Kent v MacLELLAN and Ors - [2002] WASC 199

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: KENT -v- MacLELLAN & ORS [2002] WASC 199

CORAM: PULLIN J

HEARD: 27 JUNE 2002

DELIVERED : 27 JUNE 2002

FILE NO/S: CIV 1820 of 2002
CIV 1861 of 2002

BETWEEN: ANDREW LESLIE KENT
Plaintiff
AND
RICHARD CAMERON MacLELLAN
First Defendant
LECHMERE FINANCIAL CORPORATION
Second Defendant
DRYSDALE INVESTMENTS CORPORATION
Third Defendant
ASPERMONT LIMITED
Fourth Defendant

Catchwords:

Practice and procedure - Application to adjourn applications to set aside writ and service of writ - Turns on own facts

Legislation:

Corporations Act, s 109X(1)(a), s 109X(1)(b)

Result:

Plaintiff's application to adjourn refused
Second defendant's application granted

Category: B

Representation:

Counsel:

Plaintiff:     Mr K J O'Toole
First Defendant             :     No appearance
Second Defendant         :     Mr A R Beech & Mr S J Penrose
Third Defendant           :     No appearance
Fourth Defendant          :     Mr C R Coulson

Solicitors:

Plaintiff:     K J O'Toole & Associates
First Defendant             :     No appearance
Second Defendant         :     Tottle Christensen
Third Defendant           :     No appearance
Fourth Defendant          :     Coulsons

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

Aspermont Ltd v Lechmere Financial Corporation [2002] WASCA 52
Kent v Lechmere Financial Corporation [2002] WASC 75
Laurie v Carroll (1958) 98 CLR 310

Case(s) also cited:

