Coombes v Capital Certifiers Pty Ltd (No 2) - [2023] ACTSC 9

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:	Coombes v Capital Certifiers Pty Ltd (No 2)
Citation:	[2023] ACTSC 9
Hearing Date:	18 November 2022
DecisionDate:	27 January 2023
Before:	McWilliam AsJ
Decision:	(1) Pursuant to s 500 of the Corporations Act 2001 (Cth) and r 6351 of the Court Procedures Rules 2006 (ACT), and subject to orders 2 and 3, leave is granted to the defendant, Capital Certifiers Pty Ltd (ACN 158 851 239), to commence proceedings against Emmadale Projects Pty Ltd (ACN 145 581 675) (in liquidation) (Emmadale) by way of third-party notice. (2) The defendant is to serve the third-party notice on Emmadale by 1 February 2023. (3) The defendant is not to seek to enforce any judgment obtained against Emmadale without the leave of the Court. (4) The costs of the application are to be the defendants’ costs of the proceeding.
Catchwords:	CORPORATIONS – application for leave to proceed against a company in liquidation pursuant to Corporations Act 2001 (Cth) s 500(2) – where company in liquidation is not yet a party to proceedings – whether leave should be granted to join the company as a third-party notice – where leave has previously been refused to join the company in liquidation as a defendant to proceedings – whether it is desirable for the proposed third party to be bound by the outcome of litigation
Legislation Cited:	Building Act 2004 (ACT) ss 140, 141 Civil Law (Wrongs) Act 2002 (ACT) s 21 Corporations Act 2001 (Cth) ss 471B, 500 Court Procedures Rules 2006 (ACT) Part 2.5, rr 20, 302, 306, 6351 Legislation Act 2001 (ACT)
Cases Cited:	ACCC v Link Solutions Pty Ltd [2008] FCA 1790 Barclays Bank v Tom [1923] 1 KB 221 BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd (1998) 16 ACLC 1539 Canyon (Australia) Pty Ltd v Aktieselskabet Dampskibsselskabet Svendborg [2004] SASC 36 Capita Financial Group Ltd v Rothwells Ltd (No 2) (1989) 15 ACLR 348 Catanzariti v Muller [2017] ACTSC 365 Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 Chief Commissioner of State Revenue (NSW) v CCM Holdings Trust Pty Ltd [2014] NSWCA 42 Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 Commonwealth v Davis Samuel Pty Ltd (No 5) [2008] ACTSC 124; 164 ACTR 1 Coombes v Capital Certifiers Pty Ltd [2022] ACTSC 165 Distinctive FX9 Pty Ltd v Statewide Developments Pty Ltd [2013] NSWCA 110 Ex parte Walker (1982) 6 ACLR 423 King v Yurisich [2006] FCA 1369 Maher v Taylor (1984) 1 NSWLR 231 Pace Tasmania Pty Ltd v FAI General Insurance Co Ltd [2001] TASSC 112; 10 Tas R 276 Phonesivorabouth v Tops Services Pty Ltd (1992) 106 FLR 471 Re A J Benjamin Ltd (in liq) (1969) 90 WN (Pt 1) (NSW) 107 Re Addstone Pty Ltd; Ex parte Macks (1998) 30 ACSR 162 Re Enviro Pallets (NSW) Pty Ltd [2013] QSC 220 Re Gordon Grant and Grant Pty Ltd (1983) Qd R 314 Tolhurst Druce &…

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: [2023] ACTSC 9
Decision Date: 27 January 2023

CaseChat Overview and Summary

In Coombes v Capital Certifiers Pty Ltd (No 2), the plaintiffs sought damages against the defendant, Capital Certifiers Pty Ltd, arising out of a contract for the supply of a solar energy system. Capital Certifiers sought to join Emmadale Projects Pty Ltd, a company in liquidation, as a third party to the proceedings under section 500 of the Corporations Act 2001 (Cth) and Part 2.5 of the Court Procedures Rules 2006 (ACT). The plaintiffs opposed the application on the basis that the third-party proceeding proposed would be ultimately futile. The Court was required to determine whether leave should be granted to Capital Certifiers to commence the third-party proceedings against Emmadale, and whether it was desirable for the proposed third party to be bound by the outcome of the litigation.

