(2009) 178 FCR 334
- Aliprandi v Griffith Vintners Pty Ltd (1991) 6 ACSR 250
- Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261(2003) 200 ALR 491
- Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61(2001) 53 NSWLR 153
- Cape Breton Co v Fenn (1881) 17 ChD 198
- Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551(2008) 71 NSWLR 577
- Chahwan v Euphoric Pty Ltd [2008] NSWCA 52(2008) 65 ACSR 661
- Commonwealth v Crothall Hospital Services (Aust) Ltd (1981) 36 ALR 567
- Eros Cinema Pty Ltd v Nassar (1996) 133 FLR 34(1988) 12 ACLR 730
- Street v Luna Park Sydney Pty Ltd [2006] NSWSC 1317
- Transmetro Corporation Ltd v Kol Tov Pty Ltd [2009] NSWSC 350(2009) 71 ACSR 582
- Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd (1990) 20 NSWLR 251
- Vagrand Pty Ltd v Fielding (1993) 41 FCR 550
Judgment (3 paragraphs)
[1]
71 ACSR 582
- Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd (1990) 20 NSWLR 251
- Vagrand Pty Ltd v Fielding (1993) 41 FCR 550; (1993) 10 ACSR 373
Texts Cited: - MC Seddon and MP Ellinghaus, Cheshire and Fifoot's Law of Contract, 9th Australian ed [4.32]
Category: Interlocutory applications
Parties: John Charles Stark (First Plaintiff)
Rex Anthony Conway (Second Plaintiff)
Sule Arnautovic as liquidator of Staway Pty Ltd (in liq) (recs and mgrs apptd) (First Defendant)
Staway Pty Ltd (recs and mgrs apptd) (in liq) (Second Defendant)
Liberty Financial Pty Ltd (Third Defendant)
Secure Funding Pty Ltd (Fourth Defendant)
Representation: Counsel:
J.E. Lazarus (Plaintiffs)
J. Abel (First and Second Defendants - 17/5/13 - excused from further appearance)
D. Gasic (sol) (Third and Fourth Defendants)
Solicitors:
Brock Partners (Plaintiffs)
Truman Hoyle (First and Second Defendants - 17/5/13 - excused from further appearance)
Norton Rose (Third and Fourth Defendants)
File Number(s): 2013/59789
[2]
Judgment
1By Amended Originating Process dated 7 March 2013, the Plaintiffs, Mr John Stark and Mr Rex Conway seek orders under s 511 of the Corporations Act 2001 (Cth) or alternatively the Court's inherent jurisdiction that they have leave and authority to initiate and continue proceedings in the name of Staway Pty Limited (receivers and managers appointed) (in liq) ("Staway") against Liberty Financial Pty Limited ("Liberty") and Secure Funding Pty Limited ("Secure") and to defend, compromise or settle any motion, set-off or cross-claim brought in the proceedings against Staway.
Factual background
2By way of background, Staway was trustee for the "Dale Ford Trust" and, in May 2007, purchased the business and assets of Dale Ford and thereafter operated the Dale Ford dealership at Chullora, New South Wales. Its shareholders were Mr Stark and Mr Conway. JJ Way Pty Limited as trustee for the Stark Family Trust held 50 units in the Dale Ford Trust and Rexway Pty Limited as trustee for the Conway Family Trust also held 50 units in that trust.
3Staway entered a Bailment Agreement ("Bailment Agreement") with Liberty in March 2009, which was directed to financing certain vehicles under a floor plan financing arrangement to a maximum amount of $1 million. Staway later granted a fixed and floating charge ("Charge") in favour of Secure over its assets, executed on 5 March 2010. It is common ground that Secure is a wholly owned subsidiary of Liberty. The term "Secured Money" was defined in the Charge by reference to monies owing to the "Chargee", that is, Secure rather than Liberty. Clause 14.1 provided for an event of default if any of the Secured Money was not paid when due and payable or if Liberty failed to perform any provision of the Floor Plan Facility (as defined), the Charge or any collateral security and that failure was not capable of remedy or continued for 10 business days after Staway received a notice from Secure requiring that the failure be remedied, or if any representation, warranty or statement made or repeated in connection with the Floor Plan Facility, the Charge or any collateral security was untrue or misleading when made or repeated, inter alia. The term "Floor Plan Facility" was defined as the arrangements between Secure, Liberty and any guarantor comprising the Bailment Agreement, Dealer Agreement, Term Sheet, Charge and any collateral security. The term "Collateral Security" was defined by reference to the concept of "Secured Money" which in turn related to Secure.
4Mr and Mrs Stark, Mr Conway, JJ Way and Rexway each gave guarantees of Staway's obligations under the Bailment Agreement. Mr and Mrs Stark and Mr Conway also gave mortgages over their respective properties in favour of Secure in respect of these arrangements.
5In September 2010, Staway obtained a new floor plan finance facility and a loan from Secure. Further documentation was signed in October 2010 including a Second Supplementary Term Sheet extending the Floor Plan Facility and a Deferred Payment Program Agreement ("DPP Agreement") between Staway and Liberty which, broadly, permitted Staway to defer receipt of the purchase price form customers and corresponding payments to be made by it to Liberty in respect of bailed vehicles sold by the dealership to fleet owners and larger customers on extended payment terms. The events of default under the DPP Agreement included failures to make payments on time under any Transaction Document (as defined) and any incorrect representation or warranties made by Staway or on its behalf in connection with a Transaction Document.
6It appears that, at least by October 2011, Staway was suffering financial difficulties, at least in part associated with limited availability of Ford vehicles for sale following natural disasters in Thailand and Japan. It also appears that vehicles were sold by the dealership to retail customers on a "sold out of trust" (SOT) basis, by which title to the vehicle was transferred to the purchaser in circumstances that Staway had not yet paid the cost price for the vehicle to Liberty. Mr Stark's evidence, which was not contested for the purposes of this application, was that he had a discussion with representatives of Liberty on 27 October 2011 in which he indicated that cashflow was very tight and debtors were "blowing out" and Liberty expressed a concern that Staway was "well over in your DPP limits" and sought written confirmation as to how Staway expected to get the amounts under the DPP arrangements in order. By email dated 3 November 2011, Mr Stark advised Liberty of steps to be taken to address that concern (Stark 25.2.2013 [59], Tab 25).
