Myers v Wadsworth

[2004] VSC 364

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 7561 of 2004

LESLIE DAVED MYERS AND GRANT WAYNE MYERS	Plaintiffs
v
CHRISTOPHER WADSWORTH, RUBY ISABEL WADSWORTH AND MYERS SELF STORAGE PTY LTD	Defendants

---

JUDGE:	Cummins J
WHERE HELD:	Melbourne
DATES OF HEARING:	6, 10, 20 September 2004
DATE OF JUDGMENT:	24 September 2004
CASE MAY BE CITED AS:	Myers & Anor v Wadsworth & Anor
MEDIUM NEUTRAL CITATION:	[2004] VSC 364

---

Courts – procedure – ex parte injunction – requirement of full and frank disclosure – lack of prejudice to defendants – access to company records.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Dr A. Ciro	De Marchi & Associates
For the First and Second Defendants	Mr M. Osborne	Bullards

HIS HONOUR:

1. By summons on originating motion both filed in this Court on 13 August 2004, the plaintiffs inter alia sought injunctive relief that the first and second defendants - the third defendant being a company of which the two plaintiffs and the first two defendants are sole directors and shareholders - be restrained from refusing to allow the plaintiffs access to the financial records of the third defendant, contrary to s.290(1) Corporations Act 2001, and from entering upon the plaintiffs’ land and from doing certain acts thereon; that the first and second defendants be required to grant to the first and second plaintiffs or person authorised by them, full access to all financial records of the third defendant; and numerous other orders which presently need not concern this judgment. Likewise the relief (other than the above) sought in the writ filed the same day need not concern this judgment. The matter before the Practice Court essentially concerns access to financial records. The wider relief sought in the summons, and in the writ, presently does not fall for determination.

1. An affidavit in support of the summons was sworn on 3 August 2004 by the first plaintiff and was filed on 13 August 2004 setting out the matters underpinning the summons, and in particular a lack of access to necessary records.

1. The matter came on in the Practice Court ex parte before Osborn J on 20 August 2004.  In the Order made by His Honour of that date, it is stated: 

"HOW OBTAINED:  On application by Summons filed by Solicitors for the Plaintiffs, application date:  20^th August 2004.

ATTENDANCE:  Dino De Marchi of De Marchi & Associates for the Plaintiffs.  Non-attendance of Defendants.

OTHER MATTERS:

Upon the First Plaintiff undertaking to abide by any order the Court may make as to damages if the Court is hereafter of the opinion that the Defendant has sustained any by reason of this order which the First Plaintiff ought to pay.

THE COURT ORDERS THAT:

1.Until the hearing and determination of the action or until further order the First Defendant and Second Defendant be restrained from:

(a)refusing to allow the Plaintiffs or either of them to have access to the financial records of the Third Defendant, contrary to the provisions of subsection 290(1) of the Corporations Act 2001;

(b)entering upon the land described as 'the Myers Land', situated at lot 48 on plan of subdivision 056989 parent title volume 08398 folio 793 in the register book, otherwise known as 72-74 Kyabram Street, Coolaroo in the State of Victoria and from depositing rubbish or any other thing upon the Myers Land or causing such depositing to occur.

2.That Terry Hanlon, accountant, be authorised to inspect the financial records of the Third Defendant on behalf of the First Plaintiff and the Second Plaintiff, pursuant to the provisions of section 247A of the Corporations Act 2001.

3.That a copy of this Order be served upon the Third Defendant by registered mail at its registered address."

The summons was otherwise adjourned to 6 September 2004.  Not insignificantly, liberty to apply was granted.

1. The matter came on before me in the Practice Court, being the succeeding judge in the Practice Court by rotation, on 6 September 2004.  On that day Mr De Marchi appeared for the plaintiffs and Mr David Bullard appeared for the first and second defendants.  Upon hearing the parties I ordered that:

"(1)Compliance with the Order of Osborn J of 20 August 2004 be extended to 10 September 2004;  and

(2)That in addition to Order 2 of Osborn J, the first and second defendants be required to provide the original storage contracts, the client list, the original data files, the original invoices and receipts of the company and bank statements for the period 14 November 2000 to the present."

The matter was then adjourned to 10 September 2004.

1. Then on 10 September 2004 the matter came on again before me in the Practice Court in the morning.  On that occasion Mr De Marchi appeared for the plaintiffs and Mr Anthony Bullard appeared for the first and second defendants.  The matter was stood down while there was discussion between the legal practitioners.  The matter then came on before me in the afternoon, with Mr Osborne of counsel appearing for two defendants.  I made interim Orders that the Orders by Osborn J on 20 August continue to operate until further order; that Order 2 made by me on 6 September continue to operate; and that by 5.00 p.m. on Thursday, 16 September 2004, the first and second defendants file and serve on the plaintiffs' solicitors an affidavit in accordance with Rule 29.08 as to the categories of documents referred to in Exhibit C to the affidavit of Mr T.M. Hanlon, accountant, sworn 10 September 2004.  Otherwise the matter was adjourned over until 20 September.  The matter returned before me on 20 September 2004, when the various affidavits were in, and I heard full submissions of counsel for the respective parties.  It is in respect of the issues thereby argued that this judgment is given.

