Zollo v Deller - [2023] SASC 144

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal to a Single Judge)
ZOLLO v DELLER
[2023] SASC 144
Judgment of the Honourable Justice Hughes
9 October 2023
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT
CORPORATIONS - WINDING UP - CONDUCT AND INCIDENTS OF WINDING UP - PROCEEDINGS BY OR AGAINST THE COMPANY - STAY OF PROCEEDINGS
This is an appeal of an interlocutory decision of a Magistrate in debt recovery proceedings. Mr Zollo, the appellant, claims the sum of $83,642.84 from the respondent, Mr Deller. The respondent is a solicitor and the money claimed by Mr Zollo represents proceeds from litigation involving the company Built It Pty Ltd (in liquidation), and its former client, Mr Caruso.
Mr Deller denies that Mr Zollo is entitled to monies held in his trust account as they are the property of the company, and he now takes instructions from the liquidator. In the Magistrates Court, Mr Deller applied for a stay of the proceedings on the basis that Mr Zollo requires leave of the Supreme Court to commence or proceed with the debt recovery action pursuant to s 471B of the Corporations Act 2001 (Cth). The Magistrate stayed the proceedings on 2 March 2022. Mr Zollo has appealed that order on the basis that s 471B of the Corporations Act 2001 does not apply to the proceedings, and sought to re-instate the Magistrates Court proceedings.
Held, refusing leave to appeal:
• Leave to proceed under the Magistrates Court Act 1991 is required because the decision appealed is interlocutory in nature.
• The appellant has not demonstrated that he has a reasonably arguable case that the Magistrate was wrong to find that the paid and unrecovered amounts from the Caruso litigation were or are property in which the company has a proprietary interest.
• If leave had been granted, Mr Zollo would require leave pursuant to s 471B of the Corporations Act 2001 to proceed with the action against Mr Deller on the basis that the proceedings relate, arguably, to the property of the company in liquidation. Further, the appellant did not demonstrate that the interests of justice favoured the extension of time required to bring the appeal.
Corporations Act 2001 (Cth) s 471B; Magistrates Court Act 1991 (SA) s 40; Uniform Civil Rules 2020 (SA) r 211.1, 213.1, 214.2, referred to.
Ong v Lottwo (2013) 116 SASR 280; Ulowski v Miller (1968) SASR 277; Hall v City of Burnside [2006] SASC 86; Nominal Defendant v FAI General Insurance Co Ltd (in liq) [2004] QSC 309; Viscariello v Tamasauskas [2018] SASC 111, considered.

ZOLLO v DELLER
[2023] SASC 144
Single Judge Appeal: Civil

Hughes J: The appellant, Alessandro Zollo, is the former director of a building company, Built It Pty Ltd (In Liquidation) (“Built It (In liq)”). When it was trading, Built It (In liq) was in dispute with a client, Mr Caruso (“the Caruso litigation”). In that dispute, Built It (In liq) was legally advised and represented by Matthew Deller, barrister and solicitor, who is the respondent in these proceedings.
In his capacity as Built It (In liq)’s legal representative, Mr Deller received certain monies into a trust account arising from the Caruso litigation. Other monies owed by Mr Caruso to Built It (In liq) arising from the Caruso litigation have not yet been paid.
Mr Zollo claims that the sum of $83,642.84 should be paid to him by Mr Deller. Mr Zollo contends that he is entitled to this sum because it represent the paid and anticipated fruits of the Caruso litigation and that he bought Built It (in liq)’s interest in the dispute from the company before it went into liquidation (“the chose in action”). Mr Zollo maintains that Mr Deller has wrongly disbursed some of the Caruso litigation monies, including to himself on account of fees, without entitlement to do so.
Mr Deller maintains that Mr Zollo has not established that Mr Zollo is personally entitled to the monies, and that some was properly disbursed and the remainder is held by Mr Deller for Built It (In liq). He submits that now that the company is in liquidation, he is taking instructions from the liquidator.
Mr Zollo commenced proceedings in the Magistrates Court in action CIV-21-007876 to recover the monies from Mr Deller. Mr Deller successfully applied for a stay of those proceedings and the stay was granted by a Magistrate on 2 March 2022. The proceedings were stayed pursuant to s 471B of the Corporations Act 2001 (Cth) which provides that proceedings against a company in liquidation, or in relation to the property of a company in liquidation, can only be commenced or continued with the leave of the Supreme Court.
