Acton Engineering Pty Ltd v Cam

Federal Court of Australia|1996-04-12|Before: Tamberlin J

CATCHWORDS CORPORATIONS - application for order that cross-claim be dismissed or permanently stayed - application for preliminary determination of whether cross-respondent is a tortfeasor liable within the meaning of s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) - application for leave to file cross-claim seeking indemnity or contribution from cross-respondent - nature of office of liquidator - composite elements - courts administering laws in relation to bodies corporate will not allow their officers to be subject to action in another court on basis of same conduct - suit in another court requires sanction of court appointing the officer - court concerned to ensure winding up is implemented in timely and efficient manner - court to protect integrity of winding up process under its jurisdiction - court to prevent wrongful impediment to process - leave necessary to sanction proceedings against official liquidator - not necessary that application for leave be made to court which made winding up order - discretionary power of court to grant leave - court to consider all circumstances including necessity for protection of its process - liquidator's duty of care - liquidator can be a tortfeasor - whether loss suffered is the same loss - whether satisfied there is a real question to be tried. PRACTICE and PROCEDURE - application for order that cross-claim be dismissed or permanently stayed - application for preliminary determination of whether cross-respondent is a tortfeasor liable within the meaning of s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) - application for leave to file cross-claim seeking indemnity or contribution from cross-respondent. Corporations Law (Cth) ss536, 471(2), 598, 232, 82(A)(2), 1318 Law Reform (Miscellaneous Provisions) Act 1946 (no 33), s5(1)(c) Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25, considered In re Maidstone Palace of Varieties, Ltd [1909] 2 Ch 283, applied Acton Engineering Pty Ltd v Campbell (1991) 103 ALR 437, applied In re Hutton (a Bankrupt) [1969] 2 Ch 201, cited Aston v Heron (1834) 2 My & K 390, 39 ER 993, cited Maelor Jones Investments (Noarlunga) Pty Ltd v Heywood-Smith & Ors (1989) 7 ACLC 1232, considered

Daniels v Anderson (1995) 37 NSWLR 438, considered Albion Insurance Company Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342, applied Mahoney v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522, cited General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125, cited Peter Loose MA, Michael Griffiths LLM; Loose on Liquidators, (3rd edition) 1989 Palmer's Company Law, Service (published Sweet & Maxwell) Ford & Austin's Principles of Corporations Law (7th edition) 1995 B H McPherson and J O'Donovon, The Law of Company Liquidation (3rd edition) 1987 SYDLOW PTY LTD (In Liquidation) v T G KOTSELAS PTY LTD, THEO GEORGE KOTSELAS and WILLIAM JAMES HAMILTON NO. NG 3036 of 1995 Tamberlin J Sydney 12 April 1996

