Black v Hays Personnel Services (Australia) Pty Ltd - [2008] WADC 32

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: BLACK -v- HAYS PERSONNEL SERVICES (AUSTRALIA) PTY LTD & ORS [2008] WADC 32

CORAM: DEPUTY REGISTRAR HARMAN

HEARD: 17 JANUARY 2008

DELIVERED : 25 FEBRUARY 2008

FILE NO/S: CIV 1970 of 2005

BETWEEN: NIGEL BLACK
Plaintiff
AND
HAYS PERSONNEL SERVICES (AUSTRALIA) PTY LTD (ACN 001 407 281)
First Defendant
WANZENG PTY LTD t/as SINEWAVE ELECTRICAL (ACN 093 022 845)
Second Defendant
HAMERSLEY IRON LTD (ACN 004 558 276)
Third Defendant
KOUNIS METAL INDUSTRIES PTY LTD (ACN 008 701 335)
Fourth Defendant
SIEMENS PTY LTD
First Third Party
ALLIANZ AUSTRALIA INSURANCE LTD
Second Third Party
ACN 066 045 645 PTY LTD
Third Third Party

Catchwords:

Practice - Western Australia - Practice under the Rules of the Supreme Court of Western Australia - Application to strike out statement of claim alternatively for summary judgment - Corporations Act Pt 5.3A - Deed of company arrangement - Whether a claim brought in third party proceedings seeking an indemnity is a claim for the purposes of the deed similarly in the case of a claim under the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1974

Legislation:

Corporations Act 2001
Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1974

Result:

Application successful

Representation:

Counsel:

Plaintiff:     No appearance
First Defendant              :     No appearance
Second Defendant         :     No appearance
Third Defendant            :     Ms C Elphick
Fourth Defendant           :     No appearance
First Third Party            :     No appearance
Second Third Party       :     No appearance
Third Third Party           :     Mr P McGowan

Solicitors:

Plaintiff:     Hoffmans
First Defendant              :     McAuliffe Legal
Second Defendant         :     SRB Legal
Third Defendant            :     DLA Phillips Fox
Fourth Defendant           :     Pynt & Partners
First Third Party            :     Pynt & Partners
Second Third Party       :     Jarman McKenna
Third Third Party           :     Christensen Vaughan

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

Brash Holdings Ltd v Katile Pty Ltd (1994) 12 ACLC 472
Chamberlain v Deputy Commissioner of Taxation (1998) 164 CLR 502
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589

