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[2009] WASC 165
Supreme Court of WA
2009-06-15
Hasluck J
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : W J GREEN & CO (1984) PTY LTD -v- TACE PTY LTD [No 3] [2009] WASC 165
BETWEEN : W J GREEN & CO (1984) PTY LTD (ACN 008 851 867)
WESTERN AUSTRALIAN REAL ESTATE CUSTODIAN LTD (ACN 069 896 966)
AUSTRALIAN REAL ESTATE INVESTMENTS LTD (ABN 64 076 608 681)
Practice and procedure - Application to strike out defendants' defence for failure to comply with orders - Turns on own facts
Second Defendant : Mr S Owen-Conway QC & Mr T Galic
Green v Wilden Pty Ltd [2005] WASC 83
The State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146
Western Australian Real Estate Custodian Ltd v W J Green & Co (1984) Pty Ltd [2006] WASC 278
1 MASTER SANDERSON: This is yet another instalment of what appears to be an intractable dispute between the plaintiffs and the defendants. Although the genesis of this dispute is to be found in earlier litigation between these parties this action stands alone and is to be determined independent of any other proceedings.
2 By chamber summons filed 27 November 2008 the plaintiffs sought the following relief:
3 To understand the nature of this application it is necessary to go back even beyond the issue of the writ in this matter. The plaintiffs had a caveat over land known as the Summerfield Shopping Centre. The first and second defendants made an application for removal of the caveat in proceedings CIV 2153 of 2006. The application for removal of the caveat was refused and the first plaintiff was ordered to commence these proceedings to substantiate its interest in the land to maintain the caveat: see Western Australian Real Estate Custodian Ltd v W J Green & Co (1984) Pty Ltd [2006] WASC 278.
4 What might be termed the main proceedings (CIV 3049 of 1991) between some of these parties resulted in a trial before Hasluck J and a lengthy decision: Green v Wilden Pty Ltd [2005] WASC 83. In the caveat proceedings Hasluck J found that the present first defendant as trustee had failed to comply with the requirements of cl 1.4 of the orders made on 31 August 2005 following the main action. His Honour found that if fresh proceedings were commenced by the present plaintiffs the issues as to whether the sale of the Summerfield Shopping Centre would be resolved. The issue was whether the sale was undertaken exclusively for the benefit of the unit holders of the Summerfield/Tace Trust or whether there was a conflict of interest referrable to the requirements of the Kelmscott/Magenta Trust. His Honour said the ordinary course should be followed. The caveat was to remain so that the disputed questions could be left for trial and an action commenced by writ of summons with pleadings: see Green v Wilden Pty Ltd [83]. The parties were given general liberty to apply on seven days notice.
5 The plaintiffs issued these proceedings seeking declaratory relief by writ of summons dated 12 December 2006. At the time the writ was issued only the first and second defendants were parties to the proceeding.
6 A statement of claim was lodged on 6 February 2007. The plaintiffs are identified as unit holders in the Summerfield (1987) Unit Trust (the Trust). Certain terms of the Summerfield (1987) Unit Trust Deed of Trust (the Deed) are pleaded including the power of the trustee to deal with property held by the Trust. Reference is then made to the main proceedings and the orders made in those proceedings:
1.4 give not less than 14 days' written notice to the Plaintiffs' solicitors of any proposed dealing with any of the assets of the Trust.
8 The plaintiff then pleads that as a consequence of these orders the powers vested in the defendants pursuant to the Deed were required to be exercised in accordance with the orders made by the court. Further, and as a consequence of those orders, the plaintiffs claimed a caveatable interest in the Trust property.
9 On 7 December 2006 the defendants gave notice that they intended to deal with the Summerfield Shopping Centre land without reference to the court order. They then applied for removal of the caveat. Justice Hasluck made the order which resulted in the issue of these proceedings in which the plaintiffs claim:
10 On 10 May 2007 Hasluck J made orders in these proceedings including:
11 On 1 June 2007 Simmonds J made orders in these proceedings restraining the third defendant from disposing, dealing, charging or otherwise distributing funds received by the third defendant from the first defendant. On that same day the first and second defendants concluded a settlement of the sale of the Summerfield Shopping Centre. On 6 June 2007 Sydney James Chesson as a director of each of the defendants filed an affidavit on behalf of the defendants deposing inter alia that funds from the sale of the shopping centre were 'paid out contemporaneously pursuant to another settlement'. Presumably this was done to comply with the orders of Hasluck J made on 10 May 2007.
