Creenaune v Work Cover Queensland
[2018] QDC 51
•29 March 2018
DISTRICT COURT OF QUEENSLAND
CITATION:
Creenaune v Work Cover Queensland & Ors [2018] QDC 51
PARTIES:
Anthony John Creenaune
(Plaintiff)
v
Work Cover Queensland
(First defendant)
Maritimo Offshore Pty Ltd (administrator appointed) ACN 070000798
(Second Defendant)
FILE NO/S:
17/17
DIVISION:
District Court of Queensland
PROCEEDING:
Civil Application
ORIGINATING COURT:
District Court of Queensland
DELIVERED ON:
29 March 2018
DELIVERED AT:
Brisbane
HEARING DATE:
On the papers
JUDGE:
Chowdhury DCJ
ORDER:
Application refused
CATCHWORDS:
COMPANY – ADMINISTRATION - PROCEEDINGS- Consent of Administrator- Application for default judgment
SOLICITORS:
T.O’Donnell of O’Donnell Legal for the Plaintiff
A.Haworth of Cartner Newell for the Defendant
By notice filed in the registry on 23 February 2018 the plaintiff seeks default judgment against the second defendant, in respect of a claim for damages filed on 23 June 2017. As no notice of intention to defend has been served on the plaintiff by the second defendant, the application was brought, and was requested in the first instance for the Registrar to give default judgment on the papers. The matter was referred by the Registrar to me for my consideration. On Monday 19 March 2018 the acting Deputy Registrar advised the plaintiff by email that I had refused the application for default judgment on the basis that “I’m not satisfied that s.440D Corporations Act 2001 has been complied with. The parties are at liberty to have the matter brought on for oral hearing on an application”.
These are the reasons for my decision.
Background to the application
The history of the application is set out in the further affidavit of Thomas Noel O’Donnell, filed on 8 March 2018. Relevantly, on 27 October 2017 Mr O’Donnell, acting for the plaintiff, sent a letter to Mr Andrew Cummins and Mr Brian Silvia of BRI Ferrier (New South Wales) Pty Ltd, the administrators of the second defendant. This letter is “TOD-16” to the affidavit of Mr O’Donnell, and relevantly states as follows:
“We refer to the attempted service of our client’s claim and statement of claim upon Maritimo Offshore Pty Ltd.
Please find enclosed, an email from Garth Corbitt, CEO of Maritimo, dated 1 August 2017. You will note that Mr Corbitt advises that he received authorisation from BRI Ferrier to accept service of our client’s claim and statement of claim.
Unfortunately, section 440D (1) (a) of the Corporations Act 2001 (‘the Act’), requires your approval in writing to accept service. Accordingly, please also find enclosed, written authority to permit us to serve the claim and statement of claim on you. We would be grateful if you signed, dated and returned this authority to our office in the replied paid envelope that we have also enclosed for your benefit.
It is important to note in this claim, Maritimo Offshore Pty Ltd are indemnified by an insurer. Accordingly, the service of proceedings upon you or Maritimo Offshore Pty Ltd has no impact on the administration of the company.”
By further letter dated 14 November 2017 Mr O’Donnell sent a reminder letter to the administrators requesting that they sign the enclosed authority. That letter is “TOD-17” exhibited to the affidavit. The next document exhibited to the affidavit is “TOD-18”, which is a signed authority to accept service, signed purportedly by Andrew Cummins. It is entitled “Authority to Accept Service”, and reads as follows:
“We, Andrew Cummins and Brian Silvia, principals of BRI Ferrier (New South Wales) Pty Ltd and administrators of Maritimo Offshore Pty Ltd, hereby CONSENT to O’Donnell Legal of 58 Morgan Street, Fortitude Valley, legal counsel for Anthony Creenaune, serving the claim and statement of claim in Beenleigh District Court matter 17/17 directly upon us by express post.”
That authority is signed by Mr Cummins, and written under his name is ‘joint and several deed administrator’. Mr Silvia did not sign the authority, which is dated 10 November 2017.
“TOD -19” exhibits a letter from Mr O’Donnell to the administrators which reads relevantly as follows:
“We refer to your authority to accept service, signed 10 November 2017 (‘the authority’). In accordance with same, please find enclosed, by way of service, claim and statement of claim, dated 23 June 2017 filed in the Beenleigh registry of the District Court.
