WRS Pacific Pty Ltd v Lunt
[2004] WASC 110
WRS PACIFIC PTY LTD -v- LUNT & ANOR [2004] WASC 110
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 110 | |
| Case No: | CIV:1489/2001 | 21 NOVEMBER, 2003, 8 MARCH & 20 APRIL 2004 | |
| Coram: | MASTER NEWNES | 27/05/04 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | WRS PACIFIC PTY LTD WILLIAM TREVOR LUNT WASTE RECOVERY SYSTEMS LTD |
Catchwords: | Practice and procedure Application for summary judgment by defendant Turns on own facts |
Legislation: | Rules of the Supreme Court 1971 (WA), O 16 r 1 |
Case References: | Eng Mee Yong v Letchumanan (1980) App Cas 331 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Gillon & Ors v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991 Hunt v Knable (No 2) (1992) 8 WAR 96 Webster v Lampard (1993) 177 CLR 598 White v Johnston (1886) 8 ALT 53 Anderson v Effxseven (1999) 10 ANZ Ins Cas 61-424 Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
WILLIAM TREVOR LUNT
First Defendant
WASTE RECOVERY SYSTEMS LTD
Second Defendant
Catchwords:
Practice and procedure - Application for summary judgment by defendant - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 16 r 1
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr M D Cuerden
First Defendant : Mr B W Duckham
Second Defendant : Mr B W Duckham
Solicitors:
Plaintiff : Vincent Partners
First Defendant : B W Duckham & Co
Second Defendant : B W Duckham & Co
Case(s) referred to in judgment(s):
Eng Mee Yong v Letchumanan (1980) App Cas 331
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Gillon & Ors v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991
Hunt v Knable (No 2) (1992) 8 WAR 96
Webster v Lampard (1993) 177 CLR 598
White v Johnston (1886) 8 ALT 53
Case(s) also cited:
Anderson v Effxseven (1999) 10 ANZ Ins Cas 61-424
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
(Page 3)
1 MASTER NEWNES: This is an application by the defendants for summary judgment against the plaintiff. The application is well out of time under O 16 r 1 of the Rules of the Supreme Court1971 (WA). The writ of summons was filed on 9 April 2001. A memorandum of appearance was filed on 14 May 2001 and a statement of claim filed on 9 August 2001. A defence was filed on 4 September 2001 and a number of subsequent interlocutory steps, including discovery and an application for security for costs, were subsequently taken. The application for summary judgment was filed by the defendants on 14 April 2003. the defendants seek leave to bring this application on the ground that relevant material has only recently become available to them from separate proceedings in the District Court.
2 It is not in issue that, by a written agreement dated 21 May 1991, the plaintiff agreed to purchase all of the assets of the second defendant for the sum of $3,325,000, of which $3,000,000 was to be paid by the allotment and issue of 1,485,000 shares at $2.02 each and the sum of $325,000 by way of a loan owing by the plaintiff to the second defendant, classified as a subordinated loan and payable out of the after-tax profits of the plaintiff. If the loan was not paid in whole or in part from after-tax profits, then it would, with the agreement of the plaintiff and Essex Properties Pty Ltd (the major shareholder of the plaintiff), become repayable on demand. The first defendant was an attorney for the second defendant, which was a company registered in Hong Kong.
3 The plaintiff says it has not made any after tax profits in any financial year since the date of the agreement, a matter which was known to the first defendant who was a director of the plaintiff at all material times, until his resignation in about December 1996.
4 The plaintiff alleges that the first defendant, in breach of his duties as a director of the plaintiff, in about April 1995 caused the plaintiff to pay to the second defendant the sum of $200,000 when the plaintiff had no liability to do so. The plaintiff seeks to recover those moneys from each of the defendants.
5 In their amended defence, filed on 21 February 2003, the defendants admit the agreement of 21 May 1991, but say that the plaintiff and the second defendant entered into an agreement dated 23 December 1992 which provided that the subordinated loan was converted to an unsubordinated loan as at that date. The defendants admit the sum of $200,000 was paid to the second defendant and say that Essex Properties Pty Ltd ("Essex") authorised the payment by a letter under seal dated
(Page 4)
- 14 April 1995, following demand for payment by the second defendant. The defendant says that Essex, as the majority shareholder, through its officers exercised effective control of the plaintiff.
6 In support of the application the defendants filed 12 affidavits and the plaintiffs filed five affidavits in opposition. The parties sought to refer to a total of more than 20 affidavits, including affidavits filed on an earlier application for security for costs, comprising more than 400 pages of material, including exhibits. The multiplicity of affidavits, and the somewhat piecemeal nature of them, has not assisted in piecing together the defendants' case on this application.
