Perpetual Nominees Limited v Chaucers Canterbury Pty Ltd
[2006] VSC 396
•27 October 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 7977 of 2003
BETWEEN:
| PERPETUAL NOMINEES LIMITED (ACN 000 733 700) and McLAUGHLINS FINANCIAL SERVICES LTD (ACN 088 647 796) | Plaintiffs |
| and | |
| CHAUCERS CANTERBURY PTY LIMITED (ACN 098 748 424) and others | Defendant |
AND BETWEEN:
| CHAUCERS CANTERBURY PTY LIMITED (ACN 098 748 424) | Plaintiff by Counterclaim |
| and | |
| PERPETUAL NOMINEES LIMITED (ACN 000 733 700) McLAUGHLINS FINANCIAL SERVICES LTD (ACN 088 647 796) | 1st and 2nd Defendants by Counterclaim |
| and | |
| AUSTRALIAN FINANCE SOLUTIONS PTY LTD (ACN 079 102 597) | 3rd Defendant by Counterclaim |
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JUDGE: | TEAGUE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 August 2006 | |
DATE OF JUDGMENT: | 27 October 2006 | |
CASE MAY BE CITED AS: | Perpetual Nominees & Anor v Chaucers & Ors | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 396 | |
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PRACTICE COURT – Appeal from Master – Application for stay of Counterclaim for want of substantiation of governance requirements – Review of evidence – Appeal allowed
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs/1st and 2nd Defendants by Counterclaim | Mr J. Dixon | Gadens Lawyers |
| For the Defendant/ Plaintiff by Counterclaim | Mr R. Berglund Q.C. | Wilmoth Field & Warne |
| For the 3rd Defendant by Counterclaim | Mr N. Jones | McKean & Park |
HIS HONOUR:
These are my reasons for allowing an appeal from a Master and for dismissing a summons in these proceedings seeking a stay of the proceedings by Counterclaim. The appeal was instituted by the Plaintiff by Counterclaim from an order of a Master made on 24 July 2006. The Master had then granted a stay of proceedings of the counterclaim. The appeal was heard in the Practice Court on 7 August 2006. Before me, Mr Dixon appeared for the First and Second Defendants by Counterclaim, Mr Jones for the Third Defendant by Counterclaim and Mr Berglund QC for the Plaintiff by Counterclaim.
The proceedings were instituted by Perpetual Nominees Ltd and McLaughlins Financial Services Ltd (the Plaintiffs who are also the First and Second Defendants by Counterclaim) against Chaucers Canterbury Pty Limited (“Chaucers”), Mr Dale Robertson, and Rumasc Pty Ltd (the Defendants). The claim, arising out of loan agreements executed between the parties, from which the Plaintiffs withdrew because of Chaucers’ alleged failure to comply with requirements therein, was for monies allegedly owing under the agreements. The Counterclaim was brought by Chaucers against the Plaintiffs and a Third Party, Australian Finance Solutions Pty Ltd (together they are “the Defendants by Counterclaim”). The Counterclaim alleges, amongst other things, breach of contract and misleading and deceptive conduct.
A summons was issued by the Defendants by Counterclaim to have the proceedings by Counterclaim stayed. This summons was issued as a consequence of information being provided through correspondence that was exchanged between lawyers for each of the Defendants by Counterclaim and Chaucers over a period of approximately 5 months. In early February 2006, Gadens Lawyers (“Gadens”), the solicitors for the First and Second Defendants by Counterclaim, were made aware through an ASIC press release that Mr Dale Robertson, sole director and secretary of Chaucers, had been disqualified from managing corporations for a period of five years. On 14 February 2006, a then current ASIC search on Chaucers was obtained. It indicated that Chaucers did not have a director or secretary, and that the shareholders of Chaucers were Rumasc Pty Ltd and Alamanda Property Investments No 2 Pty Ltd. On 15 February 2006, Gadens wrote to Wilmoth Field Warne, (“WFW”), the solicitors for Chaucers, and raised the issue of Mr Robertson’s disqualification and requested information as to who had given instructions on behalf of the company, particularly as to the drafting of the amended Counterclaim. That same day WFW replied, stating that they had received their instructions before 19 January 2006, and that the company was currently in the process of appointing a new director.
