Unconventional Conventions Pty Ltd v Accent Oz Pty Ltd [2004] NSWSC 1101

Reported Decision : 52 ACSR 95

New South Wales Supreme Court

CITATION : Unconventional Conventions Pty Ltd v Accent Oz Pty Ltd [2004] NSWSC 1101 HEARING DATE(S) : 17 November 2004 JUDGMENT DATE : 17 November 2004 JURISDICTION: Equity JUDGMENT OF : Hamilton J DECISION : Application to file cross claim refused.

CATCHWORDS : CORPORATIONS [20] - Constitution and legal capacity - External litigation - Claim by shareholder against third party - Joinder of company as claimant - Necessity for. LEGISLATION CITED : Corporations Act 2001 (Cth) ss 236, 237 CASES CITED : Carpenter v Pioneer Park Pty Ltd [2004] NSWSC 1007 Foss v Harbottle (1843) 2 Hare 461; 67 ER 189 Unconventional Conventions Pty Limited (P) PARTIES : Accent Oz Pty Limited (In Liq) (1D) David Blogg (2D) Karyn Rae Matterson-Blogg (3D) FILE NUMBER(S) : SC 2586/02 D P Robinson SC (P) COUNSEL : K Pringle, Solicitor (1D) No appearance (2D) In person (3D) Access Business Lawyers (P) SOLICITORS : Gordon & Johnstone (1D) In person (2D) In person (3D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

