Murphy v Mackay Labour Hire Pty Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:

Murphy v Mackay Labour Hire Pty Ltd [2018] QCA 90

PARTIES:

GEOFFREY JOHN MURPHY
(appellant)
v
MACKAY LABOUR HIRE PTY LTD
ACN 130 813 295
(respondent)

FILE NO/S:

Appeal No 5383 of 2017
DC No 84 of 2013

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:


District Court at Mackay – [2013] QDC 84 (Clare SC DCJ)

DELIVERED ON:

18 May 2018

DELIVERED AT:

Brisbane

HEARING DATE:

13 October 2017

JUDGES:

Fraser and Philippides JJA and Boddice J

ORDER:

The appeal be dismissed with costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – PARTIES AND NON-PARTIES – where a proprietary limited company was a defendant in proceedings for breach of contract – where the proceedings did not proceed to judgment because the defendant company was placed into liquidation after the hearing of the evidence in the trial – where a non-party costs order was made against the company’s sole director and secretary – whether the trial judge erred in finding insolvency of the defendant company – whether the trial judge erred in finding there was a positive obligation on the defendant company’s sole director and secretary to warn of the defendant company’s insolvency – whether the trial judge erred in finding impropriety in those circumstances – whether the trial judge erred in the application of Knight v FP Special Assets Ltd (1992) 174 CLR 178 in failing to consider the issues of the non-party’s involvement or interest in the litigation

Civil Proceedings Act 2011 (Qld), s 15
Corporations Act 2001 (Cth), s 1335
Queensland Building and Construction Commission Act 1991 (Qld), s 56AC
Uniform Civil Procedure Rules 1999 (Qld), r 670, r 671, r 681(1)

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; [1981] HCA 39, cited
Bischof v Adams [1992] 2 VR 198; [1992] VicRp 61, cited
FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340, cited
International Cat Manufacturing (in liq) v Rodrick (2013) 97 ACSR 200; [2013] QCA 372, cited
Keith Smith East West Transport Pty Ltd (in liq) v Australian Taxation Office (2002) 42 ACSR 501; [2002] NSWCA 264, cited
Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28, applied
Owners of Strata Plan No 23007 v Cross (2006) 153 FCR 398; [2006] FCA 900, cited
Plante v James[2011] QCA 109, applied
R v Noonan (2002) 127 A Crim R 599; [2002] NSWCCA 46, cited
TQM Design and Construct Pty Limited v Golden Plantation Pty Limited [2011] NSWSC 500, cited
Walsh v Natra Pty Ltd (2000) 1 VR 523; [2000] VSCA 60, cited

COUNSEL:

J W Peden for the appellant
M T de Waard for the respondent

SOLICITORS:

Mahoneys for the appellant
Macrossan & Amiet Solicitors for the respondent

  1. FRASER JA:  For the reasons given by Philippides JA (in [2]-[47])…

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Details
Case
[2018] QCA 90
Decision Date

CaseChat Overview and Summary

In the case of Murphy v Mackay Labour Hire Pty Ltd, Mr Murphy appeals a non-party costs order made against him in relation to proceedings involving a company, Collhart Investments Pty Ltd, of which he was the sole director. The proceedings were for breach of contract and did not proceed to judgment because the company was placed into liquidation after the trial evidence was concluded. The respondent, Mackay Labour Hire Pty Ltd, sought costs from Mr Murphy, who was not a party to the action but was the sole director of the defendant company. The primary judge found that Mr Murphy had not contested the inference that his company conducted the litigation while insolvent and ordered that Mr Murphy pay the respondent’s costs incurred from 17 March 2016.

The legal issues before the court were whether the primary judge erred in finding that the defendant company was insolvent, whether there was a positive obligation on Mr Murphy to warn of the defendant company’s insolvency, whether there was impropriety in those circumstances, and whether the primary judge erred in applying Knight v FP Special Assets Ltd (1992) 174 CLR 178 by failing to consider Mr Murphy’s involvement or interest in the litigation. The court examined the evidence provided by the respondent, including Mr Murphy’s actions immediately after the close of evidence, and determined that the primary judge’s findings were supported by the evidence. The court also found that the primary judge correctly applied the principles set out in Knight v FP Special Assets Ltd.

The court held that the primary judge did not err in finding that the defendant company was insolvent and that there was a positive obligation on Mr Murphy to warn of the defendant company’s insolvency. The court found that Mr Murphy’s actions demonstrated a clear impropriety in the circumstances. The court also found that the primary judge correctly applied the principles from Knight v FP Special Assets Ltd in making the non-party costs order against Mr Murphy. The appeal was dismissed with costs.

Orders

Orders of the court

The appeal be dismissed with costs.