7On 4 January 2012, Liberty requested that all DPP amounts over 45 days be paid by 31 January 2012.
8In mid February 2012, senior managers of Secure met with Messrs Stark and Conway. Messrs Stark and Conway contend that a plan was agreed at that meeting for reducing outstanding amounts in respect of SOT vehicles and the DPP arrangements. Mr Stark gives evidence of the relevant meeting and Liberty and Secure rely on minutes of the meeting prepared by a representative of Secure. Mr Stark's evidence is that Secure and Liberty required a repayment schedule of one SOT vehicle per month starting in February 2012 and Mr Stark offered his motorboat as security while the SOT position remained. Mr Stark's evidence is also that he indicated that Staway had been
"stretching DPP payments to manage cashflow by paying the oldest outstanding DPPs first when funds become available".
Mr Stark's evidence is that a representative of Liberty responded that
"You don't have to be Einstein mate to work that out. We've known this for some time."
Mr Stark's evidence is also that he referred to having paid more to Liberty than was received from a particular fleet purchaser from the Company's cash resources. Mr Stark's affidavit records a statement, at the conclusion of the meeting, by a representative of Liberty, Mr Heinnen, to the effect that "We will discuss this matter with Kendall [Mahnken] [a senior executive of Liberty] and get back to you". Liberty and Secure place substantial weight on that statement as indicating that no concluded agreement had been reached at that meeting.
9Mr Stark contends that he understood from that meeting that a "Go Forward Agreement" had been reached, the essential terms of which he describes as:
"(a) Staway's existing repayment obligations pursuant to the floor plan facility in respect of DPPs and SOT vehicles would be deferred;
(b) Staway would pay off one SOT vehicle on the fifteenth day of each month, such repayment schedule to be reviewed after 90 days;
(c) The repayments for the SOT vehicles would be secured by Staway procuring Mr Stark to provide security over his motor vessel in favour of Liberty;
(d) Amounts owing by Staway to Liberty in respect of DPPs which were outstanding for more than 60 days would be paid out by 31 March 2012;
(e) Staway was expected to trade out of its DPP backlog on the basis that back orders for Ford vehicles would be able to be filled during March 2012 and thereafter; and
(f) Staway would implement a plan to reduce its stockholdings and thereby reduce its monthly floor plan costs."
10Those items overlap with matters recorded in the minutes of that meeting prepared by Liberty which include reference to Staway paying out "one SOT vehicle per month", with that arrangement to be reviewed after 90 days; Mr Stark offering his motorboat to Liberty "as additional surety whilst the SOT position persists"; and to several action items consistent with such an arrangement. The action items in the minutes of the meeting cover steps to be taken between mid-February 2012 and 31 May 2012, contemplating, for example, a review of the SOT repayment schedule in the light of current profitability and SOT outstandings in mid-May 2012. Those minutes do not record any suggestion that the action items were, for example, conditional upon any further agreement of Liberty.
11The minutes of the meeting prepared by Liberty also record that:
"[Stark] advised that [Staway] had been manipulating DPP payments so as to meet the commitment dates on DPPs regardless of whether Dale has received payments from the vehicle debtor. [Stark] and [Conway] believed that [Staway] has paid $200K to $300K more to Liberty on DPPs than they have received from [customer], with the funds coming from their cash resources".
Mr Gasic, solicitor, who appeared for Liberty and Secure in this application, placed substantial weight on the language of "manipulation" of the DPP payments. However, Liberty and Secure led no evidence in this application to describe what was involved in that conduct and I am left in a state of uncertainty as to what was involved in it. On the one hand, Staway appears to accept, and the conversation at the meeting to which Mr Stark referred suggests, that Staway was obtaining some cashflow advantage from the manner in which it approached paying out DPP payments; on the other hand, the minutes prepared by Liberty suggest that, in fact, Staway was paying out a greater amount on the DPP plan than it had received from customers. It seems to me that, to the extent that Liberty and Secure sought to rely on the "manipulation" of DPP payments as a factor warranting the refusal of leave to Mr Stark and Conway to bring the proceedings, they needed at least to identify, with a degree of precision, what was involved in that conduct. They have not done so and I give that matter little weight.
12Following the February meeting, a general manager of Liberty, Ms Jordan, attended at the Dale Ford dealership for an extended period. A General Security Agreement and a Receivables Purchase Agreement were executed by Staway and Messrs Stark and Conway and their associated entities on Friday 2 March 2012 and Mr Stark executed a General Security Agreement over his motorboat on the same date. It appears that at least some of the documents executed on 2 March 2012 were executed in connection with the introduction of the Personal Properties Securities regime; however, the additional security granted in respect of Mr Stark's motorboat did not fall with that class.
13Also on 2 March 2012, Messrs Stark and Conway submitted a further business plan to Ms Jordan (Stark 25.2.2013 [155]). Mr Stark also gives evidence of a conversation with Ms Jordan on the same date to the effect that:
"I will phone you on Monday and I will be back at the dealership late next week.
Over the next few weeks, I'm your new best friend until we work through this situation.
There will be 3 people running this business, John [Stark], Rex [Conway] and Lynne Jordan, but we will overcome these problems."
Whether a conversation in these terms occurred will be a matter to be determined at any final hearing. If it occurred, it is potentially inconsistent with the appointment of a receiver by Secure shortly thereafter, to which I will refer below.
14Also on 2 March 2012, Ms Jordan sought a letter from Mr Stark and Mr Conway explaining certain matters which was said to be for the purposes of discussions with Liberty's Credit Committee. That letter was provided on the same day and expressed Messrs Conway and Stark's sorrow "for the current situation" and referred to the impact of the global financial crisis, deterioration in Ford's market share in New South Wales and the withdrawal of Ford Credit from the Australian motor industry, and the stock shortages to which I have referred above. The letter also indicates that:
"I [Mr Stark] believed at that time that the actions of our conversion were able to be repaid from the drawdown of the business loan in combination with our Ford receivables.
We are by no means excusing our actions, but trying to show we were not intentionally looking to mislead or personally profit in any way, other than to balance as best we could our daily cashflow to support the ongoing business."
Liberty placed significant weight on the reference to "the actions of our conversion" in that letter, which presumably refers at least to the sale of vehicles out of trust and may or may not also refer to breaches of the terms of the DPP Agreement.
