Dean-Willcocks v Air Transit [2016] NSWSC 1489 | Case summary

Dean-Willcocks v Air Transit [2016] NSWSC 1489 | Case summary | Zoe

Judgment - ex tempore

Several Interlocutory Processes and a Notice of Motion were listed for hearing today, although it has emerged in the course of that listing that the Plaintiffs will pursue only one application, and that the Defendants do not seek to be heard in respect of that application.
By Interlocutory Process filed on 25 August 2016, the Second Defendant, Wenman Brimak Investments Pty Ltd sought an order that proceedings against it in a Statement of Claim filed on 25 July 2016 be dismissed or struck out. By Interlocutory Process also filed on 25 August 2016, the Third Defendant, Statewide Printing Group Pty Ltd, also sought orders that the Statement of Claim filed on 25 July 2016 be dismissed or struck out against it. By Notice of Motion filed on 26 August 2016 the First Defendant, Banq Accountants and Advisors Pty Ltd, the Fifth Defendant, Sivasli Pty Ltd, the Seventh Defendant, Kito Investments Pty Ltd, and the Tenth Defendant, Coolfind Pty Ltd, also sought orders that the Statement of Claim filed on 25 July 2016 be dismissed or struck out against them.
By Interlocutory Process filed on 25 August 2016 the Plaintiffs, Mr Mitchell Ball in his capacity as liquidator of RCG CBD Pty Ltd (in liq), ("Company") and the Company sought orders that, pursuant to r 6.19 of the Uniform Civil Procedure Rules 2005 (NSW), the Plaintiffs be granted leave to bring the relevant proceedings and join the Defendants in these proceedings as parties. The Plaintiffs also sought leave to file an Amended Originating Process, which involved, it appears, some changes in the amounts claimed, as well as the claim not proceeding against one of the Defendants, the Fourth Defendant. I will defer dealing with that matter until other aspects of the Interlocutory Process have been resolved.
A preliminary issue was raised in submissions as to whether leave under r 6.19 of the Uniform Civil Procedure Rules was required, although the application has proceeded on the basis that the Defendants submit that such leave is required, and the Plaintiffs are content to seek it, in circumstances that the Defendants do not seek to be heard in respect of it. That rule provides that: "(1) Two or more persons may be joined as plaintiffs or defendants in any originating process if: (a) separate proceedings by or against each of them would give rise to a common question of law or fact, and (b) all rights of relief claimed in the originating process are in respect of, or arise out of, the same transaction or series of transactions, or if the court gives leave for them to be joined."
It seems apparent that the first limb of r 6.19(1)(a) of the Uniform Civil Procedure Rules is satisfied in this case, so far as the separate proceedings brought against the Defendants give rise to at least one common question of law or fact, namely the solvency of the Company at the time the impugned transactions took place. It is possible that the relevant transactions give rise to a second common question of law or fact, namely the purpose or commerciality of the relevant transactions, to the extent that they have, or may have, or at least are alleged to have, some common factual elements, although involving different Defendants. There may have been a wider question whether all rights of relief claimed in the Originating Process can be said to have arisen from a series of transactions, where those transactions involve different parties, but are alleged, as I have noted, to involve similar factual features. It is not necessary to determine that question given the manner in which the application has proceeded.
As I have noted, the Plaintiffs now seek leave for the Defendants to be joined in the proceedings, while not conceding that such leave is necessary. They identify the basis on which such leave should be granted as involving at least the fact that there is a common issue as to the insolvency of the Company in the proceedings against each of the Defendants, and potentially also involving the question of the commerciality of the transactions to which I have referred, where there may be a risk of inconsistent findings, in respect of allegedly functionally similar transactions involving different parties, if those transactions were heard in separate proceedings. It is ultimately not necessary to determine whether both grounds are available to support an application for leave, if one of those grounds is sufficient for that purpose.
