CGS and Co Pty Ltd v The Owners - Strata Plan No. 5290

Case •

[2010] NSWSC 1173

•

15 October 2010

No judgment structure available for this case.
CITATION: CGS & Co Pty Ltd v The Owners - Strata Plan No. 5290 [2010] NSWSC 1173
HEARING DATE(S): 16 September 2010
 
JUDGMENT DATE : 
15 October 2010
JUDGMENT OF: Bryson AJ at 1
DECISION: Refer to [61]
CATCHWORDS: ASSIGNMENT - assignment of cause of action - GC9 of Building Contract forbade assignment of the contract or any payment thereunder without prior written approval - held an assignment of a claim for payment without consent by Liquidator of the contractor did not have effect as an equitable assignment. CORPORATIONS - winding up - disposition by Liquidator of claim for payment took effect under s477(2) of Corporations Act notwithstanding that assignment was not otherwise possible.
LEGISLATION CITED: Abolition of Obsolete Offences Act 1969 (UK)
Civil Procedure Act 2005
Conveyancing Act 1919
Corporations Act 2001 (Cth)
Corporations Law (Cth)
Law of Property Act 1925 (UK)
Uniform Civil Procedures Rules 2005
Wrongs Act 1958 (UK)
CASES CITED: Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15
Baldry v Jackson [1976] 2 NSWLR 415
Broadcast Australia Pty Limited v Minister Assisting The Minister for Natural Resources (Lands) (2004) 221 CLR 178; [2004] HCA 4
Brookfield v Davey Products Pty Ltd [1996] 14 ACLC 303
Carob Industries Pty Ltd (in liq) v Simto Pty Ltd (2000) 23 WAR 515; [2000] WASCA 362
Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238
Don King Productions Inc v Warren [2000] Ch D 291
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
Guy v Churchill (1889) 40 Ch D 481
Helstan Securities Limited v Hertfordshire County Council [1978] 3 All ER 262
Jericho Developments Pty Ltd v Garden Tower (NSW) Pty Limited [2006] NSWSC 595
Krishell Pty Ltd v Nilant & Ors (2006) 60 ACSR 410; [2006] WASCA 223
Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85
Minister for Land & Water Conservation v NTL Australia Pty Ltd (2002) 122 LGERA 53; [2002] NSWCA 149
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395; [2006] FCAFC 40
Ramsay v Hartley [1977] 2 All ER 673; 1 WLR 686
Re Movitor Pty Limited v Sims [1996] 19 ACSR 440
Seear v Lawson (1880) 15 Ch D 426
Stein v Blake [1996] 1 AC 243
Stone v Angus [1994] 2 NZLR 202
Torkington v Magee [1902] 2 KB 427
Trendtex Corp v Credit Suisse [1982] AC 679; (1981) 3 All ER 520
UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 251
UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457
Wigan v Edwards (1973) 47 ALJR 586
Yeandle v Wynn Realisations Ltd (in Administration) (1995) 47 Con LR 1
PARTIES: CGS & Company Pty Limited
The Owners - Strata Plan No. 5290
FILE NUMBER(S): SC 2008/290637
COUNSEL: Pl: S Goldstein
Def: F Corsaro SC / R O'Brien
SOLICITORS: Pl: CCS Legal Pty Ltd
Def: Doyle Edwards Anderson Lawyers Pty Ltd


IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

Friday 15 October 2010

SC 2008/290637 CGS & COMPANY PTY LIMITED v THE OWNERS - STRATA PLAN No. 5290

JUDGMENT

1 HIS HONOUR: The defendant’s strata plan relates to a residential apartment building in Harbord. The defendant entered into a contract with BMP Industrial Pty Limited for repair work on the building: repair of spalled and drummy concrete, removal and replacement of balcony tiling, waterproofing and other upgrading work. BMP Industrial carried out extensive work and was paid large sums, but made a claim in writing for additional payment for extra work over the allowances in the Bill of Quantities for “Repair of spalling concrete – Greater than 15 litres”.

2 The contract dated 20 September 2002 incorporated General Conditions of Contract AS2124-1986, with Special Conditions. The General Conditions included GC3.2 which provided for adjustment of the contract sum where the quantity of any item varied from allowances provided for in the Bill of Quantities. BMP Industrial’s claim arose out of GC3.2. The contract contained provisions in GC46 and SC2.36 for dispute resolution procedure.

3 General Condition 9.1 is:

          “Neither party shall, without the prior written approval of the other and except on such terms and conditions as are determined in writing by the other, assign the Contract or any payment thereunder.”

4 BMP Industrial went into administration on 13 August 2004 and Mr Albarran and Mr McDonald were appointed Administrators. A Deed of Company Arrangement was entered into on 20 September 2004. On 24 June 2005 during the administration BMP Industrial submitted its claim. The company went into a creditor’s voluntary liquidation on 31 March 2006 and the Administrators became liquidators.

5 The claim was made in a letter of 24 June 2005 from Mr Paul Jennings, Managing Director of BMP Group written on behalf of BMP Industrial (as its terms show). The basis of the claim was spelt out in great detail. It claimed additional costs of $1,038,918.07 and was said to be a claim pursuant to GC3.2(b) of the Contract. Clause 3.2 is entitled “Quantities” and the passage which includes 3.2(b) is as follows:

          “… Where otherwise than by reason of a direction of the Superintendent under Clause 40.1, the actual quantity of an item required to perform the Contract is greater or less than the quantity shown in the Bill of Quantities or Schedule of Rates -
          (a) where the Principal accepted a lump sum for the item, the difference shall be valued under Clause 40.2;
          (b) where the Principal accepted a rate for the item, the rate shall apply to greater or lesser quantities within the limits of accuracy stated in the Annexure and quantities outside the limits shall be valued under Clause 40.2.”

