Pearl Coast Divers Pty Ltd v Cossack Pearls Pty Ltd

Federal Court of Australia|2008-06-19|Before: Gilmour J

REASONS FOR JUDGMENT 1 By its Amended Notice of Motion the plaintiffs seek orders that: 1. Colin Andrew Sharp be substituted as First Applicant in place of Pearl Coast Divers Pty Ltd (In Liquidation); 2. Colin Andrew Sharp as trustee of the Sharp Family Trust be substituted as Second Applicant in place of Liquid Investments (WA) Pty Ltd; and 3. Colin Andrew Sharp have leave to bring the proceedings on behalf of Pearl Coast Divers Pty Ltd (In Liquidation) the subject of the Substituted Statement of Claim filed 4 September 2007 in respect of the claims against: 3.1 The First Respondent pursuant to sections 52 and 82 of the Trade Practices Act 1974; 3.2 The Second Respondent pursuant to sections 52 and 82 of the Trade Practices Act 1974; 3.3 The Third Respondent pursuant to sections 52, 75B and 82 of the Trade Practices Act 1974 and sections 10 and 79 of the Fair Trading Act 1987; and 3.4 The Third Respondent pursuant to sections 52, 75B and 82 of the Trade Practices Act 1974; and sections 10 and 79 of the Fair Trading Act 1987.

BACKGROUND 2 The defendants' written outline of submissions correctly sets out the relevant background to this motion. It is convenient to repeat that history here. 3 The plaintiffs' Substituted Statement of Claim lodged 4 September 2007 can be divided into claims made on behalf of the first plaintiff, Pearl Coast Divers Pty Ltd (In liquidation) ("Pearl Coast") and claims made on behalf of the second plaintiff, Liquid Investments (WA) Pty Ltd ("Liquid"). It should be noted that this pleading contains both in its heading and in the text of the statement of claim the purported substituted parties. That is obviously premature. Whilst acknowledging that difficulty, it is nonetheless convenient for present purposes to refer to its contents in these reasons. 4 In summary, Pearl Coast's claims are: (a) a claim against Cossack Pearls Pty Ltd ("Cossack"), Dampier Pearling Company Pty Ltd ("Dampier"), Lindsay Kevin Brady ("Brady") and Paul John Thomas ("Thomas") under the Trade Practices Act 1974 (Cth) ("TPA") for loss or damage suffered by Pearl Coast as a result of alleged misleading and deceptive representations made in 1997 and 1998; (b) a claim against Brady and Thomas under the Fair Trading Act 1987 (WA) ("FTA") for loss or damage suffered by Pearl Coast as a result of alleged misleading and deceptive representations made in 1997 and 1998; (c) a claim for breach of contract against Cossack for loss and damage arising from an alleged breach of a term of the 1997 Agreement; (d) a claim for breach of contract against Dampier for loss and damage arising from an alleged breach of a term of a the Dampier Pearling Agreement; (e) a claim for breach of contract against Cossack in relation to of the 1999 Pearl Fishing Agreement; and (f) a claim for wrongful repudiation against Cossack in relation to of the 1999 Pearl Fishing Agreement. 5 In summary, Liquid's claims are: (a) a claim against Cossack under the TPA for loss or damage suffered by Liquid as a result of alleged misleading and deceptive conduct occurring in 2001; and (b) a claim against Brady and Thomas under the FTA for loss or damage suffered by Liquid as a result of alleged misleading and deceptive conduct occurring in 2001.

Substitution of parties 6 The plaintiffs rely on the deed dated 9 June 2005 between Martin Jones, one of the liquidators of Pearl Coast and Colin Andrew Sharp ("the Deed of Assignment") to establish the right of Mr Sharp to be substituted in place of Pearl Coast. 7 Causes of action arising pursuant to s 82 of the TPA are personal and cannot be assigned: Salfinger v Niugini Mining (Australia) Pty Ltd (No. 3) [2007] FCA 1532 at [110] and the cases cited therein, in particular, Park v Allied Mortgage Corporation Ltd (1993) ATPR Digest 46-105. By parity of reasoning, claims arising pursuant to s 79 of the FTA cannot be assigned. 8 The Deed of Assignment is therefore not capable of assigning the TPA and FTA causes of action to Mr Sharp and understandably the defendants oppose any order substituting Mr Sharp for Pearl Coast in relation to those causes of action. 9 The defendants do not dispute that the Deed of Assignment is capable of assigning the causes of action in contract to Mr Sharp, or that he may be substituted as the first plaintiff in respect of those causes of action.