15Secure moved promptly to the appointment of receivers, after the discussions in February 2012 and the steps taken to improve its security position, including obtaining security over Mr Stark's motor boat on 2 March 2012. On 7 March 2012, Liberty served Staway with a default notice (Stark 25.2.13 [181]). That default notice referred to the Floor Plan Facility provided by Liberty to Staway and to breach of obligations owed to Liberty under the Floor Plan Facility, specifically that:
- As of today, 126 vehicles have been identified as sold out of trust with a total value of $4,579,485;
- The amount of $4,579,485 has not been paid when due and payable; and
- Untrue and misleading representations and statements have been paid to Liberty and its representatives in respect of the utilisation of the Floor Plan Facility by Staway."
That notice purported to allow Staway 10 business days' notice to cure the default, after which Liberty would take further action to protect its interests, which, it was stated, may include the appointment of a receiver in respect of the secured property. That notice did not, in terms, give notice of the appointment of receivers by Secure.
16In fact, Secure, rather than Liberty, appointed receivers and managers to Staway on 7 March 2012, the same day as the default notice was given. That occurred after Messrs Stark and Conway signed a Consent to Appointment of Receiver proffered by Secure which provided:
"We hereby:
- acknowledge that Staway is obliged to pay $4,579,485 to Liberty immediately as set out in the Default Notice dated 7 March 2012; and
- consent to Secure appointing a receiver with immediate effect to the Secured Property (as defined in the Charge)."
That document also contains a handwritten notation "Signed under duress 7/3/12 at 7.30pm". Mr Stark's evidence is that the consent to appointment of the receivers, who characterised the appointment as being by Liberty under security documents given by Staway to Liberty (as distinct from by Secure under the Charge). Mr Stark seeks to support the allegation of duress by reference to a statement made by the representative of the receivers that Mr Stark and Mr Conway either had to sign the consent to appointment of the receiver or the receivers would "close the dealership now and remove all your stock this evening". If that statement was made, it would at least potentially be inconsistent with the terms of the default notice given by Liberty to Staway, which purportedly allowed 10 days to remedy the default. Mr Stark also refers to having requested the opportunity to seek legal advice, and to a representative of Liberty then having given an instruction to remove the stock, change the locks and secure the property, following which Mr Stark and Mr Conway signed the consent. Whether that evidence is accepted is a matter for a final hearing. Liberty and Secure did not seek to controvert it on this application.
17Subsequently, Messrs Stark and Conway were dismissed as employees of Staway; Ford Motor Company cancelled Staway's dealership; the receivers abandoned Staway's premises; Secure repossessed Mr Stark's motorboat; and Liberty or Secure have sought possession of Messrs Stark's and Conway's homes under the securities to which I have referred above. Messrs Stark and Conway advanced several criticisms of the conduct of the receivers and Liberty and Secure in this regard, to which I will refer below.
18Staway was placed in voluntary liquidation on 7 September 2012. A proposal to authorise the liquidators to commence the proposed proceedings was considered at a meeting of creditors of Staway held on 21 December 2012, but was defeated when Liberty voted against the resolution (Ex GBV-1, Tab 13).
19It should be recognised that the amount owing by Staway to Liberty and Secure is substantial. Mr Stark's evidence acknowledges that the amount owing in respect of the Floor Plan Facility Agreement is in excess of $5.8 million and the amount owing in respect of the capital loan is in excess of $269,500. The claim for damages in the proposed Commercial Division proceedings is substantially in excess of that amount, although whether the damages claimed are ultimately recoverable would depend on the outcome of a final hearing, if leave to bring the proceedings is granted.
Grant of leave to proceed against Staway
20The Plaintiffs seek leave, under s 500(2) of the Corporations Act, to commence and proceed with these proceedings against Staway, nunc pro tunc from 26 February 2013. That application is necessary because Staway, as noted above, is in liquidation and has properly been joined as party to these proceedings so as to be bound by the outcome.
21Liberty and Secure's position was initially that Messrs Stark and Conway have no standing in relation to the application for leave under s 500(2) of the Corporations Act, and that application needed to be determined in advance of the determination of the grant of leave under s 511 of the Corporations Act. I do not understand that submission to have been pressed in oral submissions and its basis was not articulated. On the face of it, it seems to me that Messrs Stark and Conway have standing to bring the application, since 500(2) does not limit the persons who may bring such an application to particular classes of persons, and Messrs Stark and Conway are contributories of Staway and have an obvious interest in obtaining leave to pursue the relevant proceedings on Staway's behalf.
22The factors relevant to the grant of leave to proceed against Staway include whether a serious question to be tried is shown, 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 have progressed: Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314 at 317; Hu v PS Securities Pty Ltd as trustee of Joseph Family Trust & Anor [2011] NSWSC 303 at [20]. It seems to me that it is appropriate to grant such leave, since the question of the Plaintiffs' ability to bring derivative proceedings could only be determined by the Court, and not by lodgement of a proof of debt in the liquidation: Vagrand Pty Ltd v Fielding (1993) 41 FCR 550 at 555; (1993) 10 ACSR 373; Re Gordon Grant and Grant Pty Ltd above at 317.
Grant of leave to bring derivative action
23Messrs Stark and Conway seek leave to bring the proposed proceedings in the Court's inherent jurisdiction and under s 511 of the Corporations Act. Liberty opposed the grant of that leave and contends that, if the Court is minded to grant leave, it should only do so on condition that security is provided for the anticipated costs of Liberty and Secure in defending the proceedings.
24The general principle is that proceedings in the name of a company in liquidation should be conducted by the liquidator: Scarel Pty Ltd v City Loan and Credit Corporation Pty Ltd (No 2) (1988) 17 FCR 344; (1988) 12 ACLR 730 at [733]; Hu v PS Securities Pty Ltd above at [35]. However, the power to grant leave to a creditor or contributory of a company in liquidation to use a company's name as a plaintiff is available in the Court's inherent jurisdiction and under s 511 of the Corporations Act: Hu v PS Securities Pty Ltd above at [25]-[29]. Where a company is in liquidation, that power is available to the exclusion of the statutory derivative action under Part 2F.1A of the Corporations Act: Chahwan v Euphoric Pty Ltd [2008] NSWCA 52 at [124]-[125]; (2008) 65 ACSR 661.
