COMPUTER ACCOUNTING AND TAX PTY LTD (in liq) -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 7] [2014] WASC 360 (16 September 2014)

Supreme Court of WA|2014-09-16|Before: Simmonds J

1 This hearing is for the purpose of delivery of my determination in this matter on what might be called an expedited basis. It is on an application styled the amended application for orders by Angela Cecilia Theresa Frigger (Mrs Frigger) and Hartmut Frigger (Mr Frigger) (together, the Friggers), dated 3 July 2014. It is an application for leave pursuant either to the Rules of the Supreme Court 1971 (WA) O 18 r 7(2) or O 18 r 6(2), for the Friggers to be joined as parties to the present proceedings (CIV 2265 of 2006).

2 I should note that the Friggers are husband and wife, and the only shareholders of the plaintiff, and they are or were its only directors. I should indicate at the outset that my determination of this application is that I would not grant it for the reasons that I will set out.

4 So far as the present application is concerned, it began as a hearing ex parte before me on the original form of the amended application on 3 July 2014. At that time, I made orders providing for the amended application, its filing and service, and for the filing and service of affidavits.

5 On 13 August 2014, there was a hearing, at which I considered objections to certain affidavits, and determined those objections. On 4 September 2014, there was a hearing at which I made programming orders for the filing and service of written submissions, and for a decision in this matter on the papers. I note now, and will note again, that those programming orders did not provide for affidavits.

6 I should note the following material before me for the purposes of my decision. I have the following affidavits: the affidavit of Mrs Frigger, sworn 24 June 2014; the affidavit of Mrs Frigger, sworn 10 July 2014; and the following further affidavits of hers, sworn 7 August 2014, 11 August 2014, and 4 September 2014. The affidavit of 4 September 2014 I will return to in connection with those programming orders.

7 I also have an affidavit of Mr Donald Campbell Smith, sworn 25 July 2014; an affidavit of Mervyn Jonathon Kitay, sworn 8 August 2014; and an affidavit of Cameron Victor Eastwood, sworn 12 August 2014.

8 I also have written submissions: two sets for the Friggers, dated respectively 18 July 2014 and 7 September 2014; for the liquidator of the plaintiff, Computer Accounting and Tax Pty Ltd (CAT), dated 13 August 2014; and for the first and second defendants, dated 11 September 2014.

9 In respect of the last set of written submissions, I have noted the request made by the Friggers for me to disregard them, that is to say, the submissions for the first and second defendants, dated 11 September 2014, as not having been served on the Friggers personally by 4.00 pm on 11 September 2014, as, in their submission, my programming orders made on 4 September 2014 required.

10 I accept, as the Friggers were selfrepresented, that service on them was what was required. I understand that service did not occur until the following day. However, it was not made apparent to me what prejudice arose from the failure to provide that service on that day, given the decision was to be on the papers. I therefore do not disregard the written submissions of 11 September 2014.

Where at any stage of the proceedings in any cause or matter the interest or liability of any party is assigned or transmitted to or devolves upon some other person, the Court may, if it thinks it necessary in order to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, order that other person to be made a party to the cause or matter and the proceedings to be carried on as if he had been substituted for the first mentioned party.

At any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application -

(a) order that any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b) order that any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, be added as a party,

but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as may be authorised.

14 It is not altogether apparent from the amended application or the submissions of the Friggers whether they seek substitution as the plaintiff in CIV 2265 of 2006, or to be joined as an additional plaintiff. I proceed to consider the amended application as if orders in terms of substitution or joinder as an additional plaintiff have been sought.

15 It is also not altogether apparent as a matter of law whether or not O 18 r 7(2) is confined to substitutions. No authority was cited to me, and I could not identify one in which orders for the addition of a party under O 18 r 7(2) were made. However, I will assume orders for addition are also possible under the subrule. By contrast, there is authority under O 18 r 6(2) that that subrule is capable of allowing for substitution or addition of a party: see LexisNexis Butterworths Civil Procedure in Western Australia, vol 1 [18.6.1AA], referring to APT Finance Pty Ltd v Bajada [2008] WASCA 73 [35].

16 Finally, it is clear in respect of O 18 r 6(2), that there is a discretion whether or not to permit joinder, notwithstanding that the conditions in the subrule are met: see LexisNexis Butterworths Civil Procedure in Western Australia, vol 1 [18.6.5C], citing authority. As will become apparent, that position is of importance in these reasons.

