Frisken in his capacity as liquidator for ACN 610 031 224 Pty Ltd (formerly known as Diamond Valley Puppy Sales Pty Ltd) v DVK FARMING PTY LTD

District Court of NSW|2022-11-16|Before: Mr J

INTRODUCTION

This proceeding commenced on 14 January 2022. It was commenced by the liquidator of a company in liquidation. That company has had various name changes but at the material time, was known as Diamond Valley Puppy Sales Pty Ltd. It was incorporated on 4 January 2016. Its sole director, secretary and sole shareholder was Ms Lisa Howlett.
Put very simply, it concerns the sale of the business, of the nature of a dog breeding business, predominantly Cavoodles, in the retail sales market, and operating from premises at Diamond Valley in Queensland. The sale was from Diamond Valley Puppy Sales Pty Ltd (as vendor) to the defendant, DVK Farming Pty Ltd (formerly known as Diamond Valley Kennels Pty Ltd) (as purchaser). Ms Howlett's spouse (Mr Michael Cross) is the sole director and secretary of the defendant.
There is evidence to indicate that the sale occurred as part of a voluntary liquidation of the former company in liquidation. The sale was completed on or about 1 July 2020. The liquidator complains that although the vendor transferred the assets and business, the purchaser failed to make the payment of the purchase price of approximately $208,000.
The purchaser admits to not paying the purchase price in accordance with the share sale agreement of 1 July 2020, but contends in its defence (filed 17 February 2022) that by verbal variations to that agreement, the date for payment was extended (to 6 July 2020) (a matter the liquidator does not dispute) and, more significantly, that in lieu of payment of the purchase price, the purchaser would forgive certain debts for canines previously provided by the purchaser to the vendor and promised to provide more canines to the vendor in the future (a matter hotly in dispute). Other defences raised included that the liquidator was not the proper plaintiff; a 'representation estoppel' concerning set-off of the purchase price against the running account and statutory set-offs (under s 21 of the Civil Procedure Act 2005 (NSW) and/or s 553C of the Corporations Act 2001 (Cth). The vendor points to certain matters in support of the argument that the posited defence of variation is hopeless.

The application for dismissal

The provenance of this application appears to be a direction by the Court on 12 April 2022, that the plaintiff serve their affidavit evidence in chief by 15 June 2022. This was to occur after the defendant answered requests by the plaintiffs for particulars. Those requests were answered on 4 May 2022. In accordance with the timetable directed by the Judicial Registrar, the next step was for the plaintiff to serve its evidence in chief.
But on 15 June 2022, the date for directed service of its affidavit evidence, the plaintiff foreshadowed its intention to amend. Through its solicitors, it indicated that it expected to serve a proposed amended pleading within a fortnight (29 June). Mr Sewell sent a letter two days later indicating proposed regime to consider the amendments
It took longer for the plaintiff to serve its proposed amended pleading than it indicated. Moreover, the plaintiff had still not served the proposed amended pleading by 27 July 2022, the date Mr Sewell prepared his affidavit. Ultimately, the proposed pleading was only served no later than 18 August - a period of about two months.
In a separate affidavit, Ms Nikolic engaged in what was really argument in defence of the time taken to prepare the proposed amended pleading.
The liquidator cited the defendant's own delay, stretching over, three months, in providing particulars of its defence (notwithstanding directions from the Judicial Registrar), effectively to argue that the defendant was being hypocritical in seeking the dismissal of the proceeding on a single act of default by the plaintiff enduring in a lesser period, only over two months.
In the circumstances, I am not persuaded that dismissal of the proceeding under r 12.7 is warranted. Although there has been delay, it is far from the worst of its kind in civil litigation in the Court. In retrospect, the original estimate of 15 June for the completion of a proposed amended pleading was a significant underestimate. Circumstances I will shortly touch upon indicate that the plaintiff's lawyers were in the process of getting new Counsel's advice and input. That took time. Nor do I find persuasive the suggestion that the liquidator should have been expected to go to the trouble of preparing the plaintiff's evidentiary case from the time when the defendant gave notice of its intention to strike out the pleading and apply for dismissal for due despatch. Its pleading was in a state of flux.
The remedy under r 12.7 is severe and usually is exercised after a more protracted period and repeated defaults in directions after indulgences and/or extensions of time are given by a Court. It is not to be used as effective punishment for delay of this relatively modest length for a singular act of default especially in the absence of actual prejudice to the defendant. The proceeding is not that old. I take into account, also, the competing prejudices to the parties (per s 58(2)(b(vi) of the Civil Procedure Act). I agree with the plaintiff that there is no demonstrable prejudice to the defendant if the claim is allowed to proceed. That is against the prejudice to the plaintiff if the application is acceded to, being the plaintiff's exposure to a costs liability in relation to the entire proceeding.
The defendant's application for dismissal of the proceeding for want of due despatch is dismissed.

