Clifton v CSR Buildings Products Ltd - [2008] SASC 254

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CLIFTON & ANOR v CSR BUILDINGS PRODUCTS LTD
[2008] SASC 254
Reasons of Judge Lunn a Master of the Supreme Court
24 September 2008
PROCEDURE
Action by liquidators under 6R 32 for disclosure of documents before bringing a substantive action for repayment of unfair preferences - held where plaintiffs had multiple alternative causes of action they could obtain disclosure under 6R 32 in respect of one of them even though not for the balance of them - order made.

CLIFTON & ANOR v CSR BUILDINGS PRODUCTS LTD
[2008] SASC 254

JUDGE LUNN: The plaintiffs are the liquidators of Adelaide Fibrous Plasterboard Linings Pty Ltd (“the Company”). Between June 2005 and August 2006 the defendant regularly supplied building products to the Company. Between 26 April and 8 August 2006 the Company made six payments to the defendant, totalling $142,027.16. The plaintiffs asserted, and put forward some evidence, that each of the payments were made within six months of the Company going into voluntary administration and that the Company was insolvent in the whole of this period. They also asserted that by receiving these payments the defendant received more than it would have received if it had to prove for those amounts in the winding up of the Company.
The plaintiffs, as the liquidators of the Company, are contemplating bringing proceedings against the defendant under s 588FA of the Corporations Act 2001 (“the Act”) (quoted below) to set aside each of the six payments as unfair preferences. (The plaintiffs also allege other similar causes of action under other sections of the Act, but it is not necessary to go into these for the purposes of this action). By a letter of 18 May 2007 the solicitors for the defendant have denied liability to repay such unfair preferences on the grounds, inter alia, that the payments were made in good faith and without grounds to suspect insolvency under s 588FG of the Act and that the transactions between the defendant and the Company constituted a running account for the purposes of s 588FA(3) of the Act.
The plaintiffs bring this action under 6R 32 which provides:
32(1)If the Court is satisfied, on application by any person (the plaintiff) that the plaintiff may have a good cause of action and requires further information –
(a)to determine whether a cause of action exists; or
(b)to formulate the claim properly; or
(c)to determine against whom the claim lies,
the Court may exercise the investigative powers conferred by this rule in anticipation of an action.
(2)The Court may, if satisfied that a person may be in possession of evidentiary material relevant to the possible cause of action, make an order imposing one or more of the following requirements –
(a)to disclose to the Court or to the plaintiff whether the person is or has been in possession of relevant evidentiary material and, if so, to disclose full particulars of the relevant evidentiary material that is, or has been, in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] SASC 254
Decision Date: 24 September 2008

CaseChat Overview and Summary

The case of Clifton and Anor v CSR Buildings Products Ltd involves the liquidators of Adelaide Fibrous Plasterboard Linings Pty Ltd, the plaintiffs, seeking disclosure of documents from CSR Buildings Products Ltd, the defendant, before bringing a substantive action for repayment of unfair preferences. The dispute centres on six payments made by the insolvent company to the defendant within six months of the company going into voluntary administration, which the plaintiffs claim constitute unfair preferences under the Corporations Act 2001. The court was required to determine whether the plaintiffs could obtain disclosure of documents under r 6R 32 of the Supreme Court Civil Procedure Rules 2006 (SA) in respect of one of their proposed causes of action for unfair preferences, even if they could not satisfy the requirements for all of them. The court also needed to decide if the plaintiffs' proposed causes of action under s 588FA(1) and s 588FA(3) of the Corporations Act 2001 could be pursued separately or in the alternative.

The court reasoned that the plaintiffs could indeed obtain disclosure of documents under r 6R 32 if they could demonstrate that they might have a good cause of action and required further information for one of their proposed causes of action. The court held that the plaintiffs' proposed causes of action under s 588FA(1) and s 588FA(3) of the Corporations Act 2001 were distinct and could be pursued in the alternative or separately. The court found that the plaintiffs had satisfied the requirements of r 6R 32(1) for the proposed cause of action under s 588FA(3), as they had a good cause of action and required further information to determine whether any such cause of action existed and/or to formulate it properly. The court also found that the defendant may be in possession of evidentiary material relevant to the possible cause of action under s 588FA(3) and that the exercise of the discretion under r 6R 32(2) should be in favour of the plaintiffs. The court concluded that disclosure and production of the specified documents should be ordered to avoid additional expense, delay, and prejudice to the administration of justice.

The final orders of the court were as follows: the defendant was to file a list of documents within 21 days, the defendant was to produce the disclosed documents for inspection within 14 days, the question of costs was to be reserved to the trial judge or the master, and the case was fit for counsel.

Orders