FloMin Inc v Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Limited) (voluntary administrators appointed) ACN 103 341 804

[2011] NSWSC 585

Supreme Court

New South Wales

Medium Neutral Citation:	FloMin Inc & Anor v Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Limited) (voluntary administrators appointed) ACN 103 341 804 [2011] NSWSC 585
Hearing dates:	15 June 2011
Decision date:	15 June 2011
Jurisdiction:	Equity Division - Commercial List
Before:	Einstein J
Decision:	Orders made in accordance with the plaintiffs' short minutes of order. See paragraph 56.
Catchwords:	Leave pursuant to section 440D Corporations Act Declaration Contract Parties to an agreement
Legislation Cited:	Corporations Act 2001(Cth)
Cases Cited:	Aussie Airlines Pty Ltd v Australian Airlines Ltd & Ors (1996) 68 FCR 406 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 Brian Rochford v Textile Clothing and Footwear Union (1998) 47 NSWLR 47 Complex Pty Ltd v Austar Properties Macquarie Waters Pty Ltd [2007] NSWSC 435 County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 Foxcroft v The Ink Group (1994) 15 ACSR 203 Foxcroft v The Ink Group Pty Ltd, Supreme Court of NSW, 31 October 1994, unreported Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 JF Keir Pty Ltd v Priority Management Systems Pty Ltd (administrators appointed [2007] NSWSC 748 Magill v National Australia Bank Ltd [2001] NSWCA 221 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Panel Tech Industries (Aust) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 Quintano v BW Rose Pty Ltd [2008] NSWSC 720 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603, [2007] NSWCA 65 Suncorp Metway Insurance Ltd v Owners Corporation SP 64487 [2009] NSWCA 223 Tennant Limited v FloMin Inc [2009] NSWSC 1246 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Tomko v Palasty [2007] NSWCA 258
Category:	Principal judgment
Parties:	FloMin Inc (First Plaintiff) Qingdao Aotong Chemical Co Ltd (Second Plaintiff) Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Limited) (voluntary administrators appointed) ACN 103 341 804 (Defendant)
Representation:	Mr LT Livingston (Plaintiff) Mallesons Stephen Jaques (Plaintiff)
File Number(s):	2010/272821

Judgment

1. There is before the Court and application pursued by the plaintiffs for the Court to order the following :

(1) Leave be granted to the plaintiffs pursuant to s 440D(1)(b) of the Corporations Act 2011(Cth) to proceed with the present proceeding against the defendant.

(2)   Declare that in or about July to September 2007 the defendant and the second plaintiff entered into a contract (identified by the parties as Contract 2453) for the supply by the second plaintiff to the defendant of 18,000 kilograms of potassium and amyl xanthate, at a price of US$1.49 per kilogram.

(3)   Judgment be entered for the first plaintiff against the defendant in the amount of US$272,850.00 or the Australian dollar equivalent at the time of payment.

(4)   The defendant is to pay interest to the first plaintiff on the principal sum in order 3 above in the amount of US$75,291.22 or the Australian dollar equivalent at the time of payment.

(5)   Judgment be entered for the second plaintiff against the defendant in the amount of US$16,445.00 or the Australian dollar equivalent at the time of payment.

(6)   The defendant is to pay interest to the second plaintiff on the principal sum in order 5 above in the amount of US$5,824.01 or the Australian dollar equivalent at the time of payment.

(7)   The defendant is to pay the plaintiffs' costs of and incidental to these proceedings.

1. On 10 June 2011 an administrator was appointed to Australian Raw Materials Corporation Pty Ltd.

1. In relation to the current proceedings the administrator has drawn attention to section 440D of the Corporations Act 2001 (Cth) which provides that "during the administration of the company, a proceeding in a Court against the company... cannot be begun or proceeded with, except :

(1)   With the administrators written consent, or

(2)   with the leave of the Court and in accordance with such terms (if any) as the Court imposes on at the same time."

1. At the same time the administrator advised that the company would not be represented at the hearing on 15 June 2011 and that he neither consents nor opposes the proceedings.

1. I have formed the view that in the circumstances before the Court it is appropriate for the Court to grant leave to the plaintiffs on certain conditions which are discussed below.

The general circumstances

1. The plaintiffs seek recovery of amounts outstanding under three contracts for the supply of mining chemicals to the defendant ("Tennant"). In the case of one contract (Contract 2453), the plaintiffs seek a declaration as to the existence of the contract and the identity of the parties to it, namely that the contract came into existence between Tennant and the second plaintiff ("Qingdao Aotong") or, in the alternative, between Tennant and the first plaintiff ("FloMin").

