Jayasekara v Homegrown Me Pty Ltd; Jayasekara v; Homegrown Me Pty Ltd; Jayasekara v Homegrown Me Pty; Ltd; Dassanayaka v Homegrown Me Pty Ltd; Polgolla v; Homegrown Me Pty Ltd; Rathnayake v Homegrown Me Pty; Ltd
[2023] ACTSC 159
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Jayasekara v Homegrown Me Pty Ltd; Jayasekara v Homegrown Me Pty Ltd; Jayasekara v Homegrown Me Pty Ltd; Dassanayaka v Homegrown Me Pty Ltd; Polgolla v Homegrown Me Pty Ltd; Rathnayake v Homegrown Me Pty Ltd |
Citation: | [2023] ACTSC 159 |
Hearing Date: | 23 & 28 June 2023 |
Decision Date: | 28 June 2023 |
Before: | Curtin AJ |
Decision: | (1) The applications in proceedings filed 13 June 2023 by the first defendant in each proceeding be heard together. (2) I grant leave to Homegrown Me Pty Ltd (Homegrown) to proceed against Daana Original Food Pty Ltd (under eternal administration and/or controller appointed) (Daana) pursuant to s 471B of the Corporations Act 2001 (Cth) on the following conditions: (a) that Homegrown will not, without leave of the Court, seek to enforce against Daana any judgment it may obtain against it in the proceedings; and (b) Homegrown will not seek any legal costs against Daana in the proceedings brought by Homegrown against Daana incurred after the date of the liquidation of Daana. (3) Costs of these applications to be Homegrown’s costs in the cause in each of the proceedings brought by Homegrown against Daana. |
Catchwords: | CORPORATIONS – application for leave to proceed against a company in liquidation pursuant to s 471B of the Corporations Act 2001 (Cth) – relevant principles to be applied – whether there is a substantial question to be tried – whether the action would interfere with the orderly winding up – whether the action would serve any sufficient purpose – whether the action would have any adverse effect – whether to impose any conditions in the event leave is granted |
Legislation Cited: | Corporations Act 2001 (Cth), ss 471B, 500 |
Cases Cited: | Catto v Hampton Australia Limited (In Liquidation) (1998) 29 ACSR 225;(1998) 12 ACLC 1688 |
Parties: | Supun Polgolla ( Plaintiff in SC 137 of 2021) Lasitha Rathnayake (Plaintiff in SC 138 of 2021/Third Third Party in SC 137, 375, 443, 444 of 2021) Ishan Jayasekara (Plaintiff in SC 139 of 2021/Second Third Party in SC 137, 375, 443, 444 of 2021) Eashaan Dassanayaka (Plaintiff in SC 375 of 2021) Mahadura Jayasekara (Plaintiff in SC 443 of 2021) Shirani Jayasekara (Plaintiff in SC 444 of 2021) Homegrown Me Pty Ltd ( First Defendant in SC 137, 138, 139, 375, 443, 444 of 2021) Daana Original Food Pty Ltd t/as Daana (Second Defendant/First Third Party in SC 137, 138, 139 of 2021; First Third Party in SC 375, 443, 444 of 2021) |
Representation: | Counsel H Ehsan ( Plaintiff in SC 375 of 2021) D Campbell SC w/ J Ronald ( Plaintiffs in SC 137, 138, 139, 443, 444 of 2021 ) M Best (First Defendant in SC 137, 138, 139, 375, 443, 444 of 2021) |
| Solicitors MEJ ( Plaintiff in SC 375 of 2021) Carroll O’Dea (Plaintiffs in SC 137, 138, 139, 443, 444 of 2021) Hall & Wilcox (First Defendant in SC 137, 138, 139, 375, 443, 444 of 2021) | |
File Numbers: | SC 137, 138, 139, 375, 443, 444 of 2021 |
CURTIN AJ:
EX TEMPORE (REVISED)
Introduction
1․In these proceedings, the first defendant seeks orders granting it leave to proceed against the second defendant/first third party, Daana Original Food Pty Ltd (under external administration and/or controller appointed) (Daana), pursuant to ss 471B and/or 500(2) of the Corporations Act 2001 (Cth).
2․The application arises in the following way.
3․The claims arise from a gas explosion that occurred in a kitchen container on 24 October 2018. The container was owned by Homegrown Me Pty Ltd (Homegrown).
4․Supun Polgolla (the plaintiff in SC 137 of 2021), Lasitha Rathnayake (the plaintiff in SC 138 of 2021/third third party in SC 137, 375, 443, 444 of 2021), Ishan Jayasekara (the plaintiff in SC 139 of 2021/second third party in SC 137, 375, 443, 444 of 2021) and Eashaan Dassanayaka (the plaintiff in SC 375 of 2021) had hired the container from Homegrown and were injured as a result of the explosion.
5․Homegrown purchased the kitchen container from Daana (the second defendant/first third party in SC 137, 138, 139 of 2021; first third party in SC 375, 443, 444 of 2021) on 16 November 2016.
6․Ishan Jayasekara’s parents, Mahadura Jayasekara (the plaintiff in SC 443 of 2021) and Shirani Jayasekara (the plaintiff in SC 444 of 2021) subsequently brought nervous shock claims against Homegrown.
7․On 16 April 2021, originating processes and statements of claim were filed by Sunpun Polgolla, Lasitha Rathnayake, Ishan Jayasekara against Homegrown as the defendant.
8․On 15 September 2021, an originating process and statement of claim were filed by Eashaan Dassanayaka against Homegrown as the defendant.
9․On 20 September 2021, third party notices and statements of claim were filed in SC 137, 138, 139 and 375 of 2021 by the defendant joining Daana to the proceedings as a third party.
10․On 21 October 2021, matters SC 443 and 444 of 2021 were commenced by Mahadura Jayasekara and Shirani Jayasekara by way of originating process and statement of claim against Homegrown as the defendant.
11․On 17 December 2021, Daana filed defences to the third party claims against it in proceedings SC 137, 138, 139 of 2021.
12․On 2 February 2022, Daana filed a defence to the third party claim in proceedings SC 375 of 2021.
13․On 24 March 2022, Homegrown filed third party notices and statements of claim in proceedings SC 443 and 444 of 2021, joining Daana to these matters as the third party.
14․Daana has not filed defences to the third party claims against it in proceedings SC 443 and 444 of 2021.
15․On 20 April 2022, the plaintiffs in proceedings SC 137, 138 and 139 of 2021 filed amended originating claims and statements of claim, joining Daana to the proceedings as the second defendant.
16․Daana is therefore:
(a)The first third party/second defendant in matters SC 137, 138 and 139 of 2021;
(b)The third party in matter SC 375 of 2021; and
(c)The third party in matters SC 443 and 444 of 2021.
17․On 14 October 2021, solicitors for Daana, Wotton & Kearney, filed a notice of intention to respond in proceedings SC 137, 138, 139 and 375 of 2021. Wotton & Kearney acted on instructions from Daana’s public liability insurer, AIG Australia Ltd (AIG).
18․On 22 February 2022, Wotton & Kearney filed notices of ceasing to act in the above matters.
19․On 28 April 2022, Rachel Bird & Co Solicitors filed notices of intention to respond on behalf of Daana.
20․On 11 November 2022, Rachel Bird & Co Solicitors filed a notice indicating that they no longer held instructions to act on behalf of Daana.
21․From 11 November 2022 to date, Daana has not had legal representation and has failed to appear at any Court listings.
Daana
22․At the time of the explosion, Daana was insured by AIG.
23․On 11 February 2022, AIG declined Daana’s claim for indemnity under the relevant public liability insurance policy in relation to Daana’s liability arising from the explosion and these proceedings.
24․On 22 February 2022, Wotton & Kearney ceased acting for Daana after AIG declined indemnity.
25․On or around 6 October 2022, Daana produced documents in response to a subpoena issued by the first defendant’s solicitors which included, amongst other things, the purportedly applicable AIG policy schedule and wording.
26․On 1 February 2023, following multiple requests, Daana provided the first defendant’s solicitors with a copy of AIG’s declinature letter dated 11 February 2022. It became apparent to the first defendant’s solicitors on reviewing this letter that the version of the policy wording produced by Daana under subpoena was not the applicable policy wording at the time of the explosion.
27․On 23 March 2023, the first defendant’s solicitors received an ASIC notice confirming that Daana had entered voluntary external administration.
28․On 4 April 2023, the first defendant’s solicitors undertook a further ASIC search which confirmed that on 22 March 2023 Daana filed a notification of resolution winding up the company, and a liquidator was appointed.
29․On 5 May 2023, the first defendant’s solicitors became aware (from their own investigations) that the directors of Daana appear to have transferred Daana company assets to a new business, Gravitas Hospitality Pty Ltd (Gravitas).
30․Daana’s website states that in 2023, the company “created Gravitas Hospitality as a parent company for our growing business”. It confirms that the Daana restaurant is still operating, as well as Daana catering. It also confirms the directors have recently acquired a wedding venue which is also operating under the Gravitas business name.
31․On 9 May 2023, the first defendant’s solicitors wrote to the liquidator appointed to Daana regarding its concerns that Daana had shifted its assets to the new company, Gravitas, in an attempt to avoid liability arising from these proceedings.
32․On 12 May 2023, the liquidator appointed to Daana wrote to the first defendant’s solicitors and said, amongst other things:
(a)to date, the plaintiffs’ lawyers have not indicated any intention to seek leave to continue the proceedings against Daana in liquidation;
(b)investigations in relation to the transfer of assets from Daana to Gravitas are ongoing; and
(c)any recovery actions which may be identified and available against Gravitas and/or the officers of Daana will be reported to creditors of Daana and ASIC.
33․On 2 June 2023, the matter was listed before McWilliam J.
34․During the application before her Honour the below occurred:
(a)Mr Campbell SC, appearing for the plaintiffs in matters SC 137, 138, 139, 443 and 444 of 2021, informed the Court that the plaintiffs in SC 137, 138 and 139 of 2021 did not intend to seek leave to pursue the claim against Daana in liquidation, and confirmed the claims against Daana would not be pressed at trial;
(b)Mr Best, appearing for the first defendant, informed the Court the first defendant intended to maintain the third party claims against Daana in all six claims at trial; and
(c)Her Honour directed the first defendant to file applications seeking leave to proceed against Daana under external administration prior to the trial which was listed in the call over list commencing 3 July 2023.
35․As a result of Daana entering external administration on 22 March 2023, Homegrown’s third party claims against it are stayed pursuant to s 471B(a) of the Corporations Act 2001 (Cth), unless the Court grants leave to proceed against it under external administration.
36․On 8 June 2023, the first defendant’s solicitors wrote to the liquidator putting him on notice of the first defendant’s intention to file the applications to seek leave to proceed against Daana.
37․On 21 June 2023, the first defendant’s solicitors served the foreshadowed applications on the liquidator.
38․On 21 June 2023, the liquidator wrote to the first defendant’s solicitors confirming he nether consented to or opposed the orders sought in the applications.
39․As at the date of this judgment, Daana remains under external administration.
40․The matter is listed for a 10-day hearing before me on 3 July 2023.
41․Homegrown intends to prosecute its claims against Daana in all six matters at hearing.
Legal principles
42․Section 471B of the Corporations Act says;
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.
43․Section 500(2) of the Corporations Act says;
500 Execution and civil proceedings
(1)…
(2)After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.
44․I do not think s 500(2) of the Corporations Act is applicable because that section only applies to a creditor's voluntary winding up and not a member's voluntary winding up: Catto v Hampton Australia Limited (In Liquidation) (1998) 29 ACSR 225;(1998) 12 ACLC 1688.
45․Therefore, this application falls to be determined under s 471B.
46․The relevant principles to apply in an application of this sort were comprehensively discussed and identified in Commonwealth of Australia v Davis Samuel Pty Ltd (No 5) [2008] ACTSC 124. In particular, Refshauge J in that case said at [32] that a useful summary of the matters to consider in an application such as this were set out in Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (In Liquidation) (1993) 11 ACSR 516 at 520 where Zeeman J said:
Questions relevant to the exercise of my discretion as to whether leave ought to be granted at all include the following:
1. Whether there is a substantial question to be tried.
2. Whether the action would interfere with the orderly winding up of the respondent.
3. Whether the action would serve any sufficient purpose.
4.Whether the action would have any adverse effect upon the respondent and its shareholders.
47․The first question is whether there is a substantial question to be tried.
48․On that issue, an applicant is ordinarily required to provide the Court with sufficient information for the Court to be satisfied that there is a serious question to be tried: see [24]-[29] of Commonwealth of Australia v Davis Samuel Pty Ltd (No 5) [2008] ACTSC 124.
49․The evidence in this case on that question is a little thin but suffice to say I am satisfied from the pleadings and submissions that there is a serious question to be tried in relation to the possible liability of the first third party for the occurrence of the accident.
50․The next question is whether the action would interfere with the orderly winding up of the first third party.
51․There is no evidence that the continuation of the proceedings against the first third party would interfere with its orderly winding up. In the liquidator's email to the solicitors for the defendant dated 21 June 2023, the liquidator says that he neither consents to nor opposes the applications being made for leave to proceed against the company in liquidation.
52․He goes on to say:
There are no funds in the liquidation for me to instruct solicitors and participate in various proceedings. Accordingly, if leave is granted by the court, I propose to file a submitting appearance in the proceedings.
53․Although, as Mr Best submitted, the expression “no funds in the liquidation for me to instruct solicitors” is, in Mr Best's submissions, “carefully worded”, the expression to me indicates that more probably than not the first third party has little available net assets. If there are few net assets it is unlikely these proceedings will interfere with the winding up.
54․That probability is corroborated to some degree by Ms Lee's evidence in her affidavit of 7 June 2023, and particularly at [31], that there is credible information that the directors of the first third party have transferred assets of the company to a new business.
55․In any event, the liquidator does not assert that the continuation of the proceedings against the company in liquidation would interfere with the company's orderly winding up.
56․The third question is whether the proceedings, if continued, would serve any sufficient purpose.
57․These proceedings commenced in 2021 and the first third party participated in the processes of the Court once it was joined and up until March or April this year, the point in time at which the first third party filed a notification of resolution of winding up and a liquidator being appointed.
58․These six matters are set down for a 10-day hearing commencing on 3 July 2023, which is two clear working days from today and five clear working days from when the application was first listed for hearing before me. The significance of that chronology is that the time at which an application of this sort is brought is relevant to the exercise of the discretion whether or not to grant leave to Homegrown to proceed against Daana.
59․Homegrown says there are two purposes for the continuation of the proceedings.
60․The first was that should Homegrown be successful on its contribution notice and should Homegrown be unsuccessful against the plaintiffs, or one or more of the plaintiffs, then prima facie Homegrown would succeed in a judgment for contribution for a certain sum of money from Daana and therefore would become a creditor of Daana in liquidation. Homegrown then says that if that occurred, it would be entitled to share in any distribution made by Daana’s liquidator should the company’s assets exceed its liabilities.
61․Ordinarily, the same position could be achieved by lodging a proof of debt, but given the lateness of Daana’s liquidation vis-à-vis the hearing of these proceedings and given the nature of these proceedings being personal injury proceedings involving negligence and possible assessments of contribution on a percentage basis, I am satisfied that it is appropriate for the proceedings brought by Homegrown against Daana to continue so that any debt which Daana may be held to owe to Homegrown (if any) can be quantified and Homegrown and the liquidator for Daana avoid the necessity for negotiations and disputes concerning any potential indebtedness of Daana to Homegrown.
62․One difficulty with granting leave for that reason is that the continuation of the proceedings would increase the quantum of costs that Homegrown could seek to recover from Daana. Any increase in the costs incurred (and therefore of the potential indebtedness of Daana to Homegrown) would logically decrease any distribution to other creditors of Daana should there be such a distribution. That would unfairly disadvantage those other creditors but it can be accommodated by confining Homegrown in relation to the costs it may seek against Daana.
63․I will return to that matter shortly.
64․The second matter advanced by Homegrown as a basis for the continuation of the proceedings against Daana was the assertion of some phoenix like activity whereby the directors of Daana have allegedly transferred assets of Daana to a new company which has, allegedly, conducted the same business (in substance) as Daana.
65․When Homegrown was asked during submissions how a judgment against Daana would assist it in relation to those allegations, no direct answer was provided. No relevant answer is obvious to me.
66․However, the first reason advanced by Homegrown and the other matters to which I have referred above are sufficient to grant the leave sought subject to conditions.
Orders
67․I make the following Orders:
(1)The applications in proceedings filed 13 June 2023 by the first defendant in each proceeding be heard together.
(2)I grant leave to Homegrown Me Pty Ltd (Homegrown) to proceed against Daana Original Food Pty Ltd (under eternal administration and/or controller appointed) (Daana) pursuant to s 471B of the Corporations Act 2001 (Cth) on the following conditions:
(a)that Homegrown will not, without leave of the Court, seek to enforce against Daana any judgment it may obtain against it in the proceedings; and
(b)Homegrown will not seek any legal costs against Daana in the proceedings brought by Homegrown against Daana incurred after the date of the liquidation of Daana.
(3)Costs of these applications to be Homegrown’s costs in the cause in each of the proceedings brought by Homegrown against Daana.
| I certify that the preceding sixty-seven [67] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Curtin. Associate: Date: |
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