Cameron Hugh Shaw as joint and several liquidator of Roberts Plumbing & Contracting Pty Ltd (in Liquidation) v Brooks Hire Service Pty Ltd
[2024] WASC 68
•15 MARCH 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CAMERON HUGH SHAW as joint and several liquidator of ROBERTS PLUMBING & CONTRACTING PTY LTD (IN LIQUIDATION) -v- BROOKS HIRE SERVICE PTY LTD [2024] WASC 68
CORAM: STRK J
HEARD: 1 & 6 MARCH 2024
DELIVERED : 15 MARCH 2024
FILE NO/S: COR 16 of 2024
BETWEEN: CAMERON HUGH SHAW as joint and several liquidator of ROBERTS PLUMBING & CONTRACTING PTY LTD (IN LIQUIDATION)
First Plaintiff
RICHARD ALBARRAN as joint and several liquidator of ROBERTS PLUMBING & CONTRACTING PTY LTD (IN LIQUIDATION)
Second Plaintiff
ROBERTS PLUMBING & CONTRACTING PTY LTD (IN LIQUIDATION)
Third Plaintiff
AND
BROOKS HIRE SERVICE PTY LTD
First Defendant
REECE AUSTRALIA PTY LTD
Second Defendant
ROY GALVIN & CO. PTY LTD
Third Defendant
Catchwords:
Practice and procedure - Insolvency - Application for leave nunc pro tunc to join multiple defendants to the one proceeding pursuant to the Rules of the Supreme Court 1971 (WA) O 18 r 4 - Joinder to a 'mother proceeding' - Discretion - Recent expiry of three-year period under s 588FF(3)(a)(i) of the Corporations Act 2001 (Cth) - Alternative order - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 588FF
Rules of the Supreme Court 1971 (WA) O 18 r 4
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | S Paisel |
| Second Plaintiff | : | S Paisel |
| Third Plaintiff | : | S Paisel |
| First Defendant | : | J Stynes |
| Second Defendant | : | MC Harrick |
| Third Defendant | : | TJ Langdon |
Solicitors:
| First Plaintiff | : | Mendelawitz Morton Commercial Lawyers |
| Second Plaintiff | : | Mendelawitz Morton Commercial Lawyers |
| Third Plaintiff | : | Mendelawitz Morton Commercial Lawyers |
| First Defendant | : | HopgoodGanim Lawyers |
| Second Defendant | : | FCW Lawyers |
| Third Defendant | : | McCabes Lawyers |
Case(s) referred to in decision(s):
Dean‑Willcocks v Air Transit International Pty Ltd (2002) 55 NSWLR 64
Hodgson as joint and several liquidators of Diploma Construction (WA) Pty Ltd (In Liq) (Recs and Mgrs Apptd) v Classic Contractors Pty Ltd [2020] WASC 68
Jones v Sun Engineering QLD Pty Ltd [2017] WASC 195
Re Bias Boating Pty Ltd [2017] NSWSC 1524
STRK J:
This proceeding was commenced by an originating process filed on 2 February 2024. The first and second plaintiffs are the joint and several liquidators of the third plaintiff, Roberts Plumbing & Contracting Pty Ltd (in liquidation). In these reasons, I refer to the first and second plaintiffs as the liquidators, to the third plaintiff as the company, and to the first, second and third plaintiffs collectively as the applicants.
By the proceeding, relief is sought pursuant to s 588FA, s 588FC, s 588FE and s 588FF(1) of the Corporations Act 2001 (Cth). In summary, the payments made by the company to the defendant companies named in the proceeding are sought to be voided as insolvent transactions, as it is alleged that each impugned transaction provided to the defendants an unfair preference over other creditors, and that each transaction was an insolvent and voidable transaction.
The proceeding was commenced as what is commonly described as a 'mother proceeding'. Three separate entities were named as defendants in the proceeding. The claims against each defendant appeared to give rise to at least one common question, namely the insolvency of the company at the time of the impugned transactions. As the claims against each defendant were not in respect of or arising out of the same transaction or transactions, the applicants were not entitled to join the defendants to the same proceeding as of right.
