Moorabool Shire Council v J & B Taitapanui [2002] VSC 418

6. Proceeding D303/2001 was instituted on 27 July 2001 by Justin and Lisa Taitapanui, as applicants, against HIA Insurance Services Pty Ltd (trading as Home Owners' Warranty), Moorabool Shire Council and Wally Mellas, as respondents. The proceeding concerns building defects alleged to exist in a house at 6 The Mews, Torquay. The house was built by Watson Constructions and the Taitapanuis are the second purchasers of the house.

9. For reasons to which I will come, it is important to note that in paragraphs 7 to 10 of the original points of claim and also in paragraphs 7 to 10 of the second further amended points of claim the Taitapanuis made and continue to make extensive allegations of breaches by Watson Constructions as builder of terms implied into the building contract by reason of s. 8 of the Domestic Building Contracts Act 1995.

12. On 4 February 2002, Moorabool Shire Council filed a defence to the amended points of claim and at paragraph 48 of that defence the Council pleaded that if it has any liability to the Taitapanuis, which it denies, the proceeding is a building action within the definition of s. 129 of the Building Act 1993 and, further, that the Council's liability to the Taitapanuis is limited pursuant to ss. 131 and 132 of that Act.

15. On 20 March 2002, the parties attended a compulsory conference. Regrettably, however, the matter did not settle at the compulsory conference, and orders were made, inter alia, that the matter be adjourned to a further compulsory conference on 20 May 2002 (to allow the Council to file and serve expert reports).

18. On 17 May 2002, the compulsory conference was further adjourned to 17 June, but again the matter did not settle. Subsequently, the matter was fixed for hearing on 15 July 2002 on an estimate of 10 days.

21. On 8 July 2002, the Council applied for leave of the Court to proceed against Watson Constructions in liquidation, pursuant to s. 471B of the Corporations Act 2001, and on that day Master Evans made the following order:

"1. Moorabool Shire Council (`the Applicant') has leave on 8 July 2002 to proceed with its proceeding numbered D303/2001 in the Victorian Civil and Administrative Tribunal against Watson Constructions Pty Ltd (In Liquidation) (`the Respondent') in liquidation in respect of the causes of action described in paragraph 11 of the affidavit of Rohan Michael Bennett sworn 4 July 2002."

25. It is convenient to note that the paragraph of the affidavit referred to in the Master's order was in the following terms:

"11. Moorabool Shire Council submits that the subject matter of the applicants' claim against it and Mr Mellis in the VCAT proceeding relates to defective building work by the company in the construction of the dwelling at the property. Moorabool Shire Council also submits that there is a prima facie cause of action by the applicants against the company in negligence and for breach of statutory warranties by the company pursuant to section 8 of the Domestic Building Contracts Act 1995."

29. On 11 July 2002, Moorabool Shire Council applied to the Tribunal to join Watson Constructions as a respondent to the proceeding pursuant to s. 6o of the VCAT Act. On 12 July 2002, the solicitors for the Taitapanuis wrote to the solicitors for the Council expressing concern about issues being raised so close to the day which had been set for the hearing.

32. The application came on for hearing before Deputy President Cremean on 23 July 2002 and on 9 August 2002, the Deputy President refused the application and gave as his reasons the following:

"14 I am asked by the Second Summons to make an order joining Watson Construction Pty Ltd (in liquidation) as a respondent under s 60 of the 1998 Act. 15 I do not agree that I should act to do this. 16 The order of Master Evans made on 8 July 2002 is as follows: `Moorabool Shire Council (`the Applicant') has leave on 8 July 2002 to proceed with its proceeding numbered D303/2001 in the Victorian Civil and Administrative Tribunal against Watson Constructions Pty Ltd (In Liquidation) (`the Respondent') in liquidation in respect of the causes of action described in paragraph 11 of the affidavit of Rohan Michael Bennett sworn 4 July 2002.' 17 Except as allowed, a person cannot begin or proceed with a proceeding in a court against a company in liquidation. See s 471B of the Corporations Law. But the leave given by Master Evans was not leave given to the Second Respondent. It was leave given only to the Third Respondent. Therefore, in my view, s.471B applies to prevent me adding the company in liquidation as a party upon the application of the Second Respondents. The argument that I should regard leave as having been given based on the reference to the `causes of action' described in the affidavit, is I think, quite spurious."

