Yates v Integrity Industrial Pty Ltd
[2018] WADC 86
•24 JULY 2018
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: YATES -v- INTEGRITY INDUSTRIAL PTY LTD [2018] WADC 86
CORAM: REGISTRAR KINGSLEY
HEARD: 23 JANUARY 2018
DELIVERED : 24 JULY 2018
FILE NO/S: CIV 1605 of 2016
BETWEEN: SAMANTHA AMY YATES
Plaintiff
AND
INTEGRITY INDUSTRIAL PTY LTD
Defendant
Catchwords:
Practice - Inactive Cases List - Case dismissed pursuant to s 44G District Court Rules 2005 (WA) - Application to set aside dismissal - Consideration of s 440D and s 500 Corporations Act 2001 (Cth) - Exceptional circumstances
Legislation:
Nil
Result:
Application dismissed
Representation:
Counsel:
| Plaintiff | : | Mr N Morrissey |
| Defendant | : | Mr J Campbell |
Solicitors:
| Plaintiff | : | Foyle Legal |
| Defendant | : | DLA Piper Australia - Perth |
Case(s) referred to in decision(s):
Aquila Resources Ltd v Pasminco Ltd (Administrators Appointed) [2002] WASC 53
Arogen v Leighton [2013] NSWSC 1099
Australian Competition and Consumer Commission (ACCC) v Advanced Medical Institute Pty Ltd (Administrator Appointed) (No 3) [2011] FCA 348
Brian Rochford Ltd (Administrator Appointed) v Textile Clothing & Footwear Union of New South Wales (1998) 30 ACSR 38
Foxcroft v Ink Group Pty Ltd (1994) 15 ACSR 203
Gibbs v Royal Blue Securities Pty Ltd [2017] WADC 80
Lopez v Star World Enterprises Pty Ltd [1997] FCA 454
Re Oliver Brown Pty Ltd [2012] NSWSC 957
Sovereign Grange Pty Ltd v AV Truck Services Pty Ltd [No 2] [2017] WASCA 142
The Owners of SP13443, 129-133 Eighth Avenue Maylands v The Owners of 135 Eighth Avenue (Survey Strata Plan 44698) (Maylands) [2015] WADC 133
Thompson v Mulgoa Irrigation Co Ltd (1893) 4 BC (NSW) 33
REGISTRAR KINGSLEY:
The plaintiff issued her writ in May 2016 and an appearance was entered in May 2016. The plaintiff filed a statement of claim dated 13 July 2016.
On 2 March 2017 a default notice was issued, advising the plaintiff had not entered the action for trial as required. Due to a failure to enter the action for trial a notice that the case was now on the Inactive Cases List was sent on 20 March 2017. As a consequence of the action being on the Inactive Cases List for a continuous period of six months, on 19 September 2017 the action was deemed dismissed for want of prosecution (r 44G(1) District Court Rules 2005 (DCR)). A chamber summons to set aside the dismissal was filed by the plaintiff on 26 September 2017.
Rule 44G(5) DCR provides that a court may, in exceptional circumstances and on such terms as it thinks just, set aside the dismissal of a case from the Inactive Cases List.
The law
In The Owners of SP13443, 129-133 Eighth Avenue Maylands v The Owners of 135 Eighth Avenue (Survey Strata Plan 44698) (Maylands) [2015] WADC 133 her Honour Judge Davis considered, having regard to the ordinary meaning of 'exceptional' that for the circumstances to exceptional under r 44G(5) DCR they must be out of the ordinary, unusual, special or uncommon. Her Honour Judge Davis noted that the circumstances do not need to be unique or unprecedented or very rare; however they will not be exceptional if they are regularly or routinely or normally encountered.
Each case must be determined on its own facts. There is no one particular circumstance that could be defined as exceptional. It may well relate to a single exceptional matter or to a combination of exceptional facts, or to a combination of ordinary facts when taken together in combination may reasonably regarded as amounting to exceptional circumstances (see Gibbs v Royal Blue Securities Pty Ltd [2017] WADC 80 [5] (Gibbs)).
Inadvertence or inattention by a solicitor may be considered an exceptional circumstance, however mere inadvertence or inattention would ordinarily not constitute an exceptional circumstance (Gibbs [8]).
Background
The plaintiff's solicitor Christian John Foyle in an affidavit sworn 4 October 2017 refers to the circumstances of the plaintiff's injury in December 2014. Mr Foyle at par 4 of his affidavit deposes that, by letter dated 20 December 2016, the defendant's solicitor DLA Piper advised Mr Foyle that the defendant had been in voluntary administration since 21 September 2016.
The defendant's solicitors' letter noted that pursuant to s 500(2) Corporations Act 2001 (Cth) (the Act) as the company was in voluntary administration, no action or other civil proceeding is to be proceeded with, except with leave of the Court.
