Court of Appeal (WA)|2000-11-24|Before: Malcolm CJ

Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd [2000] WASCA 362 (24 November 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : CAROB INDUSTRIES PTY LTD (IN LIQ) -v- SIMTO PTY LTD [2000] WASCA 362

BETWEEN : CAROB INDUSTRIES PTY LTD (IN LIQ) (ACN 008 847 256)

Appeal and new trial - Appeal - Chose in action the subject of appeal absolutely assigned by company in liquidation to third party - Notice given to respondent - Company ceased to have any interest in the matter - Whether appeal should be stayed pending joinder of assignee - Parties - Absolute assignment of chose in action of appellant company pursuant to deed approved under s 477(2B) Corporations Law - Joinder of assignee as appellant in substitution for company

Corporations Law s 9, s 477(2), (2B), (6)

1 MALCOLM CJ: This is a motion by the respondent, Simto Pty Ltd ("Simto"), to stay this appeal until further order. The appellant, Carob Industries Pty Ltd (In Liquidation) ("Carob"), opposes the motion. The grounds on which the stay is sought are as follows:

"1. On 28 January 2000, the Honourable Justice Anderson approved, pursuant to section 477(2B) of the Corporations Law, the Deed of Sale of Chose in Action ('the Deed') between Phillip Clements and Carob Industries Pty Ltd (In Liquidation) ('Carob').

2. By clause 1 of the Deed, Carob assigned all of its right, title and interest in the cause of action the subject of the arbitration proceedings commenced by Carob against the Respondent in 1992.

3. Clements gave notice to the Respondent of the assignment of the chose in action on 7 July 2000.

4. Clements refuses to be substituted as the appellant in this appeal.

5. Following the assignment of the chose in action, Clements is the proper appellant and for so long as Carob remains as Appellant, the appeal is improperly constituted and the appeal is liable to be stayed until further order."

2 Mr Bereyne says in par 4 of his affidavit that the facts concerning the underlying disputes between the parties are set out in the reasons for judgment of Anderson J in Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd [1999] WASC 258, which is the decision the subject of the appeal.

3 In 1991 Simto was the main contractor employed to construct two seawalls at Cape Lambert. Pursuant to a subcontract agreement with Carob entered into in March 1991, the latter agreed to cart various classes of earth materials required in connection with the construction of the walls. A dispute arose between the parties concerning the quantity of material carted. Carob claimed that it was short-paid for the work. Simto contended that Carob failed to cart the quantity of material contracted and claimed that it was put to expense in arranging for others to complete the work.

4 On 14 May 1992 Carob gave notice of a dispute under the subcontract agreement and on 8 June 1992 called for the nomination of an arbitrator. On 3 July 1992 a Mr J G Foster was nominated by the Institute of Arbitrators, Australia. On 5 August 1992 a winding up order was made placing Carob in liquidation and Mr V C Court was appointed liquidator. By notice of originating motion dated 19 November 1993 in the arbitration proceedings, Carob referred the question of the validity of the arbitration clause to the Supreme Court for determination. On 17 April 1996 Scott J held that there was no valid arbitration clause in the subcontract: Carob Industries Pty Ltd (In Liquidation) v Simto Pty Ltd, unreported; SCt of WA; Library No 960201; 11 March 1996. Carob appealed against this decision to the Full Court by notice of appeal dated 8 May 1996. On 17 January 1997 Simto filed a motion to stay the appeal on the grounds that the arbitration proceedings were being maintained under a champertous arrangement and were an abuse of process. The stay application was adjourned by reason of the unavailability of witnesses: Carob Industries Pty Ltd v Simto Pty Ltd [1997] 18 WAR 1 at 6 per Malcolm CJ. The appeal itself was allowed and it was held that there was a valid arbitration clause in the subcontract.

5 By an originating summons dated 26 May 1997 Simto brought an application in the arbitration proceedings seeking a stay of the arbitration on the ground that the proceedings were champertous and an abuse of process. The application was heard by Anderson J on 10 July and 2 October 1997. On 11 December 1997 his Honour held that the arbitration was being maintained under a champertous agreement between the liquidator and Mr Phillip Clements. In the course of his judgment, Anderson J said of Mr Clements:

"In the affidavit that he filed in the champerty proceedings, the picture that he attempted to paint was that he was not involved in any arrangement whereby he was funding the arbitration or a share of the award, but was merely acting as the liquidator's agent in instructing the solicitors. In Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd, unreported; SCt of WA; Library No 970692; 11 December 1997, I gave detailed reasons why that was not true. I held that Clements was maintaining the arbitration in the name of Carob and doing so without possessing any legitimate and genuine interest in the outcome of the arbitration. He did so for some five years - from sometime in 1993 until the order I made on 11 December 1997 staying the arbitration proceedings on the ground of unlawful maintenance."