A Directions Hearing was conducted on 16 February 2006, before Senior Master Mahony. Mr Dixon appeared on behalf of the Plaintiffs. He raised amongst other issues the deregistration of Rumasc Pty Ltd, a shareholder of Chaucers. In a letter dated 27 March 2006, which WFW wrote to Gadens, it was stated that Rumasc Pty Ltd had been deregistered on 28 August 2005 for non-payment of ASIC fees and was in the process of being reinstated. In a letter dated 28 March 2006, Gadens wrote to WFW querying Mr Weerappah’s appointment as director and how any resolution could be passed when Rumasc Pty Ltd, one of Chaucers’ shareholders, was deregistered. WFW, by letter dated 19 May 2006, stated that Mr Weerappah had been appointed pursuant to Rule 98 of Chaucers’ constitution and not pursuant to a resolution of shareholders. A copy of the constitution was later provided to Gadens.
In a letter dated 30 May 2006, Gadens wrote to WFW stating that, when Mr Weerappah was appointed on 15 February 2006, Chaucers had no directors capable of appointing Mr Weerappah, as Mr Robertson had been disqualified in January 2006. Thus, it was put, Mr Weerappah could not have been appointed pursuant to Rule 98. In a letter dated 30 June 2006, WFW stated that on 18 January 2006 Mr Robertson had “resolved to appoint Mr Weerappah as a director of Chaucers. Pursuant to that resolution the appointment was to take effect from the date upon which Mr Weerappah consented to the appointment. Mr Weerappah consented to the appointment on 15 February 2006. The Constitution of Chaucers enables a director to appoint any other person as a director. It is silent as to when the appointment by a director is to take effect. It is a valid exercise of the power of appointment of a director if the appointment is to take effect from a date after the resolution making the appointment.”
On 7 July 2006, Gadens wrote to WFW stating their intention to make an application seeking a stay of the proceedings by Counterclaim, on the basis that Chaucers had neither provided a satisfactory explanation for Mr Weerappah’s appointment as director and secretary, nor had provided any documentation in support. In a letter dated 11 July 2006, WFW enclosed documents said to verify Mr Weerappah’s appointment as Director of Chaucers. One was an ASIC Form 484: ‘Change to company details’ signed by Mr Weerappah and dated 15 February 2006. Another was a consent signed by Mr Weerappah dated 15 February 2006. A third was a resolution stated to have been made by Mr Weerappah as sole director and secretary of Chaucers dated 15 February 2006. The fourth was an undated resolution signed by Mr Robertson in his then capacity as the sole director and secretary of Chaucers stating that, as at 18 January 2006, he had “consented to the appointment of Clestus Weerappah as a director and secretary of the company to take effect from the date of signing a consent to act regarding same.”
Two affidavits sworn on 21 July 2006 were relied on in support of the appeal by Chaucers. They were provided by Mr Dale Robertson and Mr Clestus Weerappah . They set out a more detailed explanation of the events leading to Mr Weerappah’s appointment as director. That detail also revealed a degree of inconsistency with information earlier provided.
What Mr Robertson deposed to was substantially as follows. He had been disqualified by ASIC from managing Chaucers as from 19 January 2006. Before he was, and because he was aware that he was to be, disqualified from being a director of Chaucers, he thought it appropriate to approach Mr Weerappah, as the controller of Alamanda Property Investments Pty Ltd, a shareholder and creditor of Chaucers, to act as director and secretary of Chaucers. Before approaching Mr Weerappah, Mr Robertson sought advice from Mr James Copes of Clements Dunne & Bell, Mr Weerappah’s accountants, to see whether it was appropriate that Mr Weerappah be appointed as director of Chaucers. After being told by Mr Copes that it would be appropriate, Mr Robertson asked Mr Copes to ascertain whether Mr Weerappah would consent to act in such a capacity. He understood that Mr Copes contacted Mr Weerappah in late November 2005 and advised the latter that it would be in his best interests to undertake such directorship. That was the prelude to Mr Weerappah contacting Mr Robertson late in 2005 to state that he would consent if Mr Robertson was likely to be disqualified. On 10 January 2006, a meeting was held at Spargo’s Restaurant in Bridge Road, Richmond. At that meeting, Mr Weerappah formally consented to act as the director of the company. A diary entry had been made by Mr Robertson which recorded the meeting and the agenda for the day. The diary entry was exhibited. It reads: “Directorship Chaucers” and “CW to be Sole Director”.
