First Plaintiff v Defendant

CORPORATIONS - Statutory derivative action - Section 237 of the Corporations Act 2001 (Cth) - Impact of liquidation of a company on availability of statutory derivative action - Good faith - Best interests of company - Company in liquidation - No power.

CORPORATIONS - Section 477(2)(c) of the Corporations Act 2001 (Cth) - Assignment - Assignment of causes of action - Liquidator's power of sale.

1 The claims in this proceeding (Proceeding) relate to financing and other dealings between the plaintiffs and the defendant (Capital Finance) in connection with a property development project in Coburg, Victoria.

2 From May 2002, the first plaintiff (Pentridge Village) was a participant in, custodian for, and manager of a joint venture, the business of which was to purchase, develop, manage, lease and sell land upon which the former Coburg prison complex was located (Project). The second plaintiff (West Homes) was subsequently engaged by Pentridge Village to undertake the construction of buildings and other works on the land.

3 The plaintiffs allege that Capital Finance was the provider of banking services to Pentridge Village in respect of the Project, including the provision of credit, and from August 2005 until February 2010, its financial adviser.

4 Pentridge Village is said to have been in receivership since July 2014 and in liquidation since August 2014, and West Homes is alleged to have been in receivership since July 2014.

5 By their amended statement of claim (ASOC) the plaintiffs seek damages from Capital Finance, including damages pursuant to s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), s 1041I of the Corporations Act 2001 (Cth) (Act) and ss 82 and/or 87 of the Trade Practices Act 1974 (Cth) (TPA), in respect of alleged contraventions of statutory prohibitions on misleading or deceptive conduct and unconscionable conduct regarding the renewal of an existing facility agreement between Pentridge Village and Capital Finance, and the financing of the Project (collectively, Statutory Claims). An equitable estoppel claim is also pleaded in connection with the renewal of the relevant facility agreement (Estoppel Claim).

6 Capital Finance denies liability on the grounds set out in its defence to the ASOC.

7 Pentridge Village and its sole director, Mr Chiavaroli, allege that on 3 August 2017 Pentridge Village, by its liquidator Mr Marsden (Liquidator), irrevocably assigned to Mr Chiavaroli all of Pentridge Village's right, title and interest in certain property, including the causes of action and the claims the subject of the Proceeding, and all and any proceeds recovered. The assignment is said to be recorded in a deed of assignment dated 3 August 2017 (Original Deed) and a supplemental deed of assignment dated 26 October 2017 (Supplemental Deed) (collectively, Assignment Deeds).

8 Capital Finance contends that, as a matter of law, the Statutory Claims are not capable of assignment and have not been validly assigned to Mr Chiavaroli. This issue is central to the three applications now before the court. It also contends that the Estoppel Claim should be struck out, that West Homes' damages claims in the relevant parts of the ASOC should be struck out, and that West Homes should cease to be a party to the Proceeding.

(a) an application by the plaintiffs by summons seeking to substitute Mr Chiavaroli as the first plaintiff in place of Pentridge Village pursuant to r 9.09(2)(a) of the Supreme Court (General Civil Procedure) Rules 2015 (Rules) on the basis that all of Pentridge Village's claims and causes of action have been assigned to Mr Chiavaroli (Substitution Application);

(b) an application by Capital Finance by amended summons filed 6 September 2018 seeking an order pursuant to r 23.02(a) and/or 23.02(b) of the Rules striking out those parts of the ASOC that plead the assignment, the Estoppel Claim, and West Homes' claims,[1] and an order pursuant to r 9.06(a) of the Rules that West Homes cease to be a party to the Proceeding (Strike Out Application); and

(c) an application by Mr Chiavaroli by summons, made in the alternative to the Substitution Application, seeking leave pursuant to ss 236 and 237 of the Act to intervene in the Proceeding for the purpose of taking responsibility for the Proceeding on behalf of Pentridge Village (Section 237 Application).

10 Capital Finance opposes the Substitution Application and the alternative Section 237 Application. The plaintiffs resist Capital Finance's Strike Out Application.

11 For the reasons that follow it has been concluded that:

(a) as a matter of law the Statutory Claims are incapable of assignment and the purported assignment of these claims to Mr Chiavaroli is ineffective;

(b) because the purported assignment of the Statutory Claims is ineffective:

(i) Mr Chiavaroli's application to be substituted as first plaintiff in place of Pentridge Village should be refused; and

(ii) the paragraphs of the ASOC that plead the assignment should be struck out;

(c) the Estoppel Claim should not be struck out and the parties should be given a further opportunity to consider the position regarding the Estoppel Claim in light of these reasons and the foreshadowed proposed amendments to the Estoppel Claim;

(d) an order should not be made at this point directing that West Homes cease to be a party to the Proceeding;

(e) West Homes' claims against Capital Finance should not be struck out and the parties should be given a further opportunity to consider the position in light of these reasons and the foreshadowed proposed amendments to West Homes' claims; and

(f) Mr Chiavaroli's application for leave to intervene pursuant to ss 236 and 237 of the Act for the purpose of taking responsibility for the Proceeding on behalf of Pentridge Village should be refused because:

(i) even if Part 2F.1A of the Act (which includes ss 236 and 237) is assumed to apply to a company in liquidation, on the evidence before me the statutory criteria in ss 237(2)(a) and 237(2)(c) of the Act have not been satisfied because it has not been established by Mr Chiavaroli that it is probable that Pentridge Village through the Liquidator will not properly take responsibility for the Proceeding, or that it is in the best interests of Pentridge Village that leave be granted; and

(ii) in any event, Part 2F.1A of the Act does not apply to a company in liquidation.

12 The balance of these reasons is divided as follows:

(a) A procedural matter - clarification of current parties.

(b) Evidence, background and submissions.

(c) The Applications - order of approach.

(d) The Substitution Application:

(i) Introduction.

(ii) Rule 9.09(2)(a) - assignment as a threshold condition.

(iii) Satisfaction of the threshold condition - have the Statutory Claims been validly assigned?

(iv) Conclusion and further observations.

(i) Introduction.

(ii) Consideration:

• The assignment paragraphs.

• The Estoppel Claim.

• West Homes' claims.

(iii) Conclusion.

(i) Introduction.

(ii) The legislation.

(iii) The issues.

(iv) Section 237 - General observations.

(v) Standing.

(vi) Nature of Mr Chiavaroli's application.

(vii) Section 237(2)(a) - Probable that Pentridge Village will not properly take responsibility for the Proceeding.

(viii) Section 237(2)(b) - Applicant acting in good faith:

• Good faith requirement - general observations.

• Mr Chiavaroli and good faith.

(ix) Section 237(2)(c) - Best interests of the company that leave be granted:

• Best interests requirement - general observations.

• Mr Chiavaroli and the best interests requirement.

(x) Section 237(2)(e) - 14-day notice requirement.

(xi) Conclusion - Section 237 criteria.

(xii) Part 2F.1A (including ss 236 and 237) of the Act and companies in liquidation.

(g) Conclusion and proposed orders.

(h) Background Schedule.

A PROCEDURAL MATTER - CLARIFICATION OF CURRENT PARTIES

13 To reduce the risk of confusion it is necessary to say something about how it is that the filed ASOC records on its face that the first plaintiff is Mr Chiavaroli, as assignee of Pentridge Village, in circumstances where he was not originally named as a plaintiff and no order has been made substituting him as the first plaintiff in place of Pentridge Village.

14 The ASOC was filed on 27 October 2017 and records that it was amended pursuant to r 36.04(1)(a) of the Rules. That rule permits a party to amend their pleadings once without leave provided pleadings have not closed. When amending the statement of claim the plaintiffs named Mr Chiavaroli on the document as the first plaintiff (as assignee of the rights, title and interest in the proceeding of Pentridge Village) in place of Pentridge Village, and filed the document in that form.

15 The ASOC therefore impermissibly states on its face that Mr Chiavaroli is the first plaintiff. The issue was raised with the parties, and the plaintiffs and Capital Finance each confirmed what had occurred, that no substitution order had been made, and that Pentridge Village remains the first plaintiff, not Mr Chiavaroli.[2]

16 This aspect will need to be addressed and regularised.

17 The plaintiffs and Mr Chiavaroli relied upon the affidavits of Mr Chiavaroli sworn 22 July and 7 August 2018[3] and the affidavits of the plaintiffs' solicitor, Mr Bear, affirmed 7 and 8 May 2018. They also relied upon eight written submissions.[4]

18 Capital Finance relied upon a short affidavit of its solicitor, Ms Whiting, sworn 3 August 2018 (Whiting Affidavit), an email dated 15 June 2018 from the Liquidator (Cussen Email), and six written submissions.[5] A small number of additional documents were admitted into evidence without objection.[6] No witnesses were sought to be cross-examined and the parties' written submissions were supplemented by extensive oral submissions on 10 August and 5 September 2018.

19 Given the conclusions that I have reached and the operation of r 23.04(2) of the Rules[7] most of the evidence is not relevantly germane to the Substitution Application or the Strike Out Application. However, the need to have regard to a range of factual circumstances in connection with the Section 237 Application made in the alternative means it is desirable to set out parts of the evidentiary background from the affidavits in some detail.[8] Because of the order in which the applications are dealt with below, it is convenient to set this background out in a schedule appearing at the end, but forming part, of these reasons (Background Schedule).

20 The plaintiffs' and Mr Chiavaroli's primary position is that Pentridge Village's causes of action have been assigned to Mr Chiavaroli. Consequently there is a direct overlap between matters raised in the Substitution Application and the Strike Out Application. Although materially affected by the assignment question, the Section 237 Application is made in the alternative to the Substitution Application and it is appropriate and convenient to address the Substitution Application and the Strike Out Application before turning to the Section 237 Application.

21 In their written submissions the plaintiffs raised what was described as a 'Practical Path Forward'; namely, to decide the (alternative) Section 237 Application first so that if the court determined that Mr Chiavaroli had a right to intervene in the Proceeding under the derivative action regime the question of the assignment need not be resolved 'now, or at any stage'. It was said that if Mr Chiavaroli was successful in his derivative action application he would withdraw the Substitution Application and amend the statement of claim to delete the allegations which refer to the assignment. It was also said that if the court determined that Mr Chiavaroli was not entitled to intervene under the derivative action regime then the question of the assignment must be dealt with but that this should not occur on a strike out application.[9]

22 Given that the Assignment Deeds exist and the plaintiffs' primary position is that the causes of action have been validly assigned to Mr Chiavaroli, this 'practical path' faced a logical and legal difficulty. If, as contended by the plaintiffs, the assignment was effective at law then the causes of action would no longer be claims that Pentridge Village could pursue on its own account. This would be a matter necessary to consider in the Section 237 Application and an impediment to the grant of leave to intervene to Mr Chiavaroli to take proper responsibility for the assigned claims on behalf of the company (that is, Pentridge Village), even if Part 2F.1A of the Act applies to a company in liquidation and the relevant criteria in s 237 of the Act were satisfied.

23 In light of this irreconcilable tension between the plaintiffs' primary position regarding the validity of the assignment and the postulated 'Practical Path Forward', at the further hearing on 5 September 2018, senior counsel for the plaintiffs was asked and confirmed that the plaintiffs' primary position remained that the causes of action had been validly assigned to Mr Chiavaroli, and that the Section 237 Application was being brought in the alternative to the Substitution Application.[10] That being so, the plaintiffs responsibly recognised that the suggested 'Practical Path Forward' faced difficulty.

25 By its summons in the Substitution Application the plaintiffs seek an order pursuant to r 9.09(2)(a) of the Rules that Mr Chiavaroli be substituted for Pentridge Village as the first plaintiff in the Proceeding. Such an order is said to be appropriate because Pentridge Village irrevocably assigned to Mr Chiavaroli all of Pentridge Village's right, title and interest in the causes of action the subject of the Proceeding and any proceeds, including costs. The assignment is said to have been made pursuant to the Assignment Deeds.[11]

26 The plaintiffs did not and do not seek an order[12] that Mr Chiavaroli be added as a further plaintiff in addition to Pentridge Village, whether pursuant to rr 9.02, 9.06, 9.09 of the Rules or otherwise.[13]

27 Capital Finance opposed the Substitution Application. It raised a discrete legal point and contended that the Statutory Claims were not assignable at law and therefore were not validly assigned to Mr Chiavaroli, meaning that the Substitution Application must fail.[14] As will be seen, determination of this point did not require the resolution of any issue of contested fact and was addressed at length in written and oral submissions. The same legal point lies at the heart of the Strike Out Application insofar as it relates to the Statutory Claims.[15]

28 For the reasons that follow I have concluded that the Statutory Claims were not validly assigned to Mr Chiavaroli and I do not propose to order that Mr Chiavaroli be substituted as the first plaintiff in the Proceeding in place of Pentridge Village.

Rule 9.09(2)(a) - Assignment as a threshold condition

(2) Where at any stage of a proceeding the interest or liability of any party is assigned or transmitted to or devolves upon some other person, the Court may order-

(a) that the other person be added as a party to the proceeding or made a party in substitution for the original party; and

(b) that the proceeding be carried on as so constituted.

Submissions - Rule 9.09(2)(a) and assignment as a threshold condition

30 During the hearing a question was raised with the parties as to whether establishing the existence of a valid assignment under r 9.09(2)(a) of the Rules was a threshold condition to enlivening the power to make a substitution order, or whether it was sufficient to allege the existence of an assignment.[16] There was a difference of view on the point, although at that stage the issue had not been raised or fully considered by the parties. The parties were invited to examine the issue further and it was addressed in the plaintiffs' and Capital Finance's separate written submissions dated 24 August 2018, and their oral submissions on 5 September 2018. These submissions revealed that the parties remained at odds on the issue.

31 The plaintiffs' research found no authority on point, but they submitted that provided that allegations of assignment were made and were not frivolous or untenable then that was sufficient to enliven the jurisdiction.[17] Although they did not seek to draw attention to any particular features of r 9.09(2) of the Rules or its language that would suggest the existence of an assignment was not a threshold condition, the plaintiffs submitted that the decision in WorkCover Queensland v Amaca Pty Ltd[18] (WorkCover) was 'highly persuasive authority' for the proposition that the question of the validity of the assignment in the present proceeding is not appropriate for resolution in a strike out proceeding[19] or, I inferred, an application for substitution under r 9.09(2)(a).

32 The plaintiffs also pointed to the decision in Davidovic v Vesuvius Australia Pty Ltd (No 3) (Davidovic)[20] and submitted that it provided guidance because it was a case in which Stevenson J did not consider it appropriate to determine the validity of an assignment in the context of a substitution application but still made a substitution order.[21]

33 Capital Finance's position on the operation of r 9.09(2)(a) of the Rules was different. It submitted that a finding by the court that there has been a valid assignment is a pre-condition or 'jurisdictional fact'[22] to the court exercising any discretion pursuant to this particular rule.

34 Capital Finance drew attention to what it submitted was the clear language of the rule, also observing that it is cast in the past tense and speaks of events which have occurred. It submitted that a valid assignment would result in an assignor no longer being entitled to be a party to the Proceeding and that it was necessary for the question of the validity of the assignment to be determined before substitution is permitted. It also contended that leaving the question of the existence or otherwise of a valid assignment to the trial would lead to 'untenable uncertainty', and that this substantial and expensive proceeding would be futile if a substitution order was made and it was ultimately found that the assignment was invalid. It was further submitted that such an approach would not be consistent with the overarching purpose of the Rules or the Civil Procedure Act 2010 (Vic) (CPA).[23]

35 With respect to the authorities, Capital Finance submitted that there was no authority in this court on the point, but that other authorities addressing substitution supported the contention that, having regard to the terms of r 9.09(2)(a) of the Rules, it must first be established that a valid assignment existed before the discretionary power to substitute a party pursuant to this rule can be exercised. The cases referred to in this context included Vintage Developments Pty Ltd v GHD Pty Ltd (No 2),[24] APT Finance Pty Ltd v Bajada,[25] Yorkshire Regional Health Authority v Fairclough Building Ltd,[26] Computer Accounting & Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd,[27] Platinum Mortgage Securities Ltd & Ors v Nikolyn Pty Ltd (in liq) & Ors,[28] Aspendale Holdings Pty Ltd v Wellington Street Investments Pty Ltd (Aspendale Holdings),[29] and Territory Pastoral Company Pty Ltd v Elders Ltd.[30]

36 The last two cases were raised in the context of joinder by addition of a party rather than substitution. In this context observations were made by Capital Finance regarding the absence of the assignment pre-condition in rr 9.02 and 9.06 of the Rules[31] and the ability to permit joinder of an additional plaintiff where such an order was sought and the validity of alleged assignments remained in question. As mentioned, Capital Finance also placed some emphasis on the fact that the plaintiffs do not seek an order[32] that Mr Chiavaroli be added or joined as an additional plaintiff (as opposed to being substituted), and it referred to aspects of the authorities that have addressed joinder or addition of a party in the context of assignment and disputed assignments.[33]

Consideration - Rule 9.09(2)(a) and assignment as a threshold condition

37 The language of r 9.09(2)(a) of the Rules is clear and unambiguous and reveals that establishing that there 'is' an assignment is a threshold condition to the enlivening of the discretionary substitution power where r 9.09(2)(a) and an alleged assignment is relied upon as the sole basis for seeking a substitution order. As the terms of the rule provide, the court 'may order' substitution 'where at any stage of the proceeding the interest or liability of any party is assigned ... to ... some other person ...' (emphasis added).

38 The clear, simple and unqualified language speaks of the existence of an assignment having occurred.

39 Further, concluding that the existence of an assignment is a threshold condition to enlivening the discretionary power in r 9.09(2) of the Rules is consistent with what has been observed by the Victorian Court of Appeal in relation to the operation of other similarly structured rules and, in particular, r 62.02(1) of the Rules.

40 Rule 62.02(1) of the Rules deals with security for costs and allows a discretion to be exercised regarding the ordering of security for costs if one of a number of threshold conditions are first satisfied. To employ the language of Maxwell P and Buchanan JA when addressing the similarly structured r 62.02(1) of the Rules in Livingspring Pty Ltd v Kliger Partners (Livingspring),[34] '... [t]he first question to be addressed is whether the threshold condition for the exercise of the power is satisfied'. In that case the 'threshold condition' in the relevant rule was whether the applicant had established on the evidence that there '... is reason to believe that the corporation will be unable to pay the costs of the defendant if successful'.[35]

41 In the present application the language of r 9.09(2)(a) of the Rules dictates that the relevant 'threshold condition' [is whether '... at any stage of the proceeding the interest or liability of any party is assigned ...] to ... some other person.'[36] To borrow again from the language in Livingspring, '[t]hat jurisdictional condition must be satisfied before the discretionary power ... is enlivened.'[37] The need for the interest or liability to have been 'assigned ... to ... some other person' is therefore a 'touchstone of jurisdiction'[38] under r 9.09(2)(a) of the Rules. If that touchstone is established on the balance of probabilities[39] and the discretionary power is enlivened, the court will then consider whether the discretionary power should be exercised.[40]

42 I do not accept the plaintiffs' submissions that the decisions in WorkCover[41] and Davidovic[42] are persuasive in the way suggested or that they ought to lead to a different result. Neither case was addressing the issue in question and each is distinguishable.

43 For example, in WorkCover[43] the Queensland Court of Appeal was dealing with an appeal from a determination by a trial court of a separate question about the validity of a pleaded assignment of non-statutory causes of action, rather than a substitution application under an equivalent to r 9.09(2)(a) of the Rules. It appears that at the time the relevant civil procedure rules of the Supreme Court of Queensland did not have a rule in the same terms as r 9.09(2)(a) of the Rules. Further, the question of the previously made substitution order was not in issue and there is no suggestion that the point now under consideration was raised or considered. It also appears that the terms of the rule relied upon for the earlier substitution order were not referred to, identified or considered.

44 In Davidovic,[44] Stevenson J was not concerned with statutory causes of action, and did not consider the issue before me. Stevenson J was concerned with an application for substitution of a party under an equivalent to r 9.06 of the Rules (in the Uniform Civil Procedure Rules 2005 (NSW)) and not an equivalent to r 9.09(2)(a). The rule considered by Stevenson J uses different language and does not contain the same threshold condition. It was in this context that his Honour decided not to determine a factual controversy arising on the application, being a contention by the respondent that neither of the plaintiffs had a '[g]enuine commercial interest in the taking of the assignments and their pursuing of the assigned rights for their own benefit in the sense described by authorities such as [Trendtex]'.[45] It will also be seen in the reasons that follow that this factual 'Trendtex issue' has not been necessary to determine in this case.

45 To the extent that it was submitted by the plaintiffs that the threshold condition to the enlivening of the power should be construed as requiring no more than an allegation of an assignment or an allegation of an assignment that is not frivolous, untenable or vexatious, I do not accept that submission. That is not what the rule says, and its plain and clear language says otherwise. Further, where the Rules intend to employ language of a more qualified kind or requirements that are easier to satisfy, they do so. There are numerous examples in the Rules, including r 62.02(1)(b) referred to by the Court of Appeal in Livingspring[46] ('... is reason to believe ...'). Other examples are r 37B.03(1)(a) ('... a strong prima facie case ...'), r 37B.03(1)(c) ('... there is sufficient evidence that ... there is a real possibility that ...'), and r 80.12(2)(b) ('... has a prima facie defence ...').

46 To this it may be added that if the rule had been intended to enliven the discretionary power where only an allegation of assignment was made, or an allegation of assignment was made that was not frivolous, vexatious or untenable, that could have been easily stated. Such language is far from foreign to the Rules, as Order 23, which deals with summary stay or dismissal and striking out a pleading, well illustrates.[47]

47 Given the conclusion that I have reached it is not necessary for me to address Capital Finance's other submissions, including those regarding the asserted futility and 'untenable uncertainty' that is contended to result if the assignment issue is not addressed as a threshold condition to enlivening of the discretionary power under r 9.09(2) of the Rules. The position is the same regarding the authorities relied on by Capital Finance, although I make the following three brief observations:

(a) It should not be too readily accepted that allowing an issue regarding an assignment to be addressed at trial gives rise to untenable uncertainty. It is not uncommon for assignment issues to be addressed at trial, and two ways in which that can occur are where more than one plaintiff commences the proceeding and allegations are made in the alternative, or where a party claiming to be an assignee is joined as an additional plaintiff pursuant to, for example, r 9.06(b) or r 9.02. Such an approach is also evident in a number of the cases referred to by Capital Finance.[48]

(b) Although some of the cases referred to by Capital Finance reveal instances where, in the particular circumstances of each case, the existence or otherwise of an assignment has been determined, in the circumstances of the present case I do not find that to be particularly relevant or germane. As the High Court has often observed, it is the language of the provision or rule that must guide, as is the case here.[49]

(c) With respect to the decision of the County Court of Victoria in Aspendale Holdings,[50] I make the following observations. That case was dealing with an application for joinder and not substitution and the issue was being addressed in the context of r 9.06 and also r 9.09 and joinder was refused. It was also concluded that simply alleging the existence of an assignment was not enough. Insofar as it was held that under rr 9.06 and 9.09(2) there must be presented to the court a satisfactory basis for a prima facie argument that an assignment has occurred, or that what is required is to establish to a prima facie or arguable standard that the circumstances giving rise to an assignment have occurred, in my respectful opinion that approach ought not to be followed. In this regard, I refer to my reasoning above regarding the operation of r 9.09(2) and add, respectfully, that so to construe rr 9.09(2) and 9.06 is to impermissibly depart from the language of the rule in each case. As earlier observed, r 9.06 involves different language and criteria, and r 9.09(2)(a) speaks in plain terms and neither rule employs language of the kind referred to in Aspendale Holdings. It may also be noted again that where criteria or requirements akin to those referred to in Aspendale Holdings are intended to be employed in the Rules, that is done expressly.[51]

48 Having concluded in the present case that establishing the existence of an assignment is a threshold condition to the enlivening of the discretionary power to substitute Mr Chiavaroli pursuant to r 9.09(2)(a) of the Rules, it is now necessary to turn to the competing contentions regarding the satisfaction or otherwise of the threshold condition by reference to the discrete point of law in issue between the parties. This is also relevant to the Strike Out Application addressed later below.

Satisfaction of the threshold condition - Have the Statutory Claims been validly assigned?

49 The Statutory Claims in the ASOC said to have been assigned to Mr Chiavaroli comprise damages claims:

(a) under ss 82 and 87 of the TPA, s 12GF of the ASIC Act and s 1041I of the Act in respect of alleged misleading or deceptive conduct (under s 52 of the TPA, s 12DA(1) of the ASIC Act, and s 1041H of the Act); and

(b) under ss 82 and 87 of the TPA, and s 12GF of the ASIC Act in respect of alleged unconscionable conduct (under s 51AA of the TPA, and ss 12CA and 12CB of the ASIC Act).

Plaintiffs' submissions - Have the Statutory Claims been validly assigned?

(a) Rule 9.09(2)(a) of the Rules enables a person to be substituted for another person in a proceeding where the first person has acquired the second person's rights and causes of action by assignment.[52]

(b) In the present case the Liquidator in the course of the liquidation transferred by assignment Pentridge Village's causes of action in the Proceeding to Mr Chiavaroli who was a sole director of that entity and, absent disentitling circumstances, a substitution order should be made; and there were no disentitling circumstances.

(c) Having regard to the decision in Trendtex Trading Corp v Credit Suisse (Trendtex),[53] as referred to in EWC Payments Pty Ltd v Commonwealth Bank of Australia (EWC Payments),[54] it is uncontroversial that an interest in a cause of action is assignable where the assignee has a genuine and substantial interest in the success of the litigation or a genuine commercial interest in the enforcement of the claim and there can be no doubt that the exception identified in Trendtex must be treated as good law in Australia.[55]

(d) In determining whether an assignee has a genuine commercial interest the whole of the transaction must be looked at, and in this case it is clear from the affidavit evidence[56] that Mr Chiavaroli has an interest of the required kind.

(e) In any event, s 477(2)(c) of the Act expressly permits the Liquidator to assign statutory causes of action notwithstanding that such an assignment might otherwise be held void for maintenance and champerty or purports to assign a bare right of action.

(f) Although the plaintiffs in their written submissions initially stated that the decision in UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd (UTSA1)[57] 'did not relate to statutory provisions analogous to those pleaded in the ASOC',[58] it was submitted that the decision on appeal, UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (UTSA2)[59] is authority for the proposition that the 'general words of section 477(2)(c) should not be read down'[60] and therefore should be read as permitting the assignment of statutory causes of action even if they would otherwise be unassignable.[61]

(g) Having regard to the decisions in UTSA1,[62] UTSA2;[63] Cant; Re Novaline Pty Ltd (in liq) (Re Novaline);[64] and the decision of Jackson J in Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) (Lanai);[65] it has been held that it is 'unclear' on the authorities whether or not the Statutory Claims based on the provisions of the legislation pleaded in the ASOC can be assigned,[66] and North J in Re Novaline held that they could be.

(h) The Court of Appeal in UTSA2[67] endorsed the decision of Hansen J at first instance and held that statutory causes of action of the kind in question were assignable pursuant to s 477(2)(c) of the Act and, as a judge at first instance, I am bound to follow that decision.

(i) Where the discretionary power is enlivened as a result of an assignment, although it is not mandatory to order substitution, the correct test was as described by the Court of Appeal in Culve Engineering Pty Ltd v Apollo General Engineering (Aust) Pty Ltd (in liq)[68] and that, absent 'disentitling circumstances', a substitution order should be made.

Capital Finance's submissions - Have the Statutory Claims been validly assigned?

(a) As a matter of law, statutory causes of action for damages for misleading or deceptive conduct and unconscionable conduct, including those the subject of the Statutory Claims, are not assignable. It is said that this is a consequence of the statutory language which makes such claims personal and restricted only to the person who suffered loss 'by' the relevant conduct and that this has been confirmed by the authorities which are 'overwhelmingly' to that effect.[69]

(b) Because it is the terms of the statutory language creating the Statutory Claims and not simply the principles of maintenance and champerty that render the Statutory Claims unassignable, there is no reason why s 477(2)(c) of the Act would have the effect that causes of action under the relevant statutes would become assignable, and this is also well accepted in the authorities. Section 477(2)(c) of the Act does not 'render assignable the unassignable'.[70]

(c) The issue of the assignability of statutory causes of action was not raised or determined in UTSA1[71] or on appeal and those decisions say nothing on the point. Further, the decisions in Re Novaline[72] and Lanai[73] provide no support for the plaintiffs' contentions because each decision effectively rests upon what was decided in UTSA1 and UTSA2.[74]

(d) With respect to Trendtex,[75] although it must be accepted for present purposes that it is arguable that Australian law recognises an exception to the prohibition on an assignment of a bare right of action as identified in Trendtex and EWC Payments,[76] Mr Chiavaroli has not established that he has the necessary genuine and substantial interest in the success of the litigation or a genuine commercial interest in the enforcement of the claim.[77]

(e) Although the Estoppel Claim is not a statutory cause of action, it should be struck out because, among other things, it fails to disclose a cause of action. This last aspect is addressed later in these reasons when dealing with the Strike Out Application.[78]

Consideration - Have the Statutory Claims been validly assigned?