6 It was against this background that three applications were dealt with by Anderson J. The first was an application under s 46 of the Commercial Arbitration Act 1985 to terminate the arbitration on the ground of undue delay on the part of the claimant Carob in prosecuting the claim. There was an application on the part of Carob to lift the order for the stay of the application. Finally, there was an application to have a deed approved under s 477(2B) of the Corporations Law. This provision permits a liquidator of a company to enter into an agreement on behalf of the company, having a duration of more than three months, subject to the approval of the creditors or of the court. The relevant agreement was described by Anderson J as "an agreement to sell one of the assets of the company; namely, its chose in action being the claim in the arbitration". In the result, Anderson J concluded that:

"1. The arbitration should be dismissed for want of prosecution.

2. On the filing of a proper application, the proposed funding arrangement between the liquidator and Clements should be approved pursuant to s 477(2B) of the Corporations Law.

3. The stay of proceedings ordered by me on 11 December 1997 should be lifted."

7 On 2 March 2000 Anderson J granted Carob leave to appeal against his decision and directed pursuant to O 63A r 4(2)(d) that the appeal proceed under O 63 of the Rules of the Supreme Court 1971. The grounds of appeal are directed to the approval by his Honour of the deed of sale of the relevant chose in action. They are as follows:

"1. The learned Judge erred in law in allowing the application when it was obvious that the members and creditors of the company would not be any better off if the agreement were approved.

2. The learned Judge erred in fact or law or in the exercise of his discretion in finding that it was in the company's interests and also in the interests of the community that the liquidator should be paid his proper fees and the winding up concluded in an orderly manner when:

(a) there was no evidence as to whether the liquidator's fees were proper;

(b) there was no evidence as to any work the liquidator had done;

(c) the liquidator had charged fees of $133,911.15;

(d) the liquidation could have concluded in an orderly manner many years before had it not been for the liquidator's and the maintainer's dilatory conduct of the arbitration;

(e) it is not in the interests of the company or the community for liquidators and maintainers to pursue actions exclusively for their own benefit and thus prolong liquidations and increase the costs thereof."

8 Section 477 of the Corporations Law is concerned with the powers of a liquidator. Section 477(2) relevantly provides that:

"Subject to this section, a liquidator of a company may:

(a) bring or defend any legal proceeding in the name and on behalf of the company;

...

(c) sell or otherwise dispose of, in any manner, all or any part of the property of the company;

...

(d) do all acts and execute in the name and on behalf of the company all deeds, receipts and other documents and for that purpose use when necessary a seal of the company;

..."

"Except with the approval of the Court, of the committee of inspection or of a resolution of the creditors, a liquidator of a company must not enter into an agreement on the company's behalf (for example, but without limitation, a lease or a charge) if:

(a) without limiting paragraph (b), the term of the agreement may end; or

(b) obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance;

more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those 3 months."

"The exercise by the liquidator of the powers conferred by this section is subject to the control of the Court, and any creditor or contributory, or the Commission, may apply to the Court with respect to any exercise or proposed exercise of any of those powers."

11 So far as the conduct of the arbitration proceedings was concerned, Anderson J commented in par 11 of his judgment that:

"One cannot help but conclude, from an examination of the proceedings as a whole, that they have been conducted by (or on behalf of) the claimant in a most unsatisfactory manner from their inception. I have come to the conclusion that the liquidator has never been interested in prosecuting the arbitration. He left it in the hands of Clements under an unlawful arrangement; and Clements turned his attention to it when it suited him in his travels around the world. It is this which has caused the inordinate delay. I do not think it all to the point for the liquidator or Carob or Clements to complain about the delay occasioned by Simto's application to stay the arbitration on the ground that it was being unlawfully maintained. The fact is that the arbitration was being unlawfully maintained almost from its very inception, so that any delays occasioned by having that matter resolved must be laid at the feet of Carob and must be regarded as inexcusable. There was nothing to prevent proper arrangements being made between the liquidator and Clements long ago."

