[2011] NSWSC 322
In the matter of Kala Capital Pty Ltd [2012] NSWSC 1073
JSBG Developments v Kozlowski (2009) 75 NSWLR 745
[2009] NSWSC 1128
Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2000) 175 ALR 36
[2000] NSWSC 507
Pham v Enterprise ICT Pty Ltd
[2005] VSCA 213
Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd (2015) 110 ACSR 29
Source
Original judgment source is linked above.
Catchwords
[2011] NSWSC 322
In the matter of Kala Capital Pty Ltd [2012] NSWSC 1073
JSBG Developments v Kozlowski (2009) 75 NSWLR 745[2009] NSWSC 1128
Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2000) 175 ALR 36[2000] NSWSC 507
Pham v Enterprise ICT Pty Ltd[2005] VSCA 213
Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd (2015) 110 ACSR 29[2015] NSWSC 1519
Thomas A Edison Ltd v Bullock (1912) 15 CLR 679
Judgment (3 paragraphs)
[1]
Judgment
HER HONOUR: This is an application in the Duty List, brought by notice of motion filed by the first and second defendants on 17 September 2021 in Court (the third defendant is a deregistered company). They seek an order pursuant to r 12.11 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that the first plaintiff's summons dated 8 September 2021 be set aside on at least one or more of the following bases.
First, that the summons was improperly executed and commenced by an individual, Mr Nathaniel John Whitehall, who they say is not a director of the first plaintiff, in contravention of rr 7.1(2), 7.1(3) and 7.2 of the UCPR. Second, further or in the alternative, that even if Mr Whitehall is a director of the first plaintiff, which the defendants deny, he is not permitted to commence and carry on proceedings in the Supreme Court in the absence of compliance with rr 7.1 and 7.2 of the UCPR. Third, further or in the alternative, that the supporting affidavit (being the affidavit of Ms Lorraine Berry affirmed 28 August 2021) was improperly affirmed, as Mr Whitehall purportedly affirmed it himself (and as such it is defective).
Prayer 2 of the notice of motion seeks, further or in the alternative, that the proceedings be stayed pending the following: the appointment of a solicitor to act on behalf of the plaintiffs; and proper execution of the summons and supporting affidavit; and service of all evidence, including all annexures and written submissions, to be relied upon by the plaintiffs. As to that last application, there appears to have been an ongoing issue in relation to difficulties with proper service of the annexures to various of the affidavits, to which I will return in due course.
In support of the application, the defendants have relied upon two affidavits affirmed by their solicitor on the record, those being the affidavits affirmed 17 September 2021 and 27 September 2021 by Mark Joel Fester and they have exhibited certain material either annexed or exhibited to those affidavits. In defence of the motion, the plaintiffs place reliance on two affidavits of Ms Lorraine Berry, those being the affidavits affirmed by Ms Berry on 28 August 2021 and 9 September 2021, and two affidavits affirmed by Mr Whitehall on 20 September 2021 and 27 September 2021.
The first plaintiff's application for interlocutory relief contained in the summons, as set out in prayer 2, relates to an order pursuant to s 74K of the Real Property Act 1900 (NSW) extending the operation of a particular caveat until further order of the Court. In the alternative, the plaintiffs seek an order pursuant to s 74O of the Real Property Act, granting the first plaintiff leave to lodge a fresh caveat over certain land at Teralba and preserving the same interest claimed by the specified caveat until further order of the Court. The summons also seeks, by way of primary or substantive relief, a declaration that the first and second defendants (the registered proprietors of the land in question (Teralba land) hold that property as trustees for the benefit of the first plaintiff by way of constructive trust, arising from the defendants' acquisition of that land with funds that were misappropriated from the plaintiffs.
The summons that is the subject of the application was filed in Court on 9 September 2021 in the Duty List before Kunc J, the Duty Judge on that day. Upon the undertaking that Mr Whitehall gave to pay all applicable filing fees, his Honour inter alia granted leave to Mr Whitehall to appear on that day only on behalf of the first plaintiff and gave leave for the filing in Court of the summons together with the affidavit of Ms Berry. His Honour also made orders for the filing and service of an outline of written submissions and affidavit evidence and listed the matter for hearing of the first plaintiff's application for interlocutory relief on 28 September 2021 before the Duty Judge.
