Huang v Hua Cheng International Group Pty Ltd

Judgment

1. JUDGMENT of the COURT delivered by BASTEN JA: According to an amended statement of claim filed in the Equity Division on 16 April 2018, the plaintiffs (the applicants in this Court) being mother and son, each entered into a contract for the purchase of separate apartments in a building under construction at Woodville Street, Hurstville. The contracts, executed on 27 September and 1 October 2013, were in identical form and each required a deposit of 99.9% of the purchase price on execution of the contract. These amounts ($425,000) were paid.
2. In July 2014, the vendor, Hua Cheng International Holdings Group Pty Ltd (Hua Cheng) mortgaged its estate and interest in the land and fixtures to the sixth respondent, Super Vision Resources Ltd (Super Vision), a company incorporated in the British Virgin Islands. The mortgage was registered on 22 August 2014.
3. The applicants contended that from the date of the contracts, Hua Cheng was a bare trustee of their interests in the two apartments. In November 2016 Hua Cheng lodged a strata plan of subdivision, which was registered on 21 November 2016. The primary relief sought by the applicants were declarations that the mortgage to Super Vision did not include the applicants' interests in their respective apartments, and orders that Super Vision discharge the mortgage registered on the title of each apartment. With respect to Hua Cheng, the applicants sought specific performance and delivery of executed transfers in registrable form.
4. On 22 June 2017, Super Vision appointed receivers and managers to Hua Cheng, which then entered liquidation. Mr Kijurina of Hall Chadwick was appointed liquidator on 21 July 2017. A meeting of creditors was fixed for 9 August 2017. What happened thereafter is unclear.
5. On 19 September 2017, the matter came before Hammerschlag J who gave leave to the applicants nunc pro tunc under s 500(2) of the Corporations Act 2001 (Cth) to bring and continue proceedings against Hua Cheng.
6. On 12 July 2018 Super Vision (the sixth defendant) filed a defence by its solicitor Ross McClymont of Ashurst Australia; the contact person at Ashurst was Mr David Greenberg. Some three months later, Mr Greenberg filed an affidavit indicating that he acted for all the defendants except the liquidator of Hua Cheng (the fifth defendant) and the Registrar General (the seventh defendant). Hua Cheng was the first defendant; the second, third and fourth defendants were the receivers and managers. Mr Greenberg said that he had received a notice of intention to cease acting from Mr Shen, the solicitor for the applicants, filed on 28 August 2018. That notice advised the clients that further communications would be directed to their specified address if no lawyer was on the record. Mr Greenberg annexed a copy of a notice of ceasing to act filed on 6 September 2018.
7. The matter was listed for directions on 21 September 2018 at which time there was no appearance for the applicants. Mr Greenberg stated in his affidavit: "24 Following Mr Shen's notice, I have received no correspondence from the plaintiffs in which the plaintiffs have indicated to me that they wish to continue with or otherwise discuss this litigation. 25 In these circumstances, I believe that the plaintiffs have abandoned these proceedings."
8. Mr Greenberg then annexed short minutes of order seeking dismissal of the proceedings and payment of the costs of the first to fourth and sixth respondents.
9. The transcript of the hearing before Darke J on 11 October 2018 commenced with a statement by Mr Greenberg that "[o]n the last occasion, this case was given a last warning. This is a case where the plaintiffs appeared to have abandoned the proceedings." The plaintiffs were not in attendance, nor represented on that occasion. There was, however, no evidence of any attempt to contact them directly.
10. Darke J then read the affidavit and made the orders requested by Mr Greenberg.
11. On 12 November 2018, acting for themselves, the applicants filed a notice of intention to appeal. On 29 November 2018, still acting for themselves, they filed a notice of appeal against the judgment of 11 October 2018. The single ground identified was "Because it's not fair to us, as applicants, to make this order without us knowing anything." There were statements in the notice which suggested that the person signing it did not fully understand its purpose. However, the seven respondents were accurately named.
12. The first-fourth and sixth respondents did not file a notice of appearance, but appeared by their solicitor before the Registrar on 13 and 20 February 2019, (A notice of appearance was filed belatedly by Mr Greenberg who appeared at the hearing on 20 June 2019.) The applicants were first represented at the directions hearing on 20 February 2019.
13. On 14 March 2019, the applicants filed an amended notice of appeal through their new legal representative, Ivan Ling Wai Hung of TY Lawyers Pty Ltd. The details of appeal identified the appeal as brought from order (2) made by Darke J, which was the costs order. The ground was in the following terms: "The learned judge did not have before him evidence from the plaintiffs in relation to ongoing discussions between the parties as to the settlement of the underlying dispute by alternative means. Such would have altered his discretion as to ordering that costs be borne by the plaintiffs."
14. The notice asked for orders setting aside order (2) and providing that each party bear its own costs. At the same time, the applicants filed submissions prepared by counsel. The submissions accepted that leave to appeal was required, both because the orders were interlocutory and order (2) related only to costs. That constituted a concession that the proceedings commenced by a notice of appeal were incompetent and that a summons seeking leave should have been filed. It was not; however, a direction given on 6 May contemplated that leave could be sought by notice of motion in the incompetent proceedings, which was done. Further, and understandably given the ground of appeal, the submissions foreshadowed an application for leave to adduce evidence at the hearing of the appeal. The submissions referred to "non-compliance" with Court orders and to the failure of the plaintiffs to attend. It is not clear what orders were not complied with but the submissions indicated the evidence sought to be called would relate to the failure of Mr Shen to notify the applicants of his intention to cease to act, and in fact ceasing to act. (Mr Greenberg said from the bar table that the plaintiffs had been in breach of directions with respect to subpoenas and the filing of evidence in reply.)