25In Aliprandi v Griffith Vintners Pty Ltd (1991) 6 ACSR 250, McLelland J observed that the Court's inherent power to order that a creditor or contributory of a company in liquidation be authorised to use the company's name as plaintiff "is of respectable antiquity and is sanctioned by high authority". His Honour noted that that jurisdiction was based on the principle that allows a person to obtain orders in chancery against his or her trustee to be allowed to use the trustee's name to recover trust property: Cape Breton Co v Fenn (1881) 17 Ch D 198 at 207. In Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551; (2008) 71 NSWLR 577 at [25], Barrett J noted that the power to authorise derivative proceedings by a beneficiary in the name of a trustee was available "in special circumstances", which could involve a failure, excusable or inexcusable, by the trustee in the performance of the duty they owed to the beneficiary to protect the trust property or protect the interests of the beneficiary of the trust estate. His Honour also identified (at [34]) three matters which should be taken into account in an application for such leave, namely:
"1. The question whether the proceedings proposed to be pursued have some solid foundation, in that they exhibit such a degree of merit as to be neither vexatious or oppressive and to present reasonable prospects of success.
2. The attitude of the liquidator to the question whether the proceedings should be pursued.
3. The question whether 'practical considerations support the initiation of the proceedings', with particular reference to the financial protection of the liquidator and the estate of the company by means of indemnity and, if indicated, security."
That test was also adopted by Ward J in Hu v PS Securities Pty Ltd above at [38]ff.
26Section 511 of the Corporations Act in turn provides for the liquidator, or a contributory or creditor of a company, to apply to the Court to determine any question arising in the winding up of a company or to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court. In ACT Commissioner for Revenue v Slaven [2009] FCA 744; (2009) 178 FCR 334, Rares J referred to that section as the source of "the Court's undoubted jurisdiction and power to permit a person other than the liquidator to commence proceedings in the Company's name when it is in voluntary liquidation". In order to grant such leave under s 511, the Court must be satisfied that the commencement and conduct of the proceedings in the name of Staway will be just and beneficial, and the Court may accede wholly or partially to such an application on such terms and conditions as it thinks fit or make such other order on the application as it thinks just: Hu v PS Securities Pty Ltd as trustee of the Joseph Family Trust & Anor above at [27].
Whether Staway's proposed claim has a solid foundation
27I turn now to the question whether the claim which Messrs Stark and Conway seek to bring on behalf of Staway has a solid foundation, in the sense referred to in Carpenter v Pioneer Park Pty Ltd above. I will review the claims sought to be advanced and the criticisms which Liberty and Secure advance of them before expressing a view as to whether those claims, taken as a whole, have a solid foundation. Several possible issues as to the legal basis of the claims were not addressed by the parties in submissions and I will proceed on the basis that I should not address, at least in any detail, such issues.
28By the proposed Commercial List Statement, Staway claims damages arising out of an alleged breach of contract by Liberty and Secure and other alleged breaches of equitable and statutory duties and Mr Stark seeks injunctive and other relief concerning the taking of possession of his boat. The issues likely to arise are identified as, inter alia:
whether a "Go Forward Agreement" or Variation Agreement was reached between Liberty and/or Secure and Staway;
whether that agreement was breached;
whether there was an Event of Default under the Charge entitling secure to appoint receivers and managers to Staway;
whether Secure had any right, contractual or otherwise, to appoint receivers and managers to Staway;
whether Liberty and Secure are estopped from denying the existence of the "Go Forward Agreement" or Variation Agreement and taking certain other steps;
whether Liberty and Secure contravened s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) or alternatively ss 21 and 22 of Schedule 2 to the Competition and Consumer Act 2010 (Cth);
whether Liberty and Secure were knowingly involved and concerned in breaches of equitable and statutory duties by the receivers; and
whether Liberty and Secure were officers and controllers of Staway within the meaning of s 9 of the Corporations Act and owed statutory duties to Staway and breached those duties.
29Paragraphs 20-21 of the proposed Commercial List Statement plead the "Go Forward Agreement" or alternatively a Variation Agreement in respect of the Floor Plan Facility, in terms which reflect Mr Stark's evidence and the minutes of the meeting of February 2012. Paragraph 22 pleads an implied term of the Go Forward Agreement or alternatively the Variation Agreement that:
"Liberty would take no action to recover amounts that would otherwise be owing to it under the Floor Plan Facility, to enforce any security in its favour, or to procure Secure to enforce any security in its favour, for so long as Staway complied with its obligations under the Go Forward Agreement, or alternatively the Variation Agreement".
It does not seem to me that that allegation can be said to be so devoid of merit as to be either vexatious or oppressive or to be without reasonable prospects of success. Mr Stark's evidence at to the February meeting is largely consistent with the minute of that meeting prepared by Liberty and, if it is accepted and the Court finds that an arrangement was reached in the terms discussed at that meeting, then the performance of the obligations imposed upon Staway by that arrangement necessarily appear to contemplate the continuance of the financing relationship with Liberty and Secure, rather than it would be brought to an end by the appointment of receivers shortly after Staway had entered into a Receivables Purchase Agreement with Secure and Mr Stark had executed the additional security agreement over his motorboat as contemplated by that arrangement.
30Liberty and Secure contend that there was no "Go Forward Agreement" and that the discussion at the meeting in mid-February 2012 on which Messrs Stark and Conway (and ultimately Staway) rely was left on the basis that "[Secure] will get back to you". While Liberty and Secure may ultimately be able to establish that proposition in a hearing on the merits, it is by no means self-evident, particularly where they have not led evidence in this application, and does not seem to me to indicate that this claim does not have a solid foundation. I also accept Mr Lazarus' submission that Staway could potentially succeed at a hearing without establishing that a contract was formed during the meeting itself, where that contract may have been formed by Liberty and Secure later accepting an offer made by Staway at that meeting, for example by taking security over Mr Stark's motorboat; or by a course of conduct, of which the meeting and the taking of that security formed part. It might be added that the question whether a commercial arrangement constitutes a contract is not necessarily to be approached by strict analysis of whether, for example, there was offer and acceptance in accordance with classical contract theory: New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 at 167; Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [71]-[74].
31Liberty and Secure also contend that clause 15.13 of the DPP Agreement deprives any agreement reached at the February meeting of effect. That clause provides that:
"A provision of a Transaction Document, or a right created under it, may not be waived or varied except in writing signed by the party or parties to be bound."
