Barbatano v Firm Construction Pty Ltd

[2023] WASC 37

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   BARBATANO -v- FIRM CONSTRUCTION PTY LTD [2023] WASC 37

CORAM:   HILL J

HEARD:   6 FEBRUARY 2023

DELIVERED          :   6 FEBRUARY 2023

PUBLISHED           :   15 FEBRUARY 2023

FILE NO/S:   CIV 1070 of 2023

BETWEEN:   FRANCESCO BARBATANO

Plaintiff

AND

FIRM CONSTRUCTION PTY LTD

Defendant

Catchwords:

Practice and procedure - Application for leave to commence an action for personal injuries against a company under external voluntary administration - Limitation period about to expire - Whether leave should be granted - Turns on own facts

Legislation:

Corporations Act 2001 (Cth) s 500(2)

Result:

Application granted

Category:    B

Representation:

Counsel:

Plaintiff	:	A J Stewart
Defendant	:	No appearance

Solicitors:

Plaintiff	:	Slater & Gordon
Defendant	:	No appearance

Case(s) referred to in decision(s):

Latimer v Cutwood Panels Pty Ltd (in liq) [2012] WASC 408

HILL J:

(This judgment was delivered extemporaneously and has been edited from the transcript.)

1. This is an application made by the plaintiff pursuant to s 500(2) of the Corporations Act 2001 (Cth). The plaintiff seeks leave to commence proceedings in the District Court of Western Australia against the defendant.

Factual background

1. The application was made by an originating motion filed 25 January 2023 and is supported by two affidavits:  an affidavit of Ruzica Condelli, a solicitor for the plaintiff, filed 25 January 2023 and an affidavit of Michael David Raw filed 3 February 2023.

2. Jerome Mohen and Gregory Dudley, both partners of RSM Australia, were appointed as voluntary administrators of the defendant on 24 November 2022, and the defendant continues to be under external voluntary administration.[1]

   [1] Affidavit of Ruzica Condelli filed 25 January 2023, 'RC4', 'RC9'.

3. The plaintiff was employed as a concreter by Barbatano Construction to perform work at the construction of the Samphire Resort at Rottnest Island.  Ms Condelli deposes that on or about 12 February 2020, the plaintiff suffered injuries in an accident which occurred at the construction site.[2]  At the time of the accident, the plaintiff's solicitors believe the site was occupied and controlled by the defendant.[3]

   [2] Affidavit of Ruzica Condelli filed 25 January 2023 [4] - [13].

   [3] Affidavit of Ruzica Condelli filed 25 January 2023 [17].

4. The plaintiff's action against the defendant for damages in relation to personal injury allegedly suffered on 12 February 2020 must be commenced on or before 11 February 2023.

5. The affidavits filed by the plaintiff annexe correspondence between the plaintiff's solicitors and the voluntary administrators regarding the availability of an insurance policy.  On 3 February 2023, they were advised that at the relevant time, the defendant had public liability insurers, namely QBE Insurance (Australia).[4]

   [4] Affidavit of Michael David Raw filed 3 February 2023, 'MR1'.

6. The affidavit evidence reveals that the defendant has notice of the plaintiff's claim,[5] however, it is not clear whether the company's defence is being conducted by the insurer.

   [5] Affidavit of Ruzica Condelli filed 25 January 2023, 'RC5'.

7. Notice has been given to the administrators of the defendant company of the intention to make this application on behalf of the plaintiff.  The administrators have indicated they do not intend to participate in these proceedings and will abide the decision of the court.[6]

   [6] Affidavit of Ruzica Condelli filed 25 January 2023, 'RC9'.

Applicable legal principles

1. In Latimer v Cutwood Panels Pty Ltd (in liq),[7] Beech J outlined the principles relevant to an application under s 500(2) for leave to proceed against a company in liquidation in the following terms:

   [7] Latimer v Cutwood Panels Pty Ltd (in liq) [2012] WASC 408 [6] - [14].

   6Section 500(2) of the Corporations Act provides that after the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court imposes.

