Dealquip Australia Pty Ltd v 33 Electra Pty Ltd

Judgment 1HIS HONOUR: The applicants Messrs Sanderson and Kaye are cross-defendants to a cross-claim filed on 31 January 2012. The cross-claimants are 33 Electra Pty Ltd ("33 Electra"), a company now in liquidation, and a Mr Jeffrey Shannon. The cross-claim was filed in proceedings brought by a company Dealquip Australia Pty Ltd ("Dealquip") which is also in liquidation against 33 Electra and Mr Shannon amongst others. 2The proceedings brought by Dealquip have been dismissed and an order for costs made against it. 333 Electra and Mr Shannon filed notices of motion in which they sought orders that Messrs Sanderson and Kaye, amongst others, pay on an indemnity basis, the costs that were awarded against Dealquip. 4The present application is brought by Messrs Sanderson and Kaye seeking summarily to dismiss for want of prosecution the applications brought by 33 Electra for orders that the applicants pay the costs of the proceedings brought by Dealquip and for summary dismissal for want of prosecution of the cross-claim brought by 33 Electra. On 16 August 2013 I dealt with similar applications brought by Messrs Sanderson and Kaye against Mr Shannon. There being no appearance for 33 Electra on either 8 August or 16 August 2013 when the applicants' notices of motion were returnable, I declined to deal with the applications in the absence of 33 Electra until the then administrators of that company had been served and given further opportunity to appear on the applications. 5The applicants also indicated that they would seek orders for security for costs against both 33 Electra and Mr Shannon. The application for security for costs against Mr Shannon was not pressed. I directed that notice be given of the intended application for security for costs to the then administrators of 33 Electra. That application is made if the application for summary dismissal does not succeed. There has been no appearance today for 33 Electra, just as there was no appearance on the two prior occasions when the applicants' notices of motion were before me. 6Administrators were appointed to 33 Electra on or about either 21 May or 30 May 2013. This followed a hearing of the matter before Young AJ on 15 May 2013 when the proceedings brought by 33 Electra and Mr Shannon for third party costs orders were adjourned. 7On 2 July 2013 UTR Law, the solicitors for the present applicants, wrote to the administrators, Messrs Kerr and Stone of RSM Bird Cameron Partners, referring to the hearing before Young AJ and the fact that the matter had been stood over to the Registrar's list on 1 July 2013. UTR Law advised that on that day the matter could not be progressed because there were no lawyers currently instructed by 33 Electra in relation to the proceedings. They noted that the proceedings had been adjourned to 15 July 2013 and they sought the urgent advice of the Administrators as to whether or not they proposed to carry on with the proceedings on behalf of 33 Electra. UTR Law advised that if they were not informed of the administrators' intentions by 8 July 2013, they would file a notice of motion seeking dismissal of the proceedings. 8On 15 July 2013 there was no appearance for 33 Electra when the matter was before the Registrar, but Mr Shannon was ordered to file and serve points of claim by 5 August 2013 and the matter was stood over for directions on 8 August 2013. On 8 August 2013 the matter was referred to me. The applicants filed in court on that day notices of motion seeking orders against both 33 Electra and Mr Shannon. It is those notices of motion, so far as they concern 33 Electra, with which I am now dealing. 9On 8 August 2013 I made an order that the solicitors for the applicants advise the administrators of 33 Electra that the notices of motion would be listed to be heard on 16 August 2013 and that in the absence of an appearance by 33 Electra, the cross-claim brought by that company and the notices of motion filed for that company might be dismissed. The reference to the notices of motion filed for that company was to the notice of motion filed for 33 Electra seeking third party costs orders. 10I also directed that the administrator be advised that if those notices of motion and cross-claim were not dismissed, Messrs Sanderson and Kaye would move for an order for security for costs and any ancillary order that might be sought in relation to such an application. The proceeding was stood over to 16 August 2013. 11Again, there was no appearance for 33 Electra on that day. The solicitors for the administrators of 33 Electra wrote to UTR Law stating that they had sought instructions from their client, that is, the administrators, whether they intended to pursue either or both of the cross-claim or the notice of motion filed by the company. They said that their client was not in a position to form a view about that. Apparently a significant reason for this was an assertion that had been made by a firm of lawyers in Queensland called Platinum Lawyers who have acted for Mr Shannon in these proceedings and who, I understand, formerly acted for 33 Electra. That firm asserted that it was the beneficiary of an assignment made by Mr Shannon and perhaps by 33 Electra. However, that issue has since fallen away. Messrs Johnson, Winter & Slattery stated that there were little or no funds available in the administration and it was in the best interests of the creditors that they not appear at the hearing. They said that they would ask that the solicitors for the applicants seek an adjournment for a period of two weeks to provide sufficient time for the administrators to obtain a response from Platinum Lawyers and consider their position. They said that their clients would abide by any orders of the Court entered on this and any subsequent occasion. 