In the matter of Reed Constructions Australia Pty Ltd (in liquidation)

[2015] NSWSC 2033

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Reed Constructions Australia Pty Ltd (in liquidation) [2015] NSWSC 2033
Hearing dates:	27 November 2015
Decision date:	27 November 2015
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Orders in accordance with the short minutes of order initialled by Black J and placed in the file.
Catchwords:	CORPORATIONS — Winding up — Application for leave to bring proceedings in winding up — Where company insured against the relevant liability — Whether prima facie case established.
Legislation Cited:	- Corporations Act 2001 (Cth), s 471B
Cases Cited:	- Re Coastal Constructions Pty Limited (in liq) (1994) 13 ACSR 329 - Re Ozrac Engineering New South Wales Pty Limited (in liq) [2013] NSWSC 740 - Re Summit Design and Construction Pty Limited [1999] NSWSC 1136; (1999) 33 ACSR 301
Category:	Principal judgment
Parties:	Vicinity Centres PM Pty Ltd (formerly known as Colonial First State Property Management Pty Ltd) CC No 1 Pty Limited (as trustee of the CC No 1 Trust) CC No 2 Pty Limited (as trustee of the CC No 2 Trust) (Plaintiffs) Reed Constructions Australia Pty Limited (in liquidation) (Defendant)
Representation:	Counsel: T W Marskell (Plaintiff)   Solicitors: Wotton & Kearney (Plaintiff)
File Number(s):	2015/348390

Judgment – ex tempore

1. By Originating Process filed on 26 November 2015 and amended today, the Plaintiffs, Vicinity Centres PM Pty Limited (formerly known as Colonial First State Property Management Pty Limited) (“Vicinity Centres”) and two other entities, seek leave under s 471B of the Corporations Act 2001 (Cth) in the first instance to commence proceedings against Reed Constructions Pty Limited (in liq) (“Company”). It is important to note that, at this stage, the application is simply for leave to commence the proceedings, rather than to take further steps in them. That reflects the character of the application, which, as will emerge below, is partly directed to preserve the Plaintiffs' position in respect of the imminent possible expiry of a limitation period. The application is expressly brought on the basis that no further step would be taken by the Plaintiffs in the proceedings without leave of the Court.

2. I should note, before turning to the substance of the application, that the application was originally commenced by Vicinity Centres only, and was served in that form on the Company's liquidator. The Company's liquidator responded, complaining about short notice of the application, but pointing out that the liquidator was largely unfunded and not in a position to defend proceedings, and indicating that he neither objected nor consented to the orders sought. Since that point, the application has been amended to include the additional two Plaintiffs, who are the registered proprietors of the relevant property, as to which Vicinity Centres acted as disclosed agent. It is difficult to see that the addition of those two parties, while formally significant, could impact upon the liquidator's attitude to the application. However, it seems to me that the liquidator's position can be fairly protected by proceeding on the basis of the amended application, directing the Plaintiffs to give notice to the liquidator of the amended application and reserving his ability to apply, if he contends, perhaps surprisingly, that his attitude would alter because of the addition of the registered proprietors to the claim.

3. The application relates to leave to commence proceedings by a proposed Summons and List Statement to be filed in the Technology and Construction List, which involves a claim for damages and other relief against the Company, arising from the circumstances in which an electrical switchboard was installed by a subcontractor to the Company, in performing a building contract between Vicinity Centres and the Company, and on an alleged failure in that switchboard that in turn caused a fire, which resulted in, it is claimed, loss and damage to the Plaintiffs.

4. The application is supported by an affidavit of the Plaintiffs’ solicitor, Ms Geraghty, sworn 26 November 2015. Ms Geraghty exhibits a number of relevant documents, to which Mr Marskell who appears for the Plaintiffs has taken me in the course of submissions. The head contract between Vicinity Centres and the Company is in evidence, and it, in particular, preserves the Company's liability for conduct of its subcontractors in respect of the construction works. Ms Geraghty sets out the circumstances in which the fire occurred in the switchboard, and exhibits expert reports, prepared by a consulting electrical engineer, which identify the fault that gave rise to the fire, and indicates that there is a proper evidentiary basis for the Plaintiffs' claim. There is also in evidence a public liability insurance policy in favour of Vicinity Centres, which has an extended application to provide cover to a contractor in respect of the relevant building works, and on which the Plaintiffs, or more precisely their insurer exercising a right of subrogation, now seeks to claim in respect of the relevant loss. My attention has been drawn to a provision dealing with cross liability in that policy, in circumstances that the claim would involve a claim brought in the name of one insured, Vicinity Centres, against another insured, the Company, but there is nothing on the face of that provision which seems to me to deprive the claim on the policy of having a seriously arguable basis.

5. The claim for leave is put on two bases, which parallel those on which a claim for leave was brought, in somewhat similar circumstances, in Re Ozrac Engineering New South Wales Pty Limited (in liq) [2013] NSWSC 740. In this case, as in Re Ozrac Engineering, the application for leave was brought shortly before the expiry of a limitation period, and in large part to avoid the risk that the limitation period would expire. In Re Ozrac Engineering, I reviewed the relevant factors in respect of such a claim, and noted that s 471B of the Corporations Act relevantly provided that a party could not begin or proceed with court proceedings against a company that is being wound up by the Court, without leave of the Court. I referred to the purpose of that provision, and noted that, in order to establish leave, the applicant must establish that it has a prima facie case, and that there is good reason why it is appropriate that it be permitted to commence the proceedings, whether instead of the proof of debt process or, in this case, in parallel to it.

6. I am satisfied, having regard to the terms of the proposed Summons and List Statement, and the evidence, including the expert report, to which I have been taken, that the Plaintiffs can here establish a prima facie case so as to support a grant of leave to proceed. It seems to me that, as in Re Ozrac Engineering, there are two bases on which good reason to permit the Plaintiffs to proceed by the commencement of proceedings are established. The first is that the Plaintiffs should not be put to the risk that, their proposed proceedings would be prejudiced by reason of the expiry of the limitation period: Re Summit Design and Construction Pty Limited [1999] NSWSC 1136; (1999) 33 ACSR 301; Re Ozrac Engineering above at [9]. The second is that it is well established that leave will more readily be granted where a company is insured against a relevant liability, as appears to be at least arguably the case here: Re Coastal Constructions Pty Limited (in liq) (1994) 13 ACSR 329; Re Ozrac Engineering above at [10]. In that case, the commencement of proceedings is unlikely to prejudice the creditors' interests, and it may be necessary to bring proceedings so as to bind the company's insurer, which would not be bound by a determination of a proof of debt in favour of the plaintiffs.

7. I note that, in the present case, the liquidator does not presently oppose the application, having taken the position, given the limited funding which he has identified, that he neither consents to nor opposes the application. I am satisfied that a proper case for grant of leave within the limited terms sought by the Plaintiffs has been established on this basis.

8. I have added an additional order 6; by which I direct the Plaintiffs to serve the Amended Originating Process, including Annexures A and B, on the liquidator to the Defendant, identifying the amendments made and their purpose by 4 pm on 30 November 2015, and reserve liberty to the liquidator to apply to vary or set aside these orders within seven days. I otherwise make orders in accordance with the short minutes of order initialled by me and placed in the file.

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Decision last updated: 29 February 2016