Re M & M Outdoor Centre P/L
[1996] QSC 202
•25 October 1996
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane App. No.7475 of 1996
Before the Hon. Mr Justice Mackenzie
[Re M & M Outdoor Centre P/L]
IN THE MATTER OF the Corporations Law
- and -
IN THE MATTER OF M & M OUTDOOR CENTRE
PTY LTD ACN 008 006 844 (in Liquidation)
JUDGMENT - MACKENZIE J.
Judgment Delivered 25 October 1996
CATCHWORDS: CORPORATIONS LAW - s.471B - whether an application for leave to proceed under s.471B Corporations Law is a "fresh proceeding" requiring leave under District Court Rule 377(2) - whether leave to proceed should be granted under s.471B.
DISTRICT COURT PRACTICE AND PROCEDURE - District Court Rule 377 - whether an application for leave to proceed under s.471B Corporations Law is a "fresh proceeding" requiring leave under District Court Rule 377(2).
Counsel: D. Andrews for the applicant.
M. Hinson for the respondent.
Solicitors: Phillips Fox for the applicant.
Barker Gosling for the respondent.
Hearing date: 18 September 1996.
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane App. No.7475 of 1996
Before the Hon. Mr Justice Mackenzie
[re: M & M Outdoor Centre P/L]
IN THE MATTER OF the Corporations Law
- and -
IN THE MATTER OF M & M OUTDOOR CENTRE
PTY LTD ACN 008 006 844 (in Liquidation)
JUDGMENT - MACKENZIE J.
Judgment Delivered 25 October 1996
This is an application by Grainco Limited for leave to proceed with a District Court action against M & M Outdoor Centre Pty Ltd. The subject matter of the action is a claim that grain covers fabricated by the latter were defective. The applicant had provided the materials for the covers to be made. The action had originally been commenced in the Federal Court. The claim is for the difference between the value of the grain covers at the time of delivery or as soon thereafter as the applicant was reasonably able to ascertain their quality, and the value which they would have had had they been fabricated in a proper and workmanlike manner. The quantum is calculated at $153,638-84. There is also a claim for $16,367 for labour costs incurred in removing and replacing the defective covers, inspection costs and costs incurred in effecting emergency repairs to replacement grain covers.
The defendant, shortly after service of the initiating proceedings in the Federal Court action, commenced proceedings in the District Court at Adelaide claiming $18,546 for goods supplied and work done in fabricating the covers. In March 1992, Spender J. ordered that the Federal Court proceedings be transferred to the District Court of Queensland at Brisbane upon an undertaking that the applicant pay $18,546 to the solicitors for the respondent, such moneys to be held by the solicitors for the respondent and deposited in an interest bearing account pending the determination of the proceedings by the District Court. The solicitors for the respondent were ordered to abide the order of the District Court at to the disposition of the money together with accretions. The sum was duly paid in accordance with the order and a counter-claim for that amount has been made by M & M in the District Court proceedings. The South Australian action has been discontinued. The liquidator has claimed title to the money in the account and maintained a denial of liability and quantum in respect of the applicant's claim. It is said that the only way in which the entitlements in relation to the moneys paid in can be determined is by the action proceeding.
The terms of Spender J.'s. order do not of themselves create an entitlement in the respondent to the money. It may be, but is yet to be established in legal proceedings, that a claim for that amount is valid. The order simply requires the money to be held by the solicitors, and deposited in an interest bearing account pending the determination of the District Court proceedings, the outcome of which the solicitors are to abide. The debt claimed by Grainco is at least substantially provable in the liquidation. The indications are that if a judgment were to be obtained by the applicant there would be no money to meet it. That would be the case whether individual judgments were entered on the claim and counterclaim, or whether the two sums were set off and one judgment for the balance entered. The latter would, in principle, seem in ordinary circumstances to be the appropriate form of order. If that were the case, the $18,546 paid into court would already be accounted for in the final judgment sum and the respondent would have no entitlement to the money paid into court. In terms of Spender J.'s order, it would be within the District Court's power to order that the money be paid out to Grainco. The case is somewhat out of the ordinary. The most likely outcome, in principle, if the matter were to go to trial, is that M & M would not receive the fund created pursuant to the order of Spender J., but would receive only a credit for whatever was ultimately found to be due to it (assuming that Grainco's action succeeded to an extent exceeding the claim by M & M). As previously observed, there is no present entitlement in M & M to the fund.