52 The central issue raised by Capital Finance involves a question of law as to whether statutory causes of action of the kind the subject of the Statutory Claims are capable of assignment pursuant to a liquidator's power of sale under s 477(2)(c) of the Act. The conclusions I have reached mean that the determination of this issue does not involve or require exploration of factual matters or the determination of any disputed question of fact.

53 That being so, and the matter having been the subject of extensive written and oral submissions and able and full argument by senior counsel for the plaintiffs and Capital Finance, it is in my view desirable and appropriate to determine this discrete legal point. Not only does this address the discrete point of law raised in connection with the satisfaction or otherwise of the threshold condition in the Substitution Application and the same legal issue raised in the Strike Out Application, but in circumstances where Mr Chiavaroli seeks only to be substituted rather than added as a plaintiff, and a Section 237 Application has been made in the alternative, there are time, cost and efficiency benefits given the likely scale and cost of the litigation. In my opinion the adoption of this course well serves the overarching purpose of the CPA and the Rules and is consistent with the court seeking to give effect to the overarching purpose in the exercise of its powers as required by s 8 of the CPA.[79]

54 Two matters can be addressed swiftly at the outset, namely, whether the 'Trendtex exception' is good law, and whether an assignee of a cause of action needs to fall within the Trendtex exception where a cause of action is assigned by a liquidator pursuant to s 477(2)(c) of the Act. This will also reveal why, for present purposes, it is not necessary to consider or determine any disputed question of fact.

55 Following a helpful review of the authorities in EWC Payments, Elliott J concluded '... that the exception identified in Trendtex Trading Corporation v Credit Suisse now must be treated as good law in Australia'.[80] Capital Finance did not make any substantive submission to the contrary, although it expressed the position more cautiously in its written submissions, stating that it accepted for the purposes of the applications that they must proceed on the basis that it is arguable that Australian law recognises an exception to the prohibition on an assignment of a bare right of action as identified in Trendtex.[81]

56 Substantially for the reasons referred to by Elliott J in EWC Payments, I respectfully share the view that the exception identified in Trendtex is 'good law in Australia'.[82] In any event, for the reasons that follow the point is not material because even if it was to be assumed that it was not good law, that would not aid Capital Finance's challenge to the assignment. In UTSA1 Hansen J held that '... the assignment of a cause of action ... by a liquidator is valid notwithstanding that such an assignment might otherwise be held void for maintenance and champerty, or (if there be any difference) because it purported to assign a bare right of action.'[83]

57 On appeal the appellant in UTSA2 contended that the words of s 477(2)(c) of the Act 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.'[84] It was held by the Court of Appeal that it would be 'surprising indeed' if the liquidator were able to sell a particular form of the company assets to only a limited class of persons being those who are already interested in the outcome of the action concerned and that the proposed sale of the company's rights of action was within the power of the liquidator.[85]

58 It follows from the decisions in UTSA1[86] and UTSA2[87] that, whether or not the exception in Trendtex[88] is recognised as part of the law in Australia (which in my view it is), and whether or not Mr Chiavaroli has a sufficient interest in the Statutory Claims or their outcomes to satisfy what might be described as the 'Trendtex test', the validity of the alleged assignment in question cannot be successfully attacked on the basis of maintenance or champerty related considerations, or on the basis that Mr Chiavaroli does not have a sufficient interest to satisfy the Trendtex test. This is because an assignment of a cause of action by a liquidator pursuant to s 477(2)(c) of the Act is valid notwithstanding that such an assignment might otherwise have been held to be void for maintenance or champerty, or because it purported to assign a bare right of action.

59 That being so, it is not necessary to embark on a factual enquiry to decide whether or not Mr Chiavaroli has an interest of the kind required to satisfy the 'Trendtex test' or determine the competing positions on the point. Even if Mr Chiavaroli was assumed to be a stranger to the litigation, the Court of Appeal in UTSA2[89] has made it clear that this, of itself, would be no impediment to an effective assignment by a liquidator of causes of action pursuant to s 477(2)(c) of the Act.

Assignability of statutory causes of action and s 477(2)(c) of the Act

60 The above conclusion serves more to expose the central issue regarding the validity of the assignment rather than to resolve it. If, as I have concluded, the issues of maintenance and champerty or genuine interest in the litigation or its outcome can be put to one side, it is then necessary to ascertain the legal position regarding the assignability of statutory causes of action of the kind in question by a liquidator pursuant to s 477(2)(c) of the Act.

61 The position of the parties regarding the authorities relating to the assignment of statutory causes of action generally and in the context of s 477(2)(c) of the Act, and particularly the decisions in UTSA1[90] and UTSA2,[91] mean that it is necessary to say something further regarding the main authorities.

62 Although it involves a small element of repetition, it is convenient first to consider the position regarding the assignment of the statutory causes of action generally, and largely without having regard to the impact, if any, of s 477(2)(c) of the Act.

63 As was observed by Rares J in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (Boston Commercial Services),[92] a number of decisions identify that a cause of action for recovery of damages under s 82 of the TPA is not one which is capable of assignment because the terms of the section confer a right which is personal to the person who suffers loss or damage by the conduct of another, in contravention of the relevant provision of the TPA.

64 In Salfinger v Niugini Mining (Aust) Pty Ltd (No 3),[93] Heerey J observed that it was 'well established' that a cause of action for recovery of damages or compensation under either ss 82 or 87 of the TPA was not one capable of assignment, and his Honour made reference to the relevant authorities identified by Rares J in Boston Commercial Services,[94] being Park v Allied Mortgage Corporation Limited,[95] Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited,[96] Pritchard v Racecage Pty Ltd (Pritchard),[97] and Chapman v Luminis Pty Ltd (No 4) (Chapman).[98]

65 Numerous cases since have reinforced the position, and Gordon J in Mijac Investments Pty Ltd v Graham (No 2)[99] made observations regarding the reason that statutory causes of action have been held not to be assignable, also referring to that which was stated by Rares J in Boston Commercial Services,[100] and the fact that the distinction is well established. Another example is Chapman[101] in which von Doussa J observed that it had been 'consistently held' that the cause of action created by s 82 of the TPA cannot be assigned and must be enforced by action by the person who suffers loss or damage. This was cited with approval by Ward JA in Mahommed v Unicomb.[102]

66 Cases in which the issue has been similarly addressed include: Park v Allied Mortgage Corporation Limited;[103] Brookfield & Septic Products Australia Pty Ltd (in liq) v Davey Products Pty Ltd (Brookfield);[104] Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia (No 6) (Rosebridge Nominees);[105] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd (CGS);[106] Re Novaline;[107] Re Colorado Products Pty Ltd (in prov liq) (Re Colorado Products);[108] Aquatic Air Pty Ltd v Siewert (Aquatic Air 1);[109] Aquatic Air Pty Ltd v Siewert (Aquatic Air 2);[110] and Lanai;[111] and Mahommed v Unicomb.[112]

67 As is apparent from the list of cases referred to, even the two cases upon which the plaintiffs placed reliance on in the context of their submissions regarding s 477(2)(c) of the Act, being Re Novaline[113] and Lanai[114] (addressed below), accepted this to be the position. As North J observed in Re Novaline, '[i]t is established that a statutory right to damages under section 82 of the [TPA] cannot be assigned...' and '[t]he reasoning applied in s 82 cases applies equally... ' to claims for compensation for damage pursuant to s 1317H of the Act.[115]

68 Recognising that the authorities referred to above address Commonwealth legislation, and artificially putting s 477(2)(c) of the Act and the decisions in UTSA[116] to one side for the moment, it is appropriate to accept and follow what has been consistently held and become well established. It will be recalled in this regard that the Statutory Claims in question are claims for damages for misleading or deceptive conduct and unconscionable conduct pursuant to ss 82 and 87 of the TPA, s 1041I of the Act and s 12GF of the ASIC Act. Consequently, and as appeared to be common ground between the parties, they are statutory claims of the character addressed in the authorities.

69 I turn then to the impact, if any, of the authorities that address or touch upon s 477(2)(c) of the Act in the context of the assignment of statutory causes of action of the kind under consideration. In so doing, it is helpful to recall that s 477 of the Act deals with the powers of a liquidator, and that s 477(2)(c) provides that, subject to the section, a liquidator of a company may '... sell or otherwise dispose of, in any manner, all or any part of the property of the company; ...'.[117]

70 Although it is not necessary to address every case on the topic, a useful starting point in this context is the decision of Branson J in Brookfield.[118] In Brookfield it was alleged that Mr Brookfield had been assigned by a liquidator all of a company's right, title and interest in a particular proceeding including causes of action for damages under s 82 of the TPA. Branson J concluded that the court had consistently expressed the view, that on its proper construction, s 82 of the TPA does not allow recovery by an assignee who has not himself or herself suffered the loss and damage sought to be recovered.

71 It was also observed that '[o]n this question of the proper construction of section 82 of the [TPA], section 477(2)(c) of the Corporations Law, ... can, in my view, have no bearing.'[119] It was concluded that the claim for damages made pursuant to ss 52 and 82 of the TPA must fail. Although there was no further relevant detailed discussion of s 477(2)(c) in connection with the statutory cause of action,[120] it appears that Branson J was of the view that because the statutory cause of action was not capable of assignment, s 477(2)(c) of the Corporations Law[121] could not alter the position and make the unassignable, assignable.

72 This was one aspect of the decision challenged on appeal,[122] where it was relevantly contended that the deed of assignment was effective to assign the cause of action under ss 52 and 82 of the TPA by reason of the operation of s 477(2)(c) of the Corporations Law.[123] The court concluded that if the critical findings of fact that were challenged on appeal were upheld, the s 477(2)(c) appeal ground and the other grounds of appeal would not need to be dealt with, and therefore addressed the factual grounds first. The appellants failed to establish error regarding the findings of fact and it was not necessary for the Full Court to consider the other grounds of appeal. The appeal was dismissed.[124]

73 UTSA1[125] involved an application by the liquidators for an order pursuant to s 511 of the Corporations Law that they be authorised to assign UTSA's causes of action in a proceeding by UTSA against a number of defendants, including former directors, employees and shareholders, alleging breaches of duty in connection with the disposition of assets to another company. The relief claimed included damages.

74 A summary of the allegations in the statement of claim was set out in the reasons of Hansen J and was said to include allegations that a sale of certain assets was brought about by directors and employees of UTSA in breach of their duties (statutory, contractual and fiduciary) which they owed to UTSA, including breaches of duties of fidelity; to exercise due care and diligence; and not to advantage themselves or to place themselves in a position of conflict or to profit from their position. It was further alleged that the directors of UTSA signed the sale contract in contravention of ss 232(2), (4) and (6)[126] of the Corporations Law and that UTSA suffered loss and damage as a result.[127]

75 In UTSA1[128] the objection to the assignment was that it was tainted by maintenance and champerty and involved the assignment of a bare right of action, which, so it was submitted, was impermissible. The primary submission in response to this objection was that the proposed deed of assignment was made in exercise of the statutory power of sale in s 477(2)(c) of the Act and that this power represented an exception to the principles of maintenance and champerty.[129] As earlier mentioned, on this point Hansen J concluded that:

In my opinion, the assignment of a cause of action (which is clearly within the definition of 'property' in s.9 of the Corporations Law) by a liquidator is valid notwithstanding that such an assignment might otherwise be held void for maintenance and champerty, or (if there be any difference) because it purported to assign a bare right of action.[130]

Because of the conclusion reached on the 'main objection' it was not necessary for his Honour to consider the liquidators' alternative submissions that the proposed assignment was not void as being champertous because the intended assignee had a sufficient commercial interest to overcome that objection.[131]

76 Hansen J's detailed reasons do not suggest or refer to any objection being made to the assignment on the basis that the assignment included statutory causes of action that were unassignable at law, or reveal or suggest that the issue was raised by the parties or otherwise considered.

77 The Court of Appeal recognised that the principal contention against the assignment was advanced with a large number of variations and with many matters being agitated, but that his Honour 'dealt with each of those matters in the course of his long and careful reasons for judgment'.[132] It appears clear from a review of the reasons that the statutory cause of action assignment issue which falls for consideration in this case was not raised for consideration, notwithstanding that the claims as described by Hansen J included claims for damages in respect of alleged breaches of statutory directors' duties.[133]

78 I add that I do not accept Capital Finance's submission that I cannot be satisfied from the reasons of Hansen J that the claims in UTSA1 involved statutory damages claims for breaches of directors' duties. Given the express reference to such claims in Hansen J's reasons summarising the allegations in the statement of claim, I am so satisfied.[134]

79 As earlier observed, the decision of Hansen J was upheld on appeal. There, too, the court referred to the principal contention before Hansen J being, 'that the arrangement which the liquidators proposed to make ... was contrary to public policy as being an agreement for the unlawful maintenance of the action or as being a champertous agreement'.[135] In the context of s 477(2)(c) of the Corporations Law, Hayne JA (with whom Brooking and Phillips JJA agreed) addressed this principal contention concluding that there was no warrant for reading down the general words of the Corporations Law and that permitting the 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. As mentioned, his Honour observed that it would be surprising indeed if the liquidators were able to sell a particular form of the company's assets (such as rights of action) to only a limited class of persons being those who were already interested in the outcome of the action concerned.[136] Hayne JA agreed with Hansen J, 'substantially for the reasons that his Honour gave',[137] that the proposed sale of the company's rights of action was within the power of the liquidator.

80 As with the reasons of Hansen J, it is clear from the reasons of the Court of Appeal that the issue regarding the assignment of statutory causes of action for reasons not related to maintenance and champerty was not raised or considered on appeal. There is no reference to, or consideration of, the issue in the careful reasons of Hayne JA. Put simply, that matter was not in issue.

81 There are various decisions subsequent to UTSA2[138] which refer to the UTSA decisions as confirming that s 477(2)(c) of the Act allows a liquidator to sell a cause of action or bare right of action and that such an assignment, being made under that statutory power, will be exempt from the rule against champerty and maintenance. Those decisions include, for example, Bank of Melbourne Limited v HPM Pty Ltd[139] and a number of the decisions referred to below.

82 In Chapman,[140] von Doussa J was considering the validity of assignments of, among other things, a cause of action seeking damages pursuant to s 82 of the TPA. In that case his Honour concluded that if the general law prohibition upon assigning a bare right of action was the only obstacle to the maintenance of an action under s 82 by an assignee of the person who suffered loss or damage by a contravention of the relevant provision of the TPA, it was probable in that case that s 477(2)(c) and the principles discussed in Trendtex[141] would overcome that obstacle. However, after referring to the authorities dealing with the inability to assign statutory causes of action and noting that the principle had been unanimously endorsed by the Full Court of South Australia in Pritchard,[142] von Doussa J concluded that, notwithstanding the terms of s 477(2)(c), the cause of action was not assignable and therefore the claims were not maintainable.[143]

83 In Ex parte McGrath, Re; Pan Pharmaceuticals Ltd (in liq),[144] Jacobsen J made reference to Bank of Melbourne,[145] observing that it had been held that s 477(2)(c) entitled a liquidator to sell a company's rights of action to a stranger.[146] The issue now before me for consideration appears not to have been raised, and it is also not evident from the reasons what particular causes of action were assigned.

84 Although dealing with a different issue in connection with the appointment of a new trustee, in Rosebridge Nominees[147] the position regarding the assignment of a statutory cause of action based on s 82 of the TPA was referred to, including that which was said by von Doussa J in Chapman.[148] Le Miere J reasoned similarly to von Doussa J and concluded that because an assignee was not a person who comes within the terms of the statutory remedy under s 82, the cause of action was not trust property and did not vest in the new trustees. This case was not addressing the impact, if any, of s 477(2)(c) on the ability to assign statutory causes of action that are otherwise not assignable.

85 In CGS,[149] the issue came before the New South Wales Court of Appeal more squarely. In that case, a liquidator purported to assign a chose in action that by the express terms of the relevant contract was not assignable to a third party. After reviewing the authorities, including the decisions in UTSA1 and UTSA2, the legislative context and history, and considering the construction of s 477(2)(c), Sackville AJA (Giles and Campbell JJA agreeing) concluded that there was nothing in the language of the earlier legislation to suggest that the power to sell or dispose of a chose in action could be exercised so as to defeat a limitation on assignability resulting from the express agreement entered into by the company and the obligor, and that substantially the same analysis applied to the legislation in its current form. That is:

The language of s 477(2)(c) of the Corporations Act is not apt to bring about the somewhat startling result that a liquidator, by exercising the statutory power to sell or dispose of the company's property, can override an otherwise perfectly valid restraint on assignability which arises by virtue of a specific agreement entered into and binding on the company and which (as CGS accepted) renders property inherently incapable of being assigned. If that were the correct construction of s 477(2)(c), it would be open to the liquidator, by exercise of the statutory power, to affect adversely the right of a third party who has entered into a contract with the company on the express basis that the contract is not to be assignable.[150]

86 The court reached this conclusion whilst also accepting that the language of s 477(2)(c) was broad, but held that it is not so broad or unequivocal that it should be interpreted so as to empower a liquidator to render nugatory restraints on assignability that have been expressly agreed to by the company and that are regarded by the law as valid and effective to render property incapable of being assigned.

87 Sackville AJA further observed that '[t]he contrary construction of s 477(2)(c) would authorise the liquidator not merely to sell or dispose of the company's choses in action, but to transform their character deriving from an express agreement entered into by the corporation'.[151] His Honour also observed that this construction recognises that clearer words are required to interpret the liquidator's power to sell or dispose of the company's property so as to change the nature of the contractual liabilities undertaken by the obligor.

88 In CGS, the decisions of Hansen J in UTSA1[152] and the Court of Appeal in UTSA2[153] were relied upon by the plaintiff in support of the assignment and they were addressed in the reasons of Sackville AJA, where his Honour observed as follows:

[70] UTSA did not turn on whether section 477(2)(c) of the Corporations Act empowers a liquidator to sell or dispose of an otherwise non-assignable chose in action. It does not appear to have been suggested in that case that the company's cause of action was not assignable, provided that the proposed assignee had a sufficient interest in the proceedings. Much less was UTSA concerned with an attempt by a liquidator to sell or dispose of a chose in action that was non-assignable by virtue of an express agreement between the company and the obligor.

[71] The question in UTSA was whether the public policy reflected in the doctrines of champerty and maintenance restricted the class of persons to whom the liquidator could assign the company's cause of action. Hayne JA applied principles well settled in the law of bankruptcy to hold that the object of the legislation would be frustrated if the public policy underlying the doctrines of champerty and maintenance prevented a liquidator discharging his or her statutory duty realising the company's assets to advantage.[154]

89 The Court concluded that the chose in action was not assignable.

90 The case of Re Novaline[155] involved a liquidator seeking to assign a company's claims against a former director for breaches of statutory and common law directors' duties.[156] The liquidator was seeking approval to enter into a deed of assignment and one of the bases upon which this was opposed was that the statutory causes of action were not capable of assignment.

91 After referring to the decisions in UTSA1[157] and UTSA2[158] and that which was said by the New South Wales Court of Appeal in CGS,[159] North J concluded that it was established that a statutory right to damages under s 82 of the TPA could not be assigned and that the reasoning that applied in the s 82 cases applied equally to claims for damages for breaches of directors' duties under ss 180 and 184 of the Act.[160] When referring to UTSA1, his Honour observed that Hansen J was upheld on appeal but, 'as pointed out in CGS', without direct reference to the issue, seemingly suggesting an acceptance by North J of that which was observed by the New South Wales Court of Appeal in CGS regarding what was, and what was not, in issue in UTSA1 and UTSA2.[161] North J also stated briefly that the judgment of Hayne JA referred to the width of the statutory power and North J concluded that, 'it is to be accepted that the statutory causes of action under ss 180 to 184 are capable of being assigned by a liquidator under s 477(2)(c).'[162]

92 The issue in EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) (EC Dawson Investments)[163] relevantly involved the question of whether a liquidator could assign a company's claim for breach of fiduciary duty.[164] In the course of the analysis of this issue references were made to the '... substantial body of authority establishing that a liquidator may assign to a third party a cause of action to which the company is entitled, even though such an assignment would otherwise be void for champerty or some other form of maintenance, or because it purported to assign a bare right of action, so long as what is assigned is within the definition of property'. In so doing Beech J referred to, among other decisions, the first instance and appeal decisions in UTSA1 and UTSA2, observing also that the relevant claims in UTSA included claims for a breach of fiduciary duty.[165] The question of whether statutory causes of action of the kind in question were capable of assignment was not in issue and was not addressed.

93 The topic came before Black J in Re Colorado Products,[166] in connection with what was said to be an assignment by a provisional liquidator of various causes of action. In that case the defendants accepted that a liquidator's power to assign property under s 477(2)(c) of the Act was broad but contended that the power did not render assignable that which was inherently unassignable, relying upon the New South Wales Court of Appeal in CGS.[167] On the issue of maintenance and champerty, his Honour also held that this did not prevent an assignment by a liquidator under s 477(2)(c) of the Act, and endorsed the conclusions in the reasoning of Beech J in EC Dawson Investments,[168] concluding that a claim for a breach of fiduciary duty was assignable under s 477(2)(c) of the Act.

94 With respect to the statutory causes of action for breach of duties under ss 180 to 183 of the Act and the related claims for compensation sought to be made under ss 1317H and 1324(10) of the Act, Black J referred to the decision of North J in Re Novaline[169] and also noted the outcome of UTSA2[170] regarding the assignment of various statutory claims. However, his Honour then observed that UTSA1[171] and UTSA2 had been considered by the New South Wales Court of Appeal in CGS,[172] which held that it was not authority that an otherwise non-assignable chose in action could be assigned under s 477(2)(c) of the Act.[173]

95 Black J also pointed out that an assignee would not have standing to seek to obtain an order of compensation under s 1317H of the Act and that an assignment cannot confer upon an assignee a right which the section does not. His Honour concluded that whilst the assignment of the fiduciary duty claims in question was effective, the purported assignment of the statutory breach of duty claims was not, and did not confer standing upon the assignee to bring the assignor corporation's breach of directors' duty claims.[174]

96 In Aquatic Air 1, Brereton J, when dealing with statutory causes of action for damages under the Competition and Consumer Act and the ASIC Act, concluded that they were not assignable because the sections do not contemplate an award of damages in respect of loss not suffered by a party to the proceeding. In so doing he referred to many of the authorities referred to above. His Honour also concluded that:

Notwithstanding cases that hold that Corporations Act, s 477(2)(c), empowers a liquidator to assign the company's causes of action notwithstanding the law of champerty and maintenance [UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 14 ACLC 1610; Re Cant (in his capacity as liquidator of Novaline Pty Ltd (ACN 006 622 933) (in liq) [14]-[21]], at least in New South Wales the position is that s 477(2)(c) does not have the effect of making assignable causes of action which are otherwise not assignable [Owners of Strata Plan 5290 v CGS & Co Pty Ltd [2011] NSWCA 168, [70]-[72]].[175]

97 His Honour held that the assignee could not sue on any causes of action that the assignor may have had under the Competition and Consumer Act 2010 (Cth) or the ASIC Act for damages or rescission for misleading or deceptive conduct because such causes of action are not assignable.[176]

98 The appeal from Brereton J was dismissed by the New South Wales Court of Appeal in Aquatic Air 2.[177] Although the issue now under consideration was ultimately not necessary for the Court of Appeal to decide, it referred to the Court of Appeal's decision in CGS[178] and made the following considered observations in relation to s 477(2)(c) of the Act and its relationship with causes of action under the Australian Consumer Law and claims for damages for misleading or deceptive conduct under the ASIC Act:[179]

[113] The primary judge concluded that the statutory causes of action for damages under the Australian Consumer Law and the ASIC Act, as pleaded in paras 16e and 16f of the further amended statement of claim, were not assignable. His Honour considered that the relevant statutory provisions do not contemplate an award of damages in respect of loss not suffered by a party to the proceedings. His Honour held that the same principle applied to the statutory causes of action for relief in the nature of rescission or avoidance, on the basis that they too are limited to orders that will compensate a person who is a party to the proceedings and who has suffered, or is likely to suffer, damage by the contravening conduct.

[114] Aquatic accepts that, but for the operation of section 477(2)(c) of the Corporations Act 2001 (Cth), the causes of action available to [the company] were not assignable by [the company]. However, Aquatic contends that following the order for winding up of [the company], the liquidator of [the company] was able to assign causes of action that were not assignable by [the company] prior to its being wound up. His Honour concluded that, while section 477(2)(c) empowers a liquidator to assign the company's causes of action, notwithstanding the law of champerty and maintenance, that provision does not render assignable a cause of action that is not otherwise assignable. Having regard to the conclusion reached above, it is not necessary for that question to be answered in the present case. However, it is difficult to see any error in the reasoning of the primary judge.[180]

99 At the end of the last sentence of this extract the Court of Appeal included a footnote[181] referring with apparent approval to the reasons of Sackville AJA in CGS,[182] which it will be recalled concluded, among other things, that UTSA1[183] and UTSA2[184] did not address issues of the kind now in question before me, and that s 477(2)(c) did not operate to make the unassignable, assignable.

100 In Lanai,[185] a decision handed down by the Supreme Court of Queensland a month before the Court of Appeal's decision in Aquatic Air 2[186] referred to above, Jackson J in a strike out application was dealing with circumstances where a plaintiff trustee alleged that the defendant had engaged in misleading or deceptive conduct in breach of s 52 of the TPA resulting in a former trustee suffering loss and damage under s 82 of the TPA. The plaintiff there alleged that by reason of s 15(1) of the Trusts Act 1973 (Qld) the trust property of the unit trust, including the rights of the former trustee against the defendant in respect of the TPA claim, vested in the plaintiff as the new trustee.

101 His Honour accepted that damages under s 82 of the TPA for contravention of s 52 could only be recovered by a person who suffered the loss by the contravening conduct. In so doing his Honour concluded that this question of construction had been decided at the level of an intermediate Court of Appeal and in the Full Court of the Federal Court in Pritchard,[187] and that he was bound to follow that decision on the proper construction of the section of the Commonwealth legislation unless convinced that it was clearly wrong. His Honour therefore concluded that it followed that the operation of s 82 did not permit a person who was not the person who suffered damage by the conduct done in contravention of s 52 to recover any damages for loss or damage under that section, subject to the operation of bankruptcy and winding up laws.[188]

102 In the course of addressing this different question to the question now under consideration, and in a context that did not involve insolvency, his Honour briefly commented that, in the context of a company winding up, the question has arisen as to whether a liquidator is able to sell and assign a claim under s 82 of the TPA pursuant to s 477(2)(c) of the Act. In this context his Honour observed that '[s]ome cases have proceeded on an assumption that it can be done. Others have taken a contrary view.[189] The answer to this question is not authoritatively decided at present. ... It is not necessary, or possible in my view, to reconcile the cases under section 477(2)(c)'.[190]

103 The cases to which his Honour referred as being cases where it had been assumed that 'it can be done' were only Re Novaline[191] and UTSA2.[192] The cases referred where it was said 'a contrary view' had been taken, were Brookfield,[193] Chapman,[194] and Aquatic Air 1,[195] although as noted above, Lanai[196] was decided a month before the appeal decision in Aquatic Air 2[197] and therefore did not take account of the Court of Appeal's observations in that case.

104 Relevant observations to be made and collected from the review of the authorities and the discussion that preceded it above include the following.

105 First, where an alleged assignment is to be relied upon as the only basis for seeking a substitution order pursuant to r 9.09(2), it is a threshold condition to the enlivening of the discretionary power in r 9.09(2)(a) that the applicant establish the existence of an assignment.