12 On 20 June 2007 Simmonds J ordered that the present third defendant be joined as a party to these proceedings. He also allowed the plaintiffs to amend their writ and the statement of claim in terms of a minutes annexed to a chamber summons filed 14 June 2007. As might be expected the thrust of the amendments was to draw in the third defendant. Because of the importance of the way the claim against the third defendant is framed I will quote in full pars 17 - 25 of the amended statement of claim. They read as follows:
20.1 to the third defendant the sum of $5,788,076.44 purportedly by way of partial discharge of an equitable mortgage;
20.2 selling fees of $195,000;
20.3 settlement fees of a further $5,850;
20.4 other disbursements, council rates and charges in the sum of $11,073.56.
13 The third defendant filed a defence on 25 July 2007. For present purposes pars 5, 6 and 7 of that defence are relevant. They are in the following terms:
14 It is not difficult then to see what is at issue between the parties. Each agrees that settlement took place and that funds were received by the first and second defendants. Over $5 million of the funds received was paid to the third defendant. It is said by the first and second defendants that the payment to the third defendant was part payment of a debt owing by the first and second defendants to the third defendant. On the defendants' case the payment was therefore justified. No reply has been filed admitting any part of the third defendant's defence. Therefore at trial one of the issues is whether or not there was a debt owing by the first and second defendants to the third defendant, part payment of which was made subsequent to the settlement.
15 On 21 August 2007 at a status conference before Registrar Dixon Mr Thomir Galic, the defendants' solicitor, advised that he could not inform the plaintiffs of the whereabouts of the funds from the sale of the shopping centre. As the third defendant's defence had by that stage been filed he was presumably referring to the funds which had passed to the third defendant: see the affidavit of Annabelle Helen Hughes sworn 2 April 2008 and filed in support of the application to have the case removed from the Inactive Cases List. On 24 August 2007 the defendants filed an application to strike out the statement of claim. This application was dismissed by Registrar Dixon on 2 October 2007.
16 On 27 September 2007 Lavan Legal, the solicitors for the plaintiffs, wrote to Galic & Co requesting a proper explanation and detailed account of the terms of the contemporaneous settlement. No response was received. On 12 November 2007 Laval Legal wrote to the Supreme Court giving a status report of the matter. On 4 December 2007 Registrar Dixon ordered discovery be provided by the parties by 18 December 2007.
17 On 31 December 2007 Mr Chesson told Mr Bennett of Lavan Legal at the Annual General Meeting of the Trust and the Balga Bazaar (1985) Unit Trust that he would send the financial statements forthwith. On 2 January 2008 Lavan Legal wrote to Galic & Co requesting accounts for each trust. The accounts and financial statements were not provided.
18 On 15 January 2008 the plaintiffs' solicitors attended a status conference before Registrar Dixon and submissions were made to the effect that the plaintiffs required the financial statements to allow them to determine the whereabouts of the proceeds of sale of the shopping centre. They also required this information to evaluate their claim and determine whether or not to join extra parties. Registrar Dixon ordered that:
19 On 12 February 2008 at a further status conference Registrar Dixon made orders that the parties give discovery by 4 March 2008. Failing discovery by that date the matter was to be placed on the Inactive Cases List. At that status conference Mr Galic informed Ms Hughes, representing the plaintiffs, that he had some financial documents which were not up to date. He indicated that he would provide those documents within 10 days.
20 On 27 February 2008 Mr Galic informed the plaintiffs' solicitors that he was still waiting for the financial documents and that he would have them 'this week'. Mr Galic indicated he would provide an update in due course. On 28 February 2008 Mr Galic advised the plaintiffs' solicitors that he would try to provide the financial statements the following week. On 29 February 2008 Lavan Legal wrote to Galic & Co seeking an explanation for the whereabouts of the documents.