The orders promoted by the originating process included an order in the following terms:
1.As against each of the Defendants:
1.1.if and to the extent required, an order that the Plaintiffs be granted leave nunc pro tunc to join each of the Defendants to the proceeding pursuant to Order 18 Rule (4)1 of the Rules of the Supreme Court 1971 (WA) (Rules); alternatively
1.2an order pursuant to section 588FF(3)(b) of the [Corporations Act 2001 (Cth)] that the period within which an application may be made by the Plaintiffs under section 588FF(1) of the [Corporations Act 2001 (Cth)] for an order against the Defendants or any of them in respect of the Payments be extended to a date not less than 14 days after the date of any refusal to grant the leave sought in paragraph 1.1 or such other date as the Court considers appropriate.
The originating process was listed on Friday, 1 March 2024 for a first return, by which time all defendants had filed a notice of appearance. At the first return the applicants moved for orders with the consent of the defendants, seeking to program only the relief sought at par 1 of the originating process to a special appointment on a date not before 18 March 2024.
At the first return the court was informed that only counsel for the second defendant had instructions in relation to the applicants' request for leave nunc pro tunc to join all of the defendants to the one 'mother proceeding', whereas the others had not yet had the opportunity to take instructions in relation to the same. It was the second defendant's position that it did not oppose the grant of leave as contemplated by par 1.1 of the originating process. The court was also informed that the applicants were content for the application for leave at par 1.1 of the originating process to be determined at a later date, despite the time limit provided by s 588FF(3) of the Corporations Act. That is, the applicants were content for the application for leave to be determined on a date not before 18 March 2024 even though the liquidators had been appointed over 12 months ago; and the period beginning on the relation-back day and ending three years after the relation-back day was due to end on 4 March 2024.
In all of the circumstances, rather than programming the relief sought at par 1 of the originating process to a special appointment in anticipation that the application would be opposed, the proceeding was adjourned to Wednesday, 6 March 2024 so that instructions could be taken by counsel from the first and third defendant. I also entered the proceeding into the Commercial and Managed Cases List. Given the second defendant's position, counsel for the second defendant was excused from attending the hearing on Wednesday, 6 March 2024.
On 6 March 2024, without opposition by the first or third defendant, I made an order as advanced on behalf of the applicants at par 1.1 of the originating process, granting them leave nunc pro tunc to join Brooks Hire Service Pty Ltd (ACN 008 975 988), Reece Australia Pty Ltd (ACN 004 097 090) and Roy Galvin & Co Pty Ltd (ACN 008 719 408) as defendants to the one proceeding pursuant to the Rules of the Supreme Court 1971 (WA) O 18 r 4(1). My reasons for so ordering are as follows.
Evidence
Two affidavits were read in support of the application for leave.
First affidavit of Mr Shaw
The first was the affidavit of Mr Cameron Hugh Shaw sworn on 1 February 2024 to which Mr Shaw annexed 18 documents marked CHS‑1 to CHS‑18.
Among other things, Mr Shaw deposed to his appointment and to the appointment of Mr Richard Abarran as joint and several administrators of the company on 3 March 2021; to the company being placed into a creditor's voluntary liquidation by special resolution on 16 April 2021; and that on 16 April 2021 he and Mr Abarran were appointed as joint and several liquidators of the company.
Mr Shaw also deposed to the investigations conducted by the liquidators into the financial affairs of the company; the collection of records with respect to the company; the creditors of the company; that the relation-back day for the company was 3 March 2021, being the day on which the company was placed into administration; that the relation‑back period for the company was the period from 4 September 2020 to 3 March 2021 (being the period of six months prior to the relation‑back day for the company); his belief that preference payments were made to each defendant during the relation‑back period, which payments came to a total of $194,277.01 to the first defendant, $245,189.35 to the second defendant, and $148,427.23 to the third defendant; and his belief as to the date of insolvency of the company and the basis for his belief.
The documents annexed to Mr Shaw's first affidavit included an Australian Securities and Investments Commission company extract for the company; various financial and other records of the company, including bank statements; and reports that had been issued to creditors.
Second affidavit of Mr Shaw
The second was the affidavit of Mr Shaw, also sworn on 1 February 2024. Mr Shaw's second affidavit was particularly sworn in support of the application for relief at par 1 of the originating process.