Background

Background to the litigation

The appellant, Mr Murphy, appeals against a non-party costs order made against him in relation to proceedings involving a company of which the appellant was the sole director. The proceedings did not proceed to judgment because, after the hearing of evidence in the trial, the company was placed into liquidation.Background The appellant was, at all material times, the sole director of Collhart Investments Pty Ltd, formerly known as JM Kelly (Project Builders) Pty Ltd, a construction company. That company was the defendant in a District Court proceeding brought by the respondent, Mackay Labour Hire Pty Ltd, as plaintiff, for $288,242.54 for labour hire provided under various contracts. The respondent’s proceeding was commenced in August 2013. In July 2015, the defendant counterclaimed for recovery, by way of restitution, of $131,178.05 as money paid under a mistake of law. The trial commenced on 13 June 2016 with evidence being finalised on the afternoon of 15 June 2016 and the matter being adjourned by the primary judge (Clare DCJ) for submissions. On 15 July 2016, the respondent brought an application seeking costs against the appellant returnable on 9 August 2016. The application was filed with a supporting affidavit of Mr Naylor. It deposed to liquidators being appointed to the defendant on 20 June 2016 (five days after the close of evidence) and that that matter had only come to the respondent’s (Mackay) solicitors attention the following day as a result of a report in a Rockhampton newspaper. When the matter came before the primary judge on 9 August 2016, the liquidator consented to an order dismissing the defendant’s counterclaim against the respondent, with costs in favour of the respondent. Submissions were also made, orally and in writing, concerning the non-party costs application, with her Honour reserving her decision on that application. It seems that the file was marked as settled but subsequently, in April 2017, it became apparent that the non-party costs application remained on foot. An inquiry was made as to whether the respondent wished to offer any evidence on the question of the defendant’s insolvency and the matter was adjourned to 2 May 2017. An affidavit deposed to by the appellant on 28 April 2017 was filed. Thereafter, on 2 May 2017, her Honour determined the application for non-party costs and ordered[1] that the appellant pay the respondent’s costs of the proceedings (including trial and reserve costs and costs of the application) incurred from 17 March 2016. The appellant appeals against that costs order.[1]Mackay Labour Hire Pty Ltd v Collhart Investments Pty Ltd [2013] QDC 84 (Reasons).The decision of the primary judge The following factual background, derived from Mr Naylor’s supporting affidavit, was referred to by the primary judge:[2][2]Reasons at [4].·Mr Murphy, in addition to being the sole director and secretary of the defendant and the nominee for the defendant’s building licence, was also the sole director and secretary of Murphy International Pty Ltd and JM Kelly Group of Companies Pty Ltd.·Mr Murphy’s building licence was used for JM Kelly Group of Companies Pty Ltd as well as related companies.·On 9 June 2016, all three companies changed their names by resolution. (The new names did not reference Kelly or Murphy or construction.)·On 10 June 2016, the Friday before the commencement of the trial on the following Monday, the name changes for two of the companies, Murphy International Pty Ltd and JM Kelly Group of Companies Pty Ltd, were registered with ASIC but not for the defendant.·Also on 10 June 2016, Mr Murphy executed a series of detailed deeds transferring the productive resources and contracts of the defendant to a related company. There were separate deeds for the sale of assets and the transfer of employees and construction contracts to JM Kelly Builders Pty Ltd.·On 20 June 2016, Mr Murphy made a resolution to wind up the defendant.·The liquidator’s report (exhibited to the affidavit of Mr Naylor) indicated that the defendant had ceased business on 17 June 2016 (two days after the evidence closed), which was also the day the defendant’s change of the name was lodged.[3]·Upon the liquidation of his companies, Mr Murphy was disqualified by law from further acting as nominee for any building company.[4] The Queensland Building and Construction Commission (the QBCC) was notified of a change of nominee for JM Kelly Builders Pty Ltd on the day that the defendant’s name change was registered.·The firm of solicitors used to register the name change for all three companies and prepare the deeds was different to the solicitors representing the defendant at trial.[3]Reasons at [9].[4]Section 56AC of the Queensland Building and Construction Commission Act 1991.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Thereafter, on 2 May 2017, her Honour determined the application for non-party costs and ordered[1] that the appellant pay the respondent’s costs of the proceedings (including trial and reserve costs and costs of the application) incurred from 17 March 2016. The appellant appeals against that costs order.[1]Mackay Labour Hire Pty Ltd v Collhart Investments Pty Ltd [2013] QDC 84 (Reasons).The decision of the primary judge The following factual background, derived from Mr Naylor’s supporting affidavit, was referred to by the primary judge:[2][2]Reasons at [4].·Mr Murphy, in addition to being the sole director and secretary of the defendant and the nominee for the defendant’s building licence, was also the sole director and secretary of Murphy International Pty Ltd and JM Kelly Group of Companies Pty Ltd.·Mr Murphy’s building licence was used for JM Kelly Group of Companies Pty Ltd as well as related companies.·On 9 June 2016, all three companies changed their names by resolution. (The new names did not reference Kelly or Murphy or construction.)·On 10 June 2016, the Friday before the commencement of the trial on the following Monday, the name changes for two of the companies, Murphy International Pty Ltd and JM Kelly Group of Companies Pty Ltd, were registered with ASIC but not for the defendant.·Also on 10 June 2016, Mr Murphy executed a series of detailed deeds transferring the productive resources and contracts of the defendant to a related company. There were separate deeds for the sale of assets and the transfer of employees and construction contracts to JM Kelly Builders Pty Ltd.·On 20 June 2016, Mr Murphy made a resolution to wind up the defendant.·The liquidator’s report (exhibited to the affidavit of Mr Naylor) indicated that the defendant had ceased business on 17 June 2016 (two days after the evidence closed), which was also the day the defendant’s change of the name was lodged.[3]·Upon the liquidation of his companies, Mr Murphy was disqualified by law from further acting as nominee for any building company.[4] The Queensland Building and Construction Commission (the QBCC) was notified of a change of nominee for JM Kelly Builders Pty Ltd on the day that the defendant’s name change was registered.·The firm of solicitors used to register the name change for all three companies and prepare the deeds was different to the solicitors representing the defendant at trial.[3]Reasons at [9].[4]Section 56AC of the Queensland Building and Construction Commission Act 1991. The primary judge summarised the background to the making of the application as follows:[5]“The trial of this matter was effectively brought to an end by the voluntary liquidation of the defendant company. The [respondent] applied to recover its costs from ... Mr Murphy [who] was not a party to the action, but … was the sole director of the defendant. He wound up the company almost immediately after the close of evidence. He admitted details of a serious insolvency. He did not answer an inference that his company conducted the litigation while insolvent. The presumption of continuance ought to apply. The interests of justice strongly favour a costs order.”[5]Reasons at [1].

Ratio Decidendi

Legal Principle Established

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