Campbell & 2 Ors v Metway Leasing Ltd & Ors

Keith Malcolm Campbell (First Plaintiff)

Lois Audrey Campbell (Second Plaintiff)

Arnoya Holdings Pty Ltd (Third Plaintiff) PARTIES : Metway Leasing Limited (First Defendant)

Piggott Stinson Stuart Thom (Solicitors) (Second Defendant)

Metway Bank Limited (Third Defendant) JUDGMENT OF : Master Harrison

Mr K M Campbell (First Plaintiff in person and COUNSEL : also for Second & Third Plaintiffs)

Mr M Skinner (First, Second and Third Defendants) SOLICITORS : Mr W Annis-Brown Lincoln Smith & Co CATCHWORDS : Statement of claim be struck out;; Default judgment be entered;; Stay of proceedings;; Amend statement of claim Australian Securities and Investments Commission Act 1989 ACTS CITED : Corporations (NSW) Act - Corporations Law Fair Trading Act 1987 (NSW) Bankruptcy Act 1966 CASES CITED : Arnoya Holdings Pty Limited v Metway Leasing Limited [1999] NSWCA 120 Mannigel v Hewlett Phelps (unreported, NSWCA 1 June 1991) DECISION : see para 23

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

21338/95 - KEITH MALCOLM CAMPBELL & 2 ORS v METWAY LEASING LIMITED & 9 ORS

JUDGMENT (Statement of claim be struck out; default judgment be entered; Stay of proceedings; amend statement of claim)

1 MASTER: By notice of motion filed 6 August 1997 the first and third defendants seek that the amended statement of claim filed on 23 April 1997 be struck out or alternatively that the amended statement of claim be struck out so far as it relates to the claims made by the first and third defendants. By notice of motion filed 10 September 1997 the second defendant also seeks that the amended statement of claim filed on 23 April 1997 be struck out or alternatively that the amended statement of claim be struck out in so far as it relates to the claims of the first plaintiff and third plaintiff. The first and third defendants relied on an affidavit of Wayne Vincent Annis-Brown sworn 7 August 1997 and the second defendant relied on affidavits of Camilla Whalen sworn 4 and 11 August 1997. 2 The plaintiffs have filed two motions both on 11 May 1999. The first motion (called A) seeks that the proposed (but not yet served notice of motion) be struck out as an abuse of process and secondly that judgment be entered in favour of the first to third defendants due to failure to comply with the Supreme Court Rules. Although the plaintiffs refer to judgment being entered in favour of the defendants this appears to be a typographical error and the plaintiffs would be seeking that default judgment be entered in their favour. The second longer motion (called B) also filed on 11 May 1999 seeks that these proceedings be stayed pending an application to the Federal Court of Australia seeking leave to appeal against a judgment of Wilcox J in Nos NG 7787 and NG 7788 of 1997 following the misleading of Wilcox J; secondly, leave to further amend as a result of continuing harassment and by adding the further claim pursuant to s 12BC of the Australian Securities and Investments Commission Act 1989 and thirdly, that the hearing of the defendants' notice of motion now before this court (but not yet served on the plaintiffs) be vacated. Mr Campbell relied on two affidavits sworn by him on 7 and 9 May 1999. The orders sought by the plaintiffs namely that the notices of motion not be served and that the hearing date be vacated are no longer being pursued. Mr Campbell acknowledged that service of the notice of motion had been effected. He also stated that he was in a position to argue the notices of motion. 3 In these proceedings, the first plaintiff is Keith Malcolm Campbell the second plaintiff is Lois Audrey Campbell and the third plaintiff is Arnoya Holdings Pty Limited (the company). The first and second plaintiffs are married and were officers of the third defendant. The second plaintiff has written a letter which requested that her husband represent her when these motions were heard before the court. I granted leave for the first plaintiff to represent the second plaintiff. Mr Campbell also purportedly acted for the third plaintiff and his submissions in relation to the third defendant were heard. The first defendant is Metway Leasing Limited, the second defendant is Pigott Stinson Stuart Thoms, a firm of solicitors, and the third defendant is Metway Bank Limited. 4 On 19 December 1995 the statement of claim was filed. The defendants accept, solely for the argument of these motions, that at the time that the statement of claim was filed both Mr and Mrs Campbell were competent to bring proceedings. However on 6 June 1996 an order for sequestration was made against the estate of Mr Campbell. On 4 April 1997 a sequestration order was made against the estate of Mrs Campbell. 5 On 10 March 1997 the court ordered that Arnoya Holdings Pty Limited be wound up under the Corporations (NSW) Act - Corporations Law and that James Millar of Ernst & Young be appointed liquidator of the defendant company. The first plaintiff admitted that both he and the second plaintiff are still bankrupt. However on 5 July 1999 an application was lodged on their behalf in the Federal Court seeking to have those bankruptcies annulled. 6 There is a history between these parties which was helpfully set out by McInerney J in his judgment in these proceedings. I respectfully repeat them. They are as follows: "[A] JVA [joint venture agreement] was made between Baystan Pty Limited (Baystan) and Prudential Finance Limited (Prudential). It related to the refurbishment and construction of home units at 57 Lindfield Avenue, Lindfield. Prudential made advances to Baystan and these were secured by Mortgage. There was default. The first defendant purchased Prudential. It brought proceedings against Baystan.