Joinder application

Dealing with the application for joinder first, it is to be noted that when the proceeding commenced it was brought in the name only of the liquidator, and not Diamond Valley Puppy Sales Pty Ltd. This was picked up by the defendant who challenged the liquidator's standing to sue in his own right.
Section 477(2)(a) of the Corporations Act 2001 (Cth) provides that a liquidator may bring or defend any proceeding "in the name and on behalf of the company".
When the defendant took the point, the liquidator acknowledged that the extant claim for breach of the share sale agreement should have been brought in the name of the company, which is why he now asks the Court to exercise its power under r 6.24 of the UCPR (and s 64(2) of the Civil Procedure Act) to join the company as second plaintiff. This, the liquidator argued, would not occasion any (real) prejudice to the defendant.
The defendant submitted that joinder of the corporate plaintiff should not be permitted. The existing cause of action, being for breach of the asset sale agreement, did not disclose a reasonably arguable cause of action, because the wrong moving party was identified as the plaintiff. As I understood its Counsel to submit, the action for breach of the share sale agreement was, in any event, doomed to fail because the evidence, as a whole, indicated that the debt had been paid. On that view, it made no difference if the corporate plaintiff was effectively substituted for the liquidator. In this way, the defendant's main point opposing joinder was subsumed in its position that the whole of the proceeding (with or without the proposed amended actions) should be summarily dismissed.
The point of the joinder of the corporate plaintiff is to have the correct plaintiff to run the action in existence when the proceeding commenced. It is the liquidator himself who has the standing to bring the actions under the Corporations Act, which are the subject of the proposed amendments.
The defendant's submissions concerning joinder are unpersuasive. The point about joinder is anterior to the issue about the validity of the pleading of the application and the proceeding as a whole. Rule 6.23 of the UCPR indicates that proceedings are not defeated because of the misjoinder (or non-joinder) of any person as a party. The liquidator accepts that a mistake was made in the misjoinder of the person who had the right and title under the existing cause of action for breach of contract. The joinder would permit the correct person (the corporate plaintiff) to be named. There is no other alteration to the facts to support the existing action for breach of the asset sale agreement. I agree with the plaintiff that the power in s 64(2) of the Civil Procedure Act is also apposite to correct the mistake. There is no sensible prejudice to the defendant by changing the name of the party with the right or title, in the requisite sense.
Leave is granted to join the company ACN 610 031 224 Pty Ltd (formerly known as Diamond Valley Puppy Sales Pty Ltd (in liq).