Mr Weerappah deposed that the contents in the affidavit of Mr Robertson insofar as they concerned him were true and correct. In both of these affidavits, it is deposed that after the meeting Mr Weerappah instructed his accountant, Mr Copes, to prepare the necessary forms for lodging at ASIC.
Mr Weerappah, as a person having the controlling interest in a company that was a shareholder and creditor of Chaucers, could be seen to have had a clear and identifiable interest in the continuation of the company, and so could be seen to be an appropriate person to be fastened with the continuing responsibility of directing the course of the company.
It is appropriate, because of submissions directed to them as being potentially relevant, to refer to the provisions as to replaceable rules in s.201G and ss. 201H(1) & (2) of the Corporations Act 2001 and the Constitution of Chaucers.
Section 201G Company may appoint a director:
A company may appoint a person as a director by resolution passed in general meeting.
Section 201H Directors may appoint other directors:
(1)Appointment by other directors.The directors of a company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors’ meeting even if the total number of directors of the company is not enough to make up that quorum.
(2)Proprietary company —confirmation by meeting within 2 months. If a person is appointed under this section as a director of a proprietary company, the company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the company at the end of those 2 months.
…
To be compared with those rules are the following clauses from Chaucers’ Constitution:
97The Company may appoint a person as a director by resolution passed in general meeting.
98The directors of the Company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors’ meeting even if the total number of directors of the Company is not enough to make up that quorum.
99If a person is appointed under Rule 97 as a director of the Company, the Company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the Company at the end of those 2 months.
My initial reaction to the provisions in Chaucers’ Constitution was to recognise that it would appear to be more appropriate for Rule 99 of the Constitution to refer to Rule 98 and not to Rule 97. It does not seem to me particularly appropriate to require that, after a resolution is passed in a general meeting, a second resolution of shareholders is required to confirm the first resolution. That reaction was confirmed by my noting the framing of the comparable provisions in the Corporations Act. The terms of Rule 99 of the Constitution are substantially similar to the terms of s.201H(2) of the Corporations Act and those of Rule 98 with those of s.201H(1). Nevertheless, and contrary to what was put to me by Mr Dixon, Counsel for the First and Second Defendants by Counterclaim, I could not say that the draftsperson had (my emphasis) to be seen as necessarily having made an error of substance or a typographical error. Notwithstanding some reservations, I am not satisfied that I am obliged to conclude that the relevant provisions in the Constitution could only (my emphasis) be construed in a manner contrary to their express terms.
It was submitted by counsel for the Defendants to the Counterclaim against the validity of Mr Weerappah’s appointment, that there was no credible evidence of a valid resolution under Rule 98 for the appointment of Mr Weerappah on 10 January 2006, and that the appointment under Rule 98 on 15 February 2006 had to be seen as invalid as Robertson was not then a director. Counsel argued that the proper conclusion to be drawn was that a paper trail had been created only on 15 February 2006 so as to make it appear that Mr Weerappah was appointed under Rule 98. My attention was drawn to inconsistencies as between the accounts in the letters and those in the affidavits. I will elaborate, with appropriate emphasis. In the letter dated 30 June 2006 from WFW to Gadens, it was stated that on 18 January 2006, Mr Robertson resolved to appoint Mr Weerappah as Director of Chaucers and pursuant to that resolution the appointment was to take effect from the date upon which Mr Weerappah consented to the appointment, and that Mr Weerappah consented to that appointment on 15 February 2006. In the affidavit of Mr Robertson sworn on 21 July 2006, he deposed that that on 10 January 2006, at a meeting at Spargo’s Restaurant in Richmond, Mr Robertson resolved to appoint Mr Weerappah to the office and Mr Weerappah formally consented to act as director of the company. Similarly Mr Weerappah swore in his affidavit of 21 July 2006 that on 10 January 2006, Mr Robertson appointed him as director and he agreed to be appointed as director. There is then the documentation provided to ASIC, the ASIC form 484: ‘Change to company details’, and Mr Weerappah’s written consent to act as director and secretary and the Resolution by sole director and secretary which is Mr Weerappah’s consent to the appointment, are all signed by Mr Weerappah and dated 15 February 2006. There is also the undated Resolution provided by Mr Robertson which stated:
“I hereby confirm that in my then capacity as sole director and secretary of Chaucers Canterbury Pty. Ltd, as at 18 January 2006 I had consented to the appointment of Clestus Weerappah as a director and secretary of the company to take effect from the date of signing a consent regarding the same.”