Mr Zollo’s response to the stay order was to seek, by proceedings in the Supreme Court in action CIV-22-007556, the leave of the Supreme Court to proceed. His application was unsuccessful.
Mr Zollo has now returned his sights to the Magistrate’s decision to grant a stay. He filed this appeal, seeking to set aside the stay order made by the Magistrate on 2 March 2022. He hopes that by this step, he will re-enliven the action in the Magistrates Court to recover monies from Mr Deller.
The appeal from a decision of the Magistrate’s stay order is governed by s 40 of the Magistrates Court Act 1991 (SA). It provides:
40—Right of appeal
(1) A party to a civil action (except a minor civil action) may, in accordance with the rules of the Supreme Court, appeal against any judgment given in the action.
(2) If the rules of the Supreme Court provide that an appeal from a judgment of a particular class can only be brought with the permission of that Court, the right of appeal is limited accordingly, but in any other case an appeal lies as of right.
(3) The appeal lies to the Supreme Court constituted of a single Judge but the Judge may (if he or she thinks fit) refer the appeal for hearing and determination by the Court of Appeal.
(4) If jurisdiction to try the civil action is created by statute and the terms of the statute are such as to indicate that Parliament did not intend that there should be an appeal from a decision made in the exercise of that jurisdiction, that intention prevails.
(5) A right of appeal conferred by this section extends to a legal practitioner, witness or other person against whom an order under section 37 is made.
There are four preliminary issues that arose in relation to the appeal.
1.Should Mr Zollo have joined the company to the appeal as an interested party or respondent in accordance with Rule 214.2 of the Uniform Civil Rules 2020 (SA) (“the Rules”)?
2.Does Mr Zollo need leave to proceed under the Magistrates Court Act1991 and the Rules on the basis that he seeks to appeal an interlocutory order?
3.Does Mr Zollo need leave to proceed under s 471B of the Corporations Act 2001?
4.Should Mr Zollo be granted an extension to bring the appeal out of time?
However, because of the overlap in matters to be considered in the preliminary issues and the matters to be considered on the appeal, it is convenient to approach the issues holistically.
The background in more detail
The key facts of the substantive dispute between Mr Zollo and Mr Deller are as follows.
In action AMCCI-14-3962, Built It (In liq) was awarded judgment against Mr Caruso on 14 September 2017 in the sum of $33,938.50, plus interest and costs to be taxed or agreed.[1] The post-judgment interest and the costs (apart from the costs of a warrant of sale) have not yet been recovered from Mr Caruso as the amounts have not yet been agreed or taxed.
[1] Affidavit of M Deller sworn 8 December 2021 at [3].
Mr Zollo contends that on 20 December 2016, before the judgment and before Built It (In liq) went into liquidation, he purchased the chose in action from the company.[2] He says that Mr Strawbridge, barrister, who was his counsel in the Caruso litigation, prepared an indenture for the company and Mr Zollo which they executed, and Mr Zollo paid the company for the chose in action by way of wages he was or otherwise would be entitled to from the company, foregone.[3]
[2] Mr Zollo made this contention orally and in his written submissions at [2]. It is also asserted in an affidavit he swore on 11 July 2022 and filed in the Supreme Court in action CIV-22-007556 which he did not seek to put before the Court in the present matter. The Court has not been required to make a finding as to the contention on this appeal and the parties did not dispute that this was Mr Zollo’s position, although it has not been established and is contested.
[3] Ibid.
On this basis, Mr Zollo maintains that the judgment sum received by Mr Deller (which constitutes about half of his claim) should have been paid to him. Mr Zollo also contends that he paid counsel fees directly to Mr Strawbridge in the amount of approximately $30,000. Mr Strawbridge has since died. Mr Zollo contends that he is entitled to receive any amount received from Mr Caruso for Mr Strawbridge’s counsel fees.
Mr Zollo further contends that Mr Deller is aware of these matters and that Mr Deller holds the proceeds of the litigation, including the costs not yet recovered, on his behalf, not on behalf of Built It (In liq).
