Yellow Wood Holdings Pty Ltd v The owners of the ship MV Cape Don
[1995] FCA 659
•24 AUGUST 1995
CATCHWORDS
PRACTICE AND PROCEDURE - Application to stay or dismiss proceedings - disputed issue of fact - real question to be tried - security for costs - principal out from behind company - personal guarantee.
Webster v. Lampard (1993) 177 CLR 598 - Appl.
Yellow Wood Holdings Pty Ltd v. The Owners of the Ship MV Cape Don
No. QG 89 of 1995
Cooper J., Brisbane, 24 August 1995
IN THE FEDERAL COURT OF AUSTRALIA
IN ADMIRALTY
No. QG 89 of 1995
BETWEEN:
YELLOW WOOD HOLDINGS PTY LTD
ACN 009 155 015
Plaintiff
AND:
THE OWNERS OF THE SHIP MV CAPE DON
Defendant
JUDGE MAKING ORDER: Cooper J.
WHERE MADE: Brisbane
DATE OF ORDER: 24 August 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
The plaintiff provide within twenty-one (21) days by way of security for costs of the action the personal guarantee of GRANT McKENZIE to guarantee the payment of any order for costs in favour of Transworld Investments Pty Ltd. such guarantee to be in a form satisfactory to the District Registrar.
In default of the provision of security, the action be stayed until further order.
The notice of motion filed 14 August 1995 be otherwise dismissed.
The applicant pay two-thirds of the respondent's costs of and incidental to the notice of motion to be taxed if not agreed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
IN ADMIRALTY
No. QG 89 of 1995
BETWEEN:
YELLOW WOOD HOLDINGS PTY LTD
ACN 009 155 015
Plaintiff
AND:
THE OWNERS OF THE SHIP MV CAPE DON
Defendant
CORAM: Cooper J.
PLACE: Brisbane
DATE: 24 August 1995
REASONS FOR JUDGMENT
On 20 June 1995 the plaintiff sought the arrest of the vessel "Cape Don" in the Port of Brisbane. In an affidavit in support of the application for arrest the plaintiff alleged it was the assignee of the interest of Burnside Services Ltd in the vessel. The interest alleged was an option to acquire a 10% interest in the vessel arising out of an agreement of sale between Burnside Services Ltd and Martaban Ltd dated 2 September 1993. In order to avoid arrest, security in lieu of the vessel to the satisfaction of the plaintiff was provided.
On 24 July 1994 Transworld Investments Pty Ltd filed an appearance in accordance with Form 15 of the Federal Court Rules. In consequence the appearance does not state the capacity in which it appears or its alleged relationship with the vessel.
However in an affidavit filed on behalf of the company by its solicitor it is claimed that the company purchased the vessel from Martaban Ltd. in or about May 1995. The contract document has not been put into evidence. On the material before the court the
vessel remains in the registered ownership of Martaban Ltd.
On 8 August 1995 the plaintiff filed a statement of claim which alleged in part :-
"2. Pursuant to a memorandum of agreement dated 10 March 1992, Burnside Services Ltd (`Burnside') purchased the vessel known as the MV `Cape Don' from Expo Experience Pty Ltd.
3. By an agreement between Burnside and Martaban Ltd contained in or evidenced by a written agreement dated 2 September 1993:
(a)Burnside agreed to sell the vessel to Martaban Ltd;
(b)it was agreed that for the consideration of $1.00 to be paid within 12 months of September 1993, Burnside or its nominee may purchase a 10 per cent interest in the vessel.
4. Pursuant to the agreement referred to in paragraph 3 hereof, Martaban Ltd did in or about September 1993 become the owner of the vessel.
5. By letter dated 5 July 1994, forwarded to the registered office of Martaban Ltd, Burnside, by its solicitors:
(a)exercised its right to purchase a 10 per cent share in the vessel;
(b)forward a cheque to Martaban Ltd in the sum of $1.00 as consideration;
(c)requested that Martaban Ltd take all steps and do all things necessary to effect the transfer of the 10 per cent share in the vessel to Burnside.