We respectfully suggest you forward these documents to the solicitors of the company’s public liability insurer, Carter Newell. ….”
The letter went on to provide the post office box address for Carter Newell Lawyers.
“TOD-20” exhibits a letter from Mr O’Donnell dated 22 December 2017 to the administrators advising them that service of a notice of intention to defend, and filing of a defence, was overdue. Relevantly, the letter stated: “if we do not receive service of the defence on or before close of business on Friday, 12 January 2018, we will have no alternative but to bring an application for summary judgment. We trust that this will not be necessary.”
“TOD-21” exhibits a letter from Mr O’Donnell dated 30 January 2018 to the Administrators again advising them that he had not yet received service of the defence despite the extension over the Christmas period. A further extension was granted until Friday 9 February 2018.
“TOD-22” exhibits a letter from Mr O’Donnell dated 31 January 2018 to Carter Newell Lawyers, enclosing the correspondence to the administrators dated 30 January 2018, referred to above. In brief, the letter requested Carter Newell Lawyers to contact the administrators of the company to deal with the issues raised by Mr O’Donnell in his previous letter.
“TOD-24” exhibited to the affidavit is an email from Allison Haworth, Senior Associate of Carter Newell Lawyers, which forwarded some enclosures. The enclosures are a letter from Carter Newell Lawyers dated 1 February 2018, letter dated 9 August 2017, email from James Sekhas from BRI Ferrier to Ms Haworth dated 8 August 2017, and a notice of appointment of solicitor.[1]
[1]That notice of appointment of solicitor was filed in the registry on 2 February 2018.
The letter from Carter Newell Lawyers dated 1 February 2018 make it clear that the plaintiff had not obtained the consent of the Administrators for proceedings to begin or to proceed with the proceeding, nor had the plaintiff obtained the leave of the court, in accordance with s440D Corporations Act 2001 (‘The Act’).
The relevant section of the act
s440D of the Act is headed ‘Stay of Proceedings’ and reads as follows:
“(1) During the administration of a company, a proceeding in a court against the company when in relation to any of its property cannot be begun or proceeded with, except;
(a) with the administrator’s written consent; or
(b) with the leave of the court and in accordance with such terms (if any) as the court imposes.
(2) Subsection (1) does not apply to: (a) a criminal proceeding;
or (b) a prescribed proceeding.”
There is considerable authority about when a court should give leave to a party to bring proceedings under this section. In Slater & Anor v Global Finance Group Pty Ltd (1999) 30 ACSR 519, Wheeler J said this at 522:
“A review of the law in relation to s 440 D of the corporations law was undertaken by Carr J in Pioneer Water Tanks (Australia 94) Pty Ltd v Delat Pty Ltd (Admin Apptd) (1997) 27 ACSR 757. His Honour noted the reluctance generally displayed towards the grant of leave. The cases to which his Honour referred established two broad themes, they being first that it is inappropriate to grant leave so that a creditor may seek to advance his own individual interest in respect of some disputed matters; the existence of s 447B assists in protection of those interests to the appropriate extent. The other theme is the undesirability of an administrator being distracted from his or her statutory duties and obliged unnecessarily to incur legal costs. Neither of those principles is strictly applicable here.”
In Foxcroft v The Ink Group Pty Ltd (1994) 15 ACSR 203, Young J in the Supreme Court of New South Wales said this at 204 – 205:
“There is, however, quite a big difference between a company in administration and a company in liquidation. A company in administration is seeking to continue to trade and is, in accordance with s 435A, seeking to maximise the chance of it remaining in business. A company in liquidation is one where the liquidator is seeking not to trade but to realise the company’s assets as soon as possible for the best price, in order to be able to distribute the net available funds to the creditors and in some circumstances, the members.
The provisions of Pt 5.3A, as exemplified in sections such as 437C, 437F, 44C and 440D, provide that there shall be a complete freeze of proceedings against the company during administration so that the administrator can have time to assess the situation, and the company’s creditors have an opportunity to work out the net position and adopt an attitude under s 439C which will be in their common interest. To allow one creditor or potential creditor to proceed will not only take the administrator’s attention from what he needs to do under the division in a relatively short period of time, but it would also involve costs in running the legal action on behalf of the administrator, as well as perhaps giving the claimant some advantage over the other creditors or potential creditors.