1. For the plaintiffs, affidavits have been filed by the first plaintiff, Mr L.D. Myers sworn 3 August 2004 setting out the history of the matter;  another affidavit of his sworn 20 September 2004 setting out contemporary issues;  an affidavit sworn 10 September 2004 of Mr T.M. Hanlon, certified practising accountant, and a further affidavit of his sworn 20 September 2004, both of which set out difficulties as to access to documentation of the third defendant.  All the affidavits have exhibited material.  Pivotal is Exhibit C to Mr Hanlon's first affidavit, that of 10 September 2004, and which identifies the documentation of the third defendant as to which Mr Hanlon states he has not had access.

1. For the first two defendants, filed are an affidavit in relation to the legal proceedings of Mr Anthony Bullard sworn 17 September 2004;  and, in relation to both the legal proceedings and to the substantive underlying matter, affidavits of the first defendant, Mr C.J. Wadsworth sworn 15 September 2004, and another sworn 17 September 2004, there being 17 exhibits to that latter affidavit. 

1. In the initiating affidavit, that of Mr L.D. Myers of 3 August 2004, the history of the matter is set out as follows.  The plaintiffs owned land at 72-74 Kyabram Street, Coolaroo and the first second defendants owned the adjoining land, at 68-70 Kyabram Street, Coolaroo.  The plaintiffs ran a storage business and in 1993 formed Myers Removals and Storage Pty Ltd to operate it.  By reason of proximity and mutual interest, in 2000 the third defendant, Myers Self Storage Pty Ltd was incorporated, the directors and shareholders being the two plaintiffs and the first two defendants.  The registered address of the third defendant is 72 Kyabram Street, Coolaroo.  Problems arose between the plaintiffs and the first two defendants and the plaintiffs say that they have been denied access to relevant records of the company by the first two defendants.  In particular the plaintiffs allege that the first two defendants without authority moved the company office from the Myers land to the Wadsworth land.  The plaintiffs further allege that the first two defendants are siphoning off business from the third defendant to a business they conduct called Aussie Self Storage and Removals.  Thus these proceedings.

1. In the affidavit of Mr L.D. Myers of 3 August 2004 and particularly in an affidavit of Mr T.M. Hanlon, certified practising accountant, of 10 September 2004 particulars are set out of financial records of the third defendant which are missing or to which the plaintiffs have been denied access or are unable to gain access.  Exhibit “C” is the pivotal exhibit to Mr Hanlon’s affidavit and to these Practice Court proceedings.  It sets out the documents requested by the plaintiffs and the parlous response thereto by the first two defendants.  A further affidavit of Mr L.D. Myers, of 20 September 2004, and of Mr T.M. Hanlon, also of 20 September 2004 sets out a course of obfuscation and attrition by the first two defendants to the requests of the plaintiffs and of Mr Hanlon. 

1. The first defendant has sworn a Rule 29.08 affidavit on 15 September 2004 in consequence of my Order of 6 September 2004 and an affidavit of 17 September 2004 seeking that the respective Orders made herein which are extant be set aside and that the plaintiffs be ordered to pay the first two defendants’ costs of the proceedings on an indemnity basis.  As I have said, the solicitor for the first two defendants, Mr A.D. Bullard, has sworn an affidavit on 17 September 2004 as to some of the history of the proceedings.

1. In the affidavit of Mr C.J. Wadsworth of 15 September 2004 he identifies the relevant documents he says are in the possession of himself and the second defendant and says that on or about 14 September 2003 their office was broken into “by the first plaintiff and/or Margaret Mays” (the first plaintiff’s wife) and that the original storage contracts presumably were taken by the intruders;  that the bank statements were either provided to the plaintiffs or their representatives or are missing or mislaid;  that the client list was provided to Mr Hanlon;  that the customer receipts have been provided to Mr Hanlon or are missing or mislaid;  that the purchase receipts and vendor invoices were provided to the plaintiffs;  that the cheque butts have been provided to Mr Hanlon or are misplaced;  and that the other documents requested have either been provided or are missing.  As to the allegedly missing or misplaced documents in the respective categories, Mr Wadsworth says he is unable to say where they are or when the misplaced documents were misplaced. 

1. In his affidavit of 17 September 2004, Mr C.J. Wadsworth sets forth a history of the dealings between the parties and their representatives and says that the Court has been materially misled by the first two plaintiffs.  I shall return to the matter of misleading of the Court. 

1. Before me it was contended on behalf of the defendants by Mr Osborne of counsel that the Orders made by Osborn J and by me respectively on 20 August, 6 September and 10 September, be discharged;  that paragraph 2 of the Order made by me on 6 September be discharged; that the plaintiffs pay the costs of the first and second defendants of the summons filed on 13 August 2004 and all appearances thereon including any reserved costs on a solicitor/client basis; and consequential directions that the matter be placed where Mr Osborne submitted it properly belonged, in the Corporations List, with directions to be made in that list by the presiding Judge.