In January 2017 the plaintiff's solicitor wrote to the defendant's administrator, together with a follow up letter in February 2017, enquiring whether the administrator would consent to the plaintiff continuing her personal injury action against the defendant.
In March 2017 a solicitor from the plaintiff's legal firm wrote to the defendant's solicitor enquiring whether the defendant would agree to the entry for trial milestone being extended. The response from the defendant's lawyer was that, as the action was stayed until leave granted, he did not think he could consent. Through April and May the plaintiff's solicitors enquired of the defendant's solicitors whether the matter could be resolved at an informal settlement conference. Mr Foyle deposes that negotiations occurred in May and June 2017 with a view of trying to settle the matter. Those negotiations were unfruitful.
In August 2017 the plaintiff's solicitor requested a copy of the policy of insurance between the defendant and its insurer. Mr Foyle deposes that he was conscious of the provisions of s 601AG of the Act which provides that a person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if the company had liability to the person.
Mr Foyle in a second affidavit sworn 18 January 2018 deposes that the plaintiff claims to have suffered psychological effects as a result of the dog attack and attaches two psychological reports, one dated 10 February 2015 and the other 15 March 2017.
In a further affidavit sworn 22 January 2018, Mr Foyle deposes that his usual practice is to prevent an action falling into the Inactive Cases List by seeking consent orders from the other parties. If this was not possible, and the action is placed on the Inactive Cases List, Mr Foyle's usual practice is to bring an application to remove an action from the Inactive Cases List.
Mr Foyle goes on to depose that, whilst he had brought an application in the Supreme Court to reinstate a company that had been deregistered, he had not brought an application for leave to proceed. Mr Foyle was unsure which form of proceeding was appropriate, and sought advice from the staff at the Supreme Court. Mr Foyle was told the staff could not give legal advice. Mr Foyle had drafted an affidavit, dated 22 August 2017, in support of an application to reinstate the defendant.
In this matter there are two issues for me to determine:
1.Whether there are exceptional circumstances causally related to the dismissal of the action and should I exercise my discretion to set aside that dismissal.
2.The impact of s 500(2) and s 440D of the Act on the proceedings.
Section 500(2) and s 440D Corporations Act 2001 (Cth)
Section 500(2) provides that:
After the passing of a resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company, except by leave of the Court and subject to such terms as the Court imposes.
Section 440D provides that:
During the administration of a company, a proceeding in a court against a company or in relation to any of its property cannot be begun or proceeded with, except:
(a)with the administrator's written consent; or
(b)with the leave of the court in accordance such terms (if any) as the court imposes.
The issue is whether during the administration a company can have an action against it dismissed for want of prosecution by reason of the court's case management rules. Notwithstanding the diligent research of counsel for plaintiff and defendant there does not seem to be any authority on this issue.
In Foxcroft v Ink Group Pty Ltd (1994) 15 ACSR 203 Young J commented that the provisions of the corporations law, as exemplified in sections such as s 440D, provide that there shall be a complete freeze of proceedings against the company during an administration. This complete freeze is to enable the administrator and the company's creditors to have an opportunity to assess their positions and adopt an attitude under s 439C of the Act.
Young J went on to comment that to allow one potential creditor to proceed will not only take the administrator's attention from what he needs to do under the division but would also involve costs in running the legal action on behalf of the administrator as well as perhaps giving the claimant some advantage over other creditors or potential creditors.
Section 440D is found within the pt 5.3A of the Act. That part sets up the structure for the administration of an insolvent company where decisions as to the future of the company can be taken by creditors within a confined timeframe, and that the administrator should not be diverted from their task of investigating and reporting to creditors by the action of charges, property owners and litigants: Brian Rochford Ltd (Administrator Appointed) v Textile Clothing & Footwear Union of New South Wales (1998) 30 ACSR 38. Thompson v Mulgoa Irrigation Co Ltd (1893) 4 BC (NSW) 33 is authority for the proposition that:
… a company in liquidation is not to be harassed and its assets wasted by unnecessary litigation and the leave of the court is therefore required as a safeguard. Before any action can be brought or continued against a company, the court must investigate the intended litigation.
The plaintiff advances authorities to support the proposition that litigation is frozen. In Australian Competition and Consumer Commission (ACCC) v Advanced Medical Institute Pty Ltd (Administrator Appointed) (No 3) [2011] FCA 348 the court stated [6]:
Whilst s 44D(1) places a statutory freeze on litigation for the purpose of advancing the administration, the proper administration of the Trade Practices Law would suggest that the proceedings brought by the ACCC should proceed despite the present form of control of the company.
The court went on to say [10]:
… at the heart of the respondent's case was the proposition that the nature of administration is temporary and it would be inconsistent with the nature of administration to allow the litigation to continue. This is reflected in the statutory presumption behind s 440D(1) that there will ordinarily be a freeze on proceedings. No doubt there is strength in this argument.