Explanation for delay

Ms Mannah explains in her affidavit (18 August 2022) that after the Defence was filed (17 February 2022), the liquidator was dissatisfied with the advice of its previous Counsel and engaged new Counsel, who advised the plaintiff to run new causes of action, including the joinder of a second defendant, which had a different ACN to the first defendant, but strangely, it seems, was formerly known by the same name - Diamond Valley Kennels Pty Ltd - as the first plaintiff.
Although there is an absence of detail as to the dates in which all this occurred, I am satisfied that, consistently with the expectation for amendment applications as indicated in Aon Risk Services Australia v Australian National University (2009) 239 CLR 175, adequate explanation has been supplied.
As Ms Mannah has summarised the proposed amendments in her affidavit, these are intended to: (b) indicate a new cause of action that the company's transfer of assets, under the agreement entered into in July 2020, was an insolvent transaction and was a voidable transaction, contravening various provisions of the Corporations Act 2001 (Cth). This new cause of action is pleaded at paragraphs 15 - 22 of the proposed amended pleading; (c) indicate an alternative cause of action, being that if the asset sale agreement was (as the defendant had alleged) varied, it was void for uncertainty, with the result that the assets be transferred to the plaintiffs. This new cause of action is pleaded at proposed paragraphs 23 - 24 of the proposed amended pleading; (d) indicate that in the 'Relief' section of the proposed amended pleading, serial declarations are sought under the Corporations Act and, in relation to the alternative proposed new action, a declaration as an equitable remedy.
The question is whether the Court should exercise its discretionary power under s 64 of the Civil Procedure Act 2005 (NSW).