The caveat in question was lodged on or about 27 July 2021. The caveator is the first plaintiff, which is a company, Lake Macquarie Conveyancing Pty Ltd. The interest identified in the caveat is a beneficial interest in land held by the registered proprietors as trustees of a constructive trust for the caveator. On its third page, the caveat specifies the facts on which reliance is placed for the claim to the alleged beneficial interest, those being:
The first registered proprietor was an employee of the caveator.
The first registered proprietor breached her fiduciary obligations to the caveator by misappropriating its funds and property in an amount exceeding $1.5 million over a four year period.
The second registered proprietor was a knowing receiver of the misappropriated funds. Furthermore, he assisted and facilitated the first registered proprietor's breach of the fiduciary duty.
By virtue of the first registered proprietor's misappropriation of the caveator's funds and the first and second registered proprietor's knowing receipt of that property and those funds, the property and funds were held on constructive trust by the registered proprietors as trustees for the caveator.
The registered proprietors contributed approximately $350,000 of trust funds towards the acquisition of the land.
The registered proprietors' acquisition of the land was the conversion of the caveator's funds into the land and, therefore, the land is held by the registered proprietors as trustees of a constructive trust for the caveator.
Pausing here, I observe that, on any view of things, the final relief claimed in the proceedings is of such gravity that there seems to be no doubt that the proceedings would need to continue by way of pleadings, and that it would not be appropriate for the final relief to be determined on the basis only by way of a summons. Mr Whitehall, who has appeared and made submissions on behalf of the first plaintiff today, has drawn my attention to a draft pleading that it is said has been prepared in relation to those matters.
Insofar as the notice of motion is concerned, the defendants argue that there are four independent reasons why the motion should succeed. The defendants premise those reasons on circumstances where, they say, the proceedings have been improperly commenced and carried on by Mr Whitehall, who is not, or was not at the relevant time, a director of the first plaintiff. I should note that the summons that was filed in Court is signed by Mr Whitehall as stated director of the first plaintiff and is dated 8 September 2021, and that Mr Whitehall is not a named party on the proceedings as constituted by the summons.
I should also add that in his affidavit of 20 September 2021, Mr Whitehall deposes to his occupation as a company director, his graduation from the University of New England with a degree in economics and law, and his completion of the College of Law practical legal training course and the accelerated practical experience module. However, as I understand it, he is not presently practising as a solicitor, which I will return to in due course.
The four reasons why the defendants say that their claim for relief in the motion should succeed are as follows: first, that, on the balance of probabilities, Mr Whitehall was not a director of the first plaintiff at all relevant times as required by r 7.1 subrr (2) and (3) of the UCPR; second, that even assuming Mr Whitehall was a director at the relevant time or times, he is not a named person with a free‑standing personal cause of action as required by UCPR r 7.1 subr (3); third, that even assuming the defendants are wrong on those first two bases, the requirements of UCPR r 7.2 were not complied with at the time of the filing of the summons and still have not been satisfied; and finally, assuming that they are wrong on any or all of those contentions, it is submitted that the discretion should not be exercised to permit Mr Whitehall to carry on the proceedings.
As to the first issue, I have already noted that the summons was executed on 8 September 2021 by Mr Whitehall purportedly as director of the first plaintiff. Reference is made to the circumstance that when the matter was before Kunc J in the Duty List on 9 September 2021 - an occasion where I note that the defendants were represented by Mr Fester - Mr Whitehall was asked whether he was in fact a director of the first plaintiff, and Mr Whitehall informed his Honour that he was and that he had been a director since 20 February or thereabouts of this year.