12 His Honour then referred to s 477(2)(c) and the definition of "property" in s 9 of the Corporations Law, namely:

" 'property' means any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action."

13 In legal terms "a thing in action" is the equivalent of "a chose in action" thus, in s 7 of the Property Law Act 1969 the definition of "property" is as follows:

" 'property' includes real and personal property and any estate or interest therein and any thing or chose in action."

14 There can be no doubt that Carob's claim in the arbitration is a thing or chose in action. By a document described as a "DEED OF SALE OF CHOSE IN ACTION" undated, but said by the liquidator to have been entered into in February 1998, it was provided in cl 1 that:

"In consideration of Clements agreeing to clauses 2 to 6 hereof Carob agrees to assign all of its right, title and interest in the cause of action being the subject matter of the Arbitration to Clements."

15 Clauses 2 and 3 provided for all legal costs and disbursements relating to the conduct of the arbitration and/or other proceedings undertaken to pursue the arbitration to be the responsibility of Mr Clements on a solicitor and client basis. There was a covenant by Mr Clements to indemnify Carob and/or the liquidator in respect of the arbitration and any consequential proceedings. The deed provided that, upon the successful completion of the arbitration by settlement, judgment, compromise, determination or otherwise, Mr Clements would pay to Carob 50 per cent of any amount recovered after deduction of various legal costs, as defined in cl 4 of the deed. The deed was expressed to be subject to the granting of all necessary approvals pursuant to s 477(2B) of the Corporations Law. Clause 9 of the deed provided that:

"This deed shall be further subject to the granting of an order of the Supreme court [sic] of Western Australia lifting the stay of the Arbitration ordered by Justice Anderson on 11 December 1997."

16 It is apparent that Anderson J both approved the deed and made an order lifting the stay of the arbitration the subject of the previous order on 11 December 1997. As a consequence, the deed became unconditional. Clause 10 of the deed provides that:

"The laws of Western Australia shall govern this deed."

17 In my opinion, it is clear that the deed effected a valid assignment in equity of the claim the subject of the arbitration which constituted a legal chose in action. Section 20(1) of the Property Law Act 1969 provides that:

"Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim that debt or chose in action is effectual in law (subject to equities having priority over the right of the assignee), to pass and transfer from the date of the notice -

(a) the legal right to that debt or chose in action;

(b) all legal and other remedies for the debt or chose in action; and

(c) the power to give a good discharge for the debt or chose in action, without the concurrence of the assignor."

18 Section 20(3) provides that:

"For the purposes of this section 'any debt or other legal chose in action' includes a part of any debt or other legal chose in action."

19 By letter dated 7 July 2000 the solicitors who otherwise acted for Carob, on instructions from Mr Clements, informed the solicitors for Simto that:

"We are instructed by the Liquidator of Carob Industries Pty Ltd (In Liquidation) to give your client, Simto Pty Ltd, notice that he has assigned this chose in action to Mr Philip Clements pursuant to the deed of sale dated 23 February 1998.

Please note that Mr Clements is a resident of Western Australia and owns substantial assets in this State and throughout Australia. There is no basis for your client to obtain security for costs and we are instructed to defend such an application."

20 The solicitors for Simto replied by letter dated 20 July 2000 saying:

"We consider that you need to apply to the Full Court seeking an order that Mr Clements be substituted as appellant for Carob Industries Pty Ltd (In Liquidation).

This needs to happen before the appeal can be entered for hearing."

21 The response by letter dated 6 August 2000 contained the following:

"We advise we do not intend to make an application to substitute the Appellant in this matter.

It is our opinion that there is no basis at law to substitute the Appellant's [sic] from Carob Industries (In Liquidation) to Philip Clements. This is based on our consideration of the following facts in this matter:

• Mr Clements was never a party of [sic] the original cause of action;

• the matter can be effectively and immediately resolved with no need to substitute the parties: Gurtner v Curcuit [1968] 2 QB 587;

• the substitution is not necessary for the complete and effectual determination and adjudication of all matters in dispute: Vandervell Trustees Ltd v White (1971) AC 912;

• there is not a want of parties in the matter: Amon v Raffael Truck & Sons Ltd [1956] 1 QB 357;

• Mr Clements has only an indirect interest in the resolution of the dispute, he does not have a direct or legal interest;

• a mere commercial interest by Mr Clements in result is not enough to justify the substitution of the parties;

• the presence of Mr Clements is not necessary for the conduct of the proceedings: Walker v Commonwealth Trading Bank of Western Australia (1985) 3 NSWLR 496.

