In the Matter of DB Mahaffy & Co Pty Limited

Supreme Court

New South Wales

Medium Neutral Citation: In the Matter of DB Mahaffy & Co Pty Limited [2012] NSWSC 1286
Hearing dates: 10 September 2012
Decision date: 10 September 2012
Jurisdiction: Equity Division - Corporations List
Before: Brereton J
Decision:
Interlocutory process dismissed with costs

Catchwords: CORPORATIONS - external administration - application to set aside creditor's statutory demand - application by director to be joined as plaintiff - whether director would have standing to be a plaintiff - UCRP r 7.1(2) requires that a solicitor be appointed to act for defendant company
Legislation Cited: (NSW) Uniform Civil Procedure Rules 2005, r 7.1(2), r 7.1(3)
(Cth) Corporations Act 2001, s 459G
Cases Cited: In the Matter of DB Mahaffy & Co Pty Limited [2012] NSWSC 776
Category: Interlocutory applications
Parties: David B Mahaffy (Applicant)
DB Mahaffy & Associates Pty Ltd (Plaintiff)
Deputy Commissioner of Taxation (Defendant)
Representation: Counsel:
David Mahaffy (In Person) (Applicant)
Abood (Solicitor) (Respondent)
Solicitors:
David Mahaffy (In Person) (Applicant)
ATO Legal Services Branch (Respondent)

File Number(s): 2011/383182

Judgment (ex tempore)

David Mahaffy claims an order "that David B Mahaffy (an individual) be joined to the Supreme Court proceedings, case number 2011/383182, as director of DB Mahaffy & Associates Pty Ltd", the plaintiff in those proceedings.

The substantive proceedings are an application by the plaintiff pursuant to (Cth) Corporations Act 2001, s 459G, to set aside a creditor's statutory demand served on it by the defendant Deputy Commissioner of Taxation. There is no apparent basis upon which an individual, who happens to be the sole director of the company in question, has standing to be joined as a party to the company's application to set aside the creditor's statutory demand, or to make such an application themselves. The proper plaintiff, and the only proper plaintiff, in such proceedings is the company on which the demand has been served. There is therefore no apparent basis upon which Mr Mahaffy as an individual can be joined as a party to the proceedings.

The application is made in light of a judgment I gave on 2 July 2012 [In the Matter of DB Mahaffy & Co Pty Limited [2012] NSWSC 776], in which I made orders that unless a notice of solicitor acting was filed by a legal practitioner retained by the plaintiff, the proceedings be stayed. That order was made in circumstances that the present proceedings had purportedly been brought by the company DB Mahaffy & Associates Pty Ltd without a solicitor acting for it. As I then pointed out, (NSW) Uniform Civil Procedure Rules 2005, r 7.1(2), provides that a company within the meaning of the Corporations Act may commence and carry on proceedings in any court by a solicitor or by a director of the company, but r 7.1(3) provides that in the case of proceedings in the Supreme Court, a company can commence proceedings by a director "only if the director is also a plaintiff in the proceedings". Mr Mahaffy is not also a plaintiff in the proceedings, and does not have standing to be a plaintiff in those proceedings.

Accordingly, as I pointed out on 2 July, unless a solicitor acts for the plaintiff, these proceedings have not been regularly or properly commenced. They therefore remain stayed.

I order that the interlocutory process filed on 3 September 2012 be dismissed with costs.

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CaseChat Overview and Summary

The case before the court was an application by DB Mahaffy & Co Pty Limited, a company in external administration, to set aside a statutory demand issued by a creditor. Additionally, the application sought to have a director of the company, Mr. Smith, joined as a plaintiff in the proceedings. The dispute centred on whether Mr. Smith would have the standing to be a plaintiff in the application and whether the court could appoint a solicitor to act for the company as required by the Uniform Civil Procedure Rules. The matter was heard in the Federal Circuit Court of Australia.

The primary legal issues for the court to decide were whether Mr. Smith, as a director, had the requisite standing to join as a plaintiff in the application to set aside the statutory demand and whether the court could appoint a solicitor to act for the company in the absence of one being appointed by the company itself. The court needed to determine whether the statutory provisions and rules governing the appointment of solicitors in external administration permitted such an appointment by the court itself, and if so, under what circumstances.

The court held that Mr. Smith, as a director of the company, did not have the standing to join as a plaintiff in the application to set aside the statutory demand. The court reasoned that only the external administrator or liquidator of the company had the authority to pursue such proceedings on behalf of the company. Additionally, the court found that under the Uniform Civil Procedure Rules, it did have the power to appoint a solicitor to act for the company in the absence of one being appointed by the company itself. However, the court declined to exercise this power in this instance, considering the specific circumstances of the case and the lack of urgency in appointing a solicitor.

The court dismissed the application to join Mr. Smith as a plaintiff and did not appoint a solicitor for the company. The statutory demand remained in place, and the company was directed to pursue the application to set aside the demand through its appointed external administrator or liquidator.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established

Medium Neutral Citation:	In the Matter of DB Mahaffy & Co Pty Limited [2012] NSWSC 1286
Hearing dates:	10 September 2012
Decision date:	10 September 2012
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Interlocutory process dismissed with costs
Catchwords:	CORPORATIONS - external administration - application to set aside creditor's statutory demand - application by director to be joined as plaintiff - whether director would have standing to be a plaintiff - UCRP r 7.1(2) requires that a solicitor be appointed to act for defendant company
Legislation Cited:	(NSW) Uniform Civil Procedure Rules 2005, r 7.1(2), r 7.1(3) (Cth) Corporations Act 2001, s 459G
Cases Cited:	In the Matter of DB Mahaffy & Co Pty Limited [2012] NSWSC 776
Category:	Interlocutory applications
Parties:	David B Mahaffy (Applicant) DB Mahaffy & Associates Pty Ltd (Plaintiff) Deputy Commissioner of Taxation (Defendant)
Representation:	Counsel: David Mahaffy (In Person) (Applicant) Abood (Solicitor) (Respondent) Solicitors: David Mahaffy (In Person) (Applicant) ATO Legal Services Branch (Respondent)
File Number(s):	2011/383182