Morris v A1 Pools Pty Ltd
[2000] WASCA 335
•10 NOVEMBER 2000
MORRIS & ANOR -v- A1 POOLS PTY LTD & ORS [2000] WASCA 335
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASCA 335 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:120/2000 | 25 SEPTEMBER 2000 | |
| Coram: | IPP J MILLER J | 10/11/00 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application for leave to appeal granted Appeal allowed in part | ||
| PDF Version |
| Parties: | TREVOR WILLIAM MORRIS HICOAST PTY LTD (ACN 085 823 810) A1 POOLS PTY LTD (ACN 078 129 905) GC CONSTRUCTIONS PTY LTD (ACN 002 837 588) GARY ALLAN GRISBROOK |
Catchwords: | Procedure Supreme Court procedure Power of court to extend time prescribed by O 63A r 3(1) Application to set aside default judgment Onus of proof on applicant Corporations Management and administration Directors Fiduciary obligations Confidential information Applicant utilising knowledge of tender price obtained as director of respondent to tender in competition with respondent |
Legislation: | Rules of the Supreme Court 1971, O 63A r 3(1), O 63A r 5(2), O 3 r 5 |
Case References: | Eaton Developments Pty Ltd v NTC Pty Ltd (1998) 19 WAR 552 Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117 Government Employees Superannuation Board v Martin (1997) 19 WAR 224 Green v Bestobell Industries Pty Ltd (1982) WAR 1 Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110 Rolland v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998 Weldon & Company Services Pty Ltd v Harbinson [2000] NSWSC 272 Decor Corporation Pty Ltd v Dart Industries Inc (1991) 104 ALR 621 Evans v Bartlam [1937] AC 473 Gillon & Anor v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991 Jacobs v Booth's Distillery Co (1901) 85 LT 262 Niemann v Electronic Industries Ltd [1978] VR 431 Webster v Lampard (1993) 177 CLR 598 Whitehall Holdings Pty Ltd & Ors v Custom Credit Corp Ltd, unreported; FCt SCt of WA; Library No 9189; 13 December 1991 Wing Luck Foods v Lay Choo Lim [1989] WAR 358 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : MORRIS & ANOR -v- A1 POOLS PTY LTD & ORS [2000] WASCA 335 CORAM : IPP J
- MILLER J
- First Applicant
HICOAST PTY LTD (ACN 085 823 810)
Second Applicant
AND
A1 POOLS PTY LTD (ACN 078 129 905)
First Respondent
GC CONSTRUCTIONS PTY LTD (ACN 002 837 588)
Second Respondent
GARY ALLAN GRISBROOK
Third Respondent
Catchwords:
Procedure - Supreme Court procedure - Power of court to extend time prescribed by O 63A r 3(1) - Application to set aside default judgment - Onus of proof on applicant
(Page 2)
Corporations - Management and administration - Directors - Fiduciary obligations - Confidential information - Applicant utilising knowledge of tender price obtained as director of respondent to tender in competition with respondent
Legislation:
Rules of the Supreme Court 1971, O 63A r 3(1), O 63A r 5(2), O 3 r 5
Result:
Application for leave to appeal granted
Appeal allowed in part
Representation:
Counsel:
First Applicant : Mr S Owen-Conway QC
Second Applicant : Mr S Owen-Conway QC
First Respondent : Mr D Vilensky
Second Respondent : Mr D Vilensky
Third Respondent : Mr D Vilensky
Solicitors:
First Applicant : Camillo D'Angelo & Co
Second Applicant : Camillo D'Angelo & Co
First Respondent : Bowen Buchbinder Vilensky
Second Respondent : Bowen Buchbinder Vilensky
Third Respondent : Bowen Buchbinder Vilensky
Case(s) referred to in judgment(s):
Eaton Developments Pty Ltd v NTC Pty Ltd (1998) 19 WAR 552
Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117
Government Employees Superannuation Board v Martin (1997) 19 WAR 224
Green v Bestobell Industries Pty Ltd [1982] WAR 1
Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110
Rolland v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998
Weldon & Company Services Pty Ltd v Harbinson [2000] NSWSC 272
(Page 3)
Case(s) also cited:
Decor Corporation Pty Ltd v Dart Industries Inc (1991) 104 ALR 621
Evans v Bartlam [1937] AC 473
Gillon & Anor v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991
Jacobs v Booth's Distillery Co (1901) 85 LT 262
Niemann v Electronic Industries Ltd [1978] VR 431
Webster v Lampard (1993) 177 CLR 598
Whitehall Holdings Pty Ltd & Ors v Custom Credit Corp Ltd, unreported; FCt SCt of WA; Library No 9189; 13 December 1991
Wing Luck Foods v Lay Choo Lim [1989] WAR 358
(Page 4)
1 IPP J: This is an application for leave to appeal and an appeal under O 63A against a decision of the learned Master. By that decision the learned Master dismissed the applicants' application to extend time to apply to set aside a default judgment granted in favour of the respondent ("A1 Pools") against them. In concluding that the application to extend time should be dismissed, the learned Master rejected the applicants' claim that they had a good defence to the action brought by A1 Pools. In the present application the applicants contend that the learned Master erred in coming to the conclusion that he did.
