Before the Court today are two Notices of Motion in two separate matters. Both matters were commenced by Summons filed in the Commercial List on 23 August 2022. The plaintiff and the second defendant are the same in each matter.
It is convenient to deal first with the matter involving Tokio Marine & Nichido Fire Insurance Co. Ltd, which is the first defendant in matter 2022/250620. The plaintiff, Horizon Capital Fund, is a trade finance company which provided finance to the second defendant, Rhodium International Trading Limited. The second defendant is a company incorporated in the Federal Territory of Labuan in Malaysia. It has been in creditors' voluntary liquidation since 16 June 2022. The liquidator, or at least the interim liquidator, is a Mr Tuan of RSM Corporate Restructuring of Kuala Lumpur. The second defendant is an insured under a trade credit policy issued by the first defendant, Tokio Marine & Nichido Fire Insurance Co. Ltd. The first defendant is registered in Australia as a foreign company.
The plaintiff claims to be an assignee from the second defendant of its interest in all moneys, proceeds and other amounts assured by or to become payable to the second defendant under or by virtue of the policy. The plaintiff further claims that the first defendant became obliged to pay a considerable sum of money to the second defendant pursuant to the policy, but has failed to make the payment. The plaintiff claims that, as the second defendant's assignee, it is entitled to be paid that sum by the first defendant.
There is no issue concerning service upon the first defendant. It has entered an appearance and has participated in the proceedings. Service has also been effected upon the second defendant, outside Australia, as described further below, but it has not entered an appearance. By a Notice of Motion filed on 21 February 2023, the plaintiff seeks the leave of the Court under Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 11.8AA to proceed against the second defendant notwithstanding its failure to enter an appearance.
UCPR r 11.8AA (1) provides:
If an originating process is served on a person outside Australia and the person does not enter an appearance, the party serving the document may not proceed against the person served except by leave of the court.
The Notice of Motion is supported by two affidavits sworn by Grace Feehan, solicitor, on 21 February 2023 and 29 March 2023, and the exhibits to those affidavits.
The first defendant neither consents to nor opposes the Notice of Motion, but it has drawn to the attention of the Court two matters that it says arise in relation to it. Those matters have been noted, but do not seem to me to bear directly upon the question of leave under UCPR r 11.8AA. They are, rather, matters that may arise in the future if the second defendant does not take an active role in the proceedings.
In dealing with the motion, it is first necessary to consider the evidence in relation to service upon the second defendant. The plaintiff has sought to serve the second defendant in accordance with UCPR r 11.4(1) which provides:
Originating process may be served outside of Australia without leave in the circumstances referred to in Schedule 6.
It appears that after being sent by email, the Summons and the Commercial List Statement were served by delivery to the office of the second defendant's liquidator on 28 August 2022. That is apparent from signed acknowledgments of receipt. It further appears that those documents were received by post at that office on 9 September 2022. That is apparent from information provided by Australia Post.
I am satisfied that those modes of service were in accordance with the law of Malaysia, in particular s 513(2) of the Companies Act 2016 (Malaysia), so as to satisfy UCPR r 11.8AC.
I am further satisfied that the service occurred in the circumstances referred to in Schedule 6 to the UCPR. In particular, it is my view that the claim the subject of the originating process falls within at least sub-paragraphs (b)(ii) and (h)(i) of Schedule 6. It seems to me that the claim is for the enforcement, interpretation of, or other relief in respect of a breach of a contract which was made through an agent trading within Australia (namely, BCC Trade Credit Pty Limited). It is also a situation where the second defendant, being a person outside of Australia, is a necessary or proper party to a proceeding properly brought against another person, the first defendant, who was served under other provisions of the UCPR. It seems to me that the second defendant is a necessary party because relief is sought in respect of a contract to which it is alleged to be a party, and by virtue of an assignment in respect of which it is the assignor to the plaintiff. The relief sought, even if not sought against the second defendant as such, would directly affect its interests.
It follows that UCPR r 11.4(1) was an available source of power for service of the originating process upon the second defendant in Malaysia. However, UCPR r 11.7 provides that, if a person is to be served outside of Australia with an originating process, the person must also be served with a notice in an approved form. Unfortunately, the required notice did not accompany the documents that were served upon the second defendant as described above.
The notice (together with the Summons and the Commercial List Statement) was served by post to the office of the second defendant's liquidator on about 23 February 2023. That is apparent from a letter dated 23 February 2023 from the liquidator to the plaintiff's solicitors that was sent as an attachment to an email sent on 24 February 2023.