1. FloMin and Qingdao Aotong are, and have been since 19 June 2007, members of the same corporate group (the SNF Group), which conducts a business of the manufacture and sale of mining chemicals.

1. In 2005 to 2008, Tennant was a customer of first, Qingdao Aotong, and, later FloMin. The three contracts upon which the plaintiffs sue in these proceedings are as follows:

Contract	Date	Form	Parties	Amount outstanding
Contract 2453	July to September 2007	Partly written, partly constituted by conduct	Qingdao Aotong (as supplier) and Tennant (as customer)	US$16,445
Or, in the alternative, FloMin (as supplier) and Tennant (as customer)	(under Invoice No 2991 dated 15.12.09 issued by Qingdao Aotong ("Re-issued Invoice 1")
Contract 2639	11-Feb-2008	Written	FloMin (as supplier) and Tennant (as customer)	US$29,240 (under Invoice No 1876 dated 15.12.09 ("Re-Issued Invoice 2"))
Contract 2662	3-Mar-2008	Written	FloMin (as supplier) and Tennant (as customer)	US$121,805 in respect of the first shipment
(under Invoice No 2008 dated 15.12.09 ("Re-Issued Invoice 3"))
US$121,805 in respect of the second shipment
(under Invoice No 2045 dated 15.12.09 ("Re-Issued Invoice 4"))
Total outstanding	US$289,295.00

1. The present proceedings follow earlier proceedings in this Court (No 3843/09) in which Tennant applied to set aside a statutory demand served by FloMin. On 18 December 2009, Forster J made orders under s 459H(4) of the Corporations Act 2001 (Cth) (" Corporations Act ") varying the amount of the statutory demand.

1. In the statutory demand proceedings, Forster J concluded that there was a "genuine dispute ... about the existence or amount of" the debt, within the meaning of s 459H(1)(a) of the Corporations Act , in respect of the amounts then claimed by FloMin under the following contracts:

(1)   Contract 2453 - on the ground that there was a "genuine dispute" between the parties as to whether Tennant had contracted with FloMin or with Qingdao Aotong in relation to Contract 2453 (referred to in the judgment as "Amount 1"). [ Tennant Limited v FloMin Inc [2009] NSWSC 1246 at [ 27]- [28], [30]-[ 31]] Forster J observed that the amount claimed under Contract 2453 ( US$16,445) , as distinct from the identity of the creditor, was not in dispute [at [59]].

(2)   Contract 2639 (which is referred to in the judgment as "Amount 3") and the first and second shipments under Contract 2662 ("Amount 4" and "Amount 5" respectively) - on the ground that there was a "genuine dispute" between the parties as to whether FloMin was entitled to impose a "sulphur surcharge" and as to whether or not there was some concession given by employees of FloMin for Tennant not to pay those invoices which included the sulphur surcharge until the situation had been finally resolved between the parties [at [51] to [55]].

1. As emphasised by Forster J, the role of the Court in the statutory demand proceedings was "not to resolve contested issues between the parties, but simply to ascertain whether or not there is a genuine dispute about the existence or amount of a debt" [[2009] NSWSC 1246 at [4]]. The test was whether Tennant had established, in relation to each alleged "genuine dispute", a "plausible contention requiring investigation" or a dispute that was "real and not spurious, hypothetical, illusory or misconceived" [Ibid, referring to Panel Tech Industries (Aust) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [17] (Barrett J)] Forster J observed that this was a "low threshold" [At [10]].

1. Forster J rejected other arguments put by Tennant as to alleged "genuine disputes" relating to components of the debt claimed in the statutory demand [at [11]]. His Honour also concluded that Tennant did not have any "offsetting claim" in respect of the statutory demand, within the meaning of s 459H(1)(b) of the Corporations Act [at [68]].

1. Following the determination of the statutory demand proceedings:

(1)   Qingdao Aotong (in place of FloMin) issued an invoice in respect of Contract 2453, being Re-Issued Invoice 1. The effect of this was to remove the ground for any "genuine dispute" of the kind found by Forster J in respect of Contract 2453 as to the identity of the creditor.

(2)   FloMin issued fresh invoices in respect of Contract 2639 and Contract 2662, being Re-issued Invoices 2, 3 and 4, each of which expressly excluded any claim for a sulphur surcharge. The effect of this was to remove the ground for any genuine dispute" of the kind found by Forster J in respect of those contracts.