106 Second, as explained by Elliott J in EWC Payments,[198] the exception identified in Trendtex[199] is good law in Australia. An assignment of causes of action or bare rights of action will not be void for maintenance or champerty where the assignee has a genuine and substantial interest in the success of the litigation or a genuine commercial interest in the enforcement of the claim of another.

107 Third, putting s 477(2)(c) of the Act to one side, it is well established that statutory causes of action for damages of the kind referred to above are not assignable. They are personal to the person who suffered loss 'by' the relevant conduct proscribed by the statute, and it is only that party that the statute empowers to commence or bring proceedings to recover the loss, damage, or compensation (as the case may be).

108 Fourth, since at least the handing down of the Court of Appeal's decision in UTSA2,[200] it has been clear that the assignment by a liquidator of a company's causes of action pursuant to the statutory power of sale in s 477(2)(c) of the Act will not be found to be void for maintenance or champerty, whether or not the assignee has an interest of the kind required to engage the Trendtex[201] exception. Section 477(2)(c) permits a liquidator to assign a company's causes of action to a stranger even if such an assignment might otherwise have been champertous or involved maintenance.

109 Fifth, the New South Wales Court of Appeal has found that the decisions in UTSA1[202] and UTSA2[203] did not turn on whether s 477(2)(c) of the Act empowers a liquidator to sell or dispose of an otherwise non-assignable cause of action. Relevantly, the question in UTSA1 and UTSA2 was whether the public policy reflected in doctrines of champerty and maintenance restricted the class of persons to whom the liquidator could assign the company's causes of action.[204]

110 Sixth, in any event, it is clear from a review of the reasons in each of the UTSA decisions that the question of whether statutory causes of action of the kind now in issue are capable of assignment was not raised, considered or addressed by Hansen J or the Court of Appeal. So much appeared to be properly acknowledged by the plaintiffs.[205] The decisions in UTSA1[206] or UTSA2[207] do not stand as binding authority for the proposition that s 477(2)(c) of the Act permits a liquidator to assign statutory causes of action that would otherwise not be assignable.[208] It may be added that even if it was to be assumed that the manner in which the parties ran the trial and the appeal in UTSA1 and UTSA2 resulted in it being assumed that statutory causes of action were capable of being assigned, that would not change the position.[209]

111 Seventh, and consistently with that which was observed by the New South Wales Court of Appeal in CGS,[210] the language of s 477(2)(c) of the Act is not apt to empower a liquidator to sell or dispose of an otherwise non-assignable cause of action. The section does not have the effect of making assignable causes of action that are otherwise not assignable.[211]

112 Eighth, having regard to the above, to the extent that the decision in Re Novaline[212] is founded upon the decision in UTSA2[213] standing as authority for the proposition that s 477(2)(c) of the Act permits the assignment of statutory causes of action that are otherwise unassignable, with respect, that conclusion should not be followed by me. In any event, in my respectful opinion, and having regard to what was not addressed or in issue in UTSA1[214] or UTSA2, the reasoning of Brereton J in Aquatic Air 1 (which draws upon the New South Wales Court of Appeal's reasoning in CGS[215] and was referred to with approval by a differently constituted Court of Appeal in Aquatic Air 2), is to be preferred and should be followed.[216]

113 Ninth, the matter in issue before me was not in issue in Lanai,[217] and Jackson J's dicta regarding the issue not being authoritatively decided rests upon, and can rise no higher than, the decisions in Re Novaline[218], UTSA1[219] and UTSA2.[220] It has also been noted that Lanai was decided shortly before the New South Wales Court of Appeal's decision in Aquatic Air 2.[221]

114 Having regard to the above, and that which has been said and emphasised by the High Court regarding the position of judges at first instance when considering Commonwealth or uniform legislation,[222] I have concluded that the Statutory Claims in question are not assignable and that s 477(2)(c) of the Act does not make them so.

115 It follows that the Statutory Claims have not been validly assigned to Mr Chiavaroli and that the plaintiffs have failed to satisfy the threshold condition in r 9.09(2)(a) of the Rules that there has been an assignment of the Statutory Claims. Therefore the power under r 9.09(2)(a) of the Rules to order that Mr Chiavaroli be substituted for the first plaintiff is not enlivened in this case in respect of the Statutory Claims and Mr Chiavaroli will not be substituted as the first plaintiff. Further, even if the discretionary power had been enlivened in some way, having concluded that the Statutory Claims were not effectively assigned I would have exercised my discretion against substitution.

116 I add that my conclusion would not be affected even if I had concluded that, properly construed, the threshold condition in r 9.09(2)(a) required an applicant to establish only a 'prima facie' or 'strongly arguable' case that an assignment had occurred, or even that it required no more than an allegation of an assignment that was not frivolous or vexatious. Having found that the Statutory Claims are not assignable at law, the plaintiffs have not established either a strongly arguable or prima facie case. Further, because it has been decided that the purported assignment of these claims is ineffective then any claim based upon the purported assignment is necessarily futile and frivolous in the relevant sense and it would be liable to be struck out, and therefore even this lower threshold contended for by the plaintiffs would not have been overcome.[223]

117 A further observation should be made. Although for the reasons earlier expressed it is not necessary to determine whether Mr Chiavaroli has a sufficient interest in the statutory causes of action to satisfy what I have described as the Trendtex[224] test, even if it was to be assumed that he has such an interest it would make no difference to the result. This is because there is no sound legal basis for contending that such an interest, in and of itself, provides a separate basis for overcoming the legal hurdle that makes statutory causes of action of the kind in question unassignable. To the extent this submission was pressed by the plaintiffs, it is not accepted.

118 Before turning to the Strike Out Application it is necessary to say something further regarding the Substitution Application and Pentridge Village's non-statutory claim in the ASOC, being the Estoppel Claim.

119 The Estoppel Claim is the subject of the Strike Out Application and in that context is addressed below. For the purposes of the Substitution Application, however, the application for substitution was made on the basis that all claims were assigned to Mr Chiavaroli and no other application was made in the alternative. I propose to allow the parties, and particularly the plaintiffs, an opportunity further to consider the position in the light of these reasons and the orders to be made consequent upon them. This is proposed for the following reasons. First, it is possible that the conclusions reached in these reasons regarding the Statutory Claims, the Strike Out Application, and the alternative Section 237 Application, will affect the plaintiffs' or Mr Chiavaroli's position as to whether, and if so, how, any application is to be made or pressed in relation to the Estoppel Claim. Second, it has been foreshadowed that the Estoppel Claim and other parts of the ASOC are to be amended and it is at least possible that these reasons and such amendments as are sought to be made will be relevant to the approach the parties wish to take. Third, during the course of the hearing a brief observation was made by Capital Finance that suggested it may wish to make a further submission as to whether the assignment is capable of being effective in respect of the Estoppel Claim if the assignment of the Statutory Claims was found to be ineffective.[225] Finally, it is efficient, fair and appropriate to allow all parties to consider the position having regard to the conclusions expressed.

121 By Capital Finance's amended summons filed 6 September 2018 it seeks to strike out, pursuant to rr 23.02(a) and/or 23.02(b) of the Rules:

(a) paragraphs 1 (insofar as it pleads Mr Chiavaroli is the first plaintiff), and 89 to 95 of the ASOC where the alleged assignment to Mr Chiavaroli is pleaded (Assignment Paragraphs);

(b) paragraphs 65 to 70 of the ASOC which set out the Estoppel Claim (Estoppel Paragraphs); and

(c) paragraphs 25, 87 and 88 insofar as those paragraphs and their particulars plead reliance by West Homes and/or loss and damage suffered by West Homes (West Homes' Paragraphs).

Capital Finance also seeks an order pursuant to r 9.06(a) of the Rules that West Homes cease to be a party to the Proceeding.

122 Applicable principles in relation to striking out pleadings have been well rehearsed in many cases including, for example, Wheelahan and Anor v City of Casey & Ors (No 12);[226] Annesley v Westpac Banking Corp;[227] Vo v Nguyen;[228] Rowson v Alpass;[229] Babcock & Brown DIF III Global Co-Investment Fund, LP v Babcock & Brown International Pty Limited (No 2);[230] and CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd (Ballan).[231] They need not be repeated here.[232]

123 The Assignment Paragraphs plead the purported assignment to Mr Chiavaroli by Pentridge Village (through the Liquidator) of the causes of action the subject of the Proceeding. As earlier observed, Pentridge Village's claims comprise the Statutory Claims and the Estoppel Claim.

124 On the Substitution Application it has been determined that the Statutory Claims were not effectively assigned. Because it is alleged in the Assignment Paragraphs that these causes of action were assigned to Mr Chiavaroli and in paragraph 95 of the ASOC it is alleged that 'by reason of the matters pleaded at paragraphs 89 to 94 above, from on or about 3 August 2017 Lee Chiavaroli acquired all of [Pentridge Village's] right, title and interests in this proceeding', paragraphs 89 to 95 of the ASOC should be struck out pursuant to r 23.02 of the Rules. This is because insofar as the Assignment Paragraphs relate to the Statutory Claims, they fail to disclose a cause of action and are frivolous and vexatious because they lack a legal basis and are futile.

125 The plaintiffs placed emphasis upon the Court of Appeal's decision in CA & CA Ballan. The following observations warrant extraction:[233]

When will a pleading be struck out?

21 Pleadings are important. Primarily, they are used to help the parties define the real issues in dispute. But it is prudent to bear in mind that they are procedural tools only.

22 On a strike out application, it is usually assumed that the matters pleaded can be established.

23 The Agents relied upon cases such as General Steel Industries Inc v Commissioner for Railways (NSW) ('General Steel') as authority for the proposition that there is a high threshold to be overcome if a pleading is to be struck out. In that case, Barwick CJ observed that a plaintiff should not be denied the right to prosecute a claim unless it was clearly demonstrated that there was no cause of action. The Chief Justice referred to various expressions that had been used to describe the test for disposing of a proceeding summarily - phrases such as: 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them (the pleadings) to stand would involve useless expense.'

24 Care should be exercised in applying such terms now. The case of General Steel and like authorities pre-date the Civil Procedure Act. That legislation introduced a test of 'no real prospect of success' for when summary judgment may be given. A pleading that would not survive a summary judgment application will be struck out, for to allow it to go forward would be futile. According to Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd: a prospect which is not 'real' is 'fanciful'; although the 'no real prospect of success' test in s 63(1) of the Civil Procedure Act is more liberal than the common law test of 'hopeless' or 'bound to fail', there may not be much difference between them in practice; and, properly understood, a real question to be tried is one which realistically might result in the Agents to an application for summary judgment succeeding in the proceeding. The correct test to apply in the present case is whether the amendments raise a claim that has no real prospect of success, in the sense of being fanciful.

25 It is still the case, however, that the effect of striking out a statement of claim if no right to re-plead is granted brings the proceeding to a peremptory end. In this regard, the older authorities provide some salutary warnings. As Dixon J said in Dey v Victorian Railways Commissioners:

A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.

26 In the same case, Latham CJ took what might be viewed as a slightly more robust approach. His Honour said:

If, as a result of argument, the court reaches a clear decision which could not be altered by any evidence which could be adduced at the trial, then it is proper in the interests of both parties to dismiss the action instead of allowing the parties to incur completely useless expense.

27 Picking up on his Honour's reference to evidence, the effect that it may have at trial cannot be underestimated. Experience tells that evidence at trial can shape the case in ways that have not been anticipated despite the best efforts of litigants and their legal advisers. As Whelan JA observed in Mutton v Baker:

Even if it is said that an issue is purely a question of law, the court should not strike out a claim on this basis if it is conceivable that some factual matter could emerge at trial which might alter the analysis.

28 In General Steel Barwick CJ referred to the passage from Dixon J's judgment in Dey that we have set out above. The Chief Justice then stated:

Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.[234]

126 Given the conclusion I have reached regarding the Substitution Application and the purported assignment of the Statutory Claims, and applying the approach referred to by the Court of Appeal in Ballan, the assignment claim regarding the Statutory Claims is lacking a legal basis and therefore has 'no real prospect of success' and is to be regarded as 'fanciful'[235] with its pursuit being futile.[236] Accordingly, it is appropriate to strike out the Assignment Paragraphs.

127 It will be apparent that I do not accept the plaintiffs' submission that I should not strike out the Assignment Paragraphs because, so it is submitted, a 'debatable question of law' is involved. Even if it was to be assumed that the discrete legal issue that I have determined involves what is described as a 'debatable question of law', I do not accept in the present circumstances that the legal issue should not be considered or determined. I also do not consider that the plaintiffs' reliance upon the decision in Ballan assists their contention to this effect and I make the following further brief observations.

128 The Court of Appeal emphasised in Ballan that 'care should be exercised' in applying terms that have been used historically in strike out cases, such as 'the case of General Steel and like authorities' because they pre-date the CPA. It is also evident from the reasons in Ballan, including paragraphs 26 and 28 extracted above, that it is accepted that argument, even of an extensive kind, might be necessary and, further, if as a result of argument the court reaches a clear decision which could not be altered by any evidence to be adduced at trial then it is proper to proceed to consider the issue rather than '... to incur completely useless expense.'[237]

129 Further, the historical and other decisions to which reference was made by the plaintiffs did not involve the circumstances, multiple applications, or peculiarities that exist in the present case. These include the Substitution Application and the plaintiffs' need to satisfy the threshold condition of assignment pursuant to r 9.09(2)(a) of the Rules, and the Section 237 Application made by Mr Chiavaroli and in respect of which the determination of the legal issue raised is also material. It may be added that in the present case the determination of the discrete legal point has not involved the need to address any factual controversy and has been undertaken in the context of a proceeding understandably regarded by the parties as being time consuming, very expensive, and self-evidently involving events and transactions from many years past. In these circumstances it was at least desirable and appropriate for the court to consider the legal point raised and, as earlier observed, this well serves the overarching purpose of the CPA and the obligations imposed upon the court by s 8 of the CPA.

130 It is also to be observed that the conclusion reached regarding the assignment of the Statutory Claims and the outcome of the Substitution Application mean that, as pleaded, paragraphs 89 to 95 and the relevant part of paragraph 1 serve no useful purpose and are otiose.

131 I add that although the position regarding the assignment of the Estoppel Claim remains to be further considered, because of the collective and intertwined manner in which the Assignment Paragraphs are pleaded it is appropriate to strike out the entirety of paragraphs 89 to 95 (inclusive).

132 The Estoppel Claim is pleaded in paragraphs 65 to 70 of the ASOC. In substance, Capital Finance's strikeout challenge to this claim rests upon two main contentions. The first is that it does not disclose a cause of action and is scandalous, frivolous or vexatious because no relief is sought in respect of the alleged estoppel. This challenge is persisted with notwithstanding that it was made clear by the plaintiffs in correspondence between the parties prior to the application that damages, or compensation in equity, was sought on the basis of the alleged estoppel. Capital Finance's first contention was based on the section of the ASOC headed 'Loss and damage' (comprising paragraphs 87 and 88 of the ASOC) where it is alleged that 'By reason of the matters pleaded ...' in specified paragraphs of the ASOC, the plaintiffs have suffered loss and damage. Because no reference is made to paragraphs 65 to 70 of the ASOC (in which the Estoppel Claim is pleaded) in paragraphs 87 and 88 of the ASOC it is said that no relief is sought by the plaintiffs in respect of the Estoppel Claim.

133 As it developed, Capital Finance's second basis of challenge appeared to be founded on a contention that where an equitable estoppel claim is sought to be made, equity will only grant relief of a kind requiring the estopped party to adhere to the assumed state of affairs. In the present case the pleaded assumed state of affairs was the continued provision of finance upon certain terms, but because, so it was submitted, time and events have now moved well past the time where Capital Finance could be required to make good that assumption by providing finance, it was contended that no other remedy would be available. As I understood it, it was a corollary of this submission that neither equitable compensation nor equitable damages could or would be awarded, and therefore even if damages or compensation were to be sought the claim ought to be struck out as not disclosing a cause of action or as being frivolous or vexatious because such a claim is necessarily futile.[238] During the course of oral submissions on 5 September 2018 senior counsel for Capital Finance also made reference to the challenges discerning the damages sought and made reference to the nature of the damages sought and to 'expectation damages' not being available.[239]

134 In exchanges during the hearing Capital Finance appropriately appeared to acknowledge that the case it largely relied upon, being ACN 074 971 109 v The National Mutual Life Association of Australasia Ltd (ACN 074),[240] may not be enough to say the issue is not open, and also appeared (again, appropriately) to accept that the earlier damages point might be accepted as being a technical one for present purposes.[241]

135 In their written submissions the plaintiffs contended that it was clear that equitable compensation or damages was being claimed, although it appears that the point raised by Capital Finance regarding paragraphs 87 and 88 of the ASOC was recognised because the plaintiffs also stated that '[t]he Plaintiffs will, if required, amend the ASOC to clarify that the loss and damage sought in paragraphs [87] and [88] of the ASOC is sought in respect of the equitable estoppel plea.'[242] However, the plaintiffs contended that the ASOC discloses a complete cause of action and is adequately pleaded, and reference was made to the claiming of damages 'in equity' in the prayer for relief.

136 With respect to Capital Finance's second point, the plaintiffs submitted that the remedy for an equitable estoppel claim is not necessarily confined to the making good of an assumption relied upon. Relying on cases such as Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd (Crown Melbourne) and ACN 074,[243] the plaintiffs submitted that whilst the requirements of conscience may necessitate that a defendant be held to an assumption that he or she has created, there are other cases in which the 'Australian preference is not to fulfil the plaintiff's expectation but to analyse what is the detriment suffered by the plaintiff from doing acts and things which he or she might not otherwise have done because of the promise'.[244] They contended that the issue was plainly arguable and involves many matters of contested fact, and they also referred to the following observation of Nettle J in Crown Melbourne:

... since the object of equitable estoppel in all its form is to prevent the detriment which a representee would suffer if the representor were unjustly or unconscionably to depart from the assumption or expectation created in the mind of the representee, relief should be accorded only to the extent of the minimum content of the assumed state of affairs from which it would be unjust or unconscionable for the representor to depart. Frequently, that may not extend to compelling the representor to fulfil the assumption or expectation as opposed to compensating the representee for the detriment suffered.[245]

137 It was also made clear by senior counsel during the hearing that the plaintiffs proposed further to amend the Estoppel Claim.

138 The complaint regarding the ASOC not referring to paragraphs 65 to 70 of the ASOC in paragraphs 87 and 88 is, at best, a technical one. The prayer for relief expressly states that damages are claimed 'at law and in equity' and the Estoppel Claim is the only equitable claim of Pentridge Village referred to in the ASOC. In these circumstances, this complaint does not warrant striking out the claim, and even less so in circumstances where the point has been clarified in correspondence and it has been indicated that a minor amendment can be made further to confirm the position if needed. In this regard I respectfully echo the remarks of Hargrave J in Babcock & Brown DIF III Global Co-Investment Fund, LP & Anor v Babcock & Brown International Pty Limited & Ors (No 2) (Babcock & Brown (No 2))[246] regarding the need to consider the pleading as a whole and adopt 'a practical case management approach to pleadings ...'.

139 The second point can also be shortly dispensed with for present purposes. Whether or not equitable damages or compensation should be granted to Pentridge Village as a result of the Estoppel Claim is a matter that should be considered at trial in light of the relevant facts and circumstances as found, including those ultimately found regarding the alleged detriment suffered. Whilst it seems clear that there will be factual and legal arguments at trial as to whether in the circumstances equity can or should grant relief of the kind sought in the event that the Estoppel Claim is made out, this is not a matter for determination on this strike out application. As the Background Schedule and the pleadings reveal, there is factual complexity involved regarding the Estoppel Claim and the pleadings also reveal that material disputes of fact and issues of credit will be involved. The plaintiffs are also correct that the Estoppel Claim is based upon the same or substantially the same facts as form the basis of Pentridge Village's misleading or deceptive conduct claim, and that striking out the Estoppel Claim will not reduce or obviate the need to consider and address such matters at trial.[247]

140 It is also at least arguable that the court can grant relief other than relief requiring the estopped party to adhere to the assumed state of affairs, including compensating a claimant for detriment suffered.[248] The nature of the minimum remedy will depend on the circumstances of the case.[249]

141 Recognising that these matters may fall to be addressed and determined at trial, it is desirable to say no more about them at this point.

142 Having regard to the above, and the plaintiffs' stated intention to seek leave further to amend the Estoppel Claim,[250] I do not propose to strike out paragraphs 65 to 70 of the ASOC.

143 Capital Finance also seeks to strike out the West Homes' Paragraphs and to have it removed as a party. It seeks to have paragraphs 25, 87 and 88 of the ASOC struck out insofar as these paragraphs and their particulars plead reliance by West Homes, and make claims for loss and damage suffered by it.

144 In substance Capital Finance submits that the ASOC does not disclose a cause of action on West Homes' behalf and is frivolous and vexatious, and that West Homes should be removed as a party because it is neither a proper nor necessary party. It submits that the only act of alleged reliance by West Homes is 'further' reliance upon the Multi Stage Development Representation in paragraph 25 of the ASOC and that this plea 'goes nowhere'. In particular, it is contended that:

(a) Pentridge Village alone is alleged to have been induced to act on the basis of all of the alleged misrepresentations and to have relied upon them;

(b) Pentridge Village alone is alleged to have adopted the assumption the subject of the Estoppel Claim;

(c) the particulars of the alleged loss and damage set out the alleged cause of Pentridge Village's loss 'but for' the contravening conduct but make it clear that West Homes' alleged loss has 'no connection to the alleged misrepresentations'. Rather, West Homes' alleged loss is said to be a consequence of Pentridge Village's alleged reliance on the misrepresentations rather than a consequence of anything that West Homes did or refrained from doing because of Capital Finance's conduct. That is, the 'necessary causal link' between Capital Finance's alleged conduct and the loss claimed is absent.

145 The plaintiffs have stated that they propose to seek leave to amend the ASOC to clarify that the relevant representations were made to and relied upon by West Homes as well as Pentridge Village, and have provided a draft proposed amended statement of claim to Capital Finance for its consideration and indicated that (if not agreed) an application is to be pressed subsequent to the determination of the applications the subject of these reasons. It is also said by the plaintiffs that the unconscionable conduct claim pleaded by Pentridge Village will be pleaded in respect of West Homes, and reference was made to Mr Chiavaroli acting in the position of a director of West Homes at the relevant time, either as a registered director or as a director within the meaning of the relevant definition in s 9 of the Act.[251]

146 That being so, even if it was to be assumed that there was substantive force in Capital Finance's contentions regarding the claims pleaded by West Homes, it would not be appropriate to remove them as a party to the Proceeding at this stage. West Homes should have the opportunity to seek leave to amend its claims in the ASOC.

147 The question remains as to whether the claims made by West Homes as currently pleaded should be struck out at this point. In my view, they should not be.

148 Even if it was to be assumed that the West Homes' Paragraphs did not disclose a cause of action, it has been foreshadowed by senior counsel for the plaintiffs that material amendments are to be made that would see relevant parts of the paragraphs in question retain utility if that amendment application is successful. It is also the case that the factual sub-stratum underlying the misleading conduct claim is substantially the same as that underlying Pentridge Village's misleading or deceptive conduct claim. It is to be remembered in this regard that the power to strike out a pleading (or parts of it) involves the exercise of judicial discretion.

149 In any event, although the pleading of the claim by West Homes has imperfections, when the substance of that which is pleaded is considered, in my view the pleaded misleading or deceptive conduct claim does enough to disclose a cause of action and I do not accept that Capital Finance has established that it is frivolous or vexatious in the manner contended.

150 Capital Finance largely focuses upon only paragraph 25 and the two paragraphs dealing with loss or damage, being paragraphs 87 and 88 of the ASOC. However, a broader consideration is required and attention is drawn to the following allegations:

(a) Mr Chiavaroli is and was at all relevant times during particular dates a director of Pentridge Village and from 14 October 2003 to 3 April 2008 and then from 18 April 2016 a director of West Homes (Paragraph 1).

(b) West Homes was engaged by Pentridge Village to undertake the construction of buildings and other works on the Land (Paragraph 2(b)).

(c) From 2001 until about December 2007 Pentridge Village and West Homes had successfully developed, completed and sold and settled 100 per cent of the 18 stages of the development using the successive stage development strategy in achieving sales of $141,564,849 (Paragraph 12).

(d) From around late 2007 Mallon on behalf of Capital Finance advised and directed Pentridge Village to various matters including altering its successive stage development strategy to a multi-stage development strategy so that stages were developed concurrently rather than successively and advised that such a strategy was necessary, should be undertaken, would lead to an increased return, and that Capital Finance would provide Pentridge Village with funding support to ensure the implementation and completion of the strategy was successful (Paragraph 13).

(e) In providing the advice in paragraph 13, Capital Finance represented to Pentridge Village a number of matters including that the multi-stage development strategy was necessary and should be undertaken, that it would lead to an increased return, and that Capital Finance would provide Pentridge Village with funding to ensure implementation and completion and that the strategy was successful (the Multi-Stage Development Representations) (Paragraph 14).

(f) Insofar as the Multi-Stage Development Representations were as to future matters, s 12BB(1) of the ASIC Act and s 51A of the TPA is relied upon (Paragraph 15).

(g) To the extent that the Multi-Stage Development Representations were an expression of opinion, they carried a further implied representation, that the opinion was genuinely held and based on reasonable grounds (Paragraph 16).

(h) Acting in accordance with the advice provided by Capital Finance referred to in paragraph 13 and then in further reliance on the Multi-Stage Development Representations, from around February 2008 Pentridge Village and West Homes commenced development and construction of the multi-stage development (Paragraph 25).

(i) The Multi-Stage Development Representations were continuing representations (Paragraph 29).

(j) The Multi-Stage Development Representations were misleading or deceptive or likely to mislead or deceive in contravention of s 1041H of the Act, s 12DA(1) of the ASIC Act and/or s 52 of the TPA (Paragraphs 30 and 31).

(k) By reason of the matters pleaded in paragraphs 14, 20, 28, 30, 32, 33, 34, 37, 39, 41, 44, 46-51 above (misleading or deceptive conduct) the plaintiffs have suffered loss and damage (Paragraph 87).

151 The particulars of loss and damage in the ASOC state that absent Capital Finance's misleading or deceptive conduct, West Homes would have continued to obtain a 20 per cent margin on the cost of the build and an annual project management fee up to the completion of the development.[252] It is also recorded in the particulars that 'further particulars [of loss and damage] will be provided prior to trial'.[253]

152 Having regard to the above, I do not accept Capital Finance's submission that West Homes' plea 'goes nowhere' or that West Homes' alleged loss 'has no connection to the alleged misrepresentations'. Representations are pleaded and in paragraph 25 of the ASOC it is alleged that each of Pentridge Village and West Homes relied upon the advice and the representations. The fact that this paragraph uses the phrase 'in further reliance' rather than only 'in reliance' is in my view a point without substance and does not detract from the fact that reliance is there pleaded. Further, the reliance is pleaded as a direct link between the conduct that is said to be misleading or deceptive and the actions of West Homes in commencing the development and construction of the multi-stage development. The conduct of Capital Finance is pleaded as being misleading or deceptive conduct in paragraph 30, and it is alleged in paragraph 87 that 'by reason of' that misleading conduct West Homes (as one of the plaintiffs) has suffered loss and damage. Again, this is a directly pleaded link between the alleged conduct and what is alleged to be West Homes' damage.

153 West Homes' claim as currently pleaded is one which alleges that it acted in reliance upon misleading or deceptive conduct of Capital Finance which resulted in it suffering loss, further particulars of which are to be provided prior to trial, but which is currently alleged to include the loss of a builder's margin and a project management fee. Whilst there may be a heated contest between the parties at trial as to whether relevant conduct was engaged in, whether it was misleading or deceptive, whether loss was suffered, and as to what part (if any) the alleged conduct played in causation, in my opinion it is not the case that, as currently pleaded, 'the particulars make it clear that West Homes' alleged loss has no connection to the alleged misrepresentations'.[254]

154 It is evident from the above that I do not propose to order that West Homes cease to be a party to the Proceeding, or to strike out paragraphs 25 or 87 of the ASOC insofar as these paragraphs or their particulars plead reliance by West Homes and make claims for loss or damage suffered by it consequent upon alleged misleading or deceptive conduct. Even if I am incorrect in my conclusion that the pleading does just enough to disclose a cause of action against Capital Finance in respect of the alleged misleading or deceptive conduct claim, senior counsel for the plaintiffs has foreshadowed seeking leave to make amendments that, if allowed or consented to, would see the paragraphs in question retain utility. Again, I echo the observations of Hargrave J in Babcock & Brown (No 2) referred to above.[255]

155 With respect to the unconscionable conduct claim, the position is more opaque and it is not as apparent on the face of the pleading how the unconscionable conduct claim is said to arise for West Homes, a point effectively acknowledged by the plaintiffs, although they have stated that they propose to seek to amend the ASOC and plead an unconscionable conduct claim also in respect of West Homes. That being so, and recognising that paragraph 25 has utility in connection with the misleading or deceptive conduct claim and that paragraph 88 has utility for Pentridge Village's unconscionable conduct and is proposed to be utilised in connection with the foreshadowed amendments, I will not strike out any part of paragraph 88 at this point. However, this aspect does not prevent Capital Finance returning to the issue in the context of any amendment application.