6 On 8 July 2005 the Superintendent wrote to BMP Industrial rejecting the claim entirely.

7 On 27 June 2005 BMP Industrial submitted Claim No.2 which was about replacement of existing balustrades and on 8 August 2005 the Superintendent by letter rejected that claim entirely.

8 By a letter from BMP Group to the Superintendent of 12 September 2005 BMP Industrial notified the Principal and the Superintendent that a dispute had arisen concerning both determinations by the Superintendent. In regards to the claim concerning additional payment, BMP Industrial complained:


          “In the determination the Superintendent failed to determine the claim pursuant to Clause 3.2 and proceeded to determine the claim as if it was a latent conditions claim pursuant to Clause 12.”

The claim about balustrades is not put forward in these proceedings.

9 The letter of 12 September 2005 sought to resolve the dispute, referring to GC46.2 as amended by SC2.36. The letter called for various actions directed toward resolution. So far as appears, there was no significant action towards resolution of the dispute by 31 March 2006 when BMP Industrial went into voluntary liquidation. It has never been established whether BMP Industrial is entitled to any further payment.

10 The reference to GC46.2 was not appropriate as SC2.36 provided for deleting clause 46.2 and substituting the following:

          “If either party is dissatisfied with the decision of the Superintendent, or if the Superintendent fails to give a decision within 28 days, the parties shall confer at least once within 14 days of a notice from either party requiring the dispute to be resolved under this clause. Failing resolution of the dispute, the partie shall seek to explore and agree on methods of resolving the dispute, including by mediation.
          If any dispute is not resolved within 28 days (or such longer period as the parties may agree) of notice under the preceding paragraph, the dispute shall be resolved by expert determination in accordance with the Australian Commercial Disputes Centre Limited Guidelines for Expert Determination, the terms of which are deemed to be incorporated into the Contract.”

11 The obligation of the Principal to make payments under the contract depends upon a regime of certificates and payments in GC42. This regime must be read with GC46 and SC2.36 relating to settlement of disputes. Where the Superintendent issues a payment certificate, the Principal is obliged by GC42.1 to pay it within 14 days, but if (as happened in this case), the Superintendent rejects a claim and it is disputed, the time of the payment depends upon the Settlement of Disputes procedure in SC2.36, finally on resolution by expert determination.

12 The mechanism for settlement of disputes in SC2.36 is substituted for GC46.2. This leaves the rest of GC46 in effect. The terms of GC46 and of SC2.36 are cast in language which shows the contemplation of the parties that the disputes procedure would take place between the Contractor and the Principal, and the steps prescribed in SC2.36 can be taken only by the parties; not by anybody else. It is not possible to imply some extension of the references to the parties to references to other persons who may become interested in the dispute; the implication would be contrary to the express prohibition against assignment in GC9.1.

13 BMP Industrial’s contract right was a right to have the dispute resolution procedure followed and an expert determination obtained; it could not rightly be classified as a claim for debt unless and until expert determination had taken place and the amount payable, if any was payable, had been determined.

14 The continuing effect if any of the provisions of GC46.1 and SC2.36 and of the fact that they have not been followed far enough to get a determination on the plaintiff’s claim and entitlement to recovery have not been debated before me; they may create further difficulties in the litigation, but they are not raised at this stage.

15 The plaintiff CGS commenced the present proceedings on 14 August 2008 and claims to be entitled to the rights of BMP Industrial. The defendant disputes the litigation on a number of grounds; it is disputed that BMP Industrial was entitled to any further payment, the amounts claimed are disputed, and the defendant claims to have entitlements against BMP Industrial in the nature of cross-claims and set-offs on which it wishes to rely. There are also issues relating to the effectiveness of the supposed assignments by which CGS claims to be entitled to sue for BMP Industrial’s claim. The defendant’s approval has never been sought or obtained for any assignment relating to the contract.

16 On 2 July 2010, the Court ordered separate determination of a number of questions. As indicated by this Court’s order, determination of some of the separate questions could conclude the litigation.

