In the matters of Datalec Services Pty Ltd (in liq) and Ichor Constructions Pty Ltd (in liq)

[2021] NSWSC 1183

Supreme Court

New South Wales

Medium Neutral Citation:

In the matters of Datalec Services Pty Ltd (in liq) and Ichor Constructions Pty Ltd (in liq) [2021] NSWSC 1183

Hearing dates:

6 September 2021

Date of orders:

6 September 2021

Decision date:

06 September 2021

Jurisdiction:

Equity - Corporations List

Before:

Rees J

Decision:

Leave granted for plaintiff to proceed against companies in liquidation.

Catchwords:

CORPORATIONS – application for leave to proceed against companies in liquidation – s 471B Corporations Act – plaintiff sues for personal injury – proceedings commenced shortly before expiration of limitation period – one company already in liquidation – other company went into liquidation – companies insured – plaintiff only seeks to recover from insurance policy – leave sought nunc pro tunc – principles at [3]-[7] – leave granted.

Legislation Cited:

Corporations Act 2001 (Cth) ss 440D, 471B

Limitations Act 1969 (NSW) s 50C

Cases Cited:

Bell Group Ltd v Westpac Banking Corporation (2000) 104 FCR 305; [2000] FCA 439

BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd (1998) 16 ACLC 1539

In the matter of Coastal Constructions Pty Ltd (in liq) (1994) 13 ACSR 329

In the matter of Gordon Grant & Grant Pty Ltd (1982) 1 ACLR 196

Moore v Scolaro’s Concrete Constructions Pty Ltd (in liq) [2004] VSCA 152; (2004) Aust Torts Reports ¶81-767

Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516

Ong v Lottwo Pty Ltd (in liq) (2013) 116 SASR 280; [2013] SASCFC 57

Sihota v Pacific Sands Motel Pty Ltd (2003) 56 NSWLR 721; [2003] NSWSC 119

Taouk v Assure (NSW) Pty Ltd [2019] NSWCA 224

Zervas v Burkitt [2019] NSWCA 112

Category:

Procedural rulings

Parties:

Craig Bowman (Plaintiff)
Datalec Services Pty Limited (First Defendant)
Ichor Constructions Pty Limited (Second Defendant)

Representation:

Counsel:
E Welsh (Plaintiff)
N Nguyen, solicitor (First Defendant)
R O’Connor, solicitor (Second Defendant)

Solicitors:
Brydens Lawyers (Plaintiff)
Meridian Lawyers (First Defendant)
Sparke Helmore (Second Defendant)

File Number(s):

2020/227906

Ex tempore Judgment

1. HER HONOUR: This is an application by Craig Bowman pursuant to section 440D(1)(b) or, alternatively, section 471B of the Corporations Act2001 (Cth) for leave to proceed against two companies, Datalec Services Pty Ltd (in liquidation) and Ichor Constructions Pty Ltd (in liquidation). As the companies are in liquidation, section 471B is the relevant provision.

Principles

2. Section 471B provides:

471B   Stay of proceedings and suspension of enforcement process

While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

(a)   a proceeding in a court against the company or in relation to property of the company; or

(b)   enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

3. The purpose of the requirement of leave is to ensure that a company in liquidation is not subjected to a multiplicity of actions which may be expensive, time-consuming and unnecessary where claims against the company can be pursued by the proof of debt process: Zervas v Burkitt [2019] NSWCA 112 at [15] per Gleeson JA.

4. A particular factor to be considered in an application for leave is whether the company was insured against the liability in respect of which the plaintiff is suing, and whether the proceedings would involve a distraction for the liquidator: Zervas at [16], [18]. Other questions relevant to the exercise of the Court’s discretion include whether there is a substantial question to be tried and whether the action will serve any sufficient purpose: Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516 at 520 per Zeeman J. Where leave is granted to commence or continue proceedings for damages against a company which is insured against its liability to pay those damages and the costs of defending the proceedings, it is common to grant leave subject to conditions, for example, the applicant will not seek to enforce any judgment which it may obtain against the company without leave: Oceanic at 521.

5. As Master Lee QC explained in In the matter of Gordon Grant & Grant Pty Ltd (1982) 1 ACLR 196 at 199, leave may be granted nunc pro tunc if good cause is shown on the merits. Such leave may be granted after the expiry of a period of limitation. Mere delay itself in applying for leave will not prevent leave being granted; leave is not to be withheld simply and solely as a punishment. See likewise Oceanic at 522; In the matter of Coastal Constructions Pty Ltd (in liq) (1994) 13 ACSR 329 per White J at 331; BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd (1998) 16 ACLC 1539 at 1542-3; Bell Group Ltd v Westpac Banking Corporation (2000) 104 FCR 305; [2000] FCA 439 at [55]-[58] per Carr J; Sihota v Pacific Sands Motel Pty Ltd (2003) 56 NSWLR 721; [2003] NSWSC 119 at [14] per Austin J; Moore v Scolaro’s Concrete Constructions Pty Ltd (in liq) [2004] VSCA 152; (2004) Aust Torts Reports ¶81-767 at [6] per Callaway JA (Buchanan JA and Dodds-Streeton AJA agreeing); Ong v Lottwo Pty Ltd (in liq) (2013) 116 SASR 280; [2013] SASCFC 57 at [59] per Nicholson J (Kourakis CJ and Stanley J agreeing); Zervas at [20] per Gleeson JA.

