Supreme Court New South Wales Medium Neutral Citation: In the matter of N J Palmer v Onesteel Trading Pty Limited (subject to a deed of company arrangement) [2017] NSWSC 740 Hearing dates: 21 March 2017 Decision date: 21 March 2017 Jurisdiction: Equity - Corporations List Before: Black J Decision: Grant the Plaintiff leave nunc pro tunc to proceed against the Defendant in the District Court of New South Wales, any judgment not to be entered against the Defendant without leave of the court. Each party to pay its own costs in relation to these proceedings, without prejudice to the Plaintiff's right to recover his costs, as costs in the cause, of the District Court proceedings. Catchwords: CORPORATIONS — Application under s 444E(3) of the Corporations Act 2001 (Cth) to continue proceedings against company in deed administration – where company's insurer would bear the costs of defending the proceedings – where company is one of two defendants – whether leave ought be granted to continue proceedings. Legislation Cited: - Corporations Act 2001 (Cth), s 444E(3) Cases Cited: - Meehan v Stockmans Australian Cafe (Holdings) Pty Ltd (1996) 22 ACSR 123 - Mehan v Arrium Limited (formerly Onesteel Limited) & Anor [2016] NSWSC 1680 Category: Principal judgment Parties: Nathan John Palmer (Plaintiff) Onesteel Trading Pty Limited (subject to a deed of company arrangement) (Defendant) Representation: Counsel: J E Doyon (Plaintiff) E Osborne (Defendant) Solicitors: CMC Lawyers (Plaintiff) Sparke Helmore (Defendant) File Number(s): 2016/247207 Judgment – ex tempore 1. By Further Amended Originating Process filed on 21 February 2017 the plaintiff, Mr Nathan Palmer, seeks leave under s 444E(3) of the Corporations Act 2001 (Cth), nunc pro tunc, to proceed with proceedings number 2016/00089975 in the District Court of New South Wales against the Defendant, Onesteel Trading Pty Limited (subject to a deed of company arrangement) ("Onesteel Trading"). That leave is sought on the basis that any judgment would not be entered against Onesteel Trading without leave of the Court. The application is not opposed by Onesteel Trading, although both parties have properly recognised that, so far as it calls upon the Court to exercise a statutory discretion, the Court must be satisfied that the basis for that discretion is satisfied. 2. Arrium Limited (subject to a deed of company arrangement) ("Arrium") was the holding company of Onesteel Trading. It is common ground that Onesteel Trading has insurance coverage in place in relation to damages that may be payable by Onesteel Trading, in respect of personal injury suffered by Mr Palmer, if Mr Palmer is successful in his action against it, under a policy of insurance in favour of Arrium which defines the insured as all companies under the effective management and control of that entity and all subsidiary corporations. 3. Mr Palmer relies on the affidavit of his solicitor, Mr Moran, dated 15 July 2016, which refers to the circumstances in which proceedings were commenced by Mr Palmer in the District Court of New South Wales in March 2016 against Onesteel Trading, in its capacity as the occupier of certain premises, and to the circumstances in which Mr Palmer's legal representatives became aware, initially, that Onesteel Trading had been placed in administration, and subsequently that it has become subject to a deed of company arrangement. 4. By further affidavit dated 21 February 2017, Mr Moran updates developments since the application was initially filed and sets out the steps which have been taken to assess Mr Palmer's medical condition, although those steps are not presently complete. Mr Moran also refers to the steps which would be taken before Mr Palmer's employer, as distinct from Onesteel Trading as the occupier, could be joined as a party to the District Court proceedings, including the necessity for participation in a mediation, and to the likelihood that an employer would insist on the occupier being present at the mediation, or at least that the prospects of a successful resolution at the mediation would be promoted by the occupier's presence at that mediation. Mr Moran also gives evidence of his estimate of Mr Palmer's potential claim, which is relatively substantial, in excess of $800,000, albeit that amount is an estimate and may be affected by further developments. 5. Both parties have approached the matter on the basis that the relevant factors to the grant of leave, and indeed some of the matters relevant to this particular case, are as set out in my judgment in Mehan v Arrium Limited (formerly Onesteel Limited) & Anor [2016] NSWSC 1680. I there reviewed the relevant legal principles to the grant of leave under s 444E(3) of the Corporations Act which relevantly provides that, until a deed of company arrangement terminates, a person bound by a deed of company arrangement cannot proceed with a proceeding against a company, except with the Court's leave, and in accordance with any terms that the Court imposes. I also reviewed the relevant authorities, including the principles identified by Lehane J in Meehan v Stockmans Australian Cafe (Holdings) Pty Ltd (1996) 22 ACSR 123 and several factors identified in the other case law, including whether the plaintiff's claim had a solid foundation and gave rise to a serious dispute; whether the plaintiff was involved in the administrator's appointment; and the disadvantage suffered by the plaintiff if leave was refused. I will not repeat the review of other case law to which I referred in that judgment. 