Mitry v Wily & Anor [2010] NSWSC 84 | Case summary

1 The Plaintiff, Mr Mitry seeks the leave of the Court pursuant to s 471B of the Corporations Act 2001 (Cth) to proceed with a Cross Claim against the Second Defendant, BACF, of which the First Defendant, Mr Wily, is liquidator in proceedings which Mr Wily as liquidator has brought against Mr Mitry in the District Court. 2 In the District Court proceedings Mr Wily seeks judgment against Mr Mitry for an amount of some $378,000, being the principal and interest said to be due under a loan agreement dated 2 April 2003 between BACF as lender and Mr Mitry and his company, Saluata Pty Ltd, as borrowers. 3 By his Defence, which was filed in the District Court on 16 January 2009, Mr Mitry admits the loan agreement and that BACF has advanced certain monies to him pursuant to the loan agreement. However, he says in answer to the whole of the Statement of Claim that BACF and Mr Wily are estopped from suing for any monies under the loan agreement because of representations made to him in May 2003 and August 2005 by BACF that if he obtained new business for BACF, BACF would pay him a commission of five percent of the value of that business and would forgive any outstanding loans owed by Mr Mitry to BACF to the extent of commissions owing to him. Mr Mitry says that he did obtain new business for BACF to a total amount exceeding $10M so that his commission would be $500,000 which is greater than BACF's claim against him. His Defence, however, gives no particulars as to how the amount of his commission is made up. 4 By a Cross Claim in the District Court proceedings, filed on 19 January 2009, Mr Mitry pleads the commission agreement referred to in his Defence and says further that in early 2004 he introduced to BACF representatives of the Nauru Government resulting in BACF arranging a loan facility for the Government of approximately $6M which was settled in mid-2004. He further alleges that BACF took proceedings against the Nauru Government for recovery of the loan or amounts owing under the facility and the Government settled the proceedings for approximately $10M. 5 The Cross Claim seeks judgment against BACF for $500,000. Apparently by inadvertence, Mr Mitry has not obtained the leave of this Court under s 471B of the Corporations Act to prosecute the Cross Claim in the District Court. The District Court proceedings, including the Cross Claim, have been fixed for trial tomorrow for three days. Mr Mitry now seeks leave under s 471B. 6 Mr Hale SC, who appears for Mr Wily and BACF, opposes the granting of leave. He says, first, the granting of leave is futile as Mr Mitry's claim is hopeless and bound to fail; second, leave should be refused because the appropriate way for Mr Mitry to proceed is to lodge a proof of debt, which he has not yet done. He says that the liquidator should be spared the expense of litigating the Cross Claim at this stage. 7 In support of his submission that Mr Mitry's Cross Claim is hopeless, Mr Hale says that there is no admissible evidence in the District Court proceedings that BACF ever made a loan, or made a facility available, to the Nauru Government. There is no loan agreement or facility agreement and the liquidator says that he can find no document in BACF's records as to the making of any such loan or facility. 8 There is a considerable volume of correspondence in evidence which shows that BACF was in negotiation with the Nauru Phosphate Royalties Trust in late 2003 for the provision of a finance facility. There is correspondence about the facility with the Nauru Minister for Economic Development. There is reference to discussion with the then Prime Minister of Nauru about the transaction. Exactly what happened between BACF, the Phosphate Royalties Trust and various Ministers of the Nauru Government is very murky indeed. In fact, it was the subject of considerable press report in 2004. I do not need to go into detail. It is sufficient to observe that whether a finance facility or loan was made available to the Phosphate Royalties Trust by or through BACF, and whether what was arranged was a result of Mr Mitry's efforts, require findings of fact which will depend very much on the credit of witnesses. 9 It will also be an issue for determination by the District Court whether Mr Mitry's efforts, if any, fall within the terms of an Introducer's Agreement entered into between himself and BACF where under he claims five percent commission. 10 Mr Hale lays heavy emphasis on the fact that none of the evidence so far adduced by Mr Mitry in the District Court proceedings as to the making of any loan or facility by BACF to the Nauru Government or the Phosphate Royalties Trust is admissible. The evidence in that regard from Mr Mitry is, he says correctly, pure hearsay. 11 There is an affidavit from Mr Dimaris, a former Director and Secretary of BACF, to the effect that BACF, "… successfully organised a loan facility in the amount of $7.1 to the Republic of Nauru." 12 But Mr Hale says, again correctly, this statement is no more than summary and conclusion without any supporting detail and it would be rejected as inadmissible. 13 Mr Rogers of Counsel, who appears for Mr Mitry, has assured the Court that no new evidence will be adduced by him in the District Court proceedings which are to start tomorrow. When confronted with the inadmissibility of Mr Dimaris' evidence, Mr Rogers foreshadowed an application to the District Court to adduce evidence from Mr Dimaris on that particular issue in admissible form. He said, with commendable frankness, that if that leave were granted he did not presently know what Mr Dimaris' oral evidence would be. 14 The fact that affidavit evidence on a critical issue, now tendered in support of Mr Mitry's application for leave to proceed with the Cross Claim, would be inadmissible in the District Court proceedings at a final hearing does not necessarily mean that the Cross Claim is doomed to failure in the District Court. This Court is not to try the Cross Claim. Its function in this application is to determine whether the Cross Claim is at least arguable. 15 I hold that the Cross Claim is arguable. There is evidence of the Introducer's Agreement upon which Mr Mitry relies. There is evidence to support, on a prima facie basis, the assertion that Mr Mitry introduced BACF to officials of the Nauru Government and of the Phosphate Royalties Trust and that some facility or loan was made available to the Trust. It remains to be seen whether, through admissions in cross examination or otherwise, Mr Mitry will be able to establish the facts upon which he relies to support his Cross Claim. 16 I turn now to the discretionary factors relevant to the granting of leave under s 471B. They are admirably summarised by Gilmore J in Swaby v Lift Capital Partners Pty Ltd (in liq) (2009) 72 ACSR 627 commencing at [26] and especially at [29], as follows: "The factors to be taken into account … have been held to include:

(a) the amount and seriousness of the claim; (b) the degree and complexity of the legal and factual issues involved; (c) the stage to which the proceedings, if commenced, may have progressed; (d) whether a cross-claim arises out of the same factual matrix as the claims made in the primary proceedings; (e) the risk that the same issues would be re-litigated if the claims were to be the subject of a proof of debt; (f) whether the claim has arguable merit; (g) whether proceedings are already in motion at the time of liquidation; (h) whether the proceedings will result in prejudice to the creditors; (i) whether the claim is in the nature of a test case for the interest of a large class of potential claimants; (j) whether the grant of leave will unleash an 'avalanche of litigation'; (k) whether the cost of the hearing will be disproportionate to the company's resources; (l) delay; and (m) whether pretrial procedures, such as discovery and interrogatories, are likely to be required or beneficial." 17 I deal with each of the relevant factors in this case. First, I think I have said enough to indicate that the Cross Claim, which is for a substantial amount, will depend on disputed facts which are very far from clear and which will depend upon credit findings. The factual issues, not to mention the legal issues, are likely to be complex. 18 Second, the Cross Claim is ready for trial, if leave were to be granted. It raises the same matter as is pleaded in Mr Mitry's Defence by way of estoppel. The same facts as found the Cross Claim would also be in contest in the Defence. 19 Third, the correspondence clearly shows that it would be a waste of time for Mr Mitry to lodge a proof of debt. His claim has already been rejected by the liquidator in correspondence and rejection of a proof of debt would be a mere formality. Sooner or later, Mr Mitry's claim must be dealt with in a way that brings the dispute to finality. A judgment on the Cross Claim, one way or another, in the District Court would achieve that result. 20 Fourth, there will be no delay in the administration of the liquidation of BACF if leave is granted to prosecute the Cross Claim. That Cross Claim will proceed tomorrow. 21 Fifth, if Mr Mitry succeeds on the Cross Claim, he will not be able to enforce judgment against BACF without the Court's leave. The result would, in the usual way, be that he would be left to prove in the liquidation for the difference between what BACF owes him and what he owes the company. 22 In conclusion I should say that I have placed considerable weight on Mr Rogers' assurance that he is ready to proceed with his case on the Cross Claim in the District Court tomorrow. I have mentioned in argument, and I repeat now, that if he were to apply to the District Court for leave to adduce a substantial volume of new evidence in support of the Cross Claim, whether tomorrow or after an adjournment, the discretionary basis upon which he obtained leave today would be undermined to a considerable degree, to the prejudice of the liquidator. I need say no more on this point, as an application for an adjournment or for leave to adduce new evidence would have to be decided by the District Court Judge as the justice of the case then requires. 23 I grant leave pursuant to s 471B of the Corporations Act to the Plaintiff, nunc pro tunc, to file and to prosecute in the District Court a Cross Claim in proceedings 3634 of 2008 in the District Court. Costs of this application for leave should abide the result of the District Court proceedings. Costs are therefore reserved.

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Mitry v Wily & Anor

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Judgment (12 paragraphs)

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Legislation Cited (1)