BARBATANO -v- FIRM CONSTRUCTION PTY LTD [2023] WASC 37 (15 February 2023)

1. In Latimer v Cutwood Panels Pty Ltd (in liq),[7] Beech J outlined the principles relevant to an application under s 500(2) for leave to proceed against a company in liquidation in the following terms:
   1. Section 500(2) of the Corporations Act provides that after the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court imposes.
   2. Like provision in respect of companies being wound up in insolvency or by the court is made in s 471B. The same principles govern the grant of leave under these sections.
   3. Part of the purpose of the requirement of leave is to avoid a company in liquidation being subject to a multiplicity of time consuming and expensive actions: Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314, 315 - 317; Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550, 555; Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266 [21].
   4. The discretion to grant or refuse leave is broad. It is not possible or appropriate to attempt to state exhaustively the relevant considerations. Among the relevant considerations are the amount, seriousness and nature of the claim; the degree of complexity and legal factual issues, and the stage the proceedings have reached: Re Gordon Grant (317); Viscariello [21]; Lawless v Mackendrick [No 2] [2008] WASC 15 [35]; Duke v Rain Bow Pty Ltd [2011] VSC 599 [19].
   5. It has often been said that there must be no prejudice to the creditors, or to the orderly winding up of the company, before the action is allowed to proceed: Re Gordon Grant and Grant Pty Ltd (in liq) (1982) 6 ACLR 727, 730; Re Sydney Formworks Pty Ltd (in liq) [1965] NSWR 646, 649 - 650; Re AJ Benjamin Ltd (in liq) [1969] 2 NSWR 374, 376; Duke v Rain Bow Pty Ltd [20].
   6. In Haviland v Joslow (No 4) Pty Ltd [1979] 2 NSWLR 318, 319 Needham J stated that the court should not grant leave to proceed or to commence proceedings against a company in liquidation if it appears there is no possibility that the company will be able to meet any part of damages awarded against it. That was said to be based on the principle that the court should not give its imprimatur to fruitless proceedings which would involve a waste of time and money. That statement of principle has been cited in a number of cases since. See, for example, Maher v Taylor [1984] 1 NSWLR 231, 233; ASIC v Managed Investments Ltd (No 2) [2012] QSC 72 (pages 2 - 3).
   7. In Re AJ Benjamin (376), Street J stated that there would be a good reason to refuse leave when there is no prospect of surplus assets in the company and no question of insurance. That statement was cited with approval in Maher v Taylor (234).
   8. The position is different if there is an insurer standing behind the company in liquidation that will pay the amount of any judgment awarded. That has been said to be a factor strongly favouring the grant of leave, as in those circumstances, the grant of leave will generally not prejudice creditors: Lawless v Mackendrick [No 2] [37]; Re AJ Benjamin; Re Sydney Formworks; Re Coastal Constructions Pty Ltd (1994) 13 ACSR 329.
   9. A claimant seeking leave need only to demonstrate a serious question to be tried: Vagrand Pty Ltd v Fielding (556).
2. I adopt and apply the principles outlined by Beech J in the determination of this application.

1. Having regard to the affidavit material before me, I am satisfied that the plaintiff has demonstrated that there is a serious question to be tried. There is evidence of injury that is above the threshold in Western Australia for the commencement of common law proceedings.
2. In considering this application, I have weighed in the balance the nature of the plaintiff's claim, its seriousness, and the status of the defendant company, a company under external administration. In this case, there is evidence of an insurance policy that was in place at the time the alleged incident occurred. The willingness of the insurer to respond, the breadth of the coverage and whether or not it will ultimately respond to the claim are matters which cannot be discerned from the affidavit material.
3. To address this issue, the plaintiff proposes a form of order which will provide a 'safety net' for the company and its creditors broadly. Order 2 of the plaintiff's originating motion contemplates the plaintiff will not be permitted to enforce any judgment that ultimately might be secured against the defendant without leave of this court. It is envisaged that upon enforcement, the court may revisit the matter of insurance and whether the insurer will meet any judgment sum.

1. In all of the circumstances, I am satisfied that there is a serious question to be tried. The evidence in relation to the insurance tips the balance in favour of leave being granted. In all of the circumstances and for these reasons, I propose to make orders in the terms sought by the plaintiff in his originating motion.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Affidavit of Ruzica Condelli filed 25 January 2023, 'RC4', 'RC9'.

[2] Affidavit of Ruzica Condelli filed 25 January 2023 [4] - [13].

[3] Affidavit of Ruzica Condelli filed 25 January 2023 [17].

[4] Affidavit of Michael David Raw filed 3 February 2023, 'MR1'.

[5] Affidavit of Ruzica Condelli filed 25 January 2023, 'RC5'.

[6] Affidavit of Ruzica Condelli filed 25 January 2023, 'RC9'.

[7] Latimer v Cutwood Panels Pty Ltd (in liq) [2012] WASC 408 [6] - [14].