It seems to me to be seriously arguable that that clause would not deprive such an agreement, if it was reached, of effect. First, as Mr Lazarus points out, that provision may be waived or varied informally at the same time as a waiver or variation of the DPP Agreement and associated documents, even if that is not in accordance with that clause: Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd (1990) 20 NSWLR 251; Commonwealth v Crothall Hospital Services (Aust) Ltd (1981) 36 ALR 567; MC Seddon and MP Ellinghaus, Cheshire and Fifoot's Law of Contract, 9th Australian ed [4.32]. Second, a clause of this kind will not necessarily provide an effective barrier to a claim in estoppel or statutory unconscionability.
32The proposed Commercial List Statement pleads that the appointment of receivers by Secure was invalid, because there was no event of default within the meaning of the Charge (paragraphs 27-36). I have referred to the terms of the Charge in paragraph 3 above. Following the completion of oral submissions, I granted leave to make submissions in relation to the Deed of Appointment of the receivers dated 17 March 2012, which had been tendered by Liberty and Secure late in the hearing. Further submissions were then made by Liberty and Secure that arguably went well beyond that leave. I will nonetheless address them, since Messrs Stark and Conway have had and utilised an opportunity to respond to them.
33Liberty and Secure point out that clause 14.5 of the Charge provides that Secure may enforce it by appointing a receiver upon an Event of Default occurring and that the clause does not require Secure to issue a demand or notice before enforcement. They contend that several Events of Default (for the purposes of the Charge) existed and that the Charge had become enforceable at the time the receivers were appointed to Staway. In particular:
Pursuant to s 500(2) of the Corporations Act, the Plaintiffs have leave to commence and proceed with these proceedings against the Second Defendant, such leave to take effect nunc pro tunc on and from 26 February 2013.
Pursuant to s 511 of the Corporations Act, and the inherent jurisdiction of the Court, the Plaintiffs have leave and authority to:
(a) initiate and continue proceedings in the name of Staway Pty Limited (receivers and managers appointed) (in liquidation) ("Staway") against the defendants named in the draft Summons and Commercial List Statement annexed to the affidavit of Mr Graeme Bruce Veitch sworn 25 February 2013 in relation to the facts and circumstances pleaded in the draft Commercial List Statement (the "Proceedings"); and
(b) defend, compromise or settle any motion, set off or cross-claim brought by the defendants, or any of them, in the Proceedings against Staway.
The Plaintiffs, and each of them, be authorised at their own expense and risk as to costs, to use the name of Staway as a plaintiff or co-plaintiff or cross defendant or co-cross defendant in the proposed Proceedings.
The Plaintiffs jointly, and each of them severally, indemnify the liquidator of Staway for all costs reasonably incurred by Staway in respect of the proposed Proceedings.
The terms of the Deed of Indemnity proffered by the Plaintiffs to the Liquidator in the form and terms of the Deed of Indemnity annexed to the affidavit of Mr Graeme Bruce Veitch sworn 25 February 2013 are noted.
64In proceedings number 2012/266739, I order that:
1 On the basis of the usual undertaking as to damages previously given to the Court by the Defendants by their counsel, the stay of execution or other enforcement orders made by Brereton J on 25 March 2013 be extended to 26 July 2013 or earlier further order of the Court.
2 The proceedings be relisted for directions before Black J at 9.30am on 26 July 2013.
[3]
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: 23 June 2013
Liberty and Secure submit there was an Event of Default was established under clause 14.1(a) of the Charge by reason of Staway's failure to pay the Secured Money to Liberty. However, they do not identify the basis on which they contend that the definition of "Secured Money" extends to money owed to Liberty as distinct from money owed to Secure.
Liberty and Secure also submit that an Event of Default existed under clause 14.1(b) of the Charge by reason of Staway's failure to perform obligations under the Floor Plan Facility (as defined in the Charge) by failing to account for vehicles which had been sold out of trust and vehicles sold on DPP terms without the requisite funds being remitted to Liberty. They do not address whether that failure is alleged to have been incapable of remedy; although this clause required notice of the breach to be given where a default was capable of remedy.
Liberty and Secure also contend that an Event of Default existed under clause 14.1(c) of the Charge through misrepresentations made by Messrs Conway and Stark and Staway to Secure and Liberty. Secure's ability to rely on that matter would depend both on the nature of the alleged conduct and the effect of the February meeting to which I have referred above. These seem to me to be matters for a hearing and not matters that deprive Staway of an arguable case.
Liberty and Secure also submit that an Event of Default existed under clause 14.1(i)of the Charge by reason of a compromise reached between Staway and Liberty at the February meeting. It seems to me at least arguable that the reference to a compromise or arrangement in that clause is not to a compromise of that character, but to a compromise or arrangement between the body corporate and its members or creditors of the kind contemplated in s 411 of the Corporations Act.
Liberty and Secure also contend that an Event of Default had arisen under cross-default provisions in clause 14.1(m)(i) and (iv) of the Charge, by reason of defaults under the Floor Plan Facility. That allegation may again require further examination of the arrangements on which Staway relies arising from the February meeting and also seems to me also to be a matter for a hearing and not a matter which deprives Staway of an arguable case.
34Clause 14.1(l) of the Charge, on which Liberty and Secure relied in oral submissions, in turn provides for an Event of Default, on which the Charge at Secure's option becomes enforceable:
"If a change occurs which, in the opinion of [Secure] formed in good faith, may have a Material Adverse Affect on [Staway], any Related Body Corporate or any Guarantor."
It may be that Secure is ultimately able to establish that it was entitled to rely on this provision at a final hearing. However, Liberty and Secure led no evidence on this application to establish either that Secure formed the relevant opinion, or that it did so in good faith, and that matter therefore does not indicate that Messrs Stark and Conway do not have a claim that warrants the grant of leave.
35Clause 17.1(a) of the Charge provided that Secure could appoint a receiver, inter alia, if the directors of Staway request it to do so. The proposed Commercial List Statement also pleads that the document consenting to Secure appointing a receiver with immediate effect was not a valid request for the appointment of a receiver within the meaning of clause 17.1(a) of the Charge on the basis, inter alia, that the document was signed under duress and on the basis of representations made by Secure. I have referred to the circumstances said to give rise to that duress in paragraph 16 above. A further issue was raised in the course of submissions, which seems to me to have some force, namely that clause 17.1(a) of the Charge permits Secure to appoint a receiver, not where Staway has consented to that course, but where Staway has "requested" that course. It seems to me at least seriously arguable that a "consent" to an act which Secure had initiated is not, of its nature, a request to Secure to initiate that act for the purposes of clause 17.1(a) of the Charge.
