Kubic Pty Ltd (in liq.) - v - Dumayne Property Group Pty Ltd

[2015] VCC 753

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL DIVISON
BUILDING CASES LIST

Case No. CI-13-05173

KUBIC PTY LTD (in liquidation)	Plaintiff
v.
DUMAYNE PROPERTY GROUP PTY LTD	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	5 June 2015
DATE OF JUDGMENT:	5 June 2015 (revised 9 June 2015)
CASE MAY BE CITED AS:	Kubic Pty Ltd (in liq.) – v – Dumayne Property Group Pty Ltd
MEDIUM NEUTRAL CITATION:	[2015] VCC 753

REASONS FOR JUDGMENT

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Catchwords:              Corporation – Plaintiff company in liquidation – Failure to make a payment into Court as security for the defendant’s costs – Proceeding to be struck out – Money in a joint bank account to abide the result of the proceeding – Money in the joint account “representing…retention moneys” pursuant to the building contract between the parties –Whether that money should be paid out to the defendant – Dura (Australia) Construction Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326 considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr T. Greenway	Harrick Lawyers
For the Defendant	Mr J. Kenny	Kalus Kenny Intelex

HIS HONOUR:

1On 30 January 2015, I made an order that the plaintiff provide security for the defendant’s costs of the proceeding for pre-trial preparation in the total sum of $47,000 and that the proceeding be stayed unless the security was provided, either by a payment into court or by alternative security being agreed, by the end of February 2015. The plaintiff did not provide security and its counsel, Mr Greenway has informed the Court today that the liquidator of the plaintiff does not intend to seek an extension of time for the provision of security.

2In these circumstances, it is clear that the plaintiff will not proceed with the action and an order should be made that the proceeding be struck out.

3The defendant has made application to the Court for an order that, as a result of the plaintiff’s failure to provide security, the Court should order that moneys paid into a joint account by the defendant in the sum of $118,750 pursuant to terms of settlement dated 6 February 2014, should be paid to the defendant.

4Paragraph 7 of the terms of settlement reads as follows:

On or before 4.00pm on 24 February, 2014, the sum of $118,750.00 (representing the first 50% of retention moneys held by Dumayne under the Contract) shall be paid into an interest bearing account in the joint names of the solicitors for each of Dumayne and Kubic, with a representative of each firm to be nominated as joint signatories to such account, and shall not be released or otherwise dealt with thereafter without prior order of the court in the Building Case or by prior agreement in writing between the parties.

5   At the time the terms of settlement were entered into, the plaintiff was not in liquidation.

6   The sum of $118,750 was paid into a joint account where it presently remains. By the terms of settlement, it was said that the sum was “representing the first 50% of retention moneys held by Dumayne (under the contract)”. The contract is the building contract between the parties which is the subject of the present dispute. Pursuant to the contract, a retention sum was to be established and held by the proprietor [the defendant in this proceeding].

7   The relevant clauses of the contract are as follows:

10.12 Retention Sum

Any Retention Sum shall be established by the Proprietor or the lending Institution retaining from the contract value of work done ten per centum thereof until the total amount retained reaches the Limit of Retention stated in Item R of the Appendix.

10.13 Partial Release of Retention Moneys

Within 10 days after Practical Completion the Proprietor shall make payment to the Builder of one-half of the amount held in retention less any sum due by the Builder to the Proprietor pursuant to any provision of this Agreement.

8   Item R of the appendix provided that the “limit of retention” was, in this case, to be “5% of contract sum”, as no other figure was stated.

9 Mr Greenway submitted that it was inappropriate for me to make the order sought by the defendant as this would infringe section 471B of the Corporations Act 2001. The section provides as follows:

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.

10    The essential dispute between the parties on the present application was whether the moneys paid by the defendant into the joint account pursuant to the terms of settlement was, or might be, the “property” of the plaintiff.

11    Mr Greenway submitted that the retention moneys under the contract were essentially moneys which otherwise would have been paid to the plaintiff as progress payments but were permitted to be retained, up to the limit of 5% of the contract sum, in case circumstances arose which would give rise to a sum being “due by the builder to the proprietor pursuant to any provision of this agreement”.

12    Alternatively, Mr Greenway submitted that when the moneys were paid into the joint account, and if one looked at the purpose of the payment, it was apparent that the fund remained the property of the plaintiff.

13    The determination of this issues involves consideration of the principles of law discussed by the Court of Appeal in Dura (Australia) Construction Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326, and the cases discussed in the leading judgment of Santamaria JA, including the earlier decision of the Court of Appeal in Equuscorp Pty Ltd v Wilmoth, Field Warne(a firm) [2006] VSCA 123.

14    At the hearing of the application for security for costs in January 2015, Mr Greenway had conceded that, “if the defendant were to successfully defend the [plaintiff’s] claim, the plaintiff would have no entitlement to the retention sums presently held to abide the result of the present proceeding” (recorded at paragraph 19(b) of my earlier reasons for judgment).

15    I consider that it is not appropriate for me to make the order sought by the defendant. Although I intend to strike out the plaintiff’s claim, I do not consider that I should then go on and make the positive order that the defendant seeks for the payment of the moneys held in the joint account to be paid to it.

16 I consider that it is at least arguable that those moneys in the joint account are the property of the plaintiff and that I am being asked to make an order in the proceeding against the plaintiff in relation to that property. Mr Greenway conceded that, if the defendant were to make application in a Superior Court to determine the issue of whether section 471B of the Corporations Act 2001 is enlivened that it would be appropriate, if that Court determined that the funds in the joint account were the property of the defendant and not the property of the plaintiff, for that Court to make a final determination in relation to payment or disposal of those funds, rather than the matter needing to be returned to this Court.

17    The orders I will make are as follows:

1It is noted that plaintiff’s counsel has informed the Court as follows:

a.the plaintiff will not provide security for the defendant’s costs previously ordered;

b.the plaintiff contends that no positive order should be made by this Court in relation to the funds paid into a joint account by the defendant pursuant to terms of settlement as leave to proceed would be required from a Superior Court pursuant to section 471B of the Corporations Act 2001;

c.the plaintiff contends that it is arguable that the moneys paid into the joint account pursuant to the terms of settlement is the property of the plaintiff and is not the property of the defendant;

d.if application were made by the defendant to a Superior Court, the plaintiff would not assert that, if that Court determined that the moneys paid into the joint account were the property of the defendant, that the matter should not be returned to this Court for a final order as to the disposal of the proceedings, although the terms of settlement provided in paragraph 7 that the moneys in the joint account “shall not be released or otherwise dealt with thereafter without prior order of the Court in the building case [ie. this court] or by prior agreement in writing between the parties”.

2The proceeding is struck out.

3The costs of the defendant’s application, including the costs of the hearing today are reserved for determination by the Superior Court, or upon further application by the defendant.

4Reserve liberty to apply.

18    I have reserved the question of costs for determination by the Superior Court, if the defendant makes a further application. In my view, that Court will be in a far better position than I am to determine the issue, notwithstanding the submission by Mr Greenway that essentially, it is a matter of this Court’s jurisdiction. The issue apparently has been the subject of correspondence between the parties prior to the hearing today.

19    If the defendant does not make an application to a Superior Court then the plaintiff can renew its application for costs to this Court pursuant to the liberty to apply which has been reserved.

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Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 5 June 2015 and revised on 9 June 2015.

Dated: 9 June 2015

Olivia Bramwell    

Associate to His Honour Judge Anderson