On its correct construction GC 9.1 prohibits the assignment in clause 4.1 of the second Deed of Assignment. I accept the characterisation which senior counsel for the defendant gave that rights assignment of which is prohibited by GC9.1 are inherently incapable of being assigned; it is not simply a matter of giving effect to the contractual prohibition on assignment; it is an inherent characteristic of those rights that they cannot be assigned, and they are given this characteristic by the agreement of the parties which is the sole source of their existence. Those rights do not have any existence on any other basis than that they are not assignable.
43 However plaintiff's counsel also relied on s 477(2) of the Corporations Act which provides:
"Subject to this section, a liquidator of a company may:
…
(c) sell or otherwise dispose of, in any manner, all or any part of the property of the company."
44 This should be understood with the definition of property in s 9 of the Corporations Act which is as follows:
" 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."
45 Counsel referred to s 506 of the Corporations Act, and to s 501 which requires in imperative language that the assets of the company must on its winding up be applied in satisfaction of its liabilities. Counsel contended that "thing in action" and "chose in action" are equivalent terms; see Carob Industries Pty Ltd (in liq) v Simto Pty Ltd (2000) 23 WAR 515; [2000] WASCA 362 at 520 [13]. This is plainly correct.
46 Cases where s 477(2)(c) has been addressed by courts of appeal, including courts of appeal of other States, should be approached having regard to the authority accorded to those decisions by observations in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [135] and Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 at 492.
47 Counsel for the plaintiff referred to a number of authorities which he contended show the amplitude of the power of disposition in s 477(2)(c). In UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 251, Hansen J in the Supreme Court of Victoria made an order under s 511 of the Corporations Law approving entry by liquidators into a Deed of Assignment notwithstanding a claim that the assignment was or might be in breach of the law of champerty and maintenance. Considering the liquidators' statutory power of sale under the Corporations Law at 265-270, Hansen J reviewed the extensive case law which over many years had held that statutory powers of trustees in bankruptcy and liquidators to enter into arrangements which would be objectionable on the grounds of champerty and maintenance, overcome such objections. In his extensive consideration Hansen J said at 269, line 16 and following:
"Third, the English and Australian cases make it clear in my opinion that it is not only the vesting in the trustee of the bankrupt's cause of action by the Bankruptcy Act which provides the foundation for the implication of a statutory exemption to the laws of maintenance and champerty. Instead (or alternatively), it is the granting to the trustee and the liquidator the power to 'sell or otherwise dispose of, in any manner' the bankrupt's and the company's 'property', together with the interpretation of the definition of 'property' as including causes of action. Simply put, it is the statutory empowering of the liquidator to sell the company's causes of action which creates the exception or exemption, which itself is based in part on the assumption that Parliament could not have intended to empower a liquidator to do something which would be unlawful if no exception or exemption was implied. This view is, I think, confirmed by the passage in Lord Hoffman's judgment in Stein v Blake [1996] 1 AC 243 quoted above. Lord Hoffman was clearly of the view that it is the trustee's 'statutory duty to realise the estate [which] excluded the doctrines of maintenance and champerty', and not the fact that the bankrupt's estate was vested in the trustee."
48 An appeal from the decision of Hansen J was dismissed by the Court of Appeal of Victoria - (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA). Brooking JA expressed
"…admiration for the careful and comprehensive judgment of Hansen J."
49 In the leading judgment Hayne JA at 463, line 8 to 464, line 12, addressed the meaning and effect of s 477(2)(c). After referring to the provisions of the Corporations Law which are not different to those now under consideration, Hayne JA said at 463, line 16 and following:
"Thus, taken literally, the statute provides that a liquidator has power to sell or otherwise dispose of, in any manner, any thing in action of the company.
The appellant contends that those words are not to be read literally but are to be read as not permitting a liquidator to sell the company's cause of action to anyone who does not already have an interest in the outcome of it because a sale to such a person will lead to maintenance or, if there is to be some sharing of the proceeds of the litigation, champerty.
