Owners Corporation Strata Plan 76011 v JML Group Pty Ltd
[2015] NSWCATCD 30
•03 March 2015
Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Owners Corporation Strata Plan 76011 v JML Group Pty Ltd and Anor [2015] NSWCATCD 30 Hearing dates: 6 & 7 February 2014, 12 June 2014, 30 June 2014 & 30 January 2015 Decision date: 03 March 2015 Jurisdiction: Consumer and Commercial Division Before: J A Ringrose, General Member Decision: The Tribunal is satisfied that both the first and second respondents are now in liquidation and proceedings cannot be continued except with the leave of the Court.
Unless the applicant obtains leave of the Supreme Court to continue the proceedings on or before 20 April 2015 the proceedings are dismissed.Catchwords: Effect of winding up of proceedings in NCAT – for the purposes of ss. 440D and 500(2) of the Corporations Act 2001 - Is NCAT a court - can proceedings be continued without leave of the Court. Legislation Cited: Corporations Act 2001 Cases Cited: Foxcroft v The Ink Group Pty Ltd (1994)15 ACSR 203 at 204 and 205
Aragen v Leighton (2013) NSWSC 1099
Sovereign M F Ltd v Compliance and Risk Services Pty Ltd (2013) VSC 213
MG Corrosion Consultant Pty Ltd v Gilmore (2012) FCA 383
Doran Constructions Pty Ltd (in liquidation) v Beresfield Aluminium Pty Ltd (2002) NSWCA 95
Shermin v One.tel Ltd (2001) VCAT 1896
Sovereign M F Ltd v Compliance and Risk Services Pty Ltd Anor (2013) VSC 213Category: Principal judgment Parties: Owners Corporation Strata Plan 76011 (applicant)
Bellford Group Holdings Pty Ltd formally known as JML Group Pty Ltd (first respondent)
Wickham Project Pty Ltd (second respondent)Representation: Mr Butler – solicitor, appeared for the applicant on the interlocutory matter.
There was no appearance by or on behalf of the first respondent.
Mr Morrissey - solicitor appeared for the second respondent on the interlocutory matter
File Number(s): HB 10/57134 Publication restriction: Unrestricted
reasons for decision
BACKGROUND
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The applicant is the Owners Corporation in respect of property comprising some 34 Residential Units and two Commercial Units at 21-25 Beresford Street, Newcastle West.
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In February 2004 the first and second respondents entered into a project services and management deed in relation to the construction of units at 21-25 Beresford Street, Newcastle West. The second respondent was the owner and developer of the property and the first respondent was the builder.
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In 2010 an application was filed in relation to alleged defects in the common property of the strata complex. The matter was referred to a number of Directions Hearings and the parties were required to submit documentary evidence upon which they wished to rely. The parties were thereafter referred to a conclave to enable experts to define issues which remained in dispute. Unfortunately, out of approximately 360 defect allegations, the experts were only able to reach agreement on a very limited number of them.
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The matter was listed before the Tribunal initially on 6 & 7 February 2014 and owing to the extent of the dispute it was listed for a further period of three days on 12 June 2014, 30 June 2014 and 1 July 2014.
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At the Hearing on 12 June 2014 the expert providing reports for the applicant was cross-examined in relation to the balance of the defects set out in the applicant’s part of the scott schedule. On 30 June 2014 the first respondent failed to attend and it was noted that it had withdrawn instructions for representation from the solicitors and counsel who had previously attended on its behalf as a result of the service of a statutory demand for a significant amount of money. It is noted that up to that time the second respondent had not taken an active part in the hearing but was, through its solicitors, relying upon the evidence and submissions adduced on behalf of the first respondent.
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The expert engaged by the first respondent, Mr Lewer, did not attend for further cross-examination on 30 June 2014 and as a result the opinion of the respondent’s expert in relation to more than 200 defects was not tested in cross-examination.
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Following the conclusion of the Hearing on 30 June 2014 the Tribunal directed that the applicant file written submissions on or before 4 July 2014 and that the respondents provide submissions on or before 18 July 2014.
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On 9 July 2014 a liquidator was appointed for Belford Group Holdings Pty Ltd formally known as JMA Group Pty Ltd. That appointment took place before the first respondent was required to provided submissions.