17 The separate questions as stated in the order of 2 July 2010 are as follows:

          ”1. Pursuant to rule 28.4 of the Uniform Civil Procedures Rules 2005, that the following separate questions be determined before a trial of all other issues in the proceedings, on the basis of the Statement of Agreement Facts:
              (a) assuming for the purposes of the separate determination, but not deciding, that BMP Industrial Pty Ltd ( ‘BMP’ ) had the alleged cause of action referred to in paragraphs 15 to 23 of the Further Amended Technology and Construction List Statement ( ‘the List Statement’ ) against the Defendant ( ‘the Cause of Action’ ):
                  (i) whether the Cause of Action was assignable having regard to:
                      (A) the terms of clause 9 of the contract between BMP and the Owners Corporation; and
                      (B) whether the Owners Corporation waived its entitlement to rely on clause 9, as referred to in paragraph 2(d) of the Amended Reply?
                  (ii) if clause 9 of the contract applies to prevent the assignment of the Cause of Action:
                      (A) is clause 9 unenforceable or void in that it constitutes an attempt to contract out of the Corporations Act 2001 or is otherwise contrary to public policy;
                      (B) does CGS have title to the Cause of Action on the grounds that there was a sale or disposal of the Cause of Action to CGS, by BMP’s liquidator pursuant to Section 477(2) of the Corporations Act 2001?
                  (iii) Having regard to the determination of 1(a)(i) and (ii), was the Cause of Action assigned or sold to the Plaintiff ( ‘CGS’ ):
                      (A) by the deed referred to in paragraph 9 of the List Statement ( ‘First Alleged Assignment’ )?
                      (B) alternatively, by the deed referred to in paragraph 14 of the List Statement ( ‘Second Alleged Assignment’ )?; or
                      (C) alternatively, by the sale or disposal of the Cause of Action.
              (b) Did CGS have a valid cause of action against the Owners Corporation at the time these proceedings were commenced?
              (c) If the answer to 1(b) is “no”, is CGS nevertheless entitled to maintain these proceedings against the Owners Corporation on the grounds that CGS filed an Amended List Statement on 1 December 2008; or on the grounds that CGS filed a Further Amended List Statement on 23 March 2009?”

18 The agreed facts are:

          ”1. On or about 20 September 2002, the Defendant ( ‘the Owners Corporation’ ) entered into a partly lump sum and partly schedule of rates contract for the works with BMP Industrial Pty Ltd ( ‘BMP’ ). The contract documents relevantly included:
              (a) the AS 2124 – 1986 form of General Conditions of Contract;
              (b) specifications prepared by Mahaffey Associates Pty Ltd;
          (c) the BMP tender offer dated 19 April 2002; and
              (d) the Owners Corporation’s letter of acceptance dated 19 September 2002.
          2. The Owners Corporation appointed Mahaffey Associates to act as the Superintendent under the Contract.
          3. Under clause 3.2 of the General Conditions of Contract, the parties agreed to adjust the contract sum payable to BMP where the quantity of any item actually required varied from the allowances provided for in the bill of quantities. For work performed at agreed rates, an adjustment only applied where the actual quantities required varied by more than 50% of the quantities allowed for in the bill.
          4. On 13 August 2004, BMP went into administration and appointed Mr Richard Albarran and Mr Geoffrey McDonald as administrators of the company under section 436A of the Corporations Act, 2001.
          5. On 20 September 2004, BMP entered into a deed of company arrangement.
          6. On 24 June 2005, BMP submitted a written claim for additional payment under clause 3.2 of the General Conditions of Contract for the extra over component over the allowances in the bill of quantities for the item described as ‘Repair of spalling concrete – Greater than 15 litres’ in the BMP tender. Mahaffey Associates rejected BMP’s claim.
          7. On 12 September 2005, BMP issued a Notice of Dispute under clause 46.2 of the General Conditions of Contract disputing the Superintendent’s rejection of the BMP claim.
          8. On 31 March 2006, BMP went into voluntary liquidation following a resolution of the creditors of the company pursuant to section 445E of the Corporations Act 2001. Mr Albarran and McDonald were appointed the liquidators of the company at that time.
          9. The Liquidators entered into a Deed on 16 October 2006 which purported to assign BMP’s rights, claims and actions against third parties to the Plaintiff ( ‘CGS’ ) (the ‘First Alleged Assignment’ ). The First Alleged Assignment was subject to the following conditions:
              (a) the Creditors of the Companies approving the sale of the Claims to CGS; and
              (b) the payment by CGS of the Purchase Price of $150,000
          ( ‘the Conditions Precedent’ )
          10. CGS paid the Liquidators the sum of $75,000.00 on 8 May 2007; and a further sum of $75,000 on 15 June 2007.
          11. On 17 April 2008, the Plaintiff’s representative provided to the Defendant’s former solicitors a copy of a letter from the Liquidators dated 16 April 2008 which stated that the Conditions Precedent had been met.
          12. In or around June 2007 a document alleged by CGS to be a second deed of assignment was brought into existence between the BMP Group of companies, the Liquidator and CGS. Sometime between June 2007 and 14 August 2008 (the date of commencement of proceedings) the document was executed by each of the parties except BMP Industrial and GMP Group ( ‘the Second Alleged Assignment – June 2007 Document’ ).
          13. CGS commenced these proceedings against the Owners Corporation on 14 August 2008, relying on the Second Alleged Assignment June 2007 Document.
          14. On 30 October 2008, the Liquidators executed the Second Alleged Assignment – June 2007 Document on behalf of BMP Industrial and BMP Group. The document alleged by its recitals as ‘providing more particularity’ to the assignment of BMP’s third party rights and claims in the First Alleged Assignment ( ‘the Second Alleged Assignment – October 2008 Document’ ).
          15. CGS filed an Amended List Statement on 1 December 2008 and again at paragraph 10 of the Amended List Statement relied on the Second Alleged Assignment – June 2007 Document .
          16. By its List Response, dated 11 December 2008, the Owners Corporation denied that it was ever liable to BMP, and also denied the enforceability of the assignment on the basis that any assignment to CGS would be against public policy for maintenance or champerty.
          17. CTS filed a Further Amended List Statement on 23 March 2009 relying on:
          (a) the First Alleged Assignment; or alternatively,
              (b) The Second Alleged Assignment – June 2007 Document or the Second Alleged Assignment – October 2008 Document.
          18. On 16 April 2010, the Owners Corporation filed a List Response to the Further Amended List Statement which alleged that all of the purported assignments were invalid and unenforceable on the basis that clause 9.1 of the contract prohibits assignment of the contract or any payment thereunder without the prior written approval of the Owner Corporation and that no prior written approval was ever sought or provided by the Owners Corporation.
          19. Clause 9.1 of the General Conditions states:
              ”Neither party shall, without the prior written approval of the other and except on such terms and conditions as are determined in writing by the other, assign the Contract or any payment thereunder”.
          20. Neither BMP nor the Liquidators obtained the written approval of the Owners Corporation to the assignment of the Contract or any payment thereunder, or of the BMP claim to CGS.”

