Ryan v Chianti Pty Ltd - [2010] WASC 147

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RYAN -v- CHIANTI PTY LTD [2010] WASC 147

CORAM: ACTING MASTER CHAPMAN

HEARD: 18 MAY 2010

DELIVERED : 25 JUNE 2010

FILE NO/S: CIV 3150 of 2009

BETWEEN: THOMAS LINDSAY RYAN
First Plaintiff
THOMAS LINDSAY RYAN as Administrator of the Estate of JEAN LENDRUM RYAN
Second Plaintiff
AND
CHIANTI PTY LTD
Defendant

Catchwords:

Practice and procedure - Summary judgment - Limitation period - Disputed facts - A question which ought to be tried

Legislation:

Nil

Result:

Consolidated with CIV 1592 of 2008

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr J N D'Angelo
Second Plaintiff            :     Mr J N D'Angelo
Defendant:     Ms R Cosentino

Solicitors:

First Plaintiff                :     Granich Partners
Second Plaintiff            :     Granich Partners
Defendant:     Gibson & Gibson

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

Anderson v Effexseven (1998) 10 ANZ Ins Cas 61-424
Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Hawkins v Clayton (1988) 164 CLR 539
Ingram v Mohren (1993) 10 WAR 497
Jefferson Ford Pty Ltd v Ford Motor Company of Australia [2008] FCAFC 60
Willoughby v Clayton Utz [No 2] [2009] WASCA 29

ACTING MASTER CHAPMAN:

Application

The defendant by chamber summons filed on 18 February 2010 seeks leave to bring the application out of time and for judgment to be entered for the defendant pursuant to O 16 r 1 of the Rules of the Supreme Court 1971 (WA). The defendant contends that the cause of action pleaded has no prospects of success. There are three grounds for this submission:
(1)The action is statute‑barred.
(2)There are no facts established or pleaded to give rise to a cause of action.
(3)The subject matter is so closely connected with other proceedings in this court it is unreasonable it is not litigated as a counterclaim in those proceedings.
In the alternative the defendant seeks an order that this matter be consolidated with CIV 1592 of 2008.

Background

The defendant is the trustee of Riverbends Trust. The Riverbends Trust balance sheet as at 30 June 1999 shows under the heading 'Current Liabilities' Thomas Ryan $423,684, JL Ryan $168,871. That balance sheet also shows the same entries for the previous year.
In his affidavit sworn on 30 March 2010 Mr Thomas Lindsay Ryan (Thomas) deposes as follows:
12On 2 April 2004 Pascoe confirms that the Riverbends Trust owes me 'the $600,000' and that the books are incorrect in showing it as owing to Stephen, the director of the Defendant. A copy of Pascoe's letter dated 2 April 2004 is attached marked 'TLR 6'.
13Lyons instructed Ord Group Pty Ltd ('Ord') to prepare a report of the accounts which report was forwarded to me on 19 April 2004. A copy of the Ord report is attached marked 'TLR 7'.
13At paragraph headed 'Riverbends Trust' on page 2 of the Ord report and at Appendix E and F of the Ord report, Ord confirms that as at 30 June 1999 am owed $448,187 and Jean is owed $193,344.
14Prior to the Ord report I had not seen the financial books of account of the Riverbends Trust and had no knowledge of the content of those accounts.
15I admit the contents of paragraph 7, 8 and 9 of the Applicant's affidavit.
He states that the Ord report was forwarded to him on 19 April 2004. The statement that he had not seen the financial books of Riverbends Trust prior to that date does not appear to be consistent with pars 10 and 11 of his affidavit which read:
10Lyons requested copies of the partnership and Riverbends Trust accounts from Pascoe, who provided me with those books of account.
11I also requested Pascoe Mr John Pascoe ('Pascoe'), chartered accountant and the accountant for the Partnership, in and during March 2004, to explain the Riverbends Trust balance sheet as at 30 June 2000, specifically the disappearance of the entries of myself and Jean as 'Current Liabilities'.
On the evidence before me it is not clear when the first plaintiff received these accounts but it would seem that it was at least by March 2004.

