NEDMAX Pty Ltd (Receiver and Manager Appointed) v Commonwealth of Australia - [2001] WASC 70

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: NEDMAX PTY LTD (RECEIVER AND MANAGER APPOINTED) -v- COMMONWEALTH OF AUSTRALIA [2001] WASC 70

CORAM: MASTER SANDERSON

HEARD: 6 MARCH 2001

DELIVERED : 20 MARCH 2001

FILE NO/S: CIV 2443 of 2000

BETWEEN: NEDMAX PTY LTD (RECEIVER AND MANAGER APPOINTED) (ACN 057 580 882)
Plaintiff
AND
COMMONWEALTH OF AUSTRALIA
Defendant

Catchwords:

Summary judgment - Turns on own facts

Legislation:

Corporations Law, s 128, s 129, s 130

Result:

Application dismissed

Representation:

Counsel:

Plaintiff: Mr K L Christensen
Defendant: Mr P G McGowan

Solicitors:

Plaintiff: Tottle Christensen
Defendant: Australian Government Solicitor

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

Barnes v Addy (1874) LR 9 Ch App 244
Jeffree v NCSC [1990] WAR 183
Kinsella v Russell Kinsella & Co Pty Ltd (1986) 4 NSWLR 722
Northside Developments Pty Ltd v Registrar General (1990) 170 CLR 146

Case(s) also cited:

Chew v R (1991) 5 ACSR 473
Fancourt v Mercantile Credit Pty Ltd (1983) 154 CLR 87
Levi v Guerlini (1997) 24 ACSR 159
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
Nicholson v Permakraft (NZ) Ltd (In Liq) [1985] 1 NZLR 242
Reg Russell & Sons Pty Ltd v Buxton Meats Pty Ltd (1996) ATPR 410476
Sali v SPC Ltd (1991) 9 ACLC 1511
Sheahan v Hertz Australia (1994) 14 ACSR 209
Walker v Wimborne (1976) 137 CLR 1
Winkworth v Edward Barron Development Co Ltd [1987] 1 All ER 114