Section 237 of the Corporations Act 10 The first plaintiff acknowledged that the Deed of Assignment is not capable of assigning Pearl Coast's alleged causes of action under the TPA and the FTA and for that reason initially sought leave for Mr Sharp to bring the alleged TPA and FTA causes of action on behalf of Pearl Coast as a derivative action pursuant to s 237 of the Corporations Act 2001 (Cth) ("the Act"). 11 For some considerable time there have been differences of judicial opinion as to whether Part 2F.1A has application to a company in liquidation. In BL & GY International Co Ltd v Hypec Electronics Pty Ltd (2001) 164 FLR 268 Einstein J in obiter expressed the view that Pt 2F.1A does not so apply. In Carpenter v Pioneer Race Pty Ltd (in liq) (2004) 211 ALR 457 Barrett J concluded that it does apply. Indeed, his Honour said that the question should now be regarded as settled, pointing to the considerable support for this view in a number of judgments of this Court. In one of these, Kamper v Applied Soil Technology Pty Ltd (2004) 50 ACSR 738 Einstein J at [10]-[11] having considered the authorities, including that of Barrett J in Charlton v Baber (2003) 47 ACSR 31, was persuaded that his earlier view in BL & GY International was wrong. 12 More recently, Siopis J, in Promaco Conventions Pty Ltd v Dedline Printing Pty Ltd (2007) 159 FCR 486 in what I consider, respectfully, to be a most persuasive judgment concluded that Part 2F.1A did not apply to a company in liquidation. Despite this, his Honour was not able to conclude that he had a high enough degree of assurance necessary to characterise the series of earlier contrary decisions at first instance as 'plainly wrong', as required by the test in Australian Securities and Investments Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485. 13 Since then the New South Wales Court of Appeal has recently delivered judgment in Chahwan v Euphoric Pty Ltd [2008] NSWCA 52 which is directly on point. Tobias JA (Beasley and Bell JJA concurring) concluded, after full argument and very detailed reasons, that Part 2F.1A of the Act does not apply to a company in liquidation. This judgment is of course highly persuasive and, in my respectful opinion, is correct. In those circumstances I decline to follow earlier judgments of single judges of this and other courts which reached a contrary conclusion: Roach v Winnote Pty Ltd (in liq) [2001] NSWSC 822; Brightwell v RFV Holdings Pty Ltd [2003] NSWSC 7; Charlton v Baber (2003) 47 ACSR 31;Kamper v Applied Soil Technology Pty Ltd (2004) 50 ACSR 738; Carpenter v Pioneer Park Pty Ltd (in liq) (2004) 211 ALR 457; Scuteri v Lofthouse (2006) VSC 317.