36Liberty and Secure also tendered the Deed of Appointment by which the receivers were appointed. That document makes clear that the appointment was made by Secure and its recitals refer to the Charge granted by Staway to Secure. Mr Gasic submitted, in the course of oral submissions that the Charge "was, in effect, a Charge that secured not only the obligations to Secure, but also the obligations to Liberty". My attention was not drawn to any basis for that submission in the terms of the Charge. Liberty and Secure rely on the fact that the notification of details of a charge lodged with the Australian Securities and Investments Commission was signed by Ms Kendall Mahnken who was there described as "General Manager - Personal Business Liberty Financial". However, the fact that the notification of the Charge to ASIC was executed by an officer of Liberty does not seem to me to assist with the construction of its tems. The reference to "trustee" in the form of notification to ASIC, on which Mr Gasic relied, also does not seem to me to assist Liberty or Secure since it is an aspect of the prescribed form of notification to ASIC and refers to a debenture trustee, where applicable.
37The proposed Commercial List Statement pleads that Staway has suffered loss and damage as a result of the alleged breach, particularised by reference to a contention that it would have overcome its temporary financial difficulties and returned to profit within a relatively short time if the receivers had not been appointed, or alternatively by reference to the difference in value between the market value of its assets and the amount recouped from the sale of such assets by the receivers. Staway may well face challenges in proving that loss and damage, as Mr Lazarus frankly accepted in submissions, but the claim may be maintained as a loss of opportunity case. On the other hand, Security and Liberty contend that, even if the "Go Forward Agreement" was enforceable, no loss could follow from the breach because the receivers were obliged to obtain the "market price" for any sale and the evidence of Mr Stark suggests that the value of the assets were limited unless sold as a going concern. I do not accept this submission since it does not follow from the fact that the receivers were obliged to obtain the "market price" for any sale that they, in fact, did so. That is a question for determination in any substantive proceedings.
38The proposed Commercial List Statement also pleads that Liberty breached the "Go Forward Agreement" and the alleged Variation Agreement by appointing receivers (paragraphs [37]-[39]). It seems to me that those breaches are at least seriously arguable, if the existence of those agreements is established.
39The proposed Commercial List Statement pleads that Liberty was estopped by representations which it had made from appointing receivers (paragraphs [40]-[44]). Liberty did not seek to advance a submission that the elements of this cause of action could not be established as a matter of law, and it is not necessary to address those elements in detail. I nonetheless note that, in Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 at 610, the elements of an estoppel were formulated as requiring:
"the creation or encouragement by the Defendant in the Plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the Plaintiff by the Defendant, and reliance on that by the Plaintiff, in circumstances where departure from the assumption by the Defendant would be unconscionable."
In Evans v Evans [2010] NSWSC 170 at [36], Brereton J observed that the defendant's knowledge or intention that the party who adopts an assumption will act or abstain from acting in reliance on it:
"is easily inferred where the adoption, assumption or expectation is induced by the making of a promise or representation, but may also be found where a defendant encourages a plaintiff to adhere to an assumption or expectation already formed, or acquiesces in an assumption or expectation when, in conscience, objection ought to be stated. The unconscionability which attracts the intervention of equity is the defendant's failure, having induced or acquiesced in the adoption of the assumption or expectation, to fulfil it, or otherwise to avoid the detriment which that failure would occasion."
40The estoppel case arises from a claimed representation that Liberty and Secure would take no steps, inter alia, to enforce the relevant securities if Staway complied with its obligations under the arrangements discussed in February 2012. The fact that Mr Stark provided additional security over his motorboat as contemplated by the action items at the February meeting and the short time between the steps taken to improve Liberty's and/or Secure's security position and the appointment of receivers would arguably provide some support to this claim.
41The proposed Commercial List Statement pleads that Liberty and/or Secure engaged in unconscionable conduct in respect of the appointment of the receivers and contravened s 12CB of the Australian Securities and Investments Commission Act and ss 21 and 22 of Schedule 2 to the Competition and Consumer Act 2010 (Cth). Liberty did not seek to advance a submission that the elements of this cause of action could not be established as a matter of law, and it is not necessary to address those elements in detail. I note that the concept of unconscionability in these sections involves "serious misconduct or something clearly unfair or unreasonable" and contemplates actions which show "no regard for conscience, or that are irreconcilable with what is right or reasonable" or involve "a high degree of moral obloquy": Hurley v McDonald's Australia Pty Ltd [1999] FCA 1728; (2000) ATPR 41-741; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491 at [184]; Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557 at [121]. The matters that are pleaded to support the element of unconscionability in an estoppel case would arguably support a claim for statutory unconscionability although there will, not doubt, be a real contest at any hearing as to whether the relevant conduct has the character necessary to establish a breach of the sections.
42The proposed Commercial List Statement pleads that Liberty and/or Secure were knowingly concerned in alleged breaches of the receivers' duties owed to Staway (paragraphs [48]-[52]). The premise of this claim is that the receivers owed duties to Staway, in equity, to exercise their powers in good faith, to deal fairly with Staway's interests and to refrain from acting in wilful or reckless disregard of Staway's interests, and Staway also relies on the statutory duties imposed on "officers" of a corporation under ss 180-181 of the Corporations Act and the standard of care specified in s 420A of the Corporations Act in respect of the exercise of a power of sale by receivers. Staway contends that the receivers breached those duties by failing to take reasonable steps to investigate a possible sale of the business to potential purchasers, failing to proceed with existing contracted sales of vehicles, procuring the cancellation of the dealer agreement and terminating the employment of senior employees, arranging for the sale of fixed assets and motor vehicles at undervalue, and failing to secure and protect Staway's stock other than new cars situated at its business premises.