Based on the assumptions set out in the Notice of Motion filed on 10 August 1995, the questions posed for preliminary determination should be answered: (a) Yes (b) Yes
Leave be granted to file on the cross-claim.
The application to stay or dismiss the cross-claim be dismissed.
The applicant pay the respondents' costs of the three Notices of Motion. NOTE: Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No. NG 3036 of 1995 GENERAL DIVISION ) BETWEEN: SYDLOW PTY LTD (in Liquidation) (ACN 003 781 182) Applicant AND: T G KOTSELAS PTY LTD First Respondent/ First Cross-Claimant THEO GEORGE KOTSELAS Second Respondent/ Second Cross-Claimant WILLIAM JAMES HAMILTON Cross-Respondent CORAM: TAMBERLIN J PLACE: SYDNEY DATED: 12 APRIL 1996 REASONS FOR JUDGMENT Background On 19 December 1991, the cross-respondent ("Hamilton") was appointed official liquidator of the applicant ("Sydlow") in proceedings commenced in the Supreme Court of New South Wales, on 8 October 1981. The first respondent, T G Kotselas Pty Ltd ("TG Kotselas") is a company which provided a range of accountancy services to Sydlow, including the preparation of accounts, tax returns and provision of financial advice. The second respondent ("Kotselas") was a director of TG Kotselas. Notices of Motion Before me are three Notices of Motion. The first was filed by Sydlow on 30 June 1995. It seeks an order that the cross-claim of the first and second cross-claimants be dismissed or permanently stayed. The second Notice of Motion was filed by Hamilton on 10 August 1995. It seeks a separate and preliminary determination of the following question: "Assuming the matters alleged in paragraphs 1 to 10(a) of the cross-claim and the matters alleged in the statement of claim: (a) Whether the cross-respondent would, if sued by the applicant, have been a tort feasor liable to the applicant in respect of the damage alleged in the cross-claim within the meaning of ss. 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW); (b) If so, whether the cross-respondent is liable to the applicant in respect of the same damage in whole or in part for which the cross-claimants are liable as tort feasors to the applicant within the meaning of ss.5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW)." The third Notice of Motion filed by Sydlow on 11 August 1995 seeks an order that leave be granted to TG Kotselas and Kotselas to file a cross-claim seeking indemnity or contribution from Hamilton, in respect of any order or judgment that they pay damages or compensation to Sydlow in these proceedings. Application and Statement of Claim On 27 January 1995, Sydlow filed an Application seeking a declaration and damages against the respondents and also equitable compensation and interest. The Statement of Claim alleges that Kotselas was a director of TG Kotselas and that, on 14 March 1990, Sydlow and the respondents agreed that the respondents would act as its accountants and provide financial advice. In late 1989 Style Kitchens Marketing Pty Limited, a company related to Sydlow, ("Style Kitchens") agreed that the respondents would provide financial advice to that company. Until 1 November 1991, the respondents provided accountancy services to Sydlow, as a result of which, the respondents owed a contractual and tortious duty of care and also fiduciary duty to Sydlow. On 8 October 1991 a summons to wind up Sydlow was filed in the Equity Division of the Supreme Court of New South Wales by the Commissioner of Taxation. On 19 December 1991, Sydlow was placed in liquidation by order of the Equity Division and Hamilton was appointed liquidator. On, or about 1 November 1991, the Statement of Claim alleges the respondents advised the directors of Sydlow that it was insolvent and would have to cease trading immediately and further that it should transfer all of its assets and some liabilities to Style Kitchens. The advice was said to be that Style Kitchens should manufacture the kitchens. In reliance, on that advice it is said that the directors of Sydlow, resolved to transfer all of its assets and trade creditors to Style Kitchens. Thereafter, Sydlow ceased manufacturing and the directors of Sydlow permitted Style Kitchens to manufacture and to utilise Sydlow's stock in trade, work in progress and plant and equipment. This continued to 12 June 1992 when Style Kitchens went into voluntary liquidation. Shortly after 1 November 1991, the respondents determined the basis on which, and the values at which, the assets of Sydlow should be transferred to Style Kitchens, and took all necessary steps to effect the transfer. Breaches of duty are alleged against the respondents because they failed to inform or warn Sydlow or its directors that the transfer should not take place, because a petition to wind up Sydlow had been lodged and Sydlow was insolvent. Further, that they failed to take legal advice before the transfer resolution was passed in circumstances where there was a likelihood that the liquidator of Sydlow would seek to set aside the transfer and recover the value of the assets. Between 1 November 1991 and 15 September 1992, Style Kitchens disposed of the assets by purportedly selling them as owner. Style Kitchens retained and spent the proceeds of sale. It is further alleged that TG Kotselas and Kotselas knowingly assisted in, or were reckless as to, the breach by the directors of Sydlow of their statutory and fiduciary duties owed to the company and in and about the dishonest and fraudulent proposal by the directors of Sydlow in relation to the transfer of assets. In defence, the respondents admit that TG Kotselas provided accountancy services from 1989 to 1992; that Kotselas was a director of TG Kotselas and a practising certified accountant. It is admitted that in about March 1990, TG Kotselas entered into an agreement with Sydlow, to provide accounting services and that in about late 1989, TG Kotselas agreed to provide accountancy services to Style Kitchens. These services were provided at all material times, up to 1 November 1991. It is admitted that, on or about 31 October 1991, and as at 1 November 1991, the respondents believed that Sydlow was insolvent and should cease to trade. On that date, entries were made in the books and records of Style Kitchens, as at 31 October 1991, to reflect the transfer of the assets from Sydlow to Style Kitchens, in accordance with instructions from Sydlow. It is said that a copy of the summons to wind up Sydlow was sent to insolvency legal experts to obtain advice and assistance and that they did not provide advice to Sydlow in relation to the proposed transfer of assets. Otherwise, in broad times, the defence either does not admit or denies the allegations. The defence also alleges that the transfer of assets was void and that any loss suffered by Sydlow through loss of the assets, was suffered by reason of the failure of the liquidator of Sydlow, to take the assets of the company into his custody and control, or alternatively to preserve the assets of the company. Clause 31 of the Statement of Claim alleges that the value of the assets lost was the value of the assets transferred to Style Kitchens. Cross-Claim - allegations - assumed facts The cross-claim which the respondents now seek leave to file is dated 12 April 1995. For present purposes it alleges that Hamilton, by reason of his appointment, owed a duty to Sydlow, to take into his custody and control, all property to which the company was, or appeared to be entitled, and to take all necessary steps to preserve and protect the assets. It also asserts a duty to exercise the degree of care and skill appropriate to persons occupying the position of a liquidator, in the exercise of his powers and the performance of his duties, and a general duty to exercise a reasonable degree of care and skill. It is said that by 19 December 1991, Hamilton knew, or ought to have known, that Sydlow had purported to transfer to Style Kitchens, the assets referred to in the Statement of Claim and that Style Kitchens had possession of the assets. He also knew or ought to have known, that the transfer was void or voidable, and that unless steps were taken to recover or protect the assets Sydlow would suffer loss. In the alternative, Hamilton ought to have known of this by 23 January 1992 and acted to recover the assets. It is alleged there was a failure to take the necessary recovery steps and breaches of the above duties are alleged. On 31 March 1992, Hamilton commenced proceedings against Style Kitchens in the Equity Division of the Supreme Court, claiming the value of the assets. However, between October 1991 and September 1992, Style Kitchens disposed of, or otherwise dissipated the assets, Sydlow recovered only about $16,000 in settlement of the proceedings. As a result, Hamilton is said to be a tortfeasor liable in respect of the damage alleged in the Statement of Claim to result from the negligent advice and conduct of the respondents. The cross-claim seeks indemnity or contribution from Hamilton in respect of any order or judgment that damages or compensation be paid by the respondents to Sydlow. Liquidator - nature of the office The office of a person appointed liquidator to a corporation, does not fit any precise legal category or classification, which defines the rights and liabilities, attaching to that office. It is a hybrid composite with elements of fiduciary, trustee, agent, officer of the corporation and (in some instances) "officer" of the Court. Attached to those elements are the obligations along with the powers and discretions which apply to those roles. The liquidator's office is described in Loose on Liquidators, 3rd edition, 1989, at page 13 as: "... a cross between a trustee and an agent or, alternatively, like the directors, whose powers terminate upon the commencement of a winding up, as a fiduciary agent of the company. Thus a liquidator must not only act bona fide and reasonably and exercise his powers for their proper purposes only but must also exercise reasonable care and skill in the performance of his duties. Failure to exercise the necessary degree of skill and care may inter alia deprive him of his costs. A liquidator is also under a fiduciary duty in respect of the assets of the company of which he is appointed. As such he should not purchase assets of the company. Similarly, a liquidator may be required to disgorge any secret profit made ... in consequence of ... his office as liquidator and transaction with an associate may be set aside ..." The liquidator differs from the normal agent, however, in that he himself controls the actions of his principal, ie. the company. Furthermore his duties as agent of the company are subject to his overriding statutory duties to apply the company's assets in paying creditors and to distribute any surplus amongst the members." A similar description is contained in Palmer's Company Law Service, (published by Sweet and Maxwell) at 15128-15132. Leave The first questions which arise, are whether it is necessary for the respondents to obtain leave to file a cross-claim seeking indemnity or contribution from Hamilton personally and if so whether leave should be granted.