21 On 4 March 2008 Lavan Legal filed an affidavit of discovery on behalf of the plaintiffs. By filing the affidavit of discovery when they did the plaintiffs complied with the orders of Registrar Dixon made on 12 February 2008. However, the defendants did not comply with those orders. Consequently the matter was placed on the Inactive Cases List.
22 On 19 March 2008 Mr Galic informed the plaintiffs' solicitors, inter alia, that he would advise them later that day when he would provide the financial statements. The same day Laval Legal wrote to Mr Galic notifying him of his breach of his undertaking in relation to the provision of financial statements. On 2 April 2008 Lavan Legal received a letter from Galic & Co saying, inter alia, that they would endeavour to provide discovery between 'now and tomorrow'.
23 On 3 April 2008 application was made to remove the matter from the Inactive Cases List. I made that order. At the time the application was made the plaintiffs also made an application for further discovery.
24 On 4 April 2008 Mr Galic sent a letter enclosing the accounts of the Summerfield and Kelmscott Unit Trusts. Lavan Legal immediately replied in relation to the adequacy of discovery.
25 On 3 and 8 April 2008 I heard the plaintiffs' application for further discovery. By order dated 30 April 2008 I made the following orders:
(a) the receipt by the third defendant of the proceeds of the sale of the Summerfield Shopping Centre; and
(b) the utilisation or disposition of those funds.
26 At the hearing before me Mr Galic made submissions orally that his clients were not prepared to give discovery as it would be tantamount to the plaintiffs obtaining final relief. I rejected that argument and made the discovery order in plain terms. Neither Mr Galic nor his clients could have been in any doubt as to what was required in the way of discovery. Consequent upon the orders the third defendant was required to give discovery by 26 May 2008.
27 On 10 June 2008 there was a further status conference. On 9 June 2008 Mr Galic sought Ms Hughes' consent to adjourn the matter for seven days. The matter was not adjourned. Discovery had not been provided and no explanation was available as to why it had not been provided. In a letter from Galic & Co dated 23 June 2008, Mr Galic says that he could not attend the status conference because he was away from the jurisdiction. He says that he had wanted to have the matter adjourned so that proper submissions could be made.
28 On 10 June 2008 Registrar Dixon made orders that, unless by 24 June 2008 the third defendant gave discovery on oath of the documents relevant and related to the receipt of the proceeds of the sale of the Summerfield Shopping Centre and the utilisation or disposition of those funds, the plaintiffs have leave to apply to enter judgment against the third defendant. On 23 June 2008 the solicitors for the plaintiffs received a facsimile from Galic & Co stating that it was foreshadowing an application to stay the order of Registrar Dixon and the proceedings. That application was never made. Discovery by the third defendant was provided on 24 June 2008. On 25 June 2008 Mr Galic wrote to Lavan Legal saying copies of the documents will be available 'next week' but that some were available publicly. On 26 June 2008 Lavan Legal wrote to Galic & Co seeking inspection forthwith. That same day Mr Galic responded saying that he could not see the urgency or the need to inspect the documents. On 1 July 2008 Registrar Dixon dismissed the stay application and ordered costs to be taxed and paid forthwith.
29 On 8 July 2008 Lavan Legal wrote to Galic & Co seeking payment of the costs order of 10 June 2008 and seeking copies of the discovered documents. No response was received. On 25 July 2008 Lavan Legal again wrote to Galic & Co in the same terms.
30 On 29 July 2008 Mr Galic wrote to Lavan Legal saying the 'cheque's in the mail' and that copies of the documents were being sent in 'tonight's mail'. By 14 August 2008 Lavan Legal had not received copies of the discovered documents. They again wrote to Galic & Co seeking copies of the documents.
31 On 9 September 2008 the court wrote to the parties seeking an update in the proceedings. On 23 September 2008 Lavan Legal wrote to the court asking that the matter be listed. On 15 October 2008 Lavan Legal wrote to Galic & Co again seeking copies of the discovered documents.
32 On 21 October 2008 Registrar Dixon ordered the third defendant to give inspection within 14 days and to give copies of the documents within seven days.
