Field v Jenolan Caves Resort Pty Ltd

CATCHWORDS : PROCEDURE - application for summary dismissal - claim by director of company where alleged wrong done to company - proper plaintiff rule - company in liquidation - director does not have standing to seek leave to sue for company - whether conceivable claim for breach of statutory duty - any such claim also belongs to company alone - CORPORATIONS - proper plaintiff rule - putative plaintiff company in liquidation joined as defendant - application for leave to proceed against company in liquidation - no cause of action - leave refused

Corporations Act 2001 (Cth), Part 5.3A, ss 236(1)(a)(ii), 237, 500(2) LEGISLATION CITED : National Parks and Wildlife Act 1974, s 58V, 58ZE Real Property Act 1900 Uniform Civil Procedure Rules 2005, rules 13.4, 14.28

Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551; (2008) 71 NSWLR 577 Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 245 ALR 780 CASES CITED : Foss v Harbottle (1843) 2 Hare 461; 67 ER 189 Spokes v Grosvenor Hotel Co [1897] 2 QB 124 St George Bank Ltd v Field [2007] NSWSC 902 Street v Luna Park Sydney Pty Ltd [2006] NSWSC 230

(1) Archer Philip Field - Plaintiff Jenolan Caves Resort Pty Limited (in liq) - First Defendant PARTIES : St George Bank Limited - Second Defendant State of New South Wales - Third Defendant (2) Archer Philip Field - Plaintiff Jenolan Caves Resort Pty Limited (in liq) - Defendant

(1) Mr R K Newton - Plaintiff Mr P J Dowdy - Second Defendant COUNSEL : Ms J Rogers, Solicitor - Third Defendant (2) Mr R K Newton - Plaintiff Mr P J Dowdy - St George Bank Limited

(1)The People's Solicitors Pty Ltd - Plaintiff Henry Davis York - Second Defendant SOLICITORS : I V Knight, Crown Solicitor - Third Defendant (2) The People's Solicitors Pty Ltd - Plaintiff Henry Davis York - St George Bank Limited

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

30126/08 ARCHER PHILIP FIELD v JENOLAN CAVES RESORT PTY LTD & 2 ORS 2099/09 ARCHER PHILIP FIELD v JENOLAN CAVES RESORT PTY LTD JUDGMENT

1 By summons filed on 23 October 2008, Mr Archer Field commenced proceedings in the Administrative Law List of the Common Law Division against three defendants, being Jenolan Caves Resort Pty Ltd ("JCR"), St George Bank Ltd ("St George") and the Crown in right of New South Wales. A statement of claim was filed on 23 December 2008. 2 JCR became subject to creditors voluntary winding up in August 2006 as a sequel to voluntary administration under Part 5.3A of the Corporations Act 2001 (Cth). At that time, receivers and managers appointed in December 2005 by St George, as a secured creditor, continued in office. 3 On 26 May 2009, I heard two applications. The first is an application by St George, by notice of motion filed on 17 April 2009 in the Administrative Law List proceedings, for an order under rule 13.4 of the Uniform Civil Procedure Rules 2005 that the summons be dismissed as against St George or, in the alternative, an order under rule 13.4 or rule 14.28 that the statement of claim be struck out in whole or in part as against St George. 4 The second application Is an application by Mr Field, by originating process filed on 26 March 2009 in separate proceedings in the Corporations List of the Equity Division, for an order under s 500(2) of the Corporations Act granting leave to commence and continue the Administrative Law List proceedings against JCR. 5 Mr R K Newton of counsel appeared for Mr Field to prosecute the second application and to oppose the first. Mr Dowdy of counsel appeared for St George to prosecute the first and oppose the second. 6 Mr Field was at material times (and remains) the sole director of JCR. Search materials in evidence show that several companies are the members of JCR and that Mr Field is not himself a member. Whether he is a member of any of those companies does not appear. Nor, in my opinion, is it relevant. 7 The principal asset of JCR was a lease of Jenolan Caves House. The lease was granted in 1990 for a 99 year term. The lessor was NSW Tourism Commission. The lessee was JCR (then called "Silkbard Pty Ltd"). 8 In or about 1997, the reversion became vested in the Jenolan Caves Reserve Trust which, by s 58V of the National Parks and Wildlife Act 1974, is established as "a reserve trust constituted as a body corporate". I shall refer to this entity as "the Reserve Trust" 9 In May 1997, JCR gave security to St George over its assets and undertaking. This included a mortgage of the Jenolan Caves House leasehold. Following defaults by JCR, St George appointed receivers. As I have said, this happened in December 2005. 10 Mr Field guaranteed JCR's obligations to St George. On 8 August 2007, St George recovered judgment against Mr Field as guarantor for a sum in excess of $6.8 million: see St George Bank Ltd v Field [2007] NSWSC 902. Mr Field has not paid the whole or any part of the sum for which he has been found liable as guarantor. St George has instituted bankruptcy proceedings against Mr Field. A bankruptcy notice dated 20 August 2007 is based on the unsatisfied judgment of 8 August 2007. 11 In June 2006, a transaction was entered into by means of a deed known as the "Jenolan Deed" the parties to which were the Reserve Trust, JCR, the receivers appointed by St George and St George itself. St George, exercising its power of sale as mortgagee, sold the Jenolan Caves House leasehold to the Reserve Trust for a consideration of $1.3 million. A transfer dated 3 July 2006 was executed by St George as transferor. The seal of the Reserve Trust was ostensibly affixed to the transfer by its administrator. The transfer was in due course registered under the provisions of the Real Property Act 1900. 12 Mr Field contends that the Jenolan Deed and the purported transfer of lease dated 3 July 2006 were of no force or effect because the Reserve Trust did not, in reality, become a party to the deed or take under the transfer.