1. As a consequence, there is no foundation in the present proceedings for any resistance by Tennant, on the grounds previously agitated by it in the statutory demand proceedings, to payment of the amounts now claimed by the plaintiffs, as identified in the Re-Issued Invoices.

1. In its Commercial List Response, Tennant has pleaded as follows:

(1)   In respect of Contract 2453, Tennant has admitted that it has not paid the amount invoiced, but alleges that any such contract was with another entity and not with Tennant, and has denied that it accepted delivery of the goods. Contrary to its position in the statutory demand proceedings, Tennant now appears to be disputing the identity of the debtor (rather than the identity of the creditor) under Contract 2453.

(2)   In respect of Contract 2639, Tennant has admitted that it has not paid the amount invoiced, but alleges that any such contract was with another entity and not with Tennant, and has denied that it accepted delivery of the goods.

(3)   In respect of Contract 2662, Tennant has admitted that it entered into an agreement with FloMin on or about 3 March 2008 for the purchase of a quantity of sodium isobutyl xanthate; that it accepted delivery of both the first and second shipments of those goods and has applied, re-supplied or otherwise used them in the course of its business; and that it has not paid the amounts invoiced for the two shipments. The Commercial List Response therefore does not disclose any reasonable defence in respect of Contract 2662.

1. Tennant has not served any evidence in the present proceedings.

Contract 2453

1. In its Commercial List Response the defendant admitted it had not made payment in relation to this contract, but raised issue as to whether the plaintiffs were parties to the contract and could therefore enforce a right of payment.

1. Consequently the plaintiffs sought a declaration from the Court that:

"in or about July to September 2007 the defendant and the second plaintiff entered into a contract (identified by the parties as Contract 2453) for the supply by the second plaintiff to the defendant of 18,000 kilograms of potassium amyl xanthate, at a price of US$1.49 per kilogram."

1. A declaration of this nature requires the Court to clearly identify the parties to the contract.

Applicable principles

1. Identification of the parties to Contract 2453 must be made in accordance with the objective theory of contract [ Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263, [2007] NSWCA 154 at [54]; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603, [2007] NSWCA 65 at [262]-[266]].

1. What matters is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe" [ Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]]. The terms of the contractual arrangement are to be determined objectively, by reference to the text of any documents passing between the parties, the surrounding circumstances known to the parties and the purpose and object of the transaction and its genesis, and the background, context and markets in which the parties were operating [ Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]].

1. The Court determines the parties to the contract by asking what a reasonable observer would conclude from the objective evidence of the communications that led to the entry into the contract, together with the background facts known to the parties [ Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263, [2007] NSWCA 154 at [54] (Campbell JA)].

1. There is a class of contracts where the offer and acceptance analysis is not applicable. In that class of case, the question is whether, viewed as a whole and objectively from the point of view of reasonable persons on both side, the dealings show a concluded bargain [ Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [74]-[81] (Heydon JA)].

1. Where, having discussed the commercial essentials and put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation, a binding contract will exist if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding. This may be so even in the absence of clear offer and acceptance, and even without being able to identify precisely when a contract arose. This analysis involves [ Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [369] (Allsop J; with whom Drummond and Mansfield JJ agreed)]:

"the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: 'and we hereby agree to be bound/ in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract."

1. A contract may be inferred from the acts and conduct of parties as well as or in the absence of their words. The question in such a case is whether the conduct of the parties, viewed in the light of surrounding circumstances, shows a tacit understanding or agreement [ Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117]. The conduct of the parties must be capable of proving all the essential elements of an express contract [(1988) 5 BPR 11,110 at 117 to 118].

1. Expressed another way, the Court asks itself: in all the circumstance can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of each of the parties think as to whether there was a concluded bargain? [ Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [81] (Heydon JA)].

1. Where the subject matter and concomitant terms of a contract must be inferred from a combination of surrounding circumstances, including conversations, documents and conduct none of which provide a definitive form of words, the question for the Court is one of fact, namely: what did the parties agree? In answering that question, it is necessary for the Court to consider the full range of relevant surrounding circumstances [ County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7]-[12] (Spigelman CJ)].

