WRS Pacific Pty Ltd v Lunt - [2004] WASC 106

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WRS PACIFIC PTY LTD -v- LUNT [2004] WASC 106

CORAM: MASTER NEWNES

HEARD: 8 MARCH & 20 APRIL 2004

DELIVERED : 27 MAY 2004

FILE NO/S: CIV 1610 of 2001

BETWEEN: WRS PACIFIC PTY LTD
Plaintiff
AND
WILLIAM TREVOR LUNT
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

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr M D Cuerden
Defendant: Mr B W Duckham

Solicitors:

Plaintiff: Vincent Partners
Defendant: B W Duckham & Co

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

Eng Mee Yong v Letchumanan [1980] AC 331
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 79
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:

Nil

MASTER NEWNES: This is an application by the defendant for leave to bring an application for summary judgment and for judgment under O 16 of the Rules of the Supreme Court1971 (WA). The application for judgment is well out of time. Under O 16 r 1, except with leave of the Court, such an application must be brought within 21 days after the entry of appearance. The defendant filed an appearance on 14 May 2001. This application was filed on 14 April 2003.
The explanation offered by the defendant for the delay is that it was only in early 2003 that, through other proceedings in the District Court, the defendant became aware of material which was inconsistent with the plaintiff's claim in this action, including evidence given in the District Court action by the representative of a major shareholder in the plaintiff. I will deal with that material in due course, but in order to make it explicable, it is necessary to describe the nature of this action and the respective contentions of the parties in relation to the plaintiff's claim.
The defendant was a director of the plaintiff from 27 June 1991 to 21 December 1996. He says he was the managing director, but that is denied by the plaintiff. In any event, on 11 January 1996 the PT Bank Finconesia issued a letter of credit to the plaintiff in the sum of US$878,096. The plaintiff alleges that the defendant had possession of the letter of credit and drew on it for purposes that were not for the plaintiff's benefit. The plaintiff says that in so acting the defendant was in breach of the duties he owed to the plaintiff both under statute and in equity to act in good faith in the best interests of the plaintiff and not to act improperly to use his position as a director to gain an advantage for himself or to cause detriment to the plaintiff. The plaintiff claims against the defendant the sum of US$878,096.
The defendant denies that he was in breach of any duties owed to the plaintiff. The defendant says the money was deposited into the plaintiff's US dollar bank account and only dealt with after consultation with Mr Peter Briggs, who acted as a common law director of the plaintiff and a representative of its major shareholder, Essex Properties Pty Ltd. According to the defendant, the money was used solely for the purposes of the plaintiff. He says that the sum of US$250,000 was paid to PT WRS Indonesia, a joint venture partner, in payment of equity due to it; the sum of US$385,000 was paid to another joint venture party, Waste Recovery Systems India Ltd, in payment of equity due to it, and the balance was paid to various creditors of the plaintiff, being a solicitor who was paid AUD$71,000 for unpaid legal expenses; Waste Recovery Systems Ltd which was paid AUD$117,000 under an agreement dated 7 May 1990; an employee, Mr Skidmore, who was paid AUD$20,000 by way of salary due to him from the plaintiff; and the defendant, who was paid AUD$135,000 in respect of salary due to him from the plaintiff.
A large number of affidavits were filed on the application over a period of some months, the majority on the defendant's side. A total of 10 affidavits sworn by the defendant in relation to this application were filed and several other affidavits which he had sworn in relation to an earlier security for costs application were referred to. The defendant also relied on several other affidavits of third parties. A total of eight affidavits were filed on behalf of the plaintiff. A number of objections were taken to parts of the various affidavits.
Although more than 20 affidavits were filed on this application, there is nowhere a coherent explanation of the transactions which lie at the heart of the case and the affidavit evidence is so fragmented that it is not easy to piece it together.
It hardly needs saying that this is a highly unsatisfactory way in which to conduct an application of this sort. A number of the affidavits of the defendant appear to have been filed simply as further matters occurred to him. When one side filed an affidavit it almost invariably lead to a further affidavit, or affidavits, from the other side. Even at the hearing, further affidavits were sought to be adduced. A running battle of affidavits of this nature is the antithesis of what might reasonably be expected in the orderly conduct of an application of this sort. The fact that leave might be required to file these affidavits does not appear to have occurred to the solicitors on either side.