6. On or about 8 November 1994, Burnside agreed to and did transfer its 10 per cent share in the vessel to the Plaintiff.
7.In the premises, the Plaintiff is the owner of a 10 per cent share in the vessel.
8. At all material times Martaban Ltd has refused and failed to transfer the said 10 per cent share in the vessel to the applicant."
By its amended writ of summons the plaintiff seeks :-
"(a)a declaration that it is entitled to ownership of a 6.4/64 share of the ship;
(b)an order restraining Martaban Limited from transferring, mortgaging or otherwise dealing with its interest in the ship;
(c)a declaration that an option pursuant to an agreement dated 2 September 1993 to acquire a 10% interest in the ship has been validly exercised;
(d)a declaration that pursuant to the agreement dated 2 September 1993 the Plaintiff is entitled to a 10% interest in the ship or 10% of the proceeds from any sale of the ship;
(e)an account in respect of the proceeds derived from the operation of the ship since the date of the exercise of the said option;
(f)interest;
(g)costs."
On 14 August 1995 Transworld Investments Pty Ltd filed a notice of motion seeking that the proceedings be dismissed or permanently stayed. Alternatively the applicant sought security for costs.
The applicant submits that the proceedings are an abuse of process because it is submitted the plaintiff will not be able to prove up the agreement pleaded in paragraph 3 of the statement of claim. In support of this submission the applicant relies upon the affidavits of Mr Brian Morris and Mr George William Jekyll. Mr Morris is one of two signatories to an agreement in writing dated 2 September 1993. The other is a Mr Jude Kirk.
Mr Jekyll in his affidavit filed 14 August 1995 deposes :-
"2. Jude Christopher Kirk (Kirk) is not a registered shareholder or Director of Martaban. He has not at any time held authority to act on behalf of Martaban.
3. On or about the 2nd day of September 1993 Martaban was involved in negotiations for the purchase of the vessel `MV Cape Don' from Burnside Services Limited (Burnside). On that day a Heads of Agreement document was prepared and it was signed by Brian Morris who acted as the stakeholder and by Kirk who purported to act on behalf of Martaban. mr Kirk did not have authority to sign the document on behalf of Martaban and was not authorised to bind the company.
4.In the discussions Burnside was represented by Paul Harvey (Harvey).
5. The said transaction, as described in paragraph 3 herein, did not eventuate and bank cheques which were provided and held by Morris on 2nd September 1993 were subsequently returned.
6. In approximately November 1993 Martaban entered into an agreement to purchase the vessel from Burnside. J & A Maritimes Services Pte Ltd of 78 Tanjong Pager Road, Singapore were appointed by way of a Power of Attorney to act on behalf of Martaban Limited. Raymore Maritime Pte Ltd represented Burnside. From my involvement in this transaction I verily believe that Raymore Maritime Pte Ltd was a company controlled by Grant McKenzie. An agreement was subsequently reached for the purchase of the vessel and the purchase monies were deposited by Martaban into a Hong Kong bank account and then transferred to the nominated account of Burnside in Singapore.
7. The transaction by which Martaban purchased the vessel from Burnside did not contain any provision that for the consideration of $1.00 to be paid within twelve (12) months of September 1993 Burnside or its nominee could purchase a 10% interest in the vessel."
Mr Morris in an affidavit filed 15 August 1995 deposes :-
"1. On or about the 2nd day of September 1993 I acted as the stakeholder in a transaction between Burnside Services Limited (Burnside) and Martaban Limited (Martaban) for the sale by Burnside to Martaban of the vessel `MV Cape Don'.
2. During the course of the transaction I acted only as stakeholder. At no time did I act as the duly authorised agent of Burnside.
Burnside at all times was represented by either Paul Harvey or the company's Solicitor, Richard Anthon.
3. On or about the 2nd day of September 1993 I caused to be prepared a document entitled `Heads of Agreement'. Now produced and shown to me and marked `BM1' is a true copy of the said agreement.
