Sanders v Probuild Constructions (Aust) Pty Ltd
[2023] WASC 317
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SANDERS -v- PROBUILD CONSTRUCTIONS (AUST) PTY LTD [2023] WASC 317
CORAM: ACTING MASTER MCDONALD
HEARD: 15 AUGUST 2023
DELIVERED : 15 AUGUST 2023
PUBLISHED : 23 AUGUST 2023
FILE NO/S: COR 84 of 2023
BETWEEN: STEPHEN JOHN SANDERS
Plaintiff
AND
PROBUILD CONSTRUCTIONS (AUST) PTY LTD
Defendant
Catchwords:
Practice and procedure - Application for leave to continue an action for damages against a company subject to deed of company arrangement - Whether leave should be granted - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 444E(3)
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | R Cywicki |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | DWL Legal |
| Defendant | : | No appearance |
Case(s) referred to in decision(s):
Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585
Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (subject to deed of company arrangement) [2016] FCA 1246
Corbett v Arrium Creditor Distribution Co Pty Ltd [2017] WASC 357
Galati-Sardo v Career Boss WA Pty Ltd (In Liq) [2021] WASC 278
J F Keir Pty Ltd v Priority Management Systems Pty Ltd (admin apptd) [2007] NSWSC 748
Meehan v Stockmans Australian Café (Holdings ) Pty Ltd (1996) 22 ACSR 123
Mehan v Arrium Ltd (formerly Onesteel Ltd) [2016] NSWSC 1680
ACTING MASTER MCDONALD:
(This judgment was delivered extemporaneously and has been edited from the transcript.)
This is an application by the plaintiff made by originating process pursuant to s 444E of the Corporations Act 2001 (Cth) (the Act) for leave to continue proceedings against a company the subject of a deed of company arrangement. The application is supported by two affidavits of Ms Alison Frances Hagan both sworn on 8 June 2023. These are referred to as the Hagan Affidavit (127 pages) and the Hagan Affidavit (5 pages). For the following reasons it is appropriate that leave be granted.
Factual background
The factual background is taken from the affidavits of Ms Hagan who, among other things, deposes to the following.
By way of writ of summons filed 25 May 2021 in the District Court of Western Australia, the plaintiff commenced proceedings against Probuild Pty Ltd (ACN 003 063 894) (later amended to 'Probuild Constructions (Aust) Pty Ltd') claiming damages for personal injury and loss sustained by him as a result of an incident which occurred on or about 4 July 2018 at workplace premises allegedly occupied and/or controlled by the defendant (the proceedings).
The statement of claim alleges that the plaintiff was employed by Express Interiors Pty Ltd as a fixer. The defendant was incorporated and was the principal building contractor in the construction of a hotel and residential apartments at premises situated at 1 Barrack Street, Perth.
It is alleged the defendant was the occupier of the premises and in control of the workplace within the meaning of s 22 of the Occupational Safety and Health Act 1984 (WA) (OSH Act). It is further alleged the defendant entered into a written contract with the plaintiff's employer to install insulation at the premises.
The plaintiff alleges that during the course of his employment, while carrying a bale of insulation, he struck his foot on a step on entering the premises causing him to fall and strike a metal power box.
The plaintiff pleads he suffered injuries due to the accident including blunt trauma to the right side of the neck, occipitofrontal cervicogenic headaches, adjustment disorder and major depressive disorder.
The injuries are said to be due to the defendant's negligence and/or breach of statutory duties.
A memorandum of appearance was filed on behalf of AXA XL, the insurer, as an interested non‑party by Barry Nilsson Lawyers.
The action is defended. The defendant admits that it was the head contractor at the workplace premises the subject of the plaintiff's claim. It is pleaded in the defence that the accident and any injuries sustained were caused by the plaintiff's own negligence or contributed to by the plaintiff.
The action is ready to be set down for a pre-trial conference.
On 23 February 2022, administrators were appointed to the company and on 20 May 2022 the plaintiff's solicitors were advised by the solicitors for AXA XL that the company had entered voluntary administration.[1]
[1] Hagan Affidavit (127 pages) 'AFH-7'.
The company's administrators were represented by King & Wood Mallesons who on 28 June 2022 advised they did not consent to the proceedings being continued against the company.[2]
[2] Hagan Affidavit (127 pages) 'AFH-9'.
On 30 August 2022, the administrators' solicitors advised that the company was no longer in voluntary administration.[3] A Deed of Company Arrangement (the DOCA) had been lodged with the Australian Securities and Investment Commission (ASIC) on 21 July 2022.
[3] Hagan Affidavit (127 pages) 'AFH-11'.
