Bettaway Financial Group Pty Ltd & Ors v Massaria & Anor [2013] NSWSC 961

Supreme Court New South Wales

Medium Neutral Citation: Bettaway Financial Group Pty Ltd & Ors v Massaria & Anor [2013] NSWSC 961 Hearing dates: Monday, 24 June 2013 Decision date: 24 June 2013 Jurisdiction: Equity Division - Duty List Before: White J Decision: Refer to paras [30]-[36] of judgment. Catchwords: PROCEDURE - judgments and orders - amending, varying and setting aside - interlocutory process heard in absence of defendants - whether sufficient explanation for failure to attend - defendants' solicitor failed to file notice of ceasing to act or notice of change of address for service - defendants unaware of hearing - whether arguable defence available Category: Interlocutory applications Parties: Rocco Massaria (Applicant) Tracy Lee Pollard (Respondent) Representation: Counsel: In Person (Applicant) J C Prowse (Respondent) Solicitors: MCW Lawyers (Respondent) File Number(s): 2011/280487

Judgment 1HIS HONOUR: This is an application to set aside orders made on 17 June 2013. Those orders were made in the absence of the defendants. 2The application is made pursuant to r 36.16 of the Uniform Civil Procedure Rules. 3On 17 June 2013 Nicholas J dealt with an interlocutory process filed by the third plaintiff, Ms Pollard. She sought orders said to be appropriate to give effect to the terms of settlement by which the proceedings had been resolved. Those terms were approved by Black J on 30 October 2012. The original claims had been brought by the two companies, the first and second plaintiffs, and by Ms Pollard, who was a director of those companies, and, I understand, a shareholder of companies that were shareholders of the first or second plaintiffs. 4The plaintiffs alleged that the first and second defendants had been in breach of statutory and fiduciary duties. A cross-claim had been brought by those defendants. 5The proceedings were resolved with the approval of the Court by the dismissal of the plaintiffs' claims against the first and second defendants and certain other defendants and dismissal of the cross-claim. The terms of settlement then provided: "The Court notes the agreement that the parties, in consideration of the orders referred to above, give mutual releases. The Court notes the agreement of the Plaintiffs on the one hand and the First, Second, Third and Fifth Defendants on the other that in notwithstanding the mutual releases and in consideration of the orders referred to above and the mutual paragraphs identified in the paragraphs below that: a) The Third Plaintiff and the First and Second Defendants do all things reasonably necessary and sign all such documents and participate in all necessary meetings so as to procure the transfer of the net proceeds of sale of the business of the First and Second Plaintiffs to the Third Plaintiff, provided that such obligation shall be conditional upon the terms of paragraph (b) below. b) That, for the avoidance of doubt, the said transfer occur only upon due satisfaction of (i) all obligations owed by the First and Second Plaintiffs to third parties being discharged; (ii) payment by the First and Second Plaintiffs to the relevant Trustee of any proper superannuation entitlements due to the Second Defendant and any other party entitled to payment of superannuation entitlements; (iii) the due release of the First of Second Defendants of all guarantees and indemnities that they may have given to secure the performance of the First or Second Plaintiff's obligations to third parties; and (iv) the finalisation of the affairs of the First and Second Plaintiff. c) That at the time of the said transfer, the First Defendant pay $30,000 at the direction of the Third Plaintiff, such direction being a direction in writing given on behalf of the Third Plaintiff by her solicitors in the proceeding. d) That each of the Third Plaintiff and the First Defendant deliver to the other of them a statement in writing within 7 days of the date of these orders identifying any known creditors of the First Plaintiff or the Second Plaintiff. e) That the third Plaintiff shall be entitled to retain the services of RMG Partners Accountants for the purposes of preparation and finalisation of necessary financial statements for the First Plaintiff and the Second Plaintiff, together with outstanding returns for income tax, other revenue obligations and returns under the superannuation guarantee legislation. f) That any question in dispute arising in respect of this settlement including the orders made is to be determined in these proceedings pursuant to section 73 of the Civil Procedure Act, to the intent that the court shall be entitled to make such orders as are appropriate to enable the carrying into effect of the foregoing agreement." 6There was no appearance for the first and second defendants on the hearing of the interlocutory process. The solicitors who had been acting for the first and second defendants, Lenehan & Co, filed a notice of intention of ceasing to act on 3 October 2012, but not a notice of ceasing to act. 7On 16 May 2013 Lenehan & Co advised the plaintiffs' solicitors, MCW Lawyers, that they no longer acted in the matter and all further correspondence should be referred to the first and second defendants at an address which was given. No notice of a change of address for service was filed in accordance with r 4.6. 8On 5 June 2013 the plaintiffs' solicitors served the interlocutory process and supporting affidavits by email on the solicitor at Lenehan & Co. In the covering letter they noted that Lenehan & Co had not filed and served a notice of ceasing to act and stated that that firm therefore remained the appropriate address for service of the documents. 9It is clear from the evidence of the first defendant, Mr Massaria, that the application was not brought to his or the second defendant's attention by Lenehan & Co. He was unaware of the application and it was for that reason that the first and second defendants were not represented at the hearing before Nicholas J. 10I do not think the first and second defendants were personally at fault because the plaintiffs' solicitors were not served with the appropriate form giving a new address for service. The plaintiffs' solicitors were aware that Lenehan & Co were not acting. They were aware of an address at which documents could be served on the first and second defendants. 11It is unfortunate and not conducive to the quick and cheap resolution of the proceedings that the documents were not served on the first and second defendants at their address given by Lenehan & Co, notwithstanding the latter's failure to file and serve the appropriate forms. 12The result is that the jurisdiction under r 36.16(2) is engaged. The result is delay and further costs. 