19 The documents referred to in the agreed facts were in evidence.

20 In lieu of pleadings the parties’ cases appear from documents under Technology & Construction List practice. The plaintiff’s claim in the Statement filed on 14 August 2008 referred to and relied only on the second Deed of Assignment in its first form (that is, the June 2007 Document). The Statement was amended on 1 December 2008, and as amended relied only on the second Deed of Assignment in its first form. A further amendment on 23 March 2009 relied on the first Deed of Assignment (that is, the October 2006 Document) and both forms of the second Deed of Assignment (that is, the June 2007 and October 2008 Documents).

21 The defendant was not a party to either Deed of Assignment. The first Deed of Assignment is dated 16 October 2006. The parties were BMP Industrial and its related companies, all in liquidation, Mr Albarran and Mr McDonald their liquidators, and CGS & Company Pty Ltd the plaintiff.

22 A significant Recital was

          “E. The Companies may have certain potential rights, claims and actions ( “the Claims” ) available to them against third parties which are yet to be ascertained.”

23 Clause 5 provided for payment of the purchase price of $150,000.

24 Clause 4.1 expresses conditions as follows:

          ”4.1 Subject to:
              (a) The creditors of the Companies approving the sale of the Claims to CGS; and
              (b) The payment by CGS of the Purchase Price to the Liquidators;
              the Companies will assign to CGS or its nominee, all of their rights, title and interest to the Claims, with the exception of any claim that the Liquidators may have:
              i. pursuant to the Act for insolvent trading against directors or former directors of the Companies or any other parties;
              ii. to bring any proceedings pursuant to Part 5.7B of the Act to recover property or compensation for the benefit of the creditors of the companies.”

25 The claims which are to be assigned are indicated by Recital E.

26 As its terms show, the first Deed of Assignment could not effect an assignment any earlier than whenever the conditions were fulfilled (of course its effect is disputed in other respects as well). Solicitors representing CGS informed the solicitors then acting for the defendant by letter of 16 April 2008 of the fulfilment of the conditions by sending them a copy of a letter or circular which said:

          ”16 th April 2008
          TO WHOM IT MAY CONCERN
          Dear Sir or Madam,
          RE: BMP GROUP OF COMPANIES
          (IN LIQUIDATION)
          (‘the Companies’)
          I refer to my appointment as Liquidator of the BMP Group of Companies which involved the external administration of the following Companies:
            BMP Industrial Pty Limited;
            BMP Administration Pty Limited;
            BMP Constructions Pty Limited;
            BMP Group Pty Limited;
            Bluemask Pty Limited;
            Topwish Pty Limited; and
            Playmask Pty Limited.
          I confirm that on 16 th October 2006 the Companies and CGS & Co Pty Limited (‘CGS’) executed a Deed of Assignment in which the Companies’ rights, claims and actions against third parties were assigned to CGS upon the payment of a fee to the Liquidator. These rights did not include any claim(s) that the Liquidator may have for insolvent trading or any proceedings pursuant to Part 5.7B of the Corporations Act 2001.
          Furthermore, at a meeting of creditors of the Companies duly held and convened on 1 st June 2007, creditors approved the assignment of these actions to CGS in accordance with Section 477(2A) of the Corporations Act 2001.
          I confirm that CGS has complied with its obligations under the Deed of Assignment and that all rights, claims and actions of the Companies as aforementioned have been assigned to CGS.
          Should you have any queries with regards to the above, please contact Mr Duke Wolfgramm of this office.
          Yours faithfully
          GEOFFREY MCDONALD
          LIQUIDATOR ”

27 In my opinion the first Deed of Assignment according to its own terms does not and does not purport to assign the claim now sued on. It constitutes an agreement to assign claims in future when conditions are fulfilled. As the words of Recital E show, it remained for the parties to identify which claims were to be assigned; this is indicated by the lack of specificity of the language identifying the subject matter “certain potential rights, claims and actions”. The thing assigned is too indeterminate to enable it to be said that it is an assignment of “any debt or other legal chose in action”. The document does not bring about an assignment under s 12 of the Conveyancing Act 1919 for a cumulation of reasons; it is not absolute but conditional, it does not purport to effect an assignment but records a promise to do so in the future and it does not identify any debt or other legal chose in action. It is doubtful whether the letter of 16 April 2008 meets the requirements of s 12 relating to notice.