The circumstances in which the court may grant leave, under r 6.19 of the Uniform Civil Procedure Rules, in respect of proceedings relating to voidable transactions, where relief is sought under s 588FF of the Corporations Act 2001 (Cth) are well established. In Dean-Willcocks v Air Transit International Pty Ltd [2002] NSWSC 525; (2002) 55 NSWLR 64 ("Air Transit International"), Austin J referred to the characteristic features of a preference claim, and the possibility that such claims may involve issues where there is a particular advantage in joining several defendants in the same proceedings. The most obvious reason for that course is the likelihood that the issue of solvency of the company will be a common issue in such claims, and that it is preferable that that is determined only once, as between the several defendants, and not in separate proceedings running the risk of duplicated costs and inconsistent findings. His Honour also noted that there was a need to weigh the advantages and disadvantages to the plaintiff and the defendants as a whole, and also in respect of the use of the court's resources.
It should be recognised that there is, of course, a risk of disadvantage to a single defendant in the joinder of multiple defendants, to the extent that it may be required to be present while issues affecting other defendants are addressed. That disadvantage can be mitigated, however, by case management, and I would have determined this application, had it been contested, on the basis that the Court would make appropriate orders for case management. In Lord v Agreserves Australia Ltd [2006] FCA 598, Jacobson J referred to the approach adopted by Austin J in Air Transit International and applied the same approach, there granting leave to join the several defendants, although in that case there were several separate proceedings involved. In Re ACN 107 936 827 Pty Ltd (formerly known as Eaton Group Australia Pty Ltd) (in liq) (unreported, 21 September 2015), I followed those decisions, in granting leave under r 6.19 of the Uniform Civil Procedure Rules to bring an application under s 588FF of the Corporations Act against multiple defendants in respect of transactions alleged to constitute voidable transactions and, in particular, unfair preferences. In Re Eaton Electrical Group (Qld) Pty Ltd (in liq) (26 September 2016), Brereton J similarly observed, in the course of argument, although it was ultimately not necessary for his Honour to deliver a formal judgment, that the existence of a common issue as to solvency is likely to be sufficient for the grant of such leave, even if there are other issues that are distinct between the parties which will need to be addressed by issues of case management.
In this case, quite apart from any common issues as to the structure of the relevant transactions and their commercial purpose, it seems to me that there is a proper case for the grant of leave under r 6.19 of the Uniform Civil Procedure Rules, so far as common issues as to solvency can then be addressed in the proceedings and at the same time. So far as there are separate issues as to quantification, or other issues particular to individual Defendants, they may well be capable of being separated by reason of case management, within the one proceeding, to minimise any additional costs that are incurred by several Defendants being present at the same time. Equally, it seems to me that any prospect of wasted time, during a hearing, is likely to be reduced by the fact that the Defendants, so far as similar issues arise between them, are likely to approach the matter sensibly, as they indicated they would approach these applications, by leaving one Defendant to advance primary submissions, and other Defendants adopting or supplementing those submissions to the extent that they canvassed issues that were in common between them.
For these reasons, I am satisfied that I should make an order in accordance with order 1 of the Plaintiffs' Interlocutory Process dated 25 August 2016. In this case, the application for leave under r 6.19 of the Uniform Civil Procedure Rules was brought, as from time to time occurs in matters of this kind, after the proceedings have been commenced. The Court has power to grant such leave nunc pro tunc, and I am satisfied that this is an appropriate case for such leave. Accordingly, I order that: Pursuant to r 6.19 of the Uniform Civil Procedure Rules 2005 the Plaintiffs be granted leave, to the extent that any such leave is required, to bring proceedings 2016/195008, and join as defendants, the defendants in these proceedings nunc pro tunc, with no order as to the costs of the Plaintiffs' application.
It follows that the Notice of Motion filed by the First, Fifth, Seventh and Tenth Defendants on 26 August 2016, and the Interlocutory Processes filed by the Second Defendant on 25 August 2016 and by the Third Defendant on 25 August 2016 should be dismissed. The Sixth and Eighth Defendants have not filed such interlocutory processes and have indicated that they did not seek to be heard in respect of the application. I will hear the parties as to costs.