A compromise was then reached. On 18 December 1990, a Deed of Settlement was executed. The parties were Baystan, the first and second plaintiffs and the first defendant. It was a document intended to implement the compromise reached. There was agreement to the discharge of the earlier Mortgage given by Baystan. Broadly speaking, there were releases and relinquishments made in respect of JVA. There was agreement to pay a sum of $2,400,000 (being part of the monies claimed). This sum was paid by the due date. In a general sense, the Deed may be said to have made provision for the giving of security for the payment of a further sum of $58,000 (which has been described as a shortfall) and any interest accruing thereon. The first and second plaintiffs (who are referred to therein as Guarantors) agreed to execute second Mortgages over two properties. The Mortgages were duly given.

There was default in payment of the sum of $58,000. On 15 November 1991, the first defendant commenced proceedings in this Court. The proceedings were disposed of at first instance on 26 April 1995, when the first defendant obtained judgment against all of the plaintiffs and Baystan [Metway Leasing Limited v Arnoya Holdings Pty Ltd (unreported, SCNSW, Barr AJ, 26 April 1995)]." 7 On 9 April 1997 McInerney J gave the plaintiffs leave to amend their statement of claim in these proceedings within 14 days. An amended statement of claim was filed on 23 April 1997. Paragraph (37) of the amended statement of claim pleads that the conduct outlined in paras (20) to (35) was conduct against the first and/or second and/or third plaintiffs engaged in or on behalf of the first and/or second defendant and/or third defendant in breach of s 55 of the Fair Trading Act 1987 (NSW). Section 55 of the Act provides: "Harassment and coercion

A person shall not use physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer or the payment for goods or services by a consumer." 8 Paragraph (38) pleads that as a consequence of the defendants' conduct the first and second plaintiffs have suffered loss and damage. Particulars of loss and damage are pain and suffering, including but not limited to post traumatic stress disorder (PTSD). No claim has been pleaded, nor could there be a serious allegation that the third plaintiff (a company) has suffered personal injury. Paragraphs (52) and (53) of the ASC plead that the second defendant has aided and abetted or been a party to contraventions by Metway Leasing and Metway. 9 The allegations pleaded in paras (20) to (35) are serious. They, in part, concern alleged actions of solicitors involved in the hearing of proceedings Metway Leasing Ltd v Arnoya Holdings Pty Ltd before Barr AJ (as he then was). Paragraph (20) complains about the actions of the defendants' solicitor when he sought sequestration orders against the first and second plaintiffs. The allegation that the bankruptcy proceedings were commenced for an improper purpose was argued before the Court of Appeal. 10 The Court of Appeal in Arnoya Holdings Pty Limited v Metway Leasing Limited [1999] NSWCA 120 dismissed the appeal from Barr AJ's decision. At pages 2 and 3 the Court of Appeal referred to the annulment proceedings before Wilcox J and the allegations that the bankruptcy proceedings have been commenced for an illegitimate purpose. (These are the same allegations raised in para (20) of the amended statement of claim in these proceedings). They found no substance in these allegations. Sheller JA with whom Powell and Beazley agreed, considered the effect of s 60(4) of the Bankruptcy Act 1966. Before I refer to s 60(4), it should be stated that s 58 (1) of the Act provides: "58 Vesting of property upon bankruptcy (1) Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankruptcy, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and (b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee. …" 11 Thus the property of the bankrupt upon bankruptcy vests in the Official Trustee. 12 The Court of Appeal referred to the provisions of s 60(2) of the Bankruptcy Act. Sheller JA stated: "Section 60(2) of the Bankruptcy Act provides that an action commenced by a person, who subsequently becomes a bankrupt, is, upon his or her becoming a bankrupt, stayed until the trustee makes election in writing to prosecute or discontinue the action. Subsection (3) provides if the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action. Subsection (4) provides that notwithstanding anything contained in this section, a bankrupt may continue in his or her own name, an action commenced by him or her before he or she became a bankrupt, his or her spouse or a member of his or her family, or, (b) the death of his or her spouse or of a member of his or her family." 13 On 5 May 1997 the defendants' solicitors wrote to the Official Trustee in Bankruptcy. The letter stated that shortly after Mr Campbell became bankrupt, the Official Trustee elected not to continue with the proceedings in the Supreme Court. However they did not presently know whether or not the same election was made in respect of Mrs Campbell. 14 On 11 July 1997 the Official Receiver wrote to the defendant's solicitors. The letter confirmed that the Official Trustee did not propose to continue on behalf of Lois Campbell the bankrupt in these proceedings. The Federal Court ordered the Official Trustee had until 26 August 1996 to make an election whether to prosecute or discontinue the proceedings of Mr Campbell against the second defendant. No election was made by that date and according to the s 63 of the Bankruptcy Act 1966 the claim by Mr Campbell was deemed to have been abandoned. The Official Trustee confirmed that the proceedings had been abandoned by letter dated 5 September 1996. 15 At p 7 of the Court of Appeal decision in Arnoya Holdings v Metway Leasing Pty Ltd the court in relation of s 60(4) said: "In determining whether or not the action can be regarded as one in respect of any personal injury or wrong done to the bankrupt, Handley JA referred to the following passage from the judgment of Sir Owen Dixon in Cox v Journeaux and Ors [No 2] (1935) 52 CLR 713 at 721. Sir Owen Dixon said: 'The test appears to be whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property.'" 16 The Court of Appeal also referred to a passage from the judgment of Handley JA in Mannigel v Hewlett Phelps (unreported, NSWCA 1 June 1991) where he said: "The plaintiffs claimed damages in the proceedings in the manner particularised in para 17 (e), (I) and (g) of their amended statement of claim but these claims were consequential upon alleged breaches of professional duty owed to them by the defendants in relation to the purchase of the land and the contract by the vendor to erect a dwelling house on it. The plaintiff's claims for damages for loss of credit for mental distress, inconvenience and for injury to their physical and mental health therefore were not claims 'without reference to their rights of property' within the principle stated by Dixon J. On the contrary, those claims were consequential on damages to the plaintiff's financial and property interest as a result of alleged breaches of professional duty by the solicitors." 17 Paragraph (36) of the amended statement of claim alleges that harassment and/or coercion was "in connection with the payments due to the first defendant of the sum of $58,000 plus interest owing under the 18 December 1990 deed". It is my view that the personal injury or wrong that the first and second plaintiffs allege to have suffered are made with reference of their rights in relation to the $58,000. I am satisfied that s 60 of the Bankruptcy Act applies to these proceedings and the Trustees in Bankruptcy have elected not to pursue these proceedings. Therefore the statement of claim should be dismissed as against first and second plaintiffs. 18 On 26 June 1997 the liquidator of Arnoya Holding Pty Limited (in Liq) advised the plaintiffs' solicitors that after consulting with creditors of the administration he decided that he would not be pursuing proceedings in the Supreme Court which were initiated by Arnoya prior to his appointment. He referred specifically to these proceedings. As the liquidator has elected not to pursue these proceedings, it is my view that the statement of claim should be dismissed as against the third plaintiff.