Derivative action: Inherent power of Court: 14 I invited the parties to make further submissions in light of the judgment in Chahwan. The plaintiffs submit that, in the alternative, the Court should determine the application, in the inherent power of the Court. 15 The defendants are opposed to any consideration of this alternative basis for the relief sought because it was not originally argued on that basis. However the circumstances here are somewhat unusual given that the decision in Chahwan was delivered after argument on the motion but prior to judgment. It is likely, I think, that reliance would have been placed on the Court's inherent jurisdiction if Chahwan had been delivered before the hearing of the present motion. In any event, the parties have delivered fulsome written submissions going to the alternative basis and, in my view, it is in the interests of justice that I consider these. 16 There is clear authority that the Court retains the inherent power in the course of a winding up of a company to permit proceedings to be taken in the name of a company by contributors and creditors: Russell v Westpac Banking Corporation (1994) 12 ACLC 278; Aliprandi v Griffith Vintners Pty Ltd (in liq) (1991) 6 ACSR 250; Magarditch v Australia & New Zealand Banking Group Ltd (1999) 32 ACSR 367. 17 It is necessary upon such an application for the plaintiff to demonstrate an arguable case for the relief sought in the litigation. The test has been put in different ways. McLelland J referred to the requirement that the proposed action to be taken in the company's name "has some arguable foundation": Aliprandi v Griffith Vintners Pty Ltd (in Liq) at 252. The Full Court in Vagrand Pty Ltd (in Liq) v Fielding (1993) 41 FCR 550 at 556-557 said that a plaintiff was required to satisfy the Court that the claim had a solid foundation and would give rise to serious dispute. The Full Court in Magarditch [69] said that the principle required the plaintiff to determine whether there was a serious claim under real dispute and in so determining to have regard to the quality and strength of the proposed case. The Court at [71], citing with apparent approval Russell v Westpac Banking Corporation (1994) 12 ACLC 278 at 281, said that even in a case where there be no drain on the assets of the company there is nevertheless a responsibility on the Court to see that any action taken in the company's name under the Court's authority is not vexatious or merely oppressive. The Court considered that, in practice, it may be that there is very little to distinguish the approaches in Aliprandi and Vagrand. It is necessary therefore to consider the merits of the TPA and FTA claims.