It is said for Sydlow that proceedings cannot be properly brought against Hamilton personally, where Hamilton was appointed by the New South Wales Supreme Court as liquidator, except by application in the winding up proceedings themselves, or pursuant to leave of the court, granted in an application made in the winding up proceedings. See Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25 at 28-29.
An allegation that the liquidator has been negligent and personally liable as a tortfeasor is not an application which arises in the winding up of Sydlow. The Federal Court, it is said, does not have jurisdiction, inherent or otherwise, to determine the contribution issue in the winding up proceedings.
The cross-claim raises matters which must be maintained by way of Statement of Claim in fresh proceedings.
The liquidator is an officer of the court and therefore subject to the control of the court. If any wrong has been done by such officer, that Court will see that justice is done. It will protect its officer, in relation to charges with respect to his conduct in the discharge of duties of office and will not permit its officer to be sued without an investigation as to whether such action ought properly to be commenced which requires an investigation of the merits of the case. Reference is made to In re Maidstone Palace of Varieties, Ltd [1909] 2 Ch 283 at 286.
Before leave will be granted the court would need to be satisfied that there is a prima facie case against its officer, who is winding up the company on behalf of the court.
Nor will a court undertake an inquiry under s536 of the Corporations Law (Cth) ("the Law") with respect to the conduct of a liquidator in the performance of official duties, unless there is at least a prima facie case to investigate.
There is said to be no relevant distinction between what the cross-claimants seek to achieve by way of cross-claim and an inquiry under s536.
A consequence of allowing the cross-claim to proceed, is said to be that the liquidator could be placed in a position of conflict and thereby forced to retire as liquidator.
To allow the cross-claim would provide a ready means for a person sued by a company in liquidation to stifle such an action, by filing a spurious cross-claim. The respondents make the following submissions.
The respondents rely on the national scheme for administration of the Law. There is no statutory requirement for leave to commence an action against the liquidator in independent Federal Court proceedings against the company, where the winding up order was made in a State Supreme Court. Reliance is placed on the decision in Acton Engineering Pty Ltd v Campbell (1991) 103 ALR 437 at 452 where Lockhart J observed that previous notions of jurisdiction had been: "... swept away by the corporations legislation of the Federal and State legislatures ... The evident intent of all legislatures within Australia is that each of the Federal Court and the Supreme Courts may exercise jurisdiction in respect of civil matters arising under the Corporations Law. Hence an order for the winding up of a company may, ... be made by the Supreme Court of Queensland and subsequent applications or motions in the winding up be made to that court or to any other State or Territory Supreme Court or the Federal Court."

