Matthew David Woods as joint and several liquidator of Brierty Ltd (in Liq) v B&J Catalano Pty Ltd - [2021] WASC 90

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   MATTHEW DAVID WOODS as joint and several liquidator of BRIERTY LTD (IN LIQ) -v- B&J CATALANO PTY LTD [2021] WASC 90
CORAM:   ACTING MASTER STRK
HEARD:   23 MARCH 2021
DELIVERED          :   25 MARCH 2021
PUBLISHED           :   8 APRIL 2021
FILE NO/S:   COR 35 of 2021
BETWEEN:   MATTHEW DAVID WOODS as joint and several liquidator of BRIERTY LTD (IN LIQ)
HAYDEN LEIGH WHITE as joint and several liquidator of BRIERTY LTD (IN LIQ)
CLINT PETER JOSEPH as joint and several liquidator of BRIERTY LTD (IN LIQ)
First Plaintiffs

BRIERTY LTD (IN LIQ)
Second Plaintiff

AND

B&J CATALANO PTY LTD
First Defendant

TENITE PTY LTD
Second Defendant

BORAL CONSTRUCTION MATERIALS GROUP LTD
Third Defendant

BROOKS HIRE SERVICE PTY LTD
Fourth Defendant

COLAS WESTERN AUSTRALIA PTY LTD
Fifth Defendant

FENNELL TYRES INTERNATIONAL PTY LTD
Sixth Defendant

FULTON HOGAN INDUSTRIES PTY LTD
Seventh Defendant

JAKK CONTRACTING PTY LTD AS TRUSTEE FOR THE JAKK PLANT HIRE AND UNIT TRUST
Eighth Defendant

KAIS CONTRACTORS PTY LTD
Ninth Defendant

KEE HIRE PTY LTD
Tenth Defendant

LEDA SECURITY PRODUCTS PTY LTD
Eleventh Defendant

TRANSIT PLANT PTY LTD TRADING AS ZENITH LOW LOADERS
Twelfth Defendant

Catchwords:

Practice and procedure - Corporations - Insolvency - 'Mother proceeding' - Proceedings by liquidators for recovery of unfair preferences against multiple defendants - Appropriate case management directions

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Case management directions made to facilitate early mediation

Category: B

Representation:

Counsel:

First Plaintiffs	:	P Edgar
Second Plaintiff	:	P Edgar
First Defendant	:	M Holler
Second Defendant	:	No appearance
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance
Fifth Defendant	:	V Ghosh
Sixth Defendant	:	S Neagu
Seventh Defendant	:	T Langdon
Eighth Defendant	:	No appearance
Ninth Defendant	:	D J Pratt
Tenth Defendant	:	N Malone
Eleventh Defendant	:	M Stacey
Twelfth Defendant	:	No appearance

Solicitors:

First Plaintiffs	:	Lavan
Second Plaintiff	:	Lavan
First Defendant	:	Slee Anderson & Pidgeon
Second Defendant	:	Aubrey Brown Lawyers
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance
Fifth Defendant	:	Corrs Chambers Westgarth
Sixth Defendant	:	Steenhof Brothers Barristers & Solicitors
Seventh Defendant	:	HWL Ebsworth Lawyers (Perth)
Eighth Defendant	:	No appearance
Ninth Defendant	:	Avon Legal
Tenth Defendant	:	Pragma Lawyers
Eleventh Defendant	:	Doyles Construction Lawyers
Twelfth Defendant	:	Fortuna Legal

Case(s) referred to in decision(s):

Dean-Willcocks v Air Transit International Pty Ltd [2002] NSWSC 525; (2002) 55 NSWLR 64
In the matter of RCG CBD Pty Ltd (In liq) [2016] NSWSC 1489
Martin Bruce Jones as Liquidator of Forge Group Ltd (Receivers and Managers Appointed) (In liq) v Sun Engineering (Qld) Pty Ltd [2017] WASC 195

ACTING MASTER STRK:

(This decision was delivered extemporaneously on 25 March 2021 and has been edited from the transcript.)