The approach to considering the amendment application

But before addressing discretionary considerations, however, the Court needs to be satisfied that there is utility in the amendments being allowed. It is commonly required that the proposed amendments are made for a proper purpose and, to the extent that new causes of action are alleged, the prospective new cause(s) of action is, or are, reasonably arguable and not liable to be struck out: the Court will not permit an amendment if that was to be futile (Ritchie's Uniform Civil Procedure (NSW), [64.5]).
The defendant goes further than this, however. Counsel for the defendant acknowledged that what his client was arguing that the proposed new causes of action (as well as the existing action, for breach of the asset sale agreement) were so manifestly groundless on the facts that the Court would not permit the amendments. Counsel acknowledged that his submission was to be measured against the standard for applications for summary dismissal, under r 13.4 of the UCPR. Counsel also submitted that on an amendment application, where the objecting party signals opposition to the amendments, the party moving the Court for an amendment has to prove a prima facie case. Counsel further argued that a plaintiff who commences a proceeding can plead the actions that it wants, without limit. But once it has pleaded its case (and presumably once any right to amend without leave under r 19.1 of the UCPR has been exhausted), it carries an onus, if there is contest about whether leave should be permitted, of proving that the new actions are not manifestly groundless.
In support of his submissions favouring this approach, Counsel for the defendant referred the Court to the decisions of Dennis v Australian Broadcasting Commission [2008] NSWCA 37 ("Dennis"), Douglas v Madden (No.2) [2009] NSWSC 194 ("Douglas") and Hudson Investments Group Ltd v Atanaskovic [2010] NSWSC 1066 ("Atanaskovic") to support the defendant's approach.
Uninstructed by authority to support them, I do not agree with these submissions, which would have very wide-ranging practical consequences for the Court's adjudication of hard fought commercial litigation of the kind evidenced by this particular litigation. It would be a rare case where in commercial litigation, the hopelessness of a moving party's case, which is not otherwise seriously challenged for non-compliance with basic pleading requirements under Part 14 (although the defendant did take a point about the absence of particularity of some of the new allegations), was illuminated at an interlocutory level. Especially is that so in a case like the present where a new action relies upon proof of a defendant's insolvency which is usually replete with a detailed mosaic of facts. This is so even if evidence on applications for summary disposal applications is permitted (r 13.4(2)) of the UCPR). A practical reason for that is that summary disposal of a plaintiff's case deprives the plaintiff of the opportunity to invoke court processes to prove the case. There is an also an element of unfairness to a plaintiff, where as is the case here, the defendant has not even put on a defence to the actions which, ex hypothesi, the plaintiff has not yet been permitted to run in a way that would crystalise issues for resolution. The plaintiff has not yet been properly apprised of matters raised by the defendant in possible answer to the new actions other than inferentially through Ms Howlett's voluminous affidavit and oral submissions made, without prior notice: in other words the issues on the prospective new actions have not been crystallised.
It was somewhat revealing that at certain points in his submissions, Counsel for the defendant argued that the amendments intended to bring about new causes of action should not be permitted since it was manifest that they lack "reasonable prospects of success". Perhaps inadvertently, that is a reference to the standard of proof for arguable claims raised in the Federal Court of Australia by reason of s 31A of the Federal Court of Australia Act 1976 (Cth). However, the test in s 31A under that legislation is inapposite to a proceeding in this Court, governed by different legislation and Court rules. The question, so it would seem to me, is whether the proposed amended actions should be denied because they are manifestly groundless in accordance with General Steel principles.
I am also inclined to disagree, in the absence of authority, with the suggestion that where a defendant objects to a plaintiff's application to amend on the ground (not articulated in any formal sense, such as might have emerged by a defence to an action), the onus falls upon the plaintiff to prove a prima facie case. What is happening, in reality, in this case, is that the defendant is pre-emptively bringing a summary disposal application in opposition to existing and new actions. Recognising that reality, the onus, in my opinion, would fall upon the defendant, as the objecting party, to persuade the Court that there is such a high degree of certainty that the new actions would fail, so as to deprive the plaintiff of the opportunity to run the case, with the benefit of the usual means of eliciting proof through the court processes, that it would be futile to allow amendments.
I will now consider the authorities that the defendant drew to the Court's attention. I do not read anything in Dennis as supportive of the defendant's contentions. The facts of that case were an extreme case of the plaintiff, to a defamation suit, unsuccessfully applying to the Court for a sixth version of a pleading, even during a trial. Although general observations were made by the Court of Appeal about pleading practice following the (then) recent enactment of the Civil Procedure Act 2005 (NSW), those observations do not speak to what a party moving the Court for amendment needs to do, in terms of proof of things, or disproof of other things.
Nor, in my view, does Atanaksovic supply authority for the defendant's approach. Relevantly, a plaintiff in a professional negligence suit against a firm of solicitors applied to amend the action to include a new action for breach of fiduciary duty. The firm's argument in opposition to the amendment, which the Judge in that case accepted, was that such action was not known to the law. Put another way, as a matter of pleading, under Part 14, it would have been liable to be struck out because it did not disclose a reasonable cause of action on the law. The amendment application did not fail because the plaintiff did not, in the face of the firm's opposition, fail to prove a prima facie case or failed to adduce enough evidence to enable the Court to form a view that there was substance to the case.
The decision of the Supreme Court in Douglas does not assist the defendant either. That case did not involve an application to amend, but rather involved an application to vary a self-executing order. Whilst Schmidt AJ referred to other authorities which looked at the way that the Court might approach the discretionary task of deciding amendment applications (including Dennis itself, but also reference to Kirby J's decision in The State of Queensland & Anor v JL Holdings Pty Ltd (1996) 189 CLR 146 at 169-172)), there was nothing in the passages cited from those earlier decisions which support the approach commended to the Court here. Arguably the closest anything that was said by her Honour which might assist the defendant here was that in the context of the case she was deciding (an application to vary a self-executing order), the applicant carried an 'onus' to establish the basis for the variation by explanation (at [19]-[20], [22]-[24]). That is, the onus fell upon the applicant for a variation of an earlier court order to explain why it should be altered. The context was vastly different to what is presently in issue.
My rejection of the defendant's suggested approach for determining whether the amendments should be permitted has, as shortly will be shown, a decisive bearing upon my determination of the application itself.

The Liquidator's submissions

The liquidator argues that these amendments are responsive to the defence of variation that the defendant relies upon on the action for breach of the asset sale agreement. They might have been run in a Reply, but that would have deprived the defendant the right to traverse them in the Defence. He argues that the defendant has not pointed to any prejudice from the amendments (the action for breach of the agreement has not been abandoned). The proposed new actions concern the same transaction. He argues further that the amendments are proper, both as to form and substance. There is no submission by the defendant, in receipt of the proposed amendments since 18 August 2022, to the contrary.

