In the matter of MB Australia Pty Limited (in liquidation)
[2021] NSWSC 864
•24 June 2021
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of MB Australia Pty Limited (in liquidation) [2021] NSWSC 864 Hearing dates: 24 June 2021 Date of orders: 24 June 2021 Decision date: 24 June 2021 Jurisdiction: Equity - Corporations List Before: Black J Decision: Application under r 6.19 of the Uniform Civil Procedure Rules granted.
Catchwords: CORPORATIONS — Practice and procedure — Application under r 6.19 of Uniform Civil Procedure Rules permitting joinder of several defendants in proceedings — Where common question exists as to solvency of company in liquidation.
Legislation Cited: - Corporations Act 2001 (Cth), ss 588FA, 588FB, 588FDA, 588FE, 588F
Cases Cited: -Dean-Willcocks v Air Transit International Pty Ltd (2002) 55 NSWLR 64; (2002) 42 ACSR 328; [2002] NSWSC 525
- Re MK Floors Qld Pty Ltd [2020] NSWSC 822
- Re RCG CBD Pty Ltd (In Liq) [2016] NSWSC 1489
Category: Procedural rulings Parties: Andrew Sallway and Helen Newman in their capacity as joint and several liquidators of MB Australia Pty Ltd (in liq) (First Plaintiff)
MB Australia Pty Ltd (in liq) (Second Plaintiff)
Australasian Food Group Pty Ltd (First Defendant)
Scott’s Refrigerated Logistics Pty Ltd as trustee for the Scotts RL Unit Trust (Second Defendant)
Bee Dee Bags Pty Ltd (Third Defendant)
SBA Music Pty Ltd (Fourth Defendant)
Sunstate Ceilings Pty Ltd (Fifth Defendant)
Benchmark Patisserie Pty Ltd (Sixth Defendant)
Farbod Salimi trading as Ashlars Lawyers (Seventh Defendant)
Arie Haikin (Eighth Defendant)
Wolf Peretz (Ninth Defendant)
Mad Design Australia Pty Ltd (formerly known as The Fire Company Pty Ltd) (Tenth Defendant)
The Chimney Cake Company Pty Ltd (Eleventh Defendant)
Anita Gelato Pty Ltd (Twelfth Defendant)Representation: Counsel:
Solicitors:
J Hutton/R Jameson (Plaintiff)
K Civich (First Defendant)
T Rogan (Second Defendant)
A W Smith (Seventh Defendant)
J O’Sullivan (Tenth Defendant)
Hogan Lovells (Plaintiff)
Norton Rose Fulbright Australia (First Defendant)
Norton White (Second Defendant)
Ashlar Lawyers (Seventh Defendant)
File Number(s): 2021/178927
Judgment – ex tempore (Revised 28 June 2021)
Nature of the application
-
By Originating Process filed, by leave, on 22 June 2021, the Plaintiffs, Mr Sallway and Ms Newman in their capacity as joint and several liquidators of MB Australia Pty Ltd (in liq) ("Company") and the Company bring an application under, variously, s 588FA, 588FB, 588FDA, 588FE and 588F of the Corporations Act 2001 (Cth) against several Defendants. It appears that an unfair preference claim is pursued against all of the Defendants, other than the Seventh Defendant as against whom the claim has been dismissed by consent. Other claims are pursued against individual Defendants, but not against all Defendants.
-
By Interlocutory Process also filed on 22 June 2021, the Plaintiffs sought and obtained orders for short service and for substituted service, and now seek an order under r 6.19 of the Uniform Civil Procedure Rules (“UCPR”) that they be granted leave, nunc pro tunc, to join the Defendants named in the proceeding in the Originating Process filed in this proceedings. It was not necessary for the Plaintiffs to pursue alternative relief, which related to an extension of time of the period under s 588FF of the Act, as events have developed.
Position as to service of the application
-
The Plaintiffs also seek orders regularising service, in respect of a number of Defendants, as to whom service had been effected, but had been effected late. In respect of three Defendants, the First, Second, and Tenth Defendants, such orders are not necessary, because those Defendants have appeared. The First and Tenth Defendants neither consent to nor oppose the relief that is sought under UCPR r 6.19 and the Second Defendant does not oppose that relief.
-
It appears that service was not effected upon the Eighth Defendant, although it is arguable that informal service had been achieved by delivering the relevant documents to a solicitor who had previously acted for him. It is not necessary to determine that question. Mr Hutton, with whom Mr Jameson appears for the Plaintiffs, submits, and I accept, that the court can in a proper case, deal with an application of this kind on an ex parte basis, reserving to a Defendant the ability to move to set aside an order in respect of that Defendant which is available where a matter is determined in his absence. I would likely not have done that had the majority of the Defendants not been served, but I am satisfied that I can properly proceed on that basis in respect of the Eighth Defendant, where all other Defendants have been served, albeit some of them have been served late, and I can reasonably infer that matters that could have been raised in opposition to the application would be raised by those other Defendants. To the extent that any individual issue affects the Eighth Defendant, he has the ability to raise that by further application so far as an order was made in his absence.