The merits - the position of the liquidators 18 In Cadima Express Pty Ltd (in Liq) v Deputy Commissioner of Taxation (1999) 33 ACSR 527, Austin J was of the opinion that the attitude of the liquidator to the merits of the action is particularly relevant to the Court's consideration. This flowed from the proposition articulated by Gummow J in Scarel Pty Ltd v City Loan & Credit Corporation Pty Limited (1998) 12 ACLR 730 at 733 that the ordinary rule is that the liquidator is the appropriate person to decide whether the company should commence proceedings, subject to review under the statutory provisions. His Honour considered that if the liquidator is of the view that the proposed litigation is soundly based, but he cannot pursue it because of an absence of funds, the Court will be more disposed to permit proceedings by a contributory in the company's name than in circumstances where he has decided that there is no reasonable foundation to bring proceedings. His Honour then referred to Partnership Pacific Ltd v Aliprandi (1990) 4 ACSR 51 where Cole J said that for an application to succeed more must be shown than that the liquidator's position is protected by an indemnity. Austin J [46]-[48] observed that the two cases indicate that the Court is entitled to have the assistance of the liquidator in making its assessment as to whether an arguable case has been demonstrated and that the Court will normally give weight to the liquidator's view. 19 The defendants submit that there is no evidence that the liquidators have considered the merits of the claims at all. Certainly there is no direct evidence from the liquidators. 20 However it is important, in my view, to consider the totality of the circumstances which emerge from the evidence, including any inferences which may properly be drawn. Pearl Coast has no realised or realisable assets which would be exposed should the action fail. The liquidators do not oppose the application. By the Deed of Assignment, Pearl Coast at the instance of the liquidators, transferred and assigned any cause of action it had against any of the defendants to Mr Sharp. This was done to prevent the creditors from being subject to any further costs in relation to the action. It is evident from the recital to the Deed of Assignment that Mr Sharp informed the liquidators as to the causes of action. It was agreed that, in the event of success in the litigation, after the payment of legal fees and disbursements, that the next $250,500 would be paid to Pearl Coast with any balance then going to Mr Sharp. 21 Plainly, the liquidators are unwilling to prosecute the proceedings. There is no direct evidence that any consideration was given to the liquidator, subject to being indemnified, causing Pearl Coast to continue with the application. It would however, as a matter of inference, be surprising if such a course had not been considered. 22 In his 23 January 2008 affidavit [18] Mr Rumsley said that Mr Jones, one of the liquidators, told him that Pearl Coast did not have funds to pursue the claims and that he had, as liquidator, not been able to obtain any funding to enable the claims to be pursued. This strongly suggests that Mr Jones considered that the claims, including the TPA and FTA claims, were arguable. If he had thought otherwise, I would have expected him to have told Mr Rumsley when the claims were discussed between them. I also do not think he would have attempted to obtain funding unless he thought the claims had merit. 23 The defendants further submit that Mr Jones consented only to Pearl Coast prosecuting the TPA and FTA claims against Cossack but not against the personal defendants. They also contend that the liquidators wrongly assumed that there could be no liability on the part of Pearl Coast but rather assumed that the plaintiff would be Mr Sharp in a personal capacity. This submission derives, it seems to me, from an unduly literal reading of the relevant correspondence which I will now consider. 24 The plaintiff's solicitor, Mr Alan Rumsley, wrote to Mr Jones, one of the joint liquidators by email dated 19 November 2007 and advised him that an application had been made under s 237 of the Corporations Act for leave for Mr Sharp, as a shareholder, to bring the claims in respect of the TPAand FTA on behalf of Pearl Coast. The letter sought confirmation that the liquidators had received notice of the application and did not oppose it and foreshadowed that this information would be provided to the Court. Mr Jones replied by email dated 27 November 2007. He referred to a telephone discussion which had taken place between himself and Mr Rumsley following the email of 19 November, in which he had been told that his consent was needed to bring claims against Cossack under the TPA and the FTA. Mr Jones also confirmed that Cossack was without funds and was not in a position to meet any adverse costs orders which a Court might make in the event that the litigation was unsuccessful. He then noted his consent for Mr Sharp to make a claim against Cossack under the TPA and FTA,provided that neither the joint liquidators personally nor Pearl Coast were liable for any costs of the plaintiffs or the defendants. However it is correct that no mention was made of the claims against the other defendants. This email is somewhat equivocal. It seems clear enough however that Mr Jones was directing his attention to the application under s 237 of the Corporations Act and indicating that the liquidators did not oppose the application. I do not think that when his email is read together with the email of Mr Rumsley, that Mr Jones was under any misapprehension as to the fact that the application, in relation to Mr Sharp, was in the context of a derivative action. I also consider that although only claims against Cossack are referred to that the consent extended to all the TPA and FTA claims which Pearl Coast had, including those against the second and third defendants. In para 8 of Mr Sharp's affidavit sworn 23 January 2008, he refers to a telephone conversation with Mr Rumsley in November 2007 in which he was told that counsel, Mr Clifford, had advised, in effect that a derivative action needed to be brought in respect to the TPA and FTA claims. The claims were not limited merely to those against Cossack. Further, Mr Sharp said that Mr Rumsley told him that he (Mr Rumsley) would have to speak to the liquidators "in respect to this change". I infer that the email of 19 November 2007, sent by Mr Rumsley to Mr Jones and followed up by the phone conversation to which I have referred, both occurred as a result of the conversation between Mr Sharp and Mr Rumsley. Mr Jones' consent to Pearl Coast bringing the TPA and FTA claims against Cossack was a rolled up way of referring to the claims against all of the defendants. The claims against each are significantly interdependent. 25 In any event, I think it unlikely that the liquidators would have been in a position, in the circumstances of this case, to add anything to the bank of information presently available to the Court as to the merits of the action. That is because in relation to the trade practices claims, their success or failure will largely depend upon the basis of evidence to be given by Mr Sharp. In this case the Court is able to make its own assessment of whether the evidence, presently before it, gives rise to a serious dispute.