The Court considered the requirements for bringing a third-party claim under Part 2.5 of the Rules, with rule 302 providing that a defendant may file a third-party notice if they want to claim a contribution or indemnity against a person who is not already a party to the proceeding. The Court noted that the scope of third-party actions is not limited solely to claims for contribution or indemnity, and that the language used in rule 302 is whether a defendant “wants” an issue relating to the proceedings to bind the proposed third party. The Court held that the defendant does not have to prove that joinder is a matter of necessity, but rather that it is sufficient if the defendant wants an issue relating to the proceedings to bind the proposed third party. The Court also noted that an equivalent rule is to be given a liberal construction. The Court found that it was desirable for the proposed third party to be bound by the outcome of the litigation, and that the proposed third-party notice was within the scope of the relevant rules.

Accordingly, the Court granted leave to Capital Certifiers to commence proceedings against Emmadale by way of third-party notice. The Court also ordered that Capital Certifiers serve the third-party notice on Emmadale by 1 February 2023, and that Capital Certifiers not seek to enforce any judgment obtained against Emmadale without the leave of the Court. The costs of the application were to be the defendants’ costs of the proceeding.

Orders

Orders of the court

(1) Pursuant to s 500 of the Corporations Act 2001 (Cth) and r 6351 of the Court Procedures Rules 2006 (ACT), and subject to orders 2 and 3, leave is granted to the defendant, Capital Certifiers Pty Ltd (ACN 158 851 239), to commence proceedings against Emmadale Projects Pty Ltd (ACN 145 581 675) (in liquidation) (Emmadale) by way of third-party notice.

(2) The defendant is to serve the third-party notice on Emmadale by 1 February 2023.

(3) The defendant is not to seek to enforce any judgment obtained against Emmadale without the leave of the Court.

(4) The costs of the application are to be the defendants’ costs of the proceeding.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

By its application filed 5 September 2022, Capital Certifiers now seeks to add Emmadale as a third party to the proceedings. It seeks leave to do so pursuant to s 500 of the Corporations Act 2001 (Cth) (Corporations Act) and Part 2.5 of the Court Procedures Rules 2006 (ACT) (the Rules), including leave to extend the time to file, required under r 6351. The proposed third-party notice was before the Court. It appears to have been accepted for filing (erroneously) on 21 September 2022 but there is no doubt that the defendant requires leave to commence the proceedings. The notice seeks contribution towards, or indemnity in relation to, any liability found against the defendant in respect of the plaintiffs’ claim. In the event that the application is granted, an order has also been proposed that Capital Certifiers will not seek to enforce any judgment obtained against Emmadale without further leave of the Court. The relief claimed in the notice is the contribution or indemnity as well as interest and costs. The plaintiffs oppose the application on the basis that the third-party proceeding proposed would ultimately be futile for two reasons. They are addressed below, but broadly, the first is that Capital Certifiers would be unlikely to recover from Emmadale on a successful contribution claim. The second is that an apportionment claim would also fail because the parties would not fit the statutory criteria for an apportionment determination to arise. The requirements for bringing a third-party claim are set out in Part 2.5 of the Rules, with r 302 providing (emphasis added):302 Third-party proceeding—when availableA defendant may file a third-party notice if the defendant wants to—(a)claim a contribution or indemnity against a person who is not already a party to the proceeding; or(b)claim relief against a person who is not already a party to the proceeding that—(i) relates to or is connected with the original subject matter of the proceeding; and(ii) is substantially the same as some relief claimed by the plaintiff; or(c)require an issue relating to or connected with the original subject matter of the proceeding to be decided not only as between the plaintiff and defendant but also between either of them and a person not already a party to the proceeding. It is readily apparent from r 302 that the scope of third-party actions is not limited solely to claims for contribution or indemnity, although that may be the most common form. Rather, r 302(c) contemplates third-party actions that may also require the court to determine an issue as between the plaintiff and defendant or also as between either of them and the third party, whether or not there is also a claim for contribution. The words emphasised above in the opening line of r 302 are to highlight that the language used is whether a defendant “wants” an issue relating to the proceedings to bind the proposed third party and potentially to claim contribution from them. The defendant does not have to prove that joinder is a matter of necessity (although plainly it would be if a claim in contribution is sought). It has been held elsewhere that an equivalent rule is to be given a liberal construction: see H Stanke & Sons Pty Ltd v Frederick John Von Stanke [2007] SASC 282 at [38] which also cited Canyon (Australia) Pty Ltd v Aktieselskabet Dampskibsselskabet Svendborg [2004] SASC 36 at [19]). I respectfully agree with that approach here.