Among other things, Mr Shaw deposed that in the course of his investigations, he had identified three creditors of the company which he considered had received payments during the relation‑back period which were potentially voidable under s 588FG of the Corporations Act; that he had determined that those payments were unfair preference payments and voidable transactions within the meaning of s 588FA, s 588FC and s 588FE(1) of the Corporations Act; that demands had been made of those creditors (who are now named as defendants in this proceeding) for repayment which had not been met; that the liquidators remain represented by a single firm of lawyers in relation to the claims against each of the defendants; and that the following issues will be a common question of fact and/or law as between the liquidators and all of the defendants at trial: whether the defendant creditors had received unfair preference payments; the insolvency of the company; the relation‑back day and the relation-back period; and whether any of the defendants might claim a set‑off.
Mr Shaw also deposed that if the issue of solvency were to be contested in separate proceedings as against each of the defendants, on solicitor's advice, he believed it likely that the court would be required to sit for an additional day per matter, and that there was a likelihood that inconsistent findings of fact and/or law might arise.
Mr Shaw deposed that based on his experience as a liquidator, he believed that there was no apparent prejudice to any of the defendants pursing the unfair preference claims as proposed; that there was a potential prejudice to the defendants and remaining creditors of the company if the unfair preference claims were not dealt with as proposed; and if there were orders made to conduct the unfair preference claims in separate proceedings, there was a real risk that it would be uncommercial for the liquidators to pursue the unfair preference claims, which would diminish any potential return to unsecured creditors.
Applicable principles
The requirement of leave
The applicants sought leave nunc pro tunc to join each of the defendants to the proceedings pursuant to the Rules of the Supreme Court O 18 r 4(1), which provides as follows:
Subject to rule 5(1), 2 or more persons may be joined together in one action as plaintiffs or as defendants with the leave of the Court or where –
(a) if separate actions were brought by or against each of them, as the case may be, some common question of law or fact would arise in all the actions; and
(b) all rights to relief claimed in the action (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions.
Rule 5(1) provides:
If claims in respect of 2 or more causes of action are included by a plaintiff in the same action or by a defendant in a counterclaim, or if 2 or more plaintiffs or defendants are parties to the same action, and it appears to the Court that the joinder of causes of action or of parties, as the case may be, may embarrass or delay the trial or is otherwise inconvenient, the Court may order separate trials or make such other order as may be expedient.
The claims as against the defendants do not satisfy r 4(1)(a) and (b), as the claims as against the defendants are not in respect of or arising out of the same transaction or transactions. Therefore, the leave of the court to join the defendants under r 4(1) was required.
Power to grant leave nunc pro tunc
The applicants sought leave from the court to join the three defendants pursuant O 18 r 4(1) of the Rules of the Supreme Court in circumstances where the proceeding had already been commenced, requiring leave to be granted nunc pro tunc.[1]
[1] Jones v Sun Engineering QLD Pty Ltd [2017] WASC 195 [14].
The grant of leave in such circumstances is within power. In Jones v Sun Engineering QLD Pty Ltd, the court considered an application by the plaintiffs to join defendants to a 'mother proceeding' nunc pro tunc pursuant to O 18 r 4(1). As was observed by K Martin J, O 2 r 1 of the Rules of the Supreme Court is applicable as regards to irregularities when evaluating leave applications of this kind;[2] and while joinder of multiple parties after a proceeding has commenced is an identifiable irregularity, the irregularity does not nullify the proceeding so far as the proceeding purports to join the defendants to the 'mother proceeding'.[3]
Joinder to a 'mother proceeding'
[2] Jones v Sun Engineering QLD Pty Ltd [52].
[3] Jones v Sun Engineering QLD Pty Ltd [52] ‑ [54], applied in Hodgson as joint and several liquidators of Diploma Construction (WA) Pty Ltd (In Liq) (Recs and Mgrs Apptd) v Classic Contractors Pty Ltd [2020] WASC 68 [21] ‑ [22]; Dean‑Willcocks v Air Transit International Pty Ltd (2002) 55 NSWLR 64.
A 'mother proceeding' is a procedural mechanism available to a liquidator to proceed by the way of uniformly case‑managed civil proceedings against multiple defendants.[4] This precedent is now well established in Australian courts.[5] In Re Bias Boating Pty Ltd [2017] NSWSC 1524, Brereton J observed that it has become the policy of Australian corporation courts dealing with proceedings of this kind to order the joinder of multiple defendants in a 'mother proceeding'.[6] Further, as articulated by Austin J in Dean‑Willcocks v Air Transit International Pty Ltd, it is open to plaintiffs to file and serve an originating process, together with an interlocutory process seeking the court's leave, in a proceeding seeking to recover unfair preferences from multiple defendants.[7]
[4] Jones v Sun Engineering QLD Pty Ltd [61].