12It appears from correspondence from the administrators that the largest creditor proving in the administration of 33 Electra is the Commonwealth Bank of Australia. It wrote to Platinum Lawyers on 2 July 2013 in relation to the assertion by that firm that it was the assignee of Mr Shannon's and 33 Electra's choses in action of 33 Electra. The Commonwealth Bank contended that 33 Electra had charged its property to the bank and that any such purported assignment would be in breach of the charge. 13I infer that from at least the time 33 Electra went into administration the administrators and the principal creditor would have given consideration to whether the claims made by 33 Electra in its notice of motion and by its cross-claim should be further pursued. In this respect it is noteworthy that voluntary administrators were appointed only a couple of weeks after the proceedings had been listed for hearing before Young AJ, but had then been adjourned. 14On 16 August, I acceded in substance to the request made by the solicitors for the administrators that the administrators be provided with a further 14 days to consider their position. I stood the applications over to today and again directed the administrators be advised that the notices of motion would be listed for hearing today and that if the claims of 33 Electra were not dismissed, then Messrs Sanderson and Kaye would move for an order for security for costs. 15On 29 August 2013 Messrs Johnson, Winter & Slattery wrote to the Registrar. They advised that at the creditors' meeting held on 28 August 2013, 33 Electra was placed into liquidation. The administrators, Messrs Kerr and Stone, were appointed as liquidators of the company. Messrs Johnson, Winter & Slattery stated that there were little to no funds available in the liquidation. They stated that the "majority secured creditor" would be the principal beneficiary of any proceeds of the proceedings and it indicated that that creditor would be looking at the proceedings and would advise whether it proposed to take any action in respect of them. They stated that the creditor might take one of four actions, namely, "appointing a receiver of the company in respect of its assets, taking possession over the proceedings [sic] on behalf of the company, funding the proceedings to prosecute the cross-claim of the company or taking no further action". The liquidators advised that they would be taking no further action in respect of the proceedings and would not be attending today's hearing. 16The applicants move under r 12.7(1) of the Uniform Civil Procedure Rules 2005, which provides: "If a plaintiff does not prosecute the proceedings with due despatch the Court may order that the proceedings be dismissed or make such other order as the Court thinks fit." 17An initial question is whether leave is required pursuant to s 471B of the Corporations Act 2001 (Cth) for the applicants to pursue that application. That section provides: "471B Stay of proceedings and suspension of enforcement process While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property; except with the leave of the Court and in accordance with such terms (if any) as the Court imposes." 1833 Electra was joined as a defendant to the proceedings brought by Dealquip. That proceeding is no longer pending. It has been finalised by judgment having been given in 33 Electra's favour. Neither the cross-claim brought by 33 Electra nor the notices of motion seeking third party costs orders could be characterised as a proceeding against 33 Electra. The present question is whether the application for summary dismissal is a proceeding against 33 Electra. If so, the applicants could not begin or proceed with that application without leave. 19As Santow J observed in Simoon Pty Ltd v Renbay Systems Pty Ltd (1995) 13 ACLC 1792 at 1793 and Doran Constructions Pty Ltd (In Liq) v Beresfield Aluminium Pty Ltd [2002] NSWCA 95; (2002) 54 NSWLR 416 at [7], the word "proceeding" is capable of having either a broad or a narrow meaning depending on context. In Skinner v Jeogla Pty Ltd [2001] NSWCA 15; (2001) 19 ACLC 1163 Spigelman CJ said in reference to the House of Lords' decision in Humber & Co v John Griffiths Cycle Company (1901) 85 LT 141 that the case was authority that: "Where proceedings have been pursued by a company after it has been ordered to be wound up, other parties may take 'defensive proceedings' without leave." His Honour said that whilst it was not clear what was meant by "defensive proceedings", it encompassed prosecuting an appeal (Distinctive FX 9 Pty Ltd v Statewide Developments Pty Ltd [2012] NSWCA 393). In Doran Constructions Pty Ltd (In Liq) v Beresford Aluminium Pty Ltd, Ipp AJA (as his Honour then was) said that there was authority to the effect that where proceedings have been pursued by a company after it has been ordered to be wound up other parties may take defensive proceedings without leave referring to Skinner v Jeogla Pty Ltd (at [89]). 