28 The provision in England and Wales corresponding to s 12 is now s 136 of the Law of Property Act 1925 (UK). English courts do not appear to face the phenomenon which recurs here in which assignment is relied on or alleged but no express notice in writing has been given, requiring reliance on equity. By 1875 it was established that a debt or chose in action could be assigned for consideration in equity, and for practical purposes, at common law: see Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 26-28 (Windeyer J) and R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies, 4th ed (2002) Butterworths LexisNexis at 225-228 [6-050] to [6-070]. Section 12 does not detract from other means of assignment. Assignment of choses in action has a long and complex history, stated in W S Holdsworth, A History of English Law, Vol XII (1925) Methuen & Co Ltd at pages 515 and following and at 534-537. For those willing to give express notice in writing, this history ended when law and equity were fused in this respect by the enactment of s 12.

29 Professor Holdsworth said at 515:

          “…the category of choses in action is in English law enormously wide and … it can only be defined in very general terms.”

      That learned author said that the definition given by Channell J in Torkington v Magee [1902] 2 KB 427 at 430 is generally accepted as correct. Channell J giving the judgment of the Kings Bench Division said:
          “…Chose in action is a known legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession. It is an expression large enough to include rights which it can hardly have been intended should be assignable by virtue of the sub-section in question, as, for instance, shares, which can only be transferred as provided by the Companies Acts. It is probably necessary, therefore, to put some limit upon the generality of the words, but I think that the necessary limitation is shown by the considerations to which I have already referred, and also by the words of sub-s (6) itself. I think the words ‘debt or other legal chose in action’ mean ‘debt or right which the common law looks on as not assignable by reason of its being a chose in action, but which a court of equity deals with as being assignable’. That is the point of difference or variance between the rules of equity and common law which it is intended to deal with by this sub-section. …”

30 The second Deed of Assignment purports to carry out and complete the assignment for which the first Deed of Assignment provided. The second Deed of Assignment came into existence in its first form in or about June 2007. The parties were the same as those in the first Deed.

31 The second Deed of Assignment contains in Recital G a clearly recognisable description of the subject matter claimed in the present litigation:

          ”G. …
              (a) The claims by BMPI against the proprietors of strata plan 5290 or the building consultant Mahaffey Associates Pty Limited employed by strata plan 5290 arising out of the contract for the Repairs and Surface Coating of External Concrete Elements and Related Works on the property known as 69 Evans Street, Harbord, NSW.
          …”

32 The first form was executed by all but two of the parties named in it at dates which do not appear but were earlier than 14 August 2008. It was not executed on behalf of BMP Industrial or BMP Group by either liquidator. On behalf of CGS it was contended to the effect that it should be inferred and found that the liquidators have unintentionally omitted to execute the Deed on behalf of those two companies; as the document shows, they executed on behalf of other companies of which they were liquidators. In my finding there is no basis in the agreed facts or in the terms of the document on which the Court should find that the omission was accidental. On its face the document shows that the liquidators deliberately executed the document at a number of places, and the probabilities are that their non-execution on behalf of these two companies was intended. In any event, if it were the case that these executions were accidentally omitted, it would still be the case that when these proceedings were commenced the document was not executed by and could not bind BMP Industrial or confer BMP Industrial’s rights on CGS, whatever other effect it may have had.

33 The liquidators executed the second Deed of Assignment, giving it its second form, on behalf of BMP Industrial and BMP Group on 30 October 2008. Whatever effect this Deed had upon the rights of BMP Industrial came about with this execution and not earlier.

34 The Further Amended Statement filed 23 March 2009 does not in terms refer to s 12 of the Conveyancing Act 1919 and does not allege notice in writing. If any allegation of notice in writing is to be implied it must be understood that the notice is the service of the Further Amended Statement itself. The letter or circular of 16 April 2008 addressed “TO WHOM IT MAY CONCERN” is the only writing put forward which could be thought of as a notice in writing of an assignment, and that could not support an assignment which took place on 30 October 2008. Allegations in the Further Amended Statement seem to show reliance on the first Deed of Assignment; but that is not available as its terms show that it is an agreement to assign, not even in purport an assignment. Paragraph 14 of the Statement alleges that the liquidator executed the Deed of Assignment on or about 18 June 2007; this is plainly wrong in fact. Alternatively, it alleges that the liquidator executed the Deed of Assignment on 30 October 2008; this refers to the second form of the second Deed of Assignment and is correct.

35 It is in my opinion altogether clear that, apart from whatever s 477(2)(c) of the Corporations Act empowers the liquidators to do, BMP Industrial, whoever is or was in control of that company, could not effectively assign the payment due to it under the contract, and (in my opinion it follows) could not effectively assign a claim to be entitled to such a payment which had not been carried through an agreed dispute resolution process or upheld by a determination. In my opinion this is established by the decision of the House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85. The holdings that are now significant are found in the passage of Lord Browne-Wilkinson’s speech commencing at 103 under the heading “Does clause 17(1) prohibit the assignment of accrued rights of action?”.

36 The claim now under consideration could not be described as an accrued right of action and its claims to assignability are significantly less strong than the right under his Lordship’s consideration. Lord Browne-Wilkinson was not prepared to give a narrow reading to clause 17(1) in that case which (see page 99) provided:

          “The employer shall not without the written consent of the contractor assign this contract.”

      On this his Lordship said (at 106B):
          “In my view they cannot have contemplated a position in which the right to future performance and the right to benefits accrued under the contract should become vested in two separate people.”