The defendant's submissions

In opposition to the amendment application, the defendant principally relies upon Ms Howlett's affidavit (12 September 2022). She was formerly the sole director of the second plaintiff, from its registration (on 4 January 2016), until its liquidation.
Amongst other things, Ms Howlett deposed (at paragraphs 6-21) that:

She had authority to prepare the affidavit for the defendant, even though she was a director of the company in liquidation (the prospective second plaintiff);
The proposed second plaintiff sold dogs that had been provided to it by wholesalers or by the defendant;
Before it was wound up, the proposed second plaintiff maintained its records through MYOB software maintained by the company's bookkeeper (Ms Simone Davies).
a range of transactions between 16 December 2019 and 1 April 2020 for the proposed second plaintiff's purchase from the defendant were accounted for in that software.
On 3 April 2020, the proposed second plaintiff and the defendant entered into a security agreement registered on the PPSR; which had the effect that the defendant held a security interest over all the dogs it supplied to the proposed second plaintiff;
Further transactions for the purchase by the proposed second plaintiff from the defendant occurred between 15 April 2020 and 17 September 2020 and these were also recorded on the MYOB software.
She believes all of the transactions so recorded in the software could be verified by primary documents (stock records and bank account statements).
Once all the canines recorded in these transactions were sold, the proposed second plaintiff ceased to trade.
So far as she was concerned, she complied with her obligations to the first plaintiff in terms of the provision of a report on the proposed second plaintiff's activities.
She believed that the liquidator had not undertaken review of primary records underlying the transactions, a belief sourced on information supplied to her by the bookkeeper.

Ms Howlett went on (from paragraph 22 on) to effectively engage in the merits of the contentions that are raised by the proposed amendments. Thus, she deposed to matters which informed her beliefs that:

The property the subject of the share sale agreement was sold at appropriate (market) value;
Sales occurred which had not been accounted for by the liquidator, which were genuine.
Information was supplied to the liquidator on 8 April 2021 in response to the demand for repayment which was ignored;
Contrary to the liquidator's contention, the assets of the business were transferred for value;
The liquidator did not conduct proper investigations;
Her husband (Mr Cross) and the bookkeeper tell her that neither have been contacted by the liquidator;
The liquidator has not reviewed the MYOB file.
There is no prospect that the liquidator will be able to prove that the consideration for the sale of the assets was not 'credible'.

On the basis of this evidence, Counsel for the defendant argued that, in relation to the existing action (for breach of the Asset Sale Agreement) the liquidator had not adduced evidence to counter the defendant's contentions that the purchase price had been paid in kind, which amounted to valuable consideration. I refer to his written submissions (MFI 1) (at paragraph 14) as to the steps in this particular argument. Details of his client's other grounds for defence (estoppel) and set-offs appear at paragraphs 16 - 17 (incl) and 18 - 21 (incl), respectively. Counsel argued, in relation to the prospective applications for relief under the Corporations Act 2001 (Cth), that the liquidator was obliged to explain what investigations he had undertaken which has led to the new actions and also criticised what he characterised as deficiencies in the particulars to those actions.

Liquidator's submissions in reply

Counsel for the plaintiff referred the Court to evidence before the Court to show that if (contrary to what he had submitted and what I have found) there was any need for the liquidator to prove matters supporting the likely success of the new actions, if permitted to run, such evidence was before the Court. He referred the Court to the liquidator's report to creditors (in Exhibit F on the application), in which the liquidator: (a) opined that the defendant was insolvent prior to the entry into the Asset Sale Agreement; (b) contemplated inquiries being made into some of the actions under the Corporations Act which the liquidator now seeks to run (to prove that the idea of bringing such actions did not suddenly come out of the blue). The liquidator's Counsel also referred the Court to the Recital (A) to the Asset Sale Agreement to argue that an inference could be drawn that Ms Howlett had been propping up the corporate plaintiff, so that without her support it was insolvent. These arguments provoked some further argument by Counsel for the defendant in reply.