Ms Hagan deposes that the deed administrators for the defendant again advised by email dated 20 April 2023 that they did not consent to leave to proceed against the company being granted as it was not consistent with the duty to act in the interests of creditors of the defendant company.[4]
[4] Hagan Affidavit (5 pages) 'AFH-1'.
On 20 July 2023, the solicitors for the deed administrators signed a memorandum of consent orders in these proceedings consenting to leave being granted to proceed against the defendant pursuant to s 444E(3)(c) of the Act to the extent as set out in the proposed orders.
On 7 August 2023 the deed administrators filed a notice of appearance indicating they neither oppose nor support the application.
It is not clear what the position of the deed administrators is, so I have assumed that the application is not made with consent. There was no appearance on their behalf at the hearing before me today.
The plaintiff therefore needs leave of the court to continue the proceedings pursuant to s 444E of the Act.
The legislation
Section 444E of the Act provides as follows:
444E Protection of company's property from persons bound by deed
(1)Until a deed of company arrangement terminates, this section applies to a person bound by the deed.
(2)The person cannot:
(a)make an application for an order to wind up the company; or
(b)proceed with such an application made before the deed became binding on the person.
(3)The person cannot:
(a)begin or proceed with a proceeding against the company or in relation to any of its property; or
(b)begin or proceed with enforcement process in relation to property of the company;
except:
(c)with the leave of the Court; and
(d)in accordance with such terms (if any) as the Court imposes.
(4)In subsection (3):
property of a company includes:
(a) any PPSA retention of title property of the company; and
(b)any other property used or occupied by, or in the possession of, the company.
Applicable principles
There are four provisions in the Act which provide for leave to commence or continue proceedings against a company under external administration: s 440D dealing with the position of when a company is in administration; s 444E dealing with a company which is the subject of a deed of company arrangement; s 471B dealing with a company being wound up by the court, and s 500(2) dealing with a company in voluntary administration.
Section 444E not only requires a stay of any proceedings against a company the subject of a deed of company arrangement but also requires leave to begin or proceed with any enforcement process in relation to the property of the company.
In Mehan v Arrium Ltd (formerly Onesteel Ltd) [2016] NSWSC 1680, Black J outlined the applicable legal principles to an application under s 444E of the Act.[5] Black J referred to the observations of Lehane J in Meehan v Stockmans Australian Café (Holdings ) Pty Ltd (1996) 22 ACSR 123 as follows:[6]
His Honour noted that the principles to be applied in such an application were analogous to those which would be applied by a court in considering an application for leave to proceed against a company in winding up under s 471B of the Corporations Act, rather than the more stringent test that may apply in determining applications for leave to proceed against a company under administration under s 440D of the Corporations Act.
[5] Adopted by Strk A/Master (as she then was) in Corbett v Arrium Creditor Distribution Co Pty Ltd [2017] WASC 357 [8] ‑ [19].
[6] Mehan v Arrium Ltd (formerly Onesteel Ltd) [11].
Black J went on to identify the following relevant factors arising out of the decisions in J F Keir Pty Ltd v Priority Management Systems Pty Ltd (admin apptd) [2007] NSWSC 748 at [8] and Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585 at [146]:[7]
(a)whether the plaintiff's claim has a solid foundation and gives rise to a serious dispute;
(b)whether the proceedings have progressed to an advanced stage;
(c)whether the plaintiff was involved in the administrators' appointment;
(d)whether the plaintiff would suffer disadvantage if leave is refused;
(e)whether the defendant is insured against the alleged liability that is the subject of the proceedings;
(f)whether, if leave is granted, the deed administrators will be unreasonably distracted from performance of their statutory duties or obliged unnecessarily to incur substantial legal costs; and
(g)whether, in the circumstances, there are good reasons for allowing the plaintiff to continue the proceedings even if the deed administrators do not provide consent.
[7] Mehan v Arrium Ltd (formerly Onesteel Ltd) [12].
His Honour recognised that these factors are not exhaustive or a shopping list although they are of assistance in guiding the court in the exercise of discretion.[8]
[8] Mehan v Arrium Ltd (formerly Onesteel Ltd) [12].
Black J also referred to the principles applicable to the exercise of discretion to grant leave to begin or proceed with proceedings under s 444E(3) of the Act as summarised by Perry J, by reference to authority, in Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (subject to deed of company arrangement) [2016] FCA 1246 at [83] ‑ [89].[9]
[9] Mehan v Arrium Ltd (formerly Onesteel Ltd) [14].