-
I am satisfied that I should make orders confirming service upon the several Defendants that did not appear, where in each case the documents were delivered to them, albeit they were delivered, in most cases, on 23 June rather than late on 22 June as the orders originally made by the Court had contemplated.
The applicable evidence
-
Turning now to the applicable evidence, the Plaintiffs rely on an affidavit dated 21 June 2021 of Mr Sallway, one of the liquidators, who addresses the basis of the claim in respect of the several Defendants, and also outlines the well understood benefits of an order under UCPR r 6.19 in respect of proceedings of this character, to which Mr Sallway refers by the common term "mothership proceedings". The most obvious of those benefits, which is recognised by Mr Sallway and to which I shall return, is the desirability of avoiding multiple determinations of the question of insolvency in preference claims brought by the same company and same liquidators, particularly, where, as here, those determinations might have to be brought in different Courts, and raise the risk of waste of public resources in determining the same issue several times and potentially inconsistent results if that were to be done. The Plaintiffs also rely on an affidavit dated 23 June 2021 of their solicitor, Mr Dunn, who refers to service of the proceedings. The Plaintiffs also read several affidavits of service, in respect of those Defendants who have not appeared.
-
In submissions, Mr Hutton submits that the matters which need to be established in an application of this kind include, relevantly, whether the underlying claims filed by the liquidators appear to have reasonable prospects of success; any commonality that exists between the several proceedings; and whether leave should or should not be granted as a matter of discretion. Mr Hutton refers to the recognition of the utility of proceedings of this character in Dean-Willcocks v Air Transit International Pty Ltd [2002] 55 NSWLR 64; (2002) 42 ACSR 328; [2002] NSWSC 525 and to the many subsequent cases which have followed that approach. I referred to the relevant principles in Re RCG CBD Pty Ltd (in liq) [2016] NSWSC 1489 at [7], to which Mr Hutton refers, and more recently in my decision in Re MK Floors Qld Pty Ltd [2020] NSWSC 822 and I need not repeat that summary for the purposes of this application, particularly where those Defendants who have appeared (with the exception of the Seventh Defendant against whom the proceedings have been dismissed by consent) implicitly recognise the utility of a common determination of at least the question of solvency by neither consenting to nor opposing the application.
-
Mr Hutton submits that the underlying claims have reasonable prospects of success and draws attention to the evidence on which the Plaintiffs will rely to seek to establish the insolvency of the Company. It is not necessary for me to address that evidence and it is preferable that I do not do so where it may be that I will later need to determine the proceedings or aspects of them, beyond noting that Mr Sallway's evidence refers to matters which are traditional indicators of insolvency, including the Company's liquidity ratio, net asset deficiency, operating losses, the age of trade creditors, and the service of at least three creditor's statutory demands in the relevant period. Those matters are capable of giving rise to a finding of insolvency, although it is not necessary to address their substantive merit at this point, beyond recognising that that finding is arguable.
-
Mr Hutton also addresses the relation back day in respect of the winding up, and submits that the relation back day is 29 June 2018, so that the 6-month period prior to the relation back day, applicable to preference claims against persons other than related parties, would allow claims from 29 December 2017. Mr Hutton points to Mr Sallway's evidence that, in respect of the large majority of Defendants, there are at least some, and on occasions many, transactions within that relevant period. In respect of one Defendant, the Tenth Defendant, it appears there may be no claims in that period, but a claim in respect of unreasonable director-related transactions is pursued against that Defendant, and there is a contention that that party is a related party, and those contentions appear to be arguable. In any event, the Tenth Defendant neither consents to nor opposes the orders sought in this application.
-
It is plain that there is a degree of commonality among the proceedings, most importantly in respect of the question of solvency which I have noted above. It follows that an order under UCPR r 6.19 has the usual advantage that that issue can be determined once, in a way that binds all parties, without incurring unnecessary costs or the risk of inconsistency, even if the proceedings are then split so that individual defences which may be available to the several Defendants, if the Company is shown to be insolvent, are determined separately in respect of the individual defendants.
-
Mr Hutton identifies a third issue as to whether the court should exercise its discretion to make the relevant order, and I am satisfied that it should do so so far as a single determination of insolvency will reduce costs and reduce the risk of inconsistency and reduce the burden upon the community, if multiple proceedings have to be commenced in more than one Court. It is not necessary to have regard to Mr Hutton's further submissions as to the advantage of such an order for the liquidators’ attempt to obtain third party funding of the proceedings, where it is sufficiently justified by the savings of costs to the parties and the benefit to the community in avoiding waste of Court time by hearing solvency as a common issue.
-
For these reasons, I make orders in accordance with the short minutes of order initialled by me and placed in the file, amended as discussed in the course of the parties' submissions. I note that the costs of this application will be costs in the cause, in respect of the Defendants to the proceedings, other than the Seventh Defendant. The position as to costs as to the Seventh Defendant, against which the proceedings will be dismissed by consent, will be addressed separately.
**********
Decision last updated: 22 July 2021
0
4
1