1. Post-contractual conduct is admissible on the question of formation of a contract or identification of its subject matter (as opposed to the question of what a written contract means) [ Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 164 [26] (Heydon JA); Magill v National Australia Bank Ltd (2001) Aust Contract R 90-131, [2001] NSWCA 221 at [50]-[53] (Ipp AJA, with whom Meagher JA and Heydon JA agreed); County Securities Pty Ltd v Challenger Group Holdings Limited [2008] NSWCA 193 at [18]-[27] (Spigelman CJ), [161] (McColl JA); Suncorp Metway Insurance Ltd v Owners Corporation SP 64487 [2009] NSWCA 223 at [55] (Sackville AJA, with whom Campbell JA and Macfarlan JA agreed)]. Further, where what is in issue is the identification of necessary terms which were not the subject of express provision in a contract not reduced to writing, then evidence of post contractual conduct may be considered [ County Securities Pty Ltd v Challenger Group Holdings Limited [2008] NSWCA 193 at [20]-[28] (Spigelman CJ)]. In any event where, as here, an issue concerns the identity of the contracting parties, subsequent communications may legitimately be used against a party as an admission by conduct of the existence or non-existence of a subsisting contract [ Tomko v Palasty [2007] NSWCA 258 at [63]-[68] (Einstein J, with whom Mason P agreed)].

The evidence

1. On the evidence, the Court is satisfied that Contract 2453 came into existence between Qingdao Aotong (or, in the alternative, FloMin) and Tennant and that its essential terms were the following:

(1)   Qingdao Aotong (or, in the alternative, FloMin) was to supply to Tennant 20 units of potassium amyl xanthate (" PAX ") in 900 kilogram bags;

(2)   the total quantity of PAX to be supplied was 18,000 kilograms;

(3)   the price to be paid by Tennant per kilogram was US$1.49;

(4)   payment was to be made by Tennant 60 days from the date of the bill of lading.

1. The order for Contract 2453 was placed by Tennant at a time shortly after the acquisition of Qingdao Aotong by the SNF Group in June 2007. In the period June to August 2007, FloMin was progressively implementing a new production and ordering process, under which existing customers of Qingdao (including Tennant) were thereafter required to place orders with FloMin rather than directly with Qingdao Aotong. Tennant's own correspondence in 2007 refers to the implementation of this new procedure. The evidence indicates that Tennant's order for Contract 2453 was one of the last orders placed by a customer directly with Qingdao Aotong.

1. The terms of Contract 2453 were contained in, or alternatively may be inferred from, the following documents and conduct:

(1)   the document entitled "Tennant's Standard Terms and Conditions of Purchase 2004" (" Tennant's Standard Terms "), which formed the basis on which the parties transacted over several years;

(2)   an email dated 18 September 2007 (1:40pm) from FloMin (Mr Aron) to Tennant (Messrs Botha and Goydych), which referred to three contracts including Contract 2453 and set out its key terms (18 metric tonnes of PAX; to be delivered from Qingdao to Melbourne, with an estimated delivery of 20 September 2007);

(3)   a reply dated 18 September 2007 (6:40pm) from Tennant's Global Procurement Manager (Mr Goydych) to FloMin (Mr Aron), in which Tennant said: " Thanks for the update - good to see some product on the way ";

(4)   a further reply dated 20 September 2007 (1:18pm) from Mr Goydych to FloMin (Mr Aron), in which Tennant said: " the contracts have been placed directly with your Qingdao plant by our Guangzhou office ";

(5)   a bill of lading dated 22 September 2007 for the shipping on that date, on board the vessel "Sky Jupiter", of 20 units of PAX in 900 kilogram bags (being a total of 18,000 kilograms) from Qingdao, China to Melbourne, in fulfilment of the order placed by Tennant;

(6)   the conduct of Qingdao Aotong (or, in the alternative, FloMin), on or about 22 September 2007, in arranging delivery to Tennant, and the conduct of Tennant in accepting delivery, of 20 units of PAX in 900 kilogram bags (being a total of 18,000 kilograms), as evidenced by the bill of lading, together with the certificate of quality, products certificate, packing declaration, Chinese export declaration, packing list, and certificate of origin;

(7)   FloMin's shipment schedule, which recorded, in respect of Contract 2453, an order date of July 2007, the identity of the customer as Tennant, the identity of the supplier as Qingdao Aotong, together with the price, quantity and shipment details, including a delivery date of 21 October 2007. As Mr Aron explains in his evidence, the absence of the prefix "F" in the purchase order indicates that the order was placed by Tennant directly with Qingdao Aotong, rather than with FloMin.

