In the matter of ICMG Commercial Pty Ltd and others

[2019] NSWSC 886

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of ICMG Commercial Pty Ltd and others [2019] NSWSC 886
Hearing dates:	18 April 2019
Decision date:	18 April 2019
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Orders made joining several Plaintiffs and several Defendants in one set of proceedings.
Catchwords:	CIVIL PROCEDURE – parties – application for joinder – where common issue of insolvency – where common questions of fact – whether several plaintiffs and defendants should be joined.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) ss 56-58 - Uniform Civil Procedure Rules 2005 (NSW) r 6.19, 6.19(1)(b)
Cases Cited:	- Dean-Willcocks v Air Transit International Pty Ltd [2002] NSWSC 525; (2002) 55 NSWLR 64 - Jones (as liquidator of Forge Group Ltd (recs and mgrs apptd) (in liq)) v Sun Engineering (QLD) Pty Ltd [2017] WASC 195 - Re BBY Ltd (recs and mgrs apptd) (in liq) (Unreported, Supreme Court of New South Wales, Black J, 25 June 2018) - Re Bias Boating Pty Ltd [2017] NSWSC 1524 - Re Port Container Services Pty Ltd (Unreported, Supreme Court of New South Wales, Black J, 17 September 2018) - Re Townsend Group Pty Ltd (in liq) (Unreported, Supreme Court of New South Wales, Black J, 5 November 2018)
Category:	Procedural and other rulings
Parties:	Paul Gerard Weston (First Plaintiff) Integrated Construction Management Group (Australia) Pty Ltd (Second Plaintiff) and others Prestige Tiling Australia Pty Ltd (Fifth Defendant)
Representation:	Counsel: A M Mathas (Solicitor) (Plaintiff) J Doyle (Solicitor) (Fifth Defendant)   Solicitors: MathasLaw (Plaintiff) Doyles Construction Lawyers (Fifth Defendant)
File Number(s):	2018/113871

Judgment – ex tempore (revised 18 april 2019)

1. By Amended Interlocutory Process filed by leave granted on 7 May 2018, the Plaintiff, Mr Paul Weston, in his capacity as liquidator of Integrated Construction Management Group (Australia) Pty Ltd (in liq) (“ICMGA”) and associated companies, and those companies, seek an order granting leave to join each of the Plaintiffs and each of seven Defendants under r 6.19 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) in these proceedings. That rule relevantly provides that two or more persons may be joined as plaintiffs or defendants in any originating process if separate proceedings by or against each of them would give rise to a common question of law or fact and all rights of relief claimed in the originating process are in respect of, or arise out of, the same transaction or series of transactions. Alternatively, the rule provides that two or more persons may be joined as plaintiffs or defendants in such an originating process if the Court gives leave for them to be joined.

2. In this case, it seems to be clear that separate proceedings brought by the relevant parties would give rise to common questions of law or fact, both at a level of generality and in respect of several specific questions of fact, although it may be less clear whether all rights of relief claimed are in respect of or arise out of the same transactions or series of transactions. Ultimately, it is not necessary to address that subtle question, since the rule permits the joinder of the several Plaintiffs or Defendants in any Originating Process if the Court grants leave for such joinder. The discretion whether to grant that leave is to be exercised having regard to whether it will promote the just, quick and cheap resolution of the real issues in dispute in the proceedings, in accordance with ss 56-58 of the Civil Procedure Act 2005 (NSW), and by reference to the principles that have been identified in the authorities. I will return to those authorities below.

The evidence led in the application

3. The Plaintiffs rely on a draft Statement of Claim (MFI 2) which identifies claims in respect of insolvent transactions, unfair preferences and voidable transactions against the several Defendants. Mr Mathas, who appears for the Plaintiffs, has fairly identified the fact that settlement discussions are continuing with one of those Defendants, which may impact on the claims brought by one of the Plaintiffs. I will refer further to that matter below.

4. By agreement of the parties, an affidavit of Mr Weston dated February 2019 was marked for identification (MFI 1). That affidavit goes to the substance of the claim made rather than to this particular application. It addresses, in particular, the issues of the alleged insolvency of the Second Plaintiff, ICMGA, the Third Plaintiff, ICMG Management Pty Ltd (in liq) (“ICMGM”), and the Fourth Plaintiff, ICMG Commercial Pty Ltd (in liq) (“ICMGC”). In each case, there appears to be a common structure of evidence led to seek to establish insolvency.

