Tropical Hire Pty. Ltd. (in liquidation) v Simpson
[2014] QDC 250
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Unreported Judgment
- Tropical Hire Pty. Ltd. (in liquidation) v Simpson[2014] QDC 250
- Add to List
Tropical Hire Pty. Ltd. (in liquidation) v Simpson[2014] QDC 250
Tropical Hire Pty. Ltd. (in liquidation) v Simpson[2014] QDC 250
DISTRICT COURT OF QUEENSLAND
CITATION: | Tropical Hire Pty Ltd (in liquidation) v Simpson [2014] QDC 250 |
PARTIES: | TROPICAL HIRE PTY LTD (IN LIQUIDATION) (ACN 119 814 387) (Plaintiff) -v- Sande Palgrave SIMPSON (Defendant) |
FILE NO/S: | D169 of 2014 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court, Townsville |
DELIVERED ON: | 06 November 2014 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 27 October 2014 |
JUDGE: | Durward SC DCJ |
ORDERS: |
|
CATCHWORDS: | CORPORATIONS – WINDING-UP ON INSOLVENCY – LIQUIDATION – DIRECTORS DUTIES – where plaintiff company in liquidation – whether defendant sole director and shareholder – where directors duties admitted but breaches denied - whether defendant entitled to rely on advice of plaintiff company’s accountant regarding payment of outstanding ATO debts and conduct of financial affairs of the plaintiff – where defendant claims to have no financial skills – where accountant arguably incompetent, dilatory and deceptive in discharge of professional responsibilities. INSOLVENCY LAW – POWERS OF COURT TO GRANT RELIEF – where alleged breach of director’s duties – where if breach proved, relief sought pursuant to s 1318 Corporations Act 2001 (Cth) – whether director acted honestly and ought fairly to be excused wholly or partly for any breach – where reliance on and trust placed in company accountant to manage financial affairs – where defendant alleges misconduct and wrongdoing of company accountant in breach of fiduciary duties. PRACTICE & PROCEDURE – SUMMARY JUDGMENT – NEW RELIEF PLEADED – summary judgment sought on claim for relief in Amended Statement of Claim – where relief sought in Claim not pursued – where Claim not amended - whether summary judgment for relief not pleaded in Claim can be granted – whether defect fatal to application for summary judgment. PRACTICE & PROCEDURE – SUMMARY JUDGMENT – whether any real prospect of first defendant successfully defending all or part of plaintiff’s claim – whether trial of claim or part of claim needed – whether application for summary judgment should be granted. PRACTICE & PROCEDURE – PLEADINGS – FURTHER AND BETTER PARTICULARS – where defendant requested further and better particulars from plaintiff solicitors – where request was ignored – where plaintiff solicitors file application for summary judgment one day after receiving request for further and better particulars – defendant sends rule 444 letter – where plaintiff solicitors claim particulars cannot be provided as the issues were not pleaded – whether plaintiff solicitors obliged to respond to request – whether application for further and better particulars should be granted. |
LEGISLATION: | Section 1318 Corporations Act 2001; Rule 292(1) Uniform Civil Procedure Rules 1999. |
CASES: | Equititrust Ltd v Gamp Development Pty Ltd & Ors [2009] QSC 115; Equititrust Ltd v Gamp Development Pty Ltd (No 2) [2009] QSC 168; Deputy Commissioner of Taxation v Salcedo [2005] QCA 227; Alton Properties Pty Ltd v J Key Investments (Australia) Pty Ltd [2009] QCA 135. |
COUNSEL: | Mr G Humphreys (solicitor) for the plaintiff C Wilson of Counsel for the defendant |
SOLICITORS: | Connolly Suthers Lawyers for the plaintiff Wilson Ryan Grose Lawyers for the defendant |
- [1]The plaintiff company (“the plaintiff”) is in liquidation. The proceeding has been commenced by the liquidator against the sole director and shareholder of the plaintiff company, Mr Simpson (“the defendant”).
The hearing
- [2]I heard and determined two applications on 27 October 2014. The plaintiff applied for summary judgment on the claim against the defendant. I refused that application. The defendant applied for an order for further and better particulars of the claim, against the plaintiff. I granted that application. I reserved brief reasons for the determination of the applications and for further consideration of costs on the hearing of them.
The background circumstances
- [3]The plaintiff was incorporated on 22 May 2006. The defendant was sole director and shareholder of the plaintiff from that date until the plaintiff was wound up in insolvency on 28 February 2014. The plaintiff had carried on the business of fuel maintenance and electrical contracting.
- [4]In or about May 2009 the plaintiff sold the business. The defendant disposed of the sale proceeds. The debts of the plaintiff were not completely paid. So far as is relevant, a substantial indebtedness to the Australian Taxation Office (“ATO”) was not completely acquitted.
