Roberts T/A Contract Refrig v Kowshu Enterprises No. Scgrg-98-1742 Judgment No. S158

[1999] SASC 158

ANGUS ROBERTS AND SHARON ROBERTS TRADING AS CONTRACT REFRIGERATION SERVICES v KOWHSU ENTERPRISES PTY LTD
[1999] SASC 158

Magistrates Appeal

1. WICKS J          The plaintiffs, Angus Roberts and Sharon Roberts trading as Contract Refrigeration Services, commenced an action against Kowhsu Enterprises Pty Ltd in the Magistrates Court (Civil Division) on 9 September 1998 claiming approximately $15,000.

2. On 16 September 1998 the defendant’s solicitor wrote to the plaintiffs’ solicitor indicating that he was waiting for an expert’s report concerning work done and that he would not be in a position to file a defence in the action until the report was received.  He sought an assurance that no steps would be taken to obtain judgment without first warning him of the plaintiffs’ solicitors’ intention to do so.  The letter was followed up on 1 October 1998 with a telephone call to the person handling the matter at the plaintiffs’ solicitors’ office.  The defendant’s solicitor indicated that he would be in a position to file a defence by early the following week.  The solicitor acting for the plaintiffs agreed to give further time.  A defence and counterclaim was posted to the Court on 2 October 1998.  A copy of the proposed defence was sent to the plaintiffs’ solicitors by facsimile on 2 October 1998.

3. At about that time the plaintiffs changed their solicitor and their new solicitor entered up judgment by default for the amount claimed without any prior reference to the defendant’s solicitors.  The existing solicitor filed notice of ceasing to act for the plaintiffs on or about 14 October 1998.  Two days later, the plaintiffs themselves wrote to the court indicating that they had appointed a new solicitor to act on their behalf.  On 20 October 1998 the plaintiffs’ new solicitor filed notice in the Magistrates Court that he had been appointed to act.

4. Judgment by default was entered on 6 October 1998 in consequence of a praecipe filed on that day.

5. Application was made promptly by the defendant’s solicitor to set aside the default judgment.  The judgment was set aside on 28 October 1998 and the defence and counterclaim filed the following day.

6. In the meantime, the plaintiffs prepared and served a statutory demand on the defendant pursuant to s459E of the Corporations Law.  Payment under the statutory demand was required to be made on or before 29 October 1998.  On the service of the notice, an employee of the defendant took possession of it and simply filed it without bringing it to the attention of someone in authority. 

7. On 2 November 1998, a letter enclosing a copy of the statutory demand was posted by the plaintiffs’ new solicitor to the defendant’s solicitor.  In an affidavit filed in this matter in the Magistrates Court, the defendant’s solicitor said that the letter to which I have just referred was the first letter received from the plaintiffs’ solicitor in which there was any mention of the statutory demand.

8. On receipt of this letter, the defendant made application under s25 of the Magistrates Court Act 1991 for an injunction restraining the plaintiffs from taking any steps to wind up the defendant until further order. The application was heard ex parte by a magistrate on 3 November 1998 and he made the following order:

   "That pursuant to Section 25 of the Magistrates Court Act an injunction be granted restraining the plaintiffs from taking any steps to wind up the defendant until further order."

1. The matter was adjourned for further consideration.

2. In the meantime, application was made by the plaintiffs for an order that the injunction granted on 3 November 1998 be dissolved.  The matter was further considered by the learned magistrate on 10 December 1998 in the presence of counsel for both parties.  The learned magistrate ordered that the injunction granted on 3 November 1998 continue to operate until the matter is finally determined by the Magistrates Court and dismissed the plaintiffs’ application to dissolve it.

3. The Magistrates Court Act 1991 confers on the Magistrates Court certain limited powers to grant an injunction. Section 25 provides:

   "The Court may, on such terms as appear just, grant an injunction or make any other order that may be necessary to preserve the subject-matter of an action intact until the questions arising in the action have been finally determined."

1. Section 26 of the Act empowers the Magistrates Court to make restraining orders in the nature of mareva injunctions in the circumstances set out in the section.  Clearly, s26 of the Act has no application in the present case. 

2. As to s25, it is really concerned with the interim preservation of property, the subject matter of litigation. The order made in the present case has nothing to do with the preservation of property. It purports to prevent the institution of a particular kind of action or proceeding - one within the exclusive province of the Supreme Court and a number of other courts mentioned. In my opinion the words of s25 of the Magistrates Court Act, on their proper construction, do not authorise the making of an order of the kind made in this case.

