Matrix Group Ltd (in liq) (Trustee) v Oates, in the matter of Matrix Group Ltd

Legal principles on application for leave to appeal 4 The following considerations provide general guidance when considering an application for leave to appeal from an interlocutory decision: (1) whether, in all the circumstances, the primary judge's decision is attended with sufficient doubt to warrant it being reconsidered by the Full Court; (2) whether, if leave were refused and supposing the decision to be wrong, substantial injustice would occur; and (3) whether leave is sought in relation to an interlocutory decision on a point of practice or procedure, or an interlocutory decision determining a substantive right: Décor Corporation Pty Limited v Dart Industries Inc [1991] FCA 655; (1991) 33 FCR 397 at 398-400. 5 If the practical effect of the relevant interlocutory decision is to finally determine the rights of the parties, a prima facie case exists for granting leave to appeal: Samsung Electronics Co. Limited v Apple Inc. [2011] FCAFC 156; (2011) 217 FCR 238 at [31] ("Samsung"). Leave should readily be granted if, as a practical matter, the interlocutory order has the effect of determining the whole of the proceeding or an important issue in the proceeding: Samsung at [33].

Sufficient doubt to warrant reconsideration 6 In written submissions, Mr Oates relied upon seven propositions to support his contention that there was sufficient doubt as to whether leave is required under s 471B of the Act for an application seeking a declaration under s 21(1) of the Federal Court of Australia Act 1976 (Cth). 7 The first proposition, that the liquidator conceded that s 471B did not apply to defensive proceedings, is not relevant to, and therefore does not raise any doubt about, my conclusion that the relevant claim was not a defensive one. 8 The second proposition, that my decision did not involve a rejection of the proposition that the declaration sought was a defensive proceeding, misconstrues my reasons. The conclusion that the "action which Mr Oates seeks to bring is [not] defensive in any relevant sense" at [71] of my reasons is a rejection of Mr Oates' argument, summarised at [68], that it is a "defensive step" to ask the Court to confirm that the Oates funding agreement is on foot. It necessarily involves a rejection of the proposition that the declaration sought was defensive. 9 The third proposition, that I erred in considering the proposed cross-claim as a whole rather than looking at each claim made by Mr Oates as a separate proceeding, also misconstrues my reasons. As explained in the previous paragraph, my reasons were squarely directed to the particular claim that Mr Oates had argued was "defensive", namely the claim for declaratory relief. Further, at [194], I expressly rejected the contention that leave was not required in respect of Mr Oates' claims for declaratory relief. 10 The fourth proposition is that a declaration should be characterised as a defensive proceeding. Mr Oates suggested that a claim for declaratory relief is analogous to a claim to set-off or reduce or extinguish a plaintiff's claim, or an application for security for costs. However, he did not explain the analogy. I do not detect any analogy. 11 Mr Oates also argued that a declaration as to contractual rights following a liquidator's breach of contract can be defensive vis-à-vis the conduct of the company, rather than defensive to proceedings brought by the company. However, he did not identify any principled basis for his argument. I do not accept that it is supported by the case law, identified in my reasons, concerning "defensive proceedings". Those cases permit a person to respond in a proceeding brought against them without the necessity that otherwise exists to obtain leave. The reasons for the requirement of leave were explained in Vagrand Pty Ltd (In Liq) v Fielding (1993) 41 FCR 550 at 553-556. In summary, they include avoiding waste of assets by unnecessary litigation, ensuring the assets of the company in liquidation will be administered in accordance with the legislation and preventing companies in liquidation from being subjected to a multiplicity of actions which would be expensive, time consuming or unnecessary. There is no apparent reason why these reasons would not apply to an application for declaratory relief. 12 The fifth proposition is that Mr Oates's application for a declaration ought not to require leave to proceed for various reasons. This reason incorrectly suggests that the Court was required to consider whether the application should not require leave. Rather, s 471B provides relevantly that "a person cannot begin or proceed with … a proceeding in a court against the company or in relation to property of the company … except with the leave of the Court". Thus, the question whether the application should require leave does not arise. 13 The sixth and seventh propositions effectively restate the submission that there is considerable doubt as to whether leave is required under s 471B in relation to applications for declarations. 14 Having considered each of these propositions, I am not persuaded that my conclusion is attended by any real doubt.

Substantial injustice 15 I accept the liquidator's submission that Mr Oates will not suffer any substantial injustice if leave is refused, having regard to my findings at [94]-[96] that: … it is within Mr Oates' power to offer to fund the proposed proceedings on the basis that he will receive the entitlements set out in the Oates funding agreement. In the absence of such an offer, and in the absence of any current prospect of funding by a third party, with one proviso, I accept that there is no utility in determining whether the Oates funding agreement remains on foot and is binding on the parties. The proviso is the possibility raised by question 1B, namely, that Mr Oates is entitled to recover legal costs in the event that the liquidator is found to have acted wrongfully in disputing that the Oates funding agreement continues to bind the parties. However, Mr Oates did not identify the basis on which he claims that entitlement, and it is not obvious. In particular, with one exception, the evidence did not identify the services for which Mr Oates allegedly incurred legal fees of $255,127 in relation to the wrongful termination of the Oates funding agreement. The exception is the letter from Pure Legal to Kemp Strang dated 18 April 2013, referred to at [53] above. On its face, it is far from obvious that Mr Oates may have an entitlement to recover the costs of that letter by reason of the wrongful purported termination of the Oates funding agreement. Although the letter refers to the purported termination, it is principally addressed to whether Mr Oates was misled when he entered into the funding agreement and whether information can be provided that would permit Mr Oates to consider the liquidator's additional funding requests. On the available evidence, I am not satisfied that there is a substantial question to be tried that Mr Oates is entitled to recover legal costs for the wrongful termination of the Oates funding agreement.

Does the judgment finally determine Mr Oates' rights? 16 Mr Oates submitted that the refusal of his application for leave to proceed on the proposed further amended cross-claim "effectively and permanently denies Mr Oates the right to be heard in relation to the status" of the Oates funding agreement. I do not agree with that proposition. If circumstances change so that there is utility in determining the issue, then it will be open to Mr Oates to make a further application for leave to proceed.

Is this a special case? 17 Mr Oates submitted that leave to appeal should be granted given the costs and time he has incurred including in providing funding to the company in liquidation, in attempting to be paid employee entitlements from nearly 20 years ago, which judgment debt gave rise to the liquidation of Matrix and the appointment of the liquidator. 18 I am not satisfied that these are matters that would justify a grant of leave to appeal where there is no real doubt that s 471B does not operate according to its terms in relation to Mr Oates' claim for declaratory relief.

Conclusion 19 The application for leave to appeal is refused. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

SCHEDULE OF PARTIES NSD 1507 of 2016 Cross-Respondents Second Cross-Respondent: SCOTT DARREN PASCOE IN HIS CAPACITY AS LIQUIDATOR OF MATRIX GROUP LIMITED (IN LIQUIDATION) AS TRUSTEE FOR THE MATRIX FINANCE GROUP UNIT TRUST