We will enter the matter for hearing forthwith and invite you to make an application to the court seeking an order for substitution of the Appellant at a later date."

22 The present position is that the appeal has been entered for hearing but no date has as yet been fixed.

23 In my opinion, the deed coupled with the giving of notice had the effect contemplated by s 20 of the Property Law Act. The signature of the liquidator satisfied the requirement that the assignment must be in writing under the hand of the assignor. The fact that the writing also constituted a deed did not take it out of the operation of the Act: Marchant v Morton Down & Co [1901] 2 KB 829 at 832 per Channell J; and Torkington v Magee [1902] 2 KB 427. That decision was reversed on another point in Torkington v Magee [1903] 1 KB 644, it being held by the Court of Appeal that it was not necessary to decide whether the assignee was entitled to sue for damages for breach of the assigned contract in his own name. There was no suggestion in this case that the notice given to the solicitors for Simto was insufficient. On the contrary, they contended that Mr Clements should be substituted as the appellant.

24 An assignment operating under s 20 of the Property Law Act has the same effect as the equivalent under the Law of Property Act 1925 s 136(1) (UK). This is described in pars 21 and 22 of Halsbury's Laws of England (4th Ed) Vol 6 as follows:

"21. Transfer of legal right. An assignment operating under the Act transfers the legal right to the thing in action to the assignee as from the date of the notice with power to give a good discharge for the same. The thing in action no longer belongs to the assignor, and he cannot sue for it."

"22. Transfer of remedies. An assignment operating under the Act passes all legal and other remedies for the thing in action. The primary result is that the assignee can bring an action in his own name where previously he could only have sued in the name of the assignor but the assignee can sue in his own name only in cases in which before the Act he could have sued in the name of the assignor."

25 In Read v Brown (1888) 22 QBD 128, Lord Esher MR said at 131 that s 25(6) of the Judicature Act 1873, the forerunner of s 136 of the Law of Property Act, gave to the assignee of a debt:

"... more than the mere right to sue for it; it gives him the debt and the legal right to the debt, and it follows from that that he would have a legal right to sue for and recover it, even had the section not contained the words 'and all legal and other remedies for the same.' A question therefore arises as to the true construction of this section. It is said that it only affects procedure, and nothing more, and in support of this contention a phrase has been cited which occurs at the end of my judgment in Schroeder v Central Bank of London [24 WR 710] where I am reported to have said, 'I am of opinion that this section gives no new right of action that did not exist before.' "

26 Later on p 132 his Lordship said that in construing s 25(6) it was necessary to adopt the ordinary rule of construction, namely, giving, if possible, a meaning to each word and that:

"... the words mean what they say; they transfer the legal right to the debt as well as the legal remedies for its recovery. The debt is transferred to the assignee and becomes as though it had been his from the beginning; it is no longer to be the debt of the assignor at all, who cannot sue for it, the right to sue being taken from him; the assignee becomes the assignee of a legal debt and is not merely an assignee in equity, and the debt being his, he can sue for it, and sue in his own name. We must give that meaning to the language of the sub-section; and, that being so, an assignee in order to show that the debt is his and that he may sue upon it must prove the assignment; he must, if suing, prove the assignment to himself in order to recover judgment, and the fact of the assignment is therefore part of his cause of action."

27 In my opinion, the effect of an assignment under s 20 of the Property Law Act is that there is a divesting of legal title correlative to the transfer of the right, so that if notice has been duly given, the debt or chose in action no longer belongs to the assignor and he cannot take proceedings to recover it: Bacon v Yatchaw Irrigation and Water Supply Trust [1898] VicLawRp 102; (1898) 23 VLR 485.

28 In Hughes v Pump House Hotel Co [1902] 2 KB 190 a building contractor executed an assignment to his bank by way of security for an overdraft all moneys due or to become due under building contracts. He also empowered the bank to settle all accounts in connection with the buildings and to give receipts for money paid for work done by him. It was held that the assignment was an absolute assignment, not just one by way of charge. The assignment being absolute, only the bank was entitled to sue on the building contract in question and the builder had divested himself of that right by virtue of s 25(6) of the Judicature Act because the legal right to the debt had been transferred to the bank as assignee including "all legal and other remedies for the same". An assignment may be absolute even though by way of mortgage: Burlinson v Hall (1884) 12 QBD 347; and Tancred v Delagoa Bay and East Africa Rail Co (1889) 23 QBD 239.

