Di Giovanni v Dark Horse Developments Pty Ltd (in liq)
[2014] WASC 132
•15 APRIL 2014
DI GIOVANNI -v- DARK HORSE DEVELOPMENTS PTY LTD (in liq) [2014] WASC 132
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 132 | |
| Case No: | CIV:1099/2013 | 3 APRIL 2014 | |
| Coram: | PULLIN J | 15/04/14 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Leave granted | ||
| B | |||
| PDF Version |
| Parties: | PIERO DI GIOVANNI DARK HORSE DEVELOPMENTS PTY LTD (in liq) |
Catchwords: | Company law Application for leave to commence or proceed with an appeal |
Legislation: | Corporations Act 2001 (Cth), s 445E, s 446A(2), s 471B, s 500(2), s 513B(d)(ii) Supreme Court Act 1935 (WA), s 10C |
Case References: | Boase v Axis International Management Pty Ltd [No 2] [2012] WASC 334 Di Giovanni v Dark Horse Developments Pty Ltd [No 2] [2013] WADC 23 Di Giovanni v Dark Horse Developments Pty Ltd [No 3] [2013] WADC 120 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
DARK HORSE DEVELOPMENTS PTY LTD (in liq)
Defendant
Catchwords:
Company law - Application for leave to commence or proceed with an appeal
Legislation:
Corporations Act 2001 (Cth), s 445E, s 446A(2), s 471B, s 500(2), s 513B(d)(ii)
Supreme Court Act 1935 (WA), s 10C
Result:
Leave granted
Category: B
Representation:
Counsel:
Plaintiff : In person
Defendant : No appearance
Solicitors:
Plaintiff : In person
Defendant : No appearance
Case(s) referred to in judgment(s):
Boase v Axis International Management Pty Ltd [No 2] [2012] WASC 334
Di Giovanni v Dark Horse Developments Pty Ltd [No 2] [2013] WADC 23
Di Giovanni v Dark Horse Developments Pty Ltd [No 3] [2013] WADC 120
1 PULLIN JA: This is an application for leave to commence and continue the appeal Mr Di Giovanni is bringing in Di Giovanni v Dark Horse Developments Ltd CACV 99 of 2013. I sat as a General Division judge with the consent of the Chief Justice granted pursuant to s 10C of the Supreme Court Act 1935 (WA).
2 If leave is to be granted, it will be granted pursuant to s 500(2) of the Corporations Act 2001 (Cth) rather than s 471B, because although Dark Horse Developments Pty Ltd (Dark Horse) is in liquidation and is insolvent, in the circumstances referred to in the next paragraph, this winding up is pursuant to a resolution for a voluntary winding up: see s 446A(2) and s 513B(d)(ii) of the Corporations Act.
3 On 16 February 2012, administrators were appointed to Dark Horse. On 20 August 2012, Mr G M Carrello was appointed liquidator of the company by resolution of the creditors pursuant to s 445E of the Corporations Act. I infer that the creditors also resolved to terminate the relevant deed of company arrangement.
4 Section 500(2) of the Corporations Act provides:
After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.
5 The factors and principles usually relevant to the exercise of the discretion to grant leave were recently referred to by Beech J in Boase v Axis International Management Pty Ltd[No 2] [2012] WASC 334. They include that there must be no prejudice to creditors or to the orderly winding up of the company and, generally speaking, the court should not grant leave to proceed or commence proceedings against a company in liquidation if it appears there is no possibility that the company will be able to meet any part of the damages awarded against it. The court should not grant leave if there is no serious question to be tried.
6 Mr Di Giovanni is a builder. He did some building work to refit and renovate two premises so they could be operated as small bars. One was called 'The Cabin' in Mount Hawthorn, the other was known as 'The Suite' in Shenton Park. Mr Di Giovanni sued Mr Brendan Aitken and Dark Horse in the District Court for monies due in respect of this work. He pleaded that Mr Brendan Aitken had signed both The Cabin contract and The Suite contract in his capacity as a director and agent of Dark Horse, and that subsequent variations relating to The Cabin contract had been signed by Mr Brendan Aitken and Mr Peter Aitken on behalf of Dark Horse. Alternatively, Mr Di Giovanni pleaded that both contracts had been entered into by Mr Brendan Aitken on his own behalf. The reamended defence and counterclaim filed on behalf of all defendants, pleaded that Dark Horse entered into both contracts. The monies claimed by Mr Di Giovanni were for unpaid invoices, interest and damages.
7 There was a trial of the preliminary issues before Wager DCJ in February 2013 about whether the contracting party was Mr Brendan Aitken or Dark Horse. The trial judge found that the contracting party was Mr Brendan Aitken and not Dark Horse: Di Giovanni v Dark Horse Developments Pty Ltd [No 2] [2013] WADC 23.
