Supreme Court New South Wales Medium Neutral Citation: Stanton (WA) Pty Ltd (in Liq) v Vasquez Investments Pty Ltd [2016] NSWSC 1635 Hearing dates: 11 November 2016 Date of orders: 11 November 2016 Decision date: 11 November 2016 Jurisdiction: Equity - Commercial List Before: Beech-Jones J Decision: The Court: (1) Makes Order 1 in the Notice of Motion filed 9 November 2016. (2) Reserves the costs of the Motion to the Trial Judge Catchwords: SUBMITTING APPEARANCE – Application by second defendant for leave to file affidavit from managing director of sixth defendant – sixth defendant filed submitting appearance – whether attempt to circumvent UCPR 6.11 – whether evidence sought to be adduced potentially relevant to first and second defendants' case – leave granted Legislation Cited: Conveyancing Act 1919 (NSW) Property Law Act 1969 (WA) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Highland v Labraga (No 3) [2006] NSWSC 871 Category: Procedural and other rulings Parties: Stanton (WA) Pty Ltd (In Liquidation) (Plaintiff/Respondent) Vasquez Investments Pty Ltd (First Defendant) Bryve Resources Pty Ltd (Second Defendant/Applicant) Robert Paul Stanton (Third Defendant) Lachlan Townend (Fourth Defendant) Vasquez (WA) Pty Ltd (Fifth Defendant) Shareholder Services Pty Ltd (Sixth Defendant) Representation: Counsel: PT Russell (Plaintiff) D Barlin (Second Defendant) Solicitors: Ashurst Australia (Plaintiff) Judd Commercial Lawyers (First and Second Defendants) Submitting Appearances (Third to Sixth Defendants) File Number(s): 2016/247919 EX TEMPORE Judgment 1. HIS HONOUR: By Notice of Motion filed on 9 November 2016, the second defendant, Bryve Resources Pty Ltd ("Bryve"), seeks leave to rely on an affidavit of Anthony Lewis sworn 3 November 2016. Mr Lewis is the sole director of the sixth defendant, Shareholder Services Pty Ltd. 2. While the time for the service of affidavits by the first and second defendants has expired, the real basis for the opposition to leave being granted is that the sixth defendant has filed a submitting appearance and thus under Uniform Civil Procedure Rule 6.11 cannot take an active step in the proceeding, including filing an affidavit, except by leave. It is contended that this motion is an attempt to subvert the effect of that rule. 3. To address this it is necessary to say something further about the proceedings. The plaintiff, Stanton (WA) Pty Ltd (In Liq), was formerly the trustee of a discretionary trust known as the Stanton Investment Trust. According to the plaintiff's Commercial List Statement, on 31 March 2016 judgment was entered against it in the sum of $945,000. It was pleaded that that judgment debt was incurred by the plaintiff acting in its capacity as Trustee of the Stanton Investment Trust. It is also pleaded that, prior to the expiry of a statutory demand, the plaintiff was removed as the trustee of the Stanton Investment Trust and instead the first defendant, Vasquez Investments Pty Ltd ("Vasquez"), became the trustee. It seems that Vasquez has denied Stanton's claim that, as a former trustee, it was entitled to indemnity out of the trust assets to meet the judgment debt to which I have referred. 4. Of particular significance to this motion is the position of the second to sixth defendants. Prior to its removal as trustee of the Stanton Investment Trust the plaintiff was the sole registered shareholder of the second defendant, that is, Bryve. At some point it is alleged that it was arranged for those shares to be registered in the name of Vasquez in its capacity as the new trustee of the Stanton Investment Trust. It is further pleaded that the individuals associated with these trusts between 13 and 14 July 2016 caused to be issued 19,000 new shares in Bryve to a number of parties, effectively being the first defendant as well as the third to sixth defendants and that this was done to reduce the effectiveness of any indemnity claim by the plaintiff. It was pleaded that this was done with the intent of defrauding the plaintiff and is thus voidable under either s 37A of the Conveyancing Act 1919 (NSW) or its Western Australian equivalent, being s 89 of the Property Law Act 1969 (WA). 5. Each of the third to sixth defendants filed a submitting appearance pursuant to UCPR 6.11. Nevertheless, the second defendant seeks to rely upon an affidavit of Mr Lewis who, as I said, is the sole director of the sixth defendant. In his affidavit, Mr Lewis addresses the circumstances that led to the sixth defendant taking up the shareholding in Bryve in July 2016. In effect he states that, via an intermediary, he received an email issued by the company secretary of Bryve seeking subscriptions to allow Bryve to raise money to "realise interests" in another company that was the subject of a proposed deed of company arrangement. In his affidavit Mr Lewis states that the sixth defendant filed a submitting appearance as he did not want it to incur adverse costs orders and did not want to expend funds on legal fees. 6. The plaintiff submits that leave should not be granted to rely on this affidavit because it amounts to a contravention, or perhaps more correctly a circumvention, of