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Submissions were received from the applicant on or about the time prescribed in the directions and on 31 July 2014 submissions were received from Nexus Lawyers under cover of a letter dated 28 July 2014, on behalf of Wickham Project Pty Ltd being the second respondent.
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It would appear that the second respondent’s solicitors were, at that time, unaware that the first respondent was in liquidation as the submissions noted:-
“the first respondent remains a registered company at the time of these submissions, albeit the first respondent changed the name of the company from JML Group Pty Ltd to Belford Group Holdings Pty Ltd on 30 June 2014.
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The second respondent’s submissions then went on to refer to a contractual indemnify in favour of the second respondents arising under clause 14 of a deed between the first and second respondents. The submissions further went on to address the question of the apportionment of liability and to criticise the expert relied upon by the applicant as well as the evidence provided by him.
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The solicitor for the second respondent reserved a right to be heard on costs at the conclusion of the hearing of the matter and sought an order that the first respondent be entirely liable to pay the second respondent amounts which may be recoverable under the indemnity.
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On 4 September 2014 a liquidator was appointed for the second respondent Wickham Projects Pty Ltd. The Tribunal was notified of that appointment by Nexus Lawyers under cover of a letter dated 29 September 2014. They advised that they would no longer be acting in the matter unless instructed to do so by the liquidators.
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On 17 October 2014 the Registrar wrote to the solicitors for the applicant pointing out that both respondents had gone into liquidation and that, as a consequence of the liquidation, the application could not proceed without the leave of the Supreme Court. On 27 October 2014 the solicitors for the applicant wrote to the Registrar submitting that the proceedings before the Tribunal were complete and that a determination of the issues would not constitute proceedings against the company for the purposes of the Corporations Act 2001. The solicitors sought leave to file further submissions in relation to the issues if necessary.
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The matter was then listed for hearing of the preliminary issue on 30 January 2015.
APPLICANT’S SUBMISSIONS
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In a letter dated 27 October 2014 Mr Butler, on behalf of the applicant referred to the provisions of ss. 440D, 471B and 500 of the Corporations Act 2000 and noted that during the administration of a company or after the passing of a resolution for voluntary winding up, proceedings could not be begun or proceeded with except with the administrator’s written consent or with leave of the Court. He submitted that the hearing of the proceedings before the Tribunal was complete, that final submissions were filed prior to the appointment of a liquidator to the second respondent and claimed that the only outstanding matter to finalise the proceedings in the circumstances was the determination of the issues which he submitted would not constitute proceedings against the company.
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Mr Butler acknowledged that the purpose of staying proceedings was to avoid detriment to potential creditors of the liquidated company due to the expense incurred in beginning or continuing with those proceedings. He conceded that funds that might otherwise be available to creditors would be exhausted in maintaining the proceedings.
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It was pointed out that the applicant had incurred significant legal and expert costs in the proceeding and that if the Tribunal dismissed the proceedings without determining the matter the applicant would suffer substantial prejudice and injustice. He also suggested that unless a determination was made (should it be made in the applicant’s favour) his client would otherwise be prevented from inclusion in the list of creditors. He accepted that any order made could not be enforced without a further step it the proceedings which would then require leave of the Court. He requested an opportunity to provide further submissions if necessary.
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On 27 January 2015 Mr Butler provided further submissions which set out the history of the matter and referred to earlier submissions filed 4 September 2014 where he had contended that the Tribunal was not a Court for the purposes of the Act having regard to the definition in s. 58AA(a) of the Act.
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He claimed that all available evidence had been presented to the Tribunal and that moving to determine the matter did not constitute “proceeding” against either of the liquidated companies for the purposes of the Corporations Act 2001. He suggested that a final determination would not incur an additional expense to the liquidated companies and there accordingly would be no detriment to the liquidators of either company.
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He added that in the absence of a final determination by the Tribunal the applicant would be unaware of its right of action against either respondent and its position as a potential creditor on the liquidated companies. He referred to the severe prejudice which would be suffered by the applicant.
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Mr Butler annexed a letter from PKI Lawlor, liquidator of the first respondent indicating that it did not object to having the matter determined and a letter from Mackay Goodwin, the liquidator of the second respondent indicating that he neither objected nor consented to the proceedings being determined.