Nil

PULLIN J: I refuse the plaintiff's application to adjourn the defendants' applications to set aside the writ and to set aside the service of the writ on the defendants. The points which are now being argued are points which required consideration by the plaintiff in making the applications for leave to issue the writ and for leave to serve the writ out of the jurisdiction, which were heard before Master Sanderson. The propositions which have been put really emerge from a consideration of the standard text, that is Seaman's Civil Procedure in Western Australia, which sets out the matters which have to be considered. The points that have been raised on behalf of the second defendant, in my opinion, raise nothing that should not have been considered by the plaintiff on the application before Master Sanderson, so I would refuse the application to adjourn.
I now turn to deal with the applications to set aside made by the second defendant in CIV 1820 of 2002 and in CIV 1861 of 2002. I will refer to the second defendant as Lechmere, to the fourth defendant as Aspermont, and to the plaintiff as Mr Kent.
Master Sanderson, in CIV 1820 of 2002, gave leave to Mr Kent to issue a writ against Lechmere and to serve Lechmere out of the jurisdiction. Lechmere is incorporated in the British Virgin Islands, and its principal place of business is in Monaco. Master Sanderson also ordered that Lechmere could be served by leaving a copy of the writ at the office of Tottle Christensen, the solicitors who previously appeared for Lechmere in other litigation. The writ then issued in CIV 1861 of 2002 and was served on Tottle Christensen.
Lechmere has entered a conditional appearance in CIV 1861 of 2002, denying the jurisdiction of the Court, and it has made an application under O 12 r 6 to set aside the order granting leave to serve Lechmere out of the jurisdiction and the order to serve Lechmere by serving it at Tottle Christensen's office.
It seems that the parties will keep this Court occupied with litigation for some time, and I think that I should therefore summarise what has happened to date for the benefit of others who might have to consider what has happened. The background facts to the dispute are summarised in Hasluck J's reasons for decision in the case of Aspermont Ltd v Lechmere Financial Corporation [2002] WASCA 52, particularly at pars 9 through to 19 and 25, 29 and 31.
In short, Lechmere says that it loaned Mr Kent $780,000 so Mr Kent could purchase a half‑interest in Australia's Mining Monthly. Lechmere then says that Mr Kent and Aspermont agreed that Aspermont would acquire Mr Kent's half‑interest in Australia's Mining Monthly, and Lechmere alleges that Aspermont agreed to take over Mr Kent's debt as part of the consideration for this transaction.
Mr Kent, on his part, says that the $780,000 advanced to him by Lechmere was money, in fact, beneficially owned by him, and he also contends that the takeover by Aspermont of the $780,000 debt was null and void. All of those contentions are yet to be decided by a court.
On 25 April 2001, Lechmere issued a statutory demand on Aspermont under the Corporations legislation concerning interest which was due under the alleged debt, due by Aspermont to Lechmere. Mr Kent now is concerned that Lechmere will issue a statutory demand against Aspermont, requiring payment of the $780,000, and it seeks relief in the writ in CIV 1861 of 2002 as per the endorsement, which reads:
"The plaintiff claims
(a) that a purported debt in the sum of $780,000 recorded in the books of account of the fourth defendant as owing by the fourth defendant to the second defendant, and as due for payment by the fourth defendant to the second defendant on 30 June 2002, is null and void.
(b) that the aforesaid sum of $780,000 was money beneficially owned by the plaintiff when it was advanced by the first defendant, from funds of the third defendant, to the plaintiff, in or about the months of December 1993, October 1995 and December 1995, such advances having been made at the direction of the plaintiff to the first defendant, who was at the time the plaintiff's trustee pursuant to an oral trust of which the plaintiff was sole beneficiary.
(c) that the plaintiff has since terminated the aforesaid trust and has legal and beneficial title to such debt, if any, and to any interest paid or payable thereon, which is the subject of the aforesaid sum of $780,000.
AND THE PLAINTIFF SEEKS THE FOLLOWING RELIEF:
1. A declaration that the purported debt in the books of account of the fourth defendant as due to the second defendant on 30 June 2002 is null and void.
2. A declaration that the sum of $780,000 received by the plaintiff in the months of December 1993, October and December 1995 was from monies held in trust by the first defendant and, or alternatively, the second defendant and, or alternatively, the third defendant, for the plaintiff, pursuant to a trust of which the plaintiff was sole beneficiary.
3. An injunction to restrain the second defendant from serving a demand for payment of alleged debt upon the fourth defendant.
4. Interlocutory relief and such other relief as this honourable Court sees fit to grant."
As to the litigation to date, I should say that there have been at least four other pieces of litigation. I know of others, but the four that I now refer to are as follows.
First, in COR 162 of 2001, an application was made under s 459G of the CorporationsLaw by Aspermont, seeking to set aside the statutory demand. This came on before Master Bredmeyer, and he set aside the statutory demand in part but allowed the demand to stand in relation to a substantial amount of interest which was due under the debt which Lechmere says is owed to it by Aspermont.
Secondly, in CIV 2960 of 2001 between Kent and Lechmere in January of this year, Miller J heard an application for an injunction brought by Mr Kent. This was dismissed, and there was a reference by Miller J to problems associated with jurisdiction, and in particular reference was made to O 5 r 9.
Thirdly, in FUL 4 of 2002, an appeal was instituted by Aspermont against the order of Master Bredmeyer refusing to set aside the statutory demand in relation to the interest in relation to the debt. It was in relation to those proceedings, and in those proceedings, that Hasluck J heard an application for a Mareva injunction brought by Aspermont against Lechmere, and that application failed. It was in relation to that application that Hasluck J wrote his reasons for decision, which I have already referred to.
Fourthly, in CIV 1082 of 2002, proceedings were brought by, I think, Mr Kent against Lechmere and others relating to the same dispute. An order had been made by Acting Master Chapman on 25 January 2002, granting leave to serve the writ out of the jurisdiction, and an application was made by Lechmere in those proceedings to set aside the writ and to set aside service of the writ, and I made orders in those terms in Kent v Lechmere Financial Corporation [2002] WASC 75.
They are the main pieces of litigation. I understand that there have been other statutory demands and other proceedings to set aside statutory demands. I know of two other sets of proceedings (COR 2 of 2000 and COR 34 of 2002), but I simply mention those for the sake of completeness.