2 At the outset I should deal with an argument raised by A1 Pools that the applicants had not complied properly with certain formal requirements relating to the commencement of the appeal. In terms of O 63A r 3(1) an appeal must be commenced within 21 days after the order or judgment by filing a notice of appeal, the application for leave to appeal and a draft notice of appeal and two copies of the appeal papers "and by serving a copy of each on each other party". The applicants did not serve a copy of each of the necessary documents on A1 Pools within 21 days after the learned Master's judgment. Rather, they did so immediately after the directions hearing held in terms of O 63A r 4. A1 Pools submitted that the court had no power to extend the time prescribed by O 63A r 3(1) and relied in this respect on Eaton Developments Pty Ltd v NTC Pty Ltd (1998) 19 WAR 552.
3 In Eaton Developments Pty Ltd v NTC Pty Ltd Owen J was concerned with O 63A r 5(2) which provides that an appeal shall be entered for hearing within seven days after the directions hearing and if not so entered shall be taken to have been discontinued. His Honour considered that the court had no power to extend the time prescribed by O 63A r 5(2) and the general power to extend time by O 3 r 5 was by necessary implication excluded. The reasoning adopted by his Honour depended largely on the particular wording of O 63A r 5(2) and, in particular, the words "and if not so entered shall be taken to have been discontinued". Owen J also took into account the fact that there was "nothing conditional" in O 63A r 5(2) in the sense that "an appeal is either entered within time or it is not". As his Honour put it: "There is nothing left to be decided."
4 In my view, however, O 63A r 3(1) is to be distinguished from O 63A r 5(2). Firstly, it does not contain within it words having a similar effect as the phrase "and if not so entered shall be taken to have been discontinued" to which Owen J attached particular importance. Secondly, it will often be uncertain as to what properly should comprise "the appeal
(Page 5)
- papers". For this reason O 63A r 3(4) empowers the respondent to file additional papers necessary for the court to determine the appeal. This is not an issue which is "conditional" in the sense referred to by Owen J.
5 In Eaton Developments Pty Ltd v NTC Pty Ltd Owen J referred to O 63A r 3(1) and after pointing out that it did "not have any self-executing properties", remarked: "I would have no hesitation in saying that the general power to extend time applies to O 63A r 3(1)". By the general power to extend time his Honour was referring to O 3 r 5. I agree entirely with these remarks. In my view the Court has power to extend time under O 63A r 3(1).
6 The delay by the applicants in serving the necessary documents on A1 Pools was relatively insignificant and caused no prejudice. I would therefore extend the time required for compliance with O 63A r 3(1) to the extent that is necessary.
7 I return now to the default judgment granted against the applicants and the reasons delivered by the learned Master. In order to understand the default judgment that was granted it is necessary to summarise the allegations made in the statement of claim filed by A1 Pools. A1 Pools alleged therein that the first applicant ("Morris") was a director of the company and accordingly was obliged not to use any information acquired by him in the course of his position as a director for his own benefit and not to use any information so acquired by him to the detriment of A1 Pools. The statement of claim asserted that Morris gained information in relation to contracts described as the Beckenham contract, the Bunbury contract and the Grisbook contract. It was alleged that Morris or the second applicant ("Hicoast") entered into an agreement with GC Constructions to build swimming pools at Beckenham and Bunbury and at the Grisbook property. It was then said that Morris thereby acted in breach of his fiduciary duties and Hicoast knowingly participated in those breaches of duty. It was asserted that the conduct of Morris and Hicoast caused A1 Pools to suffer loss and damage and A1 Pools claimed against Morris and Hicoast an account of profits, alternatively damages, alternatively equitable compensation. At a later date A1 Pools abandoned its claim for an account of profit.
8 By the default judgment, Morris and Hicoast were ordered to pay A1 Pools "damages to be assessed", interest on those damages and costs to be taxed. The applicants contend that the learned Master erred in dismissing their application to set aside that judgment largely on the ground that the evidentiary material contained in the affidavits filed on
(Page 6)
- their behalf revealed "a credible defence demonstrating that, if the default judgment was set aside and the matter was argued on its merits, the [applicants] would have a real prospect of success" (per Malcolm CJ in Rolland v Bank of Western Australia Ltd, unreported; FCt SCt of WA; Library No 980498; 3 September 1998).