The defendants have adduced evidence of a company extract of the first plaintiff as at 17 September 2021 after the filing of the summons, which does not record Mr Whitehall as having been a director when he executed the summons. That company extract shows Ms Berry as being the sole director, which is consistent with the attestation by Ms Berry on the caveat in July 2021. Mr Whitehall's evidence on the application before me is that he was "elected" as a director in February 2021, and he submits that the only issue is that there was non‑compliance with the administrative requirement for notification to be given to ASIC in that regard.
Mr Whitehall has drawn my attention to a second ASIC extract of the first plaintiff dated 20 September 2021, which he says indicates that he was an alternative director of the company at the date the summons was signed. That ASIC extract in question purports to record Mr Whitehall's appointment with that of a Ms Adriana Brentin as alternate directors to Ms Berry from 23 August 2021. It would appear that this document was lodged with ASIC on 17 September 2021, but it retrospectively records the appointment as from 23 August 2021 (and Mr Whitehall told me, more than once during the course of the application today, that had he been prepared to pay a further 700 or 800 dollars, he could have had it backdated to January). Nevertheless, Mr Whitehall says that he was "elected" as a director in February 2021 by the sole shareholder of the company, Ms Berry, and has acted in that fashion ever since. Mr Whitehall says that ASIC is simply a keeper of records and that it is not necessary that he be recorded in the ASIC registry in order to establish his position as director.
As to the second of the bases on which the defendants bring their application, it is submitted that the fact that Mr Whitehall is not a named plaintiff in the proceeding means that even if he were validly a director at the time of the filing of the summons, his not being a plaintiff alone fails the mandatory requirements of r 7.1 (3) of the UCPR. Reference is made to what was said by Fagan J in FEV Mono Constructions v Beattie [2020] NSWSC 467 (at [9]) (FEV Mono), to the effect that the subrule is not satisfied by having a director joined in the proceeding as a plaintiff solely for the purpose of conducting the company's case without litigating any claim of his or her own. The defendants say that Mr Whitehall cannot have a freestanding cause of action against the defendants in this proceeding where the action is brought substantively by the company against an ex‑employee for alleged misappropriation against the company.
The defendants similarly submit that Ms Berry, who is undisputedly the director of the first plaintiff, does not have a personal cause of action against the defendants, since the money was allegedly misappropriated from the company and not her. In any event, the caveat is in the company's own name, and the proceedings as presently constituted do not disclose any personal cause of action by Mr Whitehall in his own right. Therefore, whether or not his assertion that he has been and has acted as a director of the first plaintiff since February 2021 is borne out, the defendants say that this does not address the difficulty presented by r 7.1 subr (3) of the UCPR which provides that in the case of proceedings in the Supreme Court, the rule which authorises a company to commence proceedings by a director applies only if the director is also a plaintiff in the proceedings. It seems to me that this is fatal to the position for which Mr Whitehall presently contends, but I will return to this in due course.
As to the third basis on which the defendants submit that relief should be granted, it is noted that r 7.2 of the UCPR provides that a person who commences or carries on proceedings in the Supreme Court as the director of a company must make an affidavit containing the matters set out in subr (2). Mr Whitehall concedes that at the time the summons was commenced, there was no compliance with rr 7.1 or 7.2. However, Mr Whitehall submits that his 27 September 2021 affidavit which he has now filed rectifies this issue. In the affidavit he deposes, inter alia: that the proceedings that have commenced are interlocutory and in respect of only a caveat; that the substantive proceedings have not been filed, but the statement of claim or pleadings will identify him as the third plaintiff (see [33]); and that he omitted the inclusion of his own name as a plaintiff on the face of the summons "merely because at this stage of the proceedings I am unaffected by any potential outcome (save as to the Court fees)" (see [34]). Mr Whitehall has submitted along with that affidavit a fresh summons in precisely the same form, but noting himself as the third plaintiff.
The affidavit also goes on to assert that Mr Whitehall has been a director of the first plaintiff since 20 February 2021, and that he is authorised by a unanimous resolution of the directors of Lake Macquarie Conveyancing, (namely Ms Berry, Ms Adriana Brentin and himself) to commence and conduct the proceedings on behalf of the first plaintiff (see [42]).