DEPUTY REGISTRAR HARMAN: The plaintiff's claim against each defendant is for damages for personal injury which he suffered on 30 March 2003. The third defendant has issued proceedings against the third‑third party claiming an indemnity for, alternatively contribution to any judgment awarded against it. That third party has issued the application presently before me by which it seeks to strike out the defendant's amended statement of claim on the grounds that it discloses no reasonable cause of action or is vexatious. Alternatively it seeks judgment under O 16. The grounds of the application are as follows:
"A. Any claim that the Third Defendant may otherwise have had has been forever released, discharged and extinguished by the deed of company arrangement dated 13 May 2005 between … (and here a number of parties are mentioned).
B. The claim against the Third‑Third Party by the Third Defendant has no prospect of success."
On each part of the application the applicant carries the onus.
The relevant deed of company arrangement is dated 13 May 2005. In it the expression "creditors" is defined to mean all creditors of the third party as at the admissible claim date; "claim", to mean any debt, claim or liability, present or future, certain or contingent, ascertained, or sounding in damages; and the "admissible claim date" is 15 March 2005, which for the purposes of the operative parts of the deed is the day on or before which claims must have arisen. The operative parts are as follows:
"16.1(a)All Creditors' Claims against the Company as a result of anything done or omitted by or on behalf of the Company before the Admissible Claim Date will be forever released, discharged and extinguished on and from the Commencement Date, …
18This Deed will be pleaded by the Company against any Creditor in bar of any Claim the subject of this Deed which is not admitted or established under the provisions of this Deed."
As to each case put by the defendant, the third party submitted that the recourse that it seeks are claims to which the deed responds. In advancing that submission it drew not only on the undisputed facts upon which the third party proceedings are founded but also on the reasoning expressed by the Full Court of the Supreme Court of Victoria in Brash Holdings Ltd v Katile Pty Ltd (1994) 12 ACLC 472, when it engaged in a process of discerning the intended impact of Part 5.3A of the Corporations Act.
Section 435A by which that part is introduced is as follows:
"The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a)maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b)if it is not possible for the company or its business to continue in existence ‑ results in a better return for the company's creditors and members then would result from an immediate winding up of the company."
At Division 10 of that Pt, s 444A states:
"(1) This section applies where, at a meeting convened under section 439A, a company's creditors resolve that the company execute a deed of company arrangement."
According to s 444A(4), one of the matters to be specified in such a deed is:
"(i)the day (not later than day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed."
Section 444D(1) is expressed under the heading "Effect of a deed on creditors" and is as follows:
"A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i)."
Although not found in that Part, s 553(1) had a significant bearing on the process of interpretation followed by the court. It is as follows:
"Subject to this Division, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company."
In Brash Holdings Ltd (supra) it was proposed that the company would enter into a deed of company arrangement and subsequently default in its obligations to various lessors. The court had been asked to consider whether such prospective future defaults would amount to claims for the purposes of s 444D(1). The particular questions taken on appeal and a précis of the court's response are set out in the head note as follows:
"Who are creditors in terms of sub-sec 444D(1)?
(1)The words 'all creditors' in subsec 444D(1) were not limited to creditors whose claims arose on or before the date specified in the deed. The expression included all of the creditors for the time being of the company.
(2)'[A]ll creditors' were those who would have been creditors if the company had gone into liquidation with the relevant date (for the purposes of sec 553) having being the date specified in the deed: Re Southern Australia Perpetual Forrest Ltd [1971] VR 475 applied.
What are 'claims arising on or before the date specified in the deed'?
(1)The phrase 'claims arising on or before the date specified in the deed' was a legislative attempt to set the relevant date for the purposes of sec.553. It implied no temporal limitation on future claims other than that they must be ascertainable as at the relevant date.
(2)The use of 'claims' as a descriptive term did not limit the scope of sec 444D."
The analysis undertaken by the court commences at p 478 as follows:
"In our opinion, the reference to 'all creditors' in s.444D(1) must be read and understood in the context of all other references to 'creditors' in Part 5.3A. What has so far been described is sufficient to show that the general scheme of the Part is to involve the company's creditors, without further limitation or description. The word 'creditors' should in the absence of any good reason otherwise, be read as used in the same since throughout Part 5.3A, and it is difficult to suppose that sections, drawn so widely as, for instance, s.435A (describing the object of the Part) had in mind anything less than all of the creditors for the time being of the company. Thus s.435A discloses an intention to ensure, in certain circumstances, 'a better return for the company's creditors and members'. Section 438A, in spelling out the administrator's task to consider the three options to be presented to the second meeting of creditors, requires him to form an opinion about what is 'in the interests of the company's creditors'. Moreover, one of these options is to resolve that the company be wound up, a power simply conferred upon 'the creditors' by s.439C: see also s.435C (2) as well as s.438A. Section 445F, which has not so far been mentioned, authorises the administrator of a deed of company arrangement to convene 'a meeting of the company's creditors' and that meeting, too, has power (under s.445E) to resolve 'that the company be wound up'. Whether the resolution be passed under s.439C(c) or under s.445E, the effect is the same by virtue of s.446A: the company is taken to have passed a special resolution under s.491 of the Corporations Law that the company be wound up voluntarily (and to have done so without a declaration of solvency under s.494), s.497 is taken to have been complied with and for the purposes of s.499(1) the company is taken to have nominated the administrator to be liquidator and the creditors are taken not to have nominated anyone. All this provides compelling reason for supposing that 'the creditors' upon whom such powers are conferred are not substantially different from 'the creditors' mentioned in relation to voluntary winding up, in Part 5.5 of the Law. It may be that under Part 5.3A 'the creditors' have greater power as regards the initiation of the winding up of the company than they do under Part 5.5; but that only provides more, rather than less reason for supposing that 'the creditors' are not substantially different under the two Parts. It would be more surprising not less, if the additional power conferred upon 'the creditors' by Part 5.3A was conferred upon a significantly narrower group than that having power under Part 5.5."
It then went on to consider the impact of the submissions of the parties and concluded at p 480 as follows:
"In our opinion, the appellants' submission should be accepted. Once it is decided, for the reasons we have given, that the expression 'all creditors' in s.444D(1) should not be confined to those having claims for monies sums due and payable on or before the day specified in the deed, we see no alternative but to treat the creditors of the company for the purposes of Part 5.3A as those who would have been creditors had the company gone into liquidation and the relevant date for the purposes of s.553 been the day specified in the deed.
…
Thus far, we have dealt with the primary argument of the respondents that 'all creditors' should be narrowly confined. The respondents put an alternative submission that, if that was rejected, then the expression 'claims arising on or before the date specified in the deed' should be confined to claims falling due and payable on or before the day specified in the deed and not afterwards. This would be sufficient to exclude, in the present case, all claims for future rent; for the date specified in the deed can not be a day later than that on which the administration began. But, the conclusion having been reached that those who are creditors for the purposes of s.444D(1), so that they are bound by the deed of arrangement, are all those having debts or claims within s.553(1) (as if the relevant date mentioned therein were the day specified in the deed), it follows we think, that the reference s.444(D)(1) to 'claims arising on or before the day specified in the deed' is no more than a legislative attempt to fix that day as 'the relevant date' for the purposes of s.553. Section 553 speaks of 'debts or claims the circumstances giving rise to which occurred before the relevant date' and we think that there is no material difference between that expression and the one adopted in s.444(D), which is 'claims arising on or before the day specified in the deed'. Whether the question is in respect of what claims a deed of company arrangement binds creditors or what claims are admissible to proof against company in liquidation (at least if that company insolvent), the legislation must either directly or indirectly fix a date as at which the existence of the claim is to be determined. This is so whether or not future and contingent claims are to be recognised; for even a future or contingent claim is something the existence or non existence of which at the present time is to be determined. The very nature of a future debt involves a comparison of the creditor's right which exists now with the same creditor’s right which will arise in the future. A false emphasis has been given to the words s.444(D)(1) which impose a temporal limitation. Similar words appear of necessity in s.553(1). The words of s.444(D)(1), 'arising on or before the day…', do not, with respect, support the conclusion, which commended itself to his Honour, that the subsection does not comprehend future or contingent debts or claims."
The Court concluded at p 482 as follows:
"For the reasons we have given, we consider that a deed of company arrangement, if entered into by any of the appellants, will, by virtue of s.444D(1) of the Corporations Law bind, so far as concerns all debts and claims hereinafter mentioned, all those persons who on the day specified in the deed had debts or claims that would have been provable in the winding up of the company under s.553 if the 'relevant date' mentioned had been the day specified in the deed."