- [5]The plaintiff’s claim is that the defendant breached his duties as a director. There is a proof of the debt of the ATO. The director’s duties are admitted by the defendant, but he denies he was in breach of those duties.
- [6]The defendant has pleaded that the plaintiff, when sold, had combined assets exceeding the sale price; that he had relied on advice provided by the plaintiff’s accountant about, inter alia, acquitting any total indebtedness to the ATO; that he believed that the accountant had attended to all the financial affairs of the plaintiff; that he had acted in good faith in disposing of the proceeds of sale, which were received in three payments each in 2009, 2010 and 2011 respectively; and that he had caused the sum of $118,157.00 to be paid to the ATO on 16 July 2013, on the advice of the accountant.
The issues
- [7]The plaintiff asserts that the defendant was not entitled to rely on the accountant’s advice or the company accountant’s conduct of the financial affairs of the plaintiff or the assurances given to the defendant by the accountant that he had lodged all necessary documentation with the ATO and had arranged for all outstanding matters to be attended to.
- [8]The defendant says that he was, in effect an unsophisticated man with no financial skills, that he simply ran a fuel business, that he relied on the accountant to look after the financial affairs of the plaintiff, and that he ought to be excused from liability for any contravention of the Corporations Act 2001 (“the Act”) and, if found, any breaches of fiduciary duty pursuant to section 1318 of the Act.
The claim
- [9]The plaintiff in the claim primarily sought relief by the way of mandatory injunctions. The details are not relevant, because in a subsequent Amended Statement of Claim, the relief sought was quite different, namely:
“1An order for equitable damages and/or compensation against the Defendant by reason of the breaches such damages in respect of the business sale proceeds distribution as to the Court in all the circumstances thinks appropriate”.
- [10]In the Amended Statement of Claim any relief by way of mandatory injunctions was struck through.
- [11]Where summary judgment is sought, it is in respect of the Claim, not the pleading: that is, it is not in this case the relief sought in the Amended Statement of Claim. Mr Wilson submitted that the application for summary judgment was therefore fatally flawed, because the Claim had not been amended. Mr Humphreys submitted that I should nevertheless grant the application for summary judgment upon an undertaking (by leave) to amend the Claim.
- [12]I agree with the submission of Mr Wilson: the application is fatally flawed. Summary judgment cannot be given in respect of relief not pleaded in the Claim: Equititrust Ltd v Gamp Development Pty Ltd & Ors [2009] QSC 115, per McMurdo J at [12]; and also, albeit in the sense of a reverse situation involving a Statement of Claim, Equititrust Ltd v Gamp Development Pty Ltd (No 2) [2009] QSC 168 per Applegarth J at [2] and [17].
The legal test: summary judgment
- [13]Rule 292(1) of the Uniform Civil Procedure Rules 1999 (“UCPR”) requires the court to be satisfied that:
“(a)the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and
- (b)there is no need for a trial of the claim or a part of the claim”,
in order for summary judgment to be given: Deputy Commissioner of Taxation v Salcedo [2005] QCA 227; Alton Properties Pty Ltd v J Key Investments (Australia) Pty Ltd [2009] QCA 135.
- [14]In so far as summary judgment in the context of insolvent companies and directors are concerned, Mr Humphreys submitted in effect, that reliance on the accountant was not a viable defence; and that section 5 of the UCPR and the overriding purpose of the rules, namely “to facilitate the just and expeditious resolution” of the proceeding, applied.
- [15]Both Mr Humphreys and Mr Wilson agreed on one matter of fact or circumstance: the accountant was incompetent. On the face of the material that is a valid conclusion. Indeed, if he was not incompetent, he was dilatory and apparently deceptive in the discharge of his professional responsibilities.
- [16]Mr Humphreys argued that this was nevertheless irrelevant and that the defendant could not delegate his duties as a director to another party, whether a professional advisor or not. Mr Wilson argued that the defendant, as a man inexperienced as a director, had done all he could reasonably do to ensure that his governance of the plaintiff was in accordance with the law and to ensure the proper discharge of his duties as a director. He submitted that there was a real and material difference between the defendant as a sole director of a small company and a director of a large national corporation.
- [17]There is no evidence from the accountant. That is not surprising. He may in due course admit or concede his incompetence, dilatoriness or deception or it might otherwise be established upon a trial.
- [18]However, on the material before me, where the defendant asserts his reliance on advice and the apparent professional integrity of his company accountant and the plaintiff asserts that even if true, it matters not, there was in my view a factual issue for resolution at trial; and there was an issue of law as to the reasonableness of the conduct of the defendant in relying on the accountant.
