• Lawyers in Sydney
• Lawyers in Melbourne
• Lawyers in Brisbane
• Lawyers in Perth
• Family lawyers
• Employment lawyers
• Criminal lawyers
• Wills and estates lawyers
• Find a lawyer

Judgment - ex tempore (revised 29 march 2017)

1. In this matter Mr Perera seeks, by Amended Notice of Motion which he has not yet been granted leave to file, but which he has indicated he will press and which he is likely to be given leave to file, that he be added as Second Defendant under s 38(1) of the Civil Liability Act 2002 (NSW) to these proceedings, which Genworth Financial Mortgage Insurance Pty Ltd ("Genworth") seeks leave to discontinue. That is plainly an application made by Mr Perera in his personal capacity. It does not involve any interest of the existing defendant to the proceedings, Hodder Rook & Associates Pty Ltd (in liq) ("HRA"), other than for a potential adverse effect on HRA if, where its winding up has been completed and its deregistration is pending, it is forced to remain in litigation against it, which Genworth seeks to discontinue. The real issue raised by Mr Perera's Amended Notice of Motion is whether Mr Perera should be joined as Second Defendant, because Mr Perera in his personal capacity considers it to be in his proper interests to be a defendant to the proceedings. I have indicated to Mr Perera that there is no difficulty with his appearing, in his personal capacity, so far as he is the applicant on the Amended Notice of Motion and would plainly be affected by a decision whether to permit or not permit the relief which he seeks.
2. Mr Perera seeks a further order under s 471A of the Corporations Act 2001 (Cth) that he be granted the Court's approval to perform or exercise a function or power as an officer of HRA in respect of the proceedings, by representing HRA in the proceedings. Mr Perera submits that the situation which arises here is the purpose to which that section was directed. I do not accept that submission. That section is directed to the general position where a company is in winding up, a liquidator has been appointed, but some aspects of its affairs are properly handled by a director or officer of the company. It has a general application, and the legislature has not introduced it into the Corporations Act with a view to dealing with the somewhat unusual, if not unique, situation where a company has been in liquidation, the liquidator has indicated that he has completed the liquidation and requested ASIC to deregister the company, ASIC has given notice of its intention to deregister the company, and an officer seeks to represent it in proceedings.
3. A second question arises, beyond whether leave should be granted to Mr Perera to exercise powers or functions of a director under s 471A of the Corporations Act, which is the possibility that Mr Perera would require that rule 7.1 of the Uniform Civil Procedure Rules be dispensed with under s 16 of the Civil Procedure Act 2005 (NSW), to allow him to represent HRA in the proceedings. I have drawn that rule to Mr Perera's attention, but need say nothing further about it, because it seems to me that that rule would be dispensed with, and leave might well be granted under s 471A of the Corporations Act, if a conclusion could be reached that it was in HRA's interests, Mr Perera's interests or the interests of justice, for such leave to be granted. I am comfortably satisfied that it is not in the interests of HRA, Mr Perera or the interests of justice for such leave to be granted, for reasons that I will indicate.
4. It seems to me that it would not be in the interests of HRA, its creditors, or persons with any remaining interest in the winding up that such leave be granted. HRA is, as I have noted, in a winding up that the liquidator considers is complete and the Australian Securities and Investments Commission ("ASIC") has given notice of its intention to deregister the company. For all the Court knows, HRA may already have been deregistered, since at least to date, there is no current company search in evidence indicating its status, and ASIC had some considerable time ago indicated its intent to deregister the company.