The merits generally 26 As to the merits of the application, Mr Sharp swore an affidavit on 23 January 2008 in support of the motion which includes the following: 11. I have read the Substituted Statement of Claim filed in this action on 4 September 2007 and confirm that the factual matters set out in it are true and correct to the best of my knowledge and belief. I also believe that the claims set out in the Substituted Statement of Claim are claims that all have reasonable prospects of succeeding. 12. I have read the affidavit of Paul Thomas sworn 24 February 2005 in which Mr Thomas states that: (a) during the 2001 season Cossack [Pearls Pty Ltd] provided tags, issued by the Fisheries Department, to Pearl Coast sufficient to catch 22,476 Pearl Oysters (paragraph 13), of a total quota of 32,500 Pearl Oysters (paragraph 8); (b) Pearl Oysters cannot be caught without the tags issued by the Fisheries Department (paragraph 9); and (c) by reason of the fact that [Pearl Coast] did not catch and deliver 80% of the Quota by 30 June 2001, Cossack was entitled to terminate the Pearl Fishing Agreement (paragraph 26); 13. As stated in the Substituted Statement of Claim, Cossack was required to transfer the tags for the quota to Pearl Coast by 31 December each year (paragraph 46.1). 14. In relation to the claims from the 17 December 1999 agreement, the evidence of the Defendants is that they did not comply with the requirement to transfer the tags and relied upon a failure by Pearl Coast to catch 80% of the quota to issue a termination notice and not comply with the terms of the agreement. 15. The number of tags provided to Pearl Coast by Cossack meant that Pearl Coast could not catch 80% of the quota, 26,000 Pearl Oysters. 16. I verily believe that the Defendants do not have a defence to the claims from that agreement. 17. It was because of my belief that the claims of Pearl Coast have reasonable prospects of success, that I agreed to the claims being transferred to me in June 2005 and paid $17,310 for costs ordered by Justice Lander and $3,995.87 interest on those costs, so that the action could be continued against the Defendants. 27 Paragraphs [12]-[16] concern the claims in contract pleaded at paragraphs [45]-[58] of the Substituted Statement of Claim and are not relevant to the present application which concerns the TPA and FTA claims. 28 As pleaded in the Substituted Statement of Claim, the TPA causes of action and FTA causes of action arose prior to the December 1999 contract and prior to the events referred to in paragraphs 12 to 16 of Mr Sharp's Affidavit. 29 Accordingly, paragraphs [11] and [17] are the only conceivable ones which could refer to the statutory claims. Objection is taken to them as being statements of belief the grounds of which are not stated. 30 I am not prepared to uphold the objection. Paragraphs [3], [4], [11], [12], [15], [16], [17], [21], [24], [25] and [29] in the Substituted Statement of Claim, which are relevant to the statutory causes of action, set out the personal involvement of Mr Sharp in the alleged events. I take the basis of his belief to be his position as a director of Pearl Coast and his personal involvement in that capacity in the events which are pleaded. Further, as a director of Pearl Coast, Mr Sharp was in a position to depose to the truth of the allegation at para [28] which concerns the content of a facsimile message, as well as the allegations of loss and damage at paras [37] and [40]. 31 The statutory causes of action are not complex either factually or legally. The alleged facts which Mr Sharp deposes to being true and correct, if accepted at trial, would arguably establish the pleaded representations. 32 No affidavits on the merits in opposition were filed. I am satisfied that there are serious claims under real disputein respect of the statutory claims made against each of the defendants: Magaraditch [69].

Statutory and contractual claims interwoven 33 There are other matters which I consider are relevant to the exercise of discretion. The other causes of action in contract will be brought by Mr Sharp as assignee but the evidence will be the same as if no assignment had taken place. It will involve the dealings between Pearl Coast and the defendants. The statutory claims therefore sit in litigation with a wider context. They are closely related to the contractual claims. 34 Broadly, the TPA and FTA claims concern alleged representations made by the relevant defendants concerning pearling operations off the north-west coast of Western Australia. The so-called "Anzac Pearl Representations", are illustrative of the interrelationship. It is pleaded that representations were made in September or October 1997 by Brady and Cossack to, relevantly, Pearl Coast, through Mr Sharp that if, amongst other things, Pearl Coast were to purchase a vessel known as the "Anzac Pearl", Cossack would finance its purchase and re-fit. It is further alleged that if Pearl Coast purchased this vessel then Cossack would engage Pearl Coast to fish the "Cossack Quota". 35 It is then pleaded that, in reliance upon the pleaded representations, Pearl Coast entered into an agreement with Cossack in relation to the purchase of the "Anzac Pearl" and catching the "Cossack Quota" in or about late December 1997 or early January 1998. This is referred to as the "1997 Agreement". 36 It is the alleged breach of the 1997 Agreement which forms part of the contractual claims. This cross-over occurs in respect to other pleaded representations and related contractual claims. 37 It would, I think, be very artificial in these circumstances, to see Pearl Coast's claims in contract proceeding against the same defendants but not the statutory claims. It is only by reason of the ineffectual assignment, so far as concerns these latter claims, that the plaintiff has been driven to make this application.

