Franklin Yeezy Holdings atf Franklin Yeezy Holdings Trust v Paligaru

[2022] NSWSC 933

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Franklin Yeezy Holdings atf Franklin Yeezy Holdings Trust v Paligaru [2022] NSWSC 933

Hearing dates:

11 July 2022

Date of orders:

11 July 2022

Decision date:

11 July 2022

Jurisdiction:

Equity - Real Property List

Before:

Stevenson J

Decision:

Judgment set aside; leave to proceed against company in liquidation granted nunc pro tunc for purpose only of setting aside judgment

Catchwords:

PRACTICE AND PROCEDURE – application to set aside judgment entered in absence of a party – judgment creditor said to be assignee of original creditor – where evidence of purported assignee of judgment creditor showed judgment creditor not the assignee of the judgment debt

CORPORATIONS – where judgment creditor in liquidation – where applicant to set aside judgment had not sought leave to proceed under s 500(2) of the Corporations Act 2001 (Cth) – whether leave should be granted nunc pro tunc

Legislation Cited:

Conveyancing Act 1919 (NSW)

Corporations Act 2001 (Cth)

Category:

Procedural rulings

Parties:

Franklin Yeezy Holdings Pty Ltd ACN 619 006 272 as trustee for Franklin Yeezy Holdings Trust (Plaintiff)
Ralph Ignatius Paligaru (Applicant/First Defendant)
Amreeta Devi Paligaru (Second Defendant)
National Australia Bank Ltd (Third Defendant)
Reliance Leasing Pty Ltd (Fourth Defendant)
DCP Litigation Holdings Pty Ltd (Fifth Defendant)
Mark James Smith (Respondent)

Representation:

Counsel:
A E Maroya (Applicant/First Defendant)
D C Eardley (Respondent)

Solicitors:
Mahony Law (Applicant/First Defendant)
Moscardo Lawyers (Respondent)

File Number(s):

2018/216549

EX TEMPORE Judgment (REVISED)

1. On 2 March 2021, Mr Ralph Paligaru filed a Notice of Motion in these proceedings seeking to set aside a judgment entered against him on 11 September 2020. That judgment was purportedly entered against Mr Paligaru in a cross-claim brought in these proceedings by DCP Litigation Holdings Pty Limited, now in liquidation. For reasons to which I shall refer, the status of that cross-claim is not clear.

2. What is clear is that the claim originally brought in these proceedings by the plaintiff, Franklin Yeezy Holdings Pty Limited, against, amongst other parties, Mr Paligaru and DCP Litigation Holdings, has been resolved.

3. All that remains, if anything, in these proceedings is a cross-claim purportedly brought by DCP Litigation Holdings.

4. On 11 September 2020, Darke J made the following orders:

“The Court:

1. Makes orders in accordance with the Consent Judgment document initialled by Darke J, dated today’s date and placed with the papers.

Consent Judgment:

1. The Fifth Defendant [1] be given leave to file a Cross-Claim in these proceedings, as against the First Defendant. [2]

2. Immediately upon filing of the Cross-Claim, Judgment be entered for the Fifth Defendant/Cross-Claimant against the First Defendant in the sum of $115,000 less any monies paid by the First Defendant to the Fifth Defendant from 9 March 2020.

3. The First Defendant to pay the Fifth Defendant’s/Cross-Claimant’s costs on an indemnity basis, as agreed or assessed.”

1. DCP Litigation Holdings.

2. Mr Paligaru.

5. The terms of the judgment entered by Darke J reflected the terms of a document called "Consent Judgment" annexed to a document called "Deed of Settlement and Release" dated 11 March 2020 made between DCP Litigation Holdings, Mr Paligaru and a company called Reliance Leasing Pty Limited.

6. The effect of that deed was that if Mr Paligaru failed to take certain steps DCP Litigation Holdings could enter judgment against him in terms of the Consent Judgment, which formed the basis of the judgment entered by Darke J on 11 September 2020. The Deed of Settlement and Release recited that Reliance Leasing had lent money to Mr Paligaru and had assigned that loan to DCP Litigation Holdings.

7. There is a dispute as to whether, at a meeting which took place on 21 April 2020, the sole director of DCP Litigation Holdings, Mr Mark Smith, made representations to Mr Paligaru the effect of which, it is alleged, would estop or otherwise prevent DCP Litigation Holdings from acting on the Consent Judgment.

8. DCP Litigation Holdings was placed into liquidation on 2 March 2021.

9. In circumstances not necessary to recite for today's purposes, Mr Smith now claims to be the ultimate successor in title to DCP Litigation Holdings and thus to the debt said to provide the basis for the judgment entered on 11 September 2020.

10. Mr Paligaru was directed by Darke J to file "Points of Claim" to, in effect, articulate the basis upon which he would seek to defend the proceedings the subject of the judgment, were the judgment to be set aside. Those "Points of Claim" outline matters associated with the 21 April 2020 meeting to which I have referred.

11. However, a more fundamental reason has now emerged as to why the 11 September 2020 judgment must be set aside.

12. In an affidavit filed by Mr Smith in his capacity as, in effect, a contradictor to Mr Paligaru's application, Mr Smith has deposed that Reliance Leasing "actually assigned" the loan not to DCP Litigation Holdings but rather to "another of my companies called DC Partners (Nominees) Pty Limited". Mr Smith annexed to that affidavit what purports to be a notice of assignment under s 12 of the Conveyancing Act 1919 (NSW) addressed to Mr Paligaru, dated 1 September 2017, in which Reliance Leasing gave Mr Paligaru notice that it had assigned its rights and other interests in the relevant debt to DC Partners (Nominees).