This proceeding was commenced by originating process on 3 March 2021. The first plaintiffs are the joint and several liquidators of the second plaintiff, Brierty Limited (in liquidation). In these reasons, I refer to the first plaintiffs as the liquidators and to the second plaintiff as the company.
By the proceeding, relief is pursued under s 588FA, s 588FC, s 588FE and s 588FF of the Corporations Act 2001 (Cth) against the defendants. In summary, the liquidators seek to void payments made by the company to the defendants as insolvent transactions, alleging that each impugned transaction provided an unfair preference, priority or advantage over other creditors.
The proceeding was commenced as what was described by the liquidators' representatives as a 'mother proceeding'. There are 12 defendants named in the proceeding. The claims against each defendant give rise to at least one common question, namely the insolvency of the company at the time of the impugned transactions. As the claims are not in respect of or arising out of the same transaction or transactions, the leave of the court was required to join multiple parties to the one proceeding. Leave was obtained by an order of the court made on 4 March 2021.
The question before me now is how the proceeding should progress, particularly, what are the appropriate case management directions. There is no consensus as to how the proceeding should be case managed. I approach the question cognisant that when orders are made joining multiple defendants in the one action, the court recognises that there is a risk of disadvantage to a single or more than one defendant in the joinder, but that such disadvantage should be managed by case management.[1]
[1] Dean-Willcocks v Air Transit International Pty Ltd [2002] NSWSC 525; (2002) 55 NSWLR 64 [34]; In the matter of RCG CBD Pty Ltd (In liq) [2016] NSWSC 1489 [8]; Martin Bruce Jones as Liquidator of Forge Group Ltd (Receivers and Managers Appointed) (In liq) v Sun Engineering (Qld) Pty Ltd [2017] WASC 195 [101] – [102].
The liquidators seek that case management directions be made for pleadings. By a minute of proposed orders filed on 24 March 2021, the liquidators promote a timetable for all parties to attend to the filing of pleadings and particulars. The minute contemplates that pleadings be attended to and completed by 1 June 2021.
The fifth defendant proposes alternative case management directions and seeks two orders. First, that the liquidators file any report as to the solvency of the company upon which the liquidators intend to rely in the proceeding by 18 May 2021. Secondly, that following the filing of the expert report by the liquidators in accordance with the first order, the liquidators and each of the defendants attend separate mediations at dates and times to be ordered by the court from 15 June 2021.
A number of the defendants support the making of case management directions in the form proposed by the liquidators.
The defendants that consent, alternatively do not oppose the liquidator's proposed directions are the second, third, sixth, eighth and ninth defendants.
The defendants that consent to the proceeding being programmed by way of pleadings, but on a timetable that differs to that promoted by the liquidators are the first, fourth and 11th defendants.
The defendants that oppose the liquidators' proposed directions and support the making of case management directions in the form proposed by the fifth defendant are the fifth, seventh, 10^th and 12^th defendants.
Prior to hearing from the defendants, I inquired as a preliminary matter as to the defendants' readiness to deal with this question, noting the recent lodgment of some notices appearance and the volume of affidavit material filed by the liquidators. No defendant took up the suggestion that they might be afforded additional time to consider their respective positions.
I now turn to broadly outline the two competing positions. The submissions advanced by counsel for the liquidators in support of directions being made in terms of the liquidators' minute can be summarised as follows.
First, on the insolvency case, the liquidators have already filed in this proceeding a substantial amount of evidence to ground the asserted position that the company was insolvent when the impugned transactions took place. Secondly, in the statement of claim, the liquidators will plead all material facts that ground the allegation of insolvency. It was submitted that in such circumstances it is premature for the liquidators to be ordered to put on expert evidence as to insolvency.
Further, the court was informed that the liquidators resist mediation immediately following the provision of their statement of claim. The submission was made that the best prospect for success at mediation is for each of the defendants to proceed to plead and particularise their respective defences. The liquidators submitted that this ought be done given the evidentiary onus that will shift to the defendants to answer the liquidators' claim.
Counsel for the fifth defendant took the lead in articulating the position of those defendants who opposed the liquidators' preferred directions. In summary, it was submitted that it was appropriate for the liquidators to 'nail their colours to the mast' as to the date of insolvency at this early stage by filing any report as to the solvency of the company upon which the liquidators intend to rely in the proceeding. It was submitted that this was appropriate because the question of when the company became insolvent is a threshold question for all defendants.
Counsel for the fifth defendant noted that the impugned transactions occurred within a date range, and that date the company became insolvent is determinative of those transactions that may be impugned and those not.
The fifth defendant and those defendants that oppose the liquidators' preferred directions are concerned to ensure that the action proceed without risk of the liquidators later asserting another date as being the date of insolvency. It was submitted that certainty is required as to the date of insolvency, as that the liquidators now assert a particular date as being the true position, which differs to representations previously made to the market concerning solvency. It was further submitted that the risk of a change of position might be inferred by the evidence of Matthew David Woods, the first named first plaintiff. At par 53 of Mr Woods' first affidavit filed on 3 March 2021, Mr Woods states:
The liquidators will adduce further evidence in due course in these proceedings in relation to the company's insolvency including, if required, any necessary expert evidence as to the company's insolvency.
As to the second proposed order (that mediation immediately follow the production of any expert report) it was submitted that this is a proportionate and appropriate order, allowing settlement to be explored before the costs of pleadings, particularly the pleading of defences, are incurred. In this regard, the modest quantum of claims made by the liquidators against some of the defendants was noted.