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In supplementary submissions filed on 28 January 2015 Mr Butler referred to a decision of Justice Young in Foxcroft v The Ink Group Pty Ltd (1994)15 ACSR 203 at 204 and 205 where His Honour commented on the effect of Pt. 5.3A of the Corporations Act in which s. 440B was contained.
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Mr Butler also referred to a decision of McDougall J in Aragen v Leighton (2013) NSWSC 1099 and in particular to paragraph 61 of that judgement where he claimed that His Honour found that the provision must be interpreted in accordance with the objects of Pt. 5.3A and that making the determination at this stage of the proceedings would not involve any of the parties incurring significant additional cost or take the administrators attention from attending to their responsibilities regarding liquidation of the respondents.
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Mr Butler referred finally to a decision of Associate Justice Lansdowne of the Victorian Supreme Court in Sovereign M F Ltd v Compliance and Risk Services Pty Ltd (2013) VSC 213 and he pointed out that in that case Her Honour had found that s. 440D of the Corporations Act did not prevent the delivery of a judgement in respect of an application already heard as it was not a step taken by the Court or by a party.
RESPONDENT’S SUBMISSIONS
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No submissions were received by or on behalf of the first respondent although it is noted that the submissions on behalf of the applicant included a letter from Mackay Goodwin being the liquidators of the first respondent which included the following relevant matters:-
“I advise at this stage I neither object nor consent to the proceeding as I do not have all information on hand in regards to the proceedings.
I note that in my previous correspondence to your office dated 17 October 2014 I requested your office to complete a proof of debt form.
I now enclose a formal proof of debt form in accordance with regulation 5.6.47 of the Corporation Act 2001. Would you please complete the attached, enclosing all material supporting your claim subject to proceedings so that my office can properly consider your request.”
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A further letter dated 20 January 2015 addressed to the applicant’s solicitors noted the following matters:-
“In respect to the completed formal proof of debt form for the sum of $541,484.07 dated 13 January 2015, would you please provide the following documentation so that my office can properly consider your client’s claim:
(1) NCAT originating claim and supporting documentation evidencing the sum payable by the company is $374,305.07.
(2) supporting documentation for the costs in the sum of $96,997.00.
(3) schedule of interest accrued totalling $70,182.00.
In regard to your correspondence dated 19 January 2015, I advise that at this stage there is no insolvent trading claim or recovery actions against the former directors of the company.”
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In relation to the second respondent Wickham Project Pty Ltd it is noted that the applicants also annexed a letter dated 27 January 2015 from Nexus Lawyers which pointed out that they had received letters dated 4 September 2014 and 27 October 2014 but that they had not been provided with any further submissions to the Tribunal on behalf of the applicant. The correspondence was required at the request of the liquidator who had noted a familiarity of Nexus Lawyers with the proceedings. The following further matters of concern were noted in the letter:-
“the interpretation as to whether releasing the determination will constitute proceedings with the matter under the Act is questionable. Whilst our view that moving forward to determination would have been proceeding within the meaning of the Act we agree there is some basis to the interpretation raised in your correspondence.
the liquidator does have concerns in relation to the matter being only partly heard before JML Project Pty Ltd went into liquidation.
It remains a matter for the Tribunal to determine if it has jurisdiction.
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Mr Morrissey of Nexus Lawyers then noted that the liquidator neither consented to nor opposed the position put forward on behalf of the Owners Corporation and noted that the liquidator would not be appearing at the Hearing on 30 January 2015.
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During the course of the four day Hearing the legal representatives of the second respondent effectively played no part in the Hearing but rather observed the proceedings.
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When it became apparent that JML Group Pty Ltd was playing no part in the Hearing on the final day and further that they had not arranged for the experts to attend to be cross-examined, Mr Morrissey, in response to the Tribunal directions filed some submissions under a cover of a letter dated 28 July 2014. Those submissions substantially addressed the issue of contractual indemnity as between the first and second respondents and he then made some general submissions concerning the expertise and experience of Mr Ledgerwood who was the expert called on behalf of the applicant. He referred to the cross-examination of Mr Lewer, the expert called by the first respondent, in relation to items to 1 to 104 of the Scott Schedule and submitted that Mr Lewer’s evidence should be accepted and preferred in relation to all preliminary items. In relation to items 105 to 361 where only Mr Ledgerwood was cross-examined he submitted that the expert evidence of Mr Ledgerwood should be given no weight and rejected where items which had been dealt with were not duplicated.