13. It follows from that evidence, if it is to be accepted, that contrary to the recital in the 11 March 2020 document, Reliance Leasing did not assign the relevant debt to DCP Litigation Holdings, but rather to DC Partners (Nominees).

14. There is thus no sound basis to conclude that DCP Litigation Holdings had standing to enter judgment against Mr Paligaru.

15. The complication is that DCP Litigation Holdings is now in liquidation and that Mr Paligaru has not sought leave under s 500(2) of the Corporations Act 2001 (Cth) to proceed against the company.

16. I am informed that the liquidator of DCP Litigation Holdings is aware of the application before me and has expressed little or no interest in being involved in it.

17. Nonetheless, those representing Mr Paligaru should by 5pm today inform the liquidator of the substance of these reasons, and say that I am inclined to grant Mr Paligaru leave nunc pro tunc to bring and continue this application, and that I will grant such leave unless my Associate hears from the liquidator by 5pm tomorrow that he or she wishes to become involved in the application. Those representing Mr Paligaru should provide evidence to my Associate that these steps have been taken.

18. Subject to hearing from the liquidator, what I propose to do is:

1. Order nunc pro tunc that Mr Paligaru has leave to bring this application.

2. Order that the judgment of 11 September 2020 be set aside.

19. During argument there was discussion as to whether I should also permit Mr Paligaru to file a defence in relation to such claim as remains on foot in any cross-claim that may still exist in these proceedings. In view of the uncertainty that appears to surround all of those matters, I do not propose to make that direction.

20. As to costs, Mr Maroya, who appears for Mr Paligaru, has foreshadowed that Mr Paligaru wishes to seek an order that Mr Smith pay the costs of this application.

21. I direct that the parties confer and create a short timetable for written submissions on that question. I shall deal with that question on the papers, unless either party seeks an oral hearing.

POSTSCRIPT

22. Since giving the above ex tempore reasons, my Associate has received the following communication from the liquidators of DCP Litigation Holdings:

“The Liquidators are opposed to the leave being sought pursuant to section 500(2) and judgment being set aside as proposed for the following reasons:

● The liquidation of DCP Litigation Holdings Pty Ltd (In Liquidation) is unfunded and as such we are unable to take an active role in the proceedings in any way that would benefit the Court consistent with the Liquidator’s role as officers of the Court.

● We note the judgment obtained against Mr Paligaru is in dispute and we have not sought to enforce that judgment during the liquidation and also note that the Liquidators do not consider themselves [nor] the company DCP Litigation Holdings Pty Ltd (In Liquidation) the proper party to enforce any such proceedings given assignment of such claims before the Liquidation commenced.

● Mr Paligaru has been long aware of the liquidation and has been invited to lodge a formal Proof of Debt should he claim to be a creditor but has not done so to date. As such, there is no practical benefit to either him or the Company or its creditors … in the proceeding continuing as against the Company that is apparent to the Liquidators.

● In accordance with the principles espoused in Swaby v Lift Capital Partners Pty Ltd [2009] FCA 749 we are unsure what the serious question is to be tried in these circumstances and the relative detriment to creditors of granting leave seemingly has no corresponding benefit to Mr Paligaru given there is no apparent prospects of a dividend to the creditors of the liquidation;

● However, the Liquidators are otherwise not in a position to oppose or take an active role in the proceedings but will abide by any orders made by the Court.

The Liquidators submit that if the Court is minded to grant leave, a condition should be placed on Mr Paligaru in that any … leave to proceed be limited to seek orders to set aside the judgment and that any cost consequences that flow from same as against the Company DCP Litigation Holdings Pty Ltd be provable debts in the Liquidation. The Liquidators confirm that they have no interest or submissions regarding any consequential orders that might be made relating other interpleading parties to the proceedings.”

23. For the reasons set out in my ex tempore judgment, and despite the Liquidators’ submission, I do propose to grant Mr Paligaru leave nunc pro tunc under s 500(2) of the Corporations Act to bring his application to set aside the judgment.

24. However, I accept the Liquidators’ submission that such leave should be for the purpose only of applying to set aside the judgment and should be subject to the condition that if Mr Paligaru wishes to make any further claim against DCP Litigation Holdings, he should do so by way of proof of debt in the winding up of that company.

25. For those reasons, I order:

1. Nunc pro tunc that Mr Paligaru have leave pursuant to s 500(2) of the Corporations Act to bring and maintain his application of 2 March 2021 to set aside the judgment entered against him on 11 September 2020 in favour of DCP Litigation Holdings on condition that Mr Paligaru make any further claim against the company arising from the judgment of 11 September 2020 by way of proof of debt in the winding up of the company;

2. That the judgment entered in these proceedings against Mr Paligaru in favour of DCP Litigation Holdings of 11 September 2020 be set aside.

FURTHER POSTSCRIPT

26. In my ex tempore reasons, I mentioned at [1] and [19] that the status of the cross-claim was not clear.

27. My reason for making that comment was that, despite the wording of the orders made on 11 September 2020, which reflected the wording in the Deed referred to at [5], it does not appear from the Court’s records that any cross-claim was in fact filed by DCP Litigation Holdings. That company applied by Notice of Motion dated 7 November 2019 to file a cross-claim, but on 13 December 2019 that motion was dismissed.

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Endnotes

Amendments

12 July 2022 - Amended to add Further Postscript, being [26] and [27]

Decision last updated: 12 July 2022