Mr Whitehall referred in oral submissions to a document that he says confirms this. For the purpose of this application I will assume that it does, but the difficulty has been in attempting to locate amongst the voluminous material that has been sent through, what in fact Mr Whitehall is referring to, and his affidavit does not identify any particular annexure to that effect.
In any event, the other matters that Mr Whitehall's affidavit goes to are: the proffering of a personal undertaking to pay any further Court fees that will or may arise in the proceedings; to be bound by any order of the Court that is or may be envisaged by the UCPR (referring to r 7.3 but I assume him to be intending to refer to r 7.2(2)(a)(iv) of the UCPR; deposing to Mr Whitehall's awareness that, as a director of the first plaintiff, he may be liable for some or all of the Court fees that arise in the conduct of the proceedings; and that he has undertaken to pay the fees.
I interpose here to note that despite the fact that Mr Whitehall was only given leave to file the summons in Court on his personal undertaking to pay all applicable filing fees, he has not yet paid any fees. Mr Whitehall has informed me that he has made an application for deferral of the payment of the filing fees until the close of the hearing; and he tells me that he understood from inquiries made at the registry that this was in compliance with the orders that were made by Kunc J. There may well be an issue as to whether or not an undertaking to pay all applicable filing fees is satisfied by an application to defer the payment of those filing fees until the conclusion of the hearing. On its face it would seem to me that this does not comply with the undertaking, and it is a serious thing to proffer an undertaking to the Court in relation to matters such as this.
Nothing presently turns on it for the purposes of this application, given the view that I have reached in relation to discretion in any event. However, as a result I must be cautious about the undertaking proffered in the latest affidavit to personally undertake to pay any further Court fees that will or may arise in these proceedings, or personally undertake to be bound by an order of the Court that is or may be envisaged by the UCPR. In light of what has happened on the last occasion, it seems to me that for any further undertaking to pay Court fees to be acceptable to the Court, it would be necessary for this to be in absolute terms, and not in terms that contemplated non‑payment of the filing fees until some later deferred date.
In any event, the other issue that I raise at this stage is as to whether there was full disclosure to Kunc J when the matter was before his Honour in relation to the status of Mr Whitehall as a director of the company. In Thomas A Edison Ltd v Bullock (1912) 15 CLR 679; [1912] HCA 72, Isaacs J, as his Honour then was, considered (at 682) that a party inducing a court to provide interlocutory relief ex parte "fails in his obligation unless he supplies… all the material facts which [the absent] party would presumably have brought forward in his defence to that obligation". Gillard AJA noted in Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639; [2005] VSCA 213 that an applicant for an ex parte order has an obligation to the Court of the "utmost good faith" and to provide "full and fair disclosure of all matters within its knowledge and which are material, to the Court".
This obligation has also been characterised as one to disclose "all material including that which might lead the Court to refuse the application" (see Re Southern Equities Corporation Ltd (1997) 25 ACSR 394 at 423 (Re Southern Equities); In the matter of Idoport Pty Ltd (2011) 83 ACSR 164; [2011] NSWSC 322 at [147]; In the matter of Kala Capital Pty Ltd [2012] NSWSC 1073 at [31]). By way of example, in Re Southern Equities the applicant failed to disclose by affidavit material information to the Court about a future proceeding it planned to bring, but the summons was not set aside because the applicant made the disclosure to the Court orally before the order was made.
The reference to Mr Whitehall having been a director from 20 February was the basis upon which Kunc J appears to have been prepared to give him leave to represent the company on that occasion. It would seem that this comment did not necessarily set out the complete picture in relation to Mr Whitehall's position or status as a director or otherwise of the company at that stage and, accordingly, would seem to fall short of the obligations of utmost good faith and provision of full and frank disclosure adverted to above.
In any event, returning to the bases on which the defendants seek the relief here sought, Mr Whitehall does not dispute the third basis which is a complaint about his failure to comply with the provision of a mandatory director's affidavit at the time of the filing of the summons. The filing of any document in relation to that aspect of the matter was delayed beyond the extended timeframe which I granted, but Mr Whitehall blames, among other things, the current COVID lockdown for the delay.