13There is a satisfactory explanation for the non-appearance of the defendants at the hearing before Nicholas J. The question then is whether or not there is an arguable defence to the prayers of relief sought in the interlocutory process. 14Nicholas J said that he was satisfied that on the affidavits to which he was referred that the plaintiffs were entitled to the relief sought in orders 1, 3, 4, 5 and 6 of the interlocutory process. However, with the benefit of evidence from the defendants and submissions made by the first defendant on behalf of himself and his wife, I think there is an arguable defence to the plaintiffs' claims in the interlocutory process. 15One of the orders sought and made was that the first defendant, as a director of the first and second plaintiffs, execute a notice of assignment to a company called Iden Loan Services Pty Ltd of further payments due to the first and second plaintiffs. The notice of assignment was required to be executed in favour of Ms Pollard, the third plaintiff. 16Paragraph a) of the terms of settlement provided, relevantly, that the first and second defendants should do all things reasonably necessary to procure the transfer of the net proceeds of sale of the business of the first and second plaintiffs to the third plaintiff. Iden Loan Services Pty Ltd is the purchaser of that business. 17Further payments are due under the agreement for sale. However, the obligation in para a) of the terms of settlement that the first and second defendants do everything reasonably necessary to transfer the net proceeds of sale is expressed to be conditional on the terms in para b). Paragraph b) provides that for the avoidance of doubt, the transfer only occur upon due satisfaction of four things. The fourth thing is the finalisation of the affairs of the first and second plaintiff. 18The obligation under para a) is to transfer the net proceeds of sale, not to transfer the first and second plaintiffs' right to receive the net proceeds of sale. As the obligation to transfer the net proceeds is conditional upon the finalisation of the affairs of the companies, it is at least seriously arguable that the obligation does not arise until the proceeds of sale have been received by those companies. 19The affidavit of Ms Pollard in support of the interlocutory process annexed correspondence with a firm called Gillard Consulting Lawyers in March 2013 in which that firm stated that they acted for a company that was a creditor of the first plaintiff, being entitled to trailing commission under an agreement with the first plaintiff. 20The plaintiffs' solicitor wrote to Gillard Consulting Lawyers on 21 March 2013 asserting that a copy of an agreement provided by Gillard Consulting Lawyers on which their client was relying was not a document contained in records maintained by the first plaintiff. It was not properly executed by the first plaintiff because it was signed only by the first defendant who was only one of two directors. The plaintiffs' solicitors also said that while the agreement produced purported to be with the client of Gillard Consulting Lawyers, that company was not otherwise named in the body of the agreement. The plaintiffs' solicitors said that the plaintiff's record showed that the first plaintiff had entered into an agreement with a similarly named company which was now deregistered and there was no record of any agreement with the company named by Gillard Consulting Lawyers. They also asserted that the first plaintiff had exercised that power in any event under the agreement to vary trail commissions to nothing. 21Ms Pollard deposed that she believed no further communication had been received from Gillard Consulting Lawyers. 22I think it is seriously arguable that the mere absence of any further correspondence from Gillard Consulting Lawyers in respect of that claim may not mean that the affairs of the first and second plaintiffs have been finalised. 23In the course of submissions Mr Massaria also said that there were other brokers to whom the first and second plaintiffs owed trail commissions. There was, however, no evidence about that on this application and I note that para d) of the terms of settlement required Mr Massaria to deliver to Ms Pollard by 6 November 2012 a list of known creditors. 24Two other matters arise either in the evidence adduced on this application or on the evidence filed in support of the interlocutory process. The first is that the second defendant, Mrs Massaria, had asserted by an email of 23 April 2013 to Ms Pollard that she was entitled to unpaid long service leave. She also raised an issue in relation to her superannuation entitlements. 25Ms Pollard's position appears to be that any entitlement to long service leave of Mrs Massaria has been extinguished by the agreement of the parties to give mutual releases. 26I think there is an arguable question as to the construction of that clause of the agreement. There is an arguable defence that the reference to mutual releases is to mutual releases of claims which were the subject of the statement of claim and cross-claims which were dismissed. 27So far as Mrs Massaria's claim to superannuation is concerned, there is no real evidence that her claimed entitlement to superannuation has been met by a transfer of the appropriate funds to a trustee of her superannuation fund. There is an assertion to that effect in the correspondence from the solicitor for Ms Pollard, but no evidence as to the facts to support that assertion. 28Mr Massaria also today makes a claim for unpaid superannuation. An answer advanced by the solicitor for Ms Pollard is that that claim has no weight because it had not previously been advanced. On the other hand, Mr Massaria has sworn to there being outstanding superannuation that should be paid to the trustee of his superannuation fund and there is a triable question about that. 29Accordingly, there being arguable defences to the claims made in the interlocutory process and as there is a sufficient explanation for the defendants' failure to attend at the hearing before Nicholas J, the orders made on 17 June 2013 should be set aside. 30I order that the orders made on 17 June 2013 be set aside. 31I order that the plaintiffs serve any further affidavits proposed to be relied upon in support of the interlocutory process by 8 July 2013. 32I order that the first and second defendants serve any affidavits in opposition to the relief claimed in the interlocutory process by 22 July 2013. 33Any affidavits in reply are to be served by 29 July 2013. 34I stand the matter over into the corporations list before the Registrar on 5 August 2013. 35I order that the third plaintiff pay the first and second defendants' costs of the notice of motion filed on 21 June 2013. 36The exhibits tendered on this application may be returned. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 July 2013