5. In any event, it seems to me that there is also a more fundamental difficulty with Mr Perera's application to exercise powers on behalf HRA, by representing it in the proceedings, under s 471A of the Corporations Act, or with any corresponding application to dispense with rule 7.1 of the Uniform Civil Procedure Rules. Mr Perera indicates, in his submissions, and has confirmed in response to a question that I asked him, that at least a significant aspect of his application involves a proposition that the proceedings should continue because they will allow an opportunity for Mr Perera to vindicate his personal reputation. I acknowledge that Mr Perera submits that he also seeks to vindicate HRA's reputation, because, he suggests, although there is no evidence of it, HRA has a number of contracts with banks, notwithstanding that it is not conducting business, its liquidator has certified its winding up is complete and it is shortly to be deregistered. It seems to me difficult to see how HRA will benefit from any rehabilitation of its reputation, in circumstances that it seems inevitable that it would shortly be deregistered, and, although Mr Perera has foreshadowed an intent to seek to reinstate it after its deregistration, it appears to be currently without assets, staff, or any capacity to conduct business. It is also difficult to see how HRA could rationally form a view that any interest it may have in vindicating its reputation would be promoted by continuing as Defendant in proceedings in which substantial damages were sought against it, although there is a degree of artificiality with that proposition in circumstances that HRA has no capacity to meet any judgment in or pay any costs of any such proceedings. Mr Perera, of course, submits that it may advance both his interests to vindicate his personal reputation and HRA's interests to vindicate its reputation. He also indicates that he proposes to bring a Cross-Claim on behalf of HRA, although that Cross-Claim has not yet been put before the Court, and there are obvious difficulties with such a Cross-Claim so far as HRA is insolvent and would likely be required to provide security for costs before a Cross-Claim could be pursued.
6. The more fundamental difficulty with this matter seems to be that Mr Perera is not in a position to determine, having regard to his conflicting personal interests, what is in HRA's interests. Mr Perera's own submissions make clear that Mr Perera is driven by a wish to vindicate his own reputation. For that purpose, he seeks to have the proceedings pursued, including against HRA. Mr Perera cannot bring an independent mind to bear to the question whether it is in HRA's interests to have the proceedings pursued against it, or to expose itself to risks of a judgment against it or costs against it which it cannot meet, because his own interest in having the proceedings pursued, with him joined as a defendant so that he can vindicate his reputation, intrudes into his assessment of that question. There is no prospect of ratification or consent by HRA to that conflict, because its liquidator has resigned and does not have capacity to consent to that conflict, and there is no evidence that its creditors have done so. Even if there were consent by creditors or contributories to that conflict, it seems to me that there is reason that the Court would be reluctant to grant leave under s 471A of the Corporations Act for a conflicted officer to represent a company in proceedings, or dispense with rule 7.1 of the Uniform Civil Procedure Rules, where there is a substantial risk that decisions affecting the company would be made, possibly unconsciously, to advance the interests of the officer rather than the interests of the company.
7. A second relevant issue was the interests of Mr Perera, and I have had regard to that matter. A second, and fundamental, reason why leave should not be granted for Mr Perera to represent HRA is that his application in this case is for him to be joined as Second Defendant. As I noted above, that is a personal application, which Mr Perera can pursue, in his personal capacity, and I have confirmed that he may be heard in that personal capacity. It is not necessary, and will not advance that application, for Mr Perera to represent HRA in respect of an application made in his personal capacity. So far as Mr Perera has foreshadowed an application to reinstate HRA, if it is deregistered, then that is also an application that he may bring in his personal capacity, and he does not require to leave to act on behalf of HRA in that respect.
8. Finally, it seems to me that it is not in the interests of justice that leave should be granted under s 471A of the Corporations Act, or that rule 7.1 should be dispensed with, because a critical purpose of the latter rule is to ensure that corporate entities have the benefit of independent representation, which is ordinarily provided by legal practitioners. In some circumstances, the Court may dispense with that rule, where it is satisfied that a director's interests are not in conflict with the company's interests, and that the director may properly provide the same level of representation that a solicitor would provide, or at least a sufficient level of independent representation. If HRA were here to retain a solicitor, again putting aside the reality of its position, then that solicitor could distinguish HRA's interest from Mr Perera's interests. It does not seem to me that Mr Perera could be expected to do so, where his own interest is distinct from, and potentially in conflict with, HRA's interests. The court should not exercise a discretion under s 471A or dispense with the application of rule 7.1 in a manner that would have the result that a director who faces a conflict of interest (albeit one that Mr Perera may not fully appreciate, as a subjective matter) represents HRA in a manner that advances his personal interests and potentially not the interests of HRA in the proceedings.
9. For all these reasons, I will grant leave, to the extent that it is required, for Mr Perera to appear in respect of his own application to be joined as Second Defendant in respect of the proceedings, but will not make any order under s 471A of the Corporations Act that Mr Perera be permitted to perform or exercise any functions or powers as an officer of HRA in respect of these proceedings, or grant leave for him to represent the interests of HRA, to the extent that such leave is required, or dispense with the application of rule 7.1 of the Uniform Civil Procedure Rules.