Omni Leisure v Bridges and 3 Ors

[2004] NSWSC 423

CITATION:

Omni Leisure v Bridges & 3 Ors [2004] NSWSC 423

HEARING DATE(S):

12 May 2004

JUDGMENT DATE:

20 May 2004

JURISDICTION:

Common Law

JUDGMENT OF:

Master Harrison

DECISION:

(1) The fourth defendant's notice of motion filed 2 March 2004 is dismissed; (2) The fourth defendant is to pay the plaintiff's costs of the notice of motion filed 2 March 2004; (3) Leave is granted to the plaintiff to file and serve an amended statement of claim within 14 days; (4) The plaintiff is to pay the first, second and fourth defendants' costs thrown away by the amendment.; (5) The matter is referred to a status conference. The court is to notify the parties of the date.

CATCHWORDS:

Amend statement of claim - strick out proceedings - fourth defendant - display of Russian space shuttle

LEGISLATION CITED:

Corporations Act 2001 (Cth) - s 9
Fair Trading Act 1987 (NSW) - s 42
Supreme Court Rules 1970 (NSW) - Part 13 r 5
Trade Practices Act 1974 (Cth) - ss 52, 70, 75B

CASES CITED:

Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41
Air Services Australia v Zarb (unreported, NSWCA, 26 August 1998)
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
General Steel Industries Inc v Commissioner for Railways (NSW) & Ors (1964) 112 CLR 125
Webster & Anor v Lampard (1993) 177 CLR 598
Wickstead & Ors v Browne (1992) 30 NSWLR 1

PARTIES :

Omni Leisure Operations Limited
(Plaintiff)

Graeme Kenneth Bridges
(First Defendant)

David Eric Hammer
(Second Defendant)

Craig Richard Cooper
(Third Defendant)

Christopher Steven Coudounaris
(Fourth Defendant)

FILE NUMBER(S):

SC 20047/2002

COUNSEL:

Mr P Newton with Mr Jay
(Plaintiff)

Mr S A Kerr
(Fourth Defendant)

SOLICITORS:

Mr F Touhill,
John De Mestre & Co
(Plaintiff)

Mr G Koning,
Gray & Perkins
(First Defendant)

Mr S T Noss,
Stephen Noss & Associates
(Second Defendant)

Mr N Mattock,
Gadens
(Fourth Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER HARRISON

THURSDAY, 20 MAY 2004

20047/2002 - OMNI LEISURE OPERATIONS LIMITED
v GRAEME KENNETH BRIDGES & 3 ORS

JUDGMENT (Amend statement of claim; strike out
proceedings – fourth defendant – display of Russian space shuttle

1 MASTER: There are two notices of motion before the court. By notice of motion filed 2 March 2004 the fourth defendant seeks an order pursuant to Part 13 rule 5 of the Supreme Court Rules 1970 (NSW) (SCR) that the plaintiff’s claim as against the fourth defendant be struck out. By notice of motion filed 9 March 2004 the plaintiff seeks an order that leave be granted to file an amended statement of liquidated claim (ASC). The first and second defendants consent to the filing of the ASC. The third defendant has not yet been served.

2 The fourth defendant relied on the affidavit of Nathan Thomas Mattock sworn 3 March 2004. The plaintiff relied the affidavits of Kent Larson sworn 30 April 2003, Lawrence Stapleton sworn 21 May 2003, Michael Kelso sworn 28 May 2003, Neil Balnaves sworn 14 August 2003 and Fiona Touhill sworn 9 March 2004 and 11 May 2004.

3 The plaintiff is Omni Leisure Operations Limited (ACN 079 630 603). The first defendant is Graeme Kenneth Bridges. The second defendant is David Eric Hammer. The third defendant is Craig Richard Cooper. The fourth defendant is Christopher Steven Coudounaris. The plaintiff carried on the business as manager and investor in the Leisure and Exhibition industry. The defendants are alleged to be the directors of Buran Space Corporation Pty Limited (Buran). Buran had possession of a Russian Space Shuttle which it proposed to publicly display for reward at Darling Harbour. On 6 November 2000 Buran was placed into administration.

4 On 29 June 2000 the plaintiff and defendant agreed in writing that the plaintiff would be the attraction’s manager for the display of the Russian Space Shuttle. It is an express term of the agreement that the plaintiff would advance to Buran the sum of $1.35 million to enable the Russian Space Shuttle exhibition to take place including provision for the construction of a temporary hangar to house the Shuttle.

