Supreme Court New South Wales Medium Neutral Citation: Oliveri v P M Sulcs & Associates Pty Limited (in liq) [2012] NSWSC 1311 Hearing dates: 15 October 2012 Decision date: 26 October 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Plaintiff have leave to proceed against First Defendant. Catchwords: CORPORATIONS - Winding up - Corporations Act 2001 (Cth) s 500(2) - Application for leave to proceed against company in liquidation - Whether proposed claim has solid foundation and gives rise to a serious question to be tried. Legislation Cited: - Corporations Act 2001 (Cth) ss 471B, 500(2) - Legal Profession Act 2004 (NSW) Cases Cited: - Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (recs and mgrs apptd) (No 2) [2009] FCA 42 - Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 245 ALR 780; 65 ACSR 661; 26 ACLC 262 - Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 - Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451 - Hewlett Packard Australia Pty Ltd v Siltek Holdings Pty Ltd [2005] NSWSC 672 - Ogilvie-Grant v East (1983) 1 ACLC 742 Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314; (1983) 7 ACLR 669; 1 ACLC 742 - Re Hill (1886) 33 Ch D 266 - Re Meter Cabs Ltd [1911] 2 Ch 557 - Re P M Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 689 - Simpson v Rowe [2011] VSC 149 - Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 Category: Interlocutory applications Parties: Dominic Oliveri (Plaintiff) P M Sulcs & Associates Pty Limited (in liq) (Defendant) Representation: Counsel: M.K. Rollinson (Plaintiff) No appearance (Defendant) Solicitors: Purcell Felton (Plaintiff) No appearance (Defendant) File Number(s): 12/210690 Judgment 1By Notice of Motion dated 29 August 2012, the Applicant, Dominic Oliveri, seeks leave to proceed against the Defendant, P M Sulcs & Associates Pty Limited (in liq) ("Company") under s 500(2) of the Corporations Act 2001 (Cth). That section provides that, after the passage of a resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against a company except with the Court's leave and subject to such terms as the Court imposes. The application is supported by an affidavit of Mr Oliveri's solicitor, Ms Penelope Purcell, dated 29 August 2012. 2The factual background to the application is complex, and overlaps to some extent with the facts as outlined in my judgment delivered in the matter of Re P M Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 689. 3In broad summary, Mr Oliveri was at one point retained by the Company to act for it in proceedings ("Original Proceedings") against Daustp Pty Limited (formerly Daihatsu Australia Pty Limited) ("DAP"). Judgment was given in favour of the Company in the Original Proceedings in August 2001 in the amount of $1,390,900 and interest. DAP was also ordered to pay a substantial percentage of the Company's costs of the Original Proceedings. 4A dispute subsequently arose between Mr Oliveri and the Company about Mr Oliveri's fees claimed in respect of the Original Proceedings. The Company then brought separate proceedings in the Supreme Court of New South Wales challenging Mr Oliveri's entitlement to costs and Mr Oliveri cross-claimed to recover those costs ("Costs Proceedings"). Judgment was delivered in the Costs Proceedings in May 2009 and Mr Oliveri was held to be entitled to recover costs on a quantum meruit basis. The Court ordered that the Company pay Mr Oliveri's costs of the Costs Proceedings, partly on an ordinary basis and partly on an indemnity basis ("Costs Order"). The Company thereafter was unsuccessful in an appeal against the Costs Order ("Costs Appeal") and was ordered to pay Mr Oliveri's costs of the Costs Appeal. 5The Company was placed into administration in December 2009 and a resolution was subsequently passed for the voluntary winding up. 6In September 2010, Mr Oliveri brought proceedings ("Lien Proceedings") to enforce an entitlement to a solicitor's lien in respect of the costs in the Original Proceedings, which were settled by the Deed of Settlement to which I refer below. Mr Oliveri also brought a claim, which has not succeeded at first instance, for interest on those costs. 7A Deed of Settlement was subsequently reached between the Company, DAP and Mr Oliveri and, in my judgment delivered on 18 June 2012, I held that the Court should give a direction sought by the liquidators that they be entitled to enter into that Deed of Settlement. The Deed of Settlement provided, in summary, for DAP to pay a specified amount to the Company and to pay an amount claimed in the Lien Proceedings to Mr Oliveri. Mr Oliveri and the Company in turn agreed that the Company would set aside, from the monies it received, a specified sum, sufficient to satisfy Mr Oliveri's claim for interest on the amount claimed. There was no release as between the Company and Mr Oliveri, although the deed provided that it could be pleaded as a complete defence by the parties to any action in respect of its subject matter, except for specified proceedings. The proceedings which were excluded from that provision included proceedings (or the lodgement of a proof of debt in the liquidation of the Company) instituted or continued by Mr Oliveri against the Company in relation to the costs orders made in the Original Proceedings and the Costs Appeal. 