5. The Defendants in turn relied on the affidavit affirmed 17 April 2019 of Mr Daryl Nguyen, a solicitor in the employ of their solicitors. That affidavit referred to documents identified on an inspection of documents made available by the liquidators, including, in particular, bank statements of the holding company which demonstrate the reduction in funds held in its bank account from a significant cash balance in 30 January 2015 to a significant negative position as at 16 April 2015. Mr Doyle, who appears for the Fifth Defendant, Prestige Tiling Australia Pty Ltd (“Prestige Tiling”) which opposes the orders sought by the Plaintiffs, drew attention to those bank statements as indicating the bank’s continuing support for the holding company over the relevant period, although there has been no detailed exploration of the circumstances in which that deficit grew, or of the existence of any overdraft facility in respect of it.

The parties’ submissions

6. Turning now to the parties’ submissions, Mr Mathas points out that there are presently four proposed Defendants, although I have referred to settlement negotiations with one of them above, and three consent to the orders that are sought, and Prestige Tiling does not. The proceedings involve two unfair preference claims against Prestige Tiling, firstly, a claim in respect of ICMGA in an amount exceeding $280,000 and second, a claim in respect of ICMGC in an amount exceeding $166,000.

7. Mr Mathas draws attention to several cases in which the question of joinder of proceedings involving preference claims, uncommercial transaction claims or voidable transaction claims generally, with a common issue of solvency, in the one proceeding have been considered. Mr Mathas draws attention to Dean-Willcocks v Air Transit International Pty Ltd [2002] NSWSC 525; (2002) 55 NSWLR 64, one of the early cases considering that question, where Austin J made such an order in proceedings of that kind. Mr Doyle in turn referred to Dean-Willcocks above, although he drew somewhat different implications from that decision. Mr Doyle emphasised that, in that case, the liquidator sought to establish the insolvency of several companies throughout a common period. The evidence indicates that Mr Weston here takes the same approach. Mr Doyle took that proposition one step further, to submit that a liquidator which took that approach should be held to that approach, implicitly with the basis that the liquidator would succeed or fail on the basis of the articulated proposition that all companies were all insolvent throughout the entirety of the period, and could not succeed if, for example, some of the companies were insolvent throughout all of the period, or all of the companies were insolvent throughout some of the period. I am not persuaded by that proposition, not least because a Court’s obligation is to determine the proceedings on the merits, as they emerge from the facts and the evidence, albeit the parties must be afforded procedural fairness in respect of such a determination.

8. Mr Doyle also drew attention to the fact that, in Dean-Willcocks above, there were three corporate plaintiffs within a corporate group, and three groups of defendants, and emphasised the existence of consolidated bank accounts as a factor supporting joinder in that case. I accept, of course, that that was one of the factual matters that supported joinder in that case. It does not, however, seem to me to be the only common fact which may support such joinder. Mr Doyle also emphasised Austin J’s “hesitation” in making the order sought, and his Honour’s reference to the “special circumstances” before him, observing that the focus of the proceedings would be on, inter alia, the payment process in the relevant transaction. Again, it does not seem to me that the focus on that particular fact, in that particular case, excludes the potential existence of other common facts in other proceedings which may support joinder. It also seems to me that the criteria of “special circumstances” is perhaps somewhat elusive, since it assumes a comparison with other or “ordinary” circumstances, the content of which is not defined. The question in this case is simply whether circumstances sufficient to support joinder under UCPR r 6.19 are established, or the Court otherwise should grant leave for that joinder, and that decision is to be made in the relevant circumstances and on its merits.

9. Mr Mathas also draws attention to several other decisions which have considered that question, including Brereton J’s decision in Re Bias Boating Pty Ltd [2017] NSWSC 1524, where his Honour referred to Dean-Willcocks above and summarised the relevant principles. In particular, Brereton J there observed (at [18]) that there is a policy supporting the bringing of unfair preference proceedings under the umbrella of “mothership” proceedings, where there is inevitably a common issue of insolvency, and it is highly desirable that the question be litigated, if at all, once only and that all parties be bound by the decision. His Honour also drew attention to the efficiencies, at least for liquidators and for the courts, and by extension the community, in conducting and managing one such proceeding rather than multiple proceedings, and also pointed to the common practice that, after the determination of common questions, including primarily insolvency, separate questions of defences unique to individual defendants may be determined separately.

10. Mr Doyle also fairly drew attention to several decisions in which joinder had been ordered under UCPR r 6.19, including Re Bias Boating Pty Ltd above. He fairly acknowledged that joinder had been permitted, where there were multiple plaintiffs, in Jones (as liquidator of Forge Group Ltd (recs and mgrs apptd) (in liq)) v Sun Engineering (QLD) Pty Ltd [2017] WASC 195, although he submitted that joinder of multiple plaintiffs was not extensively considered in that case. Since that time, joinder of multiple plaintiffs and multiple defendants was also permitted, where that issue was contested, in my judgment in Re BBY Ltd (recs and mgrs apptd) (in liq) (Unreported, Supreme Court of New South Wales, Black J, 25 June 2018) and joinder of multiple defendants was permitted in Re Port Container Services Pty Ltd (Unreported, Supreme Court of New South Wales, Black J, 17 September 2018) and Re Townsend Group Pty Ltd (in liq) (Unreported, Supreme Court of New South Wales, Black J, 5 November 2018).