1. Essentially Mr Osborne submitted that those consequences should flow because the Orders made by Osborn J on 20 August were obtained ex parte, and that, he submitted, the plaintiffs failed to comply with well-known criteria of disclosure and frankness before Osborn J in the obtaining of those Orders, which as a consequence would involve the Orders being struck down.

1. The particulars in relation to the alleged non compliance were that the Court was misled or alternatively not fully appraised of the lack of personal service - that is to say that personal service had not been fulfilled on the first and second defendants (not the third defendant) at the date of the application before Osborn J (attempted service was by registered mail only) nor had their solicitors been informed - and of a number of financial matters including the accounting provision to Mr Hanlon of financial statements for the company for the years financial ended 2001 and 2002 and in draft for 2003, and the provision of certain files by the first two defendants to the plaintiffs.

1. The submissions of Mr Osborne proceeded with a number of other failures, as he put it, by the plaintiffs before the Court, being failures of form and process, including that only the first plaintiff had given an undertaking as to damages before Osborn J.

1. I must say I was most impressed by the submissions of Mr Osborne.  They were clear and well directed, concise and well supported by argument.  However in the end I am unpersuaded to accede to the courses which he has sought, and I am unpersuaded by the bases which he so well argued on behalf of the defendants.

1. I agree with Mr Osborne that there were a number of imperfections in the provision of data to the Court.  However upon the first and second defendants being duly served, neither of them took advantage of the provision of liberty to apply.  Further, when the parties appeared on the first occasion before me on 6 September, the first two defendants were represented by a very able legal practitioner, Mr David Bullard, and then on 10 September by an equally able legal practitioner, Mr Anthony Bullard.  On 6 September the numerous matters so strongly now relied upon by Mr Osborne were not advanced to the Court on behalf of the two defendants.  On the second occasion, 10 September, when the matter first came on before me, likewise the matters were not advanced on behalf of the two defendants.  The matter was stood down, and in the afternoon Mr Osborne then appeared.  It is not unreasonable to contemplate, given the initial submissions made by Mr Osborne (T.6-7), that the first concern at that juncture was the spectre of contempt process.

1. In the circumstances of the lack of complaint on behalf of the two defendants by their legal practitioners as I have outlined, I am not persuaded that any substantive injustice has occurred in relation to the two defendants by imperfections in process.  Although before Osborn J only the first plaintiff gave an undertaking as to damages (before me on 20 September 2004 both plaintiffs gave that undertaking) the situation does not fall wholly within the principle in N.A.B. Ltd & Ors v Bond Brewing Holdings Ltd & Ors[1] where no undertaking was given at all.

   [1](1991) 1 V.R. 386 at 560.

1. I emphasise, as the Courts have emphasised time and again and I am sure Mr De Marchi is conscious, on an ex parte application full and frank disclosure needs to be made because the other party is not present and the Court relies upon the party present making that disclosure.  However, the imperfections which I have outlined in my view were by no means designed to mislead the Court. and I consider were not egregious.  Given the attendances thereafter of practitioners on behalf of the two defendants before the Court, which attendances did not agitate the complaints until Mr Osborne of counsel was brought in on the afternoon of 10 September, I consider that I should not act upon the imperfections.  I am satisfied that no substantial injustice or prejudice has occurred to the two defendants from the process imperfections.

1. Looking then to the substantive matter, on the material filed before me I conclude that the plaintiffs have sought, and legitimately sought, provision of material to which the plaintiffs are entitled as directors of a corporation and as to which there are significant statutory requirements of record keeping, and that the two defendants by a process of attrition if not obfuscation have not complied with those legitimate requests. I am satisfied that the Orders which were made were justified to be made, and ought continue:  in particular, Orders 1B and 2 made by Osborn J on 20 August 2004 and Order 2 made by me on 6 September 2004.  I am so satisfied upon the basis of the affidavits filed on behalf of the plaintiffs and to which I have referred, in particular those of Mr Hanlon and the exhibits thereto.  The affidavits of the first defendant, far from establishing cooperation, in my view reveal delaying tactics.  I so order.

1. As I stated to counsel at the conclusion of submissions, it is inappropriate at present to make any of the further orders sought by the plaintiffs relating to the conducting of the business, the more so as Dr Ciro foreshadowed further amendment of the statement of claim.

1. I refer the matter into the Corporations List for further management as directed by the presiding Judge.

1. I am satisfied that the costs of the plaintiffs of the Practice Court proceedings ought be paid by the first two defendants because of the necessity of the plaintiffs having to pursue their legitimate enquiries in the face of attrition by the first two defendants.  The costs comprehended are those in these proceedings of 20 August 2004, 6 September 2004, 10 September 2004, 20 September 2004 and today.  I so order. 

1. For the reasons I have stated, I refuse the Orders sought by the first two defendants including that for indemnity costs.