- [19]Section 1318 of the Act provides that:
“(1)If, in any civil proceeding against a person … for negligence, default, breach of trust or breach of duty [as an officer of the corporation]…it appears to the court … that the person [may be so liable] but that the person has acted honestly and that … having regard to all the circumstances of the case … the person ought fairly to be excused … the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit.”
- [20]Mr Wilson in his written submissions set out a number of circumstances is support of the potential application of section 1318 of the Act, namely that the defendant only became aware of any outstanding tax liability in June 2013, when so informed by an ATO officer; he then corresponded with the ATO; the accountant advised him in July 2013 that there was a debt of $118,157.00 owing to the ATO and the defendant caused that debt to be paid on 16 July 2013; the accountant assured the defendant that he would attend to lodging objection documents in relation to penalties and interest imposed; the defendant was unaware of any winding up proceedings brought against the plaintiff company (the registered office being at the accountant’s premises); upon learning of the winding up proceedings the defendant contacted his accountant, in about late January 2014 to advise that the defendant that he would obtain an adjournment of the winding up; and the accountant subsequently advised the defendant that he had attained such an adjournment. He also advised the defendant that he would liaise with the ATO because there was no outstanding debt and that he would resolve the problem; the defendant did not become aware that the plaintiff had been wound up until early March 2014; the defendant only became aware that the accountant had failed to lodge documents as instructed, after the winding up order was made; and the defendant had been told by the accountant that the ATO was still considering the objections lodged at the time that the winding up order was made.
- [21]After June 2013 all of the contact between the ATO and the plaintiff, was between the ATO and the accountant.
- [22]In my view, that section arguably has in the circumstances of this case potential application in respect of any alleged breaches of directors duties by the defendant.
- [23]I refused the application for summary judgment on two bases: Firstly, the test in rule 292 was not made out by the plaintiff. There was sufficient material to indicate that there was a prospect (without quantifying that prospect) of the defendant successfully defending all or a part of the plaintiff’s claim (upon whichever of the two bases that the plaintiff relied on that were still alive in the proceeding); and there was a need for a trial of the claim or a part of the claim. Secondly, the Claim had not been amended. Summary judgment had been sought on the relief claimed in the Amended Statement of Claim, not the relief sought in the unamended Claim. That was a fatal flaw in the application. No leave had been sought or obtained by the plaintiff to amend the Claim. I declined to give leave, upon Mr Humphreys’ oral application in the course of submissions, to amend the Claim.
The further and better particulars
- [24]The defendant had sought further and better particulars of the plaintiff’s Claim/Amended Statement of Claim in respect of, inter alia, the accrued tax liabilities of the plaintiff and the distribution of the proceeds of sale of the plaintiff’s business.
- [25]The request for further and better particulars was made in a letter dated 22 September 2014. The letter also sought an extension of time to deliver a defence to the Amended Statement of Claim (which was filed on 11 September 2014). The application for summary judgment was filed a day after the letter, namely on 23 September 2014. No further and better particulars were provided. The defendant sent to the plaintiff a rule 444 letter on 09 October 2014 with respect to that failure.
- [26]At the hearing the plaintiff contended that there was included in the request for further and better particulars, a request about a stated sum of indebtedness, but that in the Amended Statement of Claim no such sum was specifically alleged. If that was the reason or the material reason for the omission, refusal or failure to provide further and better particulars, then it is trite. As Mr Humphreys frankly acknowledged in oral submissions, that specific request could simply be refused on that ground, whilst further and better particulars could otherwise be provided to the other requests.
- [27]It seems that the application for summary judgment was made and the request for further and better particulars was therefore ignored. However, the rule 444 letter should have been responded to. That was not done.
- [28]The application for summary judgment having been refused, it follows that it was appropriate that the application for further and better particulars should be granted.
Costs
- [29]Mr Wilson submitted that the defendant should have its costs with respect to both applications.
- [30]The fatal defect in the summary judgment application was referred to in the defendant’s outline of submissions. The oral application, in effect for leave to amend the Claim, made on behalf of the plaintiff occurred in the oral reply submission and not earlier. There was also, in my view, patently a real question to be tried. In that circumstance the defendant should have its costs of the plaintiff’s application for summary judgment, on the standard basis.
- [31]The plaintiff did not respond to the rule 444 letter. I have already observed that it should have done so. The defendant’s application for further and better particulars was granted. It follows that the defendant should have his costs of that application, on the standard basis.
Orders
- [32]The formal orders are:
- (1)The plaintiff’s application for summary judgment is refused.
- (2)The defendant’s application for further and better particulars is granted.
- (3)The plaintiff is to pay to the defendant his costs of both applications, on the standard basis.