Turning then to the fourth of the bases on which the application is brought, the defendants say that no discretion should be exercised in Mr Whitehall's favour, noting that even if he can establish that he was a director at all relevant times, and that he was a named plaintiff or would be a named plaintiff and has correctly filed the mandatory director's affidavit, there is a discretion to refuse a director leave to carry on proceedings for a company. In this regard, reference is made to Business Innovation Pty Ltd v Maddison Morgan and Bailey Pty Ltd [2018] NSWSC 1523 (at [5]).
The matters that the defendants rely upon in relation to the exercise of that discretion, noting the principles considered by the Court of Appeal in Damjanovic v Maley (2002) 55 NSWLR 149; [2002] NSWCA 230 (at [69]‑[86]) include the following: first, it is said that Mr Whitehall has a personal interest and relationship with the parties by reference to various matters raised in the affidavit evidence; and attention is given to the fact that Mr Whitehall accuses the first defendant of "commen[cing] a libellous war" against him, in Mr Whitehall's first affidavit at [10]-[11] and Mr Fester's first affidavit at [14]-[15]. It is submitted that the inference is that Mr Whitehall commenced these proceedings on behalf of the first plaintiff because of the issues raised in relation to the Law Society's intervention regarding him. There is a concern expressed that the Court cannot be certain that any interests of Mr Whitehall would not be placed above those of the company he purports to represent.
A second complaint is made as to the delay in the time it took to serve the entirety of the first affidavit of Ms Berry, and it is said that the defendants are still waiting on one of the annexures to that affidavit. The defendants also say that they were served late with the latest affidavit on which Mr Whitehall relied, and it is not clear whether all of the affidavits have been received.
Third, the defendants refer to Mr Whitehall's depositions in his affidavit: that it was not his intention to be engaged in litigation over a caveat; that he is in the process of drafting a number of documents that would be filed, served and relied upon in the near future; and that it is his intention "that at the appropriate time, an appropriate team would be assembled to prosecute what we will ultimately claim". The defendants submit that at the very least there should be a stay of the proceedings until this "appropriate team" has been assembled to prosecute the claim.
Fourth, that Mr Whitehall is still to pay the Court filing fees notwithstanding his undertaking to Kunc J, to which I have referred above.
Fifth, that Mr Whitehall was at the time of these submissions yet to file his submissions in relation to the s 74O relief, although I note that Mr Whitehall appears now to have done so. Sixth, the complaint is made as to late service of evidence in response to the motion and it is said that this evidence is still inadequate. Finally, there is a reference to irregularities in the execution of the first affidavit of Ms Berry affirmed on 28 August 2021, which purports to have been signed by Mr Whitehall and witnessed by Ms Berry in her capacity as a Justice of the Peace. It is noted that if this is merely a juxtaposition of the deponent and the witness, it would be necessary for Mr Hall to be a solicitor and/or Justice of the Peace to have properly witnessed the affidavits when, in the absence of a practising certificate, he is neither.
Mr Whitehall has served two sets of submissions and has addressed those orally. Mr Whitehall's first set of submissions lays out in some detail his or the first plaintiff's claim in relation to the relief sought, pursuant to s 74O of the Real Property Act There is to my mind some doubt as to whether, at the time Kunc J heard the matter, there was the requisite urgency to warrant an application in the Duty List but nothing turns on this. By the time the summons came before the Duty Judge, the caveat had already lapsed pursuant to a lapsing notice that had been issued which meant that the application for relief for an extension of the caveat was no longer possible and that the only application is an application for lodgement of a further caveat pursuant to s 74O.