33 On 21 October 2008 Lavan Legal asked Mr Galic for page three of the bank statements missing from a copy provided. On 17 November 2008 Lavan Legal wrote to Galic & Co seeking copies of the documents requested and inspection of the documents discovered by affidavit of Mr Chesson sworn 3 April 2008. On 24 November 2008 Galic & Co wrote enclosing one document requested. Having finally run out of patience the plaintiffs' solicitors then issued this application.
34 This application was first listed in chambers on 18 December 2008. When it was called on counsel for the plaintiffs sought to argue the matter. Counsel for the defendants sought an adjournment. I gave the defendants until 4.00 pm that day to file any affidavit on which they intended to rely. I then listed the matter for a special appointment on 19 December 2008.
35 When the special appointment was called on counsel for the defendants maintained that the matter was of such complexity that it could not be dealt with at such short notice. After hearing argument I agreed to adjourn the matter. In doing so I made the following orders:
36 At the hearing of 19 December 2008 the defendants' solicitors sought to rely on an affidavit of Mr Chesson sworn 19 December 2008. The fact of this late affidavit was one reason why the matter could not proceed as at the date of this hearing. The defendants had overlooked the filing of that affidavit. So strictly speaking they were in breach of the orders that I made on 18 December 2008. However, a copy of the affidavit had been provided to the plaintiffs and so the plaintiffs were not taken by surprise. I accept that the failure to file the affidavit was an administrative oversight and not one which caused the plaintiffs any prejudice. I therefore have taken into account Mr Chesson's affidavit in preparing these reasons.
37 In compliance with my orders Mr Bennett and Mr Galic did meet to discuss this matter. In compliance with my order Lavan Legal wrote to the court on 9 February 2008 detailing what took place at the conferral and confirming that the conferral was conducted in good faith. Mr Galic did not write to the court. He should have done. He could have been in no doubt of the importance that I placed on the fact of conferral and conferral in good faith. I regard it as a significant breach of his duty to the court not to have complied with a straightforward simple direction.
38 Nor did the defendants file any submissions. Senior counsel for the defendants who appeared on 18 February 2009 handed up submissions on the morning of the hearing. Counsel indicated he was unaware that submissions were required. It is difficult to see how counsel or his instructing solicitor could have been in any doubt as to the requirement to file submissions. I regard that failure to file submissions as a significant oversight.
39 Turning then to Mr Chesson's affidavit he refers to the affidavit of discovery he swore on behalf of the third defendant on 24 June 2008. He says that discovered document number two was a bank statement for the trust account of Master Settlements which shows amounts received on 1 June 2007 which total $5,981,283.53. He says that from that sum an amount of $5,748,000 was paid into the third defendant's account. He then goes on in par 5.3 as follows:
The bank statement of Master Settlements shows the transfer on 5 June 2007 of $5,700,000 which was transferred to an interest bearing cash management deposit account with the National Australia Bank in the name of [the third defendant]. The bank statement also shows that the return of the $5,700,000 plus $4,071.41 interest on 11 June 2007. Those funds formed part of the $6,000,000 paid out of the trust account of Master Settlements on 12 June 2007. Other funds held by [the third defendant] were used together with the $6,000,000 in order to settle the transaction disclosed in the Product Disclosure Statement (PDS) for the Augusta Development Trust.
40 So there for the first time is an indication of what became of the over $5 million paid by the first and second defendants to the third defendant. The money apparently was paid by the third defendant pursuant to some obligation arising out of the AREIT Augusta Development Fund. A copy of the product disclosure statement is found as an annexure to the affidavit of Mr Galic sworn 29 January 2009. Pages 38 - 42 of that document provide details of the 'material contracts'. There appears to be nothing in the material contracts which requires the payment by the third defendant to any other party. But even if there was such a contract it should have been discovered. It has not been. There is no doubt that if there is some obligation on the part of the third defendant to pay money to some entity related to or involved with the development fund there must exist a written contract.