17 CIV 2265 of 2006 is an action for damages with respect to the purchase of a service station property in Armadale. On 9 July 2008 I gave judgment for the plaintiff and awarded damages: see Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133.

18 On 6 May 2009, I gave costs orders in the matter for the reasons given in Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S).

19 On 23 October 2009, the Court of Appeal gave judgment on the appeal. The findings in respect of liability in the trial judgment were not contested in the appeal. In respect of the awarded damages, the determination on the appeal was that there should be, in effect, a substantial reduction of the award at trial with a consequential reduction in interest: see Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 (Martin CJ, Buss & Newnes JJA).

20 Orders to give effect to the determination and costs orders were made on 7 December 2009: see Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 (S) (Martin CJ, Buss & Newnes JJA). One of the orders was for the repayment of a substantial portion of the amount paid by the defendants to the plaintiff in respect of the awarded damages at trial. Another order was that the costs orders I made on 6 May 2009 be set aside and that the question of costs of the trial be remitted to the trial judge for reconsideration in light of the reasons of the Court of Appeal.

21 Following the trial judgment, the plaintiffs took a number of steps to enforce the trial judgment and for related purposes. The defendants for their part had taken various proceedings in respect of the amounts said to be owing to them as a result of the appeal and in respect of steps the plaintiff had taken.

23 On 18 February 2011, I made orders with the consent of the liquidator, giving leave to the Friggers to conduct the defence of CAT in respect of proceedings as to costs against CAT which I had given leave pursuant to Corporations Act 2001 (Cth) s 471B to the applicants to conduct.

24 Leave to the Friggers was on condition that they appoint solicitors for that purpose. The proceedings I had given leave to conduct against CAT were those on applications made by the defendants in respect of the costs of the freezing order obtained by CAT against the defendants that I had previously discharged, as well as certain interlocutory proceedings stipulated in the minute prepared by counsel for the defendants and filed 3 February 2011, being interlocutory proceedings in which costs were reserved, as well as the costs orders set out in the minute styled 'Defendant's Minute of Proposed Orders In Lieu of Orders Made on 6 May 2009'.

25 There is a hearing listed for 19 September 2014, that is to say, Friday of this week, at which I am to hear submissions on the applications just described. The Friggers have appointed a solicitor to represent CAT at that hearing, pursuant to my orders of 18 February 2011.

26 I turn now to set forth my determinations and the reasons for them in respect of each of the subrules. I begin with O 18 r 7(2).

27 I consider the matter in making an order for substitution or addition of the Friggers under that subrule may be shortly dealt with.

28 An order under this subrule may only be made if the interest or liability of a party was 'assigned or transferred to or devolved upon' the person seeking to be joined.

29 The Friggers have provided evidence in the affidavit of Mrs Frigger of 24 June 2014 that Mrs Frigger agreed to pay the costs of the action that became CIV 2265 of 2006. I return to the terms of that evidence shortly. The Friggers are also, as I have indicated, the only shareholders of CAT.

30 Finally, the Friggers have provided evidence of a deed of charge (the Charge), bearing the date 10 September 2009, entered into between them and CAT, in which the 'mortgaged property' is described as including, amongst other things:

[T]he judgment sums prejudgment and postjudgment interest legal costs enforcement costs owing and payable to the Grantor in legal proceedings Supreme Court CIV 2265/06, CACV 76/2008, LPA 36/2008 and related proceedings and Magistrates Court GCLM 11299/2009 and GCLM 7493/2009 and related proceedings.

31 The Friggers have also provided evidence of a notice of seizure of property, the subject of a 'fixed charge under the Personal Property Security Act 2009 (Cth)', which appears to be a reference to the Charge.

32 Of those three matters, only the third, the Charge, is capable, in my view, of being or working an assignment. No question of transmission or devolution would appear to arise for any of the three matters in any event.

33 The validity of the Charge and the effectuality of its enforcement are both strongly contested. I consider I do not need to resolve that contest, as I will also indicate below.

34 Even assuming the validity of the Charge and the effectuality of its enforcement for present purposes (O 18 r 7(2)), it is apparent to me that any assignment in respect of costs the Charge could work is limited, as the terms of the Charge indicate, to 'costs owing and payable to [CAT]'.

35 In my view, no 'assignment' within O 18 r 7(2) will occur until, at the earliest, determination of appropriate costs orders is made, and possibly only after the amount of those costs has been settled, or taxation has occurred. Neither point has yet been reached.