2033 Electra has not sought to pursue the proceedings brought by it after it has been ordered to be wound up. This might suggest that leave was required for the applicants to bring their application for summary dismissal. However, that would not be in accordance with the reasoning of the Full Court of the Supreme Court of Western Australia in BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857. There, Anderson J (with whom Kennedy and Ipp JJ agreed) said (at 859): "In my opinion, an application for security for costs is not a proceeding in a court against the company within the meaning of s471B. We were not referred to any authority directly in point but in my view the section is concerned with proceedings initiated against the company, not with procedural applications by defendants in an action initiated by the company. If it was intended that the section should operate to cut down the defensive procedural measures that would otherwise be available to a defendant in an action brought by the company, thereby reducing the defendant's normal rights in the litigation whilst leaving the company's rights intact, much clearer language would have been used in the legislation." 21In my view the application for summary dismissal for want of prosecution is not a proceeding against 33 Electra within the meaning of s 471B and leave is not required. I think this follows from the approach to the section indicated by Anderson J in BPM Pty Ltd v HPM Pty Ltd. If I were wrong in that conclusion I would nonetheless have granted leave so that the application could be considered on its merits. 22The applications for third party costs orders were brought initially by 33 Electra and Mr Shannon acting together with the one set of legal representation. Initially third party costs orders were sought against solicitors and counsel who had appeared for Dealquip. Messrs Sanderson and Kaye, the directors of Dealquip, were joined as additional respondents to that application on 30 August 2012 and 3 September 2012. 23On 7 September 2012 the Registrar ordered that the applicants to the motion, that is 33 Electra and Mr Shannon, serve on the respondent a document in the form of a statement of claim identifying the bases of their claim for costs in the event that they had not already served such documents. 24On 29 October 2012 the Registrar ordered that the applicants, that is 33 Electra and Mr Shannon, serve points of claim on the third and fourth respondents by 12 November 2012. The documents purportedly filed to comply with those orders took the form of an outline of submissions. They were a mixture of summaries of evidence, references to evidence, submissions, and some allegations of material fact. It is perhaps not surprising that in those circumstances when the application ultimately came on for hearing before Young AJ on 15 May 2013, the proceedings had to be adjourned. The reason for the adjournment substantially concerned the position of other respondents to the application who contended that the application had been advanced on grounds that fell outside the grounds previously indicated. Nonetheless, had the statement of claim or properly pleaded points of claim been filed, it is unlikely that an adjournment would have been necessary or granted. 25The orders made by Young AJ on 15 May 2013 included the following: "2. Because of procedural problems the matters are stood out of today's list. 3. The parties have liberty to withdraw the submissions that they made and filed after the direction of Hallen J. 4. The applicant may file fresh submissions no later than 27 June 2013." 26According to an affidavit of the solicitor for Messrs Sanderson and Kaye, Young AJ made clear that he intended the orders to extend to amended points of claim and submissions as against Messrs Sanderson and Kaye. 27On 16 August 2013, on the hearing of the application so far as it concerned Mr Shannon, I declined to make an order for summary dismissal of his third party costs claim for want of prosecution. But I was critical of the form of the document that Mr Shannon sought to propound as amended points of claim. I ordered Mr Shannon to file and serve a statement of claim pleading the relief claimed by him against Messrs Sanderson and Kaye in respect of the costs incurred in proceedings brought by Dealquip and the material facts relied on in support of that claim. I made further orders for the progress of Mr Shannon's application for third party costs orders. 2833 Electra stands in a different position. It has not attempted to file any amended points of claim. However, the orders made by Young AJ on 15 May 2013 did not require it to do so. The orders his Honour made gave liberty to the then applicants to withdraw submissions and to file fresh submissions. Moreover, I infer that because 33 Electra did not appear before the Registrar on 15 July 2013, no orders were made requiring it to file and serve points of claim. Had it appeared, it is clear that such an order would have been made. 29The power to dismiss proceedings for want of prosecution is not necessarily premised upon a party's having failed to comply with orders for the prosecution of the proceedings. All that the Rule requires as the condition for the exercise of the power is that the plaintiff not have prosecuted the proceedings with "due despatch". That power is to be exercised cautiously having regard to the matters in ss 56, 57 and 58 of the Civil Procedure Act 2005. 