Nu Life Air Conditioning Pty Ltd v Reef Building Contractors Pty Ltd [2006] NSWSC 1245

New South Wales Supreme Court

CITATION : Nu Life Air Conditioning Pty Ltd v Reef Building Contractors Pty Ltd [2006] NSWSC 1245

HEARING DATE(S) : 06/11/06

JUDGMENT DATE : 6 November 2006

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : White J

EX TEMPORE JUDGMENT DATE : 11/06/2006

DECISION : Order that the originating process be dismissed with costs.

CATCHWORDS : CORPORATIONS – Winding up – Proceedings by or against the company – Leave to proceed – Defendant wound up in earlier proceedings before Court – Plaintiff sought leave to commence proceedings against defendant in NSW Local Court – s 471B Corporations Act 2001 (Cth) – Whether plaintiff entitled to leave to proceed against defendant – Where evidence in support of application meagre – Application refused.

LEGISLATION CITED : Corporations Act 2001 (Cth)

CASES CITED : Ogilvie-Grant v East (1983) 7 ACLR 669 Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550

Nu Life Air Conditioning Pty Ltd PARTIES : v Reef Building Contractors Pty Ltd

FILE NUMBER(S) : SC 4985/06

COUNSEL : Plaintiff: N Eirth Defendant: N/A

SOLICITORS : Plaintiff: Pizzinga & Associates Defendant: N/A

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

WHITE J

Monday, 6 November 2006

4985/06 Nu Life Airconditioning Pty Ltd v Reef Building Contractors Pty Ltd JUDGMENT 1 HIS HONOUR: This is an application under s 471B of the Corporations Act 2001 (Cth) for leave to commence proceedings against the defendant. The defendant was wound up by an order of this Court on 4 April 2006. The evidence in support of the application is meagre. 2 The plaintiff's solicitor has annexed a copy of a statement of liquidated claim in the Local Court in which the plaintiff sues two defendants for $25,000 as moneys claimed to be owing as a result of the provision of what are called air conditioning services at a property in Camperdown. The plaintiff in those proceedings alleges that the defendants in those proceedings requested the installation of air conditioning, and that the second defendant in those proceedings agreed to pay the amount of the claim. The plaintiff's solicitor annexes a copy of the defence filed in the Local Court by the defendants. The defendants to those proceedings allege that they did not enter into an agreement with the plaintiff, but the agreement was between the plaintiff and a third party, Reef Building Contractors Pty Ltd, the defendant in these proceedings. 3 The plaintiff's solicitor deposes that "It has come to my attention upon a proper review of the facts of the plaintiff's claim that Reef Building Contractors Pty Ltd (in liquidation) is an appropriate defendant to those proceedings and will have to be joined to the course (sic) of action in order for the Local Court proceedings appropriately determined (sic)." 4 As has been explained in numerous authorities, the restriction on bringing proceedings against a company in liquidation is an incident of the fact that the making of a winding-up order imposes an administration for the benefit of all creditors. Instead of a creditor of the company in liquidation being entitled to establish its debt through litigation, prima facie, such a creditor ought to proceed by way of proof of debt. Such a procedure is designed to be more expeditious and cheaper than order proceedings by way of action. 5 The effect of s 471B is to require an applicant for leave to bring proceedings against a company in liquidation to show some good reason for departing from the usual procedure by way of proof of debt. In Ogilvie-Grant v East (1983) 7 ACLR 669, McPherson J said (at 672): " … it is quite impossible to state in an exhaustive manner all the circumstances in which leave to proceed may be appropriate, but in the past they have been said to include factors such as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which the proceedings, if already commenced, may have progressed. " 6 In Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550, the Full Court of the Federal Court said (at 556) that the relevant authorities on applications for leave under s 471B or its predecessors, have required that the Court "be affirmatively satisfied that the claim has a solid foundation and gives rise to a serious dispute." 7 There is no material before the Court which demonstrates the nature of the claim which may be sought to be made against the defendant, except such as might be inferred from the defence filed by the defendants in the Local Court. There is nothing to show whether there is a serious question to be tried that the defendant company is liable to the plaintiff for a debt of $25,000. There is no material from which the Court could form a view as to the likely complexity of such a claim, or how much time or costs the company might incur in defending such a claim in the Local Court, as compared with its liquidator dealing with the claim upon the lodgement of a proof of debt. 8 If, as the defendants in the Local Court allege, the only relevant agreement that was made was between the plaintiff and Reef Building Contractors Pty Ltd, then there will be nothing to preclude the plaintiff from lodging such a proof. 9 The refusal of leave to proceed against Reef Building Contractors Pty Ltd will not preclude the plaintiff from proceeding with its present claim in the Local Court. Having regard to the paucity of the evidence adduced on the present application, I am not satisfied that this is an appropriate case for the grant of leave. Accordingly, I order that the originating process be dismissed with costs.