In the Magistrates Court action CIV-21-007876,[4] Mr Zollo sought to recover from Mr Deller the sum of $83,642.84 made up as follows:
Counsel Fees  $30,800.00
Court issue fee Magistrates Court 1/10/2014               $292.00
Judgment Sum from Caruso litigation  $33,938.50
Interest  $18,612.34
[4] Affidavit of M Deller sworn 8 December 2021 at [10].
It was not disputed by Mr Deller that in October 2019, he received $41,812.69 from the Courts Administration Authority for payment of proceeds from a warrant of sale issued by Built It (In liq) in respect of the judgment sum, along with pre-judgment interest and costs associated with the warrant of sale.[5]
[5] Ibid, MDD-2.
An amount for post-judgment interest and costs has not been agreed or taxed or received from Mr Caruso and remains outstanding, and is, in Mr Deller’s view, property of the company in liquidation. Mr Deller contends that this amount is $45,692.90.
Before the Magistrate, Mr Deller applied for a stay of the proceedings on the basis that Mr Zollo required the Supreme Court’s leave to proceed to recover monies that are the property of the company.
Mr Zollo says that he did not have the opportunity to present evidence to the Magistrate to support his contention that he had bought the rights to the judgment sum and costs and interest from Built It (In liq), or that he had paid Mr Strawbridge directly for counsel fees. He said that the Magistrate instead heard and determined Mr Deller’s application for a stay of the action.
Mr Deller asserts that the monies he currently holds are held on trust for the company and that he has claim over them and the further amounts that may be received, for unpaid costs and disbursements.[6] In his affidavit of 8 December 2021,[7] Mr Deller stated:
[5] I say that there is no fund as alleged by the Applicant. To date, Built It (In Liq) has received a sum of $41,812.69 from the Courts Administration Authority, and disbursed a total sum of $25,262.69. I hold a sum of $16,550.00 in trust to the credit of the liquidator as trustee for Built It Pty Ltd (In Liq).
[6] Appeal Book, p 30; FDN 5 of CIV-21-007876.
[7] FDN 11 of CIV-21-007876.
Built It (In liq)’s outstanding claims in respect of interest and costs in respect of the Magistrates Court Action, are as follows:
·Interest: $11,769.90
·Costs and disbursements: $33,823.00.
Built It (In liq) is not a party to the claim in the Magistrates Court by Mr Zollo against Mr Deller.
Section 471B of the Corporations Act 2001 provides:
471B Stay of proceedings and suspension of enforcement process
While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:
(a) a proceeding in a court against the company or in relation to property of the company;
or
(b) enforcement process in relation to such property;
Except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
“The Court” in the context of these proceedings, is the Supreme Court of South Australia.
The Magistrate granted the application for a stay and issued written reasons. The parties agreed on the appeal that the key paragraphs of her Honour’s decision are at paragraphs [14]-[16].
The Magistrate said:
14For the Indenture to be enforceable, Mr Zollo must have given the agreed consideration, namely a payment of $45,646.84 to the Company. It would arguably defeat the purpose of s 471B of the Act if the applicant was permitted to proceed with his claim and await a decision on the evidence at trial before determining (a) whether the Indenture was enforceable, and (b) whether the damages, costs and interest from the Caruso Proceedings were still legally owned by the Company.
15However, I do not need to resolve these issues because even if the consideration was paid and assuming the Indenture gives rise to a valid and enforceable assignment of the proceeds of the Caruso Proceedings to Mr Zollo, the Company stills holds a proprietary interest in those proceeds. This is because, even if the Company assigns the beneficial interest in the proceeds to Mr Zollo, it retains an interest as trustee and has an equitable lien over the proceeds to satisfy the expenses of the trust before the benefits of the assignment are distributed.
16Therefore, the Company has a proprietary interest in the proceeds which Mr Zollo seeks to claim in the within proceedings, namely an equitable lien. As such, Mr Zollo requires leave of the Supreme Court to proceed with this action.