It is true that s536 of the Law provides a possible alternative avenue for recovery of damages against a negligent liquidator, in the form of an inquiry by the Court or the Australian Securities Commission, but in the present case it is desirable that all relevant issues be resolved in the one set of proceedings. This is preferable to the cumbersome separate procedure by way of inquiry under s536, which will only deal with the liquidator's alleged breaches. Similar considerations apply with respect to the further alternative remedy provided by s598. It is, in my opinion, desirable that all issues should be dealt with in the one proceeding where there is an opportunity to grant such indemnity or contribution as may be appropriate. This course avoids fragmentation and duplication of proceedings. In the present matter, I am persuaded on the evidence, after taking account of the above matters and also bearing in mind the need to protect the integrity of the court process, that there is a sufficient case made out at this stage, for grant of leave to file and pursue the cross-claim. The evidence presently before me, is sufficient to lead me to conclude that the cross-claim will not wrongfully interfere with the due conduct and progress of the winding up. Accordingly, leave should be granted.

Contribution or Indemnity Tortfeasor liable The questions on which the parties seek a determination are framed in the notice of motion filed on 10 August 1995 and are set out earlier in these reasons. Section 5(1)(c) of the Law Reform ("Miscellaneous Provisions") Act 1946 (No. 33) (Cth) ("LRMPA") provides: "5(1) Where damage is suffered by any person as a result of a tort (whether a crime or not) - .... (c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no peron shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought." Hamilton says that he cannot be described as a tortfeasor who would if sued be liable because:

An official liquidator is an officer of the court. This office derives from executive appointment and he has been selected on account of his skill and experience in the area of winding up. He is subject to the control of the Australian Securities Commission and of the court. In such capacity an official liquidator is not subject to a common law duty of care to the corporation. Section 598 of the Law empowers the Court to make orders for payment where a corporation has suffered loss or damage as a result of the negligence of a person in relation to a corporation. This is said to support the conclusion that there is a statutory duty to exercise care and diligence rather than a common law duty.
The required proximity to found the common law duty does not exist between a company in liquidation and its official liquidator. There are said to be sound policy considerations why a common law duty of care should not be imported into the duties and obligations of an official liquidator to a company in liquidation. The respondents submit:
Liquidators can be liable in an action at common law for failure to exercise due care and skill in the performance of their duties and are therefore tortfeasors within the strict sense of the term. This liability is analogous to that of directors.
Liquidators have a duty to exercise particular professional skill, care and diligence in the performance of duties. See B H Mcpherson and J O'Donovon, The Law of Company Liquidation, (3rd edition), 1987, page 218; Ford and Austin's Principles of Corporations Law 7th edition, at 1013 to 1017, Palmer's Company Law Service, para 15.323 at 15130.
In Maelor Jones Investments (Noarlunga) Pty Ltd v Heywood-Smith & Ors (1989) 7 ACLC 1232, Olsson J held that a liquidator liable in negligence on the basis that he failed to display that degree of care and skill, which by accepting office he held himself out as possessing.
In Daniels v Anderson (1995) 37 NSWLR 438 at 505, the NSW Court of Appeal (by majority, Clarke and Sheller JJA) confirmed a decision that directors owe a duty of care in tort and could be sued for contribution pursuant to s5(1)(c) of the LRMPA and that negligent directors are tortfeasors within the meaning of that subsection.
The principles adopted in Daniel's case are relevant and are of even greater force when considering the duties of a liquidator. Directors, unlike liquidators, are not necessarily professionals, and they do not necessarily hold themselves out as possessing any particular skill or experience.
There is no force in the cross-respondent's submissions that there are a range of statutory and equitable remedies available to companies aggrieved by the actions of the liquidator, and therefore a company would be no better off having a concurrent or additional right to sue at common law. The availability of additional or alternative remedies will not necessarily negate the existence of the particular remedy under consideration.
If a liquidator has been negligent he or she should be liable to contribute towards loss sustained thereby in circumstances where the whole of that loss is sought to be recovered from the respondents. As Kitto J pointed out in Albion Insurance Company Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342 at 350-351, the right of contribution at common law arises where one of several persons has paid more than his proper share towards discharging a common obligation.
The argument as to possible difficulty in other cases arising from conflict of interest should not be accepted. This difficulty will disappear if the liquidator resigns. If there is no substance in the case against the liquidator, an application can be made to strike it out. Reasons There is substance in the respondents' submissions on this point. I think they correctly set out the relevant principles. Section 5 of the LRMPA is remedial legislation intended to meet the difficulty and injustice associated with requiring courts to determine a single or substantial cause of loss in circumstances where there are in fact a number of concurrent causes. There is injustice in requiring one of a number of wrong doers to bear the whole of the loss to which all have contributed. The liquidator's duty to exercise reasonable care and skill is similar in substance from the duty of care owed by other professional persons providing services for reward. See s232 of the Law. In that section the term "officers" includes a liquidator of the corporation and there is no exclusion of a liquidator appointed by the Court. Cf s82A(2) of the Law. As a result no difficulty arises, in my opinion, in applying the legislation to breaches of duty on the basis that the liquidator as a matter of law can be a tortfeasor liable. In an appropriate case the Court may relieve the liquidator from liability where he or she had acted honestly and ought fairly to be excused. See s 1318 of the Law. Accordingly, I consider that the first leg of subs5(1)(c) is satisfied. Same Damage Hamilton also submits that the LRMPA cannot apply because the liability asserted by TG Kotselas and Kotselas against Hamilton is not the same damage ("that damage") as that asserted by Sydlow against TG Kotselas and Kotselas.
It is said that TG Kotselas and Kotselas, on the allegations, in the Statement of Claim, are liable for advising and participating in the transfer of assets on or about 1 November 1991. The damage suffered by Sydlow, it is said, is complete at the time of the transfer of the assets.
On the other hand, the failure by Hamilton to take remedial action to minimise the net loss to Sydlow is not the same damage as that caused to Sydlow by TG Kotselas and Kotselas.
It is said that where there are successive acts of negligence the "same" damage will only be suffered if the first tortfeasor is liable for the further damage suffered as a result of the negligence of the second tortfeasor. This is in part determined by whether the further damage was reasonably foreseeable at the time the first act was committed. Reliance is placed on the decision in Mahoney v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522.
It is said that the respondents claim against Hamilton is that if Hamilton had not breached his common law duty of care to Sydlow, timely steps would have been taken to have the assets restored to Sydlow. If Hamilton had taken these steps, Sydlow would not have suffered loss.
There is said to be a distinction between damages arising from Hamilton's breach which caused the loss of a chance of recovering the assets, and that suffered by Sydlow as a result of the advice given by TG Kotselas and Kotselas which led to the transfer of assets. The respondents say:
There was never a transfer of assets. The purported transfer was void and of no effect. This is common ground. At all times the assets remained the property of Sydlow but the liquidator did nothing to take control of the company's assets and allowed the directors to treat the assets as assets of Style Kitchens, thereby leading to loss.
Any loss suffered as a consequence of the breaches of TG Kotselas and Kotselas were suffered when the assets were put beyond the reach of the company or its liquidator. The loss alleged by Sydlow is said to be, the value of the assets transferred. The loss alleged in the cross-claim, is the same loss, namely the value of those assets. Indeed, the cross claim, para 11, seeks an indemnity or contribution from Hamilton, in respect of any order to pay to Sydlow the value of those assets not received.