38 The Friggers put their costs for their case for joinder on three bases. One basis is the rights of the Friggers as the only shareholders in CAT; the second is as thirdparty payers of the costs of the proceedings which became CIV 2265 of 2006; and the third is the rights of the Friggers as secured creditors over the costs under the charge as enforced. I deal with each of those separately.

39 As to the position of the Friggers as the only shareholders in CAT, I note that there is no power to add a person merely because the resolution of litigation between existing parties will operate upon a person in a commercial sense: see Rogala v Caris Corp Ltd (Unreported, WASC, Library No 5089, 27 September 1983) (Burt CJ) [57], referred to in LexisNexis Butterworths Civil Procedure in Western Australia, vol 1 [18.6.6].

40 However, where an order might be made in the proceedings which would directly affect a person's rights against, or liabilities to, a party to the action, that person should be added as a party (the test of direct effect). The test of direct effect has been said to involve, 'matters of degree, and ultimately judgment, having regard to the practical realities of the case and the nature and value of the rights and liabilities of the third party which might be directly affected': LexisNexis Butterworths Civil Procedure in Western Australia, vol 1 [18.6.5].

41 Given the nature of a shareholder's rights against and liabilities to a company, I do not consider the position of the Friggers as the only shareholders in CAT is sufficient under the test of direct effect for them to be joined as a party.

42 As to the Friggers as thirdparty payers of the costs of litigation, I proceed on the basis, but without deciding, that they have paid CAT's costs of litigation to this point and are under a continuing obligation to pay any future such costs. I note the evidence I have of both is limited to the evidence previously referred to, which is of a letter dated 1 September 2003, signed by Mrs Frigger, in terms that she intends 'to commence legal action against the former owner Professional Services of Australia Pty Ltd and its director Martin Paul Banning', that legal action to be 'commenced in the company's name', and 'the costs of the action will be paid personally by me'.

43 On that basis, I would consider that the test of direct effect is met; however, I return below to whether that requires joinder in this case.

44 As to the Friggers as secured parties, as I previously noted, the matters of the validity of the charge and the effectuality of its enforcement, are strongly contested.

45 I consider I may put aside the matter of the effectuality of the Charge's enforcement. I may do so on the basis that, whether or not the steps already taken in that regard were effectual, it is at least strongly arguable that the Charge is, if valid, one capable of enforcement in respect of after acquired property of CAT being 'legal costs enforcement costs owing and payable to [CAT]': see Australian Property Custodian Holdings Ltd v Capital Finance Australia Ltd [2012] VSC 124 [42] (Ferguson J).

46 I also consider I may put aside the contest as to the validity of the Charge. The grounds to that contest are set out in the liquidator's written submissions of 13 August 2014 as follows:

(1) whether or not a properly held meeting of CAT authorised the loan which the Charge secured and whether or not such a meeting authorised entry into the Charge: [19] [20];

(2) whether or not the Charge was properly executed as a deed in accordance with Property Law Act 1969 (WA) s 9(1)(b): [21];

(3) whether or not there is any amount owing by CAT to the Friggers which the Charge could be said to secure: [46] [47];

(4) whether or not the Charge is void as against the liquidator pursuant to Corporations Act s 266(1); [51](a);

(5) whether or not the Charge was void against the liquidator on the basis CAT was insolvent at the time that the Charge was granted: [51](b)(i);

(6) whether or not the Charge was void against the liquidator on the basis that it was an unfair preference within Corporations Act s 588FA: [51](b)(ii);

(7) whether or not the Charge was void against the liquidator on the basis it was an uncommercial transaction within s 588FD of the Corporations Act: [51](b)(iii);

(8) whether or not the Charge was an unreasonable director related transaction within s 588FDA of the Corporations Act: [51](b)(iv); and

(9) whether or not the granting of the Charge was a breach of the duties of the Friggers as directors of CAT: [51](c).

47 The matters in a number of them, at least, were, I was told, in issue in the proceedings and the matter Angela Cecilia Theresa Frigger and Angela Cecilia Theresa Frigger and Hartmut Frigger as Trustees of the Frigger Superannuation Fund v Mervyn John Kitay as Liquidator of CAT and CAT (in liquidation), CIV 2765 of 2010. I note that I have a document dated 8 April 2013 styled, 'Amended Substituted Defence and Counterclaim (filed pursuant to Orders made 3 April 2013)' which appears to offer some support for that assertion: see Mrs Frigger's affidavit sworn 24 June 2014, annexure ACTF 10 [130] [137] and [142](c) (g).