Mr Zollo did not appeal the Magistrate’s decision. Instead, he commenced action CIV-22-007556, which was an application to the Supreme Court for a grant of leave. There were several interlocutory hearings and a significant amount of affidavit material was filed by both parties. Both Judge Dart, who conducted some of the interlocutory hearings, and Auxiliary Judge Costello who ultimately decided Mr Zollo’s application, remarked that it would have been more appropriate for Mr Zollo to have lodged a proof of debt with the liquidator, rather than litigate directly with Mr Deller. In fact, on 24 November 2022, Judge Dart ordered that the liquidator provide a proof of debt form to Mr Zollo, to be completed and returned for the liquidator to adjudicate on the proof. The appellant did not return a completed form to the liquidator. It was and remains Mr Zollo’s view that his dispute is with Mr Deller and not with the company.
Mr Zollo’s application for leave was dismissed on 24 April 2023. Auxiliary Judge Costello set out the relevant facts and said:
20 Against this factual and legal background, I am satisfied that:
(i) the proceedings are likely to have a negative impact on the creditors;
(ii) the impact on the Company will be to delay the winding up;
(iii) the liquidator will be unduly distracted;
(iv) the relative complexity of the proceedings favours the proof of debt process;
(v) Mr Zollo is unlikely to receive monies from the liquidation;
(vi) the dispute has not arisen out of the liquidation; and
(vii) the proceedings were not initiated until years after the liquidator was appointed.
21 Quite apart from these specific matters, I have significant reservations as to the validity of Mr Zollo’s claim. In the words used in Ong I am not persuaded that there is a serious dispute arising from this claim, nor that it has a solid foundation.
22 In all the circumstances, I am not persuaded that this is a proper case to exercise my discretion to grant leave in this case.
23 The application is dismissed.
The effect of that decision was that the stay of proceedings in action CIV-21-007876 in the Magistrates Court remained in force. Nevertheless, Mr Zollo made an interlocutory application in those proceedings seeking to have the action “continued”, on the basis of his understanding that s 471B of the Corporations Act 2001 had been found by Auxiliary Judge Costello not to apply because the dispute did not arise out of the liquidation. On 22 May 2023, the Magistrate dismissed that application and ordered that Mr Zollo pay the respondent’s costs. The Magistrate observed that no further step in the Magistrates Court action was available to the parties, unless one or other of her decision or Auxiliary Judge Costello’s was overturned.
Mr Zollo then brought this appeal from the Magistrate’s order dated 2 March 2022 staying the action.
The Magistrate’s reasons
In the reasons for decision of 2 March 2022, the Magistrate determined that the company has a proprietary interest in the proceeds of the Caruso litigation and this enlivened the operation of s 471B of the Corporations Act 2001. This was even if Mr Zollo’s action was brought against Mr Deller and not the company, because s 471B applies not only to actions against a company in liquidation but also to actions in relation to the property of a company in liquidation. Her Honour also found that the Built It (In liq) retained a proprietary interest in the money held by Mr Deller even if Mr Zollo had purchased from it the chose in action, because Built It (In liq) retained an equitable lien over the money to satisfy other debts.
At the appeal, Mr Zollo was required to establish that this reasoning was erroneous.
Ground of appeal
Mr Zollo’s sole ground of appeal is:
The learned Magistrate erred in that she stayed the action pursuant to the operation of s 471B of the Corporations Act 2001 as a result of Mr Deller’s representations. The applicant then made application to the Supreme Court by an Originating Application on 11 July 2022 to have the court decide whether s 471B of the Corporations Law applied to this matter.[8]
[8] This was an application for leave to proceed with the Magistrates Court action pursuant to s 471B of the Corporations Act 2001.
This ground of appeal fails to identify any error in the Magistrate’s reasons but it was possible to ascertain from Mr Zollo’s written submissions and from oral argument where he considers that the Magistrate erred.
Mr Zollo’s arguments
Mr Zollo contended on the appeal that:
1.Without evidence, the Magistrate accepted Mr Deller’s assertions that the money belongs to the company and that he was not given an opportunity to prove otherwise;
2.He is not legally trained and he understood the Magistrate to have directed him to seek leave from the Supreme Court, which is why he did so and explains why the appeal was brought out of time;
3.The application for leave resulted in a finding by Auxiliary Judge Costello that his dispute with Mr Deller does not arise out of the liquidation of the company, which supports his claim that s 471B does not apply and the stay should not have been granted;
4.He paid the barrister’s fees directly and the recovery of those fees from Mr Caruso must lead to the return of those monies to him;
5.He owns the fruits of the litigation pursuant to the purchase of the chose in action.