The defendants' costs 38 Generally, whether the assets of the company are sufficiently protected by indemnity supported by security is relevant to the exercise of discretion: Aliprandi v Griffith Vintners Pty Ltd (in liq) (1991) 6 ACSR 250. In this case, however, Pearl Coast has no assets and creditors will be no worse off in that even if the application fails and adverse costs orders are made, there is no distribution to creditors to be diluted by the defendants' costs entitlements. Neither Pearl Coast nor the liquidators are at risk in this respect. 39 Nonetheless the position of the defendants is a matter going to the exercise of the Court's discretion: Cadima Express Pty Ltd (in liq) v DCT (1999) 33 ACSR 527 at [49]. 40 The liquidators do not oppose the application so long as neither they nor Pearl Coast are liable for any adverse costs orders. Mr Sharp has already paid from his own funds in excess of $21,000 on behalf of Pearl Coast, by way of costs and interest on those costs so that the action could proceed. By clause 4 of the Deed of Assignment it was agreed that Pearl Coast would not be liable for costs in connection with the action. I infer from this that Mr Sharp would be personally liable. That of course is no comfort to the defendants who, if successful, would likely obtain a costs order against Pearl Coast which in practical terms would be of no value.

Conclusion 41 I am satisfied that leave ought to be granted subject to the following further orders. First, there should be an order that Mr Sharp indemnify Pearl Coast against costs and expenses incurred, including any adverse costs orders, provided however that, in the event that Pearl Coast succeeds in recovering damages or other monies through the derivative action, he may apply to the Court for reimbursement of the expenses he has met. See by analogy Carpenter v Pioneer Park Pty Ltd (in Liq) (2004) 211 ALR 457at [39]. Second, there should be an order that Mr Sharp indemnify the defendants in respect of any costs ordered as against Pearl Coast and which are not satisfied. Mr Sharp should also provide security for these costs.