Principles governing application for summary judgment

The parties are in general agreement as to the applicable law in cases of this nature. The power to order summary judgment should be exercised with great care and should never be exercised unless it is clear there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99. The legal onus is and remains on the defendant to show that there is no serious question to be tried on any cause of action raised by the plaintiffs: Anderson v Effexseven (1998) 10 ANZ Ins Cas 61-424, 74‑756.
In Jefferson Ford Pty Ltd v Ford Motor Company of Australia [2008] FCAFC 60, Gordon J said:
Thirdly, each case must be considered separately. No particular hard and fast rules can be set down, only general principles. One principle is that the moving party bears the onus of persuading the court that the opponent has no reasonable prospect of success (see Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328 at 333). As noted earlier, however, s 31A has lessened the standard that must be met. In that regard, it must be emphasised that once a moving party has established a prima facie case that the opponent has no reasonable prospect of success, the opposing party must respond by pointing to specific factual or evidentiary disputes that make a trial necessary; general or non‑particularized denials will be insufficient to defeat the motion: see Fortron Automotive Treatments Pty Ltd v Jones(No 2) [2006] FCA 1401 at [22]. In other words, it is inappropriate in defence of a claim for judgment under s 31A of the Federal Court Act to seek to defend by merely putting a claimant to formal proof: Vans, Inc v OffpriceComAu Pty Ltd [2006] FCA 137 at [12]. This is not a new concept. It finds earlier reflection in ss 190(4) and 191 of the Evidence Act 1995 (Cth) and O 33, O 34 and O 34B of the Federal Court Rules (Cth).
…
A fifth principle is that where there is a real issue of fact relevant to a pleaded cause of action, it is unlikely that that part of the proceeding has no prospect of success: see Boston Commercial Services at [44]. So, for example, if the pleadings, affidavits, and other materials considered in connection with the summary judgment motion, reveal a factual dispute and that factual dispute must be resolved to determine whether or not the claim succeeds, it cannot be said that the claim has 'no reasonable prospect of success': see Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [20] (stating that summary judgment should be made by reference to the pleadings, affidavits, and other evidence as appropriate under the circumstances) and Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd (in liq) [2006] FCA 1416 at [32]. On the other hand, if the factual contest is unnecessary to the resolution of the cause of action pleaded, then in the absence of other relevant material, there is nothing to prevent the court entering judgment on that claim [127], [130].

Application of the principles

Counsel for the defendant contends there is no factual dispute. It is said the claim the plaintiffs plead is one based on an acknowledgement of debt and the plaintiffs are bound by the pleaded case in determining the present application. The pleaded case of the plaintiffs is:
1.The First Plaintiff is Thomas Lindsay Ryan, an adult male businessman currently residing at 50 Thornbury Close, Kojonup, in the State of Western Australia.
2.The Second Plaintiff is Thomas Lindsay Ryan, in his capacity as the executor appointed under the Will of the late Jean Lendrum Ryan ('the Deceased').
3.The Defendant at all material times was:
3.1a corporation duly incorporated pursuant to the Corporations Act 2001;
3.2the trustee for the Riverbends Trust pursuant to a Deed of Trust dated 19 September 1997 ('the Riverbends Trust').
4.In or about June 1998, the Plaintiff and the Deceased advanced the following sums of monies to the Defendant:
4.1the First Plaintiff advanced the sum of $423,684.00;
4.2the Deceased advanced the sum of $168,871.00.
5.The Defendant, as trustee for the Riverbends Trust, does:
5.1 by its financial accounts, admit that it is indebted to the Plaintiff and the Deceased in the sum of $423,684.00 and $168,871.00 respectively, thereby acknowledging its indebtedness to the Plaintiff and the Deceased.
5.2Alternatively, did state an account due, owing and payable to the Plaintiff and the Deceased in the sum of $423,684.00 and $168,871.00 respectively.
6.Despite demand having been made on 21 October 2009 the Defendant has failed to pay the Plaintiff and the Deceased the said sum of $423,684.00 and $168,871.00 respectively.
AND THE FIRST PLAINTIFF CLAIMS AGAINST THE DEFENDANT
1.The sum of $423,684.00;
2.Interest on the sum $423,684.00 pursuant to section 32 of the Supreme Court Act 1935 from 1 July 1998 until payment or Judgment;
3.Costs.
AND THE SECOND PLAINTIFF CLAIMS AGAINST THE DEFENDANT
1.The sum of $168,871.00;
2.Interest on the sum $168,871.00 pursuant to section 32 of the Supreme Court Act 1935 from 1 July 1998 until payment or Judgment;
3.Costs.
It will be noted that the statement of claim does not plead the terms upon which the plaintiffs are said to have advanced the moneys.
In support of this application Stephen Frederick Ryan (Stephen) swore an affidavit on 18 February 2010. At pars 4, 5 and part of par 6 he deposes as follows:
4.The Defendant, as Trustee for the Riverbends Trust, has not either before 30 June 1998 or at all received any monies from the Plaintiffs. In the year ended 30 June 1999 News Corporation Ltd shares were assigned by the Deceased to the Riverbends Trust. These are shown as an asset with a value of $24,503.00 in the 2000 Balance Sheet. The shares were sold in the following financial year and the proceeds paid to the First Plaintiff.
5.The Defendant has not entered into any verbal, written or implied agreement with the Plaintiffs in respect of the monies the subject of the Plaintiffs' claim.
6.Annexed and marked 'SFR 1' is a true copy of the financial statements for the Riverbends Trust for the year ended 30 June 2000. There is no acknowledgment in the accounts of an indebtedness to the Plaintiffs. At no time since 30 June 2000 has the Defendant acknowledged an indebtedness to the Plaintiffs as alleged in the Statement of Claim or at all.
In his affidavit in reply Thomas on 30 March 2010 deposes at pars 5 ‑ 7 as follows:
5.The Riverbends Trust balance sheet as at 30 June 1999 records Thomas Ryan and J L Ryan, Jean ('the Plaintiffs'), as 'Current Liabilities' respectively entitled to the sum of $423,684 and $168,871. Annexed and marked 'TLR 3' is the 30 June 1999 Balance Sheet.
6.The Balance Sheet further records the Plaintiffs entitlement to those sums of money for the 1998 financial year.
7.The Balance Sheet as at 30 June 2000, at 'SFR 1' of the Defendants Affidavit fails to acknowledge the entitlements.
Annexure TL3 is found at page 11 of the Affidavit. It purports to be signed. It is apparently part of a larger document as on the bottom it is shown to be page 2 and has the following words:
The accompanying notes form part of these financial statements.
This statement is to be read in conjunction with compilation report.
Neither the notes nor the report referred to have been annexed.
Counsel for the defendant contends that nothing in the Thomas affidavit deals with or challenges par 4 or 5 of the Stephen affidavit. It is said therefore there is no evidence to support par 4 of the statement of claim. I tend to agree. It is further submitted that par 4 of the statement of claim cannot succeed on the evidence.
On the evidence before me it appears the only basis for the plaintiff's' pleaded case is the balance sheet of Riverbends Trust as at 30 June 1999 annexed to the Thomas affidavit. Counsel for the defendant argues that the balance sheet does not go to establishing the material facts to satisfy the court that there is a factual dispute.
At par 13 of the Thomas affidavit, he deposes that a report from Ord Group Pty Ltd was commissioned by Mr Lyons (TLR7). At page 2 of that report under the heading 'Riverbends Trust' the following is recorded:
We have reviewed the accounts for the abovenamed trust for the period 1 July 1997 to 30 June 2002, at this stage we have not reviewed the trust deed, it is our view that a copy of the trust deed should be requested from PHBB. In viewing the above, we noted an unusual transaction involving the 1999 and 2000 financial years. The accounts for the year ended 30 June 1998 and 1999 showed an amount owing to Tom Ryan of $423,684 and Jean Ryan $168,871 refer appendix E, however the accounts for the year ended 30 June 2000 showed amounts owing to Stephen Ryan of $424,685 and $193,344 refer appendix F, it would appear that the loan accounts owing to Tom and Jean Ryan were changed to Stephen Ryan. We also notice that in the accounts for the year ended 30 June 2000 amended the 1999 comparatives for the above and also added an additional asset being $24,503 News Corporation Limited Shares.
The incorrect renaming of the above loan accounts is supported by a hand written fax sent to Tom Ryan by John Pascoe dated 2 April 2004. Mr Pascoe confirms that the above loans should be in the name of Tom and Jean Ryan refer appendix G.
The accounts for the year ended 30 June 2001 show the trust selling its News Corporation shares, with the capital gain and proceeds from the sale being allocated to Mr Tom Ryan; at this stage we are unable to confirm whether Mr Tom Ryan received these proceeds.
Counsel for the defendant correctly points out the report is based on the accounts for the year ended 30 June 1998, 1999 and 2000 and the notes of Mr Pascoe. It was submitted that reference in a balance sheet to a liability does not itself establish a legal obligation to pay the moneys.
I accept that financial statements can be construed as acknowledgement of debt. In Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270, Buss JA said [76] ‑ [77]:
Numerous authorities have considered, in the context of acknowledgements of debt for the purposes of limitation statutes, whether a corporation's financial statements can constitute an acknowledgment of debt. The authorities establish that financial statements (including the balance sheet and the notes to the accounts) can constitute an acknowledgement of debt, and that individual creditors comprised in the aggregate sums shown in the financial statements can be identified by extrinsic evidence, where the financial statements have been received by the creditor who sues in reliance on them. See The Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535, 543 ‑ 544, 549, 554 ‑ 563; Jones v Bellgrove Properties Ltd [1949] 2 KB 700, 704 ‑ 705; Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] Ch 146, 154, 193; Ledingham v Bermejo Estancia Co Ltd [1947] 1 All ER 749, 753; Re Brookers (Australia) Ltd (in liq); Brooker v Pridham (1986) 41 SASR 380, 385 ‑ 386, 393 ‑ 394. In Brooker, King CJ (with whom Mohr J agreed) said:
'A balance sheet can be an acknowledgment of debt (The Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535), and individual creditors comprised in the aggregate sums shown therein can be identified by extrinsic evidence: see Jones v BellgroveProperties Ltd ([1949] 2 KB 700). The acknowledgment operates, of course, at the date at which the balance sheet speaks, namely the end of the relevant financial period. I see no reason why the ordinary rule should not apply, namely that the acknowledgment implies a promise to pay. I do not think that the difference between the date of signature of the Balance Sheet and the date at which it speaks precludes the ordinary implication. If, of course, the debt has been discharged between those dates, there is nothing upon which the promise can operate. If the debt has not been discharged, the implied promise is operative. If there existed an immediate liability to repay, I do not think that the use of the expression 'deferred liability' in the Balance Sheet or the company's financial position could negative the implication of the promise to pay.
I consider that the acknowledgments were communicated to the appellants for the reasons given by Olsson J.
The remaining question is whether the Balance Sheets could operate as an acknowledgment and promise to J P Brooker by reason of his being a director and a signatory. J P Brooker, at the material times, was one of six directors. His interest as a Shareholders' Account depositor would have been well known to his co-directors. There can be no doubt, therefore, that the decisions of the Board to adopt the Balance Sheets containing the acknowledgment of debt and promise to pay J P Brooker were valid decisions. The case is therefore distinguishable from Re The Coliseum (Barrow) Ltd ([1930] 2 Ch 44). It may also be distinguishable on the same ground from Re Transplanters (Holding Co) Ltd ([1958] 2 All ER 711) because in that case there were only two directors and it is not stated whether the concurrence of both was required for the adoption of the Balance Sheet. The signature of J P Brooker, together with the co-director Allan, to the Balance Sheets did no more than give effect to the valid decisions of the Board. There was no question of abuse of his fiduciary position for his own benefit. He, like Mr Allan, was a mere instrument of the Board and his signature was the means of complying with the statutory requirement. The acknowledgment and promise were contained in the Balance Sheets validly adopted by the Board (385 ‑ 386)'.
In the present case, I am of the opinion that the financial statements of the SJRF Trust and the evidence of Stephen Frederick Ryan, which I have mentioned at [27] - [30] and [32] above, when considered in the context of the relevant factual and legal background including cl 3.5 of the SJRF Trust deed and the resolutions, constitute admissions by the appellant that the distributed amounts were owing by the appellant to the respondent, for the purposes of the principle referred to in Gummow J's reasons in Roxborough [67]. The latest financial statements before Judge Eaton, namely, those for the year ended 30 June 2003, described the distributed amounts as an 'Unpaid Beneficiary Entitlement'. When that description is read with cl 3.5, the resolutions and Stephen Frederick Ryan's evidence, the proper conclusion is that the appellant's admission was of an obligation to pay on demand. Although it is unnecessary to determine this point, my examination of Edwards v Lowndes and the other cases in the line of authority referred to in Meagher, Gummow & Lehane's, Equity Doctrines & Remedies (4th ed, 2002) [1-215] and Gummow J's reasons in Roxborough [67], does not indicate that it is essential, for there to be a binding admission in relation to an amount owing by a trustee to a beneficiary, that the relevant amount is held as, or represented by, cash at bank or some other monetary sum when the alleged admission is made.
Counsel for the defendant contends the plaintiffs have not pointed to any relevant background supporting the entry in the financial statements. I agree. Indeed the complete accounts to 30 June 1999 are not annexed to the affidavit of Thomas and so I do not have the benefit of any additional material which may have been recorded. Buss JA was of the view that after a proper consideration of the evidence the admission in the case before him was of an obligation to pay on demand. Counsel for the plaintiffs contends when the evidence in this matter is properly considered that is a conclusion the court may reach although he has not pointed to any evidence in support.

Counsel for the defendant submits that it is not sufficient for the plaintiffs to say there is a vague factual dispute. She submits that counsel for the Plaintiffs refers to the following areas of dispute:
1.There is a difference between the 1999 and 2000 financial statements.
2.The fact that Stephen denies advances have been made.
As to the first point, counsel for the defendant submits this is not a dispute because the evidence is unchallenged. She submits the plaintiffs fail to establish any circumstances which render the accounts as having the character of an acknowledgement. She points to the fact that there is an absence of any evidence as to the advancement of the money and in particular, the absence of evidence as to any terms.
Counsel for the plaintiffs submits in the balance to 30 June 1999, the sum of $423,685 is shown as a liability to TL Ryan and $168,871 to JL Ryan but in the balance sheet to 30 June 2000, the sums are included as a liability to SF Ryan. He further submits there is no explanation for this change. There may be a number of explanations but none has been put forward. The accounts to 30 June 2000 are included in full at pages 7 ‑ 12 of the Stephen affidavit, but no explanation has been given in the accounts for this change.
On the state of the evidence, the true position is not clear. The note from Pascoe indicates the books are incorrect in showing the monies are owing to Stephen. Given the relationship between the parties, I consider that statement requires further investigation.

Limitation defence

Counsel for the defendant submits the plaintiffs' claim cannot succeed as there is a clear defence based on the Limitation Act 1935 (WA). I accept limitation questions should not be decided before trial except in the clearest of cases. The statement of claim alleges the sums were advanced on or about June 1998. The action was commenced by writ filed on 21 December 2009. It is accepted by the parties that a limitation period of six years provided in s 38(1)(c) of the Limitation Act applies.
Counsel referred to Willoughby v Clayton Utz [No 2] [2009] WASCA 29 where there is a very helpful outline of the history of s 44(1) of the Limitation Act 1935. In [63(b) ‑ (d)], Pullin JA said:
(b)Secondly, even if that were wrong, there was no acknowledgment in the deed that the Causes of Action were good. The recitals merely record (in par D) that the action was based on acts or omissions 'alleged' against the respondent.
(c)Thirdly, even if that be wrong, Lawcover was not the agent or 'privy' of the respondent. Privity is not established by proof of concern in the outcome. See Spencer Bower, Turner & Handley, Res Judicata [231]. The mere fact that Lawcover was the respondent's insurer does not make Lawcover the respondent's privy.
(d)Fourthly, even if that were wrong, and the deed contained an acknowledgment recognised at common law, then time began running again from the date of the alleged acknowledgment in the deed and expired six years later and before the commencement of the Second Action. See Halsbury, vol 19, The Laws of England (1st ed) [95].
Counsel for the defendant submits that the limitation period would run from the date of the acknowledgement of the debt for a period of six years. I think that submission has some force.
Counsel for the plaintiffs acknowledges there is a substantial issue as to whether the amounts stated in the financial statements result in a cause of action to which the plaintiffs are entitled to relief. He submitted it can be argued the cause of action accrued on or about 19 April 2004, being the date when the plaintiffs first became aware of the financial accounts of the Riverbends Trust. When asked for any authorities for this proposition he referred to the decision of Hawkins v Clayton (1988) 164 CLR 539 acknowledging it was a case based on tort.
He further argued that if in fact the liability was only repayable on demand then the demand was not made until on or about 21 October 2009 and that is when the time would run: see Ingram v Mohren (1993) 10 WAR 497.
Given the plaintiffs' plead in the statement of claim they advanced the sums of money pleaded, it is not clear why they were not aware of the cause of action before they obtained copies of the accounts. It is also not clear if any agreement between the parties required a demand to be made before the amounts became due and payable and if they did, why those terms were not known to the plaintiffs and pleaded in the statement of claim.
In the alternative plea at par 5.2 of the statement of claim, it is pleaded the sums were due, owing and payable and the prayer for relief claims interest from 1 July 1998. It is in my view doubtful the pleaded case supports the proposition put forward by the plaintiffs.
Notwithstanding the fact I consider there is considerable force in the submission of the defendant. I would be reluctant to strike out the plaintiff's claim at this interlocutory stage.

Estoppel defence

I am told the other proceedings in this court are CIV 1592 of 2008 which have not yet been determined. That action I am told relates to the dissolution of a partnership and relates to the statement of accounts of that partnership. The Riverbends Trust is not party to that partnership. Whilst the partnership accounts are separate from the accounts being considered in this action, counsel for the defendant submitted they could be interrelated depending upon whether distributions are made.
The plaintiffs now consent to this matter being consolidated with CIV 1592 of 2008. Three of the parties are common in both actions. I consider if this matter is to proceed it should be consolidated with the other action.

Conclusion

Assessing the strength of the plaintiffs' case has been limited by the way it has been pleaded and the evidence which has been presented. I am satisfied that the factual matrix is such that the circumstances ought be investigated. Most of the facts relating to the account upon which the claim is based are in the knowledge of the defendant. To use the terminology of the Ord report there is an 'unusual transaction' in the accounts and the entry showing the amounts due to Stephen according to Mr Pascoe is incorrect. These issues should be properly tested and the most appropriate way to do that is to consider these transactions along with those raised in CIV 1592 of 2008.
Accordingly, I would not enter judgment for the defendant but would consolidate this matter with CIV 1592 of 2008, with CIV 1592 of 2008 being the lead action.