WEDNESDAY, 17 NOVEMBER 2004

2586/02 UNCONVENTIONAL CONVENTIONS PTY LTD v ACCENT OZ PTY LTD & ORS JUDGMENT 1 HIS HONOUR: Before me in these long running proceedings is an application by the third defendant to file a cross claim. As well as the proceedings having a lengthy history, the application for the filing of the cross claim has a lengthy history. The case has already proceeded before me for some days, has been stood over for some time, and is due to resume for further hearing on Monday next, 22 November 2004. 2 There was a debate before me on 14 October 2004 about a cross claim in similar form to that propounded today, but with some differences. At that time I indicated that I should not be inclined to grant leave to file a cross claim including causes of action against the second and third cross defendants, Mr Cunich and Dr Cunich, on the ground that there was no adequate statement of a cause of action against either of them contained in the document as it then stood. 3 The third defendant has since that time removed from the document certain prayers relating specifically to the heads of cross claim against the second and third cross defendants. Unfortunately, the substantial paragraphs relating to those matters remain in the document and there remains a prayer for damages, which would be the normal and natural form of relief did those causes of action succeed. Furthermore, Mr Cunich and Dr Cunich remain named as cross defendants in the form of cross claim laid before me today. 4 In addition to Mr Robinson, of Senior Counsel for the plaintiff and for Mr Cunich and Dr Cunich, appearing today to oppose the grant of leave to file the cross claim as now formulated, Mr K Pringle appears for the liquidator of the first defendant to join in that opposition. The cross claim purports to state causes of action against the plaintiff arising out of the contractual relations between the plaintiff and the first defendant. The first defendant is now in liquidation and not actively participating in the proceedings. It must be inferred that the liquidator has chosen not to pursue in the company's name cross claims of the sort which the third defendant now seeks to bring forward on the company's behalf. 5 The law relating to derivative proceedings on behalf of a company has now been codified in Part 2F.1A of the Corporations Act 2001 (Cth) ("the CA"). By s 236(3) the CA abolishes the right at general law of a person to bring proceedings on behalf of a company, which was previously regulated by the rule which was known as the rule in Foss v Harbottle (1843) 2 Hare 461; 67 ER 189. It provides instead a statutory right under s 236(1) for a person in classes that are specified to "bring proceedings on behalf of a company". Although subs (1) talks of bringing proceedings on behalf of a company, s 236(2) in terms makes it quite plain that the proceedings "brought on behalf of a company must be brought in the company's name". The company is not named as a cross claimant in the form of cross claim laid before me today, nor was it named as a cross claimant in the form of cross claim laid before me on 14 October 2004. This vice has not been cured in the interval. 6 In my view the vice is absolutely fatal to the bringing of the cross claim relating to the contractual relations. What I have said is borne out in the recent decision of Barrett J in Carpenter v Pioneer Park Pty Ltd [2004] NSWSC 1007. There his Honour made orders in favour of a director and shareholder that that person "be granted leave to bring proceedings on behalf of the company". But the order was made by reference to a form of Commercial Court summons which was laid before the Court and in which the company was named as plaintiff: see [12]. The order was made in the form in which Barrett J made it because that is the appropriate form for the granting of leave in view of the terms of ss 236 and 237 of the CA. But, as in that case, the proceedings for which leave was granted must always be proceedings brought in the name of the company. 7 We are now less than a week from the recommencement of this trial. I have been anxious and I think diligent to ensure that between these parties all potential issues, particularly issues relating to the contractual relations between the plaintiff and the first defendant are dealt with. Every opportunity has been given to the third defendant to bring in a cross claim in a form which meets the requirements of the rules as to pleading. A narrow or particular view of those rules has not been adopted by the Court or even, should I say, the plaintiff in submissions made upon this application. But the substance of the requirements of the rules and of relevant procedural statutes must be met. A manifestly inadequate or garbled document will serve only to embarrass the conduct of proceedings already redolent with difficulties. 8 The third defendant has said that, given until 2 o'clock, she could cure the objections now raised with the stroke of a key on a computer key pad. Even if this were so, I should be reluctant to allow that time when opportunities have already been given for the cure on more than one occasion and bearing in mind the nearness of the trial. But I do not in any event believe that all the problems that face this cross claim can be cured so simply. I have already indicated that, despite the passage of time, there is no adequate statement of any cause of action against either the second cross defendant or the third cross defendant or anything approaching such an adequate statement. In any event, the third defendant now eschews reliance upon those causes of action. But in relation to the contractual causes of action, although I have not gone into them in detail, because of the decisive nature of the vice arising from the provisions of s 236(2) of the CA, there are other problems arising with the statement of those causes of action, which I am far from sure could be solved in a short time. To suggest that simple typing in of the name of the company as a cross claimant would solve the s 236 and s 237 problems is not correct. Leaving aside many other problems that the cross claim faces, very considerable recasting of the portions of the cross claim relating to the contractual issues would have to be engaged in. 9 Equally, I do not think that there is in what is before me material that would enable me to proceed to a grant of leave under s 237 of the CA, which would be a necessary precondition to the filing of the cross claim. 10 The Court is not without sympathy for the difficulties of a litigant in person, in the position in which the third defendant finds herself. An increasing number of persons find themselves in those sorts of difficulties in complex and difficult proceedings in this highest court in the State because of the severely contracted availability of legal aid. However, the Court must be cautious when faced with those difficulties. Whilst I have made suggestions in the past as to the removal of certain elements in the document, as perhaps in improving the document's chances of passing muster and leave being granted for it to be filed, it is not a function of the Court to draw documents for any litigant, whether a litigant in person or a litigant whose legal representatives are having difficulties in formulating the documents. Equally, whilst, as I have said, there may be room for not applying the full rigor of a particular approach to rules of pleading, the Court must not yield to any temptation to allow documents to be filed, whose provisions are deficient or unclear, because they appear to represent the best efforts of a litigant in person. The admission of such documents can only further complicate the difficulties in trials already difficult. 11 As I have said, opportunities have been given to the prospective cross claimant to improve her cross claim. Now, less than a week before the trial, it falls to me simply to rule upon whether the cross claim now brought forward is a document fit to be filed. For the reasons I have given, it is not. The application for leave to file the cross claim is refused. 12 I have observed on an earlier occasion that, insofar as there are allegations about the terms of the contractual relations between the parties contained in the form of cross claim, they reflect matters already in play in the proceedings as they have been conducted to date. The third defendant will not be precluded by my refusal of leave to file the cross claim from continuing to defend the proceedings in the way that she has done up to this stage. It may be that she is precluded from seeking positive relief by way of judgments in the company's favour for sums of money, based upon claims which she says the company has against the plaintiff under the terms of the contractual arrangements. That may be unfortunate, but if those claims cannot be stated in a way which meets the basic provisions, of the pleading rules and other statutory provisions, then that, unfortunately, is the result that is inevitable in the situation. 13 The order that I propose is that the third defendant's application to file the cross claim in the form of Exhibit A10 be refused. I shall order that the third defendant pay the costs of the plaintiff, the first defendant and Mr Cunich and Dr Cunich of that application.