30In assessing what is in accordance with the dictates of justice and what best facilitates the just, quick and cheap resolution of the real issues in the proceedings, I have regard to the fact that dismissal of the notices of motion by which 33 Electra seeks third party costs orders against the applicants for want of prosecution would not preclude the bringing of a fresh application. It could not be suggested that any such application is statute barred. The failure of 33 Electra to appear at any time after 15 May is explained by the administrators and now liquidators being without funds. 31I think the case is very close to one that warrants dismissal for want of prosecution. It is quite unsatisfactory that the applicants should continue to incur costs and to have the claim for costs orders continuing to hang over their heads, if 33 Electra is not to prosecute the claim. Neither the liquidators nor the principal creditor can expect the applicants simply to wait while they take their own time in deciding whether to proceed. Nonetheless, and not without hesitation, I have concluded that I should not summarily dismiss those claims pursuant to r 12.7. That is because I think the position of the applicants can be adequately protected by dealing with their security for costs application. 32For the reasons above the application for security for costs is not one that requires leave. 3333 Electra is plainly insolvent. If the claim which it has brought for third party costs order is pursued, it will be for the benefit of a principal creditor. It could not be suggested that that creditor would be prejudiced if security for costs were required. The grounds for making an order for security for costs under s 1335 of the Corporations Act are plainly made out. This is an appropriate case for the making of such an order. 34The security is sought in the sum of $51,108.91. If the claim of 33 Electra for third party costs orders were pursued, it would have to file a statement of claim just as Mr Shannon has to file a statement of claim and the costs that the applicants' solicitor has estimated in respect of the third party costs application, so far as it concerns both Mr Shannon and 33 Electra, would be incurred. 35The security sought in the sum of $51,108.91 is based upon what appear to be reasonable rates for the work of solicitors and counsel and sufficient engagement of counsel in the pre-trial process. The assessment is made on the basis that an ordinary costs order would be made representing approximately 75 per cent of actual solicitors' costs. I think that figure is appropriate, but I will round the figure down to $50,000. 36Accordingly, in due course I will refuse the applications for summary dismissal of 33 Electra's notices of motion of 30 August 2012 and 3 September 2012. I will make orders for the provision of $50,000 as security for costs in relation to those claims. 37Similar considerations apply in relation to the application for summary dismissal of the cross-claim. Nothing has been done to progress the cross-claim since 21 September 2012. On that day the cross-claim was adjourned to 29 October 2012, but no further orders were sought by either party in relation to it. It is clear that this was because the parties were focusing their attention on the applications for third party costs orders. 33 Electra has not been in breach of any order in relation to the progress of the cross-claim and I have made orders as between the present applicants and Mr Shannon with a view to achieving progress on the resolution of that cross-claim. 38In the circumstances of the 33 Electra having gone into administration and liquidation, I do not think it would be just to dismiss the cross-claim for want of its prosecution with due despatch. On the other hand, there is no reason that 33 Electra, or the creditor that stands behind it, should not provide security for the applicants' costs in relation to that cross-claim. 39The amount of security sought is $80,763.75. Again, this security is sought on the basis of a discount of 25 per cent of solicitors' costs to reflect what might be recoverable under a costs order made on the ordinary basis. 40The estimate of costs again includes details of the work proposed to be done, the rates that would be charged by junior counsel and solicitors for different types of work. The allocation of work and the amounts of time appears reasonable. The estimate does make an allowance of some $7,800 for the giving of discovery. It is by no means clear to me that discovery would be ordered in relation to the cross-claim. The estimate also makes provision for the engagement of senior counsel. Having regard to the size of the claim made in the cross-claim, which runs into the millions of dollars, and the issues raised by the cross-claim, I accept that the engagement of senior counsel would be warranted. 41I will order security for costs in the cross-claim in the sum of $70,000. I will stand the proceedings down for suitable time today for counsel for the applicants to bring in short minutes of order in accordance with these reasons. The short minutes of order should include a time for the provision of security for costs and any consequential order that the applicants might seek including an order for the stay of the proceedings until security is given. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 September 2013