legal services to the Receivers in respect of the matters pleaded in parts I to P of the statement of claim. The plaintiffs plead that none of those instructions were for the provision of 'general advice', that each instruction from the Receivers to Corrs was a separate retainer of Corrs by the Receivers, that the legal services were primarily provided in Western Australia and that the law of Western Australia applied to the CCW Costs Agreements and the legal services provided by Corrs.
26 In [39] to [42] the plaintiffs put forward an alternative pleading. The plaintiffs plead that if the CCW Costs Agreements applied to all legal services performed by Corrs, then the Receivers breached their duties to the Borrowers and the Guarantors as pleaded in [19(a)], [19(b)] and [19(g)] of the statement of claim because they entered into the CCW Costs Agreements without taking any reasonable steps to ascertain the availability of other solicitors to act on terms more advantageous to the Borrowers and the Guarantors than in the CCW Costs Agreements, and by requiring that the CCW Costs Agreements be amended to provide that Corrs would charge and be entitled to be paid only for the time reasonably taken to perform any work performed by a fee earner whose skill and experience was reasonably appropriate to the work performed.
27 The pleading in part G that the CCW Costs Agreements do not apply to the legal services described in parts I to P is inconsistent with the pleadings in those latter parts of the statement of claim. In each of those parts it is pleaded that the Receivers retained Corrs to act for the Receivers in relation to the particular legal services 'on the terms in the CCW Costs Agreements'. To that extent, the pleadings in [28] to [38] of part G are embarrassing.
28 Paragraph 42 of part G pleads that by reason of the Receivers' breaches of duty pleaded in [41] the plaintiffs have suffered loss and damage. The breach pleaded in [41] is that the CCW Costs Agreements applied to all legal services performed by Corrs on the instructions of the Receivers and, that the conduct of the Receivers in making the CCW Costs Agreements was in breach of their duties to the Borrowers and the Guarantors as pleaded in [19(a)] and [19(b)] and (19(g)]. The basis of that plea is that the Receivers retained Corrs to act on the terms in the CCW Costs Agreements without taking any reasonable steps to ascertain the availability of other solicitors to act on terms more advantageous to the Borrowers and the Guarantors than in the CCW Costs Agreements, and without requiring that the CCW Costs Agreements be amended to provide that Corrs would charge and be entitled to be paid only for the time reasonably taken to perform any work performed by a fee earner whose skill and experience was reasonably appropriate to the work performed.
29 There is no duty on the Receivers to retain solicitors to act on terms more advantageous to the Borrowers and the Guarantors than in the CCW Costs Agreements. That plea appears to rest on an assumption that a receiver has a positive duty to act in the best interests of the chargor companies irrespective of the receiver's primary duty to gather in and realise the charged assets of the companies and to apply the proceeds of sale to the satisfaction of the claims of the appointor. To the extent that [19(a)] and [19(b)] of the statement of claim encompass such a duty they go beyond the duties owed by a receiver to the companies. I have already found that [19(g)] should be struck out. The relevant duty of the Receivers is to act in good faith without fraud and without wilfully or recklessly sacrificing the interests of the companies. There are no facts pleaded in part G that, or from which it can be inferred that, the Receivers did not act in good faith in the relevant sense in engaging Corrs without taking steps to ascertain the availability of other solicitors to act on terms more advantageous to the Borrowers and the Guarantors than in the CCW Costs Agreements. Further, the plaintiffs have not pleaded that if the Receivers had taken any reasonable steps to ascertain the availability of other solicitors to act on terms more advantageous to the Borrowers and the Guarantors than in the CCW Costs Agreements, then the Receivers would or could have retained solicitors to act on different terms. There are no facts pleaded to establish that the Receivers could or should have retained solicitors to provide comparable legal services on terms more advantageous to the Borrowers and the Guarantors than in the CCW Costs Agreements.
30 Paragraphs 39 to 42 of the statement of claim fail to disclose any reasonable cause of action and are embarrassing. Part G should be struck out.
Part H
31 This part consists of [43] to [49]. Paragraph 43 pleads that the Receivers arranged at the cost of the Borrowers and the Guarantors for Mr Clohessy, the manager of real estate for Korda Mentha, the firm of which the Receivers were partners, to travel to Perth to meet with Mr Carey to discuss the sale of real estate secured by the Charges. The plaintiff goes on to plead that there were real estate consultants and agents in each of Perth, Sydney and Melbourne possessed of skill and expertise to advise the Receivers in relation to the sale of real estate secured by the Charges. The relevance of that plea is that there was real estate in Perth, Sydney and Melbourne secured by the Charges. The plaintiff then pleads that a person exercising his powers in accordance with the duties pleaded in [19(a)], [19(b)], [19(f)] and [19(g)] would not have arranged for Mr Clohessy to travel to Perth to meet with Mr Carey at the cost of the Borrowers and the Guarantors, but would have engaged real estate consultants and agents in each of Perth, Sydney and Melbourne to advise the Receivers as necessary in relation to the sale of real estate secured by the Charges. The plaintiffs say that by reason of those matters the Receivers paid themselves unreasonably incurred fees and expenses in arranging for Mr Clohessy to travel to Perth and to meet with Mr Carey, and their conduct was in breach of their duties pleaded in [19(a)], [19(b)], [19(f)] and [19(g)] as a result of which the plaintiffs have suffered loss and damage.