I now come to the application before Master Sanderson in CIV 1820 of 2002. This application was supported by an affidavit of Mr Kent sworn 14 June 2002, and that affidavit referred to affidavits sworn by him in COR 162 of 2002, although I think that reference should be to 2001; to his affidavit in CIV 2960 of 2001; and to his affidavit in CIV 1082 of 2002. I should say that I think it is an unsatisfactory method to adopt in an application of this kind. A busy Master should not have to trawl through the other files to find the affidavits. The affidavit for the purposes of O 10 r 1 should deal only with the requirements of that provision.
There was also an affidavit by Mr Kevin James O'Toole sworn 17 June 2002. Order 10 r 4(1) requires a statement of the grounds in O 10 r 1(1) which are relied upon. Mr O'Toole's affidavit identified O 10 r 1(1)(g), which reads:
"(1)Service of a writ or notice of a writ out of the jurisdiction is permissible with the leave of the Court whenever –
…
(g)in the action an injunction is sought ordering the defendant to do or refrain from doing anything within the jurisdiction."
Reliance was also placed on O 10 r 1(1)(h), which contains the words:
"Any person out of the jurisdiction is a necessary or proper party to an action properly brought against some other person duly served within the jurisdiction."
The application was made to Master Sanderson ex parte, as is normal, and orders were made as asked, granting leave to issue the writ and to serve it out of the jurisdiction. In addition, the order for substituted service on Tottle Christensen was made.
As to the endorsed writ, Mr Kent is seeking an injunction to benefit Aspermont, that is, to restrain Lechmere from serving Aspermont with the statutory demand, and seeking a declaration that the debt recorded in the books of Aspermont as due to Lechmere, is null and void.
The relief by way of injunction is sought only if the plaintiff succeeds in its claim for the declarations based on the materials set out in the endorsement; that is, that Mr Kent was the beneficial owner of the $780,000 which Lechmere advanced to him and that the debt recorded in the books of Aspermont was null and void.
If I can briefly refer to some law in relation to an application of this kind. The law was summarised in my reasons for decision in Kent v Lechmere Financial Corporation (supra), and I refer in particular to the last sentence in par 7 of those reasons, which reads:
"In my view, under the system in this State the plaintiff must demonstrate when he applies for leave, that all of his claims fall under the provisions of O 10 r 1(1). No question of election arises."
I refer to par 8, which reads:
"When a defendant challenges the jurisdiction of the court after entering a conditional appearance and applies to set aside the writ and service of the writ - see O 12 r 6 and r 7 - the plaintiff is required to sustain service on the ground or grounds relied upon by him in the affidavit upon which the order is made, and he cannot at that stage sustain the service upon some other ground. See Koranna Nominees v Roberts (supra) per Burt CJ at p5."
I now turn to the Lechmere submissions in this case. Lechmere seeks an order setting aside Master Sanderson's orders on the grounds, inter alia, that the claims do not fall within O 10 r 1.
It does seem clear to me that the claim for the injunction depends upon Mr Kent succeeding on the other claims. The other claims are that the $780,000 which was advanced by Lechmere was beneficially owned by him (he seeks a declaration to the effect that the moneys were moneys held in trust by either Lechmere or Lechmere's director, the first defendant) and that the debt which Aspermont shows in its books of account as due to Lechmere, is null and void. Declarations are sought in relation to these two claims. As to these claims, counsel for Mr Kent sought to argue that they fell within par (e) of O 10 r 1(1). I do not understand why this is so, but in any event I refer to par 8 of my reasons in [2002] WASC 75. It is not permissible to seek to justify the orders of Master Sanderson on grounds not relied upon before him. The fact that the claim for the injunction is within O 10 r 1 and other claims are not within O 10 r 1, means that what I said in par 7 of my reasons in [2002] WASC 75 applies.
It was also argued by Lechmere that, in any event, the act that Mr Kent seeks to restrain is the service of the statutory demand. Service may be effected under s 109X(1)(a) or (b) of the Corporations Act. One permitted method of service involves Lechmere posting the statutory demand to Aspermont's registered office in Australia, but Lechmere points out that such act could be carried out by Lechmere out of Australia, and it is submitted that, therefore, even the injunction claim does not fall within O 10 r 1. Counsel for Mr Kent argues that the act is the effecting of service by causing the notice to arrive at Aspermont's office in Australia. This is an interesting debate that I do not have to resolve in these proceedings because of the other reasons I have given above.
I then come to the question about whether the claims fall within O 10 r 1(1)(h). This provision requires proof that proceedings have been properly brought against some person duly served within the jurisdiction and that the extra territorial party is a necessary or proper party to that action. No attempt has been made to show that any party within the jurisdiction had been duly served. I notice that Aspermont is within the jurisdiction and it is a party, and if it had been duly proved to Master Sanderson's satisfaction that the proceedings had been properly brought against Aspermont and that Aspermont had been duly served within the jurisdiction, then the application may have been justified. It would not seem difficult, given the facts in this case, to satisfy the requirements of this subparagraph, but in relation to this application it is enough to observe that the requirements of the paragraph were not established in the application before Master Sanderson.
I also refer to the substituted service order that was made by Master Sanderson in his order number 2. In my opinion, no order should have been made for substituted service. Where a writ may not be served personally, an order for substituted service may not be made: Laurie v Carroll (1958) 98 CLR 310 at 332.
There was also a contention that there was non‑disclosure in the application before Master Sanderson. Counsel for Mr Kent explained, and I accept his explanation, that he was ready to deal with the application before the Master at length but that the Master said that he had read the papers and was prepared to make the order. The circumstances of non‑disclosure do not adversely reflect on counsel for Mr Kent in this case. I do think, though, that in those circumstances, what counsel should have done was to persist and indicate that there had been a background to the application that required the Master to be fully acquainted with the troubles that Mr Kent and Aspermont had encountered to that date, so that the Master did fully understand the situation. I think that is a point to be borne in mind for the future.