New South Wales Supreme Court CITATION : FOYSTER v FOYSTER HOLDINGS [2002] NSWSC 768 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 2806/02 HEARING DATE(S) : 26/08/02 JUDGMENT DATE : 26 August 2002 David Lloyd Foyster - Plaintiff/Respondent Foyster Holdings Pty Limited (In Liquidation) - First Defendant Ian Lawrence Struthers - Second Defendant Jacqueline Whyatt Foyster - Third Defendant Tasmanian Titanium Pty Limited - Fourth Defendant PARTIES : Peter William Hopkins - Fifth Defendant Hopkins Professional Services Pty Limited - Sixth Defendant Maxwell William Prentice - Seventh Defendant/Applicant Repbrook Pty Limited - Eighth Defendant John Leslie Coggan - Ninth Defendant Michael John Russell - Tenth Defendant JUDGMENT OF : Barrett J COUNSEL : Mr J T Johnson - Seventh Defendant/Applicant Mr M B Evans - Plaintiff/Respondent kings lawyers - Plaintiff/Respondent SOLICITORS : Sally Nash & Co - Seventh Defendant/Applicant CATCHWORDS : CORPORATIONS - alleged breach of statutory duty by director by making representations - whether recipient of representations is party to any such breach - declaration of contravention sought under s.1317E - ASIC is only competent applicant for such declaration - claims against recipient struck out LEGISLATION CITED : Corporations Act 2002 (Cth) DECISION : Originating process against seventh defendant dismissed - 4 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J MONDAY 26 AUGUST 2002 2806/02 - DAVID LLOYD FOYSTER v FOYSTER HOLDINGS PTY LIMITED (IN LIQUIDATION) & 7 ORS JUDGMENT 1 Mr M W Prentice is named as the seventh defendant in an originating process filed by the plaintiff on 21 May 2002 in which relief is sought by the plaintiff against various other persons in respect of the affairs of the first defendant, Foyster Holdings Pty Limited, which is a significant shareholder in the fourth defendant, Tasmanian Titanium Pty Limited. The seventh defendant is the trustee of the bankrupt estate of Mr Lloyd Foyster, who is recorded as a holder of shares in the first defendant. 2 The originating process filed on 21 May 2002 sought no relief against the seventh defendant. An interlocutory process filed at the same time sought relief on an interlocutory basis by way of restraint upon transfer and voting of shares in the first defendant but, if that relief was ever appropriately sought in the absence of any corresponding claim to final relief, it is now academic as an order for the winding up of the first defendant was made on 16 August 2002. 3 Based on the originating process and the interlocutory process to which I have just referred the seventh defendant seeks by his interlocutory process filed on 30 May 2002 an order that the originating process be summarily dismissed as against him. 4 In the absence of any claim against him in the originating process, the seventh defendant is clearly entitled to that order. The plaintiff nevertheless seeks to resist summary dismissal by pointing to a proposed first amended originating process and first amended points of claim which foreshadow a claim by the plaintiff against the seventh defendant for a declaration under s.1317D of the Corporations Act 2001 (Cth) that the seventh defendant, among others, has contravened ss.182 and 183 of the Corporations Act by being knowingly concerned in certain breaches of the statutory duties imposed by those sections on the fifth defendant, a director of the fourth defendant. 5 The proposed first amended points of claim allege that the fifth defendant was guilty of such breaches of statutory duty by reason of false and misleading representations made by him. The seventh defendant's complicity making him liable in respect of the alleged breaches of duty by the fifth defendant is said to have consisted of his passive receipt of the misrepresentations allegedly made by the fifth defendant. To be more precise, para 108 of the proposed first amended points of claim is in the following terms: "By virtue of receipt of the representations dated 7th and 27th August and 3rd September 2001 MWP [that is, the seventh defendant] became a person involved in breaches of ss.182 and 183 Corporations Act in that he was directly and indirectly a party to the contraventions". 6 There is thus an attempt to call in aid s.79 which sets out in an exhaustive and exclusive fashion the circumstances in which a person is to be taken to be involved in a contravention. Para (c) of s.79 refers to the case where the person has been in any way by act or omission directly or indirectly knowingly concerned in or party to the contravention. That is, it seems, the paragraph upon which reliance is placed. 7 It is clear to my mind that mere passive receipt of representations the making of which is said to involve a breach of s.182 or s.183 or both does not involve the consequence that the passive recipient was directly or indirectly a party to the making of the representations. Mute listening simply cannot make the listener a party to any wrong involved in the speaker's speaking. 8 The other difficulty in the plaintiff's way in maintaining the claim he foreshadows against the seventh defendant derives from the fact that the relief that would be sought by para 13 of the proposed first amended originating process, by reference to the supposed complicity in conduct of the fifth defendant contrary to ss.182 and 183, is a "declaration of contravention" under s.1317E. Such declarations play a part in the civil penalty regime in Part 9.4B. 9 Section 1317E describes the circumstances in which a court must make a "declaration of contravention" and describes the content of such a declaration. Section 1317F affords a particular conclusive effect to matters specified in a declaration of contravention. Applications for such declarations are dealt with by s.1317J. It is made clear by s.1317J(1) that ASIC is a competent applicant. No one else is given standing to seek a declaration of contravention and, while the relevant corporation may, under s.1317J(3), intervene in an application for a declaration, it may not be heard on the question whether the declaration should be made. Section 1317J(4) says that no person may apply for a declaration of contravention unless permitted to do so by s.1317J itself. ASIC is thus the only competent applicant for a declaration of contravention and the only party entitled to be heard on the question whether the declaration should be made. 10 On two bases, therefore, the seventh defendant has made out an entitlement to the relief sought in the interlocutory process filed on 30 May 2002. Whether the matter be approached under Pt 13 r 5 or under Pt 15 r 26, the result is the same. No reasonably arguable cause of action of any kind is, either on the pleadings as they stand or by the proposed first amended originating process and first amended points of claim, asserted against the seventh defendant. The proceedings must be dismissed as against him. 11 I therefore make order 1 in the seventh defendant's interlocutory process filed on 30 May 2002. [Counsel addressed on costs] 12 The plaintiff has never articulated any remotely sustainable claim against the seventh defendant. It follows that the seventh defendant was made a party without any valid pretext whatsoever. The seventh defendant is obviously entitled to costs and I think that this is one of those cases in which indemnity costs are justified because of the total absence of any basis for having involved the seventh defendant at all. 13 The order therefore is that the seventh defendant's costs of this application and of the proceedings be paid by the plaintiff on the indemnity basis. 14 To the extent that is necessary to do so for the purposes of clarification, I order that the seventh defendant's costs may be assessed and are payable forthwith. 15 It is noted that the plaintiff has acknowledged that, as a result of this decision, the outstanding notice to produce directed by the plaintiff to the seventh defendant cannot and will not be called upon. 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