29 In Marchant v Morton Down & Co, supra, Channell J also considered the effect of s 25(6) of the Judicature Act. In that case a debt due to a firm was assigned by one partner to the defendants by writing, and was subsequently assigned by the other partner to the plaintiff by deed. The plaintiff gave notice to the debtor before the defendants did so. It was held that there was a valid equitable assignment of the debt to the plaintiff, and that having first given notice to the debtor, he was entitled to the debt in priority to the defendants. Channell J said at 832 that s 25(6) was:

"... merely machinery. It enables an action to be brought by the assignee in his own name in cases where previously he could have sued in the assignor's name, but only where he could so sue. It however does go to show that (, of which I think there could have been no doubt) a deed is not necessary."

30 In McIntosh v Shashoua (1931) 46 CLR 494 at 514, Evatt J expressed the view that s 12 of the Conveyancing Act 1919 (NSW), the equivalent of s 25(6) of the Judicature Act, had the effect that:

"If express notice in writing of an absolute assignment of a debt is given to the debtor, then, but not till then, the assignee obtains the legal right and the legal remedy to the debt."

31 In Norman v Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 at 27 Windeyer J noted that:

"... until the Judicature Act 1873, s 25(6), and the corresponding statutory provisions in Australia and elsewhere came into operation, an assignee of a legal debt could not in his own name bring an action against the debtor to recover the debt. The original creditor must be the plaintiff on the record. He remained in law the owner of the chose in action. What the provision of the Judicature Act 1873, did was to render unnecessary the previous circumlocutions. Debts and other legal choses in action were made directly assignable by the statutory method."

32 In Hobbs v Rawson [1961] WAR 79 the Full Court of this Court held that the vendor's interest having been assigned to a bank by way of mortgage but nevertheless by way of an absolute assignment, the assignors ceased to have any right to claim rescission of the contract assigned. As Virtue J said of such an assignment:

"It would, therefore, appear to come within the provisions of s 25(7) of the Supreme Court Act 1935, dealing with the assignment of debts and choses in action, and accordingly, to have been effective in law to pass all legal rights and remedies relative to the chose in action to the assignee. It is true that the section accepts assignments which purport to be by way of charge, but it has been held that a mortgage which transfers property with a proviso for redemption and reconveyance is absolute within the meaning of the subsection: Tancred v Delagoa Bay Railway Co (1889) 23 QBD 239; Hughes v Pumphouse Hotel Co [1902] 2 KB 190 (CA)."

"Now once there has been a perfected legal assignment, any action must be in the name of the assignee and not in the name of the assignor: Hughes v Pumphouse Hotel Co [1902] 2 KB 190, at pp193-4. See also Bacon v Yatchaw Irrigation Trust [1898] VicLawRp 102; (1898) 23 VLR 485."

34 The decision of the Full Court was reversed by the High Court in Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466, but not on this point.

35 In Re Kenneth Wright Distributors Pty Ltd (In Liquidation); W J Vine Pty Ltd v Hall [1973] VicRp 14; [1973] VR 161, Kaye J held that written notice of an assignment given to a debtor of a company after the company had been dissolved was effectual to complete the legal assignment of the chose in action. Kaye J said at 169:

"It is beyond dispute that at the time when the notice was given the company was already defunct. But this circumstance did not deprive the notice of validity because it might be likened to a grantor who died before the notice had been given. Because notice of an assignment given after the death of a grantor is effectual for the purposes of s 134, so, in my opinion, notice given by the assignee after the assignor company has become defunct is similarly effectual: Re Westerton; Public Trustee v Gray, [1919] 2 Ch 104, and Walker v Bradford Old Bank Ltd (1884), 12 QBD 511.

Thus, by giving to Mayne Nickless notice of the assignment, the legal assignment of the company's right to the debt was completed, vesting the right in Wright as though at all times it had been his. It vested the company's right in him at the time when the notice was given to Mayne Nickless: Holt v Heatherfield Trust Ltd, [1942] 2 KB 1; [1942] 1 All ER 404. Thereafter he and he alone has had, and now has, the sole legal right to recover the debt: Read v Brown (1888) 22 QBD 128, at pp131-2, and Bacon v Yatchaw Irrigation & Water Supply Trust (1897) 23 VLR 485, at pp487-8; 4 ALR 115. The company, even if it were restored, would no longer be capable of suing Mayne Nickless for damages. Furthermore, the company can no longer maintain the counter-claim in its own name."