(8)   Invoice Number 810 dated 22 September 2007 issued by FloMin to Tennant, which referred to the delivery of 20 units of PAX in 900 kilogram bags (being a total of 18,000 kilograms) at a price of US$1.49 per kilogram and sought payment of US$26,820; (this invoice followed an invoice on the same date issued by Qingdao Aotong to FloMin, in accordance with the new invoicing procedure instituted following the acquisition of Qingdao Aotong);

(9)   the absence of any contemporaneous dispute by Tennant in respect of that invoice; and

(10)   emails dated 6 June 2008 (Mr Beer) and 2 October 2008 (Mr Goydych), in which Tennant communicated an intention to pay in full the amount outstanding under Invoice Number 810 dated 22 September 2007.

1. In all the circumstances, a reasonable person in the position of each of the parties would have concluded that, by their conduct and communications, Tennant and Qingdao Aotong had manifested a mutual assent to the contractual terms identified in paragraph 29 above.

1. The evidence establishes that Qingdao Aotong performed Contract 2453 by the delivery of the goods in October 2007.

1. FloMin is entitled to payment of the amount invoiced in the Re-Issued Invoice 1, namely US$16,445, which remains unpaid.

1. In these circumstances it is appropriate for the Court to exercise its discretion to grant the declaratory relief sought by the plaintiffs as to the existence of Contract 2453 and the identity of the parties to it. Tennant has put the question in issue. The plaintiffs have a real interest in resolving the question, which is neither abstract nor hypothetical. Accordingly, declaratory relief in this case would be directed to the determination of a legal controversy, would produce real consequences for the parties and would have utility [See Aussie Airlines Pty Ltd v Australian Airlines Ltd & Ors (1996) 68 FCR 406].

Contract 2639

1. Contract 2639 was in writing and was constituted by:

(1)   a document entitled "Tennant Limited - Purchase Contract Material Terms and Conditions - Contract Number: CON-2639" dated 11 February 2008 and signed on behalf of Tennant (Mr Horna) and FloMin (Mr DeWald); and

(2)   Tennant's Standard Terms.

1. The essential terms of Contract 2639 were the following:

(1)   FloMin was to supply to Tennant 17 metric tonnes of sodium isopropyl xanthate (" SIPX ");

(2)   the price to be paid by Tennant per metric tonne was US$1,720.00;

(3)   payment was to be made by Tennant 60 days after the date of the bill of lading.

1. FloMin performed Contract 2639 by the delivery of the goods in April 2008, as evidenced by the bill of lading, certificate of origin, shipping advice, packing lists, FedEx label, Chinese export declaration and certificate of quality. Documents produced on subpoena by the shipping company (Regional Container Lines) establish that Tennant appointed a clearing agent (Bowen's Customs Brokers & Import Consultants) to collect the shipment on its behalf and that the clearing agent paid for and received the delivery.

1. It follows that FloMin is entitled to payment of the amount invoiced in the Re-Issued Invoice 2, namely US$29,240, which remains unpaid. FloMin makes no claim for any sulphur surcharge in this invoice.

Contract 2662

1. Contract 2662 was in writing and was constituted by:

(1)   document entitled "Tennant Limited - Purchase Contract Material Terms and Conditions - Contract Number: CON-2662" dated 3 March 2008 and signed on behalf of Tennant (Mr Goydych) and FloMin (Mr DeWald); and

(2)   Tennant's Standard Terms.

1. The essential terms of Contract 2662 were the following:

(1)   FloMin was to supply to Tennant 170 metric tonnes of sodium isobutyl xanthate (" SIBX "), to be delivered in two shipments, as follows:

(a)   100 x 850 kilogram bags to be available by the end of April 2008; and

(b)   100 x 850 kilogram bags to be available by the end of May 2008;

(2)   the price to be paid by Tennant per metric tonne was US$1,433.00;

(3)   payment was to be made by Tennant 60 days after the date of the bill of lading.

1. FloMin performed Contract 2662 by the delivery of the goods in the two shipments. Tennant has admitted that it accepted delivery of both shipments and has applied, re-supplied or otherwise used the goods in the course of its business. In any event, the documentary evidence (bill of lading, packing list, certificate of quality and certificate of origin) establishes that the goods were delivered in the two shipments.

1. Accordingly, FloMin is entitled to payment of the amount invoiced in respect of the first shipment (Re-Issued Invoice 3), namely US$121,805, and in respect of the second shipment (Re-Issued Invoice 4), namely a further amount of US$121,805. FloMin makes no claim for any sulphur surcharge in either invoice. Both amounts remain unpaid.

The considerations in relation to the plaintiffs' application for the Court to grant leave to the plaintiff to pursue these proceedings

1. The two plaintiffs (part of the same corporate group) seek recovery of money owing to them by the defendant under three contracts for the supply of mining chemicals.