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Mr Morrissey concluded by referring again to the contractual indemnity and sought to be heard on a question of costs at the conclusion of the Hearing and reserved his position in this regard on behalf of the second respondent.
DECISION
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In order to address the question as to whether the proceedings are stayed without leave of the Court, it is necessary to have regard to the provisions of ss. 400D, 471D and 500 of the Corporations Act 2001.
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S 440D provides:-
Stay of proceedings
(1) during the administration of a company, proceedings in a court against the company or in relation to any of its property cannot be begun or proceeded with except;
(a) with the administrators written consent; or
(b) with leave of the Court and in accordance with such terms as the Court imposes.
(2) sub-section (1) does not apply to;
(a) a criminal proceeding; or
(b) a prescribed proceeding
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S 471B of the Act provides that while a company is being wound up in insolvency by the Court or by a provisional liquidator a person cannot begin or proceed with a proceeding in a court against the company or in relation to the property of the company or any enforcement process in relation to such property except with the leave of the Court.
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S 500 prevents attachment, sequestration, distress or execution against the property of a company after the passing of a resolution for voluntary winding up. It provides that no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court on such terms of the Court imposes.
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In Foxcroft v The Ink Group Pty Ltd (1994) 15 ACSR 203 at 204 Young J found in relation to Pt. 5.3A of the Corporation’s Act:-
“the provisions of Pt. 5.3A…provide that there shall be a complete freeze of proceedings against the company during the administration so that the administrator can have time to assess the situation…to allow one creditor to proceed would not only take the administrators attention from what he needs to do under the provision in a relatively short period of time, but it would also involve costs in running the legal action on behalf of the administrator as well as perhaps giving the claimant some advantage over other creditors or potential creditors.”
Mr Butler, on behalf of the applicant pointed out that in Arogen v Leighton (2013) NSWSC 1099 McDougall J accepted that s. 440D must be interpreted in accordance with the objects of Pt. 5.3A. His Honour also adopted a definition of the term proceeding applied by Barker J in MG Corrosion Consultant Pty Ltd v Gilmore (2012) FCA 383 in the following terms:-
“the term “proceeding” does not appear to be defined relevantly in the Corporations Act but it is defined in s. 4 of the Federal Court Act 1976 (Cth) to mean a “proceeding in a court whether between parties or not and includes an incidental proceeding in the course of, or in connection with proceeding and also an appeal”. In my view in the present circumstances the Federal Court Act definition of “proceeding” should be adopted for the purposes of the Corporation Act not on the basis that the Federal Court Act applies as a matter of incorporation but rather on the basis that the broad definition given in the Federal Court Act accords with the ordinary meaning of the word and there is nothing in the context of the Corporations Act to suggest it has a different or narrow meaning of the word for the purposes of s. 440D.”
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In Doran Constructions Pty Ltd (in liquidation) v Beresfield Aluminium Pty Ltd (2002) NSWCA 95 the Court was required to consider whether the giving of notice of an award by the arbitrator was a step in proceedings within the meaning of s. 500(2) of the Corporations Act.
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Justice Santow observed:-
7 “proceeding” is itself an expression, taking its meaning from its context. In the present context it is apt to include “a step in an action, court or matter”; see “McPherson, Law of Company Liquidation” (LBC 1999) by Andrew Keay at 246. While, conceptually, an arbitrator as agent for the parties may take a step in the action, would not be a step so characterised if it did not advance that action from the point of view of either of the parties. A mere anterior, preliminary step by the arbitrator, though prerequisite to a step by either party, does not meet that description”. His Honour observed that the notice by the arbitrator was to set a time running for any appeal against a determination but that it did not advance the action. He described it as being an anterior preliminary step, pre-requisite to either party seeking to challenge the arbitrators award but not itself advancing either parties case.