19 However the first plaintiff urged the court not to dismiss the statement of claim at this point in time but rather await the outcome of the first and second plaintiffs' application to have the bankruptcy annulled. The plaintiffs opposed this course of action because it submitted that the proceedings should not be held up while the second application is made particularly after the bankruptcies occurred as long as three years ago. It is my view that the proceedings should not further be delayed while this court awaits the outcome of the first and second plaintiffs' application in the Federal Court. Some of the issues raised in Mr and Mrs Campbell's affidavit in the Federal Court have previously been considered by Wilcox J who dismissed their earlier application for an annulment. It is unlikely that the bankruptcy proceedings will be annulled at this late stage. 20 If I am wrong and the statement of claim should not be struck out the defendant in motion A has sought that default judgment be entered on the basis that the first and third defendants have not filed their defence within the time period stipulated under the rules, namely 14 days. The first and third defendants say that they are in a position to file a defence within the next few days. It would be my view that even though the defendants are in default of the timetable they should be given a further opportunity to file the defence and I would extend the time for filing the defence for a further 7 days. 21 In the plaintiffs' motion B it seeks that proceedings be stayed pending an application to the Federal Court seeking leave to appeal against the judgment of Wilcox J. Einfeld J in the Federal Court refused leave to Mr and Mrs Campbell to appeal from the decision of Wilcox J of the 1 September 1998. As the application for leave has been determined there is no longer a need for a stay of proceedings. The plaintiffs also seek leave to further amend the statement of claim as a result of continuing harassment by adding a further claim pursuant to s 12B of the Australian Securities and Investment Commission Act 1989. As I have already dismissed the statement of claim it would be futile to make such an order and I refuse to do so. 22 As the defendants were successful in obtaining the orders they sought in the notices of motion they would normally be awarded their costs. However as the first and second plaintiffs are bankrupt and the third defendant is in liquidation it is debatable whether a costs order would have any utility. It is noted that no order for costs was made in the Court of Appeal. I grant liberty to the plaintiff to apply to argue the issue of awarding them their costs of the notices of motion. 23 The orders I make are:

(1) The amended statement of claim filed on 23 April 1997 is struck out.

(2) The plaintiffs' two notices of motions filed 11 May 1999 are dismissed.

(3) Liberty to the defendants to restore the matter to argue the issue of whether they should be awarded the costs of their notices of motion. **********

Last Modified: 07/15/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.