8 The reasons in Di Giovanni [No 2] reveal that difficulties and disputes between the parties arose during construction work. Dark Horse wanted early possession to set up The Cabin. Mr Di Giovanni did not want to give up possession unless Dark Horse agreed to pay what was due on unpaid invoices. Mr Di Giovanni then wrote a letter addressed to Dark Horse. The trial judge said in her reasons:
The result of the problems however was that on 11 May 2009 Mr Di Giovanni wrote to [Dark Horse] Developments Pty Ltd on Timber Dimensions' letterhead in relation to early handover of the property 'The Cabin' (exhibit 6):
'Dear Brendan and Peter,
Before I can give early handover of 'The Cabin' to [Dark Horse] Developments Pty Ltd, that is before all invoices are paid for in full. I require this renewal of our contract agreement signed.
• That all invoices relating to the construction of 'The Cabin' be paid in full as per our Cost Plus agreement.
• Timber Dimensions retains full ownership of all material and services relating to the above property until paid for in full.
• Timber Dimensions has full access to the above property until all invoices and debts are paid for.
• In the event of any legal action taken to recover unpaid invoices, that all costs of said legal shall be charged to and paid for by [Dark Horse] Developments Pty Ltd.
This early handover is designed to be helpful to [Dark Horse] Developments Pty Ltd to raise revenue for payment of present, past and future works. As well as being for income to [Dark Horse] Developments.
No future works shall commence while there are unpaid invoices retaining to 'The Cabin' to Timber Dimensions.
This is confirming our previous agreement on The Cost Plus contracts signed on 1st May 2008.
[Signature] [Signature]
Brendan Aitken Peter Aitken
Director Director
Kindest regards
[Signature]
Piero Di Giovanni
Timber Dimensions'
In the present case the plaintiff carries the onus of proving the identity of a contracting party or parties. Although it could be inferred that the parties believed that Dark Horse Pty Ltd had responsibility for The Suite and The Cabin, there is no clear evidence of Dark Horse Pty Ltd's acceptance of the two building contracts and variations. On the contrary the contractual variations adopt the terms and conditions of the contracts signed on 1 May 2008 [54].
10 The trial judge, having decided that the parties to the contract were Mr Di Giovanni and Mr Brendan Aitken, then conducted a trial in May 2013 in order to determine the merits and to determine whether Mr Di Giovanni could establish the claims that he brought in the action. The parties continued to be shown on court documents as Mr Di Giovanni as plaintiff, Dark Horse as first defendant and Brendan Aitken as the second defendant. According to the trial judge, Mr Di Giovanni sent 'accounts' (I assume this means invoices for $279,963.50) and claimed interest at the rate of 19.94% pursuant to the contract. After that trial, the judge published reasons: Di Giovanni v Dark Horse Developments Pty Ltd [No 3] [2013] WADC 120. In those reasons the trial judge stated that:
The plaintiff, Mr Di Giovanni trading as Timber Dimensions, contracted with the second defendant, Mr Brendan Aitken, to renovate and build premises for a small bar …
11 At the end of the reasons for decision, Wager DCJ said:
1. The defendant pay the plaintiff the sum of $267,571.50 plus interest …
12 The reference to the 'defendant' must be read as a reference to Brendan Aitken in view of the trial judge's conclusion in Di Giovanni [No 2] even though Dark Horse remained a defendant.
13 The 'defendant's counterclaim' was dismissed. The interest at 19.94% was allowed, but only on the judgment sum from 30 January 2013 until judgment on 25 July 2013, this being a total of $25,716.50. Mr Di Giovanni had claimed interest from the dates he said they were due. These were dates in 2009 and 2010. On that basis, he had claimed interest at 19.94% totalling $208,060.69 (to 2 April 2013). So, by the judgment, that claim was substantially disallowed.
14 Mr Brendan Aitken went bankrupt. The assumption is that Mr Brendan Aitken has no assets. It has not been revealed whether Mr Di Giovanni has lodged a proof of debt in Mr Aitken's bankruptcy.
15 Mr Di Giovanni then instituted the appeal referred to at the beginning of these reasons seeking an order that judgment should be entered against Dark Horse because it entered into a 'collateral contract'. Although the appeal notice does not say so, he is, in effect, appealing against the interlocutory judgment of Wager DCJ in Di Giovanni [No 2]. It is not clear whether he means to argue that Dark Horse and not Brendan Aitken is liable, or that Dark Horse and Brendan Aitken are liable. Certain parts of the appellant's case suggest the latter. However, this does not matter. It is clear from his submissions that he contends that Dark Horse is liable and that the trial judge erred in concluding to the contrary.
