United Construction Pty Ltd v Rico Pty Ltd (in Liq)

[1999] WASC 68

UNITED CONSTRUCTION PTY LTD -v- RICO PTY LTD (IN LIQ) [1999] WASC 68

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[1999] WASC 68
Case No:	COR:104/1999	Heard:	11 JUNE 1999
Coram:	MASTER BREDMEYER	Delivered:	18/06/99
No of pages:	5	Judgment Part:	1 of 1
Result:	Application dismissed
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Parties:	UNITED CONSTRUCTION PTY LTD (ACN 060 569 977) RICO PTY LTD (IN LIQ) (ACN 000 967 331)
Catchwords:	Application for leave to proceed against a company in liquidation
Legislation:	Corporations Law (Cth), s 471B
Case References:	Meehan & Anor v Stockmans Australian Cafe (Holdings) Pty Ltd & Anor (1996) 22 ACSR 123 Battiston v Maiella Construction Co Pty Ltd (1967) VR 349 BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd & Ors [1998] 1019 FCA (14 August 1998) Capita Financial Group Ltd v Rothwells Ltd (1989) 7 ACLC 634 Century Mercantile Co v Auckland Provincial Fruit Growers Society (1929) NZLR 272 Re A J Benjamin (In Liq) (1969) WN (Pt 1) (NSW) 107

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : UNITED CONSTRUCTION PTY LTD -v- RICO PTY LTD (IN LIQ) [1999] WASC 68 CORAM : MASTER BREDMEYER HEARD : 11 JUNE 1999 DELIVERED : 18 JUNE 1999 FILE NO/S : COR 104 of 1999 BETWEEN : UNITED CONSTRUCTION PTY LTD (ACN 060 569 977)

Applicant

AND

RICO PTY LTD (IN LIQ) (ACN 000 967 331)
Respondent

Catchwords:

Application for leave to proceed against a company in liquidation

Legislation:

Corporations Law (Cth),s 471B

Result:

Application dismissed

(Page 2)

Representation:

Counsel:

Applicant : Mr P J Hannan
Respondent : Mr W Burbury

Solicitors:

Applicant : J D Finlay & Co
Respondent : Australian Securities & Investment Commission

Case(s) referred to in judgment(s):

Meehan & Anor v Stockmans Australian Cafe (Holdings) Pty Ltd & Anor (1996) 22 ACSR 123

Case(s) also cited:

Battiston v Maiella Construction Co Pty Ltd (1967) VR 349
BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd & Ors [1998] 1019 FCA (14 August 1998)
Capita Financial Group Ltd v Rothwells Ltd (1989) 7 ACLC 634
Century Mercantile Co v Auckland Provincial Fruit Growers Society (1929) NZLR 272
Re A J Benjamin (In Liq) (1969) WN (Pt 1) (NSW) 107

(Page 3)

1 MASTER BREDMEYER: This is an application by the applicant for leave to proceed with an action against a company in liquidation. The application is made under s 471B of the Corporations Law which provides that when a company is being wound up in insolvency a person cannot begin or proceed with an action against that company except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. Under the latter provision the Court can grant leave but refuse the applicant the right to proceed to execution without further leave of the Court. Rico Pty Ltd ("the company") was wound up voluntarily by creditors on 31 July 1998. The liquidator appointed was Thomas Javorsky who had formerly been the administrator of the company. I have not been told of the company's precise financial position. According to the ASIC search there are two charges, both fixed and floating, over the company's assets in favour of the State Bank of New South Wales. I am told that the book debts of the company are under the control of a receiver and manager no doubt appointed by the bank. The liquidator, who lives in Sydney, has been served with this application. He has not appeared but opposes the application and his opposition has been set out in a letter from his solicitors to the applicant's solicitors of 9 June 1999 which the applicant's solicitors have very properly put before me. He says that there are insufficient funds in the administration to allow him to instruct a lawyer to appear on his behalf.