If, as has been submitted, the only way to resolve the matter, in the particular circumstances of the case, is for the action to proceed, then the giving of leave would be appropriate. However, one would hope that commonsense would prevail and a less expensive resolution would be achieved in accordance with commercial reality. Having determined that result in principle it is necessary to address an argument based on Rule 377 of the District Court Rules. It was submitted that as no proceeding had been taken for more than 3 years the making of the present application is a "fresh proceeding" and cannot be taken without the prior order of a District Court Judge. Alternatively, it was submitted that the making of the application is a "step in the cause" for which a month's notice of intention to proceed was necessary. So far as Rule 377(2) is concerned the first clause is satisfied. The question is whether an application for leave to proceed is a "fresh proceeding" which cannot be instituted without the order of a court or judge. I was not referred to and have not found any authority precisely on point. If the present application is "fresh proceeding" an application for leave to bring it would have been required. Then, leave having been obtained to bring the application, the application itself would have to have been brought. As it was, by definition, a "proceeding", if leave to proceed was given leave to take subsequent steps would not be necessary.
On the other hand if it is not a "fresh proceeding" it is correctly brought without leave. However as the last proceeding was taken more than 3 years ago and the application for leave under the Corporations Law is not, on this scenario, a "proceeding", leave to take the next step would be necessary.
In Kaats v. Caelers (1966) QdR. 482, 499, Stable J. adopted the concept of a "proceeding" being" some step taken towards the judgment or relief sought in the action" and that the word suggested something in the nature of a formal step, at least a step taken by the litigant in the prosecution of the action, being a step required by the Rules. In Citicorp Australia Ltd v. Metropolitan Public Abattoir Board (1992) 1 QdR. 592, 594, McPherson SPJ said the following:-"It may I think be accepted that to constitute a "proceeding" the act or activity must have the characteristic of carrying the cause or action forward."
See also I. H. Dempster Nominees Pty Ltd v. Chemgoods Pty Ltd (1993) 2 QdR. 377.
In my opinion although the present application may appear to resemble more closely what is described in those cases as a "proceeding" than, e.g. the particular activities held not to be "proceedings" in Kaats v. Caelers and Citicorp Australia Ltd, I have come to the conclusion that the present application is not a "fresh proceeding". It is a step which must be taken to allow the action to be progressed but has two particular characteristics that are important. Firstly the incapacity to proceed against a company in liquidation is imposed by a source external to the Rules. Secondly the successful application for leave to proceed does no more than restore the applicant's capacity to take further steps in the action. By itself the granting of such leave can only be said to advance the action in the sense that it removes the bar against taking further steps. By itself it does not advance the action towards completion in the relevant sense.
With respect to the submission that Rule 377(1) requires 1 month's notice to the other party, in my opinion the present application which was required to be brought to the court and was brought on notice does not fall within that category. The orders are as follows:-
that Grainco Limited ACN 070 878 241 (formerly called Grainco Queensland Co-operative Association Limited ARBN 053 288 707, and the successor, under Act of Parliament, to Queensland Grain Handling Authority), as plaintiff in Brisbane District Court Action No. 1424 of 1992, and in which action M & M Outdoor Centre Pty Ltd ACN 008 006 844 (in Liquidation) is the defendant, be granted leave to proceed with the District Court Action.
that the costs of and incidental to this Application be reserved unto the District Court of Queensland held at Brisbane.
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