13 The ineffectiveness of the Jenolan Deed and the transfer between St George as transferor and the Reserve Trust as transferee is said to arise from the fact that the Reserve Trust ostensibly acted by and through Mr Alan Griffin as administrator of the Reserve Trust appointed as such by the Minister for the Environment on 20 January 2004 under s 58ZE of the National Parks and Wildlife Act. It is the contention of Mr Field that, while that section empowered the Minister to appoint an administrator of the Reserve Trust, the power of appointment was, under the section, exercisable only in certain circumstances, which circumstances did not in fact exist so as to make the power available. Accordingly, it is argued, Mr Griffin never became the administrator of the Reserve Trust and was never in a position to act for or bind the Reserve Trust. 14 Against this background, Mr Field seeks the following principal relief in the Administrative Law List proceedings:

1. A declaration that the purported appointment of Mr Griffin as administrator of the Reserve Trust on or about 1 February 2004 was contrary to the provisions of the National Parks and Wildlife Act and therefore "unlawful, null and void".

2. A declaration that the appointment of Mr Griffin as administrator was invalid.

3. A declaration that the Jenolan Deed was "invalid, null and void".

4. An order that the Crown "do all such things as may be necessary to be done to re-transfer" the lease to JCR. 15 There is also a claim based on an allegation that the leasehold was transferred by St George at less than its proper value. 16 I do not propose to go through the statement of claim in detail. Mr Newton accepted that it is deficient in some respects, as a matter of pleading, and that there is a need for it to be revised or replaced. Over and above those matters, however, there is the fundamental objection advanced by St George that such causes of action as there might be, based on alleged invalidity of the appointment of Mr Griffin as administrator of the Reserve Trust and alleged sale by the mortgagee at an undervalue, are causes of action belonging to JCR, not Mr Field. 17 The argument advanced by St George is that if, as Mr Field maintains, Mr Griffin never had the capacity to act for and bind the Reserve Trust (so that the Reserve Trust never effectively acquired the leasehold estate, which accordingly remained with JCR subject to St George's mortgage), that matter can only be litigated in proceedings the parties to which are JCR, St George and the Reserve Trust. Likewise, if St George sold the mortgaged property at an undervalue, it is JCR alone, as the wronged mortgagor, that has a cause of action against St George. In both cases the only proper and competent plaintiff is JCR. 18 Mr Field, it is said, is a stranger to each such controversy and has no standing, in any direct sense, to make the claims he has purported to make in the Administrative Law List proceedings, they being claims that only JCR can advance: Foss v Harbottle (1843) 2 Hare 461; 67 ER 189. 19 I have used the words "in any direct sense" since it is possible that, if JCR (a company in liquidation) were not set in motion by its liquidator (or, conceivably, by the receivers) to pursue its assumed causes of action, the court might, in exercise of the aspect of the inherent jurisdiction discussed in Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551; (2008) 71 NSWLR 577, permit someone else to sue on the company's behalf. But persons who may be allowed, by default, to sue in the name of a company in liquidation are confined to creditors and members of the company. Mr Field is not a member of JCR. And because he has not paid any part of the sum he has been found liable to pay to St George under his guarantee of the obligations of JCR, he cannot be regarded as a creditor of JCR. 20 Fundamentally, however, Mr Field has not been granted - or even sought - leave, as either member or creditor, to sue for JCR. If he did apply, his application would be refused because he does not stand in a relevant relationship to JCR. 21 A director of a company can, in some circumstances, bring a derivative action on the company's behalf. The ability to do so is, however, entirely statutory. It derives from s 236(1)(a)(ii) of the Corporations Act, provided that the director concerned has obtained the leave of the court under s 237. It is not open to the court to grant such leave in the case of a company in liquidation: Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 245 ALR 780. Thus, even if Mr Field, as a director of JCR, had sought leave under s 237 to sue on behalf of JCR (which he has not done), his application would have been unsuccessful. 22 Mr Field is thus in no position to sue upon or take advantage of the causes of action belonging to JCR and advanced by the statement of claim, assuming that such causes of action exist. As things now stand, the decision whether JCR should sue is a decision for its liquidator or, conceivably, the receivers appointed by St George, assuming that the relevant chose in action is caught by the St George charge.