Consideration

I have indicated my approach to considering the application and have rejected the approach that the defendant invited the Court to take. On the existing action (for breach of contract) the parties are evidently in issue. For the existing action, the defendant did not, in its motion, rely upon rule 13.4 of the UCPR which I consider should have been done. By its motion, it reasonably signalled a narrow basis for strike out, being the circumstance that the proper plaintiff was not identified. It was not unreasonable for the liquidator to fight that strike out application on that narrow basis without expecting a summary dismissal application to be brought; which is effectively what occurred. In short, he was entitled to think that if the joinder issue was rectified, he would not have to participate in a 'mini-trial' to justify maintenance of the pleading insofar as that concerned the existing cause of action. It is inappropriate for the Court to factually engage in effectively a final determination of all of the factual and legal bases of opposition to the existing cause of action identified in Counsel for the defendant's submissions. In my opinion, Ms Howlett's evidence, and that of Mr Sewell does not indicate a high degree of certainty that the existing or new causes of action are highly likely to fail. Especially in Ms Howlett's case, she has substantially relied upon evidence, on information and belief, effectively depriving the plaintiff of the opportunity to test it. Where a defendant seeks to run a de facto summary disposal application by means of evidence, Ms Howlett's evidence on information and belief is far from conclusive.
The defendant may have thrown down the gauntlet to the liquidator as to whether he can plug the gaps or answer the merits of Ms Howlett's 'beliefs', but that should occur in a context where the parties have the opportunity, in the light of the clear identification of the real issues, to prove their cases; deploying, as they see fit, the court's processes, such as subpoenas and discovery. It is inappropriate to deprive the liquidator from the opportunity to do so.
It is even less apposite for the Court to effectively finally determine legal or factual matters concerning the prospective new actions. The defendant's arguments were only really touched upon in oral argument and, necessarily, without the plaintiff receiving prior notice of potential grounds of defence for the prospective new actions. As in any case involving actions contended upon corporate insolvency, the facts are likely to be contentious and will require, in all likelihood, substantial evidence. Such action should not now be nipped in the bud.
What I have said so far, of course, says nothing about the Court's view as to the likely success of the existing action or causes of action which the liquidator proposes to add.
What is revealing about Ms Howlett's affidavit is the absence of any suggestion that she is unable to meet the new cases before the scheduled hearing; which might indicate that the defendant is in some way prejudiced by the amendments. She has clearly given very close thought to the proposed new allegations and the defendant, to the extent that it relies upon her evidence, has time to respond. To the extent that certain matters were raised by the defendant's Counsel about the adequacy of the pleading, in my view, they could probably be cured by the provision of particulars in response to any reasonable request. In saying so, however, I do not mean to foreclose the possibility that the point might reasonably be taken down the line about such particulars. It depends on what is requested and the answer to it.
Reference was made by the defendant's Counsel in argument to some pre-litigation correspondence (Exhibit H). This, it seemed was partly done to prove that the defendant had earlier argued that the new Corporations Act actions did not fly and that the liquidator had not engaged with that argument prior to the motion to amend either persuasively or at all. The circumstance that the parties had briefly sparred over actions that the liquidator now wishes to run, but did not run when he commenced this proceeding does not, in my view, represent a bar to his bringing them now.
No other matters are pointed to by the defendant, with reference to s 58(2) of the Civil Procedure Act 2005 (NSW) which would stand in the way of the amendments being allowed; save for the aspect of delay which I have dealt with when considering the application for dismissal for want of due despatch. To the contrary, a powerful reason to permit the amendments (insofar as they raise new actions) is to avoid the necessity of the liquidator commencing a separate proceeding, in accordance with the general preference of the Court to avoid the multiplicity of proceedings.
I am satisfied that the dictates of justice favour the grant of the amendments.
The Court grants leave to the plaintiff to amend the pleading in accordance with what is proposed in Ms Mannah's affidavit dated 18 August 2022, subject to any refinements the plaintiff considers appropriate having regard to his consideration of oral arguments raised on behalf of the defendant at this hearing.
The grant of leave is on terms that the first plaintiff pay the costs occasioned to the defendant by the amendments. On the issue of the costs of the application at the hearing, both parties wish to be heard and I will hear brief argument.

The transfer application

Application is brought to the Court to transfer the proceeding to the Supreme Court under s 144 of the Civil Procedure Act 2005 (NSW) on the basis of the nature of the relief sought under the Corporations Act 2001 (Cth) and, also the equitable relief for avoidance of the share sale agreement.