37 At 105D-G Lord Browne-Wilkinson pointed to the considerations which, in a building contract, made it impossible to give a limited reading to a clause restricting rights of assignment. Considerations which have special force in relation to building contracts and support the restriction include a wish to deal and deal only with the particular person with whom one has chosen to enter into a contract.

38 In the present case General Condition 9.1 is even clearer than clause 17(1) in that it specifically forbids the assignment of “…the Contract or any payment thereunder”, which in my opinion prevents assignment of any claim to be entitled to a payment. A brief reference in the judgment of the High Court in Broadcast Australia Pty Limited v Minister Assisting The Minister for Natural Resources (Lands) (2004) 221 CLR 178; [2004] HCA 4 at 185-186 [15] footnote [19] seems to indicate that, on a point which the High Court regarded as immaterial, their Honours saw the possibility of a different view on the workings of such a provision, but the footnote does no more than indicate a possibility.

39 Case law referred to by Lord Browne-Wilkinson at 106 showed that prohibitions on assignments of debts for work (in that case civil engineering work) were effective: Helstan Securities Limited v Hertfordshire County Council [1978] 3 All ER 262 (Croom-Johnson J). In Helstan’s case it appears that there was a statutory assignment. Linden Gardens was a large part of the basis for the statement of general principles by Lightman J in Don King Productions Inc v Warren [2000] Ch D 291 at 318-320. This statement of principles was noted without adverse observation in the Court of Appeal of England and Wales: see Morritt LJ at 332 [19]; and the Court of Appeal affirmed Lightman J’s application of the principles.

40 Linden Gardens has been treated as authoritative in the Court of Appeal of New South Wales: Minister for Land & Water Conservation v NTL Australia Pty Ltd (2002) 122 LGERA 53; [2002] NSWCA 149 at [19]-[22]. That decision was reversed on appeal, but not on this point, in Broadcast Australia Pty Limited v Minister Assisting The Minister for Natural Resources (Lands).

41 The defendant’s senior counsel referred to the decision of the Court of Appeal of England and Wales in Yeandle v Wynn Realisations Ltd (in Administration) (1995) 47 Con LR 1 where the Court of Appeal was of the view that contract provisions for arbitration were not available to an assignee. The subcontract there under consideration prohibited assignment of the benefit of the subcontract but authorised the subcontractor to assign

          “any sum which is or may become due and payable to him under this subcontract.”

      That decision relates to contract provisions not closely similar to those before me, and counsel referred to the case only to illustrate that availability of a dispute resolution mechanism is a consideration supporting contractual restrictions on assignment.

42 The words of assignment in the second Deed of Assignment (in both forms) are found in clause 4.1, and the relevant passages are these:

          “ 4. Assignment
          4.1 The Companies assign to CGS absolutely all of their respective right title and interest to any legal, equitable or proprietary claim or cause of action which any of the companies may have had against any person not being a party to this Deed, arising out of or in any way associated with the particular businesses carried out by each of the companies prior to the liquidation including but not limiting the generality of the foregoing:
          …”

      The plaintiff’s counsel contended that under the terms of clause 4.1
          “[T]here was no assignment of the Contract and it is submitted that there was also no assignment of any payment thereunder. All that was assigned was a chose in action which was the property of the company.”

      On its correct construction GC 9.1 prohibits the assignment in clause 4.1 of the second Deed of Assignment. I accept the characterisation which senior counsel for the defendant gave that rights assignment of which is prohibited by GC9.1 are inherently incapable of being assigned; it is not simply a matter of giving effect to the contractual prohibition on assignment; it is an inherent characteristic of those rights that they cannot be assigned, and they are given this characteristic by the agreement of the parties which is the sole source of their existence. Those rights do not have any existence on any other basis than that they are not assignable.

43 However plaintiff’s counsel also relied on s 477(2) of the Corporations Act which provides:

          “Subject to this section, a liquidator of a company may:
          …
          (c) sell or otherwise dispose of, in any manner, all or any part of the property of the company.”

44 This should be understood with the definition of property in s 9 of the Corporations Act which is as follows:

          “ property means any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action.”

45 Counsel referred to s 506 of the Corporations Act, and to s 501 which requires in imperative language that the assets of the company must on its winding up be applied in satisfaction of its liabilities. Counsel contended that ”thing in action” and “chose in action” are equivalent terms; see Carob Industries Pty Ltd (in liq) v Simto Pty Ltd (2000) 23 WAR 515; [2000] WASCA 362 at 520 [13]. This is plainly correct.

46 Cases where s 477(2)(c) has been addressed by courts of appeal, including courts of appeal of other States, should be approached having regard to the authority accorded to those decisions by observations in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [135] and Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 at 492.