23 There is, I suppose, a possibility (although it seems to me very remote) that the alleged defect, by way of failure by the Minister to exercise the power of appointment conferred by the National Parks and Wildlife Act, might be seen as having involved the invasion of some form of public right, being a right of the public to the due and regular exercise of statutory powers conferred on public authorities.

24 Even if there was an invasion of some such public right, it would by no means follow that a member of the public could sue for declaratory (or, for that matter, injunctive) relief. Only the claim of a person with some relevant "special interest" would be entertained. Speaking of claims for injunctive relief in Street v Luna Park Sydney Pty Ltd [2006] NSWSC 230 Brereton J said (at [41]): "In order to have standing to prosecute a claim for an injunction to restrain an alleged breach of a statute of general application, a private plaintiff must have a 'special interest' in the grant of the relief [ Bateman's Bay Local Aboriginal Land Council v The Aboriginal Community Benefit Fund Pty Ltd (1998) 194 CLR 247, 267]. While traditionally such a 'special interest' has involved demonstrating that the conduct also infringed a private right of the plaintiff, or that the plaintiff suffers special damage [ Boyce v Paddington Borough Council [1903] 1 Ch 109], all that is required is that the plaintiff have a sufficient special interest, greater than that of members of the public generally, in the subject matter of the action, and the rule is a flexible one [ Shop Distributive and Allied Employees Association v Minister for Industrial Affairs (1995) 183 CLR 552, 558; Bateman's Bay , 265, 267]." 25 The same principles hold good in relation to claims for declaratory relief.

26 In order to be singled out and separated from the public at large, in relation to the allegedly defective appointment of Mr Griffin and the allegedly ineffective commitments made by Mr Griffin for the Reserve Trust, Mr Field must show some special interest. The only interest he can possibly show comes from his position as a director of JCR and the fact that, on the case he seeks to make, JCR was affected by the statutory non-compliance.

27 That being so, the company law principles must again come to the fore and produce the result already discussed. A director is not relevantly affected by a statutory non-compliance that affects the company of which he or she is a director. He or she does not suffer loss or damage or possible pecuniary detriment. In every real and substantial sense, the company alone has cause to complain. 28 Because, first, the causes of action sought to be advanced by Mr Field's statement of claim are causes of action belonging exclusively to JCR and are in no sense available to Mr Field himself and, second, Mr Field has no authority or capacity to sue on behalf JCR, the statement of claim filed by Mr Field and by which he seeks declaratory and other relief must be regarded as disclosing no viable cause of action. The appropriate course is therefore the first for which St George contends, namely, that the Administrative Law List proceedings as a whole be dismissed as against St George. 29 In saying this, I do not lose sight of the fact that it is often inappropriate to grant summary dismissal as against one only of several defendants. This is so, however, only in cases where there is a possibility that deficient evidence will be supplemented. The deficiency here has nothing to do with evidence. 30 That leaves Mr Field's related application in the Corporations List for leave to proceed against JCR, a company in liquidation. No relief directed, in terms, to JCR is sought by Mr Field in the statement of claim. The claims for declaratory relief (as well as the claim based on the allegation of sale by St George at an undervalue) are, of their nature, claims made for the benefit of JCR. It appears that JCR has been joined as a defendant merely so that it will be bound by - indeed, have the benefit of - the result, as in a regularly constituted derivative action brought on general law principles: Spokes v Grosvenor Hotel Co [1897] 2 QB 124 at 128. But the Administrative Law List proceeding is not, of course, a derivative action of that or any other kind and, for reasons already discussed, the causes of action Mr Field seeks to pursue are not available to him. That being so, the application for leave under s 500(2) of the Corporations Act should also be dismissed. 31 In relation to the application in the Administrative Law List, St George considers itself entitled to costs assessed on the indemnity basis. Because there have been no submissions on costs, the question of costs generally is at this stage reserved. **********

05/06/2009 - Judgment date omitted - Paragraph(s) Frontsheet

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