Submissions

The plaintiff submitted that: (a) the declaration regarding the avoidance of the Asset Sale Agreement (as varied, on the terms posited by the defendant) for uncertainty and (b) the order for transfer back of the assets were prayers for relief which did not fall within the Court's (equitable) jurisdiction. When I asked Counsel for the plaintiff what was the nature of the claim for an order transferring back the assets, I understood him to submit that this was restitutionary in nature.
The plaintiff's Counsel also argued, in the alternative, that another reason for doubting this Court's jurisdiction is that the defendant had flagged its intention to rely upon an equitable set-off.
The defendant submitted that there was no proper basis for a transfer to the Supreme Court. First, on the matter of uncertainty of contract, the remedy of avoidance for uncertainty was not distinctively equitable in nature. It could be ordered in a common law court. Secondly, although it was true that a defence of equitable set-off was raised, it is a common place in litigation in this court for a common law (breach of contract) to be partly met by an equitable defence (an equitable estoppel was an example used in argument). The jurisdictional issue centred properly upon the nature of the plaintiff's claim. Third, insofar as the liquidator sought to run actions under the Corporations Act 2001 (Cth), the combined operation of ss 58AA, 588FF (especially s 588FF(1)(b)) and 1337B of that legislation was such that, within the monetary limit of its jurisdiction, this Court had jurisdiction to entertain those claims.

Consideration

By Part 9 of the Civil Procedure Act 2005 (NSW), this Court is generally prevented from transferring proceedings commenced here to the Supreme Court. An exception lies in s 144(2), but that exception only applies if during the proceedings, this Court decides that it "lacks, or may lack" jurisdiction to hear and dispose of the proceedings to the Supreme Court. The provision makes it clear that if the Court reaches that state of mind, it "must" transfer the proceeding.
The Court's general equitable jurisdiction appears in s 134 of the District Court Act 1973 (NSW); for equitable defences, under s 6 of the Law Reform (Law and Equity) Act 1972 (NSW) ("Law and Equity Act"); and when a proceeding has been transferred to this Court by the Supreme Court, s 149 of the Civil Procedure Act. The Court's equitable jurisdiction was considered by the Court of Appeal in Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150 at [83]-[100]; also Reid v Commonwealth Bank of Australia [2022] NSWCA 134 at [18].
I am not persuaded that a contention that a varied Asset Sale Agreement, in the terms posited by the defendant, is void for being uncertain is an equitable claim, in nature. If anything, although pleaded in a statement of claim, it is really a defence to the defendant's posited version of the agreement (as varied) which, as Counsel for the plaintiff explained, was intended to be inserted in a statement of claim so as to permit the defendant a practicable opportunity to respond. In such a way, the uncertainty argument is substantially being raised as a 'defence' which, if that defence is truly equitable in nature, this Court would have jurisdiction under s 6 of the Law and Equity Act, to adjudicate upon. The plea of avoidance for uncertainty would not necessitate an independent claim for relief, which is a well-known litmus test for whether equitable defences can be run in this Court. [1]
I also agree with the defendant that the relief sought under the Corporations Act actions is statutory; and not equitable in nature. For completeness, I add that the circumstances that the proposed prayers for relief include multiple prayers in the nature of declarative relief does not transform the nature of what the liquidator really seeks, which is a statutory order (or orders) under s 588F(1) of the Corporations Act.
I further agree with the defendant that the circumstance that a (common law) action for breach of contract for damages has been met with a defence of equitable set-off does not deprive the Court of jurisdiction to determine the claim. Section 6 of the Law Reform (Law and Equity) Act permits the Court to give effect to the equitable defence in the same way that the Supreme Court would. [2] It is also being relied upon as a defence rather than as a counter claim.
In the circumstances, I have not reached the state of mind required under s 144(2) of the Civil Procedure Act that obliges me to transfer the proceeding to the Supreme Court.
The application for transfer is dismissed.