36. It is common ground that the references in the Deputy President's reasons to "second respondent" should be references to "the applicants" and that the reference to the "third respondent" should be a reference to "the second respondent".

40. Section 131 of the Building Act 1993 provides that:

"131. Limitations on liability of persons jointly or severally liable (1) After determining an award of damages in a building action, the court must give judgment against each defendant to that action who is found to be jointly or severally liable for damages for such proportion of the total amount of damages as the court considers to be just and equitable having regard to the extent of that defendant's responsibility for the loss or damage. (2) Despite any Act or rule of law to the contrary, the liability for damages of a person found to be jointly or severally liable for damages in a building action is limited to the amount for which judgment is given against that person by the court. (3) In this section - `court' includes the Victorian Civil and Administrative Tribunal."

44. In Boral Resources (Vic) Pty Ltd and Robak Engineering and Construction Pty Ltd[2] re Court of Appeal made plain that the purpose of s. 131 of the Building Act is to provide a means whereby the liability of parties responsible for defects under the Building Act may be apportioned between them, and, moreover, it is so, notwithstanding that one or more of the parties may be insolvent or in such circumstances that it is unlikely that a plaintiff or applicant will be able to execute against them.

47. Section 471B of the Corporations Act 2001 provides that:

"While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property,

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes."

52. Authority makes plain that the reference to "court" in s. 471B is not to be construed in a strict sense, but in a fashion that is broad enough to cover a proceeding in a tribunal such as the Victorian Civil and Administrative Tribunal: see the recent decision of Merkel J in Australian Liquor Hospitality and Miscellaneous Workers' Union v Homecare Transport Pty Ltd (in Liq)[3] and also earlier decisions concerned with the comparable provisions of the Companies Code such as Revasal Pty Ltd (in Liq)[4] and Mowbray College and Exhibit Design and Construction Pty Ltd (in Liq)[5].

55. The evident policy of the section in providing for leave to proceed against a company in liquidation is to enable a party who cannot in the winding up obtain the sort of relief which might be available in a proceeding, to obtain that relief: see, for example, Vagrand Pty Ltd v Fielding[6]; BHG Nominees v Ellis Young Investments[7] and Santyre Pty Ltd v Abbey Gook Pty Ltd[8].

58. It may be noted that the words of s. 471B are somewhat different to and, in some respects, more precise than the provisions which appeared in earlier forms of the companies legislation, and it has been suggested on behalf of the Taitapanuis that the difference should be taken as an indication of an intention to restrict the operation of the section to the sorts of claims which are brought by an applicant against a respondent or by a plaintiff against a defendant, rather than the sorts of proceedings which might result from the institution of a third party claim or the joinder by one defendant of another defendant to an existing proceeding.

61. It is not, however, suggested that any change of that kind found expression in the Harman Report or in the other relevant extrinsic materials, and I do not myself recall such a change as having been mentioned before.

64. In my opinion it is the intention of s. 471B, just as it was the intention of the earlier forms of legislation, to provide a relatively broad ranging means of enabling a party to obtain leave to proceed against a company in liquidation in all forms of litigation where it is just that the party should have access to a means of recovery provided for in the proceedings which would not be available to it in a winding up of the company.[9]

68. Approaching the matter on that basis, there are two things to be said about the view which the Tribunal took of s.471B. The first is that it is not self-evident that the leave to which the section refers may only be granted upon the application of a plaintiff or other moving party in a proceeding. As at present advised, I do not see why the leave cannot be granted upon the application of any party to the proceeding or, indeed, to a non-party who has a sufficient interest in the proceeding to found the application. Thus, in the present case, although the application which was made was one by the Council for leave to join Watson Constructions to the proceeding it resulted in effect in the leave of the court for the Taitapanuis to proceed against the builder once joined to the proceeding.