36 The point raised by this application for a stay is not purely academic. As appears from annexure 8 to Mr Bereyne's affidavit, being a copy of the accounts and statement by the liquidator dated 17 February 2000 and lodged with the Australian Securities and Investments Commission on 22 February 2000, it appears that as at the former date the liquidator held $281.78 cash at bank, claimed $46.65 in respect of expenses and claimed $72,461.21 in respect of unpaid remuneration. It was estimated by the liquidator that there would be no amount available for distribution to unsecured creditors.

37 Counsel for the appellant drew attention to the cross-appeal by the respondent against the order of Anderson J approving the deed pursuant to s 477(2B) of the Corporations Law. The grounds contend that:

"1. The learned Judge erred in law in allowing the application when it was obvious that the members and creditors of the company would not be any better off if the agreement were approved.

2. The learned Judge erred in fact or law or in the exercise of his discretion in finding that it was in the company's interests and also in the interests of the community that the liquidator should be paid his proper fees and the winding up concluded in an orderly manner when:-

(a) there was no evidence as to whether the liquidator's fees were proper;

(b) there was no evidence as to any work the liquidator had done;

(c) the liquidator had charged fees of $133,911.15;

(d) the liquidation could have concluded in an orderly manner many years before had it not been for the liquidator's and the maintainer's dilatory conduct of the arbitration;

(e) it is not in the interests of the company or the community for liquidators and maintainers to pursue actions exclusively for their own benefit and thus prolong liquidations and increase the costs thereof."

38 It was contended that the condition regarding the lifting of the stay of proceedings in the arbitration had not been satisfied because of the pending appeal. The short answer to that contention is that the order made by Anderson J lifting the stay remains effective unless and until it is set aside or varied by the Court in the determination of the appeal. In other words, the order stands until it is set aside, varied or its effect is stayed. We were informed that the appeal had been entered for hearing in December next.

39 In my view, there is no substance in the contention that the condition regarding the lifting of the stay of proceedings in the arbitration had not been satisfied.

40 Counsel for the appellant contended that the power conferred on a liquidator under s 447(2)(c) to "sell or otherwise dispose of in any manner all or any part of the property of a company" did not necessarily extend to a disposition by way of assignment. In my opinion, the words "otherwise dispose of in any manner" are clearly wide enough to include a disposition by way of assignment of a debt or chose in action. There is no substance in the appellant's contention.

41 It was further contended that the notice of motion was too widely framed because the grounds for the application contend that Mr Clements should be substituted as the appellant and the respondent should be seeking an order in those terms. In my opinion, the grounds for the application, however, make it clear that the respondent contends that Mr Clements is the proper appellant but he refuses to be substituted as the appellant. It follows that there is no substance in this contention. It was said that the respondent did not take up this complaint before Anderson J. The short answer to that point is that the question of the proper party to prosecute the appeal only arose once the deed had been approved by Anderson J and it was sought to appeal against that decision.

42 Next, it was contended that the company was the correct appellant because this was an action brought by the company, not the liquidator. Under some provisions of the Corporations Law, such as s 565 and s 588FF, the liquidator is the proper party, but in other cases the proper party is the company in liquidation: Bibra Lake Holdings Pty Ltd (In Liq) v Firmadoor Australia Pty Ltd (1992) 10 ACLC 726; and Horn v York Paper Co Ltd (No 2) (1991) 9 ACLC 917. In this case, however, the proceedings having been commenced in the name of the company by the liquidator, it is proper that they should be continued in the name of the company after there has been an absolute assignment of the cause of action to Mr Clements given that the effect of an absolute assignment is that the company ceases to have any right, title or interest in the property assigned. In this respect it was contended that where there is no notice of an assignment of a cause of action until after proceedings had been commenced, there is only an equitable assignment. In this case, of course, both the making of the assignment and the giving of notice had taken place after proceedings had been commenced by the liquidator in the name of the company.