41 This case provides a text book example of an abuse by defendants of the processes of this court. Discovery can be a complex and detailed process. There are occasions when documents which are related to a matter in issue will by oversight or inadvertence be omitted from a discovery affidavit. But this is a simple case. Particularly after the orders I made for discovery the third defendant could have been in no doubt it was required to discover documents which disclosed the destination of the funds it received from the first and second defendants. Furthermore, this complete failure to comply with the clearest of orders came on top of what could only be regarded as a flagrant and sustained campaign to ignore discovery obligations. Time limits were ignored, indulgences were sought and then abused, weak and trifling explanations were offered when undertakings were not complied with. All in all it has been a shameful performance by the defendants in general and the third defendant in particular.
42 Not surprisingly during the course of submissions, senior counsel for the defendants referred to the decision of the High Court in The State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146. It was submitted that although case management orders had been ignored, the interests of justice were paramount and the defendants ought to be able to put their case. With respect, there is no merit in that suggestion. The process that I have outlined above amounts to an abuse of the processes of the court - something well outside the idea of a failure to adhere to case management principles. The defendants must accept full responsibility for their failure to comply with the court's orders.
43 Having said that, there are difficulties in granting the relief the plaintiffs seek. First, it would appear that the plaintiffs are seeking to have the defence of each of the defendants struck out - the relief is not directed just against the third defendant. But in fact whatever the failures of the first and second defendants throughout the discovery process, it is really the failure of the third defendant which has led to the present application. Although all three defendants are interlinked, they are separate entities and it would not be appropriate to enter judgment against all three. Judgment could reasonably only be entered against the third defendant.
44 Therein lies the difficulty. By par 3A of the amended statement of claim, the third defendant is identified. In particular, it is said to be the responsible entity pursuant to the Corporations Act 2001 (Cth) of the Kelmscott Central Developments Trust Scheme.
45 Paragraph 21 of the amended statement of claim then reads:
By reasons of the matters referred to in paragraph 3A and further by reason of the first plaintiffs caveat, the third defendant received the payment referred to in paragraph 20 hereof in circumstances where it had knowledge of the interest of the unitholders of the Summerfield (1987) Unit Trust and in particular the interest claimed by the first plaintiff.
(1) A declaration that the first plaintiff is and at all materials times has had a caveatable interest in the Summerfield Shopping Centre Land.
(2) A declaration the plaintiffs have a beneficial interest in the funds received by Australian Real Estate Investments Limited.
(3) Directions pursuant to the Trustees Act.
(4) An order that Australian Real Estate Investments Limited account to the first defendant for the receipt of the funds the subject of the trust.
(5) An injunction restraining the defendants and both of them without leave of this Honourable Court from dealing in the assets of the Summerfield (1987) Unit Trust and in particular the beneficial ownership and legal ownership of the Summerfield Shopping Centre Land.
(6) Such further or other order as to this Honourable Court may seem just.
(7) The defendants and each of them pay the plaintiffs' costs of this action on an indemnity basis.
47 Paragraphs 2 - 4 and 6 and 7 were added by the amendment to the statement of claim. Paragraph 5 of the orders sought which was the former par 2 in the original prayer for relief, appears to have been overtaken by events. The real crux of the plaintiffs' claim is the declaration sought in par 1. If that claim is successful, then consideration can be given to whether or not the declaration sought in par 2 can be made and if that order is made, then an order for account can be made. But the orders sought really have a cascading effect with the order sought in par 1 being a necessary precursor to the other orders sought.
48 That really means there is a logical hiatus in entering judgment based upon the pleadings against the third defendant. To make that order might shut out the first and second defendants arguing that the first plaintiff did not have a caveatable interest in the Summerfield Shopping Centre land. If that was not the result, then there is at least the possibility of inconsistent judgments.
49 In the event then, and with the greatest reluctance, I am satisfied I should dismiss the plaintiffs' application. However, this matter must be brought to a head. I will make directions programming the matter for trial at the earliest possible opportunity.
50 Furthermore, the defendants ought to pay the costs of this application. Those costs should be paid on a full indemnity basis and should be taxed and paid forthwith.
51 I will hear from the parties as to the precise form of directions.
Green
Wilden Pty Ltd
(1997) 189 CLR 146