[3]

Costs

I now turn to the question of the costs of this application, which has a most unfortunate history. When the matter was first raised in a directions hearing in the Corporations List on 15 August 2016, I raised the question, why the question whether leave under r 6.19 of the Uniform Civil Procedure Rules should be granted in this matter was likely to require eight parties to have an argument as distinct from, for example, the Plaintiffs maintaining a position that if leave was not required, it was sought in any event in order to simplify the matter. Mr Narayan indicated on that occasion that the Plaintiffs' position was that leave was not required and they were not seeking it. Accordingly, the matter proceeded with what seems, at least in hindsight, to have been a false issue, as to whether leave was required, which ultimately did not need to be determined to bring about the just, quick and cheap resolution of the real issues in dispute in the proceedings, where leave would be granted if it were sought.
At least by 25 August 2016, the various Defendants had moved to strike out the proceedings, presumably on the basis of the position expressed by the Plaintiffs in the course of the directions hearing on 15 August 2016, and in correspondence, that leave was not sought. On 26 August 2016, the Plaintiffs modified their position, by seeking leave to bring the proceedings, apparently, in the alternative to their primary position that leave was not required.
Subsequent submissions of the parties proceeded on the basis that both the question whether leave was required, and the question whether leave should be granted, if sought, were in issue. The parties adopted somewhat different positions in that respect. The Plaintiffs maintained the position that leave was not required, but alternatively sought it. The First, Fifth, Seventh and Tenth Defendants took the position that leave was required and that it should not be granted. The Second Defendant appears to have adopted a somewhat more qualified position, that leave was required but that it could be granted, if certain case management issues were addressed. The Third Defendant adopted the somewhat more qualified position of the Second Defendant. The Sixth and Eighth Defendants adopted the position that the question for leave was ultimately a matter for the Court, and saved themselves the wasted costs of engagement with these issues.
The question then arises as to what should be done in respect of the costs of this application, which resolved itself without a determination whether leave was required, but on the basis that leave would readily be granted, once it was sought, where there was at least a common issue as to solvency of the Company in the application. It seems to me that there is room to take the view that all parties, with the notable exceptions of the Sixth and Eighth Defendants, have made this application significantly more complex than it needed to be. On the Plaintiffs' part, it seems to me that matters would have been much simpler had they adopted the alternative course of formally maintaining the position that they did not need leave, but seeking such leave in any event. It was equally open to the Defendants to move to that position, without engaging with the Plaintiffs' primary position, although it may fairly be said, as Mr Stack who appears for the Second Defendant points out, that the Defendants were engaging with the position which the Plaintiffs had advanced.
Mr Stack also points out that, on one view, this is a case for the application of the approach referred to by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, that the Court will not determine a matter on the merits, in order to deal with a question as to costs, where the parties have adopted an approach which avoids the need for such a determination. Mr Afshar, who appears for the First, Fifth, Seventh and Tenth Defendants, submits that this is an application for leave, which in the ordinary course would not result in an order for costs against the parties against whom leave is sought.
On balance, it seems to me that, first, no order for costs could be made in respect of any party prior to 26 August 2016, which was the first point at which the Plaintiffs identified that they were seeking leave, having advised the other parties and the Court on 15 August 2016 that they were not doing so. Second, it seems to me that if the Court were to make an order for costs it would ultimately have to be an order that differentiated between issues. So far as the contention, which was ultimately not pressed and not determined, that leave was not required is concerned, the best result that the Plaintiffs could potentially achieve is that there be no order as to costs, where that matter has not been determined and raises questions which would require substantive argument before they could be determined. The difficulty, in that respect, is that there is no utility in pursuing that issue, where the matter could have been pursued on the much simpler basis that, if leave was required, it would readily be granted. So far as the Defendants are concerned, there is room for an argument that they ought to be ordered to pay the costs of the leave application, where it was predictable, on the basis of the authorities, that once the Plaintiffs ultimately focused on an application for leave, it would be granted, given an issue as to solvency that is common between the parties.
On balance, it seems to me that the difficulties, in respect of both the Plaintiffs and the several Defendants who engaged actively with this application, in their respective positions, and in the way in which this application has been addressed, are such that I should make no order as to costs. The application could have been addressed more simply and, had it been addressed more simply, it is likely that it could have been resolved, probably in less than half an hour, in a Corporations List. It seems to me the fact that the matter has not been addressed in that way reflects difficulties in respect of the way in which several parties have addressed the application, and that no useful purpose would be served by making a differential costs orders as between issues, which would require an assessment of the costs attributable to a particular issue, likely putting good money after bad in respect of this application. For those reasons, on balance, I take the view that there should be no order as to the costs of the application.

Dean-Willcocks v Air Transit

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