[5] Jones v Sun Engineering QLD Pty Ltd [61].
[6] Re Bias Boating Pty Ltd [18].
[7] Dean-Willcocks v Air Transit International Pty Ltd [38].
I find these authorities to be binding on me. As enunciated by K Martin J in Jones v Sun Engineering QLD Pty Ltd at [65]:[8]
The line of national case authority decided in reference to the Corporations Act supporting the use of a 'mother proceeding' is therefore seen to be significant, persuasive and binding on me — particularly in circumstances where this court is exercising federal jurisdiction. This court should recognise and implement to the fullest extent open a process of uniform decision making towards a nationally applied corporate regulatory regime across Australia.
[8] Citied with approval by A/Master Whitby (as her Honour then was) in Hodgson as joint and several liquidators of Diploma Construction (WA) Pty Ltd (In Liq) (Recs and Mgrs Apptd) v Classic Contractors Pty Ltd [24].
In Re Bias Boating Pty Ltd, Brereton J further observed at [18]:[9]
There is inevitably a common issue of insolvency, and it is highly desirable that that question be litigated, if at all, once only, and that all parties be bound by the decision. There are considerable efficiencies, for liquidators and for courts, in conducting and managing one proceeding rather than multiple proceedings - and they are not limited to the saving of multiple filing fees. Moreover, it is historically conventional that all proceedings in a liquidation are conducted in the one file. And this approach does not prejudice the ability of the court, after the question of insolvency is resolved, to order that aspects of the proceedings which are peculiar to an individual defendant be determined separately – for example where the cases arise out of different transactions, or a good faith defence which is inherently peculiar to the individual defendant is raised. In that way, any additional cost to individual defendants of becoming entwined in the wider litigation can be minimised.
[9] Also cited with approval in Hodgson as joint and several liquidators of Diploma Construction (WA) Pty Ltd (In Liq) (Recs and Mgrs Apptd) v Classic Contractors Pty Ltd [23].
I also noted the special features of unfair preference proceedings described by Austin J in Dean‑Willcocks v Air Transit International Pty Ltd at [35], which may justify the grant of leave, although leave might not be granted in similarly constituted proceedings with a different subject matter.[10]
[10] Dean-Willcocks v Air Transit International Pty Ltd [35].
Disposition
I accepted that the court had the power to make an order as promoted by par 1.1 of the originating process. The proceeding was irregular but not invalid. Having regard to the affidavits filed in support of the application, I accepted that it was desirable that common questions of fact and/or law, in particular that of insolvency, be decided once, and that all defendants be bound by that decision for consistency, efficiency and cost efficacy.
There was nothing unique in the circumstances of this case that caused me to depart from well‑established authority that proceedings of this kind may be conducted by prosecution of a 'mother proceeding'. No defendant pointed to any tangible prejudice of a relevant kind arising out of bringing the 'mother proceeding', and no prejudice was otherwise evident from the evidence before the court.
I further took comfort that even if true prejudice were to later emerge, the court was capable of addressing this by specific case management measures to minimise that prejudice. Further, the joinder remained subject to the operation of r 5(1) of the Rules of the Supreme Court, with the potential for later reflection and separation if the circumstances were to require.
As the proceeding pursuant to s 588FF(1) was commenced on the date of filing (2 February 2024), had been filed within the time permitted by s 588FF(3)(a), and leave had been granted nunc pro tunc, the proceeding had been validly commenced against each of the defendants and it was not necessary for the court to rule upon the alternative relief promoted at par 1.2 of the originating process (reproduced above).
For these reasons, on 6 March 2024, I made an order in the following terms, with liberty to apply:
Pursuant to Order 18 r 4(1) of the Rules of the Supreme Court 1971 (WA) leave be granted nunc pro tunc to join Brooks Hire Service Pty Ltd (ACN 008 975 988), Reece Australia Pty Ltd (ACN 004 097 090) and Roy Galvin & Co Pty Ltd (ACN 008 719 408) as defendants to the proceeding.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SE
Associate to the Judge
15 MARCH 2024
0
2
2