In the matter of Ozrac Engineering New South Wales Pty Limited (in liquidation)

[2013] NSWSC 740

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Ozrac Engineering New South Wales Pty Limited (in liquidation) [2013] NSWSC 740
Hearing dates:	9 April 2013
Decision date:	09 April 2013
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Orders made granting leave for proceedings to be brought against the defendant.
Catchwords:	CORPORATIONS - winding up - application for leave to bring proceedings in winding up - where company insured against the relevant liability - whether prima facie case.
Legislation Cited:	Corporations Act 2001 (Cth) ss 471B Insurance Contracts Act (1984) (Cth) s 40(3)
Cases Cited:	- Re Coastal Constructions Pty Ltd (in liq) (1994) 13 ACSR 329 - Re Summit Design and Construction Pty Ltd [1999] NSWSC 1136
Texts Cited:	- Austin & Black's Annotations to the Corporations Act [5.471B]
Category:	Interlocutory applications
Parties:	Southern Cross Construction (ACT) Pty Limited (Plaintiff) Ozrac Engineering New South Wales Pty Limited (in liquidation) (Defendant)
Representation:	Counsel: T.W. Marskell (Plaintiff) Solicitors: Wotton & Kearney (Plaintiff)
File Number(s):	2013/106517

Judgment

1. By originating process dated 8 April 2013, the plaintiff, Southern Cross Constructions (ACT) Pty Limited ("SX") seeks leave under s 471B of the Corporations Act 2001 (Cth) to begin proceedings against the defendant, Ozrac Engineering New South Wales Pty Limited (in liq) ("Ozrac"), in the Technology and Constructions List in the Court by filing a Technology and Construction List Summons in the form of the Summons and List Statement annexed to the originating process.

1. The Summons relevantly seeks damages, interest and costs. The Technology and Construction List Statement in turn identifies a claim that Ozrac was engaged as subcontractor to perform air conditioning and ventilation works at a construction project; the works performed are alleged to have had defects and to require rectification; and SX contends that the works were performed negligently by Ozrac in breach of contract and seeks to recover the loss and damage it incurred including by performing interim rectification works and committing itself to perform further rectification works, by way of a settlement of a claim by its client against it.

1. The application is supported by an affidavit of Mr Andrew Moore, who is SX's solicitor, dated 8 April 2013 and a further affidavit of Mr Moore dated 9 April 2013 indicating service of the application upon the liquidator to Ozrac and the liquidator's attitude to the application. Mr Moore's substantive affidavit indicates that leave is sought on an urgent basis and in any event, prior to tomorrow, 10 April 2013.

1. Mr Moore's affidavit sets out the background to the dispute sought to be pursued by the Summons and Technology and Construction List Statement and notes that SX has caused temporary rectification works to be performed and will be causing permanent rectification works to be performed in respect of Ozrac's works at substantial cost. Mr Moore notes that SX has lodged a proof of debt in respect of its claim against Ozrac but that no proof of debts have been admitted at this stage in the liquidation.

1. Mr Moore's evidence is that leave is sought on the basis that Ozrac's potential liability in respect of the proposed claim appears to be covered by a professional indemnity policy. Although SX did not commence civil proceedings in the policy period from 31 August 2008 to 31 August 2009, it will contend that the insurer is not relieved of liability under the policy by reason of s 40(3) of the Insurance Contracts Act (1984) (Cth) which, SX contends, applies where the insured, Ozrac, gave notice of facts that might give rise to the claim as soon as reasonably practicable after it became aware of those facts and before the cover expired. SX relies in that regard on a professional indemnity claim form prepared by Ozrac dated 14 April 2009 although Mr Moore's evidence does not establish whether that claim form was, in fact, submitted by Ozrac to the insurer.

1. The application for leave is brought on an urgent basis because, SX contends, on one view, the limitation period in respect of a contractual claim arising from a certification provided by Ozrac dated 10 April 2007 would expire on 10 April 2013. SX seeks leave to begin proceedings by filing the Summons and Technology and Construction List Statement prior to the close of the registry today, 9 April 2013. SX in turn indicates that it would accept the condition that no further steps be taken by it in the proceedings without leave of the Court.

1. Section 471B of the Corporations Act relevantly provides that a person cannot begin or proceed with Court proceedings against a company that is being wound up, relevantly, by the Court, without leave of the Court. The purpose of the provision is, inter alia, to ensure that a company in winding up is not subject to a multiplicity of proceedings: see the authorities cited in Austin & Black's Annotations to the Corporations Act [5.471B]. The section contemplates that a claimant will ordinarily be required to lodge a proof of debt in the winding up rather than bringing proceedings against the company.

1. In order to obtain leave to commence the proceedings, SX must establish, first, that it has a prima facie case in the sense that there is a real dispute about the parties. I am satisfied that requirement is satisfied, by reason of the defects identified in the proposed Technology and Construction List Statement and the fact that SX has been required to undertake rectification works in respect of the alleged defects.

1. Second, SX must show that there is good reason why it is appropriate that it be permitted to commence proceedings, albeit in this case in parallel to rather than instead of the proof of debt process. Mr Marskell, who appears for SX, identifies two bases on which that good reason is shown. The first is that SX should not be put to the risk that, if it is later necessary to commence proceedings, then it is prejudiced in those proceedings by reason of the expiry of the limitation period. That approach is supported by the decision in Re Summit Design and Construction Pty Ltd [1999] NSWSC 1136, where Austin J granted leave under s 471B of the Corporations Act to a limited extent, to permit proceedings to be commenced on terms that no further steps be taken within them so as to avoid the expiry of the relevant limitation period. That reasoning, which seems to me to be compelling, would in itself be sufficient to support the grant of leave which is sought within the limited terms in which it is sought.

1. There is, however, a second basis identified by Mr Marskell on which grant of leave might be supported, which was not present in the decision in Re Summit Design and Construction Pty Ltd. It is well established that leave will be more readily granted where a company is insured against the relevant liability. In Re Coastal Constructions Pty Ltd (in liq) (1994) 13 ACSR 329 at 32 White J pointed out that, where an insurer stands behind the company to pay any judgment obtained against it, that action does not prejudice the creditors' rights. In the present case, there is a further good reason for the grant of leave to commence the proceedings, and preserve the limitation period, because the determination of SX's proof of debt would not, in itself, bind an insurer and Ozrac's liquidator may or may not ultimately be prepared to itself pursue proceedings against the insurer; so it may be necessary for SX to bring proceedings against Ozrac in order to seek to join the insurer to those proceedings. Where that possibility is realistically open, it reinforces the desirability of ensuring that SX is not prejudiced by a limitations defence potentially arising.

1. I note that SX has served the relevant application upon the liquidator. By letter dated 8 April 2013 the liquidator advised that he had limited time to review the document served upon him but neither consented nor objected to the application for leave. The liquidator was not represented on this application.

1. For those reasons, I am satisfied that a proper case for grant of leave within the limited terms sought by SX has been established, for the purposes of s 471B of the Corporations Act. I make orders in accordance with the short minutes of order initialled by me and placed in the file but adding a further order 4 that these orders be entered forthwith.

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Decision last updated: 11 June 2013