Reasons In my opinion, the damage suffered as the result of the breaches of duty alleged against each party, is the loss of the value of the assets transferred and not recovered. The nature of the damage claimed is the same in each case. The acts and omissions constituting the breach may differ in each case, but the liability can properly be described as a liability in respect of the same damage. The cross-respondent submits that no case has been made out for leave to proceed with the cross-claim in any event, because there is not even an arguable, let alone a prima facie case, that the cross-respondent, Hamilton breached any duty of care owed to Sydlow. Dismissal or Permanent Stay Summary dismissal for want of a cause of action requires a clear demonstration that there is no reasonable basis for it and that the case is one which is so clearly untenable it cannot possibly succeed: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-130. On behalf of Hamilton, it is submitted that there is no evidence of negligence, but rather that the evidence points to diligent performance by Hamilton of the duties of his office. The position advanced by the liquidator is summarised in the written submissions of 23 February 1996 as follows: "12. When one reviews Mr Hamiltons (sic) conduct in light of what was then known to him, the lack of assistance provided by Mr Kotselas and the directors of Sydlow, the lack of available funds or other assets, the legal advice Mr Hamilton received, the level of indemnity Mr Hamilton received and the risks of making an application through interlocutory relief, there is not even an arguable (let alone a prima facie) case that Mr Hamilton breached any duty of care which he owed to Sydlow." In further submissions, the conduct of the liquidator and Mr Kotselas are analysed in some detail. However, after reviewing the evidence at this stage, and bearing in mind the sequence of events between the appointment of Hamilton on 19 December 1991 and the settlement with Style Kitchens on 23 September 1993, I am satisfied that the respondents have raised a real question for determination and made out a case sufficient to withstand an application for dismissal or permanent stay. In particular, on the evidence at this stage, there appear to be some significant periods of inaction by Hamilton. For example, between 30 December 1991 and 21 January 1992, nothing of significance took place and the evidence indicates this was because no assistance or explanation was forthcoming by either directors or Kotselas over that period. There was some activity in January. On 29 January 1992 legal advice was sought by Hamilton from Baker & McKenzie.

On 6 February 1992, that firm advised him that there may be a basis to avoid the disposition to Style Kitchens under the Law. Indemnity was sought from the Deputy Commissioner of Taxation, on 11 February, in respect of costs to enable Sydlow to commence proceedings against Style Kitchens. However, no reply was received until 12 March 1992. This again is a significant delay given the advice of 6 February. Proceedings were not, in fact, commenced against Style Kitchens until 31 March. There were no steps taken to make any claim for interlocutory relief against Style Kitchens due to the potential costs of such an application but there does not appear to have been any effort made for an early hearing. There were settlement negotiations initiated in about July and the matter continued in Court at a somewhat relaxed pace. On 23 September 1993 a Deed of Settlement was executed between Style Kitchens and Sydlow. Sydlow received $15,679.00 from that company. The value of the property, which had been wrongfully "transferred" was alleged to be approximately $282,000. On the evidence before me and given the apparent significant delays in taking and pursuing action, in respect of the transfer of the assets, I am satisfied that there is a real question raised by the material. It may well be that on all the evidence available at a final hearing that the respondents may not succeed on the cross-claim. However, that is for another day. For the reasons given above, I refuse the application to dismiss or permanently stay the cross-claim. The respondents, in my view, succeed on all points raised and should be awarded costs in respect of each notice of motion. My conclusions are that:

Leave is required to file and proceed on the cross-claim.
Leave should be granted.
On the assumptions set out in the Notice of Motion filed on 10 August 1995, the questions posed for preliminary determination should be answered: (a) Yes (b) Yes
The cross-claim should not be permanently stayed or dismissed.
The applicant should pay the respondents' costs of the three Notices of Motion. I certify that this and the preceding twenty-eight pages (28) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Tamberlin. Associate: Date: 14 April 1996 Counsel for Applicant & Cross Respondent: Mr J Svehla Counsel for Respondents & Cross-Claimants: Mr S Donaldson Solicitors for Respondents & Cross-Claimants Tress Cocks & Maddox Date of Hearing: 9 October 1995 Date Final Submissions Received: 23 February 1996 Date Judgment Delivered: 14 April 1996

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