Application to amend capacity of second plaintiff 42 Mr Sharp also applies under O 13 r 2(6) of the Federal Court Rules to be substituted for Liquid as trustee for the Sharp Family Trust, the second plaintiff. Order 13 r 2(6) permits an amendment to alter the capacity in which a party sues if the new capacity is one which that party had at the date of the commencement of the proceeding or has since acquired. 43 Liquid claims damages under the TPA and the FTA caused by its asserted reliance upon representations pleaded in the Substituted Statement of Claim as the "Continuing Representations". It pleads that upon such reliance it purchased certain residential properties in the Perth metropolitan area between 1999 and 2001 and that in and after mid 2001, it entered into contracts to purchase further residential properties in the metropolitan area subject to finance approval. 44 In his affidavit sworn 23 January 2008, Mr Sharp deposes that Liquid was created, in effect, for the sole purpose of acting as the trustee for the Sharp Family Trust and that Liquid was so appointed under the Sharp Family Trust Deed executed on 16 April 1998. Mr Sharp also deposes that the only activity which Liquid undertook was to act as trustee of the Sharp Family Trust. He says that it was in this capacity that Liquid purchased the properties identified in para 65 of the Substituted Statement of Claim and entered into contracts to purchase the properties identified in para 68 of the Substituted Statement of Claim. He also says that it was in its capacity as trustee of the Sharp Family Trust that Liquid commenced these proceedings by application dated 31 August 2004. He deposes that on 8 September 2005, he was appointed as the trustee of the Sharp Family Trust in place of Liquid and a copy of the minutes of the meeting so appointing him are in evidence. Liquid, it appears, was deregistered on 27 October 2005, not long after Mr Sharp's appointment. 45 The defendants contend that Mr Sharp must first establish that Liquid has or had a claim against the defendants in its capacity as trustee of the Sharp Family Trust. It is only when this is established, they submit, that the Court can consider whether or not it should substitute Mr Sharp for Liquid. They contend that Mr Sharp has failed to establish such a claim on the part of Liquid in its capacity as trustee. It points to Order 4 rule 4(1)(b) of the Federal Court Rules which provides that when a party sues in a representative capacity, a statement of that fact shall be contained in the application. The application filed did not contain such an assertion of fact. Neither did the amended Statement of Claim filed on 29 November 2004 nor the further amended Statement of Claim filed on 15 February 2005. However in the Substituted Statement of Claim filed 4 September 2007 (but which suffers from the defects to which I have already adverted) that shortcoming is sought to be rectified. 46 The defendants submit that there is nothing before the Court to show that Liquid was acting as a trustee of the Sharp Family Trust at all relevant times. That is not so. As I have already identified, Mr Sharp has sworn an affidavit in which he says that the sole purpose for the incorporation of Liquid was so that it could act as trustee for the Sharp Family Trust and further that it only ever acted in that capacity. 47 Vintage Developments Pty Ltd v GHD Pty Ltd (No 2) [2006] FCA 1437 involved a successful application to amend the capacity in which an application and statement of claim had been filed from "Errol Investments Pty Ltd" to "Errol Investments Pty Ltd as Trustee for the Shellharbour Unit Trust". Evidence was adduced of minutes of a meeting of the company resolving that the contract to purchase land would be executed by the company in its capacity as trustee of the Shellharbour Unit Trust as well as a contract for the sale of land that in one place, at least, referred to the purchaser as Errol Investments Pty Ltd as Trustee for the Shellharbour Property Trust. The judge was satisfied that the reference should have been to the Shellharbour Unit Trust. 48 It is contended by the defendants that if Liquid was acting in its capacity as trustee of the Sharp Family Trust when it carried out the actions pleaded in paras [59]-[72] of the Substituted Statement of Claim, then it should have copies of the minutes of meetings, recording decisions to purchase properties, copies of the contracts for the sale and purchase of the properties referred to in the Substituted Statement of Claim, bank documents recording the application for facilities to be provided to Liquid, in its capacity as trustee of the Sharp Family Trust, relating to the property acquisitions and other tax and trust records. No such evidence has been put before the Court in this case. I do not consider this to be fatal to the application. Mr Sharp has deposed, in effect, that Liquid was incorporated as a sole purpose vehicle and never acted other than in its capacity as trustee of the Sharp Family Trust. There was no cross-examination upon his affidavit. He was at all material times, the sole director and shareholder of Liquid. I am satisfied, for present purposes that the position is as deposed to by him. There was certainly nothing inherently improbable about his assertions nor are they inconsistent with any document which is before the Court. 49 Liquid is deregistered. Mr Sharp was appointed trustee in its place nearly seven weeks prior to its deregistration. Liquid is not practically the "party" referred to in O 13 r 2(6). I infer that it was by some oversight that the proceedings were not brought by Liquid in its capacity as trustee. Had that occurred, then Mr Sharp would simply be seeking to be substituted for Liquid because he had been appointed as the new trustee on 8 September 2005. I regard Mr Sharp as, in effect, being the "party" for the purposes of O 13 r 2(6). There will be an order that Mr Sharp, as trustee for the Sharp Family Trust, be substituted as the second plaintiff.

Conclusion 50 I will hear the parties on the question of security for costs and otherwise invite the parties to bring in a draft minute of proposed orders to give effect to these reasons. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.

Solicitor for the Plaintiff: Alan Rumsley-Commercial Dispute Lawyer

Federal Court Rules 1979(Cth)

Trade Practices Act 1974(Cth)

Fair Trading Act 1987(WA)

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