As I understand the essential contentions of the defendant, however, they are as follows. He was at all material times the managing director of the plaintiff. In that capacity, he negotiated on its behalf the purchase of certain equipment for the sum of US$285,815 and the subsequent resale of that equipment to a company, PT WRS Indonesia, ("PT WRS") for the sum of US$878,096. PT WRS raised a letter of credit in favour of the plaintiff for that sum. The negotiations leading up to the purchase and resale were conducted by the defendant in Singapore and he says that, throughout the transaction, he liaised with Mr Briggs. The defendant says he deposited the money into an account in the plaintiff's name with the Bank of America on 24 February 1996.
The defendant says he then discussed the disbursement of the funds by telephone with Mr Briggs. He relies upon a facsimile dated 4 July 2003 addressed to Mr Briggs which, in its terms, confirms an agreement between the defendant and Mr Briggs to disburse the funds by payment of US$250,000 to joint venture parties in Indonesia, US$385,000 to a joint venture partner in India and US$228,000 to the various creditors to which I have referred above. The defendant says Mr Briggs agreed to each of the payments being made.
According to the defendant, the plaintiff made no complaint about the payments until after the parties had fallen out and the defendant and his wife had commenced legal proceedings against the plaintiff. The defendant contends that the plaintiff's claim is a recent invention by the plaintiff and there is no basis for it.
The defendant says that the payments to PT WRS and Waste Recovery Systems India Ltd were pursuant to obligations under joint venture agreements between the plaintiff and those companies. The defendant did not, however, produce the agreements in evidence or offer any explanation why he was unable to do so. Nor did he explain with any precision how the obligation to make the payments arose or the nature of those obligations. The defendant simply said that in each case the payments were to earn equity by way of a cash contribution.
The defendant relied upon a due diligence report prepared for Max Resources Ltd as verification of the receipt by Waste Recovery Systems India of the sum of US$385,000. The due diligence report, which was prepared by a chartered accountant, Michael Langoulant, for Max Resources refers to a payment by the plaintiff to Waste Recovery Systems India of US$385,679 in July 1996. At the time the due diligence report was prepared in 1997, Max Resources Ltd was proposing to purchase the plaintiff's assets, including its rights in the Indonesian and Indian joint venture companies.
Counsel for the defendant relied heavily on the fact that the amount claimed against the defendant had never appeared in the plaintiff's balance sheet as an asset. He referred to an affidavit of a Brenton Siviour, a chartered accountant, who said that if the defendant owed to the plaintiff sum of US$878,096 "by way of a receivable", then that sum should be disclosed in the balance sheet of the plaintiff as an asset of the plaintiff. It did not appear in any of the balance sheets of the plaintiff.
The defendant also says that, on 12 March 2003, in proceedings in the District Court by the defendant and his wife against the plaintiff, Mr Briggs gave evidence that he was "a director/secretary/substantial shareholder of the defendant". The defendant says that Mr Briggs went on to say:
"Trevor [meaning the defendant] hadn't been involved of course with my company for 2 years and there was no outstanding indebtedness between us and there was no ongoing conversation."
The defendant says that he was in Court when Mr Briggs also said:
"At this stage, of course, there was nothing outstanding between us. There was no debt between us …"
According to the defendant, Mr Briggs' evidence related to a meeting between the defendant and Mrs Lunt and Mr Briggs in November 1998 concerning sums of money that Mr and Mrs Lunt contended were due to them.
No other evidence was sought to be adduced by the defendants in relation to the District Court proceedings and no transcript of the evidence given by Mr Briggs was put in evidence.
The plaintiff opposed the application for judgment. It relied on, among others, an affidavit of Peter Briggs, a director of the plaintiff, which was sworn on 27 October 2003. In that affidavit, Mr Briggs says that he knew nothing of the transactions referred to by the defendant until about 2001. He says that prior to then he knew the plaintiff had entered into a joint venture agreement with an Indonesia company, PT WRS. The joint venture was going to process chicken manure into pellets for sale. The plaintiff was to buy the necessary plant and then sell it to PT WRS, but not at a profit. Mr Briggs says he asked the defendant about the sale proceeds of the plant and the defendant told him that the money was needed for the Indian joint venture and it had been transferred there. Mr Briggs says that he did not know that the defendant had sold the plant to PT WRS for nearly three times the amount for which it was purchased and the defendant did not tell him of the extra funds obtained on the resale or what had become of them.