32 Part H fails to disclose any reasonable cause of action. There are no facts pleaded which establish, or can establish, that the Receivers breached their duties as alleged. The statement of claim does not identify the real estate the sale of which Mr Clohessy discussed with Mr Carey. It may have been real estate in Perth, Sydney or Melbourne or in all three places. There are no facts pleaded which make it inappropriate, let alone a breach of duty, for the Receivers to have engaged Mr Clohessy. The failure to plead any material facts which are capable of constituting a breach of duty by the Receivers means that part H fails to disclose any reasonable cause of action. The statements in [47] and [48] that the Receivers paid themselves unreasonably incurred fees and expenses in arranging for Mr Clohessy to travel to Perth and to meet with Mr Carey and that such conduct was in breach of the Receivers duties is a statement of conclusion without stating material facts.
Part I
33 Part I is divided into four sections. Sections 1 and 2 deal with legal services provided by Corrs to the Receivers. Section 1, which consists of [50] to [59], deals with legal services in relation to the sale and settlement of the Huntingdale Village Shopping Centre which was an asset of Huntingdale and was sold by the Receivers. Section 2 deals with legal services in relation to a claim by a supermarket lessee against Huntingdale. Section 3 deals with the payment by the receivers to Corrs for legal services referred to in sections 1 and 2. Section 4 deals with the fees the Receivers paid themselves in relation to the receivership of Huntingdale.
First theme [50] to [59]
34 Senior counsel for the Receivers, Mr Zelestis QC, said that parts I to M have four themes. The first theme is exemplified by section 1 which consists of [50] to [59]. In [54] the plaintiffs plead that the Receivers retained Corrs to act for the Receivers in relation to the sale and settlement of the Huntingdale Village Shopping Centre on the terms in the CCW Costs Agreements. Paragraph 55 pleads that the Receivers retained Corrs to act for the Receivers in relation to the sale and settlement of the shopping centre without taking any reasonable steps to ascertain the availability of other solicitors to act on terms more advantageous than the CCW Costs Agreements and without regard to the entitlement of the Receivers to engage solicitors other than Corrs to act in relation to the sale and settlement of the shopping centre at the rates in the WA Solicitors Scales. The plaintiffs plead that by reason of engaging Corrs on the terms in the CCW Costs Agreements and failing to take any reasonable steps to ascertain the availability of other solicitors to act on more advantageous terms, and without regard to the Receivers' entitlement to engage solicitors to act at the rates in the WA Solicitors Scales, the Receivers paid excessive and unreasonably incurred legal costs. The plaintiffs say that the conduct of the Receivers was in breach of their duties pleaded in [19(a)], [19(b)], [19(f)] and [19(g)] and as a result Huntingdale suffered loss and damage.
35 The Receivers submit that the conclusion that the fulfilment of the alleged duties required the Receivers to engage solicitors to provide legal services at scale rates is not arguably capable of being sustained by assertions that the Receivers should have followed a process of ascertaining the availability of legal services at scale rates and having regard to their entitlement to engage legal services at scale rates. No facts are pleaded as to why the outcome of the pleaded process would have compelled the engagement of solicitors at scale rates.
36 Mr Zelestis explained the defect in the pleading in this way. To say that the Receivers failed to have regard to the availability of other solicitors and failed to regard their entitlement to engage other solicitors at scale rates does not mean that they paid excessive and unreasonably incurred legal fees, because those matters alone are not capable of negativing the existence of good reasons for engaging the solicitors they did engage. To say that the Receivers did not take steps to ascertain the availability of solicitors to act on terms more advantageous than the CCW Costs Agreements or have regard to their entitlement to engage solicitors other than Corrs to act at scale rates, does not mean that the taking of those steps would have produced a different outcome. If the plaintiffs' case is that the taking of those steps and having regard to those matters would have produced a different outcome, then they must plead the facts to give rise to that conclusion. The plaintiffs cannot establish a breach of duty by pleading merely that the Receivers did not consider something. The plaintiffs would have to plead that considering those matters arguably would have led to a different outcome. The plaintiffs must plead the facts and circumstances which establish that it was inappropriate for the Receivers to engage Corrs. That must be considered in the context that Corrs is a national firm and the receivership involved properties in Perth, Sydney and Melbourne.