11. In this case, it seems to me that a number of factors support the joinder which is sought, at least on the basis that the Court should grant leave for the Plaintiffs to be joined, to the extent that such leave may be necessary, and for the several Defendants to be joined. I am satisfied of that matter, irrespective of whether the specific requirement in UCPR r 6.19(1)(b) which provides an alternative basis for joinder is satisfied. Here, at the widest level, there is a question of insolvency of the several Plaintiff companies over the relevant period, as to which Mr Doyle has made the submission to which I referred above. However, perhaps more significantly, there are a range of subordinate questions, as to which factual findings will be needed to be made in order to address the question of whether the several Plaintiff companies were insolvent for all or part of the relevant period. These include, as Mr Mathas points out, questions of access to funding of the companies from shareholders or related parties or from third parties; the extent to which loans by each of the companies to associated parties were recoverable or not; the payroll tax liabilities of each of the companies, where those liabilities were a joint and several liability; and the interdependence of companies within the group, where they had regularly lent money to each other. Conversely, if the proceedings were not heard together, each of those matters would have to be determined separately, potentially by a different judge, but likely in the context of the same review of the same set of dealings between the relevant companies, as members of the relevant corporate group. Mr Mathas also points out that, to the extent that there are such common facts and such common matters to be determined, there would be a significant risk of duplication if that was undertaken in separate proceedings, and greater costs were likely to be incurred by the relevant parties. These are all matters to which, as I noted above, Brereton J gave emphasis in Re Bias Boating Pty Ltd above.

12. It seems to me that that conclusion is reinforced, rather than undermined, by the submissions made by Mr Doyle in respect of the manner in which Prestige Tiling considers that the proceedings should proceed. Mr Doyle contemplated that there would be three separate proceedings, the first of which would be brought by ICMGA against the Second Defendant, as to which I have been informed there are presently settlement discussions, and Prestige Tiling. Mr Doyle submits that those proceedings should be determined first, because Prestige Tiling will, or may contend that ICMGA was solvent when it was placed into liquidation, and rely upon that matter as indicating that it was capable of supporting its subsidiaries, so as to displace any suggestion of insolvency of its subsidiaries. I will return to that proposition below. The second, and separate proceedings, would be brought by ICMGM against the Chief Commissioner of State Revenue. The third proceedings would be brought by ICMGC against Prestige Tiling and the Seventh Defendant and, on Mr Doyle’s approach, would be heard after the proceedings brought by ICMGA.

13. The difficulty with this submission is, as I observed in the course of submissions by Mr Doyle, that it turns upon itself. Its premise was that it is desirable to determine the claim by ICMGA first, because the determination of that claim would illuminate the result of the other proceedings, so, for example, if ICMGA was not established to be insolvent, then it would advance the Defendants in the defence of the other proceedings. However, the difficulty with that proposition is that the determination of the first proceedings would not then bind different parties in different proceedings. In particular, it would be open to the liquidator, having failed to establish the insolvency of ICMGA in proceedings brought by it, to seek to establish ICMGM’s insolvency before a different judge in different proceedings brought in respect of ICMGC, although I accept that there is some practical force in Mr Doyle’s submission that a liquidator might well choose not to take that course, as a matter of good sense or good conduct. However, more significantly, a determination of the insolvency of ICMGA, against the interests of Prestige Tiling in the first proceedings, would not bind Prestige Tiling in the third proceedings. Prestige Tiling would then be able to contest, in the third proceedings, the insolvency of ICMGA, contrary to the result in the first proceedings, in order to seek to resist a finding of the insolvency of ICMGC in the third proceedings. This emphasises the risk of inconsistency of findings, particularly if matters are determined before different judges, but canvas the same facts or same dealings or same circumstances of companies within a corporate group. That provides a strong basis for the making of orders under UCPR r 6.19 in the relevant circumstances.

14. For completeness, I should note that Mr Doyle also points to several factual considerations which he submits support a determination of the claim by ICMGA first, prior to the determination of other claims. Those matters are all matters which seek to establish the solvency of ICMGA. Those matters may or may not establish the solvency of that entity, but if they do so, it seems to me that they do not provide any basis to exclude the desirability of that matter being determined in respect of all of the Plaintiffs and all of the Defendants at the same time, rather than exposing all parties, the Court and the community to the risk of inconsistent findings and duplication if the proceedings are heard separately.

15. For all these reasons, I am satisfied that orders granting leave to join the several Plaintiffs and the several Defendants in the one set of proceedings should be made.

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Decision last updated: 14 July 2019