5 It is alleged that on 22 May 2000, 22 June 2000 and 23 June 2000 in the course of a series of meetings, it was orally represented by the defendants on behalf of themselves and Buran that: (a) Buran had available funding of $1,000,000.00 which would be used to market the project as and from the date of opening; (b) $1,000,000.00 would be spent by Buran in marketing the Space Shuttle exhibition; (c) Buran had completed the exhibition project to date on budget; (d) Buran had available to it sufficient working capital to continue to mount and to market the attraction; and (e) the defendants were directors and shareholders of Buran were successful in business, with significant financial resources and were prepared to supply those financial resources to Buran as and when it was required to ensure that the Russian Space Shuttle Exhibition Project continued to operate.

6 It is alleged that by letter dated 2 June 2000 (the letter) Buran and the first defendant represented in writing to the plaintiff that: (a) the shareholders of Buran had directly invested $1,200,000.00 in the project to date; (b) Buran was debt free and unencumbered; and (c) the current minimum firm capital commitment of Buran’s shareholders was $2,400,000.00 plus $500,000.00 in foregone in-house consultancy revenue. The plaintiff pleads that further or alternatively a copy of the letter was circulated to the defendants at or about the time of its dispatch to the plaintiff and that each of the defendants acquiesced in and approved of the sending of the letter to the plaintiff and the making of the representations contained in the letter (paragraphs 10B & C).

7 The plaintiff alleges that the representations were untrue and misleading and the making of them constituted misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) (TPA) and s 42 of the Fair Trading Act 1987 (NSW) (FTA). The plaintiff claims substantial damages.

8 The amended statement of claim seeks to add claims, firstly, that alternatively, if the fourth defendant was not a director of Buran he held himself out or allowed himself to be held out as a director of Buran (paragraph 2B); and secondly, that each of the defendants was a person who aided, abetted, counselled or procured; and/or was knowingly concerned; and/or was a party to the alleged contraventions of s 52 of the TPA and s 42 of the FTA, by virtue of s 75B of the TPA and s 70 of the FTA (paragraph 17).

The law in relation to summary judgment

9 Part 13 r 5 of the SCR says:

“(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:
(a) no reasonable cause of action is disclosed,
(b) the proceedings are frivolous or vexatious, or
(c) the proceedings are an abuse of the process of the Court,
the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.”

10 In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 the High Court held [at paragraph 57] that:

“Ordinarily a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.”

11 According to their Honours [at paragraph 58] this is because:

“It would be wrong to deny a plaintiff resort to the ordinary processes of a court on the basis of a prediction made at the outset of a proceeding if that prediction is to be made simply on a preponderance of probabilities.”

12 Similarly, in Air Services Australia v Zarb (Unreported, NSWCA, 26 August 1998) Rolfe AJA at 13 found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railways Commissioners (1949) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (NSW) & Ors (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. Below, I have reproduced some of the passages quoted in Zarb.

13 In General Steel Industries Inc v Commissioner for Railways (NSW) & Ors Barwick CJ, who heard the application alone, stated at 130:

“Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.”

14 Barwick CJ also had earlier said at 129:

“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense’.”

15 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous test stating, at 602:

“The power to order summary judgment must be exercised with ‘exceptional caution’ and ‘should never be exercised unless it is clear that there is no real question to be tried’.”

16 According to Rolfe AJA in Zarb at 15-16:

“The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241.”

17 In particular, the plaintiff drew my attention to a pertinent passage in Wickstead & Ors v Browne (1992) 30 NSWLR 1 at 11 which relates to strike out proceeding where there are multiple defendants. It says:

“The respondent submitted that the appellants had failed to adduce any evidence or any admissible evidence on a number of issues and that the appeals should therefore be dismissed. Again it seems to us that those submissions misconceived the nature of the court's jurisdiction to dismiss summarily a plaintiff's action. By launching such an application a defendant undertakes the burden of establishing that there is no triable issue. On such an application the defendant bears the onus of proof and where the facts are peculiarly within the defendant's knowledge the plaintiff's action should not be dismissed because of gaps in the case if the necessary evidence might be obtained as a result of discovery or interrogatories.

However for another reason, which was first raised by the Court, the respondent as one of a number of defendants cannot be entitled to summary dismissal before trial because of evidentiary deficiencies in the plaintiff's case. If at the close of the plaintiff's case at the trial there was no evidence against this respondent he would not be entitled at that stage to judgment if any of the other defendants intended to go into evidence: see Menzies v Australian Iron & Steel Ltd (1952) 52 SR (NSW) 62; 69 WN (NSW) 68. The effect of this rule is now embodied in Supreme Court Rules Pt 34, r 7(6) and r 8(5). The reason for the rules is clear and was explained in the decision referred to. At the close of the plaintiff's case there may be evidence against some defendants but not against others. The court will not entertain a motion for judgment by some only of the defendants because any gaps in the plaintiff's case against those defendants may be filled when the other defendants go into evidence. In particular one or more of the defendants going into evidence may seek to exculpate themselves by inculpating defendants against whom the plaintiff had no admissible evidence at the close of his case. If the respondent would not be entitled to succeed on a no evidence point at the trial until all the evidence has been called, including that from other defendants, it is clear that there can be no such entitlement on an application by one of several defendants for summary dismissal.”