4. There are two signatures which appear on the third page of the abovementioned document. The signatures are of Jude Kirk who signed the document on behalf of Martaban and my signature as stakeholder. I did not sign the agreement for or on behalf of Burnside.
5. The Heads of Agreement related to consideration. It was always intended between the parties that the contract of sale would be in a standard internationally recognised form."
On 21 August 1995 an affidavit of Grant McKenzie, a director of Yellow Wood Holdings Pty Ltd was filed. In it he deposed :-
"AFFIDAVIT OF BRIAN MORRIS
3. I first met Mr Morris in May 1993. Mr Morris informed me and I verily believe that he was acting as an adviser to Paul Harvey and to Burnside Services Limited. Now produced and shown to me and marked with the letters `GM1' is a true copy of a letter which I forwarded to Mr Morris on 27 May 1993.
4. Mr Morris, over the next weeks, conducted negotiations on behalf of Burnside under my instructions with various parties who were interested in purchasing the MV Cape Don following completion of its acquisition by Burnside Services. At Mr Morris' suggestion I appointed Hemming & Hart to act as Solicitors on the record for Burnside as Mr Morris said that he was not licensed to practice at the Brisbane Bar.
5. At the time that the Heads of Agreement dated 2 September 1993 were signed Mr Morris was in Brisbane, conducting negotiations on behalf of Burnside. Now produced and shown to me and marked with the letters `GM2' is a copy of a facsimile I received on that day from Mr Morris.
6. Mr Morris' role was far more active than that of agent. Mr Morris was paid fees in respect of his activities directly by Burnside Services.
AFFIDAVIT OF GEORGE JEKYLL
7. I refer to paragraph 2 of this Affidavit. At no time during my dealings with Jude Kirk did he inform me he lacked the necessary authority to deal on behalf of Martaban. The first that I was aware of this allegation was after these particular proceedings commenced.
8. After the execution of the document on 2 September 1993 no further documentation was signed between Burnside Services and Martaban. The transfer of the vessel from Burnside Services to Martaban took place in accordance with the Heads of Agreement. No further agreement was entered into as alleged in paragraph 6 of Mr Jekyll's Affidavit.
9. It had been intended that the bank cheques received by Mr Morris on 2 September would be handed over at settlement of the transaction between Burnside and Martaban. However shortly prior to settlement Mr Morris informed me and I verily believe that Mr Kirk and others had requested that payment be made by way of off-shore telegraphic transfer. I, as agent for Burnside, agreed to this provided that if this transfer did not take place then the cheques which Mr Morris held would be presented. After some little delay funds were eventually telegraphically transferred and possession of the vessel passed from Burnside to Martaban. Only at this point in time were the cheques held by Mr Morris released back to the parties associated with Martaban.
10. I had no dealings at all during this transaction with Mr Jekyll. All my dealings were with Mr Kirk and Mr Morris."
Exhibited to Mr McKenzie's affidavit is a copy document "Heads of Agreement" which provided :-
"1. Burnside Services Limited (Burnside) shall sell to Martiban Limited (Martiban) the M.V. Cape Done for the sum of $300,000.00.
2. The sum of $300,000.00 is to be held by Mr B. Morris as stake holder pending completion of the transaction.
3. Of the $300,000.00 Morris is authorised to pay or to arrange the payment to John M. O'Connor and Company, solicitors, of Brisbane the sum of $6,100.00 upon O'Connor giving to Messrs. Hemming and Hart, solicitors, of Brisbane all papers, documents and files that O'Connor holds in respect of the M.V. Cape Don and Burnside.
4. Messrs. Hemming and Hart are to apply forthwith for the M.V. Cape Don to be released from restraint by the D.P.P. pursuant to the
Crimes (Confiscation of Profits) Act on behalf of Burnside.
5. Upon the Court ordering that the M.V. Cape Don be released from restraint Morris shall account to Burnside for the sum of $250,000.00 and shall give to Martiban:
(a)Registration certificate of M.V. Cape Done official number 196929.
(b)Certificate of survey dated 7th January, 1963.