7 The primary affidavit relied upon by the defendants was an affidavit of the first defendant sworn 7 July 2003. In that affidavit the first defendant says that he became a shareholder in the plaintiff in 1990 as a result of the sale to the plaintiff of the assets of a company in which he had an interest. He says from 12 April 1990 to 7 May 1997 he was a consultant to the plaintiff and, in addition, was also engaged to manage the plaintiff on a day-to-day basis as managing director. He says that he was appointed by Peter Briggs, the representative of Essex.
8 The first defendant says that, as managing director of the plaintiff, he successfully negotiated a joint venture with a group of Jakarta-based businessmen to manufacture and sell fertiliser in Indonesia. A company, PT WRS Indonesia, was incorporated in 1994 for the purposes of the joint venture and in 1996 it built and commissioned a manufacturing plant. As a result of the success of the venture one of the businessmen involved, a Mr Latief, indicated a desire to acquire a five per cent interest in the plaintiff. The first defendant says the directors and shareholders of the plaintiff were not prepared to issue new capital and the major shareholder, Essex, was not prepared to sell down a portion of its controlling interest. It was therefore agreed that the first defendant's company, Australian Capital and Technologies Pty Ltd ("ACT"), which held the first defendant's interest in the plaintiff, would reduce its interest by making 1,499,500 of his options in the plaintiff available to Mr Latief. An agreement was subsequently entered into between ACT and Mr Latief's company, Kingsgate Nominees Pty Ltd ("Kingsgate") by which Kingsgate acquired those options from ACT.
9 The first defendant says Essex and each of the other shareholders, all of which held pre-emptive rights, consented to the transaction and the options were duly transferred to Kingsgate. The first defendants says that Essex waived its pre-emptive rights by an agreement executed under seal
(Page 5)
- on 11 April 1995. The waiver document produced in evidence by the defendants includes, in addition to the waiver, a further paragraph in terms "I/We further consent the monies received from the exercise of the options being applied in repayment of monies due to Waste Recovery Systems Ltd".
10 The first defendant says that Kingsgate immediately exercised 1,000,000 of the options at the exercise price of 20 cents each and provided a cheque in the sum of $200,000 to ACT. That sum was paid into a BankWest account in the name of the plaintiff on 13 April 1995 and, on the same day, transferred to the second defendant in Hong Kong.
11 The first defendant says that Essex had agreed by letter dated 23 December 1992 that the debt of $325,000 would cease to be subordinated. A copy of the letter relied on by the defendants was annexed to the affidavit of the first defendant. The letter, which is signed in the names of Mr and Mrs Briggs and addressed to Waste Recovery Systems Ltd, is in the following terms:
"We accept the contents of your letter dated 16 December 1992. Further the loan which was previously subordinated of $325,000 to all other creditors now ranks equally …"
12 The letter of 16 December 1992 referred to was not produced in evidence.
13 The first defendant says that the consent of Essex to the payment of the sum of $200,000 to the second defendant is evidenced by a written agreement dated 12 April 1995. A copy of the agreement referred to by the first defendant was annexed to his affidavit. It is in the form of a letter from Essex to the directors of the second defendant. It is executed under the common seal of Essex and dated 12 April 1995.
14 The relevant terms are as follows:
"By letter dated 23 December 1992 we acknowledged our indebtedness to you in the amount of A$325,000.
We have not been able to settle the debt but Trevor William Lunt has now secured a fresh injection of capital into WRS Pacific Ltd that will allow WRS Pacific Ltd to remit the sum of A$200,000 to you leaving the balance of A$125,000 as due to you.
(Page 6)
- We are advised that you wish to assign that balance to Mr Lunt.
This is to confirm that upon receipt by you of A$200,000 from WRS Pacific Ltd that you may assign over to Mr Lunt, the balance of A$125,000, giving him all right, title and interest in the amount of A$125,000 with our full consent and without objection from us.
We acknowledge that the original debt attracts interest up until the amount of A$200,000 is received and thereafter the balance of A$125,000 until satisfied and that this interest accrues to the favour of Mr Lunt under the proposed assignment.
Our agreement to all of the foregoing is given on the understanding that the amount of A$125,000 plus accrued interest will not become due until July 1, 2000 when the settlement sum will then become due and payable."
15 The defendants say that the payment of the $200,000 was therefore properly made with the authority of the plaintiff and with the full knowledge of Essex as its majority shareholder.