Mr Deller’s arguments
Mr Deller contended that the claims Mr Zollo makes against him are in fact claims against the property of the company.
Mr Deller stated that he continues to act for Built It (In liq), but now on the instructions of the liquidator. He informed the Court that the liquidator authorised legal costs to be incurred by the company in liquidation to recover the outstanding amounts in the Caruso litigation. He submitted that he has an entitlement to recover solicitor fees for work done before and after the liquidation, under the separate retainers between he and the company, and he and the liquidator on behalf of Built It (In liq), respectively.[9]
[9] Affidavit of M Deller sworn 8 December 2021 at [7]-[8].
Consideration
1. Whether the Magistrate should have determined the enforceability of the indenture before considering whether leave was required.

Mr Zollo contended that he was not given an opportunity to establish that his claim was not over company property but over money held by Mr Deller. Whilst the claim is for the sum of $83,642.84, Mr Zollo did not in his statement of claim identify how that sum was reached or why he considered Mr Deller had it in his possession and why Mr Deller owed the money to him. However, from Mr Zollo’s various affidavits in that proceeding and the current appeal, and from his written and oral submissions, it can be ascertained that Mr Zollo contends that the money that was awarded to Built It (In liq) in the Caruso litigation, being amounts of $33,938.50 as a judgment sum, and the costs and interest including counsel fees bring the total to $83,642.84, are monies that were owed to him pursuant to an indenture between Mr Zollo and Built It (In liq).
Mr Deller’s contentions are that he received the sum of $41,812.69, being the judgment sum and amounts for pre-action interest and the costs of the warrant of sale, and placed it in trust against Built It (In liq)’s account. He subsequently disbursed monies from that sum pursuant to a retainer between him and the company and with the approval of the liquidator. He maintains that $16,500 remains in his trust account and that he has a solicitor’s lien over that amount. He further maintains that some of the monies to which the company is entitled from the Caruso litigation, namely post-judgment interest and costs of the litigation, have not yet been received from Mr Caruso.
The Magistrate declined to decide whether the indenture was enforceable before determining Mr Deller’s stay application. Her Honour observed that it would defeat the purpose of the policy of s 471B, which is to avoid a company in liquidation being drawn into protracted litigation whilst the liquidation is in progress. That observation is consistent with the reasoning of Nicholson J in Ong v Lottwo[10] in which his Honour said:
The well accepted purpose behind the general prohibition provided for by s 471B is that it is intended to ensure that a company liquidation proceeds in an orderly manner in accordance with the rules governing such liquidations and that creditors should be restricted in their capacity to take steps outside the liquidations process itself which might lead to preferential treatment.
[10] (2013) 116 SASR 280 at [60].
Mr Zollo has failed to acknowledge that even though it is his contention that the money he claims is held by Mr Deller personally and should be repaid to him, Mr Deller’s position is that Built It (In liq) has an interest in the money and that dispute is what s 471B is designed to avoid.
In light of the fact that the dispute concerned a judgment sum and costs and interest in relation to a dispute between the company and Mr Caruso, there was ample evidence upon which the Magistrate was able to conclude that there was at least a prima facie argument that Built It (In liq) retained a legal interest in those amounts.
2. Whether any significance attaches to the fact that Mr Zollo proceeded to request the Supreme Court’s leave to proceed.
Mr Zollo contended that he is not legally trained and he understood the Magistrate to have directed him to seek leave from the Supreme Court, which is why he did so. This issue is most relevant to the question of whether an extension of time should be granted for the bringing of the appeal.
The factors relevant to the grant of an extension of time include the length and reasons for the delay, the merits of the appeal, prejudice to the respondent and the interests of justice including case flow management.[11] As can be seen from the consideration of the remaining issues, Mr Zollo has limited prospects of demonstrating an error on the part of the Magistrate in the grant of the stay and an exercise of discretion to extend time to bring the appeal approximately 12 months later should not be granted.
3. Did the outcome of the application for leave result in a finding that supports his claim that s 471B does not apply?
[11] Ulowski v Miller (1968) SASR 277 per Bray CJ; Hall v City of Burnside [2006] SASC 86 at [32].
