Set-off - Order conferring a right to set off a judgment debt entered in favour of a company against a judgment debt entered against the company - Joint and several debtors - Whether order mandatory and automatically set off and extinguished the judgment debts - How a right of set-off may be exercised
Insolvency - Liquidator's power to sell or otherwise dispose of the company's property - Whether a right of appeal against a judgment dismissing the company's claim is "property" as defined in s 9 Corporations Act 2001 (Cth) - Assignment of a thing in action in the context of set-off of judgment debts under s 553C Corporations Act 2001 (Cth) - Liquidator has power to assign the right to the net balance, if any, owing after the judgment debts are set off under s 553C - Liquidator also has power to assign a future contingent thing in action - Whether related rights of appeal can also be assigned - Appeal against the dismissal of the company's claim is part of the process of retrospective calculation to determine the net balance owing, if any
Contract - Construction of written contract - Contract to be construed with regard to the factual and legal background against which it was concluded and the practical objects it was intended to achieve - Whether contract effective to assign a thing in action and related rights of appeal - Absence of language of assignment not decisive
Appeal - Review by appellate court of exercise of judicial discretion by Master - Turns on own facts
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Krishell Pty Ltd v Nilant [2006] WASCA 223
Case
[2006] WASCA 223
Decision Date
CaseChat Overview and Summary
The case of Krishell Pty Ltd v Nilant concerns a dispute regarding the set-off of judgment debts and the liquidators' powers to dispose of the company's property in the context of a winding up. The dispute arose from the judgment of the Supreme Court of Western Australia in Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13, where Krishell Pty Ltd was awarded damages against Gardner Corporation Pty Ltd. Gardner Corporation appealed this decision, leading to a series of legal proceedings involving the liquidators of Gardner Corporation, Mr Nilant and Mr Zohar. The liquidators sought to sell the company's rights to the appeal and were questioned about their powers to do so.
The primary legal issues before the court included whether the set-off order was mandatory and automatically extinguished the judgment debts, how a right of set-off could be exercised in insolvency, and whether the liquidators had the power to sell or dispose of the company's property, including the right of appeal against a judgment dismissing the company's claim. Additionally, the court examined whether the assignment of a thing in action in the context of set-off of judgment debts under the Corporations Act 2001 (Cth) was effective.
The court ruled that the set-off order was not mandatory and did not automatically extinguish the judgment debts. The court also held that the liquidators had the power to assign the right to the net balance, if any, owing after the judgment debts were set off, as well as the power to assign a future contingent thing in action. The liquidators could also assign related rights of appeal, as these were part of the process of determining the net balance owing. The court further determined that the appeal against the dismissal of the company's claim was part of the "property" as defined in the Corporations Act 2001 (Cth), and thus, assignable by the liquidators.
In conclusion, the court's decision upheld the liquidators' authority to sell or assign the company's rights to the appeal, including the right of appeal against the dismissal of Krishell's claim. This decision was grounded in the construction of the contract and the practical objects intended to be achieved by the set-off order. The court's ruling emphasized that the absence of specific language of assignment did not negate the effectiveness of the assignment, as long as the rights of appeal were integral to determining the net balance owing. The court's review of the exercise of judicial discretion by the Master underscored that each case turned on its own facts.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
JUDGMENT OF THE COURT: The second respondent applies to amend the costs order made by the Court on 27 October 2006. On that day, the Court ordered that the appellant pay the first and second respondents' costs of the appeal to be taxed. The second respondent seeks to amend the order to allow for the recovery of reserved costs. Counsel for the second respondent did not seek those costs at the time when the order was made. No explanation is provided for the failure. The Court has jurisdiction to correct a judgment or order where an error arises from an accidental slip or omission (O 21 r 10 of the Rules of the Supreme Court 1971 (WA)) and pursuant to the Court's inherent jurisdiction (Monaco v Arnedo Pty Ltd (1994) 13 WAR 522 at 524). The parties have filed written submissions and agree to this application being determined on the papers. The only reserved costs were in respect of an appearance before Registrar S Boyle to settle the appeal book index to which the second respondent was unwilling to consent. The second respondent was unsuccessful in seeking to include further documents in the appeal book. In response, the second respondent contends that the attendance before the Registrar resulted from the issue of a Notice to Attend on 5 October 2005. Be that as it may, such attendances may be vacated if matters are agreed, thereby reducing litigation costs. On the material put before the Court, I am not persuaded that the second respondent should have the reserved costs. Accordingly, I would order that the application be dismissed and that the second respondent pay the appellant's costs of the application to be taxed.
Ratio Decidendi
Legal Principle Established
The hearing of Krishell's entitlement to damages took place over five days in November 2002 and judgment was delivered in January 2003: Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13. The orders flowing from that judgment were made in two tranches. On 23 January 2003, Gardner Corporation and Mr Gardner were ordered to pay Krishell $109,932.28, in respect of the counterclaim. On 4 February 2003, it was also ordered that:"1.The First [Zed Bears], Second [Krishell], Fifth and Six [sic] Defendants [Mr and Mrs Myers] are jointly and severally liable to pay the Plaintiff [Gardner Corporation] the sum of $98,559.50.2.The First Defendant [Zed Bears] do pay the Plaintiff [Gardner Corporation] interest on the sum of $90,659.52 from 10 August 1996 to 27 April 2001 in the sum of $51,502.68 and thereafter interest on the said sum of $90,659.52 at 6% per annum to the date of judgment.3.The First and Second Defendants (by Counterclaim) [Gardner Corporation and Mr Gardner] do pay the Second Plaintiff (by Counterclaim) [Krishell] the sum of $98,559.50.4.The Second, Fifth and Sixth Defendants [Krishell, Mr Myers and Mrs Myers] be entitled to set‑off the sum of $98,559.50 awarded in favour of the Second Plaintiff (by Counterclaim) [Krishell] against the sum of $98,559.50 awarded in favour of the Plaintiff [Gardner Corporation]." In February 2003, Gardner Corporation lodged an appeal against Steytler J's findings, seeking orders that Krishell's counterclaim be dismissed and that Krishell pay Gardner Corporation the sum of $98,559.50 plus interest, found payable by the Master. The effect of the appeal, if successful, would be that the damages awarded to Krishell in the sums of $109,932.28 and $98,559.50 would be set aside and Gardner Corporation would be entitled to recover the sum of $98,559.50 which had been found to be due and payable to it. Subsequently, in August 2003, an order was made that Gardner Corporation be wound up in insolvency. The first respondents, Mr Nilant and Mr Zohar ("liquidators"), were appointed as liquidators of Gardner Corporation. After obtaining legal advice that continuing the appeal was not in the interests of Gardner Corporation creditors, Mr Nilant wrote to Mr Gardner and to Mr Myers (for Krishell), in October 2003, in the following terms: "I refer to the above matter and the Company's Appeal Number FUL 14 of 2003 against Krishell Pty Ltd ('the Appeal').It is not my intention to pursue this action on behalf of the Company however I have a responsibility to realise the asset being the Company's rights to the Appeal for the benefit of creditors generally.Accordingly, I am able to sell the Company's rights to the Appeal to any interested person. I am therefore, writing to yourself and Mr Denis Meyers [sic] of Krishell Pty Ltd seeking offers for the purchase of the Company's rights to the Appeal.Any offer that is submitted must be a cash offer, payable within seven (7) days and I advise that it is my intention to accept the highest offer."