The defendant's solicitors dispute the proposition that no prodecural step can be taken in an action where a company has gone into liquidation, unless and until either the administrator has consented or leave of the court has been obtained. The defendant's solicitor refer to the mischief sought to be caught by s 440D as being the diversion of attention away from the administration of the company and forcing the administrator to expend costs on litigation. The defendant's solicitor submit that the dismissal of a proceeding against a company in administration (under the Rules of Court) is not an anathema to s 440D, but rather serves to promote the purpose of that section by ensuring costs will not be expended by the administrator and ensuring the administrator's attention would not be diverted.
The s 440D must be interpreted in accordance with the objects of pt 5.3A of the Act (Arogen v Leighton [2013] NSWSC 1099 and Aquila Resources Ltd v Pasminco Ltd (Administrators Appointed) [2002] WASC 53). Both of those cases suggest that an administrator is appointed to assess the financial position of a corporation so that its future may be determined. The emphasis in pt 5.3A of the Act is to require a creditor who wishes to proceed to either seek the administrator's consent or seek approval of the court.
In my opinion the objectives of pt 5.3A of the Act are for the orderly assessment of the financial position of the corporation by an administrator such that they need not concern themselves about litigation being conducted by a creditor. In some authorities there was discussion about a procedural advantage. The context of those statements are in relation to enabling a company in administration to proceed with a cross‑claim while the action against it was stayed (see Meade, Re Oliver Brown Pty Ltd [2012] NSWSC 957).
In my opinion the dismissal of an action pursuant to r 44G by a plaintiff who has a claim in damages against a company in administration does not offend the objectives of pt 5.3A of the Act. The thrust of s 440D of the Act is not intended to prevent procedural outcomes.
In any event s 440D provides that a proceeding cannot be begun or proceeded with. The dismissal of the proceeding pursuant to r 44G, in my opinion, does not fall within the ordinary meaning of proceeded with. Proceeded with means something being moved forward or continued.
For these reasons s 440D does not operate as a stay of a dismissal pursuant to r 44G District Court Rules.
Setting aside the dismissal
Sovereign Grange Pty Ltd v AV Truck Services Pty Ltd [No 2] [2017] WASCA 142 is authority for the proposition that, when considering r 44G, it is not a two‑stage process: the nature of the exceptional circumstances must be such to warrant the exercise of the discretion to set aside the dismissal of the action.
The court stated [76]:
The court does not consider, first, whether the circumstances of the case are exceptional and, secondly, whether a residual discretion to set aside the discretion [sic] should be exercised. Rule 44G(5) poses a single question for the court: whether exceptional circumstances warrant a setting aside the dismissal. Where the court answers that question in the affirmative, and so concluded that setting aside the dismissal is warranted, it would do so on such terms as the court thinks just.
The notice placing the matter on the Inactive Cases List was issued on 20 March 2017. During April and May there were two letters and a telephone call from the plaintiff's solicitor to the defendant's solicitor enquiring whether the parties could resolve the matter by an informal conference. There were negotiations by a letter between May and June 2017 however those negotiations did not settle the claim. In August 2017 the plaintiff's solicitor then enquires from the defendant's solicitors about a policy of insurance. I am informed that there were further negotiations in late August 2017. On 22 September 2017 the matter had been placed on the Inactive Cases List.
In my opinion this is not a matter where the plaintiff's solicitor was so distracted by obtaining medical reports and negotiations that the combination of those factors give rise to extraordinary circumstances. The evidence suggests there was correspondence and only medical reports of a psychological nature – albeit one received in March 2017.
Whilst the psychological report in March 2017 indicates some psychological consequences, the report also indicated that the plaintiff's memory function was pretty good and her capacity to concentrate was good. There is no evidence to suggest the plaintiff's solicitor was experiencing difficulties in obtaining timely instructions from the plaintiff.
There is no evidence from the plaintiff's solicitor that he failed to diarise the dismissal date on receipt of the court's letter dated 22 March 2017. It is submitted by the plaintiff's solicitor that the fact the defendant was in voluntary administration is part of the context to make up an exceptional circumstance.
However there was nothing unusual about a company going into administration, and the process to continue a claim is clear in that leave of the Court is required. The plaintiff's solicitor sought to obtain the defendant company's insurance policy, although there is authority to suggest this is not necessary in an application to obtain leave to proceed (Lopez v Star World Enterprises Pty Ltd [1997] FCA 454).
Further the plaintiff's solicitor took no steps to bring an application to extend time, reciting the fact that the defendant company has gone into voluntary administration.
In all the circumstances in my opinion the plaintiff's solicitor has not demonstrated any exceptional circumstance such as to warrant the exercise of the discretion to set aside the dismissal of the action.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JC
COURT OFFICER
12 JULY 2018
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