47 Counsel for the plaintiff referred to a number of authorities which he contended show the amplitude of the power of disposition in s 477(2)(c). In UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 251, Hansen J in the Supreme Court of Victoria made an order under s 511 of the Corporations Law approving entry by liquidators into a Deed of Assignment notwithstanding a claim that the assignment was or might be in breach of the law of champerty and maintenance. Considering the liquidators’ statutory power of sale under the Corporations Law at 265-270, Hansen J reviewed the extensive case law which over many years had held that statutory powers of trustees in bankruptcy and liquidators to enter into arrangements which would be objectionable on the grounds of champerty and maintenance, overcome such objections. In his extensive consideration Hansen J said at 269, line 16 and following:

          “Third, the English and Australian cases make it clear in my opinion that it is not only the vesting in the trustee of the bankrupt’s cause of action by the Bankruptcy Act which provides the foundation for the implication of a statutory exemption to the laws of maintenance and champerty. Instead (or alternatively), it is the granting to the trustee and the liquidator the power to ‘sell or otherwise dispose of, in any manner’ the bankrupt’s and the company’s ‘property’, together with the interpretation of the definition of ‘property’ as including causes of action. Simply put, it is the statutory empowering of the liquidator to sell the company’s causes of action which creates the exception or exemption, which itself is based in part on the assumption that Parliament could not have intended to empower a liquidator to do something which would be unlawful if no exception or exemption was implied. This view is, I think, confirmed by the passage in Lord Hoffman’s judgment in Stein v Blake [1996] 1 AC 243 quoted above. Lord Hoffman was clearly of the view that it is the trustee’s ‘statutory duty to realise the estate [which] excluded the doctrines of maintenance and champerty’, and not the fact that the bankrupt’s estate was vested in the trustee.”

48 An appeal from the decision of Hansen J was dismissed by the Court of Appeal of Victoria – (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA). Brooking JA expressed

          “…admiration for the careful and comprehensive judgment of Hansen J.”

49 In the leading judgment Hayne JA at 463, line 8 to 464, line 12, addressed the meaning and effect of s 477(2)(c). After referring to the provisions of the Corporations Law which are not different to those now under consideration, Hayne JA said at 463, line 16 and following:

          “Thus, taken literally, the statute provides that a liquidator has power to sell or otherwise dispose of, in any manner, any thing in action of the company.
          The appellant contends that those words are not to be read literally but are to be read as not permitting a liquidator to sell the company's cause of action to anyone who does not already have an interest in the outcome of it because a sale to such a person will lead to maintenance or, if there is to be some sharing of the proceeds of the litigation, champerty.
          It may be accepted, for present purposes, that public policy frowns upon ‘trafficking in litigation’: Trendtex Corp v Credit Suisse [1982] AC 679, 694; (1981) 3 All ER 520 at 524 per Lord Wilberforce, Abolition of Obsolete Offences Act 1969 (UK); Wrongs Act 1958 (UK), s32. But if there is such a rule, it is not absolute. In Giles v Thompson [1994] AC 142; [1993] 3 All ER 321, Steyn LJ said:
              ‘In modern idiom, maintenance is the support of litigation without just cause. Champerty is an aggravated form of maintenance. The distinguishing feature of champerty is the support of litigation by a stranger in return for a share of the proceeds.’
          I do not think we need to consider what is ‘just cause’ for these purposes.
          In my view there is no warrant for reading down the general words of the law. The reference to sale or disposal ‘in any manner’ makes plain that it is the intention of the legislature that the powers of the liquidator are to be ample. If a liquidator is to realise the assets of the company in liquidation to the best advantage, it would be surprising indeed if the liquidator were able to sell a particular form of the company's assets (its rights of action) to only a limited class of persons - those who are already interested in the outcome of the action concerned. Especially is this so when it is to be assumed that the provisions about realisation of the company's assets are to be read in light of the long established rule in relation to bankruptcy which permits the trustee in bankruptcy to sell the bankrupt's rights of action to a third party: see Seear v Lawson (1880) 15 Ch D 426; Guy v Churchill (1889) 40 Ch D 481; Ramsay v Hartley [1977] 2 All ER 673; 1 WLR 686; Stone v Angus [1994] 2 NZLR 202; Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238. In my view nothing turns on the different treatment of property of the bankrupt and a company in liquidation in the bankruptcy and companies legislation. In the former case, the property vests in the trustee but in the latter does not, without special order, vest in the liquidator.
          I do not accept that s 477 is to be read, as counsel for the appellant contended, as doing no more than identifying the circumstances in which a liquidator can exercise powers which otherwise would rest in the company. Such a construction wholly ignores that the liquidator is to wind up the affairs of the company and distribute its property: cf s 477(2)(m). The liquidator is not appointed simply as a particular agent or controller of the company who is to set about carrying on the business and affairs of the company as if winding up had not intervened. The liquidator is there to wind up the company's affairs.
          I therefore agree with the learned primary judge, substantially for the reasons that he gives, that the proposed sale of the company's rights of action to Titan was within the power of the liquidator.”

50 Hayne JA’s view has the effect that a liquidator when disposing of property under s 477(2)(c) is not exercising any power or right to assign property under the general law, but that the effectiveness of the disposition has a different source, its authorisation by statute. The law of assignments considered in Linden Gardens is a different subject.

51 UTSA illustrates that the power in s 477(2)(c) extends to a power to dispose of a cause of action. The same view has been acted on in other cases: Re Movitor Pty Limited v Sims [1996] 19 ACSR 440 at 448 (Drummond J); Brookfieldv Davey Products Pty Ltd [1996] 14 ACLC 303 at 307 (Branson J).

52 The law of assignment was reviewed in valuable ways in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395; [2006] FCAFC 40 at 404-405 [32] (Finn and Sundberg JJ) and at 436-438 [187]-[194] (Emmett J).