156 For the reasons referred to above I propose to strike out the Assignment Paragraphs, being paragraph 1 (in part) and paragraphs 89 to 95 inclusive of the ASOC, but do not propose to strike out the Estoppel Paragraphs or the West Homes' Paragraphs. I will not order that West Homes cease to be a party to the Proceeding.

158 Mr Chiavaroli seeks leave pursuant to s 237 of the Act to intervene in the Proceeding for the purpose of taking responsibility for the Proceeding on behalf of Pentridge Village. As earlier observed, this application was made in the alternative and against the contingency that it would be concluded that the Statutory Claims were not assignable and therefore a substitution order would not be made in respect of them and/or the Assignment Paragraphs would be struck out. Because of the conclusions reached in relation to the Substitution Application and the Strike Out Application it is necessary now to address the Section 237 Application.

159 Mr Chiavaroli submits that ss 236 and 237 of the Act apply to a company in liquidation, that the relevant criteria in s 237 of the Act have been satisfied, and that leave to intervene ought to be granted.

160 Capital Finance opposes the application and submits that:

(a) part 2F.1A of the Act (which includes ss 236 and 237) has no application to a company in liquidation and therefore there is no power to make an order pursuant to s 237; and

(b) in any event, even if it was to be assumed that the section did apply to a company in liquidation, Mr Chiavaroli has failed to satisfy the relevant statutory criteria because he has not established that:

(i) it is probable that Pentridge Village will not take responsibility for the Proceeding itself;

(ii) the application is brought in good faith;

(iii) that the grant of leave is in the best interests of Pentridge Village.

161 For the reasons that follow, leave pursuant to s 237 of the Act will not be granted to Mr Chiavaroli to intervene in the Proceeding on behalf of Pentridge Village.

162 Section 236 of the Act provides as follows:[256]

(1) A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(a) the person is:

(i) a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

(ii) an officer or former officer of the company; and

(b) the person is acting with leave granted under section 237.

(2) Proceedings brought on behalf of a company must be brought in the company's name.

(3) The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.

163 Sections 237(1) and (2) of the Act are in the following terms:

(1) A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

(2) The Court must grant the application if it is satisfied that:

(a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

(b) the applicant is acting in good faith; and

(c) it is in the best interests of the company that the applicant be granted leave; and

(d) if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and

(e) either:

(i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or

(ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.

164 Section 237(3) and (4) of the Act provides as follows:

(3) A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:

(a) the proceedings are:

(i) by the company against a third party; or

(ii) by a third party against the company; and

(b) the company has decided:

(i) not to bring the proceedings; or

(ii) not to defend the proceedings; or

(iii) to discontinue, settle or compromise the proceedings; and

(c) all of the directors who participated in that decision:

(i) acted in good faith for a proper purpose; and

(ii) did not have a material personal interest in the decision; and

(iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and

(iv) rationally believed that the decision was in the best interests of the company.

The director's belief that the decision was in the best interest of the company is a rational one unless the belief is one that no reasonable person in their position would hold.

(4) For the purposes of subsection (3):

(a) a person is a third party if:

(i) the company is a public company and the person is not a related party of the company; or

(ii) the company is not a public company and the person would not be a related party of the company if the company were a public company; and

(b) proceedings by or against the company include any appeal from a decision made in proceedings by or against the company.

(a) assuming ss 236 and 237 of the Act apply to a company in liquidation, whether the requirements of s 237(2)(a), (b), (c) and (e) have been met; and

(b) whether Part 2F.1A (which includes ss 236 and 237 of the Act) applies to a company in liquidation.

166 Before considering the issue of liquidation and the satisfaction or otherwise of the substantive criteria in s 237(2) of the Act, it is instructive to refer to some of the general observations that have been made in other cases regarding aspects of the operation of ss 236 and 237 of the Act. It must also be kept in mind that each case depends on its own facts.[257]

167 The applicant bears the onus of establishing the requirements of s 237(2) of the Act on the balance of probabilities.[258]

168 If the criteria provided for in s 237(2) of the Act are made out there is no discretion and the court is required to grant leave. If any one of the criteria is not made out the court should refuse leave.[259]

169 Before considering each of the criteria it is necessary to consider the claim sought to be brought on behalf of the relevant company and the evidence that is relied on to support it.[260]

170 Whilst a concession can be taken into account when a court is undertaking the exercise required by s 237(2) of the Act, because that section requires the court to be satisfied of each of the criteria a concession does not entirely relieve the court from examination of the matter, although it may reduce the extent of the court's inquiry.[261]

171 Different views have been expressed as to whether an application under s 237 of the Act is interlocutory or final in nature. In McEvoy v Caplan,[262] the New South Wales Court of Appeal concluded that an order refusing the grant of leave under s 237 of the Act was interlocutory and this was referred to with apparent approval by Bathurst CJ and McColl JA in Huang v Wang.[263] In the same case Barrett AJA explored the issue further and concluded that whether an order under s 237 of the Act is final or interlocutory may depend upon the manner in which the application is brought, including whether it is brought by way of application in an existing proceeding.[264]

172 Mr Chiavaroli has standing to bring the application. He is a director of Pentridge Village and therefore the requirements of s 236(1)(a) of the Act are satisfied.

173 Mr Chiavaroli applies to intervene in the Proceeding rather than to bring a proceeding, which is expressly contemplated by s 236(1) of the Act. Because it is an application of this character, s 237(2)(d) of the Act is not engaged and the criteria to be established do not include establishing that there is a 'serious question to be tried'.[265]

Section 237(2)(a) - Probable that Pentridge Village will not itself properly take responsibility for the Proceeding or the steps in it

174 The first criterion to be satisfied by Mr Chiavaroli is that it is probable that Pentridge Village will not itself properly take responsibility for the Proceeding.

175 As observed by Palmer J in Swansson v RA Pratt Properties Pty Ltd (Swansson),[266] in many cases it will be readily apparent whether it is probable that the company will not itself bring a proceeding. If there is not a clear refusal by the company to take specific proceedings after receipt of a properly particularised request to do so, the applicant bears the onus of establishing that actual refusal or its probability is to be inferred. These observations apply equally to the question of whether a company will not itself properly take responsibility for a proceeding.

176 Mr Chiavaroli submits that this criterion has been satisfied and largely relies upon correspondence with the Liquidator referred to in paragraphs 17 to 32 of his July affidavit, including a letter from the Liquidator's solicitors advising that the Liquidator is 'without funds or funding'.[267]

177 Mr Chiavaroli also refers to the observations in Swansson noted above and, by way of example, relies upon the decision of Barrett J in Carpenter v Pioneer Park Pty Ltd (in liq) (Carpenter),[268] in which it is said Barrett J held that evidence that a liquidator did not have sufficient funds to conduct a piece of litigation was sufficient evidence for s 237(2)(a) of the Act to be satisfied.[269]

178 Capital Finance submits that on the evidence before me the court cannot be satisfied that it is probable that Pentridge Village will not properly take responsibility for the Proceeding or steps in the Proceeding. It points out that the Proceeding was issued by Pentridge Village whilst in liquidation on 30 June 2016, and contends that at its highest the evidence before the court is to the effect that the Liquidator will not take responsibility for the Proceeding so long as he considers it to have been assigned.[270] Capital Finance says there is no satisfactory evidence about the Liquidator's position if the purported assignment is held to be invalid and submits that this is clear from the letter dated 17 July 2018 from the Liquidator's solicitor[271] in which it is stated that the Liquidator 'has not turned his mind to any alternative course of action, or cause of action, as the assignment was presented as the appropriate manner in which the proceedings would continue'.

179 Capital Finance further submits that there is no 'clear cut and authoritative refusal' by the Liquidator of the kind referred to in Swansson, that Mr Chiavaroli overstates the effect of the evidence in the submissions, and that the extracts in his affidavit do not reflect the full effect of the correspondence. It also submits that Mr Chiavaroli's submissions put what was said in Carpenter too highly because in that case the liquidator gave evidence that he was without funds and 'importantly' that 'it [was] unlikely that he [would] ever be in a position to cause the company to commence the proposed proceedings'.[272] Capital Finance further submits that in this case the Liquidator does not give evidence in support of the application, did not appear, and that there is no evidence to the effect that he will not resume responsibility for the litigation, including if the assignment is held to be invalid.

180 Given that each party relies upon the terms of the correspondence passing between the Liquidator and Mr Chiavaroli regarding the Section 237 Application, and that the extracts referred to in Mr Chiavaroli's affidavit do not set out the full effect of the correspondence, it is necessary to consider the relevant exchange of correspondence in some detail. The relevant correspondence comprises exhibits to Mr Chiavaroli's July affidavit[273] and that chain of correspondence reveals as follows.

181 By letter dated 29 May 2018 to the Liquidator's solicitor, Kemp Strang, the plaintiffs' and Mr Chiavaroli's solicitors, Howard Bear - Legal Consulting Services (Howard Bear), referred to aspects of the history of the matter and the contentions of Capital Finance that the assignment of the statutory causes of action was invalid. The letter continued:[274]

Whilst I do not accept CFAL's submissions and plea of invalidity in the amended defence in relation to the assignment, the current state of the law on whether the assignment is valid is not fully resolved, and therefore involves risk. Mr Chiavaroli wants to avoid the plaintiffs expending money and energy on arguing a point that has not yet been authoritatively decided. The best interests of Pentridge Village would not be served by doing so. The best interests of Pentridge Village are advanced by putting the assignment issue beyond doubt.

Any issue in respect of the validity of the assignment can be avoided, and the same result will sought to be achieved by the assignment can be achieved by an application under ss 236(1) of the Corporations Act for Mr Chiavaroli to intervene in the proceeding for the purposes of taking responsibility on behalf of Pentridge Village for the proceedings.

In order to intervene in a proceeding by way of derivative action, Mr Chiavaroli needs to demonstrate to the court that 'it is probable that [Pentridge Village] will not itself bring the proceedings': s 237(2)(a).

So, as a preliminary question, can you please confirm in writing that Mr Marsden as liquidator is not able or willing to provide me with instructions and take general carriage of this litigation on behalf of Pentridge Village?

Mr Chiavaroli proposes to pay the costs of the litigation, and to indemnify Pentridge Village for any possible adverse costs order. Mr Chiavaroli also proposes that he and the liquidator agree that any sum successfully obtained as a result of the derivative proceeding be paid as to 75 percent to Pentridge Village and as to 25 percent to Mr Chiavaroli.

This division mirrors the agreement contained in Schedule 1 to the 3 August 2017 deed of assignment. In this way, the derivative proceeding by way of intervention will preserve the key aspects of the assignment and avoid the cost and uncertainty of having the court rule on the validity of the assignment.

Can you please have the liquidator provide me with a list of creditors, both secured and unsecured, and the amounts owed to them so that there is certainty as to how the fruits of any successful judgment or settlement will be distributed?

To enable the plaintiffs to inform the court and CFAL as to the course which they propose to adopt well prior to the hearing on 18 July 2018 I would ask that the liquidator respond to the requests contained in this letter by 13 June 2018.

182 No response was received on behalf of the Liquidator and by letter dated 14 June 2018 Howard Bear wrote again to the Liquidator and stated, among other things, that if no response was received by 5:00pm on 15 June 2018 Mr Bear would 'assume that [the Liquidator] Mr Marsden has no intention of providing me with instructions and taking general carriage of the litigation on behalf of Pentridge Village' and in those circumstances Mr Chiavaroli '... will take immediate steps to issue an application under s.236(1) of the Corporations Act to intervene in the proceeding for the purposes of taking responsibility for the proceeding on behalf of Pentridge Village. Obviously, notice of this application will be given to your client.'

183 On 15 June 2018 the Liquidator's solicitors, Kemp Strang, wrote to Howard Bear referring to the previous correspondence and stated as follows:

We are instructed by Mr Peter Marsden, Liquidator of Pentridge Village Pty Limited (in Liquidation) (Liquidator) that the Liquidator:

1. considers that the cause of action being prosecuted in the proceedings VSC S CI 2016 02546 (Proceedings) has been validly assigned to Mr Chiavaroli;
2. accordingly considers that he is not able to, and in the circumstances is not willing to, provide instructions to prosecute the Proceedings, in place of Mr Chiavaroli, or otherwise;
3. requires that both the Liquidator and the Company be protected as to any adverse or other costs that may be ordered in the Proceedings; and
4. so far as any derivative application under section 236(1) of the Corporations Act to intervene in the Proceedings the Liquidator instructs that:

1. for the purposes of section 237(1)(a) of the Act (and any application), it is probable that the Liquidator will not himself bring the Proceedings; 2. it is both pragmatic and practical that Mr Chiavaroli, as the assignee, have leave if required; and

1. the Liquidator will not object to such leave provided: 1. there is no order for, or exposure as to, costs for either the Company or himself; and 2. Mr Chiavaroli indemnifies the Company and the Liquidator accordingly.

Please keep us informed as to the Proceedings.

All rights remain reserved.[275]

184 By letter dated Monday 18 June 2018 Howard Bear informed Kemp Strang that he was instructed by Mr Chiavaroli that '... he confirms that he will indemnify the Company and the Liquidator in respect of any adverse or other costs that may be ordered in the Proceedings.'

185 On 28 June 2018 Howard Bear made a further request for provision of a list of creditors, secured and unsecured, and the amounts owed to them so that there is certainty as to how the fruits of any successful judgment or settlement will be distributed, and also attached orders made on 26 June 2018 regarding further directions as to the Substitution Application, the Strike out Application and the proposed application under s 237 of the Act.

186 On 29 June 2018 Howard Bear wrote again to Kemp Strang regarding the topic. In that letter it was stated that if the defendant's strike out application was unsuccessful it was anticipated that the plaintiffs' substitution application would be successful, but if '... the Defendant's submissions in relation to the assignment are successful, it will be necessary for the Court to move to consider Mr Chiavaroli's derivative action application.'[276] After stating that Capital Finance's submissions regarding the assignment were not accepted, Howard Bear continued as follows:

To be clear, I reiterate the point I made in my letter to you dated 29 May 2018 that I do not accept the Defendant's submissions in relation to the invalidity of the assignment. However, in circumstances where the liquidator's unwillingness to prosecute the cause of action is required by s 237(2)(a) of the Corporations Act 2001 (Cth) for the derivative action application to succeed, but the derivative action application will only be pressed if the assignment is found to be invalid, clarification of the liquidator's position is required. (Emphasis added)

In your email of 15 June 2018 at 11:15am, you indicated that Mr Peter Marsden 'considers that the cause of action being prosecuted in the proceedings ... has been validly assigned to Mr Chiavaroli', and that 'accordingly considers that he is not able to, and in the circumstances is not willing to, provide instructions to prosecute the Proceedings, in place of Mr Chiavaroli, or otherwise'. (Emphasis in original)

In circumstances where the derivative action application will only be considered after a determination that the assignment is not valid, (emphasis in original) can you please confirm whether Mr Marsden intends to provide us with instructions and to prosecute these proceedings even if his belief about the validity of the assignment is wrong? That is, please confirm that it would remain the liquidator's intention not to take responsibility for the proceedings should the Court determine that the assignment was invalid. (Emphasis added.)

187 A response was requested by 6 July 2018. On 9 July Howard Bear wrote to Kemp Strang again noting that no reply had been received and stated that Mr Chiavaroli intends to rely on the fact that no reply to the letter had been received '... to evidence that the First Plaintiff is unable and/or unwilling to prosecute these proceedings even in circumstances where the assignment is held to be invalid by the Court.' The letter further requested that 'if this is not the liquidator's position, please let me know, noting that the court has set a deadline of 20 July 2018 for the filing of Mr Chiavaroli's derivative action.'

188 Kemp Strang for the Liquidator responded by letter dated 17 July 2018 stating as follows:[277]

We refer to the above matter and correspondence with you and your predecessor lawyers fort [sic] the plaintiffs. With respect, your letters dated 29 June 2018 and 9 July 2018, do not change or affect our instructions clearly conveyed in our email of 15 June 2018.

The Liquidator has assigned the cause of action in all the circumstances. He has not turned his mind to any alternative course of action, or cause of action, as the assignment was presented as the appropriate manner in which the proceedings would continue.

To the extent it may be relevant, the liquidator is otherwise without funds or funding.

In accordance with your client's undertakings, please advise the outcome of the next directions hearing or interlocutory action and keep us informed of developments.

189 On the evidence before me this is the last substantive communication between the Liquidator and Mr Chiavaroli in relation to the Liquidator's position on the granting of leave and the application, and his attitude regarding taking responsibility for the Proceeding if the assignment is not effective.

190 It is also relevant to observe that which Mr Chiavaroli has said regarding his prior involvement in the Proceeding and the funding of it.[278] He deposes that, since prior to the inception of the Proceeding to date, he has provided instructions to the plaintiffs' legal representatives about the facts, matters and circumstances the subject of the Proceeding and 'either personally funded, or made arrangements to fund, the continuation of these proceedings.' He says further that 'at no point in time has [Pentridge Village] or its liquidator funded or arranged funding for the continued prosecution of these proceedings.'

191 Having regard to the above and the current lack of clarity regarding the Liquidator's position if the assignments of the Statutory Claims is found to be ineffective (as they have been), I accept the submission that, on the evidence currently before me, Mr Chiavaroli has not discharged the onus he bears and established that it is probable that Pentridge Village (through its Liquidator) will not properly take responsibility for the Proceeding or the steps in them.[279]

192 Without repeating the terms of the correspondence referred to, a number of matters are evident from the exchange. First, in order to ascertain the current position of the Liquidator it is necessary to consider the correspondence as a whole. Second, the Liquidator's position in his letter of 15 June 2018 and the last piece of correspondence on 17 July 2018 reveal that his position regarding not prosecuting the Proceeding was directly tied to his belief about the assignment. Third, although it was stated in the email of 15 June 2018 that it was probable that the Liquidator will not himself 'bring' the proceedings, this again appeared to be tied to the position of the assignment, and the absence of objection to the granting of leave was made subject to Mr Chiavaroli indemnifying Pentridge Village and the Liquidator, and there being no order for or exposure as to costs for either Pentridge Village or the Liquidator itself.

193 Fourth, Howard Bear's letter of 29 June 2018 reveals that as at that date the Liquidator's position was considered by even Mr Chiavaroli and his solicitors to be unclear. This is reflected by Howard Bear's emphasis upon the Liquidator's position regarding assignment, and a request for confirmation that the Liquidator did not propose to prosecute the Proceeding even if his belief about the validity of the assignment was wrong. The absence of clarity regarding the Liquidator's position is further reflected by Howard Bear's letter of 9 July 2018.

194 Fifth, the Liquidator's letter of 17 July 2018 is important and telling. This is because in response to a direct request for confirmation that the Liquidator will not take responsibility for the Proceeding if the assignment is found to be invalid, Kemp Strang state squarely that the Liquidator 'has not turned his mind to any alternative course of action, or cause of action, as the assignment was presented as the appropriate manner in which the proceedings would continue.' He also asks to be advised of the 'outcome' and to be kept 'informed of developments'.

195 In this regard I refer to the observations of Palmer J in Swansson referred to above and observe that this response is not only far from a clear refusal in response to a particular request but, understandably, is suggestive of the need for the Liquidator to further consider the position in light of relevant circumstances at the time.

196 The Liquidator did not give evidence and was not separately represented. Senior and junior counsel appeared on behalf of the plaintiffs, including Pentridge Village (in liquidation), instructed by Howard Bear, on the Substitution Application and the Strike Out Application, and appeared in the Section 237 Application on behalf of Mr Chiavaroli that was dealt with at the same time. They did not shed any further light on the position.

197 It may also be observed that the Proceeding was commenced by the Liquidator whilst Pentridge Village was already in liquidation and that Mr Chiavaroli's evidence is that he has funded or arranged funding for the Proceeding to date; that is, whilst Pentridge Village has been in liquidation and the Liquidator has presumably been responsible for its prosecution to date. Consequently, although the Liquidator states in his letter of 17 July 2018 that as things stand the Liquidator is otherwise without funds or funding, what is likely to happen or not happen when the Liquidator considers these reasons, 'turns his mind' to the position, communicates further with Mr Chiavaroli and takes appropriate advice, is not able to be determined on the evidence.

198 In these circumstances, I have concluded that on the evidence before me Mr Chiavaroli has not discharged the onus of establishing that it is probable that the Liquidator will not take proper responsibility for the Proceeding.

199 To the extent that it was submitted that Carpenter is authority for the proposition that the court should be satisfied of the relevant probability of not taking responsibility for proceedings where a liquidator has stated that he or she is without funds, in the circumstances of the case before me I do not accept that submission. Each case depends upon its own facts and regard is to be had to the relevant evidence, including that regarding the funding position. It may also be observed that Carpenter was addressing a circumstance involving the bringing of fresh proceedings. It did not involve circumstances where a party was seeking to intervene in circumstances where the Proceeding was commenced on behalf of the company by the liquidator, or where the proceeding had been funded throughout liquidation by the party now seeking to intervene. It also did not involve circumstances of an attempted assignment of the kind considered above or a liquidator expressly stating that he had not turned his mind to the position in response to a specific request for clarification by the applicant.

200 This conclusion means that it is not necessary to consider the remaining criteria in s 237(2) of the Act and Mr Chiavaroli's application must be refused. However, in light of the considered written and oral submissions made on the other relevant criteria, they are addressed below.

Section 237(2)(b) - Applicant acting in good faith

201 Relevant observations that have been made in other cases regarding the good faith requirement in s 237(2)(b) of the Act include those referred to below. It may also be observed that factual circumstances relevant to the satisfaction (or otherwise) of one of the requirements in s 237(2) of the Act may also be relevant to the satisfaction (or otherwise) of the other requirements in s 237(2) of the Act. Overlap between considerations relevant to different criteria is common.

202 There is no elaboration in s 237 of the Act as to what matters the court should take into account when determining whether an applicant is acting in good faith. Two interrelated matters that will be taken into account are whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success, and whether the applicant is seeking to bring the derivative suit for a collateral purpose of a kind that would amount to an abuse of process.[280] The enquiry as to good faith is not limited or confined to these two factors. Further, a collateral purpose or related conduct may still be germane even if the applicant's purpose or conduct would not constitute an abuse of process.[281]

203 In Swansson, Palmer J identified a state of mind which must be found to exist in the applicant, rather than any particular means by which that state of mind is to be proved. While in some cases the presence or absence of a sworn assertion of the relevant state of mind might be important, generally speaking such statements will be of limited weight or utility and the objective facts and circumstances will speak louder than the applicant's words.[282]

204 Where an application is made by a current shareholder who has more than a token shareholding, and the derivative action seeks recovery of property so that the value of the applicant's shares would be increased, it has been said that good faith should be relatively easy to demonstrate.[283] So also where the applicant is a current director or officer.[284]

205 A derivative action sought to be instituted by a current shareholder for the purpose of restoring value to his or her shares may not be an abuse of process even if the applicant is spurred by personal animosity, even malice, against the defendant. It is not the law that only a plaintiff who feels goodwill towards a defendant is entitled to sue. However, an action sought to be instituted by a former shareholder with a history of grievances against the current majority of shareholders or the current board may be easier to characterise as being brought for the purpose of satisfying nothing more than the applicant's private vendetta and therefore reveal an absence of good faith.[285]

206 Where the applicant is a former shareholder or officer with nothing obvious to gain directly by the success of the derivative action the court will scrutinise with care the purpose for which the derivative action is said to be brought.[286] If an applicant for leave seeks by the derivative action to receive a benefit which, in good conscience, he or she should not receive, an application may not be made in good faith even though the company itself stands to benefit if the derivative action is successful.[287]

207 There is no collateral purpose in bringing an application in order to restore full value to a shareholder's shareholding enabling it at some future point in time to realise that value as well as increasing through dividends a higher share of the profits.[288]

Submissions - Section 237(2)(b) - Good faith

208 Mr Chiavaroli submits the evidence establishes that he is acting in good faith and, after referring to relevant authorities[289] draws attention to the following matters: that he is a director; that he has sworn that he holds an honest belief that Pentridge Village has a good cause of action with reasonable prospects of success; that this belief is not a bare assertion but is based on his position as a director of Pentridge Village; his previous position as an alternate director of Pentridge Village; his interest as an indirect shareholder of Pentridge Village and his involvement in the events giving rise to the proceedings; and his involvement in the proceedings to date; that he is an indirect shareholder of Pentridge Village; and that the case discloses a good cause of action with reasonable prospects of success.

209 He further submits that there is no evidence of, nor any suggestion of, any abuse of process or collateral purpose and that what is submitted in relation to the best interests of the company (discussed below) further supports that he is acting in good faith. Mr Chiavaroli submits that his affidavit setting out a summary of the relevant facts and circumstances giving rise to the causes of action for the purpose of the application demonstrates that his involvement was extensive and that he was heavily involved with Pentridge Village's people and events that constitute the facts upon which these proceedings are based. It is said that this evidence further demonstrates that he is acting in good faith. This evidence is referred to at some length in the Background Schedule, to which I refer.

210 Capital Finance takes a different view. With respect to the principles and authorities, Capital Finance submits that:

(a) The observations of Palmer J in Swansson regarding the ease with which an officer can establish good faith is not apt to apply when a company is in liquidation.

(b) A company, including a liquidator, may have sound reasons for not pursuing a cause of action and may have legitimately decided that the best interests of the company would be served by not taking action.[290]

(c) A bold assertion as to an honest belief that a good cause of action exists is unlikely to be adequate and that an applicant may be disbelieved if no reasonable person in the circumstances could hold that belief and this test has been described as akin to deciding that a claim is so lacking in merit or substance as to be not fairly arguable, requiring the court to consider the merits of the proceeding.[291]

(d) An applicant will only be taken to be acting in good faith where as a current or former shareholder or director he or she would suffer a real and substantive injury if the derivative action is not permitted, which injury is dependent upon or connected with the applicant's status as a shareholder or director.[292]

(e) When the applicant has nothing obvious to gain directly from the success of the derivative action the court should carefully scrutinise the purpose for which leave is sought.[293]

211 In the context of the observations made regarding the authorities above, Capital Finance contended that the evidence does not establish that Mr Chiavaroli is acting in good faith and submissions made in this regard were to the following effect.

212 First, that Mr Chiavaroli's evidence amounts to no more than bold and formulaic assertions directed towards satisfying the requirements, and his evidence does not amount to and cannot be elevated to an honest belief that Pentridge Village has a good cause of action with reasonable prospects of success. Adverse reference is also made to Mr Chiavaroli's hearsay evidence based on advice from unnamed legal representatives and it is said that such evidence is inadequate.[294]

213 Second, it is submitted that Mr Chiavaroli's evidence should be regarded with 'some scepticism' and reference is made to: Mr Chiavaroli being a director for just over two years before Pentridge Village was placed into liquidation and an alternate director for some 10 years before; Pentridge Village not acting to pursue the claims against Capital Finance notwithstanding it is alleged that the claims gave rise to losses apparent at least in 2010; Mr Chiavaroli's obligation to act with care and diligence and in good faith and the best interests of Pentridge Village such that if the claims have good prospects of success there ought to be an explanation as to why nothing was done about the claims earlier; and that there is nothing in the evidence to explain the company's inaction in relation to the pre-liquidation period and therefore his evidence in his July affidavit[295] regarding his honest belief regarding reasonable prospects should be given 'little if any weight'.

214 Third, Mr Chiavaroli's evidence shows no appreciation of the risk that Pentridge Village's claims are statute barred. The Proceeding was issued on 30 June 2016 and losses are said to have been suffered by around April 2010. It is therefore submitted that no reasonable person could hold an honest belief as to a good cause of action with reasonable prospects of success in the face of the limitation issues.