43 In Brookfield v Davey Products Pty Ltd (1996) 14 ACLC 303 the liquidator of Septic Products Australia Pty Ltd ("Septic") executed a deed with one of the company's former directors. For a nominal consideration, the liquidator assigned to the director the company's rights to claim damages against a third party. If the director was successful in the damages action against the third party, part of the proceeds was to be paid to Septic's creditors. The director contended that the assignment constituted a sale by the liquidator of property, namely the chose in action of the company and that the sale was authorised by s 477(2)(c) of the Corporations Law. In that case, it was acknowledged that there had been no compliance with s 15 of the Law of Property Act 1976 (SA). However, it was sought to uphold the deed as an equitable assignment of the choses in action. The assignment was by way of deed, but the deed did not expressly authorise the institution of proceedings in the name of Septic. In Three Rivers District Council v Bank of England [1995] 4 All ER 312 at 331 Gibson LJ said that:

"... the equitable assignee can be regarded realistically as the person entitled to the assigned chose and is able to sue the debtor on that chose, but that save in exceptional circumstances the court will require him to join the assignor as a procedural requirement so that the assignor might be bound and the debtor protected. If, unusually, the assignor sues, he will not be allowed to maintain the action in the absence of the assignee."

44 In McIntyre v Gye (1994) 122 ALR 289 at 295 the Full Court in South Australia said:

"... where there is an equitable assignment of a legal chose in action, the assignor should be a party to an action to recover the debt, either as plaintiff or defendant ..."

45 In Russell & Anor v Westpac Banking Corporation & Ors [1994] SASC 4479; (1994) 12 ACLC 278; (1994) 61 SASR 583 King CJ, with whom the other members of the Full Court agreed, said:

"When the company is in liquidation, the person in whom is vested the authority to institute proceedings is the liquidator: Scavel Pty Ltd v City Loan & Credit Corporation Pty Ltd (No 2) (1988) 17 FCR 344. There is power, however, in the Court to authorise other persons to conduct liquidation in the name of the company: Cape Breton Co v Fenn (1881) 17 Ch D 198; Aliprandi v Griffith Vintners Pty Ltd (In Liq) (1991) 9 ACLC 1530; (1991) 6 ACSR 250."

46 In my opinion, there can be no doubt that the liquidator had the power to dispose by way of an absolute assignment of a chose in action pursuant to s 477(2)(c) of the Corporations Law. The power of a trustee in bankruptcy in the relevant statutes has long been so interpreted: see Seear v Lawson (1880) 15 Ch D 426 per Jessel MR at 432 - 433; Guy v Churchill (1889) 40 Ch D 481; Ramsay v Hartley [1977] 1 WLR 686 and Re Nguyen; Ex parte Official Trustee [1992] FCA 150; (1992) 35 FCR 320. Similarly, in the context of companies legislation which has empowered a liquidator to sell the property of the company, inclusive of a chose in action, the courts have permitted the liquidator to sell a chose in action in circumstances which would otherwise attract the rule against maintenance: Re Park Gate Wagonworks Company (1881) 17 Ch D 234; Bang & Olufsen UK Ltd v Ton Systeme Ltd, unreported, Court of Appeal, 16 July 1993, referred to by Lightman J in Grovewood Holdings Plc v James Capel & Co Ltd [1995] Ch 80 at 85.

"Section 474(1) of the Corporations Law does not vest the property of a company being wound up on its liquidator. It simply requires the liquidator to '... take into his or her custody or under his or her control all the property to which the company appears to be entitled ...'. Section 474(2) authorises the court to direct that all or any part of the property of the company shall vest in the liquidator. It is not suggested in this case that any order pursuant to s474(2) has been made in respect of all or any of the property of Septic Products. It therefore seems that the appropriate assignor in this case was the company, not the liquidator. However, no point was taken in this regard and I do not think that anything should turn on it."

48 In Brookfield, at a very late stage in final addresses, application was made by the assignee to be granted authority to conduct the litigation using the name of Septic as a co-applicant. The learned Judge allowed the application and ordered that the assignee be authorised with effect from the date of the commencement of the proceedings at his own expense and risk as to cost to use the name of Septic as a co-applicant in the proceedings. Her Honour commented at 306:

"Septic Products may thus be seen as a party joined in these proceedings to satisfy the procedural requirement as to joinder of an assignor of a chose in action. By reason of the execution of the liquidator of Septic Products of the deed of 28 October 1983, Septic Products cannot be seen as a party itself entitled to relief from the respondents to these proceedings. It has purported to assign those rights to Mr Brookfield. I do not understand the conflict to have been argued."