In that case Perry J observed that:[10]
(a)the applicable principles were those applied in determining applications for leave under s 471B of the Act in relation to liquidation;
(b)the onus lies upon the applicant to establish that the ordinary procedure established by a deed of company arrangement should be displaced, namely, that the continued pursuit of the litigation should be substituted for the procedure by which a claimant lodges a verified proof of debt with the deed administrators who admit or reject it, wholly or in part and from whom an appeal lies to the court;
(c)the question whether leave should be granted turns upon the exercise of discretion, and each application must turn upon its particular facts and the question cannot be approached as a shopping list of factors; and
(d)the exercise of discretion is informed by previous decisions as to relevant factors to be considered and by the purpose of the ordinary rule in s 444E(3) of the Act prohibiting a creditor from pursuing litigation, including the risk that a company in deed administration would be subject to a multiplicity of actions.
[10] Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (subject to deed of company arrangement) [83] ‑ [87].
I adopt and apply these principles in the determination of this application.
Disposition
Pursuant to cl 15.2(a)(iii) of the DOCA, while the Deed remains in force, no Creditor, in relation to that Creditor's Claim, may continue or take further steps in any action, suit, mediation or proceeding against the Deed Companies except with the consent in writing of the deed administrators or the leave of the court and in accordance with such terms (if any) as a court imposes.[11]
[11] Hagan Affidavit (127 pages) 'AFH-12' (79 - 80).
Creditor means a person who, or an entity that, has a Claim against a Deed Company.[12]
[12] Hagan Affidavit (127 pages) 'AFH-12' (57).
Claim means any action, demand, suit proceeding, debt, claim loss, damage or other liability (whether present or future, certain or contingent, ascertained or sounding only in damages) whatsoever and however incurred, arising directly or indirectly from any act or omission by the Deed Companies (or any one of them) or by agreement, circumstance or event, occurring on or before the Appointment Date, but does not include an Excluded Claim.[13] The plaintiff's claim is not an Excluded Claim. The Appointment Date is 23 February 2022.[14]
[13] Hagan Affidavit (127 pages) 'AFH-12' (57).
[14] Hagan Affidavit (127 pages) 'AFH-12' (56).
I am therefore satisfied that the plaintiff is a person bound by the deed and to which s 444E of the Act applies.
Having regard to the affidavit material before me, I am satisfied that the plaintiff has discharged the onus of establishing that it is proper to grant leave under s 444E of the Act to plaintiff to continue with the District Court proceedings. In coming to that conclusion I have taken into account the following factors.
Whether the plaintiff's claim has a solid foundation that gives rise to a serious dispute
The plaintiff alleges the defendant was the principal building contractor in the construction of the hotel and residential premises known as the Ritz‑Carlton Hotel at 1 Barrack Street, Perth. He claims the defendant was an occupier of the premises within the meaning of the Occupiers Liability Act 1985 (WA) (the OLA) and a person in control of a workplace within the meaning of s 22 of the OSH Act. Further, it is pleaded the defendant entered into a contract with the plaintiff's employer for the installation of insulation at the premises.
The plaintiff claims the defendant owed various duties to the plaintiff pursuant to the OLA and OSH Act. It also pleads that pursuant to the Civil Liability Act 2002 (WA) (the CLA) the defendant should have taken precautions against the risk of a person tripping and falling on a 20 cm step while carrying building material into the premises which was obscuring his vision. The statement of claim goes on to particularise the defendant's negligence.
The minute of proposed particulars provided pursuant to r 45C(3) of the District Court Rules 2005 (WA) indicates the plaintiff is a 52 year old man who was injured in 2018 who claims his injuries have been symptomatic since that time and will likely adversely impact his working and social life for the foreseeable future. The plaintiff ceased employment in June 2019. The particulars indicate reliance on medical evidence that suggests the plaintiff will be incapable of working in his pre‑accident capacity as a fixer and has a retained work capacity only in a sedentary role. He seeks past and future medical expenses, lost earning capacity, special damages and loss of amenities. In total the particulars of loss and damage sought amount to $531,862.[15] There is no medical evidence attached to the affidavits filed in the application.
[15] Hagan Affidavit (127 pages) 'AFH-10'.
The defendant does not admit the defendant owed a duty under s 22 of the OSH Act and in any event any breach of the OSH Act does not create a private right to damages.
The defendant pleads the use of a step is a risk obvious to all users of the step and it did not owe a duty to warn users of the step of the obvious risk. The defendant further pleads the manner of work was the responsibility of the plaintiff's employer and not that of the defendant. The defendant denies any negligence and says the accident and alleged injuries were due solely to the negligence of the plaintiff and the plaintiff's failure to take care. Alternatively the defendant claims the plaintiff was contributorily negligent.[16]
[16] Hagan Affidavit (127 pages) 'AFH-5'.
It is not possible on an application such as this to weigh up the merits of the contested claim in negligence. Suffice to say the claim is arguable and has a solid foundation which gives rise to a serious dispute.