9 At the relevant time A1 Pools carried on business as a builder of swimming pools. Morris was a director of A1 Pools. By written quotation dated 7 October 1998 Morris, on behalf of A1 Pools, tendered to construct a swimming pool for GC Construction Pty Ltd (a building contractor) for the sum of $135,000. I shall refer to this tender as "the Beckenham tender".
10 Also in October 1998, Morris, on behalf of A1 Pools, submitted a tender to GC Constructions for the construction of a swimming pool at Bunbury. That tender was accepted but the contract entered into between GC Constructions and A1 Pools was conditional upon GC Constructions being awarded the main contract.
11 A third tender was submitted to GC Constructions by Morris on behalf of A1 Pools which was also accepted and gave rise to the contract known as "the Grisbook contract".
12 It is now appropriate to go to the evidence concerning Morris' attempts to detach himself from A1 Pools, this being relevant to the claim that he breached fiduciary duties he owed to the company.
13 Morris testified that as from some unspecified time towards the end of October or the beginning of November 1998 he "ceased to have any effective part in the running of [A1 Pools]". He also said that he stopped receiving wages in approximately the first or second week of November. According to Morris, however, "settlement" of the agreement arrived at between A1 Pools and himself was not resolved until on or after 24 December 1998. This is manifest from a letter dated 24 December 1998 which Morris' solicitors wrote to A1 Pools recording that the latter's "business arrangements" with Morris were "being terminated" on certain conditions.
14 According to an affidavit filed by Morris "it was expressly agreed between [A1 Pools] and I that my wife and I were disposing of our interests on the basis that I would retain the right to trade in the pool construction industry including carrying out work for parties who may have been or continued to [be] clients of [A1 Pools]. It was said that "this agreement was the result of a number of discussions between Rapoff and
(Page 7)
- me in October and November 1998 and was acknowledged in written confirmation in a facsimile from Rapoff's wife, Sophie Rapoff, to my solicitors, which was incorrectly dated 13 January 1998 and should have been dated 13 January 1999". The reference to "Rapoff" is to another director of A1 Pools. The agreement so alleged was not properly admissible in evidence as the allegation made is in effect a conclusion of law. No attempt was made to set out what was said by each party in the "number of discussions" so that the Court itself could determine whether an agreement was arrived at as alleged. Nevertheless, for the purposes of these reasons, I shall assume that the agreement as alleged was entered into. I should also say that the alleged "written confirmation" of what was asserted does not in fact confirm an agreement that Morris would be entitled to carry out work for parties "who may have been or continue to [be] clients of [A1 Pools]". The facsimile to which reference is made says no such thing. Nevertheless, as I have mentioned, I shall assume that the agreement contended for by Morris was in fact arrived at.
15 To complete the story of Morris' alleged termination of his association with A1 Pools, I should point out that there is no evidence of him resigning as a director of the company. According to Morris he understood that Rapoff "had made arrangements to file the necessary documents at the Australian Securities & Investments Commission confirming that my wife and I were no longer involved in [A1 Pools]. I have since instructed my solicitors to deal with this issue". The fact is that, on the material before the learned Master, at the time the application was made to set aside the default judgment Morris was still a director of A1 Pools.
16 On 11 January 1999 Hicoast was incorporated. Since then Morris has been a director and shareholder of the company.
17 I now turn to the conduct of Morris of which A1 Pools complained.
18 At some date in "mid-December 1998", Morris told Grisbook, a director of GC Constructions, "that he was having a business break-up" with A1 Pools and that "he would be going his own way". Grisbook asked Morris "to provide a quote from his new business for the Beckenham centre". Morris gave Grisbook a verbal quote for $125,000 and on 18 December 1998 GC Constructions awarded the Beckenham contract to Morris. As I understand the evidence that contract was carried out by Hicoast.
(Page 8)
19 A1 Pools also asserted that Morris had performed similar acts in regard to the Bunbury and Grisbrook contracts, but on the evidence this was not material. GC Constructions was not awarded a sub-contract to construct a pool in relation to the contemplated Bunbury contract. As regards the Grisbook contract, that contract did not proceed at all. That is to say, no party was awarded a contract for the work the subject of the Grisbook tender, and a pool has never been constructed for Grisbrook. The learned Master found, accordingly, that A1 Pools was "not likely to be able to prove any case against [the applicants] in relation to the Bunbury contract or the Grisbook contract".