18 The fourth defendant is one of multiple defendants. The fourth defendant submitted that the case alleged against him in the ASC is futile and should be dismissed.

19 Section 9 of the Corporations Act 2001 (Cth) provides:

“director of a company or other body means:
(a) a person who:
(i) is appointed to the position of a director; or
(ii) is appointed to the position of an alternate director and is acting in that capacity; regardless of the name that is given to their position; and
(b) unless the contrary intention appears, a person who is not validly appointed as a director if:
(i) they act in the position of a director; or
(ii) the directors of the company or body are accumstomed to act in accordance with the person’s instructions or wishes.
Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person’s professional capacity, or the person’s business relationship with the directors or the company or body.”

20 This gives rise to the pleading that if the fourth defendant was not a director as appearing on the ASIC records then he was either holding himself out and allowing himself to be held out as director.

21 In the project description of Buran Space Corporation Pty Ltd dated 30 March 2000, Mr Chris Coudounaris is described as a director and states:

“Chris has ten years experience as a corporate and commercial lawyer and was a partner with Gadens Lawyers, where his practice included computer law, Corporations Law, joint venture sales, acquisitions of companies and businesses, export market development grants, employment law and agreements, foreign investment, retail and manufacturing, sports law, trade practices and consumer protection, management buyouts, prospectuses, capital raisings and underwriting, advising government departments and authorities, and other general contractual work. He is now the chief corporate adviser and Director of Keating Associates advising on projects both in Australia and overseas in the technology, biotechnology, public and private infrastructure, power generation, oil and gas, and mining sectors.”

22 The fourth defendant is a solicitor. One of the shareholders of Buran was Snowstorm Pty Limited. Buran means snowstorm in Russian. Snowstorm owned 25% of the shares in Buran. The fourth defendant owned shares in Snowstorm. Thus, the fourth defendant had a financial interest in the proposed venture.

23 There is evidence that the fourth defendant attended meetings in May and June 2000 in relation to the project. In a cross claim, the first defendant [at paragraph 3], alleges that the fourth defendant was at all times a director of Buran, or was acting as a director of Buran and was an officer of Buran within the meaning of s 9 of the Corporations Act. Such representations are alleged to have been made by each of the cross defendants on Buran’s behalf, and that they are all liable in the same degree in respect of any damage caused by the making of representations. The pleading indicates that one of the other defendants (who is a fellow director) alleges that the fourth defendant is a director of Buran. The defendants have not yet been ordered to file and serve affidavits. Mr Bridges’s affidavit may provide evidence of these allegations and give details of the conversations that he had with other directors in May and June 2000.

24 The first defendant in the cross claim also alleges that the letter of 2 June 2000 was circulated to each defendant prior to dispatch and that the fourth defendant acquiesced in and approved the sending of the letter to the plaintiff and the making of the representations contained therein.

25 In the Minutes of the Inaugural Meeting of the Board of Directors of Buran Space Corporation Pty Ltd held on 1 June 2000 (Ex 2), it was noted that the fourth defendant was present. At paragraph 4 under the heading “Contacts” it states:

“…It was noted that directors, Craig Cooper, Chris Coudounaris and Graeme Bridges had been personally involved in the negotiation of the “Omni contract” and that all were satisfied with the efficacy of the agreement for Buran Space Corporation.”

26 Thus there are Buran documents which state that the fourth defendant was a director of it and further that he was satisfied with the efficacy of the agreement for Buran. The fourth defendant had a financial interest in the project. Another defendant alleges that the fourth defendant was a director of Buran – see Wickstead. It is my view that the plaintiff has an arguable case against the fourth defendant. It is not hopeless. The fourth defendant’s claim for summary judgment is dismissed. Normally costs follow the event. The fourth defendant is to pay the plaintiff’s costs of this motion.

27 If the claim against the fourth defendant was not dismissed he did not object to the ASC being filed. Leave is granted to the plaintiff to file and serve an ASC within 14 days. In relation to the ASC, the first, second and fourth defendants are entitled to their costs thrown away by the amendments.

28 The court orders:

(1) The fourth defendant’s notice of motion filed 2 March 2004 is dismissed.

(2) The fourth defendant is to pay the plaintiff’s costs of the notice of motion filed 2 March 2004.

(3) Leave is granted to the plaintiff to file and serve an amended statement of claim within 14 days.

(4) The plaintiff is to pay the first, second and fourth defendants’ costs thrown away by the amendment.

(5) The matter is referred to a status conference. The court is to notify the parties of the date.
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Last Modified: 05/21/2004