16 On 20 March 2012, Mr Di Giovanni attended a creditors' meeting conducted by the administrators of Dark Horse. The minutes of the meeting contain a passage which reads:
[The chairman] noted that Mr Piero Di Giovanni, as proxy for Timber Dimensions, had previously advised his office that he was owned [sic] an amount of approximately $600,000 for works completed on behalf of the company prior to the Administrator [sic] appointment.
Mr Di Giovanni had only formalised his claim by lodging the appropriate proof of debt form for an amount of $575,791.44 approximately 2 hours prior to the meeting.
17 It appeared that Mr Di Giovanni's solicitor attended the meeting. He addressed the meeting and the minutes recorded:
[I]t is not possible to advise on the validity of the claim given the documentation provided as it was not definitive to the claim against the company. Accordingly, the chairperson admitted Timber Dimensions [sic] claim for a nominal amount of $1.00 for voting purposes, subject to further evidence being provided by Mr Di Giovanni.
18 This material was revealed in an affidavit filed by Mr Di Giovanni in proceedings in January 2013 when he sought leave to continue the District Court proceedings against Dark Horse because Dark Horse was then in liquidation. An order granting leave was made by Kenneth Martin J on 29 January 2013.
19 Mr Di Giovanni filed an affidavit sworn 31 March 2014 in support of this application for leave. In it he exhibited an annual report to creditors prepared by the liquidator dated 20 September 2013. It reveals a number of matters which are relevant. Mr Di Giovanni's proof of debt is still recorded as claiming $575,791.44.
20 The liquidator's report also reveals that in the liquidator's opinion, the company had been trading whilst insolvent at least since July 2010. The report indicates that the liquidator had issued a letter of demand to the directors for an insolvent trading claim
21 In a letter dated 31 March 2014 to Mr Di Giovanni (Timber Dimensions), the liquidator informed Mr Di Giovanni that he would be proceeding with legal action against Peter Aitken in relation to the insolvent trading. The report of 20 September 2013 set out the statement of assets and liabilities of Dark Horse as at the date of the report showing cash in the bank of $1,895; stock on hand of $2,000; plant and equipment valued at $199,000; and a small amount of $1,601 for licence and goodwill and other assets. The liquidator has sold the assets and about $200,000 has been raised as a result of those sales. The liabilities of Dark Horse total $1,859,322.
22 Mr Di Giovanni has carried out a titles office search which reveals that Peter Aitken (one of the directors being sued by the liquidator) is the registered proprietor of several titles to land. This provides some hope to creditors that the sum which is presently available to creditors may grow. Thus, if leave is granted and the appeal succeeds, Mr Di Giovanni will clearly be an unsecured creditor of Dark Horse and there is the possibility of some recovery.
23 If Mr Di Giovanni's appeal does not proceed then he might not be admitted as a creditor because the District Court judgment holds that Dark Horse was not contractually liable.
24 Mr Di Giovanni was represented by lawyers in the District Court until he was unable to fund their continued involvement. He informed me that he cannot afford them for the appeal. This is unfortunate because he does have some genuine issues to be resolved and his appeal will involve legal issues which he may struggle to deal with. His proposed grounds of appeal are difficult to follow and like many parties (and many lawyers), he has difficulty identifying what error he alleges the trial judge is said to have made. Nevertheless, I will try to identify the points I drew from the appellant's case and his oral submissions in order to determine whether there is a serious question to be dealt with in the appeal.
25 First, Mr Di Giovanni alleges that the trial judge erred in law in finding that Dark Horse was not a contracting party liable to pay the invoices rendered by Mr Di Giovanni. This was clearly an issue both on the pleadings and at trial and in the proceedings in February 2013 resulting in the judgment of Di Giovanni [No 2]. He couches his contention in terms that Dark Horse entered into a 'collateral' contract and became liable to pay what was due under the contract that Mr Di Giovanni had with Brendan Aitken. The question of Dark Horse's contractual involvement was dealt with by the trial judge in [51] and [52] of Di Giovanni [No 2]. Her Honour referred to an issue about 'assignment' or 'novation'. The heading itself reveals some uncertainty on the trial judge's mind about the law. It refers to an issue about whether there had been an assignment of contractual obligations. Contractual obligations cannot be assigned. Her Honour was doubtless not assisted by the parties who were both unrepresented by lawyers.