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In its initial submissions, the applicant suggested that the Tribunal may not be a court for the purposes of the Corporations Act 2001. S 58AA of the Act defines “court” to mean any court. “Court” means:-
the Federal Court
the Supreme Court of a State or Territory
the Family Court of Australia
a court to which s. 41 of the Family Law Act applied
The Victorian Civil and Administrative Tribunal was required to consider this issue in a matter of Shermin v One.tel Ltd (2001) VCAT 1896. The presiding member noted that for the purposes of s. 440D (1) he considered that the Tribunal was a court within the meaning of that section. He noted:-
“17 but the definition of a”court” in s. 58AA did not govern the meaning of “court” in s. 440D. The contrary intention appeared. In the Brian Watchford case Austin J set out why this was so:-
Where one reflects on legislative intention underlying s. 440D it is evident that the purpose of the section would be frustrated if the definition of the “court” in s. 58AA were applied because the general or moratorium on legal proceedings which is necessary to enable the administrator to discharge the statutory function imposed by pt. 5.3A would then largely evaporate. Having regard to the structure of pt. 5.3A and the evident purpose within the structure of s. 440D, it is proper for the Court to conclude, and I do conclude, that s. 440D in its context exhibits a legislative intention to exclude the definition of “court” in s. 58AA. I reach this conclusion on the wording of the Corporations Law taking into account s. 435A and the structure of pt. 5.3A and the place of s. 440D in that structure”. Upon further consideration the member found that s. 500(2) of the Corporations Act precluded Mr Shermin from asking the Tribunal to hear and determine proceedings unless he obtained leave of the Court to proceed with it. The Tribunal then struck out the proceedings but allowed Mr Shermin a right to reinstate it if he obtained leave of the Court.”
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The applicant has referred to a decision of Associate Justice Lansdowne of the Supreme Court of Victoria in Sovereign M F Ltd v Compliance and Risk Services Pty Ltd Anor (2013) VSC 213. In that case the plaintiff sought leave to file a substituted statement of claim containing allegations of breech of statutory duty against the defendants. The application had been heard fully and was listed for delivery of a judgement in conjunction with a directions hearing on 29 April 2013. The Court was advised on 26 April 2013 that the plaintiff had gone into administration on Friday 19 April and it was submitted that the judgement could not be handed down.
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Her Honour noted that on provisions of s. 440D in relation to a stay of proceedings and she observed that the section prevented a step in litigation concerning a company in administration at the instance of the company, if the litigations in relation to property of the company, or at the instance of the other party if the company was the defendant but it did not prevent the delivery of judgement in respect of an application already heard, which was a step taken by the Court, not by a party. I am satisfied that this decision can be distinguished for reasons which are to be outlined later in these reasons.
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Judge P Taylor SC was required to consider whether the delivery of a reserved decision on a notice of motion would be stayed by the operation of s. 440D in the absence of consent of an administrator or leave of the Supreme Court. The application was for entry of summary judgement in accordance with rule 13.1 of the Uniform Civil Procedure Rules 2005. His Honour was satisfied on the evidence there was no reason provided as to why judgement should not be granted in favour of the plaintiff on its claim. He was strengthened in his view by reference to provisions of rule 36.3 of the Uniform Civil Procedure Rules 2005 which enabled a judicial officer to reserve his or her judgement or decision but provided in sub-rule 3:-
“(3) a judgement or decision given under sub-rule (1)(a) or read under sub-rule (2)(c) takes effect on the day on which it is so given or read and is valid as if given by the judicial officer at the Hearing of the proceedings to which the judgement or decision relates.”
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His Honour noted that the effect of sub-rule (3) ensured that a reserved decision was valid as if it had been given on the day of the Hearing when no administrator had been appointed and s. 440D was inapplicable. He noted that this supported his view that delivery of a reserved judgement alone was “not proceeding with the proceedings.” It is appropriate to note that unlike the Uniform Civil Procedure Rules s. 61 of the Civil and Administrative Tribunal Act 2013 provides that a general decision or a decision determining an external or internal appeal takes effect on the date on which it is given or such later date as may be specified in the decision.
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The proceedings for principal relief in this application are not interlocutory proceedings nor are they proceedings where a summary judgement was sought on the basis that there was no valid defence or cross-claim. These proceedings were commenced with the applicant and first respondent represented by solicitor and counsel and the second respondent at all times represented by a solicitor although the second respondent was prepared to adopt the evidence and submissions provided by or on behalf of the first respondent as they shared a common interest. The proceedings were fully defended until such time as the first respondent withdrew the instructions of its solicitor and counsel and declined to arrange for the attendance of its expert for cross-examination on more than 230 items remaining in the scott schedule.