20 Nevertheless, the way in which the default judgment order was framed entitles A1 Pools to "damages" in respect of the Bunbury and Grisbook contract. This is not correct and counsel for A1 Pools, rightly, did not attempt to submit that it was. The appeal should succeed in this respect. That is, the order for default judgment should be varied so as to make it plain that judgment is not granted against the applicants in respect of the Bunbury and Grisbook contracts.
21 As regards the Beckenham contract, the learned Master held that on the evidence it was "extremely unlikely that Mr Rapoff agreed that Mr Morris could compete with the company in getting swimming pool contracts". Senior counsel for the applicants challenged this conclusion on the basis that it required the learned Master to make credibility findings on disputed affidavit material. While I accept that there is force in this submission, the facts which I have set out above disclose a case against Morris and Hicoast that has not been rebutted by them. Those facts are derived from the affidavits filed by Morris, an affidavit filed by Grisbook on which senior counsel for the applicants relied, and the undisputed evidence. In this regard, it is to be observed that the agreement alleged by Morris whereby he was entitled to solicit customers of A1 Pools did not empower him to use, for his own benefit, confidential information he had acquired as a director of the company.
22 Morris was a director of A1 Pools when he tendered, for his own account, to do the work on the Beckenham contract for $125,000. Accordingly, he was not entitled to use confidential information he had obtained as a director of A1 Pools for his own benefit: Green v Bestobell Industries Pty Ltd [1982] WAR 1; Weldon & Company Services Pty Ltd v Harbinson [2000] NSWSC 272.
23 Although the question whether particular information may or may not be "confidential" may not always be an easy one (see Faccenda
(Page 9)
- Chicken Ltd v Fowler [1987] 1 Ch 117) I have no doubt that the information that Morris obtained in relation to the tender price he submitted on behalf of A1 Pools to GC Constructions in respect of the Beckenham contract was confidential. There was no evidence to suggest that the tender price was publicly known (and the onus was on the applicants in this regard, they being the parties attempting to set aside the default judgment, regularly obtained). The inference was that it was not. The tender had been made by Morris in the course of a private, commercial transaction. The knowledge of that price enabled Morris, on his own behalf, to submit a tender price marginally lower than that submitted by A1 Pools. The tender price was a private and valuable piece of commercial information.
24 Senior counsel for the applicants submitted that, on the evidence, although Morris may have been in name a director of A1 Pools, it was the intention of the parties that he cease directing the affairs of the company by 15 December 1998. He submitted, somewhat tentatively, that this detracted from the fiduciary duties owed by Morris to the company. I do not think, however, that the evidence goes as far as establishing that after 15 December 1998 Morris was to have no responsibility in directing the affairs of the respondent. In any event, there is ample authority to the effect that the mere fact that a person ceases to be a director of a company does not necessarily put an end to any fiduciary obligations he or she might have had: Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110; Weldon & Company Services Pty Ltd v Harbinson. The fiduciary obligation not to use confidential information obtained while a director of A1 Pools endured.
25 Senior counsel for the applicants submitted that there was no evidence to prove that but for Morris' subsequent tender, GC Constructions would have accepted the tender for $130,000. For the reasons I have previously mentioned, however, the onus was on the applicants to establish that the tender of $130,000 would not have been accepted. This fact was not established by the applicants. In the circumstances it is unnecessary to say anything about the particular rules that apply to issues of causation when there has been a breach of fiduciary duties of this kind: cfGovernment Employees Superannuation Board v Martin (1997) 19 WAR 224 at 278-279; Green v Bestobell Industries Pty Ltd.
26 In my view, on the undisputed evidence, Morris has no defence to the claim that he committed a breach of the fiduciary duties he owed A1 Pools by using the confidential information relating to the Beckenham
(Page 10)
tender and Hicoast has no defence to the allegations that it knowingly participated in that breach. In consequence, A1 Pools is entitled to equitable compensation from the applicants arising from the foregoing. By the default judgment granted, Morris and Hicoast are obliged to pay to A1 Pools "damages to be assessed". In fact, the applicants are entitled to equitable compensation, to be assessed.
27 I would uphold the appeal and vary the order made by the learned Master and the default judgment to the extent that I would order Morris and Hicoast to pay to A1 Pools equitable compensation in relation to the breach by Morris of his fiduciary duties relating to the Beckenham contract, and the participation by Hicoast in that breach. I would order the applicants to pay to A1 Pools interest on the equitable compensation to be assessed at the rates applicable under the Supreme Court Act.
28 MILLER J: I have had the benefit of reading in draft the reasons published by Ipp J. I am in agreement with those reasons and have nothing further to add.
4
9
1