48 At the same time, I note that the written submissions for the first and second defendants tell me that it is 'not clear' that the validity of the Charge itself will be adjudicated upon by the trial judge 'as it is not yet properly the subject of the pleadings in [CIV 2765 of 2010]': [15]. The basis for that assertion is, however, not altogether clear to me, nor is it clear to me that the matter could not properly be made the subject of such pleadings.

49 In any event, I do not consider a need to resolve such matters. That is because, in my view, it cannot be said on the materials I have, including what I have from a party to the proceedings in CIV 2765 of 2010, as to what is, or at least may be, an issue in those proceedings, that the Charge is so plainly invalid, whether as a deed or as a contract, that it can be dismissed for the purposes of joinder: cf IAI Australia II Pty Ltd v Connemara Holdings Pty Ltd [2011] WASC 340 [7] (Beech J).

50 I accept that IAI was a decision where the proceedings had not advanced to trial. That is a matter that has relevance, in my view, to whether or not to exercise the discretion to allow a joinder. However, it does not, in my view, affect the present point.

51 For similar reasons, I consider I can leave aside the question raised, as I understood it in the submissions for the first and second defendant, of whether the Charge is in fact one that cannot be said to create a security interest in personal property within Personal Property Security Act 2009 (Cth) s 12.

52 That question arises it is said as the Charge purports to create a security interest in a bare personal right of action, namely the cause of action in CIV 2265 of 2006, or at least the right to seek the making of costs orders in that action: cf EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd [No 3] [2013] WASC 183 [886] [888], [912], [915] (Beech J).

53 I consider that I can leave that question aside because, in my view, it cannot be said on the materials I have that the Charge is so plainly one of that kind, as opposed to one in relation to a right of action for costs as finally determined, that the Charge can be dismissed in that way for the purposes of joinder.

54 This brings me to the question of discretion namely: whether or not to permit joinder, where I have determined, as I have, that the test of joinder I have referred to, the test of direct effect, is met.

55 In respect of the discretion, I note Southern Cross Pipelines Australia Pty Ltd v Kenneth Comninos Michael Western Australian Independent Gas Pipelines Access Regulator [2002] WASC 149 (EM Heenan J), as follows:

It has been held that the court has a discretion to refuse an order for joinder - Lancaster Banking Co v Cooper (1879) 9 Ch D 594, especially if the application is made at a late stage but that, generally speaking, the power is widely exercised. Indeed, it would be difficult to justify the exclusion of a party whose presence is necessary for the effectual determination and adjudication of matters in dispute and, consequently, it would seem that any discretionary power to decline an order would largely be confined to practical matters of convenience or disruption which might tell against the late admission of such a party - consider the situation which arose in News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410 at 527. Nothing of that kind arises on the present application because it has been made at an early stage of the principal proceedings and, notwithstanding the probable increase in complexity and in the controversy of the action which such a joinder would bring, those are not factors which should disincline the court to make such an order if, otherwise, it were appropriate. Accordingly, in my view, the fate of this application must depend on the extent, if any, to which the legal rights of WMC Resources Ltd are, or might be, affected by a judgment in the action adjudicating upon the matters in controversy between the existing parties. This requires an examination of the plaintiffs' claims in the action, the issues which have arisen and the extent, if any, to which these directly affect the applicant [8].

56 I note that that passage was referred to with apparent approval in APT Finance Pty Ltd v Wingside Nominees Pty Ltd [No 2] [2009] WASCA 235 [29] (Wheeler JA, Newnes JA agreeing); and both Southern Cross Pipelines and APT Finance v Wingside are referred to in LexisNexis Butterworths Civil Procedure in Western Australia, vol 1 [18.6.5C] as the sources for the proposition there stated as to the discretion under O 18 r 6(2).

57 For this purpose, I note that the Friggers seek to be joined at a very late stage of the proceedings indeed. Further, as a practical matter, it would seem that their interest in proper costs orders being made in CIV 2265 of 2006 is one which their appointment of and power to instruct a legal representative for CAT pursuant to the orders I made on 18 February 2011 is capable of addressing. It appears to me that combination of circumstances would tend to make this a case suitable for the exercise of the discretion, notwithstanding the exceptional character of the exercise of such discretion as described in Southern Cross Pipelines.

58 However, the Friggers submit that there are matters as to costs which are not covered by the proceedings to which the orders of 18 February 2011 relate. In the affidavit of Mrs Frigger, sworn 4 September 2011, there is provided as an annexure a document styled 'Minute of Proposed Orders of the Action dated 1 September 2014'. The affidavit itself at [24] refers me to Proposed Minute [1], [2], [3], [4], [5], [6], [7], [8], [9], [10], [11] and [12] as matters of costs not so covered.

