Allanson v Midland Credit

background 2 In short summary, the proceedings against Mr Battaglia concern a number of payments totalling over $1 million which ACN 092 made to Mrs Battaglia and Fellmane between August 2011 and May 2013. Mr Hillig alleges that Mr Battaglia caused ACN 092 to make those payments, that Mr Battaglia was a director of the company at that time, and that in causing the company to make the payments, Mr Battaglia breached the statutory and fiduciary duties that he owed to the company. Mr Hillig also alleges that Mrs Battaglia and Fellmane, as recipients of the relevant payments, are liable to reimburse or repay ACN 092, because they were voidable transactions for the purposes of s 588FE(6A) of the Corporations Act 2001 (Cth). 3 Mr Hillig commenced proceedings against Mr and Mrs Battaglia and Fellmane in the Supreme Court. His claim was dismissed at first instance: see In the matter of ACN 092 745 330 [2017] NSWSC 241. Mr Hillig, however, successfully appealed against that judgment: see Peter Hillig in his capacity as liquidator of ACN 092 745 330 Pty Ltd (in Liquidation) & Anor v Battaglia & Ors [2018] NSWCA 67. 4 The Court of Appeal remitted the proceedings to the Supreme Court for a new trial on all issues. The main reason it did so was because it had received fresh evidence on appeal in respect of one of the key issues in the proceeding: the credibility or reliability of Mr Battaglia's explanation for the payments. The Court of Appeal held that it was unable to determine that issue because it did not have the benefit of Mr Battaglia's explanation for, or response to, the fresh evidence, which on its face appeared to be inconsistent with the evidence he gave at trial. The Court of Appeal held that the new trial should be of the whole case. 5 Since the Court of Appeal handed down its judgment on 10 April 2018, Fellmane was wound up on 20 March 2019 and Mr Battaglia was made bankrupt on 28 March 2019. Mr Hillig was granted leave to proceed with the Supreme Court proceedings against Fellmane pursuant to s 471B of the Corporations Act by order of Rees J, in the Supreme Court, made on 28 October 2019. The proceedings have been set down for hearing in April 2020. It would appear that the matter will proceed to re-trial even if Mr Hillig does not obtain leave to proceed against Mr Battaglia.

principles governing granting leave to proceed 6 The principles concerning leave under s 58(3)(b) of the Bankruptcy Act are fairly well settled. The purpose of the requirement for leave is to ensure that a bankrupt is not subjected to a multiplicity of actions which would be both expensive and time-consuming, and in some cases unnecessary: see Zervas v Burkitt [2019] NSWCA 112 at [15]. 7 The requirement for leave focusses attention on the choice between litigation and the proof of debt procedure in a bankruptcy. It will generally be appropriate for leave to be granted in cases where the issues would be better and more comprehensively dealt with by a contested trial of the action in a court proceeding than would be the case if the creditor was required to lodge a proof of debt in the debtor's bankruptcy: see Allanson v Midland Credit Ltd (1977) 30 FLR 108; [1977] FCA 66. That would particularly be the case where the creditor's claims involve other parties. 8 The relevant factors to be taken into account cannot be stated exhaustively and will vary from case to case: see Burkitt at [15]. Nevertheless, the factors generally considered to be relevant to such applications include: the amount and seriousness of the claims; the degree and complexity of the legal and factual issues involved; the stage to which the proceedings have progressed; the risk that the same issues would be re-litigated if the claims were to be the subject of a proof of debt; whether the claim has arguable merit; whether proceedings are already in motion at the time of the bankruptcy; whether the proceedings will result in prejudice to creditors; whether the claim is in the nature of a test case for the interest or large class of potential claimants; whether the grant of leave will result in further litigation; whether the cost of the hearing will be disproportionate to the size of the bankrupt estate; the risk of delay; and whether pre-trial procedures such as discovery and interrogatories are likely to be required or beneficial: see Cassegrain v Gerard Cassegrain & Co Pty Limited (in liq) [2012] NSWCA 435 at [33]. 9 Having regard to those principles, this is plainly a case where leave should be granted to Mr Hillig to permit him to pursue the proceeding against Mr Battaglia. Following is a summary of the main considerations which lead to that conclusion.

considerations concerning granting leave in this case 10 First, it is clear from both the first instance judgment and the judgment of the Court of Appeal that Mr Hillig's claim against Mr Battaglia involves relatively complex legal and factual issues. Those issues would be best considered and resolved in the Supreme Court proceedings, rather than through the process of the submission of a proof of debt and possible appeal. 11 Second, it is equally apparent from the judgment of the Court of Appeal that there is at least a serious case to be tried against Mr Battaglia. 12 Third, the proceedings against Mr Battaglia are well advanced. The pleadings are finalised and the evidence has been filed and served. The matter has been set down for trial early this year. The trial will proceed against Mrs Battaglia and Fellmane even if leave is not granted to proceed against Mr Battaglia. 13 Fourth, there is no prejudice to Mr Battaglia or his trustee in bankruptcy. The proceedings were commenced and well advanced by the time Mr Battaglia was made bankrupt. The extent to which Mr Roufeil, as Mr Battaglia's trustee in bankruptcy, will participate in the trial will be a matter for him. He is unlikely, however, to be vexed with having to be involved in any significant pre-trial steps in preparation for the trial. The likelihood is that Mr Battaglia will give evidence at least in his wife's defence, though that will be a matter for him. What is clear, however, is that the trial will, one way or another, require the Supreme Court to consider essentially the same evidence and determine the same issues that are relevant to Mr Hillig's claims against Mr Battaglia. 14 Fifth, there is no suggestion that Mr Hillig or anyone else proposes to seek leave to commence or continue any other proceedings against Mr Battaglia. There is, accordingly, no real issue concerning the multiplicity of proceedings. 15 If leave is granted and Mr Hillig obtains judgment against Mr Battaglia, that will not place Mr Hillig in any position of unfair advantage over other creditors with a claim against Mr Battaglia's bankrupt estate. Mr Hillig's claim will still be an unsecured debt. The position in respect of the proof of debt will, however, be considerably easier if judgment is obtained.

conclusion 16 In all the circumstances, leave should be granted to both Mr Hillig, in his capacity as liquidator of ACN 092, and ACN 092 to proceed against Mr Battaglia in Supreme Court of New South Wales proceeding number 2016/00098899. 17 I make the following orders: (1) Pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth), leave be granted to the applicants, Peter Hillig in his capacity as liquidator of ACN 092 745 330 Pty Limited (in liquidation) (formerly known as SX Projects (NSW) Pty Ltd) and ACN 092 745 330 Pty Limited (in liquidation) (formerly known as SX Projects (NSW) Pty Ltd), to proceed against Vince Bruno Battaglia in the Supreme Court of New South Wales proceeding number 2016/00098899. (2) The respondent pay the applicants' costs of this application. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.