Palmgate Investments Pty Ltd v Lin

[2020] WADC 154

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   PALMGATE INVESTMENTS PTY LTD -v- LIN [2020] WADC 154

CORAM:   DEPUTY REGISTRAR HEWITT

HEARD:   26 NOVEMBER 2020

DELIVERED          :   10 DECEMBER 2020

FILE NO/S:   CIV 2753 of 2020

BETWEEN:   PALMGATE INVESTMENTS PTY LTD

Plaintiff

AND

HUANG JIE EDWIN LIN

First Defendant

WARREN GREGORY POLINI

Second Defendant

Catchwords:

Application to strike out - Whether incorporation of company to carry out the joint intention of contracting parties precludes any party thereafter from relying on the contract

Legislation:

Nil

Result:

Dismissed

Representation:

Counsel:

Plaintiff	:	Mr W C J Zappia
First Defendant	:	Mr A P Rumsley
Second Defendant	:	Mr A P Rumsley

Solicitors:

Plaintiff	:	Bennett & Co
First Defendant	:	Alan Rumsley
Second Defendant	:	Alan Rumsley

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

Palermo v Palermo [2015] WASCA 49

DEPUTY REGISTRAR HEWITT:

1. Notwithstanding the amount of paper which has been generated in this matter and in relation to the application with which I must deal, the matter comes down to a very simple proposition.

2. The plaintiff and others including the two defendants agreed to enter into an arrangement, which in my view constituted a joint venture, but that expression is not capable of precise definition in the law, that they would contribute funds to enable the purchase and development of a block of land which would then be sold and the proceeds used to repay the original contributions and proportionately share the profit which was made on the venture between them.

3. It was a term of the agreement that the arrangement, which I describe as a joint venture, would be managed through a corporate entity, which was to be created for the purpose.  The plaintiff's claim against the defendants is that the agreement which had been reached between the parties, was not followed when the project was complete and the distribution to the plaintiff did not accord with what had been agreed between the parties prior to entering into the arrangements.

4. By a chamber summons filed on 13 August 2020, the defendant applied that the indorsement of claim and the writ of summons be struck out. No basis justifying such an order was advanced in the summons, but as the matter progressed, it became obvious that the defendants were relying upon the provisions of O 20 r 19 of the Rules of the Supreme Court 1971 (WA) that the indorsement disclosed no reasonable cause of action.

5. The proposition upon which the applicants relied was that the rights and obligations of the parties, following the incorporation of the company and the undertaking of the proposed development, ceased to exist and instead were replaced by their rights and entitlements in respect of the corporate entity, which should properly have been the defendant.  The proposition essentially boiled down to the fact that the law could find no place for the original agreement once the incorporation of the company and the various steps necessary to undertake the project were underway.

6. The defendants made submissions as to the proposition that the company was a separate legal entity divorced from the individuals who were its members.

7. Various cases have been cited and there is no doubt that the proposition that the company is a separate entity and that it is separate and distinct from its members and shareholders is a perfectly correct statement of the law.  What is not clear however, is that an original agreement entered by various parties to act in a particular way and share the proceeds of a development is vitiated by the fact that the enterprise is conducted through the medium of an incorporated entity.

8. It is argued by the plaintiff that the agreement between the parties was a contractual arrangement and is enforceable as such and that the fact that their ambitions and goals were channelled through a corporate entity does not relieve the various parties to the agreement of their rights and obligations under it.  Clear authority for that proposition can be found in the case of Palermo v Palermo [2015] WASCA 49 [158]. In that case, the litigants were brothers who for many years, conducted business through various companies of which they were members on the basis that it was agreed that the wealth so created would be shared between them.

9. The court had no difficulty in finding that the agreement to share the wealth so created was not destroyed by the fact that the various wealth creation activities, which were undertaken by the litigants, were through the medium of incorporated entities.

10. I can see no compelling reason to think that the law will not allow the contractual ambitions of various parties who carry out a project using a corporate entity are somehow dissolved by the fact that the very agreement in which they have entered involves the creation of a corporate entity.

11. I have looked at the authorities which has been provided to me by the applicant and those provided by the respondent and I can see no binding authority that favours the position contended for by the defendants.  The cases appear to be decided on their individual facts, not upon some general principle of law that the incorporation of a company sweeps away the very contractual arrangements which led to its creation.

12. For these reasons, in my view, the application by the defendants is not sound and the application should be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

DH
Court Officer

10 DECEMBER 2020