Segal v Sharma

[2020] NSWCA 192

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Segal v Sharma [2020] NSWCA 192

Hearing dates:

24 August 2020

Date of orders:

24 August 2020

Decision date:

24 August 2020

Before:

Gleeson JA

Decision:

(1) Leave be granted to the appellants under s 471B of the Corporations Act 2001 (Cth) nunc pro tunc to commence and proceed with the appeal against the second respondent, South-West Radiology Pty Ltd (in liq).

Catchwords:

CORPORATIONS – application for leave to proceed against a company in liquidation – Corporations Act 2001 (Cth), s 471B – whether necessary to join company as proper party where equitable assignment of part of a debt – leave granted

Legislation Cited:

Corporations Act 2001 (Cth), s 471B

Cases Cited:

Distinctive FX 9 Pty Ltd v Statewide Developments Pty Ltd [2012] NSWCA 393

DSG Holdings Australia Pty Ltd v Hellenic Pty Ltd [2014] NSWCA 96; (2014) 99 ACSR 121

Federal Commissioner of Taxation v Everett (1980) 143 CLR 440

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9

Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516

Ong v Lottwo Pty Ltd (in liq) [2013] SASCFC 57; (2013) 116 SASR 280

Thomas v National Australia Bank Limited [2000] 2 Qd R 448

Zervas v Burkitt [2019] NSWCA 112

Category:

Procedural and other rulings

Parties:

Phillip Segal (First applicant)
Melita Segal (Second applicant)
Praneal Dutt Sharma (First respondent)
South West Radiology Pty Ltd (in liq) (Second respondent)

Representation:

Counsel:
G P Gee (Applicants)

Solicitors:
Keypoint Law (Applicants)
Carneys Lawyers (First respondent)
Bridges Lawyers (Second respondent)

File Number(s):

2020/148680

 Decision under appeal 

Court or tribunal:

District Court of New South Wales

Jurisdiction:

Civil

Citation:

[2020] NSWDC 121

Date of Decision:

22 April 2020

Before:

Russell SC DCJ

File Number(s):

2018/363950

Judgment

1. GLEESON JA: Application is made by the appellants, Dr Phillip Segal and Mrs Melita Segal (the Segals), for leave to proceed against the second respondent, South-West Radiology Pty Ltd (SWR), a company in liquidation, under s 471B of the Corporations Act 2001 (Cth).

2. SWR was placed in liquidation by court order on 20 May 2020. Mr Glenn Livingstone was appointed liquidator of the company by the Court on 17 September 2019 in place of the previous appointee. The liquidator has indicated through his solicitors that he neither consents to nor opposes the grant of leave to proceed.

3. As the applicants for leave, the Segals accept the line of authority that an appeal is a new proceeding for which a separate grant of leave is required: Distinctive FX 9 Pty Ltd v Statewide Developments Pty Ltd [2012] NSWCA 393 at [13] (see also the discussion in Zervas v Burkitt [2019] NSWCA 112 at [11]-[14]).

4. The purpose of the requirement of leave is to ensure that a company in liquidation is not subjected to the multiplicity of actions which would be both expensive and time-consuming, as well as in some cases unnecessary. Ordinarily, claims against such companies should be pursued by means of the proof of debt process. For this reason, the requirement for leave generally directs attention to the choice between ordinary litigation and the more streamlined procedure of a proof of debt: DSG Holdings Australia Pty Ltd v Hellenic Pty Ltd [2014] NSWCA 96; (2014) 99 ACSR 121 at [55].

5. The circumstances of the present case are somewhat different. The appeal concerns a judgment of Russell SC DCJ delivered on 22 April 2020: [2020] NSWDC 121. By their appeal, the Segals challenge certain findings of the primary judge concerning the construction of a deed dated 18 April 2013 between, among others, Dr Segal, the first respondent, Dr Sharma, and the second respondent, SWR, in its capacity as trustee of SWR Holding Unit Trust. The primary judge found that Dr Sharma was not liable to contribute to a loss suffered by SWR and further found that Dr Segal was not entitled to setoff or cross-claim against Dr Sharma a debt of $130,000 assigned by SWR to Dr Segal. The debt of $130,000 was part of a larger debt allegedly owed by Dr Sharma to SWR.

6. I am satisfied that the Segals have established that this is an appropriate case in which to grant leave to proceed, for the reasons advanced in their written submissions.

7. First, the weight of authority favours the view that an assignment of part of a debt is necessarily an equitable assignment because the statutory method of assignment is not available. The rule of the Chancery Court was that, whilst the assignee, not the assignor, would be the plaintiff in the suit, the assignor, as legal owner, the debtor and any other assignees of other parts of the debt were all necessary parties, so that all the obligations of the debtor and rights of all persons interested in the fund might be established by the decree: Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 29-30 (Windeyer J); Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 447.

8. Insofar as the decision of the Queensland Court of Appeal in Thomas v National Australia Bank Limited [2000] 2 Qd R 448 suggests that the assignee under an equitable assignment does not need to join the assignor as a party to the proceedings, it is not necessary to address the correctness of that decision on the present application, as the Segals were content to proceed upon the statement of principle by Windeyer J in Norman v FCT.

9. Second, the nature of the relief sought by Dr Segal against Dr Sharma does not throw up the usual question of choice between ordinary litigation against the company in liquidation or the more streamlined procedure of a proof of debt. Here, Dr Segal does not seek any recovery against SWR, but rather to enforce a debt assigned by SWR against Dr Sharma.

10. Third, it may be accepted, as the Segals submitted, that there is no prejudice to creditors given that SWR has filed a submitting appearance in the appeal and the liquidator is essentially neutral on the question of grant of leave to proceed.

11. The Court may grant leave nunc pro tunc: Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516; Ong v Lottwo Pty Ltd (in liq) [2013] SASCFC 57; (2013) 116 SASR 280 at [59]. It is appropriate to make such an order in the present case given that the appeal was commenced after SWR was placed into liquidation on 20 May 2019.

12. Accordingly, the Court orders that:

1. Leave be granted to the appellants under s 471B of the Corporations Act 2001 (Cth) nunc pro tunc to commence and proceed with the appeal against the second respondent, South-West Radiology Pty Ltd (in liq).

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Decision last updated: 24 August 2020