Melbourne Coach Terminal v Talbot

[2002] VSC 445

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 6110 of 2002

MELBOURNE COACH TERMINAL	Plaintiff
v
SCOTT OLIVER TALBOT	Defendant

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JUDGE:	Bongiorno J
WHERE HELD:	Melbourne
DATE OF HEARING:	8, 9 and 15 October 2002
DATE OF JUDGMENT:	15 October 2002
CASE MAY BE CITED AS:	Melbourne Coach Terminal v Scott Oliver Talbot
MEDIUM NEUTRAL CITATION:	[2002] VSC 445

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Practice and procedure – validity of corporation prosecuting proceeding with only disqualified director – standing of defendant to seek stay – cross-examination on interlocutory application.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R. L. Berglund Q.C.	Lewis Allen Janover
For the Defendant	Mr P. R. Hayes Q.C.	Madgwicks

HIS HONOUR:

1. This is an application brought by summons issued 7 October 2002 by the defendant, Scott Oliver Talbot, seeking a number of orders.  They are:

1.        That the proceeding be dismissed or permanently stayed.

2.That the plaintiff's solicitors be restrained from acting upon the direct or indirect instructions of Mr Philippe Barros.

3.That Mr Barros be restrained from giving instructions directly or indirectly on behalf of the plaintiff.

4.That the funds now held in the joint trust account of Baker & McKenzie and Gerard Stuk be released to the defendant absolutely.

1. Shortly before this summons was issued the solicitors for the defendant disclosed to the Court that in 1998 Mr Barros acquired a number of convictions for serious fraud within the meaning of the then Corporations Law. These convictions disqualified him from acting as a director of a company under the law as it then stood and under the law as it stands now. It is not necessary to trace the relationship between the various statutes which control the situation, having regard to the fact that, although different in form, the present statute now effectively prohibits the same conduct as the statutes did then. It is clear that the law prohibits him from directing a company or from being directly or indirectly in the position of a director.

1. Following that disclosure, the plaintiff replaced Mr Barros as a director with a Mr Osbay, a person said by the defendant to be merely an alter ego of Mr Barros, or someone accustomed to act on his instructions.  Whether that is so or not, I have considerable doubt as to the standing of the defendant to bring these matters before the Court in the way in which he has.

1. It is clear that, although a director is disqualified from acting, the company which he is directing can, I think, make valid resolutions and give valid instructions.  The difference is between a question of capacity or validity and a question of legality.  In Yango Pastoral Co Pty Ltd v. First Chicago Australia Ltd[1] the High Court distinguished a situation in which a company, although prohibited by law from carrying out a particular function, was nevertheless able to enter into valid and enforceable contracts of the very type prohibited.  The company in that case was carrying on banking without a banking licence.  This did not affect the validity or enforceability of loans made by it or securities taken by it.  The High Court said that there would need to be some express prohibition or necessary implication from the prohibiting statute for it to have the effect that acts done by someone who was disqualified (or unqualified as in the case of the bank) were, ipso facto, themselves void and of no effect.  I conclude that the acts of the plaintiff in bringing and prosecuting this proceeding are not void or of no effect, even if in having it perform those acts Mr Barros was committing a criminal offence.

   [1](1978) 139 CLR 410.

1. The other relief sought by the defendant, that is to say, restraining the plaintiff's solicitors and Mr Barros himself in various ways, are simply indirect methods of achieving the same result and must depend upon similar considerations of capacity and lawfulness.

1. Mr Hayes, for the defendant, sought leave to cross-examine Mr Barros on an affidavit which he has recently filed.  The discretion to permit cross-examination on an affidavit in an interlocutory proceeding such as this should only be exercised if there is some useful end to be obtained.  Having regard to the view I have formed, there is no useful end to be obtained, and I therefore refuse leave to cross-examine.

1. That leaves the situation that the company has, as a result of the disclosure prior to the issue of this summons of Mr Barros's disqualification, acted to correct that, at least on the face of the record.  So far as Mr Hayes's complaint that Mr Osbay is not an independent director, I doubt very much, as I have said, whether a person in the position of the defendant can effectively make the application that Mr Hayes is making.  In any event, at the moment, there is no application on the summons which goes directly to prohibit Mr Osbay from acting as a director.  Mr Barros is himself not before the Court in any capacity other than as an observer.  He is no longer a director of the plaintiff.  Mr Berglund does not act for Mr Barros and is unable to offer any of the undertakings which Mr Hayes seeks.  It may well be that on the trial of this action, which is fixed for 25 October, many of these issues will be able to be ventilated in one way or another, whether by way of preliminary application properly founded or in the course of evidence and argument on the substantive issues in the case, which are, in the end, over who is entitled to a sum of money presently held in trust.

1. In the circumstances, there is no basis, in my opinion, for the first three orders sought by Mr Hayes, and he no longer seeks the order that the trust funds be released absolutely:  an order which, I might say, he had very little chance of convincing the Court that he was entitled to.  In the circumstances, the summons of 7 October will be dismissed. 

1. I turn to the question of costs.  There is no doubt that the company and Mr Barros had been acting illegally in having Mr Barros as a director up until the point at which he ceased.  That cessation was only obtained by the revelation of Mr Barros's criminal history by the solicitor for the defendant.  Although that occurred before the summons was issued, it seems to me to have been not unreasonable for the defendant to have pursued the matter at least as far as it has.  On the other hand, it has not achieved any of the relief which it sought.  In the circumstances, the only appropriate order is that there be no order as to costs.

1. Accordingly, the summons of 7 October is dismissed with no order as to costs.

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