(c)Letter Australian Shipping Registration office dated 9th April, 1992.
(d)Part 1 Bill of Sale from the Commonwealth of Australia to Expo Experience Pty Limited dated 10th December, 1991.
(e)Part 1 Bill of Sale from Expo Experience Pty Limited to Burnside Services Limited dated 10th March, 1992.
(f)Certificate of deletion dated 28th April, 1992.
(g)Certified copy of Australian register of ships dated 28th April, 1992.
(h)Together with such other documents as are necessary to facilitate the unencumbered transfer of the M.V. Cape Don into the ownership of Martiban Limited.
6. Of the balance of consideration, namely $50,000.00, $6,100.00 shall be disbursed to John J. O'Connor and Company. Should the sale not proceed because the M.V. Cape Don is not released from restraint the balance of $293,900.00 shall be returned to Martiban Limited.
7. Should the ship be released from restraint disbursement of expenses incurred by Mr G. McKenzie, Messrs. Hemming and Hart, and Mr B. Morris together with any other reasonable expense agreed between the parties shall be deducted from the sum of $43,900.00 and the balance paid to Burnside.
8. For the consideration of $1 to be paid within 12 months of this date Burnside or its nominee may purchase a 10% interest in the M.V. Cape Don and shall be entitled to contribute a proportion of the purchase price of any other ships purchased by Martiban Limited or its nominees up to but not exceeding a 10% interest in any further ship that may be purchased.
(Signature) Brian Morris
BRIAN MORRIS
(Signature) Jude Kirk."
As well were exhibited copies of three bank cheques dated 2 September
1993 drawn as follows :-Raymore Maritime Limited $143,900.00
Raymore Maritime Limited $106,100.00
B. Morris Esquire $ 38,900.00
The copy agreement had attached to it a handwritten document signed by Mr Morris which said :-
"Received from Mr Jude Kirk on behalf of Martiban Pty. Ltd the following cheques
Westpac Banking Corp - Raymore Maritime Limited $143,900.00
National Australia Bank - Raymore Maritime Limited $106,100.00
National Australia Bank - B. Morris $38,900.00 - there being already paid $6100 to O'Connor as per Clause 6 and $5,000 initial deposit received by Burnside Limited.
(Signature) B. Morris"
All documents were under cover of a fax to Mr McKenzie from Mr Morris which read :-
"From the luxury of Flight Deck - I have the cheques - document signed as attached - I will NOT be disappearing with the loot.
(Signature) B. Morris"
There is clearly raised a factual issue of the authority, whether actual or ostensible, of Mr Kirk to make the agreement on behalf of Martaban Ltd. Assuming no actual authority, there remains the issue of ratification by the purchaser in allowing the agreement to be performed and taking and retaining the benefit of the ownership of the vessel. Importantly the acknowledgment of Mr Morris notes payment of $6,100.00 to
John M. O'Connor and Company as required by clause 6 and payment and receipt of an initial deposit of $5,000.00. The conduct of Kirk, who Morris thought was acting for the purchaser in providing the consideration by bank cheques, is prima facie inexplicable behaviour on the part of a person who is not acting for and authorised by the purchaser, particularly if the evidence ultimately is that the funds used to acquire the bank cheques were those of the purchaser or supplied on its behalf.
There is a further basis upon which the applicant seeks to strike out a stay of the proceedings. It is that the plaintiff will not provide evidence of the assignment by Burnside Services Ltd of its interest in the vessel. It was submitted that the affidavit in support of the warrant for arrest was insufficient. In particular the applicants pointed to a letter of 12 July 1995 where such evidence was sought in the context of seeking information to support an application for security for costs.
A review of lengthy correspondence indicates that both the applicant and the plaintiff have been less than willing to provide to the other party evidence as to the title of their respective clients to an interest in the vessel. There is nothing in the material in support of this application which specifically challenges the pleading in paragraph 3 of the statement of claim. No defence has been filed and the plaintiff has not been placed on notice that an application would be advanced on the basis that the proceedings are an abuse of process because there was no assignment from Burnside Services Ltd to the applicant.
