BETWEEN : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

BETWEEN : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

BETWEEN : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

BETWEEN : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

BETWEEN : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

BETWEEN : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

Companies - Liquidation - Application for leave to proceed against companies in liquidation - Whether leave should be granted, relevant principles - Turns on own facts

Corporations Act 2001 (Cth), s 471B, s 500(2)

Deputy Commissioner of Taxation for the Commonwealth of Australia v Robinswood Pty Ltd (2001) 24 WAR 284; [2001] WASC 191

Ogilvie-Grant v East (1983) 7 ACLR 669

1 WHEELER J: These are my reasons for granting the plaintiff's application filed on 22 October 2004 for leave to proceed, pursuant to s 471B and s 500(2) of the Corporations Act 2001 (Cth), against Mine Exc Pty Ltd, Grangefield Holdings Pty Ltd and Excelco Mining Pty Ltd, they being companies in liquidation.

2 The history of the present consolidated action, in which the plaintiff seeks to proceed, was summarised by me in Deputy Commissioner of Taxation for the Commonwealth of Australia v Robinswood Pty Ltd (2001) 24 WAR 284; [2001] WASC 191, and I brought that summary up to date in my later reasons in the same matter delivered on 10 January 2003, [2003] WASC 1. It is sufficient for present purposes to note that all six actions, now consolidated, including those relating to the three companies in question, were commenced between December 1997 and February 1998. Defences were filed in 1998, and for a time the proceedings were stayed while related criminal proceedings were on foot. Since late 2000, the matters have been under my control as matters in the long causes list in this Court.

3 At the date of the plaintiff's application, they were all ready for trial and the trial was scheduled to commence on 29 October. A trial date later this year had been foreshadowed since very early 2004, and the trial commencement date had been tentatively set since May 2004. The actions were formally listed around 10 August 2004.

4 Approximately two months prior to the date fixed for commencement of the trial, the then counsel for the three companies first raised the possibility that those companies might need to be wound up. It was not until 5 October 2004, however, that the three companies went into liquidation by way of a creditors' voluntary winding up. So far as one can tell, the debts which led to the winding up in each instance were not debts admitted as owing to the plaintiff, but were debts to related parties, and they appear to be debts which have been outstanding for some time. Nothing in the material before me provides any information as to the circumstances in which they arose, and when they may have been due and payable. It should also be noted that if the plaintiff were to succeed in full in its actions against these three companies, it would be by far the largest creditor. The plaintiff appears to be the only creditor not related in some way to the three companies.

5 While the liquidator of the three companies admitted the plaintiff's proof of debt for the purposes of voting at the creditors' meeting, he has not otherwise accepted them. The same liquidator has been appointed in relation to each company. The three creditors' meetings were held in succession, and at one of them the liquidator advised the meeting that he intended to postpone any in depth investigation into the affairs of those companies pending the "resolution" of these proceedings instituted by the plaintiff. Consistently with that observation, the solicitor for the plaintiff deposes that he had a discussion with the solicitor acting for the liquidator and advised the solicitor that the plaintiff intended to seek leave to proceed with its actions against the three companies. The solicitor said words to the effect that the liquidator would not be appearing and would not be opposing the application. I was advised from the bar table, without objection, that the liquidator was not proposing to appear in the action.

6 The plaintiff alleges that the liquidator is the principal of a small firm. Having regard to the complexity of the affairs of the three companies which are linked to a very large and complex network of companies which I have described loosely in other reasons in this matter as the "Caratti group", the plaintiff is concerned that the liquidator does not have the staff or the resources to conduct the lengthy, complex and detailed investigation which would be necessary to reconstruct their accounts and trace transactions and relationships between the companies in liquidation and the other companies in that group. Whether the plaintiff's characterisation of the liquidator is correct or not, one can understand that, having regard to the complexity of the issues in the present litigation, the liquidator might consider it preferable simply to allow the litigation to proceed, rather than to attempt to ascertain for himself the indebtedness of those three companies to the plaintiff.

7 I should add that in separate proceedings the plaintiff has applied to remove and replace the present liquidator, but so far as I could ascertain from enquiry of counsel, that matter may take some time to resolve. No party appears to have sought expedition of that application, and I am unable to form any view as to when it may be resolved or as to the likelihood of the plaintiff's success. I therefore proceed on the assumption that the present liquidator will be the liquidator for the foreseeable future.

8 The statutory rationale in Australia for the restriction upon actions against companies being wound up was expressed by the Queensland Full Court as follows:

"The precise purpose and function of provisions similar to s 230(3) ['a predecessor of s 471B'] have seldom been explained. From time to time the suggestion has been made that the prohibition exists in order to effectuate the statutory policy of ensuring that corporate assets are distributed rateably amongst all creditors so that none of them will gain an advantage over others ... But in Australia at least it is not often that the institution of proceedings or even the recovery of judgment operates to confer a priority or advantage on a litigating creditor. A more convincing explanation is that, without the relevant restriction, a company in liquidation would be subjected to a multiplicity of actions which would be both expensive and time-consuming, as well in some cases as unnecessary ...." (Ogilvie-Grant v East (1983) 7 ACLR 669 at 671 per McPherson J, with whom Campbell CJ and Sheahan J agreed).

9 Having regard to that observation, it seems to me that there is no risk in this case of a multiplicity of expensive and time consuming actions; as I have noted, the plaintiff is the only creditor, so far as one can tell, apart from some related parties. Further, to refuse leave to proceed would not seem to be likely to avoid litigation concerning the plaintiff's claim. Since the present liquidator does not appear inclined to accept the plaintiff's proof of debt in full - and one can understand why that might be, given the complexity of the facts involved - it would be likely in any event that the plaintiff would need to apply to the Court to appeal the liquidator's decision. In that case, much of the evidence which is likely to be heard in the present proceedings would need to be repeated, because of the interrelationship between the affairs of those three companies and the other defendants in this action.

10 In Ogilvie-Grant (supra), at 672, it was suggested that factors of relevance to the question of whether leave to proceed should be granted include the cost and seriousness of the claim; the degree of complexity of the issues involved; and the stage to which proceedings have progressed. In circumstances where the proceedings are essentially ready for trial, the factual issues are complex, the facts relating to these companies and to the other defendants are overlapping (in the sense that the plaintiff seeks to have me draw inferences from common courses of conduct pursued by the small group of persons controlling all of the defendants) and the claims are all significant ones, it seems to me that the interests of justice overwhelmingly require the matters to be dealt with in the one proceeding.

11 The significant matter advanced by counsel for the remaining defendants as a reason for not granting leave to proceed is that if the companies in liquidation are excluded, there will be a saving of trial time. I am sure that there would be some saving of trial time if those companies were excluded, but I do not accept that the saving would be very substantial. There are many overlapping factual issues. The principal witnesses who will give oral evidence are common to all actions. Although there will be some prejudice to the other defendants if the trial is unduly extended, it seems to me that the trial is unlikely to be prolonged by more than a few days because of the inclusion in it of the three companies in liquidation. In the context of a trial which is estimated to last seven weeks, that does not seem to me to be a reason to refuse leave, when all remaining considerations point in favour of a grant of leave.