Westmore Corporation Pty Ltd as Trustee for the Jandakot Transfer Station Unit Trust v Advance Waste Disposal Pty Ltd - [2019] WADC 31

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   WESTMORE CORPORATION PTY LTD as Trustee for the JANDAKOT TRANSFER STATION UNIT TRUST -v- ADVANCE WASTE DISPOSAL PTY LTD [2019] WADC 31
CORAM:   DEPUTY REGISTRAR HEWITT
HEARD:   28 FEBRUARY 2019
DELIVERED          :   21 MARCH 2019
FILE NO/S:   CIV 4195 of 2018
BETWEEN:   WESTMORE CORPORATION PTY LTD as Trustee for the JANDAKOT TRANSFER STATION UNIT TRUST
Plaintiff
AND
ADVANCE WASTE DISPOSAL PTY LTD
Defendant

Catchwords:

Practice and procedure - Application to strike out writ as commenced without proper authority - Whether a managing director had authority - Whether the actions of the director could be ratified by the board

Legislation:

Nil

Result:

Application dismissed

Representation:

Counsel:

Plaintiff	:	Mr T Houweling
Defendant	:	Mr G J Douglas

Solicitors:

Plaintiff	:	Cornerstone Legal
Defendant	:	Douglas Cheveralls Lawyers

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

Cranes 'R' US Pty Ltd v Busselton Mini Crane Hire Pty Ltd [2012] WADC 24
Nece Pty Ltd v Ritek Incorporation [1997] FCA 504

DEPUTY REGISTRAR HEWITT:

This action was commenced by a writ filed on the 6 November 2018. The defendant filed a memorandum of conditional appearance on 16 November 2018 and applied by chamber summons to set aside the writ on the basis of an irregularity which is contended makes the writ invalid and that is the application with which I am required to deal. In order to understand the application it is necessary to understand some of these circumstances of the relationships between the parties.
The plaintiff is a trustee of the Jandakot Transfer Unit Trust. There are three unit holders in the trust one of whom is the defendant. There are two other unit holders and each unit holder has a member on the board of the plaintiff company. The plaintiff operates a waste disposal business and the various unit holders are entitled to and do use the waste disposal facility for their private businesses. The action commenced by the plaintiff is for monies allegedly due to it from the defendant for the use of those facilities. The validity of the writ is challenged on the basis that the litigation was commenced by the general manager of the company, one Gregory James Scott who instructed the plaintiff's solicitors. It is alleged those instructions were not pursuant to a resolution of the board of directors, it being contented on behalf of the defendant that without the resolution of the board the general manager did not have appropriate authority to commence the action as the consequence of which it should be regarded as nullity and struck out.
Although a considerable amount of argument and discussion took place when this matter came before me, the issues involved condense to two crisp points:
1.Did Mr Scott as general manager of the company have authority to instruct a solicitor to commence the action; and
2.If he did not possess the necessary authority was the decision to commence the proceedings effectively ratified by a later resolution of the board.
There is little disagreement between the parties as to the facts of the case, and the issues distil down to the simple propositions as to what level of authority the appointment of Mr Scott as general manager invested in him and whether the decision to institute proceedings is capable being effectively ratified by a resolution of the board subsequent to the commencement of proceedings.
In my view a general manger is invested with the authority to conduct the day to day business of a company, part of which entails collecting outstanding monies for services provided by the company at its waste disposal facility. In reaching to that conclusion I'm fortified by the words of Justice Lehane in the Federal Court of Australia in the case of Nece Pty Ltd v Ritek Incorporation [1997] FCA 504. In that case his Honour commented as follows:
It is, I think, highly unlikely that a managing director entrusted with the day to day management of a company would not have implied authority to instruct solicitors to take proceedings to recover debts or resist claims against the company when the transactions concerned occurred in the daily operation of the company business.
Counsel for the applicant/defendant contended that the fact that the defendant was a unit holder in the trust company was relevant and to commence an action against one of the holders of units in the trust should be considered to no be part of the day to day management of the company. By way of analogy were a shareholder in a proprietary limited company to do business in his or her own right with that company I see no reason whatever that the implied authority of a managing director to institute proceedings against that shareholder for recovery of whatever debt may have been incurred would be impugned. I take the view that it is simply irrelevant whether or not the debtor is a unit holder in the trust. What matters is whether the debt was incurred during the day to day functions of the business, is unpaid and the company seeks to recover the amount it alleged to be due by virtue of the business conducted between the plaintiff and the defendant. Accordingly, my view is that it is an integral part of the process of management to ensure that revenues payable to the company are collected and it is appropriate for a managing director to take steps to ensure that outstanding accounts should be collected, instructing if necessary solicitors to take action to achieve that end, and it makes no difference whether or not the proposed defendant to such action is a shareholder or a holder of units in the unit trust of the which the plaintiff is a trustee. I am unable to see that a resolution of the board of directors in order to authorise such instructions is required. The appointment of Mr Scott as a general manager was pursuant to the articles of association. He was simply appointed as a general manager. There was no term in his appointment to restrict fetter or otherwise inhibit the authorities which he was authorised to exercise and in my view so long as the tasks which he undertakes are properly what one would call the day to day management of the business he has the authority vested in him to do so.
Alternatively if Mr Scott did not have the authority to instruct solicitors to commence the present proceedings the company has by virtue of a resolution dated 12 November 2018 purported to ratify the appointment of the plaintiff's solicitors and to adopt the action commenced by them on the authority of Mr Scott. The resolution was at a meeting convened on Wednesday 12 December 2018 and the resolution is in the following terms:
WESTMORE CORPORATION PTY LTD (ACN 082 140 403)
_____________________________________________________
MINUTES OF MEETING OF COMPANY DIRECTORS
Wednesday, 12 December 2018
Cornerstone Legal, Suite 1 Level 2, 280 Bannister Road, Canning Vale
______________________________________________________
Meeting Opened:
The meeting was opened at 11:20 am.
Record of Attendance:
Directors:  JK: Jack Kailis
GS: Greg Scott (telephone)
Absent:  TC: Trevor Canny
Westmore's Lawyers:        TH: Tim Houweling (Cornerstone Legal)
RC: Rebecca Cain (Cornerstone Legal)
Comments by TH:
The Memorandum and Articles of Association provides inter alia that:
i.The Directors may meet either in person or by telephone etc. (see article 73(3)).
ii.Quorum will be reach if two directors are present (see article 76).
Motions put forward:
1.  Mr Greg Scott be permitted to attend the Directors Meeting by telephone and the Directors Meeting proceed on the basis that quorum is present.
THE MOTION WAS PUT AND DECLARED CARRIED
Unanimous Resolution of Quorum
2.  Insofar as it is necessary to obtain absolute clarity and for the avoidance of all doubt Mr Greg Scott, Managing Director of Westermore Corporation Pty Ltd ('Westmore') was and remains entitled to:
i.Commence District Court proceedings on behalf of Westmore against Advance Waste Disposal Pty Ltd ('Advance Waste') in the name of Westmore.
ii. Settle and compromise any proceedings commenced in Westmore's name;
iii.Do all other things necessary to instruct Westmore's solicitors in respect of proceedings commenced in Westmore's name.
THE MOTION WAS PUT AND DECLARED CARRIED
Unanimous Resolution of Quorum
3.  The Directors authorise and ratify the commencement of action CIV 4195 of 2018 by Westmore as against Advance Waste.
THE MOTION WAS PUT AND DECLARED CARRIED
Unanimous Resolution of Quorum
4.  To discuss the Transfer Notice issued by Appala Holdings Pty Ltd and confirm that it has now lapsed.
Commences by TH, JK and GS:
TH confirmed that this motion was put forward by JK's Solicitor, Mr Ian Clairs of Clairs Keeley, JK confirmed that the time in respect of the Transfer Notice had lapsed and there was no other business in relation to the Transfer Notice that needed to be discussed.
TH confirmed that for the purposes of the Unit Holders Agreement the Directors are aware that this motion serves to put the Directors on notice and bring to their attention matters relating to the Transfer Notice which have now been noted and discussed. The minutes shall show that the Directors considered the motion which has been accepted and duly considered.
THE MOTION WAS NOTED, DISCUSSED AND DULY CONSIDERED
Meeting closed:
The meeting was closed at 11.30 am.
Dated: 12 December 2018
[SIGNED]  [SIGNED]
__________________  _________________
Greg Scott  Jack Kailis
Director  Director
__________________
Trevor Canny
Director
The words of the resolution are unequivocal but the issue remains as to whether or not it is possible for the board of directors to successfully ratify a situation such as it exists in the present circumstances.
It is well-known law that if a party enters a contract purportedly on behalf of another but without the authority of that other the other may, ratify the contract and thereby be bound to perform the contract and be entitled to receive the benefit of the contract. No cases have been cited to me and I know of no authority which indicates that such principles do not apply to companies.
The defendant places much reliance on the case of Cranes 'R' US Pty Ltd v Busselton Mini Crane Hire Pty Ltd [2012] WADC 24. That is a decision by her Honour Judge Sweeney delivered on 17 February 2012. That case directly raised the issue as to whether a proceeding which was before the judge on appeal from the Magistrates Court was validly instituted having been commenced by a director without the authority of the Board. An immediate point of difference is the fact that the director was not a managing director.
Her Honour found that the director was not invested with the authority to commence the proceedings and they were therefore a nullity. Her Honour also considered whether it was possible for the Board to ratify the proceedings and held it could not. Her Honour did however consider that a court appointed liquidator may be so empowered. That is significant because in the case she was considering there were only two directors one of whom was appointed by the defendant. A resolution required majority support and that could not be achieved in the circumstances. That however may have been able to be achieved were the management of the company to devolve on a single liquidator and her Honour recognised that possibility in the following passage:
I have considered whether the proceedings ought to be stayed, instead of being struck out. After all, the defendant does not appear to have an actual defence and it may be competent, for example, for a court‑appointment provisional liquidator to retrospectively ratify the institution of the proceedings: Alexander Ward & Co Ltd v Samyang Navigation Co Ltd [1975] 1 WLR 673.
My conclusion is that the director appointed general manager of the plaintiff did have the power to institute legal proceedings in the normal course of business; that the proceedings were commenced using that power; and the status of the defendant as a unit holder of the trust in no way inhibited the ability of the company to pursue the defendant for the moneys, it claimed; and that since the company could muster a quorum it was entitled to and did effectively ratify the decision to commence proceedings were that ratification to be required.
The application will therefore be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
AC
Court Officer
14 MARCH 2019