1. The defendant is now in administration.

1. Section 440D of the Corporations Act provides:

Stay of proceedings

(1)   During the administration of a company, a proceeding in a Court against the company or 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.

1. In the administrator's letter he neither consented nor opposed the hearing. Therefore the plaintiff requires the leave of the Court to proceed with the hearing.

1. The Court is generally hesitant to exercise its discretion in granting leave . Young J in Foxcroft v The Ink Group (1994) 15 ACSR 203 [at 205] set out the primary considerations opposing the granting of leave:

"The provisions of Pt 5.3 a , as exemplified in sections such as 437 c , 437 f , 440 c and 440 d , provide that there shall be a complete freeze of proceedings against the company during the 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 439 c which will be in their common interest. To allow one creditor or potential creditor to proceed would 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 440 d will rarely be granted . It may be that where the company is insured against the 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 situations where it would be proper to grant leave, though doubtless there are such situations." (emphasis added)

1. This approach is echoed by Austin J in Brian Rochford v Textile Clothing and Footwear Union (1998) 47 NSWLR 47 at 53-54.

1. The plaintiff sought to address all of these concerns, putting forward the following submissions:

(1)   The administrator is not in Court and therefore there attention is not taken away from its tasks;

(2)   The late appointment of the administrator prejudices the plaintiffs as they spent substantial sums of money prior to administration in order to progress to a hearing;

(3)   The administrator is unrepresented and therefore bears no cost in the proceedings;

(4)   Advantaging the plaintiffs over other creditors is not determinative as in every application this will be this possibility. The question is whether the plaintiffs will be unfairly advantaged.

1. Other authority to which the Court was taken included :

(1)   The decision of Rein AJ (as His Honour then was) in JF Keir Pty Ltd v Priority Management Systems Pty Ltd (administrators appointed ) [2007] NSWSC 748;

(2)   The decision of Austin J in Quintano v BW Rose Pty Ltd [2008] NSWSC 720;

(3)   My own decision in Complex Pty Ltd v Austar Properties Macquarie Waters Pty Ltd [2007] NSWSC 435.

1. Each of these authorities affirm that the Court must carefully review the relevant facts in order to determine whether or not a plaintiff should be granted leave pursuant to section 440D of the Corporations Act .

1. In all of the circumstances, the plaintiff has made good its case to be granted leave subject to an order that the plaintiffs not enforce the judgment without an order from the Court.

Returning to the material now before the Court on the application

1. The materials now before the Court and relied upon by the plaintiff are as follows :

(1)   At that of Dana Taege Group made on 14 June 2011

(2)   Affidavit of Calliden Aron made on to December 2010

(3)   Further affidavit of Dana Taege made on 29 March 2011

(4)   Further affidavit of Dana Taege

(5)   Affidavit of Mark Sark Schlag made on 14 June 2011.

1. Early in the hearing I indicated that I would reserve my decision as to whether to admit these documents into evidence. I am now content that this is the appropriate course.

Orders

1. The Court makes the following orders:

(1) Upon the undertaking given by the plaintiffs noted in paragraph 8 below, grant leave to the plaintiffs pursuant to s 440D(1)(b) of the Corporations Act 2001 (Cth) to proceed with the present proceeding against the defendant.

(2)   Declare that in or about July to September 2007 the defendant and the second plaintiff entered into a contract (identified by the parties as Contract 2453) for the supply by the second plaintiff to the defendant of 18,000 kilograms of potassium amyl xanthate, at a price of US$1.49 per kilogram.

(3)   Judgment be entered for the first plaintiff against the defendant in the amount of US$272,850.00 or the Australian dollar equivalent at the time of payment.

(4)   The defendant is to pay interest to the first plaintiff on the principal sum in order 3 above in the amount of US$75,291.22 or the Australian dollar equivalent at the time of payment.

(5)   Judgment be entered for the second plaintiff against the defendant in the amount of US$16,445.00 or the Australian dollar equivalent at the time of payment.

(6)   The defendant is to pay interest to the second plaintiff on the principal sum in order 5 above in the amount of US$5,824.01 or the Australian dollar equivalent at the time of payment.

(7)   The defendant is to pay the plaintiffs' costs of and incidental to these proceedings.

(8)   Note the undertaking given by the plaintiffs to the Court that they will not take any step to enforce against the defendant orders 2 to 7 above without further leave of the Court.

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Decision last updated: 16 June 2011