215 Fourth, it is not clear from the evidence that Mr Chiavaroli is intent on prosecuting the Proceeding to its conclusion. It is contended that Mr Chiavaroli 'is desperate to get to a mediation, seeking that it occur before discovery'. It is also submitted that he has not secured funding up to mediation but hoped to do so and that this suggests that Mr Chiavaroli does not have confidence in the ultimate prospects of the cause of action.

216 Fifth, it is said that the plaintiffs seek damages in this Proceeding and that they appear to overlap with damages sought in a proceeding alleging the tort of conspiracy against the CFMEU (CFMEU Proceeding)[296] in connection with industrial action relating to the Project. It is contended by Capital Finance that damages claims by Pentridge Village in the CFMEU Proceeding associated with delays and funds not being released to Pentridge Village offend the principle against double recovery and that it is likely that much of the loss claimed in this Proceeding will not be recoverable, making the value or utility of the Proceeding questionable.

217 Sixth, it is submitted that Mr Chiavaroli is not a shareholder of Pentridge Village and that although he deposes that he is a creditor, he does not say whether he is a secured or unsecured creditor or in what amount. Whilst he asserts that the litigation presents the 'only apparent way' for creditors to be paid, he does not state the basis for the belief and ignores possible proceeds from the CFMEU Proceeding in which it is said he has already been substituted as the plaintiff.

218 It is also submitted that the primary and possibly only gain from the litigation to Mr Chiavaroli is not connected to or dependent upon his status as a director, creditor or otherwise, and that he simply stands to make a personal financial gain if permitted to take responsibility for the litigation. This type of gain in that capacity is said not to be what is contemplated by the authorities, with reliance being placed upon the reasons of Tobias JA in Chahwan.[297]

Consideration - Section 237(2)(b) - Good faith

219 On the evidence before me, I accept that Mr Chiavaroli has discharged the onus he bears and established that, as applicant, he is acting in good faith.

220 Mr Chiavaroli and his family have had extensive and prolonged involvement with the Project since its inception. His involvement spans many years and his interest is real. I refer, for example, to paragraphs 311 to 353 and 356 of the Background Schedule. Other relevant matters to be observed from the evidence include the following.

221 Mr Chiavaroli has been involved prior to the inception of the Proceeding to date and provided instructions about the facts, matters and circumstances to the plaintiffs' legal representatives.

222 Since before commencement of the Proceeding Mr Chiavaroli has either personally funded, or made arrangements to fund, the continuation of the Proceeding by the Liquidator and at no point in time has Pentridge Village or the Liquidator had to fund or arrange funding for the continued prosecution of them.

223 Mr Chiavaroli is and has been since 30 July 2012 a director of Pentridge Village and during the period March 2004 to July 2012 he was an alternate director of Pentridge Village.

224 The amount sought by Pentridge Village in the Proceeding is substantial.

225 Mr Chiavaroli deposes that he holds an honest belief that Pentridge Village has a good cause of action and does so based on his position as a director of Pentridge Village, his previous position as an alternate director, his interest as an indirect shareholder of Pentridge Village and his involvement in the events giving rise to the proceedings and involvement in the proceedings to date. He states that he has no collateral purpose and has no motive in intervening other than to try and seek recovery of money from Capital Finance in respect of its conduct the subject of the Proceeding.

226 Mr Chiavaroli further deposes that he is informed by his legal representatives that Pentridge Village's case as pleaded in the ASOC has a reasonable prospect of success and, as a result of this and other matters referred to in his affidavit, it is his honest belief that a good cause of action exists on the part of Pentridge Village against Capital Finance.

227 To the extent that Capital Finance submits that Mr Chiavaroli's statements regarding his belief are no more than bold and formulaic assertions and ought not to be taken into account, I do not accept that submission. Mr Chiavaroli's statements are appropriate to take into account and are to be considered in the context of Mr Chiavaroli's evidence as a whole regarding the background and his involvement, which as the Background Schedule reveals, is extensive. It may also be observed that the ASOC has been settled by three members of counsel, including senior counsel, and signed and certified by solicitors. Mr Chiavaroli's statements of belief are proper to take into account as part of the matrix of facts and circumstances.[298]

228 Even though Mr Chiavaroli does not directly hold shares in Pentridge Village, there is evidence that he has a genuine and substantial interest in the shares of Pentridge Village in the way referred to in the Background Schedule and is evidenced in exhibited ASIC extracts. As sole owner of the shares in Piero One Pty Ltd (Piero One), he has an interest in the 52 per cent of the shares in Pentridge Village that Piero One holds. Similarly, but noting that there is an issue regarding deregistration and reregistration, Tower Developments holds 37 per cent of the shares in Pentridge Village and approximately 61.02 per cent of those shares are held directly or indirectly by Mr Chiavaroli or his family. As a result Mr Chiavaroli deposes that 'thus, Piero One, which is wholly owned by me, and [Tower Developments], which is majority owned by me and members of my family, hold 89 of the 100 shares in Pentridge Village'.

229 Pentridge Village is in liquidation and if material funds are recovered it will likely be to the benefit of any creditors and, if they are paid, and funds remain for distribution, to its shareholders.

230 Although the assignments of the Statutory Claims have been found to be ineffective, the terms of the Assignment Deeds, the commencement of the Proceeding, and the terms of the correspondence referred to above are also consistent with a belief in the existence of a cause of action.

231 It is also to be noted that the evidence of Mr Chiavaroli regarding the factual background is largely unchallenged on this application and that Capital Finance elected not to file any substantive affidavit evidence regarding any underlying factual matters referred to in Mr Chiavaroli's affidavit and the ASOC.[299]

232 There is no material force in the submission attacking the statement by Mr Chiavaroli regarding the legal advice received from, so it was submitted, 'unnamed legal representatives'. In applications such as these there is a balance to be struck and it is unsurprising that Mr Chiavaroli has not laid bare the content of all advice obtained.

233 Capital Finance submitted that the court should approach Mr Chiavaroli's evidence with scepticism. I do not accept that submission. As it stands, it is evidence before me and appropriate to be taken into account and given appropriate weight when considering this application. That is not to doubt that issues of credit and many factual disputes will arise in connection with the evidence of witnesses at trial if the matter proceeds, but that is for another day.

234 I also do not accept the submission that Pentridge Village's delay in bringing the claim, either individually or collectively with the other matters raised in submissions, detracts materially, if at all, from the evidence establishing good faith in connection with the application. The Proceeding was brought by Pentridge Village through its Liquidator after it was placed into liquidation, and it is this proceeding that is being addressed in the application. It is also to be noted that the relevant criterion in s 237(2)(b) of the Act looks to the question of whether the applicant in this application is acting in good faith in seeking to intervene to take over the conduct of the proceeding.

235 It is also to be remembered that, as referred to in the Background Schedule, Pentridge Village's then lawyers, Madgwicks, raised concerns and complaints regarding alleged misleading conduct and estoppel with Capital Finance in its letter dated 28 July 2010, noting that Pentridge Village wished to preserve its relationship with Capital Finance and did not propose to act at that time but that all rights were reserved.

236 Capital Finance's submissions regarding possible limitation issues in the context of good faith also lack persuasive force. In substance they appear to invite the court to reject Mr Chiavaroli's statements regarding his belief on the basis that Capital Finance contends that it has good limitation defences, and to do so notwithstanding the advice referred to in the evidence and the claim having been settled by senior and junior counsel and solicitors. Whilst it is true, as it is in many cases, that the pleadings in this case reveal that limitation issues will fall to be considered, in my opinion that is not a matter proper for, or capable of, detailed consideration or determination on the present application. Should the matter proceed to trial these issues will be determined at that time in light of the relevant evidence.[300]

237 Capital Finance's submission that Mr Chiavaroli is 'desperate to get to mediation', and that on the evidence it is unclear that Mr Chiavaroli intends to prosecute the proceeding to its conclusion, is similarly without persuasive force. Even if it was to be assumed that the evidence permissibly allows an inference of that kind to be drawn, which in my view it does not, it provides no material assistance or support to Capital Finance's contention that Mr Chiavaroli is not acting in good faith. If a person seeking to take over the conduct of litigation on behalf of a company has a keen desire to try and resolve the dispute by mediation, that might be seen more to the credit of the applicant than to his or her detriment. Perhaps more so in circumstances where, as here, Capital Finance itself regards the litigation to be substantial litigation with very high cost involved.[301]

238 To the extent the submission regarding mediation is intended to invite the court to infer that the Proceeding was not genuinely commenced or is a device or a sham, I reject that submission. Having regard to the evidence referred to in the affidavits of Mr Chiavaroli and Mr Bear; the statements by Mr Chiavaroli regarding his belief in the cause of action and the legal advice he has received; the history of the matter as revealed in the evidence referred to in the Background Schedule; and the fact that the Proceeding was commenced by the Liquidator on behalf of Pentridge Village, such an inference is not open on the evidence before me.

239 I also do not accept that it should be inferred that Mr Chiavaroli has no belief or confidence in the claims because the evidence suggests that, to date, external funding has not been obtained.[302] Such an inference is contradicted by the direct evidence of Mr Chiavaroli's belief earlier referred to, and sits in tension with his evidence that, to date, he has funded or arranged funding for all costs and that neither Pentridge Village nor the Liquidator has incurred any expense. This evidence, when considered with the other statements made by Mr Chiavaroli, the background to the Proceeding, and the absence of evidence to the contrary, weighs heavily against, or at least neutralises, this contention. It might also be said that the existence of efforts to obtain funding appears consistent with acting in good faith.

240 The fact that Mr Chiavaroli is involved in the CFMEU Proceeding does not aid in any material way Capital Finance's opposition on the grounds of good faith. The evidence before me does not reveal any attempt to challenge either proceeding on the basis that one or other of them constitute an abuse of process or that they seek to maintain inconsistent allegations. Capital Finance's submissions regarding double recovery appear to indicate a level of consistency with aspects of the allegations regarding alleged loss and damage suffered. This sits comfortably enough with aspects of the evidence referred to in the Background Schedule regarding delays and funding.[303] If the Proceeding proceeds to trial it will remain open for Capital Finance to adduce such evidence as it wishes regarding alleged loss and damage, including any alleged double recovery, and to make such submissions as it wishes to make regarding these matters. On the evidence before me the fact that Mr Chiavaroli is involved in the CFMEU Proceeding does not point to an absence of good faith in bringing an application to intervene in the Proceeding.

241 Whilst I accept that on the evidence the position regarding Pentridge Village's creditors is not clear, somewhat out of date, and incomplete, there is some evidence that suggests that the amounts that remains owing to creditors may be substantial. The correspondence referred to by Mr Chiavaroli also evidences that he has attempted to obtain further information from the Liquidator regarding the creditors more than once but that to date he has not received a meaningful response. This may be for good reason on the part of the Liquidator given the position that he occupies.

242 In paragraph 151 of Mr Chiavaroli's July affidavit he acknowledges the absence of 'more complete or more recent information' and he relies on the documents there identified '... not as an accurate record of precisely who PV's creditors are and how much each is owed, but to demonstrate, for the purposes of this application only, that there are various secured and unsecured creditors of PV ...'.

243 The documents referred to[304] were said to comprise:

(a) a spreadsheet titled PV Creditors as at 10 September 2015 '... which states that "creditors outstanding for [PV] amounts to approx. $2,500,000.00"';

(b) presentation of accounts and statement (Form 524) authenticated by Pentridge Village's receiver and manager filed with ASIC in February 2018 showing secured debt of $15,486,954 at the date of the appointment of the receiver with the amount of $44,882.10 owing at the date of the document and also said to show that as at February 2018 Pentridge Village had $38,514.69 in cash;

(c) an 'Aged Payables' report generated on 24 September 2014 showing aged payables of Pentridge Village in the sum of $1,859,007.63. Mr Chiavaroli deposes that he believes this document is 'inaccurate at least insofar as it omits reference to the debt PV owes to West Homes'; and

(d) a report as to affairs (Form 507) certified by Mr Chiavaroli on 2 October 2014 showing secured creditors 'consisted of the first and second mortgage holder (owed $16.5 million), the third mortgage holder (owed $1.8 million), the fourth mortgage holder (owed $4.3 million) and the fifth mortgage holder (owed $85 million). The holder of the fifth mortgage is stated to be Daimleigh Pty Ltd, a Chiavaroli family company', but the court was informed that the reference in the affidavit was intended to be to 'Daimleigh Capital Pty Ltd' and a company search was tendered.[305]

244 The majority of the material referred to was out of date and a review of the documents exhibited to Mr Chiavaroli's July affidavit revealed some anomalies. For example, the document said to comprise the spreadsheet titled '10 September 2015' and contain the statement regarding $2,500,000 being owing for creditors outstanding appears to be a spreadsheet headed 'Pentridge Village Pty Ltd & Daimleigh Capital P/L' dated 27 August 2014. It also does not appear to contain the statement referred to. In any event, 10 September 2015 is more than three years ago. Exhibit "LAC-63", which was said to be a true copy of the Presentation of Accounts and Statement for PV lodged with ASIC in February 2018 appears to be presentation of accounts and statements documentation in respect of other companies, being Pierora Pty Ltd, Regent Way Pty Ltd, Marnong Pty Ltd. Most of these matters were addressed in Mr Chiavaroli's supplementary affidavit sworn 7 August 2018.

245 Perhaps the most informative, but out of date, document is the Liquidator's 'Presentation of accounts and statement' (Form 524) for Pentridge Village, lodged by the Liquidator with ASIC, that was tendered by Capital Finance during the hearing[306] and records the position as at 19 February 2018. That document records that as at 19 February 2018 the estimated number of priority creditors was 2, secured creditors was 3, and unsecured creditors was 87. It also records the estimated value of creditors as $9,581.05 (priority), $1,827,816.25 (secured) and $15,512,220 (unsecured), and notes that 'No dividend has been paid to the date of this account'. As to the 'Estimated outcome', it records that the Liquidator does not expect that a dividend will be paid to any class of creditor.

246 Notwithstanding the challenges with the evidence, and bearing in mind that Pentridge Village remains in liquidation, on the evidence before me it seems that material amounts likely remain owing to secured and unsecured creditors. If that is so and there is any material recovery as a result of either the determination or earlier resolution of the Proceeding, then it also appears likely that at least some of the creditors of Pentridge Village may stand to benefit.

247 Mr Chiavaroli also states[307] that he and other members of his family are creditors of Pentridge Village. Little objective information is provided regarding the relevant debts other than that which is referred to in paragraph 151 of his July affidavit, where it is stated that a Chiavaroli family company, Daimleigh Capital Pty Ltd,[308] is a fifth mortgage holder and owed $85 million, although it was observed by Capital Finance that this debt does not appear in the Pentridge Village (Form 524),[309] which the plaintiffs suggested was because the Liquidator has not admitted the debt.

248 On the evidence before me it is not possible to determine satisfactorily the extent to which, if any, Pentridge Village is indebted to Mr Chiavaroli, other members of his family, or related entities. However, such evidence as there is reveals that Mr Chiavaroli has at least a possible if not likely further interest in the financial position of Pentridge Village. Further, although Capital Finance attacked Mr Chiavaroli's statement that, except for the Proceeding, there is no apparent way for the creditors of Pentridge Village to be paid, it did not adduce or point to any evidence of alternate sources of funds other than referring to the as yet undetermined CFMEU Proceeding.

249 Capital Finance also submits that Mr Chiavaroli stands to gain from the litigation and that the primary 'and possibly only' gain from it is not connected to or dependent upon his status as a director, creditor or otherwise but that he simply stands to make a personal financial gain if permitted to take responsibility for the litigation. I do not accept that such a characterisation fairly reflects that which is revealed by the evidence, or that the position is as stark or adverse to Mr Chiavaroli as the submission suggested. If material amounts are recovered through the Proceeding and this results in creditors being paid and leaves a surplus for distributions to shareholders then it appears Mr Chiavaroli stands to benefit through his interest in Piero One and, potentially, Tower Developments. That further supports the existence of a genuine shareholder related interest. I also refer to the preceding paragraphs regarding Mr Chiavaroli's claimed interest in Pentridge Village as a creditor.

250 With respect to the asserted personal gain, these submissions directed attention to the suggested 25 per cent of the proceeds that it is said will be sought to be obtained from the 'fruits of the litigation'.[310] As referred to by Mr Chiavaroli, and senior counsel confirmed during the hearing, any ability to obtain such an amount would need to be the subject of an application to the court for appropriate orders. Consequently, this aspect of asserted personal gain is heavily contingent.

251 That being so, and having regard to the other evidence referred to above and in the Background Schedule, any personal gain that might be obtained by Mr Chiavaroli does not in my view, individually or collectively, alter the position that Mr Chiavaroli has established on the evidence before me that he is acting in good faith in bringing the application. I add that what was relevantly said by Tobias JA in Chahwan[311] is not particularly apt in the present circumstances given how different they are, including Mr Chiavaroli's historical involvement and interest, his previous directorships, his current directorship, the liquidation, the proceeding being commenced by the Liquidator, his indirect but real interest in the shares of Pentridge Village, and the arrangements recorded in the Deed of Assignment.

252 In all the circumstances, on the evidence before me I am satisfied Mr Chiavaroli has discharged the onus he bears and established that the application to intervene is brought in good faith.

Section 237(2)(c) - Best interests of the Company that leave be granted

Best interests requirement - General observations

253 Section 237(2)(c) of the Act requires the court to be satisfied that the proposed derivative action is in the best interests of the Company, not that it may be, appears to be, or is likely to be.[312] Instructive observations that have been made regarding the operation of the 'best interests' requirement follow.

254 The phrase 'best interests' directs attention to the company's separate and independent welfare which imports the familiar concept of the interests of the company as a whole.[313] Best interests, at least assuming the company concerned is solvent, will predominantly reflect the interests of shareholders in that capacity and the fact that such shareholders may derive some collateral benefit from the bringing or otherwise of the proceedings will often be of no concern.[314]

255 The section requires the applicant to establish a fact which can only be determined by taking into account the relevant circumstances. This will normally require the applicant to adduce evidence regarding at least the following matters:[315] the character of the company; the business, if any, of the company so that the effects of the proposed litigation on its proper conduct may be appreciated; evidence enabling the court to form a conclusion whether the substance of the redress which the applicant seeks to achieve is available by a means which does not require the company to be brought into litigation against its will; and the ability of the defendant to meet at least a substantial part of any judgment in favour of the company in the proposed action so that the court may ascertain whether the action would be of any practical benefit to the company.

256 Other matters that have been considered in the context of best interests of the company include prospects of success, the likely costs and likely recovery if the proceedings are successful, the likely consequences if the proceedings are not successful, the nature of any indemnity the applicant has offered to the company, the likelihood of the company recovering under the indemnity, the resources the company will need to devote to the proceedings and the resources it has available, and the effect that the proceedings may have on other parts of the company's business.[316]

257 There is no fixed test to determine best interests and there is no special standard of proof or any presumption or disposition against the granting of relief. The court will always have regard to whether the benefits of the proceeding are outweighed by the costs and risks that the company would suffer in bringing them.[317] Whether or not an application under s 237 of the Act is final or interlocutory does not alter the requirement that an applicant satisfy the court on the balance of probabilities that the proceedings are in the best interests of the company.[318]

258 In determining whether granting leave to an applicant is in the best interests of the company the fact that the applicant has a personal interest in the outcome of the action or the applicant has personal animus against other members of the company is not significant or decisive because this is common in the types of disputes that lead to derivative actions.[319]

259 A proceeding to protect the interests of members as members from breaches of duty by the directors is likely to be in the best interests of a company as a whole, although that may not invariably be the position.[320]

260 It may be in the best interests of the company to grant leave for the company to bring proceedings against shareholders where there is a deadlock and the proceeding is a suitable means by which the deadlock can be resolved.[321] Joint venture companies in which no one shareholder has a controlling interest have a real potential to become bogged down in a stalemate where shareholders cannot agree how to conduct the business of a company. A grant of leave may be a suitable means by which to resolve deadlocks of that kind.[322]

261 If ss 236 and 237 of the Act are capable of applying to a company in liquidation,[323] it has been observed that where a company is being wound up the question as to what is in the best interests of the company will, as a general rule, be answered by having regard to what is in the best interests of the creditors.[324] Where there are no creditors the question may then be what is in the best interests of the contributories, being the shareholders. It may often be to their advantage to resolve the issues between them and to have the assets distributed to them.[325]

262 Where the company is a joint venture vehicle and one of the venturers alleges that the other has acted unlawfully causing the company loss, it will usually be appropriate to allow the complaining venturer to bring proceedings in the company's name against the other venturer and its representatives on the board, even though there are no shareholding interests other than those of the litigants and that the effect of success will be indirectly to benefit the complaining venturer proportionately to its shareholding.[326]

Mr Chiavaroli's application and the best interests requirement

Submissions - Section 237(2)(c) - Best interests

263 Mr Chiavaroli submitted that regard should be had to all of the relevant circumstances, and that where a company is in liquidation the best interests requirement focuses attention on the interests of the general body of creditors in the first instance.[327] He submitted that the starting point for the analysis is the interests of the creditors and because there are both secured and unsecured creditors who have not been fully paid they 'clearly stand to benefit from a successful outcome of the proceeding'. It was also submitted that because the costs of the proceeding have been, and will continue to be, borne by Mr Chiavaroli there is no disadvantage caused to the creditors or the Liquidator by an intervention in the proceedings by Mr Chiavaroli. The overlap between considerations was raised, with Mr Chiavaroli also relying on matters in support of his good faith contention.

264 Drawing upon the principles referred to in Swansson and Fiduciary regarding the position between joint venturers in dispute, it was also contended that the same logic applies to the present situation because, despite being a director and with other interests of his family, the indirect holder of over half of the issued shares, Mr Chiavaroli cannot compel Pentridge Village to pursue the proceedings because it is in liquidation.

265 Capital Finance submitted that the issue involves an objective question and that the court must be positively satisfied that the grant of leave to intervene is in the best interests of Pentridge Village. Capital Finance referred to a number of the observations regarding the criteria addressed above. It further submitted that a balance needs to be struck between the prejudice a company will suffer if claims are unsuccessful and there is an adverse costs order, and the advantage that it will gain if the claims are successful. It submitted that the applicant needs to demonstrate that even if the proceeding is unsuccessful a company would be in no worse a financial position and that to overcome the hurdle the applicant ordinarily needs to undertake to indemnify the company in relation to any adverse costs orders, provide security for the costs of the defendant and such sum as may be agreed or ordered by the court, and pay the costs of conducting the proceedings. In this regard reference was made to Woods v Links Golf Tasmania Pty Ltd (No 2).[328] It was further contended that it must be in the best interests of a company that a proceeding be brought or conducted by the particular person who seeks leave (in this case, Mr Chiavaroli). Capital Finance also submitted that not only was it necessary to satisfy the criteria in s 237(2) of the Act, but that it was also necessary for Mr Chiavaroli to rebut the presumption arising under s 237(3) of the Act.

266 It was submitted that Mr Chiavaroli had not discharged his burden of proof under s 237(2)(c) of the Act and established that the intervention was in the best interests of the company, and that he had not rebutted the presumption under s 237(3) of the Act. The matters relied upon were as follows:

(a) The court cannot be satisfied on the evidence that it is in the best interests of Pentridge Village and the evidence falls well short.

(b) The Liquidator is the person best placed to form a view about the best interests of Pentridge Village and the court can infer that any evidence the Liquidator would give on the issue would not assist Mr Chiavaroli. Mr Chiavaroli's belief that the Proceeding is the only apparent way for creditors to be paid is irrelevant.

(c) The fact that Mr Chiavaroli cannot compel Pentridge Village to pursue the litigation because Pentridge Village is in liquidation is of no support; it is simply a reflection of the primary position that it is for the Liquidator to determine what matters should be pursued.

(d) The claim is significant and the costs will be very high, including high costs of reviewing a large volume of discoverable documents. The risks of conducting litigation of this scale cannot be ignored and include the real risk of loss and the very significant adverse costs orders against Pentridge Village.

(e) There is no or no reliable evidence before the court about Pentridge Village's current creditors and the evidence that does exist is out of date, of questionable provenance, inadmissible, and Mr Chiavaroli himself doubts the veracity of the documents. Consequently the court is not in a position to assess whether the grant of leave is in the bests interests of the company and its creditors.[329]

(f) The evidence indicates that Mr Chiavaroli would stand to receive 25 per cent of the fruits of the litigation and in so doing will obtain an advantage for himself in priority to the interests of other creditors.

(g) Having regard to the limited evidence the court cannot be satisfied that there is adequate costs protection for Pentridge Village.[330]

(h) The character of Pentridge Village does not support the grant of leave because the land has been sold, the project has been wound up and there is no ongoing role for Pentridge Village in the joint venture and no ongoing business of Pentridge Village. The cases regarding disputes between joint venturers are inapplicable.

(i) Mr Chiavaroli has not tried to rebut the presumption in s 237(3) of the Act and has not explained what consideration if any Pentridge Village gave to issuing proceedings in the pre-liquidation period. This, so it is submitted, provides a further reason for drawing an adverse inference against Mr Chiavaroli on the issue of best interests.

Consideration - Section 237(2)(c) - Best interests requirement

267 Cognisant of observations such as those referred to above regarding the operation of s 237(2)(c) of the Act, and noting also the matters addressed regarding the criterion in s 237(2)(a), the good faith requirement, and the uncertainty of the Liquidator's position, I have concluded that Mr Chiavaroli has not discharged the onus he bears. On the evidence currently before me it has not been established that granting him leave to intervene for the purpose of taking responsibility for the Proceeding on behalf of Pentridge Village is in the best interests of Pentridge Village. I elaborate below.

268 I do not accept Mr Chiavaroli's submission that the position of a director of a company in liquidation is akin to the position between joint venturers in dispute or circumstances where a corporate structure prevents one party compelling the other to bring or pursue proceedings on behalf of a company. Although each case depends upon its own facts, observations relating to such arrangements do not in my view resonate in the present case, which involves a company in liquidation with a liquidator responsible for Pentridge Village's winding up who has various statutory and other rights and is subject to statutory and other duties and obligations, and also where it is the Liquidator himself that exercised his powers to commence the Proceeding.

269 Of itself it is of little persuasive force that Mr Chiavaroli 'cannot compel' Pentridge Village to pursue the Proceeding because Pentridge Village is in liquidation. This contention appears to assume that a director, or a director with direct or indirect shareholdings, should be entitled to compel a company in liquidation to bring or continue with proceedings if a liquidator has a different view. If that is so then the assumption is ill founded. Further, in the present case the Proceeding was in fact commenced (and continued) through the Liquidator on behalf of Pentridge Village, and it remains on foot.

270 Next, it has not been established on the evidence that the Liquidator will not take proper responsibility for the Proceeding or the steps in it and in this regard I refer to the matters addressed above regarding the criterion in s 237(2)(a). Although the correspondence between Howard Bear and the Liquidator's solicitors Kemp Strang is not as clear as it might be, the Liquidator has expressly stated that he has not yet turned his mind to alternative courses of action, revealing on the evidence both the need for and desirability of the Liquidator to have a further opportunity properly to consider the position. Further, allowing Mr Chiavaroli to intervene would involve the court supplanting the Liquidator as the personification of the company for that purpose in circumstances where, if Part 2F.1A is assumed to apply to a company in liquidation, it has been held in the context of considering the best interests of a company, in the ordinary case the liquidator is the appropriate person in whom authority should be vested to decide whether the company should proceed with an action to recover damages or secure other relief for an injury done to the company.[331]

271 Further, Mr Chiavaroli's evidence is that since before the Proceeding was commenced he has either personally funded or made arrangements to fund the Proceeding and at no point has Pentridge Village or the Liquidator funded or arranged funding for their continued prosecution.[332] He says that his application to intervene is made on the basis that all expenses, including any adverse costs orders will continue to be met by him and not by Pentridge Village. This is also referred to in the letters dated 29 May and 18 June 2018 from Howard Bear.[333] This evidence at least reveals a past willingness to address costs of the litigation whilst the Proceeding remained under the control of the Liquidator, and there is no direct evidence from Mr Chiavaroli to which my attention was drawn that if leave to intervene is not granted to him Mr Chiavaroli will refuse or fail to fund or arrange the funding for the Proceeding.[334]

272 In addition, given the evidence that to date Mr Chiavaroli has funded the Proceeding and, in the context of the assignment was willing to indemnify Pentridge Village, it is at least possible that arrangements might be made with the Liquidator regarding ongoing funding of the Proceeding or steps in it. This may be one of a number of matters which the Liquidator considers when he turns his mind to the position.