The substantive issue for determination is whether the defendant's claims fall within the scope of the deed. The procedural consideration is whether it would be appropriate for the court to now determine that issue.
As to the procedural consideration I am conscious of caution often expressed that the process of interpretation is appropriately left for trial. In this case trial is listed in three months time. Against that consideration I am satisfied that the facts as they would be revealed at trial will be as they have been presented before me. Ultimately the procedural consideration would be resolved by an exercise of discretion.
As to the substantive issue I ought to be satisfied that Brash Holdings Ltd speaks authoritatively to the statutory landscape. In reaching its conclusion the court considered the intended impact of the introduction of Pt 5.3A and the context in which it would operate. The interpretation given to s 444D(1) was informed by consideration that it was appropriate that there was consistency in constituting creditors for particular purposes. Ultimately the third party contended that an interpretation of the terms of the deed in line with the reasons given in Brash Holdings Ltd would reveal the defendant's case as unsustainable.
Although there is no express reference to the fact, the deed draws its authority from Pt 5.3A of the Corporations Act 2001. Section 444(1) speaks to the third party's creditors. In my opinion there is no reason to consider that s 444D(1) would be accorded any reading other than was given to it in Brash Holdings Ltd. In the deed "claim" is defined by the same terminology that the court in that case adopted from s 553 of the Act. That suggests that in the process of putting the deed in place it had been intended that the reasoning that bore upon the court's determination also spoke to the intention of the parties to the deed. The definition given to the term "creditors" would also permit the same process of identification adopted by the court. The operative provisions are expressed in similar terms to those suggested by s 444D(1).
In determining the substantive issue consideration is properly be given to the significance of the word "creditors" in the expression "creditors claims" in cl 16.1(a). One interpretation of the clause is that the word is superfluous as the clause would have some, conceivably the same utility if it simply referred to "claims". It would be inconsistent with the approach to interpretation adopted in Brash Holdings Ltd to consider that the word would limit the scope of claims to which cl 16.1(a) refers and there is nothing to suggest that the word was intended to have that effect. All of the indications are to the contrary. The strongest indication is the context in which the deed was put into effect and its nature. In Brash Holdings Ltd the only limit on the reading of the word "claims" was to the extent that they be ascertainable. The meaning of the word "creditors" is that would simply encompass those persons who would properly be regarded as being affected by winding up: that is, those who in that context would be accorded recognition as parties with an actual interest in that prospect. In my opinion there would be no reason to consider the purpose of the deed was to achieve any different result than that found in relation to s 444D(1) by the court in Brash Holdings Ltd. There is no reason to limit the expression "creditors" claims so as to exclude other than existing causes of action.
The defendant's particular submission was that it would not properly be regarded as having been a creditor of the third party at the operative date, and it was my understanding, that it would not now be accorded that status by the third party proceeding. Those two considerations are interwoven.
The defendant's claim for indemnification is founded upon two mechanisms. The first is a provision in an agreement between the defendant and the third party dated 28 February 2000. The second and also the alternative claim for contribution are brought under the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947on the basis that the third party is a joint tortfeasor regardless of the fact that no claim has been put against it by the plaintiff.
The defendant submitted that for the purposes of the contractual indemnity mechanism, until it paid the plaintiff it had no cause of action against the third party. In advancing that submission it drew on part of the following passage from Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at p595:
"Although the right to an indemnity arises on payment of the liability to which it relates and not before, this is not a bar to the litigation as between a defendant an a third party, or as between defendants, of a claim based on an indemnity in respect of a liability in negligence asserted by the defendant in his action. It is accepted that under so‑called 'third party procedures' of the kind provided for by O.16A, the claim to an indemnity may be litigated in the plaintiff’s action, notwithstanding that the payment creating the right to indemnity is not made until after the amount of the plaintiff's verdict is ascertained in that action. It has been repeatedly affirmed that one of the peculiarities of third party procedure is that it enables litigation on the indemnity to take place before there is any liability ... Consequently, the fact that liability under the indemnity had not arisen was no bar to the Authority asserting its claim to an indemnity in (the action) by means of a notice served on Anshun under …"