MASTER SANDERSON: This is the plaintiff's application for summary judgment. The application was brought more than 21 days after the filing of an appearance by the defendant and accordingly leave to bring the application is required. The defendant raised no objection and accordingly there was a grant of leave to bring the application out of time.
I have determined that the application ought be dismissed and it is therefore inappropriate for me to deal in any detail with matters which will eventually be determined at trial. Accordingly, these reasons are somewhat tenuated. Nonetheless, it seems to me appropriate in this case to state briefly the reasons why I have concluded that summary judgment ought not be granted.
By par 2 of the chamber summons dated 13 December 2000 the plaintiff sought judgment in the following terms:
"(a)a declaration that the Charge Deed, the Repayment Deed and the Guarantee Deed entered into between the Plaintiff and the Defendant are invalid and of no force or effect;
(b)the Defendant to pay the Plaintiff the sum of $133,338.83 together with interest thereon at the rate of six per cent per annum pursuant to Section 32 of the Supreme Court Act 1935 (As Amended) from 18 August 1998 until payment or judgment herein, whichever is the earlier.
(c)…"
The relevant facts briefly stated are as follows. As at 13 August 1997 the plaintiff was indebted to the defendant in the sum of $72,397.61. This amount represented unpaid deductions (group tax) for the period between July 1996 and April 1997. The defendant issued a statutory demand under s 459E of the Corporations Law. The plaintiff failed to comply with the statutory demand and was thereby deemed insolvent: see s 459C(2)(a). Consequent upon the failure to comply with the statutory demand the defendant issued a winding‑up application in this Court. Thereafter the plaintiff and the defendant entered into negotiations with respect to the debt the subject of the demand.
It is apparent from the affidavit material filed by both parties that during the course of the negotiations the defendant was concerned about the capacity of the company to meet any schedule for the repayment of the debt. This concern was voiced on a number of occasions by different officers of the defendant who were negotiating with accountants and a solicitor acting for the plaintiff.
Eventually a settlement was reached. It involved the plaintiff making periodic payments to the defendant to discharge the debt. It also required the plaintiff to enter into the charge deed, a repayment deed and a guarantee deed referred to in par 2(a) of the plaintiff's chamber summons. All of these deeds were executed under seal by one Ian Gerald Jenke, then the sole director and secretary of the plaintiff. Pursuant to the various deeds payments were made by the plaintiff to the defendant. It is those payments which the plaintiff now seeks to recover.
The plaintiff says that at the time the company entered into the three deeds its constitution required that it have two directors. The fact that Mr Jenke was the sole director and secretary of the company meant that the deeds were not properly entered into. Where there was only one director of the company the only power that director had with respect to the company's affairs was to appoint another director or call a meeting of shareholders to allow for the appointment of another director. Further, the plaintiff says that the protection offered to a party in the defendant's position by s 128, s 129 and s 130 of the Corporations Law are not available to the defendant.
During the course of his submissions counsel for the defendant did not deal in any detail with the validity of the three deeds. There was a mention in counsel's written submissions of a meeting of shareholders which ratified Mr Jenke's signing of the three deeds, thereby obviating any shortcomings with respect to Mr Jenke's authority to sign the deeds for the company (see par 7 of the defendant's submissions). The plaintiff answered this submission by making the point that Mr Jenke, as a sole director of the company, had the power only to call a meeting for the purposes of appointing another director. Any meeting which purported to ratify his signing the deeds on the part of the company was of no force and effect: see Northside Developments Pty Ltd v Registrar General (1990) 170 CLR 146 at 174 ‑ 175. Furthermore, counsel for the defendant submitted that a resolution of members cannot cure any defect such as the want of authority of the director signing the deeds: see Kinsella v Russell Kinsella & Co Pty Ltd (1986) 4 NSWLR 722.
Assuming without deciding that the plaintiff's arguments on this question are correct it raises the question of what follows from the fact that the deeds were not validly entered into by the company. It is open to doubt whether or not this has any effect on the payments made. There is evidence to the effect that the plaintiff was indebted to the defendant. It matters not whether payments were made pursuant to any deed or simply in reduction of a debt. The payments themselves cannot be impinged. It may be that the deeds were not properly executed and it may be that the company operated under a mistake in purporting to make payments pursuant to those deeds. But that does not alter the fact that the payments were made in reduction of a debt validly due. In my view, it is open to question whether the invalidity of the deeds vitiates any payments made in reduction of the debt.
The second limb of the plaintiff's argument relies on a finding of fact that as at the date the parties entered into the deeds the defendant was aware that the plaintiff was insolvent or nearing insolvency or might become insolvent. In that situation it was argued that the then director of the plaintiff was required to take into account the interests of the company's creditors before entering into any agreement: see Jeffree v NCSC [1990] WAR 183. It was submitted by counsel for the plaintiff that by causing the plaintiff to enter into the deeds with the defendant and make payments pursuant to those deeds that Mr Jenke was acting in breach of his fiduciary duty. It was further submitted that as the defendant was aware of the plaintiff's insolvency or near insolvency, it was also aware of Mr Jenke's breach of his fiduciary duties. As such it was liable to account to the plaintiff as a party being knowingly concerned in a breach of fiduciary duty. In other words, the defendant was liable to account on the basis of accessorial liability on what is sometimes known as the second limb of Barnes v Addy (1874) LR 9 Ch App 244.
Counsel for the defendant challenged the submissions on two separate grounds. First it was said that the question of whether or not the plaintiff was insolvent at the time it entered into the deeds and made the payments was a question of fact which could not be determined on affidavit evidence. Secondly, it was said that whether or not the defendant was knowingly concerned in any alleged breach of trust was also a question of fact which also could not be determined on the affidavit evidence.
Without providing a detailed analysis of the evidence submitted by both sides, it is enough if I say that I am satisfied that the defendant's submissions are arguable. There are issues of fact which cannot be resolved on affidavit and which must await trial. On that basis I would not be prepared to grant the plaintiff's application for summary judgment.
There is one other aspect of this application which I should mention. The first order sought by the plaintiff (2(a)) was a declaration in relation to the validity of the three deeds. As the chamber summons is phrased, this order stands apart from order 2(b) and, it must be said, the effective part of the order. It is possible under O 14 r 1(1) to order summary judgment on part of a claim. It would then be open to me to make the declaration sought. On balance, however, I am satisfied that it would not be appropriate to grant partial relief. The making of a declaration is to some extent, at least, discretionary. A declaration as to the validity of the three deeds may or may not be of any utility in this case. The trial Judge's view on the utility of such a declaration may impact upon whether or not the declaration is made. In circumstances where the substantive issues between the parties will proceed to trial, I think it is better if the question of whether or not a declaration is made is also left to the trial Judge.
I would dismiss the plaintiff's application. I will hear the parties as to costs.