Supreme Court New South Wales Medium Neutral Citation: Staunton v Parfit Investments Pty Ltd [2018] NSWSC 1857 Hearing dates: 26 November 2018 Date of orders: 26 November 2018 Decision date: 26 November 2018 Jurisdiction: Common Law Before: McCallum J Decision: Pursuant to s 500 of the Corporations Act 2001 (Cth) the plaintiffs have leave to continue the proceedings against the third defendant (in liquidation) on the basis that the plaintiffs undertake that they will not, without the leave of the Court, seek to enforce against the third defendant any judgment which they may obtain against it in the proceedings. Catchwords: PROCEDURE – application pursuant to s 500(2) of Corporations Act 2001 (Cth) for leave to continue proceedings against a company in liquidation Legislation Cited: Corporations Act 2001 (Cth), s 500(2) Australian Commercial Law, s 18 Cases Cited: Active Adult Management Pty Ltd v Milstern Retirement Living Pty Ltd [2017] NSWSC 1238 Oliveri v P M Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 1311 Category: Procedural and other rulings Parties: June Edwinn Staunton (first plaintiff) Colin Andrew Towns (second plaintiff) Stillness Moves Pty Ltd (ACN 608681385) (third plaintiff) Parfit Investments Pty Ltd (ACN 5386425) (first defendant) Andrew David Cookes (second defendant) Mary Magalotti (third defendant) Life Resolutions Australia Pty Ltd (ACN 118704313) (fourth defendant) Representation: Counsel: M Hassall (plaintiff) E Debono (first and second defendants) No appearance for third and fourth defendants Solicitors: Legal on London (plaintiffs) Swaab Attorneys (first and second defendants) Melbourne Legal Chambers (third and fourth defendants) File Number(s): 2018/207262 Publication restriction: None Judgment ex tempore – revised 1. HER HONOUR: These are proceedings brought by a psychologist and her de facto husband arising out of a series of agreements pursuant to which, in summary, the psychologist agreed to sell franchises on behalf of the third defendant, Life Resolution Australia Pty Ltd. 2. After the commencement of the proceedings, that company went into voluntary liquidation. An application has been referred to me as duty judge today for leave for the plaintiffs to proceed with the proceeding as against the company in liquidation. 3. The application is brought by notice of motion filed 26 October 2018 and invokes the Court's power pursuant s 500(2) of the Corporations Act 2001 (Cth). That section provides that, after the passing of a resolution for voluntary winding-up of a company, 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. The application is neither opposed nor consented to by the liquidator. 4. The proceedings were initially commenced in the Federal Court on 4 June 2018 but were subsequently transferred to this Court. There is on the file in this Court a statement of claim filed 6 August 2018. The statement of claim pleads causes of action against the first defendant, Parfit Investments Pty Ltd, and its director, Mr Andrew Cooks. Parfit Investments was the financier in the franchise arrangements. Those parties neither oppose nor consent to the present application. 5. The relief against Parfit Investments in turn rests on the relief sought against the company in liquidation, which is the third defendant named in the statement of claim. The fourth defendant is one of the two directors of the third defendant and is alleged to be the principal negotiator in the franchise arrangements. She is and will remain a defendant to the proceedings. She also neither opposes nor consents to the application. 6. The statement of claim makes plain that the principal relief sought is against the third defendant, the company in liquidation. Specifically, it is alleged that company made misrepresentations to the first plaintiff, Ms Staunton. Causes of action are pleaded in misleading and deceptive conduct, breach of the franchising agreement and unconscionable conduct. 7. The relief sought includes declaratory relief that the third defendant has in trade or commerce engaged in conduct that is misleading or deceptive or likely to mislead or deceive in breach of s 18 of the Australian Commercial Law; declaratory relief that the fourth defendant was involved in that conduct; declaratory relief that by reason of the third defendant's misleading and deceptive conduct an agreement called "The Area Representative Agreement" is void ab initio or void; and declaratory relief that by virtue of the declarations sought (to which I have already referred), a facility agreement between the plaintiff and the first defendant and any security granted to secure that facility are void. 8. It is thus plain from the relief sought that the plaintiffs' causes of action as against the first defendant rest critically on the declaratory relief sought as against the third. 9. The proceedings have reached the stage where the defendants have filed defences. There is one outstanding cross-claim but otherwise the pleadings are closed and the matter has proceeded to the point of there being a timetable for the service of evidence. 10. There are related proceedings with which these proceedings are travelling in which the first defendant seeks an order for possession against the plaintiffs for the security property the subject of the financial agreement between them. 11. The principles in accordance with which the Court is to determine an application of this kind are well-established and not the subject of any controversy for present purposes. Mr Hassall, who appears for the plaintiffs, drew my attention to the decision of Ward J in Active Adult Management Pty Ltd v Milstern Retirement Living Pty Ltd [2017] NSWSC 1238 at [46]. I had in my own researches also identified a helpful judgment of Black J in Oliveri v P M Sulcs & Associates Pty Ltd (in liq) [2012] NSWSC 1311 where his Honour considered an application with some similarities to the present, setting out the relevant authorities at [9]. Having considered the factors listed by Ward J at [46] of the decision to which I have referred, as far as they are relevant in this case, I am persuaded that leave should be granted on the terms proposed. 12. In particular, I note that there is a measure of complexity, at least in the factual issues and potentially the legal issues involved; it is unlikely that the liquidator would accept a proof of debt; the proceedings have reached the stage where the pleadings are almost closed and evidence is being exchanged; the fourth defendant is involved in the proceedings in any event and she is one of the two directors of the company in liquidation and, most significantly, the fact that it is clear that the relief sought by the plaintiffs against the financier (the first defendant, which holds security over the plaintiffs' property) is, it would appear, critically dependent upon their obtaining relief against the third defendant. 13. For those reasons I grant the relief sought in the notice of motion as follows: 1. Pursuant to s 500 of the Corporations Act 2001 (Cth) the plaintiffs have leave to continue the proceedings against the third defendant (in liquidation) on the basis that the plaintiffs undertake that they will not, without the leave of the Court, seek to enforce against the third defendant any judgment which they may obtain against it in the proceedings. ********** 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: 04 December 2018