2 The applicant seeks leave to proceed with its District Court action No 161 of 1997 in which it sues for hire charges on a crane which it hired to the defendant in October 1996. The applicant/plaintiff claims that the agreed daily hire rate was $5000 a day and that the total hire fees came to $297,000. The plaintiff says that the company paid $185,000 leaving a balance of $112,000 payable. The company in its defence and counter-claim alleges that it was agreed that the maximum amount payable by the defendant to the plaintiff would be $120,000. It also pleads a term that the re-rigging of the crane would take no more than one or two days and that the plaintiff was to supply a crane driver and assistant. It pleads an implied term that no hire fee would be charged on days when the crane driver and assistant were not provided and it then pleads 19 days on which these two men were not provided. It also pleads that the contract was frustrated and hence the hire charge suspended between 23 August and 16 September and 24 September and 10 October when all the workers at Westralian Sands Ltd were on strike. The defendant says that the plaintiff continued to charge the defendant the daily rate of $5000 during the strike when the plaintiff's own staff, the crane driver and the assistant, were on strike. The defence also pleads that the re-rigging took three days on

(Page 4)

three separate occasions in breach of the agreement. There is a counter-claim for particulars of loss and damage due to additional re-rigging of $19,061 and some other matters totalling $15,264.

3 The applicant's solicitor, Mr Finlay, has deposed in two affidavits that the pleadings in this action are complete. The substituted reply and defence to counter-claim was filed on 4 March 1998. He says that the applicant has incurred considerable expense to date in preparation of this action and that very little further work is needed before it can be entered for trial. It is expected that the hearing will last one to two days. I note that the liquidator has not admitted the debt. Neither has he denied it. He has called for more information in support of the applicant's claim. Mr Finlay says that the applicant has attempted to settle the matter with the liquidator but without success. He says that case management in the District Court requires the applicant to pursue the claim, or discontinue the proceedings, and that it would be unfair to expose the applicant to a claim for costs if the applicant is required to discontinue the action. The liquidator's solicitors in their letter to Mr Finlay, which has been copied to me, state that if the proceedings are discontinued the liquidator would not presently be seeking an order for costs.

4 The reason for s 471B is that, without such a restriction, a company in liquidation would be subjected to a multiplicity of actions which would be both expensive and time consuming as well as in some cases unnecessary. When a company is in liquidation a creditor can lodge a verified proof of debt with the liquidator who can admit it or reject it in whole or in part, and from whom an appeal lies to a Judge who determines that appeal de novo primarily on affidavit material. There can be no doubt that ordinarily such a procedure is, and is designed to be, more expeditious and less expensive than ordinary proceedings by way of action. The question of whether a claimant should be permitted to proceed by action or should be require to submit his proof of debt to the liquidator and, if dissatisfied, appeal to a Judge, is therefore largely reduced to one of choosing between alternative forms of procedure. The effect of the section is to require the claimant to adopt the course of lodging a proof of debt unless he can demonstrate that there is some good reason why departure from that procedure is justified in the particular case. The Courts have not tried to give an exhaustive list of all the circumstances in which leave to proceed may be appropriate but they include such factors as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which proceedings, if already commenced, may have progressed. If the company in liquidation is indemnified by an insurer against the

(Page 5)

claim on which leave is sought, that is a powerful factor in favour of granting leave. Leave is also likely to be granted where it is clear that the liquidator will reject the claim so that, if the claimant wishes to press it, and appeal to the Court is inevitable. See Meehan & Anor v Stockmans Australian Cafe (Holdings) Pty Ltd & Anor (1996) 22 ACSR 123.

5 Applying those considerations to the facts of this case, I consider that the applicant's claim in the District Court is an ordinary contractual claim of no special complexity. I consider that it could be determined adequately by the liquidator who could easily rule on the validity of the claim, probably with the assistance of some legal advice on the defence of frustration. The question of whether there was a strike at the site on the days mentioned, is a factual matter which could easily be determined by the production to him of some appropriate evidence. Also I do not consider that this case is so far advanced and so close to hearing that it would be unjust to deny the applicant/plaintiff a hearing. As stated above, I do not know the company's present financial position but nevertheless it appears to be parless. There were 21 creditors present at the meeting of creditors which appointed the liquidator. The applicant is another creditor. No deed of company arrangement was proposed by the company directors. Mr Roy Inglis and Mrs Jacqueline Inglis - whom I presume were the directors - went bankrupt on 10 July 1998. I also note that there is a secured creditor with a receiver and manager appointed and he is entitled to the book debts of the company. In all the circumstances I consider that leave should be refused. I consider that it would be an unnecessary expense for the company - ultimately impacting on all the other creditors - to contest this litigation and the applicant's claim could more cheaply and more conveniently be determined by the proof of debt procedure. The District Court action should be discontinued or permanently stayed. I propose to dismiss this application. I will make no order as to costs.