53 In Krishell Pty Ltd v Nilant & Ors (2006) 60 ACSR 410; [2006] WASCA 223 the company appealed against an adverse judgment and then went into liquidation; the liquidators agreed to sell the right of appeal for $5,000 to the director of the company on the basis that the director had to obtain the court’s leave to prosecute the appeal. The Master dismissed an application to set aside the transaction because the Master considered the right of appeal to be property of the company which was capable of assignment. The Court of Appeal of Western Australia dismissed the appeal; the reasons given were diverse and included address by McLure JA to whether the right of appeal was itself an assignable chose in action. At 426 [73] and following McLure JA addressed whether the right of appeal was property under s 9 of the Corporations Act. Because of the diversity of opinion these observations do not have the authority of a decision of the Court of Appeal. After extensive consideration at [73]-[79] McLure JA concluded that the right of appeal was property capable of being assigned together with the judgment debt by the liquidator and observed:

          “The right of appeal is closely connected with Mr Gardner’s interest in (ownership of) the judgment debt that either exists or will come into existence if the appeal is successful. In either event Mr Gardner’s interest in the judgment debt is ‘property’ under the Corporations Act which can only be claimed in appellate proceedings.”

54 In the course of this consideration McLure JA referred to many authorities and several texts bearing on the question whether a bare right to litigate is a chose in action and whether or not assignability is an essential characteristic of a right of property.

55 In my opinion the plaintiff’s claim to be entitled to a payment of $1,038,918.07 is a chose in action or thing in action within the ordinary meaning of that expression, and there is no reason to suppose that the expression has a different or qualified meaning when used in s 9 of the Corporations Act. It is difficult to see the claim as included within general concepts of property or within the references to property interests in the first part of the definition in s 9, but the extension by inclusion of “thing in action” in the definition shows that the reference to a thing in action has a longer reach than general concepts of property rights. It is authoritatively established that disposition of a claim within the power in s 477(2)(c) is effective notwithstanding that without that power assignment would be illegal and void under the law relating to maintenance and champerty.

56 In my opinion the claim is no less a thing in action and no less susceptible to disposition by a liquidator because under the general law an assignment would be ineffective for another reason. The disposition did not take place under the general law; it has the force that s 477(2)(c) gives it.

57 This reading gives the transaction a severe adverse effect against the interests of the defendant. According to the terms of its contract, the defendant was entitled to have any disputes about payments limited to disputes with the party it was contracting with; there are good reasons for such a limitation, especially in building cases, as explained in Linden Gardens. The Court looks for clear expression of legislative intention to override rights under the general law including contractual rights, but powers of disposition under Bankruptcy Law and Corporations Law have long been understood to operate with amplitude and I regard the intention as clear.

58 The defendant’s senior counsel gave great stress and clear illustration to the position that according to the contract and the general law of assignment, the subject matter of the supposed assignment is inherently incapable of being assigned. The inherent incapacity is as counsel contended, but statute law has created machinery under which the right can be disposed of, and it is the Court’s function to give effect to that disposition so as to serve the purpose of enabling realisation of a company’s resources for the benefit of those interested.

59 It was contended by the plaintiff that the Owners Corporation had waived its entitlement to rely on GC9; see Amended Reply, paragraph 2(d). In support of this contention the pleading referred to and the plaintiff relied on 12 letters and messages passing between the parties and solicitors representing them between the period from 4 November 2005 to 21 April 2008. The position asserted is to the effect that each of these communications was an occasion on which the defendant could have asserted reliance on GC9.1, but did not do so; and it was said that waiver was a consequence. However none of these was an occasion on which the defendant was under a duty or in a situation of election which required it to state whether it relied on GC9 or to forego the opportunity to do so. The facts asserted could not in my understanding constitute a waiver. However this is not a point on which my decision turns.

60 The defendant asserted that the plaintiff is disentitled to rely on the second Deed of Assignment in its second form and disentitled to make the amendments in the Further Amended Statement of 23 March 2009 which relied on it, because of the rule, associated with Baldry v Jackson [1976] 2 NSWLR 415, which limits claims introduced into litigation by amendment to claims existing at the date of commencement of the proceedings. An unstated element of this argument was that the events constituting assignment were part of the cause of action for the purposes of the law applied in Baldry v Jackson; this can be left unexamined. The judgment of Samuels JA clearly contemplates that the rule is no more than a rule of procedure, and cited a statement to that effect in Wigan v Edwards (1973) 47 ALJR 586 at 592 (Gibbs J); no important principle is at stake. The Civil Procedure Act 2005 s 64(3) makes a quite different rule to that applied and acted on in Baldry v Jackson. Amendment to add a cause of action which arose after commencement of proceedings is authorised by s 64(3), which also cures a principal ground upon which the previous rule was based, the anomaly of giving a litigant the benefit of an earlier date of commencement of proceedings than would otherwise be available for the purpose of defences relating to effluxion of time. The position was fully and clearly stated in Jericho Developments Pty Ltd v Garden Tower (NSW) Pty Limited [2006] NSWSC 595 at [21]-[26] (Gzell J) and I follow that decision.

61 In my opinion, the separate questions should be answered in the following ways:

(a) (i)(A) No, it was not assignable.
(i)(B) No, it did not waive its entitlement.
(ii)(A) No
(ii)(B) Yes
(iii)(A)(B) and (C) The cause of action was disposed of to the plaintiff by the second Deed of Assignment in its second form.
(b) No
(c) CGS is entitled to maintain these proceedings on the grounds that CGS filed a Further Amended List Statement on 23 March 2009.
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