43The allegation of knowing involvement against Liberty and/or Secure is particularised by reference to instructions which are alleged to have been given by Liberty and/or Secure to the receivers in the manner as to the manner in which they should proceed to realise the assets of the business. Liberty and Secure contend that there is no arguable case in respect of the allegations of knowing concern because the receivers were appointed as agents of Staway and not of Secure or Liberty, neither of whom were responsible for any breaches of duty (none of which are conceded) by the receivers. In order to displace the allegations of accessorial liability, Liberty and Secure rely on clause 17.4 of the Charge which provides that:
"Any Receiver appointed under this Charge is the Chargor's agent unless the Chargee notifies the Chargor that the Receiver is to act as the Chargee's agent. The Chargor is solely responsible for anything done, or not done, by Receiver and for the Receiver's remuneration and costs."
Liberty and Secure also rely on clause 6 of the Deed of Appointment of the receivers which provides that:
"To the extent allowed by law the Receivers are the agents of the Chargor, and the Chargor alone is responsible for the Receivers' acts and defaults."
44However, even if the receivers were validly appointed as agents of Staway and breached their equitable or statutory duties in that capacity, it would not follow that third parties who were knowingly involved in that breach could not be held liable for knowing assistance in equity or as persons involved in a contravention for the purposes of s 79 of the Corporations Act. Liberty and Secure contend that it is not explained by Staway why it is not proposed to join the receivers and managers in the proceedings. It does not seem to me that that matter provides any reason not to grant the leave sought, since a claim for accessorial liability can be maintained without joining the alleged principal in breach in the proposed proceedings.
45Liberty and Secure also refer, in response to the allegations of knowing concern, to a letter dated 20 March 2012 from Messrs Stark and Conway to Liberty identifying concern that the receivers and managers were unfamiliar with the operation of motor dealerships and were acting in a way which, Messrs Stark and Conway contended, would damage the business and "obliterate any opportunity of a successful sale of this business". That letter indicates that the complaints now made as to the conduct of the receivership are not of recent origin, but does not seem to me to provide any support to Secure or Liberty in displacing the allegations as to their involvement, which are founded on instructions which it is contended they gave to the receivers. Liberty and Secure contend that there is no evidence that third parties were interested in buying the relevant business, so as to support the allegations of breach of the receivers' duties in respect of the sale of the business. There is evidence of at least one potential purchaser for the business and further evidence as to this matter seems to me to be a matter for any hearing, and not necessary to establish that the claim has a solid foundation at this stage.
46Liberty and Secure also contend that the allegations of knowing concern pleaded in paragraphs 48-56 of the proposed Commercial List Statement are not sufficiently pleaded or particularised, and there is some force in this submission that the pleadings and particulars are presently somewhat abbreviated. Having said that, Mr Stark's affidavit identifies the directions which it is contended were given by Liberty and/or Secure to the receivers, which appear to found the claim for knowing involvement and further particulars may be sought of the allegations in the Commercial List proceedings, or any issue as to the adequacy of that pleading raised in those proceedings. I do not consider that that matter provides a basis for declining leave. The allegations of knowing involvement are plainly fact-intensive, and may or may not be established at a hearing. However, I do not consider that they can be said to be not seriously arguable on the basis of the evidence which Staway has led in the application.
47The proposed Commercial List Statement pleads that Liberty and/or Secure themselves breached statutory duties as "officers" or "controllers" of Staway within the meaning of s 9 of the Corporations Act, themselves owed the relevant statutory duties to Staway, and breached those duties by giving the same instructions in respect of the realisation of Staway's assets (paragraphs [53]-[56]). Liberty and Secure contend that the claims that they were themselves controllers of Staway cannot be maintained, where they had appointed receivers to Staway. While these allegations are also fact-intensive, and may or may not be established at a hearing, I do not consider that they can be said to be not seriously arguable on the basis of the evidence which Staway has led in the application.
48It seems to me that, taking these matters and the response by Liberty and Secure to them as a whole, the proposed claim has some solid foundation, in that it exhibits a degree of merit such as to be neither vexatious or oppressive and to present reasonable prospects of success, and this supports a grant of leave to bring the claim.
The liquidator's attitude
49As I noted above, in Carpenter v Pioneer Park Pty Ltd above, Barrett J noted the relevance of the liquidator's attitude to the question whether the proceedings should be pursued. In particular, the Court may permit such an action to be brought where a liquidator considers that an action is soundly based but is not prepared to bring it, by reason of the absence of funds: Partnership Pacific Ltd v Aliprandi (1990) 4 ACSR 51 at 54.
50In the present case, the liquidator is not prepared to undertake the proposed proceedings itself, having regard to the risk in the proceedings. However, by letter dated 22 February 2013, the solicitors for the liquidator advised that:
"Having regard to Counsel's preliminary opinion to the effect that the Plaintiffs referred to in the Statement, including the Company, have reasonable prospects of success in relation to the proceedings foreshadowed in the letter of demand and in the Statement, we confirm that [the liquidator] will not object and, if called upon, will support an application by the Company's directors, shareholders and contributories to the Supreme Court of New South Wales for an order authorising them to use the Company's name as a co-plaintiff in the foreshadowed proceedings."
The liquidator's solicitor also confirmed, in the course of the application, that the liquidator supports the application (T28).
51In Carpenter v Pioneer Park Pty Ltd above, Barrett J also noted the relevance of practical considerations supporting the initiation of the proceedings, particularly the financial protection of the liquidator and the estate of the company by means of indemnity and, if indicated, security. A Deed of Indemnity has been executed between Messrs Stark, Conway and the liquidator which provides, relevantly, that they would have the conduct of the proceedings; that they indemnify Staway and the liquidator against liabilities and costs associated with the proceedings, and provide a cash bond to the liquidator; and that the majority of any net damages awarded in the proceedings is retained by Messrs Stark and Conway, with a relatively small portion of those damages being paid to the liquidator (Veitch 25.3.13, Annexure "A"). The liquidator is apparently satisfied with those arrangements.
Collateral purpose
52Liberty and Secure contended that the application for leave should not be granted because Messrs Stark and Conway had a collateral purpose in bringing the proceedings, namely to stay the enforcement of judgments for possession of property in Liberty's favour in respect of a loan unrelated to the relevant facilities. It appears this submission is directed to a stay of possession granted in respect of loans over residential properties in respect of Mr Stark, and the possibility that Mr Conway may seek a similar stay if an order for possession of his properties is made.