6. That judgment also construed, relevantly, the form of insurance policy which was available to Arrium, and which I have noted above extends to Onesteel Trading, and I there noted that the existence of insurance was a factor that weighed strongly in favour of the exercise of a discretion to grant leave, and referred to authorities that supported that proposition. I also reviewed the terms of the relevant policy and, importantly, held that the insurer's responsibility for the conduct of proceedings, under the terms of the relevant policy, was not qualified by the amount of the deductible in that policy, such that the insurer would ordinarily, under the terms of the policy, assume responsibility for the conduct of the proceedings, irrespective of whether the deductible was reached and, if it did not do so, it would be open to Arrium to act as a prudent uninsured in the relevant circumstances. Both parties have accepted, for the purpose of this application, that the construction of the policy adopted in that decision is correct. 7. Mr Doyon, who appears for Mr Palmer, in turn points, in submissions, to the applicable legal principles to which I have referred above and to the importance of the existence of insurance. He submits that, consistent with my findings in Mehan v Arrium Limited above, the conduct of the proceedings against Onesteel Trading would here not be a significant imposition upon Arrium, Onesteel Trading or the deed administrators, where it would be expected that the insurers would have the conduct of defence of the proceedings, and where it would ordinarily not be expected that Arrium or Onesteel Trading would be required to incur the costs of that defence. Mr Doyon submits, as the authorities establish, that the existence of insurance in favour of Arrium is a matter that weighs strongly in favour of the grant of leave. Mr Doyon also submits that, for the reasons noted above, the deed administrators would not be unreasonably distracted from the performance of their statutory duties or obliged to unnecessarily incur substantial legal costs in the defence of the proceedings. 8. Obviously enough, Mr Palmer was not here involved in the administrator's appointment. Mr Doyon points out, by reference to Mr Moran's evidence, that Mr Palmer would potentially suffer disadvantage if leave was refused because he may well be unable to lodge a proof of debt within the time stipulations contained in the deed of company arrangement, given the evidence as to the time that may be required for proper medico-legal assessment. Mr Doyon also submits that there would be disadvantage to Mr Palmer, of a similar kind to that which I noted in Mehan v Arrium Limited above, where a claim was potentially available against the occupier and the employer, but both would not be present at a mediation, or indeed in subsequent proceedings, if Mr Palmer was left to pursue any claim against his employer in District Court proceedings, and required to proceed by way of proof of debt under the deed administration for any claim against Onesteel Trading. 9. It seems to me that, in these circumstances, Onesteel Trading has acted sensibly and appropriately in consenting to the grant of leave in the relevant circumstances, and that the Court can be satisfied that its jurisdiction to grant such leave is properly exercised in favour of the grant of leave, so as to allow Mr Palmer to pursue a claim which, if successful, would be expected to be met by Onesteel Trading's insurer, and where that claim can then be pursued in the one proceeding, whether by way of mediation or ultimately in the District Court, in respect of both Onesteel Trading and, if necessary, Mr Palmer's employer at the time of the relevant incident. I will grant such leave, as Mr Palmer accepts, on terms that any judgment may not be entered against Onesteel Trading without leave of the Court. 10. In this matter I make the following orders by consent, but on the basis that I am satisfied that they are properly made, for the reasons set out above: 1. The plaintiff be granted leave, nunc pro tunc, to proceed with proceedings number 2016/00089975 in the District Court of New South Wales against the defendant. 2. Each party to pay its own costs in relation to these proceedings and without prejudice to the plaintiff's right to recover his costs, as costs in the cause, of the District Court of New South Wales proceedings number 2016/00089975. 3. Any judgment not to be entered against the defendant without leave of the court. 4. The exhibits may be returned. ********** 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: 22 June 2017