Mr Briggs says that the plaintiff did not have a bank account with the Bank of America and the plaintiff only became aware of this bank account after the commencement of these proceedings, and then only through documentation provided by the defendant. He says the plaintiff has no record of the bank account. He also says the plaintiff has no records evidencing the amounts the defendant says were due to PT WRS and Waste Recovery Systems India Ltd. Mr Briggs says it is absurd to suggest that the plaintiff would purchase the pelletiser plant for US$285,815, sell it to PT WRS for US$878,096 and then pay US$250,000 of that purchase price back to PT WRS.
Mr Briggs says that he has been informed by a Robert Skidmore, a director of PT WRS at the relevant time, that PT WRS did not receive the amount of US$250,000. The plaintiff also relied on an affidavit of Mr Skidmore, sworn 24 October 2003, in which Mr Skidmore says the money was not received by PT WRS. Mr Skidmore says that he has also spoken to the financial director of PT WRS who told him that no such transaction took place.
The plaintiff has also filed an affidavit of one Rodney Bothwell, sworn 24 October 2003, in which Mr Bothwell says he was the general manager at the relevant time of PT WRS. He says that, to the best of his knowledge, no sum of US$250,000 was received from the plaintiff as contended by the defendant. Mr Bothwell says he would have known if such a payment had been made as he ran the company on a day‑to‑day basis and was aware of its financial position.
The payments that the defendant says were made to various creditors of the plaintiff are also disputed. Mr Briggs says he has no idea why Mr Skidmore was a creditor of the plaintiff. In his affidavit, Mr Skidmore says he did not receive the AUD$20,000 which the defendant says was paid to him. He says that on one occasion he received a sum between AUD$10,000 and AUD$13,000 which the defendant withdrew from the National Australia Bank in Perth, but he did not receive any further funds from either the plaintiff or the defendant.
Mr Briggs says that the plaintiff has no record of any entitlement that would authorise a payment to the defendant of AUD$135,000. Mr Briggs also annexes facsimiles to and from the solicitor to whom the payment of AUD$71,000 was allegedly made. The solicitor in a facsimile to the plaintiff's solicitors denies receiving AUD$71,000 in about June 1996. Mr Briggs also annexes a facsimile from Mr Bond, a director of the plaintiff at the relevant time, who says that, so far as he was aware, the solicitor was not a creditor at that time.
The authenticity of the facsimile in which the defendant says he confirmed the payments with Mr Briggs was also put in issue. Mr Briggs says he did not receive such a facsimile and denies that the defendant liaised with him from Singapore in relation to the transaction. Mr Briggs contends that the telephone records produced by the defendant do not support the defendant's contention in that regard, as they refer to only three international calls by the defendant at that time, none of them to a number with which Mr Briggs is familiar.
According to Mr Briggs, the first time he became aware of the transaction was in about May 2001 when he was informed of it by Mr Skidmore. Up to that point, he was only aware of the purchase of the plant for resale to PT WRS at cost. Mr Briggs says that the money claimed did not appear in the plaintiff's balance sheets because he did not become aware of it until about May 2001. It was not included after that date because its recoverability was uncertain.
The plaintiff has filed two affidavits of Edmund Czechowski, who is a director and the accountant of the plaintiff. Mr Czechowski says that he prepared the financial accounts of the plaintiff, but there were many documents missing and he prepared them on the assumption that previous financial statements were correct. Mr Czechowski says that he was not aware of the disbursement of US$878,096 until shortly before this action was commenced.
In response to the due diligence report prepared by Mr Langoulant for Max Resources, the plaintiff has filed an affidavit of Mr Langoulant sworn 24 October 2003, in which Mr Langoulant says that he now believes the documents which he saw at the offices of Waste Recovery Systems India were forgeries and he says that, on the basis of the inquiries he has since made, he believes the payment was not made.
In relation to the evidence he gave in the District Court proceedings, Mr Briggs says that, so far as he recalls, the evidence referred to by the defendant was in response to questions concerning Mrs Lunt's claim against the plaintiff for wages. Mr Briggs says his evidence was to the effect that there had been no meeting of the sort claimed by Mr and Mrs Lunt and that, in any event, there was no indebtedness of the plaintiff to them. It was not in the context suggested by the defendant