37 The Receivers further explain the matter this way. Let it be assumed that the Receivers could have ascertained that other solicitors were available to provide legal services at scale costs and that the Receivers specifically considered their entitlement to engage such solicitors. Those matters themselves could not arguably support a conclusion that the Receivers' duties would then have compelled them to engage other solicitors at scale rates. Those matters do not arguably negative the existence of sound reasons to engage Corrs at other rates. The Receivers submit, and I accept, that the case put in [50] to [59], is so plainly wrong as to disclose no reasonable cause of action.
38 The Receivers made a further point concerning [56] of the statement of claim. It is there pleaded that pursuant to the WA Solicitors Scales a solicitor's fees to act in the sale of the Huntingdale Shopping Centre would have been about $11,772. The Receivers submitted that there is no pleading that the scope of the services to which that fee relates was the same as the scope of the services which Corrs were retained to provide or did provide and that accordingly the plea of the scale fee is meaningless. I agree. If the plaintiffs intend that the fee pleaded in [56] is the scale fee in relation to the same work that Corrs were retained to carry out and did carry out in relation to the Huntingdale Village Shopping Centre, then they should expressly plead those things.
39 Section 2 of part I follows the same structure as section 1 but relates to legal services the Receivers engaged Corrs to provide in relation to a claim by a supermarket lessee against Huntingdale. In [64] the plaintiffs plead that a reasonable allowance for providing the legal services could not exceed $20,000. The Receivers submit that there is no basis for that plea. I agree. The pleading does not set out the items of work carried out by Corrs or any other facts which could properly found the conclusion that a reasonable allowance for providing the legal services could not exceed $20,000. The pleading in section 2 discloses no reasonable cause of action or may prejudice, embarrass or delay the fair trial of the action.
Second theme [67] to [72]
40 Mr Zelestis submitted that the second theme is exemplified by section 3 of part I which consists of [67] to [72]. Section 3 pleads in relation to costs paid by the Receivers to Corrs. Paragraph 67 pleads that as at December 2009 the Receivers had paid Corrs $170,365 for their services in respect of the Huntingdale receivership. In the course of the hearing counsel for the plaintiffs, Mr Metaxas, stated that [67] is intended to plead that the Receivers paid Corrs $170,365 for the legal services referred to in sections 1 and 2 of part I. The present pleading does not say that. If the plaintiffs wish to advance that plea they will need to do so expressly. Section 3 continues by pleading that after allowance for the $20,000 for the Huntingdale solicitors work, that is the work for the legal services referred to in section 2, the Receivers were charged by Corrs about 13 times the allowance under the WA Solicitors Scales to act in the sale and settlement of the Huntingdale Centre. That plea is unsustainable for the reasons that the pleading of sections 1 and 2 are unsustainable. The assertion of an allowance of $20,000 for the legal services referred to in section 2 is an argumentative conclusion based on facts not pleaded. The comparison of the amount paid for the legal services referred to in section 1 and the 'allowance under the WA Solicitors Scales to act in the sale and settlement of the Huntingdale Centre' is unsustainable. The pleading does not purport to set out the items of work done by Corrs or any facts which enable a comparison to be drawn between the amount paid by the Receivers to Corrs and the scale rate for such work.
41 The remaining paragraphs of section 3 plead that the legal costs charged by Corrs were excessive, unreasonably rendered for the services provided and should not have been paid except to the extent they were reasonable, and a person exercising his powers in accordance with the duties pleaded in pars 19(a) (b), (f) and (g) would not have paid Corrs $170,365 for their services in respect of the Huntingdale receivership. There are no facts pleaded which enable that argumentative conclusion to be drawn. Section 3 discloses no reasonable cause of action and may prejudice, embarrass or delay the fair trial of the action.
Third theme [73] to [76]
42 Mr Zelestis submitted that the third theme is exemplified by section 4 of part I which consists of [73] to [76]. Section 4 deals with the Receivers' fees in relation to the Huntingdale receivership. Paragraph 73 pleads that as at December 2009 the Receivers had paid themselves $473,616 of fees in relation to the receivership of Huntingdale. The plaintiffs then plead in [74] that a person exercising his powers in accordance with the duties pleaded in pars 19(a), (b), (f) and (g) would not have paid themselves fees in that amount in relation to the receivership of Huntingdale by reason of the facts, matters, acts and things pleaded in part I. The preceding paragraphs of part I provide no foundation for the plea in [74]. The plaintiffs go on to plead breach of duties and resulting loss and damage. This section contains statements of argumentative conclusion which are not supported by pleaded facts. Those paragraphs disclose no reasonable cause of action and may prejudice, embarrass or delay the fair trial of the action.