26 The position Mr Di Giovanni contends for, gleaned from the trial judge's reasons and Mr Di Giovanni's submissions, is as follows. Mr Di Giovanni carried out work on the two premises under contracts with Mr Brendan Aitken. Soon after work commenced, Mr Di Giovanni learned that Dark Horse had been incorporated and was to be the entity to conduct the business from the two premises. Mr Di Giovanni says that he began dealing with Dark Horse once he knew of its existence. He says that invoices were rendered and not paid. Then, Dark Horse wanted early possession of the premises to set up for the opening of the two businesses. Mr Di Giovanni did not want to give up possession while invoices remained unpaid, so he demanded that if he were to give early possession, Dark Horse had to become contractually liable for the payment of the outstanding invoices. The letter of 11 May 2009 addressed to Dark Horse was then signed by Brendan and Peter Aitken in their capacity as directors of Dark Horse, and by Mr Di Giovanni. Mr Di Giovanni contends that Dark Horse was then given possession. Thus, it is possible to conceive that on 11 May 2009, a contract came into existence between Mr Di Giovanni and Dark Horse, partly implied, partly oral and partly in writing, in terms that, in consideration of Mr Di Giovanni giving early possession of the premises to Dark Horse, that Dark Horse would undertake to pay the amount due on all unpaid invoices in accordance with the contracts between Mr Di Giovanni and Brendan Aitken and otherwise be bound by the terms of those contracts.
27 Mr Di Giovanni contends in one of his grounds of appeal (ground 5) that:
In paragraphs 51 and 52 there was no findings made to the letter dated 11 May 2009 [sic] [exhibit 61] that was put into evidence as 'a collateral contract'.
28 Being generous to Mr Di Giovanni, this ground contends that the trial judge erred in law in concluding that no contract was entered into between Mr Di Giovanni and Dark Horse in terms that Dark Horse was to pay the amount due under all outstanding contracts which had been rendered to Brendan Aitken, and that Dark Horse was bound by the terms of the agreement entered into between Mr Di Giovanni and Brendan Aitken.
29 Mr Di Giovanni is keen to apply the adjective 'collateral' to the contract that he alleges Dark Horse entered into. It may not be necessary to employ that adjective, but that is how Mr Di Giovanni presently describes the contract that he said Dark Horse entered into.
30 This ground is therefore an allegation that the trial judge erred in Di Giovanni [No 2]. Being an interlocutory decision, Mr Di Giovanni may, with leave (which is likely to be granted), allege error in relation to it following the final judgment in the action in Di Giovanni [No 3].
31 Second, as to the quantum, the trial judge awarded judgment in the sum of $267,571.50, plus interest of $25,716.50, a total of $293,288. However, Mr Di Giovanni says that the invoices he rendered amounted to $280,847.14 (see annexure 3 to his affidavit in these proceedings) and that sum, together with interest calculated at 19.94% and a claim for damages and interest concerning 'The Suite' contract, produced a total amount due to him of $537,166.94 to 2 April 2013, and $575,791.44 to the date of judgment, 25 July 2013. Mr Di Giovanni says that the trial judge erred in allowing Mr Aitken to challenge the amount due under the invoices reducing his claim from $280,847.14 to $267,571.50. Mr Di Giovanni points to cl 10 of the HIA form contract with Brendan Aitken which he says reads:
[I]f the owner shall not within 5 days of receipt of any progress claim notify the builder of their disagreement with any of the items therein specifying full details of the owner's disagreement the owner shall be deemed to have accepted and approved of that progress claim as true and correct.
32 Mr Di Giovanni claims that the evidence at trial revealed that he rendered the invoices in 2009 and 2010 totalling $280,847.14 and they were not disputed. Mr Di Giovanni submits that because the invoices were not disputed within the time specified in cl 10, the full amount of the invoices was due and payable and the judge erred in finding otherwise. He contends that the trial judge erred in allowing any question to be raised about the correctness of the invoices, and that this error is revealed in [91] - [99] in Di Giovanni [No 3]. I would also refer to [82] and [85].
33 These errors are not clearly articulated in the grounds of appeal. Nevertheless, it is clear that Mr Di Giovanni is complaining in ground 11 of this appeal about the trial judge's reasons between [91] - [99] in Di Giovanni [No 3]. Mr Di Giovanni may need to apply to amend to allege (if this is his point) that the trial judge erred in law in permitting any challenge to the invoices which had not been disputed within the period specified in cl 10.
34 Then, in par 19 of the submissions, Mr Di Giovanni says, 'There is an error of law to Judge Wager's orders [sic] relating to the interest component time frame as stated at paragraph 11 of this submission'. Mr Di Giovanni in par 11 refers to exhibits which he says records when invoices were sent and not disputed, and from which I infer that Mr Di Giovanni says that interest should have run from the date of those invoices and not for the short period of time allowed by the trial judge.
35 Thus, although the grounds of appeal are poorly drawn, there is a serious question to be dealt with in the appeal.
36 There is nothing to indicate that granting leave and the progress of the appeal will interfere with the orderly winding up of the company. It is also clear that if Mr Di Giovanni succeeds on the appeal, he will then be entitled to share in any distribution made by the liquidator of funds already recouped and in any monies recouped from the directors in the insolvent trading proceedings.
37 For those reasons, an order will be made granting Mr Di Giovanni leave to commence and continue with appeal CACV 99 of 2013.
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