The liquidator's letter stated, after making express reference to the notice that had been served, the following:
We wish to advise that the Company, being the second defendant will not be filing an appearance in the proceedings as we are unable to secure any legal representation due to the lack of funds in the company.
UCPR r 11.8 provides:
Except when the court otherwise orders, a defendant who has been served outside of Australia must file an appearance within 42 days from the date of service.
It may be that the second defendant was not "served outside of Australia" within the meaning of the rule until about 23 February 2023. If that is so, the 42 day period referred to in the rule would have expired on about 6 April 2023.
In my opinion, it is appropriate, in all the circumstances, to grant leave to the plaintiff under r 11.8AA to proceed against the second defendant.
In particular, that is appropriate in circumstances where the second defendant:
1. was served with the originating process in August 2022, albeit without the UCPR r 11.7 notice;
2. was served with the originating process again on about 23 February 2023, together with the UCPR r 11.7 notice;
3. indicated on 24 February 2023 that it would not be filing an appearance in the proceedings;
4. more than six weeks have since elapsed without any appearance having been filed; and
5. if it be necessary to show an arguable case, where no relief is sought against the second defendant, I am satisfied that there is a sufficiently arguable case for relief in the proceedings in respect of which the second defendant is a necessary party.
I have reached that conclusion notwithstanding the fact that, on 6 September 2022, the liquidator of the second defendant expressed the view that, as the second defendant was being wound up by way of a creditors' voluntary liquidation, "leave of the Court is required to be obtained from the Courts in Labuan, prior to commencing any proceedings against" the second defendant.
It is not known whether the liquidator maintains that view. In any event, whilst not entirely clear, the view was likely based upon s 451(2) of the Companies Act 2016 (Malaysia), which provides:
After the commencement of the winding up, no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court may impose.
The reference to winding up in that sub-section is a reference to a creditors' voluntary winding up.
The provision is of a familiar type, akin to s 500(2) of the Corporations Act 2001 (Cth), which was itself preceded by similar provisions in company legislation throughout the States of the Commonwealth of Australia. Provisions of this type (including those that apply generally to winding up in insolvency, such as s 471B of the Corporations Act 2001 (Cth)) have been held to operate only within the territory of the enacting jurisdiction (see, for example, Bond Media Ltd v John Fairfax Group Pty Ltd (1988) 14 ACLR 701 at 705-6 per Giles J (as his Honour then was), and Consulere Design & Construction Pty Ltd v Hooker Corporation Ltd [1991] 2 VR 189 at 191-2 per Brooking J (as his Honour then was)).
There is no good reason to think that s 451(2) of the Malaysian statute would be construed any differently, and I therefore conclude that it has no operation in relation to the commencement or carrying on of the present proceedings in this Court. I would add that it seems that no attempt has been made to invoke the Cross-Border Insolvency Act 2008 (Cth) to obtain recognition of the Malaysian insolvency proceedings as a foreign proceeding and seek relief accordingly.
For the above reasons, the Court will grant leave to the plaintiff pursuant to UCPR r 11.8AA to proceed against the second defendant. There will be no order as to costs in respect of the motion.
I turn now to the second matter (matter 2022/250607), involving Insurance Australia Ltd as the first defendant. In this matter, there is also an additional defendant, namely, BCC Trade Credit Pty Ltd. Both the first defendant and BCC Trade Credit Pty Ltd as third defendant neither consent to nor oppose the plaintiff's application for leave to proceed against the second defendant.
The application in this case was supported by the affidavits of Grace Feehan of 21 February 2023 and 12 April 2023 and the exhibits to those affidavits.
The relevant facts are almost the same as those in the other matter. One notable difference is the presence of the third defendant as a party. That is explained by the fact that the first defendant insurer in this case has denied that a valid contract of insurance was entered into on the basis that the third defendant did not have authority to bind it to such a contract. Otherwise, apart from some minor differences, such as in relation to the date of service by delivery in August 2022, the relevant facts are substantially the same.
Therefore, for substantially the same reasons as are expressed above in relation to the first matter, I regard the case as one where it is appropriate in all the circumstances to grant leave to the plaintiff under UCPR r 11.8AA to proceed against the second defendant. An order to that effect will be made. Again, there will be no order as to the costs in respect of the motion.
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Decision last updated: 18 April 2023
Parties
Applicant/Plaintiff:
Horizon Capital Fund (Luxembourg Business Registration No. B218924)