Fourth theme [219] to [232]
43 Mr Zelestis' fourth theme is exemplified by section 1 of part O which consists of [219] to [232]. This section is concerned with a proceeding brought by the Receivers in the Federal Court – WAD 83 of 2006. Paragraph 219 pleads that the Receivers retained Corrs on the terms of the CCW Costs Agreements to prosecute WAD 83 of 2006 in the Federal Court. Paragraphs 220 to 226 plead the nature of the issue in the proceedings and the work done by Corrs. Paragraph 226 pleads in effect that the legal fees charged by Corrs to the Receivers were in excess of $75,000. Paragraph 227 pleads that a reasonable allowance for the Receivers' legal costs would have been $20,000 to $25,000, and hence the costs charged by Corrs were excessive for the services provided and should not have been paid.
44 The Receivers submit that the plaintiffs have pleaded that the Receivers retained Corrs on the terms of the CCW Costs Agreements and hence the concept of a 'reasonable allowance' for the work is irrelevant. The relevant question, the Receivers submit, is whether Corrs' fees were charged in accordance with the CCW Costs Agreements and it is not pleaded that they were not. Accordingly, the Receivers submit, the plea as to a 'reasonable allowance' provides no basis for the plea in [227] that the costs charged by Corrs were excessive and should not have been paid. I agree. It follows that the pleading discloses no reasonable basis for the allegations of breach of duty pleaded in [230] and [231]. This section discloses no reasonable cause of action.
Parts J to Q
45 Mr Zelestis submitted that parts J to Q are based on the same four themes that I have referred to in relation to part I and disclose no reasonable cause of action for the same reasons. I agree.
46 The Receivers raised further and particular objections to a number of paragraphs of the statement of claim, which I will consider separately.
Paragraphs 77 to 85
47 Paragraphs 77 to 85 constitute section 1 of part J. Part J concerns the Silkchime receivership. Section 1 concerns a data room set up by the Receivers in relation to the sale of six strata titled medical suites in the Warwick Medical Centre. Paragraph 80 pleads that a person exercising his powers in accordance with the duties pleaded in pars 19(a), (b), (f) and (g) would not have set up a data room in order to sell the units and would not have engaged Corrs to assist in that work.
48 The statement of claim does not plead facts which enable a conclusion to be drawn about what information was reasonably required to be made available to prospective purchasers and whether it was appropriate to make that information available in a data room. It follows that the pleas in [83] and [84], that the Receivers paid themselves excessive and/or unreasonably rendered fees and incurred unnecessary legal costs and engaged Corrs to assist in that work and thereby breached their duties, are argumentative conclusions unsupported by pleaded material facts.
Paragraphs 219 to 232, 233 to 241
49 Part O is concerned with the WPC receivership. Section 1 is concerned with the Receivers having retained Corrs to prosecute WAD 83 of 2006 in the Federal Court. Section 2, which consists of [233] to [241], deals with the Receivers and Perpetual having retained Corrs to prosecute WAD 60 of 2008 in the Federal Court. The allegations against the Receivers in these sections depend on the assertion that the Federal Court Rules 1979 (Cth) prevent a payment of certain solicitor and client costs. The plaintiffs rely on O 62 r 12 of the Federal Court Rules. However, that rule only applies to costs payable or to be taxed under any order of the Federal Court or under the Rules and costs to be taxed in the Federal Court under any Act: O 62 r 2 Federal Court Rules. It does not apply to solicitor/client costs, at least in the absence of an order of the Federal Court requiring a legal practitioner's costs to be taxed in that court. Accordingly, there is no basis for the contention that Corrs have no entitlement to charge costs higher than those provided for in the Federal Court scale. Sections 1 and 2 of part O should disclose no reasonable cause of action.
Paragraphs 279 to 281
50 Part Q is concerned with the receiverships generally. Section 1 is entitled 'Actions unnecessary to repay the monies loaned'. Paragraph 279 pleads that prior to the advance of the monies loaned on 28 September 2005 the real estate assets secured by the Charges had been valued, by valuers engaged by Perpetual, at in excess of $60 million. Paragraph 280 pleads things that a person exercising his powers in accordance with the duties in pars 19(a), (b), (d) and (g) would have done. Paragraph 281 pleads that after their appointment the Receivers acted other than as was consistent with the duties pleaded in pars 19(a), (b), (d) and (g) insofar as they did the things there enumerated and in so doing caused their fees and the legal costs they incurred to be increased above the fees and the legal costs that ought reasonably have been incurred. There are no facts pleaded to sustain the pleaded breaches of duty.
Paragraphs 282 to 285, 286 to 299
51 These paragraphs depend upon the matters pleaded in parts G to Q and fall with those paragraphs.
Conclusion
52 The amendments to [19(g)] and [28] to [299] of the re-amended statement of claim of 11 August 2010 should be disallowed.
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