273 Although there is some limited information regarding Pentridge Village's creditors, the position is not clear and therefore on the current information it is difficult to make a satisfactorily informed assessment of the extent to which it would be in the interests of creditors, or ultimately the shareholders, to allow Mr Chiavaroli to intervene. Although it may be accepted that any material funds received would likely assist at least some creditors in circumstances where there is evidence that the Liquidator is currently without funds, and noting the absence of evidence from the Liquidator the evidence before the court does not allow for a sufficiently considered or qualitative assessment to be made regarding their interests.

274 Further, the Proceeding involves factual and legal complexity and, given its scope and scale as revealed by the evidence before me and the pleadings to date, it will be expensive and time consuming - a matter which appeared to be common ground. In this context, it is unsurprising that the Liquidator has shown through the correspondence a sensitivity to trying to ensure that no costs orders can be made against Pentridge Village and that it and he is protected both as to expenses and future costs orders.[335] For a liquidator such caution is usually well placed and the extent to which financial risk to Pentridge Village or the Liquidator has been removed or materially mitigated is appropriate to have regard to.

275 On this topic the evidence before the court gives limited or little substantive insight and there are many matters about which the court is left to speculate. This includes costs to date; likely costs going forward; existing costs orders; counsel and solicitor's costs; other costs and expenses; the prospect of securing funding and what stands behind any offer of indemnity. There is little evidence before the court regarding Mr Chiavaroli's financial position or funding sources so as to allow the court properly to consider and assess the extent to which an offer by Mr Chiavaroli to fund or arrange funding, or indemnify Pentridge Village or the Liquidator, impacts the financial or other risks that Pentridge Village might face in the future in connection with the Proceeding.

276 This point is reinforced by the Cussen Email dated 15 June 2018 from the Liquidator's solicitor, Mr Cussen, to Mr Chiavaroli and the plaintiffs' solicitor, Mr Bear, that was produced in answer to a Notice to Produce served on the plaintiffs by Capital Finance. This email was in the following terms:[336]

Dear Sir

We refer to your email and letter yesterday.

Given the terms of the Deed of Assignment, we request that:

1. you confirm that Mr Chiavaroli is seeking litigation funding; and
2. you advise when it is expected that litigation funding will be secured.

It concerns our liquidator client that despite:

1. Apparent offers of funding;
2. Advances by potential funders of moneys to engage counsel opinions;
3. the Assignment, and
4. the passing of substantial time, the proceedings having been filed in June 2016,

we have not been informed that satisfactory funding has been obtained.

Your client well knows, and should ensure, that:

• funding is required, and must procure that satisfactory litigation funding is obtained forthwith, including most relevantly, adverse costs protection for the Company and the Liquidator; and
• he indemnifies the Liquidator for any adverse costs or damages.

277 In this context there is some force in Capital Finance's submission that the terms of the email are suggestive of the Liquidator having genuine and appropriate concern about financial risk to Pentridge Village and himself, and genuine concern about an indemnity from Mr Chiavaroli not being sufficient. In this regard, and notwithstanding the plaintiffs' contrary submission, the observations made in cases such as Woods v Links Golf Tasmania Pty Ltd (No 2)[337] and Re Fishinthenet Investment Pty Ltd[338] resonate.

278 Despite senior counsel for the plaintiffs' able submissions, I do not accept that the court can be appropriately satisfied about the relevant financial risk by reason of the fact that Mr Chiavaroli has deposed to having paid costs in the past and proposes to pay costs in the future. Apart from the correspondence recording or addressing Mr Chiavaroli's promise to pay expenses and indemnify Pentridge Village, there was no substantive evidence enabling an informed view to be reached regarding the value or worth of any promise or agreement. It may also be noted that, as pointed out in the Cussen Email, the Assignment Deeds also contemplated obtaining sources of external funding, but there was no evidence regarding the existence or likelihood of such funding emerging, or if so, when.

279 Finally, whilst it is acknowledged that Mr Chiavaroli has an interest in the shares of Pentridge Village through Piero One and, less directly, Tower Developments if it is reregistered, when this is weighed in the balance it does not operate to alter the conclusion that, having regard to the evidence, Mr Chiavaroli has not established that it is in the best interests of Pentridge Village to grant him leave to intervene to take proper responsibility for the Proceeding in place of the Liquidator.

280 To this it may be added that whilst reference has been made above to authorities where applications for leave have been made in respect of companies in liquidation and one factor that has been considered to carry weight is whether it is appropriate to permit another to supplant the liquidator as the personification for that purpose, even if this consideration was to be put to one side in the present case, having regard to the other considerations mentioned above the conclusion I have reached would remain the same.[339]

281 That being so, it is not necessary to address all of Capital Finance's submissions, although it will be apparent that the substance of most of them have been canvassed in the above observations. However, I make the following brief observations about two matters.

282 I do not accept in circumstances such as the present that there was an onus upon Mr Chiavaroli to rebut the presumption in s 237(3) of the Act. In my opinion s 237(3) was not relevantly engaged because the Proceeding was commenced some time ago, and it was brought by the Liquidator. It does not appear to me to be the case that s 237(3) of the Act requires a survey of the different and speculative historical points in time where a proceeding might have been brought but was not. No authorities were drawn to the court's attention in this regard and Capital Finance did not point to any evidence or make any substantive submissions as to how it is contended that the criteria for engaging the 'rebuttable presumption' have been established or engaged in the present case. Further, and noting the terms of s 237(3)(c) regarding 'directors', the section does not in my view engage in the present circumstances or context, observing also that the Proceeding was commenced by Pentridge Village through the Liquidator and not its directors.[340]

283 In my view Mr Chiavaroli's disclosed intention later to apply to the court for an order that 25 per cent of any sum successfully obtained from the Proceeding is paid to him if leave to intervene was to be granted, is not in the present circumstances to be regarded as a factor weighing materially against the grant of leave to intervene being in the interests of Pentridge Village. The matter was properly disclosed and any later application would occur after the determination (or earlier resolution) of the Proceeding and would be the subject of submissions and evidence in the light of the then prevailing circumstances. It would be a matter to be determined by the court at that time in the appropriate way and in respect of which other submissions may be sought to be made on behalf of Pentridge Village or by other interested persons.

284 As I have said, Mr Chiavaroli has not satisfied s 237(2)(c) of the Act because he has not established on the evidence currently before me that granting him leave to intervene is in the best interests of Pentridge Village.

Section 237(2)(e) - 14-Day notice requirement

285 Section 237(2)(e) of the Act requires an applicant to satisfy the court that either at least 14 days' notice was given (before making the application) of the intention to apply for leave and of the reasons for applying, or that it is appropriate to grant leave even though notice of the kind referred to was not given.

286 Mr Chiavaroli submits that his correspondence with the Liquidator referred to earlier in these reasons satisfies this requirement. He further submits that if the court concluded that this requirement had not been complied with, s 237(2)(e)(ii) of the Act allows the court to grant the application in any event if it considers it to be appropriate. Capital Finance did not contest this position and accepted that notice had been given.[341]

287 A review of the correspondence between Howard Bear and the Liquidator's solicitors, Kemp Strang referred to above, reveals that s 237(2)(e)(i) of the Act is satisfied because at least 14 days before making the application Mr Chiavaroli gave written notice to Pentridge Village through the Liquidator of the intention to apply for leave, and of the reasons for applying. In any event, if there had been any technical non-compliance with the provision, having regard to the content of the correspondence, it would have been appropriate to grant leave even though the requirement in sub-paragraph (i) was not satisfied.

Conclusion - Section 237 criteria

288 On the evidence before me Mr Chiavaroli has not satisfied the criteria in s 237(2)(a) or s 237(2)(c) of the Act because he has failed to establish that it is probable that Pentridge Village (through its liquidator) will not take proper responsibility for the Proceeding, or that the grant of leave is in the best interests of the Company. Consequently, Mr Chiavaroli would not be granted leave to intervene in the Proceeding pursuant to s 237(2) of the Act even if Part 2F.1A of the Act applies to a company in liquidation.

289 The above consideration has proceeded on the assumption that Part 2F.1A applies to a company in liquidation and having regard to the conclusion reached, it is not strictly necessary to consider Capital Finance's submission that Part 2F.1A does not apply to a company in liquidation. However, given that the matter was fully and ably argued, I address this further issue below.

Part 2F.1A (including ss 236 and 237) of the Act and companies in liquidation

290 In his written submissions Mr Chiavaroli submitted that the fact that Pentridge Village '... is a company in liquidation is of no moment in this application. ... [it] does not affect the ability of Mr Chiavaroli, as an appropriate applicant, to make an application under Part 2F.1A.'[342] Carpenter[343] was relied on as authority for that proposition.

291 Capital Finance in its written submissions contended that Mr Chiavaroli's submissions 'gloss over' the liquidation issue by relying entirely upon the decision of Barrett J in Carpenter and that, having regard to the authorities, it is clear that Part 2F.1A does not apply to a company in liquidation.

292 For the reasons that follow, I have concluded that the substance of Capital Finance's position is to be accepted and that Part 2F.1A of the Act does not apply to a company in liquidation. Consequently, because Pentridge Village is in liquidation there is no power under ss 236 and 237 of the Act for the court to grant leave to Mr Chiavaroli to intervene in the Proceeding on behalf of Pentridge Village even if he was otherwise able to satisfy the relevant statutory criteria referred to in s 237(2) of the Act.

293 Mr Chiavaroli observed that the learned trial judge in Re Fresh Start Australia Pty Ltd; Scuteri v Lofthouse (Re Fresh Start),[344] agreed with Barrett J in Carpenter v Pioneer Park Pty Ltd (in liq),[345] that Part 2F.1A applied to a company in liquidation and that the issue should be regarded as settled.[346]

294 It was further submitted that the Victorian Court of Appeal in S & D International Pty Ltd (in liq), Re; Malhotra v Tiwari & Ors (Malhotra)[347] adopted and approved the decision and reasoning in Re Fresh Start[348] and that I was bound to follow this decision notwithstanding that later authorities decided otherwise, including the considered decision by the New South Wales Court of Appeal in Chahwan v Euphoric Pty Ltd (Chahwan).[349]

295 Capital Finance took a different position and submitted that:

(a) Prior to the decision of the New South Wales Court of Appeal in Chahwan,[350] there were conflicting first instance decisions as to whether ss 236 and 237 of the Act (as part of Part 2F.1A) applied to a company in liquidation, including the decision in Re Fresh Start.[351]

(b) In Promaco Conventions Pty Ltd v Dedline Printing Pty Ltd (Promaco Conventions),[352] Siopis J undertook a considered review of the position, concluding that the preferable view was that Part 2F.1A did not apply to a company in liquidation. However, in that case, and applying the principle in Australian Securities and Investments Commission v Marlborough Gold Mines Limited, Siopis J considered that he did not have the high degree of assurance necessary to conclude that the considerable number of other single judges who had come to a different view were 'plainly wrong'.[353]

(c) The New South Wales Court of Appeal in Chahwan addressed the issue in a detailed and considered way, drawing also upon the analysis of Siopis J in Promaco, and concluded that Part 2F.1A of the Act does not apply to a company in liquidation.[354]

(d) Chahwan[355] has been applied or referred to with approval or apparent approval in numerous first instance and appeal decisions since, including Oates v Consolidated Capital Services Ltd;[356] Pearl Coast Divers Pty Ltd v Cossack Pearls Pty Ltd;[357] Denis Cassegrain v Gerard Cassegrain & Co Pty Ltd;[358] Smart Company Pty Ltd (in liq) v Clipsal Australia Pty Ltd;[359] In the matters of Beechworth Land Estates Pty Ltd (admin apt) & Griffith Estates Pty Ltd (admin apt);[360] and Viscariello v Macks.[361]

(e) In both Pearl Coast Divers[362] and Smart Company,[363] Gilmour J and Lander J (respectively) observed that Promaco Conventions (in which Siopis J had felt unable to conclude that the contrary view was 'plainly wrong') preceded the Court of Appeal's decision in Chahwan.[364] In reliance on Australian Securities and Investments Commission v Marlborough Gold Mines both judges followed Chahwan, expressing the view that the decision was 'highly persuasive ... and correct' and 'right'.[365]

(f) The issue was not considered or addressed by the Victorian Court of Appeal in Malhotra[366] and such reference as there was to Re Fresh Start[367] in that decision was neither to the point nor of binding effect on the issue in question.

(g) Because the issue involves the interpretation of Commonwealth legislation, the observations of the High Court in Australian Securities and Investments Commission v Marlborough Gold Mine Ltd[368] are apposite and therefore intermediate appellate courts 'and all the more a single judge' should not depart from an interpretation placed on such legislation by another Australian intermediate court unless convinced that that interpretation is plainly wrong.

(h) Far from being plainly wrong, the interpretation placed on the legislation by the Court of Appeal in Chahwan[369] is clearly correct for the reasons it gave and should be followed.

296 Capital Finance also made reference to Iliopoulos v BM2008 Pty Ltd (in liq) ACN 005 762 685,[370] in which the applicant for special leave sought to have the High Court grant special leave so as to determine an asserted 'conflict' between the decisions in Chahwan[371] and Malhotra. It was submitted that in refusing special leave, Crennan J observed that Chahwan was a 'decision in which Justice Tobias comprehensively analysed the legislative scheme, looked at secondary materials, looked at all previous first instance decisions.'[372] Capital Finance also relied on observations of Crennan J to the effect that, in Chahwan, Tobias JA dealt with what had been said in Re Fresh Start,[373] and that her Honour pointed out that Tobias JA had given quite detailed reasons for his conclusions about the observations in Re Fresh Start.

Consideration - Part 2F.1A of the Act and companies in liquidation

297 In Chahwan,[374] Tobias JA observed that the question of whether Part 2F.1A applies to a company in liquidation had been the subject of 'conflicting authorities' and that 'the issue is one of general importance and should be resolved by this court'.[375] In detailed and considered reasons his Honour explored the issue in depth, including the reasoning in the conflicting first instance decisions and the detailed competing submissions of the parties. Tobias JA then concluded that Part 2F.1A has no application to a company in liquidation, whether that be a voluntary liquidation (shareholders or creditors) or a court-ordered liquidation and that, accordingly, the single instance judgments that hold to the contrary should not be followed.

298 In my respectful opinion, for the reasons given by Tobias JA, the conclusion reached by the New South Wales Court of Appeal is correct and, unless I am bound to decide otherwise, should be followed. Indeed, even if I had been of a different view to that expressed by Tobias JA, it could not be said that the conclusion reached in Chahwan[376] is 'plainly wrong' and therefore unless I am otherwise bound it should be followed in any event.

299 Having reviewed and considered the decisions in Re Fresh Start;[377] Re S & D International Pty Limited (in liq); Malhotra v Tiwari,[378] and the appeal from that decision in Malhotra v Tiwari,[379] I have concluded that, contrary to the submissions of the plaintiffs, the decision by the Court of Appeal in Malhotra does not compel me to decide the issue in a manner different to the New South Wales Court of Appeal in Chahwan.

300 The decision before the trial judge in Malhotra involved 'primarily'[380] an application by Dinesh Malhotra for an order that the liquidation of S & D International Pty Limited (S&D) be terminated. A review of the trial judge's reasons reveals that the plaintiff's application for leave to commence a derivative action against S&D (in liquidation) was one of about 23 various forms of relief sought by the plaintiff. The reasons expose that this application for leave to commence a proceeding was far from central to the issues determined before Mandie J, a point well reinforced by the fact that the topic was addressed in only one short paragraph of the 284 paragraphs of Mandie J's reasons for decision.[381] That paragraph reads as follows:

As to para I of the originating process, leave to the plaintiff to commence a derivative proceeding against the directors of the Company is refused. There is no good reason why this matter should not be left to the liquidators at this stage. There are clearly a considerable number of potential claims against the directors that need to be evaluated, many of which the liquidators have already assessed as of some validity and strength.

301 It is apparent that the trial judge was addressing crisply one of the many forms of alternative or cumulative relief sought and that the question being addressed was whether leave should be given to commence a proceeding. There is no suggestion in any aspect of the reasons for decision that the question of whether Part 2F.1A applies to a company in liquidation was raised, addressed or considered by the parties or the court. The reasons show that this matter was not relevantly in issue.

302 The issues considered and addressed on appeal were similarly focused on other matters, although it is evident that the grounds of appeal include grounds that '... challenge the correctness of his Honour's decision to refuse [the appellant] leave to bring derivative proceedings against the respondents ...'.[382] This topic was addressed 'for completeness'[383] and occupied only the final four paragraphs of the Court of Appeal's 78 paragraph judgment. Those paragraphs read as follows:

1. In his submission to us the appellant did not put forward any argument in support of the grounds of appeal (grounds 6, 7 and 12) that challenge the correctness of his Honour's decision to refuse him leave to bring derivative proceedings against the respondents. For completeness, however, in light of our conclusion that his Honour's decision is not vitiated by any of the errors contended for by the appellant and that it would be appropriate that new liquidators be appointed in place of the second respondents, we consider that there is no basis for disturbing his Honour's refusal to grant leave to the appellant to commence the proposed proceedings that resulted in the matter being left to the liquidators. As his Honour correctly observed, there are a considerable number of potential claims against the first respondents at least that need to be evaluated and many of them have already been assessed by the present liquidators as having some validity or strength. We consider that there is no reason to think that the new liquidators will not adopt a like attitude.
2. We apprehend that the appellant's primary reason for seeking such relief in the first place was his concern that the second respondents would not bring appropriate proceedings, given the quality of the administration of the company as was alleged by him. On an objective basis, however, we think that such concern can no longer be present given our decision as to his Honour's findings relating to the second respondent's administration of the company and, importantly, the impending appointment of new liquidators.
3. In any event, ordinarily, it is inappropriate to allow derivative proceedings to be brought when a company is in liquidation because it would require the court to permit another to supplant the liquidator as the personification of the company for that purpose.9 And as Gummow J said in _Scarel Pty Ltd v City Loan & Credit Pty Ltd_10:

"The ordinary rule is that the liquidator, in the ordinary case, is the appropriate person in whom is vested the authority to decide whether the company should take or continue action to recover damages or secure other relief for an injury done to the company. In my view, this follows from the operation of the provisions of the Code to which I have referred. ... [T]he general proposition is that with the liquidation, both the directors and shareholders in general meeting cease to have authority to institute or continue litigation by the company".

1. We are not satisfied that it is probable that the liquidators will not bring such proceedings against the relevant respondents as may be warranted, assuming sufficient funds are available to adopt that course. Overall, we consider that it is in the best interests of the company that, as his Honour concluded, the matter be left with the liquidators. In the circumstances, we would not uphold grounds 6, 7 and 12.

__________________________

1. See, for example, Freshstart Australia Pty Ltd v Lofthouse [2006] VSC 317 at [15], per Whelan J.
2. (1998) 17 FCR 344 at 350.

303 Observations that may be made regarding the above include the following:

(a) The issue now under consideration was not raised, considered or addressed in the decision at first instance in Malhotra.[384]

(b) The basis of the decision for refusing to grant the plaintiff leave to commence a derivative action was, in substance, that there was '... no good reason why this matter should not be left to the liquidators at this stage ...'.[385]

(c) The appeal grounds were in respect of that refusal, not the issue now under consideration, and there is no suggestion in the reasons of the Court of Appeal that the issue was the subject of any notice of contention, discussion, argument or consideration.

(d) As observed by the Court of Appeal, the appellant in Malhotra '... did not put forward any argument in support of the grounds of appeal (grounds 6, 7 and 12) that challenge the correctness of his Honour's decision to refuse him leave to bring derivative proceedings against the respondents ...'[386] and the Court of Appeal concluded that the trial judge's decision to refuse the grant of leave should not be disturbed.

(e) It was only in this context that the Court of Appeal made brief additional observations and, after referring to a passage from Gummow J's reasons in Scarel Pty Ltd v City Loan & Credit Corp Pty Ltd (No 2)[387] and concluding that overall it was considered to be 'in the best interests of the company that, as his Honour concluded, the matter be left with the liquidators ...' the court held that the appeal grounds would not be upheld.

(f) The only reference to the decision in Re Fresh Start[388] is in footnote 9, where reference is made to paragraph 15 of that decision in the context of Scarel[389] and considering the statutory criterion of the best interests of the company and whether a court should '... permit another to supplant the liquidator as the personification of the company ...' for the purpose of bringing a proceeding.[390]

304 It is clear that the issue now under consideration was not considered, addressed or determined by the Court of Appeal in Malhotra.[391] Consequently, I do not accept the plaintiffs' submission that this decision compels me to decide the issue differently to the manner in which it was decided by the New South Wales Court of Appeal in Chahwan[392] and the numerous decisions that have followed Chahwan. I add that even if it was to be concluded that because of the way the case below or on appeal was conducted by the parties it was assumed that Part 2F.1A applied to a company in liquidation, that would not alter my conclusion. This is because of the operation of the principles regarding assumptions made in court decisions, discussed in cases such as Markisic v Commonwealth of Australia,[393] Coleman v Power,[394] CSR Limited v Eddy.[395]

305 I make two further observations. First, the observations of Crennan J in the special leave application are of no precedential value given that they relate to an application for special leave to appeal to the High Court, noting also that they were comments made during the course of exchanges with counsel during the hearing of the application.

306 Second,[396] the brief observation made in Perth Freight Lines Pty Ltd v BM2008 Pty Ltd (in liquidation)[397] on the topic does not alter the position. That case was an appeal from the decision of Davies J in VFS Group Pty Ltd v BM2008 Pty Ltd (No 2)[398] in connection with applications to set aside statutory demands in which one party asserted that there was a 'conflict' between the decision in Malhotra and Chahwan and sought to rely upon this asserted conflict in a context associated with a statutory demand, the detail of which need not be canvassed for present purposes. On appeal, a number of matters fell away and it was noted that it was not necessary to discuss any difference between Chahwan and Malhotra. Again, the matter before me was not addressed, considered or determined. In any event, had the matter been in issue and necessary to explore on appeal it would have revealed only that which I have discussed above regarding what was and was not considered and determined in Malhotra.

307 Having regard to the above, I have concluded that the New South Wales Court of Appeal's conclusion in Chahwan should be followed and that Part 2F.1A of the Act does not apply to Pentridge Village because it is a company in liquidation.

308 The plaintiffs' application to be substituted as the first plaintiff in place of Pentridge Village is refused. Paragraphs 1 (in part) and 89 to 95 of the ASOC will be struck out and Capital Finance's strike out application will be otherwise dismissed. Mr Chiavaroli's application for leave to intervene in the Proceeding to take responsibility for it on behalf of Pentridge Village is refused.

309 It is proposed to make orders to the following effect:

1. The plaintiffs' application by summons filed 10 May 2018 seeking an order pursuant to r 9.09(2) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) that Mr Chiavaroli be substituted as the first plaintiff is dismissed.
2. Paragraph 1 (in so far as it refers to Mr Chiavaroli being the first plaintiff) and paragraphs 89 to 95 of the Amended Statement of Claim dated 27 October 2017 be struck out and the defendant's application by amended summons filed 6 September 2018 is otherwise dismissed.
3. Mr Chiavaroli's application by summons filed 23 July 2018 for leave to intervene in this proceeding on behalf of Pentridge Village pursuant to s 237 of the Corporations Act 2001 (Cth) is dismissed.

310 I will hear the parties on the question of costs.

The affidavit and other evidence includes evidence to the following effect.

311 Mr Chiavaroli and members of his family are 'indirect shareholders' in Pentridge Village through various corporate entities resulting in Mr Chiavaroli and other family members holding, indirectly, 89 of the 100 shares in Pentridge Village. Brooklyn Timber Traders Pty Ltd holds the remaining shares in Pentridge Village, and neither Mr Chiavaroli nor anyone in his family holds shares in Brooklyn Timber Traders Pty Ltd.

312 Fifty-two shares in Pentridge Village are owned by Piero One, and Mr Chiavaroli holds the only share on issue in Piero One. Tower and Tower Developments Pty Ltd (Tower Developments) holds 37 shares in Pentridge Village and through Mr Chiavaroli or members of his family the Chiavaroli family interests hold approximately 61.02 per cent of the shares in Tower Developments. Tower Developments was deregistered on 9 October 2016 but is in the process of being re-registered and it is expected that once re-registration of Tower Developments is complete the shareholdings will be revested.

313 Since May 2002, Pentridge Village has been the custodian and manager of the joint venture known as the Pentridge joint venture. The business of the joint venture was to purchase, develop, manage, lease and sell the land at 13 Urquhart Street, Coburg, which was the former Coburg prison complex (Land). Pentridge Village was until about April 2015 the registered owner of the Land.

314 From 15 March 2004 until 30 July 2012 Mr Chiavaroli was an alternate director of Pentridge Village and thereafter a director. His father, Peter Chiavaroli, was a director and company secretary of Pentridge Village from 16 April 1999 until 18 April 2016.

315 During the period 14 October 2003 to 3 April 2008 Mr Chiavaroli was, and from 18 April 2016 to date he was and remains, a director of West Homes. From about 2001 onwards West Homes worked exclusively on the Project, but prior to this time West Homes had multiple display homes across Victoria and during the period 2005 until early 2008 Mr Chiavaroli divided his time between a sales role for Pentridge Village and a construction role for West Homes. In early to mid-2008 he began to focus exclusively on his construction role as a result of the multi-stage development strategy being developed in 2007, and that throughout 2007 when the sales phase of the multi-stage strategy was being pursued he focused on selling apartments and townhouses, with the focus turning to construction occurring in mid-2008 of those apartments and townhouses.

316 Mr Chiavaroli's role for West Homes included project and building related activities and liaising with Mr Mallon regarding delayed payments, progress claims and variations in the loan.

317 On 4 August 2005 Pentridge Village entered into a facility agreement with Capital Finance (2005 Facility Agreement) which was varied from time to time by letters passing between Capital Finance and Pentridge Village.

318 From 4 August 2005 until late February 2010 Pentridge Village's primary point of contact at Capital Finance was Mr John Mallon who held Capital Finance's power of attorney and who was the senior manager, property finance, for Victoria, and subsequently an associate director.

319 Prior to 4 August 2005 Mr Mallon was employed by Suncorp Bank which had provided Pentridge Village with a credit facility for the financing of the Project. Mr Mallon was Pentridge Village's primary contact at Suncorp Bank in relation to financing of the Project during that time.

320 During the period between August 2005 and February 2010 Mr Mallon regularly visited Mr Chiavaroli, his father Peter, and his brother Damian in relation to matters regarding the finance of the Project. Peter Chiavaroli often said that he considered Mr Mallon to be Pentridge Village's financial adviser. Mr Chiavaroli also considered Mr Mallon to be Pentridge Village's financial adviser because of the role he assumed in advising Pentridge Village in relation to the financing of the Project, his involvement in the negotiation and management of the loan funds advanced to Pentridge Village, and his review and approval of cash flow spreadsheets produced by Pentridge Village in respect of the Project. Mr Mallon regularly referred to himself as Peter Chiavaroli's and Pentridge Village's financial adviser.

321 In about July 2005 Mr Mallon moved from Suncorp Bank to take up his position at Capital Finance.

322 Prior to 2008 Pentridge Village's strategy for the Project was to develop successive individual stages and utilise profits from each completed stage to assist in paying down the debt owed to Suncorp Bank (and, later, Capital Finance), with the net profits from the sale and settlement of apartments and townhouses also assisting ongoing cash flow for the Project.

323 During the period 2001 until about December 2007 Pentridge Village developed, completed, sold and settled 100 per cent of the apartments and townhouses built on the Land utilising the successive stage strategy. By the end of 2007, 18 stages of the development had been successfully completed, with overall gross revenue of approximately $142 million.

324 As a result of conversations between Mr Mallon, Mr Chiavaroli and his father during late 2007, Pentridge Village altered its strategy of developing successive stages and began developing multiple stages at the same time. Mr Mallon had said that Pentridge Village ought to develop multiple stages concurrently rather than in succession and that it should do so immediately as it would benefit Pentridge Village financially as a result of the buoyant property market and historically low interest rates for homebuyers. Mr Mallon said that developing in multiple stages would lead to an increased return on the investment for Pentridge Village.

