Supreme Court of WA|2000-06-28|Before: Owen J

Blakeley v Bpm Pty Ltd & Ors [2000] WASC 170 (28 June 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : BLAKELEY -v- BPM PTY LTD & ORS [2000] WASC 170

1 MASTER BREDMEYER: This is an application dated 2 June 2000 by the fourth defendants to dismiss the plaintiff's claim as an abuse of process, to countermand entry for trial, and for the plaintiff to pay the fourth defendants' costs on an indemnity basis to include the costs of the fourth defendants' attendance in court on 15 March 2000. This application only concerns the plaintiff and the fourth defendants. The action is not proceeding in relation to the first, second and third defendants. As the action has been entered for trial the application would normally be outside my jurisdiction but the Judge in charge of the civil list, currently Owen J, has delegated the hearing of this application to me under O 33 r 8B.

2 By way of background it is necessary to summarise the plaintiff's pleaded claim. The plaintiff, Mr Blakeley, is the major shareholder and managing director of HPM Pty Ltd, which was the owner of the Peninsula Hotel, Mandurah. That company was placed in liquidation on 21 December 1995 and remains in liquidation. The liquidator is Mr Gary Trevor. The first defendant, BPM Pty Ltd ("the accountants"), is a firm of accountants trading as Bird Cameron. The second defendant is a receiver and manager. The third defendant is a financier which had several mortgages over the hotel. In May 1990 the plaintiff entered into an oral agreement with the accountants for advice on how best to manage its land, hotel business and assets. The accountants advised that it should be appointed as the business manager of the hotel for the next six months to undertake the day-to-day running of the hotel. I add that the hotel was in financial difficulties at that time. The plaintiff, HPM, accepted that advice and entered into a written management agreement on 24 May 1990 with the accountants. The plaintiff alleges that the accountants managed the business negligently and breached their management agreement in a number of ways, eg they did not minimise the operating costs of the hotel. It is also pleaded that the accountants were guilty of misrepresentation in stating that the third defendant had agreed to capitalise the plaintiff's interest and any arrears on its loans.

3 In July and August the third defendant served notices of demand on the plaintiff, calling up the moneys due under the mortgages and on 14 December 1990 the third defendant appointed the second defendant, Mr Fear, as receiver and manager. The appointment of Mr Fear as receiver and manager is said to be invalid because, inter alia, there was no event of default. The second defendant owed a duty to the plaintiff to act in good faith and not to disregard the plaintiff's interest in exercising his power of sale. Mr Fear breached those duties in that he failed to take reasonable care to obtain a proper price or the true market value of the hotel and property to be sold. He allowed the hotel business to degenerate through lack of proper management, thereby reducing its saleability and value. Prior to the public auction he failed to advertise and present all the property in a proper and adequate manner. After the unsuccessful public auction he failed to advertise the property's potential value in a proper way by ignoring the fact that the council had given preliminary approval for the building of a shopping centre comprising of 11 shops and eight licensed food markets with seating for 350 patrons and a drive-in liquor shop on part of the land. He also disregarded the plaintiff's interest by refusing to facilitate attempts to sell the hotel's leasehold, thereby obliterating the hotel's goodwill and derogating the total asset value. He refused to accept private treaty offers from prospective purchasers of the hotel freehold. He insisted that the assets be auctioned solely as freehold and he disclosed a third party's detailed offers submitted by competing purchasers. It is said that, with reckless disregard to the interests of the plaintiff and with lack of good faith, he sold the hotel to the fourth defendants at a gross undervalue. It is said that the second defendant acted fraudulently in making the sale. He colluded with the fourth defendants and conspired with them to sell the hotel to them at a gross under-value. It is said that the second defendant provided to the fourth defendants confidential information regarding other offers that had been made and this disclosure put the fourth defendants in a preferred position relative to other interested parties. The second defendant sold the hotel to the fourth defendants at a gross under-value and thus failed to exercise its power of sale bona fide. The second defendant dishonestly rejected four favourable offers to purchase the hotel from other entities. He refused to negotiate with prospective purchasers and refused to negotiate and effect the sale of the hotel's leasehold so as to effect a sale solely of the hotel's freehold to the fourth defendants, which was designed to deprive the plaintiff of the true value of its assets.