Quite apart from Mr Briggs' affidavit in response, I do not think any weight can be given to the isolated snippets of evidence deposed to by the defendant. No reason was proffered as to why the context of Mr Briggs' evidence could not be provided. In the absence of that context it would be dangerous to rely on it.
The defendant has responded with a number of affidavits in which he takes issue with each of the matters raised on behalf of the plaintiff. The defendant has also produced various documents, including a letter and bank statements from the Indonesian bankers for PT WRS, to prove that the sum of US$250,000 was paid to it and other documents, including a bank statement from the bankers for Waste Recovery Systems India, to demonstrate that the sum of US$385,000 was, in fact, received by that company. In relation to the various creditors, according to the defendant the payment to the solicitor was, in fact, a payment to the defendant to reimburse him for the solicitor's fees that the defendant had paid on behalf of the plaintiff in 1991 when the plaintiff did not have the funds to do so. He claims that Mr Briggs authorised that reimbursement.
The defendant also submitted that Mr Briggs' denial that the plaintiff held the Bank of America account was not credible because Mr Czechowski had referred to the account number in his affidavit of 25 June 2003. The difficulty, however, with that submission is that the defendant provided the account number in an annexure to his affidavit of 11 October 2001.
The defendant also sought to rely on a written apology dated 22 May 2000 that Mr Briggs gave to the defendant in relation to the termination of the defendant's employment with Max Resources Ltd. In it Mr Briggs said that in the 30 years he had known the defendant he had had no reason to complain about him. The context in which that apology was given was not explained. In any event, it was given some 12 months before Mr Briggs says he became aware of the transactions which are the subject of these proceedings.
The principles to be applied on an application of this sort were not in dispute. It is clear that the power to order a 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 79. 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 contemporary documents or other statements by the deponent: Eng Mee Yong v Letchumanan [1980] AC 331 at 341.
The defendant therefore bears a high onus on this application. The plaintiff, by Mr Briggs, has said on oath that the plaintiff has no record of the disbursement of the US$878,096 and no records that would indicate that the moneys were properly paid to discharge legal obligations of the plaintiff. Mr Briggs denies the defendant's claim that he was aware of, and approved, the disbursement of the funds. Mr Briggs has put in issue the authenticity of a number of the documents relied upon by the defendant to establish that the disbursements were authorised. Mr Czechowski, another current director of the plaintiff, says that, the moneys claimed from the defendant in these proceedings did not appear in the plaintiff's balance sheet because he was unaware of the transaction until May 2001.
Mr Bothwell, the general manager of PT WRS at the relevant time, and Mr Skidmore say that the sum of US$250,000 was not received by PT WRS. Mr Langoulant says he now does not believe that the payment referred to in his due diligence report was, in fact, made to Waste Recovery Systems India.

I should say that Mr Skidmore's evidence has to be viewed in the light of an earlier affidavit he swore 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 he had earlier rejected a draft affidavit containing those statements and he understood they had been removed from the affidavit which he swore. Mr Skidmore says he swore the affidavit on behalf of the defendant without reading it.
As I have said, in response to the affidavits filed on behalf of the plaintiff, the defendant produced a number of documents which he says clearly demonstrate that the payments were made to each of PT WRS and he has responded to the allegations by Mr Briggs that the balance of the funds, paid to various debtors, were not in payment of legitimate debts of the plaintiff. The defendant has also filed responsive affidavits in which the credibility of Messrs Bothwell and Langoulant is attacked.
There are, in my view, clearly substantial issues of fact to be resolved which cannot properly be resolved on affidavit material on an application of this sort. Those issues include whether there was a liability of the plaintiff to each of the entities to which the defendant says payment was made and whether in each case the payments alleged were actually made to those entities. The evidence is in an unsatisfactory state as to that, and, in my view, the defendant has not established that the plaintiff's claim is unarguable. There is simply too much that remains unexplained, or inadequately explained, to entitle the defendant to judgment without trial.
I would therefore dismiss the application.