Accordingly, it seems to me that an application under s 440D will rarely be granted. It may be that where the company is insured against a liability the subject of the proceedings, the administrator will ordinarily consent or the court will give conditional leave, but outside this field it is hard to see situation where it would be proper to grant leave, though doubt less there are such situations.”
In Modcol Pty ltd v National Build Plan Group Pty Ltd (2013) 93 ACSR 598, McDougall J in the Supreme Court of New South Wales considered the approach of Young J in Foxcroft v The Ink Group Pty Ltd, (supra), as well as a different approach from another Judge of the Supreme Court of New South Wales. His Honour said this at 601 – 602:
“ [15] Clearly enough, the discretion given by s 440D, to grant leave to commence or continue proceedings, is one to be exercised having regard to the objects of Pt 5.3A as a whole and the importance, to the achievement of those objects, of protecting the company’s property during administration…
[17] There has been some debate as to whether the statutory discretion given by s 440D is (as Young J suggested in Foxcroft at 205) something to be exercised with great caution, and whether good reasons are necessary before the court should grant leave.
[18] Young J said in Foxcroft at 205 that applications under s 440D ‘will rarely be granted’. His Honour referred to instances of insurance and the like but said that ‘outside this field it is hard to see situations where it will be proper to grant leave, though doubtless there are such situations.’
[19] The question of circumscription of the discretion, was considered by Hammerschlag J in Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd (2011) 285 ALR 207; [2011] NSWSC 1305.
[20] After referring to what Young J had said Foxcroft, and to other authorities, Hammerschlag J said (at [36]) that one should not approach an application under s 440D ‘with an assumption that leave will only rarely be granted or that the court must approach this type of application with a degree of caution greater than that with which it would approach the exercise of any other discretion within a particular statutory context’.
[21] His Honour said that to impose some higher standard than the wording of the statute required was to place on the exercise of the discretion ‘an unwarranted confinement’.
[22] It does seem to me that there is a lot to be said for the proposition that the language of s 440D speaks for itself, and that the discretion is one to be exercised, as I’ve said, giving proper weight not only to the particular facts in respect of which exercise is sought or resisted but, more generally, to the object of Pt 5.3A and the role that Div 6 plays.
[23] It may be accepted that the general position is that stated: namely, that proceedings are not to be commenced or continued with, as the case may be, against a company in administration. But that general position is subject to the express statutory exceptions, of administrators’ written consent or leave of the court (on terms if appropriate).
[24] In the result, it is not necessary for me to express a concluded view as to whether I should prefer the approach taken by Young J (and others) or that taken by Hammerschlag J, because on either view, it seems to me, the outcome in this case is the same.”
In Brian Rochford Ltd (Administrator Appointed) v Textile Clothing and Footwear Union of NSW (1998) 47 NSWLR 47, Austin J at 53 – 56 set out the structure and operation of Part 5.3A of the Corporations Law. In that case his Honour considered that the Industrial Relations Commission of New South Wales could properly be described as a “court” for the purposes of s 440D of the Act, and that an application to that commission in respect of unfair dismissal claim could properly be described as a “proceeding” for the purposes of the section.
I have been unable to discover any authority on what is required for an administrator to provide written consent within the meaning of the section. However the words speak for themselves. An administrator’s written consent is required for the commencement or continuation of a proceeding in a court; significantly leave of the court to begin or proceed with a proceeding is not sought in this case.
Conclusion
By way of letter dated 27 October 2017, which was exhibited as “TOD – 16” and referred to above, the plaintiff’s solicitor sought “written authority to permit us to serve the claim and statement of claim on you.” The signed “Authority to Accept Service” which is “TOD – 18” provides consent only to the service of the claim and statement of claim upon the administrator who signed it.
Consent to receive service is not the same as consent to a proceeding beginning or proceeding within the meaning of s 440D of the Act. In the criminal sphere, it is common for a solicitors’ firm to consent to police serving a summons on the firm in respect of a client. That does not mean that the solicitors are consenting to criminal proceedings actually being commenced and maintained.
For these reasons I was not satisfied that the strict requirements of the section were met, and therefore I was not prepared to grant the plaintiff default judgment against the second defendant.
In order to preserve the rights of the plaintiff, I should also state that the delivery of this judgment constitutes the date of my refusal, in respect of any potential appeal pursuant to R763 Uniform Civil Procedure Rules 1999.
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