Mr Zollo has misapprehended the effect of the decision of Auxiliary Judge Costello. His Honour listed various factors relevant to the determination of whether leave to proceed in an action against a company in liquidation should be granted. Ultimately, the Auxiliary Judge found that the factors weighed against a grant of leave and it was declined.
One of the factors listed was whether the dispute “arose out of the liquidation”. That factor was considered in Nominal Defendant v FAI General Insurance Co Ltd (in liq).[12] In those proceedings, the Nominal Defendant was granted leave to proceed against FAI General Insurance Co Ltd (in liq) to recover contributions and debts from the insurer in respect of compulsory third party policies it issued. Under a statutory provision, the Nominal Defendant became the insurer in respect of those policies upon the insolvency of FAI General Insurance Co Ltd (in liq). The Court determined that it was appropriate to grant leave because the dispute “concerns matters which have arisen after and as a consequence of the liquidation. It concerns whether a substantial sum of money is an asset of the company’s in liquidation, or whether they were moneys properly payable to the nominal defendant.”[13]
[12] [2004] QSC 309, per Chesterman J.
[13] Ibid, at [16].
Thus it can be seen that the factor operates to militate in favour of a grant of leave whether the dispute arises out of the liquidation.
His Honour Auxiliary Judge Costello found that the dispute between Mr Zollo and Mr Deller did not arise out of the liquidation. It may be assumed, therefore, that his Honour considered that this was not a factor that weighed in favour of a grant of leave. It was one of seven factors that were listed at paragraph [20] of the judgment, each of which was found to operate against Mr Zollo’s request for leave. In addition to the seven factors, the Auxiliary Judge observed that in considering the filed material, he had developed “significant reservations as to the validity of Mr Zollo’s claim” and that he was “not persuaded that there is a serious dispute arising from this claim, nor that it has a solid foundation.”[14]
[14] Decision of Auxiliary Judge Costello in CIV-22-007556 dated 24 April 2023, at [21].
It is not necessary to consider whether his Honour correctly determined that the dispute between Mr Zollo and Mr Deller arises out of the liquidation because that is not Mr Zollo’s point, and because that decision is not the subject of this appeal. Mr Zollo considers that the finding that the dispute did not arise out of the liquidation supports his contention that s 471B does not apply to the dispute. That reasoning must be rejected. Section 471B applies where there are proceedings “in relation to the property of a company in liquidation”. The Auxiliary Judge did not make a finding about that. His Honour’s decision does not assist Mr Zollo.
4. Did Mr Zollo pay the barrister’s fees directly to the barrister and does he have an entitlement to recover those fees?
It appears from the affidavit material that if the matter proceeded to trial, Mr Deller would assert that counsel fees have not yet been recovered from Mr Caruso and if and when they are, such fees are the property of Built It (In liq) pursuant to the orders in its favour. Mr Zollo would assert, it appears, that he has a right to the counsel fees in accordance with the indenture by which Built It (In liq) assigned its interest in the action to him, or by virtue of having paid the counsel fees personally on behalf of the company, a fact of which he says Mr Deller is aware.
It is not possible or appropriate to resolve this factual dispute as to who paid the counsel fees or whether they have been paid at all. What is clear is that on both accounts, Built It (In liq)’s claim for recovery of counsel fees from Mr Caruso has not yet been taxed or agreed, and if and when such fees are taxed or agreed, any amount payable for counsel fees will be payable by Mr Caruso to Built It (In liq). This is because the Court in AMCCI-14-3962 (the Caruso litigation) would not ordinarily order that the fees be paid to a party other than a party to the action and it has not been suggested that there has been an application by anyone for it to do so. Mr Zollo was not a party to that action. It follows that the monies for counsel fees, if and when received by Built It (In liq), will be in the possession of the company in liquidation which will hold those fees for its own benefit or on behalf of counsel, or to be paid in accordance with any agreement reached between the solicitor and counsel. Consequently, insofar as any person(s) or body has a property interest in the unrecovered counsel fees, it is Built It (In liq). The Magistrate was therefore correct to conclude, in respect of the unrecovered barrister fees, that they constitute the property of Built It (In liq) and therefore Mr Zollo requires leave to proceed to recover them as owing to him.
5. Does Mr Zollo own the fruits of the litigation pursuant to the assignment of the chose in action by the company in liquidation to him?