   7Like provision in respect of companies being wound up in insolvency or by the court is made in s 471B.  The same principles govern the grant of leave under these sections.

   8Part of the purpose of the requirement of leave is to avoid a company in liquidation being subject to a multiplicity of time consuming and expensive actions:  Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314, 315 - 317; Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550, 555; Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266 [21].

   9The discretion to grant or refuse leave is broad. It is not possible or appropriate to attempt to state exhaustively the relevant considerations.  Among the relevant considerations are the amount, seriousness and nature of the claim; the degree of complexity and legal factual issues, and the stage the proceedings have reached:  Re Gordon Grant (317); Viscariello [21]; Lawless v Mackendrick [No 2] [2008] WASC 15 [35]; Duke v Rain Bow Pty Ltd [2011] VSC 599 [19].

   10It has often been said that there must be no prejudice to the creditors, or to the orderly winding up of the company, before the action is allowed to proceed:  Re Gordon Grant and Grant Pty Ltd (in liq) (1982) 6 ACLR 727, 730; Re Sydney Formworks Pty Ltd (in liq) [1965] NSWR 646, 649 - 650; Re AJ Benjamin Ltd (in liq) [1969] 2 NSWR 374, 376; Duke v Rain Bow Pty Ltd [20].

   11In Haviland v Joslow (No 4) Pty Ltd [1979] 2 NSWLR 318, 319 Needham J stated that the court should not grant leave to proceed or to commence proceedings against a company in liquidation if it appears there is no possibility that the company will be able to meet any part of damages awarded against it. That was said to be based on the principle that the court should not give its imprimatur to fruitless proceedings which would involve a waste of time and money. That statement of principle has been cited in a number of cases since. See, for example, Maher v Taylor [1984] 1 NSWLR 231, 233; ASIC v Managed Investments Ltd (No 2) [2012] QSC 72 (pages 2 - 3).

   12In Re AJ Benjamin (376), Street J stated that there would be a good reason to refuse leave when there is no prospect of surplus assets in the company and no question of insurance.  That statement was cited with approval in Maher v Taylor (234).

   13The position is different if there is an insurer standing behind the company in liquidation that will pay the amount of any judgment awarded.  That has been said to be a factor strongly favouring the grant of leave, as in those circumstances, the grant of leave will generally not prejudice creditors:  Lawless v Mackendrick [No 2] [37]; Re AJ Benjamin; Re Sydney Formworks; Re Coastal Constructions Pty Ltd (1994) 13 ACSR 329.

   14A claimant seeking leave need only to demonstrate a serious question to be tried: Vagrand Pty Ltd v Fielding (556).

2. I adopt and apply the principles outlined by Beech J in the determination of this application.

Disposition

1. Having regard to the affidavit material before me, I am satisfied that the plaintiff has demonstrated that there is a serious question to be tried.  There is evidence of injury that is above the threshold in Western Australia for the commencement of common law proceedings.

2. In considering this application, I have weighed in the balance the nature of the plaintiff's claim, its seriousness, and the status of the defendant company, a company under external administration.  In this case, there is evidence of an insurance policy that was in place at the time the alleged incident occurred.  The willingness of the insurer to respond, the breadth of the coverage and whether or not it will ultimately respond to the claim are matters which cannot be discerned from the affidavit material.

3. To address this issue, the plaintiff proposes a form of order which will provide a 'safety net' for the company and its creditors broadly.  Order 2 of the plaintiff's originating motion contemplates the plaintiff will not be permitted to enforce any judgment that ultimately might be secured against the defendant without leave of this court.  It is envisaged that upon enforcement, the court may revisit the matter of insurance and whether the insurer will meet any judgment sum.

Conclusion

1. In all of the circumstances, I am satisfied that there is a serious question to be tried.  The evidence in relation to the insurance tips the balance in favour of leave being granted.  In all of the circumstances and for these reasons, I propose to make orders in the terms sought by the plaintiff in his originating motion.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

FD

Associate to the Honourable Justice Hill

15 FEBRUARY 2023