8The proposed proceedings for which leave is now sought under s 500(2) of the Corporations Act seek to establish that Mr Oliveri has a lien, on funds recovered by the Company from DAP, securing his costs against the Company in the Costs Proceedings and on the Costs Appeal. A draft Statement of Claim is before the Court. That draft Statement of Claim seeks a declaration that Mr Oliveri is entitled to an equitable charge or lien over all money held by the Company to secure the payment to him of legal costs and interest thereon owing by the Company for costs and disbursements in the Costs Proceedings and the Costs Appeal. The proceedings also seek an order that, upon a quantified amount of costs (with or without interest) becoming due and payable by the Company to Mr Oliveri in respect of those proceedings, the Company pay Mr Oliveri so much of that amount as will not exceed the amount of that charge or lien. That order is put in that way because, it appears, the amount of costs payable by the Company to Mr Oliveri in respect of the Costs Proceedings and the Costs Appeal has not yet been assessed under the Legal Profession Act 2004 (NSW). Mr Oliveri also contends that he is entitled to an equitable charge or lien over any input tax credit in respect of goods and services tax to which the Company or its liquidator may become entitled in respect of certain matters. 9The Court's power to grant leave under s 500(2), which applies in a creditors' voluntary winding up, is similar to s 471B of the Corporations Act which applies in a winding up by the court. The purpose of this section is to prevent a company's assets being dissipated by unnecessary litigation; an applicant for leave will be required to show why it should not be left to prove its debt in the winding up, and it must show that the claim has a solid foundation and gives rise to a serious question to be tried; and factors relevant to the exercise of the court's discretion may include the degree of complexity of legal and factual issues and the prospect that a proof of debt would be rejected: Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314; (1983) 7 ACLR 669; 1 ACLC 742; Ogilvie-Grant v East (1983) 1 ACLC 742 at 743-5 per McPherson J (Wanstall CJ and Sheahan J concurring); Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 at 554-6 per Wilcox, Burchett and Beazley JJ; see also Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (recs and mgrs apptd) (in liq) (No 2) [2009] FCA 42 at [17]-[23] per Jacobson J. 10In this case, Mr Oliveri contends that his solicitor's lien extends to the costs in the Costs Proceedings and the Costs Appeal as they were incurred by him in enforcing his right to costs against the client's denial of that right, including a denial of the retainer: Re Hill (1886) 33 Ch D 266; Re Meter Cabs Ltd [1911] 2 Ch 557; see also Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451 at [113]; Simpson v Rowe [2011] VSC 149 at [26]. It is not necessary to the existence of such a lien that those costs have been assessed: Firth v Centrelink above at [117]. I am satisfied that there is a serious question to be tried as to the existence of the solicitor's lien over the monies received by the Company from DAP on that basis. It is unlikely that that question could be resolved by lodging a proof of debt in the liquidation, since any rejection of that proof of debt by the Liquidator would in turn likely lead to an appeal from that rejection and further proceedings. Leave will also more readily be granted for a proprietary claim which cannot be accommodated within the proof of debt procedure: Hewlett Packard Australia Pty Ltd v Siltek Holdings Pty Ltd [2005] NSWSC 672 at [7]; Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 at [40], on appeal [2008] NSWCA 52; (2008) 245 ALR 780; 65 ACSR 661; 26 ACLC 262 at [8]. 11I should add that the application for leave was not opposed before me. The liquidators' solicitor had advised Mr Oliveri's solicitor that the liquidator would submit to orders of the Court in this application in accordance with the Deed of Settlement. It appears that Mr Oliveri's solicitor also sent this application for leave to proceed to the directors of the Company, but that letter has been returned to sender, and she has been advised that the solicitor who previously acted for them no longer represents them. She has also received no response to a text message or email sent to one of those directors. 12Accordingly, I grant leave to the Plaintiff pursuant to s 500(2) of the Corporations Act to proceed against the First Defendant. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 November 2012