325 Mr Mallon said that Capital Finance would provide Pentridge Village with funding to ensure the implementation and completion of the multiple stage development strategy. On 15 January 2008 Capital Finance sent a letter to Pentridge Village offering a loan facility varying the 2005 Facility Agreement which had as its stated purpose 'development of multi stage residential and commercial master planned project comprising ongoing development of super lots as medium density dwellings and commercial space'. That letter offered a facility amount of $167,364,229 with peak debt not exceeding $85 million. The letter records the date of acceptance as 21 January 2008 and is signed by directors of Pentridge Village, including Mr Chiavaroli.

326 Following acceptance of the offer from Capital Finance to provide finance to develop multiple stages of the Project, during 2008 Pentridge Village began to develop and pre-sell 100 per cent of the apartments and townhouses for each of the stages to be developed concurrently. The gross realisation of the pre-sales of these apartments and townhouses was approximately $173 million.

327 Shortly before changing the strategy, Capital Finance, through Mr Mallon, was provided with a copy of the construction contract with West Homes and a sample apartment and townhouse sale contract, which Mr Mallon had indicated he required for the purpose of completing due diligence on the Project. West Homes was the builder engaged to oversee construction and a project manager to oversee the whole of the Project.

328 The apartment and townhouse sale contracts included a term to the effect that if the purchase was not completed and settled within three years of the date of the contract the purchaser was not obliged to settle the purchase of the apartment and was entitled to a refund of his or her deposit. Neither Mr Mallon nor anyone else from Capital Finance requested or suggested any amendments be made to these contracts.

329 During the period June 2008 and April 2012 there were various occasions when Capital Finance did not make payment on approved progress claims which led to the builder, West Homes, not being paid and, in turn, contractors not being paid. This resulted in regular stoppages and delays to the Project throughout this period. Pentridge Village's concerns regarding Capital Finance's approach to payment and funding was the subject of dispute and correspondence with Capital Finance at times throughout this period.

330 The 'Repayment Date' for the Capital Finance credit facility was 30 June 2010, but at that time the progress with the Project was less advanced than had been planned as a result of, among other things, stoppages and delays to the construction work. In March 2009 it became obvious to Mr Chiavaroli that Pentridge Village would require a rollover or renewal of the Capital Finance credit facility to extend its terms to at least the end of June 2011 and to increase the peak debt level by at least $10 million to $95 million to ensure there was enough finance in place to complete the multiple stages of the Project.

331 From around February 2009 Mr Chiavaroli, his father and his brother began discussions with Mr Mallon about renewing or rolling over the credit facility and increasing the peak debt level, and there were regular meetings with Mr Mallon and he was provided with cash flow spreadsheets which are said to have been reviewed and approved by him. By June 2009 the cash flow spreadsheets incorporated figures extending out to June 2011 and reflecting peak debt in the facility of over $90 million.

332 From at least 27 March 2006[399] Mr Mallon held himself out as being the only point of contact at Capital Finance and being the person who put the finance package together and could obtain constant rollover of facilities. During various conversations in 2008 and 2010 Mr Mallon said words to the effect that he and he alone possessed the total authority on behalf of Capital Finance to approve renewal and rollover of the credit facility.

333 During a meeting on 2 July 2009 in the Pentridge Village boardroom Mr Mallon said to Mr Chiavaroli and his father that obtaining the approval to extend the credit facility by 12 months (to June 2011) involved 'a simple rollover' of the existing facility. It is also said that Mr Mallon referred to it just being a timing issue, that it would be 'cool', that there is 'no problem' and that 'she'll be right mate'. Later that day it is also said that Mr Mallon confirmed by telephone that the facility acceptance confirmation was near.

334 At no time until Mr Mallon's employment with Capital Finance ceased at the end of February 2010 did Mr Mallon or anybody else say that Mr Mallon did not have the authority to rollover or renew the Pentridge Village credit facility for another 12 months or that any such rollover or renewal would not be or had not been approved by Capital Finance. Various conversations are said to have occurred in the second half of 2009 regarding renewal and rollover of the facility during which it is said that Mr Mallon referred to the renewal and rollover as a 'formality'. It is also said that Mr Mallon said that if equity was to be put in by the joint venturers in the meantime, the equity could be repaid on rollover of the facility and the peak debt limit could be increased to $95 million.

335 At a meeting with Mr Mallon on 28 January 2010 he said to Mr Chiavaroli and his father that he would prepare a paper for simple acceptance by Capital Finance as a rollover and there was no need for concern and that the new facility would be due in April 2010 for rollover review. On 9 February 2010 he wrote confirming that an 18-month extension of the facility was being sought and that he was in the process of writing up the credit paper.

336 On 15 February 2010 Pentridge Village's then solicitors wrote to Mr Mallon seeking prompt confirmation regarding the renewal and rollover of the facility for the Project. In a telephone conversation the following day between Mr Chiavaroli and Mr Mallon, Mr Mallon said it was all okay but not to have lawyers write to him again and that it was 'under control'. Mr Chiavaroli says Mr Mallon also said that there was no one else to see at Capital Finance, that he was the highest authority, and that Mr Chiavaroli should tell the Pentridge Village board to be patient and there was no need to chase refinancing alternatives. In a telephone conversation on 19 February 2010 Mr Mallon is said to have stated that funding was fine and that Pentridge Village should just keep working on the site and be patient so as to increasing value.

337 As a result of the various conversations held with Mr Mallon and correspondence passing from him it is said that it was Mr Chiavaroli's and Pentridge Village's understanding until early March 2010 that:

(a) a multi-staged development strategy was necessary, should be undertaken, and would benefit Pentridge Village as a result of the property market and low interest rates;

(b) adopting a multi-staged development strategy would lead to an increased return on investment for Pentridge Village;

(c) Capital Finance would provide Pentridge Village with funding support to ensure the successful implementation and completion of a multi-staged development strategy;

(d) Mr Mallon alone possessed the total authority on behalf of Capital Finance to approve renewal and rollover of the credit facility;

(e) Capital Finance would renew the facility agreement on terms no more onerous than the existing facility and would allow an increase in the limit of peak debt to $95 million for a 12-month period expiring on 30 June 2011;

(f) the loan renewal had been approved by Capital Finance; and

(g) Capital Finance would increase peak debt level by $10 million and that this increase had been approved and was a formality.

338 Acting on this understanding Pentridge Village did not, during the period 2 July 2009 until the end of February 2010, pursue alternative sources of debt or equity financing with which to replace the Capital Finance facility agreement upon its expiry on 30 June 2010. Instead, Pentridge Village focused on implementing the multi-staged development strategy by upgrading the Pentridge Village master plan, which included adding a full commercial precinct and increased residential density on the remaining lots of the development where construction had not yet commenced. This upgraded master plan was gazetted on 24 December 2009 and reference was made in correspondence on 15 February 2010 that if Capital Finance did not provide refinancing it would have to enter negotiations with other finance providers and would require all of the last quarter of the then current financial year to be able to effect the same so as to be in a position to repay the loan to Capital Finance on 30 June 2010.

339 On 24 February 2010 notice was received by Pentridge Village that, as of the previous day, Mr Mallon was on 'redeployment and [has] no access to the office, file or anything. Even [his] remote internet access has been revoked'. On 26 February 2010 Mr Mallon informed Pentridge Village that he was 'going on gardening leave'. At this time there were numerous stages of the Project that were under construction and had been commenced pursuant to the multi-stage strategy and were scheduled to be completed by 30 June 2010. At the time the forecast total return on investment for these stages excluding GST was $111,706,068.

340 At a meeting on 4 March 2010 Capital Finance's Mr Moulden (Head of Property Finance Victoria) and Mr De Garis (Associate Director of Property Finance Victoria) informed Mr Chiavaroli that Mr Mallon had left everything in a mess and had destroyed or disposed of Capital Finance's entire Pentridge Village files. They said Capital Finance had not approved a variation or renewal of the facility agreement, and Mr Mallon did not have total authority at Capital Finance to approve the type of credit facility rollover contemplated by Pentridge Village. They said that Mr Mallon had been dismissed as an employee and Mr Moulden was now assuming responsibility at Capital Finance for the Project.

341 In that meeting Mr Moulden said he had expected that the stages under construction were all on schedule and that the facility would be repaid on 30 June 2010. He said there was no record at Capital Finance of any credit facility renewal application having been made or approval process having been commenced. He said that Capital Finance would work with Pentridge Village to 'sort this out'.

342 At a further meeting on 19 March 2010 Mr Moulden said that the facility agreement would be rolled over and all would be fine as long as Pentridge Village worked together with Capital Finance. On 29 March 2010 Mr De Garis said Capital Finance management would work with Pentridge Village and not to worry because so far as he could see all would be okay.

343 During the period April and November 2010 there were further communications between Pentridge Village and Capital Finance regarding renewal of the facility and the progress of the Project, including those referred to in paragraphs 112 and following of Mr Chiavaroli's affidavit. This is said to include statements by Mr De Garis in correspondence that Pentridge Village 'should/can proceed with the construction of lot S 13 (both townhouses and apartments) ASAP'.

344 Also during this period, on 7 July 2010, Capital Finance sent an email informing Pentridge Village that Capital Finance's lawyers would shortly be issuing notices of default given the facility expiry but that these letters were issued as 'standard practice' and simply allowed reservation of rights in respect of the default. The email also stated that Capital Finance was keen to work with Pentridge Village to finalise the restructure for such extension of the facility as soon as possible. Thereafter exchanges of correspondence occurred between solicitors, including a letter dated 28 July 2010 from Pentridge Village's then solicitors, Madgwicks, to Capital Finance's solicitors, Maddocks.

345 That letter, being exhibit "LAC-51" to Mr Chiavaroli's affidavit, made reference to alleged representations made by Capital Finance over an extended period regarding continuing funding. It also stated that Pentridge Village and West Homes had acted in reliance upon the representations that the facilities would be extended and proceeded on the basis that funding would be available as a result of which Pentridge Village and West Homes withdrew from discussions with alternative financiers. The letter further asserted that Capital Finance was estopped by its conduct from alleging that there were breaches under the facilities and, further or alternatively, that Capital Finance had engaged in conduct that was misleading or deceptive in contravention of the TPA. The letter stated that Pentridge Village and West Homes did not propose to take this any further at this point but all rights were reserved. Madgwicks also informed Maddocks that Pentridge Village and West Homes wished to maintain a productive relationship with Capital Finance.

346 Maddocks responded by letter dated 29 July 2010 stating that it was standard Capital Finance practice to issue letters reserving its rights but that Capital Finance was working on a proposal to seek credit approval to extend the facilities for a further 12 months but that such credit approval had not yet been obtained. It was suggested to be neither helpful nor appropriate for Madgwicks to be intervening or responding as they had, and a request was made to refrain from doing so in order to allow the credit process to proceed.

347 During this period Mr Chiavaroli's father raised a concern with Capital Finance about missing the registration dates and sunset clauses in the sale contracts, to which Mr Moulden said it was not Capital Finance's problem, that it did not have the time or the appetite for the issue, that Mr Mallon had painted a different picture to Capital Finance that the loan would be repaid by 30 June 2010, and that it was now a matter for 'credit' in the UK.

348 On 15 September 2010 a draft of a new facility agreement was received from Capital Finance and it is said that its terms were materially different to that which had been discussed with Mr Mallon. Following further correspondence this resulted in a new facility agreement between Pentridge Village and Capital Finance being entered into on 15 November 2010 (2010 Facility Agreement) in less favourable terms than had been discussed with Mr Mallon. Relevant adverse differences are said to include:

(a) removal of the builder's margin so that there were no funds to pay West Homes for construction;

(b) no amount for contingencies (variations) despite the original facility agreement containing approximately 10 per cent coverage for contingencies;

(c) a reduction in peak debt limit from $85 million to $80 million;

(d) a requirement for Pentridge Village to sell $29 million of 'Englobo Land' by 31 October 2010;

(e) removal of the marketing budget;

(f) a reduction in the loan-to-value ratio so that from the date of agreement to 31 January 2011 it could not exceed 85 per cent, and on and from 1 February 2011 it could not exceed 75 per cent;

(g) the inclusion of an event of default if the loan-to-value ratio was breached and not cured within two business days;

(h) Capital Finance's obligation to allow a drawing under the facility being subject to conditions precedent that the advance would not breach or cause to be breached any undertaking or ratios, and the absence of any existing event of default;

(i) a requirement that further personal guarantees be provided by Mr Chiavaroli's father and another; and

(j) a further reduction in the amount payable to Pentridge Village from the facility by an amount of $3.5 million which was to be applied by Capital Finance to offset an unrelated loan from Capital Finance to a company named Regent Way Pty Ltd, which further reduced Pentridge Village's access to funds.

349 From the date the 2010 Facility Agreement was executed, Pentridge Village was unable to comply with the loan-to-value ratios and by about April 2010 numerous purchasers to whom apartments had been pre-sold for various stages had either rescinded their contracts of sale and refused to settle their purchase and requested refunds of deposits, or sought and were given reduced prices for settlement of their purchases.

350 On 17 July 2014 receivers and managers were appointed to Pentridge Village and on 20 August 2014 Mr Marsden was appointed as the liquidator.

351 By generally indorsed writ filed 30 June 2016 Pentridge Village and West Homes commenced proceedings against Capital Finance in relation to alleged misleading or deceptive conduct by Capital Finance in connection with the facility agreements and, in particular, the renewal and extension of the facility.

352 The ASOC was filed on 27 October 2017 and the claims made include damages claims pursuant to s 12GF of the ASIC Act, s 1041I of the Act, and ss 82 and/or 87 of the TPA in respect of alleged misleading or deceptive conduct and unconscionable conduct.

353 The ASOC was prepared on the basis of instructions provided by Mr Chiavaroli and the factual allegations in the pleadings so far as they involve him directly are true and accurate to the best of his knowledge. He is informed by his legal representatives that Pentridge Village's case against Capital Finance as pleaded in the ASOC has a reasonable prospect of success and as a result of this and the other matters referred to in his affidavit it is his honest belief that a good cause of action exists on the part of Pentridge Village against Capital Finance.

354 Alleged loss and damage is referred to in further and better particulars of loss and damage dated 2 March 2018.[400] As summarised in Mr Chiavaroli's affidavit, the loss and damage claimed by Pentridge Village is said to be as follows:

(a) lost net profit for partially completed stages (based on historical net profits from prior completed stages) of $44,468,224;

(b) alternatively to (a), lost net profit for partially completed stages (based on contemporaneous forecast and budgets) of $86,177,243;

(c) loss of the opportunity to develop the land to its full potential (including the net profit that would have been achieved on such an opportunity) of $242,997,000; and

(d) increased financing costs of $20,144,915.

355 West Homes' loss is said to include an amount equal to the loss of its 20 per cent builder's margin and its annual project fees in respect of certain lots.

356 With respect to payment of expenses related to the Proceeding, Mr Chiavaroli says that all expenses relating to the Proceeding to date have been paid by him and that his alternative application to intervene in the Proceeding on behalf of Pentridge Village is made on the basis 'that all expenses, including any adverse costs orders, will continue to be met by me and not by [the] Pentridge Village'.

357 The evidence regarding Pentridge Village's creditors is limited and documents exhibited are relied on by Mr Chiavaroli '... not as an accurate record of precisely who [Pentridge Village's] creditors are and how much each is owed, but to demonstrate, for the purposes of this application only, that there are various secured and unsecured creditors of [Pentridge Village]'.[401]

358 The 'Presentation of accounts and statement' (Form 524) lodged with ASIC by the Liquidator on 15 March 2018[402] refers to the existence of 2 'Priority' creditors totalling $9,581.05, 3 'Secured' creditors totalling $1,827,816.25, and 87 'Unsecured' creditors totalling $15,512,220, as at 19 February 2018. This document also records that the Liquidator does not expect a dividend to be paid to any class of creditor.

359 Correspondence has passed with the Liquidator to obtain an updated list of creditors, but that has not yet been provided. The correspondence also addresses the assignment, the Section 237 Application, costs and other matters.[403]

360 Mr Chiavaroli says further that if his (alternative) Section 237 Application is successful and the claims against Capital Finance succeed, he proposes to make an application to the court at an appropriate time for orders that any sum obtained as a result of the Proceeding be paid 75 per cent to Pentridge Village and 25 per cent to him.

361 Mr Chiavaroli as assignee of Pentridge Village is the first plaintiff in the CFMEU Proceeding[404] and West Homes is the second plaintiff. In that proceeding allegations of conspiracy and other unlawful conduct are made against the CFMEU and others in connection with delay and disruption associated with the Project, including damages for disruption and delay and the alleged consequent inability to service loans and obtain access to funds, and the failure of the Project.

[1] Being paragraphs 1 (in part); 65-70; 89-95; 25, 87, and 88 (in part) of the ASOC.

[2] Accordingly, references in these reasons to the plaintiffs are references to Pentridge Village and West Homes.

[3] Including several volumes of exhibits, although only a limited number of documents were relied on. See, for example, Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 10 August 2018) 62.

[4] Dated 10 May, 23 July, 3 August, 24 August, 29 August, 4 September (two submissions) and 5 September 2018.

[5] Dated 16 May, 23 July, 3 August, 24 August, 31 August and 3 September 2018.

[6] Comprising an ASIC current and historical extract for Daimleigh Pty Ltd (Exhibit 1), a presentation of accounts and statement of Pentridge Village Pty Ltd (ASIC Form 524) (Exhibit 2), an email from Mr Glen Cussen to Mr Howard Bear dated 15 June 2018 at 10:49am (Exhibit 3), and an ASIC historical company extract for Daimleigh Capital Pty Ltd (Exhibit A).

[7] That rule provides that no evidence shall be admissible on the question of whether an indorsement of claim or pleading offends against r 23.02 of the Rules, although regard can be had to documents referred to in a pleading. See, for example, Wheelahan v City of Casey (No 12) [2013] VSC 316 [25(n)] (Dixon J) and Annesley v Westpac Banking Corp [2016] VSC 323 [71(e)] (Derham AsJ), each citing Day v William Hill (Park Lane) Ltd [1949] 1 KB 632 (Bucknill and Singleton LJJ).

[8] The only affidavit evidence currently before the court regarding the background to the Proceeding was that contained in the affidavits of Mr Chiavaroli and Mr Bear, to which there was no objection.

[9] See Pentridge Village and West Homes, 'Plaintiffs' Further Submissions on Application Returnable Before the Honourable Justice Connock on 5 September 2018', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 24 August 2018, [7]-[8] (Plaintiffs' Submissions dated 24 August 2018). If considered in isolation, this submission overlooks the Substitution Application.

1. [10] See Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 5 September 2018) 195.
2. [11] See ASOC, [89]-[95] and Pentridge Village and West Homes, 'Plaintiffs' Submissions Regarding Substitution', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 10 May 2018, [4]-[6] (Plaintiffs' Submissions dated 10 May 2018).

1. [13] A point also emphasised in the submissions of Capital Finance. See, for example, Capital Finance, 'Defendant's Submissions on Rule 9.09(2)', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 24 August 2018 [2] (Capital Finance's Submissions dated 24 August 2018).
2. [14] See, for example, Capital Finance, 'Defendant's Outline of Submissions In Support of Application for Strike Out Made By Summons dated 23 July 2018', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 23 July 2018 [3]-[5] (Capital Finance's Submissions dated 23 July 2018). In the Strike Out Application it makes the same substantive contention regarding the assignment and also seeks to strike out the Equitable Estoppel Claim.

[15] Capital Finance also stated that if, contrary to its position on the legal point, the Statutory Claims were validly assigned to Mr Chiavaroli, then Pentridge Village would lack standing to seek relief or remain as a party in the Proceeding and, in those circumstances, Capital Finance would not oppose the substitution of Mr Chiavaroli as first plaintiff.

[16] See, for example, Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 10 August 2018) 36-38, 85-86.

[17] See Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 5 September 2018) 191-2 and Plaintiffs' Submissions dated 24 August 2018 [3].

[18] [2013] 2 Qd R 276 (Margaret McMurdo P, Gotterson JA and Martin J).

[19] See, for example, Plaintiffs' Submissions dated 24 August 2018 [5] and Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 5 September 2018) 191.

[20] [2017] NSWSC 76 (Stevenson J).

[21] Plaintiffs' Submissions dated 24 August 2018 [6]. In footnote 3 of these submissions reliance was placed upon the decision of Master Luppino in Territory Pastoral Company Pty Ltd v Elders Ltd [2009] NTSC 69 but as even the plaintiffs' written submissions revealed the circumstances in that case were different and the relevant party was added as a party and not substituted.

[22] Capital Finance's Submissions dated 24 August 2018 [1].

[23] See s 7 of the Civil Procedure Act 2010 (Vic).

[24] [2006] FCA 1437 (Bennett J).

[25] [2008] WASCA 73 (Pullin JA and Newnes AJA).

[26] [1996] 1 All ER 519, 522 (Neill, Evans and Millett LJJ).

[27] [2014] WASC 360 (Simmonds J).

[28] [2018] WASC 117 (Acting Master Strk).

[29] [2009] VCC 1309 [19].

[30] [2009] NTSC 69 (Master Luppino).

[31] And their equivalents in the Northern Territory.

[32] In the alternative or otherwise. See, for example, Capital Finance's Submissions dated 24 August 2018 [2].

[33] Joinder powers under other rules are expressed in different terms and do not refer to the need for the existence of an assignment. See for example r 9.06 of the Rules (which also allows substitution orders to be made in certain circumstances).

[34] [2008] VSCA 93; (2008) 20 VR 377, 381 [11]-[17] (Maxwell P and Buchanan JA), which dealt with, among other things, the power to order security for costs under Order 62.

[37] Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; (2008) 20 VR 377, 381 [11] (Maxwell P and Buchanan JA), also citing FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241, 247-248 [21] (Pidgeon and Owen JJ).

[38] Ibid 382 [15] (Maxwell P and Buchanan JA).

[39] See ss 4(1)(b) and 140 of the Evidence Act 2008 (Vic), noting also the same position at common law if it was to be successfully contended that the language of s 140 of the Act ('case of a party') does not include interlocutory proceedings (which in my view it does).

[40] Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; (2008) 20 VR 377, 382 [17] (Maxwell P and Buchanan JA).

[41] WorkCover Queensland v Amaca Pty Ltd [2013] 2 Qd R 276 (Margaret McMurdo P, Gotterson JA and Martin J).

[42] Davidovic v Vesuvius Australia Pty Ltd (No 3) [2017] NSWSC 76 (Stevenson J).

[46] Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; (2008) 20 VR 377 (Maxwell P and Buchanan JA).

[47] See, for example, rr 23.01(1)(a), 23.01(2) and 23.02(b) of the Rules.

[48] As earlier observed, in the present case, the plaintiffs seek only substitution and do so only pursuant to r 9.09(2)(a) and therefore different considerations arise.

[49] See, for example, Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552, 571 [43] (Gaudron, McHugh, Gummow and Hayne JJ) where it was stated that '[t]he starting point for the present inquiry, however, must be the terms of the Rules, not any general considerations of the kind just mentioned.' See also Lew Footwear Holdings Pty Ltd v Madden International Ltd [2014] VSC 320 [121]-[122] (Elliott J), noting also Madden International Ltd v Lew Footwear Holdings Pty Ltd [2015] VSCA 90; (2015) 50 VR 22 (Mandie and Beach JJA and Dixon AJA).

[50] [2009] VCC 1309.

[51] See, for example, paragraph 45 above. The relevant observations in Aspendale Holdings Pty Ltd v Wellington Street Investments Pty Ltd [2009] VCC 1309 appear at [16]-[19] and [35]-[39].

[52] Plaintiffs' Submissions dated 10 May 2018 [12].

[53] [1982] AC 679 (Lords Wilberforce, Edmund-Davies, Fraser, Keith and Roskill).

[54] [2014] VSC 207 (Elliott J).

1. [55] Pentridge Village and West Homes, 'Plaintiff's (sic) Submissions In Reply to Defendant's Outline of Submissions dated 23 July 2018', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 3 August 2018, [7]-[10] (Plaintiffs' Submissions dated 3 August 2018),

citing Elliott J in EWC Payments Pty Ltd v Commonwealth Bank of Australia [2014] VSC 207 [62].

[56] Referred to in the Background Schedule.

[57] [1997] 1 VR 667 (Hansen J).

[58] Plaintiffs' Submissions dated 3 August 2018 [17]. This position was recalibrated during oral submissions when attention was drawn to Hansen J's summary of the claims. See, for example, Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 10 August 2018) 152-154.

[59] (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[60] Plaintiffs' Submissions dated 3 August 2018 [17]

1. [61] It was not submitted that s 100-5(1) of Division 100 of Schedule 2 to the Corporations Act (Insolvency Practice Schedule (Corporations)) applies and no approval was sought pursuant to s 100-5(2). In M Murray and J Harris, Keay's Insolvency: Personal & Corporate Law & Practice, (Thomson Reuters, 10th edition, 2018) it has been observed that, as the language of the provision suggests, the power in s 100-5(1) is in relation to rights conferred by the Act on external administrators to sue in their own name. This point was also noted in Capital Finance, 'Defendant's Outline of Submissions', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 16 May 2018 [25] (Capital Finance's Submissions dated 16 May 2018) and Capital Finance's Submissions dated 23 July 2018 [22] and footnote 31.

[62] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[63] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[64] [2011] FCA 898; (2011) 282 ALR 49 (North J).

[65] [2016] QSC 242; [2017] 2 Qd R 456 (Jackson J).

[66] Plaintiffs' Submissions dated 3 August 2018 [21].

[67] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[68] (2017) 53 VR 219, 232 [59] (Whelan JA and Ferguson JA).

[69] Capital Finance's Submissions dated 16 May 2018 [11]. The authorities are discussed below.

[71] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[72] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49 (North J).

[73] Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2016] QSC 242; [2017] 2 Qd R 456 (Jackson J).

[74] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[75] Trendtex Trading Corp v Credit Suisse [1982] AC 679 (Lords Wilberforce, Edmund-Davies, Fraser, Keith and Roskill).

[76] EWC Payments Pty Ltd v Commonwealth Bank of Australia [2014] VSC 207, [62] (Elliott J).

[77] Trendtex Trading Corp v Credit Suisse [1982] AC 679, 703 (Lord Roskill).

[78] See paragraphs 132 to 142 below.

[79] Whilst different considerations might have arisen if it was proposed only to add (as opposed to substitute) Mr Chiavaroli as a plaintiff, that is not the position.

[80] EWC Payments Pty Ltd v Commonwealth Bank of Australia [2014] VSC 207, [62] (Elliott J).

[81] Capital Finance's Submissions dated 23 July 2018 [36].

[82] EWC Payments Pty Ltd v Commonwealth Bank of Australia [2014] VSC 207, [62] (Elliott J). See also Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20; (2016) 111 ACSR 277 [42] (Gleeson and Leeming JJA and Emmett AJA).

[83] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667, 685 (Hansen J).

[84] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457, 463 (Hayne JA, Brooking and Phillips JJA agreeing).

[86] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[87] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[88] Trendtex Trading Corp v Credit Suisse [1982] AC 679 (Lords Wilberforce, Edmund-Davies, Fraser, Keith and Roskill).

[89] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[90] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[91] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[92] [2006] FCA 1352; (2006) 236 ALR 720, 732 [49]-[55] (Rares J).

[93] [2007] FCA 1532.

[94] Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352; (2006) 236 ALR 720 (Rares J).

[95] (1993) ATPR (Digest) 46-105 at 534667 (Davies J).

[96] [1994] FCA 814, [18] (Beaumont J).

[97] [1997] FCA 27; (1997) 72 FCR 203, 218 (Branson J).

[98] [2001] FCA 1106; (2001) 123 FCR 62, 116-117, [204]-[207] (von Doussa J).

[99] [2009] FCA 773; [2009] 72 ACSR 684, 696, [32] (Gordon J).

[100] Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352; (2006) 236 ALR 720 (Rares J).

[101] [2001] FCA 1106; (2001) 123 FCR 62, 116, [204] (von Doussa J).

[102] [2017] NSWCA 65, [59] (Macfarlan J and McDougall JJA agreeing at [1] and [64]).

[103] (1993) ATPR (Digest) 46-105, [4] (Davies J).

[104] (1996) 14 ACLC 303 (Branson J).

[105] [2014] WASC 203, [18]-[22] (Le Miere J).

[106] [2011] NSWCA 168; (2011) 81 NSWLR 285 (Giles, Campbell JJA and Sackville AJA).

[107] [2011] FCA 898; (2011) 282 ALR 49, 54 [19]-[21] (North J).