15. The applicants' written submissions also noted that Mr Greenberg's affidavit of 11 October 2018 did not attest to any attempts to contact the plaintiffs directly. It was submitted that, in the absence of any further information, it was not open to Darke J to infer that the plaintiffs did not wish to continue to prosecute their proceedings.
16. On 27 May 2019 counsel provided further submissions in support of the application for leave to appeal. There was passing reference to order (2) relating to costs; the bulk of the submissions were directed to a challenge to order (1), which had dismissed the proceedings summarily. This was not the subject of the appeal (or the leave application), but challenged the supposed justification for the costs order, namely that the plaintiffs had abandoned the proceedings.
17. There was no evidence before this Court that steps were taken by the defendants, prior to the failure of the plaintiffs to attend before the trial court on two occasions, to ensure that the plaintiffs had notice of the hearings. Evidence of notification was required before the judge could be satisfied that the plaintiffs had abandoned the proceedings, justifying the costs order against them.
18. The costs order was obtained on behalf of all the defendants except five and seven, the liquidator and the Registrar General. There are affidavits of service in this Court which demonstrate service of the amended notice of appeal and the written submissions on the liquidator and the Registrar General, neither of whom are parties affected by the challenge to the costs order. Indeed, neither played an active role in the proceedings below and, it may be assumed that they are not affected by the challenge to the costs order. The Registrar General has filed a submitting appearance in this Court.
19. It is doubtful that the applicants would have been able to succeed on an appeal, or even obtain leave to appeal, absent evidence as to what they did and did not know about the proceedings in the Equity Division after Mr Shen ceased to act for them. The requirements with respect to receipt of additional evidence on an appeal are dealt with in Uniform Civil Procedure Rules 2005 (NSW), r 51.51. The rules were not complied with. However, on the day before the hearing, an affidavit of Ms Huang was filed and served. That step led the respondents to file submissions, relying on the affidavit of Mr Greenberg of 11 October 2018.
20. Despite the lateness of the applicants' evidence, Mr Greenberg, who appeared for the respondents on the appeal, fairly did not take objection to it being read. There was no application to cross-examine them, nor to contradict their statements. The affidavit established that, in October 2018, the plaintiffs had no intention to abandon the proceedings, nor had they been notified of the further hearings listed in the court.
21. The applicants had a further problem. Hua Cheng is still registered and remains in liquidation. No leave had been obtained to bring proceedings by way of appeal against the company. Section 500(2) of the Corporations Act provides that after the passing of the resolution for voluntary winding up, "no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes." In Distinctive FX 9 Pty Ltd v Statewide Developments Pty Limited [1] Beazley JA held that the commencement of an appeal (or an application for leave to appeal), triggered the leave requirement contained in s 471B with respect to a winding up in insolvency. The language is sufficiently similar to conclude that the same operation should be given to s 500(2). As recently noted by Gleeson JA in Zervas v Burkitt, [2] Distinctive FX 9 has been followed consistently by this Court. On this matter being raised, Mr Yeh for the applicants sought such leave.
22. Where the proceedings involve a challenge to a judgement or order in favour of the company the subject of a voluntary winding up, it is likely that leave will readily be given. This is not a case where alternative procedures by way of proof of debt in the liquidation are available; it is the company's debt which is challenged. Although the liquidator did not appear, it may be inferred that the receivers were, in practical terms, the affected parties. In the circumstances leave should be granted.
23. On the basis that the applicants did not have proper notice of the steps being taken in the proceedings in the Equity Division prior to 11 October 2018, and had not been given notice after Mr Shen ceased to act for them, they should have leave to appeal. The appeal should be allowed and order (2) made by Darke J on 11 October 2018 set aside.
24. No application was made under the rules by the respondents to dismiss the appeal for incompetency and, it having been accepted that it is appropriate to proceed by way of a concurrent hearing of the application for leave and the appeal, those orders may be made today.
25. Accordingly, the Court makes the following orders: 1. Grant leave to the applicants under s 500(2) of the Corporations Act 2001 (Cth) nunc pro tunc to proceed against Hua Cheng International Holdings Group Pty Ltd. 2. Grant the applicants leave to appeal. 3. Direct that the amended draft notice of appeal in proceedings 2018/347492 stand as the notice of appeal. 4. Allow the appeal. 5. Set aside order (2) made by Darke J on 11 October 2018. 6. Make no order as to the costs of the proceedings in this Court.

Endnotes

1. [2012] NSWCA 393 at [13].
2. [2019] NSWCA 112 at [14]. 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: 25 June 2019