In the matter of Terra Cresta Business Solutions Pty Limited

[2016] NSWSC 1961

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Terra Cresta Business Solutions Pty Limited [2016] NSWSC 1961
Hearing dates:	Monday, 16 May 2016
Date of orders:	16 May 2016
Decision date:	16 May 2016
Jurisdiction:	Equity - Corporations List
Before:	Brereton J
Decision:	Amended originating process dismissed with costs
Catchwords:	PROCEDURE – application for dismissal or striking out originating process brought in name of company in liquidation – where liquidator unaware of proceedings and does not consent to their institution – where proceedings purportedly brought pursuant to assignment of chose in action by company – held, company in liquidation is not a proper plaintiff
Legislation Cited:	(CTH) Corporations Act 2001, s 420, s 423
Cases Cited:	Bank of Western Australia Ltd v Usalj [2010] NSWSC 991 Cook v Northoak Holdings Pty Ltd (rec & mgr apptd), (1997) 25 ACSR 517; 15 ACLC 1656 GE Capital Australia v Davis (2002) 180 FLR 250; 11 BPR 20,529; [2002] NSWSC 1146 Newtronics Pty Ltd, Re; ATCO Controls Pty Ltd (in liq) v Stewart [2011] VSC 349 Oswal v Carson & Ors (in their capacities as recs and mgrs of Burrup Fertilisers Pty Ltd (recs & mgrs apptd) (No 3) (2013) 300 ALR 149; 93 ACSR 645; [2013] FCA 357 S and D International Pty Ltd (in liq) (recs and mgrs apptd), Re [2009] VSC 225
Category:	Procedural and other rulings
Parties:	Terra Cresta Business Solutions Pty Limited (in liquidation)(plaintiff) Richard Albarran and the person identified in Schedule A to the Amended Originating Process t/a Hall Chadwick (NSW)(defendant)
Representation:	Counsel: C Harris SC (plaintiff/respondent) D Jarrett (defendant/applicant)   Solicitors: Drexler Litigation Lawyers (plaintiff/respondent) Nelson McKinnon Lawyers (defendant/applicant)
File Number(s):	2016/ 38098

Judgment (EX TEMPORE)

1. HIS HONOUR: On 5 February 2016, an originating process was filed in the name of Terra Cresta Business Solutions Pty Limited (in liquidation) as plaintiff, joining as defendant Hall Chadwick Pty Limited. An amended originating process was filed on 15 March 2016, purporting to substitute as defendant the partners in Hall Chadwick (NSW), and claiming the following relief:

(1) An order pursuant to s 423 of the Corporations Act 2001 (Cth) that the court conduct an inquiry into the conduct of the defendants in its receivership of Business Australia Capital Finance Pty Limited and Business Australia Capital Mortgage Pty Limited pursuant to instruments of appointment granted by Terra Cresta Business Solutions Pty Limited.

(2) A declaration that the defendants convened s420 of the Corporations Act 2001 (Cth).

(3) A declaration that the defendants contravened s420(2)(k) of the Corporations Act 2001 (Cth)

(4)   A declaration that the defendants engaged in unconscionable conduct.

(5)   A declaration that the defendants engaged in conduct contrary to its obligations under the general law by failing to act impartially, properly and in good faith in representing that a resolution of Supreme Court proceedings numbered 4200 of 2006 required the insertion into a Deed of Release of Bondedge Pty Limited and Given Form Pty Limited.

(6) An order pursuant to s423(1) of the Corporations Act 2001 (Cth) that the plaintiff be paid compensation as assessed by this court being action to make good all losses sustained by the plaintiff caused by the conduct of the defendants in failing to proceed with the resolution of proceedings numbered 4200 of 2006 and by insisting that two unrelated corporations be included in a Deed of Release preventing the resolution of proceedings being proceedings numbered 4200 of 2006 being resolved for the sum of $1.3 million and further failing to maintain proceedings to determine a quantification of debts due and payable to the plaintiff assessed by the defendants to be recoverable for the sume of $2,091,599.81 together with such further or other orders as this court deems fit.