4 It is said that the fourth defendants knowingly participated in the second defendant's dishonest scheme designed to deprive the plaintiff of its interest and that they had knowledge, or ought to have had knowledge, that the second defendant was selling the hotel assets at a gross under-value. Moreover it is said that the fourth defendants were put on notice of the improper exercise by the second defendant of his power of sale by a caveat lodged on 26 November 1990 prior to the sale which occurred in June 1991. By reason of these matters the fourth defendants gained unjust enrichment at the plaintiff's expense. By reason of these matters the fourth defendants became constructive trustees for the plaintiff HPM and therefore it is right and proper that the sale to them be set aside and that the assets revert and be restored to the plaintiff. The prayer for relief against the fourth defendants in par 44(g) of the statement of claim is in this form:

"A declaration that the sale of the plaintiffs HPM Pty Ltd's property to the fourth defendants be set aside, and orders be given to effect the reversion of the said property, plus damages, to the plaintiff."

5 The plaintiff's action against the fourth defendants is said to be an abuse of process for two reasons. The first is that Mr Blakeley has no standing to bring this action. The company owned all the assets so clearly the company should normally bring the action. The liquidator who made a long report to the court dated 9 February 2000, lodged pursuant to an order of Miller J made on 12 January 2000, has no intention of bringing the action. He outlines in considerable detail the history of a previous action, CIV 2236 of 1994 which was brought by HPM Pty Ltd against the same parties and pleading substantially the same causes of action as set out in the current pleading. That action was dismissed by consent on 27 March 1999 against the accountants; it was discontinued by the plaintiff against the second and third defendants on 20 October 1998, and it was dismissed for want of prosecution against the fourth defendants on 6 May 1996.

6 For Mr Blakeley, as a shareholder, to bring an action on behalf of the company, he must do so under s 236 and s 237 of the Corporations Law which are new sections which recently came into force. Section 236(3) abolishes the right of a person at general law to bring proceedings on behalf of a company. I take it that the aim of these sections is to abolish the law previously known as exceptions to the rule in Foss v Harbottle [1843] EngR 478; (1843) 2 Hare 461, 67 ER 189. Mr Blakeley has not obtained leave under s 237 to bring this action on behalf of the company. He applied to me for leave under that section by chamber summons dated 8 March 2000. The matter came before me on 24 March ex parte when it was briefly argued and I reserved to 12 April to research the law. On that day I pointed out to Mr Blakeley the considerable difficulties he faced in obtaining leave under s 237 and he then withdrew the application. I consider the fourth defendants' objection is a good one. Because he has not obtained leave under s 237 Mr Blakeley has no right to bring this action on behalf of the company. He has no right as a shareholder to claim relief which can only be claimed by the company.

7 The second ground of objection is that the earlier action, which as I have said, is in very similar form, was dismissed for want of prosecution on 6 May 1996. Such a dismissal is not a bar to bringing a similar action again, either by the same plaintiff or a different plaintiff. I quote from Malcolm CJ, with whom Kennedy and Pidgeon JJ agreed, in Hughes v Gales (1995) 14 WAR 434 at 437:

"An order dismissing an action for want of prosecution is interlocutory, see Hall v Hall & Pickles Ltd [1969] 1 QB 405; Neiman v Electronic Industries Ltd [1978] VicRp 44; [1978] VR 431; Canberra Formwork Pty Ltd v Civil & Civic Ltd (1982) 67 FLR 66; Vidler v Merit Engineering Pty Ltd (1987) 86 FLR 213. In such a case the court merely determines the question whether the action has been prosecuted with due diligence. There is no judgment on the merits. When an action has been dismissed for want of prosecution, there is no reason why a fresh action should not be commenced based on the same cause of action provided the relevant limitation period has not expired: see Birkett v James [1978] AC 297 at 322 per Lord Diplock; Lewandowski v Lovell (1994) 11 WAR 124 at 132-133, per Murray J."

8 The fourth defendants' first objection is a good one and this action will be dismissed against the fourth defendants. This is an action which would not have been brought against the fourth defendants if Mr Blakeley had proper legal advice. It is misconceived. I will order the plaintiff to pay the fourth defendants' costs of the action and of this application on a solicitor-client basis, to be taxed. My file does not indicate that the fourth defendants' solicitor was present on 15 March 2000 which was the first return date of Mr Blakeley's summons for leave to bring proceedings under s 236(1) of the Corporations Law. I will reserve on those costs with liberty to apply.

Blakeley v Bpm Pty Ltd & Ors [2000] WASC 170

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Judgment (13 paragraphs)

Blakeley v Bpm Pty Ltd & Ors [2000] WASC 170 (28 June 2000)

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Cases Cited (4)