Disposition

I have weighed in the balance the submissions made on behalf of all parties and I have had careful regard to those parts of the affidavits filed to date in this proceeding that were expressly referred to by counsel in the course of oral submissions. I have had regard to the use and objects of case management as described in the Rules of the Supreme Court 1971 (WA) (RSC) O 1 r 4B. In so doing, I have had regard to the value of claims made as against each defendant, which range in value from approximately $1.25 million at the higher end to a more modest claim of about $133,000.
It is appropriate that this proceeding be initially case managed so that it is ready for mediation. I come to this conclusion aware that this one proceeding will spawn 12 mediations and a considerable use of registrar time and administrative resources. I acknowledge that preparation for and attendance at 12 mediations by the liquidators will likely require at least 12 days to be set aside, and that costs in preparation and attendance will be incurred. Indeed, engaged participation in mediation is a cost that will be borne by all parties. Careful case management is therefore appropriate to ensure that each claim against a defendant is ripe for mediation.
There is a balance to be undertaken to ensure that a claim is not set down for mediation too early, where the parties' respective positions are not sufficiently articulated and understood; or set down too late where, at worst, unnecessary costs have been incurred which costs may reduce the prospect of a successfully mediated outcome.
Having weighed in the balance of the respective submissions as to what course will strike the most appropriate balance consistent with the need to provide a just outcome, I intend to make case management directions which will facilitate the following course.
First, the liquidators should file and serve a statement of claim. I understand from the minute filed on behalf of the liquidators that the liquidators are in a position to do so by 9 April 2021.
Secondly, each of the 12 separate claims will be listed for mediation following service of the statement of claim. Subject to hearing from the parties, mediation orders should substantially reflect the standard orders set out in Consolidated Practice Direction 4.1.2.2, pars 20, 22, 23, 24, 24(A) and 25. As there will be 12 mediations, the usual order at PD 4.1.2.2 par 21 will require substantive adjustment.
It is contemplated that one registrar will conduct all mediations. I accept that attendance at mediation without the prior exchange of substantive position papers and materials is less likely to achieve settlement of claims at mediation. The mediation registrar will be charged with making tailored directions for each mediation, which should include directions for the production by each defendant of a confidential position paper for mediation which is to, among other things, clearly articulate all defences intended to be pleaded and the evidentiary foundation for the same. This course has limited risk of duplication of work by the defendants, as the analysis required to prepare a mediation position paper is the analysis required to plead a defence.
Further, the mediation registrar may require the representatives of the participants in any or every mediation to attend a pre‑mediation conference to ensure that there has been an appropriate exchange of material to properly facilitate the taking of instructions, and the orderly and efficient conduct of the mediation conferences. Pre-mediation conferences may be attended in person, alternatively via an electronic platform such as Microsoft Teams, to ensure that the costs incurred in preparation for mediation are contained.
I suggest that appropriate period in which mediations might be listed is after the filing of the statement of claim and prior to the court recess in July. This will, of course, require some flexibility and good fortune in the alignment of the available dates of those who will be required to attend mediation.
In all of the circumstances, the making of such directions appear to be the most likely to achieve successful mediated outcomes at an early stage of the proceeding.
For completeness, I note that I have turned my mind to whether it would be appropriate to make bespoke case management directions, taking the defendants on one of two case management paths. That is, making the case management directions promoted on behalf of the liquidators for those defendants that supported (or did not oppose) the same; and the making case management directions promoted by the fifth defendant for those that supported the making of the same. From a cost and efficiency perspective, this does not appear to be an appropriate course. Costs can become an impediment to settlement and it is not helpful to have liquidators at this early stage incurring the costs of prosecuting two divergent paths of case management within the one 'mother proceeding'. To do so at this early stage would not promote the objects expressed in the RSC O 1 r 4B.
It is also premature, in light of the affidavit evidence filed on behalf of the liquidators to date, to order the liquidators to file any expert report upon which they may seek to rely in the proceeding. Once mediations have occurred, the parties may revisit the questions of expert evidence and what are appropriate case management directions, hopefully among a smaller cohort of defendants and with a better understanding of all parties' respective positions.
I requested that the solicitors for the liquidators prepare a draft order that reflects these reasons. Subject to hearing from the parties, I also propose to order that the costs for today and of 23 March 2021 be in the cause.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AS
Associate to Principal Registrar Strk
8 APRIL 2021