Merhi & Anor v Green [2007] NSWSC 722 | Case summary

JUDGMENT 1 HIS HONOUR: The plaintiffs are the owners of premises at Hornsby (the premises). The premises were let to Moonprom Pty Limited (the company). 2 The company was wound up and the defendant was appointed as liquidator on 3 May 2005. 3 An auction took place in respect of plant and equipment owned by the company and installed at the premises. Certain of the plant and equipment was sold at the auction and subsequently removed from the premises. 4 The plaintiffs claim that damage was caused to the premises by reason of the removal and seek to recover the repair costs (in the order of $12,000). 5 Proceedings were brought in the Local Court. The company was named as the first defendant and the defendant was named as the second defendant. 6 On 20 April 2006, by consent, the company was dismissed as a party to the proceedings. 7 The defendant filed a Notice of Motion. It sought an order striking out the Amended Statement of Claim. The defended application was heard by a Magistrate (Mr Lulham LCM). On 31 October 2006, he delivered his reserved judgment. He came to the view that the proceedings were an abuse of process and he ordered that the plaintiffs' claim be struck out. 8 On 11 December 2006, the plaintiffs filed a Summons in this Court. It purports to bring an appeal as of right against the decision of the Magistrate. The purported appeal has been filed out of time and an extension of time is required by the plaintiffs. 9 The Summons was heard on 4 July 2007. The parties were legally represented. Written submissions were made, which were supplemented by oral argument. 10 At the outset, it became apparent that the plaintiffs also required leave to bring the appeal (which was opposed). The order made by the Magistrate did not finally dispose of the proceedings. It was interlocutory in nature. It remains open to the plaintiffs to apply to the Local Court for leave to file a further amended process. 11 Before proceeding further, it is convenient to set out the matters pleaded in the Amended Statement of Claim. They are as follows:- "1. The First Defendant was the Lessee of the Plaintiffs premises situated at 65 Jersey Street, Hornsby being Units 4 and 5. 2. The first Defendant went into Liquidation. 3. The second Defendant was appointed Liquidator to the first Defendant on 3 May 2005. 4. In the course of his duties as Liquidator, the second Defendant appointed an auctioneer to auction the First Defendant goods, situated at the Plaintiffs premises. 5. At all material times the auctioneer was the agent of the principal namely the second Defendant. 6. In the course of the auction held on 17 May 2005 damage was occasioned to the plaintiff's premises by removal of machinery. 7. As a result of the damage, the Plaintiffs must pay to have repairs carried out. 8. In addition to the costs of repairs, the Plaintiffs have lost and continue to lose their rental income." 12 At this stage, it may be observed that the Amended Statement of Claim does not disclose a cause of action (it does little more than make a vague allegation of damage being suffered in the course of an auction) and, for that reason alone, would have been liable to be struck out. 13 The Magistrate came to his decision on the basis that leave was necessary to maintain the proceedings against the defendant and that the Local Court did not have jurisdiction to make such a grant of leave. 14 The Court has a discretionary power to extend time. The merits of the proposed appeal are a relevant consideration to the exercise of the discretion. 15 The Court has a discretion also to grant leave. Again, the merits of the proposed appeal are a relevant consideration to the exercise of the discretion. The approach has been taken that manifest error needs to be shown to invoke an exercise of the power. Other matters (such as questions of public interest) may also have relevance. 16 The Summons identifies three grounds of appeal. One challenges the decision that leave was required from the Supreme Court. One raises the question of lack of disclosure of the reasoning process. The remaining one challenges the discretionary exercise by the Magistrate (by allegation of failure to consider an unidentified relevant matter). 17 One complaint made by the plaintiff is that of failure on the part of the Magistrate to comprehend the true nature of the cause of action brought by the plaintiff in the Local Court. If that be the case, he can hardly be blamed for experiencing confusion. 18 This Court has been told that the intention of the pleading was to allege a cause of action founded in negligence. Precisely what it was intended to be was not identified with any precision in this Court. In the Local Court it seems to have been presented by general reference to negligence and breach of duty. 19 A cause of action in negligence is constituted by three elements. There has to be a duty of care owed by the defendant to the plaintiff. There has to be a breach of that duty of care by the defendant. There has to be damage as a consequence of that breach. These elements should be precisely defined. 20 In this case, if the claim is intended to be one of negligence, then all of the three elements are missing from the pleading. 21 One matter that does emerge clearly from the Amended Statement of Claim is that whatever was alleged against the defendant, it was something that took place in the course of his duties. It was this allegation that brought about the application to strike out the pleading and explains why the application was so dealt with by the Magistrate. 22 The defendant had been appointed as an official liquidator by this Court and, as such, is regarded as an officer of the Court. There is well-established authority (which bound the Magistrate) that the Court will not allow its officer to be subject to an action in another Court with reference to his conduct in the discharge of the duties of his office. The authorities state that the proper remedy for anyone aggrieved by his conduct is to apply to the Court in which he was appointed for leave (see, inter alia, Re Siromath Pty Limited (No 3) (1991) 25 NSWLR 25). 23 The authorities establish a principle which concerns the control and protection of its own officers (and not a requirement of the Corporations Act). 24 It was contended on behalf of the defendant that, as this was a cause of action brought against the defendant personally, it could not be maintained in the absence of the plaintiffs first obtaining leave of this Court. There may be some issue as to whether or not Counsel for the plaintiffs contended before the Magistrate that leave was not required. Whatever be the position, he argued that the Local Court had jurisdiction to grant leave, and that it could be granted after the commencement of the proceedings. As earlier mentioned, the Magistrate rejected the jurisdictional argument. I am not persuaded that there was error in what he did. 25 The question of whether or not such leave is required in a particular case depends on the nature of the cause of action pleaded in the proceedings. In this case, on the face of the Amended Statement of Claim, save for the clear indication that the defendant was being sued for something alleged to have been done in the course of his duties as liquidator, there was no revelation of the precise case that was sought to be litigated by it. 26 The onus borne by the plaintiff is to demonstrate error in point of law that justifies the disturbing of the decision of the Local Court. In my view, the plaintiffs have not discharged that onus. 27 Leaving these matters aside, as earlier mentioned, by reason of the manifest deficiencies of the Amended Statement of Claim, it would be futile to disturb the decision of the Magistrate and it remains open to the plaintiffs to seek leave to file a further amended pleading. 28 In the light of what has been said, it is unnecessary to address the other grounds. However, for purposes of completeness, I will make a brief observation concerning both of them. I consider that the judgment of the Magistrate more than adequately discloses his reasoning process. I do not consider that there was discretionary error in failing to take into account a relevant consideration. 29 Because of what has been said, it follows that it would be futile to either grant an extension of time or give leave to bring the appeal.

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Merhi & Anor v Green

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