UCPR 6.11, in that the proposed evidence of Mr Lewis is not relevant to, and cannot properly be relied upon in relation to, the issues that arise on the pleadings between the first and second defendants in answer to the plaintiff's claims. In response, the second defendant submits that UCPR 6.11 is not engaged, because the affidavit is from Mr Lewis and not the sixth defendant and, more specifically, it is not the sixth defendant who is seeking to file the affidavit but the second defendant. Most significantly, it says that one way or another neither the rules nor orders of the Court should operate to deny it the opportunity to present relevant evidence in answer to the plaintiff's case. 7. A counterfactual was posed to demonstrate this, namely that nothing in the UCPR purports to restrict the power of the Court to issue a subpoena to Mr Lewis. It was submitted that if he had relevant evidence the court would issue a subpoena and he could give that evidence at the trial. 8. One matter that was raised in the submissions concerned what the potential relevance of Mr Lewis' evidence to the first and second defendants' case is. These submissions appeared to reveal that, as between the parties, there is an underlying issue of principle as to whether it was open to the first and second defendants to not only deny that their actions were undertaken with an intent to defraud creditors but also to rely on the defence in s 37A(3) of the Conveyancing Act which prevents the section operating in relation to any estate or interest in property that is alienated to a purchaser in good faith who did not have notice of the intention to defraud creditors. 9. Counsel for the plaintiff submitted that in effect it was only the third to sixth defendants who could properly invoke s 37A(3) and that they clearly elected not to do so by filing submitting appearances. 10. On an application such as this one I do not think the Court should resolve a dispute of that nature. In my view, the question as to whether the first and second defendants could seek to defeat any part of the plaintiff's claim by pointing to s 37A(3) is a matter best left to the trial judge to determine. It should not be determined on an application that simply seeks to rely upon an affidavit. Otherwise, at least at this point, I can see the potential relevance of the evidence given by Mr Lewis to the first and second defendants' defence of the plaintiff's claim in at least explaining the circumstances in which his company came to subscribe for shares. It may be determined, although not necessarily will, that the evidence has some relevance to whether it can be demonstrated that the dilution of the shareholdings in the second defendant were done with an intent to defraud creditors. Once that conclusion is reached then the ultimate outcome of this motion must be that one way or another the affidavit can be relied upon. 11. Otherwise, I am sceptical that leave is in fact required under UCPR 6.11 given that at least, on its face, the party seeking to file the affidavit has not filed a submitting appearance. In those circumstances, I think it is perhaps unlikely that the rule was engaged. However, even if it was, in circumstances where on an interlocutory application a party who has not filed a submitting appearance can point to evidentiary material that is at least arguably relevant to its defence, I do not think that the Court should shut it out from relying on that material. 12. That said, a number of matters should be noted. If it should emerge that this is in effect a back-door attempt by the sixth defendant to circumvent the operation of UCPR 6.11, then its submitting appearance would be very unlikely to save it from incurring a costs order (see Highland v Labraga (No 3) [2006] NSWSC 871). Similarly, the potential may exist for Mr Lewis himself to be liable for costs, if it emerges that in effect he has sought to circumvent UCPR 6.11 by agitating for the first and second defendants to run a case on his behalf or that of the sixth defendant. One way or another that potential should be brought to Mr Lewis' attention sooner rather than later. 13. Counsel for the plaintiff also raised the point that discovery may now need to be sought against the sixth defendant in light of the affidavit that has been sworn. That may be the case, however, I do not think that that precludes the grant of leave to rely on the affidavit. The making of discovery orders against parties who submit is quite common. 14. Finally, I note that Counsel for the plaintiff sought orders which would have the effect of precluding the first and second defendants from relying upon this material in support of any argument under s 37A(3) of the Conveyancing Act, and precluding the first and second defendants from relying on that provision at all. It follows from what I have stated that I do not propose to impose any such limitation at this point. 15. Accordingly, the Court will make Order 1 in the Notice of Motion filed 9 November 2016. [Parties addressed on costs] 1. I reserve the costs of the Motion to the trial judge. ********** 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: 23 April 2018