It may be accepted, for present purposes, that public policy frowns upon 'trafficking in litigation': Trendtex Corp v Credit Suisse [1982] AC 679, 694; (1981) 3 All ER 520 at 524 per Lord Wilberforce, Abolition of Obsolete Offences Act 1969 (UK); Wrongs Act 1958 (UK), s32. But if there is such a rule, it is not absolute. In Giles v Thompson [1994] AC 142; [1993] 3 All ER 321, Steyn LJ said:
'In modern idiom, maintenance is the support of litigation without just cause. Champerty is an aggravated form of maintenance. The distinguishing feature of champerty is the support of litigation by a stranger in return for a share of the proceeds.'
I do not think we need to consider what is 'just cause' for these purposes.
In my view there is no warrant for reading down the general words of the law. The reference to sale or disposal 'in any manner' makes plain that it is the intention of the legislature that the powers of the liquidator are to be ample. If a liquidator is to realise the assets of the company in liquidation to the best advantage, it would be surprising indeed if the liquidator were able to sell a particular form of the company's assets (its rights of action) to only a limited class of persons - those who are already interested in the outcome of the action concerned. Especially is this so when it is to be assumed that the provisions about realisation of the company's assets are to be read in light of the long established rule in relation to bankruptcy which permits the trustee in bankruptcy to sell the bankrupt's rights of action to a third party: see Seear v Lawson (1880) 15 Ch D 426; Guy v Churchill (1889) 40 Ch D 481; Ramsay v Hartley [1977] 2 All ER 673; 1 WLR 686; Stone v Angus [1994] 2 NZLR 202; Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238. In my view nothing turns on the different treatment of property of the bankrupt and a company in liquidation in the bankruptcy and companies legislation. In the former case, the property vests in the trustee but in the latter does not, without special order, vest in the liquidator.
I do not accept that s 477 is to be read, as counsel for the appellant contended, as doing no more than identifying the circumstances in which a liquidator can exercise powers which otherwise would rest in the company. Such a construction wholly ignores that the liquidator is to wind up the affairs of the company and distribute its property: cf s 477(2)(m). The liquidator is not appointed simply as a particular agent or controller of the company who is to set about carrying on the business and affairs of the company as if winding up had not intervened. The liquidator is there to wind up the company's affairs.
I therefore agree with the learned primary judge, substantially for the reasons that he gives, that the proposed sale of the company's rights of action to Titan was within the power of the liquidator."
50 Hayne JA's view has the effect that a liquidator when disposing of property under s 477(2)(c) is not exercising any power or right to assign property under the general law, but that the effectiveness of the disposition has a different source, its authorisation by statute. The law of assignments considered in Linden Gardens is a different subject.
51 UTSA illustrates that the power in s 477(2)(c) extends to a power to dispose of a cause of action. The same view has been acted on in other cases: Re Movitor Pty Limited v Sims [1996] 19 ACSR 440 at 448 (Drummond J); Brookfield v Davey Products Pty Ltd [1996] 14 ACLC 303 at 307 (Branson J).
52 The law of assignment was reviewed in valuable ways in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395; [2006] FCAFC 40 at 404-405 [32] (Finn and Sundberg JJ) and at 436-438 [187]-[194] (Emmett J).
53 In Krishell Pty Ltd v Nilant & Ors (2006) 60 ACSR 410; [2006] WASCA 223 the company appealed against an adverse judgment and then went into liquidation; the liquidators agreed to sell the right of appeal for $5,000 to the director of the company on the basis that the director had to obtain the court's leave to prosecute the appeal. The Master dismissed an application to set aside the transaction because the Master considered the right of appeal to be property of the company which was capable of assignment. The Court of Appeal of Western Australia dismissed the appeal; the reasons given were diverse and included address by McLure JA to whether the right of appeal was itself an assignable chose in action. At 426 [73] and following McLure JA addressed whether the right of appeal was property under s 9 of the Corporations Act. Because of the diversity of opinion these observations do not have the authority of a decision of the Court of Appeal. After extensive consideration at [73]-[79] McLure JA concluded that the right of appeal was property capable of being assigned together with the judgment debt by the liquidator and observed:
"The right of appeal is closely connected with Mr Gardner's interest in (ownership of) the judgment debt that either exists or will come into existence if the appeal is successful. In either event Mr Gardner's interest in the judgment debt is 'property' under the Corporations Act which can only be claimed in appellate proceedings."
54 In the course of this consideration McLure JA referred to many authorities and several texts bearing on the question whether a bare right to litigate is a chose in action and whether or not assignability is an essential characteristic of a right of property.