The defendant's strike out application

The only basis for this application was that the liquidator was wrongly named as the plaintiff for the action in contract. Putting aside the amendments directed to introducing new causes of action (in the liquidator's name) there was no argument that the remaining paragraphs to sustain the existing action, the claim for breach of the Asset Sale Agreement, did not disclose a reasonable arguable cause of action to justify the defendant's invocation (in order 2) in its notice of motion of the strike out power under r 14.28 of the UCPR. The defendant's concern was only the identity of the proper plaintiff. That issue has now been resolved by the Court's decision on the joinder application so as to render consideration of the strike out application otiose. I would add also, that if a defendant considers that the wrong plaintiff has commenced the suit, where it believes another entity or person was the correct plaintiff, it would only be a rare case that this circumstance would likely lead to the significant result that the entire action should be struck out in the Court's discretion. The power to strike out should not be a remedy of first resort.

SUMMARY & ORDERS

To recap, for the reasons I have given, the Court has: 1. dismissed the application for dismissal for want of due despatch; 2. granted leave to join the company as a second plaintiff; 3. granted leave to the plaintiff to amend the statement of claim as proposed; 4. dismissed the application for transfer of the proceeding to the Supreme Court; and 5. in circumstances where joinder has been allowed, the defendant's strike out application in relation to the original statement of claim, is otiose.
In accordance with those reasons, the Court orders: 1. The defendant's notice of motion dated 27 July 2022 is dismissed. 2. Pursuant to r 6.27 of the Uniform Civil Procedure Rules 2005 (NSW) (and, if necessary, s 64(2) of the Civil Procedure Act 2005 (NSW)), leave is granted to join the company ACN 610 031 224 Pty Ltd (formerly known as Diamond Valley Puppy Sales Pty Ltd (in liq)), as second plaintiff. 3. Pursuant to s 64 of the Civil Procedure Act, the plaintiffs have leave to file and serve an Amended Statement of Claim in accordance with the affidavit of Joanne Mannah, sworn 18 August 2022 subject to the qualification I referred to earlier in these reasons (at [53]), by 28 November 2022. 4. Orders 2 and 3 are made on terms that the first plaintiff pay the defendant's costs thrown away by the joinder of a second plaintiff and costs occasioned by the amendments. 5. The application in prayer 5 of the plaintiff's notice of motion dated 19 August 2022 is dismissed.
The Court further directs that: 1. the parties are at liberty to make submissions as to costs of the various interlocutory applications as follows: 1. the plaintiffs are to serve written submissions (strictly not exceeding 3 pages, excluding relevant evidentiary attachments) by 24 November 2022; 2. the defendant is to serve written submissions (strictly not exceeding 3 pages, excluding relevant evidentiary attachments) by 28 November 2022; 3. copies of written submissions are to be emailed to my Associate (in PDF and Word Format) contemporaneously upon service; 4. costs will be determined on the papers. 1. upon receipt of the sealed Amended Statement of Claim, the defendant is to make any reasonable request for particulars of the new causes of action introduced by the amendments by 5 December 2022; 2. by 19 December 2022, the plaintiffs are to provide answers to proper requests for particulars; 3. by 27 January 2023, the defendant is to file and serve a Defence to the Amended Statement of Claim; 4. by 10 February 2023, the plaintiffs are to file and serve any Reply to the Defence; 5. the proceeding is listed for further case-management before the Judicial Registrar on 17 February 2023.

Endnotes

Finnane et al, Equity Practice and Precedents (Law Book Co, 2008) citing Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 at 23.
Taylor Farms (Aust) Pty Ltd v A Calkos Pty Ltd & Ors [1999] NSWSC 186 at [74]

Amendments 22 November 2022 - Typos corrected at [3], [32], [49] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 November 2022

Civil Procedure Act 2005(NSW)ss 21, 58, 64, 144

Corporations Act 2001(Cth)ss 58AA, 477, 553C, 588FF, 1337B

Uniform Civil Procedure Rules 2005(NSW)rr 6.23, 6.24, 6.27, 12.7, 13.4, 14.28, 19.1

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