16 The first defendant says that on no occasion prior to the commencement of proceedings by the first defendant and his wife against the plaintiff in December 1998 did Mr Briggs or anyone else on behalf of the plaintiff ever claim that the first defendant was indebted to the plaintiff for $200,000 or any other sum.
17 The defendants relied heavily on the fact that the balance sheet of the plaintiff for the year ended 30 June 1994 showed non-current loans in an amount of $325,000, whereas the balance sheets for the plaintiff for the financial years ended 30 June 2000 and 2001 showed as non-current liabilities only the sum of $125,000. For the financial year ended 30 June 2002 the balance sheet shows a "long term liability" to WRS (HK) Ltd in the sum of $125,000. Counsel for the defendants submitted that the fact that the later balance sheets reflected non-current loans having been reduced from $325,000 to $125,000, and the fact that none of the balance sheets of the plaintiff showed the alleged indebtedness of the defendants as an asset, was cogent evidence that this claim was a recent invention by the plaintiff.
18 The defendants also relied on an affidavit of Kevin Bond, a chartered accountant, who was a director of the plaintiff at the relevant time and prepared its financial statements from 30 June 1991 to 30 June 1994, and
(Page 7)
- draft accounts for the financial year ended 30 June 1995. In his affidavit, Mr Bond describes the transaction involving Mr Latief and says that, following the transfer of the options to Kingsgate, that company exercised 1,000,000 of the options at 20 cents each, resulting in a payment of $200,000 to the plaintiff. The plaintiff then paid that money to the second defendant in repayment of moneys due by the plaintiff to the second defendant. Mr Bond says that the plaintiff and all shareholders of the plaintiff consented to the payment.
19 The defendants also relied on an affidavit of Brenton Siviour, a chartered accountant, who said that if the plaintiff sought to recover the sum of $200,000 from the defendants as a receivable owing to the plaintiff, that amount should have been reflected in the balance sheets of the plaintiff as a receivable. Mr Siviour says he has examined the plaintiff's accounts and no such receivable is shown. He also says that in the financial statements for the period ending 30 June 1996 and thereafter, the outstanding balance of non-current liabilities is shown as $125,000, which is an acknowledgement that $200,000 has been paid in respect of the non-current liability of $325,000 shown in the accounts for the year ending 30 June 1994.
20 The plaintiff filed an affidavit of Peter Briggs, a director of both the plaintiff and Essex. In it, Mr Briggs denies that the first defendant was appointed managing director of the plaintiff and says there is no record of the directors of the plaintiff ever agreeing to that appointment. Mr Briggs also denies any knowledge of the transaction involving Mr Latief. Mr Briggs denies that Essex signed the waiver of pre-emptive rights and points out that the copy of the waiver produced in evidence by the defendant is, on its face, not signed by all of the shareholders of the plaintiff. He challenges the authenticity of the execution of the document by Essex. Mr Briggs also challenges the receipt by the plaintiff of the $200,000 from Mr Latief's company, Kingsgate. He says there is no record of the plaintiff ever having held the bank account into which the first defendant says the moneys were deposited. Mr Briggs notes that the copy of the bank statement produced by the first defendant shows the account as having been opened at the BankWest branch in Karrinyup, the suburb in which the first defendant then lived. Mr Briggs says that the bank statement was not included in the defendants' discovery.
21 Mr Briggs also challenged the authenticity of the letter of 23 December 1992 and says that, in any event, in its terms it does not make the loan repayable on demand. He says that, as the agreement was to make payment from the profits earned by the plaintiff, it would have
(Page 8)
- been uncommercial to make the monies payable on demand in 1992 and then to pay them in 1995. Mr Briggs denies that there was ever an agreement to do so.
22 The authenticity of the letter of 12 April 1995 was also challenged by Mr Briggs. He says, among other things, that it shows as the plaintiff's address, an address from which the plaintiff has never operated and with which neither the plaintiff nor Essex has any connection.
23 According to Mr Briggs, the first time he became aware of the payment of $200,000 was shortly before the present action was commenced in April 2001. He says he learned of it when the defendant sued the plaintiffs and Mr Briggs then had checks made of the first defendant's financial dealings involving the plaintiff.
24 On the state of the financial statements of the plaintiff since 1995, Mr Briggs says that the draft accounts for 1995 were completed by the plaintiff's accountant, Mr Czechowski, based on the information then available. According to Mr Briggs, many of the plaintiff's records were missing after the defendant resigned as a director and it was virtually impossible to verify the draft accounts. It had to be assumed that they were correct. Those accounts showed non-current liabilities in an amount of $125,000.