In that case, the proposition before the court was that despite nothing having been paid to the plaintiff, it had been open for the Authority to serve a notice claiming indemnity.
As much as the passage supports the proposition on which the defendant relies, in the case before me its force is more that the third party mechanism would facilitate judgment being entered in favour of the defendant prior to payment being made to the plaintiff. In Chamberlain v Deputy Commissioner of Taxation (1998) 164 CLR 502 at 507 the court referred to a later passage from the reasons expressed in Port of Melbourne Authority v Anshun Pty Ltd (supra) in considering the impact of judgment on the independent existence of a cause of action. In that case the Deputy Commissioner had the benefit of a judgment for tax and penalties at lesser amounts than he later contended had been due over a particular period. He had subsequently commenced proceedings for the full amounts due over the same period. In its reasons at p 510 the court expressed that:
"… the respondent brought an action against the appellant and recovered judgment against him. He obtained a judgment of the Court in which the cause of action upon which he relied merged, thereby destroying its independent existence so long as that judgement stood."
Applying that reasoning, any payment made by the defendant subsequent to an award of judgment in its favour would not speak to any entitlement to be indemnified.
As to the proposition that up until the point of judgment against the defendant it would not be considered to be a creditor for the purposes of the deed, in my opinion it is obvious from the definition of the word "claim" that the deed would apply. The definition includes both scope for a finding of liability against the third party and a contingent claim. It is as much by those prospects as it is by the word "creditors" that the impact of the deed is established. In my opinion the justification given by the court in Brash Holdings Ltd for having recourse to s 553(1) in considering who is a creditor applies as much to a consideration of the impact of the deed as it did to finding the scope of s 444D(1). And that is so if for no other reason than the impact of each was intended to be universal.
Whatever the meaning given to the expression "creditors' claims", in my opinion it is clear that the view of the court in Brash Holdings Ltd was that in the particular context, the purpose of such a deed is that it would apply to all claims as to which the holder of any cause of action founded upon it would be designated as being in a class of creditor for the purposes of winding up.
As at the operative date of the deed, had consideration been given to whether the provision for indemnity would expose the third party to risk, it would have been logical to consider whether the defendant had been aware of any circumstances that would give rise to the prospect of its recourse to that mechanism. Any such circumstances may have been sufficient to characterise the prospect of such recourse as contingent. In the case revealed by the defendant's claims, the plaintiff had then sustained injury in circumstances that at least now he now attributes to the defendant’s breach of duty of care. In my opinion any prospect that the plaintiff would make a claim against the defendant is the same prospect that the defendant would consider having recourse to the third party under the provision for indemnity. All that has transpired since the operative date of the deed is that the plaintiff has made his claim and the defendant has issued its third party proceeding. That proceeding is one of the two means by which it could have sought such recourse; the other was for it to have paid the plaintiff. Each of the courses of action open to the defendant would be considered to be logical straightforward responses had the third party reflected upon the prospect of its exposure under the provision for indemnity. Taking into account the scope provided by the legislature for the impact of a deed of company arrangement and the terms of the deed before me, in my opinion the date on which a party would choose to bring an action on a cause that had already accrued ought not be considered to be significant. I accept that the date might differentiate a claim from a contingent or future claim but such categorisation is not fundamental for the purposes of determining the case before me. I would add that as much as the timing of the bringing of a claim ought not to be considered significant, so too the prospect that prior to the date of service of the writ upon it the defendant had not been aware of the plaintiff's accident. That is the result of the fact that the operative provisions of the deed apply universally.
I suspect that at a more fundamental level, for the purposes of cl 16.1(a), the relevant act of the third party was its execution of the agreement by which it became exposed to any unspecified future claims made under the indemnity. That event occurred well prior to the operative date of the deed.
Although the same course of analysis does not apply to the statutory claims in my opinion the relevant considerations are not significantly different. If at the conclusion of the trial consideration was given to recourse to the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 the focus would be upon any negligent act or omission of the third party. In my opinion there would be no scope to consider that any feature of any such act or omission had arisen subsequent to the operative date of the deed. Any cause of action founded upon the circumstances of the plaintiff’s injury had accrued prior to the critical date.
On the question of the exercise of discretion, there are two significant considerations that are interwoven. The first is the clarity with which I see the result. The second is whether in any event it would be appropriate that there be a trial of the issues. Regardless of the particular form of any judgment contemplated in favour of the defendant on its case, the significant consideration is that it would establish the third party's liability under the defendant's claim against it and thereby engage the operative provisions of the deed. I consider that the result is clear.
Accordingly it is appropriate to determine the application in favour of the third party, ultimately the defendant's case is unsustainable.