The issue of the unrecovered fees has been addressed above. The judgment sum, pre-action interest and the costs of the enforcement of the warrant of sale were paid into Mr Deller’s trust account for the company in liquidation.[15]
[15] Decision of Magistrate Jackson in CIV-21-007876 dated 2 March 2022, at [4].
Like the unrecovered fees, the monies were awarded to Built It (In liq) and not to Mr Zollo. Some of the funds were disbursed by Mr Deller pursuant to the instructions he received from the liquidator on behalf of the company. The Magistrate found that at all relevant times, the monies were the property of the company or the company in liquidation.
Mr Zollo contends that since the execution of the indenture in 2016, those monies became his. Even if he were to establish that he has an entitlement to the monies pursuant to the indenture, he was not entitled to the monies unless and until he established that Built It (In liq), which received the monies pursuant to the court orders, was obliged to remit those monies to him pursuant to the indenture. Because Mr Zollo did not take any action to assert rights to the company’s ownership of the monies received, as could have been pursued if he had submitted a proof of debt to the liquidator, he cannot now assert that the monies should not have been received by the company or paid out by the company in liquidation in accordance with its various legal obligations.
Contrary to Mr Zollo’s strenuous assertions, his dispute is not with Mr Deller. It is with Built It (In liq).
The Magistrate’s reasoning that the paid and unrecovered amounts from the Caruso litigation were or are property in which Built It (In liq) had or has a proprietary interest is upheld. Accordingly, the conclusion that Mr Zollo required leave to proceed with the action against Mr Deller in respect of that property was properly reached.
Outcome
Against that analysis, answers can be provided to the preliminary questions that required resolution before the appeal proper could be considered.
Joinder
Rule 214.2 of the Rules provides that:
214.2—Institution of appeal
(2) The appellant must join as a respondent or interested party in the appellate proceeding—
(a) any party to the first instance proceeding unless that party has no interest in the appeal; and
(b) any other person falling within paragraph (b) of the definitions of respondent or interested party in rule 211.1.
(3)The Court may order the addition or removal of a person as a party to an appellate proceeding; however a person cannot be added as an appellant without the person’s consent.
Rule 211.1 provides:
respondent to an appellate proceeding means a party (whenever joined)—
(a) who was an applicant or respondent in the proceeding at first instance, unless the party has no interest in the appellate proceeding; or
(b) against whom orders are sought in, or whose interest may be directly and adversely affected by, the orders sought in the appellate proceeding;
On the above analysis of Mr Zollo’s case, part of his claim relates to money received by the company, paid into Mr Deller’s trust account and disbursed by Mr Deller on instructions from the liquidator. Another part of the claim relates to money currently in Mr Deller’s trust account against the company’s name. The final component of the claim relates to monies not yet recovered from Mr Caruso which, if and when paid, will be paid to the company in liquidation. In respect of all three aspects of the claim, the company has a proprietary interest and should have been joined to the action. As will be seen, no prejudice has accrued to Built In (In liq) because of the other conclusions reached in this decision.
Leave to proceed under the Magistrates Court Act 1991
The Magistrate’s decision was interlocutory in nature. It was not a permanent stay. Mr Zollo requires leave to proceed with this appeal.[16] Having considered his arguments, leave is refused. The appeal is misconceived.
Leave to proceed required under the Corporations Act 2001
[16] Magistrates Court Act 1991, s 40(2); Uniform Civil Rules 2020, r 213.1(1)(a); Viscariello v Tamasauskas [2018] SASC 111.
Had leave been granted to proceed under the Magistrates Court Act 1991 and the Rules, and on the basis of the analysis, Mr Zollo may have required leave to bring this appeal under s 471B of the Corporations Act 2001. Whether he did or not turns on whether the appeal can be said to be a proceeding “in relation to” the property of the company. Given the wide import of “in relation to”, I am inclined to consider that leave is required under s 471B. However, it is not necessary to reach a concluded view because I would refuse leave under the Magistrates Court Act1991 in any event because the appeal lacks merit.
Extension of time
It follows that the issue of an extension of time is not reached but consistent with the approach taken in this matter, the lack of prospects of success of the appeal would likely have presented an insurmountable hurdle to the application for an extension of time.
Orders
Leave to appeal is refused.