25 Mr Briggs says that Mr Bond is mistaken in stating that all shareholders of the plaintiff had signed the waiver of pre-emptive rights. The copy document produced by the first defendant is, on its face, not signed by two shareholders, Mr Skidmore and Waste Recovery Systems Ltd. Mr Briggs denies that it was in fact executed by Essex, although it purports to be. Mr Briggs says the plaintiff has no record of receiving the waiver. Mr Briggs also says that he has been informed by Mr Skidmore that Mr Skidmore knew nothing about the transaction and Mr Briggs, for Essex, says that Essex was unaware of it.
26 The plaintiffs filed an affidavit of Edmund Czechowski, a director and the accountant of the plaintiff. Mr Czechowski says that after the defendant left the company many documents were missing and it was impossible to know, on the information available, if the draft accounts were correct. Mr Czechowski says he had to assume that they were correct. Mr Czechowski says that he was not aware until shortly before this action of the payment of $200,000 to the second defendant.
27 An affidavit of Robert Skidmore sworn 24 October 2003 has also been filed on behalf of the plaintiff. According to Mr Skidmore, about a
(Page 9)
- month before he swore the affidavit the first defendant showed him a waiver of pre-emptive rights and asked him to sign it and some other documents relating to dealings some years previously. Mr Skidmore says that the first defendant told him that he [Skidmore] had signed the waiver before but the Court had the original. Mr Skidmore says that he refused to sign it. Mr Skidmore says that as a shareholder and director of the plaintiff he was not aware of the payment of $200,000, he did not sign any documents concerning it and he would not have agreed to a waiver of his pre-emptive rights leading to the transfer of $200,000 to the first defendant's company.
28 I should say, however, that Mr Skidmore had earlier sworn an affidavit in these proceedings on behalf of the defendant in which he said, among other things, that he had no knowledge of the plaintiff's claim and would have expected to have known of it if it existed. In the subsequent affidavit, filed on behalf of the plaintiff, Mr Skidmore says those statements in his earlier affidavit are false and he did not realise they were contained in the affidavit when he swore it. Mr Skidmore says that the defendant visited him in Indonesia in about April 2003 and requested him to sign various prepared affidavits in actions between Mr Briggs and/or his companies and Mr and Mrs Lunt. Mr Skidmore said he quickly read through the affidavits and refused to sign them on the basis that they were incorrect. He says that the incorrect parts included the statements referred to above. The defendant later returned with affidavits that Mr Skidmore assumed had been corrected. Mr Skidmore says he signed them without reading them.
29 The principles to be applied on an application of this sort were not in dispute. It is clear that the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87. The need for exceptional caution is nowhere more important than where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact: Webster v Lampard (1993) 177 CLR 598. It was never intended that when the facts are in dispute, actions should be disposed of summarily: White v Johnston (1886) 8 ALT 53, and a respondent's affidavit evidence should not be rejected because it is arguably inconsistent with documentary evidence adduced by the applicant: Gillon & Ors v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991; Hunt v Knable (No 2) (1992) 8 WAR 96. But the Court is not bound to accept uncritically as raising a dispute of fact calling for further investigation, every statement in an affidavit, however equivocal, lacking in precision or inconsistent with
(Page 10)
- contemporary documents or other statements by the deponent: Eng Mee Yong v Letchumanan (1980) App Cas 331.
30 The defendants therefore bear a high onus on this application. The plaintiff, by Mr Briggs, denies that there was ever any agreement by which the subordinated loan of $325,000, or any part of it, was to be payable on demand rather than out of profits made by the plaintiff. He denies any knowledge of the transaction involving Mr Latief which led to the payment of $200,000 being made to the second defendant and says that the plaintiff has no record of it. He disputes that the documents relied upon by the first defendant are genuine and says that the transaction was wrongly reflected in the accounts of the plaintiff because the accounts, for want of adequate records, had simply followed accounts prepared when the first defendant was involved in the preparation of the plaintiff's accounts, prior to his resignation as a director. Mr Briggs says he only became aware of the payment to the second defendant shortly before this action was commenced.
31 The defendants have sought to refute those assertions by a series of responsive affidavits in which various documents have been produced which the defendants contend demonstrate that what the deponents on the plaintiff's side have said in opposition to the application is plainly untenable.
32 The quite extensive cross-fire of affidavits has, however, rather tended to emphasise that this is simply not a matter which can appropriately be determined on affidavit evidence. In my view, there are clearly important issues of fact that can only be resolved at a trial of the action.
33 I do not think it is appropriate to comment at this stage on the merits of the plaintiff's claim. It is only necessary to say that I am not satisfied the plaintiff's claim is unarguable. I would therefore dismiss the application.
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