53I do not accept this submission. First, the analysis of the Commercial List Statement and the evidence of Messrs Stark and Conway which I have set out above suggests that their claim is properly arguable and has at least a prospect of recovering damages for the Company. That is a proper purpose of litigation. Second, the allegation has the obvious difficulty that the grant of leave to bring these proceedings does not necessitate that there will be a stay of judgment for possession, a fortiori in respect of loans unrelated to the facilities the subject of the claim. Such a stay will only be granted if the Court is satisfied that it is properly granted in the relevant circumstances, and there seems to me to be no impropriety involved in the grant of such a stay, if the Court is satisfied of its merit.
Conflicting interests
54Liberty and Secure contend that the application for leave should not be granted because Messrs Stark and Conway will have conflicting duties or interests when Liberty or Secure bring a cross-claim against them in the proposed proceedings. Liberty and Secure rely on the decision in Transmetro Corporation Ltd v Kol Tov Pty Ltd [2009] NSWSC 350; (2009) 71 ACSR 582, affirmed as McEvoy v Caplan [2010] NSWCA 115; (2010) 78 ACSR 167. That decision was directed to the criteria for grant of leave to bring a statutory derivative action under s 237 of the Corporations Act, in circumstances where the applicant for leave to bring an action faced an obvious conflict of interest in seeking to contend for two companies that a management agreement was validly terminated while he was bound to contend as a director of two other companies that it was still in full force and effect. There could be no doubt as to that conflict and no doubt that that person could not discharge both duties at once. The present case does not seem to me to be analogous, at least on the facts that are presently before the Court, for reasons that I will note below.
55Liberty and Secure refer to Mr Stark's affidavit which refers to an allegation made by a representative of Liberty that Mr Stark "ran two sets of books" while a director of Staway. It is not clear how this allegation advances Liberty's and Secure's position, not least because Liberty and Secure have not sought to lead any evidence in this application to suggest that the allegation made by that representative was well founded or that there would be any proper basis for bringing a cross-claim based upon it.
56Liberty and Secure also contend that, if the proceedings are allowed, they would be "obliged" to file a cross-claim against Staway for breach of the Bailment Agreement and breach of trust in relation to DPP monies, and this would place Messrs Stark and Conway in a position of conflict that could not be reconciled with their maintaining the claim in the name of Staway. Liberty's and Secure's submissions did not identify the logic by which the first proposition (the existence of a cross-claim) led to the second (the existence of a conflict). It seems to me that that is likely to depend on, first, the nature of the cross-claim and, second, the nature of Staway's defence. It is difficult to see, for example, that there would be any conflict if each of Staway, Messrs Stark and Conway denied, or indeed admitted, the relevant allegation. In any event, I do not consider that the Court should decline to grant such leave on the basis of a possible future conflict, the parameters of which cannot presently be identified. If such a conflict arises, and steps cannot be then identified which would address it, then the Court may make appropriate orders in respect of the conduct of the proceedings at that point.
Security for costs
57Liberty and Secure contend that, if the Court grants leave to the Plaintiffs to commence and maintain the proceedings against Staway, then such leave should be conditional on their providing security for costs in the order of $321,960, exclusive of GST and Counsel's fees, as set out in Mr Mathas' affidavit sworn 2 April 2013 filed on their behalf.
58There are, it seems to me, several difficulties with that contention. First, it does not seem to me that whether security for costs is provided in order to preserve the position of the defendants in the proposed proceedings is relevant to the grant of leave, which requires an assessment of the merits of the proceedings, the attitude of the liquidator and the protection of the Company and the liquidator, not the interests of the defendants. Conversely, the question of security for costs can readily be dealt with by the Court if and when the Commercial List proceedings are commenced.
59Second, Mr Mathas' evidence in support of the claim for security for costs has the difficulties that it involves an uplift for contingencies and particular costs (for example, an amount of $20,400 in respect of a mediation) which would not be allowed in an assessment of the costs of the proceedings; the amount of security sought is quantified by reference to solicitor/client costs rather than party/party costs; and there is no evidence, either from a costs assessor or from Mr Mathas as to the amount likely to be recoverable on a party/party basis.
60Third, and possibly more fundamentally, the question of security for costs here raises issues of some complexity, because many of the matters raised by Staway in its proposed claim seem also to be relevant to Mr Stark's personal claim in respect of the motorboat, for which he would not generally be required to provide security. The question of security for costs in overlapping claims of natural persons and companies involve issues of substantial complexity, and an order for security for costs would not generally be made against a corporate plaintiff where it is likely that each plaintiff would be liable for the whole of the costs of the proceedings: see, for example, Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2002] NSWSC 609 at [84]; Street v Luna Park Sydney Pty Ltd [2006] NSWSC 1317 at [28]; Narradine Pty Ltd v Mascot Steel and Tools Pty Ltd [2012] NSWSC 385. Neither party addressed these complexities in submissions and, in my view, that reinforces the desirability of my leaving the question of security for costs to be determined in the Commercial List proceedings. Further questions may also then need to be addressed as to whether an order for security for costs would stultify otherwise meritorious proceedings and whether the conduct of Liberty and Secure was the cause of Staway's present impecuniosity.
Orders and costs
61For these reasons, I consider that I should make orders in the form sought by Messrs Stark and Conway. That form of order sought, so far as it contemplates that Messrs Stark and Conway be permitted to use Staway's name at their own expense and risk as to costs, is consistent with the form of order made by Simos J in Eros Cinema Pty Ltd v Nassar (1996) 133 FLR 34; (1996) 14 ACLC 1374. My preliminary view is that the costs of this application should be reserved to the trial judge who hears the Commercial List proceedings which may be brought by the Plaintiffs in the name of Staway pursuant to the leave that I have granted. However, I grant leave to the parties to send to my Associate any submissions urging a different course within 14 days of this judgment.
62I should add that Brereton J has previously ordered a stay of orders for possession of property owned by Mr and Mrs Stark, which I extended to the date of judgment in these proceedings. I propose to further extend that stay to 26 July 2013 (the first date on which the proceedings in which it was granted can readily be relisted before me) to allow the parties a reasonable opportunity to consider this judgment and to consider whether that stay should be extended by consent, or whether that matter requires a further contested hearing. I was informed that Liberty and Secure have provided an undertaking in respect of property of Mr Conway, as to which an order for possession has not yet been made. If necessary, the Court could grant an interim stay of possession in respect of Mr Conway's property on the same basis as that already made in respect of Mr Stark.
63I therefore make the following orders in these proceedings: