Seaman v Silvia

Case [2018] FCA 97

FEDERAL COURT OF AUSTRALIA

Seaman v Silvia [2018] FCA 97

File number(s): QUD 291 of 2017
Judge(s): DERRINGTON J
Date of judgment: 16 February 2018
Catchwords:

CORPORATIONS – External administration – Administrators – Action against administrators by creditors, shareholders or directors – Statutory duties and common law duties not owed by Administrators to creditors, shareholders and directors

CORPORATIONS – External administration – Administrators – Activities of administrator in performing statutory duties is not conduct “in trade or commerce”

EQUITY – Trusts and trustees – Appointment removal and estate – Vesting of property in trustees – Choses in action not vesting automatically upon appointment – Requirement for assignment in writing

PRACTICE AND PROCEDURE – Pleading – Leave to file a further amended statement of claim – inadequacy of pleading

Legislation:

Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law, s 60

Corporations Act 2001 (Cth) Pts 5.3A, 9.4B; ss 180, 181, 439A, 1317H, 1321, 1324

Federal Court of Australia Act 1976 (Cth) ss 37M, 37N

Property Law Act 1974 (Qld) s 199

Trusts Act 1973 (Qld) s 15
Cases cited:

AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175

Bankstown City Council v Zraika (2016) 94 NSWLR 159

Day v Woolworths Limited [2016] QCA 337

Garzo v Liverpool/Campbell Christian School Ltd [2011] NSWSC 292

Gove Aluminium Limited v EF Maritime Navigation SA [2012] FCA 599

Granger v A.C.N 165 098 617 Pty Ltd [2016] FCA 474

Hausmann v Smith (2006) 24 ACLC 688

Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026

Innovateq Australia Pty Ltd (ATF The Innovateq Unit Trust) v Barnes [2017] VSC 16

Macks v Viscariello [2017] SASCFC 172

McCracken v Phoenix Constructions (Qld) Pty Ltd [2013] 2 Qd R 27

Mills v Sheahan (2007) 99 SASR 357

Perpetual Nominees Ltd v McGoldrick (No 3) (2017) 317 FLR 227

Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102

QS Holdings SARL & Ors v Paul’s Retail Pty Ltd (ACN 114 419 242) (2011) 92 IPR 460

Raging Thunder Pty Ltd v Bank of Western Australia Ltd [2012] QSC 329

Research in Motion Ltd & Anor v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66

Sutherland Shire Council v Heyman & Anor (1985) 157 CLR 424

Viscariello v Macks [2014] SASC 189; (2014) 103 ACSR 542
Date of hearing: 9 February 2018
Registry: Queensland
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 59
Counsel for the Applicant: Mr M Henry
Solicitor for the Applicant: Irish Bentley Lawyers
Counsel for the Respondents: Ms S Anderson
Solicitor for the Respondents: JHK Legal

ORDERS

QUD 291 of 2017
BETWEEN:

JOSHUA ROBERT SEAMAN

Applicant
AND:

BRIAN RAYMOND SILVIA

First Respondent

GEOFFREY PETER GRANGER

Second Respondent

JUDGE:

DERRINGTON J

DATE OF ORDER:

16 FEBRUARY 2018

THE COURT ORDERS THAT:

1.The application dated 14 November 2017 for leave to file and serve a further amended Originating Application and…

Continue reading Seaman v Silvia

Sign in free to access the full text

Details
AGLC
Seaman v Silvia [2018] FCA 97
Case
[2018] FCA 97
Decision Date

CaseChat Overview and Summary

The case of Seaman v Silvia involved an application for leave to file and serve a further amended Originating Application and a further amended Statement of Claim. The applicant, Mr. Seaman, a director of a company, sought to challenge the actions of the administrators appointed to the company. The court was required to determine whether the applicant's claims had any merit and whether the pleading was adequate.

The court found that Mr. Seaman's claims against the administrators lacked substance. The court held that the administrators' activities in performing their statutory duties did not constitute conduct in trade or commerce, and therefore, could not be the basis for claims under the Australian Consumer Law. Additionally, the court found that the claim for damages under s 1324(10) of the Corporations Act was unsupported by the pleading. The court also noted that the manner in which the claims had been pleaded was inadequate and that there were significant pleading deficiencies.

The court refused the application for leave to file the new Statement of Claim. The court found that the discernible claims advanced in the new Statement of Claim lacked any substance and that the manner in which they had been pleaded was most inadequate. The court also noted that the applicant had imposed substantial delay and wasted costs on the respondents and that there must be great doubt as to whether he would ever be able to put forward an appropriate pleading in the future.

The court ordered that the application for leave to file and serve a further amended Originating Application and a further amended Statement of Claim be dismissed. The parties were to be heard on the question of costs.

Orders

Orders of the court

1. The application dated 14 November 2017 for leave to file and serve a further amended Originating Application and a further amended Statement of Claim be dismissed.

2. The parties are to be heard on the question of costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The formal application is for leave to file and serve a further amended Originating Application and a further amended Statement of Claim (the “new Statement of Claim”). For the reasons set out herein the application must be dismissed.The procedural background Mr Seaman commenced these proceedings on 14 June 2017 with the issuing of an Originating Application together with a Statement of Claim. To date the respondents have not been required to file a Defence as Mr Seaman has encountered numerous impediments to successfully agitating his claim in a comprehensible pleading. The following steps have occurred:(a)On 14 June 2017, the initial Statement of Claim was filed along with the claim. (b)On 22 June 2017, leave was sought to file a further Statement of Claim although the document then proffered required some alterations.(c)On 4 August 2017, the applicant filed a second Statement of Claim. However it attracted an application in September 2017 to strike it out.(d)On 10 November 2017, Mr Seaman produced a new pleading by which he hoped to meet the complaints which underpinned the strike out application. (e)On 17 November 2017, the strike out application was heard. Ultimately it did not proceed to judgment because Mr Seaman applied to replead the Statement of Claim. (f)On 20 December 2017, a new pleading was produced for the purposes of the adjourned strike out application. However, it too was deficient and the application was again adjourned to allow the applicant a further attempt to replead. (g)This application, made on 9 February 2018, is for leave to replead. The iteration of the pleading which is advanced as the Second Further Amended Statement of Claim is the fifth iteration of the pleading. The substance of the claim Mr Seaman is a director of a company previously named “Private Health Clubs Pty Ltd” (the Company). The only other director of that company is a Ms Leanne Taratoris (Ms Taratoris). They were equal shareholders in the Company and the only shareholders. The Company conducted the business of a fitness studio or gymnasium from premises which it leased in Neutral Bay, NSW. In or around 30 March 2016, Mr Seaman was temporarily overseas. Ms Taratoris was conducting the Company’s business. It appears that the landlord of the leased premises required the Company to comply with the terms of its lease by replacing a bank guarantee which it had previously given to secure its lease obligations and which had then been called upon. It appears that Ms Taratoris was not prepared to contribute further money to the company as she was then its largest creditor. She has claimed that Mr Seaman would not respond to her attempts to contact him about that issue. She contacted Mr Geoffrey Granger, an insolvency professional, to assist her in relation to the Company’s financial problems. By a purported resolution on 30 March 2016, the Company appointed Mr Granger and Mr Silvia as its administrators. That resolution was invalid as the meeting at which it was passed required the attendance of both directors and Mr Seaman was absent. The appointment was subsequently validated by an order of this Court on 6 May 2016 (see Granger v A.C.N 165 098 617 Pty Ltd [2016] FCA 474). In previous iterations of his Statement of Claim in this matter Mr Seaman has sought to go behind that decision, albeit made with his consent, although he does not attempt to do so in the present version of the pleading.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The claim for relief sought under s 1324(10) cannot succeed. Conclusion It necessarily follows from the above that the application for leave to file the new Statement of Claim ought to be refused. The above discussion discloses that Mr Seaman, in his capacities as a natural person, a shareholder, a trustee, director or creditor or even a guarantor has no cause of action against the administrators on the facts of this case. He also has no cause of action based on his recently acquired status as a trustee of the PHC Business Trust. If Mr Seaman has any cause of action which he might agitate, it has been well hidden within the various versions of the Statement of Claim advanced by the applicant in this matter so far. Moreover, it is apparent that his legal representatives are not able to articulate it with any clarity. The application should be refused because the discernible claims advanced in the new Statement of Claim lack any substance. Second, however, putting aside the substantive deficiencies in Mr Seaman’s claims, the manner in which they have been pleaded is most inadequate. This was recognised by Mr Henry during the course of his submissions. He acknowledged on many occasions that the document as proffered as the new Statement of Claim required deletions, insertions, clarifications, elaborations, amendments and the like. Whilst he submitted that the relief sought on the application was the filing of a Statement of Claim “substantially in the form of” the proffered document, his acknowledgement of the necessary amendments meant that any future document would be significantly different to that on which the application is founded. An order granting leave to file an amended pleading substantially in the form of that which had been debated might be appropriate on some occasions such as if it were the first attempt to amend and only minor alternations were required. That is not the position here. This is an application to file a fifth iteration of the pleading which is acknowledged to be insufficient in numerous respects. That being so, matters of case management and the overarching purpose set out in s 37M and s 37N of the Federal Court of Australia Act 1976 (Cth) come into play (see Gove Aluminium Limited v EF Maritime Navigation SA [2012] FCA 599). In the circumstances of this case where the respondents have been now required to confront and deal with five versions of the pleading and the applicant acknowledges the proposed pleading requires amendment, consideration must be given to the lack of speed and efficiency with which this matter is being progressed. As a result of the five failed attempts to plead their case, the applicant has imposed substantial delay and wasted costs on the respondents and that must now weigh heavily in any consideration of the matter. Moreover, the failures of the applicant to plead anything coming close to an adequate pleading necessarily results in the conclusion that there must be great doubt as to whether he will ever be able to put forward an appropriate pleading in the future. That being so, putting all other considerations aside, I would not make an order allowing the filing and serving of a pleading which has not undergone a process of close scrutiny by the respondents and the Court.

Ratio Decidendi

Legal Principle Established

In the present case, the allegations of misleading or deceptive conduct is said to arise from certain statements made in the 439A report. As was said by the Full Court, such conduct of an administrator is the performance of the statutory functions, powers and duties and as such, it does not constitute conduct “in trade or commerce”. It follows that the proposed new pleading in this regard could not succeed. I would add that the pleading of the alleged misleading or deceptive conduct claim was confusing and in parts inconsistent. In the course of submissions Mr Henry agreed that the pleading required further amendments and he ought to be allowed to do that. As indicated above, that is not an appropriate course in the circumstances of this case. Therefore, even if there were some substance in this cause of action, I would not have allowed the pleading in this respect to be filed because of its pleading inadequacies. Obligations to exercise due care and skill in the performance of the administration As mentioned, Mr Seaman also relies upon the allegation that the administrators engaged “in trade and commerce” to found an allegation that they were subject to s 60 of the ACL which requires the exercise of due care and skill in the provision of services. The observations of the Full Court in Macks v Viscariello cited above make it clear that the conduct complained of by Mr Seaman is conduct in the fulfilment of the administrators’ statutory functions, powers and duties relating to the creditors, contributories and directors of the Company and, as such, does not amount to conduct “in trade or commerce”. For this reason the claim founded upon s 60 of the ACL could not succeed. In addition, this claim is derivative upon other claims which, as has been indicated above, are not maintainable by Mr Seaman. Again, even if there was some semblance of a cause of action which was maintainable by Mr Seaman pursuant to s 60 of the ACL, in the exercise of my discretion I would not have allowed the new Statement of Claim to be advanced due to the pleading deficiencies surrounding the relevant allegations. In the course of submissions Mr Henry also acknowledged that in relation to this plea there were deficiencies which required amendment. With respect to paragraph 43 (which is part of the allegations of due care and skill) he claimed that there were some typographical errors in the chapeau which required curing. Those typographical errors could be remedied, so he submitted, by completely rewriting and rephrasing that chapeau so as to completely change its meaning. The errors were patently not of a typographical nature. The pleading deficiencies in this respect were also so significant that I would not have allowed the new Statement of Claim to be advanced for that reason alone.Claim for damages under s 1324(10) of the Corporations Act Mr Seaman claims in his prayer for relief in the new Statement of Claim relief pursuant to s 1324(10) of the Corporations Act although there is very little in the new Statement of Claim which indicates why or how that relief might be granted. Section 1324 concerns the granting of injunctions by the court in respect of actual and prospective breaches of the Corporations Act. Section 1324(10) permits the court to award damages in lieu of the granting of an injunction. It appears that Mr Seaman relies upon this subsection in order to bolster his claim for compensation or damages and, although it is somewhat opaque, it seems that he bases that claim upon contraventions of s 180 or s 181 of the Corporations Act. As has been indicated above, those sections impose obligations owed to the Company and not to Mr Seaman in any of his various capacities.