[108] [2014] NSWSC 789; (2014) 101 ACSR 233, 340-341, 357-358, 360, [339], [341], [391]-[396], [404] (Black J).

[109] [2015] NSWSC 928, [87] (Brereton J)

[110] [2016] NSWCA 318, [103], [113]-[114] (Emmett AJA, Macfarlan and Ward JJA agreeing).

[111] [2016] QSC 242; [2017] 2 Qd R 456, 459, [6]-[9] (Jackson J).

[112] [2017] NSWCA 65, [59] (MacFarlan, Ward JJA and McDougall J).

[113] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49 (North J).

[114] Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2016] QSC 242; [2017] 2 Qd R 456 (Jackson J).

[115] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49, 54 [19]-[21] (North J). After observing that the bare right to litigate such a claim was 'thus not assignable', North J then identified what in substance is the primary discrete legal issue regarding the assignment in question in this case, namely, '... whether a liquidator is able to assign [such a] cause of action pursuant to the power in s 477(2)(c).

[116] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J); UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[117] Property is defined in s 9 and, relevantly for present purposes, 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 ...'. For the purposes of part 5.4B (winding up in insolvency or by the court), of which s 477 forms part, the definition is affected by s 465 in connection with the Personal Property and Securities Act 2009 (Cth) but that is not relevant for present purposes.

[118] Brookfield & Septic Products Australia Pty Ltd (in liq) v Davey Products Pty Ltd (1996) 14 ACLC 303 (Branson J).

[120] Though there was in connection with the causes of action which were regarded to be validly assigned, namely in negligent misrepresentation and breach of contract. See Brookfield & Septic Products Australia Pty Ltd (in liq) v Davey Products Pty Ltd (1996) 14 ACLC 303 [108]-[109] (Branson J).

[121] Which was relevantly in the same terms as the same section of the Act.

[122] [1996] FCA 1771 (von Doussa, O'Loughlin and Lehane JJ).

[123] [1996] FCA 1771 [24] (von Doussa, O'Loughlin and Lehane JJ). And also the principle in Trendtex Trading Corp v Credit Suisse [1982] AC 679 (Lords Wilberforce, Edmund-Davies, Fraser, Keith and Roskill).

[124] [1996] FCA 1771 [54]-[55] (von Doussa, O'Loughlin and Lehane JJ).

[125] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[126] Section 232 of the Corporations Law is now largely reflected in ss 180-184 of the Act.

[127] Damages was one of the remedies sought, although the reasons do not specify pursuant to which section they were sought.

[128] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[129] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667, 681 (Hansen J).

[131] Or because what was being assigned was a right to retrieve property.

[132] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457, 458 (Hayne JA) (emphasis added).

[133] See UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667, 670-672 (Hansen J).

[134] Ibid 671-672. See also the observations of North J in Re Novaline [2011] FCA 898; (2011) 282 ALR 49, 52 [16]. It should be noted that the plaintiffs' acknowledgement in their written submissions that statutory causes of action were not in issue in UTSA is inaccurate, although this was recognised and addressed during oral submissions.

[135] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457, 458 (Brooking, Phillips and Hayne JJA).

[139] (1997) 26 ACSR 110, 112 (Lee J).

[140] Chapman v Luminis Pty Ltd [2001] FCA 1106; [2001] 123 FCR 62 (von Doussa J).

[141] Trendtex Trading Corp v Credit Suisse [1982] AC 679 (Lords Wilberforce, Edmund-Davies, Fraser, Keith and Roskill).

[142] Pritchard v Racecage Pty Ltd [1997] FCA 27; (1997) 72 FCR 203 (Branson J).

[143] There appears to have been no discussion of UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J) or UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA) in that decision.

[144] Ex parte McGrath, Re; Pan Pharmaceuticals Ltd (in liq) [2008] FCA 563.

[145] Bank of Melbourne Limited v HPM Pty Ltd (1997) 26 ACSR 110 (Lee J).

[146] Ex parte McGrath, Re; Pan Pharmaceuticals Ltd (in liq) [2008] FCA 563 [35]-[38].

[147] Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia (No 6) [2014] WASC 203 (Le Miere J).

[148] Chapman v Luminis Pty Ltd [2001] FCA 1106; [2001] 123 FCR 62.

[149] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285 (Sackville AJA).

1. [150] Ibid 299 [59] (emphasis in original).

[151] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285, 300 [64] (Sackville AJA).

[152] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[153] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[154] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285, 301 [70]-[71] (Sackville AJA). Citations omitted.

[155] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49 (North J).

[157] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[158] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

1. [159] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285 (Giles, Campbell JJA and Sackville AJA).

[160] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49, 54, [19]-[21] (North J).

[161] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[162] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49, 54, [21]. North J also referred to the Trendtex exception concluding that the assignee had a genuine commercial interest in the enforcement of the company's claim for his own benefit.

[163] [2013] WASC 183 (Beech J).

[165] EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183, [895], [899] (Beech J).

[166] Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; (2014) 101 ACSR 233 (Black J).

1. [167] Ibid 341; Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285 (Giles, Campbell JJA and Sackville AJA).

[168] EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183.

[169] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49 (North J).

[170] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[171] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

1. [172] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285 (Giles, Campbell JJA and Sackville AJA).

[173] This point was also made in Challis v Hoffman [2017] NSWSC 870; [2017] 121 ACSR 585, 589,[10] (Gleeson JA).

[174] Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; (2014) 101 ACSR 233, 340-343, 356-360, [339]-[346] and [390]-[404] (Black J).

[175] Aquatic Air Pty Ltd v Siewert [2015] NSWSC 928, [87] (Brereton J).

[176] Aquatic Air Pty Ltd v Siewert [2015] NSWSC 928, [87]-[88] (Brereton J).

[177] Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318 (Macfarlan and Ward JJA and Emmett AJA).

1. [178] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285 (Giles, Campbell JJA and Sackville AJA).

[179] Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318, [113]-[114] (Macfarlan and Ward JJA and Emmett AJA) (footnotes omitted).

[182] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 300-302 [64]-[67], [70]-[74] (Sackville AJA).

[183] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[184] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[185] Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2016] QSC 242; [2017] 2 Qd R 456 (Jackson J).

[186] Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318 (Macfarlan and Ward JJA and Emmett AJA).

[187] Pritchard v Racecage Pty Ltd [1997] FCA 27; (1997) 72 FCR 203 (Branson J).

[188] Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2016] QSC 242; [2017] 2 Qd R 456, 467-468, [56]-[61] (Jackson J).

[190] Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2016] QSC 242; [2017] 2 Qd R 456, 461, [17] (Jackson J) (footnotes omitted).

[191] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49 (North J).

[192] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[193] Brookfield & Septic Products Australia Pty Ltd (in liq) v Davey Products Pty Ltd (1996) 14 ACLC 303 (Branson J).

[194] Chapman v Luminis Pty Ltd [2001] FCA 1106; [2001] 123 FCR 62 (von Doussa J).

[195] Aquatic Air Pty Ltd v Siewert [2015] NSWSC 928 (Brereton J).

[196] Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2016] QSC 242; [2017] 2 Qd R 456 (Jackson J).

[197] Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318 (Macfarlan and Ward JJA and Emmett AJA).

[198] EWC Payments Pty Ltd v Commonwealth Bank of Australia [2014] VSC 207 (Elliott J).

[199] Trendtex Trading Corp v Credit Suisse [1982] AC 679 (Lords Wilberforce, Edmund-Davies, Fraser, Keith and Roskill).

[200] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[201] Trendtex Trading Corp v Credit Suisse [1982] AC 679 (Lords Wilberforce, Edmund-Davies, Fraser, Keith and Roskill). See also Mateljan v HTT Huntley Heritage Pty Ltd [2016] NSWCA 20; (2016) 111 ACSR 277 [42] (Gleeson and Leeming JJA and Emmett AJA)

[202] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[203] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[204] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285, 301, [70]-[71] (Sackville AJA, Giles and Campbell JJA agreeing).

[205] Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 10 August 2018) 28.

[206] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[207] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[208] See also Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318, [113]-[114] (Macfarlan and Ward JJA and Emmett AJA) and footnote 3 of that case.

[209] See, for example, Markisic v Commonwealth of Australia [2007] NSWCA 92; (2007) 69 NSWLR 737, 56 (Campbell JA, Handley AJA and Bell J), where it was observed that 'a decision is not authority for a matter that has been assumed, rather than actually decided, in the course of making the decision ...'; Coleman v Power [2004] HCA 39; (2004) 220 CLR 1, 44 [79] (McHugh J); and CSR Limited v Eddy [2005] HCA 64; (2005) 226 CLR 1, 11 [13]-[14] (Gleeson CJ, Gummow and Heydon JJ).

[210] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285 (Giles, Campbell JJA and Sackville AJA). And followed by Brereton J in Aquatic Air Pty Ltd v Siewert [2015] NSWSC 928 and cited with apparent approval by the Court of Appeal in Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318 (Macfarlan and Ward JJA and Emmett AJA).

[211] Aquatic Air Pty Ltd v Siewert [2015] NSWSC 928 [87] (Brereton J).

[212] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49 (North J).

[213] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[214] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[215] Owners of Strata Plan No 5290 v CGS & Co Pty Ltd [2011] NSWCA 168; (2011) 81 NSWLR 285 (Giles, Campbell JJA and Sackville AJA). And was subsequently supported by the dicta of the Court of Appeal in Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318 (Macfarlan and Ward JJA and Emmett AJA).

1. [216] Noting also the observations of the High Court in cases such as Australian Companies and Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1997) 177 CLR 485, 492 and Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

[217] Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2016] QSC 242; [2017] 2 Qd R 456 (Jackson J).

[218] Cant; Re Novaline Pty Ltd (in liq) [2011] FCA 898; (2011) 282 ALR 49 (North J).

[219] UTSA Pty Ltd (in liq) v UltraTune Australia Pty Ltd [1997] 1 VR 667 (Hansen J).

[220] UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 (Brooking, Phillips and Hayne JJA).

[221] Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318 (Macfarlan and Ward JJA and Emmett AJA).

[222] See, for example, Australian Companies and Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 (Mason CJ, Brennan, Dawson, Toohey & Gaudron JJ) and Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

[223] In this regard I refer also to the observations and reasoning below in the context of the Strike Out Application.

[224] Trendtex Trading Corp v Credit Suisse [1982] AC 679 (Lords Wilberforce, Edmund-Davies, Fraser, Keith and Roskill).

[225] See Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 10 August 2018) 84-85.

[226] [2013] VSC 316, [25] (Dixon J).

[227] [2016] VSC 323, [70]-[71], [92]-[93] (Derham AsJ).

[228] [2013] VSC 304, [34] (Derham AsJ).

[229] (2017) 53 VR 196, 204-205, [29]-[34] (Derham AsJ).

[230] [2017] VSC 556, [14]-[15], [19] (Hargrave J).

[231] [2017] VSCA 11 (Redlich, Tate and Ferguson JJA).

[232] But see the extracted reference from the Court of Appeal in Ballan below.

[233] At CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd [2017] VSCA 11, [21]-[28] (Redlich, Tate and Ferguson JJA) (footnotes omitted and emphasis added).

[235] See CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd [2017] VSCA 11, [24] (Redlich, Tate and Ferguson JJA). It should be noted that the reference to rule 23.03(a) in the questions reserved for consideration by the Court of Appeal should be a reference to r 23.02(a). See the discussion at first instance, Oliver Hume (Australia) Pty Ltd v Land Source Australia Pty Ltd (No 2) [2016] VSC 72 [8], [70] (Cameron J).

[236] See Plaintiffs' Submissions dated 3 August 2018 [2] and Annesley v Westpac Banking Corp [2016] VSC 323, [70]-[71] (Derham AsJ).

[237] Citing Latham CJ in Dey v Victorian Railways Commissioners (1949) 78 CLR 62.

[238] See, for example, Capital Finance's Submissions dated 23 July 2018 [43]. Although not raised, it may also be observed that the Estoppel Claim pleaded in paragraphs 65 to 70 does not, in terms, articulate that which Capital Finance is said to be estopped from. However, in my view, it is clear enough that it is alleged that Capital Finance should be estopped from resiling from the state of affairs reflected in the alleged representation in paragraph 65. That is, that on or before 30 June 2010 the Facility Agreement would be rolled over or extended on terms no more onerous than the then existing facility agreement, with the terms including an increase of the peak debt limit to $95 million and an extension of the term of the agreement to 30 June 2011.

[239] See, for example, Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 5 September 2018) 226-228.

[240] [2008] VSCA 247; (2008) 21 VR 351 (Buchanan, Nettle and Dodds-Streeton JJA).

[241] See Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 5 September 2018) 226 and 228.

[242] Plaintiffs' Submission dated 3 August 2018 [30].

1. [243] [2016] HCA 26; (2016) 260 CLR 1 ] and ACN 074 971 109 v The National Mutual Life Association of Australasia Limited [2008] VSCA 247; (2008) 21 VR 351, 391-392 [161] (Buchanan, Nettle and Dodds-Streeton JJA). Further authorities were relied on in Pentridge Village and West Homes, 'Plaintiffs' Further Submission on Equitable Compensation for Equitable Estoppel Application Returnable Before the Honourable Justice Connock on 5 September 2018', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 29 August 2018 (Plaintiffs' Submissions dated 29 August 2018), including Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505, Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101, and Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

[244] ACN 074 971 109 v The National Mutual Life Association of Australasia Limited [2008] VSCA 247; (2008) 21 VR 351, 393, [166] citing Dillwyn v Llewellyn [1862] EngR 908; (1862) 4 De G F & J 517; 45 ER 1285 and Henderson v Miles (No 2) [2005] NSWSC 867; (2005) 12 BPR 23,579 at 23,586, [72] (Young CJ in Eq).

[245] At Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1, 69 [218] (Nettle J) citing Verwayen v The Commonwealth (1990) 170 CLR 394, 439 (Deane J).

[246] [2017] VSC 556, [15] (Hargrave J).

1. [247] See, for example, Pentridge Village and West Homes, 'Plaintiffs' Note on Striking Out Part of a Pleading Where the Same Material Forms the Basis of Alternative Claims', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 5 September 2018 (Plaintiffs' Submissions dated 5 September 2018) and the cases there cited being Dorfler v Fourways Holdings Pty Ltd [1991] FCA 409; (1991) 103 ALR 699, 706 (Spender J); Sun Earth Homes Pty Ltd v Australian Broadcasting Corp (1991) 19 IPR 201, 213 [26] (Burchett J); and Wickstead v Browne (1992) 30 NSWLR 1, 6 (Kirby P).

[248] See, for example, Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1, 69 [218] (Nettle J). See also ACN 074 971 109 v The National Mutual Life Association of Australasia Limited [2008] VSCA 247; (2008) 21 VR 351, 391-392 [161] (Buchanan, Nettle and Dodds-Streeton JJA), Dillwyn v Llewellyn [1862] EngR 908; (1862) 4 De G F & J 517; 45 ER 1285 at 439, 429, 459 and 487. See also Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1, 24 [66] (Keane J), and Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

[249] ACN 074 971 109 v The National Mutual Life Association of Australasia Limited [2008] VSCA 247; (2008) 21 VR 351, 391-392 [161] (Buchanan, Nettle and Dodds-Streeton JJA).

[250] And noting senior counsel for Capital Finance's proper acknowledgements regarding the issues raised.

[251] The substance of this position was made known to Capital Finance by at least 3 August 2018 when it was referred to in the plaintiffs' written submissions of that date.

[252] This alleged loss is also incorporated by reference in the alleged loss and damage for unconscionable conduct in paragraph 88 of the ASOC.

[253] Further particulars were also exhibited to Mr Chiavaroli's July affidavit.

[254] A further observation may also be made. Capital Finance's submissions appear to proceed on the assumption that loss can only be recoverable by a plaintiff for misleading or deceptive conduct where a claimant itself had a relevant representation made to it, and it relied upon the representation. This, however, is not correct. It is not the law that a person claiming damages for misleading or deceptive conduct has to have been the recipient of the representation and to have relied upon it. Whilst that might be a frequent way in which a cause of action will arise, it is not the only way. See, for example, Eggerth v EPI International Pty Ltd [2017] FCA 1547, [9] (Derrington J). What is required is that there be a sufficient cause or direct link between contravening conduct and recoverable loss or damage. See, for example, Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437; (1992) 37 FCR 526, 529-537 (Lockhart J); Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494, 528, [101] (Gummow J); McCarthy v McIntyre [1999] FCA 784, [48]-[52] (Hill, Sackville and Katz JJ); and Eggerth v EPI International Pty Ltd [2017] FCA 1547 (Derrington J). It is to be acknowledged however that, at least at this point, this does not appear to be the way in which West Homes puts its claim and that, were it to seek to do so, further issues may arise between the parties.

[255] Babcock & Brown DIF III Global Co-Investment Fund, LP & Anor v Babcock & Brown International Pty Limited & Ors (No 2) [2017] VSC 556, [15] (Hargrave J).

[257] These observations and the further observations referred to later in these reasons when addressing the relevant statutory criteria have largely been extracted from Li v Dao [2018] VSC 530, [41]-[52], [60]-[66], [82]-[92], [176], [180]-[182], [184] (Connock J).

[258] Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [24] (Palmer J); Huang v Wang [2016] NSWCA 164; (2016) 114 ACSR 586 [56], [58] (Bathurst CJ, McColl JA and Barrett AJA agreeing).

[259] Huang v Wang [2016] NSWCA 164; (2016) 114 ACSR 586 [57] (Bathurst CJ, McColl JA and Barrett AJA agreeing). But see Fiduciary Ltd v Morning Star Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732 [16] (Austin J). Note also the qualification in s 237(2)(e)(ii) of the Act.

[260] Slea Pty Ltd v Connective Services Pty Ltd [2017] VSC 609, [52] (Robson J).

[261] Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 [20] (Brereton J) c.f. Harris v Caladine [1991] HCA 9; (1991) 172 CLR 84, 96 (Mason and Deane JJ), 103 (Brennan J), 133 (Toohey J).

[262] [2010] NSWCA 115; (2010) 78 ACSR 167 (Macfarlan JA, Allsop P and Beazley JA agreeing).

[263] [2016] NSWCA 164; (2016) 114 ACSR 586 [58] (Bathurst CJ, McColl JA and Barrett AJA agreeing) citing McEvoy v Caplan [2010] NSWCA 115; (2010) 78 ACSR 167 [4] (Macfarlan JA, Allsop P and Beazley JA agreeing).

[266] [2002] NSWSC 583; (2002) 42 ACSR 313 [29] (Palmer J).

1. [267] Extracted from Mr Chiavaroli's July affidavit at [32] and comprising exhibit "LAC-11". Attention is also drawn to the Liquidator's statement that 'he is "not able to, and in the circumstances is not willing to, provide instructions to prosecute the proceedings"'. See Pentridge Village and West Homes, 'Outline of Submissions in Support of Application for Leave to Intervene in Proceedings', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 23 July 2018, [15] (Plaintiffs' Submissions dated 23 July 2018) and Mr Chiavaroli's July affidavit at [25].

[268] [2004] NSWSC 1007; (2004) 211 ALR 457.

[269] Plaintiffs' Submissions dated 23 July 2018 [14]; Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [28] (Palmer J); Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457 [9] (Barrett J).

[270] Exhibit "LAC-6", [1], [2] and [4(b)] at page 0062 and exhibit "LAC-11" (at page 0077).

[272] Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457 [9] (Barrett J).

1. [274] Footnotes omitted, but noting that the letter footnoted the decision in Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2016] QSC 242; [2017] 2 Qd R 456, 461, [17] (Jackson J) in support of the statement that the current state of the law was not fully resolved.

[275] It may be noted that reference is made to the Liquidator not bringing the proceeding in circumstances where this has already occurred through the Liquidator.

[278] See Mr Chiavaroli's July affidavit at [35]-[37]. See also Background Schedule at paragraphs 311 to 353 and 356.

[280] Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [36] (Palmer J); Daiwa Can Company v Barokes Pty Ltd [2016] VSC 296 [38]-[40] (Sifris J).

[281] Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 65 ACSR 661 [82]-[83] (Tobias JA, Beazley and Bell JJA agreeing); Connective Services Pty Ltd v Slea Pty Ltd [2018] VSCA 229 [105]-[110] (Ferguson CJ, Whelan and McLeish JJA).

[282] Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 [33] (Brereton J); Daiwa Can Company v Barokes Pty Ltd [2016] VSC 296 [40] (Sifris J).

[283] Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [38] (Palmer J).

[285] Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [41] (Palmer J).

[288] Slea Pty Ltd v Connective Services Pty Ltd [2017] VSC 609 [108] (Robson J). See also Connective Services Pty Ltd v Slea Pty Ltd [2018] VSCA 229 [105]-[111] (Ferguson CJ, Whelan and McLeish JJA).

[289] Plaintiffs' Submissions dated 23 July 2018 [17]-[24] and the authorities there cited.

[290] Capital Finance, 'Defendant's Outline of Submissions in Opposition to Application for Leave to Intervene in Proceeding Pursuant to Section 237 of the Corporations Act 2001 (Cth)', Submission in Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd, S CI 2016 02546, 3 August 2018 [25] (Capital Finance's Submissions dated 3 August 2018) relying on Fiduciary Limited v Morning Star Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732, [44] (Austin J).

[291] Degiorgio v Dunn (No 2) [2005] NSWSC 3; (2005) 62 NSWLR 284 [28] (Barrett J). Capital Finance's Submissions dated 3 August 2018 [25].

[292] Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 65 ACSR 661 [74] (Tobias JA, Beazley and Bell JJA agreeing). Capital Finance's Submissions dated 3 August 2018 [25].

[293] Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [39] (Palmer J). Capital Finance's Submissions dated 3 August 2018 [25].

[294] Mr Chiavaroli's July affidavit at [138].

[295] Mr Chiavaroli's July affidavit at [33] and [138].

[296] Proceeding No S CI 2016 02556, the claim which comprises exhibit "JMW-1" to the affidavit of Janet Whiting.

[297] Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 245 ALR 780, 797 [74] (Tobias JA, Beazley and Bell JJA agreeing).

[298] That is not to ignore observations such as those referred to in paragraph 203 above.

[299] That is not to ignore the affidavit of Ms Whiting regarding the CFMEU proceeding or the company searches regarding Daimleigh Pty Ltd and Daimleigh Capital Pty Ltd and the email dated 15 June 2018 which became known as the 'Cussen email'.

[300] See, for example, Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 533 (Mason CJ, Dawson, Gaudron and McHugh JJ).

[301] Capital Finance's Submissions dated 3 August 2018 [38].

[302] See, for example, the terms of what became known as the 'Cussen email' dated 15 June 2018.

[303] Mr Chiavaroli's July affidavit at [67]-[74].

[304] Exhibits "LAC-62" to "LAC-65" (inclusive).

[305] Exhibit A. A company search of Daimleigh Pty Ltd was also tendered as Exhibit 1, which reveals its current status as deregistered.

[306] See Transcript of Proceedings, Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd (Supreme Court of Victoria, S CI 2016 02546, Connock J, 10 August 2018) 144.

[307] In his July affidavit at [145].

[308] Senior counsel for Mr Chiavaroli informed the court during the hearing that there was an error in the affidavit and Daimleigh Pty Ltd intended to be a reference to Daimleigh Capital Pty Ltd. A company search for each company was tendered without objection.

[310] Referred to Mr Chiavaroli's July affidavit at [154].

[311] Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 245 ALR 780 (Tobias JA, Beazley and Bell JJA agreeing).

[312] Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [55] (Palmer J).

[313] Daiwa Can Company v Barokes Pty Ltd [2016] VSC 296 [60] (Sifris J) citing Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 [44] (Brereton J). See also Ehsman v Nutectime International Pty Ltd [2006] NSWSC 887; (2006) 58 ACSR 705 [53]-[57] (Austin J).

[314] Huang v Wang [2016] NSWCA 164; (2016) 114 ACSR 586 [59] (Bathurst CJ, McColl JA and Barrett AJA agreeing).

[315] Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [56]-[60] (Palmer J).

[316] Robash Pty Ltd v Gladstone Pacific Nickel Pty Ltd [2011] NSWSC 1235; (2011) 86 ACSR 432 [57] (Ball J).

[317] Daiwa Can Company v Barokes Pty Ltd [2016] VSC 296 [61] (Sifris J) citing True Value Solar Holdings Pty Limited v Fernandez [2013] VSCA 27 [13] (Osborn JA, Neave JA and Priest JJA agreeing); Fiduciary Ltd v Morning Star Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732 [15] (Austin J); Oates v Consolidated Capital Services Limited [2009] NSWCA 183; (2009) 76 NSWLR 69, 93 [119] (Campbell JA, Spigelman CJ and Allsop P agreeing).

[318] Huang v Wang [2016] NSWCA 164; (2016) 114 ACSR 586 [58] (Bathurst CJ, McColl JA and Barrett AJA agreeing).

[319] Robert P Austin and Ian M Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (LexisNexis, 17th ed, 2018) 762 [10.240.9] citing Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 (Brereton J); Ehsman v Nutectime International Pty Ltd [2006] NSWSC 887; (2006) 58 ACSR 705 (Austin J); Ragless v IPA Holdings Pty Ltd [2008] SASC 90; (2008) 65 ACSR 700 [55]-[60] (Debelle J, Sulan and Vanstone JJ agreeing). See also Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 [41] (Palmer J).

[320] Connective Services Pty Ltd v Slea Pty Ltd [2018] VSCA 229 [120] (Ferguson CJ, Whelan and McLeish JJA) citing with approval Slea Pty Ltd v Connective Services Pty Ltd [2017] VSC 609 [159] (Robson J).

[321] Metyor Inc. v Queensland Electronic Switching Pty Ltd [2003] 1 Qd R 186 [10] (McPherson JA, Williams and Wilson JJA agreeing); Fiduciary Ltd v Morning Star Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732 [47], [51] (Austin J); Ragless v IPA Holdings Pty Ltd [2008] SASC 90; (2008) 65 ACSR 700, 709-10 [35] (Debelle J, Sulan and Vanstone JJ agreeing); Daiwa Can Company v Barokes Pty Ltd [2016] VSC 296 [62]-[65] (Sifris J).

[322] Ragless v IPA Holdings Pty Ltd [2008] SASC 90; (2008) 65 ACSR 700 [35] (Debelle J, Sulan and Vanstone JJ agreeing).

[323] As to which, see the discussion in the next section of these reasons below.

[324] Charlton v Baber [2003] NSWSC 745; (2003) 47 ACSR 31 [53] (Barrett J).

[325] See Ragless v IPA Holdings Pty Ltd [2008] SASC 90; (2008) 65 ACSR 700 [38] (Debelle J, Sulan and Vanstone JJ agreeing).

[326] Fiduciary Ltd v Morning Star Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732 [47] (Austin J).

[327] Citing Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457, 464 [19] (Barrett J).

[328] [2013] FCA 143 [31] (Gordon J).

[329] However, it is to be remembered that Capital Finance itself tendered the Liquidator's Form 524 lodged 15 March 2018 and sought to rely upon it (Exhibit 2).

[330] See Capital Finance's Submissions dated 3 August 2018 [39] and [46].

[331] See the observations in Dinesh Malhotra v Sheela Tiwari & Ors [2007] VSCA 101, [75]-[77] (Chernov, Nettle and Redlich JJA). See also Fresh Start Australia Pty Ltd v Lofthouse [2006] VSC 317, [15] (Whelan J). See also Perth Freight Lines Pty Ltd v BM2008 Pty Ltd & Ors [2011] VSCA 62, [48] (Kyrou AJA, Maxwell P agreeing) and note the observations of Davies J in the judgment appealed from, VFS Group Pty Ltd v BM2008 Pty Ltd (No 2) [2010] VSC 593, [23]-[26]; [2010] VSC 593; [2010] 246 FLR 235, [23]-[26]. However, see the discussion in the final section of these reasons regarding Part 2F.1A not applying to a company in liquidation.

[332] Mr Chiavaroli's July affidavit at [35]-[37].

[333] See Mr Chiavaroli July affidavit at [142] and exhibits "LAC-4" and "LAC-7".

[334] But noting that the Liquidator indicated in the letter dated 17 July 2018 from Kemp Strang when addressing the question of assignment that he was, at least at that point, without funds.

[335] See email dated 15 June 2018 from Kemp Strang comprising exhibit "LAC-6". It should be noted for present purposes the Liquidator's personal position has been put to one side.

[336] And addressed in written and oral submissions of each party.

[337] [2013] FCA 143 (Gordon J).