49 It was submitted that in the present case notice was only given after the proceedings in question had been indicated and, in particular, only after the appeal had been instituted. It was submitted that in these circumstances there had not been a legal assignment. In my opinion, there is no substance in this point. In my opinion, there is nothing in the decision in Brookfield which says that there cannot be an absolute assignment of a chose in action in pending proceedings. In Brookfield her Honour was dealing with an equitable assignment. However, there is no prescribed form of notice. It is apparent from s 20 of the Property Law Act that what is needed is an express notice in writing.

50 One result of the decision of Anderson J is that there is, on the face of it, an effective assignment of the cause in action which took effect as an absolute assignment: cf Ultratune Australia Pty Ltd v UTSA Pty Ltd (1996) 14 ACLC 1610. In accordance with the authorities to which I have referred, the effect of the absolute assignment by the deed as approved by Anderson J and perfected by the giving of notice is that it is now Mr Clements to whom the chose in action was passed and transferred from the date of the notice. The consequence was that Mr Clements acquired the ownership of the chose in action; all legal and other remedies for the chose in action; and the power to give a good discharge for the chose in action without the concurrence of the assignor, all as contemplated by s 20(1) of the Property Law Act. It follows that Carob has no longer any right, title or interest in the subject matter. The sole right to pursue the matter is now vested in Mr Clements. In these circumstances, the company has ceased to be a proper party in these proceedings and it would be entirely appropriate for Mr Clements to be joined in the proceedings as an appellant. This is expressly contemplated by O 18 r 6 of the Rules of the Supreme Court 1971 which provides that:

"(1) No cause or matter shall be defeated by reason of the misjoinder or nonjoinder of any party; and the Court may in any cause or matter determine the issues or questions in dispute so far as they affect the rights and interests of the persons who are parties to the cause or matter.

(2) At any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application -

(a) order that any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b) order that any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, be added as a party,

but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as may be authorized.

(3) An application by any person for an order under paragraph (2) adding him as a defendant must, except with the leave of the Court, be supported by an affidavit showing his interest in the matters in dispute in the cause or matter."

51 Consequently, it is not possible to effectively and immediately resolve the matter without the substitution of Mr Clements as the appellant. In this respect the case is similar to Gurtner v Circuit & Anor [1968] 2 QB 587 because, in the absence of the defendant driver, who had gone to Canada, the Motor Insurer's Bureau who would be liable if the judgment was unsatisfied were properly joined as a defendant.

52 As neither Carob nor the liquidator no longer held any right title or interest in the chose in action and Mr Clements was the assignee pursuant to an absolute assignment of which notice had been given, he had a sufficient interest to justify his being substituted as the appellant as Carob had ceased to have any interest. Consequently, there was a want of parties as Carob no longer had any interest in the chose in action: cf Amon v Raphael Tuck & Sons Ltd [1956] 1 QB 357. This is a case in which it was necessary to join Mr Clements as a party in order that he be bound for the very reason that Carob had ceased to have any interest in the subject matter. Contrary to the submissions by counsel for the appellant Mr Clements is now the legal and equitable owner of the chose in action in question. His interest is, therefore, more than a "mere commercial interest". As he is the legal and equitable owner of the chose in action represented by the claim against Simto, it follows that his presence is necessary for the proper conduct of the proceedings: cf Vandervell Trustees Ltd v White [1971] AC 912. It is also just and convenient that he be so joined.

53 I observe that when this matter was called on, counsel for Carob announced only an appearance on behalf of Carob and did not say that he appeared for Mr Clements. In these circumstances it would not be appropriate to make an order for joinder without giving him the opportunity to be heard separately, although he is the only person entitled to prosecute the appeal. In my view, the proper order to make is to stay all proceedings on the appeal unless and until Mr Clements is joined, with liberty to Mr Clements or the respondent to apply. I would direct that

these reasons and the order of the Court be served on Mr Clements and that he have liberty to apply to a single Judge within 14 days of such service. In default of any such application within that time I would order that he be joined as appellant in substitution for Carob with effect from the expiration of the period of 14 days I have mentioned.

54 KENNEDY J: I have had the benefit of reading the reasons of Malcolm CJ in draft. I am in agreement with those reasons and with the orders which his Honour proposes.

55 PIDGEON J: I agree with the reasons of the Chief Justice and the orders proposed.

Arbitration Act 1985

Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd [2000] WASCA 362

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (103 paragraphs)

Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd [2000] WASCA 362 (24 November 2000)

Parties

Legislation Cited (5)

Cases Cited (8)