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The first respondent went into liquidation before the time had expired for the provision of submissions in the matter. The second respondent seeks to rely on written submissions which were filed after the first respondent went into liquidation and which addressed its liability with reference to allegations of an apportionment between the first and second respondents based upon a deed of indemnity. Although part of the submissions provided by the second respondent refer to the applicants expert witness a substantial part of those submissions address a question of a apportionment based on a deed of indemnity. It is clearly arguable that, to this extent, the provisions of the Corporations Act would preclude the second respondent from relying on those parts of the submissions which refer to an apportionment of the first respondent after 9 July 2014 when the first respondent went into liquidation.
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The second respondent has sought leave to address the Tribunal on a question of costs in relation to the matter generally and again this right is affected by the appointment of a liquidator for the first respondent and more particularly for the second respondent.
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In a letter dated 27 January 2015 addressed to the solicitors for the applicant, Mr Morrissey on behalf of the second respondent, noted that the liquidator had concerns in relation to the matter being only part heard before JML Project Pty Ltd went into liquidation.
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It can properly be said that by reason of the liquidation of the first respondent the dispute between the parties was not finally dealt with on its merits but rather the applicant, through no fault of its own, seeks a final determination of the Tribunal based upon the limited evidence which was available up until the time when the two respondents went into liquidation.
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It is likely that the first respondent, through liquidation, has been deprived of an opportunity to argue its final case in submissions. It is equally appropriate to note that the second respondent has, by reason of the liquidation of the first respondent been prevented from arguing matters in support of their claim which could be construed as claims against the first respondent.
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In Foxcroft v The Ink Group Pty Ltd (supre) Justice Young referred not only to a freeze preventing one creditor from taking the administrators attention from what he needs to do in a relatively short period of time but he referred also to costs of running a legal action on behalf of the administrator as well as perhaps giving the claimant some advantage over the other creditors or potential creditors (by reason of having obtained a judgement). In Shermin vOne.tel Ltd (supra) VCAT Member Vassie noted:-
“25. /the rationale of s. 500(2) is unsecured creditors of an insolvent company that has been wound up once the creditors have resolved to wind it up, should be treated equally. They should have to lodge proofs of debt and abide by a rateable distribution of assets of the company. The power of determining whether an alleged debt should be admitted to proof is (subject to the right of appeal) in the hands of the liquidator. An unsecured creditor who had commenced legal proceedings before the liquidation began is not permitted to take the power of admitting the proof out of the hands of the liquidator by pursuing the legal proceedings. The creditor cannot do that unless the Court grants leave. Otherwise a creditor who had his claim decided and evaluated by a court at the conclusion of legal proceedings might gain an advantage over other unsecured creditors. An interpretation of s. 500(2) that precluded a creditor who had begun legal proceedings in one of the ordinary courts from pursuing the proceedings but permitted the creditor who had begun the Tribunal for monitory claims to continue with the proceedings would defeat the rationale. This is another compelling reason why in my claim proceedings in the civil claims system tribunal are claimed within the meaning of s. 500(2).”
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It is noted that the applicant has now successfully lodged a proof of debt with the liquidators for each of the respondents. At the time when the first respondent went into liquidation it had not provided the submissions to which it was entitled to prepare before the case could be determined. The second respondent has been deprived of an opportunity to argue, in relation to the question of apportionment against the interests of the first respondent. I am not satisfied that the proceedings have been fully concluded apart from the handing down of a decision. For these reasons this matter can be distinguished from the decision of the Victorian Supreme Court in Sovereign MF Pty Ltd (supra) and the decision of the District Court in Unilever Australia Ltd (supra) and I am satisfied that a stay should operate unless or until leave of the Supreme Court or another Court referred to in the Act is obtained.
It is therefore appropriate to dismiss the proceedings pursuant to s. 55 of the Act noting that sub-section (2) allows for a reinstatement of proceedings that had been dismissed under sub-section (1).
J A Ringrose
General Member
Civil and Administrative Tribunal of New South Wales
3 March 2015
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
Decision last updated: 12 May 2015
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