Mr Whitehall has made oral submissions as to the prejudice that the first plaintiff may suffer and/or that Ms Berry and/or he may suffer if there is not a fresh caveat placed on the property. It is said, for example, that it is not the defendants' residential home, that the defendants' conduct has shown a willingness or an ability to put assets out of reach or the like, and that a grave prejudice would be suffered if a fresh caveat were not ordered. But it is not clear to me that there is evidence of any conduct which would give rise to an apprehension that if a fresh caveat were not now to be lodged, the assets would be disposed of in some way other than in the ordinary course of business, or in some way so as to frustrate the plaintiffs from obtaining the fruits of any successful judgment that might arise at the end of the day. It would seem to me that if such conduct was apprehended, the appropriate course would more likely be an application for an injunction to restrain the apprehended conduct, which would need to be accompanied by the usual undertaking as to damages.
In any event, Mr Whitehall has set out in great detail in his first set of submissions why he says that the evidence of Ms Berry clearly and comprehensively establishes the misappropriation of a substantial sum of money and property, and that the misappropriation was conducted by the first and second defendants in concert who have retained the money or converted that property into money for their benefit. It is contended that there is more than a probability that the plaintiff, i.e., the company, is entitled to the interest claimed in the caveat. There is then an analysis of the claim for a constructive trust set out in some detail that I will not here go into, together with an address on the balance of convenience and prejudice to the defendants' issues, as well as prejudice to the plaintiffs. All of those submissions go to the claim for interlocutory relief, not to the claim under the motion for the proceedings to be set aside or stayed because of the issues that have been raised by the defendants (although I accept that the matters going to whether or not there is a reasonably arguable case would be relevant to take into account in exercising the discretion as to what relief, if any, should be granted if I am not prepared to permit Mr Whitehall to represent the company).
The second set of submissions, which were served today, set out a number of propositions. Those propositions essentially emphasise the perceived merits of the plaintiff's claim, and to complain as to the basis on which the defendants have brought the present application. There are a number of assertions contained in this document that would appear to me to be difficult at the moment to accept. For example, there is an assertion at [3] under the heading "two" that the plaintiffs have proved the defendants' misappropriation of the first plaintiff's property and funds. It does not seem to me at this stage that any finding could be made as to the allegations in that regard (noting that this is an interlocutory application itself) and I am not quite certain what it is that Mr Whitehall seeks to make of those assertions.
In any event, Mr Whitehall's position is that the summons was not defective because it was signed by himself as a director in circumstances where he has been a director since February 2021 (albeit that there was a failure to advise ASIC of this). Reference is made to s 205 of the Corporations Act 2001 (Cth), which Mr Whitehall admits obliges a director to inform ASIC of the director's appointment, but nevertheless contends that this does not mean that he is not properly a director of the company, notwithstanding that the ASIC records did not show him as such at the relevant time. Mr Whitehall submits that the fact that he is not named as a plaintiff in the proceedings is "potentially an omission'" but emphasises that the proceedings as now constituted, prior to the substantive matters being pleaded, filed and served, relate to a caveat and says that the parties affected are the first plaintiff and the first and second defendants.
Mr Whitehall says he does have a cause of action in the substantive matters. He reiterates his undertaking to pay the Court fees in this proceeding and further matters "should the Court so desire". Reference is also made to the fresh summons said to have been prepared, upon the face of which Mr Whitehall is named as plaintiff. Mr Whitehall says that there is no weight that can be placed on the fact that he is not a shareholder of the plaintiff and contends that nothing turns on this. Insofar as the application to stay proceedings is made, Mr Whitehall says it is misconceived and that the opportunity to make such an application was open until (in the case of a summons) the first return date.
Mr Whitehall seems to agitate that, as a result of the leave granted by Kunc J for the filing of the summons on the undertaking he proffered to pay the requisite filing fees, the defendants cannot now move to set aside or stay the proceedings. That would seem to me to be contrary to a number of authorities. I refer in that regard to Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2000) 175 ALR 36; [2000] NSWSC 507 at [11] and [17]; and Agricultural and Rural Finance Limited v Kirk (2011) 82 ACSR 390; [2011] NSWCA 67 at [217], to which reference is made in Ritchie's Uniform Civil Procedure NSW, vol 1 at [12.11.5], for the proposition that a defendant who has entered an appearance or otherwise participated (to a limited extent) in the conduct of the proceedings can still move to set aside the process or its service.