If was further submitted by Counsel for the First and Second Defendants by Counterclaim, that in the letters from WFW, the various documents and the affidavits of Mr Weerappah and Mr Robertson, different dates were noted as to when Mr Weerappah’s alleged appointment as director of Chaucers occurred, namely: 10 January, 18 January and 15 February 2006. It was submitted that there should be added to the lack of confidence arising from the multiple dates, the consideration that there ought to have been an affidavit provided by Mr Copes, Mr Weerappah’s accountant, since he had been informed of the meeting and had been actively involved in the process. Accordingly, it was submitted, any question surrounding the appointment of Mr Weerappah as director and secretary could easily have been resolved by having an affidavit from him. Mr Jones, counsel for the Third Defendant by Counterclaim, confirmed and supplemented the submissions of Mr Dixon.
Mr Berglund, counsel for Chaucers, sought to rely principally on the affidavits of the two people who were primarily involved in the appointment of a director, both of whom had sworn to the appointment having taken place on 10 January 2006. He argued that the written consent provided by Mr Weerappah on 15 February 2006 was to be viewed as merely being that which was to achieve compliance with the procedural requirements for the appointment of a director. I was taken to Collins v Zernike Australia Pty Ltd and Anor [2006] WASC 67 as to s.201D(1) of the Corporations Act. There it was held that an appointment of a director is not rendered invalid if a person is appointed prior to giving their written consent. Mr Berglund submitted that any affidavit from Mr Copes, the accountant, would be hearsay and hence inadmissible, as Mr Copes was not present at the critical meeting. I do accept that Chaucers’ position would have been stronger had there been an affidavit from Mr Copes in which there could have been specific confirmation of the position spelt out in the affidavits of Mr Weerappah and Mr Robertson, not of a hearsay kind. The principles in Jones v Dunkel (1959) 101 CLR 298 could be seen to apply. But that is not a factor to which I would attach much weight.
Both Messrs Dixon and Berglund took me to the subject of the alternative rectification options available to have regularised the situation in appointing Mr Weerappah. On the one hand, the availability of those options could be seen to support the conclusion that to grant a stay would cause no long term unfairness. On the other hand, that availability could be seen to bring home the sterility of fastidiously insisting on formal procedural compliance.
In my assessment, the most critical consideration is as to the weight to be given to different aspects of the evidence. I am troubled by the differences in the detail as between the documents submitted to ASIC, the letters and the affidavits from Mr Robertson and Mr Weerappah. However, to my mind, the character of the exhibited diary note which records the meeting at Spargo’s Restaurant is such that it represents a very weighty piece of corroboration for the material which is sworn to in the affidavits of Messrs Weerappah and Robertson. The diary note bears the indicia of authenticity. I accept that there is the possibility that it could have been carefully crafted at a date much later than those which it bears. However, I assess that possibility as remote. If the diary note had not been seen by me to add such weight, I might have had to consider the issues of burden of proof raised by counsel. In the circumstances, I am amply satisfied that I should accept that by reason of the steps taken by Mr Weerappah and Mr Robertson as spelt out in their affidavits, there has been appropriate procedural compliance with the necessary governance requirements.
Thus I would allow the appeal brought by Chaucers. Subject to any submissions to the contrary, I would propose to order that the appeal be allowed, that the summons seeking a stay be dismissed and that the Defendants by Counterclaim pay the costs of the Plaintiff by Counterclaim of the application seeking a stay and the appeal.
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