71. The second thing is that, as a matter of substance, both the basis upon which leave was granted and the basis upon which the proceeding will be conducted if Watson Construction is joined, is that the Council seeks to have apportioned as between itself and Watson Construction such, if any, liability as is found to exist. The claim of the Council is thus a claim pursuant to a statutory right of apportionment afforded to the Council by s. 131 of the Building Act and the basis on which leave was granted was to enable enforcement of that right. It does not matter that the Taitapanuis may not care to prosecute their claim against Watson Constructions.[10]

74. I add that if there were any doubt about the basis upon which the Master made his order, or the intention with which it was made, it was dispelled when the Master made the following further order on 9 October 2002, nunc pro tunc,

"'The plaintiff has leave now for then on 8 July 2002 to proceed against Watson Constructions Pty Ltd (in liquidation by applying to have it added as a Respondent in proceeding numbered D303 of 2001 in the Victorian Civil and Administrative Tribunal in which Justin Bryan Respondent, Moorabool Shire Council is Secondnamed Respondent and Wally Mellis the Thirdnamed Respondent.' (Proceeding no. 7246 of 2002) See: Emanuele v A.S.C. [1997] HCA 20; (1997) 188 CLR 114 BHG Nominees Pty Ltd v Ellis Young Investments Pty Ltd (1998) 16 ACLC 1539."

78. There are three further points which require attention. The first is that it was said that the power of joinder provided for in s. 60 of the Act is not as broad as the power of joinder provided for in Rule 9.06 of the Rules of the Supreme Court and, therefore, what was said about the propriety of the joinder considered in Boral, supra, is not applicable in this case. I reject that submission. The power of joinder provided for in s. 60 is at least as broad as the power provided for in Rule 9.06.

81. The second is that it was submitted that, because the proceeding concerns a domestic building rather than the sort of commercial construction which was the subject of consideration in Boral, it is not appropriate here, in the way it was in Boral, to facilitate the pursuit of the s. 131 apportionment right. I reject that contention. I see no reason to conclude that s. 131 was not intended to apply generally.

84. The third is that it is said that, because the Council left for so long the application for leave to join the builder to the proceeding, the Taitapanuis have been prejudiced; for they are still in occupation of the property and, if Watson Constructions is joined, the hearing of the proceeding which is fixed for a day in October may have to be adjourned.

87. In my view, there are two considerations which bear upon that. The first, as has been seen, is that the alleged default of the builder has been an issue on the pleadings since day one of the proceeding and, if there were any delay, it was only a delay as between February and July 2002. In the circumstances, I do not regard it as excessive.

90. The second is that whilst one may have sympathy for the plight of the Taitapanuis, the purpose of s. 131 has been so strongly laid down by the Court of Appeal as being to enable the pursuit of the right of statutory apportionment for which it provides, that it should be taken to override the disadvantage presently being suffered by the Taitapanuis.

94. In my opinion the Tribunal erred in law in holding s. 471B of the Corporations Act prevented the joinder of Watson Constructions as a respondent to the proceeding. I consider that the order made by Master Evans on 8 July 2002 was sufficient leave for the purposes of s. 471B to enable the joinder.

97. Under s. 148(7) of the Victorian Civil and Administrative Tribunal Act, the Court is empowered, upon an appeal such as this, to make orders setting aside the order of the Tribunal and, if the circumstances be appropriate, to make such order as the Tribunal could have made in the proceeding.

100. Subject to the submissions of counsel, I am disposed in the circumstances of this matter to order that the appeal be allowed, that the decision of the Tribunal be set aside and, because of the limited amount of time remaining before the proceeding comes on for hearing this month, that leave be granted now pursuant to s.60 of the Act to join the builder as a respondent to the proceeding.

[1] Jeffrey Harrison was appointed as liquidator of the company on 31 January 2001.

[2] [1999] VSCA 66; (1999) 2 VR 507

[3] [2002] FCA 497; (2002) 20 ACLC 820

[4] (1984) 2 ACLC 53

[6] (1993) 113 ALR 128 at 131

[7] (1999) 16 ACLC 1539

[8] (1995) 13 ACLC 283

[9] see McPherson, The Law of Company Liquidation, 4th Ed at pp. 245-251.

[10] cf Boral Resources, supra at [14], per Batt JA