As to discretion generally, Mr Whitehall submits (referring to what was said in Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd (2015) 110 ACSR 29; [2015] NSWSC 1519 (Tanamerah), which considered the circumstances in which a director may be granted leave to appear for a company) that the current circumstances are unusual and that, given that the world outside due to the COVID pandemic is still largely closed, it would be a gross injustice to deprive the plaintiffs of the ability to make submissions to the Court which "almost certainly, will make orders preserving the "Trust Property", pending the pleading, litigating the real issue". That is a reference to the fact that when I listed the present application for hearing today, I also listed the application for interlocutory relief before the Duty Judge next Tuesday, 5 October 2021.
Finally, Mr Whitehall says that the defendants make "disturbing cognisance" of the way in which the first affidavit of Ms Berry was witnessed. Mr Whitehall submits that the error is real and that the affidavit was executed incorrectly (in an unusual manner at the time), but that the anomaly has been picked up and rectified and the correctly sworn affidavit is now before the Court.
In the present case, it is not necessary for me to come to a concluded view as to whether or not Mr Whitehall has established on the balance of probabilities that he was a director and was acting as one at the relevant time, despite the ASIC extract not showing him as a director at that time. That is because it is conceded that there was a failure to comply with the rules in relation to circumstances in which a director may be permitted to represent a company, and because, as presently constituted, there is no dispute that the proceedings do not name Mr Whitehall as a plaintiff. In any event, even if leave were to be granted for the fresh summons naming Mr Whitehall as a plaintiff to be filed, there is no freestanding cause of action claimed at this stage in the proceedings as constituted on his behalf. The claimed interest in the property over which the lapsed caveat was lodged is not held by Mr Whitehall, nor is it held by Ms Berry.
I should add that there was no appearance by Ms Berry on the present application, but the submissions appear to suggest that Mr Whitehall is making the submissions on Ms Berry's behalf. In any event, it does not appear at this stage that the caveat claimed any interest of Ms Berry in the property; rather, the caveat claims an interest solely in the name of the first plaintiff. The defendants have referred to the cases which consider the underlying rationale of the restriction on representation in legal proceedings on behalf of a company, being limited to that of a solicitor. In that regard, they refer to authorities such as the FEV Mono case, and JSBG Developments v Kozlowski (2009) 75 NSWLR 745; [2009] NSWSC 1128 at [18].
The defendants note that in Tanamerah, the Court said (at [16]):
For all these reasons, I do not accept Mr Tydeman's wider submission that he is entitled to represent the company as of right. I should, however, return to the question of s 14 of the Civil Procedure Act. As I noted above, Mr Tydeman made clear that the Company did not seek to have rr 7.1 and 7.2 dispensed with under that section, against the contingency that I might not, as I have not, accepted his construction of those rules. I should note that, had the company or Mr Tydeman sought to have those rules dispensed with, there may have been real difficulties in such an application. The area of applications to set aside creditors' statutory demands is notoriously technical and complex and poses challenges even to the practitioners who conduct such applications on a daily basis. It seems to me that there is a real risk that a layperson, in bringing such an application, would expose the company to unnecessary risk, both in respect of costs and to the extent that any argument that it may have, within this technical field, may not be identified or may be displaced by other arguments which are not likely to succeed. In this case, it seems to me that the risk is very real, so far as Mr Tydeman's lengthy affidavit dated 15 June 2015, read in these proceedings, raises a very large number of issues, which are not expressed in a way that identifies any obvious relevance to an application to set aside a creditor's statutory demand. Rule 7.1(3) of the UCPR, which Mr Tydeman considers should not apply to the company, does not seem to me to be directed to entrenching legal practitioners' work, as Mr Tydeman may understand it to be. At least in the context of complex and technical applications of this kind, it operates to protect the company and the administration of justice by ensuring those who bring such application ought to have the legal expertise to manage it properly, and to make a reasoned assessment as to whether arguments are likely to be relevant to an application to set aside a creditor's statutory demand, particularly if that demand is based on a judgment debt, or are likely to establish an offsetting claim, given the authorities as to what that would require.