55 In my opinion the plaintiff's claim to be entitled to a payment of $1,038,918.07 is a chose in action or thing in action within the ordinary meaning of that expression, and there is no reason to suppose that the expression has a different or qualified meaning when used in s 9 of the Corporations Act. It is difficult to see the claim as included within general concepts of property or within the references to property interests in the first part of the definition in s 9, but the extension by inclusion of "thing in action" in the definition shows that the reference to a thing in action has a longer reach than general concepts of property rights. It is authoritatively established that disposition of a claim within the power in s 477(2)(c) is effective notwithstanding that without that power assignment would be illegal and void under the law relating to maintenance and champerty.
56 In my opinion the claim is no less a thing in action and no less susceptible to disposition by a liquidator because under the general law an assignment would be ineffective for another reason. The disposition did not take place under the general law; it has the force that s 477(2)(c) gives it.
57 This reading gives the transaction a severe adverse effect against the interests of the defendant. According to the terms of its contract, the defendant was entitled to have any disputes about payments limited to disputes with the party it was contracting with; there are good reasons for such a limitation, especially in building cases, as explained in Linden Gardens. The Court looks for clear expression of legislative intention to override rights under the general law including contractual rights, but powers of disposition under Bankruptcy Law and Corporations Law have long been understood to operate with amplitude and I regard the intention as clear.
58 The defendant's senior counsel gave great stress and clear illustration to the position that according to the contract and the general law of assignment, the subject matter of the supposed assignment is inherently incapable of being assigned. The inherent incapacity is as counsel contended, but statute law has created machinery under which the right can be disposed of, and it is the Court's function to give effect to that disposition so as to serve the purpose of enabling realisation of a company's resources for the benefit of those interested.
59 It was contended by the plaintiff that the Owners Corporation had waived its entitlement to rely on GC9; see Amended Reply, paragraph 2(d). In support of this contention the pleading referred to and the plaintiff relied on 12 letters and messages passing between the parties and solicitors representing them between the period from 4 November 2005 to 21 April 2008. The position asserted is to the effect that each of these communications was an occasion on which the defendant could have asserted reliance on GC9.1, but did not do so; and it was said that waiver was a consequence. However none of these was an occasion on which the defendant was under a duty or in a situation of election which required it to state whether it relied on GC9 or to forego the opportunity to do so. The facts asserted could not in my understanding constitute a waiver. However this is not a point on which my decision turns.
60 The defendant asserted that the plaintiff is disentitled to rely on the second Deed of Assignment in its second form and disentitled to make the amendments in the Further Amended Statement of 23 March 2009 which relied on it, because of the rule, associated with Baldry v Jackson [1976] 2 NSWLR 415, which limits claims introduced into litigation by amendment to claims existing at the date of commencement of the proceedings. An unstated element of this argument was that the events constituting assignment were part of the cause of action for the purposes of the law applied in Baldry v Jackson; this can be left unexamined. The judgment of Samuels JA clearly contemplates that the rule is no more than a rule of procedure, and cited a statement to that effect in Wigan v Edwards (1973) 47 ALJR 586 at 592 (Gibbs J); no important principle is at stake. The Civil Procedure Act 2005 s 64(3) makes a quite different rule to that applied and acted on in Baldry v Jackson. Amendment to add a cause of action which arose after commencement of proceedings is authorised by s 64(3), which also cures a principal ground upon which the previous rule was based, the anomaly of giving a litigant the benefit of an earlier date of commencement of proceedings than would otherwise be available for the purpose of defences relating to effluxion of time. The position was fully and clearly stated in Jericho Developments Pty Ltd v Garden Tower (NSW) Pty Limited [2006] NSWSC 595 at [21]-[26] (Gzell J) and I follow that decision.
61 In my opinion, the separate questions should be answered in the following ways: (a) (i)(A) No, it was not assignable.
(i)(B) No, it did not waive its entitlement.
(ii)(A) No
(ii)(B) Yes
(iii)(A)(B) and (C) The cause of action was disposed of to the plaintiff by the second Deed of Assignment in its second form.
(b) No
(c) CGS is entitled to maintain these proceedings on the grounds that CGS filed a Further Amended List Statement on 23 March 2009.