59 I should indicate that my programming orders of 13 August 2014, as I had previously said, did not allow for affidavits, nor is it plain that the affidavit I have was served on the other parties to the joinder application.

60 However, I leave aside those matters. I note that only Proposed Minute [7], [10] and [12] appear, on their face, clearly to be outside the proceedings to which the orders of 18 February 2011 relate.

61 In my view, as a practical matter, those three items do not justify the joinder of the Friggers to CIV 2265 of 2006 at this late stage of the proceedings in this action, when account is taken of the costs matters to which the orders of 18 February 2011 relate and of those orders.

62 I leave aside, for this purpose, the matter of whether or not the liquidator of CAT can or should be relied upon at this stage to pursue these matters and Proposed Minute [7], [10] and [12]. I have noted the assertion in the affidavit of Mrs Frigger of 11 August 2011 [4] that the liquidator, as well as the defendants, do not wish to have CAT's legal and enforcement costs quantified, as that goes, 'directly' to whether or not CAT was insolvent as alleged by them, and as is the 'main issue' in CIV 2765 of 2010.

63 However, it is not apparent to me in view of the liquidator's consent to my orders of 18 February 2011 that any such consideration influenced any determination by the liquidator not to proceed in respect of the costs and Proposed Minute [7], [10] and [12].

64 I put that assertion by the Friggers aside accordingly.

65 I have also noted in the present respect Huntingdale Village Pty Ltd v Mallesons Stephen Jaques [2013] WASC 48 [42] (Le Miere J), where his Honour indicated he would permit the joinder of a third party payer of costs to litigation. In that litigation, the plaintiffs were seeking a declaration that they were 'thirdparty payers' within Legal Profession Act 2008 (WA) s 295 in relation to the defendants' bill of costs, and that the defendants were required to submit a bill of costs for assessment in accordance with s 295(3).

66 I accept that the Friggers are at least arguably 'thirdparty payers' within the same provision of the Legal Profession Act.

67 However, the litigation in Huntingdale Village was at a very different and earlier stage, and there was no question of the exercise of the discretion that appears to have been raised in that case.

68 I would distinguish Huntingdale Village accordingly.

69 For these reasons, I have concluded that I would not allow the joinder application in this case. My preliminary view of the matter of costs is a matter that I should probably indicate, as the matter of costs was raised in the written submissions for the first and second defendants.

70 In my view, the applicants have been unsuccessful. However, it does not seem to me that their lack of success is such as would, on its face, warrant an order for indemnity costs. Further, it seems to me that this is an application, in view of the way in which it was able to be dealt with, where the costs should be fixed in accordance with the practice direction properly applied to the facts of this case.

71 However, I will hear submissions from the parties, if they would choose to make them, with respect to the costs that should be fixed in that way.

72 Before doing that, however, I should turn to the matter of the postscript that I indicated I would provide.

73 It may be noted that it was not necessary in this judgment for me to determine a question on which, as I understood it, the defendants had sought to have me rule whether or not the Charge was valid.

74 As I understand it, there is presently listed before the Master the hearing of an application by Mrs Frigger for a suspension order in respect of a means order to be made of Mrs Frigger. The basis of that order, sought pursuant to Civil Judgments Enforcement Act 2004 (WA), s 31(1)(b), is, as I further understand it, that Mrs Frigger received an assignment from CAT of costs pursuant to the Charge and its enforcement in an amount of $700,000 or thereabouts.

75 In this judgment, I determined that there has been no assignment of costs worked by the Charge and its enforcement thus far.

76 However, it would indeed be determinative of the basis for the order that Mrs Frigger seeks that I have referred to whether or not the Charge is valid and, I assume, whether or not its enforcement to this point, at least, is effectual.

77 It is equally a separate question whether or not such a determination must be made in order to determine the suspension application, and I note the analogy to matters of a summary judgment kind, or indeed what I determined was necessary for the purposes of the present application.

78 I further record that there have been discussions between Principal Registrar Gething, who will be the Acting Master at the time listed for the hearing of the suspension order application (that time being 15 October 2014, as I understand it), and myself, about whether or not the matter of the suspension order should be transferred to me, or to the judicial officer responsible for CIV 2765 of 2010, that judicial officer being, as the Principal Registrar and I understood it, Allanson J.

Personal Property Security Act 2009(Cth)s 12.

Judgments Enforcement Act 2004

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