3. The Magistrates Court is entirely the creature of statute, being established under s4 of the Magistrates Court Act 1991. It is a court of record but not a superior court of record. Its correct title is “The Magistrates Court of South Australia” but I have simply referred to it as the Magistrates Court for brevity. The court has no inherent jurisdiction: Palmer v Clarke (1989) 19 NSWLR 158 at p166. Its jurisdiction and powers are therefore confined by the metes and bounds of the Magistrates Court Act but subject to any other jurisdiction which might be conferred on the Court by Parliament.

4. The Magistrates Court has certain equitable jurisdiction under s8 of the Magistrates Court Act, but that section would appear to have no application in the present case.

5. Under s58AA of the Corporations Law, a distinction is drawn between a “court” and a “Court”.  A “court” with a small “c” is defined to mean any court when exercising jurisdiction in South Australia and “Court” with a capital “C” is defined to mean various courts including the Supreme Court of the State and the Federal Court of Australia. 

6. Under s459A of the Corporations Law a “Court” may order that an insolvent company be wound up in insolvency.  Under s461, there is a similar power vested in a “Court” to order a winding up as set out in the various circumstances listed in that section.

7. Clearly, under the Corporations Law, the power to wind up companies is vested in the limited number of Courts to which I have referred.  That being so, it would seem extraordinary that the Magistrates Court would be given any jurisdiction which would limit access to a court having jurisdiction under the Corporations Law to hear and determine winding up proceedings. 

8. I should also make mention of s42B of the Corporations (South Australia) Act 1990. So far as material, that section provides as follows:

   "42B.(1) ... jurisdiction is conferred on the lower courts of South Australia and of each other State and the Territory with respect to civil matters other than superior court matters arising under the Corporations Law of South Australia.

   (2)  The jurisdiction conferred on a lower court by subsection (1) -

   (a)     is subject to the court’s general jurisdictional limits so far as they relate to the amounts, or the value of property, with which the court may deal; but

   (b)    is not subject to the court’s other jurisdictional limits."

1. In s41 of the Corporations (South Australia) Act, “lower court” is defined as a court which is not a “superior court”, “superior court” is defined to include a number of particular courts, including the Supreme Court and “superior court matter” is defined to mean “a civil matter that the Corporations Law clearly intends (for example by the use of the expression “the Court”) to be dealt with only by a superior court”.

2. In my opinion, the statutory jurisdiction conferred by s42B of the Corporations (South Australia) Act 1990 is intended to enable certain jurisdiction arising under the Corporations Law to be exercised by the lower courts. I note that under s588FF of the Corporations Law, the power to set aside a voidable transaction is vested in a “court”, thus including the Magistrates Court within the monetary limits of its jurisdiction.

3. Under s232(4) of the Corporations Law, a director is required, in the exercise of his or her powers to exercise a degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporation’s circumstances. That provision is a civil penalty provision and thus division 5 of part 9.4B of the Corporations Law is applicable. Section 1317HA within that division provides that where, on an application for a civil penalty order against a person in relation to a contravention, the Court is satisfied that the person committed the contravention, the Court may order the person to compensate the corporation accordingly. Jurisdiction granting relief under division 5 of part 9.4B of the Corporations Law is vested only in “Courts” as so defined by s58AA of the Corporations Law. Jurisdiction arising under that division is limited to the Supreme Court and certain other named courts.

4. Having regard to the general scheme of the Corporations Law, and the illustrations which I have provided above, I consider that s42B of the Corporations (South Australia) Act is intended merely to enlarge the jurisdiction of the lower courts, including the Magistrates Court in respect of certain topics but, as I have indicated, those topics do not include the winding up of companies. Section 42B is inapplicable in this case.

5. In my opinion, and for the reasons I have given, orders made by the Magistrates Court on 3 November 1998 and 10 December 1998 and to which I have referred above were made in excess of the powers of the Court.  They should not have been made and ought to be set aside.

6. I would therefore allow the appeal and set aside the order made by the Magistrates Court of South Australia on 3 November 1998 in Action No 24172 of 1998 between Angus Roberts and Sharon Roberts as plaintiffs and Kowhsu Enterprises Pty Ltd as defendant, whereby the court ordered that pursuant to s25 of the Magistrates Court Act, an injunction be granted restraining the plaintiffs from taking any steps to wind up the defendant until further order.  I would also set aside the order made in the action on 10 December 1998 continuing the operation of the order made on 3 November 1998.

7. I will hear the parties as to costs.