Whether the proceedings have progressed to an advanced stage
The District Court proceedings was commenced on 25 May 2021 by writ with an indorsement of claim. An appearance by the interested non‑party was filed in June 2021. A statement of claim was filed on 4 August 2021 and a defence was filed on 17 September 2021. Ms Hagan deposes that the matter is ready to be listed for a pre‑trial conference.
If the matter settles the matter is effectively close to an end. If it does not settle, I have been given no information about the discovery process, the expert evidence or the prospective trial dates. Nevertheless, the plaintiff's claim has been able to be quantified.
There has been a lengthy delay since the filing of pleadings in the latter half of 2021 and this application. However, that appears to be due to the changing status of the defendant from being under administration as of 23 February 2022 to being subject to a deed of company arrangement since 21 July 2022. The latter information was communicated to the plaintiff on 30 August 2022.[17]
[17] Hagan Affidavit (127 pages) 'AFH-11'.
Since that time there is no explanation of the delay in bringing the application on 6 June 2023.
Albeit that the delay is unexplained, the claim is well‑developed and ready for mediation, which weighs in favour of the grant of leave.
Whether the plaintiff was involved in the administrators' appointment
Mr Sanders was not involved in the appointment of administrators to the defendant.
Whether the plaintiff would suffer disadvantage if leave is refused
If leave was refused Mr Sanders would be unable to pursue his claim against the defendant and, if his claim is ultimately accepted by the District Court, he will be left with a reduced earning capacity for the remaining of his working life.
Whether the defendant is insured against the alleged liability that is the subject of the proceedings
The Hagan Affidavit (127 pages) annexes correspondence between the plaintiff's solicitors and the solicitor for the interested non‑party, AXA XL, indicating that the insurer of the defendant company had granted an indemnity to the company in respect of the plaintiff's claim and that the policy had a $100,000 deductible.[18] AXA XL would only provide cover for any damages payable above the deductible amount.
[18] Hagan Affidavit (127 pages) [14] - [15], 'AFH-8'.
In an email dated 8 June 2022, the solicitors for the insurer state:[19]
We can confirm as follows:
1. Indemnity was previously granted to Probuild subject to known facts and circumstances and the policy terms and conditions.
2. The Policy has a $100,000 deductible payable by AXA XL, and Probuild has not paid any of the deductible.
3. Probuild is responsible for payment of the first $100,000 of any liability arising from the claim, and therefore the AXA XL insurance policy will only provide cover for any damages payable above $100,000.
4. If the Plaintiff is entitled to damages from Probuild, he will need to submit a claim to the administrator for any sum up to the first $100,000.
We have recently been informed that the administrator does not have sufficient funds to pay the $100,000, but the financial position of the administrator remains unclear. We understand the financial position will only be clear once the administration is concluded.
[19] Hagan Affidavit (127 pages) 'AFH-8'.
Against the nature and seriousness of the plaintiff's claim, I have weighed up the status of the defendant company, as a company subject to a deed of company arrangement. There is no evidence before me of any prospect of there being any assets in the defendant company which could pay the first $100,000 of any amount awarded to the plaintiff, a factor which would be a good reason to refuse leave.[20] However, there is an extra precaution, namely orders are sought that leave of the court be obtained prior to any enforcement action against the company, at which time the company can be heard.
[20] Galati-Sardo v Career Boss WA Pty Ltd (In Liq) [2021] WASC 278 [16].
The fact the insurer has appeared in the District Court action and taken an active role in its defence suggests that the insurer will respond to any claim in accordance with its policy.
If leave is granted, whether the deed administrators will be unreasonably distracted from performance of their statutory duties or obliged unnecessarily to incur substantial legal costs
The defendant's insurers are separately represented in the District Court proceedings. As such neither the administrators nor their solicitors should be distracted from their statutory duties and they are unlikely to incur any significant legal costs arising from the application.
In the circumstances, whether there are good reasons for allowing the plaintiff to continue the proceedings even if the deed administrators do not provide consent.
As stated above it is unclear if the administrators have provided consent. In any event, for the reasons stated the plaintiff has demonstrated that there is a serious question to be tried. I am satisfied the plaintiff has grounds to bring a claim in damages in respect of injuries sustained by him at the premises of the defendant. The claim has been developed and responded to. If denied the opportunity to pursue the claim the plaintiff will be disadvantaged.
There is evidence that the defendant's insurer will respond to the claim if ultimately found in the plaintiff's favour. To the extent the company is unable to meet the cost of any deductible, there is requirement for leave to be obtained by this court before enforcement action can ensue. This form of order provides a safety net for the defendant and creditors. Upon enforcement of any judgment the court may revisit the matter of insurance and the ability to pay any deductible judgment sum.
I will make orders in the terms sought by the plaintiff in the originating process.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CM
Associate to the Acting Master
23 AUGUST 2023
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