6. In Oceanic, Zeeman J observed that whether leave is granted nunc pro tunc is a matter of discretion. Matters relevant to the exercise of the discretion include:

1. whether the application for leave was filed promptly after commencement of the proceedings;

2. if leave is not granted nunc pro tunc, whether there is a risk that the company may be able to set up a limitation defence which, primarily, would be for the benefit of the insurer; and

3. whether there is an explanation for the delay until the proceedings were commenced.

7. Whilst Zeeman J considered that the Court should be slow to encourage litigants to deliberately act in breach of the statute, he nonetheless considered it appropriate in all of the circumstances of that case to grant leave nunc pro tunc subject to conditions: at 522.

Facts

8. The plaintiff sues Datalec and Ichor for personal injury alleged to have been suffered in August 2017, when he tripped and fell on a building site. It is said that Datalec was contracted to install electrical infrastructure on the site, whilst Ichor was the builder. Both are said to have contributed to the plaintiff’s accident. In evidence are medical reports describing the plaintiff’s injuries.

9. Both companies were insured when the accident happened. The plaintiff does not intend to seek to recover from the assets of the companies beyond the proceeds of the insurance policies.

10. In November 2018, Ichor went into liquidation.

11. In August 2020, these proceedings were commenced against Datalec and Ichor in the Common Law Division of this Court. The proceedings were commenced four days before expiry of the limitation period: section 50C, Limitations Act 1969 (NSW). The plaintiff’s solicitors knew that Ichor was then in liquidation, describing it as such on the statement of claim. The plaintiff did not, however, by the statement of claim or otherwise, seek leave to proceed against Ichor under section 471B of the Corporations Act.

12. In September 2020, Datalec also went into liquidation.

13. Both companies filed an appearance, apparently with the assistance of the insurers’ solicitors. Directions were made for pleadings and evidence. Correspondence ensued concerning the companies’ insurers and the correct names of the defendants.

14. In February 2021, Datalec’s solicitor advised the plaintiff’s solicitor that the company was in liquidation and invited the plaintiff to seek leave to maintain the proceedings. Instead, in June and July 2021, the plaintiff filed motions to join the companies’ insurers. In July 2021, Bellew J dismissed the motions as a nullity in the absence of leave being granted to proceed against the companies in liquidation. The plaintiff was ordered to pay the costs of the motion.

15. On 10 August 2021, the plaintiff filed the motion presently before the Court. The motion was transferred to the Corporations List for determination. In support, the plaintiff relied on an affidavit by his solicitor, Wesley Ranson. The companies did not adduce any evidence.

16. Today, Datalec’s liquidator, Christopher Darin, consented to leave being granted.

Consideration

17. The plaintiff submitted that the proceedings are being defended on behalf of the companies through their insurers. These proceedings would ordinarily be conducted on behalf of a company by its insurer. The liquidators do not suggest that the proceedings will interfere with their ability to deal with the affairs of the companies. Further, the claim is for unliquidated damages and will require curial determination. The medical reports indicate that there is substance to the plaintiff’s claim. Failure to grant leave, and in Ichor’s case, to grant leave nunc pro tunc, will deprive the plaintiff of a remedy.

18. Ichor opposed leave on the basis that, when the proceedings were commenced, Ichor was already in liquidation. The proceedings were commenced in contravention of section 471B of the Corporations Act and should be dismissed as incompetent and re-commenced: Taouk v Assure (NSW) Pty Ltd [2019] NSWCA 224 at [1]-[4] per the Court (Macfarlan and Payne JJA, Emmett AJA). The plaintiff’s conduct showed a disregard for longstanding provisions of the Corporations Act and should not be encouraged. Thus, if leave were granted, it should not be granted nunc pro tunc.

19. The plaintiff is amenable to a condition that, should he succeed in his claim for damages, he will only seek to recover damages from the companies’ insurance policies. As such, his action will not adversely impact the creditors or shareholders of the defendants. There is medical evidence before the Court which suggests that the plaintiff has a prima facie case. A grant of leave will serve a purpose. If leave is not granted – and granted nunc pro tunc – the plaintiff’s claim against Ichor will be statute barred. Accepting that there is no explanation for the plaintiff’s delay in commencing these proceedings, or seeking leave, and also accepting that the plaintiff may have initially gone about it the wrong way, I am not minded to punish him by refusing leave. The plaintiff has already been ordered to pay the defendants’ costs of his failed motion before Bellew J in July 2021. In these circumstances, I consider it appropriate to grant leave to proceed against the defendants nunc pro tunc.

20. For these reasons, I make the following orders.

1. Grant leave to the plaintiff to file in Court the affidavit of Wesley Ranson affirmed 6 September 2021, a copy of which is initialled by her Honour, dated today and placed with the papers.

2. Pursuant to section 471B of the Corporations Act 2001, grant leave to the plaintiff, Craig Bowman, nunc pro tunc to proceed against Datalec Services Pty Limited (in liquidation) and Ichor Constructions Pty Ltd (in liquidation).

3. Order that the costs of the plaintiff’s motion filed on 10 August 2021 are to be the parties’ costs in the proceedings.

4. Order that no step to enforce any judgment or verdict obtained in these proceedings shall be taken by the plaintiff as against Datalec Services Pty Limited (in liquidation) or Ichor Constructions Pty Ltd (in liquidation) otherwise than by resort to proceeds of insurance, without the further leave of the Court.

5. Refer the matter back to Bellew J for case management.

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Decision last updated: 17 September 2021