The defendants also refer to the comments of Kirby P, as his Honour then was, in Bay Marine v Clayton Country Properties (1986) 8 NSWLR 104 (at 107), where, in relation to the corresponding previous Supreme Court rules, his Honour considered that a director should only be permitted to appear for a company in very exceptional circumstances. Similarly, the Court in Pham v Enterprise ICT Pty Ltd; Pham v Sebie (No 3) [2018] NSWSC 381 (at [63]) considered that leave should be granted only "in emergency situations when counsel are not available". Reference is also made to what was said by Hammerschlag J in Finsec Pty Ltd as trustee of Batterham Retirement Fund) v Nauer [2019] NSWSC 1831 (at [22]) to the effect that where serious allegations of dishonesty are proposed to be made, legal practitioners have significant responsibilities to the Court, and to permit the director appearing in those circumstances would undermine the significant policy reasons underlying this rule.
I am of the view that this is not a case where it is appropriate for Mr Whitehall to represent the company, even assuming or accepting for present purposes that he has acted as a director of the company with the consent of the sole shareholder for some time, and notwithstanding that he has a law degree. I am not satisfied that these are circumstances which would warrant such representation, and I am concerned that serious allegations are here being made in relation to the claims against the defendants. They need to be properly pleaded and properly prosecuted (if at all) by solicitors who are objective and independent of the parties involved in the proceedings.
I am also troubled by the fact that there have been various non‑compliances, or apparent non‑compliances, with directions in relation to the filing of documents or affidavits within particular periods of time. It causes me no little concern that the undertaking as to the filing fees was proffered to the Court, but no filing fees have yet been paid (in circumstances where Mr Whitehall considers that he has acted responsibly in simply seeking an application to defer to pay the relevant filing fees). But more importantly, it seems to me that this is a matter that would benefit from independent, balanced, objective legal advice, and I am not persuaded on the material before me that Mr Whitehall is in a position to provide that.
The question which then arises is as to what relief should follow. The first relief that was sought by the defendants was for the summons to be set aside, on the basis that it was improperly commenced without compliance with the rules. The alternative is said to be that the summons be struck out or summarily dismissed. The third alternative is for there to be a stay of the proceedings if and until the plaintiffs appoint a solicitor and the solicitor files and serves a notice of appointment pursuant to r 7.28 of the UCPR. It is suggested that, as was the case in the FEV Mono matter, there be an accompanying order that the defendants be granted leave to have the matter dismissed if a notice of appointment of solicitor has not been filed within a certain period of time.
In my opinion, there is quite some force in the proposition that the claim should simply be dismissed at this stage ‑ and I say that because all that is sought in the summons at the moment is the leave to file a fresh caveat in circumstances where the substantive dispute is one that needs to be properly pleaded, and no steps have yet been taken in that regard. Nevertheless, I consider that the first plaintiff should have a final opportunity to engage legal representation to continue the proceedings.
In those circumstances, what I propose to do is to stay the proceedings for a period of 28 days in order to permit the first plaintiff the opportunity to engage legal representatives and to have those legal representatives file a notice of appearance in the proceedings. If that is not done within 28 days, then I would grant liberty to the defendants to apply to have the summons dismissed.
[2]
Orders
For the above reasons, I make the following orders:
1. Stay the proceedings for 28 days to permit the first plaintiff to engage and retain independent legal representatives to act on behalf of the first plaintiff in the proceedings.
2. Grant liberty to the defendants, if a notice of appearance by a solicitor on behalf of the first plaintiff is not filed within 28 days, to move to have the summons dismissed.
3. Vacate the listing of the matter before the Duty Judge on 5 October 2021.
4. Order that the plaintiffs pay the defendants' costs of the motion.
5. List the matter for directions on 2 November 2021 before me at 8.30am.
6. Give the parties liberty to apply on 3 days' notice.
[3]
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Decision last updated: 14 October 2021