(7)   Alternatively damages as assessed.

(8)   Alternatively equitable compensation.

(9) Alternatively compensation pursuant to the Corporations Act.

(10)   An order that the defendants pay the plaintiff interest.

(11)   A order that the defendants pay the plaintiff’s costs.

2. The defendants, by solicitors, filed an appearance on 4 April 2016. The retainer of those solicitors was disputed, and they filed a notice of ceasing to act on or about 2 May 2016, when new solicitors were appointed to act for the defendants. By interlocutory process filed on 9 May 2016, the defendants now seek orders dismissing the amended originating process or, alternatively, striking it out.

3. The application for dismissal or striking out is mounted on a number of bases. However, as one of them is sufficient to dispose of the application, it is unnecessary that I deal with all the matters that have been advanced.

4. Although the named plaintiff is Terra Cresta Business Solutions Pty Limited (in liquidation), the liquidator has indicated that he was not aware that the proceedings had been instituted, and does not consent to the institution of proceedings in the name of the company.

5. The proceedings are purportedly brought pursuant to an assignment of such choses in action as Terra Cresta may have had against the named defendants, pursuant to a deed of sale of chose in action dated 15 December 2015. The copy of that deed in evidence is not stamped, and thus it may well be that it is unenforceable. However, assuming that it should be regarded as enforceable, it provides for the assignment by the liquidator, at the request of TCBS Group Holdings Pty Limited and Mr Owen Salmon, of all of the liquidator's right, title and interest in connection with the “chose in action”, as defined. Such an assignment, if effective, does not authorise the assignee to sue in the name of the company, but rather to sue in its own name, pleading the assignment as a material fact in in its cause of action.

6. Accordingly, the company in liquidation is not a proper plaintiff, and the proceedings as presently constituted, with the company as the named plaintiff, have not been duly authorised or commenced. That of itself is a sufficient basis for an order that the proceedings be permanently stayed or dismissed.

7. In so far as the proceedings seek an inquiry under Corporations Act, s 423, it is well-established that an application for such an inquiry involves two steps: first, a determination as to whether an inquiry should be conducted; and second, the inquiry itself. [1] However, it has been said that proceeding under s 423 is generally, although not universally, inappropriate unless the question is one amenable to summary determination. [2]

   1. Re S and D International Pty Ltd (in liq) (recs and mgrs apptd) [2009] VSC 225 at [210]; Re Newtronics Pty Ltd; ATCO Controls Pty Ltd (in liq) v Stewart [2011] VSC 349; Oswal v Carson & Ors (in their capacities as recs and mgrs of Burrup Fertilisers Pty Ltd (recs & mgrs apptd) (No 3) (2013) 300 ALR 149; 93 ACSR 645; [2013] FCA 357.

   2. Cook v Northoak Holdings Pty Ltd (rec & mgr apptd), above; GE Capital Australia v Davis (2002) 180 FLR 250; 11 BPR 20,529; [2002] NSWSC 1146 at [63]; Bank of Western Australia Ltd v Usalj [2010] NSWSC 991 at [23]- [24]; Oswal v Carson & Ors (in their capacities as recs and mgrs of Burrup Fertilisers Pty Ltd (recs & mgrs apptd) (No 3), above.

8. In so far as the originating process seeks declarations of contravention of Corporations Act, s 420, and, in particular, s 420(2)(k), those are sections conferring powers, not imposing obligations, and the concept of a contravention of those provisions does not make sense.

9. It may be – I offer no opinion - that Mr Salmon has legitimate ground for complaint about aspects of the conduct of the receivers, but the present proceeding, as presently constituted, and much of the relief sought in it, is not a way in which such a complaint can be pursued. The fact that I have not adverted to the other claims for relief should not be taken as indicating that on any future application they would be regarded as viable. I have not considered one way or the other the limitation points that arise. If further proceedings are brought, and when the precise relief sought is formulated, they may be considered then.

10. Therefore, the Court orders that the amended originating process be dismissed, with costs.

**********

Endnotes

Decision last updated: 17 November 2017