The test as to striking out or staying proceedings as an abuse of process has
in recent times been restated by the High Court in Webster v. Lampard (1993) 177 CLR 598 (at 602-603 per Mason CJ, Deane and Dawson JJ) :-
"It is important to note at the outset that the issue before the learned Master on the application for summary judgment was not whether Mr. and Mrs. Webster would probably succeed in their action against Sergeant Lampard. It was whether the material before the Master demonstrated that that action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail. The power to order summary judgment must be exercised with `exceptional caution' (General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 C.L.R. 125, at p.129) 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 C.L.R. 87, at p.99). As Dixon J. commented in Dey v. Victorian Railways Commissioners (1949) 78 C.L.R. 62, at p.91:
`A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.'
Nowhere is that need for exceptional caution more important than in a case where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact. In such a case, it is essential that `great care ... be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal' General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964), 112 C.L.R., at p.130; see also, Church of Scientology Inc. v. Woodward (1982), 154 C.L.R. 25, at p. 31."
Applying that test, it cannot be said that there is no real question to be tried.
Security for Costs
I am satisfied that the financial situation of the plaintiff is such that an order for security for costs ought to be made. Mr McKenzie has stated that he is a shareholder in the plaintiff and the person who stands to benefit from the action. He is willing to give security by way of personal guarantee to make himself fully liable for any costs order in favour of the applicant. He has in his affidavit given some indication of his assets and net worth.
The applicant contends that the information is unsatisfactory and there is no guarantee that it will not alter. Consequently it was submitted that security should be ordered over Mr McKenzie's assets as was done in K.P. Cable Investments Pty. Ltd. v. Meltglow Pty. Ltd. (1995) 13 ACLC 437. In my opinion, having regard to the fact that Mr McKenzie is proposing to make the whole of his assets available and not only those limited to an assessment of the likely costs of the action, and having regard to the likely range of costs on a party and party basis which would be recoverable, the applicant's interests are sufficiently protected by a personal guarantee unrestricted as to amount. If security was to be ordered in a set sum, then in my view the estimate of the applicants in terms of the length of trial and the quantum of solicitors and counsels recoverable fees is overstated and a more realistic estimate of recoverable fees is in the vicinity of $20,000.00.
The plaintiff in its letter of 2 August 1995 did not offer a guarantee from Mr McKenzie or state that he would accept responsibility for any adverse costs order. On 4 August 1995 the applicant's solicitors specifically asked whether or not Mr
McKenzie was intending to come out from behind the company and expose his assets to an order. If that was intended then details of his asset position was sought. That information was not provided until the affidavit of Mr McKenzie was supplied on 21 August 1995 after the filing of the notice of motion.The applicant was justified on the material available to it to bring an application for security for costs. However the substantial application was for a stay or striking out and in this it has failed. It is appropriate that the applicant pay two-thirds of the respondent's on the notice of motion to be taxed if not agreed.
THE COURT ORDERS THAT:
The plaintiff provide within twenty-one (21) days by way of security for the costs of the action the personal guarantee of GRANT McKENZIE to guarantee the payment of any order for costs in favour of Transworld Investments Pty Ltd., such guarantee to be in a form satisfactory to the District Registrar.
In default of the provision of security, the action be stayed until further order.
The notice of motion filed 14 August 1995 be otherwise dismissed.
The applicant pay two-thirds of the respondent's costs of and incidental to the notice of motion to be taxed if not agreed.
I certify that this and the preceding eleven (11) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.
Date:24 August 1995
Associate
Counsel for the Applicant on the
Notice of Motion: Mr. S. Couper QC
Solicitors for the Applicant on the
Notice of Motion: G.P.S. Spencer Woodhead
Counsel for the Respondent on the
Notice of Motion: Mr. P.J. Favell
Solicitors for the Respondent on the
Notice of Motion: Hemming & Hart
Date of Hearing: 22 August 1995
Place of Hearing: Brisbane
Date of Judgment: 24 August 1995
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