Flourishing Land Development Group Pty Ltd v A1 Property & Maintenance Group Pty Ltd

1. The matter be stood over to 7 November 2017 at 9.15 am. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

GLEESON J: 1 By originating process dated 4 September 2017, the plaintiff ("Flourishing") seeks leave to commence a proceeding in the Local Court of New South Wales against A1 Property and Maintenance Group Pty Limited in liquidation ("the company") pursuant to s 471B of the Corporations Act 2001 (Cth). Section 471B provides, relevantly: While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property; except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. 2 The form of order sought by Flourishing and not opposed on behalf of the company is as follows: 1. The Plaintiff be granted to leave to seek orders in Local Court proceedings number 2016/00367326 (the Local Court Proceedings) against the defendant, specifically seeking orders that the defendant be joined to the Local Court Proceedings as an intervenor. 2. No order as to costs. 3 The evidence in support of the application is an affidavit of Carl Ku, Flourishing's solicitor, made on 4 September 2017. 4 Mr Ku states that the company is in liquidation. The evidence does not disclose whether the company is being wound up in insolvency or by the Court, as opposed to being the subject of a voluntary winding up. 5 In the absence of evidence on this matter, I cannot be satisfied that the Court has power to grant leave under s 471B of the Act. 6 Flourishing's proposal to join the company to the Local Court proceeding is curious, and the Local Court's power to join the company to the proceeding was not explained. The Local Court proceeding is an action against Flourishing for moneys due for works done or material provided by Denise Medich. Ms Medich is a director or former director of the company and the invoices on which her claim is apparently based were issued by the company. The basis upon which Ms Medich may have a personal entitlement to relief in the Local Court proceeding is not apparent. 7 According to Mr Ku, the company claims that it, and not Ms Medich, is entitled to the amounts claimed from Flourishing in the Local Court proceeding. As I understand Flourishing's position, it disputes that it is indebted to either Ms Medich or the company. There is no suggestion that Flourishing wishes to seek relief against the company in the Local Court. For example, it is not suggested that Flourishing seeks a declaration that it does not owe a debt to the company, or that the Local Court might have jurisdiction to grant such relief. 8 The purpose of s 471B is to ensure that a company in liquidation does not face a multiplicity of legal proceedings that are expensive, time consuming, and potentially unnecessary: Swaby v Lift Capital Partners Pty Ltd [2009] FCA 749; (2009) 72 ACSR 627 at [22], Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (recs and mgrs apptd) (in liq) (No 2) [2009] FCA 42; Cryovac Australia Pty Ltd v Aus-Lid Enterprises Pty Ltd [2017] FCA 1027 at [3]. Evidently, the liquidator has a responsibility in relation to these matters, and I have no reason to think that he has not given due consideration to the most efficient way of dealing with the alleged debt due by Flourishing. However, the liquidator has not given evidence. 9 As a practical matter, I understand that Flourishing is seeking to have the question of the disputed debt resolved in one proceeding in the Local Court. However, I do not understand how that could be achieved by Flourishing seeking to join the company as a defendant to the Local Court proceeding. In the absence of any identification of the proceedings sought to be commenced against the company, I am concerned that what is proposed is misconceived and may impose unnecessary costs on the liquidation of the company to the potential detriment of its creditors. 10 I note that if the liquidator wishes to bring an action against Flourishing, it may do so without the grant of leave under s 471B. 11 Accordingly, I am not prepared to grant the relief sought today. I will stand the matter over to Tuesday, 7 November 2017 at 9.15 am. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.